UP settles part of drug fine dispute

OMAHA — Union Pacific has resolved part of its long-running dispute with the federal government over fines imposed over drug smuggling on trains crossing from Mexico, but the railroad's lawsuit challenging whether it's proper for U.S. officials to impose the penalties will proceed.

The company and the U.S. Customs and Border Protection agency announced an agreement Friday that covers about $500 million in fines the government had tried to impose and provides a five-year amnesty for Union Pacific. In exchange, the Omaha-based railroad agreed to invest $50 million in efforts to strengthen security in the rail supply chain at the Mexican border without admitting any fault.

Federal officials agreed to let continue Union Pacific's lawsuit challenging about $60 million in fines imposed between 2002 and 2008 when more than 4,000 pounds of drugs — mostly marijuana — were seized.

In dispute is whether it's right for Customs to impose these fines on U.S. railroads. Union Pacific, the largest rail shipper on the U.S.-Mexico border, has always argued that it shouldn't be held responsible for the train cars until after they cross the border. Government officials maintain that the railroad is responsible for verifying the nature of what it is bringing into the U.S.

Union Pacific said it is not practical for the railroad to patrol trains in Mexico because its security officers have no authority there and cannot carry guns. Plus, drug trafficking is a dangerous business. It owns 26 percent of Ferrocarril Mexicano, but says since it does not control the Mexican railroad it cannot force that business to make drug interdiction efforts.

According to the lawsuit, Customs and Border Protection agents found at least 4,514 pounds of marijuana hidden on Union Pacific trains, and on at least one occasion about 257 pounds of cocaine were also found. The drugs are often found in false compartments on the railcars. Thirty-seven of the seizures took place at the Calexico, Calif., crossing. Four happened at Nogales, Ariz., and one seizure happened at Brownsville, Texas.

Union Pacific says customs inspections themselves often leave the trains vulnerable. While agents check the Mexican railroad crew's paperwork, railcars on trains up to two miles long can stretch back into Mexico and sit unprotected.

Under the agreement announced Friday, the railroad will work with Customs to determine where to invest the $50 million. Some may go to improvements in Union Pacific's security, such as adding more personnel and drug dogs, and some may go toward improving Customs' operations at the border. Technological improvements, such as radio frequency identification and GPS tracking systems, may also be purchased.

The agreement also says that Union Pacific representatives will be included in an information-sharing center where they will be able to coordinate efforts with government officials.