Written by Darell Luther & Shannon Rodgers
Onboarding or bringing private railcars online should be a strategic process. Private railcars can be acquired by purchasing or leasing used railcars or newly built and acquired from a railcar builder. Proper onboarding will ensure that the “new to you” railcars start earning an economic return for you in a reasonable timeframe. Additionally, proper onboarding will ensure that the railcars go into service timely and you avoid storage or additional shipment charges.
Onboard planning starts one step upstream from the act of obtaining private railcars for your use. This starts with the acquisition (lease or purchase) process. Whether a railcar is used or newly constructed, the steps are generally the same for the onboarding process. When leasing, your planning starts during the lease negotiation process as the lease sets the commitments that are intended to occur at inception and throughout the lease term. These commitments are what becomes your onboarding process. When purchasing railcars, negotiations during your purchase paperwork will set high level commitments as to how you’ll take possession of the railcars but you’ll need to set additional onboarding commitments for yourself thereafter.
The onboarding process begins with getting the paperwork (electronic) completed. At Tealinc, we suggest you start this process with a question. Do you have a railcar mark registered with the Association of American Railroads (AAR) or are you going to use the Lessor provided railcar mark? There are advantages and disadvantages to either option.
If you use your own private railcar mark, here are some things you should be thinking about:
- ADVANTAGES: An advantage of using your own private railcar mark is that your railcar mark will represent your business and that could help with your marketing campaign. Another advantage is that the AAR recognizes that the railcar mark owner has control of and makes decisions for the railcars and if something goes wrong, you as the railcar mark owner will receive the first notifications. This allows you visibility to your rail equipment and allows you to take charge of how a car is handled when something goes wrong.
- DISADVANTAGES: The disadvantage of using your own private railcar mark is that when a repair or problem arises, you will get inundated with requests and notifications for the railcars that you must deal with. In some cases, this is immediately and, in most cases, this is time constrained by only several days. This requires that you to make a decision on how to manage the railcars when you may not completely understand what is being asked of you, what is required and how to most efficiently (time/money) proceed.
- MIDDLE GROUND: There are several middle ground approaches to take which soften the decision-making demand and still allow you visibility of your equipment. One option we see many customers take is to provide a Letter of Authority (LOA) to the AAR and then have a railcar fleet manager (such as Tealinc) complete all the railcar decision-making tasks on your behalf.
If you use your lessor private railcar mark, here are some things you should be thinking about:
- ADVANTAGES: The advantage of using a Lessor mark is that all those requests, invoices and mechanical maintenance are managed by the Lessor. You may still be responsible to pay some of them but the wickedly tedious responsibility of reviewing, sorting, auditing, decision-making, directing and coordinating falls on the lessor.
- DISADVANTAGES: If your lessor does not partner with you on the management of your railcars, when a repair or problem arises, you may be the last to know and if a decision has to be made based on time constraints, you may not have a say in how the problem is managed. This can lead to your railcars moving to a repair shop where it will sit for an indefinite period of time or it could be moved out of route.
- MIDDLE GROUND: There is a place of harmony where repairs and problems are managed by a knowledgeable and skilled professional who partners with you and includes you in the decision-making process where you are comfortable or makes a decision for you where you are not. All focused in on your best interests. Here at Tealinc, we call this our Rolling Stock Management Agreement (RSMA), and it’s inclusive of all the requirements to managing a railcar fleet. This allows your team of experts the time to do their job and they can be as involved or hands-off as you would like
The railcar mark will be used as the basis for the Universal Machine Language Equipment Register (UMLER) transfer from the old mark in the case of used railcars to the new mark or direct registration from the railcar builder for newly constructed railcars. UMLER is similar to the Department of Transportation (DOT) automobile registration process but in this case for railcars. UMLER has a majority of the physical characteristics for the railcar stored in one file and all railcars that interchange between railroads must be registered in UMLER.
Once you’ve determined the railcar mark that will be used and once the railcar(s) is registered in UMLER, a permission request of the AAR to use the private railcars on the Class I railroads line is required and needs to be sought out by you or your railcar fleet manage. This is known as filing OT-57. Loading Authority OT-57 system provides a centralized, digital process for registering private freight rail equipment and provides access to the controlling entity of the railcars be it the owner, shipper or lessee providing contact and storage information. It creates visibility for private freight rail equipment storage options along with the intended use of the railcars. The controlling entity (railcar mark owner or lessee) or its representative is responsible for registering railcars within the Loading Authority OT-57 system.
Following these activities, it’s a good idea to file a recordation with the Surface Transportation Board (STB). This creates a trail substantiating that the railcars are now under lease or are under ownership with your company.
Consecutive with the requests, electronic filings, recordation and registrations, if the railcars changed railcar marks/numbers, you will need to retag and restencil the railcars before they can be run in service on the Class I railroads. This process requires that new AEI tags be purchased, programmed to the UMLER characteristics of the railcars and be placed on the railcars. Visible stencils showing the railcar mark and railcar number(s) must also be placed on the railcar specifically as determined by the AAR Interchange Rules. You have the option of stencils and paint or vinyl decals for railcar marks and numbers. Decals give the railcar a better look but hey these railcars are hauling commodities so it really boils down to what you like best or what is easiest for the person doing the job.
Now on to the real work! Thus far we’ve basically been getting the electronic paperwork complete to meet AAR rules and regulations and tags and stencils applied to the railcars. So, let’s move the railcars to your loading location! This entails generation of a waybill that’s sent to the railroads telling them the method of payment, which is either prepay or collect, origin physical address of the shipper, consignee or destination of the empty railcars and track number for railcar placement and freight payee. Upon gathering this information, generate an electronic bill of lading to the railroad and they will generate a waybill for the railcars. A good railcar fleet manager can help you with this. Always double check the waybill information to ensure the railroad translated exactly what you sent.
If you have a rail fleet management partner (like Tealinc!) in place, you’ll want them to track the empty railcars daily until they reach their loading location. If you don’t have a rail fleet management partner, you’ll want to do this task yourself. Do not skip it! You’re at the point now that if there’s anything going to go wrong in the transport (i.e., the railroad isn’t familiar with the customer, something was translated incorrectly, and railcars aren’t moving or moving the wrong way) it will go wrong.
Onboarding should be part of the railcar ownership or lease process long before the actual onboarding is required to be initiated. A little strategic planning goes a long way to a smooth transition of putting a railcar into service. We’re here to help! webmail@tealinc.com