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Shippers embrace STB’s demurrage billing rule

Tuesday’s rule complements May 2020 policy statement clarifying the use of demurrage

Rail shippers praised STB's final rule on demurrage billling. (Photo: Jim Allen/FreightWaves)

Shippers groups are praising the Surface Transportation Board’s (STB) effort to address issues with demurrage billing, saying the final rule brings transparency and accountability into the billing process.

Some also hope that this week’s final rule will be part of a longer-term study of how precision scheduled railroading (PSR) has affected the industry, since the number of demurrage billing disputes increased as the railroads implemented PSR. Demurrage charges are the fees that the freight railroads assess when rail cars are detained beyond a specified time to be loaded and unloaded.

The final rule, which was published in the Federal Register on Tuesday and will be effective on Oct. 6, calls for Class I carriers to “include certain minimum information on or with demurrage invoices and provide machine-readable access to the minimum information.” This information includes data such as the railcar number, the date the waybill was created, the status of the car,  the dates and times of the actual placement of each railcar, and the original time of arrival for a car.

The machine-readable data requirement means the data will be provided in an open format that can be easily processed by computer. That will make shippers’ auditing process more efficient, shippers said.

They say the new requirements will help standardize what information is available across carriers and provide transparency into what some have characterized as a sometimes opaque billing process. 

The information will also help shippers audit the demurrage bills they receive and make it easier and less costly to mount potential disputes, they said. 

The demurrage and related fees levied by the Class I railroads cost shippers almost $1.4 billion in 2020, according to the American Chemistry Council (ACC), which calculated the figure using STB data. 

The final rule is “going to provide much needed transparency in the process,” said Rob Benedict, vice president of midstream for the American Fuel and Petrochemical Manufacturers Association.

“The bills that have come to shippers in the past have sometimes been very opaque, and it’s very hard to discern if the charges are in fact reasonable. And so this rule provides a lot more clarity in the type of the specific information that is useful to shippers in reviewing those invoices and make sure they’re being charged appropriately,” said Jeff Sloan, ACC’s senior director of regulatory and technical affairs for transportation.

Said Freight Rail Customer Alliance (FRCA) spokesperson Ann Warner, “While these STB actions did not adopt all of the recommendations put forth by FRCA, such as penalty provisions for a Class I carrier that does not comply with the billing requirements, these new minimum requirements should make a positive difference for shippers and receivers moving forward.”

The shippers lauded the board for making this final rule, noting that the board approved the rule unanimously and that demurrage was a contentious issue between shippers and the railroads.

“My view is this is an important decision for rail users, and the STB should be commended for its leadership. This final rule shows they understand the serious challenges that rail users are having in trying to verify the accuracy of demurrage charges,” said Karyn Booth, who serves as legal counsel for the Institute of Scrap Recycling Industries

Indeed, shippers see this week’s rule as building upon the policy statement that STB published in May 2020, which clarified the principles behind demurrage, including how to assess whether a demurrage was reasonable or unreasonable. 

They also hope this week’s actions serve as a conduit to studying further how PSR has impacted shippers. PSR is an operational tool that almost all of the Class I railroads deployed to streamline operations. 

The Class I railroads have said applying demurrage fees served as a way to ensure railcars and assets turned around in an efficient fashion, but some have said the deployment sometimes lacked coordination with shippers.

“We still need to have a better understanding of how PSR is impacting shippers,” said ACC spokesperson Scott Jansen.

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Related links:

STB to require ‘certain minimum information’ on demurrage invoices

Surface Transportation Board issues decisions on demurrage and accessorial charges

Surface Transportation Board issues final rule on demurrage

Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.