Dive Brief:

• Union Pacific is indefinitely suspending intermodal accessorial fees it rolled out in July. The railroad planned to charge $25 for canceling a booking within 24 hours and a $50 fee for failing to show up without canceling. On-time drop-offs that do not depart on their booked train would have received $100 in credit in a digital credit and debit system.
• The fees were part of Union Pacific's transition to its Intermodal Terminal Reservations system (ITR), which replaced the previous system last month.
• "Instead, Union Pacific will proactively monitor and provide visibility into each customer’s reservation utilization and will work with them to ensure reservations match actual demand. We will continue to monitor the need to implement an accessorial system for ITR, but we would prefer to have customers take advantage of the visibility it provides," wrote Executive Vice President of Marketing and Sales Kenny Rocker in a letter to customers posted on the railroad's website.

Dive Insight:

Rocker does not offer a clear reason for the retreat on such fees, but these charges are a constant point of contention between railroads and shippers — and a point of scrutiny for regulators — especially since demurrage and accessorial charges have become more common in the age of precision scheduled railroading (PSR), according to shippers.

"Since the adoption of PSR, [International Paper] has seen our demurrage more than double to over $7 million,” said Mike Amick, senior vice president at International Paper at a hearing before the U.S. House of Representatives Subcommittee on Railroads, Pipelines and Hazardous Materials in July.

PSR mandates more precise movements by railroad and shipper. In order to keep trip plan compliance (TPC) high, trains must depart on schedule and railroads have argued accessorial charges are necessary to keep the system moving on time. Shippers contend the penalties only flow in one direction and the dramatic uptick in such charges in the last year or two are unwarranted and have unduly stressed relationships between railroads, terminal operators and shippers.

"We too are concerned that the railroads are increasingly using demurrage and accessorial charges as revenue generators," said Randy Gordon, president of the National Grain and Feed Association, at the same July hearing.

The Surface Transportation Board has been investigating accessorial fees charged by Union Pacific and Norfolk Southern for the whole of 2019. The regulator held a hearing in May dedicated to the topic.

"The reduction of free time to unload cars from 48 hours down to 24 hours, intermodal storage and the implementation of the bulk train tariff drove the increase in demurrage charges year over year," Rocker said at the May hearing. "Although these charges have increased, we hope that increase is temporary because the intention is to improve service, not drive cost increases for our customers."

The charges did indeed turn out to be temporary but not in the way Rocker likely intended.