a definiution: "…Force majeure refers to unforeseeable circumstances that prevent a person or company from fulfilling a contract. The term means ‘superior force…"
The following is aC&P, from a letter from CF industries to Union Pacific RR in regards to their rail shipments out of ther plants in Louisiana and Iowa.
FTA:"…CF Industries ships to customers via Union Pacific rail lines primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa. The rail lines serve key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas and California. Products that will be affected include nitrogen fertilizers such as urea and urea ammonium nitrate (UAN) as well as diesel exhaust fluid (DEF), an emissions control product required for diesel trucks. CF Industries is the largest producer of urea, UAN and DEF in North America, and its Donaldsonville Complex is the largest single production facility fo
Regarding Force majeure (superior force), who would claim it in this situation? Would it be the U.P. or CF Industries? It seems that both are in the same circumstance. CF Industries cannot ship product because of restrictions on shipping imposed by U.P., so CF would conclude that they are restricted by a superior force.
Then U.P. also claims they are restricted by a superior force. But what exactly does U.P. say the superior force confronting them is?
When U.P. imposed the shipping restrictions, did they nullify service already contracted for? If so, what reason did they cite?
Generally, the root cause seems to always land on the “supply chain” as though it were some kind of higher force. But the supply chain was working when we parked it, so why isn’t it working now?
Let me get this straight: UP takes no interest in shippers with too low, or too irregular, a shipping pattern. Now it intends to threaten embargo against shippers with too high, or too regular a shipping pattern. Remind me if UP was one of the carriers trying to impose ‘punitive’ excess demurrage or detention, including slow intermodal transfer in congested facilities.
Gee, who would have ever anticipated that seven decades of anti-competitive merger would yield entities immune to market forces that otherwise might correct their “excesses”?
They wanted to eliminate competition so that they could set rates where ever they wanted. The goal is maximize profits, NOT maximize traffic levels. UP’s gross and revenue ton-miles are about 2/3’s of that for BNSF, yet they make more money than BNSF. These stats were at parity in late 1990’s. Whether you like the playbook or not, it certainly is working for UP and their shareholders.
PSR has excerbated things on UP, but looking back at the traffic and rate data over the past 20+ years, it is evident that UP has been intentionally pricing itself out of markets for a long time. I understand the thought process, especially after the meltdown in the late 1990’s and the near meltdown in 2006. UP had to shed traffic to stay fluid. The long-term implications of this behavior, however, definitely could have a very negative effect on the growth of the US economy.
Precisely!! Once the competition has been either assimilated or eliminated, then the surviving entity is in better shape to dictate terms to the customer…pick whichever fruit is the most appealing
I don’t have adequate data to make an informed observation. But I suspect they are operating at a level they have determined to provide an optimal return for the level of spending they are willing to ante up? Something just shy of where diminishing returns become a factor, perhaps?
Another possibility is that UP is just using this as a tool to raise prices. (I wrote weapon first, but that seemed too harsh-or too obvious). Think about how we have an annual news of a “shortage” of turkeys, Christmas tress and eggs at strategic times of the year-every year. [:-,]
So anyway, I’m trying to imagine how I would feel if I were on the receiving end of such a threat?
Here we are in the most prosperous nation on the planet, operating under an economic model dependent upon constant growth for success. And here allasudden one of my trade partners puts me on notice that my slice of the American dream has just been capped.
It’s hard to imagine any one railroad trying to pull off such a stunt back in the pre-consolidation days…but now what practical alternatives are there?
And in line with the O.P. 's main premise that this be an industry wide dilemma…I think it is. Norfolk Southern or CSX could easily hide behind force majeure protections where UP is a connecting road with their provided services.
Perhaps Farce Majeure is a more appropriate descriptor? [8o|][um][st]
U.P. is not being very clear about why they are falling behind. They cite a “tight labor market” and a shortage of locomotives. Both suggest they are experiencing a demand surge, but they don’t come out and say that. However, if they suddenly have a shortage of locomotives and employees, what else could cause them to fall behind in operations?
In my opinion, they sound like they are signaling weakness and making themselves into a victim of too much demand. That is a shockingly self-destructive marketing message to send out. Clearly they they see the solution to be the limiting of traffic so they can keep up with demand. Robber barons would be rolling over in their graves to hear such weakness and lack of confidence.
I conclude that the problem is a demand surge coming as a response to the country being shut down almost two years for the pandemic. Apparently this consequence was never considered, and has now caught us by surprise.
Metering as described here is really nothing new and has been going on for years across all sectors of the transportation industry. It’s a short term measure to deal with spikes in volume. Once volumes normalize the metering will come back off.