On Oct. 1 UP began charging a $300 surcharge for 40 foot/45 foot containers exceeding 26 tons and a $200 surcharge for 20 foot containers exceeding 22 tons. The company said the surcharge will allow it to “efficiently and safely” transport double-stacked intermodal containers.
UP spokesman Mark Davis said the charge is tied to handling the heavier containers, which cannot be stacked on top of lighter containers or on top of each other.
The heavier containers were prohibiting UP from double stacking containers on westbound intermodal trains out of terminals such as Chicago, causing UP to operate extra trains to get the containers to West Coast ports, he said.
“We are not trying to prohibit overweight containers, but rather the surcharge is in place to compensate us for the inefficiencies and additional costs associated with those heavier containers,” he said.
A significant increase in heavier containers in recent years limited UP’s ability to double stack containers and forced UP to inefficiently transport single-stacked containers, leading to the surcharge, said UP Chairman, President and CEO Jack Koraleski in an Oct. 15 letter to Idaho Gov. Butch Otter.
The intermodal containers are primarily used for consumer goods, and most shipping out of western ports are headed for the Pacific Rim, Davis said.
The nearest intermodal connection for Idaho is Salt Lake City, where containers are offloaded from trains, trucked to Idaho and trucked back, he said.
That’s how Standlee Premium Western Forage in Eden, Idaho, gets its forage products to its big three overseas customers—Japan, China and Taiwan, said Jay Shansby, Standlee’s general manager of Marketing.
Exports are a small portion of the Standlee family business, which primarily focuses on supplying 3,500 retail stores across the country, but the surcharge is raising its overall cost per ton of exported product, he said.
Rates vary, but Standlee pays an average of $1,250 to $1,400 per container. A $300 surcharge for overweight containers is an increase of more than 20 percent, Shansby said.
Standlee has tried to avoid the surcharge by reducing container weights. But keeping weights below the threshold means shipping more containers and increases freight costs per ton of product, he said.
Standlee either has to internalize that added cost and reduce overall profits or pass it on to the customer, he said.
UP only gave three months notice before applying the surcharge, but freight rates are negotiated on a yearly basis, he said.
Travis Jones, executive director of Idaho Grain Producers Association, said only so much Idaho grain moves by container, but rail surcharges have been a problem for some time. They primarily apply to grain growers as a fuel surcharge or a premium to get a rail car to show up when it is wanted—which can be as much as an additional $900 per hopper car, he said.
Source: www.capitalpress.com