STB to rule on demurrage
The concept of railcar detention or “demurrage” charges is fairly simple to
grasp: A railroad makes its fleet of boxcars, tank cars, and hopper cars available to shippers, third parties, and consignees. Under contractual terms, the
equipment must be returned to the railroad by a specified date or the rail
gets compensated for the absence of revenue-producing assets.
Just who bears the burden for these charges—which have run well into
the six figures in a number of cases—will be determined by the Surface
Transportation Board (STB), the federal agency that oversees the railroad
industry.
On May 3, the board opened a rulemaking to invite comments on a proposal that any receiver of railcars that detains the equipment beyond a specified “free time” may be responsible for paying the demurrage charges, as
long as the receiver accepted the cars with actual notice of the demurrage
terms prior to the cars’ delivery.
In a statement, the agency said, “differences among recent court decisions
highlight the need for uniformity on demurrage liability.” The board said
its rulemaking will center on whether the receiver of the goods or the intermediary involved in their handling should be liable when an intermediary
detains railcars for too long.
“We expect this rule to bring clarity to what has become a murky legal
area,” said Daniel R. Elliott III, STB chairman, in the statement. “It should
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simplify the roles and responsibilities of all
parties in the chain of railcar movements,
realigning them with actual industry practices and enhancing efficiency of movements.” Comments must be filed no later
than June 25, the agency said.
The board’s involvement comes after two
appeals courts, the 3rd circuit in
Philadelphia and the 11th circuit in
Atlanta, issued conflicting decisions on
demurrage liability. The 3rd circuit ruled
that if the railroad names an intermediary
as a receiver in the carrier’s bill of lading—
the contract that governs the transaction—
and the third party does not dispute that
classification prior to physical delivery of
the equipment, the third party would then
be liable for the demurrage charges.
By contrast, the Atlanta appellate court
ruled that if the third party does not agree
prior to receiving the equipment to the language contained in the bill of lading, then it
is not responsible for detention claims and
payments.
The demurrage ball was bounced to the
STB after the U.S. Supreme Court in 2010
declined to sort out two conflicting appellate rulings and requested comment from
the solicitor general’s office. The solicitor
general, which argues cases before the high
court on behalf of the federal government,
advised that the STB, as the experts in rail
disputes, take up the matter.
IWLA WEIGHS IN
The matter has aroused the interest of the
International Warehouse Logistics
Association (IWLA), a Des Plaines, Ill.-based trade group. IWLA said it represents
between 40 and 50 members that operate
railroad sidings on behalf of consignees
and which have control of the cars and the
goods for a period of time.
IWLA contends that if the warehouseman advised the railroad prior to accepting
the equipment that it is acting as an agent
and not the owner of the cargo, it should
not be liable for demurrage charges. The
group has advised its members that they
should stipulate to the railroad in writing,
prior to taking delivery of any railcar, that
