surcharge

Case Study In early 2007 the Surface Transportation Board ordered railroads to alter the method they were using to establish surcharges to recover increased fuel costs. The railroads had implemented the surcharges following a big run-up in petroleum prices. The federal order followed charges by shippers that the railroads were using surcharges to boost profits in addition to recovering higher fuel charges. The railroads had set the surcharges as a percentage of base shipping rates that didn't necessarily reflect mileage or fuel charges. Heavy demand for transportation services allowed the railroads to raise base rates, which in turn resulted in the firms generating additional revenues and profits from the surcharges. The federal order was likely to cause the railroads to base the surcharge on mileage rather than on base rates in order to more closely track fuel expenses.