STB Issues Final Rule in Demurrage Billing Requirements
Client Alert
On April 30, 2020, the Surface Transportation Board (Board) issued a final rule in Docket No. EP 759, Demurrage Billing Requirements, which requires that a Class I carrier directly bill the shipper, rather than a warehouse, for demurrage occurring at destination. This requirement is conditioned upon there (1) being an agreement to that effect between the warehouse and the shipper, and (2) the agreement being communicated to the railroad.
Many shipper and warehouse parties sought this change, while various railroads were opposed to the action. Generally, the shipper/warehouse parties wanted to again have the ability to determine between themselves which entity would be responsible for demurrage costs associated with delays in unloading rail equipment or returning empties or loads to the railroad.
The commenting railroads objected, largely on the ground that their contractual arrangements were with the shippers, not warehouses. Hence, according to the carriers, the proposed rule interfered with those contractual arrangements and could make the assessment and collection of demurrage far more difficult.
Those objections were brushed aside by the Board on the basis that the railroads should not have the power to prevent shippers and warehouses from assigning responsibility for these charges based on their own determination of which party would be better able to account for the movement of rail equipment into and out of warehouse facilities. Additionally, while the proposed rule would have required one of the parties to provide notice of this type of arrangement to the rail carrier, the final rule requires both parties to jointly notify the rail carrier. That eliminates one railroad concern about whether they could properly rely on those types of agreements. Further, to address concerns that a rail carrier may not know which party would be responsible, the final rule requires that the notice contain the responsible party’s contact information and that notice to a rail carrier could be provided in hard copy or electronic format.
The final rule also makes it clear that a rail carrier would not be required to determine which of the shipper or warehouse parties was actually responsible. Once notified that an agreement between them was in place, the railroad would bill demurrage based on the notice those parties provided, and enable the shipper and warehouse to sort out which party was actually responsible.
The final rule does not apply to Class II and Class III carriers; however, they are encouraged to comply to the extent they can. The final rule will go into effect on June 20, 2020.