By Tim Devaney - 04/15/14 11:18 AM EDT
Warehousemen will be charged late fees for taking too long to unload cargo from trains, under a new rule from the Surface Transportation Board.
Known as "demurrage liability,” railroad carriers can charge an additional fee to companies that take more than their allotted time to load a rail car with products they are shipping, or the receivers of those products that take too long to unload the car for the delays they cause.
"Demurrage is a charge for detaining rail cars for loading or unloading beyond a specified amount of time called 'free time,'" the agency wrote in the Federal Register. "Demurrage has compensatory and penalty functions. It compensates rail carriers for the use of railroad equipment and assets; and, by penalizing those who detain rail cars for too long, it also encourages prompt return of rail cars into the transportation network."
This is a historical principle is used when shipping goods by boat, train, or plane, but the Surface Transportation Board is updating the rules to explain who is responsible to pay the late fee.
Previously, the rule caused confusion on the receiving end, because the person who was purchasing the goods could be held responsible, even if they hired a warehouse company to unload the product and had no control over how quickly that company worked.
Under the new rules, anyone who receives the goods, whether it be the actual owner or a warehouse company, would be liable for demurrage, if they were notified in advance of the terms of the late fee.
The Surface Transportation Board wrote that the need to clarify the rules arose after two federal courts issued conflicting decisions on demurrage liability, and the Supreme Court declined to hear either case. So the agency decided to step in and clarify.
The final rules, which go into effect on July 15, would apply to both railroad-owned and privately-owned cars that are used for shipping products around the country, as long as they are held on railroad property.
The rules also state that companies only have to be notified on their demurrage liability once, rather than every time they ship a product. However, if the terms of the liability change, they must be notified of that, as well.