WASHINGTON — The National Grain and Feed Association (N.G.F.A.), on behalf of the North American Millers’ Association and others, urged the Surface Transportation Board (S.T.B.) to develop policy principals or guidance to discipline Class 1 railroads’ demurrage and accessorial charges and practices at a two-day public hearing May 22-23.
“N.G.F.A. believes it is very clear that the S.T.B. needs to step in and take action to provide policy and guidance to restore balance to demurrage and accessorial practices, and it has the authority to do so as an outcome of this proceeding,” the N.G.F.A. said.
The N.G.F.A.’s testimony and previously submitted written statement to the S.T.B. highlighted numerous specific examples of demurrage and accessorial tariffs that are not commercially fair, practicable or reciprocal, and incur millions of dollars in charges to individual rail customers even amid efficient operations. The N.G.F.A. cited data submitted by the seven North American Class 1 railroads to the S.T.B. showing more than $1.43 billion generated from demurrage and accessorial charges from all rail customers in 2018, up 29% from 2017.
“At a minimum, to be reasonable, demurrage and accessorial tariff provisions should clearly establish the conditions for when a rail customer is not liable for such charges, either because the carrier is at fault or because of other circumstances beyond the rail customer’s control,” the N.G.F.A. said. “But true reciprocity and commercial fairness goes a step beyond waiver or non-payment of charges because the harm to rail customers extends beyond the amount of the charge ... including plant shutdowns or slowdowns, the need to use alternative transportation modes, the need to source commodities on an emergency basis and disruptions to their supply chains and customers.”
Demurrage typically refers to charges imposed by railroads that are intended to encourage the efficient use of cars and locomotives, usually ranging from $100 to $150 per car per day. Accessorial charges are not defined but generally refer to a wide range of rail services and activities not included in demurrage or the line-haul freight charge.
“We believe that in far too many cases, current demurrage and accessorial charges and practices are egregious and merely exemplify the market power of today’s Class 1 railroads, reflecting their ability to unilaterally impose one-sided terms and conditions on their customers,” N.G.F.A. president and chief executive officer Randy Gordon said in testimony before the S.T.B.
Some N.G.F.A. members were at a “tipping point” in their relationship with Class 1 rail carriers because of those practices and with the increased adoption of the precision scheduled railroad operating model, he said.
The N.G.F.A. said most of the complaints received from its members on the two issues were associated with the Union Pacific and Norfolk Southern Railways, but multiple complaints also had involved BNSF, Canadian Pacific, Canadian National and CSX railroads.
S.T.B. data from Class 1 railroads showed that revenue from penalties in 2018 increased by 75% for CSX, 44% for Canadian Pacific, 24.5% for BNSF, 15% for Union Pacific, 12% for Canadian National, 8% for Kansas City Southern and 0.2% for Norfolk Southern.
The N.G.F.A., among other things, also noted the absence of equitable reciprocal penalties that should apply to railroads if they are the cause for delays in the efficient use of rail assets.
The N.G.F.A.’s desired outcome of the hearing was for the S.T.B. to direct Class 1 railroads to “modify their tariffs and practices to comply with policy principles or guidance that ensure rail carrier tariffs implementing demurrage and accessorial charges are commercially fair, commercial practicable and reciprocal in nature, imposing comparable penalties on railroads in they fail to perform.” The S.T.B. also was urged to retain oversight and monitor changes in railroads’ tariff practices.