Demurrage is often a continuous touchy topic between railroads and shippers or receivers. I remember dealing with this topic when I started in the rail industry in grain marketing at a Class I railroad. As a person that set the actual rates for a number of grain based commodities I’d often get calls about accessorial charges that absolutely frustrated our shipping customers and caused havoc on us substantiating the data. As the marketer we’d have to decide on the application of the accessorial charge and try to substantiate why it was charged or why it shouldn’t be charged. Back then it was a very arbitrary process. Often times those with the best information won the battle and either got paid, reduced the charges or wrote them off entirely.
Today that tune has changed. The discrepancy of information generally became, as a Class I our information was correct, and as a shipper you paid the bill unless you had superior information. In these times many shippers still don’t have a good handle on their interchange dates and times as it pertains to demurrage.
There are a lot of information systems out there including voluminous Excel spreadsheets that are used to keep track of demurrage related events such as free days for a railcar, billable days, debits and credits, empty releases, loaded releases, etc. However, unless everyone is using the same data the information just becomes data that is subject to dispute.
It appears that the sharing of data is going to expand to the point that demurrage accounting shouldn’t be as much of a mystery. Recently the Surface Transportation Board (STB) ruled on the issue of demurrage. This ruling requires Class I railroads to include certain information on or with demurrage invoices and to provide machine-readable access to the minimum information. The ruling is effective October 6, 2021 and was published in the Federal Register on April 6, 2021.
Specifically, the Board proposed the inclusion of:
- The unique identifying information (e.g., reporting marks and number) of each car involved;
- The following shipment information, where applicable:
- The date the waybill was created;
- The status of each car as loaded or empty;
- The commodity being shipped (if the car is loaded);
- The identity of the shipper, consignee, and/or care-of party, as applicable; and
- The origin station and state of the shipment;
- The dates and times of:
- Actual placement of each car;
- Constructive placement of each car (if applicable and different from actual placement);
- Notification of constructive placement to the shipper, consignee, or third-party intermediary (if applicable); and
- Release of each car; and
- The number of credits and debits attributable to each car
As it has been in the past it will be in the future – those who have the best data available will win! If you have a void in your information system you’ve got time to fix it before the Final Rule is applicable in October.
Keep in mind this ruling applies to the use of railroad railcars on railroad owned or controlled track and private railcars on railroad owned or controlled track.
Another Way. As an adjunct there is an alternative to using railroad supplied railcars that may help you in managing your demurrage process that requires capital or operating dollars that may be less than the demurrage exposure. The ultimate situation is to have private controlled (owned or leased) railcars in your fleet and use them on private tracks that are owned or controlled by the you the shipper or receiver. Private cars on private tracks are not subject to demurrage.
If you want to do a comparison between what your demurrage exposure is to the leasing of railcars and leasing or building track give us a call and we’ll assist you in thinking through the process.