another educational but interesting video! Demurrage charges also apply to shipping companies when they don’t pickup & remove their intermodal containers from the railroad’s terminal within a specified time period
It gets really interesting with large unit train blocks like coal and grain and claims by shippers/receivers of equipment availability and loading/unloading. Lawyers have built full time practices around this friction. 🛤️
To give you some idea of the savings made in car accounting as a result of computerization, when B&O (JUST B&O, not CSX) was doing car accounting by hand in the 1950s, there were roughly 9,300 people in Car Accounting. They pretty much filled up a nine story building in Baltimore. After car accounting was computerized, the number of people fell from 9,300 to about 400.....and B&O vacated and sold the building where they had worked. Two additional facts. B&O was the first non-governmental industry to have their own computer, pieces of which are now in the Smithsonian museum. Second, the reports to the computer to keep track of car accounting served as the basis for railroad system that told customers where their shipments were, and otherwise provided the basic data that supports all rail computer information systems today. Good job Killer Bee !!
Hi Bob!! I try to make these 5 minutes...the last two have gone 10...and this one was originally 15 before I took the scalpel to it. So much to say... Thank you for your comments.
So glad that you explained the distinction between these two rail industry terms, given that in the rail and the trucking sectors - it may mean slightly or considerably different things. This may be partly responsible for the often misuse by lamen that you referenced at the beginning. Trucking demurrage and _detention_ have some conceptual parallels, but they are indeed different. Excellent video. 👍🏿 Cheers
Thank you and yes, it drives me nuts to always hear someone say that one railroad pays another demurrage on a car. My little campaign to clarify the terms.
If I had more time I would have gone into all the gyrations you had to go thru - like having to recalculate demurrage to account for cars run around "for railroad convenience" and bunching, two name two scenarios a sharp traffic manager will call you out on.
I remember the freight agents located at offices ( old passenger stations) along the different subdivisions as they kept their local customers ( industries ) happy and I remember the bands of waybills being handed off and grabbed on the fly and you mentioned 1985 which was right around the start of major changes, abandonments, cabooseless operations started, reduced crew size all in that 80d’s period of “ reaganomics “ , folks this time period saw a lot of “ loss traffic “ and the economy stunk with savings accounts and cd’s paying 13% hard times …. Let’s not forget Dick Cheney’s muffing up the UP-SP merger in the early 90d’s, a-lot of trains were lost and parked because they didn’t plan ahead….I will say Cheney ( after he was in the whitehouse ) did get the retirement age down to 60 so the higher tier’d employees ( like myself ) that way with the two-tier pay system the older employees could retire earlier and not 62…40 years of changes I experienced and now on pension, alls good ….👍
The advent of computers on the RR was the death knell of RR clerking. I can remember the old days when I would walk from the caller's office at the CNW's Proviso administration building (now torn down) to the break room and you would have to pass a platoon of clerks keeping track of and sorting paper waybills. The walls were lined with small sorting "cubby-holes" (I assume those were destinations for cars). It did not take long for all of those clerks to disappear. At the end of my career as a hogger, I think there was only ONE clerk left at Proviso and his job only entailed keeping Proviso yard offices supplied with boxes of computer paper and other supplies. I saw so many changed in my 40 year career. And it ain't over! More changes are on the way I am sure.
I started "downtown" with CNW in 1981. Would get out to the old ad building at Proviso now and them. Knew most of the Chief Clerks, Booking Desk, Inbound, etc. then.
Also worth noting that TTX is, in turn, owned by a bunch of the major railroads. They formed the company to pool cars and increase efficiency. For example, if someting is shipped in a CSX box car from New York to California, that car needs to be routed immediately back to CSX and will go back across the country empty. But if it's a TTX car, it can just be sent empty to the nearest place that needs it, and loaded again.
A good video. The aspect of demurrage that always was confusing was free time and subsequent charges. That led to many disagreements in the rate staff.
My wife was a clerk for CNW way back when and had to argue demurrage bills with customers. Bunching, run arounds, missed days of service, car substitution for railroad convenience, acts of God - all points that customers would raise and argue.
I used to track demurrage of compressed gas cylinders. We used multiple types for atmospheric testing. It turned out that the suppliers had sloppy accounting, so they were billing us for cylinders we had already returned, and not billing for some that we had. Areal nightmare…
A very interesting but complicated topic to understand to the laymen. So if I own say 5 grain hoppers as a private car company, and offer them up for use, I only get paid when they are moving and loaded and when empty or stored at a customer or yard I get nothing? So as a private car company, do I try and find customers to use my cars, like say a local grain elevator near me or does the railroad take them in as part of their car pool and use them as needed? How do I get my car moving again in loaded service if there is no incentive for a end user or the railroad to get it back to me?
Unfortunately I need to keep the videos on the brief side so I don't lose my audience...but that means just giving a quick description. So I will try to elaborate. There are car leasing companies who acquire new railcars and then lease them out, to both rail shippers and the railroads themselves. GATX, Greenbrier, and Wells Fargo Rail are three large examples. As a railcar is a 50-year asset, many parties do not want to take on the risk of acquiring them themselves. If say you are a rail shipper and need cars of your own because it might be a car type that the railroad doesn't supply like a tank car or a plastic covered hopper, you would go to a car leasing company. They will lease you the cars for $XXX a month. The amount ebbs and flows depending on what the market for that car is like. A few years ago when frac sand was going gangbusters by rail, small cube covered hoppers were hard to get and the monthly lease charge was high. After the rail market for moving it crashed and the cars became surplus, the monthly lease charge came way down. Also, there are two kinds of leases. One lease is where you as the lessee agree to take on maintenance responsibility for any needed repairs to the car, pay taxes on the car, etc. This will get you a lower monthly lease charge then if you don't want to be bothered. If this responsibility stays with the car leasing company, your monthly lease charge will be higher. Oh yes - the mileage charges that the railroads pay (if in fact they still pay on the move) will go to the car owner but a split can be negotiated. To hopefully answer your question, if you own 5 grain hoppers, they will most likely be "private" or "X" cars - a car whose reporting mark ends in "X" because it is not a car owned by a railroad. These cars only earn mileage. So if it is sitting still, it is not earning anything. Well...not entirely correct, as you would be paying or charging a monthly lease charge. People have their own cars for different reasons. Railroads do not supply tank cars, so any tank car shipper has to go secure his own cars (from a car leasing company). A lot of plastic pellet shippers own their own cars. Their business model is to use the railcars as sitting inventory. Big grain shippers who load 100-car unit trains may have their own cars so as to be assured they will have cars to load and not have to depend on the railroad maybe or maybe not being able to supply cars during the harvest season when car supply tightens up. Clear as mud?
@@killerbee6310 Thanks!! That does add more clarity to the whole thing. So who is responsible to clean out the car when it has been unloaded and is ready for re-use for car leasing companies or private car owners? What if it breaks down along the rail line? How does the leasing company get it fixed?
If a car needs a "running repair" - a repair necessary to ensure its safe movement - the railroad who has the car will repair it. They then bill the car owner. The repair rate for any task is set by the AAR. Same as when you take your car to the dealer for repairs and they have set rates for each task. If the repair is to other parts of the car - such as the top hatch or a valve or an outlet gate, etc, the car will be directed to a car shop. Some of the bigger car leasing companies operate their own car repair facilities, and those that don't will direct the car to a contract car shop. Unlike a railroad marked car that can go to anybody, private cars usually go back to the same loading point and get shipped to the same receivers. So residue in the car from its prior load might not be that big a deal because the same product is getting loaded in the car. Not until the car's lease ends and it gets returned to the car leasing company would it need to be cleaned out thoroughly. Now of course there are always exceptions - I am waiting for one to be pointed out - LOL.
If you own 5 grain cars and want to lease them out you would have to find a leasing company or customer willing to pay you a flat rate per car per month. The rate will vary based on demand, age and other factors. The railroad will take the cars into a pool on behalf of a customer. But when that lease terminates you may end up owning railcars no where near where you want them to be. Moving empty railcars can be expensive. There used to be a business assocaited with private individuals owning railcars as an investment but that is very rare now
@ 9:02... yea demurrage fees are hot topic among rail customers... just read an article penned by the president of the National Association of Chemical Distributors from 2019... he was complaining about the demurrage fees and quoted a COMBINED grand total of $761.5 MILLION in demurrage fees collected in 2018 by CSX, UP, BNSF and NS... also there is a practice railroad do called BUNCHING where from what i understand, the railroad will dump on a customer way more cars than they can unload... this creates a demurrage situation (and an intra plant switch situation to)... the main issue with all of this is the there is a huge element of CAPTIVE CUSTOMER associated with railroads and some of their customers... customers like grain shippers and coal fired power plants are at the mercy of the railroads... grain shippers in particular are notorious for having CONSTANT rate fights with the railroads... the railroads do act like "collectors" for the mob... the only thing missing is a couple of gorillas in those velour track suits with baseball bats
Railroads used to make demurrage allowances for bunching but some no longer do. Say a shipper releases the same number of cars every day to a receiver - and never any more cars then the receiver can handle. Inevitably at some point one days worth of cars will miss a connection while en route and the next days cars catch up to them. Both sets of cars now arrive together. The receiver can only take in some of them, so the remainder held out get CP'ed (Constructively Placed) and demurrage begins for them. As it is up to the customer to dispute any demurrage, the onus is on him to say "hey - bunching" and once upon a time the railroad would make allowances for the said cars. (Either by cancelling the CP or by issuing credits to offset the debits that build up) But now the customer is told - sorry - you gotta manage your pipeline better. Huh??
@@killerbee6310 *sorry you gotta manage your pipeline better* HA that sounds like the standard railroad response... but can a customer add an addendum to their rail agreement that sets the maximum number of cars to be spotted at their facility at any one time, to head off a potential bunching situation?... sheesh talk about operating in bad faith
In the old days when you placed cars on interchange tracks, the receiving railroad would refuse the car in interchange and car hire stayed with the delivering road. But now with so many run thru trains or direct deliveries into the receiving roads yards, you are kind of stuck with the car. If it is just a regular running repair the RIP track can knock out, you just pay the car hire. If the car cannot be moved and you have to order and wait on materials required to fix the car, I believe you can reclaim the car hire.
Sure appreciate the for instance details of charges on these videos. Even if only close, it gives you a reference for the cost of moving freight and the economics or railroads. Demurage charge of $200/400 a day, wow. So does the charge stop when you call and say pickup the car, or when the RR gets around to it?
Well, that is a sore point with customers. When you release the car back to the railroad (empty or loaded), the demurrage clock stops ticking, as we say. We had a branch line with once a week service. Obviously the customers knew this. But if they didn't have the car unloaded after two days, demurrage would start. They were always like "but what does it matter - your're not coming for 5 more days". Rules are rules....
Demurrage stops on the date and time the customer notifies the railroad that they are finished with the car and that the railroad can come and get it. If the railroad does not sent a crew to pick up the car for a couple of days there is no demurrage charges for the car for those two days. The calculation stops at "release".
Killerbee, love your videos. Do consignees who don't use railroad owned cars have deals in place with their shippers that are similar to demurrage? Like if they dont release the car in X number of days they have to pay a rate? I ran into a customer that unloads ethanol that complained about a 14 day grace period, but they were all lease cars.
Some customers have that. Some don't. I was totally dumbfounded a little while ago when I talked to a large plastic shipper who has thousands of cars and found out they didn't charge their receivers who sit in cars for weeks. But then, that is their business model.
One point you forgot for private cars. The customer has to have enough private track or leased track from the railroad. Or cars will be CP'd and charged demurrage until placed on Customer track. Unless they have changed the rules when I was a demurrage clerk back in the 1970's and 80's...
8:34 "In 1985, the ICC permitted rail carriers to set their own demurrage rules. So, kind of a free-market approach." But it's not a free market. In almost all cases, a customer can't choose which railroad serves them. If I don't like supermarket A's prices, I can shop at supermarket B. If I don't like Railroad X's demurrage rates, it's not like I can move my factory to Railroad Y's tracks.
What I meant was from the railroads perspective it was now kind of a free market because they were no longer so bound by regulation but could set their own demurrage rates, etc.
You are right...but that's not the full story. The new flexibility in setting rules enables the railroad to reduce the demurrage rates or grant extra free time so as to win traffic back from trucks (or any other competition). For example, under the old rules the railroad was unable to reduce the rate or say certain days were free. That may mean a boxcar unloader who could only unload at a specific pace was bringing in product by truck as they could not avoid demurrage. But the railroad could now give them 48 extra hours (or reduce the rate just to cover car hire). So while it may not be 'free market' the flexibility can be very useful. So while you cannot move your factory, if the railroad reduce the daily penalty day to $20 then maybe you continue to use rail (or order larger quantities)
I have a question I’m hoping you can help me with. That job I had in high school unloading boxcars. We would get loads of raw product from the west coast which would come to us in Southern Pacific cars but were delivered to us by C & O. Once the car was released for pickup, would that car deadhead empty back to the west coast or would it be assigned a load that was headed that way? Say in Chicago? Like the trucking industry does with brokers. Thanks!
It depends on the exact type of car and what time period and whether the car was assigned to a pool or not. As time has gone on and railroad systems have gotten bigger, reloading of other railroads cars has diminished. What you can do with an empty car is governed by the car service rules. There were the Car Service Rules (CSRs), Car Service Directives (CSDs) and Special Car Orders (SCO's). I spent from 1981 to 1994 as a Car Distributor, so had to know how to apply the rules so I would know what cars I could pick off to reload and what cars I could not and how to properly send unneeded foreign empty cars home. Boxcars have Mechanical Designations (See my "How to Read a Boxcar" video). A plain, generic boxcar with nothing special inside it for general commodities loading is an "XM". Cars that have their interiors with special devises such as interior bulkhead doors or belt rails installed in the walls to permit the hanging of crossbars are "XL". Cars coated on the inside with a white epoxy lining to permit the loading of packaged food (boxes of cereal, etc) are "XF". There were also XP cars. If a car was an XM, you could reload it. But if it is was any other mechanical designation, it had to go back home empty. If it was assigned to a pool, it had to go back reverse of loaded route. If it was not assigned to a pool, it had to go home either reverse of loaded move or back to the owning road at your closest junction to it. XM cars could not be assigned. Before my time, it was even more liberal and reloading was more commonplace. I might have a few details wrong but that is the gist of it. I went back into Car Management for a few years around 2010 and the computer took care of everything. The "kids" that were my fellow car fleet managers had no clue car service rules existed. One other thought. The philosophy of a specific railroad would also have a bearing. I was with C&NW at first and they were very aggressive at trying to maximize car hire earnings. So not reloading other railroads cars but getting them off line as fast as possible once empty was the plan. We wanted to load everything in our cars and collect the car hire. We would even switch out entire empty grain trains to separate the low per diem earning cars from the high per diem cars. All the high per diem earning cars would be put together and be spotted at an elevator that was loading the train to an off line point, such as the Gulf. Low per diem cars would get spotted for loading where the train was staying on line, like going just to East Clinton or Chicago. Lots of neat little twists to this subject but not enough time to put all in a video.
For special cars, ie HD depressed center flats, the rate may be as high as $10/hour.. Refusing to pay mileage on private cars is a double edged sword. Sure, you may save a few bucks on the mileage, but big shippers will use RR owned cars instead. One railroad I worked for did this. I couldn't get management to understand that I'd rather pay the owner ( shipper ) $6 or so for their cars than the UP $600 for theirs.
I appreciate this video, but I still don't really understand it. It's obviously very complicated. I also wonder about container shipping rates. Does it cost the same ship an empty container as a loaded one? I also wonder how rail car location is tracked, especially given that most car markings are covered by graffiti these days.
Railcars have transponders on them that are read by the railroad's wayside readers. Kind of like when you drive on a toll road and drive under or through the readers. GPS is being experimented with also, but that is more for shippers knowing where their cars are. Containers gets complicated because you have domestic ones and international ones. Domestic container owners try very hard to have them reloaded as close to their unloading point as they can. International containers have a sizeable percentage go back to Asia or wherever empty. The railroads usually charge the steamship lines (who own most of the international containers you see here) to move them back to the ports. That said, anybody else please elaborate on this point.
The crews know what is in their train and in many environments make the moves in an on-board system. Other crews turn in the paperwork to "clerks/agents" who input the data into computer systems. Graffiti can at times be a pain for crews but it's rare.
I had a high school job of unloading boxcars in the 1970s. Sometimes the boss would make us work way into the evening so they wouldn’t have to pay “rent” I assumed for another day. Sometimes the railroad wouldn’t pick up the empty car for a couple days. Who paid while it was sitting empty on our siding?
Ah, another point of discontent. Once the customer notifies the railroad the car is released (as an empty or a load, whatever is the case), the "demurrage clock stops ticking". Customers get upset that they have to hurry up and unload a car to avoid demurrage, knowing the train only runs, say, twice a week and won't be back for a few days. Some brave customers report a car released when in fact it isn't, knowing the train won't be back for a few days. I have known customers to get caught doing this when the railroad sees the cars released and makes an extra trip to grab them. Opps.
@@killerbee6310and then there are surcharges. Where I live there was a grain elevator that was the last customer on a short line. The railroad threw on a 1200 surcharge on each car. Forcing the elevator to give up rail service and the railroad got to abandon that stretch of track.
@@killerbee6310 I had a elevator release 15 cars to me on a Friday afternoon and I new good and well they had not loaded them. I had a job running on the branch as an extra so I sent them over to pull the cars. Crew arrived and called and told me the cars were indeed loaded. So we pulled them. Turned out they were indeed loaded but they had not been graded. The elevator operator wasn't very happy with us but he couldn't do much more than shout at me the next time we had a beer together. He had to drive the grader to a point he could catch up to the cars. This story dates me a bit
Another possible video topic. Railroads pay horsepower hours to each other - in your example CN would pay the BNSF the horsepower of the locomotive multiplied by how many hours it is on CN. Now keep in mind undoubtedly there are also CN engines on BNSF at the same time. So it gets netted out. And how do you pay back a horsepower hour if you owe someone? A lot of times you loan them your locomotives to "pay back horsepower hours". Or there is also a monetary value to a horsepower hour and you can "write a check". Little itty bitty maintenance issues will be swallowed by the user but if there is a major issue or if the engine is due its 92-day test, they get sent home (back to the owning road). Whoever is using the engine fuels it just like it was their own. If a railroad is short of power, they may hang onto foreign power so they can run their trains. But that means someone isn't getting their power back, causing them to get short, so in turn they start hanging onto foreign power. This used to happen a lot when winter hit...then come spring when operations smoothed out, everybody would send the foreign power back home. ("Get rid of all those foreign engines - we're running up a horsepower hour deficit").
I've heard it phrased both ways....and also head the word 'car hire'. For example, what's the hourly per dee-um rate on that car. Of you may ask...What's the car hire on that car
im a truck driver, the railroad is the only business that will take it's lines out aka csx. They can't compete no one want car to truck it either train to train or they will leave it on a truck instead. Besides shipping containers. I really don't understand the railroads approach to it. Csx tore our line out put all their eggs into coal. That's been dying since the 90s. I really don't understand why you would cut yourself out of a market. Trucking companies will answer the phone tell you where the load is at what time and everything. Hell I've had a customer call me and ask that I tarped up the windshield on a tractor I was hauling. I'm all for the railroad but the cutting corners mile long trains in my town. What happened in Ohio I'm not okay with.
YOU'LL NEVER HAVE IT STRIEGHT. TILL YOU ALL LEARN TO USE WORDS THAT MAKE SENSE.😂 Demurrage has multiple meanings, including a charge for delayed cargo or currency ownership costs Shipping Demurrage is a charge for keeping cargo at a terminal for longer than the allotted "free time" period. This free time is a grace period for loading or unloading cargo without extra fees, and is usually two to seven days. Demurrage fees are charged per container, per day, and are based on the carrier, terminal, and warehouse. The consignee is usually responsible for paying the demurrage charges before receiving their goods. Vessel chartering Demurrage is the period when a charterer keeps a vessel after the normal time for loading and unloading cargo is over. The charterer then pays the ship owner for the delayed operations. Currency Demurrage is a cost associated with owning or holding currency. For example, the Islamic system of zakat is a form of demurrage that applies to unused assets on an annual basis. SO YA I JUST GOOGLED IT REAL QUICK. SHORTER THAN YOUR VIDEO.❤😂🎉
This video was specifically relating to demurrage in North America for railcars. This video did not concern itself with containers, vessels, currency exchange etc.
another educational but interesting video! Demurrage charges also apply to shipping companies when they don’t pickup & remove their intermodal containers from the railroad’s terminal within a specified time period
Yes, always an irony. Shippers say they want "service" but then they let their loads sit at the ramp.
It gets really interesting with large unit train blocks like coal and grain and claims by shippers/receivers of equipment availability and loading/unloading. Lawyers have built full time practices around this friction. 🛤️
To give you some idea of the savings made in car accounting as a result of computerization, when B&O (JUST B&O, not CSX) was doing car accounting by hand in the 1950s, there were roughly 9,300 people in Car Accounting. They pretty much filled up a nine story building in Baltimore. After car accounting was computerized, the number of people fell from 9,300 to about 400.....and B&O vacated and sold the building where they had worked. Two additional facts. B&O was the first non-governmental industry to have their own computer, pieces of which are now in the Smithsonian museum. Second, the reports to the computer to keep track of car accounting served as the basis for railroad system that told customers where their shipments were, and otherwise provided the basic data that supports all rail computer information systems today. Good job Killer Bee !!
Hi Bob!! I try to make these 5 minutes...the last two have gone 10...and this one was originally 15 before I took the scalpel to it. So much to say... Thank you for your comments.
very interesting thanks
Robert, thank you for that.
So glad that you explained the distinction between these two rail industry terms, given that in the rail and the trucking sectors - it may mean slightly or considerably different things. This may be partly responsible for the often misuse by lamen that you referenced at the beginning. Trucking demurrage and _detention_ have some conceptual parallels, but they are indeed different. Excellent video. 👍🏿
Cheers
Thank you and yes, it drives me nuts to always hear someone say that one railroad pays another demurrage on a car. My little campaign to clarify the terms.
I was a car hire/demurrage clerk for about 10 years. It is a very intense line of work.
If I had more time I would have gone into all the gyrations you had to go thru - like having to recalculate demurrage to account for cars run around "for railroad convenience" and bunching, two name two scenarios a sharp traffic manager will call you out on.
@@killerbee6310I will have to give this a relisten about 3× to get the concepts.. Man
I remember the freight agents located at offices ( old passenger stations) along the different subdivisions as they kept their local customers ( industries ) happy and I remember the bands of waybills being handed off and grabbed on the fly and you mentioned 1985 which was right around the start of major changes, abandonments, cabooseless operations started, reduced crew size all in that 80d’s period of “ reaganomics “ , folks this time period saw a lot of “ loss traffic “ and the economy stunk with savings accounts and cd’s paying 13% hard times …. Let’s not forget Dick Cheney’s muffing up the UP-SP merger in the early 90d’s, a-lot of trains were lost and parked because they didn’t plan ahead….I will say Cheney ( after he was in the whitehouse ) did get the retirement age down to 60 so the higher tier’d employees ( like myself ) that way with the two-tier pay system the older employees could retire earlier and not 62…40 years of changes I experienced and now on pension, alls good ….👍
The advent of computers on the RR was the death knell of RR clerking. I can remember the old days when I would walk from the caller's office at the CNW's Proviso administration building (now torn down) to the break room and you would have to pass a platoon of clerks keeping track of and sorting paper waybills. The walls were lined with small sorting "cubby-holes" (I assume those were destinations for cars). It did not take long for all of those clerks to disappear. At the end of my career as a hogger, I think there was only ONE clerk left at Proviso and his job only entailed keeping Proviso yard offices supplied with boxes of computer paper and other supplies. I saw so many changed in my 40 year career. And it ain't over! More changes are on the way I am sure.
I started "downtown" with CNW in 1981. Would get out to the old ad building at Proviso now and them. Knew most of the Chief Clerks, Booking Desk, Inbound, etc. then.
Also worth noting that TTX is, in turn, owned by a bunch of the major railroads. They formed the company to pool cars and increase efficiency. For example, if someting is shipped in a CSX box car from New York to California, that car needs to be routed immediately back to CSX and will go back across the country empty. But if it's a TTX car, it can just be sent empty to the nearest place that needs it, and loaded again.
Next Load, Any Road
CSXT owns free-running boxcars. Hundreds of them. Once they are empty the road that has them can reload a CSXT free runnig car.
Had no idea what either of these were. Now I know. Thank you for the informational video. 👍🏻
My pleasure. My goal is to educate and entertain.
A good video. The aspect of demurrage that always was confusing was free time and subsequent charges. That led to many disagreements in the rate staff.
My wife was a clerk for CNW way back when and had to argue demurrage bills with customers. Bunching, run arounds, missed days of service, car substitution for railroad convenience, acts of God - all points that customers would raise and argue.
I used to track demurrage of compressed gas cylinders. We used multiple types for atmospheric testing. It turned out that the suppliers had sloppy accounting, so they were billing us for cylinders we had already returned, and not billing for some that we had. Areal nightmare…
A very interesting but complicated topic to understand to the laymen. So if I own say 5 grain hoppers as a private car company, and offer them up for use, I only get paid when they are moving and loaded and when empty or stored at a customer or yard I get nothing? So as a private car company, do I try and find customers to use my cars, like say a local grain elevator near me or does the railroad take them in as part of their car pool and use them as needed? How do I get my car moving again in loaded service if there is no incentive for a end user or the railroad to get it back to me?
Unfortunately I need to keep the videos on the brief side so I don't lose my audience...but that means just giving a quick description. So I will try to elaborate. There are car leasing companies who acquire new railcars and then lease them out, to both rail shippers and the railroads themselves. GATX, Greenbrier, and Wells Fargo Rail are three large examples. As a railcar is a 50-year asset, many parties do not want to take on the risk of acquiring them themselves. If say you are a rail shipper and need cars of your own because it might be a car type that the railroad doesn't supply like a tank car or a plastic covered hopper, you would go to a car leasing company. They will lease you the cars for $XXX a month. The amount ebbs and flows depending on what the market for that car is like. A few years ago when frac sand was going gangbusters by rail, small cube covered hoppers were hard to get and the monthly lease charge was high. After the rail market for moving it crashed and the cars became surplus, the monthly lease charge came way down. Also, there are two kinds of leases. One lease is where you as the lessee agree to take on maintenance responsibility for any needed repairs to the car, pay taxes on the car, etc. This will get you a lower monthly lease charge then if you don't want to be bothered. If this responsibility stays with the car leasing company, your monthly lease charge will be higher. Oh yes - the mileage charges that the railroads pay (if in fact they still pay on the move) will go to the car owner but a split can be negotiated. To hopefully answer your question, if you own 5 grain hoppers, they will most likely be "private" or "X" cars - a car whose reporting mark ends in "X" because it is not a car owned by a railroad. These cars only earn mileage. So if it is sitting still, it is not earning anything. Well...not entirely correct, as you would be paying or charging a monthly lease charge. People have their own cars for different reasons. Railroads do not supply tank cars, so any tank car shipper has to go secure his own cars (from a car leasing company). A lot of plastic pellet shippers own their own cars. Their business model is to use the railcars as sitting inventory. Big grain shippers who load 100-car unit trains may have their own cars so as to be assured they will have cars to load and not have to depend on the railroad maybe or maybe not being able to supply cars during the harvest season when car supply tightens up. Clear as mud?
@@killerbee6310 Thanks!! That does add more clarity to the whole thing. So who is responsible to clean out the car when it has been unloaded and is ready for re-use for car leasing companies or private car owners? What if it breaks down along the rail line? How does the leasing company get it fixed?
If a car needs a "running repair" - a repair necessary to ensure its safe movement - the railroad who has the car will repair it. They then bill the car owner. The repair rate for any task is set by the AAR. Same as when you take your car to the dealer for repairs and they have set rates for each task. If the repair is to other parts of the car - such as the top hatch or a valve or an outlet gate, etc, the car will be directed to a car shop. Some of the bigger car leasing companies operate their own car repair facilities, and those that don't will direct the car to a contract car shop. Unlike a railroad marked car that can go to anybody, private cars usually go back to the same loading point and get shipped to the same receivers. So residue in the car from its prior load might not be that big a deal because the same product is getting loaded in the car. Not until the car's lease ends and it gets returned to the car leasing company would it need to be cleaned out thoroughly. Now of course there are always exceptions - I am waiting for one to be pointed out - LOL.
If you own 5 grain cars and want to lease them out you would have to find a leasing company or customer willing to pay you a flat rate per car per month. The rate will vary based on demand, age and other factors. The railroad will take the cars into a pool on behalf of a customer. But when that lease terminates you may end up owning railcars no where near where you want them to be. Moving empty railcars can be expensive. There used to be a business assocaited with private individuals owning railcars as an investment but that is very rare now
@ 9:02... yea demurrage fees are hot topic among rail customers... just read an article penned by the president of the National Association of Chemical Distributors from 2019... he was complaining about the demurrage fees and quoted a COMBINED grand total of $761.5 MILLION in demurrage fees collected in 2018 by CSX, UP, BNSF and NS... also there is a practice railroad do called BUNCHING where from what i understand, the railroad will dump on a customer way more cars than they can unload... this creates a demurrage situation (and an intra plant switch situation to)... the main issue with all of this is the there is a huge element of CAPTIVE CUSTOMER associated with railroads and some of their customers... customers like grain shippers and coal fired power plants are at the mercy of the railroads... grain shippers in particular are notorious for having CONSTANT rate fights with the railroads... the railroads do act like "collectors" for the mob... the only thing missing is a couple of gorillas in those velour track suits with baseball bats
Railroads used to make demurrage allowances for bunching but some no longer do. Say a shipper releases the same number of cars every day to a receiver - and never any more cars then the receiver can handle. Inevitably at some point one days worth of cars will miss a connection while en route and the next days cars catch up to them. Both sets of cars now arrive together. The receiver can only take in some of them, so the remainder held out get CP'ed (Constructively Placed) and demurrage begins for them. As it is up to the customer to dispute any demurrage, the onus is on him to say "hey - bunching" and once upon a time the railroad would make allowances for the said cars. (Either by cancelling the CP or by issuing credits to offset the debits that build up) But now the customer is told - sorry - you gotta manage your pipeline better. Huh??
@@killerbee6310
*sorry you gotta manage your pipeline better*
HA that sounds like the standard railroad response... but can a customer add an addendum to their rail agreement that sets the maximum number of cars to be spotted at their facility at any one time, to head off a potential bunching situation?... sheesh talk about operating in bad faith
I have so much to learn about this whole world! 😂 Thank you for being an educational conductor! 🚂
My pleasure. A lot more to come !! (All I need is time-LOL)
You are very well versed in railroad info of all kinds!
Great video! What happens to these charges when a car is received in bad order?
In the old days when you placed cars on interchange tracks, the receiving railroad would refuse the car in interchange and car hire stayed with the delivering road. But now with so many run thru trains or direct deliveries into the receiving roads yards, you are kind of stuck with the car. If it is just a regular running repair the RIP track can knock out, you just pay the car hire. If the car cannot be moved and you have to order and wait on materials required to fix the car, I believe you can reclaim the car hire.
Sure appreciate the for instance details of charges on these videos. Even if only close, it gives you a reference for the cost of moving freight and the economics or railroads. Demurage charge of $200/400 a day, wow. So does the charge stop when you call and say pickup the car, or when the RR gets around to it?
Well, that is a sore point with customers. When you release the car back to the railroad (empty or loaded), the demurrage clock stops ticking, as we say. We had a branch line with once a week service. Obviously the customers knew this. But if they didn't have the car unloaded after two days, demurrage would start. They were always like "but what does it matter - your're not coming for 5 more days". Rules are rules....
Demurrage stops on the date and time the customer notifies the railroad that they are finished with the car and that the railroad can come and get it. If the railroad does not sent a crew to pick up the car for a couple of days there is no demurrage charges for the car for those two days. The calculation stops at "release".
Killerbee, love your videos. Do consignees who don't use railroad owned cars have deals in place with their shippers that are similar to demurrage? Like if they dont release the car in X number of days they have to pay a rate? I ran into a customer that unloads ethanol that complained about a 14 day grace period, but they were all lease cars.
Some customers have that. Some don't. I was totally dumbfounded a little while ago when I talked to a large plastic shipper who has thousands of cars and found out they didn't charge their receivers who sit in cars for weeks. But then, that is their business model.
One point you forgot for private cars. The customer has to have enough private track or leased track from the railroad. Or cars will be CP'd and charged demurrage until placed on Customer track. Unless they have changed the rules when I was a demurrage clerk back in the 1970's and 80's...
Sorry for the delay in responding. You are correct. I just didn't have enough time to get into all the nuances such as OT-5.
Well done🚂👍
8:34 "In 1985, the ICC permitted rail carriers to set their own demurrage rules. So, kind of a free-market approach."
But it's not a free market. In almost all cases, a customer can't choose which railroad serves them. If I don't like supermarket A's prices, I can shop at supermarket B. If I don't like Railroad X's demurrage rates, it's not like I can move my factory to Railroad Y's tracks.
What I meant was from the railroads perspective it was now kind of a free market because they were no longer so bound by regulation but could set their own demurrage rates, etc.
@@killerbee6310 Right, there's freedom in their side of the market. But the phrase "free market" refers specifically to freedom for the customers.
You are right...but that's not the full story. The new flexibility in setting rules enables the railroad to reduce the demurrage rates or grant extra free time so as to win traffic back from trucks (or any other competition). For example, under the old rules the railroad was unable to reduce the rate or say certain days were free. That may mean a boxcar unloader who could only unload at a specific pace was bringing in product by truck as they could not avoid demurrage. But the railroad could now give them 48 extra hours (or reduce the rate just to cover car hire). So while it may not be 'free market' the flexibility can be very useful. So while you cannot move your factory, if the railroad reduce the daily penalty day to $20 then maybe you continue to use rail (or order larger quantities)
I had always wanted to know this.
Who pays (and what is the cost) if a car needs to be “set out” due to a mechanical issue?
It is just the cost of repairs. The railroad will make the necessary repairs and bill the car owner the standard AAR rates applicable to the repair.
@@killerbee6310 so I’m assuming that the car owner pays to repair a wheel problem, even though wheelsets are interchangeable.
I have a question I’m hoping you can help me with. That job I had in high school unloading boxcars. We would get loads of raw product from the west coast which would come to us in Southern Pacific cars but were delivered to us by C & O. Once the car was released for pickup, would that car deadhead empty back to the west coast or would it be assigned a load that was headed that way? Say in Chicago? Like the trucking industry does with brokers. Thanks!
It depends on the exact type of car and what time period and whether the car was assigned to a pool or not. As time has gone on and railroad systems have gotten bigger, reloading of other railroads cars has diminished. What you can do with an empty car is governed by the car service rules. There were the Car Service Rules (CSRs), Car Service Directives (CSDs) and Special Car Orders (SCO's). I spent from 1981 to 1994 as a Car Distributor, so had to know how to apply the rules so I would know what cars I could pick off to reload and what cars I could not and how to properly send unneeded foreign empty cars home. Boxcars have Mechanical Designations (See my "How to Read a Boxcar" video). A plain, generic boxcar with nothing special inside it for general commodities loading is an "XM". Cars that have their interiors with special devises such as interior bulkhead doors or belt rails installed in the walls to permit the hanging of crossbars are "XL". Cars coated on the inside with a white epoxy lining to permit the loading of packaged food (boxes of cereal, etc) are "XF". There were also XP cars. If a car was an XM, you could reload it. But if it is was any other mechanical designation, it had to go back home empty. If it was assigned to a pool, it had to go back reverse of loaded route. If it was not assigned to a pool, it had to go home either reverse of loaded move or back to the owning road at your closest junction to it. XM cars could not be assigned. Before my time, it was even more liberal and reloading was more commonplace.
I might have a few details wrong but that is the gist of it. I went back into Car Management for a few years around 2010 and the computer took care of everything. The "kids" that were my fellow car fleet managers had no clue car service rules existed.
One other thought. The philosophy of a specific railroad would also have a bearing. I was with C&NW at first and they were very aggressive at trying to maximize car hire earnings. So not reloading other railroads cars but getting them off line as fast as possible once empty was the plan. We wanted to load everything in our cars and collect the car hire. We would even switch out entire empty grain trains to separate the low per diem earning cars from the high per diem cars. All the high per diem earning cars would be put together and be spotted at an elevator that was loading the train to an off line point, such as the Gulf. Low per diem cars would get spotted for loading where the train was staying on line, like going just to East Clinton or Chicago. Lots of neat little twists to this subject but not enough time to put all in a video.
For special cars, ie HD depressed center flats, the rate may be as high as $10/hour.. Refusing to pay mileage on private cars is a double edged sword. Sure, you may save a few bucks on the mileage, but big shippers will use RR owned cars instead. One railroad I worked for did this. I couldn't get management to understand that I'd rather pay the owner ( shipper ) $6 or so for their cars than the UP $600 for theirs.
I appreciate this video, but I still don't really understand it. It's obviously very complicated.
I also wonder about container shipping rates. Does it cost the same ship an empty container as a loaded one?
I also wonder how rail car location is tracked, especially given that most car markings are covered by graffiti these days.
Railcars have transponders on them that are read by the railroad's wayside readers. Kind of like when you drive on a toll road and drive under or through the readers. GPS is being experimented with also, but that is more for shippers knowing where their cars are.
Containers gets complicated because you have domestic ones and international ones. Domestic container owners try very hard to have them reloaded as close to their unloading point as they can. International containers have a sizeable percentage go back to Asia or wherever empty. The railroads usually charge the steamship lines (who own most of the international containers you see here) to move them back to the ports. That said, anybody else please elaborate on this point.
The crews know what is in their train and in many environments make the moves in an on-board system. Other crews turn in the paperwork to "clerks/agents" who input the data into computer systems. Graffiti can at times be a pain for crews but it's rare.
Would like to see more railroad business related content.
Can you give me a specific example or two? If I can do it, I will. Appreciate the feedback.
@@killerbee6310 what happens from the shipper and receivers perspective. How do they get a quote, order cars and how is the receiver interacted with.
@@DogRedful I can do that !! Thanks for the input.
Another great video...
Appreciate it - thank you. More in the pipeline
I had a high school job of unloading boxcars in the 1970s. Sometimes the boss would make us work way into the evening so they wouldn’t have to pay “rent” I assumed for another day. Sometimes the railroad wouldn’t pick up the empty car for a couple days. Who paid while it was sitting empty on our siding?
Ah, another point of discontent. Once the customer notifies the railroad the car is released (as an empty or a load, whatever is the case), the "demurrage clock stops ticking". Customers get upset that they have to hurry up and unload a car to avoid demurrage, knowing the train only runs, say, twice a week and won't be back for a few days. Some brave customers report a car released when in fact it isn't, knowing the train won't be back for a few days. I have known customers to get caught doing this when the railroad sees the cars released and makes an extra trip to grab them. Opps.
@@killerbee6310and then there are surcharges. Where I live there was a grain elevator that was the last customer on a short line. The railroad threw on a 1200 surcharge on each car. Forcing the elevator to give up rail service and the railroad got to abandon that stretch of track.
@@killerbee6310 I had a elevator release 15 cars to me on a Friday afternoon and I new good and well they had not loaded them. I had a job running on the branch as an extra so I sent them over to pull the cars. Crew arrived and called and told me the cars were indeed loaded. So we pulled them. Turned out they were indeed loaded but they had not been graded. The elevator operator wasn't very happy with us but he couldn't do much more than shout at me the next time we had a beer together. He had to drive the grader to a point he could catch up to the cars. This story dates me a bit
I would like to know how do rr's work it with locomotives,say a bnsf loco comes onto cn tracks who drives it and who pays maint and fuel
Another possible video topic. Railroads pay horsepower hours to each other - in your example CN would pay the BNSF the horsepower of the locomotive multiplied by how many hours it is on CN. Now keep in mind undoubtedly there are also CN engines on BNSF at the same time. So it gets netted out. And how do you pay back a horsepower hour if you owe someone? A lot of times you loan them your locomotives to "pay back horsepower hours". Or there is also a monetary value to a horsepower hour and you can "write a check". Little itty bitty maintenance issues will be swallowed by the user but if there is a major issue or if the engine is due its 92-day test, they get sent home (back to the owning road). Whoever is using the engine fuels it just like it was their own. If a railroad is short of power, they may hang onto foreign power so they can run their trains. But that means someone isn't getting their power back, causing them to get short, so in turn they start hanging onto foreign power. This used to happen a lot when winter hit...then come spring when operations smoothed out, everybody would send the foreign power back home. ("Get rid of all those foreign engines - we're running up a horsepower hour deficit").
I have never heard it pronounced per die-um, always per dee-um. My daily food allowance for work travel is a per dee-um.
I've heard it phrased both ways....and also head the word 'car hire'. For example, what's the hourly per dee-um rate on that car. Of you may ask...What's the car hire on that car
im a truck driver, the railroad is the only business that will take it's lines out aka csx. They can't compete no one want car to truck it either train to train or they will leave it on a truck instead. Besides shipping containers. I really don't understand the railroads approach to it. Csx tore our line out put all their eggs into coal. That's been dying since the 90s. I really don't understand why you would cut yourself out of a market. Trucking companies will answer the phone tell you where the load is at what time and everything. Hell I've had a customer call me and ask that I tarped up the windshield on a tractor I was hauling. I'm all for the railroad but the cutting corners mile long trains in my town. What happened in Ohio I'm not okay with.
I spent my whole work career with railroads and some stuff that was done still amazed me too. But sometimes you had to go with the flow.
👍😀OperateOnOperator
Per dee um, not die um.
I've heard both pronunciations throughout my career. Others just call it 'car hire'
YOU'LL NEVER HAVE IT STRIEGHT. TILL YOU ALL LEARN TO USE WORDS THAT MAKE SENSE.😂
Demurrage has multiple meanings, including a charge for delayed cargo or currency ownership costs
Shipping
Demurrage is a charge for keeping cargo at a terminal for longer than the allotted "free time" period. This free time is a grace period for loading or unloading cargo without extra fees, and is usually two to seven days. Demurrage fees are charged per container, per day, and are based on the carrier, terminal, and warehouse. The consignee is usually responsible for paying the demurrage charges before receiving their goods.
Vessel chartering
Demurrage is the period when a charterer keeps a vessel after the normal time for loading and unloading cargo is over. The charterer then pays the ship owner for the delayed operations.
Currency
Demurrage is a cost associated with owning or holding currency. For example, the Islamic system of zakat is a form of demurrage that applies to unused assets on an annual basis.
SO YA I JUST GOOGLED IT REAL QUICK. SHORTER THAN YOUR VIDEO.❤😂🎉
This video was specifically relating to demurrage in North America for railcars. This video did not concern itself with containers, vessels, currency exchange etc.