Join The Petition to Avoid a “Boxcar Cliff”

By The Railway Supply Institute

In the face of a looming box car shortage, this week (March 26, 2024) the Railway Supply Institute (RSI) filed a petition with the Surface Transportation Board (STB) seeking reforms to the method by which the car hire Default Rate is calculated.

Without these needed reforms, we can expect that shippers will be forced to deal with a situation where there simply are not enough boxcars to meet demand. The unfortunate consequences of this are many and will lead to significant disruptions that will ripple throughout the economy at large.

We estimate that every lost boxcar shipment will require three trailer truck shipments. Since the average box car does one run a month, the loss of each box car from the fleet will result in 36 additional tractor-trailer trips per year. Not only will that increase road traffic and reduce road safety, but it will also hurt our nation’s investments in transportation infrastructure and our efforts to improve environmental sustainability.

As you may know, current AAR rules which govern how the Default Rate is applied, disincentivize the necessary construction of new boxcars to replace cars hitting their maximum operating age. This is evident by the fact that America’s boxcar fleet size has declined by 38% since 2008 and is expected to decline another 22% by 2030.

The car hire Default Rate rule, which was established in 1994 by the Interstate Commerce Commission (ICC), is woefully out of date. This rule, sanctioned by the ICC and adopted by AAR keeps rates paid by railroads for using boxcars artificially low and therefore reduces incentives for new construction.

The Default Rate, often as meager as $0.17 cents per hour for a boxcar costing over $150,000 to build, is wholly inadequate in light of the increased costs associated with manufacturing and maintaining boxcars since 1994. The resulting boxcar shortage threatens the most cost-effective means of transportation for a significant number of commodities shipped via boxcars.

A reformed Default Rate regulation should come from balanced, market-based negotiation between railroads and boxcar owners facilitated by the Surface Transportation Board (STB), resulting in a fair price that incentivizes new construction and secures supply chain stability.

Now that the petition has been filed, stakeholders have 20 days to respond with comments. Following the STB’s review of any responses, the agency will determine if there are grounds to open a proceeding. Upon doing so, relevant stakeholders will have a chance to negotiate an agreement that can ultimately be considered by the STB.

Please join the RSI in asking the STB to open a proceeding on this crucial effort to reform car hire rates by filling out the form below. The RSI will use your comments to supplement its filing, and your personal information will not be used for any other purpose.