WASHINGTON — The Railway Supply Institute, the trade group representing the companies that build and lease freight cars, today asked federal regulators to take action that would prevent the North American boxcar fleet from hurtling over a looming retirement cliff.
The problem: Boxcars are being scrapped at a faster rate than they are being built. The trend is expected to accelerate, with 22% of the current boxcar fleet set to age out by 2030, which would create a shortage of boxcars and shift freight to trucks.
The culprit, RSI says, is the 1994 car-hire Arbitration Rule, which keeps boxcar leasing rates artificially low and therefore reduces incentives for new construction. The default rate, as low as 17 cents per hour for a boxcar that costs more than $150,000 to build, has been stagnant for decades.
“America is plunging toward a boxcar cliff as many cars are hitting their 50-year expiration date and not being replaced because the Arbitration Rule suppresses boxcar rates far below competitive levels,” RSI President Patty Long said in a statement. “The current car hire system discourages investment in this integral component of our rail transportation fleet, with boxcars providing efficient shipping for crucial American commodities. We can’t afford to fall off the boxcar cliff. Reform is needed now.”
In a filing today, RSI has asked the Surface Transportation Board to review the Arbitration Rule. After receiving comments on RSI’s petition, the board will determine whether to reopen the Interstate Commerce Commission’s Arbitration Rule decision and solicit comments on whether to condition or terminate the approval.
The Arbitration Rule includes a provision allowing the Association of American Railroads’ Equipment Assets Committee to consider and vote on amendments to the rule. TTX, which is owned by the Class I railroads, is exempt from the Arbitration Rule.
The AAR panel has no incentive to revise the Arbitration Rule, RSI says, because changes would allow investors in railroad boxcars to compete on relatively equal footing with TTX.
RSI in 2019 proposed changes to the Arbitration Rule, but the Equipment Assets Committee rejected the measure.
Not everyone agrees a boxcar shortage is looming.
TTX says the ratio of fleet size to loads has remained the same due to declines in the number of boxcars and boxcar loads, and therefore no rule changes are necessary.
High-capacity boxcars are replacing old, lower-capacity cars, meaning that the industry does not have to replace retiring cars on a one-for-one basis, TTX says.
In the past two decades, boxcar loads have declined by 44%, according to RSI, while the fleet has shrunk by 39% since 2008.
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