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Rail Demurrage Transparency Required by New STB Rules

Volume 2, Issue 8
April 30th, 2014
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Following four years of deliberation, the Surface Transportation issued a final rule declaring the railroads cannot assess demurrage charges on warehouse-based third-party logistics providers unless those charges are clearly laid out in tariffs communicated directly to the 3PL.

Commercial warehouses had been fighting the railroads’ practice of charging for demurrage absent a 3PL’s contractual consent.

The STB rule, which will go into effect on July 15, requires railroads to clearly communicate its terms for detention and demurrage charges to the 3PL prior to the placement of the equipment. The bill of lading by itself is no longer recognized as being sufficient to establish demurrage liability.

If the railroad makes material changes to its tariff, a new notice must be sent to the receivers in order for demurrage penalties to be enforced.

The new rule also states that notice of demurrage charges by only including them in a tariff is considered inadequate to assign demurrage liability. Notice of demurrage terms must be contained in an actual notice that is communicated in written or electronic form.

In order to meet their new legal obligation, railroads can send directly to receivers a blanket, one-time notice that includes a link to the full tariff containing the demurrage provisions.

Under STB rules, receivers and warehousemen may file complaints at the board if they believe that the demurrage charges resulting from constructive placement or any other railroad practice is an unreasonable practice.

The new rule states that “demurrage liability does not begin until actual placement or proper notice of constructive placement.” However, in handing down its newest rule the board declined to explain what it believes would constitute “proper notice of constructive placement.”

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