[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Notices]
[Pages 54717-54726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22200]
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SURFACE TRANSPORTATION BOARD
[Docket No. EP 757]
Policy Statement on Demurrage and Accessorial Rules and Charges
AGENCY: Surface Transportation Board.
ACTION: Notice of Proposed Statement of Board Policy.
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SUMMARY: The Surface Transportation Board (STB or Board) is issuing
this proposed policy statement to provide the public with information
on principles the Board would consider in evaluating the reasonableness
of demurrage and accessorial rules and charges. The Board seeks public
comment on this proposed policy statement, and may revise it, as
appropriate, after consideration of the comments received.
DATES: Comments on this proposed policy statement are due by November
6, 2019. Reply comments are due by December 6, 2019.
ADDRESSES: Comments and replies may be filed with the Board either via
e-filing or in writing addressed to: Surface Transportation Board,
Attn: Docket No. EP 757, 395 E Street SW, Washington, DC 20423-0001.
Comments and replies will be posted to the Board's website at
www.stb.gov.
FOR FURTHER INFORMATION CONTACT: Sarah Fancher at (202) 245-0355.
Assistance for the hearing impaired is available through the Federal
Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION: Demurrage is subject to Board regulation
under 49 U.S.C. 10702, which requires railroads to establish reasonable
rates and transportation-related rules and practices, and under 49
U.S.C. 10746, which requires railroads to compute demurrage charges,
and establish rules related to those charges, in a way that will
fulfill national needs related to freight car use and distribution and
maintenance of an adequate car supply.\1\ Demurrage is a charge that
both compensates rail carriers for the expense incurred when rail cars
are detained beyond a specified period of time (i.e., ``free time'')
for loading and unloading and serves as a penalty for undue car
detention to encourage the efficient use of rail cars in the rail
network. See 49 CFR 1333.1; see also 49 CFR pt. 1201, category 106.\2\
Accessorial charges are not specifically defined by statute or
regulation but are generally understood to include charges other than
line-haul and demurrage charges. See Revisions to Arbitration
Procedures, EP 730, slip op. at 7-8 (STB served Sept. 30, 2016).\3\
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\1\ The Board notes its authority to regulate demurrage
includes, among other things, transportation under the exemptions
set forth in 49 CFR 1039.11 (miscellaneous commodities exemptions)
and Sec. 1039.14 (boxcar transportation exemptions). See Savannah
Port Terminal R.R.--Pet. for Declaratory Order--Certain Rates &
Practices as Applied to Capital Cargo, Inc., FD 34920, slip op. at
7-8 (STB served May 30, 2008) (rejecting argument that the Board
could not address demurrage dispute because of boxcar and certain
commodity exemptions). In Exclusion of Demurrage Regulation from
Certain Class Exemptions, Docket No. EP 760, served concurrently
with this decision, the Board is proposing to revise 49 CFR 1039.10
to make the exemption for the transportation of agricultural
commodities (except grain, soybeans, and sunflower seeds, which are
already subject to the Board's regulation) consistent with those
exemptions.
\2\ In Demurrage Liability (Demurrage Liability Final Rule), EP
707, slip op. at 15-16 (STB served Apr. 11, 2014), the Board
clarified that private car storage is included in the definition of
demurrage for purposes of the demurrage rules established in that
decision. The Board uses the same definition for purposes of this
policy statement.
\3\ As used in this policy statement, the term ``accessorial
charges'' includes charges for diverting a shipment in transit,
ordering a railcar but releasing it empty, weighing a railcar,
tendering one railroad's car to another railroad without a line-haul
move, special train or additional switching services, or releasing a
railcar with incomplete or incorrect shipping instructions. Issues
relating to accessorial charges may arise in proceedings before the
Board in a variety of contexts. See, e.g., Cent. Valley Ag Grinding,
Inc. v. Modesto & Empire Traction Co., NOR 42159 (STB served July
25, 2018) (involving a challenge to accessorial charges).
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This proposed policy statement provides information with respect to
certain principles the Board would consider in evaluating the
reasonableness of demurrage and accessorial rules and charges. It
arises, in part, as a result of the testimony and comments submitted in
Oversight Hearing on Demurrage & Accessorial Charges, Docket No. EP
754.\4\ The Board commenced that docket by notice served on April 8,
2019, following concerns expressed by users of the freight rail network
(rail users) \5\ and other stakeholders about recent changes to
demurrage and accessorial tariffs administered by Class I carriers,
which the Board was actively monitoring.\6\
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\4\ Unless otherwise noted, all citations to comments are to
material docketed in Oversight Hearing on Demurrage & Accessorial
Charges, Docket EP 754.
\5\ As used in this policy statement, the term ``rail users''
broadly means any person that receives rail cars for loading or
unloading, regardless of whether that person has a property interest
in the freight being transported. This policy statement uses the
terms ``warehousemen'' or ``third-party intermediaries'' to refer to
these entities with no property interest in the freight.
\6\ In November 2018, the Board sent letters to two Class I
carriers, requesting that they examine, from the perspective of
reciprocity and commercial fairness, recently announced changes to
their policies and practices made in connection with new operating
plans they were implementing. After receiving responses from those
two carriers, the Board requested each Class I carrier to report its
revenues from demurrage and accessorial charges for each quarter of
2018, and, on a going-forward basis, for each quarter of 2019.
Because accessorial charges are not uniform among rail carriers,
each Class I carrier was asked to identify the specific accessorial
items that account for its reported revenues.
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Specifically, in Oversight Hearing on Demurrage & Accessorial
Charges (April 2019 Notice), EP 754, slip op. at 2 (STB served Apr. 8,
2019), the Board announced a May 22, 2019 public hearing, which was
later extended to
[[Page 54718]]
include a second day; \7\ directed Class I carriers to appear at the
hearing; and invited shippers, receivers, third-party logistics
providers, and other interested parties to participate. The notice also
directed Class I carriers to provide specific information on their
demurrage and accessorial rules and charges and required all hearing
participants to submit written testimony, both in advance of the
hearing. April 2019 Notice, EP 754, slip op. at 2-4. Comments were also
accepted from interested persons who would not be appearing at the
hearing.
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\7\ Oversight Hearing on Demurrage & Accessorial Charges, EP
754, slip op. at 1 (STB served May 3, 2019).
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The Board received over 90 pre-hearing submissions from interested
parties; heard testimony over a two-day period from 12 panels composed
of, collectively, over 50 participants; and received 36 post-hearing
comments.\8\ The Board encourages all carriers, and all shippers and
receivers, to work toward collaborative, mutually beneficial solutions
to resolve disputes on matters such as those raised in the Oversight
Hearing on Demurrage & Accessorial Charges proceeding \9\ and intends
for this proposed policy statement to provide useful guidance to all
stakeholders.
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\8\ The Appendix to this decision lists the numerous parties
that participated in Oversight Hearing on Demurrage & Accessorial
Charges, Docket No. EP 754.
\9\ For example, Kansas City Southern Railway Company (KCS)
reportedly forgave significant demurrage because the shipper had
agreed to spend at least an equal amount to build capacity to store
its own cars. KCS Comments 5, May 8, 2019.
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Through this proposed policy statement, the Board expects to
facilitate more effective private negotiations and problem solving
between rail carriers and shippers and receivers on issues concerning
demurrage and accessorial rules and charges; to help prevent
unnecessary future issues and related disputes from arising; and, when
they do arise, to help resolve them more efficiently and cost-
effectively. The Board is not, however, making any binding
determinations by this proposed policy statement. Nor is the Board
promoting complete uniformity across rail carriers' demurrage and
accessorial rules and charges; the principles discussed in this
proposed policy statement recognize that there may be different ways to
implement and administer reasonable rules and charges. When
adjudicating specific cases, the Board will consider all facts and
arguments presented in such cases.\10\
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\10\ Several stakeholders suggested that the Board initiate an
investigation into recent tariff changes by Class I carriers. The
Board finds that, at this time, rather than conducting an
investigation, issuing this proposed policy statement, providing
information on broad principles, and soliciting public comment as
part of an open process is the more appropriate way to proceed.
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Historical Overview and General Principles
Historically, the detention of freight rail cars was governed by a
uniform code of demurrage rules and charges that became effective for
national application in 1910. See Chrysler Corp. v. N.Y. Cent. R.R.,
234 I.C.C. 755, 759-60 (1939) (recounting history of code's
development).\11\ The uniform code provided for 48 hours of free time
for both loading and unloading, which ran from the first 7 a.m.
following placement of the cars. It offered shippers and receivers two
alternative methods for computing demurrage (straight demurrage and
average demurrage), permitted them to choose the method that best
suited their needs, and allowed them to switch to the other method on
one month's notice. Straight demurrage applied in the absence of any
other arrangement with the rail carrier.\12\
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\11\ The code was adopted by the National Convention of Railway
Commissioners, and the Interstate Commerce Commission (ICC), the
Board's predecessor, soon thereafter recommended that it be ``made
effective on interstate transportation throughout the country.''
Swift & Co. v. Hocking Valley Ry., 243 U.S. 281, 283 (1917). One aim
of the code was to prescribe rules, to be applied uniformly
throughout the country, to help determine what detention was to be
deemed reasonable. Pa. R.R. v. Kittanning Iron & Steel Mfg. Co., 253
U.S. 319, 323 (1920).
\12\ See generally Exemption of Demurrage from Regulation, EP
462, slip op. at 1-2 n.3 (STB served Mar. 29, 1996); Car Demurrage
Rules, Nationwide, 350 I.C.C. 777, 778-79 (1975); Cleveland Elec.
Illuminating Co. v. ICC, 685 F.2d 170 (6th Cir. 1982) (describing
historical treatment of demurrage and straight and average demurrage
plans).
In 1975, the ICC approved a proposal by rail carriers to reduce
the free time for loading from 48 hours to 24 hours. See Car
Demurrage Rules, Nationwide, 350 I.C.C. 777.
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Under the straight demurrage plan, charges were applied and billed
on individual cars at daily rates when cars were detained beyond the
allowable free time. Saturdays, Sundays, and holidays were excluded
unless preceded by at least two chargeable days. Shippers and receivers
received no ``credits'' for returning cars early but were not assessed
demurrage if severe weather or other circumstances beyond their
control--such as the bunching \13\ of cars due to the act or omission
of any rail carrier involved in the movement--prevented them from
returning cars on time. Exemption of Demurrage from Regulation, EP 462,
slip op. at 1 n.3.
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\13\ The uniform code defined bunching as ``[w]hen, as the
result of the act or neglect of any carrier, cars destined for one
consignee, at one point, are bunched at originating point, in
transit, or at destination, and delivered by the railroad company in
accumulated numbers in excess of daily shipments.'' Kittanning, 253
U.S. at 323 n.2 (quoting Rule 8 on bunching). More recently, the
Board has described bunching as ``rail car deliveries that are not
reasonably timed or spaced.'' See Demurrage Liability Final Rule, EP
707, slip op. at 23.
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Under the average demurrage plan, shippers and receivers could
offset demurrage liability by earning credits for returning cars early
but received no relief for bunching. Each car released before the first
24 hours of free time expired earned one credit; a car released during
the second 24 hours of free time earned no credit; and cars released
after the 48-hour free time period incurred one debit for each excess
day. The first four chargeable debit days could be offset by credits
earned by early releases. At the end of each month, balances were
struck, excess debits were charged at a specified base rate, and excess
credits expired. Car Demurrage Rules, Nationwide, 350 I.C.C. at 779.
In 1975, railroads obtained approval from the ICC to, among other
things, reduce free time for loading to 24 hours based on evidence that
it would not impose an unreasonable burden and would promote better
equipment utilization and a more adequate car supply. See generally Car
Demurrage Rules, Nationwide, 350 I.C.C. 777. Subsequently, Congress
enacted what is now Sec. 10746 in the Rail Revitalization & Regulatory
Reform Act of 1976, Public Law 94-210, 211, 90 Stat. 31 (the 4-R Act),
requiring that demurrage charges be computed in a manner that fulfills
specified national needs and that the ICC establish rules and
regulations relating to such charges. Congress then enacted the
Staggers Rail Act of 1980, Public Law 96-448, 94 Stat. 1895 (the
Staggers Act), which made broad deregulatory reforms in the rail
industry.
Following enactment of the 4-R Act and the Staggers Act, the ICC in
1985 allowed rail carriers to establish individualized demurrage and
storage rules and charges that were based on market forces but still
generally subject to the statutory requirements for reasonableness
under 49 U.S.C. 10702 and demurrage under what is now 49 U.S.C. 10746.
Railroads Per Diem, Mileage, Demurrage & Storage Agreement, 1 I.C.C.2d
924, 934 (1985) (finding that ``the need for uniform demurrage and
storage charges has been overstated'' and that ``a free market approach
to such charges will more effectively foster the goals of the national
transportation policy''). Later that year, the ICC sought comment in
Exemption of Demurrage from
[[Page 54719]]
Regulation, Docket No. EP 462, on whether action should be taken under
former 49 U.S.C. 10505 (current 49 U.S.C. 10502) to reduce or eliminate
the regulation of demurrage. In 1996, the Board ultimately determined
not to take further deregulatory action on demurrage, concluding that
``exemption could result in shippers paying unreasonable charges for
detention that they did not cause. Thus, there is the potential with
such an exemption for an abuse of market power.'' Exemption of
Demurrage from Regulation, EP 462, slip op. at 3.
In December 2010, the Board issued an advance notice of proposed
rulemaking (ANPRM) to address ``when parties should be responsible for
demurrage in light of current commercial practices followed by rail
carriers, shippers, and receivers.'' Demurrage Liability (2010 ANPRM),
EP 707, slip op. at 1 (STB served Dec. 6, 2010). Among other things,
the 2010 ANPRM noted that there was a need to examine the Board's
policies given a split in the federal courts regarding the liability of
warehousemen and other third-party intermediaries for railroad
demurrage. Id. at 2. Under the final rule, issued in 2014, a person
receiving rail cars from a rail carrier for loading or unloading that
detains those cars beyond the ``free time'' provided in a governing
tariff may be held liable for demurrage if that person had actual
notice, prior to rail car placement, of the demurrage tariff
establishing its liability. Demurrage Liability Final Rule, EP 707,
slip op. at 1. The rule was based on the theory that responsibility for
demurrage should be placed on the party in the best position to
expedite the handling of rail cars at origin or destination. Id. at
8.\14\
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\14\ The regulation, codified at 49 CFR part 1333, provides
default rules that govern demurrage in the absence of privately
negotiated contracts. Demurrage Liability Final Rule, EP 707, slip
op. at 25.
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With respect to decisions regarding the reasonableness of demurrage
rules and charges in individual cases, the Board has ``tailor[ed] its
analysis to the evidence proffered and arguments asserted under a
particular set of facts.'' N. Am. Freight Car Ass'n v. BNSF Ry., NOR
42060 (Sub-No. 1), slip op. at 8 (STB served Jan. 26, 2007), aff'd sub
nom. N. Am. Freight Car Ass'n v. STB, 529 F.3d 1166 (DC Cir. 2008).
General principles recognized in past decisions include: that a rail
carrier seeking to collect assessed demurrage charges must provide
evidence to establish the dates of actual or constructive car placement
and release and to show how the assessed charges were computed; \15\
that a rail carrier may not collect demurrage when it is responsible
for the delay; \16\ and that the shipper or receiver must establish by
competent evidence that the assailed charges are unlawful based on the
claims it has asserted.\17\
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\15\ See, e.g., R.R. Salvage & Restoration, Inc.--Pet. for
Declaratory Order--Reasonableness of Demurrage Charges, NOR 42102 et
al., slip op. at 6 (STB served July 20, 2010).
\16\ See, e.g., Capitol Materials, Inc.--Pet. for Declaratory
Order--Certain Rates & Practices of Norfolk S. Ry., 7 S.T.B. 576,
577 (2004).
\17\ See, e.g., Savannah Port Terminal R.R.--Pet. for
Declaratory Order--Certain Rates & Practices as Applied to Capital
Cargo, Inc., FD 34920, slip op. at 8 n.20 (STB served May 30, 2008).
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The Board has also recognized that demurrage principles may
continue to develop as industry practices and technology change. In
Capitol Materials, for example, the Board stated that ``[i]n light of
the technological advances that have been made with respect to railroad
operations in recent years, it might be appropriate for railroads to
reconsider some of their longstanding demurrage practices under which
delivering railroads charge their customers demurrage regardless of the
reasons for delays.'' 7 S.T.B. at 577-78 (noting that the widespread
use of computers and sophisticated tracking systems now allows
railroads to determine the location of rail cars in the rail system
with more precision, and that in-transit delays and other anomalies
that could interfere with time-of-delivery expectations also would
likely be known). Most recently, in Utah Central Railway--Petition for
Declaratory Order--Kenco Logistic Services, LLC, FD 36131, slip op. at
12 n.38 (STB served Mar. 20, 2019), the Board noted that it may need to
consider future action to ensure that shippers, receivers, and smaller
rail carriers are not being forced to bear the burden of delays due to
actions not attributable to them.
The overarching purpose of demurrage is to incentivize the
efficient use of rail assets (both equipment and track) by holding rail
users accountable when their actions or operations use those resources
beyond a specified period of time. See, e.g., Kittanning, 253 U.S. at
323 (``The purpose of demurrage charges is to promote car efficiency by
penalizing undue detention of cars.'').\18\ Under this foundational
precept, that period of time must be reasonable,\19\ and further it is
unreasonable to charge demurrage for delays attributable to the rail
carrier. See, e.g., R.R. Salvage & Restoration, Inc., NOR 42102 et al.,
slip op. at 4 (stating ``a shipper is not required to compensate a
railroad for delay in returning the asset if the railroad and not the
shipper is responsible for the delay''). The Board has also expressed
concerns about demurrage charges for delays that a shipper or receiver
did not cause. See, e.g., Utah Central Ry., FD 36131, slip op. at 12
n.38; Exemption of Demurrage from Regulation, EP 462, slip op. at 4.
Where demurrage charges are imposed for circumstances beyond the
shipper's or receiver's reasonable control, they do not accomplish
their purpose to incentivize behavior to encourage efficiency--the
stated rationale for and objective of the rail carriers' demurrage
rules and charges \20\--and the purpose of demurrage is not fulfilled.
Charges assessed for circumstances beyond the shipper's or receiver's
reasonable control would, as a general matter, not fulfill the purpose
of demurrage.
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\18\ Accord Increased Demurrage Charges, 1956, 300 I.C.C. 577,
585 (1957) (``The primary purpose of demurrage regulations is to
promote equipment efficiency by penalizing the undue detention of
cars.'' (citation omitted)). As acknowledged by one rail carrier in
the Docket No. EP 754 proceeding, demurrage charges should not serve
as a ``revenue play'' or ``a source of profit.'' Union Pacific
Railroad Company (UP) Comments 19, June 6, 2019 (filing ID 247892)
(further stating that ``Union Pacific would rather not bill for
accessorial and demurrage charges.''). As noted by another rail
carrier, ``Congress framed the purposes of demurrage not in terms of
cost recovery or a penalty for poor performance, but rather in terms
of incentives.'' Canadian National Railway Company (CN) Comments 8,
June 6, 2019.
\19\ See, e.g., Kittanning, 253 U.S. at 323 (stating a shipper
is ``entitled to detain the car a reasonable time''); R.R. Salvage &
Restoration, Inc., NOR 42102 et al., slip op. at 4 (stating that
time period must be reasonable).
\20\ See, e.g., citations infra note 24.
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The general principles discussed below, which flow from the
agency's precedent and governing statutes and are consistent with the
purpose of demurrage, can help frame the demurrage reasonableness
issues in individual cases, together with the evidence and argument
presented in those proceedings.
Free Time
Background. Free time--a major focal point of the May 2019
oversight hearing--is the period of time allowed for a shipper or
receiver to finish using rail assets and return them to the railroad
before demurrage charges are assessed.\21\ Free time is a critical
[[Page 54720]]
component of demurrage charges, the purpose of which, as noted above,
is ``to promote car efficiency by penalizing undue detention of cars.''
Kittanning, 253 U.S. at 323 (further noting that ``the duty of loading
and of unloading carload shipments rests upon the shipper or consignee.
To this end he is entitled to detain the car a reasonable time without
any payment in addition to the published freight rate.''). As the Board
has explained:
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\21\ Tariff provisions typically define the amount of free time
provided in terms of 24-hour periods or ``credit days,'' which
commonly begin to run at 12:01 a.m. the day following actual or
constructive placement. Constructive placement occurs when a rail
car is available for delivery but cannot actually be placed at the
receiver's destination because of a condition attributable to the
receiver (for example, lack of room on the tracks in the receiver's
facility). The railroad holds the car and sends notice to the
receiver. See Savannah Port Terminal R.R., FD 34920, slip op. at 3
n.6 (citing Capitol Materials, 7 S.T.B. 576).
A railroad has a right to set a reasonable time--free time--for
a shipper to finish using rail assets and return them to the
railroad. If a shipper keeps an asset for too long (beyond the
allocated free time), it should compensate the railroad for the
extended use of its asset (rail cars or track)--in other words, for
demurrage. However, a shipper is not required to compensate a
railroad for delay in returning the asset if the railroad and not
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the shipper is responsible for the delay.
R.R. Salvage & Restoration, Inc., NOR 42102 et al., slip op. at 4. Free
time also helps temper adverse impacts to shippers and receivers of
delays arising from service variability.\22\
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\22\ See N. Am. Freight Car Ass'n, NOR 42060 (Sub-No. 1), slip
op. at 13 (noting, among other things, that private agricultural
hopper car owners were given an average of two days to accept empty
private cars without charge, in response to claim that objectionable
storage charges were attributable to service variability).
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In addition, free time plays a role in the credit and debit rules
and practices of many rail carriers. Free time is often expressed in
terms of credit days that are allotted and applied to incoming cars
before demurrage charges begin to accrue. Separate from free time, some
rail carriers also provide credits for certain problems and delays.
Many rail carriers administer rules and practices under which demurrage
charges (debits) can be offset by credits that have been allocated to
the shipper or receiver.\23\
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\23\ See Capitol Materials, 7 S.T.B. at 578 (describing
demurrage programs under which credits for cars released before the
end of the allowable free time can be used to offset demurrage
charges for other cars that are released after the allowable free
time has expired).
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As described above in the ``Historical Overview,'' the uniform code
that historically governed demurrage allowed 48 hours of free time for
loading and unloading until 1975, when the ICC approved a reduction of
free time for loading to 24 hours. In 1985, the ICC allowed rail
carriers to establish individualized demurrage and storage rules and
charges. However, until recently, it remained common practice for a
rail carrier to provide at least 24 hours of free time (or one credit
day) to load rail cars and at least 48 hours of free time (or two
credit days) to unload cars. See generally Portland & W.R.R.--Pet. for
Declaratory Order--RK Storage & Warehousing, Inc., FD 35406, slip op.
at 5 (STB served July 27, 2011) (citing references to tariff provisions
providing 48 hours for unloading in demurrage decisions handed down in
2010, 2004, and 2000). Some Class I carriers use alternative rules and
practices for private cars in which no credit days are given as a proxy
for free time. These alternative rules and practices are also discussed
below.
Current Issues. Last fall, the Board became aware that several
Class I carriers had implemented or announced significant tariff
changes that made or would make, among other things, substantial
reductions to the free time allowed to shippers and receivers. At least
one rail carrier reduced the number of credit days for loading and
unloading private cars, in some circumstances, from two to zero. Some
other rail carriers reduced free time for unloading from 48 to 24 hours
(or two credit days to one) for both private and railroad-owned cars.
After various letter requests to Class I carriers, see supra note 6,
the Board instituted the proceeding in Oversight Hearing on Demurrage &
Accessorial Charges, Docket No. EP 754. In its April 2019 Notice, the
Board directed the Class I carriers to submit information on a list of
specified subjects, including all tariff changes since January 2016
pertaining to the amount of free time allowed for loading and unloading
rail cars and the reason(s) for the change. April 2019 Notice, EP 754,
slip op. at 2-3.
The rail carriers consistently identified the same objectives and
rationales for reductions to free time: To align the behavior of
shippers and receivers in order to promote network fluidity to benefit
all rail users with improved service reliability and reduced cycle
times. Carriers stated that the reductions were made to enable them to
optimize network efficiencies and provide better, more reliable
service; that the changes were not made to generate revenue; and that
their hope is that recent revenue increases generated from demurrage
charges will be temporary as shippers and receivers adapt and respond
because, in the words of one rail carrier, ``the intention is to
improve service, not drive cost increases for our customers.'' \24\
Rail carriers' post-hearing submissions largely reiterated these points
and expressed willingness to work with shippers and receivers to help
them align their behavior to better meet the reductions in free time.
While the Board recognizes some rail carriers made certain changes and
conducted additional outreach following the hearing, many of the
broader issues raised before, during, and after the hearing remain.
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\24\ UP Comments 2, May 8, 2019; see generally id. at 1-2; UP
Comments 3, June 6, 2019 (filing ID 247876); Norfolk Southern
Railway Company (NSR) Comments 2-3, May 8, 2019; CSX Transportation,
Inc. (CSXT) Comments 3-5, May 8, 2019. BNSF Railway Company (BNSF)
stated that it ``puts a tremendous amount of energy and resources
into the area of demurrage and storage for the express purpose of
collecting less demurrage revenue.'' BNSF Comments 5, May 8, 2019.
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In comments submitted both prior to and following the hearing, and
in testimony at the hearing, interested parties from many industries
expressed multiple concerns about the recent reductions in free time.
Several stated that they lacked the physical capacity or capital needed
to expand their facilities to meet the reduced time periods.\25\ Others
stated that past investments, as well as infrastructure and operational
decisions, had been made based on the standard free time periods
previously in place over many years.\26\ Many stated that they, or
their members, regularly experience bunching or otherwise unreliable
service (including missed switches or unpredictable switching times);
that bunching is a major obstacle to compliance with the reduced free
time periods; and that the recent reductions have made it even more
difficult and costly to deal with unreliable service because the free
time that has been eliminated had served as an important buffer against
irregular and unpredictable railroad performance.\27\ To cope with free
time reductions, to the extent they could, they reported having to
build more track at their facilities, lease track at remote locations,
add worker shifts, or resort to other transportation modes (typically
trucking).\28\
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\25\ See, e.g., Corn Refiners Association (CRA) Comments 5, May
8, 2019; Agricultural Retailers Association (ARA) Comments 5, May 8,
2019; Consolidated Scrap Resources Inc. (CSR) Comments 4-5, May 8,
2019; Lyondell Chemical Company, Equistar Chemicals LP & Lyondell
Basell Acetyls, LLC (LYB) Comments 2, May 8, 2019.
\26\ See, e.g., The Fertilizer Institute (TFI) Comments 2, May
8, 2019; Barilla America, Inc. (Barilla) Comments 4, 10, May 8,
2019; MillerCoors LLC (MillerCoors) Comments 16-17, May 8, 2019.
\27\ See, e.g., Barilla Comments 9, 11, May 8, 2019; National
Industrial Transportation League (NITL) Comments 4-5, May 8, 2019;
National Grain and Feed Association (NGFA) Comments 10-11, 22, May
8, 2019; TFI Comments 2-4, May 8, 2019; American Forest & Paper
Association Comments 3-5, May 8, 2019; Institute of Scrap Recycling
Industries, Inc. (ISRI) Comments 2, 4-5, 8-9, May 8, 2019;
International Paper (IP) Comments 2-4, May 7, 2019; Anderson-Dubose
Company (Anderson-Dubose) Comments 2-3, May 8, 2019; LYB Comments 2,
May 8, 2019; American Chemistry Counsel (ACC) Comments 4, May 8,
2019.
\28\ See, e.g., TFI Comments 4-5, May 8, 2019; ISRI Comments 8-
9, May 8, 2019; ARA Comments 5, May 8, 2019; Brainerd Chemical Co.
(Brainerd) Comments 7, May 8, 2019; Lhoist North America (Lhoist)
Comments 2, May 7, 2019.
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[[Page 54721]]
Shippers that rely on private rail cars expressed additional
concerns. Many noted a significant industry shift since the enactment
of 49 U.S.C. 10746 from rail carrier ownership of rail cars to private
car ownership and described how they had previously been encouraged by
rail carriers to use private cars or had been forced to do so because
the supply of railroad-owned cars was insufficient.\29\ In addition to
the types of challenges and experiences described above, private car
users objected to recent tariff changes that eliminated credit days
previously allotted as free time for private (but not railroad-owned)
cars as unreasonable and commercially unfair.\30\
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\29\ See, e.g., NGFA Comments 6, May 8, 2019; CSR Comments 2-3,
6, May 8, 2019; Ag Processing Inc Comments 1-2, 5, May 8, 2019;
MillerCoors Comments 7, May 8, 2019; Lhoist Comments 2, May 7, 2019;
ISRI Comments 2, June 6, 2019.
\30\ See, e.g., Diversified CPC International, Inc. Comments 5-
7, 11, May 8, 2019; Auriga Polymers, Inc./Indorama Comments 2-3, May
8, 2019; ACC Comments 2, 9, May 8, 2019; NGFA Comments 17-18, May 8,
2019; CRA Comments 3-4, May 8, 2019; ISRI Comments 2, June 6, 2019.
Among other concerns, these commenters explained that allowing no
free time for private cars beyond midnight on the date of
constructive placement could result in situations where a shipper
could not possibly avoid demurrage charges, because it might have
only minutes to evaluate its ability to accept and order the
incoming car.
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Discussion. Demurrage serves a valuable purpose to encourage the
efficient use of rail assets (both equipment and track) by holding
shippers and receivers accountable when their actions or operations use
those assets beyond a specified period of time. That period of time
must be reasonable and consistent with the purpose of demurrage.
However, the Board has heard repeatedly, from interested parties in a
broad range of industries, that it has become difficult, if not
impossible, to avoid demurrage charges following the recent reductions
in free time, particularly in light of inconsistencies in rail
service.\31\ Commenters across a range of industries questioned rail
carriers' claims that the changes are reasonable under Sec. 10702 and
can be justified as meeting national needs under the standard Congress
prescribed in Sec. 10746. Many commenters noted that they had seen no
improvement in the reliability or consistency of rail car deliveries
upon which their own operations depend, while others stated that
bunched deliveries had increased.\32\ Rail carriers presented data,
generally on a system-wide basis, reflecting recent improvements in
some metrics, such as transit time, dwell time, system velocity, and
trip plan compliance. However, rail carriers presented limited data on
the extent to which changes to their demurrage rules and charges caused
reductions in loading and unloading times, as compared to the times
prior to the changes.
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\31\ See, e.g., CRA Comments 4, May 8, 2019 (explaining why,
``[f]or all CRA members, whether they have open or closed-gate
facilities, their ability to actually accept a rail car with zero
free-time is highly dependent upon their consistency of rail
service''); NITL Comments 4-5, May 8, 2019 (noting that ``[i]t is
not uncommon for carriers to have variation in their deliveries of
more than twenty-four hours'' and that reducing free time will only
exacerbate the costs and challenges shippers and receivers already
bear from delays attributable to the railroads' actions); TFI
Comments 5, May 8, 2019 (``inconsistent rail service remains their
greatest obstacle to compliance'').
\32\ See, e.g., CSR Comments 6, May 8, 2019; Anderson-DuBose
Comments 2-3, May 8, 2019; IP Comments 3-4, May 7, 2019; ACC
Comments 1-3, June 6, 2019.
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The Board is troubled by the adverse impacts of reductions in free
time to rail users and the potentially negative consequences of
providing no credit days for private cars if rail carriers do not have
reasonable rules and practices for dealing with, among other things,
variability in service and carrier-caused bunching, and for ensuring
that shippers and receivers have a reasonable opportunity to evaluate
and order incoming cars before demurrage begins to accrue. As noted
above, many commenters described the already difficult challenges and
adverse impacts caused by bunched deliveries, missed or unpredictable
switching times, and other variations in rail service (some of which
occur even when rail service is working well). Commenters also
explained that, when free time is reduced by 24 hours or more (whether,
for example, from two credit days to one credit day for unloading, or
to zero credit days for private cars), an important buffer against
service inconsistencies and variations in car deliveries is undermined.
In addition, commenters explained that eliminating credit days so as to
allow no free time for private cars beyond midnight of the constructive
placement date could result in demurrage being unavoidable because the
receiver would have no reasonable opportunity to evaluate its ability
to accept and order the incoming car.
Based on the information presented in the Docket No. EP 754
oversight proceeding, the Board has serious concerns about the
reasonableness of reductions in free time that make it more difficult
for shippers and receivers to contend with variations in rail service
and do not serve to incentivize their behavior to encourage the
efficient use of rail assets.\33\ The Board is also concerned that, in
some circumstances, such reductions may be inconsistent with rail
carriers' statutory charge to compute demurrage and establish related
rules in a way that fulfills the national needs specified in Sec.
10746 and may be incompatible with the overarching purpose of
demurrage--namely, to encourage the efficient use of equipment by
penalizing the undue detention of cars.\34\ Where, for example,
carrier-caused circumstances give rise to a situation in which it is
beyond the shipper's or receiver's reasonable control to avoid charges,
demurrage does not fulfill its purpose.
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\33\ Parties are, of course, free to negotiate and enter into
contracts that provide for any period of free time (including zero)
to which the parties agree. 49 CFR 1333.2; Demurrage Liability Final
Rule, EP 707, slip op. at 25 (noting that the Board's rules
specifically allow parties to enter into contracts pertaining to
demurrage). In addition, the Board notes that demurrage programs
that do not provide any credit days for private cars could be
reasonable if, among other things, they give shippers and receivers
a reasonable window of time to accept incoming cars without
incurring demurrage charges.
\34\ See supra note 18; 49 CFR 1333.1 (demurrage ``serves as a
penalty for undue car detention to encourage the efficient use of
rail cars in the rail network'').
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Such circumstances might include, for example, charging demurrage
that accrues as a result of a missed switch (both cars scheduled to be
switched and incoming cars impacted by the missed switch); charging
demurrage for transit days to move cars from constructive placement in
remote locations; or charging demurrage that arises from bunched
deliveries substantially in excess of the number of cars ordered until
the shipper or receiver has had a reasonable opportunity to process the
excess volume of incoming cars. Changes in historical practices on
which the shipper or receiver has long relied (e.g., regarding
switching frequency or delivery methods that deviate from prior
arrangements made by the parties) may also be taken into account.\35\
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\35\ On the other hand, circumstances within the shipper's or
receiver's reasonable control might include, for example, taking
reasonable steps to: Ensure that its facility is right-sized for its
expected volume of incoming traffic when it receives reliable,
consistent service; manage its pipeline to mitigate expected
incoming car volumes that exceed its capacity; and order and release
cars in the manner specified by reasonable tariff requirements.
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Lastly, the Board is concerned that, in some circumstances, such
reductions in free time may jeopardize important goals of the nation's
rail transportation policy by rendering freight rail service less
likely to meet the needs of the public and, if other modes are even
effectively an option for a rail user, less
[[Page 54722]]
competitive with other transportation modes.\36\
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\36\ See 49 U.S.C. 10101 (stating, in pertinent part, ``[i]n
regulating the railroad industry, it is the policy of the United
States Government . . . (4) to ensure the development and
continuation of a sound rail transportation system with effective
competition among rail carriers and with other modes, to meet the
needs of the public and the national defense; . . . [and] (14) to
encourage and promote energy conservation'').
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The Board recognizes that reductions in free time might be
justified if there were evidence to show, by way of example, that (1)
advances in technology or productivity, or other changes across the
industry, have made compliance with the shorter time frames reasonable
to achieve; (2) service improvements resulting from more efficient use
of rail assets would facilitate the ability of shippers and receivers
to adjust to the reductions; (3) reductions are necessary to address
systemic problems with inefficient behavior or practices by shippers or
receivers; or (4) rail carriers have implemented tariff provisions or
program features, such as credits for bunching, service variabilities,
and certain capacity constraints, that place the avoidance of demurrage
charges within the reasonable control of a shipper or receiver.
The Board also recognizes that demurrage serves an important
purpose, namely, incentivizing the behavior of rail users to encourage
the efficient use of rail assets, which benefits rail carriers and
users alike. Rail carriers and users have a shared responsibility in
this endeavor--rail carriers to implement and administer reasonable
rules and charges designed to accomplish this goal, and rail users to
recognize and accept responsibility for promoting efficiencies within
their reasonable control.
Bunching
The April 2019 Notice invited stakeholders to comment on recent
experience with demurrage and accessorial charges pertaining to
bunching, including bunching that may be attributable to upstream rail
carriers. April 2019 Notice, EP 754, slip op. at 3. Bunching-related
issues were identified as a common problem by rail users across a broad
range of industries. Many commenters stated that they regularly
experience bunched deliveries of rail cars and are charged demurrage
for related backlogs; several reported that unpredictable, bunched
deliveries increased in frequency following changes to rail carriers'
operating plans.\37\ In other words, these commenters contend that
recent operating changes and actions by rail carriers may be resulting
in rail car deliveries that are not ``reasonably timed or spaced,''
which the shipper or receiver cannot prevent.\38\ Commenters also
reported that some rail carriers have eliminated tariff provisions that
formerly provided demurrage relief for bunching; that rail carriers
that do provide relief for bunching often do not do so automatically,
instead billing for the charge and requiring the shipper or receiver to
apply for a credit or dispute the charge; and that relief for upstream
bunching is not available.\39\ Some rail carriers stated that they
award credits for bunching in some instances, but did not describe with
specificity how adjustments are made or otherwise address the concerns
expressed by rail users.\40\
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\37\ See generally, e.g., citations supra notes 27 & 32, infra
note 38; ISRI Comments 2, May 8, 2019; International Association of
Refrigerated Warehouses (IARW) Comments 1-2, May 8, 2019.
\38\ See, e.g., Private Railcar Food and Beverage Association,
Inc. (PRFBA) Comments 3-4, May 8, 2019 (``The net impact of this new
service model is that railcars get bunched in route while waiting
for the next full train to depart. PRFBA has been told by several
railroads that the term for this occurrence is no longer called
`bunching'; this negative delivery practice is now referred to as
`train building' in the [Precision Scheduled Railroading (PSR)]
world.''). As explained by another industry organization, despite
its members' best efforts to regulate the tender of rail cars to
arrive over a defined time period, cars may be delayed or held for
the railroad's convenience, resulting in a single mass of cars
delivered at once. ACC Comments 3-4, May 8, 2019 (also describing
other types of carrier-caused bunching and limits to the
effectiveness of related credits offered by rail carriers, including
that credits are not available for bunching caused by upstream rail
carriers); IARW Comments 1-2, May 8, 2019 (bunching is a major
contributor to demurrage despite efforts by shippers to
appropriately space shipments to warehouses).
\39\ See, e.g., NGFA Comments 22-23, 26, May 8, 2019; NITL
Comments 5, May 8, 2019; ACC Comments 3-4, May 8, 2019.
\40\ In post-hearing comments, CSXT stated that if a customer
raises a dispute and ``that customer's demurrage was caused by CSXT
bunching traffic, CSXT will provide credits for those days of
demurrage.'' CSXT Comments 11-12, June 6, 2019. UP stated that it
applied a ``case-by-case process within which customers are credited
for carrier-caused bunching,'' and that UP ``takes into account
customer choices and actions, the actions of [UP's] interline
partners, and [UP's] own actions in determining whether a customer
should be charged for bunching-related demurrage.'' UP Comments 10,
June 6, 2019 (filing ID 247892). It is unclear whether UP engages in
this process automatically or only if a dispute is raised, and UP
does not describe what actions it does and does not consider.
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Demurrage disputes pertaining to bunching are best addressed in the
context of case-specific facts. See Demurrage Liability Final Rule, EP
707, slip op. at 23-24. As discussed above, demurrage charges must be
designed to incentivize shippers' and receivers' behavior. Where rail
carriers' operating decisions or actions result in bunched deliveries
and demurrage charges that are not within the reasonable control of the
shipper or receiver to avoid, the purpose of demurrage is not
fulfilled.\41\ When analyzing the appropriateness of demurrage charges,
rail carriers should consider these principles both when cars originate
with the serving carrier and when cars originate on an upstream
carrier. Rail carriers are encouraged to take these considerations into
account in their future administration of demurrage rules and charges,
particularly in evaluating whether their automatic billing processes
sufficiently account for carrier-caused bunching (for cars that
originate on their network or upstream, and bunching attributable to
missed switches), and in resolving any related disputes. In any future
proceeding, the Board expects to take these considerations into account
as well, along with any additional evidence and argument the parties
may choose to present.
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\41\ As noted above, such circumstances might include, for
example, charging demurrage that arises from bunched deliveries
substantially in excess of the number of cars ordered until the
shipper or receiver has had a reasonable opportunity to process the
excess volume of incoming cars.
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Overlapping Charges
Many participants in the Docket No. EP 754 oversight proceeding
voiced concerns about additional charges recently instituted by two
Class I carriers for claimed customer-caused congestion or delay. The
first, a so-called ``congestion'' charge, was reportedly being assessed
by NSR following a determination, in its sole judgment, that an
excessive quantity of cars for a given consignee causes material
operating problems at an NSR facility.\42\ Commenters objected that the
$100 per car/per day charge, assessed on five days' notice for all cars
destined for the location identified as congested, was arbitrary and
unreasonable in its own right, and that it effectively resulted in a
double recovery for NSR because it served the same purpose
(incentivizing the prompt removal of cars held in railroad yards) as
demurrage charges, to which the cars in question were also subject.
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\42\ See ACC Comments 5, May 8, 2019; NGFA Comments 19, May 8,
2019; NITL Comments 6-7, May 8, 2019 (referencing NSR Tariff 8002-A,
Item 6265).
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Another type of potentially overlapping charge, termed ``not
prepared for service,'' was implemented by UP. As initially
established, UP reportedly assessed the $400 per car/per occurrence
charge when it determined, in its discretion, that it was unable to
pull or spot a car due to a customer's
[[Page 54723]]
actions.\43\ The applicable tariff item lists various examples of
situations--including cars that cannot be spotted due to track being
blocked by other cars--that would permit UP to assess the additional
charge. Commenters objected to this charge on multiple grounds,
including that it could be imposed even when UP could service some (but
not all) cars that had been released, and that the charge was often
imposed in situations beyond the customer's control.\44\ Commenters
stated that UP does not commit to a service window to pull released
cars; that days may pass before UP arrives to pull released cars; and
that shippers are given little or no advance notice of UP's arrival and
have insufficient time to move cars that in the interim may be blocking
released cars in order to avoid the charge.\45\
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\43\ See NGFA Comments 12-14 (referencing UP Accessorial Tariff
6004, Item 9005).
\44\ See ISRI Comments 6-7, May 8, 2019; Barilla Comments 8-9,
May 8, 2019.
\45\ See NGFA Comments 12-14, May 8, 2019.
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Both rail carriers have since responded to these concerns.
Specifically, UP announced during the May 2019 hearing that it has
abated the ``not prepared for service'' charge by applying it ``per
occurrence'' (rather than ``per car''), establishing a threshold
trigger of three occurrences per month, and clarifying that where the
charge is applied, demurrage would not be assessed. NSR advised the
Board that it would no longer assess a ``congestion'' charge as of July
1, 2019.
The Board is encouraged by these actions but nevertheless notes
that, when adjudicating specific cases, it would have significant
concerns about the reasonableness of any tariff provision that sought
to impose a charge, in addition to the otherwise applicable demurrage
charge, for congestion or delay that is not within the reasonable
control of the shipper or receiver to avoid. Although the Board remains
open to evidence and argument that such a charge could in some instance
be reasonable, no such information was presented in Docket No. EP 754.
Invoicing and Dispute Resolution
The April 2019 Notice invited stakeholders to comment on whether
the tools available to manage demurrage and accessorial charges provide
adequate data for shippers and receivers to evaluate whether charges
are being properly assessed and to dispute the charges when necessary.
April 2019 Notice, EP 754, slip op. at 3. It also directed Class I
carriers to provide information on the procedures and time periods
applicable to the process for raising and resolving disputed charges.
Id. The comments and information received revealed several issues of
concern.
Shippers and receivers stated repeatedly that under the programs
administered by several rail carriers, demurrage and accessorial
charges are difficult, time-consuming, and costly to dispute; that
invoices are often inaccurate or lack information needed to assess the
validity of the charges; and that erroneous invoices are issued even
when the tariff expressly provides for relief or the rail carrier has
acknowledged its responsibility for the problem, compelling the shipper
or receiver to initiate a protracted dispute resolution process.\46\
Commenters also stated that, pursuant to some rail carriers' rules and
practices, charges must be disputed within limited time frames, while
those carriers are often slow to respond, and disputes are often
denied.\47\ Some tariffs also have imposed costs or charges that serve
as a deterrent to pursuing a dispute or a formal claim.\48\
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\46\ See, e.g., National Coal Transportation Association
Comments 8-9, May 8, 2019; NITL Comments 8, May 8, 2019; Packaging
Corporation of America (PCA) Comments 4-5,7-8, May 8, 2019; Brainerd
Comments 4, May 8, 2019; IP Comments 4, May 7, 2019.
\47\ See, e.g., NGFA Comments 26-28, May 8, 2019; ACC Comments
4, May 8, 2019; CSR Comments 4, May 8, 2019.
\48\ See, e.g., NGFA Comments 27-28, May 8, 2019 (citing
provisions in UP, NSR and KCS tariffs); ACC Comments 4, May 8, 2019
(citing provision in NSR tariff).
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The Board is deeply troubled by these reports, which came from
shippers and receivers in a broad range of industries that are highly
dependent on rail service. If rail carrier practices effectively
preclude a rail user from determining what happened, then the user
would not be able to determine whether it was responsible for the
delay; the responsible party would not be incentivized to modify its
behavior; and the demurrage charges would not achieve their purpose.
Transparency and mutual accountability are important factors in the
establishment and administration of reasonable demurrage and
accessorial rules and charges. Rail shippers and receivers should be
able to review and, if necessary, dispute charges without the need to
engage a forensic accountant or expend ``countless hours and extra
overhead'' to research charges and seek to resolve disputes.\49\
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\49\ IP Comments 4, May 7, 2019; accord PCA Comments 4-5, 7-8,
May 8, 2019 (describing process that is ``hugely time and resource
consuming'').
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The Board encourages all Class I carriers (and Class II and Class
III carriers to the extent they are capable of doing so), taking into
account the principles discussed here, to provide, at a minimum and on
a car-specific basis: The unique identifying information of each car;
the waybill date; the status of each car as loaded or empty; the
commodity being shipped; the identity of the shipper, consignee, and/or
care-of party; the origin station and state of the shipment; the dates
and times of actual placement, constructive placement (if applicable),
notification of constructive placement (if applicable), and release;
and the number of credits and debits issued for the shipment (if
applicable).\50\ The Board also expects rail carriers to bill for
demurrage only when the charges are accurate and warranted, consistent
with the purpose of demurrage. With respect to the dispute resolution
process more broadly, rail shippers and receivers should be given a
reasonable time period to request further information and to dispute
charges, and the rail carrier likewise should respond within a
reasonable time period. Finally, the Board has serious concerns about
the reasonableness of costs or charges that could deter shippers and
receivers from pursuing a disputed claim.\51\ Although the Board
remains open to argument and evidence, based on the record in Docket
No. EP 754, there is no apparent justification for imposing such costs
or charges.
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\50\ In Demurrage Billing Requirements, Docket No. EP 759,
served concurrently with this decision, the Board is proposing to
specify certain information that Class I carriers must provide on or
with demurrage invoices to enable recipients of those invoices to,
among other things, readily verify the validity of the demurrage
charges.
\51\ The Board notes that NSR has announced that, effective July
1, 2019, disputes for demurrage and storage charges or computations
can be submitted without any potential charge.
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The Board recognizes that some rail carriers may already employ
billing practices consistent with the practices described above, and
with the principles discussed in this proposed policy statement. The
Board intends through this decision to provide information about how it
would consider the reasonableness of invoicing and dispute resolution
procedures when adjudicating specific cases, along with the
consideration of any additional evidence and argument the parties may
choose to present. The Board also commends rail carrier commitments to
addressing demurrage disputes through arbitration or other streamlined
dispute resolution procedures and encourages
[[Page 54724]]
additional commitments to do so.\52\ The Board hopes that such
commitments, together with the principles addressed here and the
outcome of the proposed rule relating to invoice requirements, will
make it unnecessary for the Board to revisit these issues.
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\52\ The Board notes that three of the Class I carriers have
agreed to arbitrate certain demurrage disputes under the binding,
voluntary program set forth in 49 CFR part 1108. See UP Notice (June
21, 2013), CSXT Notice (June 28, 2019), and CN Notice (July 1,
2019), Assessment of Mediation & Arbitration Procedures, EP 699. In
addition, BNSF was commended by one commenter in the Docket No. EP
754 proceeding for including an arbitration provision in its
tariffs. See NGFA Comments 28, May 8, 2019.
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Credits
The April 2019 Notice directed Class I carriers to provide
information on their systems and practices for issuing credits and
debits in connection with the assessment of demurrage or accessorial
charges and to describe any limits on the amount of credits or debits
that may be available or incurred. April 2019 Notice, EP 754, slip op.
at 3.\53\ It also invited all stakeholders to share their perspectives
on whether demurrage and accessorial tariffs in effect during the past
three years have created balanced and appropriate incentives for both
customers and railroads. Id. at 4.
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\53\ Each rail carrier sets its own rules and practices for
issuing credits and debits in connection with the assessment of
demurrage or accessorial charges; however, a common aspect across
rail carriers' rules and practices is that certain types of credits
expire monthly.
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With respect to credits, a common concern voiced by shippers and
receivers is that limitations imposed by rail carriers' credit and
debit rules and practices diminish the utility of credits as a means of
offsetting debits that are incurred.\54\ At the same time, as noted by
one commenter, ``railroad-imposed demurrage and accessorial charges do
not `expire' until paid.'' NGFA Comments 9, June 6, 2019.
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\54\ See, e.g., TFI Comments 4, May 8, 2019 (credits issued for
carrier-caused bunching near the end of the month have an expiration
date of just a few days); Western Coal Traffic League Comments 3,
June 6, 2019 (ensuring that credits do not expire after only a few
weeks would increase reciprocity in rail carrier practices);
American Fuel & Petrochemical Manufacturers Comments 12, 16, May 8,
2019 (credit systems are not balanced).
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The Board is troubled by this lack of reciprocity, particularly
where the expiration date of a credit, in effect, undermines the value
of a credit or credits that were allocated for a problem or delay that
was not within the reasonable control of a shipper or receiver. The
Board also recognizes that credits issued for carrier-caused problems
and delays serve a different purpose than credits that function as a
proxy for free time, and that different types of credits might have
different expiration time frames. The Board remains open to argument
and evidence in future cases that involve these issues. However, as
preliminary guidance based on the information presented in Docket No.
EP 754, the Board would evaluate how credit rules and practices are
administered in determining the reasonableness of demurrage rules and
charges when adjudicating specific cases, including, in particular,
whether the shipper or receiver has been afforded a reasonable
opportunity to make use of the credits in question, before any
expiration date imposed by the rail carrier. The Board would also take
into account the credits' purpose and function. The Board also notes
that these concerns would be allayed if shippers and receivers were
compensated for the value of unused credits at the end of each month,
rather than the credits merely expiring.
Notice of Major Tariff Changes
The April 2019 Notice requested information on the notice given in
connection with recent changes in Class I carrier demurrage and
accessorial tariffs, and feedback concerning impacts on shippers,
receivers, third-party logistics providers, and short line railroads
flowing from those changes. April 2019 Notice, EP 754, slip op. at 3-4.
Insufficient notice, particularly with respect to changes involving
reductions in free time, was identified as a widespread problem in the
feedback the Board received.
In the words of one commenter, ``the operational challenges and
costs caused by reductions in free time were aggravated by the lack of
sufficient notice and coordination that would have allowed rail
customers to plan for the change.'' \55\ Another commenter explained
that its members had designed their operations and infrastructure
around the 48-hour standard, and ``suddenly have been forced to
redesign everything'' with less than 45 days' notice in many cases.\56\
A third commenter noted that rail carriers had many months to adjust
their operations to implement PSR but often expected their customers to
comply with associated new rules and practices in 45 days.\57\
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\55\ NITL Comments 4, May 8, 2019 (further stating that,
``[g]iven the complexity of rail operations and the time, money[,]
and difficulty involved in constructing new facilities or otherwise
acquiring additional track capacity to address the reduction in free
time, 45 days of notice was insufficient for many shippers and
receivers'').
\56\ TFI Comments 2, May 8, 2019 (further stating that the
ability of TFI members to comply with the new free time rules varies
by member and location, but that compliance ``takes time and comes
at a substantial cost'').
\57\ ACC Comments 7-8, May 8, 2019 (further stating that
``[a]ctions such as building or acquiring new infrastructure to
avoid storage charges require far more time. It is unreasonable to
impose charges while a facility is acting in good faith to implement
necessary changes'').
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As a matter of commercial fairness, and consistent with the
principles discussed in this proposed policy statement, railroads
should provide sufficient notice of major changes to demurrage and
accessorial tariffs to enable shippers and receivers to evaluate, plan,
and undertake any feasible, reasonable actions to avoid or mitigate new
resulting charges. The Board recognizes that a 20-day notice period is
statutorily prescribed for changes to common carrier rates and service
terms. 49 U.S.C. 11101(c). However, rail carriers themselves recognized
that 20 days was not sufficient for many of the changes recently
implemented, and generally provided between 45 and 60 days, while other
commenters stated that the marginally longer notice periods that were
provided were still insufficient.
Rail carriers also described various other actions taken to help
shippers and receivers adapt, such as delayed billing and working with
those that needed more flexibility.\58\ The Board encourages rail
carriers to take these and other initiatives to support all rail users
facing the financial, operational, or other challenges of adjusting to
major tariff changes, to thoughtfully consider the amount of advance
notice that should be given, and to be especially cognizant of and
accommodating to any unique obstacles a shipper or receiver may face in
adapting to demurrage and accessorial tariff changes.
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\58\ See also N. Am. Freight Car Ass'n, NOR 42060 (Sub-No. 1),
slip op. at 9 (referencing steps taken by BNSF to inform shippers
about the newly imposed storage charges and respond to shippers'
concerns, including offering to waive the charges in the first year
to offset the cost of new track construction and offering to enter
into transitional leases).
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Demurrage Billing to Shippers Instead of Warehousemen
In the Docket No. EP 754 oversight proceeding, several participants
expressed concerns about the impact of demurrage on third-party
intermediaries who handle goods shipped by rail but have no property
interest in them (also commonly known as warehousemen, as noted above)
following the Board's adoption of the final rule in Demurrage
Liability, Docket No. EP 707 (codified at 49 CFR part 1333).\59\
Participants raised
[[Page 54725]]
concerns that the rule adopted in Docket No. EP 707 led rail carriers
to impose demurrage charges on warehousemen who lack control over the
timing or volume of railcars shipped to them and have no business
relationship with rail carriers to facilitate the resolution of
demurrage disputes.\60\
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\59\ In Docket No. EP 707, the Board explained that a question
had arisen as to who should bear liability when an intermediary that
detains rail cars too long is named as consignee in the bill of
lading but asserts that it either did not know of its consignee
status or had affirmatively asked not to be named as consignee.
Demurrage Liability Final Rule, EP 707, slip op. at 4. The Board
noted that there was a split on that issue in the U.S. Courts of
Appeals. Id. The Board determined that identification of a party in
the bill of lading was not controlling for purposes of demurrage
liability. Id. at 14. The Board adopted ``a conduct-based approach
to demurrage in lieu of one based on the bill of lading,'' id. at
15, based on ``the theory that responsibility for demurrage should
be placed on the party in the best position to expedite the loading
or unloading of rail cars at origin or destination,'' id. at 8.
\60\ See, e.g., International Liquid Terminals Association
(ILTA) Comments 1-2, May 8, 2019; Kinder Morgan Terminals (Kinder
Morgan) Comments 8-9, May 8, 2019.
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Commenters suggested shipper-direct billing as one potential
solution but stated that warehousemen and shippers have been unable to
reach such agreements with rail carriers.\61\ At least one rail carrier
has reportedly taken the position that the rule adopted in Docket No.
EP 707 precludes rail carriers from entering such agreements and
requires them to bill and hold warehousemen solely responsible for
demurrage on delivered cars.\62\
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\61\ ILTA Comments 2, May 8, 2019; Kinder Morgan Comments 2-3,
June 6, 2019.
\62\ See Kinder Morgan Comments 10-11, May 8, 2019; Kinder
Morgan Comments 1-2, June 6, 2019.
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The rule adopted in Docket No. EP 707 does not require rail
carriers to bill warehousemen, nor does it preclude a rail carrier from
sending demurrage bills directly to the shipper, or from looking to the
shipper as the responsible party for any unpaid assessments. The Board
notes, in particular, that the rule adopted in Docket No. EP 707
states, in permissive terms, that parties who receive cars ``may be
held liable for demurrage,'' see 49 CFR 1333.3 (emphasis added), and
that the Board expressly stated that the demurrage liability rules
promulgated in that docket ``are default rules only, meant to govern
demurrage in the absence of a privately negotiated contract.''
Demurrage Liability Final Rule, EP 707, slip op. at 25. Nor should rail
carriers be able to hold warehousemen responsible when a shipper that
has agreed to accept responsibility for demurrage does not pay.\63\ In
Demurrage Billing Requirements, Docket No. EP 759, served concurrently
with this decision, the Board is proposing rules that will further
address these matters, in addition to the invoicing issues noted above.
In the meantime, the Board encourages railroads to work collaboratively
with warehousemen and shippers to address these issues.
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\63\ The shipper is, after all, the party shown on the bill of
lading, and indeed the one that was historically responsible for
demurrage.
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General Concluding Considerations
The Board concludes by restating two fundamental principles that
all rail carriers, and all shippers and receivers, are encouraged to
keep in mind. First, demurrage rules and charges are not reasonable
when they do not serve to incentivize the behavior of shippers and
receivers to encourage the efficient use of rail assets. In other
words, charges should not be assessed in circumstances beyond the
shipper's or receiver's reasonable control. It follows, then, that
revenue from demurrage charges should reflect reasonable financial
incentives to advance the overarching purpose of demurrage and that
revenue is not itself the purpose. Second, transparency and mutual
accountability by both rail carriers and the shippers and receivers
they serve are important factors in the establishment and
administration of reasonable demurrage and accessorial rules and
charges. These two principles were recognized by rail carriers,
shippers, and receivers in connection with the Docket No. EP 754
oversight hearing, and the Board affirms them here.
The Board expects to take all of the principles discussed in this
proposed policy statement into consideration, together with all of the
evidence and argument that is before it, in evaluating the
reasonableness of demurrage and accessorial rules and charges in future
cases.
Opportunity for comment. The Board seeks public comment on this
proposed policy statement. Comments are due by November 6, 2019. Reply
comments are due by December 6, 2019.
Decided: October 4, 2019.
By the Board, Board Members Begeman, Fuchs, and Oberman.
Kenyatta Clay,
Clearance Clerk.
Participants in Docket No. EP 754
The Board received comments and testimony from the following
parties in Docket No. EP 754. For parties that provided testimony at
the May 22-23, 2019 hearing, the panel is noted in parentheses. Pre-
hearing comments are denoted with ``*''and post-hearing comments are
denoted with ``[dagger]''.
Ag Processing Inc * [dagger] (Panel VI)
Agricultural Retailers Association (ARA) * (Panel VI)
Agricultural Transportation Working Group* \64\
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\64\ Submitted on behalf of ARA, Amcot, American Farm Bureau
Federation, American Frozen Food Institute, American Soybean
Association, Corn Refiners Association (CRA), Cotton Growers
Warehouse Association, Cotton Warehouse Association of America,
Cottonseed & Feed Association, Growth Energy Institute of Shortening
and Edible Oils, National Barley Growers Association, National
Cotton Council, National Cotton Ginners Association, National
Cottonseed Products Association, National Council of Farmer
Cooperatives, National Farmers Union, National Grain and Feed
Association (NGFA), National Oilseed Processors Association (NOPA),
National Sorghum Producers, North American Millers' Association
(NAMA), The Fertilizer Institute (TFI), U.S. Canola Association, and
U.S. Wheat Associates.
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Agricultural Transportation Working Group
[dagger] \65\
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\65\ Submitted on behalf of ARA, American Bakers Association,
American Cotton Shippers Association, American Farm Bureau
Federation, CRA, Cottonseed & Feed Association, Cotton Warehouse
Association of America, Growth Energy Institute of Shortening and
Edible Oils, National Association of State Departments of
Agriculture, National Association of Wheat Growers, National
Cattlemen's Beef Association, National Corn Growers Association,
National Cotton Council, National Cotton Ginner's Association,
National Cottonseed Products Association, National Council of Farmer
Cooperatives, National Farmers Union, NGFA, National Grange,
National Milk Producers Federation, NOPA, National Pork Producers
Council, National Renderers Association, NAMA, TFI, and U.S. Wheat
Associates.
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All South Warehouse D/C, Inc.[dagger]
American Chemistry Council * [dagger] (Panel
VIII)
American Forest & Paper Association *
American Frozen Food Institute *
American Fuel & Petrochemical Manufacturers *
American Plant Food Corporation *
American Short Line and Regional Railroad Association
[dagger]
ArcelorMittal USA LLC *
Archer Daniels Midland Company *
Arizona Electric Power Cooperative, Inc. and Freight Rail
Customer Alliance * [dagger] (Panel XII)
Armada Supply Chain Solutions, LLC *
Association of American Railroads [dagger]
Auriga Polymers, Inc., a wholly owned subsidiary of
Indorama, NA, on behalf of Indorama Ventures affiliates * (Panel
VII)
Barilla America, Inc. * (Panel IX)
BNSF Railway Company * [dagger] (Panel XI)
Brainerd Chemical Company, Inc., on behalf of itself and
other members of the National Association of Chemical Distributors *
(Panel IV)
Brunk Plastic Services * (Panel VII)
Bunge North America * [dagger] (Panel I)
California League of Food Producers *
Canadian National Railway Company * [dagger]
(Panel XI)
Canadian Pacific Railway Company * [dagger]
(Panel XI)
Cargill, Inc.* (Panel IV)
Consolidated Scrap Resources, Inc.* [dagger]
(Panel I)
Corn Refiners Association (CRA) * (Panel VI)
Covia Holdings Corporation *
CSX Transportation, Inc.* [dagger] (Panel II)
[[Page 54726]]
Diversified CPC International, Inc.* (Panel VIII)
Dow, Inc.*
Energy Transfer *
Federal Maritime Commission * (Panel III)
Glass Packaging Institute *
Global Harvest Foods *
Grain Craft *
Growth Energy *
Hudson Terminal Rail Services *
Imerys USA, Inc.*
Industrial Minerals Association--North America *
Institute of Scrap Recycling Industries, Inc.*
[dagger]
Intermodal Motor Carriers Conference[dagger]
International Association of Refrigerated Warehouses *
(Panel X)
International Liquid Terminals Association * (Panel X)
International Paper * (Panel IV)
International Warehouse Logistics Association *
[dagger] (Panel X)
Kansas City Southern Railway Company * [dagger]
(Panel VIII)
Kinder Morgan Terminals * [dagger] (Panel I)
Lansdale Warehouse Company *
Lhoist North America * (Panel V)
Louis Dreyfus Company LLC *
Lyondell Chemical Company, Equistar Chemicals LP, and
LyondellBasell Acetyls, LLC *
Martin-Brower Company, LLC *
MHW Group, Inc. and its companies, Cryo-Trans, Inc.,
Perryville Cold Storage and Chambersburg Cold Storage *
[dagger] (Panel V)
MillerCoors LLC * (Panel IV)
National Coal Transportation Association * (Panel XII)
National Customs Brokers and Forwarders Association of
America, Inc.*
National Grain and Feed Association (NGFA) *
[dagger] \66\ (Panel VI)
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\66\ Pre-hearing comments supported by members of NOPA, North
America Freight Car Association, and NAMA.
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National Industrial Transportation League *
[dagger] (Panel VII)
Norfolk Southern Railway Company * [dagger]
(Panel II)
Normerica Inc. and Northdown Industries Inc.* (Panel IX)
North America Freight Car Association * [dagger]
North Dakota Grain Dealers Association *
Olin Corporation * [dagger] (Panel I)
Oxbow Carbon LLC *
Packaging Corporation of America * (Panel IV)
Palmer Logistics * (Panel V)
PBF Energy Inc. and PBF Logistics * (Panel XII)
Peabody Energy Corporation *
Portland Cement Association [dagger]
Private Railcar Food and Beverage Association, Inc. (PRFBA)
* [dagger] (Panel IV)
R. D. Gould *
Rebel Oil Company, Inc. and Pro Petroleum, Inc.*
Reserve Management Group *
San Jose Distribution Services Inc.*
San Jose Distribution Services Inc., Kenco, RBW Logistics,
Palmer Logistics, CDS Transportation, Acme Distribution, Total
Distribution Inc., Verst Group Logistics Inc., Sonwil Distribution
Center, Peoples Services, Lansdale Services Inc., Logistics Services
Inc., PRFBA, Stech Group, The Shippers Group, RGL Logistics, Moran
Logistics, Wagner Logistics [dagger]
Shea Brothers Lumber Handling, Inc.*
Sims Metal Management Limited and SA Recycling * (Panel IX)
Star Distribution [dagger]
Sysco Corporation *
The Anderson-DuBose Company * (Panel V)
The Fertilizer Institute (TFI) * [dagger] (Panel
VII)
The Shippers Warehouse Co., dba The Shippers Group (The
Shippers Group) * [dagger] (Panel V)
UGI Energy Services, LLC *
Union Pacific Railroad Company * [dagger] (Panel
II)
U.S. Clay Producers Traffic Association, Inc.*
U.S. Department of Agriculture *
Valley Distributing & Storage Company *
Verso Corporation *
Western Coal Traffic League * [dagger] (Panel
XII)
[FR Doc. 2019-22200 Filed 10-9-19; 8:45 am]
BILLING CODE 4915-01-P