[Federal Register Volume 85, Number 88 (Wednesday, May 6, 2020)]
[Rules and Regulations]
[Pages 26866-26874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09682]
[[Page 26866]]
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SURFACE TRANSPORTATION BOARD
49 CFR Part 1333
[Docket No. EP 757]
Policy Statement on Demurrage and Accessorial Rules and Charges
AGENCY: Surface Transportation Board.
ACTION: Statement of Board policy.
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SUMMARY: The Surface Transportation Board (STB or Board) is issuing
this policy statement, following public notice and comment, to provide
the public with information on principles the Board would consider in
evaluating the reasonableness of demurrage and accessorial rules and
charges.
DATES: This policy statement is effective on May 30, 2020.
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 the national needs related to freight car use and distribution
and maintenance of an adequate car supply.\1\ Demurrage is a charge
that serves principally as an incentive to prevent undue car detention
and thereby encourage the efficient use of rail cars in the rail
network, while also providing compensation to rail carriers for the
expense incurred when rail cars are unduly detained beyond a specified
period of time (i.e., ``free time'') for loading and unloading. See Pa.
R.R. v. Kittaning Iron & Steel Mfg. Co., 253 U.S. 319, 323 (1920)
(``The purpose of demurrage charges is to promote car efficiency by
penalizing undue detention of cars.''); 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). As discussed below, this policy statement
pertains to accessorial charges that, like demurrage charges, are
designed or intended to encourage the efficient use of rail assets.
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\1\ The Board's authority to regulate demurrage includes, among
other things, transportation under the exemptions set forth in 49
CFR 1039.11 (miscellaneous commodities exemptions) and section
1039.14 (boxcar transportation exemptions). The Board recently
amended those regulations to state more clearly that the exemptions
do not apply to the regulation of demurrage. It also revoked, in
part, the class exemption for the rail transportation of certain
agricultural commodities at 49 CFR 1039.10 so that the exemption
does not apply to the regulation of demurrage, making it consistent
with similar class exemptions covering non-intermodal rail
transportation. Exclusion of Demurrage Regulation from Certain Class
Exemptions (Demurrage Exclusion Final Rule), EP 760 (STB served Feb.
28, 2020).
\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 regulations established in
that decision. The Board uses the same definition for purposes of
this policy statement.
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On October 7, 2019, the Board issued, for public comment, a notice
of proposed statement of Board policy providing information with
respect to certain principles it would consider in evaluating the
reasonableness of demurrage and accessorial rules and charges. See
Policy Statement on Demurrage & Accessorial Rules & Charges (NPPS), EP
757 (STB served Oct. 7, 2019).\3\ As described in the NPPS, EP 757,
slip op. at 2-3, that action arose, in part, as a result of the
testimony and comments submitted in Oversight Hearing on Demurrage &
Accessorial Charges (Oversight Proceeding), Docket No. EP 754. The
Board commenced the Oversight Proceeding by notice served on April 8,
2019 (April 2019 Notice), following concerns expressed by users of the
freight rail network (rail users) \4\ and other stakeholders about
recent changes to demurrage and accessorial tariffs administered by
Class I carriers, which the Board was actively monitoring.\5\
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\3\ Notice was published in the Federal Register, 84 FR 54,717
(Oct. 10, 2019).
\4\ As used in this policy statement, the term ``rail users''
broadly means any person or business that receives rail cars for
loading or unloading, regardless of whether that person or business
has a property interest in the freight being transported. This
policy statement uses the terms ``warehousemen'' or ``third-party
intermediaries'' to refer more specifically to those entities with
no property interest in the freight.
\5\ The April 2019 Notice announced a public hearing, at which
Class I carriers were directed to appear, and shippers, receivers,
third-party logistics providers, and other interested parties were
invited to participate. The notice also directed Class I carriers to
provide specific information on their demurrage and accessorial
rules and charges; required all hearing participants to submit
written testimony (both in advance of the hearing); and permitted
comments from interested parties who did not appear. The Board
received over 90 pre-hearing submissions; heard testimony over a
two-day period from 12 panels composed of, collectively, over 50
participants; and received 36 post-hearing comments. That record,
which is detailed in the NPPS and summarized below, is available in
Docket No. EP 754. See NPPS, EP 757, slip op. at 22-25 (Appendix
listing the parties who provided comments or testimony in the
proceeding).
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In response to the NPPS, the Board received 44 comments and 13
replies.\6\ After considering the comments received, along with the
record in the Oversight Proceeding, the Board is issuing this statement
of Board policy. Through this 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 policy statement. Nor is the Board promoting
complete uniformity across rail carriers' demurrage and accessorial
rules and charges; the principles discussed in this policy statement
recognize that there may be different ways to implement and administer
reasonable rules and charges.
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When adjudicating specific cases, the Board will consider all facts and
arguments presented in such cases.
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\6\ The Board received comments and/or reply comments from: The
American Chemistry Council (ACC); the American Forest & Paper
Association (AF&PA); American Fuel & Petrochemical Manufacturers
(AFPM); the American Iron and Steel Institute (AISI); the American
Short Line and Regional Railroad Association (ASLRRA); ArcelorMittal
USA LLC (AM); Archer Daniels Midland Company; the Association of
American Railroads (AAR); Auriga Polymers, Inc. a wholly owned
subsidiary of Indorama, NA, on behalf of Indorama Ventures
affiliates (Auriga/Indorama); the Automobile Carriers Conference;
Barilla America, Inc. (Barilla); BNSF Railway Company (BNSF);
Canadian National Railway Company (CN); Canadian Pacific Railway
Company (CP); The Chlorine Institute (CI); The Corn Refiners
Association (CRA); CSX Transportation, Inc. (CSXT); Diversified CPC
International, Inc. (Diversified CPC); Dow, Inc. (Dow); The
Fertilizer Institute (TFI); the Freight Rail Customer Alliance
(FRCA); Growth Energy; the Industrial Minerals Association--North
America (IMA-NA); the Institute of Scrap Recycling Industries, Inc.
(ISRI); International Paper; the International Warehouse Logistics
Association (IWLA); The Kansas City Southern Railway Company (KCS);
Kinder Morgan Terminals (Kinder Morgan); the National Association of
Chemical Distributors (NACD); the National Coal Transportation
Association (NCTA); the National Grain and Feed Association (NGFA)
(supported by the Agricultural Retailers Association; the Pet Food
Institute; the National Oilseed Processors Association and the North
American Millers' Association); The National Industrial
Transportation League (NITL); the National Mining Association; the
North American Freight Car Association (NAFCA); Omaha Public Power
District (OPPD); Peabody Energy Corporation; Plastic Express/PX
Services (Plastic Express); the Portland Cement Association (PCA);
the Private Railcar Food and Beverage Association, Inc. (PRFBA);
Union Pacific Railroad Company (UP); and the Western Coal Traffic
League and Seminole Electric Cooperative, Inc. (WCTL/SEC). Two
comments were filed after the comment deadline of November 6, 2019.
In the interest of a more complete record, the late-filed comments
are accepted into the record.
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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 Proceeding
\7\ and intends for this policy statement to provide useful guidance to
all stakeholders.
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\7\ For example, KCS reportedly forgave significant demurrage
bills 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, Oversight Proceeding, EP 754.
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Historical Overview and General Principles
The NPPS, EP 757, slip op. at 4-7, provides a detailed historical
overview and summary of general principles related to demurrage. The
Board here addresses some of the more general comments raised by
commenters before turning to comments about the specific issues
addressed in the policy statement.
Rail users generally support the proposed policy statement and
endorse its key principles. Many rail carrier commenters also either
generally support or do not take exception to the general principles
discussed in the proposed policy statement. In particular, several
Class I carriers voiced support for two key principles: That there may
be different ways to implement and administer reasonable demurrage
rules and practices, and that disputes pertaining to demurrage are best
resolved on a case-specific basis that considers all pertinent facts.
(See BNSF Comments 2-3; CSXT Comments 3; UP Comments 2; CN Reply
Comments 3.) AAR, however, raises objections, which are shared by some
carriers, to certain language in the proposed policy statement related
to compensation and the imposition of demurrage charges for delays
beyond a rail user's reasonable control. (See AAR Comments 1-6; CSXT
Comments 1-2; CP Comments 15-16; KCS Comments 3, 5.)
In its discussion of general principles, the Board stated that 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. NPPS, EP 757, slip op. at 6-7 (citing
Kittaning, 253 U.S. at 323).\8\ That period of time must be
reasonable,\9\ 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 (``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 also reiterated its concerns about demurrage charges for delays
that a shipper or receiver did not cause. NPPS, EP 757, slip op. at 7
(citing Utah Cent. Ry.--Pet. for Declaratory Order--Kenco Logistic
Servs., LLC, FD 36131, slip op. at 12 n.38 (STB served Mar. 20, 2019);
Exemption of Demurrage from Regulation, EP 462, slip op. at 4 (STB
served Mar. 29, 1996)). The Board stated that 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.\10\
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\8\ 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)).
\9\ See, e.g., Kittaning, 253 U.S. at 323 (``[T]he shipper or
consignee . . . is entitled to detain the car a reasonable time . .
. .''); R.R. Salvage & Restoration, Inc.--Pet. for Declaratory
Order--Reasonableness of Demurrage Charges, NOR 42102 et al., slip
op. at 4 (STB served July 20, 2010) (time period must be
reasonable).
\10\ See, e.g., citations infra note 23.
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In its comments, AAR claims that the proposed policy statement
``ignore[s] the compensation function of demurrage.'' (AAR Comments 4.)
But the Board's regulations and the NPPS recognize this dual role, see
NPPS, EP 757, slip op. at 2 (citing 49 CFR 1333.1), and the Board
recognizes and reaffirms here that carriers should be compensated when
a rail user unduly detains rail assets. As noted by one rail carrier in
the Oversight Proceeding, ``Congress framed the purposes of demurrage
not in terms of cost recovery . . ., but rather in terms of
incentives.'' CN Comments 8, June 6, 2019, Oversight Proceeding, EP
754. In other words, under the operative statutory framework, demurrage
rules and charges must serve an incentivizing function. And, as AAR
itself recognized in the Oversight Proceeding, demurrage and storage
charges have long been considered ``primarily a penalty to deter undue
car detention, and to a lesser extent, compensation to the railroad for
expenses incurred.'' AAR Comments 4, June 6, 2019, Oversight
Proceeding, EP 754 (quoting R.Rs. Per Diem, Mileage, Demurrage &
Storage--Agreement, 1 I.C.C.2d 924, 933 (1985)).\11\ When carriers
established individualized demurrage programs in the post-Staggers Act
\12\ era, they stopped breaking out demurrage charges into
incentivizing (punitive) and compensatory (per diem) components. Cases
involving disputed charges are no longer decided on that basis, and, in
the Oversight Proceeding, AAR eschewed a return to the former
system.\13\ The compensatory function of demurrage is achieved, along
with its incentivizing function, by permitting the delivering carrier
to retain the charges assessed for a rail user's undue detention of
rail assets.
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\11\ As the Interstate Commerce Commission also explained in
that decision, ``[d]emurrage and storage charges are assessed by
railroads against shippers or receivers for undue detention of
equipment.'' 1 I.C.C.2d at 933. ``Unlike per diem and allowances,
the primary purpose of demurrage and storage charges is not to
compensate the owner of the car, but to enhance efficient car use by
ensuring the prompt turnaround of equipment.'' Id. at 934.
\12\ Staggers Rail Act of 1980, Public Law 96-448, 94 Stat.
1895.
\13\ See AAR Comments 8, June 6, 2019, Oversight Proceeding, EP
754 (stating that ``[a]fter Staggers, it was no longer necessary or
appropriate to require railroads to use uniform demurrage tariffs
that included prescribed terms, compensatory and penalty elements,
and regulated rates'').
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AAR also argues that ``[t]he law is well settled that assessment of
demurrage charges in no way depends upon a finding of shipper or
consignee fault.'' (AAR Comments 6 (quoting Foreston Coal Int'l v.
Balt. & Ohio R.R., 349 I.C.C. 495, 500 (1975).) AAR's argument,
however, fails to take full account of the caselaw on this issue. As an
initial matter, AAR overlooks that each case stands on its own facts,
as the agency retains broad discretion to determine whether demurrage
charges, under all the circumstances of a particular case (including
fault), are reasonable under section 10702 and comport with the
statutory requirements specified in section 10746.\14\ Also overlooked
is the fact that, as AAR acknowledged in the Oversight Proceeding,
historically under ``straight'' demurrage programs,\15\ ``the
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shipper or receiver was not assessed demurrage if severe weather or
other circumstances beyond their control prevent[ed] them from
returning cars on time.'' AAR Comments 5, June 6, 2019, Oversight
Proceeding, EP 754. AAR also overlooks more recent Board decisions,
discussed in the NPPS, EP 757, slip op. at 6-7, expressing concern
about holding a rail user liable for demurrage attributable to delays
beyond its reasonable control. Several carriers acknowledged at the
oversight hearing various circumstances in which it would not be
appropriate to charge a customer for delays the customer did not
cause,\16\ and UP and ASLRRA affirmatively state that demurrage should
not be charged to rail users for delays beyond their reasonable
control.\17\
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\14\ See, e.g., N. Am. Freight Car Ass'n v. BNSF Ry., NOR 42060
(Sub-No. 1), slip op. at 8 (STB served Jan. 26, 2007) (stating that
Congress ``gave the Board `broad discretion to conduct case-by-case
fact-specific inquiries to give meaning to [section 10702's
statutory] terms, which are not self-defining' '' and explaining
that ``[t]his broad discretion is necessary to permit the Board to
tailor its analysis to the evidence proffered and arguments asserted
under a particular set of facts'' (citing Granite State Concrete Co.
v. STB, 417 F.3d 85, 92 (1st Cir. 2005))); N. Am. Freight Car Ass'n
v. STB, 529 F.3d 1166, 1170-71 (DC Cir. 2008) (agency has ``wide
discretion in formulating appropriate solutions'' when dealing with
complex matters within its expertise, including claims involving
statutory obligations under section 10702 and section 10746
(citation omitted)).
\15\ Historically, the detention of freight rail cars was
governed by a uniform code of demurrage rules and charges, which
offered shippers and receivers two alternative methods for computing
demurrage: Straight demurrage and average demurrage. Under the
straight demurrage plan, which historically applied in the absence
of any other arrangement with the rail carrier, charges were applied
and billed on individual cars at daily rates when cars were detained
beyond the allowable free time. See NPPS, EP 757, slip op. at 4. The
Board mentions straight demurrage programs here not to suggest a
return to the former system but rather to give a more complete
account of the law and history on the issue.
\16\ See, e.g., UP Comments 10-11, 14, 23, June 6, 2019 (filing
ID 247892), Oversight Proceeding, EP 754; Hr'g Tr. 146:11 to 147:1,
May 22, 2019, Oversight Proceeding, EP 754 (CSXT agreeing that
demurrage should not be assessed where charges penalize a shipper
who is powerless to avoid or abate the detention); Hr'g Tr. 923:8 to
924:16, May 23, 2019, Oversight Proceeding, EP 754 (BNSF agreeing
that ``it's not a strict liability standard in the law or in
practice'' and noting language in its tariffs excusing demurrage for
force majeure events beyond the control of a shipper).
\17\ See UP Comments 3 (also endorsing same principle for
accessorial charges); ASLRRA Comments 4.
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In sum, the Board finds that AAR's arguments are misplaced, as
there have been long-standing concerns about rail users being held
responsible for circumstances beyond their reasonable control. The
proposed policy statement properly focused on the foundational
questions that arise in determining whether demurrage rules and charges
are reasonable and designed to fulfill national needs related to
freight car use and distribution, and to maintenance of an adequate car
supply, under 49 U.S.C. 10746.\18\
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\18\ In response to AAR's assertion that a policy statement
cannot be used to change the law, (see AAR Comments 5), the Board
reiterates that this policy statement articulates what the Board may
consider in future decisions and does not constitute a binding
determination by the Board or seek to change the law. See NPPS, EP
757, slip op. at 3-4. The general principles and non-binding
considerations discussed in a statement of Board policy--
particularly one that was published for public comment--are well
within the bounds of appropriate agency action.
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As noted above, rail users generally support the proposed policy
statement, and several agree with the Board that the principles
outlined in the NPPS would help prevent disputes from arising, and,
when they do arise, help resolve them more efficiently and cost-
effectively.\19\ Some voiced concern that carriers would not
voluntarily change certain rules and practices and called for further
prescriptive actions.\20\ Such prescriptive actions are not appropriate
for inclusion in a policy statement, and the Board declines at this
time to take further regulatory action beyond the actions taken in
Demurrage Exclusion Final Rule, Docket No. EP 760, and the actions
under consideration in Demurrage Billing Requirements, Docket No. EP
759. However, the Board will remain open to argument that these
concerns and suggestions should be considered in future proceedings in
assessing the reasonableness of demurrage rules and charges and whether
they comport with the objectives specified in section 10746. Further,
carriers are encouraged to thoughtfully consider rail users' concerns
and suggestions--along with the principles discussed below--as
potential solutions that would promote the goals of transparency,
timeliness, and mutual accountability stakeholders broadly profess to
embrace.
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\19\ See, e.g., ACC Comments 3; ISRI Comments 8, 12 (also noting
that the policy statement appropriately ``provid[es] flexibility to
account for differing factual circumstances inherent in the receipt
and shipment of goods by rail''); Barilla Comments 2-3 (principles
will ``establish a foundation for the railroads and their customers
to recognize one another as partners when addressing issues and
potential [rule] changes in the future''; also noting that some
rules discussed at the oversight hearing have since been removed);
AF&PA Comments 3 (principles in the policy statement provide
``provide valuable guidance for the future administration of
demurrage and accessorial charges''); IMA-NA Comments 2 (same); CI
Comments 1 (policy statement ``should assist in resolving many of
the problems with demurrage and accessorial rules and charges'').
\20\ Several parties state that the Board should require
railroads to comply with and incorporate the policy statement into
their tariffs. (See, e.g., Kinder Morgan Comments 2, 11-12; AISI
Comments 6-7; PCA Comments 3-4; WCTL/SEC Comments 5. See also AM
Comments 5; NCTA Comments 4-5; NGFA Comments 3, 21-22 (arguing that
the Board should adopt binding rules or final guidelines and direct
railroads to conform within specified time); FRCA Comments 5
(arguing that ``the Board should require carriers to certify that
their rules and practices comply with Board's standards'' and impose
penalties if noncompliance is demonstrated).)
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Free Time
In the NPPS, EP 757, slip op. at 7-10, the Board described the
background and current issues surrounding free time--the period of time
allowed for a rail user to finish using rail assets and return them to
the railroad before demurrage charges are assessed.\21\ The Board
explained that free time, which railroads may set within reasonable
limits, helps temper adverse impacts to rail users of delays arising
from service variability, and plays a role in the credit and debit
rules and practices of many rail carriers. NPPS, EP 757, slip op. at 8.
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\21\ As the Supreme Court has noted, ``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.''
Kittaning, 253 U.S. at 323.
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The NPPS also explained that, until recently, rail carriers
typically provided 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.\22\ NPPS, EP 757, slip op. at 8 (citing Portland
& W. R.R.--Pet. for Declaratory Order--RK Storage & Warehousing, Inc.,
FD 35406, slip op. at 5 (STB served July 27, 2011).) 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. NPPS, EP 757, slip
op. at 8-9.
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\22\ 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 (a status assigned 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 such as lack of room on the tracks in the receiver's
facility, see Savannah Port Terminal R.R.--Pet. for Declaratory
Order--Certain Rates & Practices as Applied to Capital Cargo, Inc.,
FD 34920, slip op. at 3 n.6 (STB served May 30, 2008)).
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Recent reductions in free time implemented by several Class I
carriers were a major focal point of the Oversight Proceeding. 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.
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.
Rail carriers that reduced free time identified similar objectives
and rationales for doing so: to better align the behavior of shippers
and receivers in order to promote network fluidity for the benefit of
all rail users through improved service reliability and reduced cycle
times. These carriers
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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.'' \23\ Rail carriers' post-
hearing submissions largely reiterated these points and expressed
willingness to work with customers to help them align their behavior to
better meet the reductions in free time. While the Board recognizes
that some changes and rail carrier outreach occurred following the
hearing, it is apparent that many issues related to free time remain.
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\23\ UP Comments 2, May 8, 2019, Oversight Proceeding, EP 754;
see generally id. at 1-2; UP Comments 3, June 6, 2019 (filing ID
247876), Oversight Proceeding, EP 754; Norfolk Southern Railway
Company (NSR) Comments 2-3, May 8, 2019, Oversight Proceeding, EP
754; CSXT Comments 3-5, May 8, 2019, Oversight Proceeding, EP 754.
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, Oversight Proceeding, EP 754.
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In the Oversight Proceeding, 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 facilities to meet the reduced free-time
periods. Many reported that bunching or otherwise unreliable service is
a major obstacle to meeting the reduced free-time periods, and that the
recent reductions have made it more difficult and costly to deal with
unreliable service because the free time that has been eliminated had
served as an important buffer against unpredictable railroad
performance. Rail users that rely on private rail cars expressed
additional objections and concerns and noted that there has been a
significant industry shift from rail carrier ownership of rail cars to
private car ownership since the enactment of section 10746. See NPPS,
EP 757, slip op. at 9-10 (describing comments submitted in Docket No.
EP 754). Although rail carriers presented data in the Oversight
Proceeding, generally on a system-wide basis, reflecting recent
improvements in some metrics, they presented limited data on the extent
to which changes to their demurrage rules and charges succeeded in
reducing loading and unloading times, as compared to the times prior to
the changes. See NPPS, EP 757, slip op. at 11.
Comments from rail users on the NPPS broadly reiterate these
concerns and suggest that the Board should take more binding
action.\24\ Comments from rail carriers on the NPPS were largely silent
about its discussion of free time. CP states that its customers adapted
to free-time reductions implemented in 2013 by adding track capacity,
using CP tools to better manage their pipeline, and adjusting labor
schedules, and that CP is moving more cars while demurrage charges have
decreased. (CP Comments 7.) UP states that it has worked
collaboratively with customers over the past year and that ``the vast
majority'' have successfully adapted to a reduction in free time from
48 hours to 24 hours. (UP Reply 2.)
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\24\ See, e.g., TFI Comments 4-5; NITL Comments 4-5; CRA
Comments 5-6; AF&PA Comments 4-5; AISI Comments 7-8; Dow Comments 3-
4; Diversified CPC Comments 3; NGFA Comments 11-12; ISRI Comments 4-
5; Joint Reply (ACC, CRA, TFI, NITL) 8-9.
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Demurrage serves a valuable purpose to encourage the efficient use
of rail assets (both equipment and track) by holding rail users
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 overarching purpose of demurrage. The Board
continues to have serious concerns about the adverse impacts of
reductions in free time to rail users, including 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 rail users have a reasonable
opportunity to evaluate their circumstances and order incoming cars
before demurrage begins to accrue. Some of these reductions to free
time or credit days may make it more difficult for rail users to
contend with variations in rail service and therefore may not serve to
incentivize their behavior to encourage the efficient use of rail
assets.\25\ In some circumstances, which would need to be examined in
individual cases, such reductions may not be reasonable or consistent
with rail carriers' statutory charge to compute demurrage and establish
related rules in a way that fulfills the national needs specified in
section 10746. Where, for example, carrier-caused circumstances give
rise to a situation in which it is beyond the rail user's reasonable
control to avoid charges, the overarching purpose of demurrage is not
fulfilled.
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\25\ Parties are, of course, free to negotiate and enter into
contracts that provide for any period of free time (including zero
credit days) 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).
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As stated in the NPPS, EP 757, slip op. at 12, 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 rail user has had a
reasonable opportunity to process the excess volume of incoming cars.
Changes in historical practices on which the rail user 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.\26\
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\26\ On the other hand, circumstances within a rail user'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 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 remains 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 competitive with other
transportation modes.\27\
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\27\ 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 have made compliance with the
shorter time frames reasonably achievable; (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
[[Page 26870]]
bunching, service variabilities, and certain capacity constraints--that
place the avoidance of demurrage charges within the reasonable control
of the rail user.
The Board also recognizes an important goal of demurrage in
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.
Although the Board will not, as certain commenters suggest, take
more binding action pertaining to free time,\28\ it will closely
scrutinize demurrage rules and charges where free time has been
reduced, or where no credit days have been provided. The Board
encourages all stakeholders to take the principles and considerations
discussed above into account going forward. The Board will do likewise
in future proceedings, along with all evidence and argument the parties
present.
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\28\ See, e.g., TFI Comments 4-5; NITL Comments 4-5; CRA
Comments 5-6; AF&PA Comments 4-5; AISI Comments 7-8; Dow Comments 3-
4; Diversified CPC Comments 3; NGFA Comments 11-12; ISRI Comments 4-
5; Joint Reply (ACC, CRA, TFI, NITL) 8-9.
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Bunching
Bunching-related issues were identified as a common problem by rail
users across a broad range of industries in the Oversight Proceeding.
Some rail carriers in that proceeding stated that they award credits
for bunching in some instances but did not describe with specificity
how these credits are awarded or did not otherwise address the concerns
expressed by rail users. See NPPS, EP 757, slip op. at 13-14
(describing comments submitted in Docket No. EP 754).
In response to the NPPS, rail users reiterate that bunching is a
significant problem that has increased following changes to rail
carriers' operating plans,\29\ has become even more difficult to
contend with due to free-time reductions,\30\ and often is not
sufficiently addressed in either carrier tariffs or the initial
invoices.\31\ Some commenters request the Board to elaborate on what it
would consider ``reasonable rules and practices for dealing with . . .
variability in service and carrier-caused bunching''; \32\ two propose
mechanisms keyed to trip-plan compliance; \33\ and some state that
upstream bunching is an issue best resolved among the railroads
participating in the movement without involving the rail user.\34\
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\29\ See, e.g., CRA Comments 7 (stating that bunching has
increased amid changes implemented by some railroads, despite
members' best efforts to spread out car deliveries, resulting in
demurrage charges that are not within their reasonable control);
NGFA Comments 13 (stating that bunching of empty return cars has
increased due to ``unilaterally imposed reductions in service
frequency as an outgrowth of carriers' implementation of the so-
called precision schedule railroad [(PSR)] operating model''); AFPM
Comments 8 (stating that ``[b]unched deliveries increased in
frequency following changes to rail carriers' operating plans'');
NCTA Comments 6-7 (stating that PSR has disrupted and undermined
service and created problems such as bunched rail cars and
insufficient locomotive availability).
\30\ See, e.g., AF&PA Comments 4-5 (stating that challenges of
contending with free time reductions are aggravated by erratic
service); TFI Comments 5 (same); NITL Comments 4 (same); CRA
Comments 5-6 (same); Auriga/Indorama Comments 2 (same). See also ACC
Comments 2 (stating that free time is necessary to account for
carrier-caused bunching and service variability); Dow Comments 3-4
(proposing minimum free time be keyed to service variability).
\31\ See, e.g., AISI Comments 8-9 (stating that carriers'
tariffs and billing practices do not properly address railcar
bunching); PCA Comments 5 (stating that tariffs often fail to
address bunching); Kinder Morgan Comments 9-10 (same).
\32\ NAFCA Comments 7; see also OPPD Comments 5-6; WCTL/SEC
Comments 5.
\33\ AFPM Comments 9; NGFA Comments 12-13.
\34\ ISRI Reply 5-6; Joint Reply (ACC, CRA, TFI, NITL) 4.
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Certain rail carriers and ASLRRA express concerns about addressing
upstream bunching in the policy statement. CP argues that any attempt
by the Board to address upstream bunching is contrary to law insofar as
past decisions have held rail users responsible for demurrage unless
the delivering carrier is at fault. (CP Comments 10 (citing Chrysler
Corp. v. N.Y. Cent. R.R., 234 I.C.C. 755, 758 (1939).) In addition,
these commenters note that because the delivering carrier may have no
knowledge of or ability to control upstream events, it should not be
forced to bear the costs of delays arising from off-line events. (CP
Comments 10-12; KCS Comments 3 n.2; ASLRRA Reply 4-5.)
The types of factual scenarios described by CP, KCS, and ASLRRA are
among the reasons why bunching should be addressed on a case-by-case
basis in order to permit the Board to properly consider all relevant
circumstances pertaining to an assessment of demurrage. Further, it is
the Board's view that carriers should consider the actions of upstream
carriers when administering their demurrage rules and charges. CP's
claim that Board consideration of upstream bunching would be contrary
to law overlooks the points discussed above and in the NPPS explaining
that demurrage rules and charges must be designed to incentivize rail
users' behavior.\35\ Where rail carriers' operating decisions or
actions result in bunched deliveries and demurrage charges that are not
within the reasonable control of the rail user to avoid, the
overarching purpose of demurrage is not fulfilled.\36\ 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--as at least one carrier
professes to do.\37\ The Board encourages all rail carriers to take
these considerations into account in their administration of demurrage
rules and charges, particularly in evaluating whether their automatic
billing processes sufficiently account for carrier-caused bunching
(especially for cars that originate on their network \38\ or bunching
attributable to missed switches), and in resolving bunching 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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\35\ The Board also notes that relief for upstream bunching was
available under the former uniform code for rail users that chose
the straight demurrage plan. See NPPS, EP 757, slip op. at 4-5 &
n.13.
\36\ 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 rail
user has had a reasonable opportunity to process the excess volume
of incoming cars. Other circumstances that could bear on an
assessment of bunching include the considerations described in note
26, above.
\37\ UP reportedly employs ``a case-by-case process within which
customers are credited for carrier-caused bunching.'' UP Comments
10, June 6, 2019 (filing ID 247892), Oversight Proceeding, EP 754
(explaining 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'' and reiterating that ``[UP] does not
charge the customer for bunching that is beyond the customer's
reasonable control'').
\38\ The Board recognizes that carriers may lack information
needed to take upstream bunching into account in their initial
invoices, but encourages them to do so when resolving bunching-
related disputes. The Board further encourages carriers to seek to
reconcile any costs incurred as a result of actions by the upstream
carrier with that carrier.
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Accessorial Charges
Some commenters request that the Board clarify the definition of
accessorial charges for purposes of the policy statement,\39\ and ask
that the policy statement include a more robust
[[Page 26871]]
discussion of how its general principles apply to accessorial
charges.\40\
---------------------------------------------------------------------------
\39\ See NAFCA Comments 4; OPPD Comments 3.
\40\ See NGFA Comments 6-7, 19; NAFCA Comments 5; OPPD Comments
3-4.
---------------------------------------------------------------------------
As stated in the April 2019 Notice, EP 754, slip op. at 2 n.1, and
the NPPS, EP 757, slip op. at 2 & n.3, accessorial charges are
generally understood to include anything other than line-haul or
demurrage charges. Upon further consideration, however, the Board notes
that many accessorial charges do not serve the same efficiency-
enhancing purpose as demurrage or implicate issues raised in the Docket
No. EP 754 Oversight Proceeding. \41\ The Board therefore clarifies
that, insofar as the purpose of an accessorial charge is to enhance the
efficient use of rail assets in the same way as demurrage, the
principles discussed in the policy statement would generally apply. The
Board further clarifies that references to accessorial charges in the
policy statement are intended to encompass only such types of
charges.\42\
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\41\ For example, some types of accessorial charges are imposed
for services such as weighing rail cars or requests for special
trains.
\42\ Such charges would include, by way of example, the types of
overlapping charges discussed below. The Board notes that, based on
the descriptions given by the rail carriers, many of the accessorial
charges identified in the May 1, 2019 Class I data submissions in
Docket No. EP 754 would appear to meet this criterion, including the
UP ``deadhead'' charge referenced by commenters in both that docket
and this proceeding.
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Overlapping Charges
Many participants in the Oversight Proceeding voiced concerns about
additional charges that had recently been instituted by two Class I
carriers for claimed customer-caused congestion or delay. See NPPS, EP
757, slip op. at 15 (describing comments submitted in Docket No. EP 754
relating to a so-called ``congestion'' charge imposed by NSR and a
``not prepared for service'' charge imposed by UP).
As noted in the NPPS, both rail carriers have since responded to
these specific concerns. See NPPS, EP 757, slip op. at 15 (noting
announcements that NSR would discontinue the ``congestion'' charge and
that UP had clarified and limited the application of the ``not prepared
for service'' charge). The Board was encouraged by these actions but
nevertheless found it important to provide forward-looking guidance
indicating that it would have concerns about such overlapping
demurrage-type charges. See id. Commenters generally either broadly
supported or did not address the Board's proposed guidance. ACC,
however, argues that the discussion in the NPPS did not fully capture
the concerns about overlapping charges, which may arise even when one
of the charges might be considered reasonable. (ACC Comments 3.) The
Board clarifies that, when adjudicating specific cases, it would have
significant concerns about the reasonableness of a tariff provision
that sought to impose an overlapping charge intended to serve the same
purpose as demurrage, or a charge arising from the assessment of
demurrage for congestion or delay that is not within the reasonable
control of the rail user to avoid.\43\ In an individual proceeding, the
Board remains open to evidence and argument that such a charge could in
some instance be reasonable, but no such information was presented in
Docket No. EP 754 or in this proceeding.
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\43\ The Board also notes that one commenter continues to
express concerns about the ``deadhead'' charge assessed by UP. (See
NGFA Reply 8-12.) Although not specifically addressed in the NPPS,
it appears these charges could similarly raise issues related to
overlapping charges or lack of control but, consistent with the
guidance in this policy statement, such charges would need to be
examined on a case-by-case basis.
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Invoicing and Dispute Resolution
In the Oversight Proceeding, the Board heard repeatedly that
demurrage charges are difficult, time-consuming, and costly to dispute
and that invoices are often inaccurate or lack information needed to
assess the validity of the charges. Commenters also stated that, under
some carriers' rules and practices, charges must be disputed within
limited time frames, while carriers are often slow to respond and
disputes are often denied. Some tariffs have imposed costs or charges
that serve as a deterrent to pursuing a dispute or a formal claim. See
NPPS, EP 757, slip op. at 16 (describing comments submitted in Docket
No. EP 754). Rail users reiterate these points in comments on the
proposed policy statement,\44\ and in Demurrage Billing Requirements,
Docket No. EP 759, where the Board has proposed to specify certain
information that Class I carriers must provide on or with demurrage
invoices to enable recipients to, among other things, more readily
verify the validity of the demurrage charges.\45\ Two commenters also
express concerns about untimely billing.\46\
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\44\ See, e.g., NACD Comments 4; OPPD Comments 6-7; AFPM
Comments 10-11; NGFA Comments 16-17; CRA Comments 8; NITL Comments
6-7.
\45\ Comments submitted by Class I carriers in Docket No. EP 759
generally state that a substantial amount of information is already
provided with the invoice or available through online platforms,
while ASLRRA claims that small carriers lack the resources needed to
provide detailed information to invoice recipients. Rail carriers
largely did not address, in either this docket or Docket No. EP 759,
other concerns voiced by rail users about the billing and dispute
resolution process.
\46\ See NCTA Comments 3-4 (reporting that shippers have
experienced delays up to six months in receiving demurrage bills and
suggesting that ``a three month or 90-day time frame limit would be
more appropriate''); FRCA Comments 5 (requesting that carriers be
required to make all invoice information available on a monthly
basis to avoid the undisclosed accumulation of potential charges).
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While the Board recognizes that some rail carriers may already
employ billing and dispute resolution rules and practices consistent
with the principles discussed in this policy statement, the Board
remains deeply troubled by these reports, which come from rail users in
a broad range of industries that are highly dependent on rail service.
If rail carrier rules and practices effectively preclude a rail user
from determining what occurred with respect to a particular demurrage
charge, 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, timeliness, and mutual
accountability are important factors in the establishment and
administration of reasonable rules and charges for demurrage.\47\ Rail
users 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.\48\
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\47\ These general principles are also important factors in
assessing the reasonableness of rules and practices pertaining to
the assessment of accessorial charges.
\48\ See International Paper Comments 4, May 7, 2019, Oversight
Proceeding, EP 754; accord Packaging Corporation of America Comments
4-5, 7-8, May 8, 2019, Oversight Proceeding, EP 754 (describing
process that is ``hugely time and resource consuming'').
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As indicated in the NPPS, 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).\49\ The Board also
expects
[[Page 26872]]
rail carriers to bill for demurrage only when the charges are accurate
and warranted, consistent with the purpose of demurrage, and to send
invoices on a regular and timely basis.\50\
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\49\ In response to comments received in Demurrage Billing
Requirements, Docket No. EP 759, the Board is serving today a
supplemental notice inviting parties to comment on certain
modifications and additions to the notice of proposed rulemaking's
proposal regarding information that Class I carriers would be
required to provide on or with demurrage invoices to promote
transparency and accountability.
\50\ The Board declines to discuss specific time periods but
notes that it would have significant concerns if (absent extenuating
circumstances) a carrier permitted demurrage or accessorial charges
to accrue over several months without invoicing the customer. The
Board also notes that, according to information contained in the
record in Docket No. EP 754 and various demurrage cases, carriers
often appear to bill on a monthly cycle.
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With respect to the dispute resolution process more broadly,
several commenters request elaboration or prescriptive action
pertaining to the Board's initial guidance that 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.\51\ The Board will not take
prescriptive action at this time. However, the Board emphasizes that
the time frames in question should be both reasonable and balanced. By
way of example, the Board would have serious concerns about a process
that imposed a short deadline to dispute charges or a process that
placed no meaningful restrictions on the time carriers can take to
respond. Similarly, the Board would have serious concerns about the
reasonableness of costs or charges that could deter shippers and
receivers from pursuing a disputed claim. Although the Board remains
open to argument and evidence in individual proceedings, no apparent
justification for imposing such costs or charges was provided in the
record in the Oversight Proceeding or in this proceeding.
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\51\ See, e.g., WCTL/SEC Comments 8 (asserting that carriers
should be required to ``respond meaningfully'' to disputed charges
within 30 days); NGFA Comments 17 (requesting greater specificity;
recommending a minimum of 30 days for rail user to request
additional information and dispute an erroneous charge); NAFCA
Comments 8-9 (requesting greater specificity and more definitive
Board position that carriers' dispute resolution processes should be
expedited); OPPD Comments 7 (requesting greater specificity).
---------------------------------------------------------------------------
Finally, some commenters call for the Board to establish more
streamlined formal dispute resolution procedures.\52\ The Board notes
that a variety of formal mechanisms already exist, both within and
outside the Board's purview, for aggrieved parties to resolve demurrage
and accessorial charge disputes in an efficient, cost-effective manner.
For example, three Class I carriers have agreed to arbitrate certain
demurrage disputes under the binding, voluntary program set forth in 49
CFR part 1108.\53\ In addition, BNSF was commended by one commenter for
including an arbitration provision in its tariffs, see NGFA Comments
28, May 8, 2019, Oversight Proceeding, EP 754, and UP reported that it
has also agreed to arbitrate contested demurrage and accessorial
charges using various external programs, see UP Response to Data
Request 3 (pdf page 8), May 1, 2019, Oversight Proceeding, EP 754
(listing NGFA's Rail Arbitration Rules and AAR's Interchange
Rules).\54\
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\52\ AFPM Comments 14; PRFBA Comments 1; NGFA Comments 3, 7-8,
21-22; see also NGFA Comments 17 (stating that tariffs should
clearly articulate the carrier's dispute resolution process,
including whether it is willing to arbitrate disputes and if so, in
which forum).
\53\ See UP Notice (June 21, 2013), CSXT Notice (June 28, 2019),
and CN Notice (July 1, 2019), Assessment of Mediation & Arbitration
Procedures, EP 699.
\54\ The Board also notes that, in addition to binding
arbitration, parties can make use of the informal mediation process
conducted by the Board's Rail Customer and Public Assistance (RCPA)
program or formal mediation under 49 CFR part 1109 to attempt to
negotiate an agreement resolving some or all of the issues involved
in a dispute.
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The Board commends rail carrier commitments to address disputes
about demurrage and accessorial rules and charges through arbitration
or other streamlined dispute resolution procedures and strongly
encourages all rail carriers to commit to doing so.\55\ Likewise, the
Board also strongly encourages rail users to make use of these
procedures to resolve disputes that they are unable to resolve
informally, and to keep the Board apprised of their endeavors to do
so.\56\ The Board hopes that such commitments by all stakeholders to
make use of these procedures will make it unnecessary for the Board to
revisit these issues. However, the Board remains open to doing so if
stakeholders encounter obstacles to the effective use of the mechanisms
already in place. The Board also expresses its commitment to resolve
disputes brought before it in an expeditious manner. See 49 U.S.C.
10101(2) (``it is the policy of the United States government . . . to
require fair and expeditious regulatory decisions when regulation is
required'').
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\55\ The Board also encourages carriers to specify their dispute
resolution procedures in their tariffs, consistent with their
broadly expressed commitment to transparency in the Docket No. EP
754 Oversight Proceeding.
\56\ The Board notes that its RCPA program (202-245-0238;
[email protected]) is available to assist with informal resolution of
disputes. In addition, rail users have several avenues available to
them to keep the Board apprised of demurrage-related problems that
they encounter, such as the Railroad-Shipper Transportation Advisory
Council, the National Grain Car Council, and the Rail Energy
Transportation Advisory Committee, all of which meet regularly to
provide guidance and advice to Board members on rail transportation
issues and areas of concern. The Board therefore finds it
unnecessary to establish an advisory committee or task force on
demurrage as proposed by some commenters. (See NGFA Comments 9-10;
CRA Comments 10-11.)
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Credits
A common concern voiced by rail users in the Oversight Proceeding
is that various limitations imposed by rail carriers diminish the
utility of credits as a means of offsetting debits that are incurred,
while carriers' charges (i.e., debits) do not ``expire'' until they are
paid. See NPPS, EP 757, slip op. at 18 (describing comments submitted
in Docket No. EP 754). In the NPPS, the Board provided preliminary
guidance as to how it would expect to evaluate credit rules and
practices when adjudicating specific cases. In response, rail users
reiterate the concerns about credits and broadly endorse the Board's
suggestion that its concerns would be allayed if rail users were
compensated for the value of unused credits at the end of each month
(rather than the credits expiring).\57\ Some rail users call for
further action or guidance from the Board.\58\ Some rail carriers state
that credits are intended to address specific problems associated with
carrier-caused delay, and that allowing customers to keep credits long
after that delay would undermine the purpose of the credit, encourage
inefficient use of rail assets, and create operational and accounting
complexities. (CSXT Comments 3-4; CP
[[Page 26873]]
Comments 12-14 (also claiming that ``allowing [rail users] to monetize
such credits penalizes the carrier'' and ``raises similar concerns as
banked credits'' about disincentivizing efficiency); UP Comments 5-6
n.7.) UP also states that its system is consistent with agency
precedent that favorably discusses monthly reconciliation of credits
and debits and the expiration of unused credits, and suggests that the
Board modify the policy statement to be consistent with that precedent.
(UP Comments 5 (citing Red Ash Coal Co. v. Central R.R. of N.J., 37
I.C.C. 460, 462 (1916).)
---------------------------------------------------------------------------
\57\ See, e.g., AF&PA Comments 7-8; TFI Comments 8-9; WCTL/SEC
Comments 7-8; ISRI Comments 7; NGFA Comments 18; ISRI Reply 7-8;
Joint Reply (ACC, CRA, TFI, NITL) 7-8; WCTL/SEC Reply 8.
\58\ See, e.g., AF&PA Comments 8 (arguing that the Board should
clarify that railroads must offer credits for delays beyond the
control of the shipper or receiver and should identify credits on
the invoice); Kinder Morgan Comments 10-11 (asserting that credits
that expire should be deemed presumptively unreasonable unless the
railroad provides appropriate compensation); AISI Comments 8 (same);
ACC Comments 2 (stating that the Board should adopt a policy calling
for credits to be issued for cars delivered more than a specific
time early or late from the original estimated time of arrival);
NGFA Comments 12-13 (stating that carriers should be required to
make tariffs reciprocal and provide remuneration if rail cars are
not placed in accordance with the trip plan within the same amount
of free time allowed by the carrier).
The Board acknowledges rail users' claims that providing such
reciprocity may also promote more efficient car supply, and that the
shift in rail car ownership from railroad-owned to private cars
documented in the record of the Oversight Proceeding, see NPPS, EP
757, slip op. at 9-10, raises issues from the perspective of private
car users. The Board remains open to argument and evidence in future
cases in which these issues may be raised.
---------------------------------------------------------------------------
The Board remains troubled by the lack of reciprocity between
demurrage credits and charges, particularly where the expiration date
of a credit, in effect, undermines the value of credits allocated for a
problem or delay that was not within the reasonable control of a rail
user. 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 application methods or expiration time frames. As
stated in the NPPS, the Board remains open to argument and evidence in
future cases that involve these issues. However, the Board disagrees
with the concerns raised by the rail carriers on this issue. The
primary concern in the NPPS was ``whether the shipper or receiver has
been afforded a reasonable opportunity to make use of the credits,''
and, contrary to the claims of some carriers, (see CSXT Comments 3; CP
Comments 13; UP Comments 6 n.7), the Board did not suggest that credits
should never expire. The Board's concerns about this issue would be
allayed if rail users were compensated for the value of unused credits
at the end of each month. Compensating rail users for the value of
unused credits at the end of each month could hold rail carriers more
accountable for service failures that undermine network efficiency and
make rail users less likely to incur future demurrage charges that
could be offset by the credits; \59\ it would also be consistent with
the conventional calendar month-end accounting practice discussed in
Red Ash.\60\
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\59\ Conversely, the Board notes that CP's claim that monetizing
credits would ``raise[] similar concerns as banked credits'' about
disincentivizing efficiency, (see CP Comments 14), is neither
explained nor persuasive as a matter of policy.
\60\ The Board also notes that the Red Ash case involved credits
issued under an average demurrage plan to incentivize faster loading
and unloading, not credits issued for service failures.
---------------------------------------------------------------------------
The Board reiterates its initial guidance and declines to take
further regulatory action related to credits at this time. The Board
intends to 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 rail
user 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 reiterates that it would also take into account the
purpose and function of the credits in question and that these concerns
would be allayed if rail users were compensated for the value of unused
credits at the end of each month (rather than the credits expiring).
The Board remains open to argument and evidence on all credit issues,
including those involving reciprocity.
Notice of Major Tariff Changes
Some commenters in the Oversight Proceeding indicated that carriers
provided insufficient notice of major changes to demurrage and
accessorial tariff provisions, particularly with respect to changes
involving reductions in free time. Among other things, rail users
commented that they were suddenly forced to try to redesign, on short
notice, operations and infrastructure that had been designed around a
48-hour free-time provision, and noted that rail carriers had many
months to adjust their operations to implement new operating plans but
often expected customers to comply with their new rules and practices
in 45 days. See NPPS, EP 757, slip op. at 19 (describing comments
submitted in Docket No. EP 754). Rail users reiterate these points in
this proceeding. Some comments call for prescriptive guidance that is
not appropriate for inclusion in a policy statement; \61\ others either
tend to support or do not address the principles discussed in the
NPPS.\62\ UP states that it will continue to provide customers with
``reasonable notice of accessorial and demurrage tariff changes but not
less than 60 days' notice.'' (UP Comments 3.)
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\61\ See NGFA Comments 19; CRA Comments 10; AFPM Comments 12-13.
\62\ See, e.g., AF&PA Comments 8 (stating that it ``strongly
agrees with the Board's views''); NITL Comments 8 (stating that it
``strongly supports the Board's proposed principles'').
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The Board reiterates the guidance it provided in the NPPS. As a
matter of commercial fairness, and consistent with the principles
discussed in this 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, in the Docket No. EP 754 Oversight Proceeding, rail
carriers themselves recognized that 20 days was not sufficient lead
time in many cases, and noted that they generally provided between 45
and 60 days, periods that other commenters found 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. See NPPS, EP 757, slip
op. at 19.
The Board continues to encourage 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.
Demurrage Billing to Shippers Instead of Warehousemen
In the 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). The NPPS addressed these issues
and noted that the Board had initiated a rulemaking on this subject.
See NPPS, EP 757, slip op. at 20-21. The Board refers stakeholders to
the decision being issued concurrently herewith in Demurrage Billing
Requirements, Docket No. 759, for further direction and guidance
pertaining to this issue.
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 may be unreasonable
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 generally should not be assessed in circumstances beyond
the shipper's or receiver's reasonable control. It follows, then, that
revenue from demurrage
[[Page 26874]]
charges should reflect reasonable financial incentives to advance the
overarching purpose of demurrage and that revenue is not itself the
purpose. Second, transparency, timeliness, 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. Just as this policy
statement recognizes that there may be different ways to implement and
administer reasonable rules and charges, carriers are encouraged to
recognize the importance of working with rail users to develop
reasonable solutions to unique situations those shippers and receivers
may face.
The Board expects to take all of the principles discussed in this
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.
Congressional Review Act. Pursuant to the Congressional Review Act,
5 U.S.C. 801-808, the Office of Information and Regulatory Affairs has
designated this policy statement as non-major, as defined by 5 U.S.C.
804(2).
Decided: April 30, 2020.
By the Board, Board Members Begeman, Oberman, and Fuchs.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2020-09682 Filed 5-5-20; 8:45 am]
BILLING CODE 4915-01-P