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January 2 2023

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90 Journal of Commerce | J anuar y 2, 2023 EXECUTIVE COMMENTARY ANNUAL REVIEW & OUTLOOK 2023 Surface Transportation ◀ "Service is hard — is it worth it? " Anthony Hatch ABH Consulting Anthony Hatch Principal We close out the year with some major questions affecting the long-term position of the rail and inter - modal space that remain unresolved — such as the labor contract (which will follow the PEB guidelines in any event), the International Longshore and Warehouse Union contract, the CP–KCS merger process (set to be approved early in the new year) and, most of all, the question of service restoration. That last, all-consuming issue is tied, as so much is, to labor (hiring, training, and retention). Those issues are all of a near-term nature but with long- term implications. Assuming the sequential progress noted here, the questions for next year — no matter the state of the economy — will be: How much pent-up demand will there be? Some was business not moved for lack of crews, such as in bulk and finished vehicles. Another set might be boxcar and intermodal business that can shift back to rails as service improves. Then comes the biggest question of all — have the rails truly moved past what I dismissively called "the cult of the operating ratio" to a growth platform? Does service, as the KCS precision-scheduled railroading mantra stated, really beget growth? Service is hard — is it worth it? Can rails, through better integration, smart capital spending, and IT application, actually provide consistent service, especially in the higher-end markets? I think they can, but I know that they'd better. Association of Bi-State Motor Carriers Tom Heimgartner Chairman The year 2022 was a chal- lenging one, and we antici- pate that many of the difficulties we faced are likely to persist into 2023. Port con - gestion due to unprecedented freight volume, lack of chassis inven- tory, insufficient appointment availability at the marine terminals, and a chronic failure on the part of the ocean carriers to take back their empty containers — all circum- stances beyond our control — created an operational nightmare and spurred a huge increase in the assessment of detention, demurrage, and per diem fees, driving up trans- portation costs. One encouraging develop- ment was the passage of the Ocean Shipping Reform Act, giving the US Federal Maritime Commission (FMC) greater authority to provide much-needed regulatory guidance. We experienced a high level of engagement with FMC Chair Daniel Maffei and his commissioners, who communicated with the intermodal community on a regular basis to gain a solid understanding of the obstacles that hinder supply chain efficiency. We're hopeful that the rulemaking put forth on detention and demur - rage billing will provide long-overdue relief from the unfair practices that have plagued our industry. While container dwell continues to be an issue, we've started to expe- rience some improvement, thanks to the Port Authority of NY-NJ imple- menting a container imbalance fee. There's recently been an increase in the evacuation of empty containers, and we hope this compliance contin- ues into 2023. Looking ahead, we're bracing for the potential impacts of limited die- sel supplies and working to maintain a robust workforce as freight vol- umes fluctuate due to falling rates. We must also continue fighting Association of American Railroads Ian Jefferies President and CEO Speak with leaders in any industry — energy, manufacturing, agriculture, technology — and the theme stays the same: disruption. The same is true when I speak to executives not just among railroad customers, but in the rail industry specifically — from the operators to the marketers and even the human resources managers of the freight carriers and suppliers. There is no single source, but future gener - ations will undoubtedly study, and hopefully learn from, the remarkable shifts that have occurred in just a few years regarding key economic matters, such as supply chains, the labor market, and views of work and mon- etary policy. The aggregate of these factors continues to impact US freight railroads, a key benchmark for the economy that exists to meet the needs of myriad industries. Looking forward, however, I am confident that a clearer picture will emerge. Some measures of progress will correlate with broader economic trends. Yet a larger share of gains relates to the hard work of railroads and their employees, as well as cus - tomers and intermodal partners. Navigating the unprecedented events of the past few years has been a unique challenge for the entire economy, but railroads have taken focused steps, most notably increasing their employee ranks to meet demand, resulting in increased velocities and reduced dwell times — key indicators of overarching rail service. Having new contracts in place provides certainty to rail workers, providing our dedicated employee base with much-deserved historic wage increases. Similarly, companies are expand - ing warehouse capacity, bringing more chassis online and more strate- gically considering shipping routes and manufacturing plans. Infrastructure dollars for public highways and ports, but also rail-related public– private partnerships, are pushing regionally significant projects forward that expand capacity and increase efficiencies. Readers here understand commerce in a global economy is complicated. I am optimistic that logistics leaders will continue to apply the lessons we learned to move forward. I am certain railroads will lead in doing so. "Speak with leaders in any industry — energy, manufacturing, agriculture, technology — and the theme stays the same: disruption." ▶ "Looking ahead, we're bracing for the potential impacts of limited diesel supplies and working to maintain a robust workforce as freight volumes fluctuate due to falling rates." Tom Heimgartner

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