WASHINGTON — A number of the largest railroad companies in America have profited from the supply-chain crisis by increasing fees and lowering their costs, a liberal-leaning watchdog claimed in a new analysis.
Accountable.US is a non-profit organization that studies corporations and special interests. It found that the seven largest railways dominate an industry that transports about 40% of U.S. freight. In the first nine months 2021, freight fees totaled $1.18 billion for freight caught in supply chain bottlenecks.
Supply chain problems worsened last yea as the Covid-19 pandemic had an impact. The railways were suspended or limited in service and collected more demurrage fees. These are charged when cargo is left at a terminal for longer than a specific time and are essential tools to keep cargo moving.
Companies have also reduced their expenses by using “precision scheduled railwaying,” which involves streamlining their schedules and reducing staff, as well as reducing locomotive and car fleets. The report stated that fees for the rail industry had already risen at a rate ten-fold higher than the expenses since 2002 before the pandemic.
According to the Association of American Railroads (an industry trade group), railroads handled the most intermodal traffic in the first half of 2021.
However, the group argued that the “idea railroads use demurrage fees to ‘profit off the supply chains crisis’ is false,” and that such charges are used “to incentivize others in the supply chain to be more efficient and in ways that would enhance the supply chain.”
According to analysis, BNSF, a subsidiary Warren Buffet’s Berkshire Hathaway, was the largest North American railroad company. It charged 5 percent more freight rates in the third quarter 2021 than the previous year.
CSX, fourth largest railroad company, credited higher profits to its operations and spent more lobbying on user fees, rail regulations, mergers and other issues during the fourth quarter 2021.
According to the analysis, Union Pacific, Canadian National and Norfolk Southern increased their fees, which boosted net income.
Canadian National and CSX referred NBC News directly to The Association of American Railroads. Other companies didn’t immediately respond to our requests for comment.
Martin Oberman, Chairman of the Surface Transportation Board, was a key federal regulator appointed by President Joe Biden. Oberman has criticised railroads for exploitation of their market power.
Oberman criticized the industry’s pursuit of the “almighty OR ‘”–” last September. This refers to railroads’ attempts to improve operating ratios and cut costs.
Oberman estimates that the industry has spent $46 Million more on stock buybacks, dividends, and maintenance since 2010. This analysis says that this would have “improved the rail system’s resilience against the kind supply chain shocks which are currently straining consumers’ wallets and access to daily necessities.”
Oberman stated that he was counting on shippers and RR’s to see the bigger picture and actively participate in efforts to alleviate the problems, not just for the immediate crisis but also for the long-term in fixing the holes in international supply chains that the pandemic has exposed,” during a speech.
