STB issues fuel surcharge ruling for railroads
Surcharges as a percentage of base rates called “unreasonable”
By Dave Hannon -- Purchasing, 1/26/2007 4:01:00 PM
The Surface Transportation Board issued a final rule defining how railroads should—and should not--calculate fuel surcharges. STB declared it an “unreasonable practice for railroads to compute fuel surcharges in a manner that does not correlate with actual fuel costs for specific rail shipments.”
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The ruling from STB says that “computing rail fuel surcharges as a percentage of a base rate is an unreasonable practice, and we direct carriers to change this practice. We also conclude that the practice of ‘double dipping,’ i.e., applying to the same traffic both a fuel surcharge and a rate increase that is based on a cost index that includes a fuel cost component, such as the Railroad Cost Adjustment Factor (RCAF), is an unreasonable practice, and we direct carriers to change this practice as well.”
In its statement on the decision, STB Chairman Charles D. Nottingham said, "Our decision today brings common sense and fairness to the railroads' implementation of fuel surcharges. This new rule will preclude them from selectively imposing surcharges in a manner that bears little relationship to actual fuel use. It will also remove the possibility that railroads will view fuel surcharges as a profit center."
Carriers had responded to the proposed ruling back in November.
The STB said that after collecting comments, it found that shippers “generally support a requirement that fuel surcharges be linked to attributes of a movement that directly affect the amount of fuel consumed, such as mileage or weight...or be limited to the changes in fuel prices from a defined starting point (such as when a new rate is negotiated), and that shippers be able to separately challenge surcharges that exceed the change in fuel costs for their particular movement.”
The full ruling is available on the STB web site.
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