Intermodal Shipping: How to do it right in 2023

January 20, 2023
Cassandra Gaines

Understanding intermodal shipping is crucial to ensuring efficient and cost-effective transportation of goods. In this article, we’ll break down intermodal transportation, when to use it, its pros and cons, drayage, rail pricing, rail tariffs, and much more.  

What is intermodal shipping?

Intermodal can mean many things depending on the person or company you talk to. Simply put, intermodal is the use of two modes of transportation. But, for a complete description, you could say it’s using multiple modes of transport without touching the cargo.  

For example, a truck moves the cargo to the railyard, then rail, and then another truck moves it to delivery.  

For ocean shippers, their intermodal department considers any movement of the domestic rail. Meaning, containers that they would pick up on a rail ramp or at a port which needs to be delivered.

What is drayage?

A simple definition of drayage is moving containerized cargo that’s usually on a chassis. Many drayage companies do not move outside of their State.  

How to ensure better drayage pickup timing?

An excellent solution to improve the drayage time, if you’re a broker or shipper, is to hire a carrier for the day. This way, you’ll ensure your freight is delivered on time, and the carreir only focuses on your goods instead of trying to make various pickups to earn more money.  

What should a drayage carrier have for onboarding with a broker or shipper?

There are many things to consider when onboarding a drayage carrier. The good news is that drayage shipments involve a lot less risk than full truckload shipments. So you do not have to be as stringent with your vetting requirements. The downside is that it is incredibly difficult to prevent double brokering. Drayage carriers should present during onboarding:

  • UIIA Insurance or interchange insurance of $25,000 to cover trailer damage
  • Standard carrier agreement
  • Experience handling multiple chassis and containers every day at the applicable port.  

Rail transportation

Can a shipper or broker contract directly with the rail company?

In the U.S., because the network is so complicated, you cannot directly book with the railroad. So, you need to call an asset-based carrier or an Intermodal Market Company (IMC) to move the freight.  

In Canada, you can contract directly with the rail company. You can even hire door-to-door services with them where they’ll pick up the load from your warehouse to its destination.  

Why do shippers or brokers decide to move freight via rail?

In most cases, it is because transportation by rail is cheaper; it's also more energy efficient. It’s cheaper because, through rail, you can transport a thousand containers, but with a truck, you can transport a truckload across the country.  

The advantage of intermodal shipping is that you have control over the freight once you pick it up from the rail, allowing you to deliver it in a timely manner.  

If I’m a shipper, and I’m transporting through rail; do I need to buy a container?

As shippers, you do not have to buy the container. The container will be owned by the rail company or the carrier. Usually, however, drayage companies do not own the containers.  

Most of the time, shippers do not need to worry about the container logistics since the company they hire to transport or arrange to transport the freight will take care of the entire process. If the company you hire is good, it should feel like a door-to-door, over-the-road shipment.  

What commodities shouldn’t be transported by rail?

  • Freight that’s completely time-sensitive: shelf freight, production freight.  
  • Fragile goods  
  • Sensitive electronics
  • High value commodities

How much time does rail transport take?

This will depend on the distances, the rail ramps you’re using, and the locations. The proximity to the rail head will also determine the amount of time your transportation process by rail will take.  

For example, if you’re transporting from L.A. to Chicago, there aren’t many transfers, so it could potentially take 4-5 days once the rail is loaded.  

What are the most common rail lanes?

The most common lanes are long hauls from East to West.  

L.A. - Chicago  

Vancouver – Toronto

Texas – Chicago

Mexico – Chicago  

Rail transportation costs

To understand rail pricing, it’s essential to know about the truck market, specifically OTR trucking. To be competitive, your prices need to be 10% below truck cost, so customers choose to work with rail instead of trucks. Usually, IMC companies take care of the entire payment process so that companies do not have to pay the different companies that are part of the process.  

How many free days do you get to recover your freight from port before demurrage starts? What’s the rate per day?

This is generally negotiated with the VCO or the NVOCC for ocean containers. Usually, you’re going to have 2-3 free days, but that depends on the location of the freight. For example, if your shipment arrives at the L.A, Seattle, or Portland ports, you’ll likely get 5 free days. If you’re a bigger shipper, you can get 10 free days.  

Cargo liability for rail

There is a minimum cargo amount in the tariff, but when customers have sensitive freight, companies can create custom contracts to increase that tariff. Also, customers must be advised to get their own cargo insurance to avoid any issues throughout the transportation process. Usually, there aren’t many claims on rail transportation. But it’s essential to know about it.

Are there size limits for rail?

Rail can carry very heavy loads, but what limits the customers are the over-the-road drayage part of the transportation process, where you must comply with the regulation. It also depends on the state regulations, where you’ll be able to get special heavy permits for your loads.  

Understanding these essential parts of intermodal shipping is crucial to ensure your cargo is transported in the correct mode of transportation and with the right companies.