Shippers are pleased with the Surface Transportation Board’s (STB) three decisions aimed at clarifying how the freight railroads should apply demurrage and accessorial charges.
“It’s good to see the STB is continuing to move forward on important rail policy reforms. And it’s great to see some final action on things that have been out there for awhile,” sais Jeff Sloan, senior director of regulatory and technical affairs for the American Chemistry Council (ACC).
The board on May 1 issued three decisions on the fees and penalties that can come with delayed train movements. The Class I railroads, most of which have deployed some form of precision scheduled railroading, have said demurrage and accessorial charges encourage shippers to turn around rail assets in a timely fashion. But many shippers have said the practice can penalize shippers even if the delay lies with the railroad. Shippers have also said the practice can lack transparency and lead to inaccurate billing or a challenging dispute resolution process.
“The three decisions issued on Thursday [April 30] essentially followed the previously issued notices from October [2019] except for the invoice information which added a supplemental notice to require more information on invoices,” said Dan R. Elliott III, an attorney and former STB chairman. Elliott was referring to one of the three decisions, which is the issuance of a supplemental proposed rulemaking asking stakeholders to comment on what information should be included on or with Class I carriers’ demurrage invoices.
Continued Sloan, “it’s going to help ACC members and other rail customers from being subjected to unreasonable charges, particularly for things that are out of their control. The whole purpose for demurrage charges is to incentivize all parties to have the rail network moving as efficiently as possible, but when those charges are for things that shippers can’t control, they’re not incentives anymore. They’re just a way for railroads to make more money.”
The Institute of Scrap Recycling Industries (ISRI) thanked STB for taking heed of shippers’ concerns and implementing measures which the association says will save the scrap recycling industry from being penalized tens of millions of dollars annually while also staving off potential interruptions in the manufacturing supply chain.
“The STB’s rulings will allow for a better and more fair partnership between recyclers and railroads,” said Billy Johnson, chief lobbyist for ISRI. The group represents 1,300 companies in 20 chapters in the U.S. and more than 40 countries worldwide. “When issues do occur, there will be a fair way to resolve disputes. This ensures that valuable commodity-grade scrap materials will consistently be delivered to manufacturers for the use in new everyday products.”
Johnson told FreightWaves that ISRI plans to submit comments on the supplemental proposed rulemaking, saying that the group has raised questions about billing information and billing practices, transparency and billing disputes before with the Board.
ACC also expects to file comments on the supplementary proposed rulemaking especially since the supplemental notice includes some items that ACC agrees should be included in the minimum information requirements.
Meanwhile, another decision to issue a policy statement describing what principles the Board would consider in evaluating the reasonableness of demurrage and accessorial charges should help shippers, Elliott said.
“The policy statement gives guidance to shippers about various ways to challenge demurrage charges as unreasonable. Shippers can use the policy statement as a negotiating tool or in litigation as a defense to these charges,” Elliott said.
Sloan said the policy statement is a “positive development.”
“I think the Board members recognized that they needed to clarify their policy for when rail charges were or were not appropriate. Collectively, these are important steps to ensure demurrage charges doing what they’re legitimate purposes but not subjecting shippers to unreasonable charges,” Sloan said.