Union Pacific Railroad has pulled back on plans to fine trucking companies for missed appointments at intermodal ramps after carriers and logistics providers protested the move, due to take effect this week.
UP hit pause on the plan two weeks ago, saying after further consideration the railroad would “indefinitely suspend” any penalties, according to a letter to customers posted on the company’s website.
“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,” Kenny Rocker, UP’s vice president of marketing and sales, wrote in the letter. “We will continue to monitor the need to implement an accessorial system for ITR [intermodal terminal reservation system], but we would prefer to have customers take advantage of the visibility it provides.”
The proposed fines are just one example of the ongoing attempt by railroads to tighten the standards on shippers to drop off and pick up containers in a timely fashion to ensure terminal fluidity, consistent turn times, and reliable rail service.
Penalties under the revised reservations plan, announced in July, would have been as high as $50 and ultimately passed through to the shipper in certain situations. The negative feedback was swift, with intermodal marketing companies (IMCs) viewing it as little more than a cash grab. One IMC told JOC.com a better solution would be to restrict appointment access to chronic offenders who cancel or miss in-gate appointments regularly without good reason.
“Most certainly the big guys made a stink,” said one intermodal marketing executive, speaking on the condition of anonymity.
The plan, due to go into effect Sept. 3, would have assessed a $25 fine for canceling a reservation less than 24 hours before a gate cutoff and a $50 fine for missing a gate reservation appointment. UP would have provided a $100 credit, however, had a container arrived in time but gotten bumped from its assigned train. Reservations are required in Los Angeles, City of Industry, and Lathrop, California; Brooklyn, Oregon; and Seattle and Tacoma, Washington.
All US Class I railroads have tightened their storage windows in the last year to provide shippers less free time to retrieve boxes before assessing a fee, essentially terminal demurrage. Railroads believe too many shippers use the terminal as a de-facto warehouse. UP announced in July that all domestic intermodal shipments would face a storage charge after one free day and international shipments after two days — that went into effect Sept. 1.
UP’s plan would have been the first known example of fines associated with a terminal appointment system in the US. Typically, a terminal operator addresses chronic abusers of an appointment system on an individual basis, threatening to restrict reservation slots or locking the company out of the system completely. CSX, which requires appointments to drop off outbound containers in major markets, does not issue fines for a missed gate reservation.
A second intermodal marketing company executive told JOC.com UP should have consulted more with customers when building out its reservation system.
“Even though the system had a lot of bugs, UP continued to push it out,” the executive, who asked not to be identified, said. “They are still at least 30 days away from having the product in a usable format for most IMCs.”
More terminals get reservation systems
UP intends to launch the reservation system in Dallas, Denver, and Kansas City, Missouri by the end of September. Although reservations won’t be required initially, UP is asking customers to reserve slots.
“Customers with reservations will have a high degree of certainty that units will be able to in-gate when they arrive at the terminal and depart on the scheduled train. To be flexible, we are designing [the terminal reservation system] with ‘drive-up’ capability,” Rocker told customers. “At those terminals, in most cases, you will be assigned to the train with the next cutoff if there is available capacity. If that train is already full, we will attempt to assign you to a subsequent train where capacity is available.”
The drive-up feature isn’t an option in California, Oregon, or Washington because there is high demand to move containers out of these markets and an unscheduled container drop-off would likely be bumped to a future train, Rocker said.
UP’s goal is to expand the intermodal terminal reservation system to its entire network by the end of 2019.