Skip to main content

Union Pacific Won’t Issue Any New Embargoes For Now

Union Pacific CEO Lance Fritz said Friday the railroad will hit the pause button on shipping embargoes after criticism of its use reached fever pitch during a regulatory hearing this week.  

“I appreciate the feedback we received from our customers and the board,” Fritz said in a letter to Surface Transportation Board (STB) chairman Marty Oberman on Friday. “I assure you, we are taking a hard look at our use of congestion-related embargoes. To facilitate that hard look, we are immediately pausing any additional embargoes under the pipeline inventory management program we began in November.” 

The succinct letter followed a two-day STB hearing that ended Wednesday in which the carrier’s surge in embargoes in more recent years was put under a microscope. 

Railroads implement temporary embargoes on certain shipments in response to labor shortages, congestion, weather or other issues. 

The pipeline inventory management program Fritz referenced in his letter created what the railroad called “fluidity targets” for Union Pacific customers, which it says is calculated using transit times and average release rates. Shippers that exceeded their targets were contacted by Union Pacific in November.

Related Stories

Out of the 311 customers contacted, 230 worked with the railroad to create plans for reducing inventory, while 81 did not respond or cut back on their inventory. In the latter case, Union Pacific said it issued limited embargoes.  

The railroad’s executives suggested the embargoes were in response to excess inventory that was overloading the rail network amid a labor shortage. 

“These last resort embargoes simply ask customers to do what most others have already done voluntarily,” Union Pacific executive vice president of operations Eric Gehringer told the STB during this week’s hearing.

Fritz said in his letter Friday more details on Union Pacific’s embargoes would follow “in the coming days.” 

Union Pacific in 2017 issued 27 embargoes. The annual number then surged to 140 embargoes in 2018, followed by 413, 251 and 662 from 2019 through 2021, respectively. For this year, the railroad’s embargo count tallied 886 through October. 

The numbers turned the STB’s head, with the board pointing out in a notice ahead of the hearing use of embargoes by competitors “pales in comparison to the number of embargoes issued by UP.” 

While the board grilled Union Pacific executives on the embargo uptick, several shippers also offered their perspectives on the matter. 

“I know… you hear this all the time, I think: shippers continue to face drastic deterioration of rail service all year,” Justin Louchheim, senior director of government affairs at The Fertilizer Institute (TFI), said during the hearing. “I’d say rail service in this calendar year has probably been the worst it’s been perhaps in our history in this nation unfortunately.” 

Louchheim pinned the start of the decline in service to Union Pacific’s use of precision scheduled railroading (PSR), an operational strategy used by carriers to create efficiencies, but has often been criticized for trimming the workforce at the expense of service and employee safety. 

Rob Benedict, vice president of petrochemicals and midstream for the American Fuel & Petrochemical Manufacturers (AFPM), pointed to an “endless wave of embargoes” that go against signed service contracts in comments sent to the board. 

Benedict added “there seems to be no end in sight” to the challenges slowing companies from resuming normal shipping operations. 

He also cited fear among shippers of “retribution from the railroads,” which he called “a very real and important issue” after the association’s membership was encouraged to testify during this week’s hearing. 

“Unfortunately, many of our members are fearful of potential backlash should they testify,” Benedict said. “One AFPM member noted that they have been directed not to provide any service or embargo details publicly since such testimony could be linked back to their company, leaving them vulnerable to retaliation or other subtler recourse from UP.” 

Benedict’s comments come as ocean shipping liners face similar scrutiny around poor service and, in some cases, allegations of retaliation against shippers that bring up complaints to the Federal Maritime Commission (FMC). 

The Ocean Shipping Reform Act of 2022 (OSRA) aimed to address that by explicitly prohibiting carriers or terminal operators from discriminating or retaliating against shippers who file complaints or push back on carrier charges.The FMC on Thursday said it would begin a probe of the 20 largest shipping lines servicing U.S. ports to ensure their compliance with OSRA. Documentation for that request from the carriers is due by mid-January.