STB to Class I’s: Terminal Congestion, Demurrage Data, Please

Written by Marybeth Luczak, Executive Editor
STB Chairman Oberman’s information request to the Class I chief executives is “designed to help the Board better understand the magnitude of container congestion, the purpose and effect of storage fees, and whether receivers are afforded relief when they lack the ability to facilitate the release of their containers.”

STB Chairman Oberman’s information request to the Class I chief executives is “designed to help the Board better understand the magnitude of container congestion, the purpose and effect of storage fees, and whether receivers are afforded relief when they lack the ability to facilitate the release of their containers.”

Surface Transportation Board (STB) Chairman Martin J. Oberman has called on the CEOs of the seven North American Class I’s to provide information on the extent of congestion at key U.S. container terminals and on their policies and practices for assessing container demurrage fees, citing reports of “substantial charges being levied by the railroads for container storage at these terminals.”

According to the STB, the Chairman’s request is “designed to help the Board better understand the magnitude of container congestion, the purpose and effect of storage fees, and whether receivers are afforded relief when they lack the ability to facilitate the release of their containers.”

In identical letters (see below), dated July 22, Oberman wrote that “in recent months, the Board has received numerous reports related to the length of time that containers are being held in rail yards, and the sizeable storage fees (‘demurrage’) some customers have been required to pay in order to obtain release of containers bearing their shipments. These reports have come from shippers, both large and small, in addition to third-party logistics providers. I am particularly troubled about reports that Class I railroads are continuing to impose these charges even in circumstances when the receivers, as a practical matter, have no means to facilitate the release of their containers. Under these circumstances, demurrage fails to provide any constructive incentives, and perversely results in massive charges that can exceed the commercial value of the shipment.”

The move follows Oberman’s May 28 letter to each Class I railroad chief executive, requesting that they continue providing quarterly information about their revenues from demurrage and accessorial charges.

The STB’s top concerns right now, Oberman wrote in the July 22 letter “are helping to mitigate the congestion problems at intermodal yards caused by the unprecedented economic situation, improve network fluidity, and provide relief to shippers and receivers who are not in a position to reasonably avoid onerous and potentially business-threatening storage charges.”

Oberman noted that the shipper reports to STB “suggest that railroad billing practices for container storage charges are markedly out of step with prevailing Board policy [download below] on the imposition of demurrage charges” in that “‘charges generally should not be assessed in circumstances beyond the shipper’s or receiver’s reasonable control.’” He added that given the “magnitude and duration of congestion issues, many shippers have questioned whether the Board should lift the COFC/TOFC exemption for the limited purpose of subjecting container storage charges to Board demurrage policy and rules applicable to non-exempt rail traffic.”

However, Oberman underscored that “the Board has not initiated any actions.” Recognizing “the significance of any such potential Board action,” Oberman wrote that he is requesting Class I information “to facilitate careful consideration of this difficult situation and to assist the Board in determining whether any action may be warranted.”

Railway Age provides the July 22, 2021, letter—submitted to Katie Farmer, BNSF; Keith Creel, Canadian Pacific; JJ Ruest, CN; James Foote, CSX; Patrick Ottensmeyer, Kansas City Southern; James Squires, Norfolk Southern; and Lance Fritz, Union Pacific—in its entirety below. (Pete Buttigieg, Secretary, U.S. Department of Transportation; Daniel B. Maffei, Chairman, Federal Maritime Commission; Amit Bose, Deputy Administrator, Federal Railroad Administration; Sen. Maria Cantwell [D-Wash.], Chair, Senate Committee on Commerce, Science and Transportation; and Rep. Peter A. DeFazio [D-Ore.], Chair, House Committee on Transportation and Infrastructure all received copies.)

“I am writing to express my concerns about significant disruptions within the aspects of the international intermodal supply chain that involve the Class I freight rail network. I am particularly concerned about significant increases in container congestion at key U.S. terminals, and substantial charges being levied by the railroads for container storage at these terminals. 

“Specifically, in recent months, the Board has received numerous reports related to the length of time that containers are being held in rail yards, and the sizeable storage fees (“demurrage”) some customers have been required to pay in order to obtain release of containers bearing their shipments. These reports have come from shippers, both large and small, in addition to third-party logistics providers. I am particularly troubled about reports that Class I railroads are continuing to impose these charges even in circumstances when the receivers, as a practical matter, have no means to facilitate the release of their containers. Under these circumstances, demurrage fails to provide any constructive incentives, and perversely results in massive charges that can exceed the commercial value of the shipment. 

“In order to better understand the magnitude of the current container congestion and the framework for the associated demurrage fees, I am seeking information from each of the Class I railroads regarding policies and practices with respect to the assessment of demurrage fees on intermodal containers.

“At your earliest opportunity, please provide the following specific detailed information for your top ten intermodal terminals in the United States by volume: (1) the number of ‘free days’ allowed for container storage before demurrage fees begin to accrue; (2) the daily fee schedule after any free days expire; (3) any increase or decrease in such demurrage fees and free time since January 2021; (4) any fee ‘caps’ that are currently in place and how long those caps are expected to remain in place; (5) whether receivers are being permitted to provide their own chassis to retrieve their containers; (6) a description of efforts made, if any, to reduce storage charges where delay is not within the control of the shipper or receiver; and (7) the average daily volume of stored containers, broken out by month from July 2020 to the most recent month for which data is available. Of particular importance, please describe your policies and practices of assessing storage charges, including the circumstances under which relief can be granted or charges can be excused, and whether charges are imposed even when the receiver is powerless to avoid a delay in retrieving a container. 

“The reports described above suggest that railroad billing practices for container storage charges are markedly out of step with prevailing Board policy on the imposition of demurrage charges. Policy Statement on Demurrage & Accessorial Rules & Charges, EP 757, slip op. at 21 (STB served Apr. 30, 2020) (“charges generally should not be assessed in circumstances beyond the shipper’s or receiver’s reasonable control”). Given the magnitude and duration of congestion issues, many shippers have questioned whether the Board should lift the COFC/TOFC exemption for the limited purpose of subjecting container storage charges to Board demurrage policy and rules applicable to non-exempt rail traffic. 

“It is important to underscore that, at this time, the Board has not initiated any actions with respect to the existing intermodal exemption. Because I recognize the significance of any such potential Board action, I am requesting the above information to facilitate careful consideration of this difficult situation and to assist the Board in determining whether any action may be warranted. Right now, the Board’s principal concerns are helping to mitigate the congestion problems at intermodal yards caused by the unprecedented economic situation, improve network fluidity, and provide relief to shippers and receivers who are not in a position to reasonably avoid onerous and potentially business-threatening storage charges.

“I would appreciate your prompt attention to supplying the requested information, and any other information you believe would be helpful in understanding these circumstances. Thank you in advance for your cooperation during this challenging time. If you or your staff have any questions, please contact me or Mr. Michael Higgins, Acting Director of the Board’s Office of Public Assistance, Governmental Affairs, and Compliance, at 202-245-0238.”

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