[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Notices]
[Pages 54717-54726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22200]


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SURFACE TRANSPORTATION BOARD

[Docket No. EP 757]


Policy Statement on Demurrage and Accessorial Rules and Charges

AGENCY: Surface Transportation Board.

ACTION: Notice of Proposed Statement of Board Policy.

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SUMMARY: The Surface Transportation Board (STB or Board) is issuing 
this proposed policy statement to provide the public with information 
on principles the Board would consider in evaluating the reasonableness 
of demurrage and accessorial rules and charges. The Board seeks public 
comment on this proposed policy statement, and may revise it, as 
appropriate, after consideration of the comments received.

DATES: Comments on this proposed policy statement are due by November 
6, 2019. Reply comments are due by December 6, 2019.

ADDRESSES: Comments and replies may be filed with the Board either via 
e-filing or in writing addressed to: Surface Transportation Board, 
Attn: Docket No. EP 757, 395 E Street SW, Washington, DC 20423-0001. 
Comments and replies will be posted to the Board's website at 
www.stb.gov.

FOR FURTHER INFORMATION CONTACT: Sarah Fancher at (202) 245-0355. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Demurrage is subject to Board regulation 
under 49 U.S.C. 10702, which requires railroads to establish reasonable 
rates and transportation-related rules and practices, and under 49 
U.S.C. 10746, which requires railroads to compute demurrage charges, 
and establish rules related to those charges, in a way that will 
fulfill national needs related to freight car use and distribution and 
maintenance of an adequate car supply.\1\ Demurrage is a charge that 
both compensates rail carriers for the expense incurred when rail cars 
are detained beyond a specified period of time (i.e., ``free time'') 
for loading and unloading and serves as a penalty for undue car 
detention to encourage the efficient use of rail cars in the rail 
network. See 49 CFR 1333.1; see also 49 CFR pt. 1201, category 106.\2\ 
Accessorial charges are not specifically defined by statute or 
regulation but are generally understood to include charges other than 
line-haul and demurrage charges. See Revisions to Arbitration 
Procedures, EP 730, slip op. at 7-8 (STB served Sept. 30, 2016).\3\
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    \1\ The Board notes its authority to regulate demurrage 
includes, among other things, transportation under the exemptions 
set forth in 49 CFR 1039.11 (miscellaneous commodities exemptions) 
and Sec.  1039.14 (boxcar transportation exemptions). See Savannah 
Port Terminal R.R.--Pet. for Declaratory Order--Certain Rates & 
Practices as Applied to Capital Cargo, Inc., FD 34920, slip op. at 
7-8 (STB served May 30, 2008) (rejecting argument that the Board 
could not address demurrage dispute because of boxcar and certain 
commodity exemptions). In Exclusion of Demurrage Regulation from 
Certain Class Exemptions, Docket No. EP 760, served concurrently 
with this decision, the Board is proposing to revise 49 CFR 1039.10 
to make the exemption for the transportation of agricultural 
commodities (except grain, soybeans, and sunflower seeds, which are 
already subject to the Board's regulation) consistent with those 
exemptions.
    \2\ In Demurrage Liability (Demurrage Liability Final Rule), EP 
707, slip op. at 15-16 (STB served Apr. 11, 2014), the Board 
clarified that private car storage is included in the definition of 
demurrage for purposes of the demurrage rules established in that 
decision. The Board uses the same definition for purposes of this 
policy statement.
    \3\ As used in this policy statement, the term ``accessorial 
charges'' includes charges for diverting a shipment in transit, 
ordering a railcar but releasing it empty, weighing a railcar, 
tendering one railroad's car to another railroad without a line-haul 
move, special train or additional switching services, or releasing a 
railcar with incomplete or incorrect shipping instructions. Issues 
relating to accessorial charges may arise in proceedings before the 
Board in a variety of contexts. See, e.g., Cent. Valley Ag Grinding, 
Inc. v. Modesto & Empire Traction Co., NOR 42159 (STB served July 
25, 2018) (involving a challenge to accessorial charges).
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    This proposed policy statement provides information with respect to 
certain principles the Board would consider in evaluating the 
reasonableness of demurrage and accessorial rules and charges. It 
arises, in part, as a result of the testimony and comments submitted in 
Oversight Hearing on Demurrage & Accessorial Charges, Docket No. EP 
754.\4\ The Board commenced that docket by notice served on April 8, 
2019, following concerns expressed by users of the freight rail network 
(rail users) \5\ and other stakeholders about recent changes to 
demurrage and accessorial tariffs administered by Class I carriers, 
which the Board was actively monitoring.\6\
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    \4\ Unless otherwise noted, all citations to comments are to 
material docketed in Oversight Hearing on Demurrage & Accessorial 
Charges, Docket EP 754.
    \5\ As used in this policy statement, the term ``rail users'' 
broadly means any person that receives rail cars for loading or 
unloading, regardless of whether that person has a property interest 
in the freight being transported. This policy statement uses the 
terms ``warehousemen'' or ``third-party intermediaries'' to refer to 
these entities with no property interest in the freight.
    \6\ In November 2018, the Board sent letters to two Class I 
carriers, requesting that they examine, from the perspective of 
reciprocity and commercial fairness, recently announced changes to 
their policies and practices made in connection with new operating 
plans they were implementing. After receiving responses from those 
two carriers, the Board requested each Class I carrier to report its 
revenues from demurrage and accessorial charges for each quarter of 
2018, and, on a going-forward basis, for each quarter of 2019. 
Because accessorial charges are not uniform among rail carriers, 
each Class I carrier was asked to identify the specific accessorial 
items that account for its reported revenues.
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    Specifically, in Oversight Hearing on Demurrage & Accessorial 
Charges (April 2019 Notice), EP 754, slip op. at 2 (STB served Apr. 8, 
2019), the Board announced a May 22, 2019 public hearing, which was 
later extended to

[[Page 54718]]

include a second day; \7\ directed Class I carriers to appear at the 
hearing; and invited shippers, receivers, third-party logistics 
providers, and other interested parties to participate. The notice also 
directed Class I carriers to provide specific information on their 
demurrage and accessorial rules and charges and required all hearing 
participants to submit written testimony, both in advance of the 
hearing. April 2019 Notice, EP 754, slip op. at 2-4. Comments were also 
accepted from interested persons who would not be appearing at the 
hearing.
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    \7\ Oversight Hearing on Demurrage & Accessorial Charges, EP 
754, slip op. at 1 (STB served May 3, 2019).
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    The Board received over 90 pre-hearing submissions from interested 
parties; heard testimony over a two-day period from 12 panels composed 
of, collectively, over 50 participants; and received 36 post-hearing 
comments.\8\ The Board encourages all carriers, and all shippers and 
receivers, to work toward collaborative, mutually beneficial solutions 
to resolve disputes on matters such as those raised in the Oversight 
Hearing on Demurrage & Accessorial Charges proceeding \9\ and intends 
for this proposed policy statement to provide useful guidance to all 
stakeholders.
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    \8\ The Appendix to this decision lists the numerous parties 
that participated in Oversight Hearing on Demurrage & Accessorial 
Charges, Docket No. EP 754.
    \9\ For example, Kansas City Southern Railway Company (KCS) 
reportedly forgave significant demurrage because the shipper had 
agreed to spend at least an equal amount to build capacity to store 
its own cars. KCS Comments 5, May 8, 2019.
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    Through this proposed policy statement, the Board expects to 
facilitate more effective private negotiations and problem solving 
between rail carriers and shippers and receivers on issues concerning 
demurrage and accessorial rules and charges; to help prevent 
unnecessary future issues and related disputes from arising; and, when 
they do arise, to help resolve them more efficiently and cost-
effectively. The Board is not, however, making any binding 
determinations by this proposed policy statement. Nor is the Board 
promoting complete uniformity across rail carriers' demurrage and 
accessorial rules and charges; the principles discussed in this 
proposed policy statement recognize that there may be different ways to 
implement and administer reasonable rules and charges. When 
adjudicating specific cases, the Board will consider all facts and 
arguments presented in such cases.\10\
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    \10\ Several stakeholders suggested that the Board initiate an 
investigation into recent tariff changes by Class I carriers. The 
Board finds that, at this time, rather than conducting an 
investigation, issuing this proposed policy statement, providing 
information on broad principles, and soliciting public comment as 
part of an open process is the more appropriate way to proceed.
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Historical Overview and General Principles

    Historically, the detention of freight rail cars was governed by a 
uniform code of demurrage rules and charges that became effective for 
national application in 1910. See Chrysler Corp. v. N.Y. Cent. R.R., 
234 I.C.C. 755, 759-60 (1939) (recounting history of code's 
development).\11\ The uniform code provided for 48 hours of free time 
for both loading and unloading, which ran from the first 7 a.m. 
following placement of the cars. It offered shippers and receivers two 
alternative methods for computing demurrage (straight demurrage and 
average demurrage), permitted them to choose the method that best 
suited their needs, and allowed them to switch to the other method on 
one month's notice. Straight demurrage applied in the absence of any 
other arrangement with the rail carrier.\12\
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    \11\ The code was adopted by the National Convention of Railway 
Commissioners, and the Interstate Commerce Commission (ICC), the 
Board's predecessor, soon thereafter recommended that it be ``made 
effective on interstate transportation throughout the country.'' 
Swift & Co. v. Hocking Valley Ry., 243 U.S. 281, 283 (1917). One aim 
of the code was to prescribe rules, to be applied uniformly 
throughout the country, to help determine what detention was to be 
deemed reasonable. Pa. R.R. v. Kittanning Iron & Steel Mfg. Co., 253 
U.S. 319, 323 (1920).
    \12\ See generally Exemption of Demurrage from Regulation, EP 
462, slip op. at 1-2 n.3 (STB served Mar. 29, 1996); Car Demurrage 
Rules, Nationwide, 350 I.C.C. 777, 778-79 (1975); Cleveland Elec. 
Illuminating Co. v. ICC, 685 F.2d 170 (6th Cir. 1982) (describing 
historical treatment of demurrage and straight and average demurrage 
plans).
     In 1975, the ICC approved a proposal by rail carriers to reduce 
the free time for loading from 48 hours to 24 hours. See Car 
Demurrage Rules, Nationwide, 350 I.C.C. 777.
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    Under the straight demurrage plan, charges were applied and billed 
on individual cars at daily rates when cars were detained beyond the 
allowable free time. Saturdays, Sundays, and holidays were excluded 
unless preceded by at least two chargeable days. Shippers and receivers 
received no ``credits'' for returning cars early but were not assessed 
demurrage if severe weather or other circumstances beyond their 
control--such as the bunching \13\ of cars due to the act or omission 
of any rail carrier involved in the movement--prevented them from 
returning cars on time. Exemption of Demurrage from Regulation, EP 462, 
slip op. at 1 n.3.
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    \13\ The uniform code defined bunching as ``[w]hen, as the 
result of the act or neglect of any carrier, cars destined for one 
consignee, at one point, are bunched at originating point, in 
transit, or at destination, and delivered by the railroad company in 
accumulated numbers in excess of daily shipments.'' Kittanning, 253 
U.S. at 323 n.2 (quoting Rule 8 on bunching). More recently, the 
Board has described bunching as ``rail car deliveries that are not 
reasonably timed or spaced.'' See Demurrage Liability Final Rule, EP 
707, slip op. at 23.
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    Under the average demurrage plan, shippers and receivers could 
offset demurrage liability by earning credits for returning cars early 
but received no relief for bunching. Each car released before the first 
24 hours of free time expired earned one credit; a car released during 
the second 24 hours of free time earned no credit; and cars released 
after the 48-hour free time period incurred one debit for each excess 
day. The first four chargeable debit days could be offset by credits 
earned by early releases. At the end of each month, balances were 
struck, excess debits were charged at a specified base rate, and excess 
credits expired. Car Demurrage Rules, Nationwide, 350 I.C.C. at 779.
    In 1975, railroads obtained approval from the ICC to, among other 
things, reduce free time for loading to 24 hours based on evidence that 
it would not impose an unreasonable burden and would promote better 
equipment utilization and a more adequate car supply. See generally Car 
Demurrage Rules, Nationwide, 350 I.C.C. 777. Subsequently, Congress 
enacted what is now Sec.  10746 in the Rail Revitalization & Regulatory 
Reform Act of 1976, Public Law 94-210, 211, 90 Stat. 31 (the 4-R Act), 
requiring that demurrage charges be computed in a manner that fulfills 
specified national needs and that the ICC establish rules and 
regulations relating to such charges. Congress then enacted the 
Staggers Rail Act of 1980, Public Law 96-448, 94 Stat. 1895 (the 
Staggers Act), which made broad deregulatory reforms in the rail 
industry.
    Following enactment of the 4-R Act and the Staggers Act, the ICC in 
1985 allowed rail carriers to establish individualized demurrage and 
storage rules and charges that were based on market forces but still 
generally subject to the statutory requirements for reasonableness 
under 49 U.S.C. 10702 and demurrage under what is now 49 U.S.C. 10746. 
Railroads Per Diem, Mileage, Demurrage & Storage Agreement, 1 I.C.C.2d 
924, 934 (1985) (finding that ``the need for uniform demurrage and 
storage charges has been overstated'' and that ``a free market approach 
to such charges will more effectively foster the goals of the national 
transportation policy''). Later that year, the ICC sought comment in 
Exemption of Demurrage from

[[Page 54719]]

Regulation, Docket No. EP 462, on whether action should be taken under 
former 49 U.S.C. 10505 (current 49 U.S.C. 10502) to reduce or eliminate 
the regulation of demurrage. In 1996, the Board ultimately determined 
not to take further deregulatory action on demurrage, concluding that 
``exemption could result in shippers paying unreasonable charges for 
detention that they did not cause. Thus, there is the potential with 
such an exemption for an abuse of market power.'' Exemption of 
Demurrage from Regulation, EP 462, slip op. at 3.
    In December 2010, the Board issued an advance notice of proposed 
rulemaking (ANPRM) to address ``when parties should be responsible for 
demurrage in light of current commercial practices followed by rail 
carriers, shippers, and receivers.'' Demurrage Liability (2010 ANPRM), 
EP 707, slip op. at 1 (STB served Dec. 6, 2010). Among other things, 
the 2010 ANPRM noted that there was a need to examine the Board's 
policies given a split in the federal courts regarding the liability of 
warehousemen and other third-party intermediaries for railroad 
demurrage. Id. at 2. Under the final rule, issued in 2014, a person 
receiving rail cars from a rail carrier for loading or unloading that 
detains those cars beyond the ``free time'' provided in a governing 
tariff may be held liable for demurrage if that person had actual 
notice, prior to rail car placement, of the demurrage tariff 
establishing its liability. Demurrage Liability Final Rule, EP 707, 
slip op. at 1. The rule was based on the theory that responsibility for 
demurrage should be placed on the party in the best position to 
expedite the handling of rail cars at origin or destination. Id. at 
8.\14\
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    \14\ The regulation, codified at 49 CFR part 1333, provides 
default rules that govern demurrage in the absence of privately 
negotiated contracts. Demurrage Liability Final Rule, EP 707, slip 
op. at 25.
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    With respect to decisions regarding the reasonableness of demurrage 
rules and charges in individual cases, the Board has ``tailor[ed] its 
analysis to the evidence proffered and arguments asserted under a 
particular set of facts.'' N. Am. Freight Car Ass'n v. BNSF Ry., NOR 
42060 (Sub-No. 1), slip op. at 8 (STB served Jan. 26, 2007), aff'd sub 
nom. N. Am. Freight Car Ass'n v. STB, 529 F.3d 1166 (DC Cir. 2008). 
General principles recognized in past decisions include: that a rail 
carrier seeking to collect assessed demurrage charges must provide 
evidence to establish the dates of actual or constructive car placement 
and release and to show how the assessed charges were computed; \15\ 
that a rail carrier may not collect demurrage when it is responsible 
for the delay; \16\ and that the shipper or receiver must establish by 
competent evidence that the assailed charges are unlawful based on the 
claims it has asserted.\17\
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    \15\ See, e.g., R.R. Salvage & Restoration, Inc.--Pet. for 
Declaratory Order--Reasonableness of Demurrage Charges, NOR 42102 et 
al., slip op. at 6 (STB served July 20, 2010).
    \16\ See, e.g., Capitol Materials, Inc.--Pet. for Declaratory 
Order--Certain Rates & Practices of Norfolk S. Ry., 7 S.T.B. 576, 
577 (2004).
    \17\ See, e.g., Savannah Port Terminal R.R.--Pet. for 
Declaratory Order--Certain Rates & Practices as Applied to Capital 
Cargo, Inc., FD 34920, slip op. at 8 n.20 (STB served May 30, 2008).
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    The Board has also recognized that demurrage principles may 
continue to develop as industry practices and technology change. In 
Capitol Materials, for example, the Board stated that ``[i]n light of 
the technological advances that have been made with respect to railroad 
operations in recent years, it might be appropriate for railroads to 
reconsider some of their longstanding demurrage practices under which 
delivering railroads charge their customers demurrage regardless of the 
reasons for delays.'' 7 S.T.B. at 577-78 (noting that the widespread 
use of computers and sophisticated tracking systems now allows 
railroads to determine the location of rail cars in the rail system 
with more precision, and that in-transit delays and other anomalies 
that could interfere with time-of-delivery expectations also would 
likely be known). Most recently, in Utah Central Railway--Petition for 
Declaratory Order--Kenco Logistic Services, LLC, FD 36131, slip op. at 
12 n.38 (STB served Mar. 20, 2019), the Board noted that it may need to 
consider future action to ensure that shippers, receivers, and smaller 
rail carriers are not being forced to bear the burden of delays due to 
actions not attributable to them.
    The overarching purpose of demurrage is to incentivize the 
efficient use of rail assets (both equipment and track) by holding rail 
users accountable when their actions or operations use those resources 
beyond a specified period of time. See, e.g., Kittanning, 253 U.S. at 
323 (``The purpose of demurrage charges is to promote car efficiency by 
penalizing undue detention of cars.'').\18\ Under this foundational 
precept, that period of time must be reasonable,\19\ and further it is 
unreasonable to charge demurrage for delays attributable to the rail 
carrier. See, e.g., R.R. Salvage & Restoration, Inc., NOR 42102 et al., 
slip op. at 4 (stating ``a shipper is not required to compensate a 
railroad for delay in returning the asset if the railroad and not the 
shipper is responsible for the delay''). The Board has also expressed 
concerns about demurrage charges for delays that a shipper or receiver 
did not cause. See, e.g., Utah Central Ry., FD 36131, slip op. at 12 
n.38; Exemption of Demurrage from Regulation, EP 462, slip op. at 4. 
Where demurrage charges are imposed for circumstances beyond the 
shipper's or receiver's reasonable control, they do not accomplish 
their purpose to incentivize behavior to encourage efficiency--the 
stated rationale for and objective of the rail carriers' demurrage 
rules and charges \20\--and the purpose of demurrage is not fulfilled. 
Charges assessed for circumstances beyond the shipper's or receiver's 
reasonable control would, as a general matter, not fulfill the purpose 
of demurrage.
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    \18\ Accord Increased Demurrage Charges, 1956, 300 I.C.C. 577, 
585 (1957) (``The primary purpose of demurrage regulations is to 
promote equipment efficiency by penalizing the undue detention of 
cars.'' (citation omitted)). As acknowledged by one rail carrier in 
the Docket No. EP 754 proceeding, demurrage charges should not serve 
as a ``revenue play'' or ``a source of profit.'' Union Pacific 
Railroad Company (UP) Comments 19, June 6, 2019 (filing ID 247892) 
(further stating that ``Union Pacific would rather not bill for 
accessorial and demurrage charges.''). As noted by another rail 
carrier, ``Congress framed the purposes of demurrage not in terms of 
cost recovery or a penalty for poor performance, but rather in terms 
of incentives.'' Canadian National Railway Company (CN) Comments 8, 
June 6, 2019.
    \19\ See, e.g., Kittanning, 253 U.S. at 323 (stating a shipper 
is ``entitled to detain the car a reasonable time''); R.R. Salvage & 
Restoration, Inc., NOR 42102 et al., slip op. at 4 (stating that 
time period must be reasonable).
    \20\ See, e.g., citations infra note 24.
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    The general principles discussed below, which flow from the 
agency's precedent and governing statutes and are consistent with the 
purpose of demurrage, can help frame the demurrage reasonableness 
issues in individual cases, together with the evidence and argument 
presented in those proceedings.

Free Time

    Background. Free time--a major focal point of the May 2019 
oversight hearing--is the period of time allowed for a shipper or 
receiver to finish using rail assets and return them to the railroad 
before demurrage charges are assessed.\21\ Free time is a critical

[[Page 54720]]

component of demurrage charges, the purpose of which, as noted above, 
is ``to promote car efficiency by penalizing undue detention of cars.'' 
Kittanning, 253 U.S. at 323 (further noting that ``the duty of loading 
and of unloading carload shipments rests upon the shipper or consignee. 
To this end he is entitled to detain the car a reasonable time without 
any payment in addition to the published freight rate.''). As the Board 
has explained:
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    \21\ Tariff provisions typically define the amount of free time 
provided in terms of 24-hour periods or ``credit days,'' which 
commonly begin to run at 12:01 a.m. the day following actual or 
constructive placement. Constructive placement occurs when a rail 
car is available for delivery but cannot actually be placed at the 
receiver's destination because of a condition attributable to the 
receiver (for example, lack of room on the tracks in the receiver's 
facility). The railroad holds the car and sends notice to the 
receiver. See Savannah Port Terminal R.R., FD 34920, slip op. at 3 
n.6 (citing Capitol Materials, 7 S.T.B. 576).

    A railroad has a right to set a reasonable time--free time--for 
a shipper to finish using rail assets and return them to the 
railroad. If a shipper keeps an asset for too long (beyond the 
allocated free time), it should compensate the railroad for the 
extended use of its asset (rail cars or track)--in other words, for 
demurrage. However, a shipper is not required to compensate a 
railroad for delay in returning the asset if the railroad and not 
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the shipper is responsible for the delay.

R.R. Salvage & Restoration, Inc., NOR 42102 et al., slip op. at 4. Free 
time also helps temper adverse impacts to shippers and receivers of 
delays arising from service variability.\22\
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    \22\ See N. Am. Freight Car Ass'n, NOR 42060 (Sub-No. 1), slip 
op. at 13 (noting, among other things, that private agricultural 
hopper car owners were given an average of two days to accept empty 
private cars without charge, in response to claim that objectionable 
storage charges were attributable to service variability).
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    In addition, free time plays a role in the credit and debit rules 
and practices of many rail carriers. Free time is often expressed in 
terms of credit days that are allotted and applied to incoming cars 
before demurrage charges begin to accrue. Separate from free time, some 
rail carriers also provide credits for certain problems and delays. 
Many rail carriers administer rules and practices under which demurrage 
charges (debits) can be offset by credits that have been allocated to 
the shipper or receiver.\23\
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    \23\ See Capitol Materials, 7 S.T.B. at 578 (describing 
demurrage programs under which credits for cars released before the 
end of the allowable free time can be used to offset demurrage 
charges for other cars that are released after the allowable free 
time has expired).
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    As described above in the ``Historical Overview,'' the uniform code 
that historically governed demurrage allowed 48 hours of free time for 
loading and unloading until 1975, when the ICC approved a reduction of 
free time for loading to 24 hours. In 1985, the ICC allowed rail 
carriers to establish individualized demurrage and storage rules and 
charges. However, until recently, it remained common practice for a 
rail carrier to provide at least 24 hours of free time (or one credit 
day) to load rail cars and at least 48 hours of free time (or two 
credit days) to unload cars. See generally Portland & W.R.R.--Pet. for 
Declaratory Order--RK Storage & Warehousing, Inc., FD 35406, slip op. 
at 5 (STB served July 27, 2011) (citing references to tariff provisions 
providing 48 hours for unloading in demurrage decisions handed down in 
2010, 2004, and 2000). Some Class I carriers use alternative rules and 
practices for private cars in which no credit days are given as a proxy 
for free time. These alternative rules and practices are also discussed 
below.
    Current Issues. Last fall, the Board became aware that several 
Class I carriers had implemented or announced significant tariff 
changes that made or would make, among other things, substantial 
reductions to the free time allowed to shippers and receivers. At least 
one rail carrier reduced the number of credit days for loading and 
unloading private cars, in some circumstances, from two to zero. Some 
other rail carriers reduced free time for unloading from 48 to 24 hours 
(or two credit days to one) for both private and railroad-owned cars. 
After various letter requests to Class I carriers, see supra note 6, 
the Board instituted the proceeding in Oversight Hearing on Demurrage & 
Accessorial Charges, Docket No. EP 754. In its April 2019 Notice, the 
Board directed the Class I carriers to submit information on a list of 
specified subjects, including all tariff changes since January 2016 
pertaining to the amount of free time allowed for loading and unloading 
rail cars and the reason(s) for the change. April 2019 Notice, EP 754, 
slip op. at 2-3.
    The rail carriers consistently identified the same objectives and 
rationales for reductions to free time: To align the behavior of 
shippers and receivers in order to promote network fluidity to benefit 
all rail users with improved service reliability and reduced cycle 
times. Carriers stated that the reductions were made to enable them to 
optimize network efficiencies and provide better, more reliable 
service; that the changes were not made to generate revenue; and that 
their hope is that recent revenue increases generated from demurrage 
charges will be temporary as shippers and receivers adapt and respond 
because, in the words of one rail carrier, ``the intention is to 
improve service, not drive cost increases for our customers.'' \24\ 
Rail carriers' post-hearing submissions largely reiterated these points 
and expressed willingness to work with shippers and receivers to help 
them align their behavior to better meet the reductions in free time. 
While the Board recognizes some rail carriers made certain changes and 
conducted additional outreach following the hearing, many of the 
broader issues raised before, during, and after the hearing remain.
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    \24\ UP Comments 2, May 8, 2019; see generally id. at 1-2; UP 
Comments 3, June 6, 2019 (filing ID 247876); Norfolk Southern 
Railway Company (NSR) Comments 2-3, May 8, 2019; CSX Transportation, 
Inc. (CSXT) Comments 3-5, May 8, 2019. BNSF Railway Company (BNSF) 
stated that it ``puts a tremendous amount of energy and resources 
into the area of demurrage and storage for the express purpose of 
collecting less demurrage revenue.'' BNSF Comments 5, May 8, 2019.
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    In comments submitted both prior to and following the hearing, and 
in testimony at the hearing, interested parties from many industries 
expressed multiple concerns about the recent reductions in free time. 
Several stated that they lacked the physical capacity or capital needed 
to expand their facilities to meet the reduced time periods.\25\ Others 
stated that past investments, as well as infrastructure and operational 
decisions, had been made based on the standard free time periods 
previously in place over many years.\26\ Many stated that they, or 
their members, regularly experience bunching or otherwise unreliable 
service (including missed switches or unpredictable switching times); 
that bunching is a major obstacle to compliance with the reduced free 
time periods; and that the recent reductions have made it even more 
difficult and costly to deal with unreliable service because the free 
time that has been eliminated had served as an important buffer against 
irregular and unpredictable railroad performance.\27\ To cope with free 
time reductions, to the extent they could, they reported having to 
build more track at their facilities, lease track at remote locations, 
add worker shifts, or resort to other transportation modes (typically 
trucking).\28\
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    \25\ See, e.g., Corn Refiners Association (CRA) Comments 5, May 
8, 2019; Agricultural Retailers Association (ARA) Comments 5, May 8, 
2019; Consolidated Scrap Resources Inc. (CSR) Comments 4-5, May 8, 
2019; Lyondell Chemical Company, Equistar Chemicals LP & Lyondell 
Basell Acetyls, LLC (LYB) Comments 2, May 8, 2019.
    \26\ See, e.g., The Fertilizer Institute (TFI) Comments 2, May 
8, 2019; Barilla America, Inc. (Barilla) Comments 4, 10, May 8, 
2019; MillerCoors LLC (MillerCoors) Comments 16-17, May 8, 2019.
    \27\ See, e.g., Barilla Comments 9, 11, May 8, 2019; National 
Industrial Transportation League (NITL) Comments 4-5, May 8, 2019; 
National Grain and Feed Association (NGFA) Comments 10-11, 22, May 
8, 2019; TFI Comments 2-4, May 8, 2019; American Forest & Paper 
Association Comments 3-5, May 8, 2019; Institute of Scrap Recycling 
Industries, Inc. (ISRI) Comments 2, 4-5, 8-9, May 8, 2019; 
International Paper (IP) Comments 2-4, May 7, 2019; Anderson-Dubose 
Company (Anderson-Dubose) Comments 2-3, May 8, 2019; LYB Comments 2, 
May 8, 2019; American Chemistry Counsel (ACC) Comments 4, May 8, 
2019.
    \28\ See, e.g., TFI Comments 4-5, May 8, 2019; ISRI Comments 8-
9, May 8, 2019; ARA Comments 5, May 8, 2019; Brainerd Chemical Co. 
(Brainerd) Comments 7, May 8, 2019; Lhoist North America (Lhoist) 
Comments 2, May 7, 2019.

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[[Page 54721]]

    Shippers that rely on private rail cars expressed additional 
concerns. Many noted a significant industry shift since the enactment 
of 49 U.S.C. 10746 from rail carrier ownership of rail cars to private 
car ownership and described how they had previously been encouraged by 
rail carriers to use private cars or had been forced to do so because 
the supply of railroad-owned cars was insufficient.\29\ In addition to 
the types of challenges and experiences described above, private car 
users objected to recent tariff changes that eliminated credit days 
previously allotted as free time for private (but not railroad-owned) 
cars as unreasonable and commercially unfair.\30\
---------------------------------------------------------------------------

    \29\ See, e.g., NGFA Comments 6, May 8, 2019; CSR Comments 2-3, 
6, May 8, 2019; Ag Processing Inc Comments 1-2, 5, May 8, 2019; 
MillerCoors Comments 7, May 8, 2019; Lhoist Comments 2, May 7, 2019; 
ISRI Comments 2, June 6, 2019.
    \30\ See, e.g., Diversified CPC International, Inc. Comments 5-
7, 11, May 8, 2019; Auriga Polymers, Inc./Indorama Comments 2-3, May 
8, 2019; ACC Comments 2, 9, May 8, 2019; NGFA Comments 17-18, May 8, 
2019; CRA Comments 3-4, May 8, 2019; ISRI Comments 2, June 6, 2019. 
Among other concerns, these commenters explained that allowing no 
free time for private cars beyond midnight on the date of 
constructive placement could result in situations where a shipper 
could not possibly avoid demurrage charges, because it might have 
only minutes to evaluate its ability to accept and order the 
incoming car.
---------------------------------------------------------------------------

    Discussion. Demurrage serves a valuable purpose to encourage the 
efficient use of rail assets (both equipment and track) by holding 
shippers and receivers accountable when their actions or operations use 
those assets beyond a specified period of time. That period of time 
must be reasonable and consistent with the purpose of demurrage. 
However, the Board has heard repeatedly, from interested parties in a 
broad range of industries, that it has become difficult, if not 
impossible, to avoid demurrage charges following the recent reductions 
in free time, particularly in light of inconsistencies in rail 
service.\31\ Commenters across a range of industries questioned rail 
carriers' claims that the changes are reasonable under Sec.  10702 and 
can be justified as meeting national needs under the standard Congress 
prescribed in Sec.  10746. Many commenters noted that they had seen no 
improvement in the reliability or consistency of rail car deliveries 
upon which their own operations depend, while others stated that 
bunched deliveries had increased.\32\ Rail carriers presented data, 
generally on a system-wide basis, reflecting recent improvements in 
some metrics, such as transit time, dwell time, system velocity, and 
trip plan compliance. However, rail carriers presented limited data on 
the extent to which changes to their demurrage rules and charges caused 
reductions in loading and unloading times, as compared to the times 
prior to the changes.
---------------------------------------------------------------------------

    \31\ See, e.g., CRA Comments 4, May 8, 2019 (explaining why, 
``[f]or all CRA members, whether they have open or closed-gate 
facilities, their ability to actually accept a rail car with zero 
free-time is highly dependent upon their consistency of rail 
service''); NITL Comments 4-5, May 8, 2019 (noting that ``[i]t is 
not uncommon for carriers to have variation in their deliveries of 
more than twenty-four hours'' and that reducing free time will only 
exacerbate the costs and challenges shippers and receivers already 
bear from delays attributable to the railroads' actions); TFI 
Comments 5, May 8, 2019 (``inconsistent rail service remains their 
greatest obstacle to compliance'').
    \32\ See, e.g., CSR Comments 6, May 8, 2019; Anderson-DuBose 
Comments 2-3, May 8, 2019; IP Comments 3-4, May 7, 2019; ACC 
Comments 1-3, June 6, 2019.
---------------------------------------------------------------------------

    The Board is troubled by the adverse impacts of reductions in free 
time to rail users and the potentially negative consequences of 
providing no credit days for private cars if rail carriers do not have 
reasonable rules and practices for dealing with, among other things, 
variability in service and carrier-caused bunching, and for ensuring 
that shippers and receivers have a reasonable opportunity to evaluate 
and order incoming cars before demurrage begins to accrue. As noted 
above, many commenters described the already difficult challenges and 
adverse impacts caused by bunched deliveries, missed or unpredictable 
switching times, and other variations in rail service (some of which 
occur even when rail service is working well). Commenters also 
explained that, when free time is reduced by 24 hours or more (whether, 
for example, from two credit days to one credit day for unloading, or 
to zero credit days for private cars), an important buffer against 
service inconsistencies and variations in car deliveries is undermined. 
In addition, commenters explained that eliminating credit days so as to 
allow no free time for private cars beyond midnight of the constructive 
placement date could result in demurrage being unavoidable because the 
receiver would have no reasonable opportunity to evaluate its ability 
to accept and order the incoming car.
    Based on the information presented in the Docket No. EP 754 
oversight proceeding, the Board has serious concerns about the 
reasonableness of reductions in free time that make it more difficult 
for shippers and receivers to contend with variations in rail service 
and do not serve to incentivize their behavior to encourage the 
efficient use of rail assets.\33\ The Board is also concerned that, in 
some circumstances, such reductions may be inconsistent with rail 
carriers' statutory charge to compute demurrage and establish related 
rules in a way that fulfills the national needs specified in Sec.  
10746 and may be incompatible with the overarching purpose of 
demurrage--namely, to encourage the efficient use of equipment by 
penalizing the undue detention of cars.\34\ Where, for example, 
carrier-caused circumstances give rise to a situation in which it is 
beyond the shipper's or receiver's reasonable control to avoid charges, 
demurrage does not fulfill its purpose.
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    \33\ Parties are, of course, free to negotiate and enter into 
contracts that provide for any period of free time (including zero) 
to which the parties agree. 49 CFR 1333.2; Demurrage Liability Final 
Rule, EP 707, slip op. at 25 (noting that the Board's rules 
specifically allow parties to enter into contracts pertaining to 
demurrage). In addition, the Board notes that demurrage programs 
that do not provide any credit days for private cars could be 
reasonable if, among other things, they give shippers and receivers 
a reasonable window of time to accept incoming cars without 
incurring demurrage charges.
    \34\ See supra note 18; 49 CFR 1333.1 (demurrage ``serves as a 
penalty for undue car detention to encourage the efficient use of 
rail cars in the rail network'').
---------------------------------------------------------------------------

    Such circumstances might include, for example, charging demurrage 
that accrues as a result of a missed switch (both cars scheduled to be 
switched and incoming cars impacted by the missed switch); charging 
demurrage for transit days to move cars from constructive placement in 
remote locations; or charging demurrage that arises from bunched 
deliveries substantially in excess of the number of cars ordered until 
the shipper or receiver has had a reasonable opportunity to process the 
excess volume of incoming cars. Changes in historical practices on 
which the shipper or receiver has long relied (e.g., regarding 
switching frequency or delivery methods that deviate from prior 
arrangements made by the parties) may also be taken into account.\35\
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    \35\ On the other hand, circumstances within the shipper's or 
receiver's reasonable control might include, for example, taking 
reasonable steps to: Ensure that its facility is right-sized for its 
expected volume of incoming traffic when it receives reliable, 
consistent service; manage its pipeline to mitigate expected 
incoming car volumes that exceed its capacity; and order and release 
cars in the manner specified by reasonable tariff requirements.
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    Lastly, the Board is concerned that, in some circumstances, such 
reductions in free time may jeopardize important goals of the nation's 
rail transportation policy by rendering freight rail service less 
likely to meet the needs of the public and, if other modes are even 
effectively an option for a rail user, less

[[Page 54722]]

competitive with other transportation modes.\36\
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    \36\ See 49 U.S.C. 10101 (stating, in pertinent part, ``[i]n 
regulating the railroad industry, it is the policy of the United 
States Government . . . (4) to ensure the development and 
continuation of a sound rail transportation system with effective 
competition among rail carriers and with other modes, to meet the 
needs of the public and the national defense; . . . [and] (14) to 
encourage and promote energy conservation'').
---------------------------------------------------------------------------

    The Board recognizes that reductions in free time might be 
justified if there were evidence to show, by way of example, that (1) 
advances in technology or productivity, or other changes across the 
industry, have made compliance with the shorter time frames reasonable 
to achieve; (2) service improvements resulting from more efficient use 
of rail assets would facilitate the ability of shippers and receivers 
to adjust to the reductions; (3) reductions are necessary to address 
systemic problems with inefficient behavior or practices by shippers or 
receivers; or (4) rail carriers have implemented tariff provisions or 
program features, such as credits for bunching, service variabilities, 
and certain capacity constraints, that place the avoidance of demurrage 
charges within the reasonable control of a shipper or receiver.
    The Board also recognizes that demurrage serves an important 
purpose, namely, incentivizing the behavior of rail users to encourage 
the efficient use of rail assets, which benefits rail carriers and 
users alike. Rail carriers and users have a shared responsibility in 
this endeavor--rail carriers to implement and administer reasonable 
rules and charges designed to accomplish this goal, and rail users to 
recognize and accept responsibility for promoting efficiencies within 
their reasonable control.

Bunching

    The April 2019 Notice invited stakeholders to comment on recent 
experience with demurrage and accessorial charges pertaining to 
bunching, including bunching that may be attributable to upstream rail 
carriers. April 2019 Notice, EP 754, slip op. at 3. Bunching-related 
issues were identified as a common problem by rail users across a broad 
range of industries. Many commenters stated that they regularly 
experience bunched deliveries of rail cars and are charged demurrage 
for related backlogs; several reported that unpredictable, bunched 
deliveries increased in frequency following changes to rail carriers' 
operating plans.\37\ In other words, these commenters contend that 
recent operating changes and actions by rail carriers may be resulting 
in rail car deliveries that are not ``reasonably timed or spaced,'' 
which the shipper or receiver cannot prevent.\38\ Commenters also 
reported that some rail carriers have eliminated tariff provisions that 
formerly provided demurrage relief for bunching; that rail carriers 
that do provide relief for bunching often do not do so automatically, 
instead billing for the charge and requiring the shipper or receiver to 
apply for a credit or dispute the charge; and that relief for upstream 
bunching is not available.\39\ Some rail carriers stated that they 
award credits for bunching in some instances, but did not describe with 
specificity how adjustments are made or otherwise address the concerns 
expressed by rail users.\40\
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    \37\ See generally, e.g., citations supra notes 27 & 32, infra 
note 38; ISRI Comments 2, May 8, 2019; International Association of 
Refrigerated Warehouses (IARW) Comments 1-2, May 8, 2019.
    \38\ See, e.g., Private Railcar Food and Beverage Association, 
Inc. (PRFBA) Comments 3-4, May 8, 2019 (``The net impact of this new 
service model is that railcars get bunched in route while waiting 
for the next full train to depart. PRFBA has been told by several 
railroads that the term for this occurrence is no longer called 
`bunching'; this negative delivery practice is now referred to as 
`train building' in the [Precision Scheduled Railroading (PSR)] 
world.''). As explained by another industry organization, despite 
its members' best efforts to regulate the tender of rail cars to 
arrive over a defined time period, cars may be delayed or held for 
the railroad's convenience, resulting in a single mass of cars 
delivered at once. ACC Comments 3-4, May 8, 2019 (also describing 
other types of carrier-caused bunching and limits to the 
effectiveness of related credits offered by rail carriers, including 
that credits are not available for bunching caused by upstream rail 
carriers); IARW Comments 1-2, May 8, 2019 (bunching is a major 
contributor to demurrage despite efforts by shippers to 
appropriately space shipments to warehouses).
    \39\ See, e.g., NGFA Comments 22-23, 26, May 8, 2019; NITL 
Comments 5, May 8, 2019; ACC Comments 3-4, May 8, 2019.
    \40\ In post-hearing comments, CSXT stated that if a customer 
raises a dispute and ``that customer's demurrage was caused by CSXT 
bunching traffic, CSXT will provide credits for those days of 
demurrage.'' CSXT Comments 11-12, June 6, 2019. UP stated that it 
applied a ``case-by-case process within which customers are credited 
for carrier-caused bunching,'' and that UP ``takes into account 
customer choices and actions, the actions of [UP's] interline 
partners, and [UP's] own actions in determining whether a customer 
should be charged for bunching-related demurrage.'' UP Comments 10, 
June 6, 2019 (filing ID 247892). It is unclear whether UP engages in 
this process automatically or only if a dispute is raised, and UP 
does not describe what actions it does and does not consider.
---------------------------------------------------------------------------

    Demurrage disputes pertaining to bunching are best addressed in the 
context of case-specific facts. See Demurrage Liability Final Rule, EP 
707, slip op. at 23-24. As discussed above, demurrage charges must be 
designed to incentivize shippers' and receivers' behavior. Where rail 
carriers' operating decisions or actions result in bunched deliveries 
and demurrage charges that are not within the reasonable control of the 
shipper or receiver to avoid, the purpose of demurrage is not 
fulfilled.\41\ When analyzing the appropriateness of demurrage charges, 
rail carriers should consider these principles both when cars originate 
with the serving carrier and when cars originate on an upstream 
carrier. Rail carriers are encouraged to take these considerations into 
account in their future administration of demurrage rules and charges, 
particularly in evaluating whether their automatic billing processes 
sufficiently account for carrier-caused bunching (for cars that 
originate on their network or upstream, and bunching attributable to 
missed switches), and in resolving any related disputes. In any future 
proceeding, the Board expects to take these considerations into account 
as well, along with any additional evidence and argument the parties 
may choose to present.
---------------------------------------------------------------------------

    \41\ As noted above, such circumstances might include, for 
example, charging demurrage that arises from bunched deliveries 
substantially in excess of the number of cars ordered until the 
shipper or receiver has had a reasonable opportunity to process the 
excess volume of incoming cars.
---------------------------------------------------------------------------

Overlapping Charges

    Many participants in the Docket No. EP 754 oversight proceeding 
voiced concerns about additional charges recently instituted by two 
Class I carriers for claimed customer-caused congestion or delay. The 
first, a so-called ``congestion'' charge, was reportedly being assessed 
by NSR following a determination, in its sole judgment, that an 
excessive quantity of cars for a given consignee causes material 
operating problems at an NSR facility.\42\ Commenters objected that the 
$100 per car/per day charge, assessed on five days' notice for all cars 
destined for the location identified as congested, was arbitrary and 
unreasonable in its own right, and that it effectively resulted in a 
double recovery for NSR because it served the same purpose 
(incentivizing the prompt removal of cars held in railroad yards) as 
demurrage charges, to which the cars in question were also subject.
---------------------------------------------------------------------------

    \42\ See ACC Comments 5, May 8, 2019; NGFA Comments 19, May 8, 
2019; NITL Comments 6-7, May 8, 2019 (referencing NSR Tariff 8002-A, 
Item 6265).
---------------------------------------------------------------------------

    Another type of potentially overlapping charge, termed ``not 
prepared for service,'' was implemented by UP. As initially 
established, UP reportedly assessed the $400 per car/per occurrence 
charge when it determined, in its discretion, that it was unable to 
pull or spot a car due to a customer's

[[Page 54723]]

actions.\43\ The applicable tariff item lists various examples of 
situations--including cars that cannot be spotted due to track being 
blocked by other cars--that would permit UP to assess the additional 
charge. Commenters objected to this charge on multiple grounds, 
including that it could be imposed even when UP could service some (but 
not all) cars that had been released, and that the charge was often 
imposed in situations beyond the customer's control.\44\ Commenters 
stated that UP does not commit to a service window to pull released 
cars; that days may pass before UP arrives to pull released cars; and 
that shippers are given little or no advance notice of UP's arrival and 
have insufficient time to move cars that in the interim may be blocking 
released cars in order to avoid the charge.\45\
---------------------------------------------------------------------------

    \43\ See NGFA Comments 12-14 (referencing UP Accessorial Tariff 
6004, Item 9005).
    \44\ See ISRI Comments 6-7, May 8, 2019; Barilla Comments 8-9, 
May 8, 2019.
    \45\ See NGFA Comments 12-14, May 8, 2019.
---------------------------------------------------------------------------

    Both rail carriers have since responded to these concerns. 
Specifically, UP announced during the May 2019 hearing that it has 
abated the ``not prepared for service'' charge by applying it ``per 
occurrence'' (rather than ``per car''), establishing a threshold 
trigger of three occurrences per month, and clarifying that where the 
charge is applied, demurrage would not be assessed. NSR advised the 
Board that it would no longer assess a ``congestion'' charge as of July 
1, 2019.
    The Board is encouraged by these actions but nevertheless notes 
that, when adjudicating specific cases, it would have significant 
concerns about the reasonableness of any tariff provision that sought 
to impose a charge, in addition to the otherwise applicable demurrage 
charge, for congestion or delay that is not within the reasonable 
control of the shipper or receiver to avoid. Although the Board remains 
open to evidence and argument that such a charge could in some instance 
be reasonable, no such information was presented in Docket No. EP 754.

Invoicing and Dispute Resolution

    The April 2019 Notice invited stakeholders to comment on whether 
the tools available to manage demurrage and accessorial charges provide 
adequate data for shippers and receivers to evaluate whether charges 
are being properly assessed and to dispute the charges when necessary. 
April 2019 Notice, EP 754, slip op. at 3. It also directed Class I 
carriers to provide information on the procedures and time periods 
applicable to the process for raising and resolving disputed charges. 
Id. The comments and information received revealed several issues of 
concern.
    Shippers and receivers stated repeatedly that under the programs 
administered by several rail carriers, demurrage and accessorial 
charges are difficult, time-consuming, and costly to dispute; that 
invoices are often inaccurate or lack information needed to assess the 
validity of the charges; and that erroneous invoices are issued even 
when the tariff expressly provides for relief or the rail carrier has 
acknowledged its responsibility for the problem, compelling the shipper 
or receiver to initiate a protracted dispute resolution process.\46\ 
Commenters also stated that, pursuant to some rail carriers' rules and 
practices, charges must be disputed within limited time frames, while 
those carriers are often slow to respond, and disputes are often 
denied.\47\ Some tariffs also have imposed costs or charges that serve 
as a deterrent to pursuing a dispute or a formal claim.\48\
---------------------------------------------------------------------------

    \46\ See, e.g., National Coal Transportation Association 
Comments 8-9, May 8, 2019; NITL Comments 8, May 8, 2019; Packaging 
Corporation of America (PCA) Comments 4-5,7-8, May 8, 2019; Brainerd 
Comments 4, May 8, 2019; IP Comments 4, May 7, 2019.
    \47\ See, e.g., NGFA Comments 26-28, May 8, 2019; ACC Comments 
4, May 8, 2019; CSR Comments 4, May 8, 2019.
    \48\ See, e.g., NGFA Comments 27-28, May 8, 2019 (citing 
provisions in UP, NSR and KCS tariffs); ACC Comments 4, May 8, 2019 
(citing provision in NSR tariff).
---------------------------------------------------------------------------

    The Board is deeply troubled by these reports, which came from 
shippers and receivers in a broad range of industries that are highly 
dependent on rail service. If rail carrier practices effectively 
preclude a rail user from determining what happened, then the user 
would not be able to determine whether it was responsible for the 
delay; the responsible party would not be incentivized to modify its 
behavior; and the demurrage charges would not achieve their purpose. 
Transparency and mutual accountability are important factors in the 
establishment and administration of reasonable demurrage and 
accessorial rules and charges. Rail shippers and receivers should be 
able to review and, if necessary, dispute charges without the need to 
engage a forensic accountant or expend ``countless hours and extra 
overhead'' to research charges and seek to resolve disputes.\49\
---------------------------------------------------------------------------

    \49\ IP Comments 4, May 7, 2019; accord PCA Comments 4-5, 7-8, 
May 8, 2019 (describing process that is ``hugely time and resource 
consuming'').
---------------------------------------------------------------------------

    The Board encourages all Class I carriers (and Class II and Class 
III carriers to the extent they are capable of doing so), taking into 
account the principles discussed here, to provide, at a minimum and on 
a car-specific basis: The unique identifying information of each car; 
the waybill date; the status of each car as loaded or empty; the 
commodity being shipped; the identity of the shipper, consignee, and/or 
care-of party; the origin station and state of the shipment; the dates 
and times of actual placement, constructive placement (if applicable), 
notification of constructive placement (if applicable), and release; 
and the number of credits and debits issued for the shipment (if 
applicable).\50\ The Board also expects rail carriers to bill for 
demurrage only when the charges are accurate and warranted, consistent 
with the purpose of demurrage. With respect to the dispute resolution 
process more broadly, rail shippers and receivers should be given a 
reasonable time period to request further information and to dispute 
charges, and the rail carrier likewise should respond within a 
reasonable time period. Finally, the Board has serious concerns about 
the reasonableness of costs or charges that could deter shippers and 
receivers from pursuing a disputed claim.\51\ Although the Board 
remains open to argument and evidence, based on the record in Docket 
No. EP 754, there is no apparent justification for imposing such costs 
or charges.
---------------------------------------------------------------------------

    \50\ In Demurrage Billing Requirements, Docket No. EP 759, 
served concurrently with this decision, the Board is proposing to 
specify certain information that Class I carriers must provide on or 
with demurrage invoices to enable recipients of those invoices to, 
among other things, readily verify the validity of the demurrage 
charges.
    \51\ The Board notes that NSR has announced that, effective July 
1, 2019, disputes for demurrage and storage charges or computations 
can be submitted without any potential charge.
---------------------------------------------------------------------------

    The Board recognizes that some rail carriers may already employ 
billing practices consistent with the practices described above, and 
with the principles discussed in this proposed policy statement. The 
Board intends through this decision to provide information about how it 
would consider the reasonableness of invoicing and dispute resolution 
procedures when adjudicating specific cases, along with the 
consideration of any additional evidence and argument the parties may 
choose to present. The Board also commends rail carrier commitments to 
addressing demurrage disputes through arbitration or other streamlined 
dispute resolution procedures and encourages

[[Page 54724]]

additional commitments to do so.\52\ The Board hopes that such 
commitments, together with the principles addressed here and the 
outcome of the proposed rule relating to invoice requirements, will 
make it unnecessary for the Board to revisit these issues.
---------------------------------------------------------------------------

    \52\ The Board notes that three of the Class I carriers have 
agreed to arbitrate certain demurrage disputes under the binding, 
voluntary program set forth in 49 CFR part 1108. See UP Notice (June 
21, 2013), CSXT Notice (June 28, 2019), and CN Notice (July 1, 
2019), Assessment of Mediation & Arbitration Procedures, EP 699. In 
addition, BNSF was commended by one commenter in the Docket No. EP 
754 proceeding for including an arbitration provision in its 
tariffs. See NGFA Comments 28, May 8, 2019.
---------------------------------------------------------------------------

Credits

    The April 2019 Notice directed Class I carriers to provide 
information on their systems and practices for issuing credits and 
debits in connection with the assessment of demurrage or accessorial 
charges and to describe any limits on the amount of credits or debits 
that may be available or incurred. April 2019 Notice, EP 754, slip op. 
at 3.\53\ It also invited all stakeholders to share their perspectives 
on whether demurrage and accessorial tariffs in effect during the past 
three years have created balanced and appropriate incentives for both 
customers and railroads. Id. at 4.
---------------------------------------------------------------------------

    \53\ Each rail carrier sets its own rules and practices for 
issuing credits and debits in connection with the assessment of 
demurrage or accessorial charges; however, a common aspect across 
rail carriers' rules and practices is that certain types of credits 
expire monthly.
---------------------------------------------------------------------------

    With respect to credits, a common concern voiced by shippers and 
receivers is that limitations imposed by rail carriers' credit and 
debit rules and practices diminish the utility of credits as a means of 
offsetting debits that are incurred.\54\ At the same time, as noted by 
one commenter, ``railroad-imposed demurrage and accessorial charges do 
not `expire' until paid.'' NGFA Comments 9, June 6, 2019.
---------------------------------------------------------------------------

    \54\ See, e.g., TFI Comments 4, May 8, 2019 (credits issued for 
carrier-caused bunching near the end of the month have an expiration 
date of just a few days); Western Coal Traffic League Comments 3, 
June 6, 2019 (ensuring that credits do not expire after only a few 
weeks would increase reciprocity in rail carrier practices); 
American Fuel & Petrochemical Manufacturers Comments 12, 16, May 8, 
2019 (credit systems are not balanced).
---------------------------------------------------------------------------

    The Board is troubled by this lack of reciprocity, particularly 
where the expiration date of a credit, in effect, undermines the value 
of a credit or credits that were allocated for a problem or delay that 
was not within the reasonable control of a shipper or receiver. The 
Board also recognizes that credits issued for carrier-caused problems 
and delays serve a different purpose than credits that function as a 
proxy for free time, and that different types of credits might have 
different expiration time frames. The Board remains open to argument 
and evidence in future cases that involve these issues. However, as 
preliminary guidance based on the information presented in Docket No. 
EP 754, the Board would evaluate how credit rules and practices are 
administered in determining the reasonableness of demurrage rules and 
charges when adjudicating specific cases, including, in particular, 
whether the shipper or receiver has been afforded a reasonable 
opportunity to make use of the credits in question, before any 
expiration date imposed by the rail carrier. The Board would also take 
into account the credits' purpose and function. The Board also notes 
that these concerns would be allayed if shippers and receivers were 
compensated for the value of unused credits at the end of each month, 
rather than the credits merely expiring.

Notice of Major Tariff Changes

    The April 2019 Notice requested information on the notice given in 
connection with recent changes in Class I carrier demurrage and 
accessorial tariffs, and feedback concerning impacts on shippers, 
receivers, third-party logistics providers, and short line railroads 
flowing from those changes. April 2019 Notice, EP 754, slip op. at 3-4. 
Insufficient notice, particularly with respect to changes involving 
reductions in free time, was identified as a widespread problem in the 
feedback the Board received.
    In the words of one commenter, ``the operational challenges and 
costs caused by reductions in free time were aggravated by the lack of 
sufficient notice and coordination that would have allowed rail 
customers to plan for the change.'' \55\ Another commenter explained 
that its members had designed their operations and infrastructure 
around the 48-hour standard, and ``suddenly have been forced to 
redesign everything'' with less than 45 days' notice in many cases.\56\ 
A third commenter noted that rail carriers had many months to adjust 
their operations to implement PSR but often expected their customers to 
comply with associated new rules and practices in 45 days.\57\
---------------------------------------------------------------------------

    \55\ NITL Comments 4, May 8, 2019 (further stating that, 
``[g]iven the complexity of rail operations and the time, money[,] 
and difficulty involved in constructing new facilities or otherwise 
acquiring additional track capacity to address the reduction in free 
time, 45 days of notice was insufficient for many shippers and 
receivers'').
    \56\ TFI Comments 2, May 8, 2019 (further stating that the 
ability of TFI members to comply with the new free time rules varies 
by member and location, but that compliance ``takes time and comes 
at a substantial cost'').
    \57\ ACC Comments 7-8, May 8, 2019 (further stating that 
``[a]ctions such as building or acquiring new infrastructure to 
avoid storage charges require far more time. It is unreasonable to 
impose charges while a facility is acting in good faith to implement 
necessary changes'').
---------------------------------------------------------------------------

    As a matter of commercial fairness, and consistent with the 
principles discussed in this proposed policy statement, railroads 
should provide sufficient notice of major changes to demurrage and 
accessorial tariffs to enable shippers and receivers to evaluate, plan, 
and undertake any feasible, reasonable actions to avoid or mitigate new 
resulting charges. The Board recognizes that a 20-day notice period is 
statutorily prescribed for changes to common carrier rates and service 
terms. 49 U.S.C. 11101(c). However, rail carriers themselves recognized 
that 20 days was not sufficient for many of the changes recently 
implemented, and generally provided between 45 and 60 days, while other 
commenters stated that the marginally longer notice periods that were 
provided were still insufficient.
    Rail carriers also described various other actions taken to help 
shippers and receivers adapt, such as delayed billing and working with 
those that needed more flexibility.\58\ The Board encourages rail 
carriers to take these and other initiatives to support all rail users 
facing the financial, operational, or other challenges of adjusting to 
major tariff changes, to thoughtfully consider the amount of advance 
notice that should be given, and to be especially cognizant of and 
accommodating to any unique obstacles a shipper or receiver may face in 
adapting to demurrage and accessorial tariff changes.
---------------------------------------------------------------------------

    \58\ See also N. Am. Freight Car Ass'n, NOR 42060 (Sub-No. 1), 
slip op. at 9 (referencing steps taken by BNSF to inform shippers 
about the newly imposed storage charges and respond to shippers' 
concerns, including offering to waive the charges in the first year 
to offset the cost of new track construction and offering to enter 
into transitional leases).
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Demurrage Billing to Shippers Instead of Warehousemen

    In the Docket No. EP 754 oversight proceeding, several participants 
expressed concerns about the impact of demurrage on third-party 
intermediaries who handle goods shipped by rail but have no property 
interest in them (also commonly known as warehousemen, as noted above) 
following the Board's adoption of the final rule in Demurrage 
Liability, Docket No. EP 707 (codified at 49 CFR part 1333).\59\ 
Participants raised

[[Page 54725]]

concerns that the rule adopted in Docket No. EP 707 led rail carriers 
to impose demurrage charges on warehousemen who lack control over the 
timing or volume of railcars shipped to them and have no business 
relationship with rail carriers to facilitate the resolution of 
demurrage disputes.\60\
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    \59\ In Docket No. EP 707, the Board explained that a question 
had arisen as to who should bear liability when an intermediary that 
detains rail cars too long is named as consignee in the bill of 
lading but asserts that it either did not know of its consignee 
status or had affirmatively asked not to be named as consignee. 
Demurrage Liability Final Rule, EP 707, slip op. at 4. The Board 
noted that there was a split on that issue in the U.S. Courts of 
Appeals. Id. The Board determined that identification of a party in 
the bill of lading was not controlling for purposes of demurrage 
liability. Id. at 14. The Board adopted ``a conduct-based approach 
to demurrage in lieu of one based on the bill of lading,'' id. at 
15, based on ``the theory that responsibility for demurrage should 
be placed on the party in the best position to expedite the loading 
or unloading of rail cars at origin or destination,'' id. at 8.
    \60\ See, e.g., International Liquid Terminals Association 
(ILTA) Comments 1-2, May 8, 2019; Kinder Morgan Terminals (Kinder 
Morgan) Comments 8-9, May 8, 2019.
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    Commenters suggested shipper-direct billing as one potential 
solution but stated that warehousemen and shippers have been unable to 
reach such agreements with rail carriers.\61\ At least one rail carrier 
has reportedly taken the position that the rule adopted in Docket No. 
EP 707 precludes rail carriers from entering such agreements and 
requires them to bill and hold warehousemen solely responsible for 
demurrage on delivered cars.\62\
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    \61\ ILTA Comments 2, May 8, 2019; Kinder Morgan Comments 2-3, 
June 6, 2019.
    \62\ See Kinder Morgan Comments 10-11, May 8, 2019; Kinder 
Morgan Comments 1-2, June 6, 2019.
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    The rule adopted in Docket No. EP 707 does not require rail 
carriers to bill warehousemen, nor does it preclude a rail carrier from 
sending demurrage bills directly to the shipper, or from looking to the 
shipper as the responsible party for any unpaid assessments. The Board 
notes, in particular, that the rule adopted in Docket No. EP 707 
states, in permissive terms, that parties who receive cars ``may be 
held liable for demurrage,'' see 49 CFR 1333.3 (emphasis added), and 
that the Board expressly stated that the demurrage liability rules 
promulgated in that docket ``are default rules only, meant to govern 
demurrage in the absence of a privately negotiated contract.'' 
Demurrage Liability Final Rule, EP 707, slip op. at 25. Nor should rail 
carriers be able to hold warehousemen responsible when a shipper that 
has agreed to accept responsibility for demurrage does not pay.\63\ In 
Demurrage Billing Requirements, Docket No. EP 759, served concurrently 
with this decision, the Board is proposing rules that will further 
address these matters, in addition to the invoicing issues noted above. 
In the meantime, the Board encourages railroads to work collaboratively 
with warehousemen and shippers to address these issues.
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    \63\ The shipper is, after all, the party shown on the bill of 
lading, and indeed the one that was historically responsible for 
demurrage.
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General Concluding Considerations

    The Board concludes by restating two fundamental principles that 
all rail carriers, and all shippers and receivers, are encouraged to 
keep in mind. First, demurrage rules and charges are not reasonable 
when they do not serve to incentivize the behavior of shippers and 
receivers to encourage the efficient use of rail assets. In other 
words, charges should not be assessed in circumstances beyond the 
shipper's or receiver's reasonable control. It follows, then, that 
revenue from demurrage charges should reflect reasonable financial 
incentives to advance the overarching purpose of demurrage and that 
revenue is not itself the purpose. Second, transparency and mutual 
accountability by both rail carriers and the shippers and receivers 
they serve are important factors in the establishment and 
administration of reasonable demurrage and accessorial rules and 
charges. These two principles were recognized by rail carriers, 
shippers, and receivers in connection with the Docket No. EP 754 
oversight hearing, and the Board affirms them here.
    The Board expects to take all of the principles discussed in this 
proposed policy statement into consideration, together with all of the 
evidence and argument that is before it, in evaluating the 
reasonableness of demurrage and accessorial rules and charges in future 
cases.
    Opportunity for comment. The Board seeks public comment on this 
proposed policy statement. Comments are due by November 6, 2019. Reply 
comments are due by December 6, 2019.

    Decided: October 4, 2019.

    By the Board, Board Members Begeman, Fuchs, and Oberman.
Kenyatta Clay,
Clearance Clerk.

Participants in Docket No. EP 754

    The Board received comments and testimony from the following 
parties in Docket No. EP 754. For parties that provided testimony at 
the May 22-23, 2019 hearing, the panel is noted in parentheses. Pre-
hearing comments are denoted with ``*''and post-hearing comments are 
denoted with ``[dagger]''.
 Ag Processing Inc * [dagger] (Panel VI)
 Agricultural Retailers Association (ARA) * (Panel VI)
 Agricultural Transportation Working Group* \64\
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    \64\ Submitted on behalf of ARA, Amcot, American Farm Bureau 
Federation, American Frozen Food Institute, American Soybean 
Association, Corn Refiners Association (CRA), Cotton Growers 
Warehouse Association, Cotton Warehouse Association of America, 
Cottonseed & Feed Association, Growth Energy Institute of Shortening 
and Edible Oils, National Barley Growers Association, National 
Cotton Council, National Cotton Ginners Association, National 
Cottonseed Products Association, National Council of Farmer 
Cooperatives, National Farmers Union, National Grain and Feed 
Association (NGFA), National Oilseed Processors Association (NOPA), 
National Sorghum Producers, North American Millers' Association 
(NAMA), The Fertilizer Institute (TFI), U.S. Canola Association, and 
U.S. Wheat Associates.
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     Agricultural Transportation Working Group 
[dagger] \65\
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    \65\ Submitted on behalf of ARA, American Bakers Association, 
American Cotton Shippers Association, American Farm Bureau 
Federation, CRA, Cottonseed & Feed Association, Cotton Warehouse 
Association of America, Growth Energy Institute of Shortening and 
Edible Oils, National Association of State Departments of 
Agriculture, National Association of Wheat Growers, National 
Cattlemen's Beef Association, National Corn Growers Association, 
National Cotton Council, National Cotton Ginner's Association, 
National Cottonseed Products Association, National Council of Farmer 
Cooperatives, National Farmers Union, NGFA, National Grange, 
National Milk Producers Federation, NOPA, National Pork Producers 
Council, National Renderers Association, NAMA, TFI, and U.S. Wheat 
Associates.
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 All South Warehouse D/C, Inc.[dagger]
 American Chemistry Council * [dagger] (Panel 
VIII)
 American Forest & Paper Association *
 American Frozen Food Institute *
 American Fuel & Petrochemical Manufacturers *
 American Plant Food Corporation *
 American Short Line and Regional Railroad Association 
[dagger]
 ArcelorMittal USA LLC *
 Archer Daniels Midland Company *
 Arizona Electric Power Cooperative, Inc. and Freight Rail 
Customer Alliance * [dagger] (Panel XII)
 Armada Supply Chain Solutions, LLC *
 Association of American Railroads [dagger]
 Auriga Polymers, Inc., a wholly owned subsidiary of 
Indorama, NA, on behalf of Indorama Ventures affiliates * (Panel 
VII)
 Barilla America, Inc. * (Panel IX)
 BNSF Railway Company * [dagger] (Panel XI)
 Brainerd Chemical Company, Inc., on behalf of itself and 
other members of the National Association of Chemical Distributors * 
(Panel IV)
 Brunk Plastic Services * (Panel VII)
 Bunge North America * [dagger] (Panel I)
 California League of Food Producers *
 Canadian National Railway Company * [dagger] 
(Panel XI)
 Canadian Pacific Railway Company * [dagger] 
(Panel XI)
 Cargill, Inc.* (Panel IV)
 Consolidated Scrap Resources, Inc.* [dagger] 
(Panel I)
 Corn Refiners Association (CRA) * (Panel VI)
 Covia Holdings Corporation *
 CSX Transportation, Inc.* [dagger] (Panel II)

[[Page 54726]]

 Diversified CPC International, Inc.* (Panel VIII)
 Dow, Inc.*
 Energy Transfer *
 Federal Maritime Commission * (Panel III)
 Glass Packaging Institute *
 Global Harvest Foods *
 Grain Craft *
 Growth Energy *
 Hudson Terminal Rail Services *
 Imerys USA, Inc.*
 Industrial Minerals Association--North America *
 Institute of Scrap Recycling Industries, Inc.* 
[dagger]
 Intermodal Motor Carriers Conference[dagger]
 International Association of Refrigerated Warehouses * 
(Panel X)
 International Liquid Terminals Association * (Panel X)
 International Paper * (Panel IV)
 International Warehouse Logistics Association * 
[dagger] (Panel X)
 Kansas City Southern Railway Company * [dagger] 
(Panel VIII)
 Kinder Morgan Terminals * [dagger] (Panel I)
 Lansdale Warehouse Company *
 Lhoist North America * (Panel V)
 Louis Dreyfus Company LLC *
 Lyondell Chemical Company, Equistar Chemicals LP, and 
LyondellBasell Acetyls, LLC *
 Martin-Brower Company, LLC *
 MHW Group, Inc. and its companies, Cryo-Trans, Inc., 
Perryville Cold Storage and Chambersburg Cold Storage * 
[dagger] (Panel V)
 MillerCoors LLC * (Panel IV)
 National Coal Transportation Association * (Panel XII)
 National Customs Brokers and Forwarders Association of 
America, Inc.*
 National Grain and Feed Association (NGFA) * 
[dagger] \66\ (Panel VI)
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    \66\ Pre-hearing comments supported by members of NOPA, North 
America Freight Car Association, and NAMA.
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 National Industrial Transportation League * 
[dagger] (Panel VII)
 Norfolk Southern Railway Company * [dagger] 
(Panel II)
 Normerica Inc. and Northdown Industries Inc.* (Panel IX)
 North America Freight Car Association * [dagger]
 North Dakota Grain Dealers Association *
 Olin Corporation * [dagger] (Panel I)
 Oxbow Carbon LLC *
 Packaging Corporation of America * (Panel IV)
 Palmer Logistics * (Panel V)
 PBF Energy Inc. and PBF Logistics * (Panel XII)
 Peabody Energy Corporation *
 Portland Cement Association [dagger]
 Private Railcar Food and Beverage Association, Inc. (PRFBA) 
* [dagger] (Panel IV)
 R. D. Gould *
 Rebel Oil Company, Inc. and Pro Petroleum, Inc.*
 Reserve Management Group *
 San Jose Distribution Services Inc.*
 San Jose Distribution Services Inc., Kenco, RBW Logistics, 
Palmer Logistics, CDS Transportation, Acme Distribution, Total 
Distribution Inc., Verst Group Logistics Inc., Sonwil Distribution 
Center, Peoples Services, Lansdale Services Inc., Logistics Services 
Inc., PRFBA, Stech Group, The Shippers Group, RGL Logistics, Moran 
Logistics, Wagner Logistics [dagger]
 Shea Brothers Lumber Handling, Inc.*
 Sims Metal Management Limited and SA Recycling * (Panel IX)
 Star Distribution [dagger]
 Sysco Corporation *
 The Anderson-DuBose Company * (Panel V)
 The Fertilizer Institute (TFI) * [dagger] (Panel 
VII)
 The Shippers Warehouse Co., dba The Shippers Group (The 
Shippers Group) * [dagger] (Panel V)
 UGI Energy Services, LLC *
 Union Pacific Railroad Company * [dagger] (Panel 
II)
 U.S. Clay Producers Traffic Association, Inc.*
 U.S. Department of Agriculture *
 Valley Distributing & Storage Company *
 Verso Corporation *
 Western Coal Traffic League * [dagger] (Panel 
XII)

[FR Doc. 2019-22200 Filed 10-9-19; 8:45 am]
BILLING CODE 4915-01-P