The Surface Transportation Board (STB) plans to adopt a final rule on what information should be included in demurrage-related billing statements from the Class I railroads. The rule seeks to address some of the transparency concerns raised by rail shippers.
The rule, published in the Federal Register on Tuesday, will be effective on Oct. 6. It requires Class I carriers to “include certain minimum information on or with demurrage invoices and provide machine-readable access to the minimum information.”
A number of shippers had expressed concerns to STB roughly two years ago about the changes associated with the rail carriers’ demurrage charges, which are the fees that the freight railroads assess when rail cars are detained beyond a specified time to be loaded and unloaded.
The Class I railroads, a number of which began deploying precision scheduled railroading as a way to streamline operations and set more fixed schedules, countered that the charges were meant to encourage shippers to turn around assets more promptly.
The rule calls for a demurrage invoice to include the date and time that a Class I railroad received rail cars at an interchange, if applicable, so that rail users can identify where delays occurred on joint-line movements. This in turn would allow rail users to know when to adjust their own conduct to account for upstream transit variabilities and conduct further inquiries when necessary, STB said.
The invoice should include other information such as the date that the waybill was created, whether each car was loaded or empty, what commodity was shipped, and the dates and times for original estimated arrival, actual placement of each car and release of each car.
The rule also includes a machine-readable data requirement, enabling Class I rail carriers to provide demurrage information to rail users in this format. This data will be provided in an open format that can be easily processed by computer without human intervention while ensuring no semantic meaning is lost, STB said.
“The Board finds ample support in the record for adoption of minimum information requirements for demurrage invoices. The Board received many comments in this proceeding … from rail users asserting that carriers either do not provide sufficient information or do not present the information in a format that allows rail users to effectively verify demurrage charges,” STB said in its decision. “The Board is particularly concerned about rail users’ assertions that even with significant time and resources devoted to reviewing demurrage invoices, they find erroneous charges overly difficult to detect under carriers’ present invoicing practices.”
STB continued, “While it may be true that certain Class I carriers provide more information, or more accessible information, than others, the Board finds that the comments from a diverse array of shippers served by different carriers demonstrate a widespread issue that justifies the imposition of a uniform set of minimum requirements for all Class I carriers. … The Board intends for the final rule to reduce unnecessary litigation by providing rail users with information that enables them to readily assess the validity of demurrage charges and determine when to dispute or accept responsibility for them. Indeed, rail users describe demurrage litigation as a complicated and time-consuming process that they would prefer not to undertake.”
Tuesday’s decision (for the proceeding Ex Parte 759) follows a string of other decisions the board has made on demurrage. These decisions were also in response to a notice of proposed rulemaking from October 2019 that proposed changes to its existing demurrage regulations to address several issues regarding carriers’ demurrage billing practices.
In May 2020, STB made three decisions; one (EP 757) was the development of a policy statement clarifying the principles behind demurrage and accessorial charges; another (EP 759) was related to billing and clarifies that the party responsible for demurrage should be the one in the best position to expedite the loading or unloading of rail cars; and a third (EP 759) entailed a request for public comments on what should be included with Class I carriers’ demurrage invoices. Tuesday’s decision relates to this third decision.
In February 2020, the board adopted a final rule that clarified how it will regulate demurrage. The decision (EP 760) amended the regulations that govern the class exemptions for certain miscellaneous commodities, such as paper products and steel scrap, as well as for boxcar transportation so that demurrage for these categories will also be subject to STB’s regulation. The Board previously didn’t regulate demurrage for these categories.
“Today’s rule, which the Board members adopted unanimously, represents a significant step toward ensuring basic transparency in demurrage bills and thereby helps to eliminate a source of unnecessary conflict between railroads and their customers,” STB Chairman Marty Oberman said in a release. “In this regard, I anticipate that the rule will reduce the need for litigation or further regulatory intervention related to what should be fairly straightforward and routine commercial interactions. I further expect that the new rule will promote more productive dialogue between Class I railroads and rail users to either avoid unnecessary disputes over demurrage charges or hasten their resolution.”
STB amends thresholds defining freight rail classifications
In an unrelated announcement earlier this week, STB also adopted a final rule amending the revenue thresholds for classifying freight rail carriers.
The rule raises the Class I revenue threshold to $900 million, and it rounds out the current Class II/Class III threshold to $40.5 million. The rule will use 2019 dollars as a baseline.
The final rule was in response to a Feb. 14, 2020, petition filed by Montana Rail Link, in which it said that it was nearing the Class I threshold of operating revenues of $505 million. But Montana Rail Link has historically been a regional railroad with a smaller footprint and revenue base.
As a Class I railroad, companies are subject to additional regulatory requirements, including more extensive reporting of financial and economic information.
“This action represents a common-sense modification of our regulations to reflect the real-world distinction between the largest railroads in the freight rail network and the comparatively smaller regional and short line carriers, and the balance the agency needs to set with respect to reporting requirements that differ based on this distinction,” Oberman said.
The final rule for the proceeding EP 763 is effective on June 4.