UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

New directions for Canadian railway demurrage Kemp, Sidney William 1986

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1986_A4_6 K45.pdf [ 12.13MB ]
Metadata
JSON: 831-1.0096622.json
JSON-LD: 831-1.0096622-ld.json
RDF/XML (Pretty): 831-1.0096622-rdf.xml
RDF/JSON: 831-1.0096622-rdf.json
Turtle: 831-1.0096622-turtle.txt
N-Triples: 831-1.0096622-rdf-ntriples.txt
Original Record: 831-1.0096622-source.json
Full Text
831-1.0096622-fulltext.txt
Citation
831-1.0096622.ris

Full Text

NEW DIRECTIONS FOR CANADIAN RAILWAY DEMURRAGE By SIDNEY WILLIAM KEMP B.Comm,, The U n i v e r s i t y of B r i t i s h Columbia, 1983 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUSINESS ADMINISTRATION i n THE FACULTY OF COMMERCE AND BUSINESS ADMINISTRATION We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA October, 1986 © Sidney W i l l i a m Kemp, 1986 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r reference and study. I f u r t h e r agree t h a t permission f o r extensive copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the head of my department or by h i s or her r e p r e s e n t a t i v e s . I t i s understood that copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain s h a l l not be allowed without my w r i t t e n permission. Department O f Commerce and Business Administration The U n i v e r s i t y of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date 7 October 1986 3E-6 (.3/81) - i i -A B S T R A C T This study reviews Canadian railway demurrage rules, questions i t s effectiveness and concludes with recommendations for change. The demurrage rules, t h e i r genesis and current i n t e r p r e t a t i o n are described i n d e t a i l . The Canadian rules are placed i n perspective by reviewing demurrage i n other transportation modes as well as U.S. r a i l demurrage. Current effectiveness of the Canadian railway demurrage rules i s assessed by analyzing C.N. R a i l car release data. Canadian performance i s then contrasted to U.S. performance and conclusions are drawn on the performance of the Canadian system, The study then i d e n t i f i e s current issues with demurrage rates and arrangements. Through questionnaires and interviews a number of contentious issues are i s o l a t e d . The study recommends that three major changes i n Canadian demurrage rules be made. F i r s t , greater f l e x i b i l i t y i n negotiating exceptions should be provided f o r . Second, an incentive plan should be developed. F i n a l l y , a system of demurrage charges varying with the type of r a i l car detained should be incorporated into the demurrage t a r i f f . Using C.N. R a i l data, the impact of these recommendations on r a i l car u t i l i z a t i o n i n Canada i s simulated. Considerable reduction i n car days and r e s u l t i n g r a i l car investment i s observed. - i i i -TABLE OF CONTENTS ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . v i i i I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . 1 A. Demurrage D e f i n e d and E x p l a i n e d . . . . . . . . . 1 B. Purpose of the Paper . . . . . . . . . . . . . . 2 D. Paper O u t l i n e . . . . . . . . . . . . . . . . . . 6 I I . CHARACTERISTICS OF DEMURRAGE IN CANADA . . . . . . . 9 A. H i s t o r y of Rates and Arrangements . . . . . . . . 9 B. Current Arrangements . . . . . . . . . . . . . . 13 ( i ) S e c t i o n I . . . . . . . . . . . . . . . . 13 ( i i ) S e c t i o n I I . . . . . . . . . . . . . . . . 28 ( i i i ) D e t e n t i o n . . . . . . . . . . . . . . . . 28 ( i v ) Averaging . . . . . . . . . . . . . . . . 30 C. Performance Measures . . . . . . . . . . . . . . 31 I I I . INSTITUTIONS AND PROCEDURES . . . . . . . . . . . . 37 A. Canadian Car Demurrage Bureau . 37 ( i ) H i s t o r y . . . . . . . . . . . . . . . . . 37 ( i i ) Purpose of the Bureau . . . . . . . . . . 38 ( i i i ) O p e r a t i o n . . . . . . . . . . . . . . . . 39 1. Reports . . . . . . . . . . . . . . . 39 2. Shipper Claims and Complaints . . . . 40 3. A u d i t . . . . . . . . . . . . . . . . 41 4. Spot Checks . . . . . . . . . . . . . 41 ( i v ) S t r u c t u r e . . . . . . . . . . . . . . . . . 42 1. Membership . . . . . . . . . . . . . . 42 2. V o t i n g R i g h t s . . . . . . . . . . . . 42 3. E x e c u t i v e . . . . . . . . . . . . . . 42 4. Finances . . . . . . . . . . . . . . . 44 B. Railways . . . . . . . . . . . . . . . . . . . . 44 ( i ) A r r i v a l of the R a i l Car a t the C a r l o a d Center . . . . . . . . . . . . . . . . . . 45 ( i i ) Cars Ordered and Cars Released 46 ( i i i ) Placement and P u l l i n g of R a i l Cars . . . . 47 ( i v ) B i l l i n g . . . . . . . . . . . . . . . . . 48 (v) Forwarding of Records t o the CCDB . . . . 49 C. Shippers . . . . . . . . . . . . . . . . . . . . . 49 ( i ) Load and Unload Times . . . . . . . . . . 50 ( i i ) Reasons f o r D e t e n t i o n . . . . . . . . . . 52 1. Temporary Lack of Storage Space . . . 52 - i v -TABLE OF CONTENTS - continued 2. Lack of Control over Inbound Shipping . . . . . . . . . . . 53 3. Car Supply Considerations 53 4. Inconsistent Transit Time 54 5. Cars Routinely Held for Storage , , , 59 6. Production Line Problems 60 7. Customer Relations Considerations , . 60 8. Apathy 60 D. Shippers' Demurrage Committee 62 IV. RATIONALE OF DEMURRAGE 63 Economic Importance of Equipment U t i l i z a t i o n (i) Railway Perspective . , ( i i ) Shipper's Perspective and Car Supply ( i i i ) Board of Railway Commissioners/CTC View 63 63 64 75 Demurrage » 9 • » * » Demurrage to B. Demurrage Arrangements i n Other Modes of Transportation . . . . . . . . . . . . . (i) Shipping 1. Demurrage 2. Damages for Detention , , . 3. Lay Days . . . . . . . . . . 4. Dispatch . . . . . . . . . . 5. Relationship Between Dispatch and the Economy 6. Relevance of Shipping Railway Demurrage . . . . . . ( i i ) Motor Carrier Industry . . . . . . 1. Detention i n the United States 2. Detention i n Canada . . . . . 3. Relevance of Motor Carrier Detention to R a i l Demurrage ( 1 1 1 ) BcLlTCfGS (iv) Containers . . . . . . . . . . . . . . . C. Railway Demurrage i n the United States . . . . (i) History . . . . . . . . . . . . . . . . 1. Early R a i l Development (1830-1879) . 2. Regulation - 1870 onwards . . . . . 3. Deregulation - 1976 onwards . . . ( i i ) Current Demurrage Rules i n the United 1. Contract and Exempt T r a f f i c . . . . 79 79 80 81 82 85 86 88 91 92 99 103 106 106 107 107 108 111 124 125 125 - v -TABLE OF CONTENTS - continued ( i i i ) 2. Demurrage Rules under PHJ 6004 . . . . 130 a) P a r t 1: Ex c e p t i o n s (131); b) P a r t 2: The General Car Demurrage Rules and Charges (132); c) P a r t 3: S p e c i a l Car Demurrage Rules and Charges (140) Performance Measures 142 D. C o n c l u s i o n 143 V. CURRENT ISSUES WITH DEMURRAGE RATES AND ARRANGEMENTS 149 A. Number and Types of Ex c e p t i o n s . , . , B. S t r u c t u r e of Charges ( i ) Overtime . . . . . . . . . . . . 1. I n c r e a s i n g P e n a l t y Charge 2. 24 versus 48 Hours Free Time 3. Weekends . . . . . . . . . . 4. R e c i p r o c a l Demurrage . . . . ( i i ) Averaging . . . . . . . . . . . 1. H i s t o r y of Averaging . . . . 2. B e n e f i t s and Costs of Averaging ( i i i ) I n c e n t i v e s . . . . . . . . . . . . C. L e v e l of Charges . . . . . . . . . . . . ( i ) C.P.I. Indexing of Demurrage Rates ( i i ) V a r i a b l e Cost . . . . . . . . . . D. Summary of Current Issues . . . . . . . . VI. DIRECTIONS FOR CHANGE . . . . . . . . . . . . A. Current S t a t u s of Canadian Demurrage , , B. Recommended Changes . . . . . . . . . . . ( i ) G r e a t e r F l e x i b i l i t y i n N e g o t i a t i n g E x c e p t i o n s . . . . . . . . . . . . ( i i ) I n c e n t i v e P l a n . . . . . . . . . . ( i i i ) V a r i a b l e Cost Demurrage Charges BIBLIOGRAPHY . . . APPENDICES . . . . 149 164 164 164 169 179 184 188 188 194 199 203 203 205 220 222 222 225 225 226 228 230 232 - v i -LIST OF APPENDIXES APPENDIX PAGE A Canadian Questionnaire 232 B U.S. Questionnaire 235 C P a r t i c i p a t i n g C a r r i e r s 239 D C.C.D.B. Produced Performance Data (1983) 240 E Percentage of Cars Released within Free Time 241 F C.N. R a i l Supplied Data - Graphs 243 G Canadian Railway Opportunity Cost 268 H Summary of U.S. Studies of U.S. R a i l Car Release Times 269 I Car Type Groupings f o r the Purpose of Per Diem Calc u l a t i o n s 271 - v i i -LIST OF TABLES TABLE PAGE I Ca p i t a l Investment i n R o l l i n g Stock 3 II History of Demurrage Charges . . . . . . . . . . . 24 III C.N. Car Release - Loading. . . . . . . . . . . . 33 IV C.N. Car Release - Unloading . . . . . . . . . . 33 V Calculation of Overtime Cost for Loading/Unloading R a i l Cars . . . . . . . . . . 57 VI Calculation of Overtime Marginal Cost for Loading/Unloading R a i l Cars . . . . . . . . 58. VII Railway Car Loadings . . . . . . . . . . . . . . 66 VIII A t t r i t i o n Rate of R a i l Cars i n Service . . . . . 70 IX R a i l Cars i n Revenue Service . . . . . . . . . . 73 X Comparison of Motor Carrier T a r i f f s . . . . . . . 101 XI History of U.S. Demurrage Charges . . . . . . . . 118 XII Car Loading and Unloading Time D i s t r i b u t i o n . . . 175 XIII Po t e n t i a l Car Day Savings - C.N. R a i l . . . . . . 176 XIV Pot e n t i a l Car Investment and Interest Cost Saving 177 XV Maximum Potential Car Day Savings - C.N. R a i l . . 180 XVI Maximum Pote n t i a l Car Investment and Interest Cost Saving . . . . . . . . . . . . . . . . . . 181 XVII History of Per Diem Rates . . . . . . . . . . . . . 211 XVIII Maximum and Minimum Per Diem Rates. . . . . . . . 217 XIX Freight Car Service L i f e and Salvage Valve by Car Type . . . . . . . . . . . . . . . . . . 219 - v i i i -ACKNOWLEDGEMENTS The author wishes to express his sincere appreciation to both C.N. R a i l and C P . R a i l as well as the many employees who assisted i n the research. Their co-operation was instrumental i n the successful completion of t h i s t h e s i s . In p a r t i c u l a r , express thanks i s owed to Mr. Trevor Coles, Mr. Jim Ziegler, Mr. Ken Irving and Mr. Lawrance Humpries. Equally deserving mention are a l l the transportation and d i s t r i b u t i o n manager of Canadian Corporations who responded to the questionnaire and who l a t e r , when asked, w i l l i n g l y gave up th e i r time and consented to interviews. A s p e c i a l note of gratitude goes to Dr. T.D. Heaver, Thesis Chairman, for h i s i n s i g h t f u l , encouraging comments and his o v e r a l l assistance. Also sincere thanks i s owed to Dr. G. Chow and Dr. T. Knight, Thesis Committee members for t h e i r ever watchful supervision and h e l p f u l comments. - 1 -I. INTRODUCTION A. Demurrage Defined and Explained Demurrage originated i n maritime law. Today i t i s prevalent i n most transportation modes. Motor c a r r i e r s , shipping l i n e s , container, barge and railway companies a l l assess demurrage. Railways, a f t e r placing the r a i l car on the shippers/consignees siding, allow the shipper a prespecified period to unload or load the cargo. Normally t h i s free time for unloading or unloading i s 48 hours. If the shipper detains the car beyond t h i s period he i s assessed a d a i l y charge c a l l e d demurrage. In more formal terms, demurrage i s defined i n Corpus J u r i s Secundum Vol. 13, pg. 3 34, as: a charge made by the c a r r i e r for the detention of cars beyond a reasonable time for the purpose of compensating the c a r r i e r and of securing a prompt release of the car, thus preventing interference with the general t r a f f i c of the c a r r i e r Demurrage charges are d e t a i l e d i n a standard t a r i f f . In Canada i t i s CCD-6500-A. This t a r i f f i s uniformly applied by a l l Canadian Railways against- a l l shippers, and for the most part, the rules/charges do not d i f f e r e n t i a t e by car type, shipper or railway. Further the rules, themselves, have varied l i t t l e since t h e i r establishment i n 1906. The current rules are remarkably s i m i l a r to the rules introduced i n the f i r s t part of the century. - 2 -B. Purpose of the Paper Canadian Railways have 10 b i l l i o n d o l l a r s i n a s s e t s of which 3,5 b i l l i o n i s t i e d up i n r o l l i n g s t o c k . Table I shows the p r e c i s e investment i n r a i l c a r s , by each Canadian Railway. The u t i l i z a t i o n of t h i s c a p i t a l i s a key determinate of cor p o r a t e p r o f i t a b i l i t y , Higher u t i l i z a t i o n through f a s t e r t u r n around of c a r s r e s u l t s i n l e s s r a i l c a r s b e i n g r e q u i r e d and c o r r e s p o n d i n g l y l e s s c a p i t a l investment. Demurrage, by i n c r e a s i n g u t i l i z a t i o n , has the e f f e c t of r e d u c i n g c a p i t a l requirements, thus, r e s u l t i n g i n lower c o s t and p o s s i b l y lower f r e i g h t r a t e s . But i t a l s o has the e f f e c t of a v o i d i n g c a r shortages and r e d u c i n g t e r m i n a l c o n g e s t i o n . T h i s paper examines the c u r r e n t Canadian r a i l w a y demurrage system and qu e s t i o n s whether these e x i s t i n g demurrage r u l e s and procedures a r e , p r e s e n t l y , c o n s i s t e n t w i t h t r a n s p o r t a t i o n e f f i c i e n c y . A number of matters make t h i s examination a p p r o p r i a t e . F i r s t , the U n i t e d S t a t e s , once uniform i n i t s a p p l i c a t i o n of r a i l demurrage, today i s not. U.S. r a i l d e r e g u l a t i o n t h a t allows the n e g o t i a t i o n of c o n t r a c t r a t e s i s a l s o a s s o c i a t e d w i t h i n c r e a s e d e x c e p t i o n s t o the U.S. demurrage t a r i f f . While the g e n e r a l U.S. demurrage t a r i f f i t s e l f has many e x c e p t i o n s , c h o i c e s , and a l t e r n a t i v e p l a n s , Canadian demurrage has remained s u r p r i s i n g l y uniform. I t i s not c l e a r t h a t such i n t r a n s i g e n c e i s a p p r o p r i a t e . Second, i n the U n i t e d S t a t e s , s h i p p e r s are allowed an average p l a n f o r demurrage - 3 -Table I Cap i t a l Investment i n R o l l i n g Stock by Canadian Railways as of Year End 1983 CLASS I CLASS II TOTAL G.N, Rail CP. Rail VIA Rail Rolling Stock 1,467,721,692 1,276,317,678 335,275,285 509,311,513 3,588,626,168 Total Assets 4,920,970,000 2,538,374,000 652,381,000 1,846,883,000 10,038,608,000 Percentage 29.8% 50.3% 51.4% 27.6% 35.7% Source: Railway Transport i n Canada - General S t a t i s t i c s , 1983. General S t a t i s t i c s #52-215 - 4 -while Canadian shippers are not. Numerous requests have been made for the adoption of such a plan i n Canada. This paper examines the appropriateness of such a plan. Third, the arrangements and penalty l e v e l s governing the demurrage (or detention) of motor c a r r i e r s and ships, as well as U.S. r a i l c a r r i e r s , suggest alternatives for Canadian railway demurrage that have not been considered adequately. Fourth, where bulk commodities move i n large volume, more r e s t r i c t i v e demurrage provisions have occasionally been incorporated into the agreement i n recent years. In essence, demurrage rules i n Canada have been l a r g e l y stagnant while the surrounding environment has changed greatly. Transportation and technology have changed dramatically i n ways the authors of the o r i g i n a l 1906 code could not have envisioned. For these reasons, the paper re-examines Canadian r a i l r o a d demurrage and concludes with a number of recommendations for change. C. Research The majority of previous research i n r a i l demurrage has focused on the demurrage system i n the U.S. Reebie and Associates examined the U.S. system and recommended extensive changes i n t h e i r exhaustive analysis of the U.S. demurrage system e n t i t l e d Towards an E f f e c t i v e Demurrage System, published i n 1972. The American Association of Railways i n - 5 -1981 s t u d i e d t h e U.S. demurrage system and made s e v e r a l recommendations f o r change i n R a i l r o a d - C u s t o m e r R e l a t i o n s h i p s  V o l . 4 AAR R e p o r t No. R-446. I n Canada, t h e o n l y s t u d y appears t o be a M a s t e r s T h e s i s c o m p l e t e d a t U.B.C. i n 1974 ( G a b i l l e , J.P.R., E f f e c t s o f F r e e Time R e d u c t i o n on R a i l Car  U t i l i z a t i o n ) . R e s e a r c h f o r t h i s paper proceeded i n s e v e r a l d i r e c t i o n s . An e x t e n s i v e l i t e r a r y s e a r c h was c o n d u c t e d . L a t e r , q u e s t i o n n a i r e s f o l l o w e d by i n t e r v i e w s were employed. The f i r s t q u e s t i o n n a i r e i n v o l v e d a m a i l i n g o f q u e s t i o n n a i r e s t o 760 Canadian f i r m s t h a t showed two o r more t r a f f i c managers i n t h e O f f i c i a l D i r e c t o r y o f I n d u s t r i a l and Commercial T r a f f i c E x e c u t i v e s (Appendix A ) . I n r e s p o n s e , 124 u s a b l e q u e s t i o n n a i r e s were r e c e i v e d . The q u e s t i o n n a i r e s ' p r i m a r y purpose was t o i d e n t i f y e x c e p t i o n s t o t h e u n i f o r m demurrage t a r i f f . A s e c o n d a r y o b j e c t i v e was t o s o l i c i t s h i p p e r s ' comments on t h e e f f e c t i v e n e s s o f t h e demurrage t a r i f f and t e s t s h i p p e r s ' a c c e p t a n c e t o s e v e r a l p o s s i b l e changes t o t h e c u r r e n t t a r i f f . A second q u e s t i o n n a i r e was s e n t t o members of t h e U.S. Committee on Demurrage and S t o r a g e (Appendix B ) . The purpose o f t h i s q u e s t i o n n a i r e was t o d e t e r m i n e how demurrage i s c u r r e n t l y a s s e s s e d i n t h e U n i t e d S t a t e s and how, as a r e s u l t o f the S t a g g e r s A c t , t h e a p p l i c a t i o n of r a i l w a y demurrage has changed i n t h e U n i t e d S t a t e s . F o l l o w u p i n t e r v i e w s were c o n d u c t e d w i t h some of t h e s h i p p e r s who responded t o t h e f i r s t q u e s t i o n n a i r e . A d d i t i o n a l - 6 -i n t e r v i e w s were a l s o conducted w i t h Canadian Car Demurrage Bureau (C.C.D.B.) o f f i c i a l s and Canadian and U.S. railway-p e r s o n n e l . I t was a l s o important t o determine the e f f e c t i v e n e s s of the c u r r e n t demurrage system on r a i l c a r r e l e a s e times. Accurate measurements of r a i l c a r l o a d and unload r e l e a s e times were r e q u i r e d . R a i l c a r placement and r e l e a s e data were o b t a i n e d from C.N. R a i l which was subsequently o r g a n i z e d and analyzed along w i t h s i m i l a r d ata o b t a i n e d from the Canadian Car Demurrage Bureau. D. Paper Outline Chapter 2 d e s c r i b e s , i n d e t a i l , demurrage i n Canada. The h i s t o r y and development of the pres e n t t a r i f f i s d e s c r i b e d i n i t i a l l y . The c u r r e n t r u l e s and subsequent i n t e r p r e t a t i o n by the Board of Railway Commissioners/C.T.C. i s then c h r o n i c l e d . F i n a l l y , the performance of these r u l e s i s analyzed. Aggregate c a r r e l e a s e d a t a produced by the Canadian Car Demurrage Bureau are a n alyzed. D e t a i l e d c a r r e l e a s e and c a r placement times by ca r by month s u p p l i e d by C.N. R a i l are compared and c o n c l u s i o n s are drawn on the e f f e c t i v e n e s s of the Canadian Demurrage Rules. Chapter 3 d e a l s w i t h the v a r i o u s i n t e r e s t groups, the i n s t i t u t i o n s i n v o l v e d i n demurrage and the procedures they f o l l o w are d e t a i l e d . The h i s t o r y , purpose, and o p e r a t i o n of the Canadian Car Demurrage Bureau i s d e s c r i b e d . The r a i l w a y s - 7 -are described with emphasis placed on the operational aspects of car placement and release plus the c a l c u l a t i o n and assessment of demurrage. The reasons for shipper detention are examined. Lastly, the genesis, composition, and structure of the Railway Shipper Committee are detailed. Having surveyed the Canadian demurrage rules and procedures and the i n s t i t u t i o n s involved, i t becomes appropriate to question the purpose, or rationale for demurrage and more s p e c i f i c a l l y , what i s the rationale for the Canadian uniform t a r i f f . Chapter 4 seeks to do t h i s by f i r s t presenting the railways stated purpose and the Canadian Transport Commission/Board of Railway Commissioners (C.T.C./B.O.R.C.) int e r p r e t a t i o n and then examining demurrage i n other modes and other countries. Such contrast shows that, although the rationale for demurrage i n general i s well founded and reasonable, our methods i n Canada may not be. The rationale for a uniform t a r i f f does not seem reasonable i n today's environment. Comparison with demurrage i n other modes highlights t h i s f a l l a c y and suggests some novel methods that may be adopted. Chapter 5 examines the current issues with demurrage rates and arrangements. The questionnaire and followup interviews, as well as data supplied by C.N. R a i l , uncovered a number of concerns with the present t a r i f f . The existence of exceptions, t h e i r value, and the appropriate l e v e l i s examined. Then, suggested areas of change i n the current t a r i f f are considered - 8 -with reference to po t e n t i a l impact on car u t i l i z a t i o n and the a c t i v i t i e s of shippers. Chapter 6 suggests di r e c t i o n s for change i n Canada. A number of changes to CCD-6500-A are recommended. - 9 -II. CHARACTERISTICS OF DEMURRAGE IN CANADA A. History of Rates and Arrangements The word demurrage i s derived from the French verb demeurer, which translated, means "to delay".- The concept of demurrage had i t s genesis i n the shipping industry. Related demurrage provisions can be found dating back as f a r as the seventh and eighth centuries A.D. The Code of Rhodos allowed a fr e i g h t e r 10 lay days to load, unload and provision the ship.2 In the l a t t e r part of the 19th century, shippers frequently detained r a i l cars beyond the time necessary to complete loading or unloading. Commonly, r a i l cars were used as storage by shippers. In large centers companies, acting as d i s t r i b u t o r s and middlemen who themselves did not have storage f a c i l i t i e s , would store the f r e i g h t i n the r a i l cars for many weeks while they attempted to dispose of i t . ^ Often, the f r e i g h t would remain i n the cars u n t i l i t had depreciated i n value to the point where i t was i n s u f f i c i e n t to pay the f r e i g h t costs.^ More sophisticated shippers weighed the cost of bu i l d i n g a d d i t i o n a l storage space against temporary storage i n ^•C.I.T.T. Handbook (1984), Chapter 4. 2 Hugo Tiberg, The Law of Demurrage, 3rd ed. (London: Stevens & Sons, 1979), p. 10. ^Canadian Railway Cases, Annotation Vol. 27, p. 17. 4 I b i d . - 10 -r a i l cars, opting for r a i l cars.- 1 Some i n d u s t r i a l establishments, lacking i n s u f f i c i e n t storage f a c i l i t i e s would seek to take advantage of bulk purchases and low market prices of commodities by ordering large quantities and subsequently withholding the cars for storage.^ The coal trade was i l l u s t r a t i v e of these practices. I t was the habit of coal shippers and large coal consumers to store the coal i n r a i l cars u n t i l a c t u a l l y sold or used.^ These abuses of r a i l equipment led to the railways borrowing the concept of a demurrage penalty practiced by the shipping industry. Demurrage was f i r s t assessed by a r a i l c a r r i e r i n Canada i n 1874. 8 By 1888, demurrage had been adopted by a number of c a r r i e r s . The Board of Railway Commissioners received numerous complaints and objections to the railways' imposition of demurrage charges.^ Complaints were received challenging the charges' l e g a l i t y , rate and administration.10 Parties requested a system of averaging. Others asked that railways be assessed a r e c i p r o c a l demurrage .T. Jackman, Economic P r i n c i p l e s of Transportation (Toronto: University of Toronto Press, 1935), p. 604. ^Canadian Railway Cases, Annotation Vol. 27, p. 17. ^History of Demurrage (C.N. R a i l Internal Document), p. 1. 8 I b i d . 9Board of Railway Commissioners, Memorandum (1906 BORC), p. 2, 1 0 I b i d . - 11 -for delays i n supplying cars. In response, the Board of Railway Commissioners, i n a memorandum, stated: The Board i s of the opinion that i t i s lawful for railway companies to make the carload rates higher i n cases i n which such delay occurs than i n those i n which i t does not and that i t i s within the power of the Board to determine the amounts of the additi o n a l t o l l s and to make general rules and regulations governing t h e i r imposition. On January 25, 1906, the Board of Railway Commissioners published a set of demurrage rules. The rules were separated from f r e i g h t t a r i f f s and published independently. Previous charges and rules were disallowed. The Board ordered that, " A l l f r e i g h t t r a f f i c , i n carloads or less which i s , or i s to be, loaded or unloaded by the shippers or consignees thereof, s h a l l be subject to the following rules." In a l l , 22 rules were delineated. The rules required that cars detained beyond free time were to be assessed a demurrage penalty of $1 per day. Free time was to be 48 hours for both loading and unloading. Free time began at 1:00 PM for cars placed before or at 11:00 AM. For cars placed a f t e r 11:00 AM, free time began at 7:00 AM. That i s to say that once the car was placed on the shippers' siding, the company was allowed 48 hours to load/unload and release the car to the railway before i t would be assessed a $1 penalty per car per day. Sundays and le g a l holidays were exempt from demurrage t o l l s . Shippers were not responsible for delays caused by customs' o f f i c i a l s . Free - 12 -time was to be extended where inclement weather renders loading or unloading impracticable during business hours. No demurrage was to be assessed on private cars or private tracks provided the track owner and car owner were the same party. F i n a l l y several exceptions existed. For Coke and Coal, i n bulk, an additi o n a l 24 hours was allowed. Goods for export at tidewater ports were allowed f i v e days free time. To clear customs, 24 additional hours free time was allowed. The rules were c a l l e d The Canadian Car Service Rules, and although the name has changed, these rules remain the basis for today's demurrage t a r i f f . H CCD 6500-A i s much longer and contains amendments and further exemptions, yet, the current t a r i f f i s remarkably s i m i l a r to the o r i g i n a l Canadian Car Service Rules. The Canadian Car Service Rules were f i r s t revised i n 1917 and c a l l e d the Car Demurrage Rules (C.R.C. No. 3). In 1921, the rules were replaced by C.R.C. No. 4. Issued October 28, 1946 and e f f e c t i v e December 2, 1946, C.T.C. No. 5 replaced C.R.C. No. 4. After a number of j o i n t shipper railway meetings, T a r i f f C.T.C. #6 became e f f e c t i v e January 1, 1960. Further subsequent revisions have resulted i n the present CCD 6500-A. While these revisions were made, they were made infrequently. From 1906 to 1960, there were only four r e v i s i o n s . Once the current rules are described i t becomes HJacobs, Railway Law of Canada (Montreal: J . L o v e l l & Sons, 1947), p. 687. - 13 -c l e a r t h a t v e r y few s u b s t a n t i a l changes were made i n t h e s e r e v i s i o n s . B. Current Arrangements The c u r r e n t Canadian Car Demurrage r u l e s t a r i f f CCD 6500-A, i s s u e d by t h e Canadian Car Demurrage Bureau, Agent E.C. Szabo, i s 24 pages l o n g and c o n t a i n s two s e c t i o n s . S e c t i o n I d e t a i l s 10 r u l e s f o r d o m e s t i c t r a f f i c w h i l e S e c t i o n I I enumerates 6 r u l e s f o r e x p o r t t r a f f i c . I t i s i m p o r t a n t t o r e c o g n i z e , a t t h e o n s e t of t h i s d e s c r i p t i o n , t h a t CCD-6500-A i s not t h e o n l y t a r i f f t h a t c o n t a i n s demurrage r u l e s and p r o v i s i o n s . Item 270 o f t h e t a r i f f p r o v i d e s f o r e x c e p t i o n s t o t h e g e n e r a l , t a r i f f . Such e x c e p t i o n s must be p u b l i s h e d . A number of t h e s e f o r m a l e x c e p t i o n s e x i s t i n s e p a r a t e t a r i f f s and w i l l be d e s c r i b e d i n Chapter 5 of t h i s p aper. As w e l l , e x c e p t i o n s t o S e c t i o n I I a r e p u b l i s h e d i n T a r i f f 270 o f t h e Canadian F r e i g h t A s s o c i a t i o n . S p e c i a l s u p p l e m e n t a l d e t e n t i o n c h a r g e s , o v e r and above t h o s e p r e s c r i b e d i n CCD 6500-A, e x i s t f o r c e r t a i n t y p e s o f r a i l c a r s . These c h a r g e s , t o o , a r e p u b l i s h e d i n s e p a r a t e t a r i f f s . (i) Section I T h i s f i r s t s e c t i o n , p e r t a i n i n g e x c l u s i v e l y t o d o m e s t i c t r a f f i c , has 10 r u l e s . Each r u l e w i l l be d e s c r i b e d as s i m p l y and c o n c i s e l y as p o s s i b l e . A t t e n t i o n w i l l be drawn t o any r e l e v a n t court/CT.C./B.O.R.C. c a s e s t h a t i n t e r p r e t t h e r u l e . - 14 -Rule 1 - Cars Subject to These Rules A l l railways operating i n Canada are p a r t i c i p a t i n g c a r r i e r s i n the t a r i f f (Appendix C), As such, they are bound by the t a r i f f . Cars subject to the t a r i f f are cars "held for or by consignor or consignee for loading, unloading forwarding di r e c t i o n s or for any other purpose". This broad d e f i n i t i o n i s subject to a number of exceptions. Private cars on private tracks are exempt from the rules. I t does not matter who owns the tracks providing they are private. Ownership of the car and track need not, now, be by the same party. S p e c i f i c a l l y , cars not c o n t r o l l e d by the railways and that do not have r a i l r o a d reporting marks waiting on non r a i l r o a d owned tracks are not subject to CCD 6500-A. For example, a chemical company's cars on a pulpmill's private sidi n g would be exempt. If the private cars were on railway owned sidings they would s t i l l be subject to the demurrage t a r i f f . Other exemptions include cars containing f r e i g h t that are awaiting transhipment to a vessel; cars containing refuse and unclaimed f r e i g h t subsequently sold by the c a r r i e r . Aside from these exceptions, under Rule 1 and any formally agreed to i n Item 270, the t a r i f f i s uniformly applied to a l l shippers by a l l railways operating i n Canada. Rule 2 - Notification Once the car has been placed, the c a r r i e r must n o t i f y the shipper of i t s a r r i v a l . Placement may be either constructive - 15 -or actual. Actual placement occurs when the car i s positioned where previously designated by the consignee or consignor. Constructive placement occurs when the requirements of actual placement cannot be met because of the condition of the railway tracks or any reason att r i b u t a b l e to the consignor or consignee. Once notice has been sent placement i s deemed complete. Notice may be i n writing and mailed. If mailed, the party s h a l l be deemed n o t i f i e d the f i r s t 7:00 AM following mailing regardless of receipt of n o t i f i c a t i o n . Ohio Iron and Metal  Co. v. E.J. Ry, 34 I.C.C. 75; Eastern Lumber Co. v. Director  General, 57 I.C.C. 272. Notice may be mailed on Sunday or a l e g a l holiday and the consignee i s deemed n o t i f i e d at 7:00 AM following mailing. C.C.D.B. v. Department of National Defence, 43 C.R.C. 53; [1935] 2 DLR.72. N o t i f i c a t i o n may be made by any other method agreed to by the consignee and c a r r i e r . Commonly the telephone i s used. As a f i n a l proviso, the rule states that n o t i f i c a t i o n w i l l be deemed to have occurred i f either the car i s placed on private sidings or part of the contents have been inspected or removed by the consignee. Rule 3 - Delivery of Cars for Loading Following the placement of a car for loading the shipper i s allowed 48 hours to load the car and free i t . This period i s c a l l e d free time, and i t begins to run the f i r s t 7:00 AM following placement. If a Saturday, Sunday or holiday - 16 -intervenes i n the free time period, free time i s expanded by the amount of the weekend or holiday. I f , for example, the car was placed shortly a f t e r 7:00 AM Thursday, free time would begin to run at 7:00 AM Friday. By 7:00 AM Saturday only 24 hours of the free time has been consumed. The weekend thus becomes part of free time. Free time would expire 7:00 AM Tuesday. E f f e c t i v e l y , the shipper has f i v e days free time to load the car. The period could be further extended i f Monday was a holiday. A holiday, as defined by the C.C.D.B., means a day either l e g a l l y proclaimed a holiday by Federal, P r o v i n c i a l , or Municipal Authority. In 1985, 10 days were considered as such. They are: New Years Day Good Friday Easter Monday V i c t o r i a Day Canada Day Labor Day Thanksgiving Day Remembrance Day Christmas Day Boxing Day These days w i l l increase free time only when they intervene. If they occur subsequent to the expiration of free time, demurrage w i l l be charged. If the holiday f a l l s on a Saturday, i t i s observed on the Saturday and does not extend free time. No other day i s substituted i n l i e u thereof. I t bears emphasis that whether free time i s extended depends on when the car i s placed. Timing i s c r i t i c a l . An example aptly i l l u s t r a t e s t h i s point. If the car arrived on - 17 -Wednesday, free time would begin to run at 7:00 AM Thursday. By 7:00 AM Saturday, free time would be expired. The l a s t free day has immediately preceded the weekend. The car, i f detained over the weekend, w i l l be assessed demurrage. The t a r i f f e x p l i c i t l y requires that before the car i s deemed released, a f t e r loading, the shipper must supply a b i l l of lading to the railway. Rule 3 of the t a r i f f also provides for wet and inclement weather. If the l o c a l weather conditions "renders loading on public d e l i v e r y tracks impossible during business hours, or exposes the goods to damage, the free time allowance s h a l l be extended so as to give the f u l l free time of suitable weather." The correct i n t e r p r e t a t i o n of t h i s wording has been the subject of considerable argument before the C.T.C./B.O.R.C. The Board refused to grant a free time extension where a consignee delayed unloading road surfacing material u n t i l the roads were s u f f i c i e n t l y dry to lay the surfacing material. Canadian Car Demurrage Bureau v. Granby, 29 C.R.C. 313. To grant r e l i e f , the Board requires weather conditions that bar access to the cars. Highwater, snowdrifts or r i s k of serious i n j u r y to the f r e i g h t i f loading/unloading i s attempted are considered to be conditions that bar access. Western Produce  Co. v. C.C.D.B.; 47 C.R.C 128. The test applied i s whether others s i m i l a r l y situated and under the same conditions reasonably could and d i d load or unload cars during the same period of time. Western Produce Co. v. C.C.D.B., 47 C.R.C. - 18 -128. Underlying both these decisions i s an examination of the shipper's motives for delaying loading or unloading. If weather conditions legitimately caused a slowdown, then adjustments w i l l be made. But, i f the motive i s extraneous to the loading or unloading, weather conditions w i l l not be allowed as an excuse. Requests for extensions of free time have been made on many occasions. The Board/Commission has consistently held that free time for loading and unloading i s of general application and i s regarded as a maximum reasonable time for loading and unloading. Exceptions to t h i s general rule for p a r t i c u l a r anomalous conditions experienced by a shipper have been refused. New Brunswick Farmers and Dairymen's  Assn. v. C.C.D.B. 43 C.R.C. 197; PEI Potato Growers v. C.C.D.B. 55 C.R.T.C. 288; J.H. Giroux v. C.C.D.B. 43 C.R.C. 198. Rule 4 - Delivery of Cars for Unloading As with loading, 48 hours free time i s allowed for unloading. S i m i l a r l y , holidays and weekends, i f intervening i n the period, serve to extend free time. As well, the provision found i n Rule 3 for inclement weather also applies to unloading. Different i s the release procedure. Cars unloaded w i l l be deemed released when the railway i s advised. Once advised, free time or demurrage stops running. I t has been held by Canadian Courts that the primary duty of a c a r r i e r i s to carry rather than to furnish storage space - 19 -beyond a reasonable time necessary for unloading and removal. McCain Produce Co. et. a l . v. C P . Limited 30 NBR 2d 476 (1980); R. v. Frank A. G i l l i s Co., [1923] Ex C.R. 1; 70 DLR 635 appd. Further, the courts have stated that the consignee has no r i g h t to delay unduly taking delivery of his cars with the object of serving his own purposes, at the expense of the c a r r i e r R. v. Frank A. G i l l i s Co. Rule 4(b) provides that when del i v e r y to a shippers' sidin g i s not possible "because of the i n a b i l i t y of the consignee to receive i t , or because of any other condition att r i b u t a b l e to the consignee such car s h a l l be held at the destination or, i f i t cannot reasonably be accommodated there at an available hold point." A constructive placement notice i s given and free time begins to run following the f i r s t 7:00 AM. Robertson J.A. of the B r i t i s h Columbia Court of Appeal i n Canadian P a c i f i c Railway v. McCabe Grain Co. Ltd.; 69 DLR 2d 313 (1968) held that: On the whole tenor of the rules, I think that the language i s apt (except so far as provision i s made for free time) to authorize the making of demurrage charges i n circumstances such as those under consideration where, through the f a u l t of a consignee, a railway must hold cars undelivered. Quite c l e a r l y then, i f the railway cannot d e l i v e r the car to the shipper due to congestion or the shipper asks the railway to hold the car demurrage i s chargeable even though the car i s not at the consignee's sidin g and immediately available for - 20 -loading. However, a d i s t i n c t i o n must be drawn as to f a u l t . If for any reason congestion and r e s u l t i n g delay i s due to the railways no demurrage may be changed. McCain Produce  v. C P . Ltd. Moreover, the r a i l car when placed for unloading must be placed i n a reasonably accessible p o s i t i o n for unloading. R. v. Frank A. G i l l i s Co. Ltd. If the car i s not accessible, no demurrage i s due. Rule 5 - Cars for Reloading Where a car i s unloaded and reloaded on tracks served by private motive power, an additional 24 hours free time i s allowed for the shipper's engine to switch the car to the designated i n d u s t r i a l interchange track. Rule 6 - Extensions An extension of free time by 24 hours i s allowed for a number of purposes. Clearance of customs i s allowed 24 hours free time i f necessary. Worthy of ca r e f u l consideration i s item 240 which e x p l i c i t l y states that "demurrage s h a l l not be charged for delays for which the c a r r i e r i s responsible." A number of Board of Transport Commissioners' decisions have dealt expressly with delays i n cl e a r i n g customs and acts of government o f f i c i a l s . I t was held that demurrage i s assessable where cars are held pending receipt of customs papers from the shipper. Western Canada Flour M i l l s v. C.N.R., 46 C.R.C. 152. If the delay i s the f a u l t of the shipper through his own f a i l u r e to present the necessary documents and comply promptly - 21 -with customs, demurrage i s assessable. In Commodity Price S t a b i l i z a t i o n Corp. v. C.C.D.B., 58 C.R.T.C. 245, the commission stated: The shipper i s charged with the r e s p o n s i b i l i t y for knowledge of these regulations and f u l f i l l i n g them, and for any delay which takes place i n doing so. It i s also established that demurrage may not be c o l l e c t e d i f the delay at customs i s due to government regulations. Canadian Seed Co., ( A p r i l 28, 1920), F i l e #1700-200.1; C.C.D.B. v. James Richardson & Sons, 41 C.R.C. 260. A caveat must be attached to these cases, i n that the they dealt with Rule 8 of the revised 1921 Demurrage Rules. This rule provided that demurrage s h a l l not be c o l l e c t e d from the consignee for delays for which government or railway o f f i c i a l s may be responsible. While item 240 of the current t a r i f f provides that no demurrage w i l l be charged for delays which are the c a r r i e r ' s f a u l t , the current t a r i f f seems to replace government delay with the 24 hour extension for c l e a r i n g customs. What remains unclear i s whether Canadian Seed Co. and C.C.D.B. v. James Richardson & Son's are v a l i d precedents i f the delay due to government regulations exceeds 24 hours. Since there are no recent C.T.C. decision on point the a p p l i c a b i l i t y of these past decisions to the present t a r i f f i s uncertain. I t i s , however, c e r t a i n that delays due to the c a r r i e r w i l l not be assessed demurrage, while delays due to the mistake of the shipper w i l l be. - 22 -Other extensions provide that i f the r e c i p i e n t of the r a i l car i s a bonded warehouse then i n addition to the free time allowed under Rule 4, another 24 hours free time i s permitted. A further 24 hour extension w i l l also be allowed for giving orders for s p e c i a l placement. Astute shippers w i l l take advantage of t h i s rule by ordering the car withholding. The r a i l r o a d holds the car i n i t s carload center while n o t i f y i n g the shipper of i t s a r r i v a l . The shipper then has 24 hours advance notice to prepare for the car's placement and advise the c a r r i e r where i t wants the car placed. The extra time allows the shipper to schedule work crews or prepare space for the car and i t s contents. For diversion, reconsignment or reshipment i n the same car, a further 24 hours w i l l be allowed. When cars are stopped i n t r a n s i t for completion of loading, p a r t i a l unloading, inspection or grading, 24 hours w i l l be allowed. Rule 7 - Demurrage Charges O r i g i n a l l y , demurrage was $1 per day, per car, held beyond free time under the 1906 Car Service Rules. The intervening years have seen a number of increases (Table I I ) . As of July 1, 1985, demurrage i s $22 per day per car for each of the f i r s t two days, $45 for each of the t h i r d and fourth days, and $51 for the f i f t h day. Thereafter $73 per car per day i s assessed. In Canada, the Board has interpreted demurrage to be two d i s t i n c t elements, a penalty and a compensation component. - 23 -N.W. Line Elevators v. C.CD.B. 77 C.R.T.C. 181; Shipping  Federation v. Railway Association; 56 C.R.T.C. 31. Both elements are considered by the C.T.C. when issues of demurrage rate increases are considered. If i t can be shown that the demurrage charge, which may be s u f f i c i e n t to compensate the railways, i s not however a s u f f i c i e n t penalty to ensure prompt return to public service of the car, then a higher demurrage charge w i l l be accepted by the Board. Canadian Car Demurrage  Bureau C.T.C. Vol. 1966-1969, p. 1. Rule 8 - Industrial Strikes The o r i g i n a l rules d i d not provide for cars delayed due to i n d u s t r i a l s t r i k e s and the Board refused to allow for them. Re. Demurrage Charges Incurred on Account of Strike Conditions ( F i l e No. 1700.400) 47 C.R.C. 102. The present t a r i f f does, however, provide some r e l i e f to shippers incurring a s t r i k e with r a i l cars delayed by picketing. The rule e x p l i c i t l y and exclusively refers to s t r i k e s . Lockouts would not be included. I f , because of the s t r i k i n g action of the employees of the consignee/consignor, the r a i l r o a d i s prevented from removing unloaded cars or placing cars, a s p e c i a l rate of $22 per car per day i s assessed u n t i l the f i r s t 7:00 AM a f t e r the interference ceases. There i s no free time and weekends and holidays are assessed at $22. After the interference ends demurrage reverts to the regular scale. - 24 -T a b l e I I C a n a d i a n Demurrage R a t e I n c r e a s e s D a t e 1906 1917 C h a r g e #3 $ 1 p e r d a y p e r c a r $ 1 f i r s t d a y $ 2 s e c o n d day $ 3 t h i r d d a y $ 4 f o u r t h day $ 5 t h e r e a f t e r #4 $ 1 1-2 d a y s $ 5 t h e r e a f t e r C . T . C . #6 $ 4 1-4 d a y s $ 8 t h e r e a f t e r C . T . C . #7 $ 5 1-4 d a y s $10 5-8 d a y s $15 t h e r e a f t e r C . T . C . #7, Supp #5 $10 1-4 d a y s $20 t h e r e a f t e r C . T . C . #8, Supp #8 $15 1-2 d a y s $25 3-4 d a y s $35 5-6 d a y s $50 t h e r e a f t e r C . T . C . #10 $15 1-2 d a y s $30 3-4 d a y s $35 f i f t h d a y $50 t h e r e a f t e r C . T . C . #10, Supp #10 $18 1-2 d a y s $36 3-4 d a y s $42 f i f t h day $60 t h e r e a f t e r C . T . C . #11, Supp #1 $20 1-2 d a y s $40 3-4 d a y s $46 f i f t h d a y $66 t h e r e a f t e r Supp #4 $21 1-2 d a y s $42 3-4 d a y s $49 f i f t h d a y $69 t h e r e a f t e r C . T . C . #11, Supp #6 $22 1-2 d a y s $45 3-4 d a y s $51 f i f t h d a y $73 t h e r e a f t e r S o u r c e s : J a c k m a n , W . T . , E c o n o m i c P r i n c i p l e s o f T r a n s p o r t a t i o n ( T o r o n t o : U n i v e r s i t y o f T o r o n t o P r e s s , 1 9 3 5 ) , p . 6 0 6 . ; CCDB, Demurrage  What and Why - T h e R u l e o f t h e B u r e a u . ; J o h n B r o w n l e e & C o . v . C . N . R . 32 CRC 2 9 1 . ; CCDB CTC V o l . 1966 - 1969. - 25 -Rule 9 - Claims If the shipper believes the delay and subsequent demurrage charges were due to frozen or congealed loading, runarounds or bunching, r e l i e f may be claimed. To claim, demurrage charges must be paid i n f u l l and a claim for adjustment must be f i l e d within 60 days or aft e r the date on which the b i l l for demurrage i s rendered. The Board/Commission has been s t r i c t i n i t s i n t e r p r e t a t i o n of the claim procedure. In La P e r r e l l e  Lumber Co. v. C.C.D.B. F i l e No. 1700.441 60 [1964] 54 BTC 321, the Board upheld the Canadian Car Demurrage Bureau's r e f u s a l to entertain a claim for adjustment of demurrage i n respect to bunching on the grounds that the claim was made following the expiry of the 60 day l i m i t a t i o n period. Frozen and Congealed Loading An addi t i o n a l 48 hours free time w i l l be granted where bulk f r e i g h t , frozen i n t r a n s i t , cannot be unloaded within free time. Bulk f r e i g h t i s defined as loose i n mass, commodities that must be shovelled, scooped or forked. Packaged goods are not considered to be bulk. This rule has been interpreted by Board of Transport Commissioners to provide additional free time only when the frozen f r e i g h t cannot be unloaded i n any one car i n 48 hours. The Board emphasized that the intention of the Car Service Rules i s that each car s h a l l be dealt with by i t s e l f and without reference to the movements of other cars. Anthracite Sales Co. Ltd. v. C.C.D.B., 58 C.R.T.C. 282. - 26 -Assuming i t normally takes one hour to unload the concentrate, f i v e cars could e a s i l y be unloaded without incurring demurrage. However, the same f i v e cars, once frozen, must be thawed. If the cars can only be thawed separately and i t takes 12 hours to thaw and one to unload, the f i f t h car w i l l incur demurrage. Since no one car takes more than 48 hours to unload, additional free time w i l l not be granted. Cars, according to the Board's in t e r p r e t a t i o n must be treated separately. Accordingly, each car can e a s i l y be unloaded i n less than 48 hours so no r e l i e f i s granted. Demurrage, i n the i l l u s t r a t i o n , i s only incurred due to the cumulative a f f e c t of multiple car placements. The claim procedure does not consider the cumulative a f f e c t s of multiple car loadings. Runarounds When constructively placed, cars are not a c t u a l l y placed i n the date/order of constructive placement, the consignee i s e n t i t l e d to the same free time charges as would have been applied had cars been placed i n chronological sequence. Bunching - Loading Where the shipper orders cars for loading but the cars a r r i v e not as he ordered them but a l l at once, bunching has occurred. The shipper w i l l be allowed such free time for loading as he would, i f the cars had arrived as ordered. - 27 -Bunching - Unloading Bunching at unloading occurs when r a i l cars departing at d i f f e r e n t times from the same o r i g i n , t r a v e l l i n g over the same route are placed simultaneously at the shipper's s i d i n g for unloading. As long as the consignee did not cause the bunching, free time w i l l be adjusted to provide the equivalent had bunching not occurred. The important point to consider i s that t h i s rule requires that the cars must be from the same o r i g i n t r a v e l l i n g over the same route or r e l i e f w i l l not be accorded. No r e l i e f i s possible i f the cars' o r i g i n s or routes are d i s t i n c t . A.D. Selick v. C.C.D.B.; 58 C.R.T.C. 52. Rule 10 - Non Payment To enforce the aforementioned rules, the railways have two options. They may seize, lock or remove the car contents for which demurrage i s owing. Or the railway may refuse to d e l i v e r cars to the offending companies' si d i n g i n the future. There i s authority for the proposition that the c a r r i e r ' s claim for payment i s with the consignee not the consignor. I t was held i n Grand Trunk Railway Co. v. Bourgeois, 67 DLR 499 (1921) that the consignee i s primafacie considered to be the owner of the goods and i n the absence of sp e c i a l circumstances the contract of carriage i s made by the c a r r i e r with the person who i s the owner of the good shipped. As such, the consignor cannot be held l i a b l e f or demurrage. - 28 -( i i ) Section II Section II of CCD 6500-A deals with export t r a f f i c . In general, the rules are s i m i l a r , however, several d i s t i n c t i o n s e x i s t . Export t r a f f i c i s considered to be t r a f f i c consigned to destinations not i n the United States or Canada that flows through a port designated i n Item 2000, Rule 2 pertains to n o t i f i c a t i o n and simply requires that notice be sent to the consignee by whatever method agreed to. If i t i s marked, as with domestic t r a f f i c , the consignee i s deemed to be n o t i f i e d at 7:00 following mailing. Rule 3 allows f i v e days free time. Rule 4 prescribes the method, i d e n t i c a l to domestic t r a f f i c , for computing the duration of free time. Rule 5 sets out the charges. Days 1-3 are charged $22 while the fourth, f i f t h , and s i x t h days are assessed at the rate of $37. The seventh to ninth days are $57. Thereafter, the rate i s $7 3. Exceptions to these export rules are published by the Canadian Freight Association. T a r i f f No. 270 d e t a i l s exceptions for both C.N. and C P . r a i l for eastbound import and westbound export. F i n a l l y Rule 6 provides for s t r i k e s , e s t a b l i s h i n g a f l a t rate of $22 per day. ( i i i ) Detention In addition to these demurrage charges the railways also tag on a supplemental detention charge over and above the demurrage assessed for c e r t a i n types of cars. The shipper who - 29 -detains these cars pays the demurrage plus the extra detention charge. Refrigerated cars, heavy duty f l a t cars, m u l t i - l e v e l cars, insulated box cars, and cars used i n container service are subject to detention charges. Detention charges on r e f r i g e r a t o r cars and insulated box cars equipped with underslung heaters and liquidometers are found i n the Canadian Freight Association T a r i f f 6540 Section 7 Item 1460. For the f i r s t four days detention i s $31.32 per day and for the f i f t h and each succeeding day, i t i s $62.72. As of January 1, 1984, the charges increased to $32.89 and $65.78 respectively. I t should be noted that these charges are applicable only between October 15 and A p r i l 15. Mechanical r e f r i g e r a t o r cars detention charges are found i n Canadian Freight Association T a r i f f 6568-F, Section 2, item 380. For the f i r s t four days charges are $33.91 per car per 12 hour period. Charges for the f i f t h through tenth day are $101.78 for each 12 hour period. For each succeeding day $339.30 per 12 hour period i s assessed. As of January 1, 1984, the charges increased to $35.61, $106.87, and $356.27, respectively. Special heavy duty f l a t cars also have a detention charge. The relevant t a r i f f i s Canadian Freight Association No. 6509-C Section 2, item 150. The scale of charges i s reproduced below: - 30 -FD Cars FM & FW 1st 24 hours aft e r free time 0 111.30 2nd 333.90 222.60 3rd 333.90 222.60 4 th 667.80 333.90 5 th 687.80 333.90 6th and each succeeding day 1113.00 445.20 M u l t i - l e v e l cars are also subject to detention charges. Canadian Freight Association T a r i f f 9081 Item 200 provides for detention charges of $20.65 per day on b i and t r i l e v e l cars. F i n a l l y , there i s a detention charge on cars used i n container service. Canadian Freight Association T a r i f f 7589 Item 300 and T a r i f f 7262 Rule 90 d e t a i l detention charges applicable when these cars are held beyond free time. Unlike the aforementioned detention charges CCD 6500-A does not apply. The complete charges are contained i n T a r i f f 7589 and 7263. (iv) Averaging Many of the provisions i n the Canadian t a r i f f are si m i l a r to i t s American counterpart PHJ-6004. However, there i s one s t r i k i n g difference i n the United States. There, a system of averaging may be agreed to by the shipper and the c a r r i e r . B r i e f l y , the system awards c r e d i t s for release within 24 hours. Debits accrue when the cars are detained beyond 48 hours. Monthly, the debits and cr e d i t s are t a l l i e d . If any - 31 -outstanding debits e x i s t , the shipper must pay demurrage on them. In Canada, no such system e x i s t s . Shippers have to no a v a i l argued for such a plan. The response from both the railways and the Board has repeatedly been a resounding No. Summary In spite of some rate increases and modifications, the rules are s u r p r i s i n g l y s i m i l a r to those introduced nearly 80 years ago. Over the years, t h i s uniform general t a r i f f has been consistently applied with l i t t l e modification or exception. C. Performance Measures S t a t i s t i c a l data obtained from the C.C.D.B. and C.N. R a i l provide useful measures of the effectiveness of CCD 6500-A i n encouraging quick release of cars. C.C.D.B. data (Appendix D) show the percentage of cars released within free time. For 1983, 96% of a l l cars were released within free time. Select data since 1927 (Appendix E) indicates that the percent of cars released has been remarkably high and consistent. Interestingly the west has always had a higher percentage of cars released within freetime than the east. With the exception of the second world war, the percent of cars released within free time i n the west has been between 95-98%. Unfortunately, the aggregate form of these data obscures some s i g n i f i c a n t trends. The data do not reveal how - 32 -long the cars were held, or the differences by car type or load, unload times. The C.C.D.B. published data only t e l l how many cars are released within free time. What i s unknown i s the length of free time. I t may be 48 hours, or i t may be 96 hours i f a weekend intervenes. Possibly, free time could be up to a week i f a holiday i s present and the shipper i s bonded. Car release times for both load and unload for 11 d i f f e r e n t car types were obtained from C.N. R a i l . The data were broken down by month for the period of January 1984 to June 1984. The data excludes private cars and cars involved i n grain transportation. What the data do show, i n six-hour time blocks, i s the number of cars released af t e r constructive or actual placement. After 96 hours the data were divided into 12-hour blocks. If the car i s placed at the shippers at 1:00 PM and released at 5:00 PM, t h i s release would be tabulated i n the f i r s t six-hour time block. The f i r s t 7:00 AM ru l e , weekends and the appropriate amount of free time i s i r r e l e v a n t to these data. Appendix F graphs the res u l t s by car type for both load and unload. Tables III and IV show the cumulative percentage of cars released within one, two and three days for each category of car type for loading and unloading. The table shows that the t o t a l percentage of cars unloaded within 24 hours i s only 53.7%. Within 48 hours, i t i s 75.1%. For loading, 65.9% of cars are loaded within 24 hours and 80.3% are loaded within 48 hours. The C.C.D.B. published figure of 96% of a l l cars being released within free time would at f i r s t - 33 -Table I I I Cumulative Percentage of Cars Released w i t h i n Three Days Cars P r o v i d e d f o r Loading Car Type * 24 Hours 48 Hours 72 Hours F l a t B i - / T r i - L e v e l 87.9 93.8 96 .9 100 Ton Covered Hopper 82.9 90.3 94 .2 Open Cross Hopper 75.2 86.1 90 .6 Mechanical Reefer 71.0 86.1 95 .7 Box I n s u l a t e d 67.1 82.1 90 .0 F l a t Bulkhead 64.3 80.0 . 87 .8 40 F t . Box 63.6 78.5 86 .8 83-90 Ton Covered Hopper 61.8 74.6 87 ,1 F l a t Standard 53.8 75.1 85 .4 Gondola 5 2 • 2 73.7 84 .3 50-52 F t . Box 52.2 70.9 81 .7 T o t a l of A l l Car Types 65.9 80.3 88 .0 Table IV Cumulative Percentage of Cars Released w i t h i n Three Days Cars P r o v i d e d f o r Unloading Car Type * 24 Hours 48 Hours 72 Hours F l a t B i - / T r i - L e v e l 78.2 92. 5 96.6 F l a t Standard 71.5 85. 3 92.6 Open Cross Hopper 69.1 84. 8 91.9 100 Ton Covered Hopper 58.4 78. 2 87.3 Box I n s u l a t e d 54.7 80. 7 91.2 40 F t . Box 53.8 76. 1 87.2 50-52 F t . Box 53.1 76. 6 87.3 F l a t Bulkhead 52.8 78. 1 90.4 Mechanical Reefer 45.5 72. 2 83.2 83-90 Ton Covered Hopper 39.5 61. 6 75.4 Gondola 25.8 50. 4 70.7 T o t a l of A l l Car Types 53.7 75. 1 86.4 * Car types are ranked by percentage r e l e a s e d w i t h i n 24 hours. Source: Based on unpublished C.N. data f o r January-June 1984. - 34 -glance indicate l i t t l e i f any s i g n i f i c a n t room for improvement. But, using the free time measurement masks the actual time the car i s held. Our data indicate that there may, i n f a c t , be considerable room for improvement. Another i n t e r e s t i n g trend found i n the C.N. data i s the marked difference between load an unload release times. The loading pattern shows that almost two-thirds of the cars were released i n 24 hours. In contrast, only half of the cars for unloading were released i n 24 hours. D i s t i n c t load and unload patterns t y p i f y each car type. Appendix F contains graphs of the load and unload times for each of the 11 car types. No two are s i m i l a r . The f l a t B i - T r i l e v e l cars show the highest percentage of cars loaded or unloaded and released within 24, 48, and 72 hours. The curves peak i n the f i r s t s i x hours. Gondolas, on the other hand, have the slowest release times with only one-half being unloaded within 48 hours. Mechanical Reefers and 83-90 ton covered Hoppers show poor release times as well. Reebie and Associates i n t h e i r study Towards an E f f e c t i v e  Demurrage System found s i m i l a r patterns i n the United States. The study reported poor release times for covered hoppers and r e f r i g e r a t e d cars. I t was suggested that these cars were t y p i c a l l y used for storage by shippers. Their research indicated that wholesalers used the mechanical r e f r i g e r a t e d cars as storage for perishables on team tracks i n urban areas. This practice saves the wholesale d i s t r i b u t o r either the additional storage space or a d d i t i o n a l tracking costs to and from the - 35 -c e n t r a l warehouse. The study also found that covered hoppers were used as supplemental storage for raw materials i n periods of high demand. Firms whose e x i s t i n g storage f a c i l i t i e s were inadequate used the r a i l equipment. Although not mentioned by Reebie, the same reasons could i n a l l l i k e l i h o o d apply to gondola's. Reebie also found that box cars were frequently used as storage. The C.N. data supports t h i s . Release time for box cars was only s l i g h t l y above mechanical r e f r i g e r a t o r cars. F u l l y 23.4% of box cars were released beyond 48 hours. It i s also l i k e l y that detention charges on r e f r i g e r a t o r , m u l t i - l e v e l , insulated box cars a f f e c t loading and unloading times. M u l t i - l e v e l c a r r i e r s have the quickest load and unload times. The ease of unloading and loading and the supplemental detention charges may be factors i n encouraging quick turnaround. Insulated box cars are assessed a supplemental detention charge. This type of car ranks f i f t h i n both load and unload times. The increased demurrage and detention charge may be a factor. Mechanical r e f r i g e r a t o r cars are loaded and released quickly yet they show very poor release times for unloading despite supplemental detention charges. Possibly the value of the car for storage s t i l l outweighs the cost of the detention charges. Hoppers show remarkably quick loading and unloading release times. We would suggest that t h i s i s due pr i m a r i l y to the speed to which these cars can be mechanically unloaded. Release times vary markedly by car type. Several factors seem to contribute to these differences. Ease of - 36 -loading and unloading, l e v e l of demurrage and detention charges and the usefulness of the car as storage seem to interact to a f f e c t release times. In summary, the uniform demurrage rules have remained remarkably s t a t i c and remain s i m i l a r to the o r i g i n a l 1906 rules. This consistency i s mirrored by the C.C.D.B. time series data that indicates that the percent of cars released within free time has remained consistent and high. This high reported rate i s deceiving. The C.N. data indicates clear differences i n release patterns between load and unload and between car types. The C.N. data indicate considerable room for improvement. I l l . INSTITUTIONS AND PROCEDURES A. Canadian Car Demurrage Bureau The Canadian Car Demurrage Bureau (CC.D.B.) was established by the railways as an independent agency to audit and uniformly enforce the Canadian Demurrage Rules. As such, i t s t r i v e s to be meticulously f a i r i n i t s dealings with the railways and shippers.^ I t does not make the rules nor does i t c o l l e c t the demurrage but i t merely ensures that they are evenly and f a i r l y applied. (i) History In September of 1905, the Canadian railways c o l l e c t i v e l y established the Canadian Car Demurrage Bureau to attend to a l l demurrage matters. Previously, demurrage was dealt with by the Canadian Freight Association along with switching charges and other car service items.2 This restructuring by the railways was opposed as i t was suggested that t h i s action was a combination i n r e s t r a i n t of trade. Duthie v. Grand Trunk  Railway Co. 4 C.R.C. 304, 325. The Board addressed t h i s outstanding issue when establishing the Car Service rules i n 1906. The Board i n i t s decision stated: ^-Demurrage, What and Why, The Rule of the Bureau (Montreal: C.C.D.B., 1963), p. 3. ^History of the Canadian Car Demurrage Bureau (Montreal C.C.D.B.), p. 2. - 38 -Objection has been made to the Board against a system by which several railway companies have joined i n an association or bureau for investigating cases of delay i n the loading or unloading of cars and enforcing t h e i r charges therefore. This appears to the Board to be a matter of i n t e r n a l management on the part of the railway companies with which the Board should not interfere.3 Over the ensuing years, the Bureau has remained a viable agency continuing to do much the same tasks that i t was o r i g i n a l l y mandated to do. Its existence seems s i n g u l a r l y uneventful. Some changes were made to the structure of the Bureau i n June 1974. P r i o r to t h i s date, two d i s t i n c t Bureau o f f i c e s existed. One o f f i c e was i n Montreal, for Eastern l i n e s , while the other was i n Winnipeg for Western l i n e s . Each o f f i c e had i t s own executive board and manager. A l l t h i s changed on June 5, 1974. Bureau member railways met and established one Bureau with one co n s t i t u t i o n , by-laws and executive board f o r a l l of Canada. Aside from t h i s restructuring, i t s purpose and operation seems to have been consistent for 80 years. ( i i ) Purpose of the Bureau The purpose of the C.C.D.B. i s formally described i n the co n s t i t u t i o n and by-laws of the organization as being: to encourage the prompt loading and unloading of cars and ensure enforcement of the Canadian Car Demurrage Rules and charges; and 3Jacobs, Railway Law of Canada (Montreal: J. L o v e l l & Sons, 1947), p. 691. - 39 -to a i d i n the proper observance of rules and charges published i n other t a r i f f s i n respect to the ap p l i c a t i o n of demurrage detention of a uniform charge therefore. E.C. Szabo, National Manager of the Bureau, stated i n a speech at C.N. R a i l i n 1981 that: The aim of the bureau i s to achieve uniform application of the demurrage rules to assure l i k e treatment between railways and t h e i r customers. In summary, the Bureau i s an independent audit agency that ensures impartial uniform ap p l i c a t i o n of demurrage i n Canada. ( i i i ) Operation 1. Reports Railway o f f i c e s , depending on where they are located, send reports of r a i l cars detained beyond free time and b i l l e d demurrage to either the Winnipeg o f f i c e or the Bureau's Montreal o f f i c e . The railways, not the Bureau, b i l l the shippers for demurrage. The Bureau simply checks the reports and revised them for any undercharges or overcharges.^ This process i s not computerized. A cl e r k examines the record submitted by the railway and ensures that the changes are calculated i n accordance with the provisions of the t a r i f f . If a mistake i s found, a corrector i s sent to the p a r t i c u l a r r a i l r o a d involved. 4E.C. Szabo, O f f i c i a l s (1981). Speech made i n Montreal to C.N. R a i l - 4 0 -2 . Shipper Claims and Complaints Almost without exception, complaints and claims by shippers are f i r s t made to the railway, After being automatically assessed demurrage, shippers often phone the railways to protest the charge. Our interviews indicated that many shippers are unfamiliar with Rule 9 of the t a r i f f . If a shipper believes a mistake has been made, bunching, runaround, or adverse weather conditions have occurred, he may apply i n writing for an adjustment of the demurrage charge. I t i s the Bureau's r e s p o n s i b i l i t y to adjudicate t h i s dispute. The shipper submits his claim to the r a i l r o a d which i n turn forwards i t to the Bureau for i n v e s t i g a t i o n and res o l u t i o n . Claims for bunching are i l l u s t r a t i v e of t h i s procedure. To i n i t i a t e the process, a special form must be f i l l e d out by the shipper and submitted. Our interviews indicated that many shippers are unaware of the existence of the form. Once the form i s f i l l e d out by the shipper, the Bureau charts the bunching or runarounds and determines i f i t occurred and the magnitude, For legitimate claims the Bureau sends a corrector to the railway authorizing a refund to the shipper by the railway. The railways may not make refunds u n t i l the Bureau has investigated and approved the claim. - 41 -3. A u d i t Under section 16 of the Bureau's c o n s t i t u t i o n and by-laws i t states: Bureau employees i n the performance of t h e i r duties s h a l l have access to books and records of member railways to enable them to ascertain that the rules are properly enforced and that car demurrage charges are assessed. I t i s conceivable that what a railway reports to the Bureau and what they a c t u a l l y assess a preferred shipper may be completely d i f f e r e n t . To avoid such a s i t u a t i o n , Bureau inv e s t i g a t i n g o f f i c e r s are given the authority to audit the books of the railways. The Bureau employs t r a v e l l i n g men who traverse the country examining the books of the railways to confirm that the car record they receive from the railway i s i n fact represent-ative and accurate. 4 . Spot Checks Investigating o f f i c e r s from the Bureau may make physical yard spot checks to see i f shippers claims are correct. Shippers may l a t e r allege that the cars were not i n t h e i r yard. The Bureau, having previously completed a spot check, i s able to match t h e i r spot check records with the shippers to confirm, or as the case may be, refute the shipper's claim. - 42 -(iv) Structure 1. Membership According to the Bureau's c o n s t i t u t i o n and by-laws: Membership of the bureau s h a l l consist of railway companies p a r t i c i p a t i n g i n the expenses of the bureau having at least one terminus i n Canada. The membership l i s t i s published i n CCD-6500-A. At present, there are 22 p a r t i c i p a t i n g c a r r i e r s (Appendix C). Each member i s e n t i t l e d to appoint one representative to the executive board. C.N. and C P . R a i l are e n t i t l e d to two each: one from Eastern Canada and one from Western Canada. 2. Voting Rights Each member i s e n t i t l e d to one vote i n any question to be decided by vote. However, the co n s t i t u t i o n also provides that where votes on f i n a n c i a l obligations of the Bureau are to take place, voting r i g h t s w i l l vary proportionately to the aggregate mileage of the r a i l r o a d . If the c a r r i e r ' s aggregate mileage exceeds 1000 miles, the c a r r i e r i s e l i g i b l e for one vote every 1000 miles. 3. Executive The executive board i s composed of representatives from each member railway. The board from within t h e i r membership el e c t one representative as chairman and a second as vice-chairman. One must be from Western l i n e s and one from Eastern l i n e s . They are elected for a term of two years. The - 43 -board, the chairman and vice-chairman embody the executive head of the C.C.D.B. As such, they e s t a b l i s h p o l i c y , promulgate rules and oversee the management of the Bureau.^ S p e c i f i c a l l y , Section 13 of the c o n s t i t u t i o n and by-laws empowers the board to make and amend such rules as may be necessary to carry out the purpose of the Bureau. These are not the provisions i n the t a r i f f , just the procedural rules involved i n operating the Bureau. The t a r i f f i s established j o i n t l y by the railways. Since the Bureau i s a creature of the railway, the d i s t i n c t i o n i s f i n e . The executive board also appoints a national manager, an assistant national manager, and a manager of Western l i n e s . A l l serve at the pleasure of the board. The national manager, located i n Montreal, i s the administrative head of the Bureau, and i s responsible for the i n t e r p r e t a t i o n of a l l rules and regulations. His decisions are f i n a l unless changed by the executive board.^ Presently, Mr. E.C. Szabo i s the National Manager and Mr. R.H. Davis i s the Assistant National Manager. The Eastern and Western managers serving under the National Manager supervise the a c t i v i t i e s of the Bureau i n t h e i r respective regions. A small group of inspection and o f f i c e personnel responsible to these managers audit demurrage records and investigate claims to ensure the stated purpose of uniform 5 I b i d . 6 I b i d . - 44 -compliance with the t a r i f f . The s t a f f i s small. In B r i t i s h Columbia, for instance, there are only two employees. 4 . Finances The expenses of the Bureau are recovered on a monthly basis from member railways. Expenses are divided among member railways on a basis of the number of cars reported by each c a r r i e r . ^ Once a car i s ordered for placement by a shipper i t becomes a car reported. Once a car arrives at i t s destination i t becomes a car reported. Both form the t o t a l number of cars reported to the Bureau, and together are the basis for assessment. In summary, the Bureau's purpose and operation remains si m i l a r to i t s o r i g i n a l mandate i n 1905. Its organizational structure c l e a r l y shows that although set up as an autonomous audit agency i t remains responsible to the railways. The Bureau would not place any l i m i t a t i o n s or represent an obstacle to successfully adopting a new demurrage system. They merely audit and p o l i c e the t a r i f f . As they audit the present t a r i f f they w i l l , i f required, audit new changes. B. Railways In examining the effectiveness of the present demurrage t a r i f f and the f e a s i b i l i t y of changing demurrage rul e s , i t i s ^History of the Canadian Car Demurrage Bureau (Montreal: C. C.D.B.), p. 2. - 45 -appropriate to consider the mechanics of car placement and release as well as the p a r a l l e l recording and c a l c u l a t i o n of demurrage charges by the railways. Alterations to the e x i s t i n g t a r i f f that do not mesh with railway practice may not achieve expected increases i n u t i l i z a t i o n and economic e f f i c i e n c y . The railways' a b i l i t y to c a p i t a l i z e on t a r i f f changes must be considered. Both C.N. R a i l and C P . R a i l follow s i m i l a r procedures for placing and p u l l i n g cars as well as recording and c a l c u l a t i n g demurrage charges. They are both highly computerized but di f f e r e n t software packages have been developed by CN. R a i l and C P . R a i l . CN. c a l l s t h e i r s YARDS while C P . c a l l s t h e i r s TRACKS. But for demurrage purposes the systems are s i m i l a r . For descriptive purpose the procedure surrounding car placement can be broken into various stages. (i) Arrival of the Rail Car at the Carload Center When a r a i l car destined for a nearby company for unloading arrives at the railway's l o c a l car load center, the assigned demurrage c l e r k advises the customer. Demurrage clerks are responsible for a l l r a i l customers i n a s p e c i f i c geographical area. When the t r a i n arrives at the car load center, the clerks receive a l i s t of a l l cars on the t r a i n . Each r a i l car l i s t e d i s given a sp e c i a l number code that i d e n t i f i e s the assigned regional demurrage cl e r k . The clerks - 46 -scan the l i s t f or t h e i r number. On finding one of t h e i r customers the c l e r k phones the company and advises them that t h e i r car has arrived. Then or l a t e r , the customer w i l l advise the c l e r k where they want the car placed. Both the time of a r r i v a l of the car at the center and the time the customer was n o t i f i e d are imputed into the computerized demurrage record. Already recorded when the car record was created i n i t i a l l y i s the car type, car number, contents and customer name. Loaded cars may be ordered by shippers i n either of two d i s t i n c t methods. They may be ordered "withholding" or "on a r r i v a l " . When ordered "on a r r i v a l " the shipper has prespecified where he wants the car placed. Upon a r r i v i n g at the car load center, the r a i l car i s automatically routed to the previously s p e c i f i e d s i d i n g . "Withholding" means that the destination has not been s p e c i f i e d previously by the shipper. Nothing happens u n t i l the customer has been advised of the r a i l car's a r r i v a l at the car load center. This method usually r e s u l t s i n the customer, i n e f f e c t , gaining about 24 hours free time. Delay occurs because the demurrage clerks phone the customer to advise him of the car's a r r i v a l . The customer then s p e c i f i e s where the car i s to be placed. ( i i ) Cars Ordered and Cars Released. Each day, p r i o r to 1500 hours (3:00 PM) at C P . R a i l and 1400 hours (2:00 PM) at CN. R a i l , customers phone i n a l i s t of - 47 -cars released and cars they want spotted for loading or cars off spot, they want spotted. For cars released by the shipper that have been unloaded and are now empty, free time or demurrage stops running at the time the l i s t i s phoned i n to the demurrage cl e r k . If the car was empty and ordered placed for loading free time or demurrage w i l l not stop running upon i t s release being phoned i n . The waybill must be forwarded to the c a r r i e r . Upon receipt, free time or demurrage w i l l stop running. These release times are entered into the computerized record. ( i i i ) Placement and Pulling of Rail Cars After the d a i l y placements and p u l l s have been received, the c l e r k organizes the l i s t of spots and p u l l s for h i s or her region and then enters i t i n the computer. The yard master i n s t a n t l y receives a copy of the required spots and p u l l s . The crews w i l l complete the requested spots and p u l l s . The foreman w i l l report back to the yard master a l l complete spots and p u l l s . The yard master, i n turn, then enters the time the foreman reported back to him into the computerized demurrage record as the time spotted. Railway planning i s based on a 24-hour cycle. The p u l l i n g and placing of cars are d i s t i n c t operations and are separately s l o t t e d into t h i s cycle. The afternoon s h i f t p u l l s cars, while the evening s h i f t spots cars. The whole operation i s geared around the standard working hours of shippers. Cars are - 48 -spotted for the morning, so the shipper can unload them during the day, The frequency of t h i s spotting and p u l l i n g w i l l depend on the available switching service. Switches may occur d a i l y or they may be less frequent. If switching service i s weekly, then a car released within 24 hours of being spotted w i l l s i t i d l e for s i x days awaiting p u l l i n g . Undoubtedly, switching service i s a s i g n i f i c a n t l i m i t i n g factor i n whether the railway can take advantage of changes i n demurrage rules r e s u l t i n g i n early car release. If switching service was d a i l y , the 24-hour cycle and current p u l l i n g and placing procedures would allow the railways to c a p i t a l i z e on early release. I f , for example, the car was placed at midnight, free time would begin at 7:00 AM. The shipper could unload i t during the morning and phone i n the release at 12:00, well before the 2:00 PM deadline. The car would have been released within 12 hours of spotting. This rapid release of the car would permit the car to be pulled by the afternoon s h i f t . The car would be returned to the railway i n less than 24 hours. (iv) B i l l i n g From the computerized car placement and release record demurrage charges are calculated. B i l l i n g for these charges i s done by the i n d i v i d u a l railway's accounting department. - 4 9 -(v) Forwarding of Records to the Canadian Car Demurrage Bureau The r a i l w a y s v a r y i n what they r e p o r t t o the Bureau. D a i l y , C.N. R a i l m a i l s a copy of the computerized c a r placement and r e l e a s e output t o the Bureau. T h i s output a l s o i n c l u d e s the amount of demurrage b i l l e d t o each s h i p p e r . I f the sh i p p e r p r o t e s t s h i s charge t o the r a i l w a y or the r a i l w a y f i n d s a mistake, the r a i l w a y f i l l s out a CCDB-2 form and m a i l s i t to the Bureau. I f the Bureau approves the change, i t sends a d i f f e r e n t form back approving the c o r r e c t i o n and a r e c o n c i l i a t i o n i s made by the r a i l w a y s . I f the Bureau f i n d s a mistake i n the assessed charges, i t w i l l send a c o r r e c t o r back to the r a i l w a y , and the c a r r i e r w i l l make the a p p r o p r i a t e adjustments. C P . R a i l f o l l o w s a s l i g h t l y d i f f e r e n t procedure. Weekly, a CCDB-2 form, the same one used by C N . R a i l f o r c o r r e c t i o n s i s m a i l e d t o the Bureau. Only c a r s f o r which demurrage was assessed are reco r d e d on t h i s form. In both cases, C N . and C P . , a l l the Bureau r e c e i v e s i s p r i n t e d or t r a n s c r i b e d output t o which i t manually checks f o r e r r o r s . In comparison to the r a i l w a y s ' computer based system, the Bureau's f o l l o w u p seems r a t h e r outdated and a r c h a i c . C. Shippers The Canadian Car Demurrage Bureau and the r a i l w a y p r a c t i c e s have been d e s c r i b e d i n d e t a i l . I t i s a l s o necessary to c o n s i d e r the p r a c t i c e s of the s h i p p e r s . In p a r t i c u l a r , i t - 50 -i s worthwhile to f i r s t inquire about the e f f e c t of technological improvements on load and unload times and then l a t e r examine the reasons for r a i l car detention despite the f e a s i b i l i t y of rapid loading and unloading. (i) Load and Unload Times In Canada, free time to load and unload cars has remained 48 hours since 1906, i r r e s p e c t i v e of s i g n i f i c a n t technological advances. While r a i l cars were manually loaded at the turn of the century, i t i s now possible to mechanically load and unload cars i n much shorter periods of time.^ Reebie and Associates i n Towards an E f f e c t i v e Demurrage System found the following load and unload times i n the United States i n 1972. LOAD UNLOAD Overall Mean Time (hours) 2.61 3.77 D i s t r i b u t i o n High/Low .15-8.0 .25-8.0 In Car Demurrage Rules Nationwide - Investigation and  Suspension Docket No. 8963, 350 I.C.C. 777 (1975), at issue was whether free time should be reduced to 24 hours i n the United States. Substantial evidence was presented by the respondent railways, i n d i c a t i n g that present technology allows r a i l cars to be loaded i n very short periods of time. The c a r r i e r s Reebie and Associates, p. 115. - 51 -claimed that to load a 50 foot box car using a f o r k l i f t truck and a p a l l o t i z e d load takes 1.4 man hours. In contrast, by hand i t takes 21 manhours. The s t e e l industry was able to load gondola cars i n one-half to three-quarters of an hour. Interviews with shippers indicated that these figures seem accurate i n Canada. Load times and unload times w i l l , of course, vary depending on the type of car and the products handled. Shippers suggested that box cars with wide doors and contents on p a l l o t s could be loaded or unloaded as quickly as one-half or three-quarters of an hour. But on average, shippers suggested about four hours were required to load or unload a box car. However, gondola cars carrying woodchips may be mechanically unloaded i n one-half hour. This rapid unloading i s due to technological improvements throughout the century. Where unloading was done manually i n the f i r s t part of the century the shipper now has a host of time and labor saving devices. Fork l i f t trucks using p a l l o t i z e d loads now allow for u n i t i z e d loading. P a l l o t s may be stacked several high and moved i n single movements. Cranes for unloading and loading f l a t c a r s and hydraulic hoists for dumping gondola cars greatly f a c i l i t a t e loading and unloading. Further innovations, such as s p e c i a l l y equipped cars, movable and pneumatic bulkheads, lading strap anchors, door bars, crossbars and i n f l a t a b l e dunnage are now available to shippers. With these advances i t i s not surprising that r a i l cars can today be loaded and unloaded i n very short periods of - 52 -time. Arguably, while 48 hours free time may have been needed i n 1906, i t i s excessive now. ( i i ) Reasons for Detention With such short unload and load times possible, i t i n i t i a l l y i s d i f f i c u l t to understand why shippers detain cars beyond free time. And, more pr e c i s e l y , why are only 53.7% of a l l C.N.'s cars unloaded and released i n 24 hours and 65% loaded within 24 hours. A number of reasons have been suggested by Reebie and Associates i n Towards an E f f e c t i v e  Demurrage System, and J.P.R. Gabille i n E f f e c t s of Free time  Reduction on R a i l Car U t i l i z a t i o n . Our interviews revealed that these factors are every b i t as v a l i d today i n Canada. 1. Temporary Lack of Storage Space R a i l cars are sometimes detained as short term storage. Such use i s not planned or i n t e n t i o n a l but i s brought about by some unexpected occurrence. Our interviews uncovered several instances where r a i l cars had been held beyond free time as a r e s u l t of some unforeseen s i t u a t i o n . One company, involved i n an i n d u s t r i a l dispute, found the r a i l cars trapped behind picket l i n e s and considerable demurrage accrued. Another had i t s loading f a c i l i t y a c c i d e n t a l l y destroyed, i s o l a t i n g a number of r a i l cars. Again, demurrage b u i l t up. - 53 -2. Lack of Control over Inbound Shipping Reebie and Associates found i n t h e i r study that detention may occur because companies receiving goods were unable to exert .influence over the shipment of inbound t r a f f i c . Goods would ar r i v e at unexpected times when the consignee was unable to unload. Similar situations were uncovered i n Canada. Against the instructions of the consignee, a fr e i g h t forwarder fearing a s t r i k e by longshoremen shipped the product onto cars destined for the consignee's plant. The cars arrived just when the firm was shutting t h e i r plant down for 2| weeks. As a re s u l t , 12 cars sat i d l e for 2\ weeks. Another firm received i t s raw materials from U.S. suppliers. The suppliers consistently shipped the product at regular i n t e r v a l s by r a i l car. This was important because the plant's unloading f a c i l i t i e s could only unload f i v e cars at a time. The railway apparently shut down for 10 days during Christmas. The r a i l cars c o l l e c t e d at the railway yard. Following the holiday, 15 - 20 cars were placed at once and demurrage resulted. 3 . Car Supply Considerations J.P.R. Gab i l l e found t h i s to be the most frequent reason for car detention by shippers i n the forest industry. Companies may require cars on hand, either empty, ready for loading or f u l l of materials ready for unloading, as inputs i n the manufacturing process. The operation of pulpmills i l l u s t r a t e t h i s need. Gondola cars carry chips for use i n - 54 -manufacturing pulp are required regularly i n great numbers. Stockpiles of chips are maintained as a buffer against inconsistent r a i l service. But ultimately i f the supply ceases, the m i l l w i l l shut down. More acute i s the need for box cars to remove the pulp. The product normally cannot be stored i n any s i g n i f i c a n t amounts at the m i l l . If box cars are unavailable the m i l l w i l l be shut down r e s u l t i n g i n considerable downtime expense. Another firm interviewed used four to f i v e hopper cars f i l l e d with the raw material as a buffer. The cars were detained as insurance that the inputs would always be available. Reebie and Associates found that shippers' concern at having the cars on hand i s so great that they w i l l either hold cars they have emptied or else they w i l l order cars i n advance to insure that the cars are available for an outbound load. These findings coincide with the assertions of the c a r r i e r s i n Car Demurrage Rules Nationwide 350 C.C.C. 777. The c a r r i e r s maintained that shippers hold cars they have unloaded i n an t i c i p a t i o n of a future load even though they have no immediate load. This practice, according to the c a r r i e r s , was one of the primary reasons for unnecessary detention of cars by shippers. 4. Inconsistent Transit Time A common complaint expressed by shippers interviewed was that r a i l service was inconsistent. Bunching and detention are - 55 -frequent consequences. Reebie and A s s o c i a t e s found t h i s t o be the most commonly thought of cause f o r d e t e n t i o n . J.P.R. G a b i l l e found t h i s t o be the second most common cause of d e t e n t i o n i n Canada. D e t e n t i o n r e s u l t s because of the d i f f i c u l t y i n s c h e d u l i n g crews to unload or l o a d the c a r when i t s a r r i v a l i s u n c e r t a i n . T y p i c a l l y , the company's l o a d i n g dock, warehouse and workers can accommodate a l i m i t e d amount of c a r s i n any g i v e n day. I f f o r example, the c a p a c i t y of the f a c i l i t y was f i v e c a r s a day, no problems occur as long as the c a r s a r r i v e as ordered. O b v i o u s l y , to a v o i d d e t e n t i o n , the f i r m would keep t h i s r a t e t o l e s s than f i v e per day. D e t e n t i o n o c c u r s , however, because the r a i l w a y s , both i n Canada and the U n i t e d S t a t e s , seem unable to p r o v i d e c o n s i s t e n t r e l i a b l e s e r v i c e . Cars shipped e a r l i e r but a r r i v i n g l a t e r may a r r i v e a t the same time as c a r s shipped l a t e r but a r r i v i n g e a r l i e r . No r e l i e f i s a v a i l a b l e through the bunching r u l e i f d i f f e r e n t o r i g i n s or routes are i n v o l v e d . A dock foreman, i n s t e a d of having f i v e c a r s t o unload, now has t e n . Unloading the e x t r a f i v e w i t h i n f r e e time may be i m p o s s i b l e . The c h o i c e f a c i n g the foreman becomes one of paying the demurrage r a t e of $22 f o r one day or c a l l i n g i n the workers to work overtime. I f the employees are u n i o n i z e d , which i n a l l l i k e l i h o o d they w i l l be, the union c o l l e c t i v e agreement may make such a c a l l an expensive a l t e r n a t i v e . I t w i l l l i k e l y s p e c i f y time and a h a l f or double time, f o r overtime, and t h a t a minimum p e r i o d of work must be p a i d a t overtime r a t e s . Table V more a c c u r a t e l y - 56 -depicts t h i s overtime expense. The wage rates are for the Teamsters Local 213 and apply to a number of unionized warehouses i n B r i t i s h Columbia. I t i s important to consider that A r t i c l e 24, Section 2 of the agreement sti p u l a t e s that overtime w i l l be If time the regular wage rate for the f i r s t two hours and double time thereafter. As well, A r t i c l e 24, Section 1 ( h ) ( i i i ) guarantees the worker c a l l e d out to work overtime a minimum of four hours pay. What t h i s means i s that i f only one worker i s retained to unload the r a i l car the minimum wage cost w i l l be $105.07, as calculated i n Table V, and $211.19 i f two workers are detained. I t i s abundantly clear that demurrage at $22 i s the least c o s t l y a l t e r n a t i v e . Table VI makes the same calculations but i n a more conservative Marginal Cost approach and considers only the additional over-time. I t assumes that the cars would s t i l l have to be unloaded the next day so the only additional expense i s the overtime pay supplemental to straight pay. S t i l l the cost i s $90.51 and well above demurrage. Even i f bunching has occurred, and t h i s would only pertain to a very r e s t r i c t i v e s i t u a t i o n , where a l l cars have the same o r i g i n , shippers interviewed expressed reluctance to claim bunching. If cars have multiple o r i g i n s but the same destination and inconsistent service causes cars to a r r i v e i n excess of the f a c i l i t i e s loading and unloading rate, no r e l i e f w i l l be accorded. Several firms interviewed encountered t h i s problem and demurrage was the r e s u l t . Shippers indicated a - 57 -Table V Calculation of Overtime Cost for Loading/Unloading R a i l Cars Fork L i f t Driver Helpers & Warehousemen (15.16 hr) (15.01 hr) F i r s t 2 hrs U x 45.48 45.03 Next 2 hrs 2 x 60.64 60.04 Cost for 1 worker for 4 hrs 106.12 105.07 Cost for 2 workers for 4 hours each 211.19 Source: C o l l e c t i v e Agreement between Transport Labour Relations and General Truck Drivers and Helpers Union Local 31 and Teamsters Local 213, 1983/84. - 58 -Table VI Calculation of Overtime Marginal Cost  for Loading/Unloading R a i l Cars Fork L i f t Driver Helpers & Warehousemen (15.16 hr) (15.01 hr) F i r s t 2 hrs If x 15.16 15.01 Next 2 hrs 2 x 30.32 30.02 Cost for 1 worker for 4 hrs 45.48 45.03 Cost for 2 workers for 4 hours each 90.51 - 59 -a reluctance to pursue primie f a c i e legitimate bunching claims for several reasons. F i r s t , to make such a claim, extensive documentation which i s c o s t l y to prepare and sometimes unavailable i s required. Second, shippers believed that very few claims are successful. Consequently they f e l t that the claim would be a f u t i l e expenditure of t h e i r time. 5 . Cars Routinely Held for Storage Reebie and Associates found that i n the United States i t was corporate p o l i c y i n many firms to use r a i l cars as storage where short term changes i n market conditions of the firm's raw material or i t s fi n i s h e d product dictated the need for additional storage space. Rather than construct new warehouse space, i t was less expensive to store the product i n the r a i l cars and pay the demurrage. Although i n times of car shortages t h i s practice can aggravate the problem, i t may not always do so. Some shippers interviewed had, i n times of car surpluses, negotiated with the railway a re n t a l rate for the r a i l car s i g n i f i c a n t l y less than the demurrage t a r i f f . The railway received revenue that i t otherwise would not. The shipper received the benefit of economical short term storage. In one si t u a t i o n , a firm was importing vegetable o i l . The market price for the product temporarily dropped s i g n i f i c a n t l y . The company be l i e v i n g the price would quickly recover arranged for storage i n tank cars at a rate much less than the demurrage rate. - 6 0 -6 . Production Line Problems Both J.P.R. Ga b i l l e , i n Canada, and Reebie and Associates, i n the United States, found that slowdowns i n production l i n e s cause demurrage. If the l i n e stops, or slows down, less raw materials are required. Cars holding the raw materials may be detained u n t i l needed. As well, no output means empty cars awaiting loading w i l l be detained u n t i l production resumes. Although J.P.R. Gabille found that 13% of shippers i n the B.C. forest industry indicated t h i s to be a source of detention, interviews f a i l e d to uncover any examples. Nevertheless, i t i s a l i k e l y cause of detention prevalent i n Canada. 7 . Customer Relations Considerations Reebie and Associates found that firms may i n t e n t i o n a l l y detain a car, although ready to be released, for customer service reasons. Since a customer may not need the product as soon as i n i t i a l l y indicated, and the supplier d e s i r i n g to get the r i g h t product at the r i g h t place at the right time may detain the r a i l car, absorbing the demurrage expense himself i n order to preserve customer goodwill. Interviews f a i l e d to uncover any situations where t h i s form of detention occurred. However, i t s practice seems l i k e l y . 8. Apathy Not mentioned by Reebie and Associates nor J.P.R. Gab i l l e , but covered i n our interviews i s an apathetic attitude - 61 -prevalent with some shippers. They were uninterested i n exerting any additional e f f o r t to release the cars early. This attitude i s understandable since there i s some reason to get the cars back before demurrage accrues yet there i s no apparent reason for the shippers to return them any e a r l i e r . Several shippers indicated that they were w i l l i n g to make extensive c a p i t a l investments to f a c i l i t a t e quick release of cars i f there was some monetary incentive. They would buy shunter engines, b u i l d more loading docks and employ larger loading and unloading crews. But, i f there was no f i n a n c i a l reason to ensure quick release of cars they had no intention of encouraging i t . Other shippers expressed f r u s t r a t i o n with the present demurrage system. After returning the majority of t h e i r cars within 24 hours, r e s u l t i n g i n considerable savings i n the form of increased u t i l i z a t i o n to the railways, occasionally a car would be detained and assessed demurrage. To these shippers t h i s action seemed inequitable. Quick releases went unnoticed while the odd detention was quickly punished. Such practice dampened t h e i r enthusiasm for quickly releasing r a i l cars. The shippers endeavored to release the cars before the expiration of free time, but no sooner. In summary, the technology exists to load, and unload and release r a i l cars i n very short periods of time. The C.N. data i l l u s t r a t e s t h i s i s not being done. A number of reasons for detention by shippers have been canvassed. Probably with the exception of temporary lack of storage space due to some - 62 -unexpected occurrence and production l i n e problems, these causes of detention are avoidable. If a monetary incentive to return cars or a s u f f i c i e n t penalty for detention e x i s t s , making the opportunity cost of retention greater than the benefit, many of these reasons would cease to e x i s t . D. Shippers' Demurrage Committee and the Joint Industry/Rail  Task Force on Demurrage During 1973 - 1974, both these bodies were formed. The idea was e a r l i e r advocated by Mr. R.E. Gracey, then General Manager of the Canadian I n d u s t r i a l T r a f f i c League before the Board of Transport Commissioners i n 1966. (C.T.C. Volume 1966 - 1969, p. 1). Subsequently the Joint Industry R a i l Task Force on Demurrage (J.T.F.) has discussed railway proposals for rate increases. In 1980/81 and i n 1983/84, the J.T.F. discussed railway proposals for rate increases and i n 1984 a proposal for demurrage rate indexing was dealt with. Changes have also been agreed to by the J.T.F. concerning the treatment of private cars on private tracks and the rewording of Item 270 of T a r i f f CCD-6500-A. The J.T.F. has also encouraged the experimental demurrage arrangement between Stelco and the railways for the company's Hamilton Plant. - 63 -IV. RATIONALE OF DEMURRAGE A. Economic Importance of Equipment Utili z a t i o n I t i s important i n a l l modes of transportation to keep the equipment moving. In general, i t i s when the equipment i s i n service that revenue i s being earned. Since c a p i t a l and time are fix e d , higher l e v e l s of equipment u t i l i z a t i o n produce lower costs per t r i p . I t i s t h i s concern over equipment u t i l i z a t i o n that was the genesis of demurrage and remains the rationale f o r i t . U t i l i z a t i o n i s of concern to railways, shippers and the B. O.R.C./C.T.C. Commission. Further, demurrage as a t o o l to encourage u t i l i z a t i o n i s not i s o l a t e d to railways but pervades most modes of transportation. In a l l , the goal i s the same: to encourage equipment u t i l i z a t i o n . (i) Railway Perspective When cars are detained and not released promptly, the railways are affected i n several ways. F i r s t , congestion i s caused at the terminals. Delivery f a c i l i t i e s may become clogged with cars awaiting loading or unloading. As congestion increases due to the number of cars awaiting orders for placement at carload centers and awaiting space for placement at public sidings, the placement of cars becomes backed up. Service soon becomes very slow because of the operational d i f f i c u l t y of shunting the required cars around the i d l e ones. - 64 -Second, a reduction i n car u t i l i z a t i o n r esults i n increased c a p i t a l requirements. S p e c i f i c a l l y to maintain the same l e v e l of service, large unnecessary increases i n c a p i t a l expenditures on r a i l cars would be required. Freight charges would in e v i t a b l y increase. In a l l l i k e l i h o o d , the increase would be borne by a l l and passed on to shippers i n the form of higher rates. The cost would not be borne s i n g u l a r l y by those detaining cars, but rather, by everyone. ( i i ) Shipper's Perspective and Car Supply Shortages In addition to the p o t e n t i a l for reduced f r e i g h t rates brought about by increased u t i l i z a t i o n , shippers also stand to benefit from an increased a v a i l a b i l i t y of cars. Poor u t i l i z a t i o n may r e s u l t i n r a i l car shortages. This, i n turn, may cause shippers several profound problems. When r a i l cars are unavailable to load f i n i s h e d goods, shippers may lose sales, goods may s p o i l and markets may be l o s t . Ultimately, production may have to be stopped. One firm interviewed indicated that i f a shortage of box cars occurred and the firm was unable to receive i t s required d a i l y placement, the plant would be shut down since the product could not be stored i n any appreciable amounts. Downtime would cost the firm three-quarters of a m i l l i o n d o l l a r s a day. Workers would be l a i d o f f , supplies would not be purchased, causing problems for material suppliers. A l t e r n a t i v e l y , car shortages may also - 65 -prevent raw materials from being delivered to the plant. Again, plant shutdowns may r e s u l t . A l i m i t e d analysis of r a i l car supply was completed using S t a t i s t i c ' s Canada data. A complete analysis i s not possible on the l i m i t e d material available and unfortunately a s i g n i f i c a n t publishing time lag exists making up to date tables and graphs impossible. Tables VII, VIII, and IX portray r a i l car supply i n Canada. Table VII shows the s e n s i t i v i t y of railway car loadings measured both i n cars and metric tons to economic conditions; while r i s i n g from 1975 onward, car loadings peaked i n 1979 and then began to f a l l o f f . By 1982, car loadings bottomed out with a yearly average of 257,818 car loadings per month. Car loadings rose i n 1983 and again i n 1984. Indications are that t h i s r i s i n g trend i s continuing i n 1985. However, whether the f l e e t of cars i s well used and adequate to meet f r e i g h t needs i s of primary importance. Table IX indicates that with the exception of f l a t cars for piggyback service, the number of cars i n each car group i n revenue service on the Canadian Railways has decreased since the peak car loading period of 1976 through 1980. The o v e r a l l number of f r e i g h t cars has f a l l e n from 193,197 i n 1975 to 149,432 i n 1983. Table VIIIA for 1982, and Table VIIIB for 1983, show the a t t r i t i o n rate by car type. In most cases, cars r e t i r e d greatly outstrips new additions to the f l e e t . Table IX shows, i n less d e t a i l , but over a greater time period changes i n f l e e t - 66 -Table VII Total Canadian Railway Car Loadings Cars Short Tons Metric Tons January 1975 300, 763 17, 678, 750 February 297, 244 17, 307, 783 March 287, 377 16, 905, 587 A p r i l 324, 001 19, 292, 372 May 342, 422 20, 751, 183 June 328, 365 20, 144, 817 July 310, 837 19, 318, 736 August 300, 222 18, 689, 037 September 300, 101 18, 882, 782 October 337, 004 20, 914, 539 November 319, 015 19, 516, 984 December 273, 571 16, 871, 479 January 1976 264, 061 16, 190, 720 February 279, 357 16, 719, 020 March 304, 370 18, 587, 822 A p r i l 310, 932 19/ 438, 436 May 330, 851 20, 923, 970 June 332, 653 21, 296, 455 July 327, 293 21, 429, ,333 August 323, 958 21, 758, 395 September 336 ,949 21 930 074 October 342, ,077 22 ,288 ,924 November 335 ,020 21 ,500 ,541 December 280, ,419 17 ,849 ,135 January 1977 269 ,839 16 ,932 ,479 February 284 ,447 17 ,470 ,490 March 331 ,936 20 ,705 ,174 A p r i l 325 ,447 20 ,992 ,228 May 349 ,688 22 ,871 ,806 June 356 ,167 23 ,207 ,946 July 325 ,173 21 ,667 ,964 August 337 ,972 22 ,577 ,288 September 333 ,678 22 ,096 ,116 October 348 r496 22 ,876 ,228 November 327 ,606 20 ,962 ,069 December 271 ,716 17 ,729 ,628 19,016,472 16,084,048 (table continues) - 67 -Table VII - continued Total Canadian Railway Car Loadings Cars Short Tons Metric Tons January 1978 283, 092 18, 242, 483 16, 549, 301 February 284, ,027 18, 095, 719 16, 416, 162 March 310, 384 19/ 064 ,580 17, 295, 094 A p r i l 292, 056 17, 489, ,800 15, 866, 476 May 299, 302 18, 193, ,660 16, 505, 009 June 310, 072 19; 154, ,375 17, 375, 559 July 301, 629 19, 732, ,755 17, 901, 255 August 340, ,304 23, 362, ,549 21, 194, 148 September 337, -517 22, 777 ,068 20, 663, ,009 October 345, ,479 23, ,061, ,319 20, ,920, ,883 November 342, ,517 22, 044 ,345 20, ,542, ,603 December 291, ,187 19, ,300 ,643 17, ,509, ,249 January 1979 289, ,752 18 ,683 ,563 16, ,949, ,440 February 266 ,768 16, ,927 ,868 15, ,356, ,703 March 325 ,888 21 ,062 ,458 19, ,107, ,539 A p r i l 308 ,907 20, ,322 ,842 18, ,436, ,570 May 355 ,415 23 ,964 ,896 21, ,740, ,585 June 345 ,336 23 ,365 ,047 21 ,196, ,414 July 328, ,592 22 ,984 ,144 20 ,850, ,861 August 342, ,402 23 ,805 ,609 21 ,596, ,084 September 343 ,292 23, ,749 ,345 21 ,545, ,043 October 365, ,757 25 ,046 ,509 22 ,721, ,810 November 335, ,747 22 ,536 ,529 20 ,444, ,796 December 781 ,302 19, ,235 ,291 17 ,449, ,961 January 1980 285 ,269 18, ,965 ,782 17 ,205, ,463 February 303, ,661 19 ,998 ,857 18 ,142, ,661 March 323, ,444 21 ,828 ,857 19 ,802, ,804 A p r i l 327, ,932 22 ,516 ,767 20 ,426, ,867 May 346, ,192 24 ,362 ,910 22 ,101, ,659 June 337 ,269 23 ,603 ,791 21 ,413, ,003 July 326, ,299 22 ,883 ,236 20 ,759 ,325 August 315, ,495 22 ,298 ,569 20 ,228 ,907 September 311 ,628 21 ,534 ,442 19 ,535 ,717 October 337 ,995 22 ,814 ,894 20 ,697 ,316 November 312 ,321 21 ,084 ,628 19 ,127 ,648 December 267 ,853 17 ,634 ,098 15 r997 ,390 (table continues) Table VII - continued Total Canadian Railway Car Loadings Cars Short Tons Metric Tons January 1981 289 ,581 19, 506, 937 17, ,696, 394 February 290 ,554 19, 742, 450 17 ,910, ,051 March 319 ,819 21, 869, 421 19 ,839, ,603 A p r i l 318 ,817 21, 827, 526 19 ,801, ,598 May 313 ,588 21, 642, 221 19, ,633, ,488 June 336 ,615 23, 959, 709 21, ,735, ,877 July 288 ,634 20, ,477, 242 18, ,516, ,039 August 271 ,440 19, ,569, ,046 17 ,752, ,735 September 296 ,039 21, 231, ,239 19 ,260, ,653 October 314 ,178 22, ,152, ,613 20 ,096, ,503 November 303 ,080 21, 663, ,372 19 ,652, ,677 December 266 ,680 19, 315, 130 17 ,522, ,389 January 1982 232 ,909 16, 456, ,768 14 ,929 ,330 February 256 ,103 18, ,075, ,343 16 ,397 ,077 March 297 ,307 21, ,046, ,553 19 ,093 ,110 A p r i l 279 ,616 18 ,326 ,661 May 298 ,371 19 ,081 ,167 June 291 ,760 19 ,190 ,241 July 250 ,296 16 ,039 ,877 August 229 ,028 14 ,165 ,484 September 241 ,571 15 ,207 ,875 October 257 ,836 16 ,675 ,918 November 243 ,123 15 ,323, ,486 December 215 ,899 13 ,865, ,700 January 1983 221 ,471 14 ,177, ,159 February 223 ,687 14 ,013, ,998 March 270 ,080 17 ,185, ,589 A p r i l 255 ,425 16 ,323, ,644 May 281 ,393 18 ,227, ,691 June 287, ,891 18 ,504, ,958 July 238 ,524 14 ,926, ,287 August 278 ,669 17 ,936 ,191 September 298 ,105 19 ,560 ,591 October 309 ,722 20 ,316 ,150 November 292 ,538 18 ,980 ,288 December 252 ,382 16 ,569 ,887 (table continues) - 69 -Table VII - continued Total Canadian Railway Car Loadings Cars Short Tons Metric Tons January 1984 277,967 17,037,849 February 277,495 17,882,997 March 293,848 18,907,835 A p r i l 299,899 19,811,306 May 337,310 22,495,390 June 314,729 20,563,130 July 304,815 20,049,026 August 318,920 20,844,868 September 306,819 20,309,083 October 341,579 22,618,659 November 330,140 21,726,424 December 256,212 16,926,087 January 1985 281,459 18,346,039 February 265,790 17,238,420 March 306,322 20,100,398 A p r i l 309,039 20,505,979 May 332,549 22,029,153 June 307,809 20,371,288 July 295,010 19,532,497 August 286,479 18,906,597 September 292,554 19,453,688 October 341,919 22,784,166 November 303,012 20,125,015 December 275,236 18,664,235 January 1986 290,650 19,260,922 February 278,222 18,259,614 March 297,156 20,009,148 A p r i l 321,163 21,414,083 May 314,861 21,180,255 Source: Railway Car Loadings 1986. S t a t i s t i c s Canada #52-001. - 70 -Table VIIIA A t t r i t i o n Rate of Rail Cars in. Service (1982) Opening Balance ADDITIONS RETIREMENTS Closing Balance Placed in Service Converted from Other Class Converted to Other Class Retired Box Car 40' 51,476 16 984 4,675 45,833 Box Car 50' 15,178 222 42 15,358 Box-Insulated 4,457 57 14 4,386 Box-Equipped 4,451 13 58 7 4,399 Hopper Standard - Open 7,398 1 362 7,035 Hopper Standard - Covered 13,361 454 140 252 13,423 Hopper-Equipped 2,572 3 36 2,533 Gondola -Standard 14,830 93 7 82 412 14,436 Gondola -Equipped 4,078 12 96 3,970 Refrigerator Car 1,120 1 57 1,062 Flat-General 6,874 18 353 161 6,378 Flat-Multi 3,234 85 47 12 18 3,336 Flat-Intermodal 7,116 292 74 68 26 7,388 Flat-Bulkhead 10,319 17 3 5 10,328 Flat-Other 989 49 940 Stock Car 1,078 156 922 Caboose 2,064 7 4 37 2,030 Other 12,033 380 27 2 300 12,138 TOTAL. 162,628 1,597 155 1,780 6,705 155,895 * Note: Source: This i s for a l l Canadian Railways. Railway Transport i n Canada General Statistics 1982. Statistics Canada #52-215. - 71 -Table VIIIB A t t r i t i o n Rate of Rail Gars i n Service (19831* ADDITIONS RETIREMENTS Opening Balance Placed i n Service Converted from Other Class Converted to Other Class Retired Closing Balance Box Car 40' 48,226 9 572 5,253 42,410 Box Car 50' 13,006 1,072 2 150 13,930 Box-Insulated 4,101 13 4,088 Box-Equipped, 3,238 4 1 2 3,217 Hopper Standard - Open 7,594 15 4 405 7,200 Hopper Standard - Covered 14,622 186 23 158 14,627 Hopper-Equipped 1,891 27 1,864 Gondola -Standard 13,442 1 40 13 278 13,192 Gondola -Equipped 6,240 405 43 92 6,510 Refrigerator Car 1,066 70 996 Flat-General 7,647 1 15 78 77 7,508 Flat-Multi 2,997 13 2,984 Flat-Intermodal 7,552 54 64 10 50 7,610 Flat-Bulkhead 8,470 7 77 8,386 Flat-Other 917 48 3 868 Stock Car 988 2 122 868 Caboose 2,025 7 2 59 1,975 Other 11,323 105 62 26 259 11,205 TOTAL 155,347 1,835 211 825 7,130 149,438 * Note: Source: This i s for a l l Canadian Railways. Railway Transport i n Canada General Statistics 1983. Statistics Canada #52-215. - 7 ? -Table VIIIC At t r i t i o n Rate of Rail Cars in Service (19841ft ADDITIONS RETIREMENTS Opening Placed in Converted from Converted to Closing Balance Service Other Class Other Class Retired Balance Box Car 40' 42,410 3 312 5,117 36,984 Box Car 50' 14,223 560 43 103 14,723 Box-Insulated 4,088 32 4,056 Box-Equipped 3,217 121 5 389 2,944 Hopper Standard - Open 7,200 3 521 6,676 Hopper Standard - Covered 14,627 1 14 68 14,546 Hopper-Equipped 1,854 118 1,746 Gondola -Standard 13,192 7 86 317 12,796 Gondola -Equipped 6,513 343 18 6 172 6,696 Refrigerator Car 996 4 58 934 Flat-General 7,508 1 80 1,946 96 5,537 Flat-Multi 3,037 6 3,031 Flat-Intermodal 7,555 263 83 60 7,675 Flat-Bulkhead 8,386 63 1,483 6 9 9,917 Flat-Other 871 259 1 107 1,024 Stock Car 868 8 60 61 875 Caboose 1,982 2 61 1,923 Other 11,188 6 53 618 10,629 TOTAL 149,725 1,364 2,011 2,582 7,806 142,712 * Note: Source: This is for a l l Canadian Railways. Railway Transport i n Canada - General Statistics 1984. Statistics Canada #52-215. Table IX Total Number of Freight Cars i n Revenue Service on the Canadian Railways 1975 1976 1977 1978 1979 1980 1981 1982* 1983* 1984 Auto Rack type 2,699 3,465 3,359 3,526 3,470 3,490 3,450 3,330 3,037 3,031 Auto Box type 77 76 52 44 207 42 42 Ballast 2,199 2,670 2,652 2,530 2,531 2,471 2,419 58,831 Box 92,669 88,644 83,478 80,670 79,302 77,079 73,635 69,976 63,645 Flat, container piggyback 3,441 3,265 3,362 2,872 3,293 3,266 3,368 Flat, t r a i l e r piggyback 4,617 4,534 4,212 4,133 3,932 3,902 3,870 7,388 7,567 7,675 Flat, other 17,664 18,506 17,507 17,557 17,560 18,253 18,201 18,657 16,762 16,479 Gondola 21,370 21,377 20,291 19,773 19,333 18,916 19,218 18,406 19,702 19,492 Hopper, open top 11,274 10,736 10,151 9,590 9,322 8,861 8,756 7,035 7,200 6,247 Hopper, covered 18,013 21,065 23,236 23,082 24,344 26,561 30,575 15,956 16,481 16,292 Ore 7,731 8,236 8,661 8,557 7,754 7,906 7,613 Refrigerated 5,016 4,898 4,685 4,591 4,042 3,674 3,577 1,062 996 934 Stock 2,359 2,093 1,924 1,734 1,520 1,347 1,077 922 808 875 Tank 379 325 324 268 262 248 263 Other 3,689 3,511 3,289 3,211 3,147 3,123 3,041 12,139 11,190 12,552 Total Freight Cars 193,197 193,401 187,183 182,138 180,089 179,139 179,105 155,897 149,432 142,407 Leased Cars included above 31,206 36,650 36,433 35,308 38,932 40,779 44,207 Source: Railway Transport Part III. Statistics Canada #52 -209 and #52-215. * Note: Statistics Canada changed their report format in 1982. Car types past 1981 do not f i t the pre-1982 classifications perfectly. - 74 -composition. What i s apparent i s that, with the exception of of f l a t cars used for piggyback service, the number of cars i n each car type has s i g n i f i c a n t l y dropped since the peak demand period i n 1976 - 1980. With car loading demand dropping dramatically i n 1981, 1982, and 1983, such changes i n f l e e t s i z e went unnoticed. On the surface, i t appears that r a i l car supply has decreased s i g n i f i c a n t l y and demand for r a i l cars, measured by r a i l car loadings, while dropping during the recession, has begun to increase. The railway f l e e t size i s currently nowhere near the size i t was during the 1976 - 1980 peak car load demand. Preliminary data would indicate that a r a i l car shortage may be possible. More factors enter into the calculus of p o t e n t i a l car shortages than have been dealt with here. Both C.N. R a i l and C P . R a i l use U.S. c a r r i e r owned r a i l cars to supplement t h e i r f l e e t . Large Canadian manufacturers own or lease t h e i r own r a i l cars. Whether they continue to do so c l e a r l y a f f e c t s r a i l car supply i n Canada. Increased car demand i n the United States may act to l i m i t the a v a i l a b i l i t y of r a i l cars to Canadian railways. The p o s s i b i l i t y of car shortages deserves f u l l e r and more det a i l e d study. A l l that can be said based on t h i s cursory examination of the available data i s that the po t e n t i a l for a car shortage i n the next few years e x i s t s . ( i i i ) Board of Railway Commissioners/CTC View For almost 80 years the Board of Railway Commissioners and the Canadian Transport Commissioners have consistently held that i t i s i n the public i n t e r e s t that r a i l cars be released promptly. I n i t i a l l y , the Board stated t h i s view i n the preamble to the 1906 Car Service Rules. Wherein the Board stated: And whereas i t appears to the board to be important, i n the public i n t e r e s t , to secure the f u l l e s t possible use of railway cars, tracks and equipment, and for that object to discourage the delay aforesaid; Many years l a t e r i n N.W. Line Elevators v. C.C.D.B.; 77 C.R.T.C. 181 [1958], the Board r e i t e r a t e d t h i s view. I t stated: The railways are required under the Railway Act to furnish adequate and suitable accommodation for a l l t r a f f i c offered for carriage: S.315. Railway equipment, so furnished, can only be p r o f i t a b l e to the railways when i t i s employed i n the service of transporting goods from one place to another and can only be of the greatest value to shippers when i t i s available for the transportation of t h e i r goods. I t i s i n the i n t e r e s t of both the shippers and the railways that the railway equipment furnished for the accommodation of t r a f f i c be promptly loaded and unloaded. The decision was appealed to the Supreme Court of Canada. N.W. Line Elevators v. C.C.D.B.; 77 C.R.T.C. 241. Writing for a unanimous court of seven, Justice Rand upheld the decision of the Board of Transport Commissioners and added: - 76 -D e l a y i n l o a d i n g o r u n l o a d i n g o f f r e i g h t v i o l a t e s t h e i m p l i e d u n d e r s t a n d i n g when equipment i s p l a c e d a t t h e d i s p o s a l o f s h i p p e r o r c o n s i g n e e t h a t no more t h a n r e a s o n a b l e t i m e s h a l l be t a k e n f o r e i t h e r p u r p o s e . The p r o f i t a b l e and e f f i c i e n t use of equipment i s an i m p o r t a n t i t e m o f t h e c o s t r e f l e c t e d i n t h e f r e i g h t r a t e s c h a r g e d and i s e s s e n t i a l i n good r a i l w a y management. That a r a i l w a y i s t o s u p p l y e x p e n s i v e equipment i n o r d e r t o f u r n i s h , g r a t i s a s t o r a g e means f o r s h i p p e r s and c o n s i g n e e s , r e v e a l s on i t s mere sta t e m e n t i t s own a b s u r d i t y . L i n k e d w i t h t h i s c o n c e p t o f equipment u t i l i z a t i o n by t h e Board, has been t h e need t o m a i n t a i n a u n i f o r m demurrage t a r i f f . The Board has r e p e a t e d l y and c o n s i s t e n t l y r e f u s e d t o g r a n t e x c e p t i o n s t o t h e t a r i f f . I t s r e a s o n s seem t o be two-f o l d . F i r s t , e x c e p t i o n s w i l l r e s u l t i n u n j u s t d i s c r i m i n a t i o n and abuse. Second, g r a n t i n g one e x c e p t i o n would open t h e f l o o d g a t e s and many more r e q u e s t s would f o l l o w . The Board l i n k e d such a p r o l i f e r a t i o n o f e x c e p t i o n s t o d e c r e a s e d u t i l i z a t i o n . A l t h o u g h i n none o f t h e r e p o r t e d d e c i s i o n s was t h e r e e v e r any e v i d e n c e p r e s e n t e d i n s u p p o r t o f t h i s p r e s u m p t i o n o f d e c r e a s e d u t i l i z a t i o n . I t was presumed b u t never p r o v e n . I n A.R. W i l l i a m s M a c h i n e r y Co. v. C.C.D.B.; 29 C.R.C. 342 [ 1 9 2 4 ] , snow and i c e had b l o c k e d t h e company's s i d i n g and b e f o r e t h e c a r c o u l d be u n l o a d e d t h e t r a c k s had t o be c l e a r e d t o a l l o w placement near t h e warehouse. The t r a c k s were c l e a r e d , b u t b e f o r e t h e c a r c o u l d be moved, a second s t o r m f i l l e d t h e f r e s h l y c l e a r e d t r a c k s . Demurrage was a s s e s s e d and the company conceded t h a t i t had no l e g a l r i g h t t o a r e f u n d - 77 -under the e x i s t i n g r u l e s , but asked t h a t as a matter of f a i r n e s s under the unusual circumstances, the case be c o n s i d e r e d e x c e p t i o n a l and r e l i e f granted. The Board was u n w i l l i n g to accede to such a p l e a . The Board s t a t e d : To ensure u n i f o r m i t y of p r a c t i c e and a v o i d any u n j u s t d i s c r i m i n a t i o n and abuse, d e f i n i t e demurrage r u l e s have been formulated. These r u l e s are of a g e n e r a l a p p l i c a t i o n and, as a p p l i e d to some i n d i v i d u a l cases, and, a p p a r e n t l y i n the p r e s e n t i n s t a n c e , may seem to work ha r d s h i p . There i s no p r o v i s i o n i n the r u l e s e n t i t l i n g the a p p l i c a n t company to a r e f u n d . To c o n s i d e r t h i s case an e x c e p t i o n a l one and i g n o r e the l e g a l s t a t u s under the p r o v i s i o n s of the r u l e s would a s i d e from i t s i l l e g a l i t y , be an i n j u s t i c e to and a d i s c r i m i n a t i o n a g a i n s t many ot h e r s whose a p p l i c a t i o n s have been d e c l i n e d . T h i s d e c i s i o n has o f t e n been quoted i n l a t e r Board r u l i n g s as j u s t i f i c a t i o n f o r r e f u s i n g e x c e p t i o n s t o the demurrage t a r i f f even though t h i s case can be d i s t i n g u i s h e d as b e i n g r e l i e f from demurrage l e g a l l y assessed and not a permanent a l t e r a t i o n of the r u l e s f o r one or more s h i p p e r s . A number of years l a t e r the P.E.I. Potato Growers' A s s o c i a t i o n a p p l i e d f o r an e x c e p t i o n to the demurrage t a r i f f a l l o w i n g them a d d i t i o n a l f r e e time. P.E.I. Potato Growers' Assn. v. C.C.D.B. 55 C.R.T.C. 288 [1942]. The growers argued t h a t due to the i s l a n d ' s g e o g r a p h i c a l l o c a t i o n , the r a i l w a y s were unable to p r o v i d e them w i t h s e r v i c e comparable to farmers on the mainland. The r a i l w a y s c o u l d not d e f i n i t e l y supply r e f r i g e r a t o r c a r s i n the w i n t e r months and i n many cases when they were s u p p l i e d , the weather c o n d i t i o n s would prevent l o a d i n g . The growers asked - 78 -f o r more f r e e t i m e . The Board r e f u s e d , c i t i n g amongst o t h e r s A.R. W i l l i a m s M a c h i n e r y Co. v. C.C.D.B. The Bo a r d h e l d t h a t : I am f i r m l y c o n v i n c e d t h a t t h e g r a n t i n g o f t h i s a p p l i c a t i o n would be f o l l o w e d by many o t h e r s w h i c h would be d i f f i c u l t t o d e c l i n e , w i t h t h e u l t i m a t e r e s u l t t h a t t h e r e would be a s e r i o u s impairment of t h e u t i l i z a t i o n o f r a i l w a y equipment t o i t s f u l l e s t p o s s i b l e e x t e n t . I n Re. Demurrage Charges I n c u r r e d on Account o f S t r i k e C o n d i t i o n s 47 C.R.C. 102 [19 3 7 ] , t h e Board was asked t o g r a n t an exemption from demurrage where s t r i k e s r e s u l t i n d e t e n t i o n o f r a i l c a r s . The Bo a r d r e f u s e d , r e l y i n g a g a i n on A.R. W i l l i a m s M a c h i n e r y Co. v. C.C.D.B. I t h e l d : I f d e l a y s i n c u r r e d t h r o u g h s t r i k e c o n d i t i o n s were t o be c o n s i d e r e d under t h i s c a t e g o r y , i t would have a v e r y f a r r e a c h i n g e f f e c t , because, u n l e s s t h e same c o n s i d e r a t i o n were extended t o a l l o t h e r c a s e s where d e l a y s might be o c c a s i o n e d t h r o u g h causes w h i c h would f a l l under t h e same b r o a d g e n e r a l h e a d i n g , i t would seem t h a t a d i s c r i m i n a t o r y c o n d i t i o n would be c r e a t e d . To e x t e n d c o n s i d e r a t i o n t o a l l such c a s e s as might f a l l under t h e g e n e r a l h e a d i n g r e f e r r e d t o would have a tre m e n d o u s l y f a r r e a c h i n g e f f e c t and would, i t seems t o u s , t e n d t o l a r g e l y n u l l i f y t h e e n t i r e demurrage r u l e s as t h e r e a r e a s u r p r i s i n g l y l a r g e number o f c a s e s where t h e d e l a y i s a l l e g e d t o be caused t h r o u g h u n f o r e s e e n c i r c u m s t a n c e s o r u n c o n t r o l l a b l e c o n d i t i o n s . These c a s e s a r e but a few, t h e Board has s i m i l a r l y r e f u s e d e x c e p t i o n s i n a number o f o t h e r r e p o r t e d d e c i s i o n s . See a l s o W a l l a c e b u r g Sugar v. Canadian Car S e r v i c e Bureau 8 C.R.C. 332 [190 9 ] ; CM.A. v. C.C.D.B. 25 C.R.C. 1 [19 2 0 ] ; New B r u n s w i c k  Farmers' and Dairymen's Assn. v. C.C.D.B. 43 C.R.C. 197 [1935]; - 79 -Alcan D i s t r i b u t o r s Ltd. v. C.C.D.B. 56 C.R.T.C. 374 [1943]; J.H. Giroux v. C.P.R. 9 Board's J.O.R. 369; C.C.D.B. v. Granby  Quebec 29 C.R.C. 313 [1929]. In a l l , there seems to have been a pervasive concern that discriminatory practices w i l l reoccur and that exceptions w i l l breed more exceptions. One exception w i l l r e s u l t i n many more being requested and acceded to. The impact of t h i s i n f l u x of exceptions was predicted to be decreased r a i l car u t i l i z a t i o n . Exceptions were steadfastly refused. B. Demurrage Arrangements i n Other Modes of Transportation The shipping industry, motor c a r r i e r industry, as well as barges and containers, employ demurrage to encourage the quick release of equipment. Each demurrage plan i s d i f f e r e n t . They provide a useful contrast to Canadian r a i l demurrage. (i) Shipping While the need for demurrage i s s i m i l a r to r a i l , a very d i f f e r e n t method of application i s employed i n the shipping industry. Demurrage provisions are only found i n voyage charters.^ Demise charters (the ship without the crew) do not include demurrage provisions. Time charters already consider the time element, so to include demurrage would simply be 1-Hugo Tiberg, The Law of Demurrage - Third E d i t i o n , (London: Stevens & Sons, 1979), p. 10. - 80 -r e p e t i t i v e . In Canadian r a i l , r i g i d rules are uniformly applied by bureaus. Whereas i n shipping, unique i n d i v i d u a l demurrage arrangements are negotiated and contracted f o r , i n each charter. The arrangements are, within c e r t a i n bounds, custom t a i l o r e d to each ship charter. The terms are s p e c i f i e d i n the charter party. In t h i s contract, terms of shipment and the exact d e t a i l s regarding dispatch, demurrage, and lay days are s p e c i f i e d . C h a r a c t e r i s t i c a l l y , these general provisions are standard i n a l l charter p a r t i e s , although the amounts and s p e c i f i c d e t a i l s of the terms may vary widely from charter to charter. Further, demurrage, l i k e charter rates, are terms subject to the competitive forces active i n the charter market. 1. Demurrage If a voyage charter vessel f a i l s to complete loading and/or unloading within the time s p e c i f i e d (lay days) i n the charter party, the charterer pays the shipowners compensation for the extra days. Demurrage can be more generally defined as: A payment provided by contract or by law for the use of the charterer of time beyond which i s conceived to be normally necessary for loading or discharging of a ship or for the performance of c e r t a i n functions r e l a t i n g thereto^ Thus demurrage days are optional a d d i t i o n a l lay days negotiated and agreed to by both the shipowner and the charterer and paid Hugo Tiberg, p. 2 - 81 -for by the charterer i f used. Demurrage usually runs continu-ously. Following the expiry of lay time, demurrage w i l l be assessed on Saturdays, Sundays, and holidays. 2. Damages for Detention Damages for detention arises when a charterer keeps the ship beyond lay days and no demurrage has been s p e c i f i e d or, a l t e r n a t i v e l y , the ship i s kept beyond demurrage days when demurrage has been s p e c i f i e d . Frequently, these damages are referred to i n practice as demurrage.^ However, a clear l e g a l d i s t i n c t i o n e x i s t s . The difference i s that with demurrage there i s no breach of contract. Demurrage i s an option provided for i n the contract of additional lay days. Taking advantage of the additional lay days i s not a breach of the contract entered into, but merely the acceptance of an option provided f o r . The demurrage payment i s i n the form of liquidated damages. In contrast, damages for detention r e s u l t from a breach of contract. When no demurrage has been agreed to i n the charter party, the holding of the ship beyond lay days by the charterer would constitute a breach of contract. Unliquidated damages w i l l be assessed. Normally, damage for detention i s awarded at the demurrage rate. Appollon Case 22 U.S.; 9 (Wheat) 362, 6 LEU 111 [1824]. Several rights and obligations of the parties have been J0.C. G i l e s , Charley and Giles Shipping Law - Seventh  E d i t i o n (London: Pitman Publishing Ltd., 1980). p. 172. - 82 -deemed to e x i s t by the c o u r t s . I f demurrage was not c o n t r a c t e d f o r i n the c h a r t e r p a r t y , a shipowner must wait a reasonable t i m e . 4 Demurrage having been c o n t r a c t e d f o r a f i x e d number of days o b l i g a t e s the shipowner t o leav e the s h i p at the d i s p o s a l of the c h a r t e r e r f o r l o a d i n g or u n l o a d i n g f o r the f u l l p e r i o d , i f requested t o do so.^ 3. Lay Days The p e r i o d agreed to i n the c h a r t e r p a r t y f o r l o a d i n g and unlo a d i n g i s c a l l e d l a y days. When l a y days are exceeded, demurrage b e g i n s . Lay days are analogous t o f r e e time. Three requirements must u s u a l l y be met b e f o r e l a y days b e g i n t o run. F i r s t , the s h i p must reach the agreed d e s t i n a t i o n . Terms of the c h a r t e r p a r t y s p e c i f y where the s h i p must be p l a c e d b e f o r e l a y time may be counted. The terms may be as s p e c i f i c as t o s t a t e a p r e c i s e b e r t h , or more g e n e r a l and simply s p e c i f y the spot. Second, the s h i p must be a v a i l a b l e t o the c h a r t e r e r s t o l o a d or d i s c h a r g e . There must be no laws t h a t prevent the c h a r t e r e r s a c c e s s . The c h a r t e r e r s must have p h y s i c a l access t o the holds so t h a t they can commence l o a d i n g or u n l o a d i n g . F i n a l l y , n o t i c e of r e a d i n e s s i s normally g i v e n t o the c h a r t e r e r . However, u n l e s s t h e r e are s p e c i f i c words i n the c h a r t e r p a r t y t o the c o n t r a r y , i f the c h a r t e r e r i s aware of the s h i p ' s r e a d i n e s s t o l o a d or d i s c h a r g e , n o t i c e i s not u s u a l l y 4 I b i d . 5 I b i d . - 83 -required. b In many cases, notice i s given as a precautionary measure to remove any p o s s i b i l i t y of the charterer claiming he was unaware of the ship's a r r i v a l . Zim's I s r a e l Navigation  Ltd. v. Tradax Export S.A., [1920] 2 Lloyd's report 409, at p. 411. If notice i s required by the charter party the hours i n which notice may be given w i l l also be s p e c i f i e d . ^ i n most cases i t i s sti p u l a t e d that notice must be given during business hours i n the port concerned. 8 Notice i s always required i n w r i t i n g . 9 Lay days may begin to count immediately following the f u l f i l l m e n t of these requirements. A l t e r n a t i v e l y , some charter parties may s t i p u l a t e that lay days begin 24 hours a f t e r , or the next working day a f t e r meeting t h e i r requirements.10 This provision c l o s e l y p a r a l l e l s Canadian railway demurrage pract i c e . The duration of lay days normally depends on three factors: nature of the cargo; loading or discharging f a c i l i t i e s ; labor conditions and customs of the p o r t . H Depending on the aggregate impact of these factors on loading ^Michael Summerskill, Laytime Third E d i t i o n , (London: Stevens & Sons, 1982), p. 108. "^steward R. Bross, Ocean Shiping (Cambridge, Maryland: Cornell Maritime Press, 1956), p. 176. 8 I b i d . 9 I b i d . l°Steward R. Bross, p. 177. H c . E . McDowell and H.M. Gibbs, Ocean Transportation (New York: McGraw-Hill Book Co., 1954), p. 196. - 84 -and unloading time, lay days allowed w i l l be adjusted accordingly. Lay days are customized to the i n d i v i d u a l circumstances and l o c a l conditions. The t o t a l lay day period agreed to may be expressed i n a number of ways.12 (a) Days Running or Consecutive This term refers to calendar days of 24 hours. Saturdays, Sundays and holidays are included. This measurement i s the most advantageous to shipowners. (b) Working Days This term invokes the standard port practices. If normal port hours are 7:00 7AM to 5:00 PM, Monday through Friday, then i t i s t h i s described period that lay days w i l l refer to. (c) Weather Working Days Charter parties using t h i s form of lay days are providing for weather conditions. In essence the term means the same as "working days" except that weather conditions are considered. Thus, i f weather conditions make loading or unloading impossible, these days are not included as expired lay days. Bross, p. 177. - 85 -(d) Agreed Rate of Loading A s p e c i f i c r a t e per hour or per day of l o a d i n g or unl o a d i n g cargo may be s p e c i f i e d . The c h a r t e r p a r t y might p r o v i d e t h a t cargo should be loaded a t an average r a t e of 150 tons per a v a i l a b l e hatch per working day. (e) Running Hours or Consecutive Hours Rather than u s i n g days, l a y time may be s p e c i f i e d i n terms of c o n s e c u t i v e hours running. (f) Reversible Lay Days Some c h a r t e r p a r t i e s p r o v i d e f o r r e v e r s i b l e l a y days. T h i s method all o w s time l o s t i n l o a d i n g t o be made up i n unl o a d i n g or v i c e v e r s a . B a s i c a l l y , l o a d i n g and unl o a d i n g time i s c o n s i d e r e d i n aggregate and then d i v i d e d between the two o p e r a t i o n s . ^ 3 4. Dispatch The o p p o s i t e of demurrage i s d i s p a t c h . I f a l l the l a y time agreed t o i s not used up, a p o r t i o n of the d i f f e r e n c e i s refunded to the c h a r t e r e r . T h i s r e f u n d f o r e a r l y r e l e a s e i s c a l l e d d i s p a t c h . D i s p a t c h w i l l be p a i d f o r each l a y day unused. In g e n e r a l , d i s p a t c h i s one-half the demurrage r a t e . ^ 4 T h i s reduced r a t e i s pro b a b l y due i n p a r t t o the p o s s i b i l i t y 1 3 I b i d . 1 4 M c D o w e l l , p. 15. - 86 -that work may not always be immediately available to absorb the unexpected slack created by the previous charterer's diligence i n quickly unloading the ship. Dispatch i s frequently paid i n the form of a monetary rebate or may take the form of reduced charter rates. Normally, charter parties specify that dispatch can only be given for lay time saved and not t o t a l time.l^ The rationale for dispatch aside from the obvious incentive value i s that charters may i n fact incur additional expenses i n providing quicker turnaround. One expense incurred would be overtime pay or s h i f t premiums paid to longshoremen. It i s i n the sole i n t e r e s t of the shipowner to ensure maximum turnaround speed. In the absence of dispatch, the shipowner i s the single beneficiary of such increased u t i l i z a t i o n , yet he suffers l i t t l e a d ditional expense from the reduction i n lay time. Dispatch attempts to r e c t i f y t h i s imbalance as well as motivating the charterer to release the ship. 5. Relationship Between Demurrage, Dispatch and the Economy The charter market rates s i g n i f i c a n t l y influence the demurrage dispatch rate. The considerable fluctuations i n the charter market w i l l also be r e f l e c t e d i n demurrage and dispatch rates. An astute shipowner i s always looking ahead to his next l^Ernst G. Frunkel, Management Operations of American  Shipping (Boston, MA: Auburn House, 1982), p. 15. - 87 -c h a r t e r when agr e e i n g to demurrage, d i s p a t c h , and l a y days terms and r a t e s . In an environment of h i g h c h a r t e r market r a t e s , demurrage w i l l be a t a maximum l e v e l , u s u a l l y the c o s t of one day's c h a r t e r . Demurrage does not normally exceed the c h a r t e r r a t e . As a l r e a d y i n d i c a t e d , as a g e n e r a l r u l e , d i s p a t c h i s one-half of the demurrage r a t e . But i t may vary, and i n a h i g h c h a r t e r market, d i s p a t c h w i l l l i k e l y be h i g h e r than o n e - h a l f , to encourage q u i c k turnaround. I f c h a r t e r r a t e s are i n c r e a s i n g , the shipowner l o o k i n g ahead r e a l i z e s t h a t h i s next c h a r t e r w i l l earn more than h i s e x i s t i n g one. Hence, the owner w i l l want t o q u i c k l y absolve h i m s e l f of the e x i s t i n g c h a r t e r and e n t e r i n t o a new c h a r t e r p a r t y a t a h i g h e r r a t e . A l t e r n a t i v e l y , i n a depressed c h a r t e r market, q u i t e a d i f f e r e n t r e l a t i o n s h i p e x i s t s . Demurrage w i l l be lower f o r s e v e r a l reasons. Demurrage i s u s u a l l y c l o s e to the c h a r t e r r a t e , so i f the c h a r t e r r a t e i t s e l f i s depressed so too w i l l be the demurrage r a t e . With l i t t l e demand f o r h i s s h i p , the shipowner w i l l g l a d l y accept demurrage when the a l t e r n a t i v e i s no revenue. Demurrage r a t e s may thus f a l l t o l e v e l s s i g n i f i c a n t l y l e s s than the c h a r t e r market r a t e . When the c h a r t e r market i s depressed and demand f o r s h i p s i s low, owners are r e l u c t a n t to pay d i s p a t c h . I t makes l i t t l e sense to pay f o r e a r l y r e l e a s e of t h e i r s h i p s when the r e i s no employment. As a r e s u l t , d i s p a t c h r a t e s w i l l a l s o be c o n s i d e r a b l y lower i n a depressed c h a r t e r market. - 88 -6 . Relevance of Shipping Demurrage to Railway Demurrage Demurrage p r o v i s i o n s have been a p p l i e d i n the s h i p p i n g i n d u s t r y s i n c e the seventh c e n t u r y A.D.I 6 Over the ensuing c e n t u r i e s the presen t demurrage system has ev o l v e d . In comparison, r a i l demurrage i s s t i l l i n i t s i n f a n c y . Of i n t e r e s t then i s the a p p l i c a b i l i t y of these s h i p p i n g demurrage p r o v i s i o n s t o r a i l . Are some of these concepts t h a t have wit h s t o o d the p r e s s u r e s of a h i g h l y c o m p e t i t i v e market and the t e s t of time, r e l e v a n t t o r a i l demurrage? A b r i e f d i g r e s s i o n i n t o the d i s t i n g u i s h i n g f e a t u r e s of demurrage i n both modes and the i n d u s t r y may h e l p to answer t h i s q u e s t i o n . S e v e r a l d i s t i n g u i s h i n g f e a t u r e s i n the two r e s p e c t i v e demurrage systems are apparent. I f a continuum c o u l d be drawn, measuring the degree of u n i f o r m i t y i n demurrage, Canadian r a i l demurrage would be a t the f a r uniform end wh i l e s h i p p i n g would be a t the o p p o s i t e end. I f anything stands out i n s h i p p i n g demurrage i t i s the d i v e r s i t y i n demurrage p l a n s . P o s s i b l y no two c h a r t e r p a r t i e s have e x a c t l y the same demurrage p r o v i s i o n s . The demurrage p r o v i s i o n s may vary depending on i n d i v i d u a l c o n d i t i o n s . For example, the l e n g t h of l a y days i s s a i d t o v a r y depending on the l o c a l c o n d i t i o n s and the nature of the cargo. In r a i l , such e x c e p t i o n s t h a t take i n t o c o n s i d e r a t i o n l o c a l c o n d i t i o n s have been s t e a d f a s t l y r e f u s e d by 1 6Hugo T i b e r g , p. 10. - 89 -the Board of Railway Commissioners. A l t e r n a t i v e l y , i n s h i p p i n g , the demurrage p r o v i s i o n s may v a r y depending on the type of s h i p . Newer, l a r g e r , more expensive s h i p s commanding a h i g h e r c h a r t e r r a t e w i l l a l s o command a h i g h e r demurrage r a t e . I n r a i l , t h i s type of v a r i a b l e c o s t has been avoided. A s h i p p e r pays the same amount of demurrage f o r a 40 year o l d box c a r as he does f o r a brand new one, as he would f o r a gondola c a r or most oth e r types of r a i l c a r s . The amount of demurrage payable w i l l depend on the market demand f o r the s h i p and the a v a i l a b l e supply. Where there i s a s u r p l u s , demurrage r a t e s w i l l be low and where a shortage e x i s t s the r a t e s w i l l be h i g h . In r a i l , the demurrage r a t e i s c o n s t a n t , r e g a r d l e s s of whether t h e r e i s a c a r shortage or a s u r p l u s . Another d i s t i n c t i o n i s d i s p a t c h . In Canadian r a i l , demurrage T a r i f f CCD-6500-A does not p r o v i d e i n c e n t i v e s f o r e a r l y r e l e a s e of c a r s . Punishment i n the form of monetary p e n a l t i e s i s the o n l y means of encouraging q u i c k c a r r e l e a s e . The more p o s i t i v e approach of i n c e n t i v e s has not been attempted. F i n a l l y the demurrage r a t e i n s h i p p i n g i s s e t at the o p p o r t u n i t y c o s t of t h a t p a r t i c u l a r s h i p . The r a t e i s normally c l o s e to the c h a r t e r r a t e , which of course, i s the shipowner's o p p o r t u n i t y c o s t . I t i s the amount foregone when the s h i p ' s r e l e a s e i s d e layed. In r a i l w a y , the demurrage r a t e i s s u b s t a n t i a l l y l e s s than what the c a r would be e a r n i n g i n s e r v i c e (Appendix G). - 90 -A s i d e from the obvious p h y s i c a l d i s t i n c t i o n s , a number of f a c t o r s d i s t i n g u i s h the s h i p p i n g i n d u s t r y from r a i l . Ships have a much g r e a t e r v a l u e and the number of s h i p c h a r t e r s i n comparison to c a r l o a d i n g s i s v e r y s m a l l . As w e l l , s h i p c h a r t e r s where demurrage i s a p p l i e d i n c l u d e the crew. R a i l does not i n c l u d e p e r s o n n e l . F i n a l l y the c h a r t e r market i s d i f f e r e n t i n s t r u c t u r e than the Canadian r a i l w a y i n d u s t r y . The c h a r t e r market i s c l o s e to a p e r f e c t l y c o m p e t i t i v e market, whereas Canadian r a i l i s l e s s than p e r f e c t l y c o m p e t i t i v e . S h i p p i n g r e v e a l s the working of economic p r i c i n g p r i n c i p l e s t o demurrage i n c o m p e t i t i v e market arrangements. In s h i p p i n g , the c o m p e t i t i v e p r e s s u r e may encourage i n n o v a t i o n i n demurrage. A form of s e r v i c e c o m p e t i t i o n may e x i s t based on demurrage. The q u e s t i o n thus seems to be t h a t i f more freedom to n e g o t i a t e s p e c i f i c demurrage arrangements and e x c e p t i o n s was allowed would we get and e x p l o s i o n of e x c e p t i o n s and a d i s i n t e g r a t i o n of demurrage to a p o i n t where i t i s a p p l i e d l e n i e n t l y or not a t a l l . S p e c i f i c a l l y , i s t h e r e something i n h e r e n t i n the market s t r u c t u r e t h a t would f a c i l i t a t e t h i s e x p l o s i o n ? The answer i s no and t h i s c o n c l u s i o n i s based on the U.S. experience i n both t r u c k i n g and r a i l . R e g u l a t o r y changes i n the U.S. Motor C a r r i e r i n d u s t r y i n d i c a t e d t h a t where the p r i c e of t r a n s p o r t a t i o n i s s t r i c t l y r e g u l a t e d , extreme s e r v i c e c o m p e t i t i o n e r u p t s and demurrage becomes ve r y non uniform and i n many cases n o n e x i s t e n t . But where the c a r r i e r s are f r e e to e s t a b l i s h both the p r i c e of t h e i r s e r v i c e and the demurrage - 91 -p r o v i s i o n s , e x c e s s i v e s e r v i c e c o m p e t i t i o n does not r e s u l t , and i n f a c t a p r o d u c t i v e meshing of s e r v i c e and p r i c e o c c u r s . ( T h i s w i l l be covered more f u l l y i n the next s e c t i o n ) . As w e l l , i t becomes apparent when U.S. r a i l demurrage i s d e s c r i b e d , t h a t freedom to n e g o t i a t e demurrage p r o v i s i o n s i n c o n j u n c t i o n w i t h p r i c e freedom has not r e s u l t e d i n an e x p l o s i o n of demurrage exc e p t i o n s and a complete breakdown of the demurrage system. I f , i n these c o m p e t i t i v e i n d u s t r i e s , where freedom to s e t demurrage r u l e s as w e l l as p r i c e has not r e s u l t e d i n a breakdown of the demurrage system, i t would seem u n l i k e l y t h a t a d i s i n t e g r a t i o n would occur i n Canada. ( i i ) Motor Carrier Industry Demurrage i s r e f e r r e d to as d e t e n t i o n i n the Motor C a r r i e r i n d u s t r y . T r u c k i n g , l i k e s h i p p i n g , i s a h i g h l y c o m p e t i t i v e i n d u s t r y . S i m i l a r l y , t r u c k i n g d e t e n t i o n r u l e s are not uniform i n Canada. The U n i t e d S t a t e s , however, f l i r t e d w i t h uniform d e t e n t i o n r u l e s i n the l a t e 1970s, but f o l l o w i n g d e r e g u l a t i o n of the t r u c k i n g i n d u s t r y , the I n t e r s t a t e Commerce Commission (I.C.C.) e l i m i n a t e d uniform demurrage requirements. In Canada, there are e i g h t major t a r i f f bureaus, each w i t h a separate t a r i f f . C o n s i d e r a b l e d i v e r s i t y e x i s t s y e t some g e n e r a l trends remain. A number of broad g e n e r a l i z a t i o n s of both Canadian and U.S. t r u c k i n g d e t e n t i o n are p o s s i b l e . Two c a t e g o r i e s of - 92 -d e t e n t i o n e x i s t . Motor c a r r i e r s s p o t t e d (without power u n i t ) f a l l under one s e t of r u l e s and charges. Motor c a r r i e r s d e t a i n e d w i t h power u n i t s f a l l under a separate d i s t i n c t s e t of d e t e n t i o n r u l e s and charges r e s u l t i n g i n f r e e time measured i n minutes and demurrage based on hours. Motor c a r r i e r s s p o t t e d without power u n i t experience more l i b e r a l d e t e n t i o n r u l e s an charges. Free time i s u s u a l l y 24 hours and demurrage p e n a l t i e s are measured i n days not hours. 1 . Detention i n the United States U n t i l 1978, motor c a r r i e r s had not e s t a b l i s h e d a uniform se t of d e t e n t i o n r u l e s . Rules and charges v a r i e d from area to area.17 I n d i v i d u a l c a r r i e r e x c e p t i o n s to the r u l e s were numerous and enforcement was p r o b l e m a t i c . D i f f e r e n t r a t e bureaus w i l l p u b l i s h a t a r i f f f o r the r e g i o n of the c o u n t r y t h a t the bureau c o v e r s . The I.C.C., a f t e r s t u d y i n g the major t a r i f f s concluded t h a t they "were remarkably a l i k e and even c o n t a i n numerous i d e n t i c a l l y worded s e c t i o n s . The d i f f e r e n c e s t h a t do e x i s t are p r i m a r i l y e x c e p t i o n s to the g e n e r a l d e t e n t i o n r u l e " D e t e n t i o n of Motor V e h i c l e s Nationwide 124 M.C.C. 680; The Commission c i t e d amongst o t h e r s the Southern Motor C a r r i e r Rate Conference Agent T a r i f f 517 H. The t a r i f f c o n t a i n e d 18 separate items s p e c i f i c a l l y r e f e r r i n g t o 43 c a r r i e r s . Free time a l l o t m e n t s , p e n a l t y amounts and o t h e r s p e c i f i c d e t e n t i o n ^ 7 T a f f , Management of T r a f f i c and P h y s i c a l D i s t r i b u t i o n , 4th ed. (Homewood, IL: R.D. I r w i n , 1979). - 93 -rules would be s p e c i f i c a l l y named to apply to ce r t a i n shippers and not others. Such practice was found i n a l l t a r i f f bureaus examined by the I.C.C. Although these t a r i f f s existed i t was found that because of the competitive nature of the trucking industry, assessment of detention changes was infrequent.! 8 Carriers usually only assessed detention charges on undesirable t r a f f i c or where the truck had been retained for an unreasonable duration.19 ^ n e basis for t h i s a c t i v i t y was noted by the I.C.C. i n 1982 132 M.C.C. 906; Competition was not i n the form of rates but i n service. The motor c a r r i e r industry was subject to s t r i c t regulation. There was minimal rate f l e x i b i l i t y combined with substantial b a r r i e r s to entry. Consequently, c a r r i e r s competed by reducing, a l t e r i n g or waiving detention charges and by providing extra services. After considerable analysis and extensive hearings, the Commission adopted a scheme of uniform detention rules for motor c a r r i e r s throughout the United States on August 29, 1978. 124 M.C.C. 680. In so deciding, the Commission outlined a number of reasons. I t was held that the uniform rules would help eliminate evasions or abuse, preference, discrimination, prejudice, concessions and rebates within the industry. Uniformity would allow easier enforcement of the rules. L astly, the Commission believed that the r e s u l t i n g 1 8Kenneth U. Flood, T r a f f i c Management - Third E d i t i o n (Dubuque, IA: W.C. Brown Co., 1975), p. 331. 1 9 I b i d . - 94 -s i m p l i f i c a t i o n and standardization would f a c i l i t a t e greater e f f i c i e n c y through reducing confusion and misunderstandings. Standardization would allow for automation of the administration of detention. The rules proposed and adopted i n Detention of Motor  Vehicles - Nationwide 124 M.C.C. 680, i n general applied to a l l truck movements. Some exceptions, such as bulk commodities hauled i n tank trucks and dump trucks were allowed. As well, shipments of household goods, i . e . moving trucks, were exempt. The rules can be broken down into two categories. Motor Carriers with Power Units This category of motor c a r r i e r s detained with the power unit and dri v e r i s categorized into s p e c i f i c less than truckload (L.T.L.) weight groups. Not s u r p r i s i n g l y , free time i s measured i n minutes. Time allowed i s dependent on the weight of the load delivered. The following scale was uniformly imposed i n the United States: less than 10,000 lbs. 120 min. 10,000 - 20,000 180 min. 20,000 - 28,000 240 min. 28,000 - 36,000 300 min. greater than 36,000 360 min. Due to the increased use of loadings well i n excess of 36,000 pounds, the I.C.C. subsequently modified the scale to include a f i f t h category of 44,000 lbs . or more which was allowed 420 minutes to unload. Detention of Motor Vehicles - Nationwide - 95 -126 M.C.C. 803. If detained beyond free time, charges were $18 i f held less than one hour and then $9 for each additional 30 minutes or f r a c t i o n thereof. Free time begins when' the consignee or consignor at the delivery s i t e i s n o t i f i e d and stops when loading and unloading i s complete. Motor Carriers Spotted Without Power Units Where the t r a i l e r , without the power unit, has been detached and l e f t i n f u l l possession of the consignee or consignor at a s i t e s p e c i f i e d by them d i f f e r e n t detention charges are assessed. Detention of Motor Vehicles - Nationwide 124 M.C.C. 680; Detention of Motor Vehicles - Nationwide 126 M.C.C. 803. Spotted t r a i l e r s were allowed 24 hours free time for loading or unloading. Saturdays, Sundays, and holidays were excluded from free time computations and from charges as well. Charges were based, not on hours, but on days. The f i r s t and second 24 hour period was at $25 a day. T r a i l e r s detained a t h i r d and fourth day were assessed $3 5 for each of these days. Thereafter, $50 a day was assessed. Detention of Motor Vehicles - Nationwide 126 M.C.C. 803. As soon as the t r a i l e r i s placed at the s i t e s p e c i f i e d by the shipper, free time begins. When the shipper n o t i f i e s the c a r r i e r that the t r a i l e r i s ready for pickup, free time or detention stops. Carriers were required to both publish and enforce these - 96 -t a r i f f s . As well, they were obligated to keep written records of the vehicle, time of n o t i f i c a t i o n , time unloading started and f i n i s h e d . Deregulation of Trucking i n the United States The Motor Carrier Act of 1980 (M.C.A.) 49 U.S.C. 10101, deregulated trucking i n the United States. On March 28, 1980, the Interstate Commerce Commission began conducting a comprehensive review of i t s uniform demurrage l e g i s l a t i o n . Submissions to the Commission highlighted a number of problems experienced under uniform demurrage plans. Detention of Motor  Vehicles - Nationwide 132 M.C.C. 906. I t was submitted that uniform rules have not worked because they do not r e f l e c t the diverse economic, geographic and operational conditions encountered by shippers. Nor was i t able to deal s a t i s f a c t o r i l y with the d i s t i n c t segments within the trucking industry. Numerous submissions to the Commission also argued that the uniform detention rules were inconsistent with the rate f l e x i b i l i t y afforded i n the deregulated environment. The c a r r i e r s are prevented from o f f e r i n g a v a r i e t y of service and p r i c i n g options. Detention could be an i n t e g r a l part of rate making. Different detention provisions combined with d i f f e r e n t rates could be possible but were not under the uniform rules. It was also argued that uniform rules discourage innovation and lead to i n e f f i c i e n t practices. Proponents of the uniform detention plan raised several arguments i n i t s defence. I t was - 97 -suggested that the uniform rules increased equipment u t i l i z a t i o n . Evidence that, although tonnage had increased, detention b i l l i n g s decreased aft e r uniform rules were adopted was presented. The Commission disagreed, s t a t i n g that detention (uniform) charges e f f e c t i v e 1978 were based on 1973 wages and other c a r r i e r cost data. Since 1973, wages and other c a r r i e r costs had r i s e n by a dramatic 59%. The Commission concluded that these uniform detention changes had f a l l e n s u b s t a n t i a l l y below current c a r r i e r cost associated with detained equipment, thus i n e f f i c i e n t use of equipment may have ac t u a l l y been encouraged under the uniform rules. I t was also argued that the c a r r i e r s w i l l return to discriminatory practices. Again the Commission disagreed, noting that unlawful discrimination i s s t i l l prohibited under 49 U.S.C. 10741. The Commission went on to state i n Motor Vehicles - Nationwide 132 M.C.C. 906: The uniform detention rules were formulated and adopted i n an era of s t r i c t regulation of the motor c a r r i e r industry. There were substantial b a r r i e r s to entry and rate f l e x i b i l i t y . Competition was accomplished by reducing detention charges, providing extra services, or by other i n d i r e c t means. Thus, the choice was between higher or lower detention charges coupled with the same basic rate. However, i n today's regulatory environment, most shippers can r e a l i s t i c a l l y expect lawfully responsive f l e x i b l e rates. Therefore, any shipper who has enough leverage to secure a reduced detention charge could a l t e r n a t e l y ask for lower l i n e haul rates. In such an environment, d i r e c t rate competition should reduce pressure to eliminate detention charges and remove the incentive not to - 98 -comply with applicable detention rules. Accordingly, i t would be highly u n l i k e l y that p r i o r abuses would return i f the uniform rules were eliminated. F i n a l l y , i t was also argued that the uniform system was advantageous due to i t s ease of administration and e n f o r c e a b i l i t y . This argument was not commented on and i s c l e a r l y spurious i f , i n f a c t , the basic purpose of uniformity i s wrong. If i t i s something that should not be enforced, then ease of enforcement i s c l e a r l y valueless. After considering these arguments and ones to the contrary, the Commission stated i n Detention of Motor Vehicles - Nationwide 132 M.C.C. 906: We conclude that uniform mandatory detention rules should be eliminated. We are unpersuaded that uniform rules maximize equipment u t i l i t y , given t h e i r inherent i n f l e x i b i l i t y and the innumerable and ever changing shipping circumstances which may be encountered. Even i f the uniform rules have improved o v e r a l l equipment use i n the motor c a r r i e r industry, allowing c a r r i e r s to e s t a b l i s h i n d i v i d u a l rules to meet t h e i r s p e c i a l needs and those of the shippers they serve should embrace the productive use of equipment even more i n the new relaxed regulatory environment under the M.C.A. For example, a c a r r i e r could improve equipment u t i l i t y by combining s t r i c t detention rules and higher charges while o f f e r i n g a lower l i n e haul rate. On the other hand, a c a r r i e r with excess equipment could o f f e r favourable detention rules and charges to shipper who desire them coupled with a higher l i n e haul rate. On March 11, 1981, the Commission served notice that i t proposed to abolish the uniform detention rules. On October 28, 1982, the decision to do so was handed down by the - 99 -Interstate Commerce Commission. In the United States, the motor c a r r i e r industry has run f u l l c i r c l e from non uniform to uniform and then back to non uniform rules. 2. Detention i n Canada In Canada, considerable lack of uniformity exists i n detention charges. Detention rules and charges are published by t a r i f f bureaus throughout Canada. 2 0 The major t a r i f f bureaus are: 1) A t l a n t i c Provinces Motor Carrier T a r i f f Bureau 2) Quebec T a r i f f Bureau Inc. 3) Canadian transport T a r i f f Bureau Association 4) Niagara Frontier T a r i f f Bureau Inc. 5) Canadian Household Goods Carriers T a r i f f Bureau 6) Western T a r i f f Bureau 7) Western Transport Association 8) P a c i f i c T a r i f f Services Ltd. These eight bureaus publish, f i l e , and d i s t r i b u t e t a r i f f s on behalf of t h e i r members. The major t a r i f f s and t h e i r relevant detention provisions are compared i n Table X. T y p i c a l l y , two d i s t i n c t types of detention charges are found. One charge applies to spotted trucks and the other rate to trucks with power units and d r i v e r . Motor Carriers Spotted Without Power Units In the majority of t a r i f f s , free time i s 24 hours. Saturdays, Sundays, and holidays are excluded from free time calculations i n a l l the t a r i f f s . Free time generally s t a r t s 2°R.K. House and Associates Ltd., T a r i f f Bureaux i n Canada - Study prepared for the Department of Transport (1976), p. 91. - 100 -the f i r s t 8:00 7AM following spotting. A couple of exceptions e x i s t . In E.T.A. 100 i t i s 7:00 AM and B.C. #2 and Vancouver Island t a r i f f #1, i t i s 12:00 Noon. Most Canadian t a r i f f bureaus subdivide charges into three rates depending on the type of motor c a r r i e r . The c l a s s i f i c a t i o n s are: (1) conventional, (2) pole trombone, and (3) reefer, Charges vary tremendously from t a r i f f to t a r i f f . No two have exactly the same detention charge. Charges for the f i r s t 24 hours may vary from a low of $49.60 to a high of $70.20. Some have charges that increase with time; the t h i r d day costing more than the f i r s t . Others, such as Q.T.B. 120-B and E.T.A. 100 do not increase. I l l u s t r a t i v e of the charges i s the Canadian Transport T a r i f f Bureau Association's t a r i f f C.T.T.B. 1020-C. This t a r i f f covers t r a f f i c between Western Canada and Ontario. I t provides for the following charges: 1st & 2nd 24 hour After Free time Thereafter Conventional 49.60 65.93 Pole/trombone 57.77 74.20 Reefer 60.74 78.02 Table X Comparison of Canadian Motor Carrier Tariffs (1984) WITHOUT POWER UNITS FREETIME CHARGES O FIRST 24 HOURS SECOND 24 HOURS THIRD 24 HOURS OTHER Sat & Sun Amt. Excl. Free Time Starts Conven- Pole/ Conven- Pole/ Conven- Pole/ tional Trombone Reefer tional Trombone Reefer tional Trombone Reefer Sat & Sun Incl, CTTB 1020-C Y 24 8:00 AM 49.60 57. .77 60.74 49.60 57 .77 60, .74 65.93 74,20 78.02 Y CTTB 1001 Y 24 8:00 AM 53.50 62, .30 69.80 53.50 62, .30 69, .80 71.10 80.00 89,70 N CTTB 1005, 1030 Y 24 8:00 AM 49.61 57, .77 60.74 49.61 57, .77 60, ,74 65.93 74.20 78.02 Y WTA 100 Y 24 8:00 AM 53.50 64, .50 64.50 53.50 64 .50 64, .50 74.50 85,50 85.80 Y ETA 100 CN Y 24 8:00 AM 55.65 68.05 55.65 69.55 87.35 Y CP Y 24 7:00 AM 55.65 55, .65 55.65 55.65 55 .65 55, .65 55.65 55.65 QTB 120-B Y 24 8:00 AM 79.20 79, .20 79.20 79.20 79, .20 79, .20 79.20 79.20 Y QTB 100-D Y 24 8:00 AM 62.65 62, .65 62.65 62.65 62, .65 62, .65 62,65 62.65 BC #2 Y 3-13 12 Noon 31.35 62.65 34,45 68, .90 34.45 68.90 N Charter Service B.C. Tariff #100 Y 0 25.00 25, .00 25.00 25.00 25, .00 25, .00 25.00 25.00 Vancouver Is. Tariff #7 Y 3-13 12 Noon 31.35 62.65 34.45 68, .90 34.45 68.90 N (table continues) Table X - continued Comparison of Canadian Motor Carrier Tariffs (19841 WITH POWER UNITS AND DRIVER FREETIME (hours) CHARGES 0 - 10,000 20,000 30,000 40,000 Pallot-9,999 19,999 29,999 39,999 & over ized Other PER | HOUR PER HOUR Reefer Conventional F i r s t Excess F i r s t Excess 2 hrs 2 hrs 2 hrs 2 hrs Straight Tractor Protective Trailer Service (N O CTTB 1020-C CTTB 1001 CTTB 1005, 1030 WTA 100 ETA CN 100 CP 0TB 120-B 0TB lOO-D BC #2 Charter Service B.C. Tariff #100 Vancouver Is. Tariff #7 Local Freight Tariff #1 Fraser Valley 0-2 i 35 3 3^  2-12 12-24 24-36 1 2 3 4* 3 36 4 20.14 28.09 15.90 22.26 17.20 24.00 17.20 24.00 20.14 28.09 15.90 22.26 $36.6 < 10,000 lbs.> $49.1 $36.6 < 10,000 lbs.> $49.1 34.00 45.00 30.90 28 28 42.55 28 23.15 31.15 - 103 -With Power Unit When the driver and power unit i s detained, free time i s measured i n hours and minutes depending on the weight of the delivered. C.T.T.B. 1020-C provides the following graduated scale of free time: Pounds Free time 0 - 9,999 1 10,000 - 19,999 2 20,000 - 29,999 3 30,000 - 39,999 3| 40,000 - 4f Pa l l e t s 3 Charges depend usually on the type of truck. Under C.T.T.B. 1020-C, reefers are $20.14 per half-hour for the f i r s t two hours, while conventional trucks are $15.90. After two hours, detention charges increase to $28.09 per half-hour and $22.26 for conventional trucks. 3. Relevance of Motor Carrier Detention to Rail Demurrage Trucking detention i s d i s t i n c t from Canadian Railway demurrage i n a number of ways. Fundamentally, detention i n trucking, both the United States currently and Canada, i s non uniform. T a r i f f s vary considerably i n the amount of charges and structure of charges by type of t r a i l e r and geography. Although trucking i s more uniform than shipping, i t i s c l e a r l y less so than the railways. There i s no incentive plan, l i k e - 104 -s h i p p i n g , but i n s t e a d the motor c a r r i e r i n d u s t r y imposes p e n a l t i e s l i k e r a i l . However, the d i s t i n c t i o n e x i s t s i n t h a t t r u c k i n g uses c o n s i d e r a b l y h i g h e r p e n a l t i e s (Table X ) . The t r u c k t r a i l e r i s s m a l l e r , having a c o n s i d e r a b l y lower replacement value than a r a i l c a r , y e t the p e n a l t y f o r t r u c k d e t e n t i o n i s t h r e e times as h i g h as r a i l . Furthermore, f r e e time i s s u b s t a n t i a l l y l e s s , a l l o w i n g o n l y 24 hours i n Canada. D e t e n t i o n i s thus d i s c o u r a g e d by a l l o w i n g minimal f r e e time and then h i t t i n g d e l i n q u e n t s h i p p e r s hard w i t h s u b s t a n t i a l p e n a l t i e s . There are some i n d u s t r y d i s t i n c t i o n s of r e l e v a n c e . F i r s t , t r u c k s are much more c o n s i s t e n t i n t h e i r t r a v e l and a r r i v a l times than r a i l c a r s . A d d i t i o n a l l y , the l i m i t i n g f a c t o r of s w i t c h times found i n r a i l , i s not a problem i n t r u c k i n g . As soon as the t r u c k i s r e l e a s e d i t c o u l d be removed, p r o v i d i n g d r i v e r , and i f needed, a power u n i t i s a v a i l a b l e . I t f o l l o w s t h a t w i t h c o n s i s t e n t r a i l s e r v i c e , as a l r e a d y d i s c u s s e d i n Chapter I I I , s c h e d u l i n g of work crews to l o a d and unload, w h i l e a problem w i t h i n c o n s i s t e n t s e r v i c e , should be l e s s so w i t h the more r e l i a b l e motor c a r r i e r t r a v e l times. The s u g g e s t i o n t h a t l e s s of f r e e time window i s r e q u i r e d i n t r u c k i n g due to t r a v e l time c o n s i s t e n c y i s a v a l i d o b s e r v a t i o n . I t i s worthy of c o n s i d e r a t i o n i n any attempt to reduce f r e e time. I t may prevent any a c r o s s the board r e d u c t i o n i n f r e e time. Where t r a v e l time i s i n c o n s i s t e n t , l a r g e r p o r t i o n s of f r e e time may be necessary. Second, w h i l e t h e r e i s interchange of r a i l c a r s - 105 -done na t i o n a l l y and between any r a i l r o a d s , trucks and t r a i l e r s exchange on a one-to-one basis. This l o c a l i z e d exchange does not require a uniform system of demurrage across the nation. Lastly, l i k e shipping, trucking i s a competitive industry. Both the motor c a r r i e r and the shipping industries provide valuable comparative examples of demurrage systems. I t must be remembered that the purpose of demurrage i s to encourage quick release of the transportation equipment. Demurrage i n shipping encourages charterers to release the ship through an elaborate plan of monetary incentives. The motor c a r r i e r industry instead encourages quick release by punishing the shipper for f a i l i n g to release the equipment. The U.S. motor c a r r i e r industry provides evidence that when rates are deregulated, coupled with non uniform demurrage i n a competitive industry, destructive service competition does not r e s u l t . Innovative demurrage and f r e i g h t rate schemes r e s u l t . In trucking, free time has been set at a lower but seemingly r e a l i s t i c l e v e l . The penalty i s high. The shipper i s given a r e a l i s t i c time to load and unload and then punished severely i f he f a i l s to comply. To shippers the message i s clea r , release t r a i l e r s quickly or face severe penalties. It was the fin d i n g of the Association of American Railways i n a recent study that shippers unload t r a i l e r s before r a i l cars.21 ^ A s s o c i a t i o n of American Railways, Freight Car  U t i l i z a t i o n Impacts of Railroad - Customers Relationships, Vol. 4, Demurrage 1981, A.A.R. Report, No. 4-446. - 106 -T h i s r e s u l t i s not s u r p r i s i n g c o n s i d e r i n g the r e s t r i c t i v e f r e e time p r o v i s i o n s and r e l a t i v e l y more severe p e n a l t i e s imposed upon d e t e n t i o n of t r a i l e r s . ( i i i ) Barges Barges are s u b j e c t t o demurrage charges. For example, Waterways F r e i g h t Bureau T a r i f f 8A (1972) (Source Reebie and A s s o c i a t e s - Towards an E f f e c t i v e Demurrage System, 1972, p. 131) imposes demurrage on barges. Free time v a r i e s between two and nine days depending on the barge s i z e . Three hundred ton barges were allowed two days w h i l e 900 ton barges were p e r m i t t e d nine days. Demurrage charges v a r i e d between $3 5 and $65 f o r each of the f i r s t t h r e e days depending on the s i z e . For the next t h r e e , i t v a r i e d between $55 - $110. T h e r e a f t e r the charge v a r i e d between $85 and $160. The lowest r a t e s b e i n g f o r a 100 ton barge and the h i g h e s t f o r a 2000 ton barge. B e a r i n g i n mind t h a t t h i s i s a 1972 t a r i f f , even the lowest r a t e i s c o n s i d e r a b l y g r e a t e r than r a i l demurrage was then and even i s now. In 1972, r a i l demurrage f o r the f i r s t day was $10. T h i s r a t e would have a p p l i e d t o 100 ton hopper c a r s . The c a r r y i n g c a p a c i t y of the barge and r a i l c a r i s the same y e t the demurrage i s 3| times h i g h e r f o r barges. As w e l l u n l i k e r a i l , demurrage charges as w e l l as f r e e time v a r i e s by type of equipment. (iv) Containers C o n t a i n e r s , once unloaded from a s h i p , may be s u b j e c t t o - 107 -demurrage. The amount of free time and l e v e l of charges varies widely. In the United States, there i s no requirement under the Shipping Act (U.S.) to publish detention charges.22 Consequently the charges are somewhat of a mystery. According to American President l i n e s i n 1985, the penalty charge ranged from $20 to $50 a day. 2 3 C. Railway Demurrage i n the United States (i) History During the century and a half of railway a c t i v i t y i n the United States, regulation has run a complete cycle. I n i t i a l l y absolute freedom existed. Railways were free to do as they wished unfettered by government interference. An era of government regulation followed. Most recently, the Staggers  Act 1981, deregulated the railways. Roughly p a r a l l e l to t h i s trend i n regulation was a s i m i l a r pattern involving demurrage. I t i n i t i a l l y was non uniform but became uniform and i s now again non uniform i n application. Of i n t e r e s t i n t h i s section are the reasons for regulation and the corresponding adoption of a uniform demurrage plan and why the problems that plagued the railway industry under early non uniform demurrage w i l l not reoccur again. This i s of s p e c i a l i n t e r e s t since Canada has not completed the cycle, 2 2"A.P.L. Asks Rule to Require T a r i f f L i s t i n g , " T r a f f i c  World, 18 March 1985, p. 118. 2 3 I b i d . - 108 -having gone from non uniform to uniform only. I t w i l l be r e c a l l e d that the Board of Railway Commissioners refused any exceptions and maintained uniform demurrage i n Canada, fearing discrimination and abuses would occur, followed by a burgeoning of exceptions that would dramatically reduce r a i l car u t i l i z a t i o n . The U.S. experience provides a valuable i l l u s t r a t i o n of how unfounded are the Board of Railway Commissioners' fears i n today's environment. To appreciate t h i s problem requires a s l i g h t digression into the h i s t o r y and development of the /American railway industry. 1. Early Rail Development (1830-1879) I t i s i n t h i s period that the railways were almost completely free from any form of government regulation. The period was one marked by tremendous growth i n the railway industry. Governments, State and Federal bodies were eager to encourage r a i l expansion. Government p o l i c i e s were that of encouragement and l i b e r t y . Grants were made i n the form of both d o l l a r s and land. Land grants during t h i s period were 155,000,000 acres, the equivalent of the s i z e of Texas. 2 4 Railroad transportation i n the United States had i t s genesis i n 1815. The f i r s t r a i l r o a d charter was granted to John Stevens i n 1815 to undertake construction between Delaware ^ 4 I . Leo Shaufman, The American Railway Problem, (New York: The Century Co., 1921), p. 33. - 109 -and Raritan Rivers. z-> But i t was not u n t i l 1825 that a locomotive ran on any r a i l s i n the United S t a t e s . 2 6 i t was not u n t i l 1830 that a scheduled passenger service began. 2 7 By 1830, there was 23 miles of railway l i n e i n a l l the country. From t h i s slow beginning construction soon accelerated to a fevered p i t c h . By 1850, there were 9000 miles of track. Ten years l a t e r , there were 30,000 miles of track. By 1870, 53,000 miles of track existed i n the United States. In the following 10-year period trackage was almost doubled as 40,000 miles were b u i l t . Between 1880 and 1890 an amazing 70,000 miles were added. 2 8 Not only had mileage expanded, but the number of r a i l r o a d companies had mushroomed. By 1868, there were 4000 i n d i v i d u a l l i n e s . 2 ^ What had developed was a patchwork of m i s f i t t i n g r a i l r o a d s . Railway service was parochial. Uniformity d i d not exi s t i n r a i l gauge, management, time or cars. /Any s i g n i f i c a n t cross country f r e i g h t t r a f f i c was impractical i n 1865 due to t h i s great d i v e r s i t y of r a i l gauges. Cars would have to be loaded and reloaded a number of times. By 1861, 46% of the 2^A.A.R., Chronology of America's Railroads (Washington, DC, 1984), p. 1. 2 6 I b i d . 2 7 I b i d . 2 8 I . Leo Shaufman, p. 37. 2^Stover, J.F. The L i f e and Decline of the American  Railway (New York: Oxford University Press, 1970). - 110 -t o t a l mileage was track made of gauges other than the standard 4 foot 85 inch gauge. 3 0 A gradual s h i f t towards the standard gauge occurred and by 1880 only 20% were non standard. F i n a l l y by 1886, a l l track was standard gauge across the country, But i t was not only r a i l gauge that varied, time also varied. There was no consensus as to how time should be adjusted as one moved across the country. I t was not u n t i l 1883 that a uniform time system was agreed to c a l l e d Standard Time. From t h i s m i s f i t t i n g c o l l e c t i o n of railways, we see a gradual trend towards uniformity. Order was slowly emerging from the chaos caused by such rapid growth. The lack of integration i n r a i l gauge was but only one problem that was spawned from t h i s rapid growth. A far more serious problem was the oversupply of r a i l capacity. The transportation system that was encouraged was one that was excessive for the country's needs. The 4000 r a i l companies, together possessing excessive capacity competed for the lesser r a i l t r a f f i c . Out of t h i s unbridled competition, a tremendous number of discriminatory practices became commonplace. Demurrage, i n t h i s period, was a t o o l to be used i n a discriminatory fashion. Like passes, rebates and f r e i g h t rate car supply discrimination, demurrage was used to favor c e r t a i n shippers and harm others. There was no uniformity i n 3 0 I b i d . , p. 65. 3 1 I b i d . - I l l -demurrage. I t v a r i e d from s t a t e t o s t a t e , r a i l company to r a i l company and s h i p p e r to s h i p p e r . S e v e r a l examples serve to i l l u s t r a t e the d i v e r s i t y of r u l e s and charges w i t h i n the U n i t e d S t a t e s . Four days f r e e time were allowed by one New England s t a t e w h i l e o t h e r s o f f e r e d one to two d a y s . 3 2 A Senate Committee, i n 1905, found t h a t some s h i p p e r s were p e r m i t t e d 15 days f r e e time, o t h e r s n o n e . 3 3 One mining company i n Butte, Montana was not r e q u i r e d to pay demurrage w h i l e other companies were charged demurrage. 3 4 In P e n n s y l v a n i a and Ohio, l a r g e p l a n t s were allowed demurrage ave r a g i n g a l l o w a n c e s . 3 ^ Demurrage p r a c t i c e s i n t h i s p e r i o d were merely one of many d i s c r i m i n a t o r y p r a c t i c e s common i n t h i s p e r i o d . 2. Regulation - 1870 onwards As these d i s c r i m i n a t o r y p r a c t i c e s became more f r e q u e n t and b l a t a n t , c a l l s f o r r e g u l a t o r y c o n t r o l s emerged. The f i r s t e f f e c t i v e c h a l l e n g e to the a c t i v i t i e s of the r a i l w a y s came from a s e c r e t order of farmers c a l l e d the patrons of Husbandry, or as i t was more commonly c a l l e d , the Grange. Founded i n 1867, the Grange had grown to 20,000 l o c a l s and one-half m i l l i o n 3 2James C o l l i e r , L e g a l and R e g u l a t o r y Aspects of Per Diem  and Demurrage i n R e l a t i o n ( T r a n s p o r t Law Seminar - Papers and Proceedings, Assoc. of I.C.C. P r a c t i t i o n e r s , 1972), p. 61. 3 3 F r a n k Parsons, p. 143. 3 4 I b i d . 35James C o l l i e r , p. 42. - 112 -members. 3 6 S t a t e laws r e g u l a t i n g r a i l w a y s were i n t r o d u c e d and supported by these powerful Granges. The l e g i s l a t i o n was s t a t e , not f e d e r a l , and i n many cases unique and d i s t i n c t . For example, Minnesota f i x e d schedules w h i l e Wisconsin e s t a b l i s h e d maximum r a t e s . I l l i n o i s f i x e d r a t e s a t the l e v e l of the lowest c o m p e t i t i v e r a t e of the year p r e v i o u s . 3 7 i n g e n e r a l , the l e g i s l a t i o n was concerned w i t h r a t e s . Schedules of maximum and minimum r a t e s were p r e s c r i b e d and u n j u s t d i s c r i m i n a t i o n and unreasonable r a t e s were p r o h i b i t e d . 3 8 S t a t e r a i l r o a d and p u b l i c u t i l i t y commissions were e s t a b l i s h e d t o c o n t r o l the c a r r i e r s . 3 9 E x t e n s i v e powers of r a t e c o n t r o l were d e l e g a t e d t o these e a r l y a d m i n i s t r a t i v e tribunals.^° A n o t a b l e r e s u l t of these Granger laws was a s e r i e s of U.S. Supreme Court d e c i s i o n s known as the Granger cases. The c o u r t upheld the v a l i d i t y of s t a t e s t o r e g u l a t e r a i l w a y r a t e s as b e i n g i n the p u b l i c i n t e r e s t . ^ What developed was a p r o l i f e r a t i o n of s t a t e laws c o n c e r n i n g every aspect of r a i l w a y t r a n s p o r t a t i o n . The r u l e s v a r i e d from s t a t e t o s t a t e . Compliance i n one s t a t e meant v i o l a t i o n i n another. Doubts 3 6 H u l b r o c k , p. 238. 3 7 H u l b r o c k , p. 240. 3 8 I . Leo Shaufman, p. 38. 3 9 F r a n k Parsons, p. 27. 4^1. Leo Shaufman, p. 38. 4 1 i . Leo Shaufman, p. 39. - 113 -grew about the a b i l i t y of i n d i v i d u a l states to regulate railways e f f e c t i v e l y . This became clear i n the Wabash Case W Ste L & P Ry Co. v. I l l i n o i s 118 U.S. 557. The U.S. Supreme Court held that states' regulation of r a i l r o a d s was r e s t r i c t e d to i n t r a s t a t e t r a f f i c . I t was u l t r a v i r e s of state l e g i s l a t i v e j u r i s d i c t i o n to regulate i n t e r s t a t e hauls. This decision freed the majority of railway t r a f f i c from l e g i s l a t i v e c o n t r o l . In 1887, the Interstate Commerce Act was passed, creating the Interstate Commerce Commission. Its primary purpose was to prevent rate discrimination and to ensure reasonable f r e i g h t r a t e s . 4 2 Many diverse state laws remained and considerable d i v e r s i t y from state to state persisted a f t e r the creation of the I.C.C. For example, 37 states had varied laws regulating whistles. The laws regulating b e l l s ranged from requiring 20 to 35 pound b e l l s . 4 3 Demurrage remained untouched by Federal l e g i s l a t i o n . I t was s t i l l regulated, i f at a l l , by state r a i l r o a d or public u t i l i t y commissions. Local lobbies and pressure groups possessed considerable clout and were apparently e f f e c t i v e i n influencing state a u t h o r i t i e s . 4 4 A state commission member, i n an o f f i c i a l report once stated that t h e i r demurrage rules were more favorable to the shipper than those of any other state i n 4 2 I , Leo Shaufman, p. 43. 4 3Hungerford, p. 249. 4 4James C o l l i e r , p. 62. - 114 -the union. Between s t a t e s t h a t allowed demurrage, c o n s i d e r a b l e l a c k of u n i f o r m i t y e x i s t e d . In New England one s t a t e allowed f o u r days f r e e time w h i l e other s t a t e s allowed o n l y one to two d a y s . 4 6 Some s t a t e s i n c o r p o r a t e d n o v e l and i n t e r e s t i n g demurrage p l a n s . Track storage charges i n a d d i t i o n to s t r a i g h t demurrage on r o l l i n g s t o c k were c o l l e c t e d by r a i l w a y s . 4 7 S t a t u t e s known as r e c i p r o c a l demurrage laws were enacted by some s t a t e s . These laws p r o v i d e d f o r p e n a l t i e s i f r a i l w a y s f a i l e d t o supply s h i p p e r s w i t h c a r s w i t h i n a s p e c i f i e d time frame. The s t a t u t e s a l s o imposed p e n a l t i e s on r a i l w a y s t h a t f a i l e d t o move c a r s at a p r e s c r i b e d minimum s p e e d . 4 8 What developed was a complete l a c k of u n i f o r m i t y i n demurrage charges and r u l e s . L i k e the problems experienced w i t h non uniform r a i l gauge and non standard time, t h i s d i v e r s i t y made r a i l t r a n s p o r t a t i o n between s t a t e s , and even i n some cases, towns complicated. Need f o r the development of a uniform demurrage code a p p l i c a b l e t o a l l of the U n i t e d S t a t e s was re c o g n i z e d . The General Time Convention was one of the predecessors of the American A s s o c i a t i o n of Railways. To encourage u n i f o r m i t y 4^H.S. Haines, Problems i n Railway R e g u l a t i o n (New York: The M c M i l l a n Co., 1911), p. 338. 4 6James C o l l i e r , p. 62. 4 7 J o h n s o n and Vanmetre, P r i n c i p l e s of R a i l r o a d  T r a n s p o r t a t i o n (New York: Appleton and Co., 1916), p. 70. 4 8 I b i d . - 115 -i n demurrage r u l e s and charges, the c o n v e n t i o n adopted a r e s o l u t i o n on October 19, 1888 c a l l i n g f o r f r e e time to be u n i f o r m l y s e t a t 48 hours. As w e l l , demurrage was to be a s s e s s e d a t a r a t e of $1 per day per c a r d e t a i n e d beyond f r e e t i m e . 4 9 The r e s o l u t i o n f a i l e d . Numerous exc e p t i o n s to the uniform r u l e s were granted by some s t a t e s , w h i l e o t h e r s were simply opposed to the i d e a of demurrage, p r o h i b i t i n g i t completely>50 A number of years would e l a p s e b e f o r e the dust would s e t t l e and j u r i s d i c t i o n over demurrage would be e s t a b l i s h e d and uniform r u l e s developed. I t was not u n t i l August of 1906 t h a t any s i g n i f i c a n t s teps were taken to f u r t h e r encourage uniform demurrage r u l e s . I t was on t h i s date t h a t the Hepburn Act was passed by Congress. T h i s amendment to the I.C.C. Act r e q u i r e d t h a t demurrage t a r i f f , r a t e s , and r u l e s be f i l e d w i t h the I.C.C. In 1907, a second attempt was made a t e s t a b l i s h i n g a uniform demurrage code. The American Railway A s s o c i a t i o n (A.R.A.), predecessor to the A.A.R., e s t a b l i s h e d a code but a g a i n i t was not unanimously adopted and seemed d e s t i n e d to f a i l . Undaunted and determined to succeed, the A.R.A. requested the a s s i s t a n c e of the N a t i o n a l A s s o c i a t i o n of Railway Commissioners. In 1909, these two b o d i e s , i n c o o p e r a t i o n w i t h the I,C.C., formed a j o i n t committee t o develop and i n s t a l l a uniform code of 4 9James C o l l i e r , p. 62. 5 0H.S. Haines, p. 338. - 116 -demurrage rules i n the United States. • 3 i Hearings were held i n Chicago and Washington. Discussions were conducted with shippers and c a r r i e r s on the f i n a l demurrage code.^ 2 A mutually acceptable code was developed, and, on December of 1909 the I.C.C. endorsed the code. The railways i n turn approved the code i n January 1910, and the t a r i f f became e f f e c t i v e on A p r i l 1, 1910.^3 i n i t s 1909 annual report to Congress the I.C.C. stressed two benefits of uniform demurrage.5 4 F i r s t , "an increase i n car e f f i c i e n c y through the securing of more prompt loading and unloading by consignors and consignees." Second, "assurance against discriminatory charges v i a r i g i d adherence to a uniform national practice applicable to i n t e r s t a t e and i n t r a s t a t e shipments a l i k e . " An amending formula was also agreed to. I t required that any future changes i n demurrage rules and charges would have to be discussed and then subsequently agreed to by a committee composed of representatives of the National I n d u s t r i a l T r a f f i c League (N.I.T.L.) and the A.R.A. Any issue that could not be agreed to by the committee was to be forwarded to the I.C.C. for i t s decision. As well, at the request of the S^Jantes C o l l i e r , p. 67. 5 2Reebie and Associates, p. 7. 53James C o l l i e r , p. 63. ^ 4The Freight Car Supply Problem and Car Rental Po l i c y - Economic Research Service, U.S. Department of Agriculture (Market Research Report No. 953, 1972), p. 24. - 117 -N.I.T.L., demurrage bureaus were formally established to f a c i l i t a t e education and to enforce and supervise the new r u l e s . A n d thus i t was that a uniform set of demurrage rules and charges was agreed to throughout the United States. The uniform code established i n 1910 s t i l l forms the basic skeleton of the current U.S. demurrage t a r i f f . The present U.S. demurrage t a r i f f PHJ 6004, although considerably more deta i l e d than the 1910 version, i s remarkably s i m i l a r . Modifications and exceptions, today, embellish the o r i g i n a l nine rules. The 1910 t a r i f f allowed 48 hours free time. U n t i l recently free time remained at t h i s l e v e l . Demurrage was set at $1 per car per day. Subsequent increases are detailed i n Table XI. Included i n t h i s 1910 t a r i f f was an averaging agreement plan. During the 1909 hearings the shippers had i n s i s t e d on the i n c l u s i o n of an averaging agreement. The shippers argued that without such a plan the v i a b i l i t y of t h e i r plants would be jeopardized. Under straight demurrage rules they would face both increased demurrage and switching costs. Switching costs would increase because they would now have to juggle t h e i r cars around to ensure that the oldest ones were released f i r s t . 5 6 Many of the plants had been operating under a form of averaging or were permitted generous free time allowances. The proposed straight demurrage plan represented a 55Reebie and Associates, p. 8. 5 6Reebie and Associates,, p. 17, - 118 -Table XI United States R a i l Demurrage Rate Increases Date Change 1880 - 1916 $ 1 per day per car A p r i l 1916 $ 1 f i r s t 3 days $ 2 thereafter November 1916 $ 1 f i r s t day $ 2 second day $ 3 t h i r d day $ 5 thereafter May 1917 $ 2 f i r s t 5 days $ 5 thereafter February 1918 $ 3 f i r s t 4 days $ 6 next 3 days $10 thereafter Post World War I $ 2 f i r s t 4 days $ 5 thereafter 1938 $ 2, .20 f i r s t 4 days $ 5, .50 thereafter September 1949 $ 3 f i r s t 4 days $ 5 .50 thereafter October 1956 $ 3 f i r s t 4 days $ 8 thereafter 1957 $ 4 f i r s t 4 days $ 8 thereafter 1964 $ 5 f i r s t 4 days $10 next 2 days $15 thereafter October 5, 1971 $10 f i r s t 4 days $20 next 2 days $30 thereafter Presently $20 f i r s t 4 days $30 next 2 days $60 thereafter Source: U.S. T a r i f f PHJ 6004. - 119 -dramatic change to these shippers. An averaging agreement, i t seems, was offered by the railways as a concession to the shippers to secure t h e i r approval of the o v e r a l l demurrage scheme. Although the 1910 t a r i f f and the current PHJ 6004 are si m i l a r , several changes bear mention. U n t i l 1918, the uniform demurrage rules had only applied to in t e r s t a t e t r a f f i c . In 1918 the rules became applicable to both i n t e r and i n t r a s t a t e t r a f f i c . 5 7 During 1918 and 1919, the rules were r e - c o d i f i e d , the r e s u l t was and s t i l l i s today the National Car Demurrage Rules. P e r i o d i c a l l y the I.C.C. has made short-term adjustments to demurrage rules and charges i n response to car shortages. Its authority to do so exists under the Interstate Commerce Act. Section 11123 allows the I.C.C. to declare an emergency and then u n i l a t e r a l l y a l t e r demurrage rules and charges. These are done i n the form of Car Service Orders. This authority has been exercised numerous times i n response to perceived car shortages. During WWI and immediately following WWII car service orders were issued.58 During 1950 to 1952, service orders Nos. 856, 871, 866, 870 were issued by the I.C.C. Number 856 required demurrage to be charged on weekends when 57James C o l l i e r , p. 63. 5 8 u . s . Congress, Senate National Freight Car Supply. S Report 1192, Calendar 1127 - to accompany S 1063, 88 long 2nd Sess., 1964, pp. 8-9. - 120 -the cars had been held beyond free time. Number 870 reduced free time for loading at ports. Number 865 increased demurrage charges. Number 871 reduced port unloading time. Service Orders 979 and 1023 during 1966 through 1969 raised demurrage rates and made the rules more r e s t r i c t i v e . E f f e c t i v e March 16, 1973, I.C.C. Service Order 1124 reduced free time to 24 hours. As well, i t eliminated average agreements. A storm of protest from shippers occurred. The order was recorded A p r i l 1, 1973. Car Demurrage Rules Nationwide 350 I.C.C. 777. On A p r i l 8, 1978, I.C.C. Service Order 1315 reduced free time for loading to 24 hours as well as increasing demurrage p e n a l t i e s . ^ 9 These service orders are only one way i n which the demurrage rules have been modified over the years, Another s i g n i f i c a n t force i s the I.C.C. and the courts i n t e r p r e t a t i o n of s p e c i f i c demurrage provisions and concepts. A number of important decisions have affected demurrage i n several general ways. A major area of contention s e t t l e d by the courts was the true nature of demurrage. Is i t a r e n t a l or i s i t a penalty or i s i t both? I t must be remembered that any changes to charges were to be discussed and agreed to by the j o i n t A.R.A.-N.I.T.L. Committee. If resolution was unattainable, the issue was referred to the I.C.C. for a f i n a l conclusive decision. Hence the genesis of t h i s issue. The true nature of byA.A.R., Freight Car U t i l i z a t i o n Impacts of Railroad  Customer Relationships, Vol. 4, Demurrage, A.A.R. Report No. R-446, 1981, p. 9. - 121 -demurrage w i l l s i g n i f i c a n t l y a f f e c t what demurrage charge i s j u s t i f i e d . If demurrage i s found to be a re n t a l , then some compensatory f a i r market value or return on investment may be appropriate. If i t i s found to be a penalty, or both, then a much higher demurrage charge may be j u s t i f i a b l e . I n i t i a l l y , there was a lack of consensus by the courts as to the true nature of demurrage. In 1906, i n Kehoe v. Charleston & Western Carolina Railway Co. 11 I.C.C. 166, i t was stated: The demurrage charge i s not however based upon the f a i r r e n t a l value of a car, i t i s rather i n the nature of a penalty. While i t should not be s u f f i c i e n t i n amount to work hardship upon the shipper who must occasionally pay i t , i t should be s u f f i c i e n t i n amount to accomplish the purpose for which i t i s intended. However, i n New York Hay Exchange Assoc. v. Pennsylvania Railroad Co. 14 I.C.C. 178, the court found that the demurrage rate should be equivalent to the per diem rate. I t was i n the court's view compensatory requiring only a f a i r r e n t a l rate. The court stated: The sum of per diem which c a r r i e r s pay one another for use of a f r e i g h t car must be taken as f a i r l y representing the value of such use and may properly be charged against the shipper who retains the car beyond the period for which he i s e n t i t l e d to i t . I t was not u n t i l 1920 that the Supreme Court of the United States ruled on the issue. The U.S. Supreme Court ruled on the issue i n Pennsylvania Railroad Co. v. Kittaning Iron and Steel  Manufacturing 253 U.S. 319. I t was the opinion of the court - 122 -that the purpose of demurrage " i s to promote equipment e f f i c i e n c y by penalizing the undue detention of cars". Interestingly, i n 1926, the U.S. Supreme Court broadened t h e i r i n t e r p r e t a t i o n of demurrage to include compensation. In Turner, Dennis & Lowry Lumber Co. v. Chicago Milwaukee & St. Paul Railway Co. 46 S. Ct. 530, 271 U.S. 259, 70 L Ed. 934, the court held: A l l demurrage charges have a double purpose. One i s to secure compensation for the use of car and of the track which i t occupies. The other i s to promote car e f f i c i e n c y by providing a deterrent against undue detention. Since 1926, the true nature of demurrage i n the United States has been held to be both one of compensation and penalty. Subsequent cases have r e i t e r a t e d the Supreme Court's 1926 findings. For example, i n Commerce and Industry Association of  New York Inc. v. B & O Railway 281 I.C.C. 655 (1951), i t was stated: I t i s a fundamental p r i n c i p l e that a shipper or consignee i s e n t i t l e d to a reasonable time to load or unload his shipment. Demurrage charges accrue af t e r expiration of that reasonable period, referred to as free time. The c a r r i e r s primary duties and obligations to the public are for the carriage of goods. If a consignor or consignee elects to use a f r e i g h t car or a r a i l r o a d s t a t i o n to store h i s goods, he receives an extra service for which the c a r r i e r i s e n t i t l e d to additional renumeration. Widespread use of r a i l f a c i l i t i e s for the storage of f r e i g h t congests c a r r i e r f a c i l i t i e s and causes delay i n handling other shipments. I t i s necessary that demurrage, track storage and storage charges o r d i n a r i l y contain a p e n c i l - 123 -element as an incentive for prompt release of equipment. As recently as 1976, the U.S. Supreme Court i n I.C.C. v. Oregon  P a c i f i c Industries 420 U.S. 184, 431 L. ed. 2d 121, 95 S. Ct. 909 reaffirmed t h e i r e a r l i e r statements i n Turner,  Dennis & Lowry Lumber Co. I t was the opinion of the court that "as Turner makes cle a r , demurrage charges have a dual purpose." Demurrage's dual purpose, that of a penalty and compensation, i s well established. What these decisions mean i s that the l e v e l of charges could be above the compensatory l e v e l . But these cases f a i l to specify what i s meant by compensation. Does compensation mean a f a i r return on equity, the firm's cost of c a p i t a l , and i f so what i s the appropriate rate or does i t imply opportunity cost. These are unsettled questions but what i s clear i s that demurrage rates can be higher than the compensatory l e v e l to encompass a penalty. I t also seems s e t t l e d that the charge must be reasonable. The U.S. Supreme Court i n Turner, Dennis & Lowry Lumber Co. held that while i t i s within the c a r r i e r ' s rights to impose demurrage both the charge and the amount of free time must be reasonable. Thus demurrage i s subject to review by U.S. courts on the grounds of reasonableness. Whatever the compensatory and penal element are, i t i s clear they must be reasonable. But what i s reasonable? I t was held that when storage charges i n elevators and warehouses are less than demurrage charges, - 124 -demurrage charges are not unreasonable. Nor i s i t unreasonable that part days are charged for whole or that car sizes and types vary. Turner, Dennis & Lowry Lumber Co. 3 . Deregulation - 1976 onwards After years of decline, manifested through bankruptcies, inadequate returns on investment and de c l i n i n g r a i l market share, Congress passed the Staggers Act i n the f a l l of 1980. The Act deregulated railway transportation i n the United States. In doing so, Congress found t h a t : 6 ^ 1) many of the government regulations a f f e c t i n g r a i l r o a d s , once e s s e n t i a l to prevent an abuse of monopolistic powers, are unnecessary and i n e f f i c i e n t . 2) most U.S. transportation i s competitive. 3) greater reliance on the market place i s e s s e n t i a l to preserve a viable energy-e f f i c i e n t and economic r a i l r o a d industry. The l e g i s l a t i o n ' s impact on the American r a i l r o a d industry was dramatic but i t i s not the purpose of t h i s paper to discuss deregulation of the U.S. r a i l industry. However, i t i s relevant where i t has affected demurrage. Exemptions to c e r t a i n commodities and c o n f i d e n t i a l contracts, both the r e s u l t 6 0 C r a i g F. Rockey, "Railroad Deregulation: The U.S. Experience," Canadian Transportation Research Forum, (May 1984), p. 757. - 125 -of d e r e g u l a t i o n , i n t r o d u c e complete freedom to n e g o t i a t e new demurrage p r o v i s i o n s f r e e from the standard PHJ 6004 t a r i f f . ( i i ) Current Demurrage Rules i n the United States Today i n the U n i t e d S t a t e s demurrage i s a p o t p o u r r i of c h o i c e s . I t i s as i t was i n the 1800s, non uniform. In g e n e r a l , two c h o i c e s e x i s t . A s h i p p e r or c a r r i e r can f o l l o w the standard PHJ 6004 demurrage t a r i f f or may agree to t h e i r own s p e c i f i e d demurrage terms. The freedom to choose w i l l depend on the type of t r a f f i c . I f the t r a f f i c moves under e i t h e r a c o n t r a c t or TOFC/COFC/BOXCAR exemption, then both a l t e r n a t i v e s e x i s t . However, i f the t r a f f i c moves under a f r e i g h t t a r i f f then PHJ 6004 a p p l i e s . But even i f PHJ 6004 i s f o l l o w e d i t i s , as w i l l be d e s c r i b e d , non uniform. I t i s loaded w i t h e x c e p t i o n s , average p l a n , s t r a i g h t p l a n , and P a r t 3. A l l are d i s t i n c t . 1. Contract and Exempt Traff i c S e c t i o n 208 of the Staggers Act permits r a i l r o a d s to e n t e r c o n f i d e n t i a l c o n t r a c t s w i t h s h i p p e r s . Shippers and c a r r i e r s are f r e e t o n e g o t i a t e r a t e s and s e r v i c e p r o v i s i o n . The Act, however, r e q u i r e s t h a t r a i l c o n t r a c t s be f i l e d w i t h the I.C.C. The c o n t r a c t s are c o n f i d e n t i a l , i n t h a t , o n l y what the I.C.C. d e f i n e s as e s s e n t i a l terms must be p u b l i c l y d i s c l o s e d . A r e c e n t I.C.C. r e p o r t on c o n t r a c t r a t e s found dramatic growth - 126 -i n the use of c o n t r a c t s . b l In 1981, only 768 contracts were f i l e d with the I.C.C. In 1982, t h i s had grown to 3248 contracts. By 1983, 8285 contracts were f i l e d . Contract revenue constitutes (1983) 26.5% of t o t a l r a i l revenue. This I.C.C. survey found that demurrage terms were commonly negotiated provisions of these contracts. Further, c a r r i e r s claimed to have implemented innovative demurrage provisions as well as the use of i d l e cars for temporary warehousing. Conrail entered a contract to ship coal. I t was for 2 hauls one of 300 and one of 465 cars of bituminous coal. Both contracts provided for demurrage r e l i e f . 6 2 Shippers and c a r r i e r s are, thus, free to and apparently do negotiate demurrage terms d i s t i n c t and independent of PHJ 6004. Whether shippers and c a r r i e r s empowered with t h i s freedom write t h e i r own demurrage provisions or use PHJ 6004 i s of relevance for Canada. In p a r t i c u l a r , have the early fears of the Board of Railway Commissioners i n Canada been borne out that the granting of one exception would open the floodgates r e s u l t i n g i n many more and a dramatic reduction i n r a i l car u t i l i z a t i o n ? To determine the current trends i n U.S. demurrage, a questionnaire was mailed out to members of the U.S. Committee on Demurrage and Storage. A d d i t i o n a l l y , input from selected U.S. shippers was s o l i c i t e d . The response ^Report on Railroad Contract Rates - Authorized by Section 208 of the Staggers Act of 1980 (I.C.C, March 13, 1984), p. 7. 6 2 T r a f f i c World, May 4, 1981, p. 76. - 127 -rate was 50%. The questionnaire inquired about demurrage terms for exempt t r a f f i c , contract t r a f f i c e and t r a f f i c moving under regulated t a r i f f s (Appendix B). The questionnaire indicated that there i s a strong tendency, i n spite of the l e g i s l a t i v e freedom to do otherwise, to continue to use the standard PHJ 6004 t a r i f f . Any a l t e r a t i o n s and exceptions were directed at l i b e r a l i z i n g either free time or the demurrage penalty. Responses to the qustionnaire show that on average 80% of c o n f i d e n t i a l contracts specify that the provisions and rules of demurrage t a r i f f PHJ 6004 apply. Some railways offered rate concessions to encourage shippers to use PHJ 6004 i n l i e u of some other demurrage arrangement. The exact provisions of these contracts are c o n f i d e n t i a l , nevertheless, i n general the demurrage terms i f they did not follow PHJ 6004 involved some v a r i a t i o n to the t a r i f f . S p e c i f i c a l l y , the contract provisions included changes to free time. I t seems that these variances w i l l depend on car supply. If there i s a surplus, extensions to free time w i l l be allowed, but where there i s a shortage, less free time i s allowed. A factor i n allowing demurrage variations i n c o n f i d e n t i a l contracts seems to be the commodity being shipped. I t was indicated that demurrage variations are dictated by commodity and car type. So i f a commodity i s being c a r r i e d that can be quickly unloaded by the shipper, for example p a l l o t i z e d loads i n box cars, less free time i s - 128 -allowed. The freedom to negotiate s p e c i f i c demurrage contractual provisions within c o n f i d e n t i a l contracts has not resulted i n an explosion of exceptions. Any changes seem to be a process of fi n e tuning the standard demurrage provisions to both car supply considerations and i n d i v i d u a l loading and unloading times as dictated by the commodity being shipped. Exempt T r a f f i c Section 213 of the Staggers Act allows the I.C.C. to grant exemptions from regulation. Regulation over Car Service and rates has now been removed from 21% (1983) of U.S. r a i l tonnage through t h i s p r o v i s i o n . 6 3 T r a i l e r s on f l a t cars and containers on f l a t cars (TOFC/COFC) were exempted i n March 1981. A g r i c u l t u r a l products, except soybeans, sunflower seeds, and grain are exempt. As well, l i q u i d i r o n chloride, i r o n sulphate and hops are exempt from regulation. On November 30, 1983, frozen food was also exempted. Most recently, two controversial exemptions, that of export coal (ex parte No 3 46 - Sub - No 7) and box car t r a f f i c (ex parte No 346 - Sub - No 8) were declared by the I.C.C. The export coal exemption was made e f f e c t i v e September 12, 1983 and the box car exemption was e f f e c t i v e January 1, 1984. Both decisions were the subject of intense l i t i g a t i o n . In September 1984, the D i s t r i c t of Columbia C i r c u i t Court struck down the export coal exemption 6 3 C r a i g Rockey, p. 762. - 129 -while upholding the box car exemption. However, the court overturned the box car exemption provisions that applied to j o i n t rates. The I.C.C. appealed both decisions to the U.S. Supreme C o u r t . 6 4 These exemptions, i n p a r t i c u l a r for box cars, permit the c a r r i e r to either follow PHJ 6004 or to devise i t s own s p e c i f i e d demurrage provisions with the shipper. Conrail, for example, e f f e c t i v e August 1, 1984, increased loading free time on placed box cars less than 60 feet i n length, from 24 to 48 h o u r s . 6 5 Results of our questionnaire indicated that 77% of box car loadings/unloadings specify that PHJ 6004 applies. This figure i s an aggregate average calculated from the respondents' indicated percentage of t h e i r box car t r a f f i c that s p e c i f i e s that PHJ 6004 applies. Thus although the freedom exists to negotiate t h e i r own demurrage provisions d i s t i n c t from the Standard T a r i f f only 23% did. Again, l i k e c o n f i d e n t i a l contracts, these exceptions l i b e r a l i z e d and f i n e tuned the t a r i f f to shippers environment. Carriers also indicated that they would grant rate concessions to encourage shippers to use PHJ 6004. I t must be emphasized that only 40% of the respondents indicated that they granted rate concessions and even these c a r r i e r s granted such concession i n less than 50% of box car t r a f f i c . Again a strong 6 4 T r a f f i c World, February 18, 1985, p. 63. 6 5 T r a f f i c World, July 9, 1984, p. 45. - 130 -tendency to f o l l o w PHJ 6004 e x i s t s . TOFC and COFC exemptions are u n a f f e c t e d by PHJ 6004 nor subsequent e x c e p t i o n s s i n c e the c o n t a i n e r s and t r a i l e r s are normally unloaded/loaded onto the f l a t c a r s a t the r a i l c a r l o a d c e n t e r . Delay would not thus be a n t i c i p a t e d . In p l a c e , demurrage may e x i s t on the t r a i l e r s and c o n t a i n e r s . 2 . Demurrage Rules under PHJ 6004 F r e i g h t t a r i f f PHJ 6004 i s a j o i n t t a r i f f and almost every r a i l r o a d i n the U n i t e d S t a t e s i s a p a r t y to the t a r i f f . I t i s on f i l e w i t h the I.C.C. The t a r i f f has the f o r c e of law, and c a r r i e r s may not modify i t by p r i v a t e agreement. Both p a r t i e s are s t r i c t l y bound by the t a r i f f . C o n s o l i d a t e d R a i l  Corp. v. Standard M i l l i n g Co. 508 F. Supp 277 (1981). V i o l a t i o n s of any term of the t a r i f f may r e s u l t i n f i n e s b e i n g imposed on the o f f e n d e r by the I.C.C. S u p e r v i s i o n of demurrage matters under the t a r i f f i s handled by bureaus. They may, but do not always, check demurrage assessments and c o l l e c t charges. The f i v e bureaus a r e : 1) Western Weighing and I n s p e c t i o n Bureau, Chicago, I l l i n o i s 2) E a s t e r n Demurrage and Storage Bureau, P h i l a d e l p h i a , P e n n s y l v a n i a . 3) New England Demurrage Commission, Boston, Massachusetts 4) Southwestern Demurrage and Storage Bureau, A t l a n t a , Georgia 5) P a c i f i c Car Demurrage Bureau, San F r a n c i s c o , C a l i f o r n i a - 131 -T h i s t a r i f f can b e s t be d e s c r i b e d as being i n t h r e e p a r t s . The f i r s t p a r t l i s t s a l l the e x c e p t i o n s to the second p a r t . The second p a r t d e t a i l s the r u l e s f o r the s t r a i g h t and average p l a n s . The t h i r d p a r t i s a new s e t of s t r i c t e r demurrage r u l e s t h a t may be agreed t o . I t i s important to r e c o g n i z e a t the onset t h a t the t a r i f f does not apply to a number of s i t u a t i o n s . I t does not apply to r a i l c a r s under l o a d w i t h l i v e s t o c k as l o n g as they c o n t a i n l i v e s t o c k . Nor does i t i n c l u d e c a r s a w a i t i n g l i v e s t o c k . I t does not apply to p r i v a t e c a r s on p r i v a t e t r a c k s p r o v i d i n g the owner of the c a r and the t r a c k are the same. F i n a l l y , c a r s c o n t a i n i n g abandoned f r e i g h t , which i s subsequently s o l d by the r a i l w a y s , i s exempt from the p r o v i s i o n s of the t a r i f f . (a) Part 1: Exceptions The t a r i f f begins w i t h 40 pages of e x c e p t i o n s to the t a r i f f n e g o t i a t e d by c a r r i e r s w i t h s h i p p e r s . In a l l , 259 e x c e p t i o n s are d e t a i l e d . The e x c e p t i o n s e i t h e r exempt a s p e c i f i c c a r or r a t e or customer from the whole demurrage t a r i f f or a p a r t i c u l a r item of the t a r i f f . U s u a l l y f r e e time i s extended or charges are reduced. For example, Item 74 s t a t e s : Demurrage r u l e s and charges p u b l i s h e d h e r e i n w i l l not apply on open top hopper c a r s b e a r i n g C o n s o l i d a t e d R a i l C o r p o r a t i o n r e p o r t i n g marks wh i l e h e l d f o r l o a d i n g of s l a g b a l l a s t by Heckett S l a g Products l e a s e d by Johns and L a u g h l i n S t e e l Inc., a t Indiana Harbour Indiana. - 132 -Other exceptions may simultaneously extend free time and reduce charges. Item 204 applicable to the New Hope and Ivyland Railroad Co. extends free time to 15 days and reduces demurrage charges to $10 per day. The rules l i b e r a l i z e the t a r i f f and customize i t to s p e c i f i e d shipper conditions. None appear to reduce free time or employ incentives for quick release of cars. (b) Part 2: The General Car Demurrage Rules and Charges The o r i g i n a l crude format found i n the 1910 t a r i f f and the l a t t e r B.B. Maurer's T a r i f f 41 (1972) i s now broken into items numbered 400 to 1440 i n the current PHJ 6004 t a r i f f . This altered format based on item numbers provides for both the straight demurrage plan and the average plan. The straight demurrage system considers each car independently and l e v i e s demurrage charges, depending on how long the p a r t i c u l a r car exceeds the allowable free time period. The average agreement plan incorporates a system of debits and cr e d i t s that cancel each other out. Monthly, accounts are closed. If a debit balance remains, demurrage i s assessed. Regardless of which method i s used, free time and the demurrage rate scale are the same. The difference l i e s only i n the method of c a l c u l a t i n g charges. Free time (Item 610) i s 48 hours for unloading and 24 hours for loading or p a r t i a l loading. Demurrage charges for detention exceeding free time (Item 900) i s as follows: - 133 -For day 1, 2, 3, 4 $20 per car per day 5, 6 $30 per car per day 7 ,,. $60 per car per day The straight plan simply allows a period of free time (48 hours for unloading; 24 hours for loading), Free time i s computed from the f i r s t 7:00 AM af t e r constructive or actual placement (Item 610), Saturdays, Sundays and holidays are excluded from free time i f they f a l l outside the a l l o t e d free time period. If they intervene then these days w i l l serve to extend free time. The r i g h t to impose demurrage i s d i r e c t l y dependent on the c a r r i e r properly placing the cars. Cars not placed c o r r e c t l y for loading or unloading are not subject to demurrage. However, t h i s i s only true i f the cars are detained at some other location for which no f a u l t can be attributed to the consignee. U.S. F i d e l i t y & G, Co, v, Central of Georgia R. Co. 226 Ala 606; 147 SO 881; 87 ALR 1028; Grie R, Co, 173 App Div 75, 158 NYS 730; A l t e r n a t i v e l y when the cars cannot be placed at the shipper's sidi n g due to the f a u l t of the shipper or consignee then the cars w i l l be constructively placed. N o t i f i c a t i o n of the car's a r r i v a l by the c a r r i e r i s required when the car i s constructively placed on tracks other than the shipper's (Item 1305), I t must be given within 24 hours of the car's a r r i v a l (Item 1300). Time i s computed from the f i r s t 7:00 7AM af t e r notice. Where there i s actual placement, notice - 134 -i s not required (Item 1315) and free time i s computed from the f i r s t 7:00 a f t e r actual placement. These notice requirements i n the published t a r i f f may not be waived or excused or j u s t i f i e d due to mistake. Empire Box Corp. v. Delaware L & W  Co. 171 F (2d) 389 V i r g i n i a n R. Co. v. Lake Export Coal Corp. 5 F (2d) 496. Certain situations may allow the shipper to claim r e l i e f from assessed demurrage charges. Weather interference, acts of God, bunching, s t r i k e s and railway error may be accorded r e l i e f i f the shipper f i l e s a claim with the r a i l r o a d within 30 days af t e r which the interference cases or the b i l l i s rendered whichever i s the l a t e s t (Item 1405-1440). If during any part of the allowed free time period, weather conditions make i t impossible to load or unload f r e i g h t without seri o u s l y i n j u r i n g the product, free time w i l l be extended u n t i l a t o t a l of 48 hours of free time from interference e x i s t s . Also included i s a provision for frozen or congealed loading i f the contents are frozen and must be thawed before unloading (Item 1420). The U.S. Courts have held that demurrage charges must be calculated i n a single car basis and t h i s e x p l i c i t l y pertains to frozen and congealed loading. Relief w i l l only be granted i f each car considered separately cannot be unloaded i n the free time period. The mere fact that a l l the cars placed could have been unloaded within free time but cannot now because t h e i r contents are frozen i s not s u f f i c i e n t grounds to grant r e l i e f . Pennsylvania - 135 -R. Co. v. Kittaning Iron and Steel Mfg. Co. Acts of God such as floods, earthquakes, hurricanes, or tornadoes w i l l r e s u l t i n the elimination of any demurrage penalty. Unlike weather interference, the catastrophe does not have to occur during free time (Item 1420). The "Bunching Rule" gives r e l i e f from demurrage charges when detention beyond free time re s u l t s from an accumulation of cars due to the f a u l t of the c a r r i e r . In determining bunching, loading and unloading claims are considered separately. For loading, when cars a r r i v e at a rate greater than that ordered, then bunching i s deemed to have occurred. The shipper w i l l be e n t i t l e d to such free time for loading as he would have been e n t i t l e d to had the cars been placed for loading as ordered. For unloading, the bunching rule requires that the cars originate at the same point, t r a v e l the same route, and a r r i v e at the same destination. If for some reason these cars are delivered by the c a r r i e r i n accumulated numbers i n excess of d a i l y shipments then bunching has occurred. I t i s c r i t i c a l that these shipments a l l have the same o r i g i n . The convergence on one point of many shipments from divergent sources causing a bottleneck at the consignors unloading f a c i l i t i e s i s not necessarily bunching within the meaning of the ru l e . But i f bunching has occurred, the shipper i s e n t i t l e d to such free time as he would have received had the cars not been bunched. For example, i f Cars 1, 2, 3 are loaded and shipped from the same loading f a c i l i t y one day apart, Car 1 leaving f i r s t and - 136 -Car 3 on the t h i r d day, yet a l l are delivered the same day, then bunching has occurred. If the shipper i s only able to unload one a day, no demurrage would occur i f the cars arrived as sent. But i f bunched, Car 1 and 2 would be unloaded on the f i r s t and second day respectively, both not incurring demurrage. Car 3, however, would not be unloaded u n t i l the t h i r d day. I t would therefore be assessed demurrage. Under a claim for bunching, Car 3 would be e n t i t l e d to 48 more hours free time beginning on the t h i r d day. That i s , i t would be treated as i f i t had just arrived on the t h i r d day. Strikes by employees of shippers that make i t impossible to load or unload r a i l cars are assessed demurrage at a lower s t r i k e rate (Item 1405). The s t r i k e rate i s either $7 per day (Item 1405-1491) or $11 per day (Item 1405-1496). Cars shipped four days a f t e r the s t r i k e s t a r t s , to the s t r i k e bound plant, are not covered by t h i s provision. Runarounds or errors on the part of the railway that precludes proper d e l i v e r y i s provided for under Item 1435. Demurrage w i l l be assessed at the rate that would have occurred had t h i s error not arisen. Even i f the claim cannot be categorized as one of these groups, r e l i e f i s s t i l l possible. The I.C.C. has held that two questions must be asked. Ormet Corp. v. I l l i n o i s Central  Railway Co. 341 I.C.C. 64 (1972). F i r s t , i t must be asked, i s the proximate cause of detention attributable to the shipper, the c a r r i e r , or neither party? If the shipper i s the proximate - 137 -cause, no further i n q u i r i e s are necessary. The shipper must pay the demurrage assessed. Ormet Corp. v. I l l i n o i s Central  R. Co. 341 I.C.C. 647 (1972); Davison Chemical Co. v. New York  Central R. Co. 298 I.C.C. 191; International Paper  Co. v. Banger and A.R. Co. 279 I.C.C. 449; Froehling Supply  Co. v. Atchison T. & S.F. Ry. Co. 274 I.C.C. 513. If the shipper was not to blame and, rather, i t was either the c a r r i e r or neither party who was the proximate cause, then a second question must be asked. I t must be inquired whether the shipper used due diligence to avoid or abate the detention. Ormet Corp. v. I l l i n o i s Central R.Co. 341 I.C.C. 653. Where the shipper/consignee exercised due diligence and the proximate cause was neither due to the action of the shipper nor c a r r i e r then the penalty portion of the charge i s remitted. The shipper only then pays the compensatory portion of the charge. Ormet v. I l l i n o i s Central R. Co. 341 I.C.C. 647; Chronical  Publishing Co. v. Great Northern Ry Co. 243 I.C.C. 279. The compensatory portion i s normally estimated by s e t t i n g compensation at the per diem rate plus 20% for i n c i d e n t a l expenses. Ormet Corp. v. I l l i n o i s Central R. Co. 341 I.C.C. 647; Chrysler Corp. v. New York Central R. Co. 234 I.C.C. 755; Commerce & Industry Assn. of N.Y. Inc. v, B & Q R. Co. 281 I.C.C. 655, 272 I.C.C. 7. These decisions are s i g n i f i c a n t because they represent an attempt by the I.C.C. to delineate the compensation and penalty element. I t was clear from Turner, D. & L. Lumber Co. v. Chicago M. & St. P. Ry, Co. 271 - 138 -U.S. 259 amongst other subsequent decisions that demurrage contains two components, penalty and compensation, but no attempt was made to estimate each. These decisions now provide such a procedure for estimating these two components. If the proximate cause i s that of the c a r r i e r s then demurrage must be refunded i n f u l l to the shipper. Demurrage i s not assessable. C.H. Sprague & Son Co. v. Pennsylvania  R. Co. 294 I.C.C. 723; Seneia Coal & Iron Corp. v. Southern  Ry. Co. 297 I.C.C. 119. Of relevance i s what constitutes due diligence. What actions must a shipper undertake to s a t i s f y t h i s requirement and thus place the company i n a p o s i t i o n to claim r e l i e f from demurrage assessed. Due diligence i s very imprecise and has been the subject of varied i n t e r p r e t a t i o n by the I.C.C. In general, i t i s required that the shipper take a l l measures that may reasonably be required to r e l i e v e any e x i s t i n g emergency. Apple Growers Assn. v. E r i e R. Co. 273 I.C.C. 1; The I.C.C. may apply a more onerous i n t e r p r e t a t i o n of due diligence requiring that the shipper exercise prudent foresight. General  Products Co. Inc. v. New York N.H. & H.R. Co. 288 I.C.C. 439; A l l e n Industries v. Pennsylvania R. Co. 280 I.C.C. 118, 120 (1951); A l Johnson Construction Co. et a l . v. M i s s i s s i p p i  V a l l e y Barge Line Co. 301 I.C.C. 501, 654 (1957). The average plan i s an optional system that requires a written agreement between the r a i l r o a d and the i n d i v i d u a l shipper. The shipper seeking an average plan must apply to the - 139 -c a r r i e r . If the c a r r i e r finds the applicant's c r e d i t s a t i s f a c t o r y , then the c a r r i e r may agree to an average plan. The c a r r i e r , however, may refuse the applicant or require posting of security (Item 825 & 850). The agreement i s v a l i d u n t i l terminated by written notice by either party. Termination i s e f f e c t i v e on the f i r s t day of the following month i n which notice was given (Item 850). In spite of t h i s d i s c r e t i o n granted to the c a r r i e r s to refuse applications for an average plan, the vast majority of cars subject to demurrage rules are covered by an average agreement. One recent publication estimates that 90% are covered under average p l a n s . 6 6 Appendix H shows that various studies indicate that the proportion of average agreements has varied from a low of 73% to a high of 99%. In our U.S. questionnaire we found that where t r a f f i c moves under c o n f i d e n t i a l contracts and PHJ 6004 i s followed, 71% s p e c i f i e d an average plan. Under t h i s d e b i t - c r e d i t based system, one c r e d i t i s granted for each car released within the f i r s t 24 hours (Item 810). Only one c r e d i t may be earned on any one car. A debit i s assessed for each day a car i s held a f t e r the expiration of free time. However, the 30, 60 d o l l a r days ( i . e . days 5, 6, 7 ...) cannot be o f f s e t by c r e d i t s and must be paid f o r . Only the f i r s t four demurrage days can be o f f s e t by c r e d i t s . Debits 6 6 F l o o d , Callson, & Jablonski. Transportation Management  Ed i t i o n (Dubuque, IA: William Brown Co., 1984), p. 392. - 140 -and c r e d i t s are n e t t e d out a t the end of the month. Excess d e b i t s over c r e d i t s are p a i d f o r by the s h i p p e r a t the same r a t e as p r o v i d e d f o r under the s t r a i g h t method. Excess c r e d i t s cannot be c a r r i e d over to the f o l l o w i n g month. As w e l l , c r e d i t s earned f o r l o a d i n g are o n l y o f f s e t t a b l e a g a i n s t d e b i t s a s s e s s e d f o r l o a d i n g . They must not be a p p l i e d a g a i n s t d e b i t s assessed f o r u n l o a d i n g . In a d d i t i o n to these r e s t r i c t i o n s , t h e r e i s another s e r i o u s drawback to u s i n g the average p l a n . Item 855 exempts c a r s under average plans from any r e l i e f c l a i m s f o r bunching and weather c o n d i t i o n s u n l e s s caused by an Act of God. Item 900 d i s a l l o w s c l a i m s f o r r e l i e f f o r c a r s d e l a y e d due to s t r i k e s . (c) Part 3: Special Car Demurrage Rules and Charges T h i s s e c t i o n i s a r e c e n t a d d i t i o n to the t a r i f f t h a t a p p l i e s o n l y when the p a r t i e s s t i p u l a t e t h a t t h i s s e c t i o n should apply. Items 2500 through 2690 are an a r r a y of 16 d i f f e r e n t combinations of reduced f r e e time, the i n c l u s i o n of weekends and when f r e e time s t a r t s . As w e l l , some a l t e r n a t i v e s exclude c l a i m s f o r Acts of God, adverse weather c o n d i t i o n s and may a l s o e x p l i c i t l y exclude the average agreement from b e i n g used. The c h o i c e s are a l l s t r i c t e r than P a r t 2 of PHJ 6004. For example, Item 2500 s p e c i f i e s t h a t PHJ 6004 a p p l i e s , except o n l y 24 hours f r e e time i s allowed f o r both l o a d i n g and unloading. - 141 -Weekends are excluded from free time unless free time begins at 7:00 AM Friday. I t also excludes any claims for r e l i e f . Under Items 1420, 143 5, and 1440. A l t e r n a t i v e l y , i f Item 2525 was agreed to 20 hours free time would be allowed. If Item 2560 was selected, free time would s t a r t immediately following actual or constructive placement. After which, 24 hours free time i s permitted. Another alt e r n a t i v e i s Item 2570 which excludes Saturday, Sunday and holidays from free time unless the car i s placed during one of these days. If so, then free time begins at 12:01 AM of the f i r s t working day following the Saturday, Sunday or l e g a l holiday. Currently U.S. r a i l t r a f f i c moves either under c o n f i d e n t i a l contracts, exemptions or the standard PHJ 6004 t a r i f f . With contracts and exemptions, the shipper and c a r r i e r are free to negotiate t h e i r own demurrage provisions or follow PHJ 6004. As the survey indicates, most f r e i g h t under contract exemptions choose to use PHJ 6004. Some however do incorporate modifications to free time allowances. However, PHJ 6004 i s far from a standard uniform t a r i f f . In f a c t , i t i s so r i d d l e d with exceptions and choices i t can hardly be c a l l e d uniform. At best i t i s a catalogue of choices. Shipper and c a r r i e r s may select a s t r a i g h t or average plan or they may choose one of the 16 exceptions i n Part 3 or they may negotiate t h e i r own exception and publish i t i n Part 1 along with the other 259 pre-existing exceptions. - 142 -( i i i ) Performance Measures There does not appear to be any recent data available on r a i l car release times i n the United States. Appendix H summarizes the r e s u l t s of s i x studies between 1956 and 1978. Consistently, release times for both load and unload under the straight plan are s i g n i f i c a n t l y better than those found i n Canada. Tables III and IV, showing cumulative percentage of cars released within three days for both loading and unloading i n Canada, indicates that 80.3% of r a i l cars placed for loading are released within 48 hours and 75.1% placed for unloading are released within 48 hours. The U.S. studies indicate that under the straight plan, combining both loading and unloading, 85.97, 89.4, 87.78, and 92.3% of the cars were released before the end of 48 hours for the years 1956, 1955, 1956, 1973-74 respectively. The most recent study i n 1977 and 1978 showed release times under the average plan i n 1978 of 92.91% for load and 82.36% for unload. Results under the straight plan were less impressive. In 1978, 86.90 of the cars placed for loading were released within 48 hours. While only 75.93% of cars placed for unloading were released within 48 hours. This l a s t figure compares to Canada. However, t h i s l a t e s t U.S. study's findings f o r straight plan release times must be judged with great care. Of the t o t a l cars considered i n the study, only about 1% were under the straight plan and the r e s u l t s quite possibly unrepresentative. Its r e s u l t s when compared with the - 143 -other s t u d i e s are c l e a r l y anomalous. The r e s u l t s of these s t u d i e s taken t o g e t h e r show q u i c k e r r a i l c a r r e l e a s e i n the U.S. than Canada. D. Conclusion The U.S. r a i l w a y i n d u s t r y changed from an u n r e g u l a t e d environment w i t h non uniform demurrage r u l e s t o a h e a v i l y r e g u l a t e d i n d u s t r y w i t h uniform demurrage r u l e s , then back to a d e r e g u l a t e d environment w i t h what approaches non uniform demurrage r u l e s . Demurrage l i k e r e g u l a t i o n has run f u l l c y c l e . The q u e s t i o n remains: w i l l the d i s c r i m i n a t o r y and i n e f f i c i e n t demurrage p r a c t i c e s of the 19th c e n t u r y reoccur? The answer seems to be an emphatic no. I t must be remembered t h a t uniform demurrage r u l e s , a c c o r d i n g t o Congress were c r e a t e d to d e a l w i t h two problems. They, through s e c u r i n g more prompt l o a d i n g and u n l o a d i n g , were designed t o i n c r e a s e e f f i c i e n c y and reduce d i s c r i m i n a t o r y p r a c t i c e s . Thus the o r i g i n a l q u e s t i o n has two components t h a t w i l l be addressed s e p a r a t e l y . F i r s t l y , w i l l non uniform demurrage l e a d to an i n c r e a s e i n d i s c r i m i n a t o r y p r a c t i c e s by c a r r i e r s ? As was e x p l a i n e d e a r l i e r i n t h i s chapter i t was the c o n s i s t e n t concern of the Board of Railway Commissioners i n Canada t h a t d i s c r i m i n a t o r y p r a c t i c e s would r e t u r n . Many a p p l i c a t i o n s f o r e x c e p t i o n s t o the uniform t a r i f f i n Canada were r e f u s e d on t h i s ground. Secondly, w i l l a p r o l i f e r a t i o n of d i f f e r e n t demurrage arrangements cause i n e f f i c i e n c i e s . S p e c i f i c a l l y , w i l l the - 144 -a p p l i c a t i o n of d i f f e r e n t demurrage p r o v i s i o n s t o d i f f e r e n t s h i p p e r s reduce r a i l c a r u t i l i z a t i o n ? The monopoly power over t r a n s p o r t a t i o n c o n c e n t r a t e d w i t h i n the r a i l c a r r i e r i n d u s t r y i n the 19th centu r y , i t w i l l be r e c a l l e d , l e d to c o n s i d e r a b l e abuse. Railways were able t o encourage and disc o u r a g e companies' i n d u s t r i e s and r e g i o n s . Demurrage was but one way r a i l w a y s were ab l e t o favour one shipper over another. But these p r a c t i c e s o c c u r r e d i n an e r a where r a i l w a y s were the o n l y mode of t r a n s p o r t a t i o n . Intermodal c o m p e t i t i o n from t r u c k i n g , planes and barges and even s h i p s e x i s t s today. Shippers can and do, when c o n f r o n t e d w i t h r a i l demurrage p r o v i s i o n s they f i n d u n f a i r s h i f t t h e i r t r a f f i c t o motor c a r r i e r s . Our i n t e r v i e w s w i t h Canadian s h i p p e r s uncovered s e v e r a l i n s t a n c e s where f i r m s had s h i f t e d t h e i r t r a f f i c from r a i l t o motor c a r r i e r s due t o demurrage p r a c t i c e s they viewed as i n e q u i t a b l e . The demurrage p r a c t i c e s must be viewed i n the p e r s p e c t i v e of the times. During the 19th c e n t u r y , they were but one of many d i s c r i m i n a t o r y t o o l s . And t h i s burgeoning of d i s c r i m i n a t i o n was a r e s u l t of the surrounding environment, s p e c i f i c a l l y the r a p i d growth, ov e r s u p p l y of r a i l w a y s and l a c k of i n t e r m o d a l c o m p e t i t i o n . These d i s c r i m i n a t o r y demurrage p r a c t i c e s were a product of the times and should be l i m i t e d t o t h i s p e r i o d . They were unique to the p a r t i c u l a r c o n d i t i o n s t h a t emerged i n t h i s p e r i o d . They should not be viewed as r e o c c u r r i n g i n today's environment. The patchwork of demurrage r u l e s d i f f e r i n g by r e g i o n and - 145 -state and railway t y p i c a l of the 19th century i s u n l i k e l y to reoccur for several reasons. F i r s t , the structure of the railway industry i s dramatically d i f f e r e n t . Where there was 4000 railway companies i n 1868, there are only 22 Class I railways, 18 Class I I , and 400 Class III railways i n 1984. 6 7 Today, the Class I systems are large, composed from numerous mergers over the years. A shipper i n 1868 may have had to deal with a number of c a r r i e r s to t r a v e l any s i g n i f i c a n t distance. Today, shippers may only require the services of one c a r r i e r . Further, i n d i v i d u a l states no longer have j u r i s d i c t i o n over demurrage. Instead the I.C.C. does. The l o c a l state demurrage l e g i s l a t i o n that further complicated demurrage i n the 19th century would not reoccur now. The p o t e n t i a l only exists for these large Class I and possibly the Class II and III railways to enter i n d i v i d u a l demurrage arrangements with s p e c i f i e d shippers. I t seems reasonably clear from the U.S. questionnaire r e s u l t s that c a r r i e r s tend to follow the provisions of the demurrage t a r i f f even where the l e g i s l a t i v e freedom to do otherwise e x i s t s . There has not been an explosion of d i f f e r e n t demurrage rules. Rather where exceptions are required they seem to e x i s t . Instead of decreasing r a i l car u t i l i z a t i o n these exceptions seem to be directed at fi n e tuning the demurrage t a r i f f to s p e c i f i c shipper circumstances and changes i n r a i l car supply. 67A.A.R. Railroad Facts, 1984 E d i t i o n , p. 1. - 146 -With the tremendous advances i n computer and communications technology s i n c e the 19th c e n t u r y such v a r i a t i o n should not now be unmanageable. I f anything, the freedom t o n e g o t i a t e e x c e p t i o n s t o the standard demurrage t a r i f f has i n c r e a s e d r a i l r o a d e f f i c i e n c y . Performance data on r a i l c a r r e l e a s e times f o r both U.S. and Canada supports t h i s c o n c l u s i o n . We see q u i c k e r r e l e a s e times i n the U n i t e d S t a t e s where v a r i a t i o n s to the demurrage t a r i f f i s allowed and the t a r i f f i s i n e f f e c t non uniform i n i t s a p p l i c a t i o n , than i n Canada where demurrage i s uniform i n a p p l i c a t i o n . On the evidence, i t i s apparent t h a t the f e a r s of i n e f f i c i e n c i e s and d i s c r i m i n a t i o n , apparent i n the 19th centu r y , would reappear once, non u n i f o r m i t y was allowed t o creep back i n t o demurrage are unfounded. I t has not happened i n the U n i t e d S t a t e s and should not happen i n Canada. N e v e r t h e l e s s , i n Canada we have p e r s i s t e d i n m a i n t a i n i n g a uniform demurrage system even though our r a i l w a y i n d u s t r y was d e r e g u l a t e d by the N a t i o n a l T r a n s p o r t a t i o n A c t i n 1967. C o n s i s t e n t l y the CTC/BORC, when c a l l e d upon t o al l o w an e x c e p t i o n , has r e f u s e d . Railway granted e x c e p t i o n s remain few i n number. Yet i n every mode of t r a n s p o r t a t i o n t h a t i s de r e g u l a t e d , s h i p p i n g , motor c a r r i e r and U.S. r a i l , non u n i f o r m i t y i n demurrage c o - e x i s t s . But Canada 18 years a f t e r d e r e g u l a t i o n r e t a i n s a uniform demurrage system. I n t e r e s t i n g demurrage concepts found i n other t r a n s p o r t a t i o n modes such as v a r i a b l e c o s t averaging, i n c e n t i v e - 147 -plans, and f l e x i b i l i t y , have been s k i r t e d or gone unnoticed. Our ignorant approach seems founded on the need for uniformity, which i n l i g h t of current evidence from the United States and placed i n the perspective of demurrage procedures i n other transportation modes, seems untenable i n today's environment. This attitude even runs contrary to the basic rationale stated by the Board of Railway Commissioners i n e s t a b l i s h i n g demurrage and l a t e r by the Supreme Court of Canada. According to the Board, i t was " i n the public i n t e r e s t , to secure the f u l l e s t possible use of railway cars, tracks and equipment." The basic rationale behind demurrage was r a i l car u t i l i z a t i o n . If changes to the current uniform rules can be made that r e s u l t i n non uniformity but increase u t i l i z a t i o n , according to the basic tenants of demurrage i n Canada they should be encouraged. To steadfastly maintain uniform demurrage i n Canada when alternatives e x i s t to increase u t i l i z a t i o n i s to v i o l a t e the well established rationale behind demurrage. Admittedly, there are more shippers and c a r r i e r s i n the U.S. than Canada and one might expect that t h i s would r e s u l t i n a greater number of exceptions being negotiated. But aside from the 259 exceptions i n part 1 of PHJ 6004, there are 16 alternate demurrage plans i n part 3 of the t a r i f f and the option of an average plan i n part 2. Furthermore, contract or exempt t r a f f i c may have variations i n free time arrangements. The point i s that while the negotiated exceptions can be explained i n part by r e l a t i v e numbers of c a r r i e r s and shippers, - 148 -they are o n l y the t i p of the i c e b e r g . O p t i o n a l p l a n s , average and c o n t r a c t u a l e x c e p t i o n s a l s o e x i s t i n the U.S. and not i n Canada. - 149 -V. CURRENT ISSUES WITH DEMURRAGE RATES AND ARRANGEMENTS A. Number and Types of Exceptions In Canada there are r e l a t i v e l y few exceptions to the uniform CCD-6500-A t a r i f f . This contrasts sharply with the tremendous number of exceptions to the U.S. demurrage t a r i f f . In Canada, exceptions must be formally agreed to i n pursuant to Item 270 of Demurrage T a r i f f CCD-6500-A. This item i s a recent amendment to the t a r i f f . I t seems to f i r s t appear on October 1, 1981, i n CCD-6500-A and reappears i n succeeding supplements. The o r i g i n a l wording was as follows: For arrangements which are exceptions to the general rules of t h i s t a r i f f , refer to spe c i a l arrangements t a r i f f s or i n d i v i d u a l railway c a r r i e r . In 1983, the Joint Industry R a i l Task Force on Demurrage agreed to a compromise change of Item 270. On June 1, 1983, i n CCD-6500-A, Supplement 3, Item 270 was reworded to stated: For arrangements which are exceptions to the general rules of t h i s t a r i f f , refer to sp e c i a l arrangements t a r i f f s or i n d i v i d u a l railway c a r r i e r ; such arrangements to be  published i n accordance with the Railway Act. I t was t h i s l a s t sentence, requiring p u b l i c a t i o n of the exception that was added. Before, i t was not at a l l clear that exceptions, e s p e c i a l l y l o c a l agreements between shippers and c a r r i e r s , need be published. Now i t i s unmistakably cle a r that any exceptions must be published. As the wording of Item 270 indicates there i s no required - 150 -organization behind the publication of exceptions. That i s , they need not be published i n one t a r i f f . Rather, mere publi c a t i o n i s s u f f i c i e n t . The r e s u l t i s that exceptions to CCD-6500-A are found i n at least eight d i f f e r e n t t a r i f f s . This contrasts sharply to the American practice of publishing exceptions to PHJ 6004 i n Part I of the same t a r i f f . C P . R a i l publishes exceptions to the general rules, regulations and charges i n accordance with item 270 of the General Car Demurrage T a r i f f CCD-6500-A i n Special Arrangements T a r i f f CPE 6498. This t a r i f f replaced E-3050 i n 1971-72. However, t h i s t a r i f f i s not the only place exceptions are found. They may also be found i n l o c a l f r e i g h t t a r i f f s . Exceptions are also i n CPW 9000. This C P . R a i l t a r i f f i s a l o c a l j o i n t competitive f r e i g h t t a r i f f of rates, rules and regulations covering terminal and t r a n s i t arrangements. I t contains a c o l l e c t i o n of miscellaneous rules. Detention charges on r e f r i g e r a t e d or insulated box cars, grain handling charges, removal of dead and c r i p p l e d animals from r a i l cars, stopover charges, are but a few of the areas covered i n t h i s t a r i f f . Several items pertain to demurrage and deserve closer attention. Item 580 s p e c i f i e s that on MDW cars of a p a r t i c u l a r series, used i n Newsprint service at Kenora, Ontario w i l l not be subject to demurrage charges as s p e c i f i e d i n CCD-6500-A. Item 140 allows for box cars to be used for storage for a f l a t rate of $19 per day ( e f f e c t i v e March 1, 1985) and CCD-6500-A does not apply. To take advantage of t h i s provision several - 151 -requirements must be met. F i r s t l y , the cars are to be used either for storage or preloading. Secondly, the cars must be road hauled by C P . R a i l . The storage point i s selected by C P . R a i l and i t i s conditional on the a v a i l a b i l i t y of box cars. A minimal storage period of f i v e days i s required. Item 290 e n t i t l e d "Free time and detention charges on cars delivered to water c a r r i e r s at Vancouver, B.C." provides more l i b e r a l free time and detention charges than CCD-6500-A. The t a r i f f item applies to r a i l cars delivered to a water c a r r i e r at the C P . R a i l terminal yard i n Vancouver, B.C. to be transported by barge to waterlocked ports along the B.C. West coast. Ports such Croften, Port Mellon, Duncan Bay, Harmac and Powell River receive supplies and export products by r a i l car transported on barges. Direct r a i l access to these ports does not e x i s t . Scheduled t r i p s to these locations by barge vary i n frequency from four t r i p s per week at Powell River to two t r i p s per month at Port A l i c e . The frequency of these t r i p s and the uncertainty of weather conditions along the west coast render the 48 hours free time provided for i n CCD-6500-A expensive f o r shippers. With barge service as infrequent as twice per month even the most d i l i g e n t loading and unloading of cars by companies would s t i l l encounter demurrage. Once r a i l cars arrive at the docks i n Vancouver, they are allowed several days free time to be loaded on the barge i n Vancouver, t r a v e l up to the waterlocked port, t h e i r contents unloaded from the r a i l car and returned to Vancouver. In addition to t h i s extended free - 152 -time allotment, s u b s t a n t i a l l y lower penalties are imposed for delay beyond free time than i s otherwise found i n CCD-6500-A. The rates are: $ 9.66 per car day for the f i r s t seven days $14.50 per car day for the next seven days $48.31 per car day for each subsequent day Interestingly, CPW 9000, Item 290 d i d not arise as a negotiated exception r e s u l t i n g from the i m p r a c t i c a l i t y of CCD-6500-A. Instead, i t evolved through a series of agreements dating back at lea s t 30 years and has never been associated with the demurrage t a r i f f . The shippers operating under t h i s t a r i f f most emphatically stated that t h i s item i s detention and has nothing to do with CCD-6500-A. The item expressly states that CCD-6500-A does not apply. A d d i t i o n a l l y , the item i s not administered or audited by the C.C.D.B. Pri o r to 1953, no demurrage or detention was assessed on r a i l cars destined to or from west coast waterlocked ports served by barges. Then i n 1953, the C.C.D.B. sent Mr. H.F. Johnston to investigate these waterlocked ports to determine whether demurrage could be assessed. His report described each port and concludes with a number of observations. Several are s a l i e n t . F i r s t , Johnston notes: the barge company i s simply acting as an intermediate c a r r i e r i n e f f e c t i n g f i n a l d e l i v e r y - 153 -As such, the barge companies are not i n a p o s i t i o n t o spot, l i f t , move or s w i t c h r a i l c a r s and i t i s not t h e i r job to keep r e c o r d s of when the c a r s were s p o t t e d and r e l e a s e d . These a c t i v i t i e s are the r e s p o n s i b i l i t y of the r a i l w a y s , who i n t h i s case are absent. Johnston suggested t h a t the assessment of demurrage would be p o s s i b l e o n l y i f the c a r r i e r s s t a t i o n e d a r e p r e s e n t a t i v e a t each p o r t t o check and c a l c u l a t e d e l a y s . T h i s seemed i m p r a c t i c a l . Second, i t was suggested t h a t : C a r r i e r s are simply u s i n g F.M. Yorke and Sons Barge Co., or any oth e r barge company who might have barges t o g a i n access t o and s o l i c i t b u s i n e s s from i n d u s t r i e s which they do not serve by r a i l and t o which they do not c o n s i d e r i t warrants e s t a b l i s h i n g a barge s e r v i c e of t h e i r own. In view of the c o n d i t i o n s o u t l i n e d , any d e l a y s o c c u r r i n g i n c o n n e c t i o n w i t h the h a n d l i n g of equipment, owing t o the barge s e r v i c e a v a i l a b l e would, of course, have t o be absorbed by the c a r r i e r r e c e i v i n g the road h a u l , and cannot i n my c o n s i d e r e d o p i n i o n be h e l d t o be the r e s p o n s i b i l i t y of e i t h e r the p a t r o n or the barge company. Understandably, the assessment of demurrage was not recommended. Cars d e l a y e d on barges or a t these p o r t s remained f r e e from the assessment of demurrage charges. I t was not u n t i l June 6, 1967 t h a t an agreement between the c a r r i e r s , C.N., C P . , and the Great Northern Railway and the water c a r r i e r s was s t r u c k , p r o v i d i n g f o r the payment by these water c a r r i e r s of per diem charges from the date the c a r i s int e r c h a n g e d w i t h the water c a r r i e r s t o the date i t i s r e t u r n e d to the r a i l w a y . The agreement l a s t e d u n t i l 1980, and per diem r a t h e r than demurrage or d e t e n t i o n was p a i d t o the r a i l w a y s . - 154 -In 1980, Item 290 of t a r i f f CPW 9000 replaced the agreement. Detention charges replaced per diem payments. This exception has been described i n d e t a i l because i t i s i l l u s t r a t i v e of a case for variations from a uniform demurrage t a r i f f . Local conditions are such that the uniform plan demurrage rules has been avoided and r e s i s t e d for 30 years. C.N. R a i l follows a s i m i l a r pattern of publishing exceptions as does C P . R a i l , The t a r i f f numbers are however d i f f e r e n t . Exceptions to the General Rules, Regulations and charges i n accordance with Item 270 of the Canadian Car Demurrage T a r i f f CCD-6500-A are found i n Special Arrangements T a r i f f CNRE 6000-0. This t a r i f f e f f e c t i v e July 1, 1985 applies to l i n e s east of Thunder Bay. A s i s t e r t a r i f f by the same number applies to l i n e s west of Thunder Bay. The Eastern t a r i f f contains nine exceptions. A l l but one either reduce demurrage charges and/or increase free time, or exempt the shipper completely from CCD-6500-A. Thus the exceptions are concerned with l i b e r a l i z i n g the t a r i f f . The one exception that does not, i s an agreement between CN. and Stelco H i l t o n Works i n Hamilton, Ontario. The arrangement combines a variable cost scheme of demurrage charges based on the Umler f i l e of per diem rates, which i s an incentive plan for quick release. Free time for loading and unloading i s 72 hours. Cars released i n less than 54 hours receive an incentive for quick release. The incentive i s calculated by determining the difference between the time released and 54 - 155 -hours for which 33 1/3% of t h i s time i s repaid at the per diem rate normally assessable for that car for detention beyond free time, The Western version of CNRE 6000-0 i s CNRW 6000-R e f f e c t i v e August 1, 1985 and contains eight exceptions to the CCD-6500-A. A l l are complete exemptions from the t a r i f f for s p e c i f i c shippers. None of the provisions i n the uniform demurrage t a r i f f apply to these firms. C.N. R a i l l i k e C P . R a i l has a sp e c i a l and competitive l o c a l and j o i n t f r e i g h t t a r i f f . Its number i s CNRE 6498, formally CR 200. Detention charges on r e f r i g e r a t o r cars, stop over charges, storage and some exceptions to CCD-6500-A are amongst other miscellaneous rules found i n t h i s t a r i f f . The demurrage exceptions are several. Item 435 exempts r a i l cars containing motor vehicles, f r e i g h t or passengers o r i g i n a t i n g i n the United States of America from the provisions of CCD-6500-A. Whether t h i s provision i s applied by the railways or taken advantage of by the shippers i s unclear. I t seems to be a l i t t l e known provision. Another exception, Item 469.9, exempts 89 foot f l a t cars of a s p e c i f i e d series consigned to Oshawa, Ontario from demurrage. In place, a f l a t storage charge of $5 per car per day i s assessed. Item 515.1 i s i d e n t i c a l to C P . Ra i l ' s Item 140 of T a r i f f CPE 0998 (the box car provision). Like C P . R a i l , CN. R a i l also has l o c a l f r e i g h t t a r i f f s that apply to one way single movements that may include exceptions to CCD-6500-A. - 156 -In addition to these s i x separate t a r i f f s , both railways are a party to the Canadian Freight Association's T a r i f f No. 270. This t a r i f f applies to import and export commodity rates. I t does not apply to domestic t r a f f i c . The export items are loaded with exceptions to CCD-6500-A. I t must be emphasized that these are exceptions to Part II of CCD-6500-A that pertains exclusively to export car movements. The exceptions, within T a r i f f 270 combine reduced free time and i n some cases higher demurrage penalties with lower f r e i g h t rates. There are several from open p i t copper mines located i n the i n t e r i o r of B r i t i s h Columbia. In general, these exceptions allow the mines only 48 hours free time rather than the f i v e days provided for i n Part 2 of CCD-6500-A. After the expiration of free time, some specify that the charges i n CCD-6500-A apply, others specify a separate charge. A number of forest products companies have agreed to these more r e s t r i c t i v e demurrage provisions. Plywood from Golden, B.C. to Vancouver under Item 5580 i s allowed 24 hours free time from actual placement. Free time runs from placement time and not the f i r s t 7:00 AM following. Demurrage charges are $30 for the f i r s t 24 hours and $20 thereafter. An i d e n t i c a l provision applies to plywood from Canoe, B.C. to North Vancouver and wood pulp from Skookumchuck, B.C. to Squamish, B.C. Sulphur from various parts of Alberta to Vancouver, B.C. i s subject to more r e s t r i c t i v e demurrage agreements. T y p i c a l l y , eight hours free time to unload the unit block of t r a i n s i s permitted. - 157 -Afterwards, demurrage i s assessed on a tonnage basis. Item 6825 provides that retention over eight but not exceeding 14 hours i s at 92$ per ton, for 14-18 hours 136<t, over 18 hours but not exceeding 24 hours i s 183$. I t would seem with these sulphur, lumber and mineral demurrage arrangements, trade o f f s between demurrage and f r e i g h t rates are made. By f a r , the most novel exceptions are those for coal from various B.C. and Alberta mines to Westshore Terminals Ltd. at Roberts Bank, B.C. Unit t r a i n s of up to 110 cars are used to transport coal to t h i s bulk loading f a c i l i t y for transfer to ocean going ships. Item 3530 pertaining to Westar Mining's Greenhills open p i t mine near Fernie, B.C. allows nine hours free time to unload the whole unit t r a i n . This agreement i s t y p i c a l of a l l the coal exceptions i n T a r i f f 270. If the t r a i n i s delayed beyond nine hours a detention charge of $260 per hour i s paid. However, i f the t r a i n i s unloaded and released i n less than nine hours, a dispatch payment of $260 per hour i s paid by C P . R a i l to Westar Mining. This procedure i s analogous to the Shipping Industry, although, here, demurrage and dispatch are i d e n t i c a l amounts. Free time for these unit t r a i n s i s i n c r e d i b l y short and i f considered on a per car basis i s s l i g h t l y less than f i v e minutes a car. Demurrage i s $56 per car day, more than double the standard t a r i f f . While some in t e r e s t i n g innovative demurrage practices incorporated into exceptions on export t r a f f i c e x i s t , they stand i n stark contrast to the r e l a t i v e l y few exceptions that - 158 -seem only to l i b e r a l i z e the demurrage t a r i f f applicable to domestic t r a f f i c . In a l l , only 17 formal exceptions have been granted by C.N. R a i l i n the CNRW(E)6000 t a r i f f s . Presumably C P . may have granted some as well, but the number remains unknown. To determine just how l i m i t e d these exceptions were, a questionnaire was employed. Of the 760 questionnaires mailed to Canadian firms, 124 usable r e p l i e s were received. With reference to exceptions, three separate questions were asked (Appendix A): Does the firm have an exception to CCD-6500-A; Has the firm considered attempting to obtain one; Did the firm attempt to negotiate an exception. Taken together, 22 firms or 18% responded yes to one of these questions, yet only 14 or 11% of the firms a c t u a l l y had t r a f f i c moving under an exception. The eight unsuccessful firms had either t r i e d to negotiate an exception and f a i l e d or i n the case of two firms, considered the p o s s i b i l i t y but d i d not t r y because they believed the p o s s i b i l i t y of success was too small to warrant the e f f o r t . These 22 firms can be characterized as large companies. I t may be because of the volume of t r a f f i c that such an attempt becomes worthwhile. Possibly because of t h e i r s i z e , greater s o p h i s t i c a t i o n and knowledge exists i n t h e i r t r a f f i c and d i s t r i b u t i o n department. Or, because of t h e i r s i z e , they may have greater bargaining power i n negotiating and extracting exceptions from the railways. Closer scrutiny, accomplished through followup interviews with these 22 firms indicates that even fewer than these 14 - 159 -f i r m s a c t u a l l y have l e g i t i m a t e n e g o t i a t e d e x c e p t i o n s , f o r m a l l y p u b l i s h e d as t a r i f f items. The m a j o r i t y of them were l o c a l arrangements n e g o t i a t e d between the t r a f f i c manager and the l o c a l r a i l w a y r e p r e s e n t a t i v e , and as such were unpublished. The m a j o r i t y of these were n e g o t i a t e d w i t h the r a i l w a y marketing p e r s o n n e l . In f a c t , 80% of the f i r m s t h a t n e g o t i a t e d or attempted to n e g o t i a t e an e x c e p t i o n d i d so s o l e l y w i t h marketing p e r s o n n e l . Followup i n t e r v i e w s i n d i c a t e d t h a t the p e r c e p t i o n of s h i p p e r s was t h a t i f an e x c e p t i o n was to be o b t a i n e d i t would o n l y be allowed by marketing p e r s o n n e l . O p e r a t i o n p e r s o n n e l were p e r c e i v e d to be i n f l e x i b l e and c o n d u c t i n g t h e i r a c t i o n s s t r i c t l y by the book. As w e l l , s h i p p e r s i n d i c a t e d t h a t i f a t r a f f i c manager can a n t i c i p a t e s i t u a t i o n s where demurrage might r e s u l t and approach the a p p r o p r i a t e marketing r e p r e s e n t a t i v e adjustments would be made to a v o i d such a s i t u a t i o n . In these cases, i t was u n c l e a r whether the c a r r i e r was simply a p p l y i n g a l i b e r a l i n t e r p r e t a t i o n of e x i s t i n g t a r i f f p r o v i s i o n s which extend f r e e time because of bunching or other d e l a y s not caused by the customer, or whether the r a i l w a y s were not r e p o r t i n g c a r d e l i v e r y times a c c u r a t e l y so t h a t , i n e f f e c t , the s h i p p e r enjoyed d i f f e r e n t treatment than s e t down i n CCD-6500-A. I t was p o i n t e d out by s h i p p e r s t h a t the l o c a l r e p r e s e n t a t i v e s are o n l y a b l e to do t h i s b e f o r e the demurrage b i l l i s c u t . Once head o f f i c e or the C.C.D.B. knows about the problem, r e l i e f i s i m p o s s i b l e . - 160 -I n t e r e s t i n g l y , 80% of the f i r m s conducted n e g o t i a t i o n s f o r e x c e p t i o n s by themselves. I n d u s t r y and s h i p p e r a s s o c i a t i o n s were not i n v o l v e d . In a c o l l e c t i v e r a t e making environment where the r a i l w a y s s e t agreed charges a f t e r b a r g a i n i n g w i t h the s h i p p e r s j o i n t l y a l l g e t t i n g the same f r e i g h t r a t e , t h e r e may be a r e l u c t a n c e to grant f o r m a l demurrage c o n c e s s i o n s . Once p u b l i c i z e d , a l l may request the same e x c e p t i o n . Instead i t appears t h a t the r a i l w a y s are s a t i s f i e d w i t h i n f o r m a l , not w e l l p u b l i c i z e d , e x c e p t i o n s i n d i v i d u a l l y n e g o t i a t e d . I t a l l o w s the c a r r i e r s t o p a c i f y s h i p p e r s w h i l e a v o i d i n g f u r t h e r demands f o r c o n c e s s i o n s . A c l o s e r examination of these 14 e x c e p t i o n s i s u s e f u l and, i n f a c t , i t becomes c l e a r t h a t they are attempts by the marketing r e p r e s e n t a t i v e s to match the uniform i n f l e x i b l e demurrage r u l e s t o the unique needs of the s h i p p e r . While three s h i p p e r s had n e g o t i a t e d e x c e p t i o n s t h a t i n v o l v e d r e l e a s i n g c a r s i n l e s s than f r e e time, the remaining e l e v e n were concerned w i t h r e d u c i n g demurrage charges and/or i n c r e a s i n g f r e e time. The t h r e e t h a t i n v o l v e d reduced f r e e time c o u l d be c h a r a c t e r i z e d as i n c e n t i v e p l a n s . One s p e c i f i e d 24 hours f r e e time and i n r e t u r n the s h i p p e r was rewarded f o r h i s q u i c k r e l e a s e of c a r s by reduced f r e i g h t r a t e s . The remaining two were s i m i l a r t o demurrage/dispatch i n the s h i p p i n g i n d u s t r y . One of these p r o v i d e d the u s u a l 48 hours f r e e time and the u s u a l demurrage p e n a l t i e s and r u l e s . Except, i f the s h i p p e r - 161 -was able to release the car i n less than 24 hours, a prespecified monetary reward was paid. If the shipper, instead, freed the car a f t e r 24 hours but before 48 hours a lesser but s t i l l s i g n i f i c a n t amount was paid by the railway. The firm i s able to return 95% of a l l cars i n less than 24 hours following placement. The remaining 11 exceptions l i b e r a l i z e d the demurrage rules i n one of four ways. Two of the firms sought and received more free time. -Another three firms negotiated lower demurrage rates. One of these involved the substitution of per diem rates for demurrage. Several of the firms were able to negotiate the use of surplus railway cars for short term storage of the companies' commodities. In both cases, the companies were a n t i c i p a t i n g an increase i n the market price of t h e i r product i n the near future. The railways, at the time, had a surplus of railway cars. The railway agreed to allow the company to use the cars for short term storage of the commodities at rates s i g n i f i c a n t l y less than the demurrage l e v e l . Both parties benefitted, the railways received revenue for cars that would otherwise have sat i d l e and the shipper was able to garner a higher sale price for his product. The largest group of exceptions were those granted by the l o c a l marketing representatives to compensate shippers for bunching and inconsistent t r a v e l times of r a i l cars. A number of shippers expressed d i s s a t i s f a c t i o n with the operation of the bunching r u l e . The process and the amount of documentation - 162 -required as well as the perceived low p r o b a b i l i t y of success led several shippers not to pursue bunching claims. One plant was receiving r a i l cars from a number of d i s t i n c t locations. As long as they consistently arrived i n the order shipped, a l l was f i n e . However, the railway was only w i l l i n g to provide once a week switching service. As a r e s u l t , a l l the cars arrived at once. The plant's unloading f a c i l i t i e s were capable of unloading the cars i f they arrived as shipped, but when a l l were placed i n unison, demurrage was incurred. Negotiations were held, and i t was agreed that no demurrage would be assessed providing the company unloaded an equal number of cars per day as they would do under normal circumstances. Another firm had a covered sidi n g at which i t unloaded chemicals from single r a i l cars and bagged the material for r e t a i l sale. Its f a c i l i t i e s permitted only one car to be unloaded at a time. To avoid demurrage, the company attempted to schedule d e l i v e r i e s so that the dock would be free. This proved impossible due to inconsistent r a i l service (the shipper claimed i t ranged from 8 - 15 days). The cars would frequently a r r i v e when another car was being unloaded. Demurrage would be the r e s u l t . To avoid t h i s s i t u a t i o n a two day extension to free time was granted. Another company was receiving r a i l cars from the United States suppliers. Their loading dock was able to accommodate f i v e cars a day. The sum t o t a l of d a i l y shipments was always less the f i v e per day and the firm received d a i l y switching. Yet, the cars would arr i v e i n groups of 10 or more i n one day - 163 -overloading t h e i r dock f a c i l i t i e s . A second demurrage problem was also encountered by t h i s firm. The railway apparently, at le a s t l o c a l l y , shut down for 10 days during the Christmas holidays. The plant and i t s U.S. suppliers continued operating. Cars were shipped and accumulated at the r a i l yard. Following the break, a l l the cars, as many as 15 - 10 were placed at once. The exception added a few more days free time to deal with these railway generated backlogs. A f i n a l exception bearing mention was one negotiated by a shipper who had obtained a truck competitive f r e i g h t rate from the railway. However, the inconsistent t r a v e l times of the railway was of concern to the company. This problem was solved by agreeing to an exception that involved the railway holding four to f i v e cars f i l l e d with the material, demurrage free, as a safety stock near the company's plant. What exi s t s i s a very disorganized and very confusing method of publishing formal (legal) exceptions to CCD-6500-A. The numerous t a r i f f s i n which these exceptions are published creates a cumbersome system of disclosure. The formal t a r i f f s reveal some, but not many exceptions to domestic t r a f f i c but many more for export t r a f f i c . While the export exceptions involve agreements to increase car u t i l i z a t i o n , the domestic ones t y p i c a l l y do not. Instead they simply l i b e r a l i z e d the provisions of CCD-6500-A. The informal (unpublished) exceptions again l i b e r a l i z e d the terms of the demurrage t a r i f f . E f f e c t i v e l y , they were attempts by the railways to - 164 -p a c i f y and placate shippers. In a l l , the exceptions are few and attempts to negotiate exceptions to increase car u t i l i z a t i o n are even rarer. B. Structure of Charges (i) Overtime 1. Increasing Penalty Charge Currently, the demurrage charges escalate as the duration of detention increases. They begin with $22 per day for the f i r s t two days, $45 a day for the following two days, $51 for the f i f t h and $73 thereafter. This increasing scale i s also applied i n the U.S. demurrage t a r i f f . I t has not always been so. O r i g i n a l l y , i n the 1906 rules, charges were simply $1 per day. This charge was not s u f f i c i e n t to discourage shippers from using cars as storage.-*- The 1917 revisions incorporated, for the f i r s t time, increasing demurrage charges based on time. In Re. Car Demurrage Rules (1917) 24 C.R.C. 180, increasing demurrage rates over time was considered by the Board. At t h i s time, the c a r r i e r s i n the United States had adopted uniform demurrage rules that incorporated increasing demurrage charges. In Canada, the c a r r i e r s proposed the same. The Board, i n agreeing with the c a r r i e r s and allowing such a scheme, commented on why and when such a scheme i s -•-W.T. Jackman, Economic P r i n c i p l e s of Transportation, (Toronto: University of Toronto Press, 1935), p. 606. - 165 -a p p r o p r i a t e . The Board s t a t e d : The man who i s t r y i n g t o do h i s b e s t ought not t o be unduly p e n a l i z e d . I agree t h a t the g r e a t e s t number of d e l a y s to c a r s of n e c e s s i t y occur on the day f i r s t a f t e r f r e e time; but I am f i r m l y convinced t h a t the d e l a y s which are r e a l l y unnecessary, many i n s t a n c e s of which have been brought b e f o r e the Board, are d e l a y s which extend u n t i l w e l l beyond t h i s f i r s t day and f o r a week and more afte r w a r d s . The Board went on to suggest t h a t the f i r s t , second and t h i r d day f o l l o w i n g f r e e time should not be c o n s i d e r e d a p e n a l t y . Compensation should be p a i d but no more. As was suggested i n other p r e v i o u s l y c i t e d Canadian and U.S. d e c i s i o n s , demurrage i s made of two components, a p e n a l t y and a compensation element. What the Board seems to be s a y i n g here i s t h a t the f i r s t t h r e e days are to i n c l u d e o n l y one element, compensation, w h i l e the remaining days are to i n c l u d e a p e n a l t y . T h i s p r i n c i p l e seems u n a l t e r e d i n subsequent CTC/BORC d e c i s i o n s . As such i n t e r e s t i n g c o n c l u s i o n s can be reached. I s , f o r example, $22 f o r the f i r s t two days even near adequate compensation? Could t h i s argument not be used to j u s t i f y g r e a t l y i n c r e a s e d demurrage charges? Furthermore, the 3, 4, 5, 6 days cannot be a s s a i l e d as b e i n g beyond compensatory l e v e l s s i n c e they are designed, a c c o r d i n g t o t h i s d e c i s i o n t o exceed compensation and p e n a l i z e the s h i p p e r . T h i s p r i n c i p l e becomes c l e a r i n s e v e r a l of the Boards l a t e r passages. The Board s t a t e s : The o b j e c t as I see i t , i s not to p e n a l i z e the man who i s d e s i r i n g t o do b u s i n e s s as q u i c k l y as he can, but to p e n a l i z e the man who i s p e r s i s t e n t l y h o l d i n g c a r s over the - 166 -prescribed period or turning them into temporary warehouses. On t h i s rationale, the demurrage charges were increased to $1 for the f i r s t day $2 for the second day $3 for the t h i r d day $4 for the fourth day $5 for the f i f t h day In 1921, the scheme was altered, the charges were changed, too. $1 f i r s t day $2 second day $5 thereafter For many years (see Table II) the charges remained at t h i s l e v e l , but i n recent years frequent changes were made. Nevertheless, the increasing scale of charges has remained. In the questionnaire and interviews, shippers expressed concern over t h i s penalty scheme. Situations occurred that, through no attributable f a u l t of t h e i r own, cars were delayed and demurrage was assessed. The delays were extensive, r e s u l t i n g i n the penalty portion being incorporated into the charge. At issue i s whether these shippers should be penalized for delay of cars where they are powerless to correct. The Board i n t h i s 1917 decision (24 C.R.C. 180) to modify the rules to include a penalty, stated that t h i s penalty portion i s to apply to the shipper who i s p e r s i s t e n t l y holding them and using them as storage. The penalty should not be applied to a shipper who i s t r y i n g to do his best to promptly release cars. The s t r i k e provision of CCD-6500-A i s consistent with t h i s p r i n c i p l e . A f l a t rate presumably compensatory only of $18 per - 167 -day i s charged. The exact wording of Item 1270 of Rule 8 of CCD-6500-A i s : When, by reason of s t r i k e on the part of employees or action taken by such employees or a trade union of such employees, t r a f f i c cannot be received, unloaded or released . . . charged at a rate of $18 per car per day. One of the examples uncovered i n the questionnaire involved an industry wide lockout of t h e i r unionized employees. As a r e s u l t , a number of cars were trapped within the plant. CCD-6500-A, Rule 8 provides r e l i e f f or s t r i k e s or action by the unionized employees but i t does not provide r e l i e f f or lockouts. No provisions for lockouts are e x p l i c i t l y included i n the t a r i f f . Possibly the rationale for t h i s exclusion i s that management may have l i t t l e control over the occurrence of a s t r i k e . A lockout, however, i s committed by the employer and i s thus within his contr o l . If r a i l cars are stuck behind pickets during a lockout, i t i s the companies' f a u l t and no one else's. The company i s not t r y i n g i t s best to release r a i l cars and should be penalized. However, t h i s l i n e of reasoning presumes that i t i s management of the i n d i v i d u a l company that makes the decision to lock i t s employees out. This i s not the case i n many industries i n some provinces e s p e c i a l l y B r i t i s h Columbia. Group bargaining i s prevalent and the industry conducts c o l l e c t i v e bargaining as a group. The decisions to lock out are that of the group not the members independently. If the group i s an accredited association i n B r i t i s h Columbia, - 168 -Section 59 of the B.C. labour Code makes e x i t from the accredited association most d i f f i c u l t . The company i s stuck with the decision of the group. Of course, the company may have a window of time to move the cars before the s t r i k e , but for various reasons such as the volume of cars and worker cooperation (the employees may be working to rule and refusing overtime), i t may be impossible to load and unload and release a l l the cars. Further, s t r i k e s do not normally occur without warning. Under the B.C. Labor Code, Section 81, 72 hours s t r i k e notice i s required. In view of the p r i n c i p l e s behind the penalty provisions the a p p l i c a t i o n of the upper l e v e l penalty charges to lockouts makes l i t t l e or no sense. A second example of the application of t h i s penalty portion being unjustly applied occurred as a r e s u l t of an accident that destroyed a shipper's dock preventing loading and unloading and release of cars. The destruction was due to an act by a t h i r d party and the shipper was not at f a u l t nor privy to the destruction. In the United States, such a s i t u a t i o n would i n a l l l i k e l i h o o d succeed i n a claim for r e l i e f . However, the shipper was assessed demurrage including the upper l e v e l penalty portion. Again, while compensation to the railway may be j u s t i f i e d penalizing the shipper i s not. Although the shipper may be d e s i r i n g to release the cars as quickly as he can, through no f a u l t of his own, i s unable to. The need for such a penalty provision can be questioned. Where an incentive plan i s used, as i t i s i n the shipping - 169 -industry and some export coal exceptions, demurrage does not increase over time to incorporate a penalty. I t i s compensatory and varies only with market conditions. However, where a uniform demurrage plan i s used that incorporates a scheme of fines for detention, such an escalating system of fines i s consistent with the punishment approach used i n t h i s demurrage system to motivate shippers to release r a i l cars promptly. As long as such a plan i s followed inequities w i l l p e r s i s t . I t i s an unfortunate byproduct of the uniform demurrage system. This was recognized by the Board i n Re. Car Demurrage Rules (1917) 24 C.R.C. 180. In t h e i r decision to incorporate such a scheme the Board concluded by stat i n g : I am confident that with diligence a l l cars can be unloaded, i f not within three, c e r t a i n l y within four days; and i f by reason for some s p e c i a l circumstance the companies may f i n d themselves i n an unfortunate p o s i t i o n , i t i s i n f i n i t e l y better that the i n d i v i d u a l should suffer rather than the whole. 2. 24 versus 48 Hours Free Time Free time has been since 1906, and remains, 48 hours for loading and unloading i n Canada. I t i s a contentious issue. At the heart of the controversy i s the question of whether or not a reduction i n free time can increase the e f f i c i e n c y of r a i l transportation to the benefit of both the c a r r i e r s and shippers. Both C P . and CN. R a i l announced on July 11, 1973 that free time would be reduced to 24 hours. The reduction was to - 170 -become e f f e c t i v e i n August of t h a t year. The r e a c t i o n of the s h i p p e r s , C.I.T.L, and the Canadian Pulp and Paper A s s o c i a t i o n was q u i c k and e f f e c t i v e . 2 The league sent a l e t t e r t o the r a i l w a y s c h a l l e n g i n g the r a i l w a y s ' j u s t i f i c a t i o n t h a t t h e r e was a c a r shortage and a r e d u c t i o n i n f r e e time would remedy t h i s s h o r t f a l l . The charge was t e m p o r a r i l y suspended and a p u b l i c h e a r i n g was scheduled f o r September 4, 1973. Before the h e a r i n g was to take p l a c e , the r a i l w a y s backed down and withdrew t h e i r proposed r e d u c t i o n . 3 S e v e r a l e a r l y s t u d i e s concluded t h a t a r e d u c t i o n i n f r e e time would not i n c r e a s e r a i l c a r u t i l i z a t i o n . In the U n i t e d S t a t e s , Reebie and A s s o c i a t e s i n 1972 i n t h e i r study, Towards an E f f e c t i v e Demurrage System concluded t h a t : time s p e c i f i c a t i o n s i n demurrage t a r i f f have a minimum i n f l u e n c e on r a i l customer a c t i o n s . In Canada, a Master's T h e s i s completed i n 1974 by J.P.R. G a b i l l e concluded t h a t "the p o t e n t i a l impact of f r e e time r e d u c t i o n i s v e r y s m a l l . " Both these s t u d i e s were based on q u e s t i o n n a i r e s and surveys and n e i t h e r had the a d d i t i o n a l advantage of exposte s t a t i s t i c a l d ata showing a c t u a l i n c r e a s e s i n r a i l c a r turnaround, as a r e s u l t of f r e e time b e i n g reduced to 24 hours. A more r e c e n t study (1981), having the advantage of such d a t a , has reached the o p p o s i t e c o n c l u s i o n . In 1973, i n 2J.P.R. G a b i l l e , E f f e c t s of Free Time Reduction on R a i l  Car U t i l i z a t i o n , (M.Sc. T h e s i s of U.B.C.), p. 45. 3 I b i d . - 171 -Investigation and Suspension Docket #8963 Car Demurrage Rules Nationwide; 350 I.C.C. 777, the I.C.C. heard arguments by both shippers and c a r r i e r s as to whether free time for loading should be reduced to 24 hours. The c a r r i e r s submitted a study to support t h e i r contention that 3 m i l l i o n car days, providing 8,200 addit i o n a l cars would r e s u l t from a reduction i n loading time to 24 hours i n the United States. At a 1974 estimated value of $25,000 per car a saving of $205 m i l l i o n i n cars would be achieved. These figures are merely a hypothesized improvement and no s t a t i s t i c a l evidence existed as to whether shippers would react as predicted and increase car turnaround times. This element i s c r i t i c a l as changes can be made i n the rules but unless shipper cooperation can be secured such changes are doomed to f a i l . Undaunted and i n spite of Reebie's e a r l i e r f i n d i n g the I.C.C. stated: An analysis of the complete record establishes that the reduction i n free time from 48 hours to 24 hours as proposed by respondents w i l l r e s u l t i n more rapid release of r a i l r o a d cars and provide an increased a v a i l a b i l i t y of r a i l r o a d cars for shippers. The I.C.C. found that the c a r r i e r s proposed reduction i n loading free time to be lawful. But i t was not u n t i l I.C.C. Service Order 1315 on A p r i l 8, 1978 that free time was reduced, making measurement of such a reduction possible. Free time for loading was changed from 48 to 24 hours. Penalties were increased on the t h i r d day following the expiration of free time. Starting i n 1974, the A.A.R. Freight Car - 172 -U t i l i z a t i o n Research - Demonstration Program, a j o i n t task force composed of representatives from the r a i l r o a d industry, shippers and government issued four reports. Its f i n a l report was on demurrage and was published i n March of 1981 and e n t i t l e d Freight Car U t i l i z a t i o n Impacts of Railroad - Customer  Relationships Vol. 4 Demurrage; A.A.R. Report #R-446. The task force studied the impact of I.C.C. Service Order 1315 on shipper detention times for the Southern Railway and Seaboard Coast Line (Appendix H). This table shows the impact on car turnaround when the demurrage rules were u n i l a t e r a l l y altered reducing free time for loading to 24 hours. The study found that cars released within the f i r s t 24 hours increased from 69.2% to 72.1%. While t h i s seems quite small, i t s impact on the railway's car requirements i s substantial. The study estimates that t h i s small percentage change would r e s u l t i n a saving of 3,694 car days for t h i s single railway system for October of 1978. Over the year, t h i s would accumulate to 47,654 car days which translates into a saving of 130 cars. Several caveats must be added to t h i s study. F i r s t the r e s u l t s measured are only short term. The measurements were taken only s i x months af t e r the announcement of the service order. Shippers may not be f u l l y aware or prepared to deal with the change. Further, s u f f i c i e n t lead time to implement improvements may not have been present. Second, the order was announced as temporary so, c a p i t a l investment (more loading docks) to improve car turnaround may have been discouraged. - 173 -T h i r d , the r e s u l t s were f o r one r a i l w a y and o n l y l o a d i n g , system wide impacts c o u l d be s u b s t a n t i a l even w i t h t h i s s m a l l change. N e v e r t h e l e s s , under these c o n d i t i o n s which can be c h a r a c t e r i z e d as p r o b a b l y the l e a s t f a v o r a b l e way to reduce f r e e time i f i n c r e a s e d s h i p p e r turnaround i s the g o a l , u t i l i z a t i o n s t i l l i n c r e a s e s impacting s u b s t a n t i a l l y on c a r supply. The charge was u n i l a t e r a l l y imposed, without s h i p p e r c o n s u l t a t i o n or involvement and i s temporary w i t h no i n c e n t i v e s o f f e r e d t o the s h i p p e r f o r complying. I f anything t h i s study g i v e s us the minimal improvement p o s s i b l e through a r e d u c t i o n i n f r e e time. In Canada, t h e r e has not been any r e c e n t s t u d i e s . At b e s t , the r e s u l t s from these U.S. experiments can be e x t r a p o l a t e d t o Canada. As the C.N. R a i l d ata i n d i c a t e s (Tables I I I and I V ) , Canadian R a i l turnaround time i s low and tremendous room f o r improvement e x i s t s . Only 65.9% of r a i l c a r s are loaded i n 24 hours and 53.7% are unloaded i n 24 hours. What t h i s i n d i c a t e s i s t h a t t h e r e i s tremendous room f o r improvement. As p r e v i o u s l y i n d i c a t e d , the 48 hour r u l e , the f i r s t 7:00 AM a f t e r placement and the e x c l u s i o n of weekends are a l l a r c h a i c r u l e s . But today, modern technology permits v e r y q u i c k l o a d i n g and u n l o a d i n g of r a i l c a r s , so t h e r e i s room f o r improvement. I f o n l y the minimal improvement, witnessed i n the Southern Seaboard system, were the r e s u l t of a change, s i g n i f i c a n t investment savings would r e s u l t i n Canada from i n c r e a s e d c a r u t i l i z a t i o n . T h i s s a v i n g f o r C.N. R a i l i f - 174 -Southern Seaboard Car turnaround r e s u l t s were achieved can be estimated. The C.N. R a i l data i s aggregated to i d e n t i f y the percentage of cars released within 24, 48, and 72 hours and shown i n Panel A, Table XII. Panel B of Table XII displays comparable s t a t i s t i c s from the Southern Railway and Seaboard Coastline Railroad. The U.S. data reveals that t h i s r a i l r o a d i s having t h e i r cars returned much more quickly than i s C.N. R a i l . We recognize that t h i s contrast i s a function of many unobserved factors including the mix of t r a f f i c and car and types of each r a i l r o a d . The Southern/Seaboard data r e f l e c t s 1978 car a c t i v i t y while the C.N. R a i l data r e f l e c t s 1985 a c t i v i t y . The U.S. experience also r e f l e c t s the extensive use of averaging agreements i n demurrage accounting. The c a l c u l a t i o n assigns one car day to a car cycle for each 24 hour block, or f r a c t i o n , that a car i s held for loading or unloading. Thus a car released between 49 and 72 hours of placement adds three days to the car cycle. The actual car days involved i n loading or unloading were calculated from the C.N. R a i l data and extrapolated into a yearly figure as shown i n Panel A i n Table XIII. Then the car days that would have been involved i n loading and unloading were calculated based on the Southern Seabound data, as shown i n Panel B. The difference i n annual car days i s 374,008 car days. Table XIV shows the p o t e n t i a l reduction i n r a i l car requirements under alternate assumptions about average yearly car u t i l i z a t i o n . A reduction i n the r a i l car f l e e t of just C.N. R a i l could thus - 175 -Table XII Car Loading and Unloading Timp Distribution Cars Released Cars Released Cars Released Cars Released Within 24 Hrs Between 25-48 Hrs Between 49-72 Hrs After 72 Hrs Total (A) C.N. Rail Number of Cars Loading (1) 31,337.00 6,882.50 3,531.50 5,835.30 47,586.30 Percentage 65.90 14.40 7.70 12.00 100.00 Number of Cars Unloading (1) 19,501.00 7,349.00 4,092.00 5,387.00 36,329.00 Percentage 53.70 21.40 11.30 13.60 100.00 (B) Southern-Seaboard Railway Number of Cars Loading (2) 59,590.30 8,554.80 2,120.40 3,103.50 73,369.00 Percentage 81.22 11.66 2.89 4.23 100.00 Number of Cars Unloading (2) 50,362.00 14,700.00 6,152.00 7,860.00 79,074.00 Percentage 63.69 18.59 7.78 9.94 100.00 (1) Weighted monthly average, January - June, 1984. Source: C.N. Rail (2) October 1978 Data Source: Association of American Railroads, Freight Car U t i l i r a t i o n Tmpact of Railroad  - Customer Relationships. Vol. 4, Demurrage, A.A.R. Report No. R446 (March 1981). - 176 -Table XIII Potential Car Day Savings - CN. Rail Cars Released Cars Released Cars Released Cars Released Within Between • Between After Total Cars 24 Hrs 25-48 Hrs 49-72 Hrs 72 Hrs CN. 1984 Loading (1) CN. 1984 Unloading (1) Total Days (A) Actual 376,044.00 165,180.00 127,134.00 350,112.00 1,018,470.00 234,012.00 176,376.00 147,312.00 323,220.00 880,920.00 1,899,390.00 C.N. Simulated Loading (2) C.N. Simulated Loading (2) Total Days (B) Simulated 436,792.08 133,164.00 49,508.28 120,772.80 767,237.16 277,644.00 162,085.44 101,750.04 216,666.00 758,145.60 1,525,382.76 Actual Car Days 1,899,390.00 Simulated Car Days 1,525,382.00 Potential Days Saved 374,008.00 (1) Number of cars loaded (unloaded) per month X number of days each car i s held by shippers X 12 months. (2) Car release distribution of Southern-Seaboard assumed for CN. Rails. - 177 -Table XIV Potential Car Investment and Interest Cost Saving Annual Car U t i l i z a t i o n ( i n days) 320 340 360 Total Car Days Saved 374008 374008 374008 Reduced Car Requirement 1169 1100 1039 Reduced Car Investment $50,000/car $58,438,750 $55,001,176 $51,950,000 - 178 -reduce c a p i t a l requirements by as much as $55 m i l l i o n . This extrapolated estimate i s a minimum anticipated impact of such a change since the environment and conditions upon which t h i s reduction i n free time was made were not conducive to shipper cooperation. Much higher l e v e l s of car u t i l i z a t i o n are possible under the r i g h t conditions. One s t a r t l i n g example i s the negotiated exception previously described, whereby free time was reduced to 24 hours i n return for a cash payment by the railways for each car released within 24 hours. The reduction was i n i t i a t e d by the shipper. B i l a t e r a l negotiations were held between the c a r r i e r and the shipper. The scheme was not u n i l a t e r a l l y imposed by the railways as i n the United States. The r e s u l t was impressive. F u l l y 95% of a l l r a i l cars were released within 24 hours. What t h i s indicates i s that high l e v e l s of car turnaround are c l e a r l y possible i n an environment conducive to securing shipper cooperation with the scheme. I t would be u n l i k e l y that such high l e v e l s of car turnaround could be achieved on a system wide basis for a l l of Canada. As such, i t probably represents an upper benchmark of the impact of such a change i n free time. Its impact on savings investment i s calculated i n Tables XV and XVI i n the same manner as the U.S. data was. The r e s u l t s are c l e a r l y impressive. The point to be made i n t h i s discussion i s that p o t e n t i a l l y large benefits measured either i n reduced c a p i t a l investment i n cars or by increased revenue and r e s u l t of the - 179 -increased car supply available to the railways. R e a l i s t i c a l l y , the amount w i l l be somewhere between these two benchmarks. How close to the upper benchmark w i l l depend on a number of factors including the type of r a i l car, the a b i l i t y of the shipper to perform well and how the railways go about securing shipper cooperation. If they do as they d i d before, i n 1973, and u n i l a t e r a l l y a l t e r the rules with no shipper consultation or quid pro quo concessions such as a monetary incentive, r e s u l t s could be disappointing. 3. Weekends Currently, the U.S. standard demurrage t a r i f f and the Canadian CCD-6500-A provide that i f a weekend or holiday intervenes while free time i s running, the weekend or holiday extends free time by the duration of the weekend or holiday. This rule i s an old rule included shortly a f t e r the standard demurrage t a r i f f was established i n 1906. I t i s a r e f l e c t i o n of past practices when mines, m i l l s , stores, plants and warehouses normally did not operate on the weekends, and numerous statutes banned r e t a i l sales on Sundays. Society has changed and t h i s practice i s quickly becoming obsolete, as corporations can i l l a f f o r d to allow c a p i t a l invested i n large expensive machinery stand i d l e . Sunday shopping l e g i s l a t i o n i n numerous j u r i s d i c t i o n s has been struck down by the courts. More and more stores are now open seven days per week. The railways for at least 10 years have been geared up for a - 180 -Table XVa - C.N. Car Loading and Unloading Time Distribution * Cars Rel. Within 24 Hrs 25-48 49-72 after 72 Total # Cars Loading 31,337.0 6882.5 3531.5 5835.3 47,586.3 Percentage 65.9 14.4 7.7 12.0 100 # Cars Unloading 19,501.0 7349.0 4092.0 5387.0 36,329.0 Percentage 53.7 21.4 11.3 13.6 100 Table XVb Incentive Plan # Cars Rel. Within 24 Hrs 25-48 49-72 after 72 Total # Cars Loading Percentage 95.0 5.0 # Cars Unloading 95.0 5.0 Percentage Table XVc Potential Car Day Savings - C.N. Rail # Cars Rel. Within 24 Hrs 25-48 49-72 after 72 Total (Al Actual C.N. 1984 Loading. 376,044.00 165,180.00 127,134.00 350,112.00 1,018,470.00 C.N. Rail Unloading 234,012.00 176,376.00 147,312.00 323,220.00 880,920.00 Total Days 1,899,390.00 (B) Simulated C.N. Simulated Load 542,483.82 57,103.56 0 0 599,587.38 C.N. Simulated Unload 414,150.60 43,594.80 0 0 457,745.40 Total Days 1,057,332.78 Actual Simulated Potential Savings 1,899,390.00 1.057.332.78 842,057.22 - 181 -Table XVI Potential Car Investment and Interest Cost Saving Annual Car U t i l i z a t i o n (in days) 320 340 360 Total Car Days Saved 842,057 842,057 842,057 Reduced Car Requirement 2631 2476 2339 Reduced Car Investment $50,000/car $131,571,406 $123,831,911 $116,952,361 - 182 -seven-day operating week. No changes to administration or operating practices are required. 4 Yet, the rule remains. Isolated islands of e f f i c i e n c y e x i s t . In B r i t i s h Columbia, the Westar Coal Mine operates on a seven-day week, the r a i l r o a d operates on a seven-day week, and so do the port f a c i l i t i e s . In the questionnaire, shippers were asked i f they could benefit from a demurrage plan that does not include weekends i n free time. They were further asked i f they could benefit, what incentive would they require. Comments from some shippers indicated that t h i s question was sometimes misinterpreted. Nevertheless, 16% of the respondents indicated that they could benefit from such a change providing there was some monetary incentive granted for such a concession. Loss of the weekend exception may well be expensive to some shippers who operate on a 5-day week basis and would have to pay workers overtime to unload on the weekends. However, there are firms i n c a p i t a l intensive industries that operate 24 hours a day 7 days a week. Greater f l e x i b i l i t y and a willingness to negotiate s p e c i f i e d demurrage arrangements i n these instances would r e s u l t i n increased car turnaround times. There were some successful attempts to do t h i s i n export t r a f f i c but there were no exceptions for domestic t r a f f i c that involved the removal of weekend exemptions for 4 " F r e d e r i c k Burbidge Speaks Out on C P . Ra i l ' s Future Concerns," Canadian Transportation and D i s t r i b u t i o n , September 1975, p. 41. - 183 -monetary incentives such as reduced f r e i g h t rates. A related area i s the aged practice of having free time s t a r t from the f i r s t 7:00 AM following placement. I t i s simple and e a s i l y understood but aside from these conveniences, makes l i t t l e sense. In many cases, t h i s rule extends free time s i g n i f i c a n t l y beyond 48 hours. Like the free time l i m i t s , the orig i n s of t h i s rule date to a time when cars were manually loaded and unloaded and where communications technology for recording the time of the switch and n o t i f y i n g the shipper were primitive or unavailable. Both Reebie and Associates, i n Towards an E f f e c t i v e Demurrage System, and the A.A.R. j o i n t task force study on demurrage recommended the removal of t h i s r u l e . I t was suggested that free time should s t a r t from the time of the switch. A uniform change i n the current t a r i f f eliminating weekend exemptions and s t a r t i n g free time from the time of switch would cause hardship to some shippers. A far more equitable way would be to a c t i v e l y encourage shippers who currently operate on a seven-day week and can adjust t h e i r r a i l car loading and unloading practices to meet these more r e s t r i c t i v e free time practices to negotiate an exception with the railway. The railway i n turn o f f e r i n g decreased f r e i g h t rates for the shippers' faster release of r a i l cars. - 184 -4 . Reciprocal Demurrage This idea dating back to the turn of the century surfaced repeatedly i n the questionnaire. P r i o r to the establishment of the U.S. uniform demurrage code i n 1910, statutes known as re c i p r o c a l demurrage laws were enacted by some states. Those laws provided for penalties i f the railways f a i l e d to supply shippers with cars within a s p e c i f i e d time frame and frequently held v a l i d by the courts. (Kansas) Of f e r l e Grain and  Co. v. Atchison T & S Ry. Co. 182 P 405; 105 Kan 272; (Wash) State v. Public Service Commission of Washington 162 P 523; 94 Wash 274. In 1907, Louisiana, F l o r i d a , M i s s i s s i p p i , North Carolina, Texas and V i r g i n i a had r e c i p r o c a l demurrage statues. The scheme i n Texas was a model of s i m p l i c i t y . Shippers could r e q u i s i t i o n cars by depositing 5 of the fr e i g h t rate. Once the deposit was made, the railway was required to supply the car by a s p e c i f i e d time. If the railway f a i l e d i t was to pay the shipper $25 per day that the car was l a t e . I f , i n turn, the shipper d i d not release the car within 48 hours, he too paid $25 per day. Despite i t s s i m p l i c i t y , the plan was unsuccessful. Texas continued to suffer severe car shortages and Galveston Texas was reported to have the most serious congestion of any U.S. r a i l car terminal. In the Matter of Car Shortage and Other I n s u f f i c i e n t Transportation F a c i l i t i e s 12 I.C.C. 561, at p. 575. The major reason for the scheme's f a i l u r e was that railways refused to allow t h e i r cars to t r a v e l beyond the l i n e - 185 -of o r i g i n . If they were to be punished for not supplying cars then they had no alt e r n a t i v e but to hoard cars to ensure an adequate supply. Each railway turned inward and began l i v i n g unto i t s e l f . The r e s u l t was that junction points, where the o r i g i n a t i n g c a r r i e r s tracks ended, cars would have to be unloaded, the contents being reloaded onto the adjoining c a r r i e r s cars. Congestion was the outcome. The Texas Court of Appeal upheld the c a r r i e r s r i g h t to refuse to supply cars where the destination i s beyond the o r i g i n a t i n g c a r r i e r s tracks. In the Matter of Car Shortage and Other I n s u f f i c i e n t  Transportation F a c i l i t i e s 12 I.C.C. 561; The court went on to consider r e c i p r o c a l demurrage and rejected i t . In doing so the court held: The enactment of a r e c i p r o c a l demurrage b i l l w i l l not b u i l d r a i l r o a d track equipment, enlarge and simplify terminals, nor transform incompetent operating o f f i c i a l s into f i r s t class r a i l r o a d men, but i t might stimulate, energize and i n some cases revolutionize the methods of delinquent r a i l r o a d s so that they would render the service which they were created to render. This i s the theory of r e c i p r o c a l demurrage. But that by i t s e l f i t w i l l enable the rail r o a d s to render adequate services i s not demonstrated by experience. In the early 1970s, the I.C.C. was again c a l l e d upon to consider the ap p l i c a t i o n of r e c i p r o c a l demurrage and again rejected the concept. The Southwest Oregon Shipper's T r a f f i c Association Inc. requested the adoption of such a plan. The I.C.C. referred back to In the Matter of Car Shortage 12 - 186 -I.C.C. 561 and s t a t e d : Time has not a l t e r e d the ap p r o p r i a t e n e s s of the f i n d i n g . . . . The p o i n t here, however, i s t h a t r e c i p r o c a l demurrage or any other s i m i l a r method of a s s e s s i n g l i q u i d a t e d damages, i n a d d i t i o n t o the p o s s i b i l i t y of i t s b e i n g an i l l - c o n c e i v e d experiment which respondents and the p u b l i c can i l l a f f o r d a t t h i s time, would be d i f f i c u l t t o r e c o n c i l e w i t h t h a t body of t r a n s p o r t a t i o n law a p p l i c a b l e t o r e f u s a l s to serve and c l a i m s f o r d e l a y . In Canada, the Board of Railway Commissioners, when e s t a b l i s h i n g the Canadian Demurrage Rules i n 1906, c o n s i d e r e d requests t h a t a r e c i p r o c a l demurrage p l a n be e s t a b l i s h e d . The Board s t a t e d : In some cases, p a r t i e s have asked t h a t the allowance of the charge be made c o n d i t i o n a l upon a p r o v i s i o n f o r what has been c a l l e d r e c i p r o c a l demurrage or some p e n a l t y or charge f o r d e l a y by r a i l w a y companies i n s u p p l y i n g c a r s or i n r e c e i v i n g , t r a n s p o r t a -t i o n or d e l i v e r i n g t r a f f i c . T h i s l a t t e r s u b j e c t r e q u i r e s more i n v e s t i g a t i o n and c o n s i d e r a t i o n than the Board has been ab l e to g i v e i t . And w i t h t h i s pronouncement the i d e a seems t o have ended. Yet as we d i s c o v e r e d i n the q u e s t i o n n a i r e , the r e c i p r o c a l concept i s s t i l l s a l i e n t w i t h some s h i p p e r s as a method of encouraging c o n s i s t e n t t r a v e l times and t i m e l y d e l i v e r i e s of r a i l c a r s o r dered f o r l o a d i n g . The most f r e q u e n t l y expressed concern on the q u e s t i o n n a i r e was the r a i l w a y s i n c o n s i s t e n t t r a v e l times. S e v e r a l s h i p p e r s suggested t h a t the r a i l w a y s should be p e n a l i z e d i f r a i l t r a v e l time exceeded scheduled times. A r e l a t e d comment was t h a t the r a i l w a y s should p u b l i s h p o i n t t o - 187 -p o i n t t r a v e l t r a n s i t time. I f the c a r a r r i v e s e a r l y or l a t e , e x t r a f r e e time should be granted. Another s h i p p e r suggested t h a t the r a i l w a y s should pay the consignee an i n c e n t i v e when the c a r s are not r e c e i v e d on time. I n c o n s i s t e n t t r a v e l times cause s h i p p e r s s e v e r a l problems. When the c a r s are delayed, the s h i p p e r has c a p i t a l t i e d up i n s i d e the r a i l c a r . He cannot use i t nor s e l l i t y e t he may be p a y i n g i n t e r e s t on the c a p i t a l . In a sense, t h i s i s the r e v e r s e of r a i l w a y s ' j u s t i f i c a t i o n f o r demurrage. L i k e r a i l c a r s , s h i p p e r s have goods they cannot use because they are delayed. R e l a t e d i s the necessary maintenance of l a r g e i n v e n t o r i e s and s a f e t y s t o c k s f o r raw m a t e r i a l s i n the manufacturing process a g a i n s t the r i s k of s t o c k outs of i n p u t s due t o i n c o n s i s t e n t r a i l w a y t r a v e l times. A second problem i s t h a t when a r r i v a l cannot be p r e d i c t e d w i t h any degree of c e r t a i n t y , s c h e d u l i n g of work crews to l o a d and unload becomes d i f f i c u l t . For these reasons, i t i s argued by s h i p p e r s , t h a t r e c i p r o c a l demurrage would compensate them and encourage r a i l w a y s to be more c o n s i s t e n t . While i n c o n s i s t e n t t r a v e l times are p r o b l e m a t i c , r e c i p r o c a l demurrage may not be a p p r o p r i a t e . The c o m p l i c a t i o n s c r e a t e d by such a scheme, as so a p t l y p o i n t e d out by the I . C . C , c o u l d be e q u a l l y a p p l i c a b l e to Canada. The r e l u c t a n c e of one c a r r i e r t o a l l o w i t s c a r s on the o t h e r ' s t r a c k s seems l i k e l y . C N . would be u n w i l l i n g to a l l o w C P . R a i l t o use i t s c a r s i f C N . stood to be punished f o r not s u p p l y i n g c a r s . - 188 -( i i ) Averaging U n l i k e the U n i t e d S t a t e s , Canada never accepted an average p l a n f o r demurrage. Over the y e a r s , the Board of Railway Commissioners were p e t i t i o n e d by v a r i o u s i n t e r e s t groups t o adopt an average p l a n i n Canada. Repeatedly, the Board r e j e c t e d these a p p l i c a t i o n s . Even a f t e r these c o n s i s t e n t r e f u s a l s , the concept of an average p l a n i s not dead i n Canada. Responses from s h i p p e r s t o the q u e s t i o n n a i r e f r e q u e n t l y h i g h l i g h t e d a c u r r e n t i n t e r e s t i n the development of an av e r a g i n g p l a n f o r Canada. 1 . History of Averaging The U n i t e d S t a t e s , i n ag r e e i n g t o t h e i r uniform demurrage code i n 1909 i n c l u d e d an averaging p l a n . I t was suggested t h a t the average p l a n was a t r a d i n g horse o f f e r e d t o the l a r g e s h i p p e r s t o o b t a i n t h e i r a p p r o v a l of the r u l e s . But i n Canada, no such consensual agreement was sought, the r u l e s were d i c t a t e d by the Board of Railway Commissioners. In a memorandum i s s u e d January 25, 1906, r e s p e c t i n g c a r s e r v i c e r u l e s and i s s u e d s i m u l t a n e o u s l y w i t h the new r u l e s the Board d i s m i s s e d a v e r a g i n g . The Board s t a t e d : The Board has a l s o been asked t o a l l o w an average t o be s t r u c k of the times o c c u p i e d i n l o a d i n g and un l o a d i n g v a r i o u s c a r s , g i v i n g c r e d i t t o p a r t i e s f o r s u r p l u s not used as a g a i n s t over-time. The Board does not t h i n k t h a t there would be many cases i n which t h i s would r e s u l t i n any c o n s i d e r a b l e advantage t o such p a r t i e s , and apprehends t h a t any such advantages would be more than - 189 -compensated for by introduction of complications and grounds for dispute. In January of 1909, less than three years after the establishment of the Canadian Car Service Rules, the f i r s t a p p l i c a t i o n for the adoption of an average plan was brought before the Board of Railway Commissioners. Wallaceburg Sugar Co. v. Canadian Car Service Bureau 8 C.R.C. 332; The majority of raw sugar beets transported to the Wallaceburg Sugar Refinery was hauled by r a i l . The company's competition i n the United States enjoyed the benefits of an average plan while Wallaceburg was experiencing a serious bunching problem, brought about by the railways i n a b i l i t y to provide regular predictable service. I t was suggested by the applicants that an average plan would be an appropriate solution to t h e i r problems. The commissioners d i d not agree. In deciding the case, the Board addressed two contentions. At issue was the value of averaging and whether r a i l cars should be treated independently. The commissioners d i d not believe that an average plan would increase car supply. In fa c t , they f e l t that quite the opposite would occur. I t was held that: In my opinion the average system might have the e f f e c t of making a consignee d i l a t o r y about unloading so long as he had free time to h is c r e d i t , the circumstances would be the same as the present rules. 8 C.R.C. 335 No evidence was provided i n the reported decision to support t h i s statement, i t was merely the commissioners' learned - 190 -o p i n i o n , which was a p p a r e n t l y s u f f i c i e n t . The commissioners went on to h o l d t h a t i t was the i n t e n t i o n of the Car S e r v i c e Rules t o d e a l w i t h each r a i l c a r independently. They claimed: The i n t e n t i o n i s t h a t under Car S e r v i c e Rules, each c a r s h a l l be d e a l t w i t h by i t s e l f and without r e f e r e n c e t o the movement of other c a r s . T h i s i n s u r e s e q u a l treatment of the s m a l l e r s h i p p e r or consignee w i t h the l a r g e r one. But i f the average p l a n were i n f o r c e , I can w e l l see t h a t an i n j u s t i c e would be done the s m a l l e r d e a l e r by g i v i n g an advantage or p r e f e r e n c e to the d e a l e r who had a l a r g e number of c a r s t o unload. 8 C.R.C. 335-336 T h i s presumption was fundamental t o the Board's r e j e c t i o n of the Wallaceburg Sugar Company's request and i t was a g a i n of concern i n the 1920 a p p l i c a t i o n by the Canadian Manufacturers' A s s o c i a t i o n . Although t h i s presumption may be t r u e , t h e r e i s no mention of t h i s p r i n c i p l e i n the t r a n s c r i p t and r u l e s t h a t flowed from the Board of Railway Commissioner's meeting i n Ottawa, January 25, 1906. The t r a n s c r i p t i n c l u d e s a preamble and a complete enumeration of the Canadian Car S e r v i c e R ules, but no mention of t h i s i n t e n t i o n . A s i d e from these two i s s u e s t h e r e seemed t o be a r e l u c t a n c e by the Board to make any major changes t o the r e c e n t l y c r e a t e d Car S e r v i c e Rules. The Board d i s m i s s e d the a p p l i c a t i o n . I t was not f o r another 11 years t h a t the i s s u e was a g a i n r a i s e d b e f o r e the Commission. On January 26, 1920, the Canadian Manufacturers' A s s o c i a t i o n a p p l i e d t o the Board f o r an order d i r e c t i n g the e x t e n s i o n of the Canadian Car - 191 -Service Rules. Re. Canadian Car Service Rules #3775.3; 25 C.R.C. 1. Three issues were raised that seemed fundamental to the Board's decision. F i r s t , a major issue was whether the shipper/consignee/consignor had the r i g h t to the f u l l free time period. Is t h i s period the shippers regardless of whether he uses i t or not? Or i s t h i s period simply a l e g a l maximum time to unload/load and the resid u a l i s the railroad's? The r a i l r o a d s argued that i t i s not a right of the shippers. The shippers maintained, instead, that the 48 hours i s a l e g a l r i g h t . I f the loading or unloading i s completed i n less than t h i s prescribed period, then they should receive c r e d i t from the railways i n return for foregoing the remaining free time. However, the shippers d i d not pursue t h i s argument to i t s l o g i c a l conclusion. I t could further be argued that the railways have included the costs of t h i s 48 hour free time period within t h e i r estimated cost. I t i s paid by the shipper and thus, t h e i r s . In deciding t h i s issue, the Board r e l i e d on a B r i t i s h R a i l decision. North B r i t i s h Ry. Co. v. Cultness Iron Co. Ltd. , et a l . , Glasgow & Southwestern Ry. Co. v. William Baird Co. Ltd., et a l ; 14 Railway and Canel Cases 246. At page 262, Lord McKenzie stated and the Board of Commissioners r e l i e d on: I t i s necessary to r e f e r to the argument used by counsel for the traders i n support of what has been c a l l e d the average p r i n c i p l e . This consists i n c r e d i t i n g to the trader whatever free time i s saved. If over the whole period of a week or a month, as the case may be, i t i s ascertained that - 192 -the t o t a l f r e e time has not been exceeded by the t o t a l number of wagons, then a c c o r d i n g t o t h i s c o n t e n t i o n no demurrage i s due, T h i s p r i n c i p l e t o my mind i s founded upon a f a l l a c y . A t r a d e r i s not e n t i t l e d to keep a wagon f o r the whole of f r e e time. H i s duty i s to d i s c h a r g e w i t h a l l d i s p a t c h . I f he does t h i s he does no more than h i s duty and i s not e n t i t l e d t o c r e d i t f o r the remainder of the f r e e time. In view of t h i s e a r l i e r B r i t i s h d e c i s i o n , the Board h e l d t h a t f r e e time was not a r i g h t but r a t h e r a l e g a l maximum. They h e l d : D e a l i n g w i t h the q u e s t i o n as a matter of r i g h t , the consignor or consignee has a r i g h t to such p o r t i o n of the f r e e time as i s a c t u a l l y necessary w i t h due d i l i g e n c e t o e f f e c t the l o a d i n g or unl o a d i n g . I f he loads or unloads the c a r w i t h i n the f r e e time t h a t i s a c l o s e d t r a n s a c t i o n and the r e i s no c r e d i t t o impute t o a c a r which takes longer than the f r e e time, the f r e e time allowed i s a maximum reasonable average. A second i s s u e c o n s i d e r e d by the Board was the i n c e n t i v e v a l u e of a v e r a g i n g . Testimony was g i v e n by a number of companies, as w e l l as the Canadian Manufacturers' A s s o c i a t i o n , t h a t the i n c e n t i v e p r o v i d e d f o r i n an average p l a n would a s s i s t i n the prompt h a n d l i n g of c a r s . The evidence presented d i d not persuade the Board who h e l d : I t has not been a f f i r m a t i v e l y e s t a b l i s h e d t h a t i t w i l l work out as to i n c r e a s e the ca r s u p p l y a v a i l a b l e a t any g i v e n time. The t h i r d i s s u e c o n s i d e r e d by the Board was the pl a n ' s impact on s m a l l s h i p p e r s . I t was argued, and accepted by the Board, t h a t such an average p l a n i s d i s c r i m i n a t o r y , f a v o r i n g l a r g e s h i p p e r s . The Board concluded t h a t "the system i s one - 193 -which moves to the advantage of the large shipper", Testimony was given that suggested 10 - 20 cars per month were required before an average plan would be of the s l i g h t e s t p r a c t i c a l use. Further evidence indicated that a f a c i l i t y handling t h i s rate of cars would be a large one. The concern for the small shipper, prominent i n Wallaceburg Sugar was again emphasized. The Board held: What has been so earnestly urged i s i n r e a l i t y a plea for the large shipper. I t means i n substance, that the large shipper who because of h i s control of c a p i t a l i s able to have superior f a c i l i t i e s i s through rearrangement for the demurrage rules to obtain therefrom s t i l l further advantage . . . But i f the large dealer, on account of his superior f a c i l i t i e s i s able to unload quickly and to obtain c r e d i t s therefrom, the r e s u l t of the system asked for would i n a l l p r o b a b i l i t y be to release him e n t i r e l y from demurrage payments which the less favorable situated dealer might be subjected to; and i t might be that these dealers were competitors to a common area. The Board concluded by s t a t i n g that the average system i s discriminatory i n p r i n c i p l e . The establishment of an average plan again resurfaced i n the 1930s. During the years 1930-32, the C.I.T.L. appeared before the Board on several separate occasions requesting the establishment of an average plan. The Board refused to reverse i t s e a r l i e r d e c i s i o n s . 5 Again, the C.I.T.L. applied to the Board of Transport Commissioners i n October of 1952 for the bW.T. Jackman, Economic P r i n c i p l e s of Transportation (Toronto: University of Toronto Press, 1935), p. 609. - 194 -i n s t i t u t i o n of an average plan. Studies were conducted. The r e s u l t s indicated that detention would increase by one-half day under an average p l a n . 6 The C.I.T.L. withdrew i t s application i n 1962. Even as recently as 1981, the issue of averaging has been discussed by the Joint Task Force on Demurrage. 2 . Benefits and Costs of Averaging I t i s with apparent r e g u l a r i t y that every decade or so, the idea of an average plan has been dredged out of the archives, dusted off and represented to the railways and the Board. I t i s discussed, studied and then forgotten, yet i t s merits seem unresolved. When the advantages and disadvantages of averaging are examined, i t i s seems that i t i s not an e f f e c t i v e method of encouraging shippers to quickly release r a i l cars. More e f f e c t i v e methods e x i s t . Advantages a) Monthly B i l l i n g One purported advantage i s that average plans reduce the administrative paperwork. Under an average plan shippers are b i l l e d once a month following the summation of debits and c r e d i t s . Whereas under the straight plan, shippers may be b i l l e d d a i l y or weekly. ^Demurrage, What and Why, The Role of the Bureau (C.C.D.B. Publication, 1963), p. 1. - 195 -b) Claims The number of claims submitted to the railways for r e l i e f from demurrage assessed i s reduced. The right to f i l e claims involving s t r i k e s , weather conditions and bunching permitted under the straight plan, are foregone under the average plan. Again, t h i s s u b s t a n t i a l l y reduces administrative costs that would otherwise be incurred i n handling these claims. c) Customer Service It i s also suggested that the a v a i l a b i l i t y of an average plan helps the railways r e t a i n large shippers as customers. 7 Due to the u n r e l i a b i l i t y of railway t r a n s i t time, large shippers tend to keep some cars as a buffer. Average demurrage then favors these large shippers with frequent bunching and r e l i a b i l i t y problems by reducing demurrage payments. They can keep a buffer of cars without encountering a s i g n i f i c a n t increase i n demurrage payments. Several large multinational corporations, with manufacturing concerns i n both Canada and the United States, expressed a strong desire to have an averaging plan adopted i n Canada. They had average plans i n t h e i r U.S. plants and found, i n comparison, t h e i r demurrage payments i n Canada disproportionately high. They suggested t h i s d eficiency was cause for them to di v e r t r a i l t r a f f i c to motor c a r r i e r s i n Canada. 7Reebie and Associates. Towards an E f f e c t i v e Demurrage  System, U.S. Department of Commerce, July 1972, p. 187. - 196 -Disadvantages a) Demurrage Revenue One disadvantage a f f e c t i n g the r a i l w a y s but f a v o r i n g s h i p p e r s concerns the amount of demurrage revenue r e c e i v e d under an average p l a n . Reebie and A s s o c i a t e s i n Towards an  E f f e c t i v e Demurrage System, estimate t h a t the " e f f e c t i v e demurrage f a l l s t o one-half the p u b l i s h e d r a t e when an average p l a n i s u s e d " , 8 In other words, i f Canadian r a i l w a y s were t o sw i t c h t o an average p l a n , revenue r e c e i v e d from demurrage p e n a l t i e s would be c u t i n h a l f . b) Discrimination A major argument a g a i n s t an average p l a n i s t h a t i t would f a v o r l a r g e s h i p p e r s over s m a l l . The Board found t h i s t o be so i n 8 C.R.C. 332 and the CMA A p p l i c a t i o n 25 C.R.C. 1; While t h i s may be t r u e , and although of concern i n the f i r s t p a r t of the 20th cen t u r y , i t i s of l i t t l e r e l e v a n c e today. Frequent advantages accrue t o l a r g e c o r p o r a t i o n s by reasons of t h e i r sheer s i z e . An average p l a n would merely be one of many. I t may be p o s s i b l e f o r a l a r g e concern to n e g o t i a t e lower f r e i g h t r a t e s , i n p u t c o s t s and be s u b j e c t t o manufacturing economies of s c a l e . In a d d i t i o n , t h i s argument i g n o r e s the r a t i o n a l e t h a t f o r the l a r g e s h i p p e r to g a i n the advantage i t would have t o be more e f f i c i e n t . S i n c e e f f i c i e n c y r e s u l t i n g i n q u i c k r e l e a s e of 8 R e e b i e and A s s o c i a t e s , p. 191. - 197 -c a r s i s what the c a r demurrage r u l e s are attempting t o encourage, t h i s argument does not appear t o be a v a l i d reason f o r r e j e c t i n g a veraging today. Although c l a i m e d t o be a disadvantage, i t does not appear t o be of s i g n i f i c a n c e today. c) Incentive Value In both the Wallaceburg Sugar and the CM.A. A p p l i c a t i o n , the Board found t h a t t h e r e was no i n c e n t i v e value t o r e t u r n c a r s any q u i c k e r under averaging than under the s t r a i g h t p l a n . Shippers f r e q u e n t l y argue t h a t t h e r e i s . However, th e r e i s l i t t l e e m p i r i c a l evidence t o support the s h i p p e r s ' c o n t e n t i o n . Reebie and A s s o c i a t e s (supra) found i n t h e i r study t h a t : In a c t u a l f a c t , t h e r e i s l i t t l e s t a t i s t i c a l evidence t h a t c a r s under averaging are handled much d i f f e r e n t l y than those t h a t are n o t . y The C.C.D.B. study i n response t o the 1952 C.I.T.L. a p p l i c a t i o n concluded t h a t averaging would i n c r e a s e c a r d e t e n t i o n time by one-half day. Aside from t h i s e f f o r t no other Canadian s t u d i e s appear t o have been p u b l i s h e d . And i n the U n i t e d S t a t e s , Reebie seems t o be p a r t i a l l y c o r r e c t ; p r i o r t o t h e i r pronouncement t h e r e o n l y appears t o be t h r e e U.S. s t u d i e s i n d i c a t i n g r e l a t i v e c a r r e l e a s e times f o r average and s t r a i g h t p l a n s . The r e s u l t s are summarized i n Appendix H. A l l three show s i g n i f i c a n t l y b e t t e r r e l e a s e times f o r c a r s under s t r a i g h t p l a n s than those under an average p l a n . While, as Reebie 9 R e e b i e and A s s o c i a t e s , p. 189. - 198 -suggests, there i s very l i t t l e s t a t i s t i c a l evidence, there i s some and i t strongly suggests that averaging r e s u l t s i n poorer release times than cars under the straight plan. Since Reebie and Associates conducted t h e i r study (1972) several surveys have been conducted. The res u l t s support the e a r l i e r studies. The 1975 I.C.C. reported study i n Car  Demurrage Rules - Nationwide 350 I.C.C. 777; (Appendix H) shows greater detention under average than straight for cars released before the beginning of free time, before the f i r s t 24 hours and 48 hours. A second study conducted by the A.A.R. looked at detention i n 1977 - 1978 on the Southern Railway and Seaboard Coastline R a i l r o a d ^ 0 (Appendix H). In contrast, car release times for cars under the average plan were better than the straight plan. As the table indicates, a very small proportion of the t o t a l cars recorded were a c t u a l l y moving under a straight plan. Between § to 1|%, only, of cars measured were under the str a i g h t plan. This proportion i s s i g n i f i c a n t l y less than the other aforementioned studies. This sample group may be too small to be not representative. As such, i t may be unreliable. In e f f e c t then, of the f i v e studies obtained, four show averaging to have poorer release times than cars operating under the straight plan, while the f i f t h ' s r e s u l t s are inconclusive due to i t s small sample s i z e . From the evidence l u A s s o c i a t i o n of American Railways, Freight Car  U t i l i z a t i o n Impacts of Railroad-Customer Relationships, Vol. 4: Demurrage (1981) A.A.R. Report No. R-446. - 199 -a v a i l a b l e a v e r a g i n g does not seem t o be an e f f e c t i v e i n c e n t i v e t o encourage prompt c a r r e l e a s e . T h i s e m p i r i c a l evidence i s i n c o n c e r t w i t h what one would i n t u i t i v e l y expect. The reason f o r the p l a n ' s i n e f f e c t i v e n e s s l i e s i n the d i m i n i s h i n g power of c r e d i t s as m o t i v a t o r s . C r e d i t s earned p e r i s h a t the end of the month. They cannot be a p p l i e d t o the f o l l o w i n g month's d e b i t s . A s h i p p e r , who d i l i g e n t l y r e l e a s e s the c a r s a t the be g i n n i n g of a month and succeeds i n b u i l d i n g up a c r e d i t s u r p l u s , w i l l q u i t e p o s s i b l y h o l d c a r s near the end of the month. When i t i s apparent t h a t h i s month end c r e d i t s w i l l exceed h i s d e b i t s there i s no i n c e n t i v e t o q u i c k l y r e l e a s e c a r s s i n c e the s o l e b e n e f i c i a r y i s the r a i l w a y s not the s h i p p e r . Once a c r e d i t i s earned, the i n c e n t i v e t o r e l e a s e c a r s q u i c k l y d i m i n i s h e s . The power of the i n c e n t i v e i s q u e s t i o n a b l e . A b e t t e r approach, w i t h a much more powerful i n c e n t i v e , e x i s t s and w i l l be c o n s i d e r e d next. ( i i i ) Incentives An i n c e n t i v e p l a n i s a means of encouraging q u i c k r e l e a s e of c a r s by s h i p p e r s through monetary rewards. I t i s s i m i l a r , but not i d e n t i c a l , t o averaging. An i n c e n t i v e p l a n i s a much more e f f e c t i v e p l a n i n c o r p o r a t i n g a more powerful i n c e n t i v e , s i n c e i t s m o t i v a t i n g power or va l u e t o the s h i p p e r remains con s t a n t and does not d e t e r i o r a t e . Two approaches are p o s s i b l e . Shippers may be g i v e n a cash bonus f o r the q u i c k - 200 -release of cars. If the shipper releases the car within 24 hours of placement the railways would pay the shipper a pre-specified amount. I f , instead, the release was between 24 and 48 hours then a lesser amount would be paid. If the car i s released a f t e r 48 hours then demurrage would be paid. This approach i s s i m i l a r to the shipping industry where dispatch for quick release of a ship i s awarded at half the d a i l y demurrage rate and the demurrage rate i n turn normally being set close to the charter rate. If t h i s r e l a t i o n s h i p was followed for r a i l then r a i l revenue, being approximately $70 per car day (Appendix G), demurrage would be $70 and the incentive $35 for release within 24 hours and something less for release between 24 and 48 hours. An alternate way of handling t h i s reward would be to reduce f r e i g h t rates by a pre-set amount for quick release. The idea of incentive plans i s not new. I t seems to be f i r s t r aised i n 1966 before the Board of Transport Commissioners by Mr. Gracey, then general manager of the C.I.T.L. I t was suggested by Mr. Gracey that one of the areas a j o i n t committed on demurrage should review i s ways of increasing u t i l i z a t i o n by penalties and incentives. Currently there are several i s o l a t e d examples of incentive plans independently operating i n Canada. The Stelco plan (see exceptions) i s one and so i s the Westar Mining Coal agreement. Another exception described i n the section on 24 vs. 48 hours free time d e t a i l e d a scheme whereby money was paid to the - 201 -shipper for cars released within 24 hours of placement. This incentive plan resulted i n 95% of a l l r a i l cars place being released within 24 hours. Incentive plans do seem to e x i s t i n Canada and work with impressive success. The questionnaire s p e c i f i c a l l y asked shippers i f a demurrage plan that provides incentives for the release of a car within 24 hours excluding holidays and weekends would be advantageous to t h e i r firm/plant. Thirty-nine respondents, or 31%, indicated that an incentive plan for quick release of cars would be advantageous. This exemplifies that there i s considerable shipper i n t e r e s t and even willingness to pa r t i c i p a t e i n such a plan. The p a r t i c i p a t i o n does not seem lim i t e d to consent. Shippers indicated that they were w i l l i n g to improve t h e i r loading and unloading f a c i l i t i e s , e n t a i l i n g c a p i t a l expenditures, i f there was a monetary incentive to do so. An incentive plan o f f e r s a number of advantages. Fundamentally, large gains i n car release times are possible i f free time i s reduced to 24 hours. But, as previously indicated, the degree of gain depends on shipper cooperation with the plan. The interviews and questionnaire indicate that _ shippers would be w i l l i n g to support changes i n the uniform rules providing a quid pro quo concession i s granted by the railways. Such a concession could be the provision of an incentive. This i s the advantage of an incentive plan. I t allows the railways to make the change and garner the benefits - 202 -of a r e d u c t i o n i n f r e e time w h i l e a t the same time g r a n t i n g a c o r r e s p o n d i n g c o n c e s s i o n to the s h i p p e r s to secure t h e i r c o o p e r a t i o n . The i n c e n t i v e p l a n c o u l d e n t a i l a l l the advantages pres e n t under an a v e r a g i n g p l a n . B i l l i n g c o u l d be reduced, as i t i s under av e r a g i n g by doing i t once a month. The s h i p p e r s ' monthly performance c o u l d be t a b u l a t e d , h i s i n c e n t i v e earned l e s s h i s demurrage assessed b e i n g refunded. Paper work and a d m i n i s t r a t i v e c o s t s would be reduced. D a i l y and weekly b i l l i n g , as i s the case under s t r a i g h t p l a n s , would no longer be necessary. Claims submitted f o r r e l i e f from demurrage assessed c o u l d be reduced. Such a r e d u c t i o n would occur, i f as w i t h averaging, the r i g h t t o f i l e c l a i m s i n v o l v i n g s t r i k e s , weather c o n d i t i o n s and bunching are foregone. Reduced a d m i n i s t r a t i v e and l i t i g a t i o n c o s t s would be the n a t u r a l b e n e f i t t o such a change. Improved customer s e r v i c e , as i n averaging, s h o u l d occur w i t h an i n c e n t i v e p l a n . I n c o n s i s t e n t t r a v e l time becomes l e s s of a problem under an i n c e n t i v e p l a n . B u f f e r s may be kept t h a t w h i l e i n c u r r i n g some demurrage may be o f f s e t by monetary i n c e n t i v e s f o r q u i c k r e l e a s e of the o t h e r c a r s . I t w i l l serve as a s u b s t i t u t e t o those l a r g e s h i p p e r s clambering f o r an average p l a n and may even a t t r a c t back those who have moved to motor c a r r i e r s . W i t h i n the framework of an i n c e n t i v e p l a n , v a r i a t i o n s t h a t r e s u l t i n even g r e a t e r improvements i n c a r turnaround time may be p o s s i b l e . Weekends c o u l d be c o n s i d e r e d l i k e any other day, i n t h a t i f they - 203 -intervened i n the free time period, they would not extend free time. Rather than begin at the time of placement, free time could begin at the time that the car i s switched. C. Level of Charges (i) C.P.I. Indexing of Demurrage Rates Louring 1984, the railways were proposing that future demurrage charges be indexed. Increases i n demurrage rates would be linked to some index, possibly the C.P.I, or an industry composite index. As the index went up, so would demurrage. The Shippers' Demurrage Committee was strongly opposed to the idea and unequivocally rejected the railway's suggestion. In the questionnaire some shippers s p e c i f i c a l l y expressed t h e i r concern about indexation of demurrage. I t was suggested that increases should be negotiated based on a v a i l a b i l i t y of car supply. Further, shippers suggested that the railways should have to prove the necessity for an increase. The shippers suggest that t h i s i s e s p e c i a l l y true when, as the railways do, claim that demurrage i s not a revenue source. The shippers' claims receive some support from C.T.C. decisions and railway publications. In Demurrage, What and Why, The Rule of the Bureau, at p. 1, i t i s stated: Demurrage i s not designed as a revenue producer. - 204 -In Re. Demurrage Charges Incurred on Account of Strike  Conditions; 47 C.R.C. 102 (1937), the Board states: Of course, the demurrage t o l l was never intended as a source of revenue, but as a penalty to e f f e c t the prompt loading and unloading of cars. This i s the only apparent authority for the proposition advanced by the shippers that demurrage may not be a revenue source. I t i s , i n f a c t , weak authority. I t i s mere obiter d i c t a and the case does not turn on t h i s statement. Further, i t i s merely a Board decision and not a Court decision; as such i t i s not binding authority. More recent decisions by the C.T.C. and the Supreme Court of Canada have held that demurrage i s both a penalty and compensation. N.W. Line Elevators v. C.C.D.B. 77 C.R.T.C. 180; affirmed by the Supreme Court of Canada 77 C.R.T.C. 241; Shipping Federation v. Railway Association of Canada 56 C.R.T.C. 21. There i s no reason why t h i s compensation element could not be indexed. As the railway costs go up, so should t h e i r compensation. The penalty element presents a problem. Only i f i t i s so low as to be i n e f f e c t i v e as a punishment should i t be increased. Its amount r e a l l y has no l i n k to any i n f l a t i o n a r y price index. When the two elements of demurrage are considered, as they should, the d i f f i c u l t i e s of indexing become apparent. One element can l o g i c a l l y be linked to price l e v e l s but the other has no r e l a t i o n s h i p , and unless t h e i r proportional amounts can be determined, which they have not, - 205 -any accurate indexing i s impossible. Furthermore, indexing i s a bandaid solution that attempts to momentarily patch some of the symptoms but i t t o t a l l y ignores the cause. The current uniform demurrage system i s i n f l e x i b l e and incapable of dealing with today's i n f l a t i o n a r y environment. I t was developed i n an era of price s t a b i l i t y when i n f l a t i o n was unheard of. Better ways ex i s t for s e t t i n g and ensuring an appropriate demurrage rate. ( i i ) Variable Cost Demurrage rates are the same regardless of the type of r a i l car. A shipper who detains a 35 year o l d box car pays the same as one who detains a hopper car. The reproduction values of each may be s u b s t a n t i a l l y d i f f e r e n t . Shippers frequently raised t h i s concern i n the questionnaire, suggesting that demurrage should vary depending on car type and/or market demand for the car. These concerns would be somewhat spurious i f demurrage was considered to be a penalty, but both the Board of Railway Commissioners, C.T.C., and the Supreme Court of Canada, as well as the I.C.C, and the United States Supreme Court have unequivocally held that demurrage i s both penalty and compensation. If i t was only punishment, then the penalty should be increased u n t i l the desired response i s received. The type of car seems i r r e l e v a n t . As one shipper pointed out, neither parking t i c k e t s nor speeding t i c k e t s vary depending on - 2 0 6 -whether the o f f e n d e r i s d r i v i n g a Honda or a C o r v e t t e . Since t h e r e i s a compensation element i t i s r e l e v a n t to q u e s t i o n how t h i s compensation should be c a l c u l a t e d . How are the r a i l w a y s to be compensated f o r t h e i r c a r b e i n g u n a v a i l a b l e ? Should the amount be based on revenue foregone, t h a t i s , the o p p o r t u n i t y c o s t , or should i t merely be the ownership expenses? Conversely, i f i t i s ownership c o s t s , what i s the l i f e s p a n of the c a r , salvage v a l u e , c o s t of c a p i t a l , maintenance c o s t s , and i n c i d e n t a l expenses to be considered? Furthermore, should the h i s t o r i c a l or replacement c o s t of the c a r be used as a b a s i s f o r c a l c u l a t i n g c o s t s ? A l l of these q u e s t i o n s become r e l e v a n t concerns when the i s s u e of v a r i a b l e demurrage r a t e s i s c o n s i d e r e d . The q u e s t i o n n a i r e , w h i l e a v o i d i n g these complex concerns, simply asked s h i p p e r s i f they f a v o r e d v a r i a b l e demurrage r a t e s . F o r t y - s i x , or 37%, i n d i c a t e d yes. The number of p o s i t i v e responses to t h i s q u e s t i o n was even g r e a t e r than those i n f a v o r of an i n c e n t i v e p l a n . T h i s q u e s t i o n a l s o t r i g g e r e d a c o n s i d e r a b l e number of comments b y , s h i p p e r s . In theory, demurrage r a t e s s h o u l d r e f l e c t s h o r t - r u n c o n d i t i o n s and be based on net revenue foregone by the c a r r i e r i n making the c a r a v a i l a b l e to the s h i p p e r . The r a t e would not be based on the average r e t u r n r e q u i r e d on c a p i t a l i n v e s t e d i n the c a r . During s l a c k market c o n d i t i o n s , the payment would be l e s s than compensatory; d u r i n g boom times, i t would be more. A l s o , demurrage r a t e s c o u l d v a r y by c a r type depending on t h e i r - 207 -revenue e a r n i n g c a p a b i l i t i e s , comparable to the d i s p a t c h and demurrage r a t e s i n s h i p p i n g . Such an analogy w i t h the s h i p p i n g i n d u s t r y i s u s e f u l to i l l u s t r a t e p r i n c i p l e s . The problem, however, i s t h a t demurrage arrangements cannot be n e g o t i a t e d f o r i n d i v i d u a l c a r l o a d movements as they can f o r i n d i v i d u a l s h i p c h a r t e r s . Even i f they c o u l d , d a t a do not appear to be a v a i l a b l e on net r a i l w a y earnings per c a r type but o n l y on o v e r a l l f l e e t revenue. From t h i s o n l y approximate estimates of revenue per/car/day can be c a l c u l a t e d (Appendix G). An e c o n o m i c a l l y l e s s d e s i r a b l e , but more p r a c t i c a l method of implementing v a r i a b l e demurrage would be to i n c o r p o r a t e a system s i m i l a r t o t h a t used to assess per diem charges between r a i l w a y s . From the onset, i t i s important to r e c o g n i z e t h a t per diem r a t e s are compensatory o n l y . They c o n s i d e r c o s t s but not revenue foregone. Before s u g g e s t i n g how per diem can be employed i n a v a r i a b l e c o s t demurrage scheme, a d i g r e s s i o n i n t o the h i s t o r y and o p e r a t i o n of per diem i s v a l u a b l e . A s i g n i f i c a n t p o r t i o n of the l i f e of a r a i l c a r i s spent i n s e r v i c e on r a i l w a y l i n e s other than t h a t of the owning r a i l r o a d . Per diem i s a system of compensation t h a t has developed between r a i l w a y s to reimburse owners f o r the use of t h e i r c a r s . One r a i l r o a d having another's c a r s on i t s own t r a c k s w i l l pay the o t h e r a predetermined per diem charge f o r the use of the o t h e r ' s c a r s . Per diem means per day and o r i g i n a l l y per diem was simply a d a i l y charge. Over time, the system of a s s e s s i n g these charges has changed but the name has - 208 -h e l d even though per diem i s not c u r r e n t l y assessed on a d a i l y b a s i s . The need f o r per diem began when r a i l w a y t r a c k s became s t a n d a r d i z e d . The s t a n d a r d i z a t i o n of gauges allowed t r a i n s t o be f r e e l y i n t e r c h a n g e d . Home r a i l w a y c a r s began d r i f t i n g onto non owners' t r a c k s . Even though the s t a n d a r d i z a t i o n of gauges was s u b s t a n t i a l l y complete by 1890, there was no indu s t r y - w i d e uniform per diem charges and r u l e s . R a i l r o a d s e n t e r e d i n t o b i l a t e r a l and m u l t i - l a t e r a l a g reements. 1 1 In t h i s e a r l y p e r i o d , t h e r e were numerous v a r i a t i o n s of per diem changes. Some were f l a t r a t e s and o t h e r s combined mileage and d a i l y c h a r g e s . 1 2 From 1886 - 1898, the General Time Convention and the A.R.A. formed committees to i n v e s t i g a t e and d i s c u s s a l t e r n a t e per diem programs.^ 3 I t was, however, not u n t i l 1902 t h a t a consensus was reached. F u l l y one-half of the members of the A.R.A., who together owned 91% of a l l r a i l c a r s agreed t o a uniform per diem schedule.-^ 4 Over the i n t e r v e n i n g y e a r s , the per diem r a t e has v a r i e d w i d e l y (Table X V I I ) . From an i n i t i a l l e v e l of 20<t i n 1902, i t rose t o 25$ i n 1906. Then i n 1907, i t jumped to 50$, o n l y t o ^ - T r a f f i c Worlds R a i l D e r e g u l a t i o n Monitor, Ex P a r t e #334, Sub #5, p. 40. l 2 R e e b i e and A s s o c i a t e s , Towards an E f f e c t i v e Demurrage  System, U.S. Department of Commerce, J u l y 1972, p. 187. 1 3 F e l t o n , The Economics of F r e i g h t Car Supply ( L i n c o l n : U n i v e r s i t y of Nebraska P r e s s , 1978). l 4 I b i d . - 209 -f a l l back to 25$ i n 1908. 1 5 In February of 1908, the A.R.A. established a committee composed of f i v e presidents from the nation's leading r a i l r o a d s . The McCreas Commission, as i t was c a l l e d , was charged with the task of developing the p r i n c i p l e s on which future per diem rates should be determined. 1 6 On May 17, 1909, the committee delivered i t s report. They stated that the r e n t a l charge for f r e i g h t cars "must y i e l d to t h e i r owners a f a i r return upon the investment i n them."-'-7 The committee went on to outline the following elements to be considered i n determining a per diem rate that y i e l d s a f a i r r e t u r n : ^ 8 1) Cost of repairs 2) Cost of replacement a) Depreciation b) Retirement 3) Cost of taxes 4) Interest cost 5) Other allowances i n c i d e n t a l to ownership The committee concluded that the d a i l y cost should have been 34.2$ from 1902 - 1907 and for 1907 i t was 40.534:. The committee recommended 40$. The A.A.R., i n turn, rejected the recommendation. However, the A.A.R. d i d increase per diem the following year but the rate was s t i l l s i g n i f i c a n t l y less than the recommended l e v e l . 1 5 I b i d . 1 6 B o l e s , The Freight Car Supply Problem and Car Rental  P o l i c i e s (Economic Research Service, U.S. Department of Agriculture, Report No. 953, A p r i l 1972), p. 16. 1 7 F e l t o n , p. 18. 1 8 B o l e s , p. 16. - 210 -From 1920 to 1945, per diem was f i x e d at $1.00 per day, with the exception of a 26 month period. An average plan was used from May 1, 1935 to June 30, 1937. 1 9 I t was created as a means of c u r t a i l i n g some i n e f f i c i e n t practices followed by railways i n the depression. During the 1930s, as a r e s u l t of the depressed economy an extensive car surplus existed. Empty car mileage rose dramatically as r a i l r o a d s sought to avoid per diem charges by r a p i d l y returning foreign cars empty. To minimize t h i s wastefulness and poor u t i l i z a t i o n , the average plan required that once a foreign car entered another railway's tracks, the railway would pay the car owner the present periem rate m u l t i p l i e d by the average number of days of foreign car detention per month i n 1932, 1933, and 1934. 2 0 I t i s r e a d i l y apparent from t h i s description and Tables I I , XII, and XVII that af t e r The McCreas Commission's de t a i l e d study and subsequent discussions and consideration, per diem remained between one-third and one-half of the demurrage rate. In 1935, several notable changes were made. F i r s t , the Railroads agreed that per diem rates would be set through membership votes of the A.A.R.21 Second, railr o a d s who owned tank cars, r e f r i g e r a t e d cars and s p e c i a l i z e d cars were permitted to place these cars on a mileage basis rather than a 1 9 F e l t o n , p. 19. 2 0 F e l t o n , p. 19. 2 1Reebie and Associates, p. 197. - 211 -Table XVII Per Diem Rates Date Per Diem Rate July 1, 1902 20$ July 1, 1906 25$ July 1, 1907 50$ March 1, 1908 25$ ' March 1, 1910 — March to July i n c l u s i v e 30$ August to February i n c l u s i v e 35$ January 1, 1913 4 5 $ December 15, 1916 75$ A p r i l 1, 1917 60$ March 1, 1920 90$ November 1, 1920 $ 1.00 May 1 to June 30, 1937 Average Per Diem Plan for Box Cars March 1, 1937 $ i . o o February 1, 1946 1.15 June 1, 1947 1.25 September 1, 1947 1.25 September 1, 1947 1.50 November 1, 1949 1.75 May 1, 1952 2.00 August 1, 1953 2.40 January 1, 1957 2.75 December 1, 1959 2.88 January 1, 1964 M u l t i l e v e l Per Diem Rates - 212 -per diem r a t e . 2 2 The evolution of per diem remained uneventful u n t i l 1964. Slowly, charges increased and by 1964, they had reached $2.88 per day. But, they were s t i l l uniform and, with the exception of the above mentioned provision, remained based on time. This f l a t uniform per diem rate was c r i t i c i z e d as causing some serious d i s t o r t i o n s . According to Yehuda Grunfield, i n The E f f e c t of the Per Diem Rate on the E f f i c i e n c y  and Size of the American Railroad Freight Car Fleet, Journal of Business, the Graduate School Business, University of Chicago, Vol. XXXII, 1959, p. 73, these uniform f l a t rates f a i l e d to provide an adequate incentive to the railways to purchase s p e c i a l service equipment. The demand for these cars greatly exceeded the amount the railways were w i l l i n g to supply under a system of f l a t uniform per diem. Railways receiving the same per diem no matter what the p r i c e , age or type of r a i l car, tended to buy the cheapest cars possible. In 1964, a major change i n the way per diem was assessed was made. A m u l t i l e v e l system of charges based on the cost of the r a i l car was i n s t i t u t e d . 2 3 O r i g i n a l l y , i t consisted of s i x cost brackets and the cost was determined by taking the o r i g i n a l purchase price and depreciating i t over 10 years on a str a i g h t l i n e basis. A 10% salvage value was assumed, During 1970, some even more dramatic changes came into e f f e c t . Time (per diem) charges have frequently been referred 2 2 I b i d . 2 3Reebie and Associates, p. 198. - 213 -to as the f i r s t t i e r of per diem. A second t i e r , mileage charges, was introduced and became e f f e c t i v e on September 1, 1970. The I.C.C. ordered that per diem rates be the summation of d a i l y rates and a rate per mile m u l t i p l i e d by the miles run by the car (332 I.C.C. 231). As well, the Commission ordered that the per diem scale be further disaggregated into more car value and age categories. The r e s u l t was a matrix of 21 car values and seven age groups. The decision was appealed to, and sustained by, the court i n Union P a c i f i c Railroad Company  v. U.S. 300 F. Supp 318. I t was affirmed per curiam 396 U.S. 1030. Later i n 1970, a t h i r d t i e r was added to the per diem structure. In addition to time and mileage, incentive per diem was incorporated into the scheme. I.P.D. recognized the seasonality of demand for box cars. I t i s a time charge that applied to unequipped box cars through the months of September to February. I t i s assessed over and above time and mileage charges. Railroads were required to earmark these funds and spend the money on repair and purchase of general service, unequipped box cars. The scheme was extended to gondola cars i n June 1979. 2 4 The r a i l r o a d s were d i s s a t i s f i e d with I.P.D. and maintained that i t f a i l e d to improve the box car shortage.25 j n August of 1980, p r i o r to the passage of the Staggers Act, the I.C.C. eliminated I.P.D. As well, Section 2 4There i s no Shortage of Frieght Cars. (Report to Congress November 10, 1980), p. 22. 2 5 I b i d . - 214 -224 of the Act r e p e a l e d the I.C.C. a u t h o r i t y over I.P.D. Today, w h i l e I.P.D. i s no more, time and mileage charges per c a r type e x i s t . Both Canadian and U.S. r a i l w a y s f o l l o w the stand a r d charges found i n the O f f i c i a l Railway Equipment  R e g i s t e r , p u b l i s h e d by the A.A.R. The c u r r e n t r a t e schedule i s a r e s u l t of the I.C.C.'s d e c i s i o n Ex P a r t e No. 334 Car S e r v i c e  Compensation - B a s i c Per Diem Charges - Formula R e v i s i o n i n  Accordance w i t h the Railway R e v i t a l i z a t i o n and R e g u l a t o r y Act  of 1976, d e c i d e d August 1, 1977. T h i s d e c i s i o n m o d i f i e d the per diem s t r u c t u r e p r e v i o u s l y s e t down by the I.C.C. i n 332  I.C.C. 231. T h i s new s t r u c t u r e , c a t e g o r i z e d r a i l c a r s i n t o 15 types (Appendix I ) . For each c a r type, a m a t r i x composed of 85 ca r v a l u e groups r a n g i n g from $1,000 to $85,000 forms the v e r t i c a l a x i s . Along the h o r i z o n t a l a x i s are c a r age c a t e g o r i e s . They are denominated i n one year b l o c k s . The number of age c a t e g o r i e s v a r i e s depending on the r a i l c a r type. Some have as few as 20, o t h e r s have as many as 38. T h i s s t r u c t u r e a l l o w s the h o u r l y time charge to be determined. The mileage charge uses the same 85 c a r value groupings and 15 c a r types but o n l y has two age c a t e g o r i e s . The exact amount i s g i v e n i n cents per m i l e . Thus, w h i l e on the same car type matrix, the time charge and mileage charge are c a l c u l a t e d s e p a r a t e l y . To determine the charges d e t a i l e d i n these t a b l e s , the I.C.C. developed a formula. The formula i s based on c o n s i d e r a t i o n of f i v e f a c t o r s . They a r e : - 215 -1) age and value 2) depreciation 3) repair cost 4) cost of c a p i t a l 5) transportation use Age and value are encompassed i n the basic structure. Depreciation i s s p e c i f i c to each car type (Table XIX). A salvage value, average service l i f e and depreciation rate for each car type i s developed from national r a i l r o a d data using a s t a t i s t i c a l a c t u a r i a l analysis. Repair costs are determined by using a three year moving average of repair costs reported from i n d i v i d u a l r a i l r o a d s . Cost of c a p i t a l i s more p r e c i s e l y the current cost of c a p i t a l and i s developed from data published i n the l a t e s t e d i t i o n of Transport S t a t i s t i c s i n the United  States. The f i n a l factor considered, transportation use, means that the formula only considers car cost associated with transporting goods. I t cannot include any amount for the value of the use of a car. Chicago B & Q Ry. Co. v. New York S & W  Ry. Co. 332 I.C.C. 176. Thus p o t e n t i a l p r o f i t or f u l l opportunity costs i s not considered. Per diem i s a very c a r e f u l , precise and d e t a i l e d c a l c u l a t i o n of the cost to one railway of another using i t s r a i l car. I t has been developed through many years of t r i a l and error and has withstood the test of time. The calculations are based on the most recent year's cost data and the scale i s reg u l a r l y updated to r e f l e c t changes i n pri c e s . I t would seem that the r e s u l t i s a very accurate and precise q u a n t i f i c a t i o n of r a i l car ownership costs. While the per diem rates can - 216 -r e a d i l y be c a l c u l a t e d from the O f f i c i a l Equipment R e g i s t e r . Per diem r a t e s are a l s o a v a i l a b l e from a computerized data base. The Canadian and U.S. r a i l w a y s use the Umler F i l e m aintained by the A s s o c i a t i o n of American Railways. T h i s computer data base g i v e s the c o r r e c t per diem r a t e f o r a l l r a i l c a r s used i n Canada and the U n i t e d S t a t e s , Any C P . R a i l or C N , R a i l employee who has access to a company computer t e r m i n a l can access t h i s data base and r e a d i l y determine such r a t e s . The r a t e s may be r e t r i e v e d by merely i n p u t i n g the r a i l c a r number p r i n t e d on the s i d e of the c a r . From these per diem t a b l e s , as an example, the range of per diem r a t e s were c a l c u l a t e d (Table X V I I I ) . I t i s assumed t h a t the c a r d i d not accumulate any mileage. A medium f i g u r e t h a t assumes a 10 year o l d c a r having the Canadian r a i l w a y ' s suggested r e p r o d u c t i o n v a l u e f o r t h a t c a r type i s a l s o shown i n Table XVIII. S e v e r a l i n t e r e s t i n g o b s e r v a t i o n s flow from these t a b l e s . F i r s t , c l e a r l y the ownership c o s t s v a r y between c a r types c o n s i d e r a b l y . Second, as i t was p r e v i o u s l y suggested, per diem was i n i t i a l l y and f o r many years a f t e r , between o n e - t h i r d and one-half of the demurrage r a t e , y e t today i f Table XVIII i s c o n t r a s t e d a g a i n s t the c u r r e n t demurrage r a t e of $22 i t i s c l e a r t h a t demurrage i s now equal to or i n some cases l e s s than per diem. In many cases then, demurrage i s not even compensatory, l e t alone a l l o w i n g f o r p e n a l t i e s or o p p o r t u n i t y c o s t . - 217 -T a b l e V I I I Maximum a n d Minimum P e r D i e m R a t e s by Gar T y p e as o f A p r i l 1 , 198A C a r T y p e Max. M e d i u m * M i n . Box AO F t . P l a i n hi.12 20. 88 (52) 2 . 6 A Box 50 F t . P l a i n A 3 . A A 26. AO (65) 3 .12 Box E q u i p p e d A 2 . 0 0 26. ,88 (70) 2 .88 G o n d o l a P l a i n 3 9 . 6 23. ,52 (62) 2 . A O G o n d o l a E q u i p p e d 39 .36 31. ,68 (82) 1 .92 H o p p e r C o v e r e d 38 .88 25. ,68 (69) 2 . 6 A H o p p e r - Open Top - G e n e r a l S e r v i c e 39 .12 16, .80 (A7) 1 .68 H o p p e r - Open Top - S p e c i a l S e r v i c e 36 .2A 22. ,08 (60) 1 .68 R e f r i g e r a t o r -M e c h a n i c a l 51 .36 39, .6 (68) 7 .68 R e f r i g e r a t o r -N o n - M e c h a n i c a l A 1 . 5 2 30, .72 (98) 3 .12 F l a t - T O F C / C O F C A 8 . 2 A 33, .6 ( 7 0 ) 6.96 F l a t - M u l t i l e v e l A 3 . 2 31, .92 (127) 2 .88 F l a t - G e n e r a l S e r v i c e A 3 . 6 8 2A, .00 (53) 3 .6 F l a t - O t h e r A O . 08 22, .08 (53) 3 .12 A l l O t h e r F r e i g h t C a r s A O . 32 20, .OA (50) 3 . 6 * U s i n g r a i l w a y e s t i m a t e d r e p r o d u c t i o n v a l u e ( ) and a s s u m i n g c a r t o be 10 y e a r s o l d . - 218 -This well established per diem formula could be incorporated as a cost base from which a v a r i a b l e demurrage system could be b u i l t . From t h i s accurate cost foundation, a c e r t a i n amount could then be tagged on as revenue foregone and/or as a penalty. Reebie and Associates i n Towards an  E f f e c t i v e Demurrage System, recommended that demurrage be set at the per diem rate plus $20 (1972 d o l l a r s ) . This approach has the advantage of s i m p l i c i t y at the s a c r i f i c e of some pr e c i s i o n . P ossibly a better method would be to, as i s done with r e p a i r costs i n the per diem formula, incorporate a three-year moving average of income generated by that car type. This formulation would create a demurrage f i g u r e that r e f l e c t s the recent opportunity l o s t . That i s , the summation of income and ownership costs found i n the Umler f i l e should produce the revenue generated by that car. A new demurrage data base s i m i l a r to the Umler f i l e could be created. ,. A l t e r n a t i v e l y , i f the demurrage f i g u r e i s to include a penalty component t h i s , too, can be added to the ownership cost figures i n the Umler f i l e . I t may also be possible to adjust these rates to r e f l e c t shortages or car surpluses very quickly. This method of s e t t i n g demurrage rates i s submitted as a better way of "indexing" demurrage than the suggested linkage to p r i c e indexes. Q u a n t i f i c a t i o n of cost data i s more accurate and j u s t i f i a b l e and p e n a l t i e s , i f incorporated, are not t i e d to p r i c e increases. - 219 -T a b l e XIX F r e i g h t C a r S e r v i c e L i f e and S a l v a g e V a l u e by C a r T y p e C a r T y p e L i f e ( y r s ) S a l v a g e V a l u e (%) A n n u a l R a t e Box AO F t . P l a i n 24 22 3 .25 Box 50 F t . P l a i n 25 19 3 .24 Box E q u i p p e d 26 17 3 .19 G o n d o l a P l a i n 27 22 2 .89 G o n d o l a E q u i p p e d 34 14 2 .53 Hopper C o v e r e d 29 17 2 .86 H o p p e r - Open Top - G e n e r a l S e r v i c e 23 23 3 .35 H o p p e r - Open Top - S p e c i a l S e r v i c e 38 23 2 .03 R e f r i g e r a t o r -M e c h a n i c a l 26 12 3 .38 R e f r i g e r a t o r -N o n - M e c h a n i c a l 25 11 3 .56 F l a t - T O F C / C O F C 29 18 2 .83 F l a t - M u l t i l e v e l 25 11 3 .56 F l a t - G e n e r a l S e r v i c e 33 22 2 .36 F l a t - O t h e r 37 18 2 .22 A l l O t h e r F r e i g h t C a r s 30 17 2 .77 S o u r c e : I n t e r s t a t e Commerce C o m m i s s i o n , Ex P a r t e 334 ( D e c i s i o n , A u g u s t 1 , 1977 ) . - 220 -One remaining c o n s i d e r a t i o n i s the ease of d i s s e m i n a t i o n of these demurrage r a t e s . T h i s i s not an o b s t a c l e and a number of p o s s i b i l i t i e s e x i s t . The demurrage schedule c o u l d be d i s t r i b u t e d i n p r i n t e d form as the per diem r a t e s are i n the O f f i c i a l Equipment R e g i s t e r . Shippers w i l l p r obably not use t h a t many c a r types so the p o s s i b l e r a t e s would be l i m i t e d . A l t e r n a t i v e l y computers are i n a l l l i k e l i h o o d owned by companies l a r g e enough to take advantage of r a i l s e r v i c e . D i s k s c o n t a i n i n g e x t r a c t s from the Umler f i l e r e v i s e d t o i n c l u d e demurrage c o u l d be d i s s e m i n a t e d t o the s h i p p e r s . P o s s i b l y access t o a c e n t r a l i z e d d a t a base where these demurrage r a t e s are maintained and r e v i s e d c o u l d be a v a i l a b l e to any s h i p p e r w i t h a microcomputer and a telephone. D. Summary of Current Issues T h i s chapter has c o n s i d e r e d a number of p r o p o s a l s f o r changes i n the c u r r e n t demurrage procedure uncovered d u r i n g the course of the i n t e r v i e w s , r e s e a r c h , and q u e s t i o n n a i r e s . Some were r e j e c t e d and some accepted. R e c i p r o c a l demurrage, averaging, and i n d e x i n g of demurrage r a t e s were found to be unacceptable d e v i c e s f o r improving r a i l c a r u t i l i z a t i o n through changes i n the demurrage scheme. C e r t a i n suggested changes, such as 24 hours f r e e time, i n c e n t i v e p l a n s , v a r i a b l e demurrage r a t e s and weekends, o f f e r p r o m i s i n g p o s s i b i l i t i e s f o r improving r a i l c a r u t i l i z a t i o n i n Canada. An a l l encompassing p r o p o s a l - 221 -f o r t h e i r i n c o r p o r a t i o n i n t o the p r e s e n t Canadian demurrage system w i l l be d i s c u s s e d i n the next chapter. - 222 -VI. DIRECTIONS FOR CHANGE The purpose of t h i s t h e s i s has been t o examine the e x i s t i n g demurrage r u l e s i n Canada t o determine i f they are p r e s e n t l y c o n s i s t e n t w i t h t r a n s p o r t a t i o n e f f i c i e n c y and, i f not, t o recommend changes. T h i s t h e s i s can be e f f e c t i v e l y d i v i d e d i n t o two p a r t s . The i n i t i a l s e c t i o n d e s c r i b e d the c u r r e n t demurrage r u l e s and t h e i r e f f e c t i v e n e s s . The second p a r t i d e n t i f i e s c u r r e n t i s s u e s w i t h Canadian demurrage, analyzes each of them and then draws out of t h i s examination recommendations f o r s p e c i f i c changes. A. Current Status of Canadian Demurrage Throughout t h i s t h e s i s evidence has mounted t h a t the c u r r e n t demurrage r u l e s are i n a p p r o p r i a t e i n today's economic environment. I t w i l l be r e c a l l e d t h a t c u r r e n t l y i n Canada, r u l e s d a t i n g back t o 1906 are used. Over 80 y e a r s , v e r y few changes have been made to the t a r i f f . A uniform system of demurrage a l l o w i n g c o m p a r a t i v e l y few exce p t i o n s and no average or i n c e n t i v e p l a n e x i s t s . Release times i n Canada r e f l e c t the i n a p p r o p r i a t e n e s s of t h i s dated demurrage scheme. When compared t o the U n i t e d S t a t e s , Canadian r e l e a s e times are s u b s t a n t i a l l y worse. Furthermore, they have remained a t t h i s same r e l e a s e l e v e l s i n c e the p l a n was adopted. Technology now e x i s t s t h a t the framers of the 1906 r u l e s c o u l d not p o s s i b l y have e n v i s i o n e d . Computers and telecommunications are a t such a l e v e l of s o p h i s t i c a t i o n t h a t - 223 -the s i m p l i c i t y inherent i n the 1906 plan i s no longer required. More complicated schemes of variable cost are manageable now through computer technology where they would have created absolute chaos i n 1906. Materials handling technology has seen tremendous advances. Where a car was unloaded by hand i n 1906, and i t may have required periods upwards of 48 hours, fork l i f t s and other mechanized systems allow cars to be unloaded i n a matter of a few hours. Moreover, close examination of the causes of detention indicate that they are often avoidable at the e l e c t i o n of the shipper. Yet, 48 hours free time remains, as i t d i d i n 1906. S o c i e t a l changes and increasing c a p i t a l equipment costs have resulted i n many shipper f a c i l i t i e s operating 24 hours per day, 7 days per week, yet the rules s t i l l exempt weekends and holidays and free time s t i l l s t a r t s from 7:00 AM. Competition through other modes, such as trucks, exists today and was not present i n 1906. This has resulted i n unforeseeable s t r u c t u r a l changes i n the r a i l r o a d industry. In every mode where deregulation has occurred or the industry i s unregulated, a non-uniform demurrage scheme e x i s t s . I t was found i n U.S. r a i l and i n U.S. trucking that the existence of many s p e c i a l arrangements i s e f f i c i e n t . I t allows shippers and railways or trucking firms to negotiate f r e i g h t rates i n conjunction with demurrage provisions. Frequently more r e s t r i c t i v e demurrage provisions requiring quicker release are traded o f f against lower f r e i g h t rates. Or i n some cases, the - 224 -f l e x i b i l i t y allows the railway to fine tune the demurrage provisions to meet s p e c i f i c shipper needs or truck competitive rules. This p a i r i n g of rate and service conditions i s true i n shipping, trucking, and U.S. railways, but i s only practiced to a very l i m i t e d extent i n Canadian railways. This i s strange since Canada deregulated i t s railways i n 1967. I t i s submitted that by leaving the demurrage t a r i f f unchanged industry has f a i l e d to r e a l i z e p o t e n t i a l e f f i c i e n c i e s . The impact of these e f f i c i e n c i e s are s i g n i f i c a n t , the simulation indicated that through increased u t i l i z a t i o n up to 131 m i l l i o n d o l l a r s i n car investment could be avoided by Canadian railways. As well, the p o s s i b i l i t y of a car shortage e x i s t s . If u t i l i z a t i o n i s increased as a r e s u l t of demurrage t a r i f f changes then such a shortage could possibly be avoided. The current demurrage plan should be retained i n i t s present form. However, the demurrage charges, should be changed to become variable. The remaining rules including 48 hours free time would be retained. If the shipper i s unable to take advantage of the incentive plan, then the old straight plan remains as an a l t e r n a t i v e . This i s important because conceivably not a l l shippers w i l l be able to, or want to, agree to an incentive plan. This p a r a l l e l s the United States Demurrage System where alternate plans including averaging are available at the e l e c t i o n of the shipper but the standard demurrage t a r i f f remains as well. Three major changes i n Canadian demurrage rules are - 225 -recommended. F i r s t , a system of demurrage charges v a r y i n g w i t h the type of r a i l c a r d e t a i n e d should be i n c o r p o r a t e d i n t o the demurrage t a r i f f . Second, g r e a t e r f l e x i b i l i t y i n n e g o t i a t i n g e x c e p t i o n s should be p r o v i d e d f o r . T h i r d , an i n c e n t i v e plan-s h o u l d be developed. B. Recommended Changes What i s recommended are changes d i r e c t e d a t c r e a t i n g a demurrage scheme t h a t a l l o w s s h i p p e r s and r a i l w a y s to c a p i t a l i z e on t e c h n o l o g i c a l changes t h a t permit q u i c k r e l e a s e of c a r s w h i l e a t the same time c r e a t i n g a p o s i t i v e environment t h a t motivates s h i p p e r s t o r e l e a s e r a i l c a r s promptly. The c o - e x i s t e n c e of both elements i s mandatory. ( i ) Greater F l e x i b i l i t y i n Negotiating Exceptions C u r r e n t l y , there seems to be few e x c e p t i o n s to the demurrage t a r i f f . Those t h a t e x i s t are mainly d i r e c t e d a t p l a c a t i n g s h i p p e r s by l i b e r a l i z i n g the terms of the t a r i f f e i t h e r by r e d u c i n g or e l i m i n a t i n g charges or i n c r e a s i n g f r e e time. A g r e a t e r number and more d i v e r s e e x c e p t i o n s seem a p p r o p r i a t e . E x c e p t i o n s t h a t reduce f r e e time or s t a r t f r e e time a t the s w i t c h or e l i m i n a t e the weekend exemption p r o v i s i o n s i n exchange f o r r a i l w a y concessions should be encouraged. F i n e t u n i n g of the t a r i f f t o l o c a l s h i p p e r geographic or economic c o n d i t i o n s may be necessary i f the r a i l w a y i s too compete w i t h t r u c k i n g or U.S. r a i l . Where r a i l s e r v i c e i s unavoidably i n c o n s i s t e n t , then e x c e p t i o n s may be the - 226 -o n l y way of c i r c u m v e n t i n g the problem and meeting the s h i p p e r s ' demands. E x t r a f r e e time or the demurrage f r e e storage of a couple of c a r s f u l l of the b u l k commodity as a b u f f e r a g a i n s t i n c o n s i s t e n t s e r v i c e may be necessary. Increased e x c e p t i o n s would not be i n c o n s i s t e n t w i t h other j u r i s d i c t i o n s or modes. Lack of u n i f o r m i t y i s t y p i c a l i n t r u c k i n g and s h i p p i n g . In U.S. r a i l , numerous ex c e p t i o n s and o p t i o n a l demurrage pl a n s e x i s t . With t h i s non-uniform system, c a r r e l e a s e times are s h o r t e r than i n Canada. ( i i ) Incentive Plan E a r l i e r t h i s paper d i s m i s s e d the average p l a n as i n e f f e c t i v e due to the d i m i n i s h i n g power of i t s i n c e n t i v e . Four U.S. s t u d i e s (Appendix H) were c i t e d i n support. An o p t i o n a l p l a n whereby s h i p p e r s are rewarded m o n e t a r i l y f o r the r e l e a s e of a r a i l c a r w i t h i n 24 hours and 48 hours i s recommended. The p l a n , as i t i s w i t h the Average p l a n i n the U n i t e d S t a t e s , should be o p t i o n a l and o n l y e n t e r e d i n t o upon the agreement of the s h i p p e r and the r a i l w a y . The reason f o r the o p t i o n a l p r o v i s o i s t h a t the frequency of s w i t c h i n g s e r v i c e p l a c e s a l i m i t a t i o n on the r a i l w a y ' s a b i l i t y t o c a p i t a l i z e on q u i c k r e l e a s e of c a r s . I t does not seem f a i r , where s w i t c h i n g s e r v i c e i s once a week and the s h i p p e r may o n l y r e c e i v e one c a r a week, t o r e q u i r e the r a i l w a y to e n t e r i n t o an i n c e n t i v e p l a n w i t h t h i s s h i p p e r on h i s i n s i s t e n c e when the r a i l w a y cannot use the r a i l c a r f o r which i t i s p a y i n g the s h i p p e r to r e l e a s e - 227 -quickly. A pre-set amount, less than demurrage, should be paid to the shipper i f the car i s released within 24 hours and a lesser amount paid for release between 24 and 48 hours and a lesser amount paid for release between 24 and 48 hours (for a discussion on the determination of these amounts, see Chapter V, Section B ( i i i ) ) . After 48 hours, the normal demurrage charge would be applied. The remaining rules of the current demurrage rules, not i n c o n f l i c t with incentive plan, would apply with the exceptions of claims. Such a plan i s currently p r a c t i c a l i n Canada. Today's technology permits many shippers to unload or load r a i l cars i n much less than 24 hours. Evidence indicates that, on average, four hours and as l i t t l e as one-half hour may be required. Further, most reasons for detention by shippers are avoidable. The railways are able to take advantage of r a i l cars released within 24 hours and such quick release r e s u l t s i n f i n a n c i a l advantages to the railways. As the simulation indicates, i f C.N. R a i l could have 95% of i t s cars released within 24 hours, i t alone would save 842,057 car days or i n d o l l a r terms reduced car investment of 131 m i l l i o n d o l l a r s . Both the railway and the shipper benefit under such a plan. It may also be possible to modify such a plan to provide incentives for release during weekends and holidays. Additional a l t e r n a t i v e plans could provide that free time st a r t s from time of switch not the old 7:00 AM ru l e . - 228 -( i i i ) Variable Cost Demurrage Charges Changes are needed to the l e v e l and s t r u c t u r e of demurrage charges. Current charges are too low and the l i m i t e d d i f f e r e n c e between c a r types i s i n a p p r o p r i a t e . An i n c r e a s e i n demurrage r a t e s should occur. S e v e r a l p i e c e s of evidence e x i s t t o support the c o n t e n t i o n t h a t demurrage r a t e s are too low. Table XVIII l i s t s per diem r a t e s by r a i l c a r type. When c o n t r a s t e d a g a i n s t the c u r r e n t demurrage charge of $22 i t i s apparent t h a t f o r many c a r s demurrage does not even cover the o p e r a t i n g c o s t of the r a i l c a r s . I t w i l l be r e c a l l e d t h a t per diem does not i n c l u d e any c o n s i d e r a t i o n f o r revenue foregone, i t i s simply o p e r a t i n g c o s t s which i s standard i n the s h i p p i n g i n d u s t r y where demurrage t r a d i t i o n a l l y equals the c h a r t e r r a t e f o r the s h i p . Simply put, comparison t o per diem i n d i c a t e s t h a t r a i l demurrage i n many cases i s not even compensatory l e t alone a l l o w i n g f o r p e n a l t i e s or o p p o r t u n i t y c o s t . Moreover, when demurrage i s compared t o revenue earned per c a r (Appendix G) the i n e q u i t y seems q u i t e l a r g e indeed. I f the s h i p p e r does not l i k e the h i g h e r charges, he has three o p t i o n s under the recommended changes. The s h i p p e r can r e l e a s e the c a r s w i t h i n 48 hours, agree t o the i n c e n t i v e p l a n , or n e g o t i a t e an e x c e p t i o n . With these a l t e r n a t i v e s a v a i l a b l e adverse consequences f o r some s h i p p e r s c o u l d be l i m i t e d . While such a d e t a i l e d demurrage system would have been unmanageable i n 1906, i t should not be so now. - 229 -In p l a c e of the c u r r e n t uniform demurrage charges, a v a r i a b l e s c a l e of charges should be developed and implemented. I t s hould v a r y by age and c a r type. The b a s i s f o r such v a r i a t i o n may be e x t r a c t e d from the a c c u r a t e and up to date c o s t d a t a t h a t forms the b a s i s of per diem r a t e s . The Umler F i l e computerized data base p r o v i d e s both C.N. and C P . R a i l w i t h the exact per diem r a t e f o r every North American r a i l c a r i n s t a n t l y upon i n p u t i n g the c a r number. T h i s a c c u r a t e c o s t base c o u l d be m o d i f i e d i n t o an e a s i l y a s s e s s a b l e demurrage s c a l e . T h i s system would a l l o w f o r the i n c o r p o r a t i o n of the now separate d e t e n t i o n charges t h a t are assessed over and above demurrage charges on r e f r i g e r a t e d , heavy duty f l a t c a r s , m u l t i - l e v e l and i n s u l a t e d box c a r s i n t o a u n i f i e d s c a l e . U s i n g the per diem r a t e s as the o p e r a t i n g c o s t p o r t i o n of the compensation element, a t h r e e year f l o a t i n g average of income f o r t h a t p a r t i c u l a r c a r type c o u l d be added. No p e n a l t y element s h o u l d be i n c l u d e d . The r e s u l t i s a c l o s e approximation of revenue earned per s p e c i f i c c a r type and year. Such an approximation i s e c o n o m i c a l l y d e s i r a b l e . T h i s same measure of demurrage i s used i n the s h i p p i n g i n d u s t r y . Demurrage i s u s u a l l y v e r y c l o s e to the d a i l y c h a r t e r r a t e and no s p e c i f i c p e n a l t y element i s added. As a p r a c t i c a l matter, such an average may be d i f f i c u l t t o determine. Resort may be taken to simply a f l a t charge added onto the per diem r a t e , as was recommended by Reebie and A s s o c i a t e s . I t would seem t h a t t h i s i s one area worthy of more r e s e a r c h . Bibliography Association of American Railways, Freight Car U t i l i z a t i o n  Impacts of Railroad - Customer Relationships, Vol. 4;  Demurrage 1981, A.A.R. Report No. 4-446. Boles, The Freight Car Supply Problem and Car Rental P o l i c i e s Economic Research Service, U.S. Department of Agriculture. Report No. 953, A p r i l 1972. Bross, Steward R. Ocean Shipping. (Cambridge, MD: Cornell Maritime Press, 1956). C o l l i e r , James. "Legal and Regulatory Aspects of Per Diem and Demurrage i n Relation to Freight Car D i s t r i b u t i o n , Transport Law Seminar, Papers and Proceedings (Assoc. of I.C.C. P r a c t i t i o n e r s , 1972). Felton, J.R. The Economics of Freight Car Supply (Lincoln, NE: University of Nebraska Press, 1978). Flood, K., Callson, G., and Sylvester, J. Transportation  Management, 4th Ed. (Dubuque, IA: Wm. C. Brown Publishers, 1984). Frankel, Ernest. Management Operations of American Shipping. (Boston, MA: Auborn House, 1982). Gab i l l e , J.P.R. Ef f e c t s of Free Time Reduction on R a i l Car U t i l i z a t i o n , (M.Sc. Thesis, U.B.C., 1974). Gi l e s , O.C. Charley and Giles Shipping Law, 7th Ed. (London: Pitman Publishing Ltd., 1980). Hulbrock. The Study of American Railways. (New York: Crown Publishers, 1947). Hungerford. The Railroad Problem. (Chicago: A.C. McClug & Co., 1917). Jackman, W.T. Economic P r i n c i p l e s of Transportation. (Toronto: University of Toronto Press, 1935). Jacobs, Samuel W. Railway Law of Canada. (Montreal: J. L o v e l l & Sons, 1900). Johnson and Vanmetr. P r i n c i p l e s of Railroad Transportation (New York: Appleton & Co., 1916). - 231 -McDowell, C.E., and Gibbs, H.M. Ocean Transportation. (New York: McGraw-Hill Book Co., 1954). Parsons, Frank. The Heart of the Railway Problem. (Boston: L i t t l e Brown Co., 1906). Reebie and Associates. Towards an E f f e c t i v e Demurrage System, U.S. Department of Commerce, July 1972. Report on Railroad Contract Rates Authorized by Section 208 of  the Staggers Act of 1980. (I.C.C. March 13, 1984). R.K. House and Associates Ltd. T a r i f f Bureaux i n Canada - A Study Prepared for the Department of Transport, 1976. Rockey, Craig F. "Railroad Deregulation: The U.S. Experience," Canadian Transportation Research Forum, May 1984. Sharfman, I.L. The /American Railway Problem. (New York: The Century Co., 1921). Summerskill, Michael. Laytime, 3rd Ed. (London: Stevens & Sons, 1982). Speb, Thomas, and Calabro, Pat. " H i s t o r i c a l Perspectives on the Freight Car Supply Problem: The Rule of Demurrage," I.C.C. Pr a c t i t i o n e r s ' Journal, V-43, 1975-1976, p. 470. Taff. Management of T r a f f i c and Physical D i s t r i b u t i o n , 4th Ed. (Homewood, IL: R.D.Irwin, 1969). Tiberg, Hugo. The Law of Demurrage, 3rd Ed. (London: Stevens & Sons, 1979). - 232 -Appendix A - 2 3 3 -R a i l w a y Demurrage Q u e s t i o n n a i r e T h i s q u e s t i o n n a i r e i s a p a r t o f a u n i v e r s i t y r e s e a r c h p r o j e c t b e i n g u n d e r t a k e n by P r o f e s s o r s G a r l a n d Chow and T r e v o r D . H eav er o f the U n i v e r s i t y o f B r i t i s h C o l u m b i a and f u n d e d by the U n i v e r s i t i e s R e s e a r c h P r o g r a m o f T r a n s p o r t C a n a d a . T h e p u r p o s e o f t h e r e s e a r c h i s t o c o n t r i b u t e t o t h e d e v e l o p m e n t o f i m p r o v e d a r r a n g e m e n t s g o v e r n i n g r a i l w a y d e m u r r a g e . The q u e s t i o n n a i r e s h o u l d o n l y t a k e a few moments o f y o u r t i m e . The i n f o r m a t i o n o b t a i n e d f r o m the q u e s t i o n n a i r e w i l l be c o n f i d e n t i a l and u s e d o n l y i n a g g r e g a t e d f o r m . I n t e r v i e w s a r e b e i n g c o n d u c t e d w i t h some s h i p p e r s . We may w i s h t o phone o r meet w i t h you l a t e r . A stamped and a d d r e s s e d e n v e l o p e i s e n c l o s e d f o r y o u r c o n v e n i e n c e . 1 . Does any o f t h e t r a f f i c o f y o u r f i r m / p l a n t move u n d e r an e x c e p t i o n t o t h e g e n e r a l d e m u r r a g e r u l e s ( C a n a d i a n C a r D e m u r r a g e T a r i f f 6 5 0 0 - A ) ? Y e s I f y e s , go to Q u e s t i o n 5 . No I f n o , c o n t i n u e . 2 . Has y o u r f i r m / p l a n t c o n s i d e r e d s e e k i n g an e x c e p t i o n ? Y e s I f y e s , c o n t i n u e . No I f n o , go to Q u e s t i o n 8 . 3 . I f y o u r f i r m / p l a n t has c o n s i d e r e d s e e k i n g a n e x c e p t i o n , was a n a t t e m p t made to ge t one? Y e s I f y e s , go to Q u e s t i o n 5 . No I f n o , c o n t i n u e . 4 . I f y o u d i d n o t go a h e a d , why n o t ? Go t o Q u e s t i o n 8 . 5 . I f y o u r f i r m / p l a n t h a s , o r has a t t e m p t e d to g e t , s p e c i a l demurrage a r r a n g e m e n t s , w i t h whom were y o u i n c o n t a c t ? R a i l w a y s a l e s / m a r k e t i n g r e p r e s e n t a t i v e : R a i l w a y t r a n s p o r t a t i o n r e p r e s e n t a t i v e : O t h e r , p l e a s e s p e c i f y : 6 . Were the s p e c i a l a r r a n g e m e n t s s o u g h t by y o u r f i r m / p l a n t a l o n e o r by an i n d u s t r y g r o u p ? A l o n e I n d u s t r y g r o u p , p l e a s e s p e c i f y : 7. What s p e c i a l a r r a n g e m e n t s were s o u g h t ? 234 8 . Does y o u r f i r m use an a s s i g n e d c a r f l e e t ? Y e s No 9 . Would you f a v o u r demurrage r a t e s w h i c h v a r y between c a r t y p e s ( i n a d d i t i o n t o t h e d i f f e r e n t c h a r g e s a p p l i e d t o r e e f e r c a r s a n d s p e c i a l i z e d h e a v y - l o a d f l a t c a r s ) ? Yes No 1 0 . Would a demurrage p l a n t h a t p r o v i d e s i n c e n t i v e s f o r the r e l e a s e o f a c a r w i t h i n 24 h o u r s , e x c l u d i n g h o l i d a y s and weekends , be a d v a n -t a g e o u s t o y o u r f i r m / p l a n t ? Y e s P l e a s e i n d i c a t e an a p p r o p r i a t e i n c e n t i v e b e l o w . No 1 1 . C o u l d y o u r f i r m b e n e f i t f r o m a d e m u r r a g e p l a n t h a t d o e s n o t i n c l u d e weekends i n f r e e t i m e ? Y e s , w i t h what i n c e n t i v e . No 1 2 . A r e t h e r e o t h e r c h a n g e s i n demurrage a r r a n g e m e n t s t h a t y o u w o u l d l i k e t o see? Name T e l e p h o n e P o s i t i o n & F i r m A d d r e s s Thank y o u f o r y o u r c o o p e r a t i o n . - 235 -- 236 -R a i l w a y Demurrage Questionnaire J u n e 1985 The q u e s t i o n n a i r e i s d i v i d e d i n t o 4 p a r t s . The f i r s t t h r e e s e c t i o n s d e a l w i t h exempt t r a f f i c , c o n t r a c t movement and t r a f f i c m o v i n g u n d e r f i l e d t a r i f f s . The q u e s t i o n s r e f e r - t o o n l y y o u r c o m p a n y ' s t r a f f i c . P l e a s e c o m p l e t e a l l s e c t i o n s . Thank you f o r y o u r c o o p e r a t i o n . A ) T R A F F I C EXEMPT FROM REGULATION (BOXCAR & TOFC) 1 . The p r o v i s i o n s and r u l e s of demurrage t a r i f f PHJ 6004 a p p l y t o : a ) what p r o p o r t i o n o f TOFC c a r - l o a d i n g s / u n l o a d i n g s ? % b) what p r o p o r t i o n of b o x c a r c a r - l o a d i n g s / u n l o a d i n g s ? % 2 . A r e r a t e c o n c e s s i o n s g r a n t e d to e n c o u r a g e s h i p p e r s to use PHJ 6004 i n l i e u o f some o t h e r demurrage a r r a n g e m e n t . I f s o , on what p e r c e n t a g e o f T . O . F . C . and BOXCAR movements? O v e r 75% 50-74% 25-49% l e s s t h a n 25% 3 . When the p r o v i s i o n s of PHJ 6004 demurrage t a r i f f a r e s p e c i f i e d , what p r o p o r t i o n of c a r s a r e l o a d e d / u n l o a d e d u n d e r : a ) S t r a i g h t Method % b ) A v e r a g e Agreement % c ) E x c e p t i o n s % 100 % T h e n e x t two q u e s t i o n s a p p l y o n l y t o exempt t r a f f i c NOT m o v i n g u n d e r  d e m u r r a g e p r o v i s i o n s f o u n d i n PHJ 6004. 4 . Where a r e the demurrage p r o v i s i o n s f o u n d ? 5 . P l e a s e d e s c r i b e t h e g e n e r a l f e a t u r e s of the demurrage a r r a n g e -m e n t , e . g . , f r e e t i m e , p e n a l t y amount , i n c e n t i v e f o r e a r l y r e l e a s e , d o e s p e n a l t y v a r y by c a r t y p e ? I f p o s s i b l e , p l e a s e s e n d r e l e v a n t pages f r o m a p p l i c a b l e t a r i f f s . - 237 -T R A F F I C MOVING UNDER CONFIDENTIAL CONTRACTS The p r o v i s i o n s and r u l e s o f demurrage t a r i f f PHJ 6004 a p p l y t o : a ) what p r o p o r t i o n of C o n f i d e n t i a l C o n t r a c t s ? % b ) what p r o p o r t i o n of c a r movements u n d e r C o n f i d e n t i a l C o n t r a c t s ? % A r e r a t e c o n c e s s i o n s g r a n t e d to e n c o u r a g e s h i p p e r s to use PHJ 6004 i n l i e u of some o t h e r demurrage a r r a n g e m e n t ? I f s o , on what p e r c e n t a g e o f c o n f i d e n t i a l c o n t r a c t s ? O v e r 75% 50-74% 25-49% l e s s t h a n 25% When the p r o v i s i o n s of PHJ 6004 demurrage t a r i f f i s s p e c i f i e d , what p r o p o r t i o n of c a r s a r e l o a d e d / u n l o a d e d u n d e r : a ) S t r a i g h t Method % b ) A v e r a g e Agreement % c ) E x c e p t i o n s % 100 % T h e n e x t two q u e s t i o n s a p p l y o n l y t o c o n f i d e n t i a l c o n t r a c t s NOT  u s i n g t h e demurrage p r o v i s i o n s f o u n d i n PHJ 6004. Where a r e t h e demurrage p r o v i s i o n s f o u n d ? P l e a s e d e s c r i b e the g e n e r a l f e a t u r e s of the demurrage a r r a n g e m e n t e . g . , f r e e t i m e , p e n a l t y amount , i n c e n t i v e f o r e a r l y r e l e a s e , does p e n a l t y v a r y by c a r t y p e ? I f p o s s i b l e , p l e a s e send r e l e v a n t p a g e s f r o m t h e a p p l i c a b l e t a r i f f s . T R A F F I C MOVING UNDER REGULATED T A R I F F S ( T a r i f f s f i l e d w i t h I C C ) The p r o v i s i o n s and r u l e s of demurrage t a r i f f PHJ 6004 a p p l y to what p r o p o r t i o n c a r s moving u n d e r t a r i f f s f i l e d w i t h the ICC? - 2 3 8 -A r e r a t e c o n c e s s i o n s g r a n t e d to e n c o u r a g e s h i p p e r s to use PHJ 6004 i n l i e u of some o t h e r demurrage a r r a n g e m e n t ? I f s o , on what p e r c e n t a g e of t r a f f i c moving u n d e r r e g u l a t e d t a r i f f s ? O v e r 75% 50-74% 25-49% l e s s t h a n 25% 3. When the p r o v i s i o n s of PHJ 6004 demurrage t a r i f f a r e s p e c i f i e d , what p r o p o r t i o n of c a r s a r e l o a d e d / u n l o a d e d a r e u n d e r : a ) S t r a i g h t Method % b ) A v e r a g e Agreement % c ) E x c e p t i o n s % 100 % The n e x t two q u e s t i o n s a p p l y o n l y t o p u b l i s h e d t a r i f f t r a f f i c NOT  m o v i n g u n d e r demurrage p r o v i s i o n s f o u n d i n PHJ 6004. 4 . Where a r e t h e demurrage p r o v i s i o n s found? 5 . P l e a s e d e s c r i b e the g e n e r a l f e a t u r e s o f the demurrage a r r a n g e -m e n t , e . g . f r e e t i m e , p e n a l t y amount , i n c e n t i v e f o r e a r l y r e l e a s e , d o e s p e n a l t y v a r y by c a r t y p e ? I f p o s s i b l e , p l e a s e send r e l e v a n t pages f r o m the a p p l i c a b l e t a r i f f s . D) GENERAL QUESTIONS 1 . C o u l d y o u i n c l u d e some sample d a t a o r s t a t i s t i c s s h o w i n g the i m p a c t o f v a r i o u s d e v i a t i o n s f r o m PHJ 6004 on c a r u t i l i z a t i o n . 2 . What a r e the b e n e f i t s o f c o n t i n u i n g to use PHJ 6004 i n l i g h t o f t h e S t a g g e r s A c t ? ( P l e a s e use back o f page f o r r e s p o n s e . ) Name T e l e p h o n e P o s i t i o n & F i r m A d d r e s s T h a n k y o u f o r y o u r c o o p e r a t i o n . - 239 -Appendix C The following c a r r i e r s are p a r t i e s to t h i s t a r i f f under Powers of Attorney issued to the Canadian Car Demurrage Bureau, Agent, which are on f i l e with the Canadian Transport Commission - Railway Transport Committee and the Interstate Commerce Commission: Algoma Central Railway. B r i t i s h Columbia Hydro and Power Authority. B r i t i s h Columbia Railway Company. Burlington Northern Railroad Company. Burlington Northern (Manitoba) Limited. Canadian National Railways. (Lines Thunder Bay, Ont., Armstrong, Ont. and East thereof). Canadian National Railways. (Lines Thunder Bay, Ont. Armstrong, Ont., and West thereof). C P . R a i l (Canadian P a c i f i c Limited). (Lines Thunder Bay, Ont., and East thereof). C P . R a i l (Canadian P a c i f i c Limited). (Lines Thunder Bay, Ont., and West the r e o f ) . Chesapeake and Ohio Railway Company, The. Consolidated R a i l Corporation. Dominion A t l a n t i c Railway Company, The. Duluth Winnipeg and P a c i f i c Railway Company. Esquimalt and Nanaimo Railway Company, The. Essex Terminal Railway Company, The. Grand River Railway Company, The. (CPE) Grand Trunk Railway System. (Lines i n the United States, East of the west bank of the D e t r o i t and St. C l a i r Rivers) comprising the following c a r r i e r : Canadian National Railway Company. Lake E r i e and Northern Railway Company, The. (CPE) N a p i e r v i l l e Junction Railway Company, The. (CPE) Norfolk and Western Railway Company. Ontario Northland Railway (Ontario Northland Transportation Commission). Quebec Central Railway Company. Toronto, Hamilton and Buffalo Railway Company, The. - 240 -Appendix D Canadian Car Demurrage Bureau  Statement of Cars Reported. Demurrage and Dentention Assessed. Refunds and Reliefs, Year Ending December 31. 1983 % in Over Month Reported Free Time One Day Two Days Three Days Four Days Five Days Five Days Dem. & Det. Assessed Reliefs & Refund Jan. E. 121,176 95 1904 915 734 506 359 1123 $ 875,689 $ 69,094 W. 125,076 98 1024 353 259 178 158 498 465,957 45,149 Feb. E. 130,063 95 2147 946 742 565 459 1335 1,003,311 74,079 W. 121,323 97 1089 398 264 159 103 384 435,033 76,196 Mar. E. 143,409 95 2543 1209 856 672 515 1349 1,046,550 164,207 W. 144,553 98 1169 346 219 171 120 384 439,695 185,848 Apr. E. 136,902 95 2527 1008 755 570 433 923 805,749 126,625 W. 143,858 98 1174 409 169 123 110 258 386,040 296,644 May E. 149,200 96 2310 1077 723 624 456 880 747,098 107,879 W. 156,127 98 1070 305 227 165 125 277 301,799 129,160 June E. 145,914 95 2677 1192 776 576 475 1035 806,394 221,691 W. 154,009 98 1184 420 253 228 99 349 257,647 72,266 July E. 115,947 95 2188 1018 699 465 494 1098 862,290 54,721 W. 147,885 98 1074 4Z3 219 163 184 404 346,657 75,878 Aug. E. 138,800 95 2313 992 713 665 519 1106 872,769 85,665 W. 168,440 98 1088 514 327 182 141 388 354,145 47,378 Sept. E. 145,694 95 2532 1191 723 712 528 1155 914,315 57,778 W. 161,518 98 1041 378 208 173 192 361 411,813 42,015 Oct. E. 163,434 96 2446 1077 738 573 407 1081 958,909 53,840 W. 154,797 98 1321 458 280 206 169 452 392,330 125,467 Nov. E. 168,359 96 2704 1299 881 705 515 1020 878,457 150,178 W. 155,455 98 1072 397 229 168 149 446 430,910 32,193 Dec. E. 127,143 95 2374 1166 674 589 397 1068 854,549 51,429 W. 142,873 98 992 406 230 210 166 418 404,454 33,103 Total E. 1,686,041 95 28665 13090 9014 7222 5557 13173 $10,626,080 $1,217,186 Total W. 1,775,914 98 13298 4807 2884 2126 1716 4619 $4,626,480 $1,160,297 Combined Total 3,461,955 96 41963 17897 11898 9348 7273 17792 $15,252,560 $2,377,483 Note: E. Eastern Lines W. Western Lines - 241. -Appendix E Percentage of Cars Released W i t h i n Free Time (Yearly) Year East West T o t a l 1927 93.55 95.23 1928 1929 93.37 95.68 1930 93.99 96.19 1931 94.97 96.68 1932 96.38 1933 96.38 97.49 1934 96.70 97.33 1935 96.44 97.72 1936 1937 95.81 97.59 1938 1939 96.13 97.77 1940 95.26 97.41 1941 1942 91.45 94.42 1943 89.82 93.35 1944 89.80 94.12 1945 89.58 93.89 1946 90.25 93.83 1947 91.01 94. 31 1948 1949 1950 90.89 92.95 1951 1952 91.39 93.91 1953 1954 1955 1956 1957 1958 1959 92.15 94.89 1960 94.30 96.54 95.16 1961 94.45 96.68 95.29 1962 94.08 96.83 95.05 1963 94.11 96.90 95.14 1964 93.66 96.80 94.78 1965 92.45 96.30 93.80 1966 1967 ( t a b l e continues) - 242 -Appendix E - continued Percentage of Cars Released W i t h i n Free Time (Yearly) Year East West T o t a l 1968 1969 1970 1971 1972 93.44 96.82 1973 93.80 97.14 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 95.00 98.00 96.00 1984 Source: Board of Railway Commissioner D e c i s i o n s - 24 3 w -Appendix F - 246 -% D i s t r i b u t i o n O i_J i__t I_I Q I_I u o — r - o iti <ji cr> - J % D i s t r i b u t i o n 15 l_J l_l O O c Q i Q e a s e d T i m e D i s t r i b u t i o n — 8 3 - 9 0 T o n C o v e r e d H o p p e r C a r s Jn l o a d i n g 0 , 0 6 . 0 5 • I , fit / 1 V X r—*w x i JO. . "-1 T J o n 2 4 4- F e b 4 8 7 2 9 6 F r e q u e n c y f h o u r s ) M a r A A p r X Mi o CM l_J re R e l e a s e e T i m e D i s t r i b u t i o n — U n l o a d i n g 8 9 f t . F l a t B i - / T r i L e v e l C a r s tCW - 1 3" /A 5ff ro F e b F r e q u e n c y f h o u r s ) M a r A ' A p r x 1 9 2 J u n e - 252 -% D i s t r i b u t i o n R e l e a s e d T i m e D i s t r i b u t i o n — U n l o a d i n g 5 2 f t . F l a t S t a n d a r d C a r s 0.4 - 259 -% D i s t r i b u t i o n 4-ct-> Z? O X Ct < c z? I _J I _ I O U I _ I I _ I o o L J o o o h o 'o h P P no M fo fo '-' t*i O • rO -h CD CO — 1 PO -4> CD CO rO rO 4> CD CO b4 rO I ml 1 t J I Ja -,lr-, i I I ! I ! I L -o <D Q 'CO H I _'J o T 5 o w w X O TJ a 03 o Q • o VO • r I R e l e a s e d T i m e D I s t r l b u t I ' 4 0 - 5 0 f t . B o x I n s u l a t e n l o a d i n g J o n - 262 -% D i s t r i b u t i o n ['__ Q l _ l I _ I i i i i i i i i i i i i i t i i I _ I u _ _ l o ro r~ i a h 9 9 h ro a.! ro -•• ro -f* C T I co ro ro ro <y> ro CO - 2 6 4 -- 266 -% D i s t r i b u t i o n t_ L i U U I I I I l _ l LJ l _ l l _ l l _ l J l _ l l _ l l _ l ro ro ro ro u co ro ro -r^ - CD CO ro R e l e a s e d T i m e D i s t r i b u t i o n — U n l o a d In a T O T A L O F A L L C A R T Y P E S i j 1 7 1 6 1 5 1 4 -1 3 i 1 2 -1 1 0.1 0 9 H 0 8 0 7 —\ 0 6 0 5 H 0 4 0 . 0 3 H 0 . 0 2 0 , 0 1 -A a n A 2 4 F e b i — r 1 4 4 1 6 8 1 9 2 F r e q u e n c y f h o u r s ) M a r A " A p r Mav v J u n e - 268 -Appendix G C a n a d i a n R a i l w a y O p p o r t u n i t y C o s t / R a i l C a r / D a y F r e i g h t Revenue ( A l l L i n e s ) (000) Number o f F r e i g h t C a r s R e v / C a r / D a y Demurrage 1971 1 ,579 ,704 187,306 2 3 . 1 $10 1972 1 ,688 ,106 186,541 24 .79 10 1973 1 ,822 ,704 10 1974 2 , 1 4 1 , 7 2 1 10 1975 2 , 2 6 3 , 1 5 6 193,197 32 .09 15 1976 193,401 42 .96 15 1977 2 , 9 3 5 , 2 5 6 187,183 42 .96 15 1978 3 , 2 0 8 , 0 6 5 182,138 48 .25 15 1979 3 , 7 2 1 , 5 4 9 180,089 56 .61 15 1980 4 , 1 3 4 , 0 7 3 179,139 63 .22 18 1981 4 , 6 3 5 , 2 1 7 179,105 70 .90 18 1982 155,897 20 1983 149,432 20 1984 21 1985 22 S o u r c e : S t a t i s t i c s Canada R a i l w a y T r a n s p o r t i n Canada #52-208 Appendix H Summary of U.S. Studies of Rail Car Release Times Released before Released before Released before Released before Total # of beginning of end of f i r s t end of second end of third Cars Released free time 24 hrs 24 hrs 24 hrs 1) 1956 RAIL CARRIER STUDY CM Average Percentage Straight Percentage 1,256,728 85.88 206,597 14.12 2) NEW ENGLAND DEMURRAGE COMMISSION - 1955 Average Percentage Straight Percentage 1,167,018 83.09 237,408 16.91 3) NEW ENGLAND DEMURRAGE COMMISSION - 1956 Average Percentage Straight Percentage 749,912 78.84 201,312 21.16 4) 1973 - 1974 RAIL CARRIER STUDY Average 783,447 Percentage 93.53 Straight 54,174 Percentage 6.47 5) A.A.R. STUDY - 1977 Average - Load 73,085 Percentage 99.6 Average - Unload 77,961 Percentage 98.5 Straight - Load 284 Percentage .4 Straight - Unload 1,113 Percentage 1.5 72,795 9.3 9,420 17.4 537,852 68.7 40,612 75 57,656.7 78.89 47,041.6 60.34 184 64.79 721.1 51.03 1,056,007 84.81 177,599 85.97 969,791 83.1 43,097 89.4 608,725 81.78 176,729 87.78 680,723 86.9 50,022 92.3 67,969 93.00 62,680.6 80.40 236 83.10 924.9 74.84 70,812 96.89 69,619 89.30 265.9 93.66 947.05 85.09 (table continues) Appendix H - continued Summary of U.S. Studies of Rail Car Release limes Released before Released before Released before Released before Total # of beginning of end of f i r s t end of second end of third Cars Released free time 24 hrs 24 hrs 24 hrs 6) A.A.R. STUDY - 1978 Average - Load 64,740 52,595 60,149 62,014 Percentage 99.5 81.24 92.91 95.79 Average - Unload 70,289 44,907 57,890 63,337 Percentage 98.75 63.89 82.36 90.11 Straight - Load 290 225 252 266 Percentage .5 77.59 86.90 91.72 Straight - Unload 889 427 675 767 Percentage 1.25 48.03 75.93 86.28 1) Source: Increased Demurrage Charges 300 I.C.C. 577 Note: Study for f i r s t six months of 1956 measured at 14 representative points within the United States. 2) Source: Increased Demurrage Charges 300 I.C.C. 577 Note: Study for f i r s t six months of 1955 and i s for New England Railroads from consolidated monthly reports of each railroad under the jurisdiction of the New England Demurrage Commission. 3) Source: Ibid. Note: Study i s for f i r s t six months of 1956. 4) Source: Car Demurrage Rules Nationwide: 350 I.C.C. 777 5) & 6) Source: Freight Car Ut i l i z a t i o n Impacts, of Railroad - Customer Relationships. Vol. 4: Demurrage. A.A.R. Report #12-446. Note that Studies 1-3 are not s t r i c t l y comparable to 4-5 and the C.N. data for Canadian release times. The f i r s t three measure only cars released before and after free time expires. However, free time is an unknown. I t could be 48 hours or i t could be more i f weekends are included. The latter studies are measured in hours and are comparable to the C.N. data. Appendix I Car Type Groupings f o r the Purpose of Per Diem C a l c u l a t i o n s Box - P l a i n 40 Foot Box - P l a i n 50 Foot or Longer Box - Equipped Gondola - P l a i n Gondola - Equipped Hopper - Covered Hopper - Open Top - General S e r v i c e Hopper - Open Top - S p e c i a l S e r v i c e R e f r i g e r a t o r - Mechanical R e g r i g e r a t o r - Non-mechanical F l a t - TOFC/COFC F l a t - M u l t i - L e v e l F l a t - General S e r v i c e F l a t - Other A l l Other Cars Source: I n t e r s t a t e Commerce Commission; Ex Parte 3 34 ( D e c i s i o n August 1, 1977) 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0096622/manifest

Comment

Related Items