At RailTrends: Grants, real estate key to short-line rail growth

Short lines are on the headpin as the North American rail business embraces a welcome rebound.

“It’s been a tumultuous eight years but the railroad industry is turning a corner as a whole, and that’s where [short lines] are going,” said Chuck Baker, president and chief executive of the American Short Line and Regional Railroad Association, speaking at the RailTrends conference in New York.

“This year I have visited with all six Class 1s and they all have engaged short-line teams. They all say that short-line traffic is the fastest growing segment of their carload and merchandise traffic.

“It’s a real success story.”

Short lines and regional carriers provide first mile-final mile services across a disparate network that totals 50,000 miles of track, handling volume ranging from a single car to thousands of carloads a year.

Canadian National President and Chief Executive Tracy Robinson agreed, and said the Canadian carrier this year reestablished its interline team in part to include 150 short-line connections in its growth strategy.

“This is how we grow, we have to be nimble,” Robinson said in a RailTrends presentation, “no matter where we are in the economic cycle. Our interline volumes are up 10% over 2023.”

The railroad in late 2023 announced its intention to acquire short line Iowa Nothern Rwy. The Surface Transportation Board in February ruled it a “minor” transaction, setting some of the parameters of the review, and the deal is still pending.

“These are the ways we are going to grow,” Robinson said.

There are a number of positive signs for short lines coming out of Washington, Baker said.

“CRISI [Consolidated Rail Infrastructure and Safety Improvement] grants are a huge deal for railroads and short lines specifically. Those are funded through the next two years so the election won’t affect that.”

A total of $2.5 billion in 2023-2024 CRISI grants were authorized under the Biden administration’s infrastructure bill. The grants help fund a wide range of rail-related projects and are critical to short-line infrastructure development.

Baker is also optimistic about prospects for legislative action. New Senate Majority Leader John Thune is highly regarded for his knowledge and engagement on railroad issues, having served as railroad director of South Dakota. “He’s probably the first Senate majority leader who was a state rail director,” said Baker.

“Short lines — these are the railroads that know about growth,” said Stefan Loeb, vice president, First & Final Mile Markets for Norfolk Southern, moderating a panel discussion at RailTrends.

When a building materials customer generating several thousand carloads a year couldn’t find a suitable site for expansion, Regional Rail found one — its own headquarters property!

“We’re in the process of finding a new home for ourselves,” said President and Chief Executive Al Sauer, a panelist. “Our administration, crew offices. It is the ideal site for them.”

Panelist Dean Piacente, chief executive of OmniTrax, said leveraging rail and real estate helped boost the company’s growth by 52% in the past four years.

“That brought OmniTrax thousands of carloads by controlling land,” Piacente said. That includes the carrier’s Savannah Gateway Industrial Hub, a 2,700-acre multimodal park in Rincon, Georgia, near the Port of Savannah. Amid the boom in warehouse and distribution center construction, OmniTrax has seven more parks featuring non-rail served industrial real estate, as well. “We have one in Colorado with a Home Depot lumber distributor. We do the short-haul business very well, such as bringing limestone 20 miles for Clorox, and silica sand in New Jersey. But it’s hard to grow if you don’t own land.”

The entrepreneurial DNA runs through most short lines, sussing out even modest opportunities that don’t fit Class 1 operating plans.

“We are working directly with farm families in New York state on feed additives,” said panelist Bob Babcock, president and chief executive of Livonia, Avon & Lakeville Railroad. “We’re good at finding five cars a week, that’s 250 cars a year.”

Short-line executives are firmly in the “if you build it, they will ship” school of rail development.

In Kentucky, R.J. Corman Railroad Group built a distribution center that does hot and cold rolled products for an aluminum producer, said Executive VP of Commercial Affairs and panelist Justin Broyles, “that generates 6,500 carloads a year for two short lines and a Class 1 over 250 miles of track. We provide shuttle service including finished product outbound moves from there.”

There’s a transload solution at the destination, said Broyles, to handle 35-car unit trains three times a week. “And, CSX puts a crew on our equipment. Not many Class 1s will do that kind of train.”

Panelist Ryan Ratledge, chief executive of Pinsly Railroad Co., said his company works with a Class 1 and a large shipper that in three switching moves produces two loaded moves for the Class 1 and only one empty move. “We’re looking to replicate that kind of opportunity in other locations,” said Ratledge.

The panelists emphasized that extra effort is required since rail seems weirdly foreign to many shippers.

“We have to teach people about rail,” Babcock said. “The rail industry has cut back on ‘face-to-face”. We are byzantine and have to teach customers how to use rail. We have to have more people knocking on doors.”

What appears to be a move toward some reindustrialization of America puts short lines in an ideal position.

“With near-shoring and reshoring, if you’re not ready you can’t play,” said Piacente. “You need land or bolt-on projects if you don’t have land. And, you need customers to spread the good word. We’ve had ports contact other ports and say how we know how to do business, also with land developers. Procter & Gamble did that.

“Be pro-active and we don’t cut back on that. Kind of like truck brokerages.”

The short-line business model, Paciente said, means being an integrated logistics provider. OmniTRAX provides warehousing, and started a logistics management business for bulk imports.

Ryan said that short lines have to serve as an extension of their Class 1 partners’ network, even where it doesn’t directly connect, in order to reach new markets.

The CRISI grants and 45G tax credit are another linchpin to growth.

“We try to use the money to grow our business,” said Babcock. “We have won two CRISI grants. States want to see how we grow our business.”

Corman is using grants with a 25% match to replace a 100-car fleet serving an aluminum customer.

Grant and tax credit funding can be a vital aid to development, Sauer said, since some properties are “fixer-uppers” that take a long time and a lot of money to rehabilitate.

Piacente called CRISI crucial to funding operations. Otherwise, we would have to put 40% of our gross revenues into it which is very, very difficult for a short line.

“The proof’s in the pudding,” said Loeb. “You want to grow, work with a shortline.”

This article was updated Nov. 25 to clarify Baker’s comments regarding short-line traffic, and to correctly state that CN’s acquisition of Iowa Northern is still pending review by the Surface Transportation Board.

Find more articles by Stuart Chirls here.

Related coverage:

Canada container ports face backlogs, delays

Trump tariffs to slow US trade, says analyst

Port of LA whittles dwell time despite record container volumes

Is Thanksgiving going to disrupt the status quo?

This week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers)

Last week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers)

Three-month FreightWaves Supply Chain Pricing Power Index Outlook: 40 (Shippers)

The FreightWaves Supply Chain Pricing Power Index uses the analytics and data in FreightWaves SONAR to analyze the market and estimate the negotiating power for rates between shippers and carriers.

This week’s Pricing Power Index is based on the following indicators:

Volumes recover, holidays likely to shine through for a couple weeks

After a sluggish start to November, tender volumes are rebounding just days ahead of the Thanksgiving holiday. The drop in the middle stages of the month appears to be driven by Veterans Day, which tends to not be that impactful to volume levels compared to other holidays. Now with Thanksgiving being later this year than last year, the comps this week will be fairly easy until the back half of the week.

*SONAR: Outbound Tender Volume Index — Seasonality View: 2024 (white) and 2023 (pink)*
**To learn more about SONAR**, ***click here***.

The Outbound Tender Volume Index (OTVI), a measure of national freight demand that tracks shippers’ requests for trucking capacity, rebounded this week, rising 2.56% week over week, erasing all of last week’s decline. The OTVI is up over 11% y/y.

Across the mileage band, the growth in volumes continues to be driven by the shortest lengths of haul. Both local and short lengths of haul, loads moving under 100 miles and between 100 and 250 miles, increased by 5.97% and 8.06% w/w.

*SONAR: Contract Load Accepted Volume – Seasonality View: 2024 (white) and 2023 (pink)*
**To learn more about SONAR**, ***click here***.

Contract Load Accepted Volume (CLAV) is an index that measures accepted load volumes moving under contracted agreements. In short, it is similar to OTVI but without the rejected tenders. Looking at accepted tender volumes, the decline was slightly smaller than the increase in OTVI, rising 2.31% w/w, driven by an increase in rejection rates over the past week.

Over the past week there were two major retailers that reported earnings that showed fairly sizable differences in the quarter. Walmart, the country’s largest retailer, showed comparable sales up 5.3% y/y while Target reported comp sales up just 0.3%. Target’s management team highlighted a slowdown in discretionary spending as one of the main reasons for the earnings miss, but with Walmart showing growth, it is likely more of a shift to value from consumers.

*SONAR: Outbound Tender Volume Index – Weekly Change*
**To learn more about SONAR**, ***click here***.

As tender volumes have continued their decline, it is being experienced by the majority of freight markets across the country. Of the 135 freight markets tracked within SONAR, 66 markets experienced volume growth over the past week, up from 55 in last week’s report.

The largest increases in tender volumes continue to be driven by markets that aren’t significantly impactful to the overall freight economy the same as if you saw double-digit growth out of Southern California or markets like Dallas, Atlanta or Chicago. Florida markets, which are back haul markets, actually saw fairly sizable growth including in Miami and Lakeland, where tender volumes were up 29.53% and 14.97%, respectively, w/w.

The largest markets in the country did experience growth over the past week that was more robust than the overall market, but not double-digit growth like the aforementioned markets. Ontario, California experienced tender volumes grow by 4.38% over the past week, while in Atlanta tender volumes were up 3.92% w/w.

*SONAR: Van Outbound Tender Volume Index (white, right axis) and Reefer Outbound Tender Volume Index (green, left axis)*
**To learn more about SONAR**, ***click here***.

By mode: The dry van market finally saw some weekly growth in volume levels, but it was against easier comps. The Van Outbound Tender Volume Index increased by 0.75% w/w, which wasn’t enough to offset last week’s decline. Dry van volumes are currently up 8.52% above year-ago levels, but that is against extremely easy comps due to the Thanksgiving holiday.

The reefer market faced continued challenges this week, but the growth in volume since April hasn’t been without volatility along the way. The Reefer Outbound Tender Volume Index fell by 1% over the past week. Reefer volumes are up nearly 10% compared to this time last year, but again need to be viewed with a grain of salt given the timing of the holiday.

Rejection rates are back above 6% ahead of Thanksgiving

Increased volatility has been the theme in recent weeks as tender rejection rates have been bouncing around 6%, which is a vast improvement from the lows of the cycle in May 2023. Tender rejection rates have nearly doubled since the beginning of May this year and have shown signs of seasonality, though even at 6% the market is still fairly loose.

*SONAR: Outbound Tender Reject Index – Seasonality View: 2024 (white), 2023 (pink) and 2019 (orange)*
**To learn more about SONAR**, ***click here***.

Over the past week, the Outbound Tender Reject Index (OTRI), a measure of relative capacity, rose by 23 basis points to 6.11%. The OTRI is 215 bps higher than it was this time last year, showing that capacity has been exiting the market and carriers have slightly more optionality in the market than they did this time last year. The current trend is more similar to what occurred in 2019, but it remains to be seen if tender rejection rates will reach double-digit levels, like in 2019, for the first time in over two years. At present, the OTRI is 37 basis points below 2019 levels.

*SONAR: Outbound Tender Reject Index – Weekly change*
**To learn more about SONAR**, ***click here***.

The map above shows the Outbound Tender Reject Index — Weekly Change for the 135 markets across the country. Markets shaded in blue and white are those where tender rejection rates have increased over the past week, whereas those in red have seen rejection rates decline. The bolder the color, the more significant the change.

Of the 135 markets, 75 reported higher rejection rates over the past week, up from the 64 that saw tender rejection rates rise in last week’s report.

The Salt Lake City market, which is a backhaul market in nature, has seen tender rejection rates soar over the past week, having the third largest increase across the country, just behind Green River, Wyoming and Twin Falls, Idaho. Tender rejection rates in Salt Lake City have increased by 428 bps over the past week, eclipsing 10%.

*SONAR: Van Outbound Tender Reject Index (white), Reefer Outbound Tender Reject Index (green) and Flatbed Outbound Tender Reject Index (orange)*
**To learn more about SONAR**, ***click here***.

By mode: The dry van market is finally experiencing some level of volatility as dry van tender rejection rates have risen to the highest level since the Fourth of July. The Van Outbound Tender Reject Index increased by 48 bps over the past week to 5.58%. Compared to this time last year, dry van tender rejection rates are up 218 bps.

The breakout in reefer tender rejection rates has slowed in November, but continue to be well above where they have been throughout much of the year. The Reefer Outbound Tender Reject Index fell by 33 basis points over the past week to 15.89%. Reefer tender rejection rates are still 579 bps higher than they were this time last year, a further indication that the reefer market has risen out of its recession.

There hasn’t been a shot in the arm for the flatbed sector in November like there was in October, though the Federal Open Market Committee did opted to lower the target range for the federal funds rate at the beginning of the month. The decline in interest rates tends to have a lagging impact on the economy, so it will likely help boost industries like manufacturing and housing in 2025, but is likely too late to help in 2024. With that said, flatbed tender rejection rates have rebounded over the past week. The Flatbed Outbound Tender Reject tIndex increased by 178 bps throughout the past week to 12.16%. Flatbed tender rejection rates are 65 bps higher than they were this time last year.

Spot rates remain elevated entering the holiday season

With tender rejection rates trending in a positive direction overall, spot rates have started to follow suit. After a sizable increase to start November, which is fairly unseasonal, the spot market rates have remained elevated ahead of the holiday season. With less than a week until the Thanksgiving holiday, the elevated state of spot rates will create a higher baseline heading into the final six weeks of the year, which tends to see fairly sizable increases, even during the freight recession of 2022-2024.

*SONAR: SONAR National Truckload Index – Linehaul Only (white, right axis) and Initially Reported Van Contract Rate (green, left axis)*
**To learn more about SONAR**, ***click here***.

This week, the National Truckload Index – which includes fuel surcharge and various accessorials – saw another increase, rising by 2 cents per mile, following last week’s 1-cent-per-mile increase, to $2.37 per mile. The NTI is now 10 cents per mile higher than it was this time last year, but as previously mentioned, with the Thanksgiving holiday being slightly earlier than this year, the impacts are showing up earlier. The linehaul variant of the NTI (NTIL) – which excludes fuel surcharges and other accessorials – increased at the same rate as the NTI, signaling that the underlying rate increased and changes to fuel prices weren’t a driver. The NTIL rose by 2 cents per mile to $1.82. The NTIL is 22 cents per mile higher than it was this time last year, a sign of how impactful the decline in diesel fuel prices has been as a rate deflator for all-in spot rates. The average diesel price at truck stops is down 16.8% compared to this time last year.

Initially reported dry van contract rates, which exclude fuel, have remained fairly stable the past couple of months, as shippers have become more understanding over the past year that pricing could shift significantly. Over the past week, the initially reported dry van contract rate was unchanged at $2.33. Initially reported dry van contract rates are 3 cents per mile higher than they were this time last year.

*SONAR: RATES.USA*
**To learn more about SONAR**, ***click here***.

The chart above shows the spread between the NTIL and dry van contract rates is trending back to pre-pandemic levels. The spread remains wide, but with the recent positive momentum in spot rates and flattening of contract rates, the spread is narrowing over the long term. Over the past week, the spread between contract and spot rates narrowed by 12 cents per mile, and it is 23 cents narrower than it was this time last year.

*SONAR: SONAR TRAC rate from Los Angeles to Dallas.*
**To learn more about SONAR**, ***click here***.

The SONAR Trusted Rate Assessment Consortium spot rate from Los Angeles to Dallas continues to trend higher, but not without some volatility along the way. The TRAC rate from Los Angeles to Dallas increased by 6 cents per mile to $2.68. Spot rates along this lane are 18 cents per mile above the contract at present.

*SONAR: SONAR TRAC rate from Atlanta to Chicago.*
**To learn more about SONAR**, ***click here***.

From Chicago to Atlanta, spot rates have been volatile but really haven’t moved significantly since the beginning of the month. The TRAC rate for this lane fell by 2 cents per mile over the past week to $2.68, after rising slightly in last week’s report. Spot rates are 4 cents per mile below the contract rate, but that spread is as narrow as it has been all year.

Borderlands Mexico: Entrepreneurs, small business see value of investing in Mexico

Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Entrepreneurs, small business see value of investing in Mexico; Automotive supplier plans third plant in Mexico; Cargo vessel makes first call at Port Houston; and $31M worth of meth found hidden in hot peppers shipment.

Entrepreneurs, small business see value of investing in Mexico

Business owners continue to see Mexico as a positive place to invest in manufacturing opportunities, according to Tatiana Skumatenko, branch manager for Wise PanAmerican Solutions (WPS).

Austin, Texas-based WPS offers services aimed at assisting firms looking to expand or establish cross-border operations in Mexico.

“American entrepreneurs maintain a strong interest in Mexico’s nearshoring potential for 2025, carefully weighing the country’s strategic advantages against both ongoing challenges and emerging political uncertainties,” Skumatenko, who oversees WPS’ business development between the U.S. and Mexico, told FreightWaves.

Skumatenko recently attended the Austin Small Business Expo, an event bringing together entrepreneurs and small business owners from across the Lone Star State.

“During my recent participation at the Small Business Expo in Austin, I noticed that small business owners are interested in working with Mexico, especially in sourcing ingredients, raw materials, and products,” Skumatenko said.

“I think the general sentiment regarding nearshoring in Mexico remains optimistic, albeit with caution. While recent U.S. election outcomes, Trump’s threats to impose tariffs, and the upcoming review in 2026 of the United States-Mexico–Canada Agreement (USMCA) pose concerns, Mexico has faced challenges even before the elections, including water shortages, energy supply limitations, and infrastructure issues.”

U.S.-Mexico trade totaled $72.5 billion in September, an increase of 8% year over year compared to the same month last year, according to the latest data from the Census Bureau.

It was the ninth consecutive month and 19th of the past 20 months that Mexico has been No. 1 in trade with the U.S.

Canada ranked No. 2 for trade with the U.S. at $63.8 billion in September, while China was third at $54.3 billion.

Through the first eight months of the year, trade between the U.S. and Mexico totaled $632 billion. Trade with Canada totaled $632 billion, while China trade came to $437 billion.

The Port of Los Angeles overtook Laredo, Texas, as the No. 1 U.S. trade gateway in September among the nation’s 450 airports, seaports and border crossings, according to Census Bureau data analyzed by WorldCity.

The top three exports from Mexico to the U.S. through Laredo during the month were auto parts ($2.3 billion), computers ($1.9 billion) and passenger vehicles ($1.58 million).

Top imports from the U.S. to Mexico in September were auto parts ($1.1 billion), electric storage batteries ($449 million) and passenger ($317 million).

As of Nov. 21, outbound truck volumes out of Laredo are up significantly compared to the same periods in 2023 and 2022, according to the SONAR Outbound Tender Volume Index (OTVI.LRD).

SONAR’s Outbound Tender Volume Index for Laredo, Texas, (OTVI.LRD), shows 2024 trucking volumes (blue line) have been trending higher compared to the past two years. To learn more about SONAR, click here.

Skumatenko said the momentum that nearshoring has gained in 2024 is unlikely to drop dramatically next year.

“Those who recognize and value the benefits of Mexico as a nearshoring destination are willing to take on these risks and establish operations south of the border. Notably, the Mexican Association of Private Industrial Parks expects around 450 new companies to arrive in Mexico by 2025,” Skumatenko said.

Automotive supplier plans third plant in Mexico

Germany-based automotive supplier Mubea plans to open its third plant in the Mexican city of Ramos Arizpe.

The $60 million factory will create 200 direct jobs and produce components for automotive chassis for the North American market. The 2.2 million-square-feet facility is scheduled to open by the end of 2025.

“This new location represents an exciting expansion for Mubea and reinforces our commitment to innovation and excellence in automotive components,” James Sheehan, CEO of Mubea North America, said according to Pro Mexico Industry.

Mubea is a global producer of automotive components. The company employs more than 17,000 people at 54 locations in 18 countries.

Cargo vessel makes first call at Port Houston

The Saudi Arabia-flagged Bahri Diriyah, a multipurpose dry cargo vessel, recently arrived at Port Houston’s Turning Basin Terminal.

The ship traveled to Houston from Dammam, Saudi Arabia.

The 31,241-ton vessel can hold up to 1.3 million cubic feet of general cargo. Operating as a tramp vessel, the Bahri Diriyah will call Port Houston on an as-needed basis to offer cargo solutions for the trade community in Texas, Bahri officials said.

“Houston is one of our largest markets, and this milestone underscores our strong partnership with Port Houston,” Rajith Aykkara, vice president of Bahri Line, said in a news release.

Riyadh, Saudi Arabia-based Bahri is the national shipping carrier of Saudi Arabia. Bahri is the largest owner and operator of very large crude carriers (VLCCs) and chemical tankers in the world, according to its website. The carrier operates 40 VLCCs.

$31M worth of meth found hidden in hot peppers shipment

U.S. Customs and Border Protection (CBP) officers in South Texas recently intercepted $31.2 million worth of methamphetamine concealed in a shipment of serrano peppers arriving from Mexico.

The incident occurred Nov. 10 at the Pharr-Reynosa International Bridge in Pharr, Texas. CBP officers found 1,859 packages of alleged methamphetamine concealed in the shipment of peppers on a tractor-trailer.

CBP seized the drugs and the tractor-trailer. Homeland Security Investigations is investigating the case.

Newfane, Vermont Post Office 05341

The Newfane, Vermont Post Office serves ZIP Code 05341. Photo by Jimmy Emerson, some rights reserved. Photo shared under the Creative Commons License.

Newfane Post Office
562 VT-30
Newfane, VT 05345

Location at Google Maps

OTR division of 38-year-old Texas carrier ‘absorbed’ by MVT

Nearly 100 truck drivers for Stagecoach Cartage and Distribution of El Paso, Texas, were notified earlier this week that its over-the-road division was being absorbed by its parent company, which also owns Mesilla Valley Transportation (MVT) of Las Cruces, New Mexico.

A source familiar with the situation confirmed to FreightWaves on Friday that the OTR division would be operating under MVT’s DOT number moving forward. The source, who didn’t want to be named for fear of retaliation, said its other divisions, which include its local or regional drivers, intermodal, tanker, flatbed and warehouse, will continue to operate under Stagecoach Cartage and Distribution’s name.

“The market has definitely turned and it’s made mid-sized companies like Stagecoach very difficult to compete,” the source told FreightWaves. “Our operating costs are very high and our rate-per-mile has just tanked. So, it just became incredibly difficult to operate, especially if you don’t have the infrastructure of a large company like Mesilla Valley Transportation, which has yards across the country.”

In April of 2020, FreightWaves reported that Roadrunner Transportation Systems Inc. had sold Stagecoach Cartage and Distribution to a third-party logistics (3PL) firm, J.H. Rose Logistics LLC of Santa Teresa, New Mexico. Royal Jones owns J.H. Rose Logistics as well as several other transportation-related companies, mainly located in New Mexico and Texas, including MVT.

Although the Federal Motor Carrier Safety Administration’s SAFER website lists Stagecoach Cartage as having 135 drivers and 142 power units, the source said that number included both OTR and local/regional drivers. The source added that just under 100 drivers were affected by the decision to shutter Stagecoach’s OTR division and move its operations over to MVT, which is one of the largest private fleets in the U.S.

Although the decision to fold Stagecoach’s OTR division into MVT was made last week, its long-haul drivers and customers weren’t notified until Wednesday.

“Our drivers are already working under the MVT name,” the source said. “We had some older drivers who decided to retire and we had some drivers who didn’t feel comfortable moving over to work under MVT’s requirements, which was expected. If the parent company absorbs another company, some employees want to go elsewhere.”

Stagecoach was founded in 1986 and was the first motor carrier permitted into Mexico under the North American Free Trade Agreement in 2006.

According to the Federal Motor Carrier Safety Administration’s SAFER website, Stagecoach had one fatal crash, two injuries and three tow-aways over the past 24-month period.

Over that same time period, MVT, which has over 2,000 drivers and nearly 2,500 power units, had six fatal crashes, 58 injuries and 96 tow-aways over the the past 24-month period.

“Stagecoach Cartage is very diversified and profitable, except the OTR division, which will be absorbed by Mesilla Valley, so the decision just makes sense,” the source said.

KAG acquires Michigan-based dry bulk hauler

Specialized transportation provider Kenan Advantage Group (KAG) announced Friday that it has acquired dry bulk hauler PRM Trucking.

Financial terms of the transaction were not disclosed.

Michigan-based PRM operates a fleet of 39 tractors and 91 trailers with a staff of 33 drivers and a 12-person operations team. The carrier specializes in the transloading, storage and transportation of lime and sand across the Midwest.

The acquisition includes PRM’s terminal and 3,000 feet of railroad track for its transloading operations.

“The further expansion of our dry bulk transportation services will be supported with the latest addition of PRM, allowing us to capitalize on our growing Midwest presence,” said John Rakoczy, executive vice president at KAG Specialty Products, in a news release.

Leadership at PRM is joining KAG as well.

North Canton, Ohio-based KAG is the largest tank trucking company in North America. It operates roughly 300 terminals, providing bulk transportation of fuels, energy products, chemicals and food products.

KAG Logistics acts as a broker in the same markets, providing capacity solutions, managed transportation and logistics services.

“We are pleased to provide our expertise and knowledge to KAG in the dry bulk space,” said PRM’s owners, Shari and Tom Morris.

Left Lane Associates was the exclusive financial adviser to KAG on this deal.

More FreightWaves articles by Todd Maiden

Conspiracy to disable truck emission controls nets guilty plea

In exchange for a fee of up to $4,500 per truck, a New Jersey man was able to remotely reconfigure heavy-duty diesel truck engines allowing company drivers to bypass federal pollution-control regulations.

He now faces up to five years in prison and a $250,000 fine.

Jonathan Achtemeier pled guilty in a Washington state federal court on Wednesday, admitting that between 2019 and 2022 he removed the pollution control software on hundreds of trucks from around the country.

Defeating emission controls can boost engine performance and improve fuel economy – at the expense of emitting more pollution. The Environmental Protection Agency estimates that removing pollution control equipment and disabling the software results in trucks polluting at 30 to 1,200 times the level of a truck with pollution control systems. Tampering with the systems is a violation of the Clean Air Act.

According to court documents, Achtemeier, 44, advertised his services on social media nationwide, doing business as Voided Warranty Tuning (VWT), based in Columbia, New Jersey.

Records filed in the case revealed that Achtemeier conspired with five truck fleet operators and garage mechanics to disable the anti-pollution software. Two of Achtemeier’s co-conspirators based in Washington state worked for trucking companies that owned fleets of 2016 and 2017 model-year diesel trucks manufactured by Freightliner and Peterbilt.

The coconspirators sought Achtemeier’s services to trick their trucks’ software into believing the systems were still working, a process known as “tuning,” the U.S. Attorney’s Office said in a statement. The process could take less than an hour per truck.

“Monitoring software on a deleted truck will detect that the pollution control hardware is not functioning and will prevent the truck from running. Achtemeier disabled the monitoring software on his client’s trucks by connecting to laptops he had provided to various coconspirators. Some of the coconspirators would pass the laptop on to others seeking to have the anti-pollution software disabled on their trucks.

“Once the laptop was hooked up to the truck’s onboard computer, Achtemeier could access it from his computer and tune the software designed to slow the truck if the pollution control device was missing or malfunctioning. Achtemeier could ‘tune’ trucks remotely, which enabled him to maximize his environmental impact and personal profit.”

Between 2019 and 2022, VWT made more than $4.3 million.

U.S. District Judge Tiffany Cartwright scheduled sentencing for Feb. 14, 2025.

Click for more FreightWaves articles by John Gallagher.

Trucking company co-owner sentenced for falsifying driving logs after crash probe

A co-owner of a Massachusetts trucking company was sentenced to two months in prison after admitting that he falsified driving logs and lied to investigators in connection with a June 2019 fatal collision involving the driver of one of the company’s vehicles.

Dunyadar “Damien” Gasanov, 39, of West Springfield, co-owner of now-defunct Westfield Transport, pleaded guilty in August in the U.S. District Court for the District of Massachusetts to three counts of making false statements to federal investigators.

U.S. District Court Judge Mark G. Mastroianni also sentenced him to one year of supervised release, during which he is prohibited from driving a commercial vehicle.

Federal prosecutors had recommended a sentence of one year in prison, according to the U.S. Department of Justice’s sentencing memorandum.

According to court documents, Damien Gasanov also admitted that he had lied about how long he had known the Westfield Transport driver, Volodymyr Zhukovskyy, who was involved in the 2019 fatal crash in which seven motorcyclists of the Jarheads Motorcycle Club died in Randolph, New Hampshire. He also admitted to knowing that Zhukovskyy had been charged with operating a vehicle while under the influence of alcohol years before the crash, according to court documents.

Trucking company owner pleads guilty to falsifying logs in fatal motorcycle crash
Owners of Westfield Transport indicted on charges of falsifying driving logs

According to Westfield Transport’s business filings with the Massachusetts Secretary of State’s office, Dunyadar Gasanov, who was listed as the supervisor of Westfield Transport, was indicted in February 2021, along with his brother, Dartanayan Gasanov, who has pleaded not guilty and is awaiting trial. Business filings with the state agency listed Dartanayan Gasanov as president, treasurer, secretary and director of the shuttered auto transport company.

“By falsifying safety records and lying to investigators, [Damien Gasanov] put profits over public safety, with potentially devastating consequences,” said acting U.S. Attorney Joshua S. Levy in a statement. “Adhering to federal safety regulations is critical to protecting public safety and our office is committed to holding accountable anyone who flouts them in this manner.”

Westfield driver acquitted

In July 2022, a jury acquitted Westfield Transport’s driver Zhukovskyy, now 30, of killing seven members of the Jarheads Motorcycle Club. He originally faced seven counts of negligent homicide, seven counts of manslaughter and one court of reckless conduct in the collision on June 19, 2019, in rural New Hampshire.

However, jurors found that the lead motorcyclist of the Jarheads, Albert “Woody” Mazza, was impaired and over the centerline of the road at the time of the collision. Zhukovskyy was pulling an empty flatbed trailer at the time of the crash. It was his first trip as a driver for Westfield Transport.

What happened?

According to court documents, from May 2019 to June 23, 2019, the owners of Westfield Transport allegedly falsified driving logs “in order to evade federal regulations designed to ensure the safety of roadways and drivers.”

In court filings, Dunyadar Gasanov admitted that he had instructed at least one Westfield Transport employee to falsify records to exceed hours-of-service limits. He then “made a false statement to a federal inspector regarding the manipulation of recording devices that track drivers’ on and off duty hours in order to evade regulations,” according to federal prosecutors.

The National Transportation Safety Board (NTSB), an independent agency called in to investigate the fatal crash, claims in its report that Westfield Transport’s owners tried to add Zhukovskyy to its insurance policy an hour after the driver was involved in the fatal crash.

NTSB investigators also confirmed that on the day of the fatal crash, Zhukovskky was using paper logs.

Read more articles by Clarissa Hawes.

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UPS hit with SEC fine over its internal valuation of UPS Freight before TFI sale

The former UPS Freight LTL carrier – which has been enough of a headache for its subsequent owner that its CEO felt the need to defend its acquisition in a recent earnings call – was not properly valued by UPS when its sale was being considered, according to the Securities and Exchange Commission.

The penalty levied against UPS, after what the SEC said was a settlement with the logistics provider, was a $45 million fine. UPS, in the settlement, did not admit or deny the SEC findings, according to the agency.

UPS Freight is now known as TForce Freight within TFI International. UPS sold the LTL carrier to TFI in an $800 million deal that closed i n April 2021 and was announced in January of that year.

At issue for the SEC was the UPS valuation of goodwill attached to the UPS Freight unit.

Goodwill is a balance sheet line item that has been described as an “intangible asset” that reflects such amorphous non-financial capital as reputation and the strength of a company’s customer base. Its valuation is always a challenge, and according to financial information company Finance Strategists, it is reported by a company “only if its valuation can be supported by a transaction involving the purchase of a firm.”

“In general, it refers to a kindly feeling of approval and support,” Financial Strategists said.

According to a prepared statement released by the SEC, UPS in a 2019 internal review concluded that the top price it could receive for UPS Freight was $650 million (or $150 million less than it ultimately received in 2021).

Given that calculation, according to the SEC, the provisions of Generally Accepted Accounting Principles (GAAP), if properly implemented, should have been considered by UPS in a determination whether to write down the value of goodwill it had assigned to UPS Freight. Approximately $500 million in goodwill attributed to UPS Freight should have been considered “impaired,” which normally would lead to a writedown, the SEC said.

(In its latest quarterly earnings, UPS listed approximately $4.4 billion in goodwill for the company as a whole. At the end of 2019, that figure was approximately $3.8 billion).

But the SEC said that UPS turned to an outside consultant to value UPS Freight “without giving the consultant information necessary to conduct a fair valuation of the business.”

Outsider sees a $2 billion business

That consultant estimated UPS Freight was worth about $2 billion, which would have been about 150% more than what TFI ultimately paid for the LTL carrier. It was also well above the internal valuation that UPS could expect to receive no more than $650 million for the asset.

As a result of what the consultant estimated, according to the SEC, “UPS did not record a goodwill impairment in 2019. Had UPS properly valued Freight, its earnings and other reported items would have been materially lower.”

When UPS (NASDAQ: UPS) entered into the deal with TFI (NASDAQ: TFII) for $800-million (TFI was not identified by name by the SEC), there were adjustments agreed to in the deal “that were likely to reduce the final price,” the SEC said.

“Despite its own analysis and its entry into this term sheet, UPS relied again on a consultant’s valuation of Freight in 2020 to support not impairing the business’s goodwill,” the SEC said. “UPS also did not inform the consultant of the term sheet.”

UPS, in a statement provided to FreightWaves, noted that the investigation had already been previously disclosed by the company.

The statement reiterated that UPS was not admitting or denying the allegations.

“The settlement amount had previously been fully accrued in our financial statements, and the settlement will not have a material effect on our business, financial condition, results of operation, or liquidity,” UPS said, adding that the investigation has concluded.

In the quarterly earnings calls at TFI, CEO Alain Bedard, frustrated by the unit’s performance, said of operations at TForce that its practice of taking shipments that he believed were too light were “stupid” and that the unit was “too fat.”

In an email to FreightWaves, Bedard said he had no comment on the SEC fine against UPS and its report.

UPS stock at approximately 12:15 p.m. EST was up 2,15% to $134.19, a gain of $2.82. It has been an industry laggard in the last year, down about 11%.

TFI was up less than 0.5% Friday morning. It is up about 28.4% in the last 12 months.

Running on Ice: Drones cozy up to cold warehousing

All thawed out

Drones are everywhere. While some of the most exciting topics for the use of drones are Walmart deliveries in residential areas and 15-minute-or-less food delivery, the most accessible and approachable way to get drones involved in the supply chain is by adopting them in warehouse inventory management.

Gather AI has developed a drone solution that now encompasses the cold chain. The company says it has the first inventory management automation setup using drones for inventory monitoring automation. The cool part about this is that the operators of the drone don’t have to be on lifts or right next to the drone. They can be on the ground or even in a toastier part of a warehouse if they don’t enjoy the prospect of standing in a cold warehouse for 12-plus hours at a time.

Langham Logistics CEO Cathy Langham said in a news release: “We use business intelligence solutions like Gather AI to give our life sciences customers total inventory visibility, control, and compliance. After engaging Gather AI in 2022, we went from a 97% accuracy rate to over 99% accuracy. With the expansion into cold storage and freezer locations, we expect the same accuracy gains and up to 10X faster cycle counts.”

Temperature checks

(Photo: Shutterstock/SORN340 Studio Images)

The rise of direct-to-consumer and e-commerce shipping isn’t showing any sign of slowing down as the market continues to grow. Grip, a logistics tech and fulfillment leader for e-commerce companies that ship perishable goods, has announced the opening of its fifth fulfillment center in Michigan. This expansion positions Grip to service 70% of the U.S. population within 24 hours.

Juan Meisel, CEO and co-founder of Grip, said in a news release, “Expanding to Michigan is a significant milestone for Grip as we continue to support DTC brands with unmatched speed, cost savings, reliability and technology. Our goal is to empower brands to scale with confidence, knowing their operations and logistics are optimized at every step.”

The perishable goods transportation market size is forecast to increase by $9.23 billion, at a compound annual growth rate of 8.8% between 2023 and 2028. Perishable e-commerce has a larger emphasis on reliability and efficiency than traditional e-commerce models as temperature-sensitive goods can’t be easily replaced if something happens, and the risk of damaged or unusable goods is higher.

Food and drug

Southern hospitality at its finest invites you to come in and have a bite. Nestle USA is taking that sentiment literally, announcing plans to invest $150 million to increase production at its food processing plant in Gaffney, South Carolina. Food processing doesn’t always involve the cold chain, especially when talking about one of the largest consumer packaged goods shippers in the U.S.

This investment is primarily targeted to increase production of single-serve frozen meals in the form of a new production line. The company is also looking to enhance some automation and technology. Reaping the rewards of this enhanced facility are fan favorites of the frozen food aisle with Stouffer’s, Lean Cuisine, Vital Pursuit, Sweet Earth bowls, and Hot Pockets sandwiches, as well as DiGiorno, Jack’s and Tombstone pizza.

Nicole Caldwell, manager of the Gaffney factory, said in a news release, “This investment further solidifies our dedication to the Gaffney community, where Nestlé has been an integral part for nearly 45 years. It also reflects our continued commitment to enhance our US manufacturing footprint and in-house capabilities.”

Cold chain lanes

This week’s market under a microscope is Raleigh, North Carolina. Raleigh’s reefer market is facing a mild capacity crunch as outbound reefer rejections are on the rise. Reefer rejections are technically down week over week but made a strong recovery compared to the sharp drop earlier this week. As one of the largest food holidays of the year approaches, rejection rates aren’t likely to change trajectory anytime soon.

Carriers will prioritize higher-paying lanes and shippers face tighter capacity, especially in regions with strong seasonal demand. Rejection rates are expected to creep up as late-year demand strengthens. Shippers should secure capacity to mitigate risks.

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Shelf life

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Wanna chat in the cooler? Shoot me an email with comments, questions or story ideas at moconnell@www.freightwaves.com.

See you on the internet.

Mary

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