Rail Transit Risks

UPDATE November 13, 2022: additional voting results from individual labor unions have come in with one additional union ratifying the agreement and one additional union rejecting the agreement, bringing the total tally to seven unions having ratified the agreement and two unions having rejected the agreement. There are three additional unions that have not yet submitted voting results.

Of the remaining unions, one will have announce voting results by November 14, the other two will announce voting results by November 21. It is noteworthy to mention that the two unions with results announcements no later than November 21 are the two largest unions in terms of the number of workers represented. The third largest union by number of employees represented has already rejected the tentative agreement.

US Rail Strike “Averted”

In early September 2022, rumblings of a potential United States railroad worker strike circulated throughout the industry and made national headlines. The strike would have impacted most rail freight operations across the US and resulted in significant supply chain disruption. An 11th hour agreement brokered by the Biden administration tabled the potential walkouts.

This pending agreement must now be ratified by 12 labor unions who represent most US railroad workers. The voting window associated with ratification will run through November 20th. Six of the 12 unions have ratified the agreement and one of the 12 unions has rejected the agreement at the time of this writing.

Factors driving the potential labor strike include widespread reports by railroad workers of a lack of work-life balance and equitable pay increases. News outlets specifically cite current attendance policies established by railroads and the lack of any pay increase since 2019 as key points of contention.

Adding to these challenges is the more than a 25% decline in the number of railroad workers over the past six years¹. A variety of reasons are cited for the decline including the COVID-19 pandemic, compensation, and efficiency measures taken by railroads referred to as Precision Scheduled Railroading (PSR)².

Bevy of Bottlenecks

Railroads accounted for 27% of US freight ton-miles in 2020 based on a dataset from the US Department of Transportation’s Bureau of Transportation Statistics³. Most rail freight is moved by seven “Class I” railroads which operate along independent networks of privately owned track. The individual railroads only operate in geographies where they have owned infrastructure. This results in most regions across the US with access to one or two of the “Class I” railroads locally.

Shippers can interchange between the individual Class I railroads through a process known as reciprocal switching⁴. These switches are often labor intensive, time consuming, and only considered in situations that make economic and operational sense for all parties involved.

That said, rail transportation has several operational efficiencies that must be considered in conjunction with the logistics hurdles.

For certain movements, rail freight’s comparative capacity makes shifting to alternative means of conveyances difficult under the best circumstances. Trucking already accounts for more the 40% of the US freight ton-miles⁵ and many regions do not have direct access to waterway transportation. Combining this with recent decreases in trucking employment numbers⁶ and deteriorating conditions along the Mississippi River⁷, a prospective transfer from rail becomes an even greater logistics hurdle.

Risk Topics

Did you know?

• A standard boxcar can carry 70 to 100 tons of freight vs. a 53’ road trailer which can carry only 21 to 23 tons.
• A study on Class I railroads found that average train length increased more than 20% from 2008 to 20175.
• There is no legal limit on how long a freight train can be. A 7,500-foot-long train can contain more than 125 railcars.
• It would take more than 500 trucks to replace a 125-car train.

Disruptions to rail service could put a plug in the bevy of bottlenecks already prevalent along US freight lanes. Equipment shortages, tied to an imbalance of import to export volumes8, are leading to growing port congestion and widespread delays of up to 14 days to secure trucking capacity⁹.

Cargo Considerations

Developing trends in rail transportation may lead to increased transit times for both intermodal and rail freight. Congestion at seaports will only increase if there are disruptions in rail service. Railroads may need to increase the number of transfers within individual networks to provide labor relief. Either outcome could increase railcar dwell times during the normal course of transit. This would increase exposure to a variety of static cargo risks depending on where railcars may need to be staged. Theft and weather factors should be specifically considered in anticipation of service disruptions to rail transportation.

Securing potential staging areas within track networks is not always possible. In many cases railroad infrastructure is in remote locales or distributed across such a large area of land that unfavorable security conditions cannot be avoided. The remote nature of railroad operations also increases exposure to certain weather-related perils. A common factor is the wide range of ambient temperatures that a railroad will operate in. The chances of encountering severe or unfavorable weather are more likely with increased transit and/or staging times.

If increases in switching operations are needed, an increase in freight handling will occur. Reloading of railcars is unlikely but an increase in humping and/or shunting during transit is plausible. These operations involve breaking apart and recoupling trains to accommodate overall network demands. Shunting is completed using locomotives to maneuver cars around a transfer yard. Humping yards use gravity and switchgear to accomplish the same goal.

The forces from switching operations can result in freight experiencing significant transfer forces. The American Association of Railroads rules for Open Top Cars prescribe longitudinal restraint values that are nearly four times the requirements for truck freight^{10, 11}. While forces encountered will vary depending on equipment used, repetitive exposure to transfer forces during switching actions could compromise cargo securing if the load restraint is not applied with rail network transfers in mind.

Best Practice

Given current uncertainties, shippers are encouraged to review SOPs and identify exposures which may be elevated through transit delays or increased handling. The following are some best practices recommended by Zurich Marine Risk Engineering to help control the developing exposures described above:

• Confirm subcontracting language within carrier agreements, prohibit when possible
• Develop contingencies if preferred transit modes become suddenly unavailable
• Ensure that cargo securing schemes are compliant with mode specific standards
• Utilize tracking devices on select shipments to identify lane specific bottlenecks

The application of these best practices is heavily dependent on the cargo and freight lanes in question. For commodity or lane specific guidance please contact Zurich Marine Risk Engineering.

References

1. Hsu, A. (2022, September 14). How an attendance policy brought the U.S. to the brink of a nationwide rail strike. 90.5 WESA. Retrieved October 14, 2022, from https://www.wesa.fm/2022-09-14/how-an-attendance-policy-brought-the-u-s-to-the-brink-of-a-nationwide-rail-strike
2. U.S. Bureau of Labor Statistics. (n.d.). Employment in rail transportation heads downhill between November 2018 and December 2020 : Monthly Labor Review. U.S. Bureau of Labor Statistics. Retrieved October 14, 2022, from https://www.bls.gov/opub/mlr/2021/article/employment-in-rail-transportation-heads-downhill-between-november-2018-and-december-2020.htm
3. U.S. ton-miles of freight. U.S. Ton-Miles of Freight | Bureau of Transportation Statistics. (n.d.). Retrieved October 14, 2022, from https://www.bts.gov/content/us-ton-miles-freight
4. Forced switching is forced inefficiency - association of American railroads. (n.d.). Retrieved October 14, 2022, from https://www.aar.org/wp-content/uploads/2022/02/AAR-Oppose-Forced-Switching-Fact-Sheet.pdf
5. GAO-19-443, rail safety: Freight trains are getting longer, and ... (n.d.). Retrieved October 14, 2022, from https://www.gao.gov/assets/gao-19-443.pdf
6. Kingston, J. (2022, October 7). Truck transportation jobs walloped in September: BLS Data. FreightWaves. Retrieved October 14, 2022, from https://www.freightwaves.com/news/truck-transportation-jobs-walloped-in-september-bls-data#:~:text=Truck%20transportation%20jobs%20in%20September,which%20truck%20transportation%20jobs%20dropped.
7. Good, K. (2022, October 7). "backups and bottlenecks" on Mississippi, as world food prices fell in September. Farm Policy News. Retrieved October 14, 2022, from https://farmpolicynews.illinois.edu/2022/10/backups-and-bottlenecks-on-mississippi-as-world-food-prices-fell-in-september/
8. McCown, J. D. (2022, September 23). Inbound containers unchanged at 0.0 percent in August. LinkedIn. Retrieved October 14, 2022, from https://www.linkedin.com/pulse/inbound-containers-unchanged-00-percent-august-john-d-mccown
9. Port updates. Hillebrand. (n.d.). Retrieved October 14, 2022, from https://www.hillebrandgori.com/port-updates?portareas=north-america&portcountries=us
10. Association of American Railroads. (n.d.). AAR Open Top Loading Rules Manual. SECTION 1 General Rules for Loading All Commodities. Retrieved October 14, 2022, from https://my.aar.org/OTLR/Documents/Section%201/Section1_20200825.pdf
11. Cargo securement rules. FMCSA. (n.d.). Retrieved October 14, 2022, from https://www.fmcsa.dot.gov/regulations/cargo-securement/cargo-securement-rules

The information in this publication was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events, or circumstances or otherwise. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy. Risk Engineering services are provided by The Zurich Services Corporation.

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