# Petition — Aliquippa & Southern Railroad v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2289%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1979 - **Citation:** 440 U.S. 968 ## Text 7 Supreme Coat VS a FILE > DEC 28 1S78 . A Ne eR) © a CLERK IN THE “s Supreme Court of the Rnited States OcToBER TERM, 1978 No ¢8-1049 ALIQUIPPA AND SOUTHERN RaILRoOAD COMPANY, ET AL., Petitioners Vv. INTERSTATE COMMERCE COMMISSION, ET AL., Respondents ee PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT Fritz R. Kaun VERNER, LITPFERT, BERNHARD & McPHeERSON 1660 L Street, N.W. Suite 1000 Washington, D.C. 20036 SaMuEL P. DELISI 1500 Bank Tower 207 4th Avenue Pittsburgh, PA 15222 THomas C. DorsEY 2000 Massachusetts Avenue, N.W. Washington, D.C. 20036 Attorneys for Petitioners Pagss or Brrzon S. Apams Patntino, Inc., Wasuineton, D. C. at. «se — ve INDEX Page I sndctecas chebuniis scene bndtsev eoek en 1 EE ata, dawtinenth chad edsdune 8 6, 7 Red Ball Vegetable Co. v. Illinois Central R.R., 197 ih A SIR Ree bard phe Foes Chewbhaa te taboces een 7 Remittance of Demurrage Charges, 349 I.C.C. 411... 3 Schiihle’s Grape Juice Co. v. Director General, 63 SM REE A Lies knee take 6 cvaid eS rissa 600-00 5 7 Seaboard Air Line R.R. v. United States, 382 U.S. 154 2 SEC v. Chenery Corp., 332 U.S. 194 ...........eeees 9 Swift é Co. v. Hocking Valley Ry., 243 U.S. 281 ...... 7 Turner, Dennis & Lowry Lumber Co. v. Chicago, M & Ee Re PNR eee 6, 7 United States v. Braverman, 373 U.S. 405 ............ 8 United States v. Chicago Heights Trucking Co., 310 ME | 5 vbdurs HARON aed h dae 4 sy oheek hens 8 United States v. Florida East Coast Ry., 410 U.S. 244 9 United States v. ICC, 352 U.S. 158 .......... eevee 7 United States v. Philadelphia &é f. Ry., 184 F. 548... 8 STATUTES: 49 U.S.C. § 10101 et seq.: OP Tk SEU bg en biccsytesvdcavanwvans’s 2 Citations Continued iii Page De Ss ED. is.Sn58 sheen oeR pass henade 2 Oe a PE vcvebass Sebieonse de ews 2, 6, 9,11, 12 Oe ee WN aves bncathwas tvesnesesacs 2 SE hn wiakudn bac Oa dvag ein 099% 2 ee NE eG caret Wieden aves ones kensnes 2,5 Oe es NCES ono Siet cairn hp se War wen ea's 2, 4, 1i. ok OE Ae era ey nn aeer 2 as OE 56 yhie a G's bo Nek bed ce dae wee 2, 5,8 Public Law 95-473, 92 Stat. 1337 et seq. ..........005 2 Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. 94-210, 90 Stat. 31 et seq.: RR Ber ee 4 MISCELLANEOUS: Locklin, Economics of Transportation (7th Ed. 1972) 6 Vanderblue and Burgess, Railroads: Rates Service a) ee eee Van Metre, Industrial Traffic Management (1953) .... 6 IN THE Suprene Court of the United States OcroBeR TERM, 1978 No. ALIQUIPPA AND SOUTHERN RAILROAD COMPANY, ET AL., Petitioners Vv. INTERSTATE COMMERCE COMMISSION, ET AL., Respondents PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT The Aliquippa and Southern Railroad Company, et al.,’ petition for a writ of certiorari to review the judg- ment and opinion of the United States Court of Ap- peals for the Third Circuit. OPINIONS BELOW The opinion of the court of appeals (App. B, pp. 4a-30a) is reported at 583 F.2d 678 (3rd Cir. 1978). The decision of the Interstate Commerce Commission (App. C, pp. 3la-84a), which it sustained, is reported at 353 I.C.C. 567 (1977). 1 Petitioners are listed in the Appendix (App. A, pp. 1la-3a). 2 JURISDICTION The order of the court of appeals denying petition- ers’ timely petition for rehearing en banc was denied on October 5, 1978 (App. D, p. 85a). The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). Long Island Rail Road v. Aberdeen & Rockfish R.R., 99 S.Ct. 46 (1978); Seaboard Air Line R.R. v. United States, 382 U.S. 154 (1965). QUESTION PRESENTED Whether the court below erred in sustaining the de- cision of the Interstate Commerce Commission upon a basis not invoked by the agency itself, namely, that railroad demurrage charges are not ‘‘rates’’ or ‘‘charges’’ within the meaning of the Interstate Com- merce Act, 49 U.S.C. § 10101 et seq., and the Elkins Act, 49 U.S.C. § 11903. STATUTES INVOLVED Involved are the provisions of what formerly were sections 1(3) (a), 1(5), 1(6), 2, 3(1), 6(1), 15(6) and 15(15) of the Interstate Commerce Act, 49 U.S.C. §§ 10102(23), 10701(a), 10705, 10741(a), 10741(b), 10747, 10750, and 10761,’ and former section 41(1) of the Elkins Act, 49 U.S.C. § 11903, the terms of which are set out in the appendix (App. E, pp. 86a-91la). STATEMENT OF THE CASE By notice of proposed rulemaking served October 19, 1972, the Interstate Commerce Commission recom- * Pub. L. No. 95-473, approved October 17, 1978, codified, with- out substantive change, the provisions of the Interstate Commerce Act and related laws. 3 mended that railroads collecting demurrage charges be required to remit all but $10 per car per day to the carriers that owned the freight cars against which de- murrage had accrued (App. F, pp. 92a-96a). A proceed- ing was instituted based upon thirteen provisions of the former Interstate Commerce Act,’ the National Transportation Policy and the Administrative Proce- dure Act, and all railroads subject to the Interstate Commerce Act were made respondents. The Commission determined, in its notice, that the $10 amount ‘‘appears to be more than adequate to com- pensate the railroad on whose lines the foreign car is being detained.” * Although written statements of facts, views, and arguments concerning the proposed rule were invited, no hearing was scheduled at this or any other time of the proceeding. On April 25, 1975, the Commission issued an interim report which sunported adoption of the rule and held that private car owners (shippers and other investors) as well as railroad car owners should receive the de- murrage revenue collected in excess of $10 per car per day.’ The proceeding was reopened for further evi- 3’ Former sections 1(4), 1(5), 1(6), 1(10), 1(11), 1(18), 1(14), 1/15), 1(17), 1(21), 6(7), 18(4), and 15(1) of the Interstate Commerce Act. *The amount was determined, as stated by the Commissicn, simply because it was the first increment of demurrage charges that, at the time, generally was applied in increments of $10, $20, and $30 per car per day depending on the extent of the detention period (App. F, pp. 92a-93a). >The Commission, in its interim report, ‘‘assume(d] that the first level of charges, currently $10 per day, will result in adequate retained revenue.’’ Remittance of Demurrage Charges, 349 1.C.C. 411, 442 (1975). Although participants were invited to submit figures to overcome the Commission’s presumption, the Commission denied petitioners’ request for a hearing. 349 I.C.C. at 417. 4 dence concerning the costs, benefits, and feasibility of implementing the proposed rule, together with any ad- ditional argument on the Commission’s clarification of the rule (App. G, pp. 97a-99a). Prior to issuance of the Commission’s final report, Congress amended former section 1(6) of the Inter- state Commerce Act by inserting the following new sentence: Demurrage charges shall be computed, and rules and regulations relating to such charges shall be established, in such a manner as to fulfill the na- tional needs with respect to (a) freight car utiliza- tion and distribution, and (b) maintenance of an adequate freight car supply available for trans- portation of property.° Comments were solicited by the Commission on the effect of the amendment on the proposed rule (App. H, pp. 100a-102a). The Commission’s final report and order was served April 7, 1977. The Commission found that it had juris- diction to consider the proposed rule under both sec- tion 1(6) of the Interstate Commerce Act, as amended, and its car service powers, and that the remittance of all demurrage charges collected ‘‘in excess of $10 per car per day, is just, reasonable, and otherwise lawful’’ (App. C, p. 73a). Following appeals to the Commission for reconsid- eration, which were denied, petitioners filed a petition ° Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. No. 94-210, § 211, 90 Stat. 46 (amending former section 1(6) of the Interstate Commerce Act, and now codified at 49 U.S.C. § 10750). 5 for judicial review of the Commission’s decision.’ On review, the court of appeals upheld the Commission’s finding that section 1(6) of the Interstate Commerce Act authorizes it to promulgate the demurrage remit- tance rule (App. B, 13a) and held that the proposed rule was ‘‘rationally supported’”’ as defined by the ‘arbitrary and capricious’? standard of 5 U.S.C. § 706(2)(A) applicable to notice and comment rule- making (App. B, pp. 18a-19a). Additionally, the court considered petitioners’ claim that the proposed rule, by including private car own- ers as well as railroad car owners in the remittance scheme, permits the payment of unlawful rebates to shippers who are private car owners in violation of former section 15(15) of the Interstate Commerce Act, 49 U.S.C. § 10747, and former section 41(1) of the Elkins Act, 49 U.S.C. § 11903. Rejecting our argu- ments, the court (App. B, pp. 26a-27a) stated: ‘“‘We have given careful consideration to these arguments and conclude that petitioners have mis- construed the purposes of §15(15) and § 41(1), as well as the concept of demurrage. ” * al Consequently, we do not believe that a demur- rage charge can properly be understood as a ‘‘rate”’ under §41(1), or as a ‘“‘charge”’’ as that term is used in § 15(15).”’ The court concluded it was unable to say that the inclusion of private car owners in the Commission’s 7A petition for judicial review in the United States Court of Appeals for the Third Circuit also was filed by thirty-three rail- road petitioners and four intervening railroads. Both petitions were consolidated before the court of appeals. 6 demurrage remittance rule is a violation of the Inter- state Commerce Act, and it did not express any con- clusion with respect to potential violations of the Elkins Act (App. B, p. 29a). The court also did not address or even acknowledge petitioners’ argument that the apportionment of demurrage revenues between carriers can be effected only in accordance with the procedures of former section 15(6) of the Act, 49 U.S.C. § 10705. REASONS FOR GRANTING THE WRIT Demurrage is a charge imposed by railroads upon shippers and receivers of freight who detain cars for loading or unloading beyond specified times.’ ‘‘The purpose of demurrage charges,’’ said this Court in Pennsylvania R.R. v. Kittaning Iron & Steel Mfg. Co., 253 U.S. 319, 323 (1920), ‘‘is to promote car efficiency by penalizing undue detention of cars. The duty of loading and of unloading carload shipments rests upon the shipper or consignee. To this end he is entitled to detain the car a reasonable time without any payment in addition to the published freight rate.’’ Accord, Turner, Dennis & Lowry Lumber Co. v. Chicago, M. ¢& St. P. Ry., 271 U.S. 259, 262 (1926). That demurrage is a ‘‘rate’’ or ‘‘charge’’ within the regulatory scheme heretofore never has been doubted by the courts or the Commission. Demurrage uniformly has been held to require publication in tariffs as any *Locklin, Economics of Transportation (7th ed. 1972) p. 587; Vanderblue and Burgess, Railroads: Rates Service Management (1924) pp. 257-258; Van Metre, Industrial Traffic Management (1953) pp. 315-318. 7 other rates or charges,’ and it has been held to be law- ful only if just and reasonable * and nondiscrimina- tory.” In these respects, the courts and the Commission have treated demurrage no differently than they have other accessorial rates or charges, such as wharfage,” icing’ and, as is most pertinent, reconsignment.”* The court below inexplicably held that demurrage was neither a “‘rate” nor a ‘‘charge.’’”’ It, accordingly, concluded that remittance of a portion of the demur- ® Berwind—White Coal Mining Co. v. Chicago & E.R.R., 235 U.S. 371, 375 (1914); Allied Chemical Corp. v. Burlington North- ern, Inc., 353 L.C.C, 49°, 501-502 (1977); Schuhle’s Grape Juice Co. v. Director General, 63 1.C.C, 129, 132 (1921). 1° Swift & Co. v. Hocking Valley Ry., 243 U.S. 281, 290 (1917) ; Allied Chemical Corp. v. Burlington Northern, Inc., 353 1.C.C. 499, 501-502 (1977) ; International Proteins Corp. v. Baltimore & O.R.R., 355 1.C.C. 187 (1976). 't Pennsylvania R.R. v. Kittaning Iron & Steel Mfg. Co., 253 U.S. 319, 323-324 (1920) ; Galveston Commercial Ass’n v. Atchison T.& S.F. Ry., 25 1.C.C, 216, 227 (1912). % United States v. ICC, 352 U.S. 158, 162 (1956) ; Cancellation of Wharfage Absorption, 335 I.C.C. 477, 522 (1969). 18 Alton & S.R.R. v. United States, 49 F.2d 414, 427 (N.D. Cal. 1931) ; Red Ball Vegetable Co. v. Illinois Central R.R., 197 1.C.C. 385, 390-391 (1933). * Turner, Dennis & Lowry Lumber Co. v. Chicago, M. & St. P. Ry., 271 U.S. 259, 263 (1926) ; Detroit Produce Ass’n vy. Director General, 62 1.C.C. 283, 286 (1921). * Iverson v. United States, 63 F. Supp. 1001 (D.D.C. 1946), relied on by the court of appeals, is inapposite. That case merely upheld the I.C.C.’s power to increase the amount of demurrage assessed upon cars in critical short supply, pursuant to the pro- visions of former section 1(15) of the Act, 49 U.S.C. § 11123, which, by its terms, allows the agency to adjust ‘‘any or all rules, regulations, or practices’’ of the carriers affecting car service. 8 rage collected by the railroads w the shippers furnish- ing their equipment could not be a rebate, within the meaning of former section 41(1) of the Elkins Act, 49 U.S.C. § 11903. The lower court’s construction of the law is an impermissibly narrow one; this court often has held that rate concessions, no matter what form they may take and no matter how indirectly they may be given, are proscribed." Indeed, in United States v. Philadelphia & R. Ry., 184 F. 548, 544 (C.C, E.D. Pa. 1910), the court specifically held that a jury can prop- erly find an unlawful concession where a railroad failed to collect and retain its entire published tariff rates with regard to demurrage charges: ‘rT }he verdict establishes the contention of the government that it was not a valid settlement of a disputed claim but was the cancellation of a de- murrage charge by the defendant for the purpose of making a concession... in the matter of charges, in violation of the Interstate Commerce Act.” The lower court’s conclusion, of course, did not track the Commission’s. The Commission found that its pro- posed regulation would not result in the payment of a rebate to the shippers furnishing their equipment, not because demurrage was neither a rate nor a charge, but because “‘the delivering carrier will receive its full rate and compensation for all demurrage charges and will merely remit the excess to the car owner.’’ 353 1.C.C, at 594 (App. C, p. 70a). Thus, the court below upheld the Commission’s de- cision on a ground altogether different than had been invoked by the agency. This clearly is error and con- 1 United States v. Braverman, 373 U.S. 405 (1963); United States v. Chicago Heights Trucking Co., 310 U.S. 344, 353 (1940) ; Baldwin v. Scott County Milling Co., 307 U.S. 478, 485 (1939). 9 trary to the fundamental rule of administrative law set forth by this Court in SEC v. Chenery Corp., 332 U.S. 194, 196 (1947): ‘“*TA] reviewing court, in dealing with a determina- tion or judgment, which an administrative agency alone is authorized to make, must judge the pro- nied of such action solely by the grounds invoked y the agency. If those grounds are inadequate or improper, the court is powerless to affirm the ad- ministrative action by substituting what it consid- ers to be a more adequate or proper basis. To do so would a the court into the domain which Congress has set aside exclusively for the admin- istrative agency.” Accord, FPC v. Texaco, 417 U.S. 380, 397 (1974); Burlington Truck Lines v. United States, 371 U.S. 156, 169 (1962). The lower court’s error colors all of its decision. Not merely did it mistakenly conclude that payment to shippers of a portion of demurrage collected from ship- pers furnishing their equipment, in compliance with the Commission’s proposed regulation, would not be a rebate. The perception of the court below that demur- rage is neither a ‘‘rate’’ nor a ‘‘charge”’ led it to disre- gard our argument, without so much as a footnote com- ment that, on carrier-owned equipment, the division of revenues between the railroads can be effected only in accordance with the procedures of former section 15(6) of the Act, 49 U.S.C. § 10705. That provision obliges a ‘“‘hearing’’ and an evidentiary record that comprehends the several factors that the Commission must consider in prescribing a division of revenues.” See United States v. Florida East Coast Ry., 410 U.S, 244, 238 (1973); Ligon Specialized Hauler v. ICC, Nos, 77-3302, 77- 3253 (3rd Cir. November 14, 1978). 10 This Court, in Baltimore & Ohio R.R. v. Aberdeen & Rockfish R.R., 393 U.S. 87, 92 (1968), affirmed a dis- trict court’s remand of a Commission order which pre- scribed divisions between northern and southern rail- roads based on an insufficient record: “Tf we were to reverse the District Court, we would in effect be saying that the expertise of the Commission is so great that when it says that aver- age territorial costs fairly represent the costs of Me orth-South traffic, the controversy is at an end, even though the record does not reveal what the nature of that North-South traffic is. The require- ment for administrative decisions based on sub- stantial evidence and reasoned findings—which alone make effective judicial review possible— would become lost in the haze of so-called exper- tise. Administrative expertise would then be on its way to becoming ‘‘a monster which rules with no es limits on its discretion’? (citation omit- ted).’’ The Commission’s decision regarding the amount of demurrage to be retained by the delivering carrier was determined on a record woefully insufficient to support such a division of revenues. The lower court over- looked this insufficiency by applying the wrong stand- ard of judicial review.” In fact, the Commission de- cided the split of demurrage revenues initially without benefit of any record or opportunity by petitioners to present within the appropriate statutory framework 18 Aberdeen & Rockfish R.R. v. United States, 270 F. Supp. 695, 710 (B.D. La, 1967), aff’d as modified, 393 U.S. 87 (1968) ; Boston & Maine R.R. v. United States, 208 F. Supp. 661, 674 (D. Mass. 1962), aff’d mem., 371 U.S. 26 (1962). ll their evidence concerning a just and reasonable appor- tionment.” Petitioners do not dispute the need for an adequate freight car supply and better freight car utilization. Their self interest obliges both. Obviously, the Com- mission must consider these factors, specifically enum- erated by the Congress in the amendment to former section 1(6) of the Act, 49 U.S.C. § 10750, in promulgat- ing rules and regulations relating to demurrage, But as long as the Commission’s demurrage remittance rule will result in a division of revenues between carriers, the Commission also is required to adhere to the appli- cable procedures under former section 15(6) of the Act, 49 U.S.C. § 10705.” The procedural requirements of 49 U.S.C. § 10705 in _ no way conflict with agency attention to the additional factors of section 1(6).” If there is to be a remittance to the owning railroad of a portion of the demurrage collected by the originating or delivering carrier, the factors contained in section 1(6) certainly can be in- cluded among those that must be considered by the Commission in fixing the split of revenues between participating lines. Petitioners are being asked to share with the car owners revenues they previously collected and retained in full. The Commission’s apportionment of those rev- '* The notice instituting the administrative proceeding proclaimed that the $10.00 amount ‘‘appears to be more than adequate to compensate the railroad on whose lines the foreign car is being detained’’ (App. F, p. 93a). © Baltimore & O.R.R. v. United States, 277 U.S. 291, 300-302 1928). * See, e.g., ICC v. J-T Transport Co., 368 U.S. 81 (1961). 12 13 enues, on a basis predetermined by the Commission, CONCLUSION without adherence to the procedural requirements un- eo ; der 49 U.S.C. § 10705, will be devastating to several of The petition for a writ of certiorari should be the petitioners and in turn impair their ability to sup- granted. ply transportation service to the public. Respectfully submitted, For example, petitioner Canton Railroad submitted evidence to the Commission that it received $66,310 in Fritz R. KAHN demurrage revenues during the first quarter of 1975. a BERNHARD Application of the Commission’s demurrage rule would & McPHERSON 1660 L Street, N.W. reduce its demurrage revenues to $36,532, which would | Sirite 1000 ree A = pon el “i of a. sig rm Washington, D.C. 20036 119,112, Considering that petitioner’s reported ne income for 1975 was $68,000, the effect of the Commis- mG RaPg cell sion’s order is ruinous. 307 4th Avenue The court below dismissed with a cursory footnote Pittsburgh, PA 16222 (App. B, p. 17a), the havoe to be wrought upon several THomas ©. DORSEY of the petitioners, and ignored petitioners’ right to dle ear tg N.W. present evidence pursuant to 49 U.S.C. § 10705 regard- | re ae ing the justness and reasonableness of the division of | Attorneys for Petitioners revenues ordered. If, as the Commission now evidently | believes, demurrage is to be treated as revenue to be Dated: December 1978 apportioned between several carriers, it has no choice but to observe the procedural safeguards of 49 U.S.C. § 10705. APPENDIX a ree _- a = se a Er la APPENDIX A Petitioners are: ALIQUIPPA AND SOUTHERN RAILROAD COMPANY; CHESTNUT RIDGE RAILWAY COMPANY; EAST ERIE COMMERCIAL RAILROAD; EAST JERSEY RAILROAD AND TERMINAL COMPANY ; GETTYSBURG RAILROAD COMPANY; LAKE ERIE, FRANKLIN & CLARION RAIL- ROAD COMPANY; McKEESPORT CONNECTING RAIL- ROAD COMPANY; MONONGAHELA CONNECTING RAILROAD COMPANY (THE); MORRISTOWN AND ERIE RAILROAD COMPANY; NORTHAMPTON AND BATH RAILROAD COMPANY ; PHILADELPHIA, BETH- LEHEM AND NEW ENGLAND RAILROAD COMPANY ; PITTSBURGH AND OHIO VALLEY RAILWAY COM- PANY; PORT JERSEY RAILROAD; RAHWAY VALLEY RAILROAD; UNION RAILROAD COMPANY; UPPER MERION AND PLYMOUTH RAILROAD COMPANY ; AMERICAN SHORT LINE RAILROAD ASSOCIATION ; ABERDEEN AND ROCKFISH RAILROAD COMPANY ; ALEXANDER RAILROAD COMPANY; APACHE RAIL- WAY COMPANY (THE); ARCATA AND MAD RIVER RAILROAD COMPANY (THE); ARKANSAS & LOUISI- ANA MISSOURI RAILWAY COMPANY ; ASHLEY, DREW & NORTHERN RAILWAY COMPANY; BELFAST & MOOSEHEAD LAKE RAILROAD COMPANY; BELTON RAILROAD COMPANY; BERLIN MILLS RAILWAY COMPANY; BIRMINGHAM SOUTHERN RAILROAD COMPANY; BROOKLYN EASTERN DISTRICT TERMI- NAL RAILROAD; BUTTE, ANACONDA & PACIFIC RAILWAY COMPANY ; CANTON RAILROAD COMPANY ; CARBON COUNTY RAILWAY COMPANY; CEDAR RAPIDS AND iOWA CITY RAILWAY COMPANY; CENTRAL NEW YORK RAILROAD CORPORATION ; CHATTAHOOCHEE INDUSTRIAL RAILROAD; CHAT- TAHOOCHEE VALLEY RAILWAY COMPANY; CHI- CAGO SHORT LINE RAILWAY COMPANY; CHICAGO, WEST PULLMAN AND SOUTHERN RAILROAD COM- PANY; CITY OF PRINEVILLE RAILWAY; CLARE- MONT AND CONCORD RAILWAY COMPANY; COLO- RADO & WYOMING RAILWAY COMPANY; COOPERS- TOWN & CHARLOTTE VALLEY RAILWAY CORPORA- TION; CUYAHOGA VALLEY RAILWAY COMPANY 2a (THE) ; DANSVILLE AND MOUNT MORRIS RAILROAD COMPANY; DARDANELLE & RUSSELLVILLE RAIL- ROAD COMPANY; DELRAY CONNECTING RAILROAD COMPANY; DeQUEEN AND EASTERN RAILROAD COMPANY; DULUTH & NORTHEASTERN RAILROAD COMPANY; EAST CAMDEN & HIGHLAND RAILROAD COMPANY; ESCANABA AND LAKE SUPERIOR RAIL- ROAD COMPANY; FAIRPORT, PAINESVILLE AND EASTERN RAILWAY COMPANY; FONDA, JOHNS- TOWN AND GLOVERSVILLE RAILROAD COMPANY; FORE RIVER RAILROAD CORPORATION; FRANK- FORT AND CINCINNATI RAILROAD COMPANY; GREAT SOUTHWEST RAILROAD INCORPORATED ; GREEN MOUNTAIN RAILROAD CORPORATION; GREENVILLE AND NORTHERN RAILWAY COMPANY ; IOWA TERMINAL RAILROAD COMPANY; JOHNS- TOWN AND STONY CREEK RAILROAD COMPANY ; KENTUCKY AND TENNESSEE RAILWAY; LACKA- WAXEN AND STOURBRIDGE RAILROAD CORPORA- TION; LAKE SUPERIOR & ISHPEMING RAILROAD COMPANY; LAKE TERMINAL RAILROAD COMPANY (THE); LAONA & NORTHERN RAILWAY COMPANY ; LaSALLE AND BUREAU COUNTY RAILROAD COM- PANY (THE); LAURINBURG AND SOUTHERN RAIL- ROAD COMPANY; LONG ISLAND RAIL ROAD COM- PANY (THE); LONGVIEW PORTLAND & NORTHERN RAILWAY COMPANY; MANUFACTURERS’ JUNCTION RAILWAY COMPANY ; MARINETTE, TOMAHAWK AND WESTERN RAILROAD COMPANY; MERIDIAN & BIG- BEE RAILROAD COMPANY; MICHIGAN NORTHERN RAILWAY COMPANY, INC.; MIDDLETOWN AND NEW JERSEY RAILWAY COMPANY INCORPORATED; MIN. NEAPOLIS, NORTHFIELD AND SOUTHERN RAIL- WAY; MINNESOTA TRANSFER RAILWAY COMPANY ; MISSISSIPPI EXPORT RAILROAD COMPANY; MO- DESTO AND EMPIRE TRANCTION COMPANY; MONT- PELIER & BARRE RAILROAD COMPANY; NEVADA NORTHERN RAILWAY COMPANY; NEWBURGH AND SOUTH SHORE RAILWAY COMPANY (THE); NORTH LOUISIANA & GULF RAILROAD COMPANY; OREGON & NORTHWESTERN RAILROAD COMPANY; PEARL RIVER VALLEY RAILROAD COMPANY; PECOS VAL- LEY SOUTHERN RAILWAY COMPANY (THE); PORT HURON AND DETROIT RAILROAD COMPANY; PRES. —— 3a COTT AND NORTHWESTERN RAILROAD COMPANY (THE); PROVIDENCE AND WORCESTER COMPANY ; RIVER TERMINAL RAILWAY COMPANY (THE); SABINE RIVER & NORTHERN RAILROAD COMPANY ; SALT LAKE, GARFIELD AND WESTERN RAILWAY COMPANY; SAND SPRINGS RAILWAY COMPANY; SANDERSVILLE RAILROAD COMPANY; SAVANNAH STATE DOCKS RAILROAD COMPANY; STOCKTON TERMINAL AND EASTERN RAILROAD; TERMINAL RAILWAY ALABAMA STATE DOCKS; TEXAS & NORTHERN RAILWAY COMPANY; TEXAS, OKLA- HOMA & BASTERN RAILROAD COMPANY; TEXAS SOUTH-EASTERN RAILROAD COMPANY; TRONA RAILWAY COMPANY; TULSA-SAPULA UNION RAIL- WAY COMPANY; VALDOSTA SOUTHERN RAILROAD ; VENTURA COUNTY RAILWAY COMPANY; WARREN & SALINE RIVER RAILROAD COMPANY; WYAN- DOTTE SOUTHERN RAILROAD COMPANY; WYAN- DOTTE TERMINAL RAILROAD COMPANY; = and YOUNGSTOWN AND NORTHERN RAILROAD COM- PANY (THE). 4a APPENDIX B UNITED STATES COURT OF APPEALS, THIRD CIRCUIT, Bautimore aANp Onto Cutcaco TerminaL Rartroap ComPaNy et al., Petitioners, V. Unrrep States of America and Interstate Commerce Commission, Respondents, Central Vermont Railway, Inc., Duluth, Winnipeg and Pacific Railway, and the Detroit and Toledo Shore Line Railroad Company, /ntervenors, Burlington Northern Inc. and Union Pacific Railroad Company, /ntervenors, Duval Sales Corporation, International Minerals & Chem- ical Corporation, Evans Products Company and Pullman Leasing Company, /ntervenors, The Texas Mexican Railway Company, /ntervenor. Axiquippa AND SourHerN Rartroap CoMPANy et al., Petitioners, Vv. Unrrep States of America and the Interstate Commerce Commission, Respondents, Duval Sales Corporation, International Minerals & Chem- ical Corporation, Evans Products Company and Pullman Leasing Company, Jntervenors, The Texas Mexican Railway Company, Intervenor. Nos. 77-1714, 77-1732. Argued July 25, 1978. Decided Sept. 6, 1978. Before Apams, Weis and Hicatnsotnam, Circuit Judges. a ee ee 5a Oprnton Or THe Court Apams, Circuit Judge Petitioners in these consolidated cases ' request us to set aside an order of the Interstate Commerce Commission (ICC) entered on April 7, 1977, in Ex Parte No, 289, ‘‘Re- mittance of Demurrage Charges by Common Carriers of Property by Rail.” * By its order, the ICC adopted a regu- lation requiring the remittance to freight car owners of all demurrage charges collected by the delivering carrier that are in excess of ten dollars per day per car.’ Specifically, petitioners maintain that the order exceeds the statutory power of the agency; that it is arbitrary, capricious, and without rational basis; and that it fails to comply with the Administrative Procedure Act (APA) * and the Interstate Commerce Act (ICA),.° For the reasons set forth below, we deny petitioners’ re- quest, ‘In No. 77-1714, a petition was filed on behalf of thirty-three railroad petitioners and four intervening railroads for review of the ICC’s order in Ex Parte 289, In No, 77-1732, a petition for review was filed by the 214 member railroads of the American Short Line Railroad Association. Both petitions are brought pur- suant to 28 U.S.C.A, §§ 2321, 2342, and 2344 (1978) to enjoin a final order of the ICC, * 353 1.C.C, 567 (1977) ; 42 Fed. Reg. 19146 ; 39390 (1977) (to be codified in 49 C.F.R. § 1254.10), *Demurrage is the charge imposed upon shippers and receivers for the detention of freight cars beyond the allotted free time period for loading and unloading. Traditionally, all demurrage payments have been made to and retained by the delivering car- riers. Under the ICC order at issue here, these payments would be remitted by the delivering railroads to the freight car owners. *5 U.S.C.A, § 551 et seg. (1977 & Supp. 1978). °49 U.S.C.A. § 1 et seq. ( 1949, 1951 & Supp. 1978). 6a T Ae The regulation at issue is a recent attempt by the ICC to deal with the long-standing shortage in this country of railroad freight cars.° The car shortage, resulting from both an insufficient supply and an inefficient utilization of freight cars, is an outgrowth of the present national car- pool system. Under the system, the freight cars that are owned by individual railroads constitute a single, common pool, used by all rail carriers. Thus, the same loaded freight car is transported over the lines of different connecting carriers to the ultimate destination point. While more effi- cient than the earlier practice of shifting freight from the ear of one carrier to the car of another, the pool system has at the same time made ‘¢ more advantageous economically for railroads to utilize the freight cars of the originating carriers than to purchase and waintain their own. The na- tional freight car shortage is the acknowledged result.’ During the past several years, che ICC has taken a num- ber of major actions in an attempt to ease the car shortage: (1) it has adopted various ‘‘car service’’ rules to regulate the placement and movement of freight cars;* (2) it has established a uniform schedule of ‘‘per diem’’ charges, which are those incurred daily by one railroad for the use ° See United States v. Florida E. Coast Ry. Co., 410 U.S. 224, 230-31, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973); United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742, 743-46, 92 S.Ct. 1941, 32 L.Ed.2d 453 (1972); Note, The Freight Car Shortage and ICC Regulation, 85 Harv.L.Rev. 1583 (1972). " See, e. g., United States v. Allegheny-Ludlum Steel Corp., 406 US. at 745-46, 92 S.Ct. 1941. * Sec, e.g., ICC v. Oregon Pac, Indus., Inc., 420 U.S. 184, 95 S.Ct. 909, 43 L.Ed.2d 121 (1975); United States v. Allegheny-Ludlum Steel Corp., 406 U.S, 742, 92 S.Ct. 1941, 32 L.Ed.2d 453; Reading Co. v. Commodity Credit Corp., 289 F.2d 744 (3d Cir. 1961). Ta of another’s cars;* (3) it has added an ‘‘incentive’’ ele- ment to the basic per diem rate; '® and (4) it has imposed an increase in demurrage charges." ox Parte No. 289, the proceeding in question here, was instituted in October 1972, to determine whether remittance of the penalty portion of the demurrage charges to the carriers owning the cars would create an added incentive for such carriers to acquire additional cars, Following no- tice in the Federal Register**® and submission of written statements by a number of the ninety-seven participating parties, the ICC, on April 25, 1975, issued its Interim Re- port.’* The Report adopted the principle of the proposed remittance rule and reopened the proceeding for receipt of additional evidence regarding the plan’s feasibility and costs. Following notice of the proposed further rulemak- ing,’® one hundred-eighteen parties submitted additional in- formation to the ICC. *See Union Pac. R.R. Co. v. United States, 300 F.Supp. 318 (D.Nev.1969) ; Boston & Me. R.R. v. United States, 297 F.Supp. 615 (D.Mass.), aff’d per curiam, 396 U.S. 27, 90 S.Ct. 196, 24 L.Ed.2d 142 (1969). See United States v. Florida E. Coast Ry. Co., 410 U.S. at 224, 93 S.Ct. 810, on remand, 368 F.Supp. 1009 (M.D.Fla.1973), aff’d mem., 417 U.S. 901, 94 S.Ct. 2595, 41 L.Ed.2d 207 (1974). ‘See General Mills, Inc. v, United States, 364 F.Supp. 1278 (D.Minn.1973). ‘® Demurrage charges consist of both penalty and compensatory elements. See ICC v. Oregon Pac. Indus., Inc., 420 U.S. at 189-191, 95 S.Ct. 909. The latter element is that portion of the demurrage charge which serves to compensate the railroad for the additional per diem payments it must make to the car owner as a result of the loading or unloading delay. The remainder of the demurrage charge is understood as the penalty portion. 8 37 Fed. Reg. 22884 (1972). 349 I.C.C, 411 (1975). * 40 Fed.Reg. 18797 (1975). 8a On April 7, 1977, the ICC issued its Report and Order in Ex Parte No. 289."° It concluded that adoption of the pro- posed remittance rule would be beneficial to the public and the rail industry, as well as administratively feasible. Con- sequently, the agency directed that the rule become effec- tive on July 6, 1977. However, the effective date was subse- quently stayed by the ICC pending judicial review. Il. A. The principal argument made in support of the petition to set aside the order in question is that the ICC lacks a statutory base to promulgate the demurrage remittance rule. The ICC, in turn, contends that it does have the requi- site authority under 49 U.S.C.A. §1(6)(Supp.1978), as amended by the Rail Revitalization and Regulatory Reform Act of 1976 (4R Act)."" The 4R Act added a provision to § 1(6) which states that ‘*{djemurrage charges shall be computed, and rules and regulations relating to such charges shall be established, in such a manner as to fulfill the national needs with respect *° 353 1.C.C. 567 (1977). *' Pub.L.No.94-210, § 211, 90 Stat. 31, 46 (1976). In its Interim Report of April 1975, the Commission found that it had jurisdic- tion under three car service provisions of the ICA, 49 U.S.C.A. §§ 1(11), 1(14) (a), and 1(15) (1959 & Supp.1978). Subsequent to the Report, the 4R Act was enacted, and on March 3, 1976, the 1CC solicited comments on the effect of the new legislation. In its final Report and Order of April 1977, as well as in its brief sub- mitted to this Court, the ICC, while continuing to assert that it has authority to promulgate the remittance rule under the three above-mentioned sections, relied principally upon the amended version of § 1(6). In light of our holding that § 1(6) provides the ICC with the necessary authority to promulgate the demurrage remittance rule in question it is unnecessary to decide whether jurisdiction might properly be founded upon §§ 1(11), 1(14) (a), and 1(15) as well. 9a to (a) freight car utilization and distribution, and (b) main- tenance of an adequate freight car supply available for transportation of property.” Petitioners assert that the statutory directive that ‘‘demurrage charges shall be com- puted’’ cannot properly be interpreted to authorize the ICC to ‘‘divide’’ demurrage revenues between the deliver- ing carrier and the owner of the car. In analyzing a question of statutory construction, the Supreme Court has said that it accords deference to the interpretation given the statute by the officers or agency charged with its administration. Udall v. Tallman.” While 1849 U.S.C.A. § 1(6), (Supp.1978), in full, provides : It is made the duty of all common carriers to the provisions of this chapter to establish, observe, and enforce just and reasonable classifications of property for transportation, with reference to which rates, tariffs, regulations, or practices are or may be made or prescribed, and just and reasonable regu- lations and practices affecting classifications, rates, or tariffs, the issuance, form, and substance of tickets, receipts, and bills of lading, the manner and method of presenting, marking, packing, and delivering property for transportation, the facili- ties for transportation, the carrying of personal, sample, and excess baggage, and all other matters relating to or connected with the receiving, handling, transporting, storing, and deliv- ery of property subject to the provisions of this chapter which may be necessary or proper to secure the safe and prompt receipt, handling, transportation, and delivery of property subject to the provisions of this chapter upon just and reason- able terms, and every unjust and unreasonable classification, regulation, and practice is prohibited and declared to be un- lawful. Demurrage charges shall be computed, and rules and regulations relating to such charges shall be established, in such a manner as to fulfill the national needs with respect to (a) freight car utilization and distribution, and (b) mainte- nance of an adequate freight car supply available for trans- portation of property. 1 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). Accord, Batterton v. Francis, 432 U.S. 416, 424, 97 S.Ct. 2399, 53 L.Ed.2d 448 (1977); Lehigh & New Eng. Ry. Co. v. ICC, 540 F.2d 71, 80 10a the agency’s interpretation is by no means controlling,”® to sustain the ICC it is necessary only that we find its inter- pretation to be a reasonable one.*' As Tallman recognized, ‘‘we need not find that [an agency’s] construction is the only reasonable one or even that it is the result we would have reached had the question arisen in the first instance in judicial proceedings.”’ ” Petitioners in the present situation argue that the plain meaning of the phrase ‘‘demurrage charges shall be com- puted”’ should control, that previous use of the term by the ICC does not indicate an understanding that it confers upon the agency the power to divide demurrage revenues, and that the division of revenues is such a substantial change from prior practice that an express authorization by Congress to divide demurrage charges is required. While the language of § 1(6) does not specifically author- ize remittance to car owners, it is equally clear that the statute does not prohibit such an arrangement. By focusing solely upon the phrase ‘‘shall be computed’’, petitioners tend to restrict what appears to be the rather broad au- thorization granted to the ICC by the 1976 amendments to § 1(6).** Indeed, the provision not only directs the ICC to (3d Cir. 1976), cert. denied, 429 U.S. 1061, 97 S.Ct. 784, 50 L.Ed. 2d 776 (1977) ; Lucas Coal Co. v. Interior Bd. of Mine Operations Appeals, 522 F.2d 581, 584 (3d Cir. 1975). *° See Batterton v. Francis, 432 U.S. at 424, 97 S.Ct. 2399. ** See Udall v. Tallman, 380 US. at 16, 85 S.Ct. 792. ** Udall v. Tallman, 380 U.S. at 16, 85 S.Ct. at 801, quoting with approval Unemployment Compensation Comm’n v. Aragon, 329 U.S. 143, 153, 67 S.Ct, 245, 91 L.Ed. 136 (1946). ** As this Court stated in Lehigh and New Eng. Ry. Co. v. ICC, 540 F.2d at 80, ‘‘[s]urely, the scope of the Commission’s responsi- bilities under the Act requires a generous construction of its statu- tory authority.’’ lla compute demurrage charges with the purpose of enhancing freight car supply, utilization, and distribution but also mandates the agency to establish ‘‘rules and regulations relating to such charges.’’ The legislative history of the 4R Act further indicates the appropriateness of a broad reading of the amendment to §1(6). The statute encompassing the provision was en- acted by Congress for the general purpose of revitalizing a sagging railroad industry.** It was the declared policy of Congress, araong other things, to balance the needs of car- riers, shippers, and the public; to help place the nation’s railroads in a position competitive with that of other modes of transportation, so as to promote more adequate and effi- cient transportation services; and to increase the attrac- tiveness of investing in railroads and rail-service-related enterprises.” One of the means of fulfilling these aims was the amend- ment pertaining to demurrage charges. That provision, comprising only eight lines in the 120-page statute, under- standably did not attract much congressional comment.” The few portions of the legislative history that deal with the demurrage provision, however, lend support to the ICC’s broad interpretation of §1(6). ** See Pub.L.No.94-210, § 101, 90 Stat. 31, 33 (1976) (codified at 45 U.S.C.A. § 801 (Supp. 1978) ). *9 Td, 2° The debates on the floors of the Senate and House of Repre- sentatives fail to offer any insight into congressional thought with regard to the demurrage provision, for the section was never men- tioned other than in the reading of the bill. Rather, the debates focused on the Final System Plan and other provisions of the 4R Act involving financial assistance by the federal government to the railroads. See 121 Cong.Ree. 38117, 38441, 41334, 41888, 42169 (1975) ; 122 Cong.Ree. H92, $271, S741, H401 (daily eds. Jan. 20, 21 & 28, 1976). l2a During the initial review of the railroad reform legisla- tion in the House of Representatives, the Committee on Interstate and Foreign Commerce was informed of the ICC’s pending consideration of the demurrage remittance rule in Ex Parte No. 289, and it gave no indication of its disapproval.” This is of special significance in light of the Supreme Court’s holding in Zuber v. Allen * that an agen- cy’s interpretation of the statute it is charged with imple- menting ‘‘carries most weight when the administrators participated in drafting and directly made known their views to Congress in Committee hearings. .. . In such cir- cumstances, absent any indication that Congress differed with the responsible department, a court should resolve any ambiguity in favor of the administrative construction, if such construction enhances the general purposes and pol- icies underlying the legislation.’’ * In addition, we find sub- stantial support for the ICC’s interpretation of the demur- rage provision in the Joint Explanatory Statements of the Conference Committee. It declared with regard to the sec- tion: ‘‘Other amendment made by this title: . . requires the Commission to establish rules and regulations for the ** The Committee received a letter from ICC Acting Chairman O’Neal with his comments on the proposed 4R Act. In his analysis of the demurrage provision, the Acting Chairman stated: Another proceeeding, Ex Parte No, 289, Remittance of De- murrage Charges by Common Carriers of Property by Rail, concerns a proposed rule requiring remittance to the car owner by a non-owning road of all demurrage charges in excess of $10 per day per car. The purposes of the proposals are to create an added incentive for the car owner to acquire additional cars and to remove any inducement to the non- owner to encourage detention of foreign cars in order to benefit from collection of demurrage charges. See Report of the Committee on Interstate and Foreign Commerce, H.R.Rep. No. 725, 94th Cong., Ist Sess. 240 (1975), ** 396 U.S. 168, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969). 2° Td, at 192, 90 S.Ct. at 327. 13a computation of demurrage charges so that freight car utili- zation is maximized and car owners receive adequate com- pensation...” * In light of this statutory history, and the goals of the legislation, we are unable to say that the ICC’s views that §1(6) authorizes it to promulgate the present demurrage remittance rule is an unreasonable one. B. Petitioners also contend that the order in Ex Parte No. 289, even if within the ICC’s power, must be set aside as arbitrary and capricious and as unsupported by substantial evidence. In this regard, petitioners assert that the appli- cable standard of review is the one established by the APA 5 U.S.C.A. § 706 (1977), and that the ICC determination, by failing to demonstrate a sufficient nexus between demur- rage remittance and improved freight car utilization and supply, cannot survive such review. Section 706(2) requires, inter alia, that the reviewing court hold unlawful and set aside agency action, findings, and conclusions found to be—(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;... [or] (E£) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or other- wise reviewed on the record of an agency hearing provided by statute ...’’" Since the present proceeding involves no- %© Final Conference Report, S.Rep. No. 595 and H.R Rep. No. 781, 94th Cong., 2d Sess. 135, reprinted in [1976] U.S.Code & Ad- min.News, pp. 149, 150 (emphasis added). Similar statements are found in the other committee reports which discussed the demur- rage provision. See Conference Report, S.Rep. No. 585 and H.R. Rep. No. 768, 94th Cong., 1st Sess. 128 (1975); Report of the Committee on Interstate and Foreign Commerce, H.R.Rep. No. 725, 94th Cong., Ist Sess. 73 (1975). 7d. 5 U.S.C.A. §§ 556 and 557 (1977) establish procedural requirements for hearings mandated by §§ 553 or 554. l4a tice and comment rulemaking under 5 U.S.C.A. § 553 (1977), and is not one ‘‘reviewed on the record of an agency hearing provided by statute,’’** the ‘‘substantial evidence”’ test of § 706(2)(E) would not appear to be ap- plicable.* As we recently stated in Ford Motor Co. v. United States,” the basic standard of review in proceed- ings such as this one is the ‘‘arbitrary and capricious”’ standard of § 706(2)(A).” It is generally settled that the scope of review of agency actions under § 706(2)(A) is narrow.” A unanimous Su- “5 U.S.C.A. § 551 (1977) defines ‘‘rule’’ as ‘‘the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency ... .’’ ‘‘Rulemaking’’ is defined in that same section as ‘‘agency process for formulating, amending, or repealing a rule.’’ Jd, Ex Parte No. 289 clearly falls within this category of proceeding. 5 U.S.C.A. § 706(2)(E) (1977). “ See, e.g., Weinberger v. Hynson, Westcott & D:nning, Inc., 412 U.S. 609, 622 n. 19, 93 S.Ct. 2469, 37 L.Ed.2d 207 (1973) ; American Iron and Steel Inst. v. EPA, 568 F.2d 284, 296 (3d Cir. 1977) ; Asphalt Roofing Mfrs. Ass’n v, ICC, 567 F.2d 994, 1002 n. 5 (D.C. Cir. 1977) ; National Nutritional Foods Ass’n v. Wein- berger, 512 F.2d 688, 700-701 (2d Cir.), cert. denied, 423 U.S. 827, 96 S.Ct. 44, 46 L.Ed.2d 445 (1975) ; K. Davis, Administrative Law of the Seventies, § 29.01-3 (1976). *° 569 F.2d 196 (3d Cir. 1977), cert. denied, —— U.S, ——, 98 8.Ct, 2844, 56 L..Ed.2d 785 (1978), 8° See id. at 198. : ** See, e.g. Bowman Transp. v. Arkansas Best Freight Sys., 419 U.S. 281, 285-86, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974) ; United States v. Allegheny-Ludlum Steel Corp., 406 U.S. at 749, 92 S.Ct. 1941; Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971) ; Ford Motor Co. v. United States, 569 F.2d at 198-99. Several courts of appeals, in- cluding this one, have observed that in notice and comment rule- making the ‘‘arbitrary and capricious’’ and ‘‘substantial evidence’’ 15a preme Court noted in United States v, Allegheny-Ludlum Steel that ‘‘{w]le do not weigh the evidence introduced before the Commission; we do not inquire into the wisdom of the regulations that the Commission promulgates, and we inquire into the soundness of the reasoning by which the Commission reaches its conclusions only to ascertain that the latter are rationally supported.’’*® Accordingly, we examine the evidence and arguments offered by the ICC in order to determine whether the demurrage remittance rule is ‘‘rationally supported.’’ In its Interim Report and final Report and Order, the ICC extensively discussed the arguments of both propo- nents and opponents of the remittance rule, and concluded that the rule would likely achieve its intended purpose of increasing freight car supply and utilization. Its reasoning was forthright, relying upon ‘‘the fundamental economic proposition that a greater return on an investment will pro- vide an increased incentive to invest in that item, whether it be stocks, cars, or as in this case, freight cars.” *° While criteria tend to converge. See, e. g., Synthetic Organic Chem. Mfrs. Ass’n v. Brennan, 503 F.2d 1155, 1158 (3d Cir 1974), cert. denied, 420 U.S. 973, 95 S.Ct. 1396, 43 L.Ed.2d 653 (1975) ; Associated Indus., Inc. v. United States Dep’t of Labor, 487 F.2d 342, 350 (2d Cir, 1973) (Friendly, J.). See generally Friendly, ‘‘ Some Kind of Hearing’’, 123 U. of Pa.L.Rev. 1267, 1313 (1975); Pedersen, Formal Records and Informal Rulemaking, 85 Yale L.J. 38, 46-51 (1975). Of course, an agency decision without any evidentiary support, in the administrative record will not be upheld. The evidence presented, however, need only establish a rational basis, rather than substantial support, for the agency action. See Almay Inc. v. Califano, 569 F.2d 674, 680-81 (D.C. Cir. 1978). 406 U.S. 742, 92 S.Ct, 1941, 32 L.Ed.2d 453 (1972), 3° Td. at 749, 92 S.Ct. at 1946, Accord, Ford Motor Co. v. United States, 569 F.2d at 199. *° 353 ICC at 589, As the ICC continued: As demurrage regulations presently exist, the delivering carrier, who may not own one freight car, is nevertheless 16a admitting that return on investment would be only one of several factors affecting a decision whether to purchase freight cars, the ICC claimed that the rule would at least tend to encourage such decision. Moreover, the agency con- cluded that the remittance rule would have an affirmative effect upon the supply of cars. Pointing to evidence ad- duced in earlier proceedings that large sums of demurrage charges remained uncollected by the carriers, the ICC reasoned that the requirement of the remittance rule, which is based on billed rather than collected demurrage charges, would likely encourage carriers to be more rigorous in their collection of the charges. This, the agency maintained, would enhance the general regulatory effect of the demur- rage system." entitled to the entire demurrage charge even though this sum may far exceed any costs incurred, In addition, there is no indication that this demurrage revenue is presently being used by the delivering road to purchase additional cars, This money is, therefore, a bonus to a carrier who has no interest in whether or not a car is being detained, However, the car owner, whether private or foreign road, has its equipment detained and unavailable for further use, and thereby loses revenue, This is especially true of private car owners who do not receive per diem but a mileage allowance, This remitted amount which table 5 shows is approximately $22 for each excess day ($11 if it is assumed that Service Order No, 1124 inflated demurrage by 50 percent), which SP estimates to be approximately $62.50 a car annually, will be an added divi- dend to car owners. When these figures are multiplied by the vast number of cars in the transportation system, the rule will certainly have a signifigant positive impact on car supply, Id. ** 349 ICC at 435.36, The ICC elaborated as follows: The shipper to whom the carrier delivers a car pays the demurrage. He has control of the car and determines how long he will hold it, One of the factors he will consider in deciding how long to detain a car is the amount of the demur- rage charges. This proposal does not alter the level of demurrage charges, It merely shifts the payment of part of these charges from one 17a Further, the ICC carefully weighed the benefits of the proposed rule against the claims of its opponents that de- murrage remitiance, by reducing railroad revenues and re- quiring additional administrative expenses, would place undue economic burdens upon many carriers.” The ICC group, the receiving carrier, to another, the car owner, Since it ean make no difference to the shipper whether he pays the charge to one party rather than another, it may appear that the implementation of this proposal would have no impact on ear utilization. However, evidence collected by the Commission staff in another proceeding suggests that this proposal may have a positive impact on car utilization, The Commission has issued a Notice of Proposed Rulemaking and Order in Ex Parte No, 285, Maintenance of Records Pertaining to Demurrage, Deten- tion, and Other Related Accessorial Charges by Rail Common Carriers of Property. In that notice and order, served August 16, 1972, we indicated that inquiries by the Commission's field staff revealed that large sums of money resulting from de- murrage charges remained uncollected by the carriers or that such debts were canceled because carriers did not maintain adequate records, Other indications that carriers do not always collect demurrage charges appear in Demurrage Rules and Charges, Nationwide, 340 1,C.C, 88, 92 (1971), and /neentive Per Diem Charges—1968, 387 1.C.C, 217, 233 (1970), When carriers do not actually collect demurrage charges, an important economic incentive for shippers to release cars with dispatch is lost. Under the proposal herein, the car owner would receive part of these demurrage payments, Faced with the necessity of paying these sums to the car owner, the delivering carrier would have added motivation to pursue the charges against the shippers and receivers. The incentive to release cars would be greater and some improvement in car utilization could reasonably be expected, Id. “The short-line railroads, in particular, have expressed their strong concern about the possible detrimental impact of the remit- tanco scheme upon their operations. Their claims, whether legiti- mate or not, are not determinative, Rather, they are but one of several considerations relevant to ascertaining the rationality of 18a found that many of the projections set forth by the object- ing carriers were based on short-term start-up expenses, and therefore were subject to question. Thus, the agency concluded that the benefits of the proposed rule outweighed the burdens.*" Having reviewed the ICC’s reasoning, we are the ICC’s rule, As a unanimous Supreme Court reasoned in a proceeding quite similar to the present one: It may be conceded that the immediate effect of the Com- mission's order will be to disrupt some established practices ., and on oeeasion to cause serious inconvenience , . . If the Commission were thrusting these regulations upon an admittedly smoothly functioning transportation industry . . . the rationality of its action might well be open to question, But such is not the case, United States v. Allegheny-Ludlum Steel, 406 U.S, at 753, 92 S.Ct. at 1948 (upholding ear service rules requiring the return of freight cars in the direction of the lines of the railroads owning the cars). ** 353 ICC 589-91, The ICC declared in its final report ; In conclusion, we realize that the cost data submitted by many of the reporting roads is inflated and that many of the expenses are unsubstantiated. (For example, a carrier states that it needs four additional employees but it does not indicate how it arrived at this figure.) However, despite our reserva- tions as to the accuracy of the cost data presented, even taking it at face value, we are nevertheless unable to find that the costs of administering the rule are excessive, As can be seen from table 4, average startup expenses of $14,219 and annual expenses of approximately $0.90 for each excess demur- rage day are not unreasonable, unjustifiable, or unduly bur- densome, Even if expenses were slightly higher, the evidence of record still supports the finding that the costs of admin- istering the rule are not prohibitive. The record also indicates that in terms of cost-benefit, the proposed rule is justified. Table 5 shows that the total amount of demurrage that would have been remitted for the period July 1 through December 31, 1973, to private and foreign car owners by 42 roads is $40,387,455, Even if we discount the effects of Service Order No, 1124, which inflated this figure by an estimated 50 percent, $20,193,727 would still have been remitted to car owners during this 6-month period, This dis- 19a unable to say that the agency’s solution is not ‘rationally supported,’’ “ C, Petitioners further contend that the ICC’s order in Kix Parte No. 289 must be set aside for failure to comply with certain procedural requirements of the APA, 5 U.S.C.A. §558(c) (1977), and of the ICA, 49 U.S.C.A. § 17(14) (b) (Supp. 1978). L. Section 553(¢) provides in pertinent part that ‘‘[a]fter consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise and general statement of their basis and purpose.” It is the petitioners’ position that this section requires that the statement by the agency be supported by more than conclusory asser- tions, and that the ICC remittance rule is invalid because of the agency’s failure to comply with this requirement. counted amount would constitute between a $10 and $11 return on a car owner's investment for each excess demurrage delay. When this amount is compared to the costs of administering the rule, it becomes evident that the costs are not so burden- some as to outweigh the rules’s benefit in providing an incen- tive for the purchase of additional equipment and, thereby, in increasing car supply. Td, at 590-91, ‘In light of the ICC’s extensive discussion of the benefits and burdens of the demurrage remittance rule, we are also unable to accept petitioners’ contention that the agency has failed to provide this Court with a basis for determining whether the proposed rule comports with the National Transportation Policy, 49 U.S.C.A, prec, § 1 (Supp.1978), See generally A. L. Mechling Barge Lines, Inc, v. United States, 876 U.S, 375, 84 S.Ct, 874, 11 L.Ed.2d 788 (1964); Schaffer Transp. Co. v. United States, 355 U.S, 83, 78 8.Ct, 173, 2 L.Ed.2d 117 (1957). 20u Those courts which have considered the issue agree that § 553(c) is designed to facilitate meaningful judicial review of agency action.” When engaging in such review, courts have expressed their intention to limit their scrutiny to’ the actual reasoning set forth by the agency.” Thus, post hoc rationalizations advanced in the course of judicial review have been considered insufficient bases for sustain- ing an administrative action.” However, in recognition of the limited purpose of the statement requirement of § 553(¢c), the provision has not been seen as a vehicle for searching judicial oversight of agency decision-making.” As the District of Columbia Court of Appeals made clear in Tabor v. Joint Board for Enroll- ment of Actuaries, the mere failure to publish the state- ment of the rule’s basis and purpose at the same moment as the regulations are published does not constitute a violation of § 553(c)."° Rather, ‘‘[t]he enquiry must be ** See, e. g., Tabor v, Joint Bd, for Enrollment of Actuaries, 185 U.S.App.D.C, 40, 44-47, 566 F.2d 705, 709-12 (1977); Alabama Ass'n of Ins, Agents v. Board of Governors of the Fed. Reserve Sys., 533 F.2d 224 (5th Cir, 1976), amended, 558 F.2d 729 (5th Cir, 1977), cert. denied, 435 U.S, 904, 98 S.Ct. 1448, 55 L.Bd.2d 494 (1978); National Nutritional Foods Assoc’n v, Weinberger, 512 F.2d at 701, See generally Pederson, Formal Recurds and Informal Rulemaking, 85 Yale LJ. 38, 78-4 (1975); Note, The Judicial Role in Defining Procedural Requirements for Agency Rulemaking, 87 Harv.L.Rev. 782 (1974), See also Atchison, T. & S. F. Ry, Co. v. Wichita Bd. of Trade, 412 U.S, 800, 807, 93 S.Ct. 2367, 87 L.Rd.2d 350 (1973); SEC v, Chenery Corp,, 332 U.S, 194, 196-97, 67 S.Ct, 1575, 91 L.Ed, 1995 (1947); American Iron & Steel Inst, v. EPA, 568 F.2a at 296.7; Dry Colors Mfrs, Ass’n Inc. v. Department of Labor, 486 F.2d 98, 104 n, 8 (8d Cir, 1973). rn Tabor v, Joint Bd. for Enrollment of Actuaries, 566 F.2d at \ "Td. Id. “566 F.2d at 711, 2la whether the rules and statement are published close enough together in time so that there is no doubt that the state- ment accompanies, rather than rationalizes the rules.’’ *° In the present situation, the ICC’s notices in the Federal Register of the proposed further rulemaking and of the final rule themselves satisfy the requirement of § 553(c)."' In addition, there can be little doubt that the ICC Interim Report as well as its final Report and Order more than fulfill the statutory purpose of facilitating judicial review.” 2. The contention of petitioners regarding the time require- ments set forth in the ICA, 49 U.S.C.A. § 17(14)(b) (Supp. 1978), presents a more difficult problem, That section pro- vides: ‘Within one year after February 5, 1976, (the date of the enactment of this subdivision] the Commission shall conclude or terminate, with administrative finality, any formal investigative proceeding with respect to a common carrier by railroad which was instituted by the Commission on its own initiative and which has been pending before the Commission for a period of three or more years fol- lowing the date of the order which instituted such pro- ceeding,’’* Petitioners argue that the proceeding here was a ‘‘for- mal investigative proceeding’’, that it was pending before the ICC for a period of more than three years subsequent to the initiation of the proceeding, and that it continued °° 7d. at n, 14, ** See 40 Fed.Reg. 18797 (1975) ; 42 Fed.Reg, 19146 (1977). * The Supreme Court has previously found a ‘‘comprehensive’’ ICC report to ‘‘fully comply’’ with the requirement of § 553(¢). See United States v. Allegheny-Ludlum Steel Corp., 406 U.S. at 747, 758, 92 S.Ct. 1941, 32 L.Ed.2d 453. 8°49 U.S.C.A. §17(14)(b) (Supp.1978) (emphasis added). 22a for more than one year after the enactment of § 17(14)(b). They maintain that the appropriate sanction for such a violation of the section is the setting aside or dismissal of the proceeding. Respondents, on the other hand, answer that the proceeding here was an informal one; that the ICC’s Notice of Proposed Further and Amended Rule- making and Order initiated a proceeding that was separate from that instituted in 1972 by the ICC’s initial notice in Ex Parte No. 289; and thus that the time limitations were not transgressed. In any event, they insist that dismissal is neither required nor appropriate. Recent opinions of several courts of appeals have con- sistently distinguished between ‘‘informal rulemaking’’ under the APA, 5 U.S.C.A. § 553 (1977), which need not be conducted with the procedural formalities of a trial, and ‘formal rulemaking’’ under 5 U.S.C.A. §§ 556 and 557 (1977), which is required to have an evidentiary hearing.” There is no disagreement among the parties here that Ex Parte No. 289 comes within the former category, that of ‘*informal rulemaking.’’ Respondents seek to establish that, —because the proceeding in question is “informal” for pur- poses of the APA, it is also “informal” for purposes of the ICA, 49 U.S.C.A. § 17414) (b) (Supp. 1978). We disagree, The ICC offers no evidence or reasoning to support the assertion that Congress, when drafting § 303 of the 4R Act, which amended the procedural require- ments of the 7CA, had in mind the characterization that several courts have given to notice and comment rulemaking under the APA, 5 U.S.C.A, § 553. In the absence of any evidence, such a congruence seems to us implausible. While the purpose of the APA is to establish general procedural ** See, «. g., National Ass’n of Food Chains, Inc. v, ICC, 175 U.S.App.D.C, 346, 351, 585 F.2d 1308, 1313 (1976); Buckeye Power, Inc. v. EPA, 481 F.2d 162, 170 (6th Cir, 1973) ; Phillips Petroleum Co, v, FPC, 475 F.2d 842, 851 (10th Cir, 1973), cert. denied, 414 U.S. 1146, 94 S.Ct, 901, 39 L.Ed.2d 102 (1974). 23a guidelines for a broad range of administrative agencies,” the ICA applies to a much narrower set of circumstances, Thus, it is reasonable to believe that Congress, when draft- ing the 4R Act amendments to the ICA, was thinking in terms of the particular problems of the ICC and the rail- road industry.” Indeed, such an interpretation of congressional intent is affirmatively supported by the available legislative his- tory of §17(14)(b). Paragraph (14)(b) was added to § 17 of the ICA in 1976, as part of Congress’ broad attempt in the 4R Act to expedite ICC procedures. Congress was particularly concerned with the lengthy delays traditionally accompanying railroad-related matters. Thus, in § 303(a) of the 4R Act, 49 U.S.C.A. §17 (Supp.1978), deadlines were established by Congress for the completion of evi- dentiary proceedings by ICC sub-units, the submission of initial reports to the full ICC, and the consideration and final disposition of administrative appeals. Furthermore, in §303(b) of the 4R Act, Congress established deadlines for the disposition of ‘‘any formal investigative proceed- ing with respect to a common carrier by railroad.’’ We are unable to find any indication, either on the face of the 4R Act or in the legislative history, that Congress intended proceedings such as Ex Parte No. 289 to be exempt from a statutory time requirement.” 55 See Wong Yang Sung v. McGrath, 339 U.S. 33, 70 S.Ct, 445, 94 L.Ed. 616 (1950), °° This is evident from the text of the 4R Act itself, See Pub.L. No.94-210, 90 Stat. 31 (1976). ** Indeed, that Congress intended § 17(14) to be applied broadly is indicated by the congressional comments, although few in num- ber, that were made during the drafting of the section. See, e. g., Final Conference Report, S.Rep.No.595 and H.R.Rep.No.781, 94th Cong., 2d Sess. 162, U.S.Code Cong. & Admin.News 1976, p. 177: ‘*The conference substitute follows the House bill except that it incorporates the Senate provision that . . . all proceedings insti- 24a It is not without significance that the ICC, in its annual reports to Congress, has consistently designated notice and comment rulemaking proceedings such as the present one as ‘formal proceedings’’.”° In contrast, informal proceed- ings have included such ICC activities as applications for temporary authority to operate a motor vehicle, applica- tions to deviate from regular routes, and applications for temporary authority to lease or control. It is most likely that it was this categorization of proceedings that Congress had in mind when drafting § 17(14) (b). Consequently, we hold that Ex Parte No. 289 constituted a ‘‘formal investigative proceeding’’ under the ICA, 49 U.S.C.A. §17(14)(b), and that the statute’s time require- ments are therefore applicable.” Nevertheless, we do not believe that the ICC’s failure in this case to comply with the statutory deadline requires us to dismiss the proceedings. Section 17(14)(b), applying to proceedings initiated prior to the enactment of that section, contains no express sanction for noncompliance as does §17(14)(a), which pertains to ICC investigations begun since the provision’s enactment.” This distinction tuted by the Commission shall be concluded with administrative finality, within 3 years after such proceeding was initiated.’’ See. e. g., 91 ICC Ann.Rep, 111 (1978); 89 ICC Ann.Rep. 101-2 (1976), °° We decline to accept the ICC’s contention that Ex Parte No. 289 was actually two proceedings. The ICC claims that the April 1975 Notice of Proposed Further and Amended Rulemaking began a new rulemaking proceeding which merely capitalized on the efforts of the earlier activity. In light of the ICC’s own language in the Interim Report and the April 1975 notice to the effect that the reopening was simply a continuation of the earlier proceeding, we find the ICC’s argument before us to be unconvincing. *° 49 US.C.A, § 17(14) (a) (Supp.1978) provides: ‘‘ Any formal investigative proceeding with respect to a common carrier by rail- 25a in the language of the two sections indicates a desire on the part of Congress not to place ongoing proceedings under the same absolute time limit as proceedings instituted sub- sequent to the enactment of the 4R Act. Furthermore, we are unconvinced that, as an equitable matter, injunctive relief barring enforcement of the ICC’s order would be at all appropriate in this instance, While §17(14)(b) evidences a congressional desire to eliminate delay in ongoing ICC proceedings, this purpose is but one of several that animated the 4R Act. Accordingly, it is necessary to balance the congressional aim of eliminating delay against the equally strong goals of revitalizing the nation’s railroad system and alleviating the boxcar short- age. In light of these competing purposes, and of the vast resources that have obviously been expended in the course of Ex Parte No. 289, to enjoin the proceeding at this juncture would appear to be inappropriate. Furthermore, petitioners have failed to offer any evidence that they have been unduly prejudiced by the additional delay of two months beyond the statutory limit.” We therefore hold that, while the ICC has exceeded the time limitations established by § 17(14)(b), dismissal here is neither required nor warranted, road which is instituted by the Commission after February 5, 1976, shall be concluded by the Commission with administrative finality within 3 years after the date on which such proceeding is instituted. Any such proceeding which is not so concluded by such date shall automatically be dismissed. ’’ *! Obviously, such a demonstration of prejudice would have been particularly difficult for petitioners to make, since the two-month delay beyond the statutory limit merely served to further postpone the eventual enforcement of the order to which they object. 26a D. Petitioners’ final claim is that the ICC rule, by including private car owners in the demurrage remittance scheme,” permits the payment of unlawful rebates in violation of 49 U.S.C. §§15(15)™ and 41(1).% It is contended that these sections will be violated by the order, since the pay- ment by a railroad for the use of a private freight car will exceed the owner-shipper’s cost of furnishing the car, and since the receiving carrier will in effect be paying an allow- ance which will not be published in its tariffs for the use of a car. We have given careful consideration to these arguments and conclude that petitioners have misconstrued the pur- poses of §15(15) and §41(1), as well as the concept of demurrage. Sections 15(15) and 41(1) were designed to ensure reasonable and nondiscriminatory rates and charges, and to prevent any type of departure from published trans- *? In its final Report and Order, the ICC reasoned that: ‘‘An increasing percentage of the Nation’s carrier fleet is owned by private interests. The evidence shows that between 1972 and 1974 private car owners and shippers added 35,711 cars to the transpor- tation system. These investors should receive a fair return on their investment as well as carriers.’’ 353 1.C.C, at 594. "49 U.S.C.A. §16(15) (Supp.1978) provides: ‘‘If the owner of property transported . . . directly or indirectly renders any service connected with such transportation, or furnishes any instru- mentality used therein, the charge and allowance therefor shall be published in tariffs . . . and shall be no more than is just and reasonable and the Commission may . . , determine what is a reasonable charge as the maximum to be paid... .”’ 49 U.S.C.A, §41(1) (Supp.1978) makes it unlawful ‘‘to offer, grant, or give, or to solicit, accept, or receive any rebate, concession, or discrimination in respect to the transportation of any property . whereby any such property shall by any device whatever be transported at a less rate than that named in the tariffs published and filed by such carrier . . . or whereby any other advantage is given or discrimination is practiced.’’ 27a portation rates.** In contrast, the essential nature of de- murrage is that of a car service regulation.*”° Consequently, we do not believe that a demurrage charge can properly be understood as a ‘‘rate’’ under § 41(1), or as a ‘‘charge’’ as that term is used in § 15(15). Unlike the use of the terms in those provisions,”’ demurrage remittance relates not to rail carriers’ property, but to excessive delay caused by the shipper or receiver in the loading or unloading of freight cars. Furthermore, it is neither a ‘‘charge and allowance’’ paid by the railroads for use of freight cars nor a reduction of the railroads’ rates for owner-shippers. Rather, demur- rage is a cost imposed upon the receiver, the penalty por- tion of which will be transmitted to the owner by the delivering carrier. As Judge Prettyman observed in his oft-quoted opinion in Iversen v. United States: [D]emurrage charges are in part compensation and in part penalty; ... in full character they are neither, not being rates as that term is used in connection with rate-making, nor penalties as that term is used in respect to penal impositions. They are sui generis. Historically, textually, in purpose and in content, they are an integral part of the established rules and regu- lations relating to the use and movement of cars. From the beginning they have been sustained as rules and * See United States v. Braverman, 373 U.S, 405, 406, 83 S.Ct. 1370, 10 L.Ed.2d 444 (1963) (unanimous) ; Zl Dorado Oil Works v. United States, 328 U.S, 12, 66 S.Ct. 843, 90 L.Ed, 1053 (1945). * See ICC v. Oregon Pac. Indus., Inc., 420 U.S, 184, 190, S.Ct. 909, 43 L.Ed.2d 121 (1975) (unanimous), *’ See notes 64 and 65 supra. **63 F.Supp, 1001 (D.D.C,.1946), aff’d mem., 327 U.S. 767, 66 S.Ct. 825, 90 L.Ed, 998 (1946), 28a regulations. They could not have been sustained as carrier charges or as penalties.” * Jd, at 1005, cited with approval in ICC v. Oregon Pac, Indus., Inc., 420 U.S, at 190 n. 7, 95 S.Ct, 909, 913 (emphasis added). In reaching this conclusion, Judge Prettyman relied in part on the opinion of the Virginia Supreme Court of Appeals in Norfolk & W. R. Co. v. Adams, Clement & Co., 90 Va. 393, 18 S.E, 673 (1894), His discussion of that case is of particular relevance to the present proceeding: In 1894 the Virginia Supreme Court of Appeals considered the validity of a demurrage charge in view of a state statute which forbade a railroad to charge any fee or commission ‘‘other than the regular transportation fees, storage, and other charges authorized by law.’’ The official report of the matter says: ‘‘The company had made a rule, of which plaintiffs had notice, that a charge of $1 per car per day would be made for every detention of a car for the purpose of loading or unloading beyond seventy-two hours from the time that the ear was placed at the disposal of the shipper or consignees, as the case might be.’’ The court said: ‘It [the demurrage charge] is neither a transportation charge, nor a storage charge, nor a terminal charge, nor a subterfuge for adding to the cost of transportation in excess of the rates preseribed.’’ The court sustained the charge on the ground that after allowance of a reasonable time for unloading, the railroad ‘‘ean make reasonable rules and regulations and charges for such service as bailee, as it may see fit,’’ and said, ‘‘Such charges are not carrier charges in the meaning, intendment, or prescription of the statute,’’ Thus, the original support for the right of a railroad to impose a demurrage charge was that such charge constituted a reasonable rule and regulation in respect to the use of the ear, the purpose being to prevent delay in loading and un- loading. Iversen v. United States, 63 F.Supp. at 1003-4, 29a As a result, we are unable to say that the inclusion of private car owners in the ICC’s demurrage remittance order is a violation of the ICA. III, For the reasons herein set forth, the petition to set aside the order of the ICC in Ex Parte No. 289 will be denied. 30a On Petitions ror Review or AN ORDER OF THE INTERSTATE COMMERCE COMMISSION (Ex Parte No, 289) Nos. 77-1714 and 77-1732 Present: Apams, Weis and Hicornsornam, Circuit Judges JUDGMENT These causes came on to be heard on the record from the Interstate Commerce Commission and were argued by counsel on July 25, 1978. On consideration whereof, it is now here ordered and adjudged by this Court that the petitions for review from the order of the said Interstate Commerce Commission are hereby denied and the order of the said Commission filed April 7, 1977, be and hereby is affirmed. Costs taxed against petitioners. ATTEST: /38/ M. ExvizasetH Fercuson M. Elizabeth Ferguson Acting Clerk September 6, 1978 3la APPENDIX C Served April 7, 1977 INTERSTATE COMMERCE COMMISSION Ex Parte No. 289 REMITTANCE OF DEMURRAGE CHARGES BY COMMON CARRIERS OF PROPERTY BY RAIL Decided March 18, 1977 Upon investigation, proposed regulation requiring remittance to the freight car owner by a nonowning railroad, on whose lines a car is being detained under demurrage, of all demurrage charges collected in excess of $10 per car per day, modified in certain respects, and adopted. Appropriate order entered. Curtis H. Berg, W. Donald Boe, Jr., and William R. Power for carrier proponents. C. W. Bath, Oliver Callson, T. A. Ellaby, James F. Fox, H. Richard George, James J. Irlandi, James E., Is- bell, Jr., A. E. Leitherer, J. W. McDermond, Thomas F. McFarland, Jr., Robert P. Post, Jon R. Roy, Larry G. Smethers, Harold E. Spencer, A. T. Walter and George William Wright for private car owner or lessee pro- ponents. Robert C. Binn, Emried D, Cole, Jr., Donald E. Cross, Robert S. Davis, Samuel P. Delisi, Thomas C. Dorsey, Louis T. Duerinck, Richard 8S. M. Emrich III, James L. Howe III, Peter J. Hunter, Jr., Harvey Huston, C. H. Johns, Howard D. Koontz, Albert W. Laisy, Richard D. Lalane, Patrick McEligot, Richard J .Murphy, Joseph J. 32a Nagle, R. R. Pumphrey, T. J. Siegel, John McDonald Smith, T. M. von Sprecken, Jr., R. H. Stahlheber, Sidney Weinberg, and Kinga M, LaChapelle for carrier opponents. Barry Chasnoff, John Hart Ely, and William A. Kutzke for United States Department of Transportation, oppo- nent. Report AND OrDER OF THE COMMISSION ON FURTHER HEARING O'NEAL, Commissioner: This proceeding was instituted by notice of proposed rulemaking and order of October 12, 1972. (Notice was published in the Federal Register on October 26, 1972, Vol. 37, p. 22884.) Therein, adoption of a proposed rule was set forth for consideration. The proposed rule would require that: “The non-owning railroad on whose line a car is being detained under demurrage, shall remit to the railroad car owner all demurrage charges collected in ex- cess of $10 per day.” All common carriers of property by railroad subject to the Interstate Commerce Act (the act) were made respondents. They along with all other inter- ested parties were invited to submit written statements of facts and arguments. In response to these representations an interim report of the Commission (349 I.C.C. 411), en- tered March 28, 1975, and served April 25, 1975, was is- sued, In the interim report, certain procedural matters were initially resolved. We held that the Commission had jurisdiction to allocate demurrage revenues under sections 1(11), 1(14)(a), and 1(15), and that no oral hearing was required in this proceeding. Also, in discussing the merits of the proposed rule, we concluded in the interim report that its adoption was warranted in principle. Car utiliza- tion would be improved and the greater return on the car owner’s investment, which would result from our adoption of the proposed rule, would increase the incentive to in- vest in freight cars and thereby improve car supply. We ae et ee 33a also determined that private car owner participation in the rule was also supported by these same principles of car utilization and supply. However, because of the lack of evidence on the cost and administrative aspects of the rule, the proceeding was reopened for the receipt of fur. ther evidence on its feasibility and implementation. Par- ticipants were asked to submit specific information con- cerning present demurrage records and the modification and additional expenses which would be incurred by the implementation of the proposed rule. Nineteen guideline questions were provided to aid participants in the presen- tation of the requested material. The notice of amended rulemaking proceeding was published in the Federal Reg- ister, April 30, 1975 (Vol. 40, No. 84, p. 18797). One hundred and eighteen parties including 101 rail car- riers or carrier organizations submitted evidence on the merits, feasibility, and implementation of the rule. Twenty-six’ initial and thirteen reply statements were filed. Most carriers submitted their information through the Association of American Railroads or the American Short Line Railroad Association, A few other parties consolidated their views. As in the interim report, we will group participants according to their major viewpoints. They are (1) carrier * Petitions for leave to intervene filed by Duval Sales Corpora- tion, Evans Products Company, and International Minerals and Chemica! Corporation jointly, and Pullman Transport Leasing Company separately, were granted by orders entered September 24, 1975. The petition for leave to intervene filed by FMC Cor- poration was granted by order entered November 28, 1975. By order entered August 10, 1976, the initial statements of the Dela- ware and Hudson Railway Co. (D&H) and the Detroit Terminal Railroad Company were striken for failure to serve a copy of these statements on all parties of rerord. D&H’s statement was subse- quently admitted by order entered March ji, 1977. 34a proponents,’ (2) private car proponents,’ and (3) pro- ponents who consist mainly of carrier and carrier orga- nizations.* All evidence and arguments not mentioned have been considered and given due weight. Discussion of many of the various examples given in support of argument has been omitted since its inclusion would unduly lengthen this report. Similar arguments of the various participants will be discussed together to simplify discussion of the various positions. Before discussing the merits, costs, and feasibility of the implementation of the proposed rule, we will consider what effect, if any, the amendment of section 1(16) of the * Burlington Northern, Ine., and Union Pacifie Railroad Com- pany. * Archer Daniels Midland Company; Allied Mills, Ine.; Bay State Milling Company; Cargill, Incorporated; Duval Sales Cor- poration; Evans Products Company; IMC Corporation; Garvey, Ine.; General American Transportation Company; General Mills; Hercules, Incorporated ; International Minerals and Chemica] Cor- poration; International Multifoods Corporation ; Peavey Company ; The Pillsbury Company; Pullman Transport Leasing Company ; and Swift Edible Oil Company and Swift Fresh Meats Company —Division of Swift and Company. *American Short Line Rail’ Association; Association of American Railroads; Robert W. Meserve and Benjamin H. Lacy, Trustees of Property of Boston and Maine Corporation, Debtor; Cedar Rapids and Iowa City Railway Company; Chicago, Mil- waukee, St. Paul and Pacific Railroad Company; Elgin, Joilet and Bastern Railway Company ; Florida East Coast Railway Company ; Illinois Central Gulf Railroad Company; Robert OC. Haldeman, Trustee of Property of Lehigh Valley Railroad Company; Louis- ville and Nashville Railroad Company; Mississippi Export Rail- road Company; Norfolk and Western Railway Company; Robert W. Blanchette, Richard C. Bond, John H, McArthur, Trustees of Property of Penn Central Transportation Company, Debtor (now a part of ConRail) ; and Delaware and Hudson Railway Company. 35a Interstate Commerce Act by the Railroad Revitalization and Regulatory Reform Act of 1976 (4RA) has on the Commission’s jurisdiction in this proceeding. Except for the jurisdictional issue, we will set out our discussion and conclusions of the participants’ contentions after the pre- sentation of all the arguments and evidence, JURISDICTION Jurisdiction.—Section 1(6) was amended by the 4RA as follows: Demurrage charges shall be computed, and rules and regulations relating to such charges shall be es- tablished, in such a manner as to fulfill the national needs with respect to (a) freight car utilization and distribution, and (b) maintenance of an adequate freight car supply available for transportation of property. By order dated February 27, 1976, the Commission noted that the amendment of section 1(6) appeared consistent with the announced purposes of this proceeding, and soli- cited comments on the effect of the amendment. Wighteen statements in response were submitted.° ®’ American Short Line Railroad Association; Archer Daniels Midland Company; Association of American Railroads; Bay State Milling Company; Burlington Northern, Inc.; Cedar Rapids and Iowa City Railway Company; Duval Sales Corporation; Evans Products Company; Exxon Company, U.S.A.; Farmland Indus- tries, Inc.; Florida East Coast Railway Company; FMC Corpora- tion; General Mills; Grain Divisions/Cook Industries; Interna- tional Minerals and Chemical Corporation; International Multi- foods Corporation ; Mississippi Export Railroad Company ; Missouri Pacific Railroad Company ; Peavey Company; Penn Central Trans- portation Company; The Pillsbury Company; Pullman Transport Leasing Company; U.S. Department of Transportation; and the Union Pacific Railroad Company. 36a The parties principally discuss whether the recent amendment conferred, confirmed, or refuted the Commis: sion’s jurisdiction to establish the proposed rules. Carrier opponents generally argue that the Commission did not have jurisdiction before section 1(6) was amended and that jurisdiction was not conferred by the recent amend- ment. Counter arguinents by carrier and private car owner proponents, however, state that the amendment con- firms the Commission’s authority to promulgate the pro- posed rule. Carrier opponents.—Opponents to the rule argue that the stated purposes of the amendment are defeated by the proposed remittance scheme, which is said to be governed by principles of equity, not of car utilization and distri- bution, or of an adequate supply. They argue that no evidence has been presented to establish that the proposal will cause car owners to purchase additional, or shippers to release equipment expeditiously. In fact, the rule is argued to have the opposite effect since nonowning car- riers will have less motivation to collect demurrage charges for the reason that they will be remitting the ex- cess amount to car owners; and shippers detaining their own equipment, it is further argued, will have less incen- tive to release cars quickly because demurrage in excess of $10 will be remitted to them. (Further elaboration of these points will be given in the discussion of car utiliza- tion infra.) It is also contended that since the amendment merely authorizes the Commission to regulate the “level” of demurrage charges, it does not confer power to divide the charges—as is being done in this processding. Still another argument is that the Commission is trying to combine unlawfully the two powers conferred by the amendments to sections 1(6) and 1(14)(a) of the act; the power to compensate an owner for the use of its cars and 37a the power to regulate the use of cars." Section 1(14) (a) of the act was amended to encourage the purchase, ac- quisition, and efficient utilization of freight cars. In estab- ® Sec. 1(14) (a): (14)(a) It is the intent of the Congress to encourage the purchase, acquisition, and efficient utilization of freight cars. In order to carry out such intent, the Commission may, upon complaint of an interested party or upon its own initiative without complaint, and after notice and an opportunity for a hearing, establish reasonable rules, regulations, and practices with respect to car service by common carriers by railroad subject to this part, including (i) the compensation to be paid for the use of any locomotive, freight car, or other vehicle, (ii) the other terms of any contract, agreement, or arrangement for the use of any locomotive or other vehicle not owned by the carrier by which it is used (and whether or not owned by another carrier, shipper, or third party), and (iii) the penal- ties or other sanctions for nonobservance of such rate, regula- tions, or practices. In determining the rates of compensation to be paid for each type of freight car, the Commission shall give consideration to the transportation use of each type of freight car, to the national level of ownership of each such type of freight car, and to other factors affecting the adequacy of the national freight ear supply. Such compensation shall be fixed on the basis of the elements of ownership expense involved in owning and maintaining each such type of freight ear, including a fair return on the cost of such type of freight car (giving due consideration to current costs of ecapi- tal, repairs, materials, parts, and labor), Such compensation may be increased by any incentive element which will, in the judgment of the Commission, provide just and reasonable compensation to freight car owners, contribute to sound car service practices (including efficient utilization and distribution of cars), and encourage the acquisition and maintenance of a ear supply adequate to meet the needs of commerce and the national defense. The Commission shal] not make any incentive element applicable to any type of freight car if the Commis- sion finds that the supply of such type of freight car is ade- quate. The Commission may exempt such incentive element from the compensation to be paid by any carrier or group of carriers if the Commission finds that such an exemption is in the national interest. 38a lishing rules and regulations (after oral hearing) for the compensation to be paid a car owner, the Commission was directed to consider whether there is just and reasonable compensation to the owner, and whether it will contribute to sound ear practices and encourage the acquisition and maintenance of car supply. This, it is argued, has not been done in this proceeding. Therefore, the Commission has no jurisdiction under section 1(14)(a), and cannot combine this section’s compensatory element with the de- murrage provisions of section 1(6). Private car and carrier proponents.—Proponents, on the other hand, contend that the legislative history of the amendment to section 1(6) supports the Commission’s ju- risdiction. In this regard, it is pointed out that the House Committee and Senate Report indicates that section 1(6), as amended, “requires the Commission to establish rules and regulations for the computation of demurrage charges so that freight car utilization is maximized and car own- ers receive adequate compensation.” Final Conference Re- port, S. Rep. 94-595 and H.R. 94-781, 94th Cong., 2d Sess. 135 (1976). In addition, proponents contend that the “na- tional needs” for maintenance of an adequate freight car supply are not being met under the traditional demurrage system because lines which do not invest in cars are being rewarded at the expense of actual investors. However, if demurrage charges are paid in part to car owners, such charges will increase the car owner’s return on its invest- ment and will thereby be an added incentive to purchase additional cars, This proponents stress, will help maintain an adequate freight car supply. The U.S. Department of Transportation (DOT) con- tends that one of the goals of Congress in enacting the 4RA was to encourage the purchase, availability, and effi- cient utilization of cars. This is reflected in the amend- ments to section 1(6) and 1(14) of the act, which the DOT argues, requires a complete reassessment by the Commis- 39a sion of all rules governing freight car acquisition, main tenance, distribution and utilization. It is submitted that this proceeding is too narrow and does not adequately deal with these concerns. Proponents, therefore, recom- mend that this proceeding be suspended and a broad in vestigation of the best methods to assure sufficient avail- ability and utilization of freight cars be instituted.’ Conclusions.—The legislative history of the amendment to section 1(6) of the act and the wording of the section itself establishes the Commission’s jurisdiction to remit excess demurrage charges to car owners to provide them with adequate compensation for the use of their cars, The Joint Explanatory Statement of the Committee of Con- ference, Report 94-768, p. 128, 94th Cong., Ist Sess. (1975), states that: The house Amendment requires that rules and regu- lations be established for the computation of demur- rage charges so that freight car utilization was maxi- mized, Conference Substitute The conference substitute follows the House amend- ment, but insures the Commission will consider the transportation use [sic] the car and provide a fair return on investment in freight cars. Further evidence is presented that the legislature indi- cated that charges contain a compensatory element. In the Joint Explanatory Statements of the Committee of Con- ference, Report 94-781, p. 142, 94th Cong., 2d Sess. (1976), "The Union Pacific Railroad Company filed a response to the DO's statement, referring to it as a motion to suspend the instant proceeding. The statement is in the form of a recommendation, is not separately titled as a motion, and, therefore, will not be con- idered as a motion but as a request or recommendation. 40a two different breakdowns for sections 1(6) and 1(14) (a) indicate that demurrasje charges can be used to compen- sate owners of cars as well as per diem charges. The re- port states that the proposed legislation: (13 requires the Commission to establish rules and regulations for the computation of demurrage charges so that freight car utilization is maximized and car owners receive adequate compensation ; (14) reforms existing law with respect to compen- sation when one carrier pays for the use of a freight car owned by another carrier; * * * Specific mention of this proceeding is also made in the Report of the Committee on Interstate and Foreign Com- merce, Report No. 94-725, p. 241, 94th Cong., 1st Sess. (1975). In discussing the Commission’s continuing activi- ties in the area of demurrage, it stated that: The purposes of the proposals are to create an added incentive for the car owner to acquire additional cars and remove any inducement to the nonowner to en- courage detention of foreign cars in order to benefit from collection of demurrage charges. Thus, the legislative history of section 1(6) clearly in- dicates that the Commission is not restricted to section 1(14)(«) of the act in providing an incentive for car own- ers to acquire additional cars. The amendment provides another basis of jurisdiction in addition to the Commis- sion’s car service authority discussed in the interim re- port (349 I.C.C. 411.415). Freight car supply will be fos- tered under the rule as investors receive a greater return on their investment, which will be an added incentive for the purchase of additional cars. As more fully elaborated in the Discussion and Conclusions hereinafter, the pro- posed rule clearly will fulfill the purposes of section 1(6) by meeting the Nation’s needs for the maintenance of an 4la adequate freight car supply. Therefore, we find that the Commission has jurisdiction to promulgate the proposed rule. In regard to the request of the DOT to suspend this proceeding in favor of a broader investigation, any fur- ther delay in the ultimate determination of this proceed- ing would only complicate and postpone the Commission’s efforts to alleviate car shortages. The request will, there- fore, be denied. ADMINISTRATIVE Costs OF IMPLEMENTATION Private car and carrier proponents.—Carrier and pri- vate car proponents argue that the railroads presently require sufficient recordkeeping data to institute the pro. posed new demurrage remittance scheme with minimal expense, Proponents point out that railroads presently keep accurate demurrage records showing car ownership and number, constructive placement date, actual place- ment date, date of release, amount of demurrage, et ce- tera. Accordingly, they conclude that the only additional burden that will be placed on the delivering road is the computation of the arbitrary or excess demurrage charges. Some private car proponents feel that opponents to the rule have exaggerated the administrative startup and an- nual costs of the remittance to include installation of new computer systems and other extraneous expenses which would be incurred even without the adoption of the rule. They argue that railroads could use demurrage bureaus and other associations to handle the administrative and recordkeeping functions and provide the necessary audit- ing safeguards, which exist in the present system. Costs would, therefore, be ininimized. No direct evidence of the costs of the proposed rule was provided by private car proponents, as this information was thought to be within the knowledge of the carriers, 42a It is also pointed out by private car proponents that the extension of the rule to private car owners will not result in excessive administrative costs. Tariffs presently provide for the payment of mileage allowances to private car owners on tank ears and nontank cars. Railroads also keep accurate records of the movement of private cars over their lines; data is gathered and consolidated; and payments are made on a “fleet” basis to the private car own- ers. Therefore, a framework for the proposed rule is said to exist already. The two carrier proponents, the Burlington Northern (BN) and the Union Pacific Railroad Company (UP), submitted data on the costs of implementing the rule on an individual basis, They used the last 6 months of 1973 as their study period, They state that the present record- keeping system can provide the necessary information, although an expanded computer printout to display the required data would be needed by the BN and the UP would have to modify its average-agreement forms, Start- up expenses for BN would be $2,500, and for UP startup would be $1,950. Annual expenses thereafter would be $48,180 for the BN and $16,000 for the UP, for additional personnel, Carrier opponents.—The Association of American Rail- rouds (AAR) * estimates that the annual costs of adminis- tering the rule will range between $1.5 and $2 million. It submits an estimated startup and annual cost for 89 rail- roads which total approximately $500,000 for the former costs and over $1.5 million in annual administrative ex- penses, These additional costs are based on the projected need for additional employees (auditors, clerks, and su- * The AAR represents all its members except the BN, UP, Denver & Rio Grande Western Railroad Company, and Pittsburgh & Lake Erie Railroad. 43a pervisors), forms, travel, and computer expenses, Some of the carriers indicate that the methodology needed to implement the rule was used in preparing the cost data presented to the Commission. The following table shows the costs for 12 selected railroads (including the 2 carrier proponents, the UP and BN). TABLE 1 Estimated startup and annual costs Carrier Startup Annual Atchison, Topeka & Santa Fe Railway CMON Srvc scessnccewioters scenes $ 4,350 $ 48,070 Burlington Northern, Inc. ........+0006+ 2,500 48,180 Chicago and North Western Transportation COI Sic ccccccccesssepnessvepens 17,200 99,063 Cheasie System .....cccccccvrccscedeves 31,184 208,366 Florida East Coast Railway Company .... 500 10,000 Illinois Central Gulf Railroad Company .. 135,000 133,200 Missouri Pacific Railroad ...........006 7,484 80,834 Norfolk and Western Railway Company .. 6,500 110,954 Penn Central Transportation Company’ .. 717,945 332,713 Southern Railway System Lines? ........ das 224,000 Southern Pacific Transportation Company . 7,512 46,500 Union Pacific Railroad Company ........ 1,950 16,000 ’ Now a part of ConRail. * Costs without using a demurrage bureau. Cost data was also presented by three demurrage bu- reaus. The bureaus believe that the costs of administering the rule would be lower if necessary accounting and audit- ing functions were done on a group basis as is presently done on a large portion of churges for demurrage, deten- tion storage, and average agreements, While, additional expenses will still be incurred in implementing the rule (for personnel, forms, travel, and computer expenses), on 44a a group basis these costs will assertedly be less than if each railroad performed the functions individually. The foreseeable costs which would be prorated among the bu- reau members are estimated as follows: TABLE 2 Costs of demurrage bureaus Bureau Startup Annual Pacifie Car Demurrage Bureau (for 34 member railroads) ............. $12,129 *$ 87,129 Southeastern Demurrage and Storage Bureau (for 58 member railroads) ............. 15,032 208,392 Demurrage, Western Weighing and Inspection Bureau (for 91 member railroads) ..... Pees 397,464 ‘This represents costs for new forms which it appears would be used throughout the year, and, therefore, is not an accurate startup cost, * The annual estimated cost will be $110,000 more if the bureau polices the rule where there are no regional] bureaus certifying the amount, Only three railroads, the Chessie System, Penn Central Transportation Company (PC) (now a part of ConRail), and Southern Pacific Transportation Company (SP), spe- cifically indicate that their costs include the amounts to be paid the demurrage bureaus.’ Therefore, it is unclear whether the costs submitted by the other individual rail- roads are costs which (1) would be incurred if the demur- *The Pacific Car Demurrage Bureau, and nine Demurrage, Western Weighing aud Inspection Bureau members’ costs were their allocable portion of the demurrage bureau costs. The 21 mem- bers of the Southeastern Demurrage Bureau did not present indi- vidual prorated costs, only the total costs to the bureau of all its members. 45a rage bureaus were not utilized, (2) would be incurred in addition to the costs reported by the demurrage bureaus, or (3) inelude individual costs and costs payable to the demurrage bureaus. To obtain an indication of the administrative costs if demurrage bureaus were utilized, we took the number of excess demurrage days presented by the Pacifie Car De- murrage Bureau’s members and divided that by the pro- rated costs to the members.” The startup and annual cost for each excess day is $0.035 and $0.2514 respectively. The American Short Line Railroad Association (ASLRA), utilized cost data submitted by 46 member lines" to project the costs of administering the rule for its 214 member lines. The expenses based on a per-car- handled basis (which includes all revenue cars handled and not just arbitrary cars) are as follows: ©The bureau submitted the prorated costs to the individual roads so that we could compute the charges for each excess day. It was the only bureau to provide us with this breakdown. The startup cost is not totally accurate as it represents the cost of new forms which would be used throughout the year. The startup and annual costs per excess day represents the costs prorated over the annualized excess days. 1 One member of the ASLRA study group is the Cedar Rapids and Iowa City Railway Company (CRANDIC) which also sub- mitted data to the AAR. There could be other overlaps in the ASLRA’s projection of costs to its total membership if demurrage bureaus have also submitted costs for the same road, However, from the evidence presented, we are unable to calculate the fre- quency of this double reporting. The ASLRA study group in- cluded 27 members in the eastern territory, 7 in the southern territory, 2 in the western territory, and 3 in the Mountain Pacific territory. 46a TABLE 3 Additional administrative expenses of rule for A.S.L.R.A. membership Total cars Expenses Total Railroads handled per car expenses Class I Switching and Terminal 3,687,518 $0.035 $129,063 Class II Switching and Terminal 995,944 081 80,671 Class I Line-haul ............ 1,508,202 0115 173,443 Class II Line-haul ............ 1,703,935 0115 195,953 , | ee re 7,895,599 ees 579,130 These figures are based on data submitted by the study group for the time and cost of preparing the administra- tive study (which was done on a manual basis). These costs do not include the auditing, claims, or overhead ex- penses associated with the proposed rule. ASLRA states that if these expenses were added to the above figures, the total expenses woud be $1 million annually. It is argued that such an increase in administrative costs is a needless and unjustified waste of carrier revenues. The rule can either be implemented by the reporting roads on a manual or computer basis, or the administra- tive functions could be turned over to demurrage bureaus or other carrier associations. Costs would vary accord- ingly. Assessments of individual implementation of the rule are provided by the Chicago, Milwaukee, and St. Paul and Pacific Railroad (CMSP) and the Chicago and North Western (CNW). Assessments of demurrage bureau im- plementation are provided by the Pacific Car Demurrage Bureau (PCDB) and Southeastern Demurrage Bureau (CFDSB), * The expenses are based on averaged data from the first quarter of 1975 for the 46 roads in the ASlra’s study group. These costs were projected to the entire membership by multiplying the num- ber of cars handled in 1974 for each class and type. 47a The CMSP states that if the proposed rule were put into effect, it would have to develop an entirely new sys- tem for accumulating demurrage records. This would mean converting its present manual method into a com- puterized system. Such a changeover would entail new forms, converting present records into machine-process- able records, and computer programming. After these initial startup programs (amounting to $142,800), CMSP also indicates it would incur $714,350 annually in adminis- tering the rule. This figure is based on the costs of 5 key- punch operators, 1.52 full-time computer programmers, 15 auditors and 3 supervisors. The startup and annual costs for CMSP for each excess demurrage day are $1.0893 and $5.4493, respectively. The CNW indicates that it would implement the rule on a manual basis, as is presently done with its demurrage records. Employees would record the car initial and num- ber, name of ear owner, station accounting number and name, miscellaneous bill date and number, number of ex- cess demurrage days, and amount of refund to car owner. It would also maintain a list of payments made at sta- tions, which would be verified against billings. After veri- fications are made, cars would be drawn off listings and classified by car owners for payment. The startup and annual costs for each excess day are $0.1028 and $0.5921, respectively, for CNW. The PCDB presently receives from its members a monthly copy of demurrage records covering all cars re- ported. These reports are reviewed for possible under- and overcharges, and claims are handled by the Bureau. Under the rule it would also determine the amounts due from other railroads and certify that the proper remit- tance was made between carrier member and other rail- roads. It anticipates that if the rule goes into effect, it would need six additional clerks to analyze each demur- rage record for possible remittance to car owners, and 48a for further review if claims are presented and adjust- ments made, A separate filing and posting system would also be needed, a number of forms would have to be re- vised, and several new six-part forms printed to cover remittance and record of cars to car owners. The SEDSB reviews records to determine charges ex- ceeding the value of $10 per car per day, identify car owners, car initial and number, station, date of demur- rage or detention bill, and amount due. On average agree- ments, it will require a complete restatement of all cars for industries which habitually delay cars. Under the pro- posed rule the excess amount will be identified as to the car owner, and auditors will review railroad accounts to determine if proper amounts are paid. Both the SEDSB and PCDB will assure the proper transfer of funds for railroads in other territories, with the understanding that similar bureaus in other territories will do the same. They state that otherwise the rule will be impossible to admin- ister. AAR replies, based on the evidence presented in all the initial statements, that the annual cost for administer- ing the rule is approximately $3.5 million dollars. The following table is our summary of the costs of the proposed rule as alleged by respondents. It is based on data submitted by 42 roads for the period July 1 through December 31, 1973. TABLE 4 Costs for implementing proposed rule I. Startup expenses (1) Lowest startup expense (Sunset Ry.) .... $6.00 (2) Highest startup expense (CMSP) ....... 142,800.00 (3) Average startup expense ............... 14,219.00 II. Annual expenses (1) Total annual expense for 41 roads ....... $2,768,740.00 (2) Annualized number of excess demurrage SAN Cat-A nun eibd on-j 0d nbdh-o dbs ted vee 3,068,004.00 49a Replies.—In reply, proponents reiterate their views that the carrier opponents are exaggerating the costs of the program. BN states that if only 25 percent of its demur- rage revenues were remitted, the administrative expenses would only amount to 4.23 percent of the total demurrage charges. Private car owners, Duval Sales Corporation, Evans Products Company, International Minerals & Chemical Corporation (Duval), state that for 19 selected railroads the cost to remit the excess charges to private ear owners for the period July 1 through December 31, 1973, is $134,376. When this is divided by the number of penalty demurrage days (184,950), the cost is 73 cents a day. Since the cost of administering the present demur- rage program is $6 a day, the administrative cost is said to be more than adequately covered by the $10 to be re- tained by the delivering carrier, Aprequacy or $10 Minimum Private car and carrier proponents.—Private car and carrier proponents argue that the sum ($10) to be re- tained by the delivering carrier is adequate compensation to cover the administrative expenses of the rule, per diem, and the switching expenses associated with the delivery of the car. Proponents state that the average per diem charge to he paid to owning railroads during periods of demurrage 1s approximately $4. Thus, the remaining $6 is arguably more than adequate to cover charges associated with the delivery of the car. They cite Ormet Corp. v. Illinois Cen- tral R. Co., 341 1.C.C. 647 (1972), where the Commission held that in providing relief from penalty demurrage charges, the delivering railroad should retain $4 per car per day to offset per diem plus 20 percent thereof for administrative costs. This expense, it is noted, falls far short of the $10 to be retained by the delivering carrier under the proposed rule. Moreover, this is especially true 50a in cases where payments are made to private car owners since there are no per diem charges. In cases where delivering carriers have shown per diem and switching charges in excess of $10, proponents note that it has not been established whether these costs are representative, or their percentage of the total number of cars involved. In addition, proponents contend that these costs should not be considered controlling in deter- mining whether the $10 is adequate because the level of line-haul rates is set after considering per diem expenses and switching costs. Proponents state that it is a common practice to extend the line-haul car costs to include an average of 4 days at origin and 4 days at destination, cit- ing “Rail Carload Cost Seales for 1973,” ICC statement No. 1C1-73, p. 137. Proponents note that Rail Form A . unit costs also include the added expenses incurred in switching cars to and from hold tracks. Therefore, pro- ponents conclude, a carrier is compensated for its ex- penses by its division of freight rate, and if any cost ad- justment is needed, it should be in the line-haul rate. Carrier opponents.—Opponents state that generally cars which incur demurrage in excess of $10 a day are those which have been constructively placed on railroad-owned tracks. Additional switching is necessary for these cars when (a) the delivering road moves the ear to a holding point, (b) cars held at these points are repositioned as other cars move in and out, and (ce) actual delivery is made, Additional costs are also incurred for track and protective services. Opponents note that each additional switch is an added expense for the delivering road in terms of actual switching costs and administrative expenses to record the position of the cars. For example, CMSP indicates 10 minutes of additional time is needed per switch—which costs $12.94, Such costs, carrier opponents maintain, will 5la not be covered by the $10 to be retained by the delivering road. The Boston and Maine (B&M) submitted a study of daily conditions and locations of cars for July 1973, to illustrate that switching costs are not covered by the re- tained $10. Out of 1,091 cars handled, 638 were identifiable as having excess demurrage. On these cars there were 1,900 switching movements which would cost between $34.06 and $44.08 if they were intraplant or other than intraplant secondary movements, respectively. Based on these figures, the switching costs would be between $64,714 and $74,233. But if the proposed remittance were in effect, B&M indicates that $56,865 would have been remitted to the car owner and, consequently, the B&M would have suffered a loss of over $10,000. The ASLRA also argues that per diem expenses are not met by the retained amount. It submits that class IT rail- roads normally are not accorded per diem reclaim by connecting carriers. Although, in theory, the short lines’ division of the fixed arbitrary and terminal lines per diem reclaim allowance makes the switching and terminal lines whole for their per diem responsibility on backhaul cars interchanged with the trunklines, in fact, according to ASLRA, this is not so. ASLRA states that “shortfalls” can occur (1) when the holding line assesses a local revenue charge on shipments; (2) when there is a high turnaround of relatively low per diem equipment and low turnaround of higher speed rated equipment (a further discussion of this point is contained in the section on average agreements); and (3) when there are changes in patron volume, detention times, or equipment value. Taking the average of the ASLRA study group carriers (except those not within the normal range indicated by the average for other railroads), demurrage retained ex- ceeds per diem by only 22 cents per car handled, Of the 25 class II line-haul short lines in its study, ASLRA states 52a that all but 2 would have net per diem costs exceed de- murrage income by amounts ranging from 47 cents to $27.47. (See appendix A.) The statement presented by one of its members, the Meridian & Bigbee Railroad, submits that it presently collects in demurrage revenue only 15 per- cent of its per diem car costs on an annual basis. The pro- posed rule would, therefore, aggravate a presently critical situation. Although opponents concede that demurrage is not con- sidered a source of revenue, they argue that the money derived from demurrage is vital to offset additional oper- ating costs which directly relate to the detention of equip- ment and car-hire costs during detention. Demurrage is also used to offset high-value equipment placed on assign- ment to delivering roads by car owners on which per diem rate exceeds the storage charge. The loss of this revenue, according to opponents, could force marginal lines into bankruptcy. Opponents conclude that the $10 to be re- tained by the delivering road is inadequate. Replies.—Proponents reply that opponents of the rule have not established that, overall, the $10 to be retained by the delivering road is inadequate to meet costs.’ How- ever, in those limited instances where costs are not met by demurrage, it is maintained that the division of the line-haul rates should cover these costs. Opponents continue to argue that costs incurred by the delivering railroad are not covered by the $10 portion of the demurrage charge. The ASLRA states that the mini- mum detention to the point of the first arbitrary day is 7 days. Thus, a carrier has 1 or more days of per diem before demurrage begins. Yet, no line-haul rate or division as The Norfolk and Western Railway Company in its reply states that if remittance is ordered, then the $10 limit should not be altered to reflect added switching expenses as these are covered in the Rail Form A unit costs. al ee ee 53a of rates contemplates covering costs for 7, 8, or 9 or more days of per diem responsibility before the assessment of demurrage for the first aribtrary days begins. AVERAGE AGREEMENTS AND Runarounp CLAIMS There is some question whether average agreements would be difficult or impossible to utilize under the pro- posed rule. In an average agreement, a shipper offsets the early release of a car (credit) against a late release (debit). Excess debits are then billed at $10 and arbitraries (which cannot be offset by credits) are billed according to the different level of charges on a monthly basic without regard to car ownership. Private car and carrier proponents.—Proponents fore- see no problems with average agreements, They contend that data for determining charges is available from ex- isting average agreement forms since the car initial, num- ber, and date placed and released are specified. Remit- tance is not affected by “free” and $10 days, but only days in excess of $10, and, therefore, the rule would have no adverse effect on average agreements. The UP proposed the following method of computing charges under the av- erage agreement: chargeable days for average agreement multiplied by $10 equals the amount chargeable at $10 a day. Then the amount chargeable at $10 a day is divided by the number of debit days per average agreement to equal the amount apportionable to each car owner per each debit day. Carrier opponents.—Rail carrier opponents, on the other hand, state that if the proposed rule goes into effect, average agreements will have to be canceled. They argue that under an average agreement if each credit has a value of $10 in offsetting debits, the delivering carrier could suffer a net loss when per diem and switching costs are not adequately covered by demurrage charges retained , 54a by the carrier. It is also contended that cars with high per diem can be used to offset low per diem cars, so that a delivering carrier cannot collect enough demurrage to offset the car costs of the high—value per diem equip- ment. For example, a $3.50 per diem charge for a coal lhopper could offset a $22.88 per diem charge for a 60- foot boxcar. Examples of the problems created by average agree- ments were cited by the SEDSB. If each credit has a value of $10 in the offsetting of debits, it states that an anomalous situation would develop. On one average agree- ment, reflecting a total of 64 cars, $900 in demurrage charges were assessed, with $240 representing possible pay out to foreign railroads. Yet, there would be per diem and switching charges of $845.09, so that the delivering carrier would suffer net loss of $185.09. In another in- stance, an average agreement covering 231 cars involved total demurrage charges of $4,770 with related costs of $6,366.11. Under the proposal $900 would be remitted to the car o [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2289%3A1. Public record. Not legal advice.