On October 4, 2019, the Surface Transportation Board (STB or Board) issued three decisions addressing various aspects of rail carriers’ demurrage and accessorial rules and charges.
The Board proposed a policy statement clarifying the principles it would consider in evaluating the reasonableness of demurrage and accessorial rules and charges, a rule imposing minimum demurrage billing requirements, and a rule that applies demurrage regulation to most exempt transportation. It seeks comments on the proposed policy statement and rules by November 6, 2019 and reply comments by December 6, 2019.
The proposals follow the STB’s two-day oversight hearing on demurrage and accessorial charges in May and the submission of written testimony by numerous railroad customers who expressed significant concerns over Class I railroad demurrage practices. Several major railroads recently changed their demurrage and accessorial charges rules and practices while implementing a new operating plan known as precision scheduled railroading (PSR).
EP 757: Policy Statement
In Docket No. EP 757, the Board proposed a policy statement (Policy Statement) to provide information and guidance on principles it would consider in evaluating the reasonableness of rail demurrage and accessorial rules and charges. The Policy Statement sets forth general principles, including that railroad demurrage rules and charges are not likely reasonable when they do not incentivize shippers and receivers to become more efficient in their use of rail assets (i.e., railcars and track) and that transparency and mutual accountability are important factors in establishing reasonable demurrage and accessorial rules and charges. The Board also identified several instances of demurrage charges that appear to be unreasonable, such as:
- charging demurrage that accrues because of a missed switch;
- charging demurrage for transit days to move cars from constructive placement in remote locations;
- charging demurrage caused by bunched deliveries; or
- changes in historical practices on which shippers or receivers have long relied.
The Policy Statement covers the following key issues regarding demurrage rules and practices:
- Free time: The STB recognized that the recent reduction of free time for both private and railroad-owned cars is concerning, particularly in light of inconsistencies in rail service that make it more difficult for railroad customers to avoid these charges. Reductions of free time that would make it difficult for railroad customers to cope with service variations and that do not incentivize the efficient use of rail assets would not serve the overarching purpose of demurrage charges.
- Bunching: The STB stated that bunching is best addressed on a case-by-case basis but noted that the purpose of demurrage is not fulfilled when railroad customers are assessed demurrage charges that result from bunched deliveries (bunching originating from the servicing carrier, as well as bunching caused by an upstream carrier) that are not within the customers’ reasonable control.
- Overlapping charges:The STB indicated that it would have significant concerns about the reasonableness of any tariff provision that imposes a charge (e.g., Norfolk Southern Railroad’s “congestion” charge or Union Pacific’s “not prepared for service” charge) in addition to the otherwise applicable demurrage charge for congestion or delay that the railroad customer can reasonably avoid.
- Invoicing and dispute resolution: The STB indicated that current invoicing and dispute resolution practices are deeply troubling and encouraged all Class I carriers (and Class II and III carriers to the extent they are able to do so) to provide more detailed information on their invoices to help shippers and receivers review and, if necessary, dispute charges. The STB also stated that the carriers should bill demurrage only if the charges are accurate and warranted and that dispute resolution processes should provide reasonable time periods for rail customers to dispute the charges and for the rail carriers to respond to the disputes. Carriers also should not charge customers for disputing invoices.
- Credits: The STB expressed concerns over the lack of reciprocity in rail carriers’ practices when issuing credits to their customers and stated that it would consider whether the railroad customer has been afforded a reasonable opportunity to use the credits. It also would consider the credits’ purpose and function and proposed that railroads compensate customers for the value of unused credits at the end of each month.
- Notice of major tariff changes:The Board indicated that the railroads should provide sufficient prior notice of major changes to demurrage and accessorial tariffs to enable railroad customers to take reasonable actions to avoid or mitigate the new resulting charges. Such notice may need to be longer than the typical 20-day minimum notice period when a customer requires more time to adjust to the changes.
- Demurrage billing of shippers instead of warehousemen: The Board stated that its prior decision on demurrage in Docket No. EP 707 does not require rail carriers to bill warehousemen for demurrage charges, nor does it preclude a rail carrier who makes deliveries to warehousemen from sending demurrage invoices directly to the shipper when the shipper agrees to be invoiced.
EP 759: Billing Requirements
In a separate order in Docket No. EP 759, the Board issued a notice of proposed rulemaking on demurrage billing requirements. Specifically, it proposed minimum information requirements for invoices and a requirement that when the shipper and warehousemen agree that the shipper is responsible for demurrage charges, Class I carriers, upon receiving notice of that agreement, must send invoices directly to the shipper and not require the warehousemen to guarantee the payment.
EP 760: Commodities Shipments
Finally, the Board issued a notice of proposed rulemaking in Docket No. EP 760 to clarify that demurrage is subject to Board regulation when it involves shipments of certain exempt commodities (e.g., lumber or wood products, pulp and paper products, and iron and steel scrap) and boxcar transportation. The Board also proposes to partially revoke the exemption for certain agricultural commodities to permit the regulation of demurrage related to the non-intermodal transportation of these commodities.