WASHINGTON — CSX Transportation and Norfolk Southern say their higher demurrage charges will encourage shippers to load and unload freight cars more quickly, which will reduce the number of cars online, make their networks more fluid, and ultimately improve service.
But a mom-and-pop lumber yard in southern New Jersey says the charges are diverting freight to trucks — and wiped out its entire profit last year.
“In a nutshell, the demurrage practices of both CSX and NS continue to cause our company severe harm and may eventually force us out of business,” Harry Shea, president of Shea Brothers Lumber Handling, wrote in a letter to federal regulators.
The Delanco, N.J., lumber transload operation rarely received a demurrage bill in 29 years, Shea tells Trains. Then last year, when the allowable unloading time was reduced to one day from two and the company handled record volumes of nearly 1,500 cars, the charges began to mount.
Part of the problem was self-inflicted, Shea says, because volumes last spring built up faster than the lumber yard could handle on its nine-car spur. At one point, more than 40 cars were sitting in Conrail’s Pavonia Yard in Camden, N.J., and were buried there by other freight cars while awaiting placement, Shea says.
But the prime culprit for the soaring demurrage bills was CSX’s policy of charging demurrage on weekends, Shea says. Conrail serves Shea’s lumber yard only on weekdays.
Also contributing factors: The reduction in free time means Shea can’t earn positive credits for unloading a car in one day, and the Conrail car-ordering and CSX and NS demurrage clocks are out of synch, so Shea might accrue two days of demurrage charges before it sees the car.
Ultimately, Shea was able to negotiate hundreds of thousands of dollars in demurrage charges down to $114,675 to CSX and $33,000 to NS, which included receiving credits for weekends and holidays.
To offset the impact of demurrage bills that hit $53,686 in the first quarter of 2019, Shea in February began charging its customers a $225 per car fee.
Customers did not like this. Shea’s third-largest customer abandoned rail and shifted to trucks. And Shea’s second-largest customer reduced its rail volume by 75%.
“This loss of business has essentially offset the additional revenues the fee has generated,” Shea wrote to the Surface Transportation Board, which will hold a two-day oversight hearing on demurrage and accessorial charges next week. [See “Shippers complain to regulators about PRS-related charges,” Trains News Wire, May 10, 2019.]
This year could be the last for Shea Brothers unless demurrage policies are changed, says Shea, whose grandfather began the family business in 1915 by hauling lumber from piers at the Port of Philadelphia. Shea opened the current transload operation, which employs 15 people, in 1989.
Shea understands that demurrage charges are necessary. “There are places that will use rail cars as warehouses,” Shea tells Trains. “We don’t do that.”
Todd Tranausky, a rail and intermodal analyst at FTR Transportation Intelligence, says Shea’s case is likely to get the attention of federal regulators as they hear from large shippers and industry trade associations.
“From the railroad’s perspective, these are the kind of filings that are dangerous,” Tranausky says. “These are the kind of filings that are small-dollar amounts but higher risk for the industry. These are the kind of things that could cause the board to act.”
Shippers have to be flexible as railroads adopt Precision Scheduled Railroading operating models and related changes to demurrage policies, Tranausky says. Ultimately, PSR can benefit smaller shippers due to Class I railroads’ increased focus on moving carloads more efficiently, he says.
Small shippers like Shea Brothers are important to CSX and its merchandise network, railroad spokesman Bryan Tucker says.
CSX has held workshops to help customers understand demurrage policies and how to use online tools to better manage their car inventory, track invoices, and dispute charges. The railroad also has reorganized and expanded its marketing and sales team to focus on growth from small and medium-sized shippers.
“We’re certainly looking to grow our business. We’re not trying to chase anyone away,” Tucker says.
In the case of Shea, CSX issued credits that took into account the additional complexity of working through Conrail and the five-day local service it provides.
“We recognize that it wasn’t fair and where that was the case we provided him with credits,” Tucker says.
Norfolk Southern did not respond to a Trains request for comment.
You can read Shea Brothers letter to the STB here.
There must be enough Center Beam flat cars built since 1985 available for all the lumber being moved today. It is impossible to make the Dwell Time of freight cars be only one day. The railroad management need to higher more employees to move the available cars around.
This is what Matt Rose is concerned about, I think…
If anyone thinks PSR is anything other than the railroads filling there pockets I don’t know what is. As one who worked in trucking, I can say that we worked with the customers if trailers had to be dropped for unloading/loading. We were happy to have the business. Railroads on the other hand are using demurrage as a weapon straight out without letting customers transition a new operating platform. Too, while the railroads claim they want to keep rail cars moving, to what end? Efficiency is helped by having a railroad move cars faster from one point to another. The jury is still out if under PSR that improved velocity is actually happening. I suspect that is not. Railroad operations are becoming so specialized and particular, that unless volume is just crazy, it is easier to put the freight on the road. Less hassle and that is why one see truck traffic has ballooned over the decades.
just ever one remember psr is about getting rid of business not growing it, hopefully the Fed will see thru this smoke screen
Not really, Eric Hendrickson. The article essentially says it’s not the charges they’re responsible for due to slow unloading that they object to. It’s the charges out of their control that they object to.
“But the prime culprit for the soaring demurrage bills was CSX’s policy of charging demurrage on weekends, Shea says. Conrail serves Shea’s lumber yard only on weekdays.”
Precision railroading doesn’t like customers. Stupid CSX and stupid NS.
CSX sez, ““We’re certainly looking to grow our business. We’re not trying to chase anyone away,” Tucker says.”
Shea has never abused your yard to warehouse ever, yet you implemented a “death by fee” approach to push him away (because the customers won’t pay).
Sorry, but that is most definitely the way to chase away these kinds of customers.
We get it. PSR is really designed for coal, perishables and bulk commodities. Not for merchandise cars that have to be sorted. Sorting is costly now for RR’s and they are using demurrage to cover their costs.
This reminds me of banks that charge fees to withdraw or deposit your money.
Mr Bouzide. Most warehouses and shippers and receivers that use trucks schedule their loading and unloading based on what their facilities can handle. It sounds like the railroad is trying to schedule arrivals with no check on what can be handled.
IE trying to deliver 12 cars to a facility that only had space for 9. In the trucking business what happens is the truck shows up early and it is up to the receiver if they can handle the early arrival.
If the railroad wants to be in a better position here it means being able to deliver the cars when the customer can receive. This is especially needed when business is brisk. Sometimes it involves enlarging facilities. For a transload business trying to justify this when your losing revenue to the carrier delivering your business…
So you gotta have 24/7/365 load/unload operations to use rail now? That ain’t cheap for a “smaller” shipper. And at 1500 cars/year or around 4 per day Shea isn’t tiny.
Not so for trucks? What kind of demurrage or equivalent fees will a trucker charge if they show up at the dock at 4:45PM on a Friday and the truck doesn’t get unloaded until Monday morning?
Same kind of treatment from short lines? I’m skeptical. My guess is that they find a way while still managing to keep their stage and spot costs tractable. Is Shea located on Conrail Shared Access trackage? I suspect yes given that Pavonia is the serving yard and they get demurrage bills from both CSX and NS.
At least part of the problem might be that the class 1s have eliminated so much serving yard trackage that there’s nowhere to Constructively Place cars not quite ready to spot without gumming up the serving yard and requiring more switching moves to dig out the cars ready to spot or depart.
I doubt anyone caught it, but she contradicted her own statement. “Shea understands that demurrage charges are necessary. “There are places that will use rail cars as warehouses,” Shea tells Trains. “We don’t do that.”
Then earlier says, Part of the problem was self-inflicted, Shea says, because volumes last spring built up faster than the lumber yard could handle on its nine-car spur. At one point, more than 40 cars were sitting in Conrail’s Pavonia Yard in Camden, N.J., and were buried there by other freight cars while awaiting placement, Shea says.”
Pot meet kettle.
In just about any main line railroad in the U.S. it’s possible to go for miles and miles without one online customer. And not only out in the country but in towns and cities big and small. This is in contrast to even 20 or 30 years ago. Now they only want to serve customers with large car counts per year.
PSR is a step back wards, case in point the Railex Produce Facility in Rotterdam N.Y. Union Pacific use to bring in 50-100 cars of produce directly from Walla Walla Washington State 2 to 3 times a week and when they are empty go right back the same way as they came by U. P. engines directly back to Washington State. Now the empty cars are put on a siding track for a day or two ,then sent down to the Selkirk yard to lash up with other cars going back west, this takes more man power to handle these cars several times then just once the old way , make it the better way , by the time they leave Selkirk the PSR way ,they would have been back in Walla Walla Washington the old way the right way . so don’t start charging customers for an extra day to unload there products when the railroads put freight cars on sidings for days waiting for a freight going the same direction instead of shipping them out ASAP.