reciprocal switching

The Biden Administration’s Rail Regulation Efforts Make Little Sense

The Biden Administration should discard a recent proposal to impose reciprocal switching on U.S. railroads.

By Ike Brannon and Michael Gorman for The Regulatory Review

May 9, 2022 - The pandemic accelerated the amount of online shopping by U.S. residents, and a large proportion of the U.S. population has grown accustomed to eschewing stores and having most goods delivered to their homes.

This trend has increased the number of trucks on the road, which has created congestion, parking problems, and more emissions due to traffic across the country. The recently passed Infrastructure Investment and Jobs Act contains $8 billion to boost freight infrastructure and safety programs. The state of Georgia is spending $1.8 billion a year, following a state recommendation that Georgia reduce problems caused by the surfeit of trucks.

Rather than address the issue, the Biden Administration appears intent on making this problem worse by embracing several policies that would result in fewer goods traveling by rail and more being transported via highways.

The most egregious of these efforts is a 2021 Biden Administration executive order that asks the Surface Transportation Board to consider forcing railroads to engage in reciprocal switching, which would ultimately push goods off of railroads and onto trucks.

Reciprocal switching would allow shippers to choose railroads without tracks adjacent to their locales to transport their goods instead of railroads whose tracks connect directly to their facility. The railroad that owns the tracks that connect to the shipper’s facility would be forced to pick up goods for the shipper and deliver them to a competing railroad, which would carry them to the customer.

The Biden Administration avers that reciprocal switching will reduce inflation by constraining shipping prices, but the data do not show that rail prices increased more in 2021 than in previous years, so attributing any of the 2021 inflation spike to rail costs seems to be little more than dissembling.

The problem with reciprocal switching is that it effectively reduces the capacity of the rail networks. Switching trains is time and labor intensive and therefore costly. Requiring railroads to do so for competitors would impose more work in already congested networks, making it more difficult for the railroad doing the switch to optimize its train schedule.

Railroads boost capacity not only by adding or expanding tracks but also by adapting their schedules to carry more trains and fuller trains each year. Accomplishing this task is...

Read the complete article at: The Regulatory Review.


West Coast Port

Report Raises Concern of Power Shortage for Green Ports, PMSA Warns about Fallout to the Supply Chain

June 28, 2021 - The following article was published by the Pacific Merchant Shipping Association (PMSA) on June 9:

State policies requiring California’s port supply chain to transition to zero-emission technologies by 2035 need to address challenges relating to providing an adequate energy grid supply coupled with resiliency to avoid significant impacts on the ability of California’s supply chain to move cargo, according to a newly released report.

The report from engineering consultants Moffat and Nichol examines the energy grid requirements for vessels and the landside equipment that move cargo between the vessel and inland destinations. The report can be accessed here.

The report examines the state’s goal of reaching zero-emission power generation and the enormous demand power demand growth necessary to achieve that goal. With the grid already stretched to its limits, the report indicates that power demand will dramatically grow at the ports.

There is considerable risk that the transition to all-electric power creates could outstrip the ability to reliably deliver power to California’s ports without careful planning.

Failure to meet rapid power demand growth over the next decade in a reliable manner will impede the ports’ ability to move cargo resulting in nationwide economic consequences.

“This report confirms our belief that the zero-emission goal of 2035 will require complex planning, substantial funding and a level of cooperation and coordination by a myriad of state and local agencies for a massive public works project that has never been undertaken in California,” said John McLaurin, President of the Pacific Merchant Shipping Association (PMSA).

The findings identify challenges for the state’s energy plan, including:

  • Ensuring sufficient power is available during marine terminal hours of operation with the ability to meet peak demand for stationery sources and electric vehicles,
  • Providing additional power capacity for operations that may overlap with regional peak power demand,
  • Requiring sufficient, dependable power redundancy, to allow rapid recovery from a natural or manmade disaster, and
  • Executing needed improvement in the electricity infrastructure to create a stable and reliable power grid.

Cargo moves in and out of the ports on a seasonal basis, and during the peak season, prior to the holidays, operations at the ports ramp up considerably. According to Moffat and Nichol, seasonable demand requires a power system that has sufficient electric power in the evening when solar is not available, power requirements that are equivalent to powering 390,000 households, or utilizing 50% of the output of one of the reactors from the Diablo Canyon Nuclear Power Generating Station that is scheduled to be shut down by 2025 as demand ramps up.

“As federal and state elected officials consider infrastructure improvements, California public officials need to review state energy and environmental policies to ensure that California jobs and businesses are not put at risk,” concluded McLaurin.

About the Pacific Merchant Shipping Association (PMSA)

The Pacific Merchant Shipping Association (PMSA) is an independent, not-for-profit association focused on global trade. PMSA operates offices in Oakland, Long Beach and Seattle, and represents owners and operators of marine terminals and U.S. and foreign vessels operating throughout the world.




CLECAT Calls for an Ambitious ‘Fit-for-55' Package

May 7, 2021 - European freight forwarders welcomed the Sustainable and Smart Mobility Strategy last December, directed towards zero-emission road transport in Europe, whilst calling for a clear and concrete roadmap for a complete infrastructure roll-out, favouring the most cost- and resource-efficient solutions, also recognising the bridging technologies.

With this in mind, CLECAT, representing European freight forwarders using all possible modes of transport, also looks forward to the 'Fit-for-55 Package.’ The '55' is referring to the 55% net emissions reduction target for 2030 that EU leaders signed off last year. The Commission will pursue a comprehensive set of transport pricing measures to encourage a switch towards greener options, such as emission trading, infrastructure charges, energy- and vehicle taxes. By 2030, the Commission also wants airplanes and ships to start using alternative fuels. CLECAT supports the switch to sustainable alternative fuels for these ‘hard to abate’ transport modes. However, so far, the Strategy falls short of clearly showing the path to achieve 90% greenhouse gas emission reduction in the transport sector by 2050 compared to 1990, to be in line with climate neutrality.

CLECAT has issued a paper, consolidating the comments made in response to the various public consultations on the scheduled proposals, in order to provide a comprehensive overview of European freight forwarders and logistics service providers’ positions. CLECAT outlines its recommendations to ensure the upcoming legislation is fit for the future. In doing so, we urge the European Commission to:

Revise the Alternative Fuel Infrastructure Directive (AFID) and set binding national targets for the alternative fuels infrastructure development in different freight transport modes. The infrastructure that freight forwarders use must have a cross-border coverage. Turning the legislation into a Regulation would certainly support further harmonisation amongst Member States.

Revise the EU Emissions Trading System (ETS) to address emission reductions in the transport sector through market-based measures. CLECAT believes that the initiative to develop a carbon pricing scheme for the maritime sector could be a driver of progress at the IMO, as it has been demonstrated in the past. EU ETS revenues generated from the auctioning of maritime transport emissions allowances should be ringfenced; they could be used to support research and development of low-carbon and zero-emissions mobility technologies and innovative shipping solutions. A part of revenues generated could also be used for climate change adaptation and carbon offsetting projects, in view of reducing the transport and logistics sector’s impact on climate.

For aviation, the EU needs to put in place a coherent and long-term framework to secure innovative aviation technologies, operational (ATM) improvements, and the production and use of sustainable aviation fuels (SAFs).  CLECAT has particularly welcomed the “ReFuelEU Aviation” initiative to increase the production, deployment, and supply of affordable, high-quality alternative sustainable fuels in Europe.

Enhance and expand measures under the Renewable Energy Directive (RED) II review to secure a larger uptake of renewable energy in the transport and logistics sector across the EU. CLECAT maintains that a more ambitious target for renewable energy could help mainstream renewable and low-carbon fuels and speed up their commercial deployment in all transport modes.

Finally, there is a reference within the Sustainable and Smart Mobility Strategy to a European framework to measure transport and logistics emissions. CLECAT holds that such a framework should be based on the upcoming global ISO standard (14083) for the quantification and reporting of GHG emissions of transport and logistics operations, respecting the full-cycle ‘well-to-wheel’ approach. Finally, regulatory incentives are needed to accelerate the market uptake of greener and more sustainable solutions in transport and logistics, especially funding mechanisms for SMEs.

Currently, the 'Fit for 55' package is expected in July 2021.

CLECAT represents the interests of more than 19.000 companies employing in excess of 1.000.000 staff in logistics, freight forwarding and customs services. Multinational, medium and small freight forwarders and Customs agents are all within its membership, making the organisation the most representative of its kind.

SOURCE: CLECAT (European Association for Forwarding, Transport, Logistics and Customs Services)


Ocean liner shipping

An EU Emissions Trading System for Shipping Would Undermine a Global GHG Solution

Sept. 11, 2020 - On Sept. 10, the World Shipping Council published a paper highlighting serious concerns for maritime trade and global efforts to reduce greenhouse gas emissions if the EU expands its Emissions Trading System (ETS) to include international shipping. The WSC paper focuses on a critical threshold issue for application of the EU ETS to shipping: geographic scope.

The most-discussed geographic application of the EU ETS to shipping is to mirror the scope of existing EU legislation on Monitoring, Reporting and Verification (MRV) of carbon emissions. The EU ETS has been described as a “regional” system, but bringing international shipping into that system using the MRV scope would regulate the operation of ships on several of the world’s seas and oceans, including on the high seas and in waters adjacent to non-EU nations.

“This question of the geographic scope of any ETS system for shipping must be addressed before the European Commission can turn to the many technical details that would be involved in creating such a system. If the current MRV geographic scope is used, a majority of the emissions covered by the system would occur outside EU waters, in many cases from voyages extending thousands of miles across the globe,” said WSC President and CEO John Butler.

Butler continued: “The cargo concerned is not just EU imports and exports; it is also the imports and exports of the EU’s trading partners. This will create trade tensions and raise legal and diplomatic concerns about the geographic reach of a unilaterally imposed emissions charge. The EU would be well advised to avoid extraterritorial application of the ETS.”

If the geographic scope is the same as the MRV GHG reporting regime, the system would also cover significant cargo volumes that are not part of EU trade at all, but are transshipped through EU ports. This would include numerous less-developed countries (LDCs) that would face an extra charge on their trade simply because their goods are routed through the EU. A charge would be levied first on the cargo as it sails into an EU port and then again as the same cargo leaves the EU on another vessel to its ultimate destination.

Equally troubling, the international tensions and disruption caused by an EU ETS with extraterritorial effect would harm the prospects for a comprehensive global solution through the International Maritime Organization.

“Ironically, far from galvanising efforts in the IMO to implement global measures to curb CO2 emissions, an EU ETS is more likely to prevent a global solution. It is unlikely that a government that has set up its own revenue-generating emissions system will dismantle it in favour of a global one,” Butler observed.

Butler concluded: “The EU wants to lead the effort to decarbonize shipping, and that leadership needs to be channelled through the IMO, which is the only place where a global solution can be reached.”

View or download the WSC’s discussion paper: Shipping in the EU Emissions Trading System (ETS): An Evaluation of Regional Regulations Applied on an Extraterritorial Basis

The World Shipping Council's goal is to provide a coordinated voice for the liner shipping industry in its work with policymakers and other industry groups with an interest in international transportation. To learn more, visit:

SOURCE: World Shipping Council


Growing Frustration Amongst European Forwarders at Times of Crisis

Sept. 9, 2020 - Recently, various shipping consultants reported in glorious terms about the multi-billion-dollar profits made by carriers at times of the global pandemic. Capacity discipline brought a silver lining to carrier circles: Maersk’s Q2 net profit increased year-on-year from $154m to $443m, despite volumes plunging 16%; Hapag-Lloyd’s net profit increased from $56m to $287m, alongside an 11% drop in volumes; and HMM’s net profit was $23m, compared to a $54m loss in Q2 19, even though its liftings fell 22%. Sea-Intelliigence noted that the combination of stronger rates and lower operating costs had helped those carriers increase their profits by 160%.

Drewry has concluded that ‘shippers should get used to a much more concentrated marketplace in which shipping lines have more power’, while warning that the container shipping costs and service levels are ‘at risk of spiralling out of control.’  The massive withdrawal of capacity since the start of the COVID-19 pandemic – 468 blanked departures on east-west trades – coincided with extremely low schedule reliability of the remaining sailings. Consequently, blanked sailings and poor schedule reliability resulted in widespread rollovers of containers. Whereas some carriers now offer no-roll or guaranteed services, they do so at premium rates, which basically is just a normal service offering at increased price.

Apart from the increase in freight rates, there are other costs implications caused by the operational problems for shippers and forwarders. The costs for the freight forwarding industry are huge: they range from the re-booking of shipments to sometimes even losing customers because there is simply no service made available by carriers.  Let me emphasize that bookings made by forwarders are not some sort of flexible agreements with carriers. At the time of booking forwarders receive a booking confirmation with a clearly identified vessel.  Imagine the extra costs and stress for the logistics sector caused by the blanked sailing and rolled shipments by seeking to make new bookings, detention and demurrage costs, as well as other charges, and financial booking costs.

Carriers blame the pandemic. But at a time when European industry is in a serious recession, and when the competitiveness of European exporters and importers and their service providers – collectively employing far greater numbers of people than carriers, contributing far more to economic prosperity and making bigger investments in Europe, is at risk – everybody is at the mercy of carriers, without tools or means to control their behaviour, at least in Europe.

This comes at a time a few months after joint efforts with shippers and terminal operators to bring liner shipping back under normal competition rules.  Today’s carrier behaviour is excessive and frustrating for many. The prolongation of the Consortia Block Exemption Regulation (CBER) was a missed opportunity to help the container shipping industry become more responsive in its role of serving European exporters and importers, trading in the global marketplace. Whereas carriers are saying that they have the ambition to become more service-minded, the reality proves to be different.

When calling for a repeal of the exemptions from the normal competition rules for consortia, CLECAT made the point that the operational activities that the CBER purports to facilitate are mainly exchanges of information between competing carriers, necessary to give effect to vessel-sharing agreements (VSAs). It is well known that nowadays container carriers have the possibility to exchange data within the framework of their VSAs. The reality today is that carriers operate in alliances with no competition from outside on the main east-west trades with three container shipping alliances that cover 95% or more of the East-West traffic. Modern digital tools allow them to jointly keep space below demand, which is the way to make money.

As so eloquently described by August Braakman in Lloyd’s List, ‘the effects of the exchange of strategically sensitive data within the framework of conference and discussion agreements are significantly reinforced within VSAs/alliances that make use of advanced state-of-the-art logistics solutions and the ensuing semantic interoperability of the computer programmes used by participating lines and possible other actors involved, both towards one another and towards the BI&A system that governs the logistics chain.’  He concludes that the shipping sector uses digitalisation as a vehicle for exchanging strategically sensitive information, which makes exemptions from competition rules redundant.

CLECAT and others also concluded that the evidence to date is that the carriers have used the CBER as a basis to extend the exemption to Voluntary Discussion Agreements, which include prices. The Commission has in our view overlooked the impact of the fundamental drivers of collaborative behaviour in the container shipping industry.  Not willing to look at the alliances, as they have a market share beyond 30%, the fact that the different shipping consortia and alliances are heavily intertwined allowing detailed coordination between them was largely ignored.

The enthusiasm with which the Commission supported the case for carriers to be granted continued generous exemptions from European competition law took us by surprise, in particular since the Commission has no adequate means of monitoring compliance or behaviour. Meanwhile, the surging freight rates seen on the transpacific trade has gained the interest of the Chinese Ministry of Transport, which has reportedly written to six of the largest carriers seeking “an explanation” for the rises. Moreover, the US FMC Commissioner wants a closer review of the blank sailing monitoring.  In the US, regulators analyse the impact vessel capacity changes and capacity projections have on freight rates.

The distortion is more widespread as also highlighted by the International Transport Forum. Following the clearing of state aid of the maritime industry in Italy, CLECAT called on EU Commissioner Vestager to clarify the state aid rules in order to avoid risks of distortion of competition and to ensure a level playing field.

There are now clear cases that more vertically integrated carriers can benefit from tax schemes, which provide incentives for carrier haulage (door-to-door transport arranged by the carrier) rather than merchant haulage (where door-to-door transport is arranged by the shipper or freight forwarder), which obviously is not acceptable to us.

CLECAT now urges European policy makers to address some important questions: Should the EU continue to give excessive privileges to the shipping sector operating as oligopolies at mercy of European supply chains? Should the EU and Member States continue to give state aid and other subsidies – such as tonnage tax – to shipping companies, which are through acquisitions in the supply chain extending business activities where they compete with logistics companies that are not subsidised? Are current EU competition rules still fit for purpose in view these market developments?

SOURCE: CLECAT (European Association for Forwarding, Transport, Logistics and Customs Services)

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