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STB releases final rule affecting fines levied by railroads

The Surface Transportation Board clarifies the regulation of railroad demurrage charges.

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March 6, 2020

The Surface Transportation Board (STB) has issued a final rule clarifying the regulation of railroad demurrage charges.

The rule, effective April 3, amends the STB regulations governing class exemptions for rail transportation of certain miscellaneous commodities by boxcar to state that the exemptions don’t apply to regulation of demurrage. “The final rule also revokes, in part, the class exemption that currently covers the rail transportation of certain agricultural commodities so that the exemption will not apply to the regulation of demurrage, thereby making the agricultural commodities exemption consistent with similar class exemptions covering nonintermodal rail transportation,” the STB says in the ruling.

The ruling goes on to state, “Currently, the board’s regulations exempt the rail transportation of certain miscellaneous commodities (see 49 C.F.R. § 1039.11) and boxcar transportation (see 49 C.F.R. § 1039.14). Although the language in the regulations for these class exemptions has consistently been interpreted by courts and the agency to effectively exclude the regulation of demurrage, the board finds these regulations would be more easily understood by more clearly stating the demurrage exclusion.”

Billy Johnson, chief lobbyist at the Washington-based Institute of Scrap Recycling Industries Inc. (ISRI) says that prior to this ruling, shippers of exempt commodities, including ferrous scrap, thought they were unable to bring demurrage-related complaints directly to the STB. The ruling clarifies that doing so is indeed allowed.

ISRI filed its reply comments in the demurrage proceedings before the STB in December 2019. The comments were a result of hearings held in the spring of last year to investigate the rail industry’s practice of reducing free time for loading and unloading and subsequent demurrage fees. They were preceded by ISRI’s initial comments, which were filed in November 2019.

“They felt they needed to clear the air,” he says of the STB’s ruling.   

Johnson adds that the STB ruling also rejects the railroads’ claim that they had abused market power.

The STB says the railroads’ “arguments mischaracterize the board’s statutory requirements.” The ruling goes on to explain, “The exemption revocation statute, 49 U.S.C. § 10502(d), provides that the board may revoke an exemption in whole or in part when it finds that regulation ‘is necessary to carry out the transportation policy of ‘49 U.S.C. § 10101. Notably, the exemption-revocation provision does not say anything about market power, in contrast to the exemption-granting provision, which, as pertinent here, requires a finding that regulation is not needed to advance the RTP or to protect shippers from the abuse of market power. Compare 49 U.S.C. § 10502(d) with id. § 10502(a).

“Even though it is not mentioned in the exemption-revocation statute, the agency has treated market power as an important issue in some of its past exemption revocation decisions," the STB states in the ruling. 

Johnson says the STB may ultimately find that railroads abused market power for demurrage and that regulation may be necessary to “rein” them in.

“The board heard us, and we feel vindicated,” he continues. “The ruling clarifies that we as except commodities can bring demurrage complaints to the board without any barriers. This is really huge.”

Johnson adds that the ruling provides a “glimmer of hope” for shippers of ferrous scrap and that the STB likely will release additional rules related to the demurrage before the end of the year.