Date: Monday, May 8, 2023
WASHINGTON — Confusion over which federal agency has the power to resolve disputes over fees charged by railroads to store ocean containers will only get worse if Congress follows the advice of the shippers getting hit by the fees, ocean carriers contend.
A coalition of 75 shipper groups — led by the National Customs Brokers & Forwarders Association of America, the National Industrial Transportation League, and the National Retail Federation — appealed this week to lawmakers to clarify that railroads should be billing ocean carriers, not shippers, for overseas import containers that the railroads pick up at the ports and transport to and store at rail yards throughout the country.
Regulations should also be amended to make clear that the storage fees be subject to the demurrage and detention invoicing requirements of the Ocean Shipping Reform Act of 2022 (OSRA), the groups maintain, which is under the jurisdiction of the Federal Maritime Commission.
“Rail storage, a form of demurrage, is charged by railroads as part of international ocean transportation at the nation’s interior rail terminals,” the shippers wrote in a letter to the leadership of the House Transportation and Infrastructure Committee.
“However, when containers are delayed at the railyard often because of the railroad’s terminal operations, rail storage charges accrue. These storage fees [currently] must be paid directly to the railroad by importers or their agents in order to gain release of the containers. In recent years, these demurrage charges have resulted in costs to U.S. businesses in the hundreds of millions of dollars.”
The charges have been difficult for shippers to dispute and/or recover due to what they contend is a long-standing jurisdictional gap between the FMC and the Surface Transportation Board, which regulates railroads, over railroad storage fees. That gap was highlighted at an FMC shipper advisory committee in March.
“The FMC has not actually taken up their authority on rail storage charges,” advisory committee member Rich Roche, senior vice president at Mohawk Global Logistics, told meeting attendees after looking into the matter.
“In fact, some of the documentation I have gotten back is that, because rail operators who are generating those charges are not regulated entities, they fall outside the scope of FMC jurisdiction.”
But after checking with the STB, Roche was told that the Staggers Act, which deregulated the railroads in 1980, does not give the STB authority over railroad contract carriage agreements or international intermodal moves — both of which can involve railroad storage fees.
“They did say there has been some exception made with a [warehousing] case that might be similar to the case we’re trying to bring to them,” Roche said. “However, the feeling in the room was that the railroads would be vehemently opposed to any kind of change in jurisdiction with the STB.
“So we have this bit of a quagmire…we’re stuck and looking for another way out.”
Asked to weigh in, John Butler, who represents the ocean carriers on Capitol Hill as president and CEO of the World Shipping Council, disagreed with the notion that the STB does not have jurisdiction over railroad storage fees.
“Since we are talking about fees charged by railroads, the STB is the right agency to handle this,” Butler told FreightWaves.
He pointed out that the agency, in his opinion, has the statutory authority to act on rail storage charges if it deems it appropriate to do so. “So there is no need for Congress to create new legislation,” Butler argued.
In fact, because the shipper coalition’s proposed legislative fix would cause FMC authority to overlap with the STB, the change “would make a confusing situation worse,” he cautioned.
“The proposal would also disincentivize ocean carriers from offering through bills using rail, and I doubt that is what shippers want. It’s safe to say that this issue needs a lot more thought from everyone involved.”
The shipper groups insist, however, that the murky area of rail storage fee oversight — which predates the billing and service issues that arose from the supply chain disruptions that led to the passing of OSRA — “is a gap that must be clarified” by giving more authority to the FMC.
“While we do not suggest that railroads themselves would or should be regulated by the FMC, the railroads’ storage charges under through bills of lading should more appropriately be invoiced through the ocean carriers,” they wrote in their letter.
“Rail storage charges assessed against containers moving in international commerce, an as-yet unaddressed abuse of demurrage charges, should clearly and formally fall within FMC authority through an act of Congress.”