On April 11, 2014 the U.S. Surface Transportation Board (STB) issued its final demurrage rules (the “rule”)  establishing the circumstance under which public warehouse operators and others will be liable for demurrage charges.

The STB Demurrage Rule imposes liability for demurrage charges on the receiver of the rail car without regard to whether the receiver is identified on the bill of lading as the consignee, consignor, the care of party or some other designation.

The rule provides in relevant parts as follows: Any person receiving rail cars from a rail carrier for loading and 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 written or electronic.

Top Areas of Concern

1. The rule eliminates current defenses that warehouse operators currently have to avoid liability including, no identification on bill of lading as consignee and advance notice to rail carriers that the warehouse is an agent.
2. The rule does not address constructive placement and bunching issues which are a significant cause of demurrage liability. The rule states both constructive placement and bunching “are best addressed in the context of individual disputes” presumably to be resolved through the STB’s dispute resolutions process discussed below.

Recommendations for Avoiding Demurrage Liability
The STB noted that it “has regulatory authority to ensure that demurrage practices are reasonable” and that the rule is a default rule which is “meant to govern demurrage in the absence of a privately negotiated contract.”

The IWLA Transportation Council supports the following recommendations in avoiding demurrage liability under the current rule:

• Negotiate an actual placement agreement with your rail carrier. Such an agreement should address a warehouse operator’s operational constraints and reasonable requirements regarding the receipt and release of the rail cars.
• Absent an actual placement agreement the public warehouse operator, upon receipt of the rail carrier’s written or electronic notice of the rail carrier’s demurrage tariff, should send the rail carrier a letter articulating all the reasonable operational constraints and other reasonable requirements it has regarding the placement and removal of rail cars including: days and time for placement, manner of notification of placement, limitations on the number of cars placed at an given time etc.
• Public warehouse operators should address responsibility for demurrage charges in their storage agreements with their customers. IWLA’s Standard Contract Terms and Conditions address the circumstances under which the public warehouse operator will be liable for demurrage charges and state generally that the public warehouse operator is only liable for demurrage if such charge was caused by the public warehouse operators failure to exercise reasonable care.

For more information regarding the ruling, the challenges and details on these recommendations, read the full article. – John F. Horvath, partner Horvath & Weaver P.C.