Class I railroads to suspend security-sensitive shipments ahead of potential strike

The Class I railroads are preparing to adjust operations in the event a strike occurs on Sept. 16, saying they will suspend the shipments of security-sensitive and hazardous material.

A late-day Friday service update from Norfolk Southern Chief Marketing Officer Ed Elkins describes how NS (NYSE: NSC) will start to issue embargoes for certain types of shipments, including rail security-sensitive material.

Elkins said 10 out of 12 unions are poised to agree to new labor contracts, but two have not reached an agreement and have not committed to not strike.

“We must take steps to ensure we can shut down operations safely if a strike occurs and be positioned to restart quickly when operations resume. Most importantly, we must ensure that no hazardous material or freight that requires special security is left on an unattended train out on the network in the event of a sudden strike,” Elkins said. “To prevent this, we must begin issuing embargoes for certain types of shipments beginning today, which includes rail security-sensitive material (RSSM) and certain time-sensitive shipments outlined in the embargo.”

Elkins continued: “Additionally, customers in certain markets, including bulk unit trains, intermodal, and automotive, will see a curtailment of service up to 72 hours before the end of the cooling-off period to prepare for a safe and orderly stoppage should there be a strike. An embargo with specific information for intermodal and automotive customers is scheduled to be issued on September 11. We will communicate with all affected customers quickly and transparently about their shipments.

Union Pacific said it will start securing hazardous and other security-sensitive materials starting Monday through embargoes, according to a Friday service update.

“This is a proactive measure we are taking ahead of any potential work stoppages due to an impasse in labor negotiationsThis is a proactive measure we are taking ahead of any potential work stoppages due to an impasse in labor negotiations,” UP (NYSE: UNP) said.

Meanwhile, Kansas City Southern said it would not issue embargoes for now, but that situation could change.

“KCS does not intend to lockout unionized employees. Additionally, we currently do not intend to embargo shipments, although circumstances could change as a result of embargoes put in place by other carriers. We will immediately communicate any changes in KCS’ approach,” KCS said in a late Friday service update.

“Should ongoing negotiations not lead to agreements with the remaining 2 unions, KCS will work to move freight to customers and to interchanges up until any union work stoppage commences. We plan to maintain interchange at all key locations to the extent possible, and will work closely with our interchange partners to provide customers as much notice as possible on the handling of interline shipments,” KCS continued.

The service updates from the three railroads come as the Association of American Railroads (AAR) said Friday that the six Class I freight railroads participating in national bargaining will take steps to manage and secure the shipments of hazardous and security-sensitive materials, such as chlorine and the chemicals used in fertilizer, starting as early as Monday.

“Railroads are taking all measures necessary to handle sensitive cargo in accordance with federal regulations to ensure that no such cargo is left on an unattended or unsecured train in the event of a work stoppage due to an impasse in labor negotiations,” AAR said. “Additionally, other freight customers may also start to experience delayed or suspended service over the course of next week, as the railroads prepare for the possibility that current labor negotiations do not result in a resolution and are required to safely and securely reduce operations.

While these preparatory actions are necessary, they do not mean a work stoppage is certain. Railroads will continue meeting throughout the weekend with the remaining unions to work toward tentative agreements. The railroads want, and continue to advocate for, a prompt resolution that would provide historic wage increases to rail employees — and allow the railroads to continue servicing customers and prevent further disruption to the struggling supply chain.”

A new labor deal for union members has been in the works since January 2020, but negotiations between the unions and the railroads had failed to progress. A federal mediation board took up the negotiations but released the parties from those efforts earlier this summer.

The Presidential Emergency Board (PEB) — a three-person board appointed by President Joe Biden that convened in July and August to come up with ways that the unions and railroads could resolve their negotiations impasse — issued recommendations last month that sought to resolve the impasse in negotiations. The recommendations were meant to serve as a jumping off point for a new contract.

Five unions have announced publicly that they have reached an agreement and have sent that agreement to their members for ratification.

Per the Railway Labor Act, both sides have until midnight on Friday to come to a consensus; after that, the “cooling-off” period ends and union members could decide to go on strike.

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