How is line haul rate for interchange set?

As between two class I carriers, division will be by negotiaion as I stated in the second paragraph of my first resonse to the original question in this thread. There are rules of thumb, but they are not known to oursiders.

Divisions are almost never distance based because of terminal costs on each end. In very simple terms consider terminal costs to be fixed dollar amounts that do not varry with distance. Only after these costs have been paid, does it make sense to consider a mileage prorate for the balance.

Mac

Here is how it was done back in the 1980s in the LTL trucking industry which is similar in many ways to the carload traffic concepts being discussed.

Most of the interline agreements between carriers called out the method of revenue split. Often it was a flat percentage, particularly if there was a smaller carrier involved in handling the short haul. Often this would be 25%. This evolved to be more and more common as deregulation advanced in teh LTL industry.

However, the majority of revenue splits were based on “factors”. These were based on common interchange points. Lets say common interchange points for Indiana originated shipments (which my company handled) were Chicago, South Bend, Ft. Wayne, and Indianapolis. Factors would be listed in a giant tariff type book to those locations from all Indiana points. These factors were 1st class rates from the 1930s, if I recall. A shipment from NW Indiana to Chicago would have a factor of 46 (I recall this). Lets say the shipment was destined for St. Louis. There would be a first class rate (factor) for Chicago to St. Louis. Lets say that factor was 110. Add the two - 46 plus 110 = 156. 46/156=29% to the shorthaul carrier and 110/156=71% to the long haul.

It was done using factor books at the time, but was possibly computerized after I left the industry in 1990.

My guess is something similar was used in the rail industry. It was not based on mileage but on “1st class rates” which would cover (theoretically) terminal costs, etc. Recall, very few LTL carriers went out of business during the regulated era…only post 1980 did those carriers drop like flies.

Hope this helps.

ed

Since the enactment of the Staggers Act in 1980 most rates on recurring traffic are negotiated between the Shipper/consignee and the carriers involved from origin to destination. The carrier side of the contract will define the revenue splits. The customer side of the contract will define the rate, the required amount of traffic to get the rate and the service rquirements the carriers must uphold to stay clear of specified penalties for service failures.

The carriers with their efforts at PSR are doing their best to discourage ‘loose car’ merchandise railroading in favor of trainload traffic. Loose car railroading requires various switching events to provide service to both the shipper and the consignee. Switching events are discouraged by PSR.