Transportation Systems 03 - Transportation by Rail

Transportation Systems
Module 3: Transportation by Rail

Facilitator Name/Date/Etc
Transportation Systems – Module 3 –Transportation by Rail

Learning
objectives
• Be aware of how railways operate, generate
revenue, and the common services that are provided
• Understand the industry structure including
infrastructure, service providers, and customers
• Understand the primary types of equipment used in
rail transportation
• Understand how rail transportation rates are
formulated including density factors
• Describe the primary documents used in rail
transportation and their purposes
• Be aware of the legislation that regulates rail
transportation
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Goes Here Transportation Systems – Module 2 –Transportation By Water
The railways have played a critical role in developing Canada’s regions.
They have often been regarded as instruments of economic and social
development and, until the 1960s, were subject to tight monopoly-
type regulation.
Page 3-1

Railways

Common Carrier Railways
• Class I railways are currently defined as CN Rail, CP Rail, and VIA Rail Canada.
Class 1 railways are railways with gross revenue in excess of $250 million.
• Class II Railways are all carriers (other than CN Rail, CP Rail, and their subsidiaries)
whose average gross revenues from their Canadian rail transportation operations
are equal to, or exceed, $500,000.
• There are a number of Class III and IV railways, defined as having revenues of less
than $500,000 per annum. In total, they account for less than one percent of
Canadian railway revenues.
Page 3-9

Class I Rail Carriers
• Canada’s Largest transcontinental • Serves 6 Provinces - 80% of

Railroad business is west of the Great Lakes
• Operates more than 19,300 rout • Operates more than 14,000 rout
miles of track in Canada & the US miles of track in Canada & the US
Page 3-9

Rail Transport Services
• Statute requires that railways, as common carriers, provide the necessary
“accommodation for traffic”
• Pursuant to the Railway Act, it was stipulated that:
The company shall, according to its powers, a) furnish, at the place of starting,
and at the junction of the railway with other railways, and at all stopping places
established for such purpose, adequate and suitable accommodation for the
receiving and loading of all traffic offered for carriage upon the railway

Industry Structure

Rail Transfer Facilities/Distribution Centres
• A location at which large volumes of a commodity
(in carloads and trainloads), are re-sorted,
perhaps repackaged, and forwarded to users.
• Transfer facilities reduce the transit time between
production locations and their markets
• The railways benefit from improved railcar
utilization, and economies of scale to compete
with trucks.
Page 3-2

• Transfer facilities are close to the ultimate

marketplace
• Rail-owned or privately held
• Handle steels, lumber, resins, machinery, and
liquids.
• Shipments can be distributed in intermodal
movement by truck, rail or water
• Lower freight rates
Page 3-2

• Bulk commodities can be handled

• The railway monitors operations closely,
ensuring tank cars are cleaned and inspected
before shipment
• Rates: rail haul, transfer from railcar to truck,
and movement to customers’ storage facilities.
• Overall freight rates: highway distance
(terminal – customers’ locations)
Page 3-2

Rail Intermodal Terminals
• Marine container terminals form a network of
import/export intermodal operations.
• Inland terminals are junction points for
connections with trucks for the pickup and
delivery
• Most intermodal terminals serve a dual
function: the transfer of containers and the
loading or unloading from rail cars for
piggyback trailers.
Page 3-3

Rail Intermodal Transitions
• Circus loading – named after the historic practice of getting the wagons of
traveling shows from town to town, requires a stub track with a ramp at the end
• Side-loading – normally done with a large fork-lift truck, designed to raise
containers from the top instead of the bottom, or lift containers with the use of
large forks
• Gantry loading – accomplished with a mobile overhead crane that straddles
both the track and adjoining roadway; can handle either containers or trailers.
Page 3-4

Distribution terminal services
Loading and unloading
• The owner or shipper/receiver must load and
unload all carload freight
• Charges: team tracks for un-and loading carload
freight, railway warehouses, or railway facilities in
the road-haul rates.
• Carload freight in pieces or packages and in bulk
• Unload freight liable to contaminate or damaged
Page 3-11

Storage
• Holding of inbound or outbound freight in sheds,
which are to handle short-term storage
• Railways are charged a higher storage rate to
discourage lengthy freight storage.
• Railway’s liability is to prove negligence in how
goods are stored and charged after 48 hours
• Railways remove goods to the warehouse after
due notice
Page 3-11

Cartage (cước chuyên chở)
• Charges for cartage services were published in tariffs,
and open for public inspection.
• Local contractors can provide required service at
current rates
• More advantageous for the shipper/receiver to arrange
pickup or delivery with a local cartage company.
• Railway line-haul rates are negotiated for local
pickup/delivery charges
Page 3-11

Private sidings
• Sidetrack owned or leased by an industry on which cars
are placed for loading or unloading.
• A firm that receives or ships carload freight in sufficient
volume usually finds it more economical to arrange for a
private siding to service its plant
• The convenience of being able to handle cars on its own
property, usually alongside the shipping or receiving
room, can be an important factor in the prompt handling
of shipments
Page 3-11

Private sidings
• Built by a contractor on the shipper or terminal
land and approved by the railway
• may diverge from a branch line or in a major
center.
• Railways connect private sidings and provide
service under Canada Transportation Act.
Page 3-11

Public sidings
• Sidetrack owned by a railway on which cars are placed for the
use of the public in loading and unloading freight directly
between cars and highway vehicles.
• Provided for shippers and receivers
• Handling of carload traffic
• Vary from single to several cars
• Equipped with heavy lift cranes, platforms, door ramps, and
forklift trucks and be arranged for by the consignee
• Another form: bulk flow or distribution center facilities.
Page 3-11

Switching
• Physical act of moving a single car, or a cut of cars, from one location to another, generally
within the limits of a terminal or station. It can also be a commercial activity for which
charges are assessed.
• Types of switching are:
• intra-plant switching: entail the separate movement of a car from one track to another
within the same plant or industry. The rates are based on a per-car basis.
• inter-plant switching: movement of cars between two branches of the same plant
located at different points in the same terminal.
• reconsigning switching: carload traffic placed on a siding for unloading, and reshipped
in the same car to another siding.
Page 3-12

Enroute Services
Diversion (sự chuyển hướng) is a service extended to shippers under which
carloads, en route to an original destination, are re-directed to another point.
• Shipper changes the car destination while it is in transit
• Additional out-of-line-haul charge: when it is not accomplished on the short-line route to
the new destination.
• One destination change is allowed: carrier agrees to make a diligent effort to affect the
requested alteration or diversion, and not be responsible for change failure.
• Benefit: allows to send goods to a destination before being sold and gives prompt delivery
soon after determining the market conditions.
Page 3-13

Enroute Services
Reconsignment (sự ký gửi lại) refers to any change in the destination after a
shipment has arrived at the billed destination.
• Implied when the original shipment is made
• Changes: name of consignor and consignee, destination, request routing, and from
collect to prepay basis or reverse.
• Shipment is diverted to a second destination: the local rate for the original – first
diversion – final destination.
• Exception: application for restoring original billing after diversion and cars not reaching
the diversion point.
Page 3-13

Enroute Services
Reconsignment (sự ký gửi lại) refers to any change in the destination after a
shipment has arrived at the billed destination.
• Tariff rates will be applied for the shipment reaching the original destination before
giving the diversion instructions to carriers.
• The party giving diversion instructions should establish proof of ownership.
• The order BoL must be surrendered to carriers for endorsement, cancellation, or
exchange.
Page 3-13

Enroute Services
Interswitching: the physical movement of cars, is solely a commercial
concept.
• Interswitching only occurs between a siding and an interchange between two
carriers, with a line-haul movement.
• One key to interswitching prior to 1987, was that it only applied at recognized
“interchanges.”
• The review of interswitching which had commenced prior to the enactment of
the NTA, in 1987, provided the legislators with the views of both carriers and
shippers on the legislative changes required in interswitching.
Page 3-15

Enroute Services
Interswitching: the physical movement of cars, is solely a commercial
concept.
• During 1990, three applications were made to the NTA for an extension of
interswitching regulations beyond the 30 km radius.
• In 2008, the Canada Transportation Act was changed with the passage of Bill C-8.
This will impact requests to have a regulated interswitching rate applied beyond
the 30 km limit.
• Under the CTA, 1996, the Canadian Transportation Agency shall review
interswitching regulations at least once every five years after regulations have
been made.
Page 3-15

Intermodal Services
Domestic services interline rail and road transport in two ways:
• Trailers on flat cars (TOFC) service, moves fully loaded truck trailers on
railway flat cars.
• Containers on flat cars (COFC) service uses special domestic containers to
transport general freight and consolidate less-than-full loads for long-haul
shipment to rail distribution terminals; such movements are the same as the
movement of marine containers to and from ports.
Page 3-17

Intermodal
Service
Groups

Equipment

Rolling
Stock
Page 3-6

Rolling
Stock
Page 3-6

Rolling Stock
Page 3-6

Railcar Ownership
• The rapid changes in the nature of commodities moved by rail, and the continued
growth in intermodalism, have seen a corresponding change in rail equipment
types being demanded by shippers.
• The cost of rail freight car ownership has been prohibitive for even some of the
largest railroad operating companies.
• To efficiently pool resources for rail car ownership and maintenance, several joint
ventures, such as railcar leasing firms, and shipper cooperatives have been
created.
Page 3-5

Railcar Ownership
• Today, operating railcars are assigned from a pool of cars owned or leased by
shippers and third parties.
• Full maintenance lease including most repairs
• Basic leases only cover the car lease with all maintenance costs borne by the
lessee (the shipper)
• Maintenance of railcars can be assigned to other third-party maintaining or
repairing rolling stock and charging the car owners
• Private car ownership increases with a decrease in Class 1 ownership of railroad
freight cars.
Page 3-5

Roadrailer
• Allows trailers to travel on the highways or rail networks.
• Equipped with air-ride running gear for both highway and rail transit.
• Moved to and from the docks of shippers and receivers by highway and to the
train assembly terminal.
• Ride on wheel trucks with a slack-free coupling, minimizing the risk of cargo
damage.
• Improve efficiency and customers savings
• Reduce highway trailers and emissions, fuel consumption, and traffic congestion.
Page 3-5

Per Diem
• charging another railway for transporting its railcar
• The compensation paid by a railroad to another
railroad for the use of its freight cars. Essentially, it is
a daily rental fee that one railroad pays to another
for the use of its railcars.
• Determined by the owning railroad, the type of
railcar, its age and condition, and the current market
demand for that type of car.
Page 3-7

Per Diem
• Railways in North America agree to interchange cars
• Cars of one railway are frequently sent on through-
route movements between points in Canada and the
United States so that the freight may be delivered
without a trans-shipping en route
• Once the loaded cars move to the tracks of another
railway they are in use and a per diem payment must
be made for them
Page 3-7

Per Diem
• Rather than contribute a share of cars to the
more or less common pool, they find it
cheaper to pay the per diem charges and use
cars of other railways.
• The Association of American Railroad (AAR)
will issue directives ordering all railways to
return foreign cars to their owners once they
have been unloaded.
Page 3-7

Pricing

Rates
• Rail rates are usually expressed in dollars per ton (2000 pounds) or dollars per
tonne (1000 kilograms) or per carload/container
• There are minimum weights that will apply on shipments, depending on the car
supplied
• The term “full visible capacity of the car” means that a closed car is loaded to the
roof line. On an open car, it would be to the top of the sides.
• Rates can be expressed in terms of dollars per “block (insert number) of similar
cars”, or in terms of unit trains of (insert number) of similar cars
Page 3-23

Confidential contracts
The practice of creating private agreements between railways and their customers on
rates and terms
Since confidential contracts were introduced in 1988, certain trends have emerged:
• most contracts are for one year or less
• the number of evergreen contracts has declined dramatically
Railways have reported downward pressure on rates because of factors such as
confidential contracts, new shipper protection measures, productivity gains, and the
depressed trade climate for many shippers. Rate increases tend to be lower if:
• the shipper is large
• the shipper negotiates a new rate during the year
• the shipper increases the percent of traffic carried under a confidential contract

Demurrage (lưu kho)
• The word “demurrage” stems from the French verb “demeurer” meaning “to
delay.” The word is used to describe a penalty that is incurred for the delay or
detention of the property of another person, or a delay beyond the agreed or
contracted time.
• Railways assess demurrage charges when equipment is held for an extended
period of time
• The charge provides an incentive for loading and unloading cars promptly, and it
thereby improves the use of equipment
Page 3-24

Rates and Tariffs
• The pricing of a service to move a commodity from origin to destination is a
business decision, but sometimes a risk, and although not always immediately
remunerative, at some stage it is anticipated that a profit will be generated.
• In the railway industry, cost of providing the service may dictate a certain
minimum level but freight rates are rarely, if at all, quoted on the basis of a
percentage over cost. The compelling factor in the determination of freight rates
is the value of the service to the shipper.
Page 3-29

Rates: The Classification Method
• In Canada in the 19th century, the major railways adopted the Classification
system which had originated in England for carriage of freight on the highways
and canals and was later embraced by the railways in that country.
• The ratings were numbered from one to ten with rate levels highest at Class 1
and decreasing through to Class 10.
Page 3-29

Rate Forms
• Commodity Point to Point
• Group Rates
• Agreed Charges
• Joint Rates
• Confidential Contracts
• Competitive Line Rates
Page 3-30

Documentation

Bill of Lading
• The Canadian Industrial Transportation Association created a generic bill of
lading that can be used for either rail shipments or truck shipments for traffic
originating in any province but Quebec.
• Many railways have also developed electronically based documentation and
reporting systems. There are a variety of EDI (Electronic Data Interchange) sets
that can be used to transmit shipping instructions. This transactional system
allows shippers to communicate with rail carriers on processes such as release
of loaded or empty cars, export booking, freight invoicing, or shipment weights.
Page 3-19

Reservation System
• The railways have implemented reservation systems to book domestic and import
/ export containers for loading and slots on a train to move the loaded containers
• This has allowed the railways to level out the demand for their intermodal
services and it provides them with better balanced intermodal equipment and rail
cars (well cars)
• Prior to this the levels of demand, equipment, and space varied each week
• The railways also offered certain incentives in the form of rate discounts to
customers to ship on the slower days and in some cases, applied surcharges for
those who wanted to ship on the high demand
Page 3-19

Legislation

National Transportation Act, 1967, 1987 (NTA)
• The NTA, 1967 provided a series of regulations aimed at protecting “captive shippers”
and ensuring railways charged rates that were commensurate with service costs
• The Act initially focused on recommendations proposed by the MacPherson
Commission which outlines a series of proposed objectives for Canada’s national
transportation policy
• The NTA, 1987 provided the framework to deregulate much of Canada’s
transportation sectors including transportation by rail. The NTA, 1987, made major
changes to the rules governing negotiations of rail rates and services.
• Confidential contracts were permitted for the first time, and new dispute resolving
mechanisms such as final offer arbitration were introduced
Page 3-20

National Transportation Act, 1967, 1987 (NTA)
• Shippers were also granted greater access to competing railways through extended
interswitching limits, and competitive line rates (CLRs) — one of the most significant
new provisions of the NTA, 1987
• Through the CLR provision, a shipper (captive to one railway at either origin or
destination and located more than 30 km from an interchange) could ask the railway
to move the shipper’s traffic to the nearest interchange and transfer it to a
competing railway
• The NTA, 1987, contained provisions for the Agency to determine a rate for this
movement if the parties could not agree

Canada Transportation Act, 1996 (CTA)
The Canadian Transportation Act created the
Canadian Transportation Agency, a new
federal department tasked with regulating
railway costing, interswitching, third-party
liability and traffic liability for rail in addition
to similar initiatives with the other modes.
Page 3-22

Module Highlights

Module Highlights
• The Canadian Pacific Railway was the first transcontinental railway in Canada
which played a vital role in connecting Canadian provinces
• Rail transfer facilities are placed at strategic locations close to the ultimate
marketplace of shippers and receivers
• Rail intermodal terminals are the key gateways for containerized cargo for both
CN and CP in Canada and typically serve two functions: the transfer of containers
between railcars and trucks and the loading or unloading from rail car
• In transitioning between the railway and trucks, three main methods of loading
are utilized: circus loading, side loading, and gantry loading

Module Highlights
• Railways maintain a fleet of rail cars which include: box cars, hopper cars, flat
cars, well cars, gondola cars, and tank cars
• Private rail car ownership continues to increase significantly
• Railways interchange cars on their networks and a system of per diem payments
has been established to compensate for the use of track and movement of the
cars on different carrier networks
• Class 1 Railways include carriers with gross revenues of $250 million or more per
year. In Canada, this includes CN, CP, and Via Rail

Module Highlights
• Rail transport services can be categorized as distribution terminal services,
enroute services, or intermodal services
• Distribution terminal services include loading and unloading, storage, cartage,
siding construction and maintenance, switching, and interswitching
• Enroute services include diversion and reconsignment
• Intermodal services include trailer on flat car (TOFC) and container on flat car
(COFC)
• Railways utilize reservation systems to manage capacity for trains and facilities

Module Highlights
• The National Transportation Act, 1967 gave railways more freedom to compete
by relaxing controls on freight rates. The National Transportation Act, 1987
primarily set the groundwork for deregulation of the rail mode in Canada
• The Canadian Transportation Act, 1996 continued the deregulation of the rail
mode including the elimination of subsidy payments for unprofitable freight
• Rail rates are typically expressed in dollars per tonne, per carload, or per
container
• Confidential contracts were introduced in 1988 and a period of rate reductions
followed as rail companies worked to competitively earn business

Module Highlights
• Demurrage is a charge for the delay or detention of equipment levied by a railway
against its customers
• Rail cars can be track-scaled to determine the cargo weight. Gross weights are
obtained by a track scale and the tare weight of the car is subtracted to
determine the cargos actual weight
• Railways developed a classification method of pricing cargo by considering a
cargos density, value, risk in carriage, and susceptibility to damage
• Rates may also take the form of agreed charges, joint rates, confidential
contracts, and competitive line rates

Module Highlights
• Both Canadian and U.S. rail industries are largely deregulated with new regulation
focused on safety.
• In 1995, the Interstate Commerce Commission transferred responsibilities for
transportation oversight, which included rail, to the Surface Transportation Board
which operates with the Department of Transportation.
• Railways have benefited from pressure on supply chains to become more efficient
by improving capacity and efficiencies within their networks.

Key Terms
• Demurrage: a charge for the delay or detention
of equipment levied by a railway against its
customers
• Tare: weight of an empty railcar or container
• Gross: total weight of a shipment, including both
the weight of the cargo being transported and
the weight of the railcar or container itself
• Net Weight: weight of the cargo being
transported, excluding the weight of the railcar
or container

Key Terms
• Per diem
• COFC, TOFC
• Cartage
• Circus, Gantry, Side loading
• Switching, Intraswitching, Interswitching
• Competitive Line Rate: pricing offered by a
railroad for the transportation of freight
over its network, relative to the rates
offered by other railroads operating in the
same geographic region


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Transportation Systems

Module 3: Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Partner School Logo

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

• Canada’s Largest transcontinental • Serves 6 Provinces - 80% of

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

• Transfer facilities are close to the ultimate

Transportation Systems – Module 3 –Transportation by Rail

• Bulk commodities can be handled

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail

Transportation Systems – Module 3 –Transportation by Rail