The United States economy depends heavily on a complex system of flight paths, highways, and rail lines to import and export products. During the past few years, serious supply chain disruptions have threatened to undo how we handle goods movement from point A to point B. Slowdowns and disruptions are partly responsible for rising food costs, a lack of essential supplies, and clogged ports. 

The COVID-19 pandemic triggered international shutdowns of nearly every transportation system, followed by widespread product shortages fueled in part by massive worker shortages. As a result, the transportation industry is grappling with disruptions and trying to overcome system-wide challenges that are more complicated than ever. 

Unreliable and inconsistent rail service caused by unfilled car orders, an increase in origin dwell time, nonexistent customer service, missed switches, tight car supply, and delays in transportation for bulk traffic and carload are major problems for the railroad industry and shippers. 

New legislation may help solve some of our biggest transportation problems, including rail delays. 

What’s Causing Rail Delays?

Rail delays have many root causes, nearly all of which started with widespread shutdowns at the beginning of the global COVID-19 pandemic. Since the start of the pandemic, a lack of workers, port congestion, and bad weather have deepened the problem. As of the summer of 2022, the Senate and House have urged leaders in the transportation industry to work harder to solve the root causes of rail delays that are frustrating the entire shipping industry while causing devastating chain reactions. 

Railroad Worker Shortages

Without enough railroad workers, it’s impossible for the transportation industry to respond to market changes occurring since the beginning of 2020. Railroad executives hypothesize that a projected increase in the number of railroad workers during the second half of 2022 could help ease some of the tension. However, it remains difficult to hire conductors and engineers, even though those jobs typically include excellent health and retirement benefits in addition to an annual salary of more than $100,000 per year. 

Current railway employees say that staff cuts during the past few years created an unacceptable working environment as the railroads attempted to implement Precision Scheduled Railroading with trains that are more than two miles long. Minimal boxcar switching, simplified routing networks, and point-to-point freight car movements intended to reduce the number of employees needed may have backfired by inadvertently creating a worker shortage. Overall, the American freight rail workforce is down 20% when compared to pre-pandemic numbers. 

Chassis Shortages

On the west coast, a lack of equipment, specifically chassis, combined with a lack of warehousing capacity is preventing the railroads from easing congestion. A chassis transports containers between rail yards, delivery locations, ports, and container depots. Without this essential piece of specialized equipment, truck drivers have no way to move the containers. A chassis shortage results in delayed turn time and shipping delays that consumers experience as product shortages and longer shipping times. 

What’s Causing Chassis Shortages?

The shortage of chassis and other essential railway equipment is a direct result of plant shutdowns caused by the pandemic during 2020 and a lack of chassis subcomponents, including air tanks, axles, and suspension systems. 

Some of the most congested ports, including Stockton, California, Phoenix, Arizona, and Dallas, Texas, are suffering due to a continually worsening shortage of 53-foot chassis equipment. Long Beach and Los Angeles ports are imposing emergency fees for the most extreme container dwells in an attempt to keep goods moving. 

Weather Problems

Strong winds, severe storms, and debris falling on tracks make it impossible for train operators to repair and maintain equipment. Crosswinds can affect high-profile vehicles, including railcars. Bad weather can lead to delays and may result in last-minute train rerouting. 

How are Rail Delays Affecting Everything?

Although every segment of the supply chain is in the midst of never-before-seen challenges, the rail network is responsible for a huge bottleneck. Severe delays are causing additional problems for shippers, who struggle to get their freight delivered once it arrives at an inland facility. 

The agriculture industry is under unprecedented stress, as chemicals and fertilizer needed to facilitate the summer growing season are difficult to obtain due to rail delays and shipping bottlenecks. In April, the U.S. Surface Transportation Board held emergency public hearings to attempt to solve supply chain problems. Multiple transportation leaders testified that unreliable and inconsistent service had a severe negative impact on shippers attempting to move energy and agriculture products via domestic railways. 

CF Industries, the world’s largest nitrogen fertilizer company, says rail delays have affected farmers all over the midwest and south. These delays drive up already record-setting prices, threatening the future financial stability of farmers all over the country and prompting them to raise prices on crops typically fed to cattle. As a result, food inflation worldwide threatens to drive grocery prices even higher. 

Now, uncertainties about economic stability threaten to add another layer of complicated problems to the already challenging landscape of rail delays. 

During mid and late July 2022, Class I railroads will provide second-quarter financial reports. Experts predict that a push to hire more workers will help ease the current railway bottleneck, but there are many more problems that must be addressed. 

How Do Rail Delays Tie Into the Shipping Reform Act?

The Shipping Reform Act of 2022 is a major overhaul of shipping regulations, and it includes the most extensive changes of any reform since 1998. President Biden signed the Ocean Shipping Reform Act (OSRA) into law on June 16, 2022. The reform includes numerous new rules and a massive initiative to gather information in an attempt to solve current and future transportation problems not limited to rail delays. 

The goal of the new legislation is to promote U.S. exports while increasing the regulatory powers of the Federal Maritime Commission (FMC) in the hopes that shipping bottlenecks will ease over the course of the next few years. 

Chassis Pool Inefficiencies

Intermodal companies, ocean carriers, and shippers argue that the current inefficient way that chassis pools operate is a serious problem for the shipping industry. The Transportation Research Board (TRB) plans to study the current chassis shortage and develop a plan to provide service to motor carriers, railroads, and marine terminal operators to optimize supply chain efficiency. The FMC will publish best practices by April 1, 2024. 

Demurrage and Detention Rules

Shippers say that carriers are not adhering to rules on demurrage and detention, and the current proposed reform gives shippers the power to enforce rules about prohibited practices, including detention charges. 

Unreasonable Refusal to Negotiate

Carriers currently have the ability to ignore any customer they think may be unprofitable, prioritizing the ones most likely to help them make money. The FMC will work closely with the U.S. Coast Guard to define unreasonable refusal to negotiate, which shippers complain is hurting their ability to move goods. 

Carrier Service Discrimination

Shippers also say that carrier service discrimination against smaller shipping operations and exporters is unfair. The FMC plans to define unfair discriminatory methods so they can identify them and prevent carriers from creating a situation where less powerful shippers can’t move their goods. 

CDL Licensing

A severe shortage of licensed truck drivers holding a CDL created a demand for relaxed licensing and skills testing rules. The Federal Motor Carrier Safety Administration plans to review its discretionary waiver authority included with the August 31, 2021 order to determine whether it resulted in reduced safety. If the FMCSA finds that the order did not reduce driver safety, they will have the power to make the waiver permanent within 90 days of the reform’s enactment. 

Shipping Exchange Platform Registration

The Shipping Reform Act includes long-term goals, as well. Within three years of the Reform Act’s passage, the FMC will develop standards for national shipping exchanges and require any shipping exchange platform, whether electronic, digital, or over-the-counter, to register with the FMC. 

Expansion to Ease Congestion

Within three months of enacting the shipping reforms, the FMC, U.S. Maritime Administration, and the U.S. Department of Transportation will meet with key players in the shipping industry to identify non-federal and federal land that may be useful for storing and transferring cargo containers to help ease congestion at U.S. ports. 

Comptroller Report on Technology’s Potential to Ease Port Congestion

The freight industry has identified ways in which they can adopt technology to help lower cargo handling costs, ease the labor burden, and remove regulatory barriers. The comptroller general will prepare a report and submit it to Congress showing an assessment of whether such technology would have the intended effect on port congestion and railway shipping challenges. 

Transportation Leaders Are Hopeful That New Shipping Reform Will Ease Rail Delays

The logistics industry is under a tremendous amount of pressure, as new rules threaten to impose modernized regulations and fines on any entity that creates unnecessary shipping delays, either directly as a result of their actions or indirectly. 

The Shipping Reform Act of 2022 aims to inspire movement in the industry most responsible for widespread rail delays while modernizing the way we move goods from the port to their final destination. 

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