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Quick Guide to Railcar Demurrage and Private Car Storage

Updated: May 25, 2021

Contents:


Overview


The rail industry utilizes a demurrage and private car storage system to encourage the efficient use of railcars by all parties to maintain fluid networks.

Railroads incent customers to promptly move railcars from railroad tracks, load/unload them and then release them back to the railroad. While conceptually similar, all Class I and Short Line railroads have their own demurrage and storage rules and conditions. Details can be found within each of the railroads' tariffs.


Demurrage is a fee charged to the customer for the extended use of railroad owned or controlled railcars on railroad tracks or customer industry tracks beyond the free (credit) day(s) granted by the railroad. For many carriers, demurrage starts at 00:01 the next day after a railcar is constructively placed (made available to customer to order) or actually placed (when railcar is placed at customer's industry) by the railroad and ends when the customer releases it back to the railroad.


Private car storage is a fee charged to the customer for the extended holding of privately owned railcars on railroad owned tracks. For many carriers, charges for private car storage start at 00:01 the next day after the railcar is constructively placed - if customer is closed gate - and ends when the railcar is ordered for placement. Storage fees, typically lower than demurrage fees, will also be charged in the event that the customer can't accept the railcar due to space constraints. Unlike demurrage for railroad owned cars, privately owned railcars do not incur storage fees while on the customer's industry tracks.


Quick Guide to Demurrage
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Debits and Credits


Most railroads calculate demurrage on a debit and credit system.


Credit days are "free" days granted to the customer to load or empty a railcar. While most carriers grant one or two days credit, the number of credit days offered varies not only by railroad but also by car ownership (railroad vs private) and load or empty status. Make sure you understand your serving carrier's rules and regulations.


Debit days are the number of days that a railcar is on the demurrage clock waiting to either be placed at a customer's facility or sitting at a customer's siding.


At the end of the month, credit days and debit days for loaded cars are totaled to determine what the customer's demurrage liability is. Credit days and debit days for empties are also totaled but in a separate account.


Total debit days minus total credits equals the number of chargeable days. The total demurrage amount owed by the customer is calculated by multiplying the number of chargeable days by the applicable daily demurrage or car storage rate. If total credit days exceed total debit days, no charges apply.


Most railroads bill at the end of the month and credit days do not carry over to the next month.


Example calculation where customer during month of May handled 8 cars that earned 1 credit each while accruing 15 debit days on other cars; daily demurrage charge is $125:


15 debit days - 8 credits - 7 chargeable days x $125 = $875


 

Key Terms


Closed Gate – Facility where railroad delivers cars only when they are specifically ordered by the customer; also called order-in.


Credit – "Free" day allocated to customers to load or unload railcars.


Cutoff Time – The designated time prior to a service window that the customer needs to submit instructions to the railroad in order to receive a switch during that window.


Debits – Demurrage days used in credit/debit demurrage calculation.


Demurrage – A fee charged to the customer for the extended use of railroad owned equipment beyond the credit (free) days granted by the railroad.


Demurrage Day – A 24 hour period, or fraction thereof, commencing with many railroads at the first 0001 or 0000 after placement or tender; may also be referred to as "Debit".


Open Gate – Facility where railroad delivers cars upon arrival, up to the facility’s loading/unloading capacity; also called spot-on-arrival.


Order-In-Customer – Customer whose rail cars are not placed at facility for loading or unloading until customer gives railroad placement instructions.


Private Car Storage - A fee charged to the customer for the extended holding of privately owned equipment on railroad tracks.


Service Window - The designated block of time within a service day that the railroad anticipates it will physically pull and place a customer’s cars.


Serving Area – The location where cars are held prior to placement at the customer’s facility.


Spot-On-Arrival Customer – Customer whose rail cars are placed at facility for loading or unloading upon arrival without placement instructions; also called open gate.

 

Key Car Events


Constructive Placement (PCON) – Date car arrives at destination serving area and is made available to the customer but railroad cannot place them due to reason attributed to the customer.


Ordered for Placement Date (ORPL) – Date a closed gate customer wants cars to be placed for loading or unloading.


Actual Placement (PACT) – Date car is physically placed for loading or unloading on a customer’s private track or another point designated by the customer.


Released Empty (RMTY) – Date railroad receives notification from customer that car is empty and available for pick-up.


Released Loaded (RLOD) – Date railroad receives notification from customer that car has been loaded and available for pick-up.


Pulled from Patron Siding (PFPS) – Date car is physically pulled from customer siding.

 

How to Manage Demurrage and Private Car Storage Charges


PLAN:

  • Read and understand your serving carrier's tariff rules and regulations

  • Coordinate with shippers and receivers to avoid too many cars in pipeline

  • Ensure all shipping documents are submitted accurately and in a timely fashion

MONITOR:

  • Proactively track the flow of inbound traffic to your facility

  • Monitor dwell times and key events including switching activities and when cars are constructively placed, ordered, actually placed, released and pulled

MANAGE:

  • Order constructively placed cars as soon as possible

  • Release railroad owned cars as soon as they are emptied/loaded

  • Unload railroad owned cars before privately owned cars

MEASURE:

  • Track and record your serving carrier's performance metrics

  • Analyze cycle times to right-size car fleet

  • Calculate your demurrage costs and accruals daily

REVIEW AND RESOLVE:

  • Carefully review all demurrage invoices and audit for accuracy

  • Submit disputes timely and with sufficient documentation

 

Demurrage Calculation Examples


EXAMPLE 1:


Customer: Open Gate / Spot on Arrival

Car Type: Railroad Owned

Service: Monday-Friday





Events:

Actual Placement on the 10th ("free" day)

Demurrage clock starts on the 11th

Release sent on the 17th

Total Demurrage Debit Days = 7


EXAMPLE 2:


Customer: Closed Gate / Order-In

Car Type: Railroad Owned

Service: Monday-Friday




Constructive placement on the 10th ("free" day)

Demurrage clock starts on the 11th

Order for placement on the 17th, demurrage clock stops

Placement at Industry on the 19th

Demurrage clock resumes on the 20th

Release sent on the 25th, demurrage clock stops

Total Demurrage Debit Days = 13



Quick Guide to Demurrage
.pdf
Download PDF • 17.18MB




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