Demurrage Liability, 21407-21412 [2014-08454]

Agencies

• Surface Transportation Board
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 79, Number 73 (Wednesday, April 16, 2014)]
[Rules and Regulations]
[Pages 21407-21412]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08454]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Part 1333

[Docket No. EP 707]


Demurrage Liability

AGENCY: Surface Transportation Board (Board or STB), DOT.

ACTION: Final rule.

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SUMMARY: The Board is adopting final rules establishing that a person 
receiving rail cars from a rail carrier for loading or unloading who 
detains the cars beyond the ``free time'' provided in the carrier's 
governing tariff will generally be responsible for paying demurrage, if 
that person has actual notice, prior to rail car placement, of the 
demurrage tariff establishing such liability. The Board also clarifies 
that it construes the provisions of 49 U.S.C. 10743, titled ``Liability 
for payment of rates,'' as applying to carriers' line-haul rates, but 
not to carriers' charges for demurrage.

DATES: This rule is effective on July 15, 2014.

FOR FURTHER INFORMATION CONTACT: Amy Ziehm at (202) 245-0391. 
Assistance for the hearing impaired is available through the Federal 
Information Relay Service (FIRS) at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Demurrage is a charge for detaining rail 
cars for loading or unloading beyond a specified amount of time called 
``free time.'' 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. 
Because of these dual roles, demurrage is statutorily recognized as an 
important tool in ensuring the smooth functioning of the rail system. 
See 49 U.S.C. 10746.
    The Interstate Commerce Act, as amended by the ICC Termination Act 
of 1995 (ICCTA), Public Law 104-88, 109 Stat. 803 (1995), provides that 
demurrage is subject to Board regulation. Specifically, 49 U.S.C. 10702 
requires railroads to establish reasonable rates and transportation-
related rules and practices, and 49 U.S.C. 10746 requires railroads to 
compute demurrage and to establish demurrage-related rules ``in a way 
that fulfills the national needs related to'' freight car use and 
distribution and that will promote an adequate car supply. In the 
simplest case, demurrage is assessed on the ``consignor'' (the shipper 
of the goods) for delays in loading cars at origin, and on the 
``consignee'' (the receiver of the goods) for delays in unloading cars 
and returning them to the carrier at destination.\1\
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    \1\ The Interstate Commerce Act does not define ``consignor'' or 
``consignee.'' Black's Law Dictionary defines ``consignor'' as 
``[o]ne who dispatches goods to another on consignment,'' and 
``consignee'' as ``[o]ne to whom goods are consigned.'' Black's Law 
Dictionary 327 (8th ed. 2004). The Federal Bills of Lading Act 
defines these terms in a similar manner. 49 U.S.C. 80101(1) & (2).
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    This agency has long been involved in resolving demurrage disputes, 
both as an original matter and on referral from courts hearing railroad 
complaints seeking recovery of charges.\2\ The disputes between 
railroads and parties that originate or terminate rail cars can involve 
relatively straightforward application of the carrier's tariffs \3\ to 
the circumstances of the case. Complications can arise, however, in 
cases involving warehousemen or other third-party intermediaries who 
handle the goods but have no property interest in them. A consignee 
that owned the property being shipped had common-law liability (for 
both freight charges and demurrage) when it accepted cars for delivery. 
See Pittsburgh, Cincinnati, Chicago & St. Louis Ry. v. Fink, 250 U.S. 
577, 581 (1919). Warehousemen, however, are not typically owners of the 
property being shipped (even though, by accepting the cars, they are in 
a position to facilitate or impede car supply). Under the legal 
principles that developed, in order for a warehouseman to be subject to 
demurrage or detention charges, there had to be some other basis for 
liability beyond the mere fact of handling the goods shipped. See, 
e.g.,

[[Page 21408]]

Smokeless Fuel Co. v. Norfolk & W. Ry., 85 I.C.C. 395, 401 (1923).
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    \2\ E.g., Springfield Terminal Ry.--Pet. for Declaratory Order--
Reasonableness of Demurrage Charges, NOR 42108 (STB served June 16, 
2010); Capitol Materials Inc.--Pet. for Declaratory Order--Certain 
Rates & Practices of Norfolk S. Ry., NOR 42068 (STB served Apr. 12, 
2004); Unger ex rel. Ind. Hi-Rail Corp.--Pet. for Declaratory 
Order--Assessment & Collection of Demurrage & Switching Charges, NOR 
42030 (STB served June 14, 2000); South-Tec Dev. Warehouse, Inc.--
Pet. for Declaratory Order--Ill. Cent. R.R., NOR 42050 (STB served 
Nov. 15, 2000); Ametek, Inc.--Pet. for Declaratory Order, NOR 40663, 
et al. (ICC served Jan. 29, 1993), aff'd, Union Pac. R.R. v. Ametek, 
Inc., 104 F.3d 558 (3d Cir. 1997).
    \3\ Historically, carriers gave public notice of their rates and 
general service terms in tariffs that were publicly filed with the 
ICC and that had the force of law under the so-called ``filed rate 
doctrine.'' See Maislin Indus., Inc. v. Primary Steel, Inc., 497 
U.S. 116, 127 (1990). The requirement that rail carriers file rate 
tariffs at the agency was repealed in ICCTA. Nevertheless, although 
tariffs are no longer filed with the agency, rail carriers may still 
use them to establish and announce the terms of the services they 
hold out.
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    What became the most important factor under judicial and agency 
precedent was whether the warehouseman was named the consignee on the 
bill of lading.\4\ Thus, our predecessor, the Interstate Commerce 
Commission (ICC), held that a tariff may not lawfully impose such 
demurrage charges on a warehouseman who is not the owner of the 
freight, who is not named as a consignor or consignee in the bill of 
lading, and who is not otherwise party to the contract of 
transportation. Responsibility for Payment of Detention Charges, E. 
Cent. States (Eastern Central), 335 I.C.C. 537, 541 (1969) (involving 
liability for detention, the motor carrier equivalent of demurrage), 
aff'd, Middle Atl. Conference v. United States (Middle Atlantic), 353 
F. Supp. 1109, 1114-15 (D.D.C. 1972) (three-judge court sitting under 
the then-effective provisions of 28 U.S.C. 2321 et seq.).
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    \4\ A bill of lading is the transportation contract between the 
shipper and the carrier for moving goods between two points. Its 
terms and conditions bind the shipper, the originating carrier, and 
all connecting carriers.
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    In recent years, however, a question arose as to who should bear 
liability when an intermediary that accepts rail cars and detains them 
too long is named as consignee in the bill of lading, but asserts 
either that it did not know of its consignee status or that it 
affirmatively asked the shipper not to name it consignee. On that 
issue, the United States Courts of Appeals for the Third and Eleventh 
Circuits have split.\5\
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    \5\ Additionally, the United States Court of Appeals for the 
Seventh Circuit indicated a predilection toward the Eleventh 
Circuit's decision, though it did not directly decide the issue. See 
Ill. Cent. R.R. v. S. Tec Dev. Warehouse, Inc. (South Tec), 337 F.3d 
813, 820-21 (7th Cir. 2003).
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    In Norfolk Southern Railway v. Groves, a warehouseman denied 
liability for demurrage charges despite being named as a consignee on 
the bill of lading, claiming that it did not consent to being named as 
a consignee and that it was never informed that it was designated as 
such. 586 F.3d 1273, 1275-76 (11th Cir. 2009), cert. denied, 131 S. Ct. 
993 (2011). Relying on contract principles, the Eleventh Circuit 
concluded that ``a party must assent to being named as a consignee on 
the bill of lading to be held liable as such, or at the least, be given 
notice that it is being named as a consignee in order that it might 
object or act accordingly.'' As such, the court concluded that the 
warehouseman was not a consignee and thus not liable for demurrage. Id. 
at 1278.
    On virtually identical facts, in CSX Transportation Co. v. Novolog 
Bucks County (Novolog), the Third Circuit rejected the notion that a 
warehouseman's designation as consignee in the bill of lading, without 
permission and where the warehouseman is not the ultimate consignee of 
the freight, cannot establish its status as consignee for purposes of 
demurrage liability. 502 F.3d 247, 257 (3d Cir. 2007). Rather, the 
court held that ``recipients of freight who are named as consignees on 
bills of lading are subject to liability for demurrage charges arising 
after they accept delivery unless they act as agents of another [party] 
and comply with the notification procedures established in ICCTA's 
consignee-agent liability provision, 49 U.S.C. 10743(a)(1).'' Id. at 
254.\6\
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    \6\ The statutory notice provision of Sec.  10743(a)(1), which 
is also referred to in Groves, states, among other things, that a 
person receiving property as an agent for the shipper or consignee 
will not be liable for ``additional rates'' that may be found due 
beyond those billed at the time of delivery, if the receiver 
notifies the carrier in writing that it is not the owner of the 
property, but rather is only an agent for the owner.
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    The legal debate and resulting conflicting opinions prompted the 
Board to reexamine its existing policy and to assist in providing 
clarification. In reviewing these decisions, the Board determined that 
it was necessary to revisit its demurrage precedent to consider whether 
the agency's policies accounted for current statutory provisions and 
commercial practices. On December 6, 2010, the Board published an 
Advance Notice of Proposed Rulemaking (ANPR) that raised a series of 
specific questions about how the demurrage process works and sought 
public input on whether the Board should consider a new rule that would 
place demurrage liability on the receivers of rail cars, regardless of 
their designation in the bill of lading, if the carrier had provided 
the receiver with notice of its demurrage tariff. Demurrage Liability, 
EP 707 (STB served Dec. 6, 2010), 75 Fed. Reg. 76496 (Dec. 10, 2010). 
Shortly thereafter, the United States Supreme Court denied a request 
that it review the split in the circuits. Norfolk S. Ry. v. Groves, 131 
S.Ct. 993 (2011) (mem.).
    After reviewing the comments received in response to the ANPR, the 
Board issued a Notice of Proposed Rulemaking (NPR) on May 7, 2012, in 
which the Board announced proposed rules whereby any person receiving 
rail cars who detains the cars beyond the free time may be held liable 
for demurrage if the carrier has provided that person with actual 
notice of the demurrage tariff. Demurrage Liability, EP 707 (STB served 
May 7, 2012). The Board also announced a new construction of the 
provisions of 49 U.S.C. 10743, under which those provisions would apply 
to carriers' line-haul rates, but not to demurrage charges. The 
proposed rules were published in the Federal Register, 77 FR 27384 (May 
10, 2012), and comments were submitted in response to the NPR.
    After receiving comments, the Board, by decision served May 28, 
2013, issued an initial regulatory flexibility analysis (IRFA) and 
request for comments regarding the impact of the proposed rules on 
small rail carriers. Demurrage Liability, EP 707 (STB served May 28, 
2013). The Board received comments from two entities.
    Final Rules: We now adopt final rules based on suggestions made in 
the parties' comments and on the Board's review of the issues raised. 
We address below certain clarifications made in response to the 
comments received. Additional information is contained in the Board's 
decision. The full decision is available on the Board's Web site at 
www.stb.dot.gov.
    Are the Demurrage Rules Generally Applicable? In the NPR, we 
proposed rules governing demurrage that would allow rail carriers to 
impose demurrage liability on ``[a]ny person receiving rail cars from a 
rail carrier'' if the carrier had provided actual notice of the 
demurrage tariff to that person. Several commenters argued that the 
language of the proposed rule was too broad, and that we should clarify 
that it applies only to a narrow subset of receivers--namely, 
warehousemen.
    We do not believe that such a clarification is appropriate. It is 
true that much of this proceeding has focused on the liability of 
warehousemen. This is only natural, given that this proceeding was 
commenced after various courts drew differing conclusions about the 
liability of warehousemen for demurrage. The rationales behind these 
new demurrage rules, however, are generally applicable to all 
receivers. First, we stated in the NPR that, ``[b]ecause warehousemen 
and other third-party receivers are often not signatories to the bill 
of lading, we do not believe that the bill of lading should be the 
contract that establishes demurrage liability.'' NPR at 12. This 
rationale is equally applicable to other receivers (i.e., consignees) 
of rail cars, as it is the shipper (i.e., consignor) who creates the 
bill of lading prior to providing it to the rail carrier. Thus, we 
continue to believe that the bill of lading should not be the contract 
that

[[Page 21409]]

establishes demurrage liability, regardless of whether the receiver is 
a warehousemen or other consignee.\7\
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    \7\ Additionally, demurrage charges can accrue at loading, prior 
to the creation of the bill of lading. This is yet another reason 
why the bill of lading should not govern demurrage liability.
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    Next, we stated in the NPR that ``[o]ur proposed rule would . . . 
tie demurrage liability to the conduct of the parties directly involved 
with handling the rail cars and would advance the goals of Sec.  10746 
by permitting the carrier to impose charges on the party best able to 
get the cars back to the carrier.'' NPR at 13. In other words, after 
concluding that demurrage should no longer be based on the bill of 
lading, we concluded that it should instead be governed by a conduct-
based rule. Such a rule is as applicable to traditional consignors or 
consignees as it is to warehousemen.
    Finally, the NPR noted that tariffs play a different role today 
than they did in the past, when they were filed at the agency and 
parties were deemed to have constructive knowledge of their terms. NPR 
at 13. As a result, we concluded that ``a shipper or receiver of rail 
cars to whom the rail carrier has given actual notice of its own 
demurrage tariff will be deemed to have accepted the rail carrier's 
demurrage terms whenever it accepts the cars.'' Id. at 13 (emphasis in 
original). Again, the logic behind this rule is applicable to both 
warehousemen and other receivers. Because neither is deemed to have 
constructive notice of a tariff's terms now that the tariff is no 
longer filed at the agency, we concluded that any person receiving rail 
cars must be provided with actual notice in order to be held liable for 
demurrage.
    We therefore reject the requests to narrow the scope of these rules 
to third-party receivers. We also reject the requests to clarify that 
the demurrage rules we are adopting here provide an alternative legal 
basis for collecting demurrage in addition to the bill of lading. As 
stated above, we are adopting a conduct-based approach to demurrage in 
lieu of one based on the bill of lading. As such, part 1333 governs 
demurrage generally and 49 CFR 1333.3 will continue to refer to ``[a]ny 
person receiving rail cars.''
    Are the Demurrage Rules Applicable to Railroad-Owned and Privately 
Owned Cars? Several commenters point out that, although the NPR 
initially described demurrage as being ``a charge for detaining 
railroad-owned rail freight cars,'' the proposed rules themselves speak 
only of ``rail cars.'' NPR at 2, 20. We have been asked to clarify 
whether the rules are limited to railroad-owned cars or if they apply 
to privately owned cars as well.
    The final rules will continue to refer to ``rail cars,'' and we 
clarify here that this term encompasses both railroad-owned cars and 
privately owned cars when such privately owned cars are held on 
railroad property. This is consistent with Board precedent, which has 
previously stated that demurrage charges may be applied to privately 
owned cars when held on railroad property because such charges 
``compensate the railroad for use of its assets (i.e., the space on its 
track or at its yards), and they encourage more efficient use of 
freight cars on its system.'' N. Am. Freight Car Ass'n v. BNSF Ry., NOR 
42060 (Sub-No. 1), slip op. at 9 (STB served Jan. 26, 2007), aff'd, 529 
F.3d 1166 (D.C. Cir. 2008); see also R.R. Salvage & Restoration, Inc.--
Pet. for Declaratory Order--Reasonableness of Demurrage Charges, NOR 
42102, slip op at 4 (STB served July 20, 2010).
    To clarify that the goals of demurrage apply equally to railroad-
owned cars and privately owned cars when held on railroad property, it 
was suggested that the Board modify the end of the proposed rule at 49 
CFR 1333.1 to read as follows: ``To encourage the efficient use of rail 
cars and the rail network.'' We do not believe that such a change is 
necessary. Under the rule as written, when privately owned cars are 
held beyond the free time on railroad property, demurrage will apply 
both to ``compensate[ ] rail carriers for the expenses incurred [for 
the use of railroad assets]'' and ``to encourage the efficient use of 
rail cars'' on the railroad system. See Sec.  1333.1. Thus, we do not 
believe any change to the language of Sec.  1333.1 is warranted.
    Form of the Actual Notice: Several comments address what form the 
actual notice of demurrage tariff should take. Certain commenters 
suggest that actual notice be satisfied by the Board's issuance of 
these final rules in the Federal Register. We find such constructive 
notice to be inadequate, however. Although publication of this decision 
and the final rules should put parties on notice as to the general 
legal framework for demurrage, it will not put them on notice as to the 
specific terms of a rail carrier's tariff. Thus, to satisfy the actual 
notice requirement, the rail carriers must provide the demurrage tariff 
directly to receivers.
    Certain commenters ask that we clarify that a written or electronic 
notice with a link to the tariff online would satisfy the actual notice 
requirement. Some commenters agree that electronic or written notice 
with a link to the full tariff could qualify as actual notice, though 
suggest that, in order to qualify as actual notice, the communication 
would need to provide a summary of the material provisions of the 
tariff. We agree that it is not necessary to send the full terms of the 
tariff in order to satisfy the requirement, and that a link to the 
tariff in full could suffice. We decline, however, to decide at this 
time whether particular forms of notice are adequate or inadequate. 
Rather, the Board will, as appropriate, address any future arguments 
with respect to the adequacy of actual notice in the context of a 
specific factual dispute.
    It was also requested that the Board clarify that, in order to 
satisfy the actual notice requirement, rail carriers may provide a one-
time ``blanket notice'' to each customer, rather than having to provide 
actual notice with each delivery to the same customer. Assuming the 
adequacy of such blanket notices, several commenters then addressed the 
related issue of what responsibility, if any, rail carriers have to 
provide actual notice of changes to the demurrage tariff after the 
blanket notice has been issued. We agree that it is not necessary to 
provide actual notice with each and every shipment, and that a one-time 
``blanket notice'' would satisfy the requirement. We are not persuaded, 
however, by the argument that no further obligation should be imposed 
on the carrier after providing a blanket notice because, so long as the 
electronic link to the tariff remains valid, the receiver has the 
ability to learn of any changes. As we stated earlier, we reject this 
type of constructive notice in the demurrage context. If, after 
providing a blanket notice, a carrier makes material changes to the 
demurrage tariff, the carrier must provide actual notice of those 
changes to the receiver in order to hold the receiver liable for 
demurrage charges under the changed tariff.
    Method of Providing Actual Notice: In the NPR, we suggested that 
the actual notice should be provided electronically or in writing. NPR 
at 13-14 (citing Rate Disclosure, 1 S.T.B. at 159). Although there was 
little direct discussion of this requirement in the comments, several 
commenters appear satisfied that the actual notice should be provided 
in either electronic or written form.
    One commenter states that providing a one-time notice, with either 
the full tariff or a link to that tariff, may be burdensome to some 
small carriers, at least in part because some of the small carriers say 
that they do not know the identity of the receivers of the rail cars 
they handle. It asks the Board to carve out an exception for Class III 
rail carriers, and offers several suggestions, including a total 
exemption from the

[[Page 21410]]

actual notice provision, an exemption if the demurrage tariff is 
published on the Class III carrier's Web site, and a rebuttable 
presumption that the receiver was given actual notice or could have 
obtained such notice by accessing the tariff on the Class III carrier's 
Web site. But our rules are not absolute, by which we mean that they do 
not require the carrier to do anything; they simply say, as did the 
court in Groves, that a carrier may not collect demurrage from a party 
unless that party has first been given real notice of its potential 
liability. As a practical matter, a rail carrier that does not know the 
identity of its receivers cannot collect demurrage from those receivers 
today, so under the new regime such carriers will be in no different 
position than they are now. Finally, and most importantly, we are 
adopting these final rules in an effort to simplify the demurrage 
process and to provide uniformity in the area. These goals would not be 
met by creating different procedures for different classes of carriers.
    Thus, our regulation at 49 CFR 1333.3 will require actual notice of 
the demurrage tariff to be electronic or in writing. Consistent with 
the NPR, in which we saw no reason to depart from the directives 
governing the form of carrier communications responding to shipper 
requests for rates, we will add language mirroring that found in 49 CFR 
1300.3-4. Specifically, we are adding a sentence at the end of Sec.  
1333.3, which is set out in full in Appendix A, stating that ``[t]he 
notice required by this section may be in written or electronic form.''
    Other Notice Issues: We were asked to clarify that proof of 
delivery of the written notice is sufficient to establish proof of 
actual notice. In other words, a carrier need not prove that a receiver 
read the tariff so long as the carrier can prove that it delivered the 
tariff to the receiver. Black's Law Dictionary defines actual notice as 
``notice given directly to, or received personally by, a party.'' 
Consistent with this definition, we clarify here that proof of notice 
given directly to a party is sufficient to constitute ``actual notice'' 
under the rule.
    Some comments raise concerns about receivers who have renamed or 
restructured their company, arguing that carriers may not be informed 
when a receiver changes its corporate name or has restructured, and 
that such a receiver should not be able to avoid demurrage liability on 
that basis simply because the carrier does not provide an additional 
notice to the renamed or restructured company. One commenter proposes 
that we create a safe harbor for carriers, asking that a carrier be 
deemed to have provided actual notice so long as, prior to delivery, it 
mailed a copy of its current demurrage tariff to the street address of 
the rail-served facility. This proposal is meant to prevent a receiver 
from disclaiming liability if the actual notice is not addressed to the 
correct legal name of the receiver.
    Those concerns could arise in certain circumstances. It would seem 
inappropriate to allow the delivery of written notice to one entity at 
a particular street address to convey actual notice to all future 
entities at that address. But whether the renaming or restructuring of 
a corporate entity is sufficient to trigger the actual notice 
requirement appears to be highly contextual. We therefore decline to 
provide a bright line rule as to this issue, but rather find that such 
questions should be addressed in the context of a specific factual 
dispute.
    Constructive Placement: In the ANPR, the Board sought comment on a 
variety of matters to assist it in developing an appropriate way to 
allocate demurrage liability. Of the many issues on which the Board 
specifically sought comment, one pertained to how warehousemen or 
similar non-owner receivers could best be made aware that they were 
liable for demurrage charges. As part of that inquiry, it asked whether 
actual or constructive placement of rail cars constituted adequate 
notice to the receiver. ANPR at 7. After reviewing comments in response 
to the ANPR, we issued the NPR detailing a specific proposal under 
which receivers would not incur demurrage liability unless they had 
been provided written or electronic notice of the demurrage tariff, 
thus moving away from the concept that placement in itself might 
constitute adequate notice. Nevertheless, the placement of rail cars 
does play one role under our rules. We stated in the NPR that liability 
does not begin unless a car is placed at the receiver's facility or 
proper notice of constructive placement is provided to the entity upon 
which liability is to be imposed. NPR at 10.
    Certain comments on both the ANPR and the NPR suggest that 
constructive placement is a difficult issue for warehousemen. These 
comments argue that when warehousemen provide rail carriers with notice 
of reasonable operational constraints, which the carrier then 
disregards, it is unfair for a railroad to be able to claim 
constructive placement.
    As we stated in the NPR, however, these types of issues are outside 
the scope of this proceeding. NPR at 6 n.16. The Board sought comment 
in the ANPR on the viability of placement as a mechanism for notice of 
demurrage liability, not on the practice of constructive placement 
generally. Although our rules state that demurrage liability does not 
begin until actual placement or proper notice of constructive 
placement, we decline to elaborate on what would constitute ``proper 
notice of constructive placement,'' as placement issues were not the 
focus of this proceeding. Receivers are free to avail themselves of the 
Board's alternative dispute resolution options or to pursue a complaint 
with the Board if they believe that the collection of demurrage charges 
against them is an unreasonable practice as a result of particular 
placement issues. See, e.g., Capitol Materials, Inc.--Pet. for 
Declaratory Order--Certain Rates & Practices of Norfolk S. Ry., 7 
S.T.B. 576, 584 (2004) (unreasonable practice claim relating to, among 
other things, placement); R.R. Salvage & Restoration, Inc.--Pet. for 
Declaratory Order--Reasonableness of Demurrage Charges, NOR 42102 (STB 
served July 20, 2010).
    Avoidance of Disputes: We were asked to include a statement of 
agency support for mediation, arbitration, and the Rail Customer and 
Public Assistance Program for the resolution of demurrage disputes. We 
agree that demurrage is an area well-suited to alternative dispute 
resolution, which includes the informal mediation process conducted by 
the Board's Rail Customer and Public Assistance Program (RCPAP), formal 
mediation that attempts to negotiate an agreement resolving some or all 
of the issues in a dispute, and binding arbitration. In Assessment of 
Mediation and Arbitration Procedures, Docket No. EP 699 (STB served May 
13, 2013), we adopted new rules governing mediation and arbitration. 
Disputes related to demurrage charges are one of four specifically 
enumerated areas that the Board deemed eligible for voluntary binding 
arbitration. Although mediation is not so limited in its scope, we 
believe that demurrage disputes are equally well-suited to mediation, 
both formally pursuant to our regulations at 49 CFR 1109 and informally 
through RCPAP. The Board's mediation and arbitration procedures may be 
found at 49 CFR 1109.1-4 and 1108.1-13, respectively.
    Several parties also discussed the role of private contracts in 
avoiding demurrage disputes. Our rules specifically allow (but do not 
require) parties to enter into contracts pertaining to demurrage. The 
rules crafted here, though, are default rules only, meant to govern 
demurrage in the absence of a privately negotiated contract.

[[Page 21411]]

    Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980, 
5 U.S.C. 601-612, generally requires a description and analysis of new 
rules that would have a significant economic impact on a substantial 
number of small entities. In drafting a rule, an agency is required to: 
(1) Assess the effect that its regulation will have on small entities; 
(2) analyze effective alternatives that may minimize a regulation's 
impact; and (3) make the analysis available for public comment. 
Sections 601-604. In its notice of proposed rulemaking, the agency must 
either include an initial regulatory flexibility analysis, section 
603(a), or certify that the proposed rule would not have a 
``significant impact on a substantial number of small entities,'' 
section 605(b).\8\ The impact must be a direct impact on small entities 
``whose conduct is circumscribed or mandated'' by the proposed rule. 
White Eagle Coop. v. Conner, 553 F.3d 467, 480 (7th Cir. 2009).
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    \8\ The Small Business Administration's (SBA) Office of Size 
Standards develops the numerical definition of a small business. See 
13 CFR 121.201. The SBA has established a size standard for rail 
transportation, stating that a line-haul railroad is considered 
small if its number of employees is 1,500 or less, and that a short 
line railroad is considered small if its number of employees is 500 
or less. Id. (subsector 482).
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    In the NPR, the Board certified that the proposed rules would not 
have a significant impact on a substantial number of small entities. 
Nevertheless, by decision served on May 28, 2013, the Board issued an 
initial regulatory flexibility analysis (IRFA) and request for comments 
in order to explore further the impact, if any, of the proposed rules 
on small rail carriers. Demurrage Liability, EP 707 (STB served May 28, 
2013). The Board received comments from the American Short Line and 
Regional Railroad Association (ASLRRA), which conducted a survey of 
small rail carriers, and the Small Railroad Business Owners Association 
of America. Having reviewed the comments, we now publish this final 
regulatory flexibility analysis.\9\
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    \9\ Pursuant to the Small Business and Work Opportunity Act of 
2007, 15 U.S.C. 631 note, we are also publishing a Small Entity 
Compliance Guide on the Board's Web site at www.stb.dot.gov.
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Description of the Reasons That Action by the Agency Is Being 
Considered

    The Board instituted this proceeding in order to reexamine its 
existing policies on demurrage liability and to promote uniformity in 
the area in light of conflicting opinions from different circuits of 
the United States courts of appeals. The Board determined that it was 
necessary to revisit its demurrage precedent to consider whether the 
agency's policies accounted for current statutory provisions and 
commercial practices. This decision and the NPR both contain a more 
detailed description of the agency's historical regulation of 
demurrage, the conflicting opinions from the courts of appeals, and the 
Board's reasons for adopting the final rules.

Succinct Statement of the Objectives of, and Legal Basis for, the Final 
Rule

    The objectives are to update our policies regarding responsibility 
for demurrage liability and to promote uniformity in the area by 
defining who is subject to demurrage. The legal basis for the proposed 
rule is 49 U.S.C. 721.

Description of and, Where Feasible, an Estimate of the Number of Small 
Entities to Which the Final Rule Will Apply

    In general, the rule will apply to any rail carrier providing rail 
cars to a shipper at origin or delivering them to a receiver at end-
point or intermediate destination who wishes to charge demurrage for 
the detention of rail cars beyond the free time. See Rule Sec.  1333.3. 
The rule will apply to approximately 562 small rail carriers.

Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Final Rule, Including an Estimate of the 
Classes of Small Entities That Will Be Subject to the Requirement and 
the Type of Professional Skills Necessary for Preparation of the Report 
or Record

    The final rules require that rail carriers make certain third-party 
disclosures, i.e., provide persons receiving rail cars for loading or 
unloading with notice of the demurrage tariff, either electronically or 
in writing, in order to hold that person liable for demurrage charges. 
See Rule Sec.  1333.3. The Board is seeking, pursuant to the Paperwork 
Reduction Act, approval from the Office of Management and Budget for 
this requirement. To provide this initial notice, rail carriers wishing 
to collect demurrage from their receivers may need to update their 
demurrage practices to conform to the final rules to the extent that 
their existing practices conflict with the rules.
    In our decision requesting comments on the impact of the rules on 
small rail carriers, we estimated that small rail carriers had an 
average of 10 terminating stations and that the burden imposed would 
therefore be to provide 10 one-time notices. ASLRRA conducted a survey 
of small railroads regarding the impact of the rules in response to our 
request for comments. ASLRRA states that 55% of the respondents to its 
study have 25 or fewer customers. ASLRRA also stated that although some 
Class III rail carriers have the capability to provide written or 
electronic notice to their customers now, a subset of Class III rail 
carriers with either revenues of $2.5 million or less or a limited 
number of shippers would need to hire or equip personnel to undertake 
the task of providing notice of their demurrage tariff to their 
customers.
    ASLRRA's study also indicates that some small rail carriers 
identify as ``handling carriers'' and do not know who the receiver of 
the rail cars is. Of the carriers surveyed, 38% responded that they 
either never know the name of the receiver or agent or only sometimes 
do. To provide actual notice under the rules, and thereby make 
themselves eligible to collect demurrage from their receivers, these 
carriers would be required to know the identity of the entity to which 
they are delivering rail cars. Current practice allows handling 
carriers to receive rail cars from Class I railroads and deliver them 
to receivers without knowing the receivers' identity. This practice is 
not an impediment to providing actual notice, but instead may be a 
byproduct of the current demurrage system, as it is not necessary for 
the handling carriers to know the identity of the receiver, unless it 
intends to collect demurrage. Even under the current system, a rail 
carrier that does not know the identity of its receivers cannot collect 
demurrage, so under the new regime such carriers will be in no 
different position than they are now. Nevertheless, to provide actual 
notice under the final rules, such knowledge would be necessary, and 
handling rail carriers, if they do not know the identity of the 
recipient of the cars, may contact the Class I carrier to receive that 
information.

Identification, to the Extent Practicable, of All Relevant Federal 
Rules That May Duplicate, Overlap, or Conflict With the Final Rule

    The Board is unaware of any duplicative, overlapping, or 
conflicting federal rules.

[[Page 21412]]

Description of any Significant Alternatives to the Final Rule That 
Accomplish the Stated Objectives of Applicable Statutes and That 
Minimize any Significant Economic Impact of the Proposed Rule on Small 
Entities, Including Alternatives Considered, Such as: (1) Establishment 
of Differing Compliance or Reporting Requirements or Timetables That 
Take Into Account the Resources Available to Small Entities; (2) 
Clarification, Consolidation, or Simplification of Compliance and 
Reporting Requirements Under the Rule for Such Small Entities; (3) Use 
of Performance Rather Than Design Standards; (4) any Exemption From 
Coverage of the Rule, or any Part Thereof, for Such Small Entities

    Under the final rule, rail carriers are free to choose between 
providing notice electronically or in writing. In response to the NPR, 
many commenters suggested that notice could be fulfilled by providing a 
link to the notice, rather than the complete text of the notice of 
demurrage tariff. Additionally, some commenters also argued that a one-
time notice should fulfill the notice requirement, as opposed to 
providing notice with every shipment. As we explain earlier in this 
decision, we agree with both of these suggestions, which will minimize 
the burden on rail carriers.
    We considered establishing a different notice requirement for small 
rail carriers, or exempting small rail carriers from the notice 
requirement altogether, but rejected these alternatives because they 
would conflict with the primary goal of this rulemaking, which is to 
simplify the demurrage process in light of current practices and to 
promote uniformity in the area. To minimize the burden on small rail 
carriers, we did adopt several suggestions, described above. However, 
the goals of this rulemaking would not be met by creating an exemption 
for certain classes of carriers. Although ASLRRA's comments state that 
providing a one-time notice, with either the full tariff or a link to 
that tariff, may be burdensome to some small carriers, we believe that 
incorporating this relatively modest requirement into the carriers' 
regular business practices and customer communications will provide 
certainty in the event of a demurrage dispute. Thus, the procedures 
adopted here will provide notice in the event that a carrier wants to 
collect demurrage, which even today it can do only if it knows the 
identity of the party from whom it seeks to collect.
    Paperwork Reduction Act. Under the Paperwork Reduction Act (PRA), 
44 U.S.C. 3501-3520, and Office of Management and Budget (OMB) 
regulations at 5 CFR 1320.3(c), a disclosure requirement, such as the 
notification requirements in the final rule, falls within the 
definition of a ``collection of information,'' which must be approved 
by OMB. In the NPR, the Board sought comments pursuant to the PRA and 
OMB regulations at 5 CFR 1320.8(d)(1) and (3) regarding: (1) Whether 
the proposed collection of information is necessary for the proper 
performance of the functions of the Board, including whether the 
collection has practical utility; (2) the accuracy of the Board's 
burden estimates; (3) ways to enhance the quality, utility, and clarity 
of the information collected; and (4) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology, when appropriate. Comments relating to these issues are 
addressed above or in the Board's decision.
    The proposed collection was submitted to OMB for review as required 
under the PRA, 44 U.S.C. 3507(d), and 5 CFR 1320.11. OMB withheld 
approval pending submission of the final rule. As also required under 5 
CFR 1320.11, we are today submitting the collection contained in this 
final rule to OMB for approval. Once approval is received, we will 
publish a notice in the Federal Register stating the control number and 
the expiration date for this collection. Under the PRA and 5 CFR 
1320.11, an agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless the 
collection displays a currently valid OMB control number.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.
    It is ordered:

0
1. The final rules will be effective on July 15, 2014.
0
2. A copy of this decision will be served upon the Chief Counsel for 
Advocacy, Office of Advocacy, U.S. Small Business Administration.

List of Subjects in 49 CFR Part 1333

    Demurrage, Railroads.

    Decided: April 9, 2014.

    By the Board, Chairman Elliott and Vice Chairman Begeman.
Jeffrey Herzig,
Clearance Clerk.

    For the reasons set forth in the preamble, the Surface 
Transportation Board amends title 49, chapter X, subchapter D, of the 
Code of Federal Regulations by adding part 1333 to read as follows:

PART 1333--DEMURRAGE LIABILITY

Sec.
1333.1 Demurrage defined.
1333.2 Who may charge demurrage.
1333.3 Who is subject to demurrage.


    Authority:  49 U.S.C. 721.


Sec.  1333.1  Demurrage defined.

    Demurrage is a charge that both compensates rail carriers for the 
expenses incurred when rail cars are detained beyond a specified period 
of time (i.e., free time) for loading or unloading, and serves as a 
penalty for undue car detention to encourage the efficient use of rail 
cars in the rail network.


Sec.  1333.2  Who may charge demurrage.

    Demurrage shall be assessed by the serving rail carrier, i.e., the 
rail carrier providing rail cars to a shipper at an origin point or 
delivering them to a receiver at an end-point or intermediate 
destination. A serving carrier and its customers (including those to 
which it delivers rail cars at origin or destination) may enter into 
contracts pertaining to demurrage, but in the absence of such 
contracts, demurrage will be governed by the demurrage tariff of the 
serving carrier.


Sec.  1333.3  Who is subject to demurrage.

    Any person receiving rail cars from a rail carrier for loading or 
unloading who detains the cars beyond the period of free time set forth 
in the governing demurrage tariff may be held liable for demurrage if 
the carrier has provided that person with actual notice of the 
demurrage tariff providing for such liability prior to the placement of 
the rail cars. The notice required by this section shall be in written 
or electronic form.
[FR Doc. 2014-08454 Filed 4-15-14; 8:45 am]
BILLING CODE 4915-01-P