Brief Explanation of Rate Increases

“As far as increasing rail rates from the leading rail carriers, the increasing volume and rising costs are two key factors on increasing the freight prices.  These carriers are hoping shippers will ship their product via truck instead of rail to help bring the rising volumes down to a reasonable capacity, especially in certain lanes.  Unfortunately, this is not working to their advantage.  The rising fuel cost, and the shortage of equipment is causing shippers to rail regardless of the increasing freight cost.  Clearly, the railroads plan to reduce the demand and volume of railcar shipments and to increase the freight costs is not working to their favor. 

Most of the major carriers are also switching to tariff rates as opposed to negotiated rail rates.  Shippers are finding some cases where shipping freight based on a tariff can be less expensive as opposed to having a contracted rate.  On the other hand, carriers are finding that shippers are willing to pay the higher contracted rate that is guaranteed for a given period of time, usually one year, than using the tariff rates that fluctuate so often.  Recently RSI has been seeing tariff rates changing in less than three months.

The rising cost of fuel is another factor in the growing cost in rail freight transportation.  The CN as well has the BNSF have already re-evaluated their fuel surcharge scales in hopes to let their customers feel some, not much but some, relief.  For example effective April 1, 2005, the CN is now reviewing the fuel surcharge monthly instead of quarterly, as they did in the past.  In a recent notice from the CN the new fuel surcharge tariff “…is applied monthly versus quarterly, triggers changes in $1 versus $5 per barrel WTI crude oil price increments and generates a more competitive surcharge than CN 7400.”  The BNSF will be changing their fuel surcharge scale to a mileage based surcharge.  This change will either benefit or hurt the shipper.  BNSF Shipments moving via rule-11, with BNSF being the origin carrier or destination carrier, will be charge fuel by the mile as opposed to a percentage.  Also, all BNSF direct route shipments will be charged fuel based on the mile instead of a percentage.”