The Surface Transportation Board (STB), on Nov. 30 announced it would begin a rulemaking instituting demurrage charges for delays in returning private railcars. If the proposed rulemaking is adopted, shippers, including recyclers, would be able to charge railroads for any delays in returning their privately-owned railcars. The rulemaking would apply to exempt and non-exempt shippers.
On Aug. 30, ISRI submitted comments in support of a joint petition asking the STB to develop rules that would hold railroads accountable when they cause inefficiencies in their use of private cars, just as rail customers are held accountable for missing similar deadlines.
Shippers have a specific period—known as “free time”—to load or unload after they receive a railcar. If shippers hold railcars beyond that period, then railroads can charge them demurrage. According to the STB, demurrage compensates carriers for the expense incurred while the cars were detained and “serves as a penalty for undue car detention to encourage the efficient use of rail cars in the rail network.”
The petition used the same principle to argue that Class I railroads should be charged for holding shipper-owned or leased cars beyond a 72-hour period. Not only would this promote fairness, it aligns with the current landscape, as the majority of railcars in service are owned or leased by non-railroad entities. The shift began after the deregulation of the rail industry in 1980 and has only increased since precision schedule railroading (PSR) in 2019 as railroads continued to downsize their fleets.
“The railroad industry came to ISRI members and others and let them know the railroads wouldn’t be able to buy cars for them,” says Billy Johnson. ISRI’s chief lobbyist. “So, our members bought their own cars. And now they, along with shippers in other industries who went through the same experience, are getting tagged with big demurrage charges.”
The idea of “reciprocal demurrage” was discussed during the STB’s 2019 hearings on railroads’ demurrage and detention practices. ISRI was among groups that shared concerns about these changes, as well documenting a consistent pattern of railroads holding onto shippers’ cars for too long. “During ISRI’s testimony, some of our members raised concerns regarding the length of time railroads held onto their cars,” Johnson says. “We were implying that maybe we should be able to charge the railroads when they don’t return our cars on time.”
A delay in receiving their cars would negatively affect shippers’ ability to deliver goods on time. For recyclers, that could lead to a ripple effect in the manufacturing supply chain. “Without the recyclers, you don’t have the materials for manufacturing,” Johnson explains. “The railroads are our partners, and we need them to be efficient; that’s why we believe in demurrage to make sure the system runs smoothly. But if the railroads don’t operate efficiently then we can’t get our products to market. If that happens, manufacturers won’t have the steel, aluminum, copper, plastic, and other materials needed in everyday life and to build out the new infrastructure package. All the new infrastructure projects simply can’t happen without recyclers.”
Johnson believes the STB will move forward with the rulemaking in shippers’ favor because reciprocal demurrage will help create a more level playing field. “The whole momentum has shifted to the shipper now,” he says. “The STB has realized that the railroads have run roughshod over their customers for years, and when they started charging demurrage a couple of years ago, I think that was the straw that broke the camel’s back. If the railroads say they deliver good service, then they shouldn’t be worried. But there are problems with their service, so it’s time for them to either improve or prove that they do offer good service.”
Additional Resources
