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Union Pacific Files for Decision: Railroad Not Required to Prevent Drug Smuggling on Mexican Railroads It Does Not Control

Omaha, Neb., April 8, 2010 – Union Pacific today filed a motion for summary judgment in its July 2008 lawsuit against the Department of Homeland Security (DHS) regarding Customs and Border Protection (CBP) fines and seizures of rail cars at the Mexican border. In the lawsuit, UP contends that federal laws designed to prevent airlines and ocean ship operators from allowing drugs to be smuggled aboard their planes and ships do not apply to the railroad, because UP does not operate or have any control over the Mexican trains on which drugs have been smuggled. UP had hoped to resolve this dispute by settlement; however, discussions deteriorated because the Department of Justice demanded substantial penalties from UP – penalties that are without merit and would not help prevent drug smuggling.

UP believes it did nothing wrong and the law (Tariff Act of 1930) does not apply to this situation. UP does not believe that federal law can nor should require the company to send unarmed personnel into Mexico to battle Mexican drug cartels that maliciously murder and wage a war against the Mexican military.

Despite this legal dispute, UP continues to maintain a cooperative and collaborative working relationship with CBP.

"The law requires UP to act on only what we can control. We expect the court will agree that it is impossible for UP to prevent drugs from being smuggled onto Mexican trains. UP does not take control of a train until after a Mexican railroad delivers it to CBP, which first inspects the train and then releases it to UP," said Bob Grimaila, vice president Safety, Security and Environment. "Our actions should be applauded, not punished. Over the last decade, the company has provided more than $72.5 million of support in the form of facilities, observation towers, training, equipment and other assistance to help protect the U.S. border and UP and CBP officers, and prevent drug smuggling. This does not take into account our police officers and K-9 patrol, resources which amount to an additional $3.6 million annually."

SUMMARY OF THE ISSUE:

In recent years, CBP imposed fines on UP and seized rail equipment when it found drugs hidden in rail cars entering the United States from Mexico. UP initiated a lawsuit in July 2008 because the company believes that CBP unlawfully applied the Tariff Act of 1930 in connection with the smuggling of these illegal narcotics. When UP first filed the case, CBP had seized six rail cars and imposed fines totaling more than $37 million. Since the filing, fines have now grown to $61.2 million and a total of 24 cars have been seized.

UP is a strong supporter of CBP in its efforts to protect the U.S. border. Over the last decade, the company has provided more than $72.5 million of support in the form of facilities, observation towers, training, equipment and other assistance to help protect the U.S. border and UP and CBP officers, and prevent drug smuggling. Additionally, UP provides approximately $3.6 million annually for its own border police officers and K-9 patrol. UP continues to enhance technology at the border and plans to open a new rail inspection portal at Eagle Pass, Texas, in June.

CBP is punishing UP for drug smuggling from Mexico when UP has no ability to control what occurs in Mexico. Drug smuggling occurs on Mexican railroads that UP does not control. Trains are not exchanged directly between Mexican and U.S. railroads at the border. Instead, trains from Mexico are delivered to CBP at the border for its exclusive control for inspection.

  • At all times prior to the discovery of the illegal drugs, either the Mexican railroad operating the train or CBP has exclusive control of the trains. UP does not assume control until after CBP has inspected the train in the US and released it to UP.
  • Even though UP has no control over trains in Mexico, and CBP asserts control over them at the border, CBP is punishing UP for drugs CBP finds.
  • In one case, a train was operated in Mexico by a railroad that is a wholly owned subsidiary of a different U.S. railroad. Even though the Mexican railroad is not affiliated with UP, CBP fined UP rather than the Mexican railroad or its U.S. parent.
  • UP cannot send its personnel or contractors into Mexico to locate drugs, because they are not allowed to carry arms and have no legal authority. Employees/contractors would be subject to arrest in Mexico for drug possession and would be unarmed in the face of vicious drug gangs. The U.S. government has warned its citizens not to travel to some of these violence-plagued areas.

UP believes CBP is violating federal law by imposing fines on UP and seizing rail cars in connection with the smuggling of illegal narcotics from Mexico to the U.S. in trains.

  • CBP has authority to assess penalties on a party that owns or operates a "vessel" or "vehicle" coming into the U.S.
  • UP does not control or own trains coming into the U.S. from Mexico. Foreign railroads control and own those trains. The law (Tariff Act of 1930) requires UP to act on only what it can control.
  • UP does not have operating facilities or run trains in Mexico.
  • UP has a 26 percent stock investment in a Mexican railroad, FXE. However, UP is a minority stockholder and has no operational control of FXE or legal right of access to its trains.
  • UP cannot accomplish what the U.S. and Mexican governments cannot.
  • UP and CBP have been in contact with management at FXE to encourage FXE to improve its drug interdiction programs in Mexico. They helped persuade FXE to become C-TPAT certified, hire a private security firm to inspect FXE's trains to verify seal numbers, and enlist the assistance of the Mexican military in conducting inspections.

UP has taken a number of significant actions on the U.S. side of the border to help CBP prevent illegal drug smuggling, spending at least $3.6 million annually on UP police officers and K-9 patrol, and $72.5 million over the last decade on support for drug interdiction programs.

  • Support includes constructing buildings such as the one in Eagle Pass, Texas, adding fencing, installing lighting (at the Nogales, Ariz., border), and building inspection towers to facilitate CBP inspections at various border crossings.
  • UP continues to enhance technology at the border with plans to launch a new rail inspection portal at Eagle Pass, Texas, in June.
  • UP maintains a dedicated police force, supplemented by security teams and K-9 teams, devoted primarily to detecting and removing illegal drugs once the trains cross into the U.S.
  • Additionally, UP has provided K-9 training to DEA and FBI task forces, conducted joint exercises and developed computer profiles to identify drug traffickers.
  • UP wants to resolve these issues. It is in the best interests of CBP/DHS and UP to continue cooperative efforts at the borders, focusing on the safety and security of our officers and preventing the illegal smuggling of drugs at the border.

About Union Pacific

Union Pacific Corporation owns one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country. Union Pacific serves many of the fastest-growing U.S. population centers and provides Americans with a fuel-efficient, environmentally friendly and safe mode of freight transportation. Union Pacific's diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad emphasizes excellent customer service and offers competitive routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada's rail systems and is the only railroad serving all six major gateways to Mexico.

Media contact: Donna Kush at (402) 544-3753 or dmkush@up.com

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