Reciprocal Switching: One Industry, Two Sides

Reciprocal switching is one of the most debated topics in rail. What does it mean, exactly? As defined by FreightWaves, “Reciprocal switching occurs when a shipper has access to one freight railroad but wants access to a nearby competing freight railroad in order to cultivate a competitive pricing environment.”

Last week, the Surface Transportation Board held a hearing on a 2016 proposal that would “​​require railroads to establish arrangements for shippers to have access to nearby competing carriers when no other competitive option exists.” When it comes to reciprocal switching regulations, there are two schools of thought, and they pit shippers and railroads against each other. Supply Chain Dive has broken them down.

Shippers see reciprocal switching as a way to prevent disruption and delays, and thus save time and money. The Supply Chain Dive article cites that more and more companies are moving their shipments to trucks, all in an effort to avoid rail delays. Both LyondellBasell and Kraft Heinz have experienced major site shut-downs, and consider reciprocal switching a tool to provide competitive service options, and potentially more competitive rates.

On the other side of the argument are the railroads, which believe reciprocal switching would only exacerbate service disruptions. They believe switching would take their time and effort away from improving rail service, without addressing the root problem — AKA using more resources to move the same amount of traffic. The railroads fear a less “agile” network. STB is continuing to take comments, and will come to a decision soon.

Our April 26th webinar focused on reciprocal switching as one of its topics. Our panelists, FTR’s VP of Intermodal Todd Tranausky, and RailState’s Co-Founder and COO, John Schmitter, discussed reciprocal switching’s long regulatory journey. While the proceedings have been active since 2011, there’s been a recent boost in momentum around reciprocal switching. Watch our full webinar here, and read our webinar blog post to learn more about the history, present, and future of this hotly debated topic in rail.

Read the full Supply Chain Dive article here.