There is a Difference

Anyone who has flown on an airline in the last couple of years has had to deal with the reality of charges for things that were previously included in the fare you paid (I’m sorry, but the reality of life is that there are really no free things included with something you have paid for, you just haven’t paid for them directly). When the airline industry realized that they could charge for things that they previously provided as a value added service (and that we would willingly pay for them), all of a sudden they found they could keep fare levels the same while providing less for that fare.The railroad industry does things a little differently than the airlines. First of all, your contract of carriage covers movement from point A to placement at point B, and that is what it always has covered. The railroad’s job was to move the car, and that was it. That worked until one day a customer wanted more than that, and the accessorial charge was born. What is an accessorial charge? It is literally the price to cover things that are outside of the rate that is paid to move the car. It can be for storage, extra switching, weighing, closing doors, rejecting cars, you name it. And railroads have tariffs that list these charges, which generally are reasonable, unless the charge is for something that is not so reasonable (cleaning sewage cars comes to mind). From time to time, railroads will review their charges, and make sure that they are at least covering the cost of doing the service covered (otherwise known as not giving away the farm), and from what I have seen in my career, this is one of those areas that gets the least amount of attention. We are required to provide the tariff with the charges to our customers in advance of any changes, and rarely do we hear anything from anyone.Recently I made some changes to our accessorial charges tariff that included some nominal increases, and sent out the changes to our customers a month in advance of them going into effect. For the first time ever in my career, a customer had a problem with the increase. I asked the customer for a reason why they had a problem, their response was that they wanted a decrease. I explained to them that the increase was not only fair, it was the first increase in a number of years, and the increase didn’t fully cover how much our costs had risen in that time period. And that was all I heard until the rate went into effect and we sent the customer our first bill.The customer sent me an email stating that they were not going to accept the charge. My response was that if the customer did not want to pay the charges, then they should not order the services in question. In fact, I informed them that those services would be terminated immediately, and I reminded them that if they could find similar services for less, they would be wrong not to utilize them.So what happened in the end? I don’t think anyone completely won. While the customer isn’t exactly happy, they are paying the charges. For us, we now have to be concerned that they are looking for other alternatives, but in the end we didn’t give away the farm. We will work with the customer to improve freight rates if we can, and work more to explain the difference between rates and charges. --By Steve Friedland
steven-fb.jpg Steve Friedland, vice president and general manager of Massachusetts Central Railroad, is a well-known leader in the short line industry who has devoted more than two decades to railroading. He got his start with the Morristown & Erie Railway, a 42-mile New Jersey short line, where he worked for 22 years in all areas of the railroad, including track, mechanical, signals, and operations. In 1999, he founded Short Line Data Systems, a provider of railroad EDI and dispatching software, AEI hardware, and management consulting to the short line industry. He has served as the ASLRRA representative to the AAR’s Wireless Communications Committee and was chairman of the joint AAR-ASLRRA Short Line Information Improvement Committee. He is currently a member of the ASLRRA’s board of directors.