On Thursday, June 30, ISRI submitted comments to the Surface Transportation Board (STB) in response to its April 1 notice seeking public comments on a petition filed July 26, 2021, by several industry groups. The petitioners argued Class I railroads should be charged for holding shipper-owned or leased cars beyond a 72-hour period. If the proposed rulemaking is adopted, shippers including recyclers would be able to charge railroads for any delays in returning their privately-owned railcars. The rulemaking would apply to exempt and non-exempt shippers.
A Quick Guide to Demurrage
Shippers have a specific period—known as “free time”—to load or unload materials after receiving a railcar. Railroads can charge shippers demurrage if the shippers hold onto railcars beyond that designated period.
According to the STB, demurrage compensates carriers for the expense incurred while cars were detained and “serves as a penalty for undue car detention to encourage the efficient use of rail cars in the rail network.”
Demurrage for Railroads
Holding railroads accountable for delays would incentivize their efficiency just as demurrage incentivizes recyclers, ISRI notes in its comments. “Developing rules for this purpose would properly recognize the need for reciprocal incentives that would promote a fluid rail network and provide for reciprocal benefits to private railcar owners and lessors that demurrage provides to railroads,” the association notes. “This is especially appropriate and necessary given that the majority of cars moving across the national network are private cars.”
The STB discussed the idea of “reciprocal demurrage” during 2019 hearings on railroads’ demurrage and detention practices. ISRI was among the groups that shared members’ concerns about these changes, as well documenting a consistent pattern of railroads holding onto shippers’ cars for too long. “During ISRI’s testimony, some of our members raised concerns regarding the length of time railroads held onto their cars,” Johnson says. “We were implying that maybe we should be able to charge the railroads when they don’t return our cars on time.”
A delay in receiving their cars would negatively affect shippers’ ability to deliver goods on time. For recyclers, that could lead to a ripple effect in the manufacturing supply chain. “Without the recyclers, you don’t have the materials for manufacturing,” Johnson explains. “The railroads are our partners, and we need them to be efficient; that’s why we believe in demurrage to make sure the system runs smoothly.”
If the railroads don’t operate efficiently recyclers can’t get their products to markets—so manufacturers wouldn’t have the steel, aluminum, copper, plastics, and other materials they need. “Recycled materials are found in everyday products and serve an important role in the new Infrastructure and Investment Jobs Act (IIJA),” Johnson adds. “All the new infrastructure projects simply can’t happen without recyclers.”
Johnson hopes the STB rulemaking is in favor of shippers because reciprocal demurrage will help balance the playing field. “Momentum is shifting to the shipper,” he says. “The STB is coming to realize that the railroads have run roughshod over their customers for years, and when they started charging demurrage a couple of years ago, I think that was the straw that broke the camel’s back. This will hopefully incentivize the railroads to improve their service.”