UPS opposes STB's proposed reciprocal switching rule

United Parcel Service (UPS) will consider ending its use of railroads for the transportation of containers and trailers if the Surface Transportation Board (STB) adopts new regulations that allow for competitive or "reciprocal" switching, the company said in a letter to the board.

UPS late last week wrote to the board to express its opposition to the STB's proposed rule that would require reciprocal switching, which would allow shippers to switch cargo among large railroads if the shippers can show the arrangement is necessary to provide competitive rail service.

In its letter addressed to STB Chairman Daniel Elliott III and board members Deb Miller and Ann Begeman, UPS noted that it has been using truck-rail intermodal service for nearly 40 years. If finally implemented, the STB's proposed reciprocal switching rule would "lead to decreased network velocity, diminished capital investments into the freight-rail network and deteriorating rail intermodal service levels," UPS Vice President-Corporate Transportation Kenneth Buenker wrote.

Ultimately, if rail intermodal service levels fall below UPS standards, "we would have no business option but to move these containers and trailers back onto the highway," the letter stated.

The letter also noted that UPS moves 3,000 containers and trailers on the rail network each business day, making it one of the largest corporate customers of the Class Is.

The STB's proposed rule involves "reciprocal" or "competitive switching," which refers to a situation in which a railroad that has physical access to a specific shipper facility switches rail traffic to the facility for another railroad that does not have physical access, according to the STB. The second railroad pays the railroad that has physical access, typically in the form of a per-car switching charge.