STB issues final rule allowing reciprocal switching

The Surface Transportation Board yesterday announced it adopted its final rule for reciprocal switching, which will allow shippers and receivers to petition the board for an agreement when they receive inadequate rail service.

Under the final rule, customers within a terminal area who have access to only one Class I rail carrier may petition the board to order a reciprocal switching agreement when the customer’s rail service falls below specified levels, STB officials said in a press release. The board approved the final rule by unanimous vote.

STB-prescribed reciprocal switching agreements will allow shippers or receivers to gain access to an additional haul carrier, while still allowing the incumbent carrier to compete for the customer’s traffic. Reciprocal switching orders by the board will be for a minimum of three years and a maximum of five years.

The final rule modified what the STB recommended in its notice of proposed rulemaking issued in September 2023. The board proposed the rule following complaints from rail customers about inadequate rail service. Since its initial rule proposal, the board received many comments from interested parties, STB officials said.

"Given the repeated episodes of severe service deterioration in recent years, and the continuing impediments to robust and consistent rail service despite the recent improvements accomplished by Class I carriers, the board has chosen to focus on making reciprocal switching available to shippers who have suffered service problems over an extended period of time," said STB Chairman Martin Oberman in a prepared statement.

The final rule identifies three performance standards: service reliability, service consistency and inadequate local services. If a rail carrier's service to a customer falls below any of those standards, the customer may petition the board to prescribe a reciprocal switching agreement, assuming the other parameters of the rule are met.

"I am confident that shippers who are suffering service below the rule's standards and who are otherwise eligible will have relatively little trouble in obtaining switching orders under this rule," Oberman said. His full statement can be read here.

The board's full summary of the final rule can be read here.

The Association of American Railroads issued the following statement in response to the board's ruling: "While we review this lengthy and complex final rule, it is important to note that from the outset, railroads have been clear about the risks of expanded switching and the resulting slippery slope toward unjustified market intervention. In the proposed rule, the STB was prudent to reject previous proposals that amounted to open access."