[Federal Register Volume 77, Number 91 (Thursday, May 10, 2012)]
[Proposed Rules]
[Pages 27384-27386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11189]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Part 1333

[Docket No. EP 707]


Demurrage Liability

AGENCY: Surface Transportation Board (Board or STB), DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: Through this notice of proposed rulemaking (NPRM), the Board 
is proposing a rule establishing that a person receiving rail cars from 
a rail carrier for loading or unloading who detains the cars beyond the 
``free time'' provided in the carrier's governing tariff will generally 
be responsible for paying demurrage, if that person has actual notice, 
prior to rail car placement, of the demurrage tariff establishing such 
liability. The Board also clarifies that it intends to construe U.S. 
Code provisions titled ``Liability for payment of rates,'' as applying 
to carriers' line-haul rates, but not to carriers' charges for 
demurrage.

DATES: Comments are due by June 25, 2012. Reply comments are due by 
July 23, 2012.

ADDRESSES: Comments and replies may be submitted either via the Board's 
e-filing format or in the traditional paper format. Any person using e-
filing should attach a document and otherwise comply with the 
instructions at the E-FILING link on the Board's Web site, at http://www.stb.dot.gov. Any person submitting a filing in the traditional 
paper format should send an original and 10 copies to: Surface 
Transportation Board, Attn: EP 707, 395 E Street SW., Washington, DC 
20423-0001. Copies of written comments and replies will be available 
for viewing and self-copying at the Board's Public Docket Room, Room 
131, and will be posted to the Board's Web site.

FOR FURTHER INFORMATION CONTACT: Craig Keats at (202) 245-0260. 
Assistance for the hearing impaired is available through the Federal 
Information Relay Service (FIRS) at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Demurrage is a charge for detaining 
railroad-owned rail freight cars for loading or unloading beyond a 
specified amount of time (called ``free time''). Demurrage has 
compensatory and penalty functions. It compensates rail carriers for 
the use of railroad equipment, and by penalizing those who detain rail 
cars for too long, it encourages prompt return of rail cars into the 
transportation network. Because of these dual roles, demurrage is 
statutorily recognized as an important tool in ensuring the smooth 
functioning of the rail system. See 49 U.S.C. 10746.
    Historical Regulation of Demurrage. Since the earliest days of 
railroad regulation, parties have had disputes about who, if anyone, 
should have to pay demurrage. Certain principles for allocating the 
liability of intermediaries for holding carrier equipment became 
established over time and were reflected in agency and court 
decisions.\1\ After reviewing recent court decisions, however, we 
believe that it is appropriate to revisit the matter and to consider 
whether the Board's policies should be revised.
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    \1\ See Responsibility for Payment of Detention Charges, E. 
Cent. States (Eastern Central), 335 I.C.C. 537, 541 (1969) 
(involving liability of intermediaries for detention, the motor 
carrier equivalent of demurrage), aff'd, Middle Atl. Conference v. 
United States (Middle Atlantic), 353 F. Supp. 1109, 1114-15 (D.D.C. 
1972) (3-judge court sitting under the then-effective provisions of 
28 U.S.C. 2321 et seq.).
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    Demurrage collection cases may only be brought in court, and thus 
much of the law governing the imposition of demurrage liability has 
been established judicially. However, the Interstate Commerce Act, as 
amended by the ICC Termination Act of 1995, Public Law 104-88, 109 
Stat. 803 (1995) (ICCTA), also provides that demurrage is subject to 
Board regulation. Specifically, 49 U.S.C. 10702 requires railroads to 
establish reasonable rates and transportation-related rules and 
practices, and 49 U.S.C. 10746 requires railroads to compute demurrage 
and to establish demurrage-related rules ``in a way that fulfills the 
national needs related to'' freight car use and distribution and that 
will promote an adequate car supply. In the simplest case, demurrage is 
assessed on the ``consignor'' (the shipper of the goods) for delays in 
loading cars at origin and on the ``consignee'' (the receiver of the 
goods) for delays in unloading cars and returning them to the carrier 
at destination.\2\
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    \2\ While the Interstate Commerce Act does not define 
``consignor'' or ``consignee,'' the Federal Bills of Lading Act uses 
the term ``consignor'' to refer to ``the person named in a bill of 
lading as the person from whom the goods have been received for 
shipment,'' 49 U.S.C. 80101(2), and the term ``consignee'' to refer 
to ``the person named in a bill of lading as the person to whom the 
goods are to be delivered,'' 49 U.S.C. 80101(1).
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    This agency has long been involved in resolving demurrage disputes, 
both as an original matter and on referral from courts hearing railroad 
complaints seeking recovery of charges.\3\ The disputes between 
railroads and parties that originate or terminate rail cars can involve 
relatively straightforward application of the carrier's tariffs to the 
circumstances of the case. Complications can arise, however, in cases 
involving warehousemen or other ``third-party intermediaries'' who 
handle the goods but have no property interest in them. A consignee 
that owned the property being shipped had common-law liability (for 
both freight charges and demurrage) when it accepted cars for 
delivery,\4\ but warehousemen typically are not owners of the property 
being shipped (even though, by accepting the cars, they are in a 
position to facilitate or impede car supply). Under the legal 
principles that developed, in order for a warehouseman to be subject to 
demurrage or detention charges, there had to be some other basis for 
liability beyond the mere fact of handling the goods shipped.\5\
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    \3\ E.g., Eastern Central; Springfield Terminal Ry.--Pet. for 
Declaratory Order--Reasonableness of Demurrage Charges, NOR 42108 
(STB served June 16, 2010); Capitol Materials Inc. --Pet. for 
Declaratory Order--Certain Rates & Practices of Norfolk S. Ry., NOR 
42068 (STB served Apr. 12, 2004); R. Franklin Unger, Trustee of Ind. 
Hi-Rail Corp.--Pet. for Declaratory Order--Assessment & Collection 
of Demurrage & Switching Charges, NOR 42030 (STB served June 14, 
2000); South-Tec Dev. Warehouse, Inc.--Pet. for Declaratory Order--
Ill. Cent. R.R., NOR 42050 (STB served Nov. 15, 2000); Ametek, 
Inc.--Pet. for Declaratory Order, NOR 40663, et al. (ICC served Jan. 
29, 1993), aff'd, Union Pac. R.R. v. Ametek, Inc., 104 F.3d 558 (3d 
Cir. 1997).
    \4\ Pittsburgh, Cincinnati, Chicago & St. Louis Ry. v. Fink, 250 
U.S. 577, 581 (1919); Norfolk S. Ry. v. Groves (Groves), 586 F.3d 
1273, 1278 (11th Cir. 2009), cert. denied, 131 S.Ct. 993 (2011).
    \5\ See, e.g., Smokeless Fuel Co. v. Norfolk & W. Ry., 85 I.C.C. 
395, 401 (1923).
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    What became the most important factor under judicial and agency 
precedent was whether the warehouseman was named the consignee on the 
bill of lading.\6\ Thus, our predecessor, the Interstate Commerce 
Commission (ICC), held that a tariff \7\ may not lawfully impose such

[[Page 27385]]

demurrage charges on a warehouseman who is not the owner of the 
freight, who is not named as a consignor or consignee in the bill of 
lading, and who is not otherwise party to the contract of 
transportation.\8\
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    \6\ A bill of lading is the transportation contract between the 
shipper and the carrier for moving goods between two points. Its 
terms and conditions bind the shipper, the originating carrier, and 
all connecting carriers.
    \7\ Historically, carriers gave public notice of their rates and 
general service terms in tariffs that were publicly filed with the 
ICC and that had the force of law under the so-called ``filed rate 
doctrine.'' See Maislin Indus., Inc. v. Primary Steel, Inc., 497 
U.S. 116, 127 (1990). The requirement that rail carriers file rate 
tariffs at the agency was repealed in ICCTA. Nevertheless, although 
tariffs are no longer filed with the agency, rail carriers may still 
use them to establish and announce the terms of the services they 
hold out.
    \8\ Eastern Central, 335 I.C.C. at 541.
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    Recently, a new question arose: who should bear liability when an 
intermediary that accepts rail cars and detains them too long is named 
as consignee in the bill of lading, but asserts either that it did not 
know of its consignee status or that it affirmatively asked the shipper 
not to name it consignee? On that issue, the courts of appeals have 
split.\9\ The legal debate and resulting conflicting opinions prompted 
the Board to reexamine its existing policy and to assist in providing 
clarification for the industry.
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    \9\ Compare Groves, supra, with CSX Transp. Co. v. Novolog Bucks 
Cnty. (Novolog), 502 F.3d 247 (3d Cir. 2007).
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    Conflict Among the Circuits. In Groves, the United States Court of 
Appeals for the Eleventh Circuit looked to contract principles and 
concluded that a party shown as a consignee in the bill of lading is 
not in fact a consignee, and hence is not liable for demurrage charges, 
unless it expressly agrees to the terms of the bill of lading 
describing it as a consignee, ``or at the least, [is] given notice that 
it is being named as a consignee in order that it might object or act 
accordingly.'' \10\ On virtually identical facts, the United States 
Court of Appeals for the Third Circuit held in Novolog that 
``recipients of freight who are named as consignees on bills of lading 
are subject to liability for demurrage charges arising after they 
accept delivery unless they act as agents of another [party] and comply 
with the notification procedures in [the] consignee-agent liability 
provision [of] 49 U.S.C. 10743(a)(1).'' \11\ The statutory notice 
provision of section 10743(a)(1), which is also referred to in Groves, 
states, among other things, that a person receiving property as an 
agent for the shipper or consignee will not be liable for ``additional 
rates'' that may be found due beyond those billed at the time of 
delivery, if the receiver notifies the carrier in writing that it is 
not the owner of the property, but rather is only an agent for the 
owner.\12\
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    \10\ 586 F.3d at 1282. Relying in part on Illinois Central 
Railroad v. South Tec Development Warehouse, Inc. (South Tec), 337 
F.3d 813 (7th Cir. 2003), which did not directly decide the issue 
but which indicated a predilection toward such a result, the court 
in Groves found the warehouseman not to be a consignee and thus not 
liable for demurrage even though the warehouse accepted the freight 
cars as part of its business and held them beyond the period of free 
time.
    \11\ 502 F.3d at 254. The court in Novolog cited Middle 
Atlantic, the Uniform Commercial Code, and the Federal Bills of 
Lading Act to find that a warehouseman (or, in that case, a 
transloader) could be a ``legal consignee,'' even if it was not the 
``ultimate consignee.'' 502 F.3d at 258-59. The court found that a 
contrary result, such as the one suggested in South Tec, would 
frustrate what it viewed as the plain intent of section 10743: ``to 
facilitate the effective assessment of charges by establishing clear 
rules for liability'' by permitting railroads to rely on bills of 
lading and ``avoid wasteful attempts to recover [charges] from the 
wrong parties.'' Id. The court found warehouseman liability 
equitable because the warehouseman--which otherwise has no incentive 
to agree to liability--can avoid liability by identifying itself as 
an agent, whereas the rail carrier has no option but to deliver to 
the named consignee. Id. at 259.
    \12\ 49 U.S.C. 10743(a)(1) states in full:
    Liability for payment of rates for transportation for a shipment 
of property by a shipper or consignor to a consignee other than the 
shipper or consignor, is determined under this subsection when the 
transportation is provided by a rail carrier under this part. When 
the shipper or consignor instructs the rail carrier transporting the 
property to deliver it to a consignee that is an agent only, not 
having beneficial title to the property, the consignee is liable for 
rates billed at the time of delivery for which the consignee is 
otherwise liable, but not for additional rates that may be found to 
be due after delivery if the consignee gives written notice to the 
delivering carrier before delivery of the property--(A) of the 
agency and absence of beneficial title; and (B) of the name and 
address of the beneficial owner of the property if it is reconsigned 
or diverted to a place other than the place specified in the 
original bill of lading.
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    After reviewing these recent court decisions, the Board determined 
that it needed to revisit its demurrage precedent to consider whether 
the agency's policies accounted for current statutory provisions and 
commercial practices. Thus, on December 6, 2010, the Board published an 
Advance Notice of Proposed Rulemaking (ANPR) \13\ that raised a series 
of specific questions about how the demurrage process works and sought 
public input on whether the Board should issue a new rule that does not 
follow the reasoning of Novolog or Groves, but that instead would 
provide that demurrage charges may apply when cars are accepted by a 
party with notice of the carrier's demurrage charges. Shortly 
thereafter, the United States Supreme Court denied a request that it 
review the split in the circuits. Norfolk S. Ry. v. Groves, 131 S.Ct. 
993 (2011) (mem.).
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    \13\ Demurrage Liability, EP 707 (STB served Dec. 6, 2010), 75 
FR 76,496 (Dec. 10, 2010).
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    Additional information is contained in the Board's decision. The 
full decision is available on the Board's Web site at www.stb.dot.gov.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.
    It is ordered:
    1. Comments are due by June 25, 2012; replies are due by July 23, 
2012.
    2. A copy of this decision will be served upon the Chief Counsel 
for Advocacy, Office of Advocacy, U.S. Small Business Administration.
    3. This decision is effective on its service date.

List of Subjects in 49 CFR Part 1333

    Demurrage, Railroads.

    Decided: May 3, 2012.

    By the Board, Chairman Elliott, Vice Chairman Mulvey, and 
Commissioner Begeman.
Jeffrey Herzig,
Clearance Clerk.

    For the reasons set forth in the preamble, the Surface 
Transportation Board proposes to amend title 49, chapter X, subchapter 
D, of the Code of Federal Regulations by adding part 1333 to read as 
follows:

PART 1333--DEMURRAGE LIABILITY

Sec.
1333.1 Demurrage defined.
1333.2 Who can charge demurrage.
1333.3 Who is subject to demurrage.

    Authority: 49 U.S.C. 721.


Sec.  1333.1  Demurrage defined.

    Demurrage is a charge that both compensates rail carriers for the 
expenses incurred when rail cars are detained beyond a specified period 
of time (i.e., free time) for loading or unloading, and serves as a 
penalty for undue car detention to encourage the efficient use of rail 
cars in the rail network.


Sec.  1333.2  Who may charge demurrage.

    Demurrage shall be assessed by the serving rail carrier, i.e., the 
rail carrier providing rail cars to a shipper at an origin point or 
delivering them to a receiver at an end-point or intermediate 
destination. A serving carrier and its customers (including those to 
which it delivers rail cars at origin or destination) may enter into 
contracts pertaining to demurrage, but in the absence of such 
contracts, demurrage will be governed by the demurrage tariff of the 
serving carrier.


Sec.  1333.3  Who is subject to demurrage.

    Any person receiving rail cars from a rail carrier for loading or 
unloading who detains the cars beyond the period of free time set forth 
in the governing demurrage tariff may be held liable for demurrage if 
the carrier has provided that person with actual notice of the 
demurrage tariff providing for such liability prior to the placement of 
the rail cars. However, if that person is acting as an agent for 
another party, that person is not liable for demurrage if that

[[Page 27386]]

person has provided the rail carrier with actual notice of the agency 
status and the identity of the principal.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix

    The additional information below is included to assist those who 
may wish to submit comments pertinent to review under the Paperwork 
Reduction Act:

Description of Collection

    Title: New Submissions Under the Board's Demurrage Liability 
Regulations.
    OMB Control Number: 2140-XXXX.
    STB Form Number: None.
    Type of Review: New collection.
    Respondents: Railroads that charge demurrage pursuant to a 
tariff, rather than a contract, and parties that receive rail cars 
as shipper agents and wish to avoid liability for demurrage under a 
tariff.
    Number of Respondents: Approximately 650 railroads and 
approximately 75 receivers acting as shipper agents.
    Estimated Time per Response: No more than 8 hours for each 
railroad; no more than one hour for each shipper agent.
    Frequency: Railroads charging the demurrage under a tariff, 
rather than a contract, would have to provide notice to receivers of 
rail cars of the demurrage that may accrue with each delivery of 
cars. Similarly, persons receiving rail cars pursuant to a tariff, 
rather than a contract, would have to inform the servicing rail 
carrier whenever they acted solely in agency capacity in order to 
avoid potential demurrage on those cars.
    Total Burden Hours (annually): No more than 2,208 (6,625 hours 
averaged over 3 years, based on the assumption that it will take 
each of 650 railroads 8 hours to provide initial notice to its 
customers (for a total of 5,200 hours) and that it will take each of 
an estimated 75 warehouses that might consider asserting agency 
status 1 hour to provide notice to each an average of 19 customers 
(for a total of 1,425 hours)). We anticipate that the notices 
required under the proposed rule will consist of electronic 
communications between parties that are already in communication 
regarding the transaction and that the burden will be minimal after 
the first year as the customer population for railroads tends to be 
rather stable and only new customers would have to be notified.
    Total ``Non-Hour Burden'' Costs: None identified.
    Needs and Uses: The new information collection, which involves 
notification requirements, is necessary to ensure that parties to 
rail transactions provide and/or receive notice regarding any 
potential liability for demurrage charges.
    Retention Period: Under the proposed rule, these records will 
not be collected or retained by the agency, nor does the proposed 
rule impose a retention requirement on the parties to the 
transaction.

[FR Doc. 2012-11189 Filed 5-9-12; 8:45 am]
BILLING CODE 4915-01-P