A N a t i o n a l P e r s p e c t i v e

o n E n h a n c i n g F r e i g h t T r a n s p o r t a t i o n

U.S. Department of Transportation

Federal Highway Administration
Notice

This document is disseminated under the sponsorship

of the U.S. Department of Transportation in the interest

of information exchange. The United States

Government assumes no liability for its contents or use

thereof.

THE FREIGHT STORY:

A NATIONAL PERSPECTIVE ON ENHANCING FREIGHT TRANSPORTATION

T A B L E O F C O N T E N T S

FREIGHT TRANSPORTATION TODAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Freight Transportation and the Economy . . . . . . . . . . . . . . . . . . . . . . . . 3

The Bottom Line for Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FREIGHT TRANSPORTATION IN A CHANGING BUSINESS ENVIRONMENT . . . . . . . . 6

The Shift from Manufacturing to Services . . . . . . . . . . . . . . . . . . . . . . . 6

Deregulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

From Push to Pull Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

KEY FREIGHT TRANSPORTATION CHALLENGES . . . . . . . . . . . . . . . . . . . . . . . . . 9

Congestion and Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

National Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Professional Capacity Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

ST R AT E G I E S T O EN H A N C E NO RT H AM E R I C A N FR E I G H T

PR O D U C T I V I T Y A N D SE C U R I T Y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8

International Freight Gateways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

State and Local Transportation Programs . . . . . . . . . . . . . . . . . . . . . . . 31

Multistate Trade Areas and Corridors . . . . . . . . . . . . . . . . . . . . . . . . . . 33

National Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
THREE

fficient, safe, and secure freight transportation helps form the foundation

upon which our nation’s economic

strength rests. Improvements in the

efficiency and reliability of freight

transportation have been the engine of prosperity and competitive advantage. The cost

of moving freight dropped from 16.1 percent

of U.S. Gross Domestic Product (GDP) in

1980 to approximately 10.0 percent in 2000

(Figure 1) (Cass Information Systems and

ProLogis). Business and consumers benefit

from these savings. Every corporate dollar

E

1

saved in logistics expenditures is available for

plant and equipment upgrades, worker training to adapt to changing global markets, basic

and applied research and development, and

increased equity value. The Journal of Commerce

estimates that American households, the ultimate beneficiaries of system improvements,

have saved an average of $1,000 annually

since 1980 because of reductions in freight

logistics costs. 

Although efforts to improve freight transportation efficiency and reliability have been

successful, the U.S.

transportation system is now facing

challenges that,

unless addressed,

may jeopardize its

reliability. Allowing

transportation system reliability to

erode would add

additional pressure

to U.S. companies

operating in an

increasingly competitive international

market and place

more burdens on

communities seeking

A National Perspective on Enhancing Freight T r a n s p o rt a t i o n
THREE

to sustain their economic base and quality of

life. Improved logistics has thus far been able

to address the corrosive effects of the loss of

system reliability. Unfortunately, the ability

of logistics to provide additional offsetting

savings appears to be nearing its limit, as are

the savings attributable to deregulation.

Unless these challenges are addressed, more

discretionary income will be devoted to moving materials and products, businesses will be

constrained in their adoption of innovative

strategies to maintain global competitiveness,

quality of life—as measured by congestion—

will suffer, and safety and security could be

jeopardized. 

These outcomes are not inevitable. The U.S.

system of governance, technical know-how,

and ability to respond when national goals

are threatened are strengths that can be mobilized to address a set of compelling, but manageable, problems.

This report summarizes three years of work

conducted by the Federal Highway

Administration (FHWA), in cooperation with

the U.S. Department of Transportation’s

(USDOT’s) other modal administrations, and

the Secretary’s Office of Intermodalism. This

work involved the development of an integrated freight data and analytical system,

called the Freight Analysis Framework (FAF),

and extensive outreach to freight stakeholders

aimed at improving the understanding of the

nature of freight movement, identifying challenges to improving freight productivity and

security, and developing strategies to increase

freight productivity. This report is not a

definitive federal document describing specific approaches to be undertaken or policies to

be adopted. Rather, it is a point of departure

for further examination of policies, programs,

and initiatives that might be undertaken by

decisionmakers at all levels of government, in

cooperation with the private sector, to meet

the challenge of sustaining system reliability

and the promise it holds for the nation’s

future.

FREIGHT 

T R A N S P O RTATION TODAY

The U.S. freight transportation network

moves a staggering volume of goods each

year. Over 15 billion tons of goods, worth

over $9 trillion, were moved in 1998

(USDOT FHWA 2002a). This translates into

310 pounds of freight moved daily for each

U.S. resident. That’s a lot of stuff. 

The movement of bulk goods, such as grains,

coal, and ores, still comprises a large share of

the tonnage moved on the U.S. freight network. However, lighter and more valuable

goods, such as computers and office equipment, now make up an increasing proportion

of what is moved. Moreover, because of

changes in the makeup of the U.S. economy

2
and the dramatic growth in international

trade, goods are being transported over

longer distances in contrast to a few decades

ago. FAF estimates that trucks carried about

71 percent of all tonnage and 80 percent of

the value of U.S. shipments in 1998 (USDOT

FHWA 2002a). A breakdown of freight shipments by mode is shown in Figure 2. 

Commodities are moved on an extensive and

complex transportation network. The U.S.

road system alone extends 4 million miles,

railroad operations cover another 100,000

miles, and the natural gas and liquid pipeline

networks spread out over 1.4 million miles.

There are over 19,000 airports in the United

States, with approximately 540 serving commercial operations, and over

5,000 coastal, Great Lakes,

and inland waterway facilities

moving cargo.

F R E I G H T

T R A N S P O R T A T I O N

A N D T H E E C O N O M Y

The benefits of freight transportation to the economy are

enormous. Freight transportation increases the value

of goods by moving them to

locations where they worth

more and encourages competition and production by

extending the spatial boundaries of commodity and labor markets.

Freight transportation also stimulates demand

for goods and services and employs millions

of people. Freight transportation infrastructure is a significant component of our nation’s

wealth and productive capacity.

From a macroeconomic perspective, transportation accounts for a significant share of

the U.S. GDP. In 2000, purchases of transportation-related goods and services accounted for approximately 11 percent of GDP

(USDOT BTS 2002). Only housing, health

care, and food accounted for a greater share

(Figure 3). For-hire transportation services,

which include warehousing, contributed

about 3.3 percent ($303 billion) to GDP.

3
THREE

Many industries and businesses depend on

their own transportation operations (primarily

trucking) to move goods. These “in-house”

transportation services contributed an additional $142 billion to the economy (USDOT

BTS 2001b).

Freight transportation also contributes to the

economy by providing jobs to millions of

people—an important indicator of economic

growth. In 2000, more than 10 million people were employed in transportation-related

industries, including for-hire services, vehicle

manufacturing, and parts suppliers. Of that

total, for-hire transportation (including warehousing) employed more than 4.4

million workers, a majority of

whom worked in freight-related

jobs. Another 5.5 million people

worked in transportation occupations in nontransportation industries, such as truck drivers for

grocery stores (USDOT BTS

2001b). Truck drivers, alone,

accounted for nearly 70 percent

of the total number of transportation occupational workers

(USDOT BTS 2002b). 

Improvements in freight productivity help the United States

maintain its competitive position

in the world economy. The

Bureau of Labor Statistics reports that productivity for the intercity trucking, railroad, air

transport, and petroleum pipeline industries

has improved over the last 20 years. The railroad industry has posted the most impressive

gains, followed by the pipeline industry.

Improvements in railroad productivity resulted primarily from deregulation, divestiture of

uneconomic lines, reductions in labor force,

and changes in technology and logistics.

Productivity improvements in trucking resulted primarily from public investments in a

high quality national road network and 

deregulation. 

4
THREE

Transportation infrastructure is a significant

part of the nation’s wealth. With the exception of railroads and pipelines, transportation

infrastructure relies heavily on public investment and joint partnerships between the public and private sectors. The Bureau of

Economic Analysis estimated that public

stock in highways and streets, alone, was

worth $1.42 trillion in 2000 (USDOC BEA

2001). Not only are roads, airports, and railroads part of the national wealth, but the

transportation system also stores or carries

large volumes of the economy’s inventory. At

any given time, billions of dollars worth of

inventory are either moved via truck, train,

ship, or barge, or held in a yard for transport

or distribution.

T H E B O T T O M L I N E

F O R B U S I N E S S

Freight is big business. It is a necessity, not a

luxury. When transportation system performance decreases, freight-related businesses and

their customers are affected in two ways.

First, freight assets become less productive.

Second, more freight transportation must be

consumed to meet the needs of a thriving and

expanding economy. Thus, when freight

transportation under-performs, the economy

pays the price.

Reliable, predictable travel times are especially important in an economy where many

goods are expensive and are needed in tightly

scheduled manufacturing and distribution systems. Late arrivals can have significant economic costs for factories waiting for parts to

assemble and for carriers who are missing

guaranteed delivery times. 

Congestion is a serious problem for freight

transportation. It contributes to making transit times longer and more unpredictable.

Unpredictability can hamper just-in-time

inventory management and hinder some production processes. As a result, shippers and

carriers assign a value to increases in travel

time, ranging from $25 to almost $200 per

hour, depending on the product carried. The

value of reliability (i.e., the cost of unexpected delay) for trucks is another 50 percent to

250 percent higher (USDOT FHWA 2001b).

Hence, congestion increases the cost of

freight and therefore has an effect on the

U.S. economy.

5

Growing traffic 

congestion affects

the U.S. economy

and our quality of

life. Source:

Washington State

Department of

Transportation
FREIGHT TRANSPORTAT I O N

IN A CHANGING BUSINESS

E N V I R O N M E N T

A host of economic and political forces here

and abroad have reshaped our nation’s economy and its freight transportation services.

After World War II, the United States began

to transition from a mass-production and consumption society to a post-industrial, or information, society with an expanding service

sector. Economic deregulation and globalization of production and trade are salient features of the post-industrial United States.

These shifts are characterized by subtle, but

significant, changes in production, distribution, and logistics requirements.

T H E S H I F T F R O M

M A N U FA C T U R I N G T O S E RV I C E S

The shift from a manufacturing to a service

economy is neither a new nor a short-term

phenomenon. Productivity improvements in

agriculture, manufacturing, and communications—aided by continuous technological

gains—have allowed a large-scale shift in

resources toward a broad range of services 

in health care, education, travel, legal, entertainment, and other areas. This shift has 

various direct and indirect implications for 

transportation:

• Customers demand more flexible, reliable,

timely service.

• Traffic growth is greatest for smaller shipments.

• Demand for traditional, high-volume transportation services will continue to grow but

will account for a smaller portion of the

industry’s revenues and volume.

D E R E G U L AT I O N

Economic deregulation has led to a wave of

carrier and network restructuring, new market

entrants, mergers and consolidations, greater

efficiencies in the use of labor and equipment,

and price reductions for shippers.

Deregulation has also facilitated the growth

of multimodal solutions to improve freight

mobility.

Deregulation has been particularly important

in the railroad industry. The Staggers Act of

1980 allowed railroads to negotiate directly

with shippers for services, more readily set

rates, and more freedom to enter and exit

markets. As a result, the volume hauled has

increased, average rail rates have decreased

dramatically, and labor productivity has

increased four-fold since 1980.

Deregulation of trucking prompted an explosion in the number of interstate motor carriers, increasing from 216,000 in 1990 to over

6
500,600 in 2000 (USDOT FMCSA 2002).

Existing carriers developed new services and

routes. Reliance on in-house trucking

declined, as shippers decided to rely on the

more efficient services offered by for-hire carriers. Moreover, deregulation reduced the

number of empty back-hauls, improving productivity and reducing prices.

Likewise, the ocean carrier industry has

undergone several major changes over the

past few decades. These include building new

alliances, abandoning less profitable routes

and ports, contracting with motor carriers for

feeder and distribution services, and focusing

on more profitable, high-volume, international routes. Rationalizing services permitted

carriers to take advantage of the benefits of

larger container ships that reduce costs, thus

allowing smaller shippers and nonvessel-owning common carriers to operate under the

same rules as ocean carriers. 

Deregulation in the air transportation industry

resulted in lower shipping costs, growth in air

freight, and improved labor productivity. It

also has spurred dedicated air-freight carriers,

like passenger airlines, to develop hub and

spoke operations. Furthermore, carrier investments in technologies for tracking time-sensitive shipments have enabled growth in

overnight air delivery of documents and small

packages.

F R O M P U S H T O P U L L

L O G I S T I C S

Businesses are in the midst of an evolutionary

shift from inventory-based “manufacture-tosupply” logistics (“push” logistics) to replenishment-based “manufacture-to-order” logistics (“pull” logistics). The latter relies less on

expensive inventory and more on accurate

information and timely transportation to

match supply and demand. Overall, the result

has been a move to coordinated logistics—the

integration of distinct logistics activities such

as cross-modal coordination or the bundling

of transportation and inventory control.

Coordinated logistics has been made possible

by cross-modal mergers and acquisitions,

cross-modal service alliances, web-based carrier exchanges, and the development of coordinators and integrators (third and fourth-party

logistics companies). The amount of money

being invested in supply-chain management

tools is an indication of the increasing importance of supply-chain logistics and freight

operations. 

Logistics are now more efficient, but in some

ways more fragile than in the past. Economic

deregulation over the past twenty-five years

has allowed carriers to optimize the transportation system, resulting in higher productivity but little or no excess capacity or redundancy. For example, the lack of excess capac7
ity in many parts of the rail network has

caused operations to be more susceptible to

even minor disruptions. The lack of redundancy limits options available to shippers,

decreases competition, and contributes to

price volatility. These factors place tremendous strains on the transportation system in

terms of demand and reliability.

Another trend in logistics over the past few

years is the increasing integration of defense

logistics with commercial logistics systems.

Underlying this trend is the drive to improve

efficiency, particularly by using new information and telecommunications technologies

that affect all supply-chain processes. 

G L O B A L I Z AT I O N

Companies and consumers in

the United States and around

the world increasingly rely

on international trade to satisfy their demand for goods

and services. Several factors

have spurred this growth,

including the liberalization of

trade policies such as the

North American Free Trade

Agreement (NAFTA), the

internationalization of supply

chains, and changes in transportation and information

technologies that make possible global production and

consumption.. As a share of GDP, U.S. merchandise trade has grown from 11 percent in

1970 to 25 percent in 1997. U.S. merchandise trade is forecast to reach 37 percent of

GDP by 2025 (Figure 4) (DRI-WEFA 2000).

Much of that trade is with NAFTA partners,

followed by Japan, China, Germany, and the

United Kingdom. 

The growth of international trade has also

influenced the location and development of

air and marine cargo facilities, land border

crossings, intermodal connectors, and the

need for improvements to existing infrastructure. Likewise, increasing reliance on containerized transport in international trade has

spurred demand for larger and more special8
ized container facilities and

ships and for more intermodal

capacity to handle increased

landside traffic.

KEY FREIGHT

T R A N S P O RTAT I O N

C H A L L E N G E S

The volume of freight moved

on the U.S. transportation system has grown dramatically

over the past few decades and is

projected to increase by nearly

70 percent by 2020 (Figure 5). General cargo

tonnage is projected to more than double, and

some gateways expect a tripling in freight volumes over the 1998 to 2020 period.

As demand for freight service

grows, concerns intensify about

capacity shortfalls, congestion,

safety, security, and the environment. Consequently, understanding and improving freight

flows are becoming higher priority issues among decisionmakers at all levels of government

and in the private sector. FAF, a

comprehensive national database

of county-to-county freight

flows, captures these flows to

enable decisionmakers to identify areas in need of capacity 

improvements. 

As an extension of FAF and in

cooperation with public and

private sector partners, FHWA

has identified several key challenges facing the freight transportation industry, many of

which are interrelated. They

include: (1) congestion and

expanding capacity, (2)

improving systems operations,

(3) planning and financing

freight projects, (4) safety, (5)

national security, (6) the environmental

effects of freight transport, and (7) building

freight professional capacity.

9

KEY FREIGHT

TRANSPORTATION

CHALLENGES

• CONGESTION

• OP E R AT I O N S

• PL A N N I N G

• FI N A N C E

• SAFETY

• NAT I O N A L SE C U R I T Y

• EN V I R O N M E N T

• PR O F E S S I O N A L

CA PA C I T Y
C O N G E S T I O N A N D C A PA C I T Y

Increases in the volume of freight have

strained the transportation network in some

locations and exacerbated conflicts between

the traveling public and freight carriers.

Recent growth in international trade has

placed greater pressure on gateways, ports,

airports, and border crossings—nodes in the

system that are potential bottlenecks for the

movement of freight (Figure 6). Between

1990 and 2000, U.S. international trade more

than doubled (in inflation-adjusted terms), rising from about $900 billion to $2.2 trillion.

Nearly one-third of U.S. merchandise trade in

2000 was with Canada and Mexico (USDOT

BTS 2001a). Many gateways now suffer from

congestion, which is

expected to intensify as a

result of increased

demand and enhanced

security measures. 

Growing international

trade has also changed

the geography of freight

movements within the

United States, creating

high-growth trade routes

and with it the need for

improvements.

Historically, domestic

freight corridors developed with an east-west

orientation, reflecting the westward development of the nation. As Pacific Rim trade

increased over the last 30 years, east-west corridors linking major West Coast gateways

with the rest of the United States experienced

dramatic growth in traffic. Many of these

corridors are experiencing increased congestion as international trade competes with

domestic traffic for use of transportation infrastructure. 

Additionally, the creation of NAFTA has fostered north-south traffic, placing more

demands on the domestic freight transportation system. Since NAFTA went into effect in

1994, U.S. trade with Canada and Mexico has

risen by about 90 percent (Figure 7) (USDOT

BTS 2001a). As a result, the nation’s highway

10
and rail networks—initially developed for the

traditional east-west trade—are now strained,

especially at border crossings. In the future,

trade with NAFTA and Latin American countries is expected to grow along both northsouth corridors and east-west corridors running through the northern and southern border regions. The anticipated growth in trade

and changes in the character of freight flows

present many challenges to the U.S. transportation system and highlights the importance of international gateways to the U.S.

economy and national security.

To exacerbate the situation, the transportation

network has not increased at a rate commensurate with growth in travel and commerce.

In the highway sector, for

example, vehicle-miles

traveled (VMT) increased

by 80 percent while lanemiles of public roads

increased by only 4 percent between 1980 and

2000. Growth in truckmiles traveled was even

more dramatic, exceeding

the growth in passenger

VMT over the last few

years (Figure 8) (USDOT

FHWA Various years).

Clearly, more traffic is

moving over essentially

the same highway infrastructure. Other surface transportation networks are witnessing a similar overburdening

of their systems as well. 

When demand outstrips supply, the resulting

congestion can have a devastating effect on

speed and reliability. The Texas

Transportation Institute (TTI) estimated that

3.6 billion person-hours of highway delay

occurred in 75 urban areas in 2000. About 54

percent of the delay was caused by incidents

such as crashes and breakdowns (TTI 2002).

Using different methods, the Oak Ridge

National Laboratory estimated that 2.3 billion

vehicle-hours of delay were caused by crashes, inclement weather, work zones, poor signal timing, and vehicle breakdowns. Total

11
delay is likely to be higher because neither of

these estimates covers the entire highway 

network.

No slowdown in travel and freight transport is

in sight. Between 1998 and 2020, total VMT

is expected to increase, on average, by more

than 2.5 percent annually. Truck VMT is

expected to grow by more than 3 percent

annually over the same period (DRI-WEFA

2000). This nearly doubling in truck VMT

and increases in passenger travel mean that

more roadways will be congested in the

future. FAF estimates that about 46 percent of

the urban National Highway System (NHS)

will either be

approaching or

exceeding capacity

during peak periods in

2020, compared with

28 percent in 1998.

In terms of functional

class, urban Interstates

are and will continue

to be the most traveled segments of the

highway system, with

an estimated 90 percent either approaching or exceeding

capacity in 2020.1

High-volume truck traffic along major corridors is also a concern. FAF estimates that 69

percent of urban Interstates will carry more

than 10,000 trucks, on an average daily basis,

in 2020 compared with 27 percent in 1998. It

is important to note, however, that these dramatic increases are not limited to urban areas,

as both congestion and truck volumes are

expected to increase on rural Interstate segments and along corridors linking metropolitan areas as well. 

Given these forecasts, congestion is likely to be

a long-term condition requiring additional

investments in freight improvements to alleviate

12

1 To estimate current congestion, FAF uses traffic count data from individual NHS segments in accordance with the

Highway Capacity Manual’s volume-to-capacity ratio. (NHS segments include only those sections built and operational.) To estimate future congestion, FAF uses forecasted vehicle-miles of travel and trucking activity data, which

are then applied to NHS segments using the methodology noted above. Estimating future congestion is difficult given

the uncertainties related to operational gains from future improvements or other changes, such as driver habits. Thus,

several caveats regarding FAF forecasts are required. FAF assumes the network in place in 1998 will remain

unchanged in 2020, but traffic volumes will increase. This may contribute to higher forecasts of system capacity

constraints than if changes in capacity or other factors were incorporated into the analysis. However, given the limited growth in total lane-miles over the past twenty years, the FAF forecast still provides useful insights into future traffic patterns related to freight movements
anticipated pre s s u re on the nation’s transport ation network. An annual expenditure of $75.9

billion (2000 dollars) will be needed for the

2001-2020 period just to maintain the physical

highway infrastru c t u re, as it existed in 2000.

The cost to improve highways and bridges is

p rojected to reach $106.9 billion (2000 dollars)

annually over the same period. (USDOT

F H WA 2002b). One of the nation’s biggest

challenges, and a critical focus of USDOT, is

closing the gap between the demand for transp o rtation services and infrastru c t u re capacity.

Reducing highway congestion won’t be easy.

13
Solutions will likely involve a mix of investments to add new capacity, pre s e rve existing

i n f r a s t ru c t u re, and improve operations. In some

locations, adding new capacity may be the right

choice to accommodate increasing demand for

f reight services. In other cases, improving operations may be the most effective way to alleviate congestion and optimize freight movements. Regardless of the approach, the environment, safety, and security of the fre i g h t

t r a n s p o rtation network are likely to also benefit

f rom projects to reduce congestion. 

Congestion and capacity issues are emerging

in other freight modes as well. Air cargo

capacity, for example, is constrained by the

limited availability of new slots at major commercial airports and by opposition to airport

noise and longer operating hours. This situation is exacerbated by the increasing reliance

of shippers on air cargo services to meet justin-time deliveries and to maintain lower

inventories.

In the rail industry, aging infrastructure and

limited capital to invest in new or improved

capacity are major challenges. The MidAtlantic Rail Study identified $6 billion of

needed improvements to meet capacity

requirements over the next 20 years. Many of

the improvements identified in the study will

benefit both freight and passenger traffic. 

The maritime industry is also experiencing

congestion. Many U.S. ports are struggling

to handle larger containerized vessels and

increases in international traffic arriving at

their terminals. Adding new and improving

existing terminal capacity, dredging to deepen

harbors and channels, and upgrading intermodal connectors are critical to providing

timely and reliable service and ensuring a

port’s long-term success. The U.S. Chamber

of Commerce is now studying capacity constraints at U.S. container ports. 

O P E R AT I O N S

Freight operations are the practical work of

moving goods from a shipper to a receiver, a

subset of activities that constitute logistics (or

supply chain) management. In the United

States, the private sector is responsible for

most freight operations. The public sector

also has a role through its ownership and

management of the nation’s highway system,

ports, and inland waterways, and its regulation and taxation of freight movement. 

The pressure on carriers to improve operations comes not only from the growth in

freight movement but also from the need for

new logistical arrangements and the demand

for smaller, more frequent shipments for

which reliability is particularly important. In

the near term, capacity shortfalls and congestion might not shut down the nation’s freight

network, but they can degrade the predictability and reliability of freight service—a

14
shipper’s most important criteria for freight

transportation in an era of tightly integrated

operations, limited inventory, and just-in-time

manufacturing and retailing.

Over the past two decades, freight operations

have expanded and improved across all modes

as a result of several factors, including deregulation, increased vehicle capacity, economic

globalization, and collaborative logistics.

Since the late 1970s, economic deregulation

has resulted in a massive restructuring and

reorganization of the freight services industry

and huge gains in productivity. Today, however, the freight services industry is experiencing diminishing returns from deregulation and

few remaining opportunities exist for further

deregulation. Still, some productivity

improvements are expected from the development of new alliances and pooling arrangements. The industry will probably not experience similar vehicle size and capacity increases in the next

decade, except perhaps in mega-containerships.

As a result, emphasis is now being

placed on better

management of

public facilities and

the use of intelligent transportation

system (ITS) technologies. These

will be particularly

important in the new environment of

increased emphasis on security and safety and

the push for increased information and visibility in the transportation process. In highway

and trucking operations, for example, ITS

technologies are used to monitor traffic and

provide information to travelers about work

zones and incidents. The first incident management programs focused on metropolitan

facilities (e.g., beltways), but FHWA and state

DOTs have expanded the program to include

intercity corridors. Many states and metropolitan areas have also introduced electronic

tolling at bridges and tunnels, increasing

speeds and reducing congestion in the

process. To better manage the urban transportation system, many metropolitan areas

have established traffic operations centers. 

15

FHWA is working

to enhance the

operational efficiency and safety

of highway work

zones for all

road users and

workers. 

Source: FHWA,

Office of

Transportation

Operations

To help reduce

traffic congestion,

five transportation

agencies in DE,

NJ, and NY use

the E-Z Pass technology to collect

tolls electronically.

Source: I-95

Coalition
In the railroad industry, new technologies,

such as positive train control, have shown

promise in improving rail operations. To

increase the efficient utilization of assets, railroads are also pursuing equipment-sharing

agreements and pooling arrangements. In the

maritime industry, operational improvements

have come from the introduction of technologies, such as terminal management systems

that can locate all terminal equipment and

containers. An example of this is the Port of

New York/New Jersey’s web-based Freight

Information Real-Time System for Transport.

The system will consolidate various sources of

cargo and carrier information, including cargo

availability and gate and shipment status.

Although many successes have been realized,

some challenges to improving operations

remain. The world of intermodal freight, for

example, is fragmented by the presence of

numerous stakeholders who have different priorities. These differences can create “islands

of information” that result in barriers to data

exchange. The lack of accurate and timely

information about shipment location, vehicle

and equipment availability, gate queues, and

highway congestion increases costs and

undermines reliability and productivity across

the intermodal system. Hence, the flow of

accurate and timely information through the

freight system is just as important today as the

movement of freight. Indeed, information

provides the thread that binds individual

operations into an efficient intermodal system

and, therefore, is an important area of focus

for both the public and private sectors. 

Unfortunately, optimization of the transportation system over the past 25 years has resulted

in little or no excess capacity or redundancy.

Vastly more freight is being moved by rail

with fewer miles of railroad and fewer rail cars

and locomotives. The lack of redundancy

reduces the number of options available to

shippers, decreases competition, and makes

prices more volatile. As a result, operations

have become more vulnerable when breakdowns or other unforeseen events occur.

Operations have become even more vulnerable with the development of coordinated

logistics systems that are cost effective for

shippers and receivers but place tremendous

strains on the transportation system in terms

of demand and reliability.

Clearly, more efficient operations are essential

to optimizing national freight performance,

expanding system capacity, and mitigating

freight transportation’s effects on natural

resources, neighborhoods, and people.

However, operations improvements cannot

obviate the need for investment in new capacity in some locations. Even so, more efficient

operations is a key cost-effective element in

strategies to improve freight productivity 

and security.

16
P L A N N I N G

Both public and private sectors execute planning for freight transportation infrastructure

and operations improvements. Planning for

publicly funded improvements follows a structured process with lengthy timelines and prescribed involvement by a broad array of stakeholders, including state and local governments, transit authorities, and the public,

among others. In contrast, private sector

planning is based on market trends, largely

without external involvement, and requires a

timely response, sometimes within three to six

months. Not surprisingly, these differences in

approaches to planning can make it difficult

to develop private-public partnerships to

move freight projects forward. 

The degree to which freight is considered in

the public transportation planning and programming process ranges from being fully

integrated with substantial freight transportation projects prioritized and funded to being

minimally considered, if at all. Typically,

freight in the public arena is a minor constituency relative to passenger and other

transportation interests. The challenge is to

change this behavior so that both freight and

passenger mobility are considered in a balanced way. Education, improved freight data,

and the use of quantitative planning tools to

assess the needs for and benefits of freight

improvements are important mechanisms for

fully integrating freight into the planning

process. 

In today’s global economic environment,

many freight movements encompass interstate

and international travel. Yet, public decisionmaking affecting these moves tends to occur

at the state and metropolitan planning organization (MPO) levels. For several reasons,

MPOs tend to give less attention to freight

investments than might be warranted. These

include: (1) limited resources, (2) a frequent

lack of communication with freight interests

on shipper and carrier needs, (3) the perception that freight projects have limited benefit

for the MPO population as a whole, (4) costs

borne locally, but benefits accruing more

widely, and (5) the perceived priority needs of

passenger-related projects (Gayle 2001).

Local planning processes tend to focus on

commuter and livability issues rather than on

freight congestion relief and economic

improvement (USDOT FHWA 1999).

Several states and MPOs have elevated freight

needs in their overall discussion of, and planning for, infrastructure investments, but “most

others continue to struggle” (USDOT FHWA

2000a). States that have been very successful

in promoting freight transportation improvements, such as Maine, Washington, and

Florida, have had legislature and gubernatorial

backing. MPOs that are most successful at

engaging the private sectors are those that

17
plan and program needed improvements

quickly, especially those projects that are in

the low to moderate cost range and greatly

enhance system performance. 

In recent years, multijurisdictional coalitions

have emerged as effective partners in dealing

with regional, corridor, and binational tradetransport development issues that cannot be

easily dealt with using traditional planning

approaches. The I-95 Corridor Coalition and

the Latin American Trade and Transportation

Study group are two examples of multijurisdictional alliances that have been successful in

addressing freight issues. Pooled resources,

improved understanding of partners’ concerns,

and enhanced communications are important

benefits of these alliances. 

Given the importance of freight to the economy and the projected growth in freight traffic,

a dynamic and responsive transportation planning process is needed to address deficiencies

in the freight transportation system.

Likewise, reconciling the vastly different timeframes used in planning by the public and private sectors, encouraging private sector

involvement in state and MPO processes, and

facilitating multijurisdictional cooperation and

coordination are critical to ensuring that

freight perspectives are included in planning

and programming major transportation

improvements.

F I N A N C I N G

In the past, investments in Interstate highways, Class I railroads, port terminals, and

other transportation facilities have more than

adequately met the needs of moving freight.

Now, neither the public sector nor the private

sector alone has the resources to invest in

improvements to meet projected future

growth. Both sectors must now look for

opportunities for joint financing. 

But it is not just a matter of more money.

Funding needs to be directed to the right

types of investments in the right places if

transportation productivity is to be maximized. These two elements of freight financing—funding level and project type/location—must be carefully considered in order to

ensure the efficiency and reliability of the

freight transportation system in the early

years of the 21st Century.

The type or mix of options used to finance

freight improvements varies among modes.

Highways, for example, are usually built using

public money from federal and state sources.

Ports are funded with public and private

funds. Railroad improvements are usually

funded privately, although public money has

been used to improve safety at highway-rail

grade crossings and for smaller railroads, especially when there is a risk of a railroad being

abandoned. Passenger fees and the jet-fuel

18
tax typically support airport facilities,

although public-private partnerships between

airport authorities and airfreight integrators

have allowed for the issuance of revenue

bonds to improve cargo facilities. 

Public funding for freight infrastructure may

be difficult to secure if projects are thought to

have only private benefits limited to local

jurisdictions. Not surprisingly, objections are

often raised about public financing of projects

when one company or one mode is perceived

to benefit disproportionately. Moreover, with

respect to highway and rail, passenger projects tend to be given a higher priority over

freight projects in the state and local decisionmaking processes. Under current federal

law, funding decisions are made at these levels

of government, and freight interests are often

not included in the planning process. 

In some circumstances, private financing may

also be difficult or expensive to arrange.

Freight improvements must compete for bank

loans with other types of projects, such as

building warehouses and office buildings.

Railroads and trucking companies have had

difficulty finding lenders to finance improvements, or they are offered unfavorable rates

over periods too short to cover the needs for

long-lived assets, such as railroad track. This

situation is compounded by the marginal economic health of some smaller railroads that

may need grants, not loans, to maintain

important parts of the rail system (USDOT

FHWA 2000a). 

The increasingly intermodal nature of freight

transportation has complicated funding as

well. When a freight project is intermodal,

such as a road connecting a marine terminal

with the Interstate system, it is often unclear

who should initiate and fund the project.

These issues become even more problematic

when a project involves freight infrastructure

on the borders with Canada and Mexico. 

The Transportation Equity Act of the 21st

Century (TEA-21) formally recognized the

need to link intermodal freight needs to infrastructure investments and advocated new

investment schemes. The Transportation

Infrastructure Finance and Innovation Act

(TIFIA), which was launched by TEA-21, provides a new source of financing underwritten

19

Air cargo was the

fastest growing

segment of the

freight industry

in the 1990s. 

Source:

American

Trucking

Associations

Foundation
by a dedicated user revenue stream.

However, TIFIA limits state and local discretion in the types of projects that may receive

federal funding. For example, current eligibility requirements do not allow public funds to

be used for private facility improvements or

railroad projects that are not connected to

highways. Moreover, the minimum $100 million threshold for projects makes it more difficult to fund improvements of intermodal connectors, which are generally in worse condition that the National Highway System as a

whole (USDOT FHWA 2000b). Freight

stakeholders suggest that selective modifications to TIFIA could enhance its use for

freight projects. 

Similarly, the Railroad Rehabilitation and

Improvement Financing (RRIF) credit program

was created under TEA-21 to help finance

railroad capital improvements, particularly

those that assist smaller short line and regional railroads. Unfortunately, RRIF implementation, to date, has been hampered by the lack

of federal funding, limited awards, and strict

applicant requirements, including mandated

documentation that RRIF is indeed the funding source of “last resort” for the applying 

railroad.

One of the most flexible programs, the

Congestion Mitigation and Air Quality

Improvement Program (CMAQ), which was

established under the Intermodal Surface

Transportation Efficiency Act, has been most

successful in funding a variety of freight transportation projects, some of which are privately owned. CMAQ funding, however, has limitations, as it must be built around the requirement of reducing the release of harmful emissions from transportation. Projects are also

limited to nonattainment areas. Freight stakeholders have suggested greater flexibility in

other Federal-aid programs, such as the

Surface Transportation Program, to fund intermodal and public-private projects.

Many states, local jurisdictions, and port

authorities are initiating new financing efforts

to advance freight projects. The Alameda

Corridor, the FAST Corridor in Washington

20

Intermodal connectors are critical components 

of the Nation’s

freight system,

tying modes

together and

facilitating distribution of products

to users. This

connector in the

Chicago area is

showing signs of

wear and tear.

Source: FHWA
State, rail improvements

in Chicago, the MidAtlantic Rail Study, and

others reflect the widely

held view that freight

transportation is growing

in importance with policymakers. 

Given expectations of

future demand, however,

current funding for

freight infrastructure is

clearly inadequate, especially for intermodal connectors, rail facilities,

ports, multistate projects,

and international gateways. Identifying ways to finance needed

projects is critical to maintaining U.S. competitiveness in the global marketplace. 

S A F E T Y

Safety is the top priority of the U.S.

Department of Transportation and a major

goal in every public and private sector transportation program. Many safety initiatives

undertaken by the department and in cooperation with the private sector have resulted in

improvements in transportation’s safety

record. Still, there is room for improvement.

In 2000, more than 41,800 people were killed

and over 3 million people were injured on our

nation’s highways. About 12 percent of all

highway fatalities involved large trucks

(Figure 11) (USDOT FMCSA 2002). 

In recent years, increasing volumes of freight

moved on all modes have heightened concerns about safety. One concern relates to

the mix of freight and passenger vehicles

competing for use of the transportation system. Today’s fast-paced global economy

requires just-in-time operations, bringing a

greater number of vehicles into close proximity, especially, along highways, but also in the

air and on rail lines. Current trends indicate

that passenger travel and freight movements

will grow substantially in the future.

21
Although actions to separate passenger and

freight services have been suggested, such as

truck-only lanes and dedicated high-speed

passenger rail lines, it is likely that most passenger travel and freight movements will continue along shared rights-of-way in the foreseeable future.

Likewise, growth in recreational boating and

cargo traffic, particularly barges, plying

shared waters presents safety risks to both

boaters and mariners. About 35 percent of

the 7,740 recreational boating accidents in

2000 involved collisions with other vessels

(USDOT USCG 2002). The U.S. Coast

Guard expects the number of recreational

boaters to increase by 65 percent to 130 million annually by 2025. Approximately 75 percent of all domestic trade (800 million short

tons) is moved on barges that are either

towed or pushed by tugs through coastal and

inland waters where recreational boaters are

found (Loy 1999).

Another safety concern relates to the growing

number of new carriers in the freight industry.

Transportation deregulation in the past two

decades has removed entrance barriers, commodity restrictions, and preapproved route

assignments, prompting a major increase in

the number of carriers, especially in the highway mode. Similarly, rail deregulation has

allowed large Class I railroads to downsize

their systems, spinning off low-volume lines,

which have often been converted to new

short line and regional railroads with lower

operating costs. 

Because of increased competition among carriers, the number of new businesses has grown

dramatically and many of them move into and

out of the marketplace more frequently.

Increased competition among a larger pool of

carriers has brought lower transportation costs

to consumers, but it has also meant that many

carriers have marginal profit margins. Where

competition is fierce, and profits are slim or

nonexistent, concerns intensify that spending

on safety will be the first line item reduced. 

Thus, a major challenge for the department

and private industry is to reduce fatalities and

injuries in the face of increasing freight and

passenger traffic. The Federal Motor Carrier

Administration (FMCSA), for example, has set

a goal of reducing truck-related fatalities by

50 percent by 2010. Other modes are also

committed to reducing fatalities and injuries

in transportation. 

NAT I O N A L S E C U R I T Y

For the most part, the freight transportation

system has been designed with productivity in

mind. Concerns about security generally

focused on controlling theft and reducing

contraband. Recent events changed that.

The focus is now on preventing attacks and

22
enhancing security while keeping commerce

moving. 

Security involves protecting transportation

assets—facilities, vehicles, and supporting

infrastructure (communications structures and

power stations)—from a host of potential

threats. Security also involves protecting

transportation assets from being used as

instruments in carrying out attacks on civilian,

industrial, or military targets. The use of

commercial aircraft in the attacks of

September 11th and the use of a rental truck

to bomb the federal building in Oklahoma

City are two painful examples. 

Because of its accessibility, extent, and diversity, the commercial transportation system presents opportunities for breaches in security

both from within and outside the United

States. In particular, the freight sector’s

increasing dependence on the use of containers, intermodal transport, and global supply

chains poses multiple security risks. In 2001,

an estimated 19 million containers moved

through the country’s water and land ports.

Few containers are tracked as they are transported to their final destinations, and the

routes used are often in close proximity to

some of the most populated cities. 

Given these risks, several freight security priorities have emerged. A top priority is general cargo shipped in containers in international

trade. Domestically, a major focus is on hazardous materials transport, which relates primarily to highway and railroad operations.

Other top priorities include air cargo, domestic general commodity movements, and

exports. 

Information about the ownership and integrity of containers as they move from origin to

destination is crucial to improving the security of the freight transportation network and

related infrastructure. A system of tracking

containers and identifying custodians of the

cargo is now being developed. Smart cards

that contain biometric identifiers and cargo

information connected to an electronic manifest can be used to establish a chain of custody. Other technologies that offer the

potential to enhance security and supply

chain efficiency include supply chain software

that can accommodate security applications,

electronic cargo seals, wireless vehicle-to23

The Port of

Oakland is one

of the top 10

container ports

in the United

States.

Source: U.S.

Army Corps of

Engineers
roadside data communications devices, and

wide-area communications combined with

global positioning systems or other global

location technologies. These technologies

can also be useful in tracking hazardous materials shipments, cargo shipped into and out of

ports, and freight transported across our international borders. 

The freight transportation network may also

be affected by responses to threats and other

incidents, such as hazardous materials transport incidents. Shutting down the U.S. aviation system for a few days after September 11

is an example of a response to terrorism.

Another example is the closing of the Howard

Street Tunnel in Baltimore for several days

after a train carrying hazardous materials

derailed. Other responses, or countermeasures, may have longer-term repercussions.

Continuing security delays in processing air

cargo is just one example. 

Intertwined with the increased focus on

freight security is the need to keep commerce

moving and further boost productivity and

reliability. In recent years, freight transportation and logistics systems have become tightly coupled, resulting in efficient global supply

chains. In this environment, predictability

and reliability are critical to shippers and carriers. Enhanced freight security can have

both good and bad repercussions. It has the

potential to adversely affect reliability and

timeliness of deliveries by disrupting welltuned supply chain operations. Enhanced

freight security measures may also provide

opportunities for increasing efficiency and

productivity.

Clearly, the extensive and readily accessible

U.S. freight transportation network is a security concern. Thus, a major challenge for

transportation decisionmakers is to balance

security needs with freight productivity.

Neither is mutually exclusive. If designed and

implemented well, security measures have the

potential to improve efficiency and customer

service and reduce losses from theft and other

threats. 

24

To ensure cargo

security, tracking

technologies like

this one are

being field tested

by the

International

Mobility and

Trade Corridor

partnership in the

Pacific Northwest.

Source: Transcor
E N V I R O N M E N T

Growing concerns about public health, air

and water quality, land use and development

patterns, plus an improved understanding of

environmental science, have resulted in a

greater emphasis on freight transportation

projects that are both environmentally sound

and economically sustainable. 

The National Environmental Policy Act of

1969 and subsequent laws established requirements for environmental impact assessments

for major transportation projects, giving special attention to air pollution, wetlands preservation, and coastal protection. Today, environmental considerations are critical in planning and designing freight projects. The

environmental review process, however, can

be complicated and time-consuming, involving several public agencies and private sector

interests. Federal and state resource agencies

are responsible for conducting environmental

reviews of projects funded by federal and/or

state monies. In recent years, efforts to

streamline the review process have included

the involvement of review agencies earlier in

the process. This approach has proven successful in a number of cases. 

Obviously, environmental resources can affect

and be affected by all aspects of freight transportation, including the location of facilities,

goods movement, vehicle performance, and

energy use. For example, increases in urban

truck traffic can reduce air quality and

increase noise. Conversely, improved access

to intermodal freight terminals and the timing

of traffic lights to reduce truck idling can

decrease air pollution and noise. More efficient marine transportation facilities and operations also could result in congestion relief on

highways in some locations. 

Some of the key environmental issues facing

the freight industry today include air pollution, dredging, the introduction of nonindigenous species, and noise. Much progress has

been made in addressing these and other environmental concerns, but there is always room

for improvement. 

Diesel engines in heavy-duty trucks, locomotives, and commercial vessels continue to be

major producers of nitrogen oxides (NOx),

which contribute to ground-level ozone

(smog) and regional haze. Although reductions in NOx

emissions have been made in

recent years, continued public health and

environmental concerns have prompted the

U.S. Environmental Protection Agency

(USEPA) to move forward with a rule to

reduce the sulfur content of highway diesel

fuel beginning in 2007. A reduction in sulfur

content will enable the use of pollution control technologies similar to those used in passenger cars. When this rule is fully imple25
mented, USEPA expects NOx

emissions to

decline by 2.6 million tons a year.

Dredging of ports and harbors and disposing

of dredged materials, particularly those contaminated with heavy metals and other toxic

pollutants, are major port industry concerns.

Because many U.S. ports were built near the

mouths of rivers, the accumulation of silt is a

common problem. Many ports and harbors

must be dredged to create deeper and broader

channels to accommodate ships. The Port of

New York and New Jersey, which is naturally

shallow, is one of the most heavily dredged

areas in the United States. According to

USEPA, about 10 percent of sediment underlying the nation’s surface waters has been contaminated and requires special handling and

disposal methods, such as confinement in

upland disposal sites (USEPA 1998). 

In fiscal year 2000, the U.S. Army Corps of

Engineers dredged 285 million cubic yards of

materials at a cost of $821.7 million (USACE

2002). In 2000, ports spent nearly $120 million on dredging for new construction and the

modernization of facilities (USDOT MARAD

2001).

Another environmental issue facing the

freight industry is the introduction of nonindigenous plant and animal species into the

United States. These species arrive by air and

water transportation from all over the world

and by surface modes from Canada and

Mexico. In the 1980s and early 1990s, more

than 205 known non-native species were

either introduced or first detected. An example of non-native species is the zebra mussel,

which entered the United States in the 1980s

when ship ballast water was discharged from

European freighters in the Great Lakes. The

zebra mussel has now spread to 20 states,

causing damage to water intake pipes, filtration equipment, and electric power generating

plants. According to USEPA, more than 21

billion gallons of ballast water are discharged

into U.S. waters each year (USEPA 2001).

The federal government and transportation

industries, and communities have instituted

monitoring and treatment programs to deal

with this environmental threat. EPA is also

investigating what options are available under

the Clean Water Act and other laws to control the introduction of non-native species

from ballast water.

26

Like other ports

and harbors,

Boston Harbor is

dredged periodically to maintain

adequate depths

for ships. 

Source: Great

Lakes Dredge

and Dock

Company
With projected growth in freight volumes and

increases in usage of the highway and air

modes, noise reduction will continue to be a

major challenge for the transportation community. Millions of people who live or work

near highways, airports, and rail yards are

exposed to annoying levels of noise.

Although this rarely leads to hearing impairment, transportation-related noise can result

in loss of sleep and related health problems.

Efforts to reduce noise include the use of quieter aircraft, the installation of noise barriers

along roadways, and improved mufflers in

motor vehicles.

In an era of heightened awareness of the damaging effects of pollution, noise, and other

problems, reducing these unintended consequences, particularly on those most affected,

might well be as important for the future success of the freight transportation system as

building new infrastructure and implementing

new operational strategies.

P R O F E S S I O N A L C A PA C I T Y

B U I L D I N G

The efficient movement of goods is dependent on the people who build the network and

operate the system, and on those who use it.

Educating and training a skilled and knowledgeable workforce are crucial to building and

maintaining a productive and competitive

freight transportation system. Yet, public sector transportation planners often do not have

the necessary information and tools to make

informed decisions about freight transportation needs and improvements. Furthermore,

transportation professionals in the private sector have little or no understanding of the public planning process, which may affect their

decisions. 

At the same time, skill levels and educational

requirements of transportation jobs are shifting in response to changes in the organizational structure of transportation. These

include a shift from building to managing and

operating systems and more interaction with

other systems, such as the environment.

Other factors that influence skill level and

educational requirements include the introduction of advanced technologies and globalization of the economy.

Developing professional capacity will require

both immediate and longer-term efforts.

Activities that will help in the short run are

mechanisms for information exchange, such as

sponsoring forums and other outreach events

and publishing technical reports to foster

ongoing learning. To further develop capacity, training courses focusing on policy, the

costs and benefits of transportation investments, and forecasting growth will provide

much needed information for states, MPOs,

and the private sector. The development of

freight-specific curricula at universities and

27
other academic institutions is another way to

build professional capacity. Many universities

are initiating and expanding business, logistics, and transportation curricula to address

freight concerns. These curricula must be

linked to maximize their utility, extended to

embrace NAFTA, and enriched to address

broader policy issues associated with freight

movement, trade development, and the relationships between freight and other social

objectives.

Education and training are the responsibilities

of both the public and private sectors.

Partnerships between government and business and educational institutions are important components of building professional

capacity. For example, an employee exchange

program between government offices responsible for transportation and employees of

freight businesses could provide valuable new

and flexible learning opportunities. Likewise,

nontraditional methods of educating, such as

distance learning, provide additional opportunities for improving skills and learning.

S T R ATEGIES TO ENHANCE

N O RTH AMERICAN FREIGHT

PRODUCTIVITY AND

S E C U R I T Y

The preceding sections suggest a compelling

public policy challenge in meeting the

nation’s needs for enhanced freight productivity and security, as agencies at all levels of

government are called upon to address and

balance numerous and often seemingly conflicting public policy goals. As has been

noted, freight and trade transport have been

fundamental to the growth and development

of the United States. The necessity of freight

movement has created a landscape of major

urbanized areas, connected to farming and

manufacturing regions and to each other by

multimodal transportation corridors. This

domestic linkage has been extended by the

dramatic growth in international trade with

Canada and Mexico, our NAFTA partners.

The result is an extensive, accessible, and

highly reliable network of highways, railroads, inland waterways, coastal ports, and

air-freight hubs, connecting all of North

America and sustaining economic growth 

and trade.

To meet this public policy challenge, several

strategies have been developed and are now

being discussed widely among freight stake28
holders. As defined by FAF and confirmed by

discussions with multiple freight interests, the

strategies are organized around the geography

of freight and include international gateways,

state and local transportation programs, and

multijurisdictional corridors and regions.

Within these geographic areas, two types of

strategies are specified: (1) the creation of an

institutional environment that supports the

identification and advancement of freight

concerns within the transportation development process and (2) the establishment of

comprehensive and sustainable funding

sources to support the implementation of

selected freight-related programs and projects. 

The strategies discussed here are elements of

a comprehensive national freight mobility and

productivity program, not specific legislative

initiatives. Over the course of the next year,

debate and discussion will continue as legislative development is advanced for the reauthorization of the federal surface transportation

program and other modal legislative initiatives

affecting air and marine interests. Information

on the nature of impending freight mobility

and productivity problems, the geography

and scope of the problems, and reasonable

options to pursue to achieve the desired outcomes will add value and enrich future

discussions.

I N T E R N AT I O N A L F R E I G H T

G AT E W AY S

The growth in international trade expected

through 2020 will place a continuing burden

on international gateways and gateway communities. Gateways create a “free rider”

transportation problem. The costs and congestion associated with trade are borne locally, while the benefits are distributed broadly

throughout the county. Moreover, as population continues gravitating to coastal and border regions (particularly the southern border)

through demographic shifts and immigration,

public agencies, port authorities, and the private sector will face stiff competition for land

and access to advance freight efficiency

improvements. Concerns about national security within the freight transport system will

also focus on gateways, as the United States

and its NAFTA trade partners seek protection

against terrorism through the international

trade system. These concerns suggest that

the major objectives of any initiative to

enhance international gateways should be to:

(1) improve gateway throughput, (2) ensure

national security, and (3) mitigate congestion

and community impacts. Gateway projects are

likely to combine existing or modified federal-aid programs and public-private partnerships through an innovative finance program

underpinned by user fees, as was done with

the recently opened Alameda Corridor.

29
The Alameda Corridor, the predecessor and

model for TIFIA, brought together several

funding sources from federal, state, and port

programs, along with a user fee applied to

shipments either using, or capable of using

the corridor. The Corridor relies substantially

on grade separations to promote safety and to

improve the operational characteristics of rail,

to minimize truck drayage and traffic conflicts

in and around the ports, and to minimize the

community impacts of freight improvements.

In addition, during construction of the

Corridor a broad employment development

program was established for surrounding neighborhoods

with significant

minority and disadvantaged populations, to provide

long-term economic

opportunities within

communities affected

by transport systems.

The Corridor is a

model for public-private cooperation in

addressing multiple

social, economic, and environmental goals. It

clearly illustrates how a systemic approach to

multimodal development, involving multiple

jurisdictions and combined funding sources,

can be brought together to address a problem

of regional and national interest. 

Port gateway projects under development

include the I-710 Freeway serving the Ports of

Long Beach and Los Angeles, the Portway

and Port Inland Distribution Network serving

the Port of New York and New Jersey, and

the FAST Corridor serving the Ports of

Seattle and Tacoma. These gateway projects

generally exceed $500 million in cost, and

some go much higher. Other surface transportation projects are being considered to

improve NAFTA land gateways, such as the

Michigan/Ontario frontier, and to facilitate

rail movements in Chicago that serve national

and international trade. In concert with an

international gateways initiative, stakeholders

have suggested that some sustained private

sector interaction with government needs to

be established to facilitate public-private decisions on freight and trade transportation

30

The Redondo

Junction project

separates passenger rail from

freight rail by 

elevating Amtrak

and Metrolink

railroad lines 

over the Alameda

Corridor in Los

Angeles.

Source: Alameda

Corridor

Transportation

Authority
issues of national and regional importance,

including gateways. 

S TA T E A N D L O C A L

T R A N S P O R T A T I O N P R O G R A M S

The 3-C (continuing, cooperative, comprehensive) transportation planning process was

established by federal law in the 1960s to support statewide and metropolitan planning.

Although freight movement is implicit in

transportation planning, it has only been

explicitly called for since the 1990s. Both

ISTEA and TEA-21 defined freight as an element that must be considered and included in

each of these planning processes. As noted

earlier, many states have initiated efforts to

incorporate freight in both state and metropolitan planning, partly in response to these

two federal legislative initiatives. These

efforts have been significant and useful in

many states and localities, but they have not

been adopted completely throughout the

nation. As a result, the consideration of

freight and trade transport issues has been

inconsistent, with strong consideration in

some areas and far less in others. Several

regional coalitions have emerged, focusing

primarily on development of specific corridors. Others have formed to address regional

freight issues. Most recently, in response to

growing trade with Canada and Mexico and

the terrorist attacks of September 11, with

their implications for international trade security, freight planning has been advanced

through the creation of binational planning

arrangements that include the involvement of

U.S. Customs and other Federal Inspection

Services with responsibility for international

trade transport.

To improve state and metropolitan consideration of freight and to secure continued private

interest and involvement in planning, new

institutional means are needed to simplify the

involvement process and to shorten the delivery time of measurable system improvements.

A “one-stop shopping” model for freight

involvement has been established in some

states, and other states are experimenting with

similar models to engage freight interests

more effectively. These models address three

major objectives of strengthened public-private cooperation in freight; (1) improve reliability of freight movement; (2) support state

and local economic development, and (3)

coordinate freight transportation investment,

economic development, and trade initiatives.

However, these models do not replace or

replicate existing state and local planning

functions. Rather, they provide a single

point-of-contact for freight interests to simplify the involvement process for the private sector, while providing a point-of-accountability

and access to public programs. 

State DOTs and MPOs are faced with a large

and complex set of issues to be addressed;

31
freight is often viewed as simply one issue

among many. Identifying a collaborative

mechanism or a suitable point-of-contact for

freight issues could substantially improve the

consideration of freight within statewide and

metropolitan programs. Governor-directed

efforts in Florida and Washington State, for

example, have enabled these states to focus

additional attention on freight and trade

transport issues without constraining other

interests and to provide the executive level

authority and guidance needed to help local

freight advisory groups to function more

effectively.

Process improvements within state and local

transportation programs should enable a more

effective focus on freight investment needs

within these geographic areas, particularly

regarding intermodal development.

Traditionally, transportation systems have

been developed modally and independently,

with highway planning conducted within the

public arena, and rail and port planning conducted either fully within the private sector,

or as a shared responsibility. The result has

been an orientation to modal specific networks, without full regard for intermodal connections and development opportunities. In

response to this, TEA-21 required USDOT to

analyze and report on the adequacy and needs

of NHS freight connectors. The NHS

Intermodal Freight Connectors report, submitted to Congress in December 2000, documented the condition of and issues associated

with connectors, often referred to as “the last

mile.”

While these relatively short highway sections

represent less than 1 percent of NHS mileage,

they are critical to enhancing intermodal

opportunities for shippers and improving asset

management of the nation’s freight infrastructure system. Additional attention must be

given to these vital sections, especially within

congested metropolitan areas, to help realize

the full potential of the nation’s intermodal

system. Almost 50 percent of NHS intermodal connectors are partially or entirely

owned by local governments, as opposed to

the remainder of the NHS, which is almost

entirely owned and operated by states.

Because of funding constraints or other priorities, connectors are often not given priority

by local governments.

Both ISTEA and TEA-21 emphasized simplifying and improving the flexibility of existing

programs over the creation of new ones. In

keeping with this approach, solutions to connector and other intermodal freight problems

are likely to require an increased state and

local focus in planning and innovative financing and greater cooperation with private sector freight interests. These approaches will

ensure that an appropriate level of condition

and serviceability is defined for critical connectors and other important freight projects,

32
33

Trucks queue 

up to enter a

maritime port

terminal in 

southern

California.

Source: 

Tom Pavia

with federal-aid eligibility assured to enable

necessary funding for improvements.

Additionally, these approaches would allow

maximum state and local flexibility, while

ensuring a public sector response appropriate

to the specific needs of the freight community.

M U LT I S T AT E T R A D E A R E A S

A N D C O R R I D O R S

The Freight Analysis Framework, viewing

freight movement from a national and continental perspective, graphically illustrates the

importance of long-distance trade corridors

and regional trade transport networks to the

efficient and effective flow of commerce.

State and local agencies may consider freight

movement external to their borders in their

planning processes, but programs are generally developed in accordance with the needs

and priorities of the state or local government

in question, not its surrounding jurisdictions.

An ISTEA-required study on the adequacy of

North American borders and corridors to

accommodate trade helped generate national

interest in multijurisdictional approaches to

regional and corridor transport development.

Corridor coalitions—spurred by the potential

development of a multistate corridor, binational coalitions emphasizing cross border

trade efficiency, and regional coalitions focusing on identification of regionally significant

multimodal subnetworks—have formed and

continue to form to raise the awareness and

interest in multijurisdictional approaches to

transportation issues. Institutionally, groups

are using pooled funding mechanisms and

congressional assistance to support multijurisdictional planning efforts. The challenge has

been twofold: (1) the institutionalization of

these efforts, with appropriate links to the

authorized state and local planning processes

and (2) the identification of funding for the

implementation of agreed upon activities and

projects, without jeopardizing other state and

local transportation priorities. 

TEA-21 includes a Borders and Corridors program to support multijurisdictional planning,

including regional, corridor, and binational
34

approaches. The program is discretionary,

with project solicitations reviewed for innovation and breadth of support. This program, while heavily oversubscribed, has been

considered a catalyst for multijurisdictional

approaches toward corridor, border, and

regional trade transport development.

Originally envisioned to support coordinated

planning, environmental assessment, and

other preconstruction activities, the Borders

and Corridors program is being used increasingly as an additional funding source for conventional construction activities. This expansion in eligibility has constrained its use in

advancing multijurisdictional institutional

approaches to transport development and in

emphasizing the need for border initiatives to

improve the efficiency, safety, and national

security of border crossings. States and

MPOs are currently able to build coalitions

and engage in coordinated multijurisdictional

planning, but implementation issues are often

a challenge. Although agreement on general

principles is relatively easily obtained, agreement on multiyear program strategies and

sequencing of investments across jurisdictions

has proven difficult. 

Borders and Corridors programs have

become models for encouraging multistate

and multijurisdictional approaches. A

strengthening of objectives and a directive for

coordinated implementation strategies, in

addition to planning, could enable jurisdictions to accommodate corridor and regionwide freight concerns more effectively. New

institutional arrangements such as interstate

compacts have been suggested to more effectively manage multistate corridor and regional

projects. 

In addition to the need for institutional innovations in support of multijurisdictional

approaches, financing is also a major concern.

Coalitions, such as the Latin American Trade

Transportation Study, the I-95 Corridor

Coalition, and the International Mobility and

Trade Corridor have addressed issues of funding across state lines, modal interests, and

international boundaries. The funding problems identified suggest programmatic and legislative improvements that can remove some

of the barriers and facilitate the leveraging of

public and private capital investment to make

the necessary freight improvements while

maintaining the integrity of the broader transport network. Innovative finance solutions

need to be further explored. Multistate

mechanisms for TIFIA, State Infrastructure

Banks, and enhanced bonding mechanisms

need to be considered.
35

N AT I O N A L I N I T I AT I V E S F O R

F R E I G H T P R O D U C T I V I T Y A N D

S E C U R I T Y

Initiatives that address institutional and funding concerns in gateways, regions, and corridors, and support state and metropolitan

transportation planning, will enhance the

ability of these geographic areas to meet the

challenges of improving freight productivity.

However, broader objectives such as ensuring

security and improving overall freight system

performance call for other, more nationally

oriented strategies. The application of

freight technologies to support freight transport security efforts and strengthen the

integrity of global supply chains will require

leadership in testing and deploying new technologies and agreement on international standards and protocols. Information sharing

among government agencies and industries

must also be continued and strengthened.

Furthermore, the United States and its trading partners must continue to work together

to accelerate the adoption of international

data and technology standards. Work on the

adoption of standards has been initiated with

the International Standards Organization and

is continuing with other international entities,

such as the World Customs Organization, the

International Electrotechnical Commission,

the United Nations Economic Commission,

and the International Telecommunications

Union. The adoption of standards will allow

global interoperability of security sensors, for

example, and help reduce information islands

that now exist throughout the freight transportation network. 

To improve national freight capabilities,

emphasis should be given to developing

freight data/tools and building professional

capacity. A comprehensive data and analytical

system, building on the success of the Freight

Analysis Framework, will enable decisionmakers to better understand trends, make

informed investment decisions, and support

safe and reliable transportation operations.

Specifically, new models need to be developed to measure the effects of growing volumes of freight on congestion and the environment and evaluate the effects of economic

growth on freight demand. Historically,

transportation demand forecasting models

have tended to focus on passenger travel.

Likewise, national programs are needed to

develop freight-specific educational and training opportunities to close a serious gap in

knowledge of freight transportation’s unique

characteristics and needs. Professional capacity building programs will require both immediate and long-term efforts focusing on such

topics as emerging freight trends, data needs,

benefits and costs of investments, forecasting

growth, and planning and financing improvements. These programs will provide much

needed information to states, MPOs, and the
36

private sector in planning for future growth in

freight transportation.

C O N C L U S I O N

The development of an extensive and efficient transportation system has allowed our

nation to bridge vast landscapes, connect

expanding metropolitan areas, link urban and

rural areas and interests, and respond to

changing economic opportunities created by

new technologies and advances in manufacturing and distribution. As international trade

increases and the global economy becomes

more integrated, transportation will take on

an even more prom- inent role in the U.S.

economy and society.

Throughout the last half of the 20th Century,

U.S. transportation policy has been governed

primarily by concerns for passenger interests.

Efficient freight movement, viewed primarily

as the responsibility of the private sector, has

often been ignored by transportation agencies, under the assumption that any transportation improvement will benefit all users

equally. Many state and local governments,

particularly in areas that have traditionally

recognized freight movement as the lifeblood

of their community, have taken steps to

understand and consider freight needs more

effectively in their plans and programs. They

have done this out of an appreciation of

freight as a major stakeholder in its own right

and out of a growing sense that freight

improvements also enhance economic health

and the overall quality of life. This recognition of freight’s importance needs to be inculcated in all areas of public policy and institutionalized within the framework of national,

state, local, and international transportation

decisionmaking.

This report, based on extensive review, analysis, and consultation, provides a general

overview of the challenges facing freight

transportation. It provides a useful starting

point for public and private sector discussions

on an array of issues associated with freight

planning, finance, operations, and security.

Embracing freight more directly in the federal

surface transportation program alone will not

resolve all of these issues. However, a concerted effort by those with interests in freight

at the federal, state, and local levels and a

strengthened partnership with the private sector will enable the development of a comprehensive set of strategies to address freight

issues more effectively. Through this greater

understanding and willingness to balance

competing interests, national goals for mobility, productivity, safety, security, and quality of

life will be realized.
37

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U.S. Department of Transportation. 1999.

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38