Demurrage

[Anonymous]

OK Tim, this is for you:
This thread is designed to specifically discuss demurrage and may be dry to some, but it is a request. Just so you'll know!
Demurrage is a miscellaneous charge, supported by tariff, made by railroads to customers to encourage the expeditious loading or unloading of rail cars. There are 3 basic types; straight plan, average agreement and special. Some roads refer to special demurrage as incentive demurrage, Straight plan is recorded and charged on a car for car basis. It is the plan most often used by those customers who do not receive a large number of cars and do not have their own siding. They would be using what is known as a team track sometimes known as public sidings. Public sidings are just what the name implies. A track that can be used by anyone receiving or shipping a railcar. Each demurrage type is subdivided into at least two parts, inbound and outbound. Incentive demurrage can have many facets, but we'll talk more about that later. In all demurrage, there is a specific amount of "free time", that period allowed a customer to load or unload without charge. It is usually 24 or 48 hours, exclusive of weekends and holidays if they fall at the beginning in the middle of or at the end of free time. Free time begins at the first 7:00 am, exclusive of weekends and hoidays, after the car is placed for loading or unloading. If the customer retains the car beyond the published free time, they will be invoiced based on the applicable charge.
Average agreement demurrage is also divided into inbound and outbound. Under average agreement, the customer must have their own siding and maintain a satisfactory credit standing with the railroad. Average agreement is sort of self explanatory. When a customer receives many cars a month, the retention time is averaged through a system of debits and credits. On inbounds, when a car is received and released prior to the expiration of free time, it receives a credit. If it is not released prior to free time, it receives a debit. Each car's time is recorded and if, at the end of the month, the credits outnumber the debits, no demurrage is due. This is a mont-to-month charge and cannot be carried forward beyond that. If a car is retained beyond the limit of debits (usually an additional 48 hours), they accrue what is known as arbitraries. Arbitraries can not be offset by credits. Inbound and outbound demurrage are calculated seperately and credits for one do not offset debits from the other.
Finally, there is incentive demurrage. This is another self-explanatory title. Incentive demurrage can take many forms so far as free time, placement, pull time, inclusions of holidays, daily rates, etc. are concerned. Usually, this demurrage form is applied to a certain commodity. In return for a lower line haul rate, demurrage rules are more strict. One reason this is done is to encourage the more expeditious use of a limited number of certain types of freight cars. As an example, there was once an incentive demurrage known as the Virginia Brick demurrage. It covered bricks moving in Virginia to certain designated points within the state. There were only 24 hours of free time on either end and included all weekends and holidays. The line haul rates were considerably lower which allowed the railroad to compete effectively with motor carriers.
This is already a pretty long post, so next time we can chat about how demurrage is administered. It is much different now than it was just 10 years ago.
All questions and comments are welcome, just jump in with any and all,
Regards and have a safe day. gdc

[bfsfabs]

gdc, I have been looking over Tim's and others shoulders at your postings. I want to thank you very much for sharing your knowledge/experience/wisdom on these many and varied subjects. It really helps this non-railroader to gain insight to "how it really is" in railroad operations and business methods.

Thank You, and please keep it coming.

Lowell
Pacific & Southwest Railroad Co HO

[Anonymous]

Thanx very much, gdc, for your most detailed & informative description. You have certainly broadened my knowledge of the subject. Regards, jwm

[Anonymous]

You're welcome. I have more on demurrage next week.
Regards and have a safe day. gdc

[Anonymous]

You're welcome! I'm glad to know it helps!
Regards and have a safe day! gdc

[edblysard]

Hi gdc,
in one of your post, you mentioned that you served as a forensic accountant. Assume your jobs then was to research back through the books after the clerks and accountants were through, looking for specific mistakes? If so, then that explains your eye for detail, and your knowleged of railroad finance. Still at it, or did you take your 60/30? Love the info, I learn something everytime I read your post and answers. Tim seemes to be asking some very intuitive questions, seems like he really wants to learn this stuff.
Stay Frosty,
Ed

[Anonymous]

Ed,
Forensic accounting involves investigative ops. While we were attached to the Internal Audit Department, forensic accounting involved the detection, investigation and prevention of fraud. The frauds we investigated involved contractors, vendors, and employees or any combination thereof. Of the employee fraud, I'd guess a good 75% were management or were so when the crime was committed. Very hard to get a white collar conviction or time even in the face of overwhelming evidence. Some of the cases make good stories, but obviously I can't discuss them, even the closed ones. We were attached to IA because of resources as well as that permitted us to interview and interrogate without Miranda warnings. My certification is as Certified Fraud Examiner. I was required to testify in many civil and criminal cases. Additionally, testified in passenger train off's and station closings (remember them). And of course, lots of travel. When we did the operational reviews, that also required much travel. NS offered an early retirement in February 2001 and I took it. I have spent so much time away from home, I thought it was time to spend more quality time with my wife who has put up with all this for so many years. I was 58 at the time with 35 years service not including a separated 2 years in operations. NS considered me as 61 with 38 years service for pension. During college, I hired on as a summer extra board fireman. Kept getting cut off, and a division supt finally found me a clerical job after the army. After nearly two years, one day, they came around asking for resumes looking for college grads, I gave them one and six months later, boom, traveling working joint facility audits.
Hope this didn't bore too many.
Regards and have a safe day. gdc

[Anonymous]

gdc, Have you ever thought of teaching a Business Class at a College or Univercity? You would make a good teacher.
Is demurrage charged to the rail customer by the Railroad company or the car owner? I noticed that some cars are not owned by a major railroad. If there is a large amount of Arbitraries owed by a shipper who gets the money, the railroad or the car owner?
TIM A

[Anonymous]

Demurrage is charged to the rail customer by the railroad delivering the car. Car ownership is not a factor if the car is owned by another railroad.
Cars not owned by any railroad accrue demurrage if they are not owned or leased by the customer. All demurrage charges are collected by the serving railroad. If UP delivers a load in an NS car at their customer's siding, they collect any demurrage.
Arbitraries reflect customer ability to load or unload within specified a time. Some customers will hold cars as warehouse capacity and pay the demurrage. Others take deep offense at demurrage charges. They would rather pay a $1,000 waybill correction than a $10 demurrage bill. It seems they think it reflects poorly on their operations. Go figure!
Regards and have a safe day. gdc

[Anonymous]

Is it possible for one railroad to owe another railroad demurrage? The BN use to store flats on a branch line in the off season. I was working a local and the dispatchers became very excited about a UP flat that was buried 200 deep up the branch. He claimed they were paying demurrage and had to get the car out.

[Anonymous]

It's possible, but it would be extremely rare. In the case you speak of, the cost concern was probably car hire, also known as per diem. These two entirely different cost items. The names sometimes get confused.
Regards and have a safe day! gdc

[Anonymous]

Perhaps the excitement about that UP flat was about car hire charges.

[Anonymous]

The only other situation I can think of is that maybe the flat was a special duty car, like a depresssed center flat. Some of these have special rates in addition to regular demurrage. But these are charges that are billed to the customer. Probably was car hire that was worrying everyone.
Regards and have a safe day. gdc!

[edblysard]

Not boring in the least, in fact, it explains a lot. So your knowledge is both hands on and investigative. And yes, I know you can't discuss cases, closed or otherwise. I had to take a security oath when I went to work for the state, and sign a statement to keep the state's secrets when I left. And yes, I would imagine getting a conviction in thoses cases would be hard, no one seems to want to "rock the boat". Try getting jail time for a doctor who owes $500,000.00 in back child support. Even when we got it to criminal court, the jury let him go with nothing more that a slap on the wrist. But lucky us, we can suspend your professional licenses now, with out a court order, so guess who lost their right to practice cosmetic surgery in texas....thats just one of hundreds, it kinda wears you down after a while. We also investigated welfare fraud. The numbers would stagger you. Officialy, most Dept of Public Services states a fraud rate of 3%, they acutally took a poll of their officer managers, to see what they felt would be a figure that the general public would tolerate, and it came back at 3%, so thats the figure they used. If you talk to the case workes, off the record of course, they will tell you that the percent is closer to 90%, in that most recipents commit some type of fraud, be it on their food stamp program, medicare/medicade, or in their HUD housing application, and over 60% fraud in the AFDC( the monthly check) Aid to Families with Dependent Children program. No one really knows the true figure, and they dont really care to. And I had to hunt some of them down. If I could tell you the stories, you wouldnt belive me anyway, the amount of money the taxpayers "lose" every month is , well, unbelivable. And its so easy to do, that a whole generation of children have grow up expecting to live on the "welfare" program for the rest of their lives, and their kids, and their kids, so forth and so on. Its a whole different subculture than what the average citizen thinks it is. Its become a way of life for some, they view it as a birthright. I just couldnt stand wading through it anymore, gathering all the evidence, crossing your t's, dotting all the i's, getting the attorneys to sign off on it, then sending it to the Inspector Generals office, and then waiting, and waiting, and waiting, you know the story from here on out. So when the chance to go railroading showed up, even this late in life, I jumped at it. Never looked back, either.
Glad you are willing to share your expertise with the rest of us, your giving Tim his moneys worth, thats for certain, and I learn something new every time I read your postings also, so please keep it going. There are quite a few myths about railroading that popular books and magazines still put out there, its kinda neat to hear, excuse me, read the real deal now and then.
Stay Frosty,
Ed
(if you havent caught it yet, that a pun on my last name, Blysard, pronounced Blizzard, from when I worked for the Attorney General office, they always told me I was too frosty, Ha Ha Ha)

[bfsfabs]

Ed,

I'm just wondering if there is some interesting relationship between Blizzard and "Snow Job" ? HHMMmmm . . .

Lowell

[Anonymous]

gdc, Questions,
1. Are demurrage rates negotiable? If your company is shipping 20 boxcars a day would you be able to get a cheaper rate on demurrage?
2. Are demurrage rates all that expensive? Is it cheap enough for companies to use rail cars for short term storage?
3. Do demurrage rates change with the season? Example, grain hoppers. In the Fall and Winter they are in demand. In the Spring and Summer they are not. Would demurrage rates change by season depending on the type of car?
4. If a company emties a boxcar early, and calls the rail company to pick up the car. Does the demurrage time stop with the phone call or when the car leaves the siding?
TIM A

[Anonymous]

1. No. Average agreement would have somewhat of an effect of a demurrage volumn discount.
2. Demurrage rates are not all that expensive until you get into arbitraries. There are some cars that have an extraordinary extra charge, such as depressed center flats.
3. Not ordinarily. There may be some incentive demurrage tariffs around that would allow that though. It would be up to the serving railroad.
4. The phone call would release the car and demurrage would stop. If the car were not empty when the crew arrived to pick it up, demurrage would continue or if the crew picked it up anyway, there would be an intraterminal switch charge to get it back.
The system is designed to disallow customers from playing games. If a customer were to continually try this tactic, they could lose any credit status and therefore lose their average agreement privilege.
Regards and have a safe day. gdc

[edblysard]

You one funny guy...why?
Ed

[edblysard]

Little slow there Lowell, though you were making a joke. If you have doubts about who I say I am, or where I worked, contact my old boss,
Patricia S. Burroughs
Assistant Attorney General,
Child Support Division,
Office of the Attorney General, State of Texas.
2040 Loop 336 West, Suite 300,
Conroe Texas, 77304-3521
[phone]
Fax: [phone]
or
Aimee Blysard
Child Support Officer
UERSA Case Officer
Child Support Division
450 N. Sam Houston Parkway East,
Suite 290
Houston Texas 77060
[phone]
Fax: [phone]
I am currently employeed by:
Port Terminal Railroad Association
890 Manchester Ave
Port of Houston
Houston Texas 77801
[phone]
I hold the position of engine foreman/switchman foreman, currently working a switching lead ,ID as job 252, at the north yard, 8900 Clinton Drive at Wayside, across from the turning basin for the houston ship channel. The entrance to our yard is directly across Clinton drive from The Port of Houston, Gate #8.
By the way, any reason you dont use your real name, instead of bfsfabs?
Any other questions you may e-mail me direct at
[e-mail]
or http://pages.sbcglobal.net/renaissance-man, my web page.
Stay Frosty
Ed

[bfsfabs]

Ed,
No aspersion intended.
There is NO DOUBT in my mind about who you say you are.
I extend an abject apology for an ill conceived and poorly executed attempt at low grade humor. Please accept.

Sometimes my mouth, or fingers, run away with my brain.

bfsfabs is the short form name of my backyard/garage activity BfS fabrications. Port of last resort for repairs, modifications and construction of automotive and/or electronic junk.

Lowell K. Ryder
Los Altos, CA

[e-mail]

[edblysard]

Oh crap, you mean people bring you their old blenders too! Got a 1950 era GE coffee percolator my next door neighbor thinks should be fixed, because it make such good coffee. I told her for the cost of parts alone, she could get two or three Mr Coffee drip machines. She still wants this thing fixed. Its sitting on the work bench, besides another neighbors rotary princess phone, and a cassett player. Need and more junk to add to your collection?
And yes, my fingers run away with my brain quite often also. Just wi***hey would learn to spell correctly before they do silly things.
Stay Frosty,
Ed