Union Pacific Empty Shop Provision (Tariff: UP 6004 Item 55)

Historically, railroads do not charge for the movement of empty tank cars. The industry’s Freight Tariff RIC 6007 Item 190 specifies that empty tank cars should move without charge subject to mileage equalization (other than new or newly stenciled cars). Empty car equalization is $0.91 per mile in excess of the 106% of loaded revenue movements.

The UP announced on December 10th that effective January 1st, mileage-based charges in Tariff UPRR 4703 Item 1100 will apply to movements of empty private tank cars to and from repair facilities. There are some exemptions, the main one being if the preceding movement is a loaded revenue movement. It would not be surprising to see the other railroads follow with similar changes. The cost associated for these movements would be as follows:

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If you currently have empty tank cars that need to be moved on the UP, you should submit billing before the end of the year. If you have sublease agreements in place, you may want to advise those parties of this change and that they would be responsible for the charges.

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In the meantime, CSX has revised many of their public freight rates as of January 1st. For commodities that RSI is involved with, we are seeing average rate increases between 3% and 9%. A sampling of 300 lanes over 35 commodities had the following characteristics: the total cost of 92% of the lanes increased, the average increase is 4.4% and the median increase is 4.8%, 2.5% of the increases are more than 10%, and the most frequently occurring increases are between five and six percent. We have noticed lube oil, glycerin, and steel experiencing particularly large increases. Going forward there are two issues to be mindful of: the gap between the current and the revised rates will increase as fuel continues to drop. Second, all future rate increases are escalated after a railroad restructures rates by adding fuel costs on to the base rate.

On December 18th, Genesse and Wyoming followed suite by announcing they are resetting their mileage based fuel surcharge (Tariff 9004) with a strike price of $3.70 HDF effective January 1st for their railroads in the Midwest region. On December 16th, BNSF announced that they will eliminate their fuel surcharge program for carload traffic in February, 2015. BNSF will convert all BNSF carload public price authorities to a single freight rate. It’s interesting to note that BNSF led the way in instituting fuel surcharges in 2003, and FSCs have been a point of contention between shippers and railroads ever since. In 2007 the Surface Transportation Board ruled that some of the ways the railroads were computing fuel surcharges were unreasonable (Ex Parte No. 661). It will be interesting to see how this will play out in 2015. As fuel costs increase, BNSF could implement a new fuel surcharge or make adjustments to the rates in their tariffs. If fuel costs are going to be contained in the freight rates, it is likely that there will be more frequent rate updates. If keeping up with these changes are a hassle, rate database management and freight auditing services from RSI Logistics are available!