B2B Payments

Feds Are Looking Into Railroad Customer Fees

Railroads Laying Tracks To Greater Efficiencies

A federal agency is investigating fees imposed by railroad companies that aim to get customers to comply with new procedures.

According to the Wall Street Journal, companies such as Norfolk Southern Corp., Union PacificCorp. and others have revised their operating plans in an attempt to boost efficiency. As a result, they are charging fees to customers that cause slowdowns on the network, including taking too long to unload railcars and failing to have their facilities ready for pickups.

Now the U.S. Surface Transportation Board is looking into the fees. “I just want to make sure they’re commercially fair to the shippers they’re serving,” said Chairwoman Ann Begeman, who has requested that large operators provide quarterly reports on how much revenue they’ve generated from the fees.

Paul Verst, chief executive of Kentucky-based Verst Logistics Inc., a provider of warehousing and transportation, contacted the agency after Norfolk Southern wanted to slash the allotted time to unload cars from 48 to 24 hours before a charging a $150-a-day fee.

“What they’re asking us now is not fair and reasonable,” Verst said.

Norfolk Southern CEO James Squires defended the move in a letter to the STB, explaining that the new charges will encourage quicker unloading of railcars and improve overall performance. Railroad companies are offering credits to shippers when they are late to pick up railcars, and Squires added that his company will increase those credits if the railroad experiences problems.

“We are demonstrating to them our increased confidence in our service product, which should in turn cause them to further improve asset utilization, creating a virtuous cycle,” he wrote.

But Jeff Sloan, senior director of regulatory and technical affairs for the American Chemistry Council, a trade group, points out that shippers “have not yet really seen the benefits to these operational changes but they certainly have suffered the service problems and are seeing new costs being added on. It seems awfully one-sided.”

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