Scrap shippers tell regulators rail fees are unfair

Commodity shippers, including scrap metal dealers, urged federal rail regulators today to ensure railroads are applying demurrage and accessorial fees fairly.

The Surface Transportation Board (STB) began what will be a two-day hearing to examine shipper complaints that these charges are increasing as railroads shift to a new operating model but have yet to pay off in better service.

Railroads assess demurrage fees when shippers hold on to carrier-owned cars for too long. Accessorial fees are applied for actions that go beyond normal handling, such as diverting a train in transit.

Railroads have increased the use of charges to force shippers to meet tight timelines associated with the implementation of the precision scheduled railroading model. That system is intended to increase railroad efficiency and reduce congestion.

But shippers said so far the shift is just costing them more money.

"We have not had any benefit from paying these increased demurrage charges," Consolidated Scrap Resources chief executive Ben Abrams told the STB today. The Pennsylvania-based company's demurrage charges billed by Norfolk Southern (NS) during the first four months of the year have exceeded the total charges from 2018, which themselves were above the average from 2015-2017.

The added charges come as scrap dealers face squeezed margins amid lower prices for ferrous scrap, the primarily metal yards ship by rail.

Abrams said NS has increased service to the company's facility to seven days per week from 5.5 days, even though the plant does not operate for a full week. That has led to higher demurrage fees when the plant was closed and no workers are available to unload the railcars.

Abrams represented the scrap industry at the STB hearing attended by commodity shippers, railroads, and third-party logistics companies. Bobby Triesch, vice president and regional general manager of SA Recycling, will testify on tomorrow.

The Institute of Scrap Recycling Industries (ISRI) requested the STB evaluate whether current demurrage practices are proper incentivization to streamline rail operations, and not simply an additional revenue stream for railroads.

STB members questioned NS, CSX and Union Pacific (UP) about why fees have increased for customers that cannot make the necessary changes to avoid higher demurrage and accessorial fees.

"There are probably customers that will never be able to be incentivized because they do not have the ability to meet the demurrage costs," STB chairman Ann Begeman said.

Railroads said the fees acted as an incentive for customers to meet schedules.

"Our goal of growth would not be possible if we were treating our customers unfairly," said Arthur Adams, CSX vice president-sales and customer engagement.

Railroads sought to addressed the benefits to their networks but STB members remained skeptical. NS agreed to meet with the board privately to discuss in greater detail why it thinks the fees it assesses are fair.

"It helps the network. The customers that more efficiently use the railroad will benefit," NS chief marketing officer Alan Shaw said.