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Shippers Want More Changes To Demurrage And Accessorial Charges

FreightWaves

Norfolk Southern (NYSE: NSC) and Union Pacific (NYSE: UNP) are modifying some of the ways they collect demurrage and accessorial charges for some commodities, but some shippers are questioning the modifications.

The changes are part of both companies' broader efforts to encourage shippers to turn railcars around faster and allow for a smoother transition to precision scheduled railroading, an operating model that streamlines operational schedules. But the shorter turnaround time-frames have resulted in hefty financial penalties for some shippers, prompting the Surface Transportation Board (STB) to host a two-day hearing on demurrage and accessorial charges in May. Shippers have also said they are penalized for the bunching of railcars even though they aren't at fault for the bunching, which is the delivery of too many railcars at once.

The Institute of Scrap Recycling Industries (ISRI) submitted a letter to the STB on July 12 to express its concerns on NSC's recent revisions to its tariffs governing demurrage and storage and accessorial charges. Most of the revisions will go into effect on September 1.

While ISRI appreciated some of the changes, the trade group said more modifications are needed to NSC's tariffs program.

"While several of the changes to the NSC tariffs would incrementally improve or eliminate certain egregious practices or charges, on the whole, they fall far short in addressing the serious concerns identified by ISRI members (and others), including the reasonableness of extremely limited credit days (i.e. zero days for private cars and 24 hours for railroad-owned cars), charges resulting from the bunching of cars, and invoicing and claims practices that create unfair obstacles to the efficient auditing and resolution of demurrage-related invoices and disputes," the ISRI letter said.

NSC announced on July 1 that it was modifying its tariffs to introduce service credit eligibility for empty, private railcars. It is also revising its service credit program for loaded cars, and it said customers will be able to schedule diversions in advance of a railcar's arrival. These changes would go into effect on September 1. NSC also said that effectively immediately, customers will be able to dispute demurrage and storage charges without charge, and the railroad said it was in the process of reformatting and reviewing its tariff on switching.

Meanwhile, UNP announced on July 2 that it would be updating its existing reservation system at certain intermodal terminals. The Intermodal Terminal Reservation System would replace the current Gate Reservation System at six West Coast intermodal terminals – East Coast Los Angeles, LATC, City of Industry, Lathrop, Brooklyn and TacSim. UNP will also roll out the technology at additional domestic terminals. 

UNP said the new reservation system, which will be implemented starting on August 6, will allow for better planning of drays and ingates. But a shipper told FreightWaves it is concerned about the new accessorial fees of $25 for reservations cancelled less than 24 hours prior to the gate cutoff and $50 for reservation no-shows.

UNP said in its notice that the new reservation system will match customer reservations more closely with train capacity and terminal fluidity. The railroad also said it would apply a $100 credit for each individual unit that ingates before cutoff and does not depart on its corresponding train. Implementation of the fees and the credit would not begin until September 3. 

UNP will release its second quarter results on July 18, while NSC will report its results on July 24.

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