The recent STB decision only requires that railroads provide you with their demurrage and private railcar tariff not necessarily interpretation of the tariffs application to your situation. Planning for and implementing procedures to prevent demurrage events can save you a substantial amount of money.
Darell Luther
The Surface Transportation Board (STB) has recently issued a decision (Docket No EP 707) clarifying who may charge demurrage and who is responsible to pay demurrage. This important accessorial railroad charge pertains to shippers and receivers of railcars both loaded and empty and is one of the most hotly contested accessorial charges in the rail industry. Solid waste transportation shippers need to pay particular attention to these changes as this is one industry that uses a large number of trans-load sites to move their product. Trans-load sites are one previous gray-area in demurrage rule application that this ruling attempts to clarify. Demurrage is a charge incurred when railcars are delayed beyond a specified time frame by the party receiving delivery of the railcars for either loading or unloading. The STB is adopting final rules pertaining to who may charge demurrage and who is subject to demurrage.
Decided on April 9, 2014 and extracted verbatim from STB Docket No EP 707, “The Board is adopting final rules establishing that a person receiving rail cars from a rail carrier for loading or unloading who detains the cars beyond the ‘free time’ provided in the carrier’s governing tariff will generally be responsible for paying demurrage, if that person has actual notice, prior to rail car placement, of the demurrage tariff establishing such liability. The Board also clarifies that it construes the provisions of 49 U.S.C. 10743, title ‘Liability for payment of rates,’ as applying to carriers’ line-haul rates, but not to carriers’ charges for demurrage.” These rules will be effective July 15, 2014.
Simple Interpretation
The simplest interpretation of these new rules are, “if you are supplied a demurrage tariff or supplied electronic or paper access to a demurrage tariff by your handling rail carrier but are not a party to the waybill as consignee or consignor and you receive and detain railcars beyond the free time, you are subject to paying the applicable demurrage charges.”
Demurrage Intent
Demurrage intent is to create a system of penalties (and sometimes rewards) for shipper or receivers of loaded and empty railcars. Railroads allow a shipper or receiver a specified amount of time called “free time” to load or unload railcars expeditiously. This free time and subsequent penalty or reward system keeps the use of railroad supplied railcars fluid and available for other shippers and receivers in the rail industry network. Railroads are required through Interstate Commerce Act and the Interstate Commerce Commission (ICC), a predecessor organization to the STB, to establish reasonable rates and transportation related rules and practices to compute demurrage and to establish demurrage related rules and practices “in a way that fulfills the national needs related to” freight car use and distribution that will promote adequate railcar supply. Demurrage in its simplest form is assessed on the consignor (the shipper of the goods) for delays in loading cars at origin and on the consignee (the receiver of the goods) for delays in unloading cars and returning them to the carrier at destination.
The Disconnect
Demurrage rules seem pretty straightforward. As it applies to railroad owned or controlled railcars, you get to use so many free days to load or unload a railroad supplied railcar as governed specifically by each individual railroad. As it applies to private owned or controlled railcars, if you store or set out a private owned railcar on railroad property because you can’t (or don’t) take it on your property due to congestion or other delay reason these railcars are also subject to individual railroad rules.
The disconnect primarily comes into play when the person loading or unloading the railcar is not a party to the freight transaction, e.g. a trans-load operator, warehouseman or other third party who’s only role is to load or unload railcars. Generally this person is responsible for multiple-parties freight and doesn’t have a solid forecast as to when railcars will arrive or depart due to the nature of his business. Sometimes the results are that several different types of commodity trans-loads will be required representing a variety of clients during the same railcar unload or load timeframe. In other instances the change in railroad performance in moving loaded and empty railcars will impact the arrival and departure of railcars causing bunching or congestion at either the origin or destination location resulting in a demurrage charge being levied through no fault of the railcar recipient.
In the private railcar demurrage case the disconnect is either service caused, e.g. the railroad is bunching loaded or empty railcars that are out of cycle to a shipper/receivers requirements, or a shipper or receiver simply doesn’t have sufficient track space to accommodate all of his railcar requirements. One demurrage event is caused by the railroad and the other demurrage event is caused by the receiver.
Notification of Demurrage Rules and Application
The STB, in its rulemaking, consented that railroad notification of demurrage rules per Docket EP 707 are sufficient if delivered electronically to each potential demurrage recipient. In short, if you ship or receive railcars you should get a notification of your responsibility to adhere to demurrage rules and to pay demurrage charges. This notification should be received before the July 15, 2014 inception date.
Additionally if railcars are constructively placed or actually placed at your facility you will have responsibility for demurrage as it applies specifically to your delivering rail carrier. If a customer receives notice of a demurrage event and is deemed responsible by the railroad and desires to dispute the charges or event on which the charges are based, the STB has retained its alternative dispute resolution process and encourages first an interaction between the customer and handling rail carrier. Absent a satisfactory resolution a customer may appeal to the STB for resolution.
Comparison of Major Railroad Demurrage Rules
Table 1 compares demurrage rules across major U.S. Railroads. It is important to keep in mind that this comparison is at a very high level and does not take into account railcar and commodity type nuances, nor does it address each unit train commodity type nuance or specific requirements. We encourage you to research your specific railcar and commodity situation by reading the applicable carrier demurrage tariff that applies to your situation.
Conclusion
Demurrage and private railcar storage charges are commodity, geographic and carload type versus unit train type specific. If you receive or ship commodities by rail it behooves you to do your homework and become knowledgeable in demurrage application, rules and regulations imposed by your handling rail carrier. The recent STB decision only requires that railroads provide you with their demurrage and private railcar tariff not necessarily interpretation of the tariffs application to your situation. Planning for and implementing procedures to prevent demurrage events can save you a substantial amount of money.
Darell Luther is president of Forsyth, MT-based Tealinc Ltd., a rail transportation solutions and railcar leasing company. Darell’s career includes positions as president of DTE Rail and DTE Transportation Services Inc., Fieldston Transportation Services LLC, managing director of coal and unit trains for Southern Pacific Railroad and directors’ positions in marketing, fleet management and integrated network management at Burlington Northern Railroad. Darell has more than 24 years of rail, truck, barge and vessel transportation experience concentrated in bulk commodity and containerized shipments. He can be reached at (406) 347-5237 or via e-mail at [email protected].
