Why Rule 11 Could Save Your Company Thousands on Rail Freight

Rule 11 lets you negotiate directly with each railroad in a multi-carrier shipment instead of accepting a single through-rate, potentially reducing costs by 15-30% through competitive pricing and transparency.

Understanding Rule 11: The Hidden Freight Cost Optimizer

In the complex world of rail freight, most shippers accept "through rates"—single prices for multi-carrier shipments that obscure individual railroad pricing. Rule 11, a often-overlooked regulation in railroad pricing, offers a powerful alternative that can unlock significant savings for informed shippers.

This little-known provision allows shippers to negotiate separate rates with each participating railroad in a multi-carrier route, creating transparency and competition that through-rates inherently suppress. For companies shipping significant volumes across multiple rail networks, Rule 11 can represent savings of $50,000 to $500,000+ annually.

The Economics of Through-Rates vs. Rule 11

Traditional Through-Rate Pricing

When you request a rate from Railroad A for a shipment that requires handoff to Railroad B, you typically receive a single "through-rate" that covers the entire journey. While convenient, this system has significant drawbacks:

• Hidden Markup: The originating railroad often adds a markup to the connecting carrier's rate
• No Competition: You can't shop connecting carrier rates independently
• Pricing Opacity: Individual railroad margins are obscured
• Limited Negotiation: You negotiate with only the originating carrier

Rule 11 Separate Rate Structure

Under Rule 11, you negotiate directly with each participating railroad:

• Direct Pricing: Each railroad quotes their portion independently
• Competitive Pressure: Railroads compete knowing you see all rates
• Transparent Costs: You understand exactly what each segment costs
• Enhanced Leverage: You can negotiate with multiple carriers simultaneously

Real-World Savings Examples

Case Study 1: Automotive Parts Manufacturer

A Detroit-based automotive parts supplier shipping to Los Angeles via BNSF and UP networks:

Case Study 2: Chemical Company Bulk Shipments

A chemical company shipping tank cars from Houston to Chicago:

The EDI Implementation Advantage

Managing Rule 11 rates manually is complex and error-prone. EDI systems provide crucial advantages for Rule 11 implementation:

Automated Rate Shopping

EDI systems can automatically request quotes from multiple railroads simultaneously:

// Automated rate request to multiple carriers
ST*460*0001~
REN*1*20250125*BNSF~
S5*CHICAGO,IL*SAN_FRANCISCO,CA~
LAD*N*GRAIN*25*40*CRL~
SE*8*0001~

ST*460*0002~
REN*1*20250125*UP~
S5*CHICAGO,IL*SAN_FRANCISCO,CA~
LAD*N*GRAIN*25*40*CRL~
SE*8*0002~

Complex Routing Optimization

EDI systems can evaluate multiple routing combinations and automatically select the lowest-cost Rule 11 combination:

• BNSF → UP → Destination
• CN → BNSF → Destination
• UP → BNSF → Destination
• Direct routing options

Billing Reconciliation

Rule 11 shipments require separate billing from each railroad. EDI 810 invoices help manage:

• Split billing across multiple carriers
• Automated invoice matching
• Accessorial charge validation
• Demurrage and detention tracking

Strategic Implementation Framework

Phase 1: Route Analysis

Identify high-volume multi-carrier routes with the greatest savings potential:

• Volume Threshold: Focus on routes with 50+ cars annually
• Distance Analysis: Long-haul routes typically show higher savings
• Carrier Diversity: Routes involving 2+ railroads are candidates
• Commodity Considerations: Bulk commodities often show better savings

Phase 2: Carrier Relationship Development

Successful Rule 11 implementation requires strong relationships with all participating carriers:

• Direct Contracting: Establish separate contracts with each railroad
• Credit Arrangements: Set up credit terms with connecting carriers
• EDI Connectivity: Implement EDI connections with all participants
• Service Commitments: Negotiate service levels and performance metrics

Phase 3: Technology Integration

Implement systems to manage Rule 11 complexity:

• TMS Integration: Connect transportation management systems
• Rate Shopping Engine: Automated rate comparison tools
• Billing Systems: Multi-carrier invoice processing
• Performance Tracking: Monitor savings and service levels

Overcoming Implementation Challenges

Carrier Resistance

Some railroads prefer through-rate arrangements because they're simpler and often more profitable. Overcome resistance by:

• Volume Commitments: Guarantee minimum annual volumes
• Long-term Contracts: Offer multi-year agreements
• Service Partnerships: Emphasize operational benefits beyond price
• Market Education: Help carriers understand Rule 11 benefits

Operational Complexity

Rule 11 adds operational complexity that must be managed:

• Multiple Contracts: Manage separate agreements with each carrier
• Billing Complexity: Process invoices from multiple sources
• Service Coordination: Ensure seamless handoffs between carriers
• Claims Management: Handle loss and damage across multiple carriers

Advanced Rule 11 Strategies

Dynamic Route Optimization

Use real-time data to optimize Rule 11 routing:

• Congestion Avoidance: Route around network bottlenecks
• Weather Routing: Avoid weather-related delays
• Fuel Price Optimization: Consider fuel surcharge variations
• Service Reliability: Factor in on-time performance data

Seasonal Rate Negotiation

Negotiate seasonal Rate 11 adjustments:

• Peak Season Premiums: Manage harvest and holiday surcharges
• Off-Peak Incentives: Secure better rates during slow periods
• Capacity Guarantees: Lock in space during tight markets
• Flexible Contracts: Build in rate adjustment mechanisms

Measuring Rule 11 Success

Financial Metrics

• Cost Per Car: Compare Rule 11 vs. through-rate pricing
• Total Annual Savings: Calculate absolute dollar savings
• Savings Percentage: Track percentage improvement over time
• Administrative Costs: Factor in additional management overhead

Operational Metrics

• Transit Time: Monitor any service level changes
• On-Time Performance: Track delivery reliability
• Claims Rate: Monitor loss and damage frequency
• Billing Accuracy: Track invoice accuracy and disputes

Industry-Specific Applications

Agriculture

Grain shippers benefit significantly from Rule 11:

• High-volume, low-margin commodities show immediate savings
• Seasonal shipping patterns allow for negotiated capacity
• Multiple origin/destination combinations increase optimization opportunities

Energy

Coal and crude oil shipments are ideal for Rule 11:

• Unit train movements provide negotiating leverage
• Long-haul distances maximize savings potential
• Dedicated equipment reduces operational complexity

Manufacturing

Intermodal and carload manufacturers benefit through:

• Regular shipping patterns enable contract optimization
• Multi-facility networks provide routing flexibility
• JIT requirements justify service level negotiations

Legal and Regulatory Considerations

Contract Structure

Proper Rule 11 contracts must address:

• Liability Limits: Define each carrier's responsibility
• Interchange Terms: Specify handoff procedures and timing
• Service Standards: Establish performance expectations
• Dispute Resolution: Define arbitration and claims processes

Regulatory Compliance

Ensure compliance with:

• STB regulations on rail transportation
• FRA safety requirements
• Environmental regulations for hazmat shipments
• State and local transportation requirements

Future Trends and Opportunities

Technology Enhancement

Emerging technologies will further enhance Rule 11 benefits:

• AI-Powered Optimization: Machine learning for route and rate optimization
• Blockchain Contracts: Smart contracts for automated Rule 11 execution
• IoT Integration: Real-time car tracking and performance monitoring
• Digital Twins: Virtual modeling for route optimization

Getting Started with Rule 11

Quick Assessment Checklist

Determine if Rule 11 makes sense for your operation:

Implementation Timeline

• Month 1-2: Route analysis and savings estimation
• Month 3-4: Carrier relationship development
• Month 5-6: Contract negotiation and EDI setup
• Month 7: Pilot program launch
• Month 8-12: Full implementation and optimization

Conclusion

Rule 11 represents one of the most underutilized opportunities for rail freight cost reduction. While implementation requires careful planning and operational adjustments, the potential savings of 15-30% on multi-carrier shipments can quickly justify the investment.

Success depends on thorough route analysis, strong carrier relationships, and robust technology systems to manage the added complexity. Companies that master Rule 11 gain a significant competitive advantage through lower transportation costs and enhanced supply chain flexibility.

As rail networks continue to evolve and technology improves, Rule 11 opportunities will only expand. The time to begin exploring these savings is now, before competitors discover this powerful cost reduction strategy.