2018 Will See Some Rail Customers Of CSX Being Imposed Hefty Fees To Prevent Schedule Delays

CSX Corp of the U.S. is going to make a number of change sin its freight transportation rules from next year. Apart from charging fees at new tares for freight shipments to Mexico, the company has announced hiking of charges for customers who to not manage to load or discharge railcars within fixed deadlines or those who ship unsafely loaded or overweight railcars. The new charges would be applicable from Jan. 1, 2018.

The dramatic operations overhaul of the company is partly responsible for continuous service delays in the schedules of CSX and the notice of the charges that has been circulated to customers, is aimed to reduce delays and better adhere to the schedules.

The charges were “in line with efforts to optimize the use of assets,” including railcars, said CSX spokesman Rob Doolittle. “These changes are intended to improve the efficiency of our operations,” he added.

The strategy of “precision scheduled railroading” is a concept that is completely focused on running freight trains according to the strict schedules fixed with suppliers and not focusing on meeting of the needs of the individual shippers’. This strategy is being used by CSX Chief Executive Hunter Harrison who took charge of the company in March for streamlining the operations of the company.

The aim of the enhanced fees is more for creating a behavioral change and as a “behavior-changing strategy” so that the shippers always conform to the timetables of the company and is not intended to only boost revenue and profits, said independent rail analyst Anthony Hatch about Harrisons’s strategy. But since the shippers tend to be deficient of the personnel and infrastructure for enhancing the speed or changing their capabilities for rail car-processing, therefore, these strictness to schedule could create a costly headache for shippers.

“Shipper-caused delays are a part of the whole story along with CSX-caused delays,” Hatch said. “Hunter Harrison is trying to reset the whole relationship.”

While Harrison was in-charge of leading the turnaround of the Canadian National Railway Co through 2009, a similar strategy and charges was used by him, Hatch said.

In case the systems in place for CSX are unable to handle the cars in a process known as “reciprocal switching”, there would be several shippers, which includes the U.S. packaged food maker Conagra Brands Inc., would no longer be able to other railroads to move freight in certain locations, the carrier also.

This step can also force such customers to choose to ship their goods by road which would typically be costlier than the rail service.

There were no comments available from Conagra.

Because of the fact that details of such penalties are generally not publicly disclosed therefore, it is not possible to compare CSX’s penalties to other major carriers, Hatch said.

“Customers are already dealing with increased transportation costs and major service disruptions because of the ongoing CSX service failures,” said Scott Jensen, a spokesman for the American Chemistry Council, a lobby group.

(Adapted from Streetinsider.com)

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