Rail Demurrage Issue for IWLA

Railroads are trying to charge warehousemen demurrage charges which should not be charged to them because they are not a party to the transportation contract, said Marc Massoglia, president of Compass Trade and Distribution. This led other members of the committee to express concerns that efforts to collect those demurrage charges from their shipper customers could strain the business relationship. Simply paying the charges was not an option, said other members, because the warehouse logistics operator would be unable to recover those costs.

The “demurrage clock” starts at the first 12:01 a.m. after the car is placed, says Massoglia. Railroads had applied an averaging rule that balanced cars turned quickly, within the two-day allowance, against cars that were held beyond the “free” time. Often, this practice resulted in no charge against the warehouseman. But, says Massoglia, the Burlington Northern Santa Fe (BNSF) and Canadian National dropped the averaging practice. The resulting charges the railroads are trying to levy against the warehousemen have become a significant issue for IWLA members because they are now faced with the need to pass that unexpected cost back to the shipper.