Earlier this week, the Washington, D.C.-based Surface Transportation Board (STB), an independent adjudicatory and economic-regulatory agency charged by Congress with resolving railroad rate and service disputes and reviewing proposed railroad mergers, issued what it called a unanimous and significant deregulatory and pro-competitive action, in a Notice of Proposed Rulemaking (NPRM).
That action, it explained, is in the form of a repeal of 49 CFR part 1144 that governs reciprocal switching, which the STB said governs the prescription of reciprocal switching through routes and through rates. STB officials explained that this NPRM would, “remove regulatory barriers that limit options for American businesses critical to our economy, including both shippers, such as manufacturers, utilities, and agricultural companies, and railroads seeking to innovate and compete,” adding that, “n removing these regulations, the Board would employ reasoned case-by-case approaches.”
The STB added that while Congress granted it authority over competitive access more than 40 years ago under the Staggers Rail Act, the existing regulations—adopted in 1985—have effectively constrained that authority and have never been used to grant relief.
What’s more, the STB observed that changes in law, industry structure, and stakeholder views make part 1144 outdated, adding that repealing it would restore the Board’s discretion to evaluate competitive access issues based on public interest and practical considerations, consistent with congressional intent. It also said that the proposal responds to calls from rail shipper groups and aligns with the Department of Justice’s Anticompetitive Regulations Task Force and Executive Order 14192, which encourage reducing unnecessary regulatory burdens. STB leadership emphasized that the action would promote market forces, competition, innovation, and supply chain resilience.
“This proposal would embrace market forces, enable meaningful choice for American businesses as provided under the statutes, and eliminate regulatory barriers unnecessarily stifling rail competition,” said STB Chairman Patrick J. Fuchs. “By proposing to remove these regulations, the Board would return to the text of statutes that advance excellence, entrepreneurship, and innovation to support economic growth and supply chain resilience.”
The STB’s proposal received a strong endorsement from the American Chemistry Council (ACC).
ACC said it welcomes the STB’s proposed rule to unlock competitive freight rail service by eliminating regulatory restrictions that limit options for freight rail shippers, calling it a commonsense, pro-competition action that aligns squarely with President Trump’s economic and deregulatory agenda by unleashing market forces to help put freight rail back to work for U.S. manufacturers, farmers, and energy producers.
“By eliminating outdated rules that impose an unreasonably high burden on shippers, the Board will carry out Congress’s clear directive to allow reciprocal switching when it is needed to ensure freight rail competition, ACC said. “Reciprocal switching gives shippers captive to a single railroad access to a second carrier at a nearby interchange, providing access to competitive service options. Under the current framework, no rail customer has ever successfully obtained reciprocal switching —a clear sign that current restrictions have failed. The new proposal would allow shippers to seek competitive access through a case specific review by the STB.”
Supply chain consultant and LM contributing editor Brooks Bentz said that reciprocal switching has been a relatively hot topic for decades, noting it’s an effort to give shippers more options, meaning they get to play one carrier off again another in hopes of better pricing.
“The carriers are not big fans, for reasons that should be obvious,” he said. “You might even think of it as ‘Open-Access Lite.’ There are going to be cases where it adds cost to the primary carrier without revenue that will be as compensatory as they’d want, so their opposition about having money removed from their pocket is understandable. Of course, it doesn’t have to be about price. It could also be about service and capacity, meaning if one carrier’s network is more fluid than the others, it may be an incentive to shift. Same for car supply. If one carrier is short on cars and the other is not, it could be impactful. Naturally, you could take some of the sting away by leaving price off the table, mandating that the rates be equalized, no matter which carrier you choose, so their opposition competitive aspects are focused on equipment and service, rather than rates. That probably not a popular option, as rates will drive much of the attractiveness of this.”
Last July, a decision made by the United States Court of Appeals for the Second Circuit vacated the adoption of final reciprocal switching rules adopted by the STB in April 2024.
Reciprocal switching has long been a prevalent topic in industry circles. As previously reported by LM, STB’s previously proposed reciprocal switching legislation offered up in 2016 would allow a rail shipper to gain access to another railroad if the shipper makes certain showings. As has been defined by the STB, reciprocal switching is 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. And the second railroad compensates that railroad that has physical access in the form of a per car switching charge, with the shipper facility gaining access to an additional railroad.
When the final reciprocal switching rule was adopted, STB officials said that under this final rule, railroad shipper customers within a terminal area that have access to only one Class I rail carrier may petition the STB to order a reciprocal switching agreement when the customer’s rail service falls below specified levels. It added that Board-prescribed reciprocal switching agreements will allow shippers or receivers to gain access to an additional line haul carrier, while still allowing the incumbent carrier to compete for the customer’s traffic. It also stated that reciprocal switching orders by the Board will be for a minimum of three years and a maximum of five years, also noting that it considers the reciprocal switching rule to be a significant step in incentivizing Class I railroads to achieve and maintain higher service levels on an ongoing basis by permitting a competing line haul carrier to offer better service to win the customer’s business.
This rule was challenged in court by Class I railroad carriers, CSX and Union Pacific, and Canadian National subsidiaries Grand Trunk Corporation and Illinois Central Railroad Company on various grounds, including: exceeding the STB’s authority under the Staggers Rail Act of 1980, governing reciprocal switching; and overstepping the STB’s ancillary powers, calling them arbitrary and capricious.
“As presented to us, the rail carriers do not challenge the application of the Final Rule in any particular instance,” the judges said in the decision. “Indeed, as far as we are aware, the Board has not yet prescribed a reciprocal switching agreement under the procedures adopted in the Rule. The carriers instead seem to challenge the Final Rule more on its face, inviting us to conclude that the Board’s promulgation of the Rule itself exceeds the authority Congress conferred in the Staggers Rail Act to order reciprocal switching.”
And they added that this dispute stems from Class I railroad service-related “widespread concerns,” especially coming out of the pandemic, which led to an April 2022 STB hearing. Which then led to the STB requiring Class I railroad carriers to submit service recovery plans explaining the specific actions each carrier planned to take to improve its service, as well as the STB issuing a Notice of Proposed Rulemaking for comments on a new set of regulations focused on improving service by increasing competition.
