Appendix — Baltimore & Ohio Chicago Terminal Railroad Co. v. United States (Nos. 78-1069, 78-1049)
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VMPICTNG GOUT, U. ay 7 [
| FILED
JAN 3 1979
THE
IN MICHAEL RODAK, JR., CLERK
Supreme Court of the United States
October Term, 1978.
No. %8-1069
BALTIMORE AND OHIO CHICAGO TERMINAL
RAILROAD COMPANY, et al.,
Petitioners,
v.
UNITED STATES OF AMERICA and
INTERSTATE COMMERCE COMMISSION,
Respondents.
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT.
Joun A. Dany,
1138 Six Penn Center Plaza,
Philadelphia, PA 19104
Counsel for Petitioners.
January 3, 1979
International Printing Co., 711 So. 50th St., Phila., Pa, 19143 — Tel. (215) 727-8711
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TABLE OF CONTENTS,
Page
AppenDIX A—List of Petitioners ..........ccseeeeeeeueees Al
Appenpix B;
Court of Appeals (D.C, Cir.) Opinion Filed September
GD, FU vecvsvvccsccedeues vei naqkcasscoteahebant A3
Court of Appeals (D.C, Cir.) Order Denying Rehearing A34
Interim Report of Interstate Commerce Commission,
Doeckeed ilavets GB BOGS sidsvccscvescceeekarcee A35
Report and Order of Interstate Commerce Commission
on Further Hearing, Decided March 18, 1977 ..... A86
Order of Interstate Commerce Commission in the Matter
of a Stay Pending Judicial Review, Dated August 23,
WCE. KGL Koes eee Reivak thu akedh eed bike icdan A140
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APPENDIX A.
Baltimore and Ohio Chicago Terminal Railroad Company
Baltimore and Ohio Railroad Company
Belt Railway Company of Chicago
Bessemer & Lake Erie Railroad Company
Boston & Maine Corporation
Chesapeake & Ohio Railway Company
Chicago and North Western Transportation Company
Chicago, Milwaukee, St. Paul & Pacific Railroad
Chicago, Rock Island & Pacific Railroad Company
Chicago, South Shore and South Bend Railroad
Consolidated Rail Corporation
Delaware & Hudson Railway Company
Detroit Terminal Railroad Company
Detroit, Toledo & Ironton Railroad Company
Duluth, Missabe and Iron Range Railway Company
Elgin, Joliet and Eastern Railway Company
Florida East Coast Railway Company
Grand Trunk Western Railroad Company
Illinois Central Gulf Railroad
Indiana Harbor Belt Railroad Company
Illinois Central Gulf Railroad
Indiana Harbor Belt Railroad Company
Kentucky & Indiana Terminal Railroad Company
Louisville and Nashville Railroad Company
Missouri Pacific Railroad Company
Norfolk & Western Railway Company
St. Louis-San Francisco Railway Company
St. Louis Southwestern Railway Company
Seaboard Coast Line Railroad
Soo Line Railroad Company
Southern Pacific Transportation Company
(Al)
A2 Appendix A
Southern Railway Company
Staten Island Railroad Corporation
Terminal Railroad Association of St. Louis
Western Maryland Railway
Central Vermont Railway, Inc.
Duluth, Winnipeg and Pacific Railway
Detroit and Toledo Shore Line Railroad Company
Court of Appeals Opinion A3
APPENDIX B.
UNITED STATES COURT OF APPEALS
For THE THirp Crrcult
No. 77-1714
Baltimore and Ohio Chicago Terminal Railroad Company;
Baltimore and Ohio Railroad Company; Belt Railway
Company of Chicago; Bessemer & Lake Erie Railroad
Company; Boston & Maine Corporation; Chesapeake
& Ohio Railway Company; Chicago and North West-
ern Transportation Company; Chicago, Milwaukee, St.
Paul & Pacific Railroad; Chicago, Rock Island & Pacific
Railroad Company; Chicago, South Shore and South
Bend Railroad; Consolidated Rail Corporation; Dela-
ware & Hudson Railway Company; Detroit Terminal
Railroad Company; Detroit, Toledo & Ironton Rail-
road Company, Duluth, Missabe and Iron Range Rail-
way Company; Elgin, Joliet and Eastern Railway
Company; Florida East Coast Railway Company;
Grand Trunk Western Railroad Company; [Illinois
Central Gulf Railroad; Indiana Harbor Belt Railroad
Company; Kentucky & Indiana Terminal Railroad
Company; Louisville and Nashville Railroad Com-
pany; Missouri Pacific Railroad Company; Norfolk &
Western Railway Company; St. Louis-San Francisco
Railway Company; St. Louis Southwestern Railway
Company; Seaboard Coast Line Railroad; Soo Line
Railroad Company; Southern Pacific Transportation
Company; Southern Railway Company; Staten Island
A4 Court of Appeals Opinion
Railroad Corporation; Terminal Railroad Association
of St. Louis; Western Maryland Railway,
Petitioners
v.
United States of America and Interstate Com-
merce Commission,
Respondents
Central Vermont Railway, Inc.; Duluth, Winni-
peg and Pacific Railway; and the Detroit and
Toledo Shore Line Railroad Company,
Intervenors
Burlington Northern Inc. and Union Pacific Rail-
road Company,
Intervenors
Duval Sales Corporation, International Minerals
& Chemical Corporation, Evans Products Com-
pany and Pullman Leasing Company,
Intervenors
The Texas Mexican Railway Company,
Intervenor
No. 77-1732
ALIQUIPPA AND SOUTHERN RAILROAD COM-
PANY; CHESTNUT RIDGE RAILWAY COM-
PANY; EAST ERIE COMMERCIAL RAILROAD;
EAST JERSEY RAILROAD AND TERMINAL
COMPANY; GETTYSBURG RAILROAD COM-
PANY; LAKE ERIE, FRANKLIN & CLARION
RAILROAD COMPANY; McKEESPORT CON-
Court of Appeals Opinion A5
NECTING RAILROAD COMPANY; MONONGA-
HELA CONNECTING RAILROAD COMPANY
(THE); MORRISTOWN AND ERIE RAILROAD
COMPANY; NORTHAMPTON AND BATH RAIL-
ROAD COMPANY; PHILADELPHIA, BETHLE-
HEM AND NEW ENGLAND RAILROAD COM-
PANY; PITTSBURGH AND OHIO VALLEY
RAILWAY COMPANY; PORT JERSEY RAIL-
ROAD; RAHWAY VALLEY RAILROAD; UNION
RAILROAD COMPANY; UPPER MERION AND
PLYMOUTH RAILROAD COMPANY; AMERICAN
SHORT LINE RAILROAD ASSOCIATION; ABER-
DEEN AND ROCKFISH RAILROAD COMPANY;
ALEXANDER RAILROAD COMPANY; APACHE
RAILWAY COMPANY (THE); ARCATA AND
MAD RIVER RAILROAD COMPANY (THE);
ARKANSAS & LOUISIANA MISSOURI RAILWAY
COMPANY; ASHLEY, DREW & NORTHERN
RAILWAY COMPANY; BELFAST & MOOSEHEAD
LAKE RAILROAD COMPANY; BELTON RAIL-
ROAD COMPANY; BERLIN MILLS RAILWAY
COMPANY; BIRMINGHAM SOUTHERN RAIL-
ROAD COMPANY; BROOKLYN EASTERN DIS-
TRICT TERMINAL RAILROAD; BUTTE, ANA-
CONDA & PACIFIC RAILWAY COMPANY;
CANTON RAILROAD COMPANY; CARBON
COUNTY RAILWAY COMPANY; CEDAR RAPIDS
AND IOWA CITY RAILWAY COMPANY; CEN-
TRAL NEW YORK RAILROAD CORPORATION;
CHATTAHOOCHEE INDUSTRIAL RAILROAD;
CHATTAHOOCHEE VALLEY RAILWAY COM-
PANY; CHICAGO SHORT LINE RAILWAY COM-
PANY; CHICAGO, WEST PULLMAN AND
SOUTHERN RAILROAD COMPANY; CITY OF
A6
Court of Appeals Opinion
PRINEVILLE RAILWAY; CLAREMONT AND
CONCORD RAILWAY COMPANY; COLORADO
& WYOMING RAILWAY COMPANY; COOPERS-
TOWN & CHARLOTTE VALLEY RAILWAY COR-
PORATION; CUYAHOGA VALLEY RAILWAY
COMPANY (THE); DANSVILLE AND MOUNT
MORRIS RAILROAD COMPANY; DARDANELLE
& RUSSELLVILLE RAILROAD COMPANY; DEL-
RAY CONNECTING RAILROAD COMPANY; De-
QUEEN AND EASTERN RAILROAD COMPANY;
DULUTH & NORTHEASTERN RAILROAD COM-
PANY; EAST CAMDEN & HIGHLAND RAILROAD
COMPANY; ESCANABA AND LAKE SUPERIOR
RAILROAD COMPANY; FAIRPORT, PAINES-
VILLE AND EASTERN RAILWAY COMPANY;
FONDA, JOHNSTOWN AND GLOVERSVILLE
RAILROAD COMPANY; FORE RIVER RAILROAD
CORPORATION; FRANKFORT AND CINCINNATI
RAILROAD COMPANY; GREAT SOUTHWEST
RAILROAD INCORPORATED; GREEN MOUN-
TAIN RAILROAD CORPORATION; GREENVILLE
AND NORTHERN RAILWAY COMPANY; IOWA
TERMINAL RAILROAD COMPANY; JOHNS-
TOWN AND STONY CREEK RAILROAD COM-
PANY; KENTUCKY AND TENNESSEE RAIL;
WAY; LACKAWAXEN AND STOURBRIDGE
RAILROAD CORPORATION; LAKE SUPERIOR &
ISHPEMING RAILROAD COMPANY; LAKE TER-
MINAL RAILROAD COMPANY (THE); LAONA &
NORTHERN RAILWAY COMPANY; LaSALLE
AND BUREAU COUNTY RAILROAD COMPANY
(THE); LAURINBURG AND SOUTHERN RAIL-
ROAD COMPANY; LONG ISLAND RAIL ROAD
COMPANY (THE); LONGVIEW PORTLAND &
Court of Appeals Opinion A7
NORTHERN RAILWAY COMPANY; MANUFAC-
TURERS’ JUNCTION RAILWAY COMPANY;
MARINETTE, TOMAHAWK AND WESTERN
RAILROAD COMPANY; MERIDIAN & BIGBEE
RAILROAD COMPANY; MICHIGAN NORTHERN
RAILWAY COMPANY, INC.; MIDDLETOWN AND
NEW JERSEY RAILWAY COMPANY INCOR-
PORATED; MINNEAPOLIS, NORTHFIELD AND
SOUTHERN RAILWAY; MINNESOTA TRANS-
FER RAILWAY COMPANY; MISSISSIPPI EX-
PORT RAILROAD COMPANY; MODESTO AND
EMPIRE TRANCTION COMPANY; MONTPE-
LIER & BARRE RAILROAD COMPANY; NEVADA
NORTHERN RAILWAY COMPANY; NEWBURGH
AND SOUTH SHORE RAILWAY COMPANY
(THE); NORTH LOUISIANA & GULF RAILROAD
COMPANY; OREGON & NORTHWESTERN RAIL-
ROAD COMPANY; PEARL RIVER VALLEY
RAILROAD COMPANY; PECOS VALLEY SOUTH-
ERN RAILWAY COMPANY (TI.E£); PORT HURON
AND DETROIT RAILROAD COMPANY; PRES-
COTT AND NORTHWESTERN RAILROAD COM-
PANY (THE); PROVIDENCE AND WORCESTER
COMPANY; RIVER TERMINAL RAILWAY COM-
PANY (THE); SABINE RIVER & NORTHERN
RAILROAD COMPANY; SALT LAKE, GARFIELD
AND WESTERN RAILWAY COMPANY; SAND
SPRINGS RAILWAY COMPANY; SANDERS-
VILLE RAILROAD COMPANY; SAVANNAH
STATE DOCKS RAILROAD COMPANY; STOCK-
TON TERMINAL AND EASTERN RAILROAD;
TERMINAL RAILWAY ALABAMA — STATE
DOCKS; TEXAS & NORTHERN RAILWAY COM-
PANY; TEXAS, OKLAHOMA & EASTERN RAIL-
A8 Court of Appeals Opinion
ROAD COMPANY; TEXAS SOUTH-EASTERN
RAILROAD COMPANY; TRONA RAILWAY COM-
PANY; TULSA-SAPULA UNION RAILWAY COM-
PANY; VALDOSTA SOUTHERN RAILROAD;
VENTURA COUNTY RAILWAY COMPANY;
WARREN & SALINE RIVER RAILROAD COM-
PANY; WYANDOTTE SOUTHERN RAILROAD
COMPANY; WYANDOTTE TERMINAL RAIL-
ROAD COMPANY; YOUNGSTOWN AND NORTH-
ERN RAILROAD COMPANY (THE)
Petitioners
v.
UNITED STATES OF AMERICA and THE INTER-
STATE COMMERCE COMMISSION,
Respondents
DUVAL SALES CORPORATION, INTERNA-
TIONAL MINERALS & CHEMICAL CORPORA-
TION, EVANS PRODUCTS COMPANY AND
PULLMAN LEASING COMPANY,
Intervenors
THE TEXAS MEXICAN RAILWAY COMPANY,
Intervenor
On PETITION FOR REVIEW OF AN ORDER OF THE
INTERSTATE COMMERCE COMMISSION
(Ex Parte No. 289)
Argued July 25, 1978
Before Apams, Weis and HiccrnsoruaM, Circuit Judges
(Opinion filed September 6, 1978)
Court of Appeals Opinion AQ
Joun A. DatLy
RicHArD J. MurPHY
Philadelphia, PA 19104
MakTIN L, CAssELL
Chicago, IL 60604
Emniep D, CoLe
Jacksonville, FL 32202
DonaLp E. Cross
Washington, DC 20006
Rosert S. Davis
St. Louis, MO 63103
Louis T. DuERINCK
Chicago, IL 60606
CHARLES B. Evans
St. Augustine, FL 32084
James L. Howe, III
Washington, DC 20013
PETER J. HUNTER, JR.
Roanoke, VA 24042
Howarp D. Koontz
Chicago, IL 60601
KincA M. LACHAPELLE
Albany, NY 12207
WILLIAM C, LEIPER
Pittsburgh, PA 15230
Joseru J. NAGLE
Chicago, IL 60606
Joun J. PAYLOR
Cleveland, OH 44101
C. HAROLD PETERSON
Minneapolis, MN 55440
Joun A. Pontrz
Detroit, MI 48226
Joun MacDona.p SMITH
San Francisco, CA 94105
Rospert H. STAHLHEBER
St. Louis, MO 63103
Dona. L. TuRKAL
St. Louis, MO 63101
SIDNEY WEINBERG
Boston, MA 02114
Attorneys for Petitioners and Intervening Railroads
in Support of Petitioners in No. 77-1714
SAMUEL P. DELIsI
Washington, DC 20036
C. H. Jouns, General
Counsel
American Short Line R.R.
Ass'n.
Pittsburgh, PA 15219
Attorneys for Petitioners in No. 77-1732
Al10 Court of Appeals Opinion
Rosert L. THOMPSON
Department of Justice
Washington, D.C. 20530
Attorney for the United States
Mark L. Evans, General Counsel
Henri F. Rusu, Associate General Counsel
Joun J. McCarrny, Jr.
Interstate Commerce Commission
Washington, D.C. 20423
Attorneys for the Interstate Commerce Commission
WILLIAM P. Hiccrns Curtis H. Bere, Sr.
W. Dona.p Bor, Jr. WILLIAM R. PowER
Union Pacific Railroad Burlington Northern Inc.
Company St. Paul Minnesota 55101
Omaha, Nebraska 68179
W. Cuar.es Hoos, Jr.
Epwarp H. Too xg, Jr.
Clark, Ladner, Fortenbaugh
and Young
Phitadelphia, Pa.
Attorneys for Burlington Northern Inc. and
Union Pacific Railroad Company, Intervenors
in support of Respondents
Betnap, McCartny, HAROLD E. SPENCER
SPENCER, SWEENEY & Tuomas F, McFar.anp, Jr.
HARKAWAY Chicago, IL 60606
Of Counsel
Attorneys for Intervening Private Car Interests
in Support of Respondents
Court of Appeals Opinion All
OPINION OF 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
regulation 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.’ Spe-
cifically, petitioners maintain that the order exceeds the
statutory power of the agency; that it is arbitrary, capri-
cious, 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’
request.
1. 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 pursuant to 28
er eag 2321, 2342, and 2344 (1978) to enjoin a final order
of the ICC.
2. 353 L.C.C, 567 Oe? 42 Fed. Reg. 19146; 39390 (1977)
(to be codified in 49 C.F.R. § 1254.10).
3. Demurrage is the charge imposed upon shippers and re-
ceivers for the detention of freight cars beyond the allotted free
time period for loading and unloading. Traditionally, all demur-
rage payments have been made to and retained by the deliverin
carriers. Under the ICC order at issue here, these payments would
continue, but the funds collected in excess of ten dollars per day
per car would be remitted by the delivering railroads to the freight
car owners.
4. 5 U.S.C.A. § 551 et seq. (1977 & Supp. 1978).
5. 49 U.S.C.A. § 1 et seq. (1949, 1951 & Supp. 1978).
Al2 Court of Appeals Opinion
I.
The regulation at issue is a recent attempt by the ICC
to deal with the longstanding 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 con-
necting carriers to the ultimate destination point. While
more efficient than the earlier practice of shifting freight
from the car of one carrier to the car of another, the pool
system has at the same time made it more advantageous
economically for railroads to utilize the freight cars of the
originating carriers than to purchase and maintain their
own. The national freight car shortage is the acknowl-
edged result.’
During the past several years, the ICC tas taken a
number 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
6. See United States v. Florida E. Coast Ry. Co., 410 U.S, 224,
230-31 (1973); United States v. oy eny-Ludlum Steel Corp., 406
U.S. 742, 743-46 (1972); Note, The Freight Car Shortage and ICC
Regulation, 85 Harv. 7? "Rev, 1583 (1972).
7. See, e.g., United States. v Allegheny-Ludlum Steel Corp.,
406 U.S. at 745-46.
8. See, e eg. ICC vy. Oregon Pac. Indus., Inc., 420 U.S. 184
(1975); United States v. Allegheny-Ludlum Steel Corp., 406 U.S.
742; = Co. v. Community Credit Corp., 289 F.2d 744 (3d
Cir. 1961
ee
Court of Appeals Opinion Al3
the use of another’s cars; ° (3) it has added an “incentive”
element to the basic per diem rate; '° and (4) it has im-
posed an increase in demurrage charges."
Ex Parte No. 289, the proceeding in question here, was
instituted in October 1972, to determine whether remit-
tance of the penalty portion ' of the demurrage charges to
the carriers owning the cars would create an added in-
centive for such carriers to acquire additional cars. Fol-
lowing notice in the Federal Register * and submission of
written statements by a number of the ninety-seven par-
ticipating parties, the ICC, on April 25, 1975, issued its
Interim Report.’* The Report adopted the principle of the
proposed remittance rule and reopened the proceeding for
receipt of additional evidence regarding the plan’s feasi-
bility and costs. Following notice of the proposed further
rulemaking,” one hundred-eighteen parties submitted ad-
ditional information to the ICC.
On April 7, 1977, the ICC issued its Report and Order
in Ex Parte No. 289."* It concluded that adoption of the
9. 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.), affd per curiam, 396 U.S. 27 (1969).
10, See United States v. Florida E. Coast Ry. Co., 410 U.S. at
224, on remand, 368 F. Supp. 1009 (M.D. Fla. 1973), affd mem.,
417 U.S. 901 (1974).
11. See General Mills, Inc. v. United States, 364 F. Supp.
1278 (D. Minn. 1973).
12. Demurrage charges consist of both penalty and compensa-
tory elements. See ICC v. Oregon Pac. Indus., Inc., 420 U.S. at
189-191. The latter element is that portion of the demurrage
— 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.
13, 37 Fed. Reg, 22884 (1972).
14, 349 L.C.C. 411 (1975).
15, 40 Fed. Reg. 18797 (1975).
16, 353 1.C.C, 567 (1977).
Al4 Court of Appeals Opinion
proposed remittance rule would be beneficial to the public
and the rail industry, as well as administratively feasible.
Consequently, the agency directed that the rule become
effective on July 6, 1977. However, the effective date was
subsequently stayed by the ICC pending judicial review.
Il.
A,
The principal argument made in support of the peti-
tion 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
requisite authority under 49 U.S.C.A. § 1(6) (Supp. 1978),
as amended by the Rail Revitalization and Regulatory Re-
form 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 estab-
lished, 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 avail-
17. Pub. L. No. 94-210, § 211, 90 Stat. 31, 46 (1976). In its
Interim Report of April 1975, the Commission found that it had
jurisdiction under three car service provisions of the ICA, 49
US.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 ICC solicited comments on the effect of the new legis-
lation. In its final Report and Order of April 1977, as well as in
its brief submitted to this Court, the ICC, while continuing to as-
sert 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)
rovides the ICC with the necessary authority to promulgate the
at 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.
i a a Nn im
Court of Appeals Opinion Al5
able for transportation of property.” ** Petitioners assert
that the statutory directive that “demurrage charges shall
be computed” cannot properly be interpreted to authorize
the ICC to “divide” demurrage revenues between the de-
livering 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 the agency’s interpretation is by no means control-
ling,”’ to sustain the ICC it is necessary only that we find
18. 49 U.S.C.A. § 1(6), (Supp. 1978), in full, provides:
It is made the duty of all common carriers to the provi-
sions 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 delivery
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 reasonable terms,
and every unjust and unreasonable classification, regulation,
and practice is prohibited and declared to be unlawful. De-
murrage 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) maintenance of an ade-
quate freight car supply available for transportation of prop-
erty.
19. 380 U.S. 1, 16 (1965). Accord, Batterton v. Francis, 432
U.S. 416, 424 (1977); Lehigh & New Eng. Ry. Co. v. ICC, 540 F.2d
71, 80 (3d Cir. 1976), cert. denied, 429 U.S. 1061 (1977); Lucas
Coal Co. v. Interior Bd. of Mine Operations Appeals, 522 F.2d 581,
584 (3d Cir. 1975).
20. See Batterton v. Francis, 432 U.S. at 424.
Al6 Court of Appeals Opinion
its interpretation to be a reasonable one.” As Tallman
recognized, “we need not find that [an agency’s] construc-
tion 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
computed” should control, that previous use of the term
by the ICC does not indicate an understanding that it con-
fers upon the agency the power to divide demurrage
revenues, and that the division of revenues is such a sub-
stantial change from prior practice that an express au-
thorization by Congress to divide demurrage charges is
required.
While the language of § 1(6) does not specifically au-
thorize remittance to car owners, it is equally clear that the
statute does not prohibit such an arrangement. By focus-
ing 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 compute demurrage charges with the purpose of en-
hancing freight car supply, utilization, and distribution,
but also mandates the agency to establish “rules and regu-
lations 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
enacted by Congress for the general purpose of revitalizing
21. See Udall v. Tallman, 380 U.S. at 16.
22. Udall v. Tallman, 380 U.S. at 16, quoting with approval
(O48 loyment Compensation Comm'n v. Aragon, 329 U.S. 143, 153
23. 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 re-
sponsibilities under the Act requires a generous construction of
its statutory authority.”
Court of Appeals Opinion Al7
a sagging railroad industry. It was the declared policy
of Congress, among other things, to balance the needs of
carriers, 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
efficient 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
amendment pertaining to demurrage charges. That provi-
sion, comprising only eight lines in the 120-page statute,
understandably did not attract much congressional com-
ment.” The few portions of the lezislative history that
deal with the demurrage provision, however, lend support
to the ICC’s broad interpretation of § 1(6).
During the initial review of the railroad reform legis-
lation 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
24, See Pub. L. No, 94-210, § 101, 90 Stat. 31, 33 (1976) (codi-
fied at 45 U.S.C.A. § 801 (Supp. 1978).
25, Id.
26. The debates on the floors of the Senate and House of Rep-
resentatives 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. Rec. 38117, 38441, 41334, 41888, 42169
(1975); 122 Cong. Rec. H92, $271, $741, H401 (daily eds. Jan. 20,
21 & 28, 1976).
27. The Committee received a letter from ICC Acting Chair-
man O'Neal with his comments on the proopsed 4R Act. In his
analysis of the demurrage provision, the Acting Chairman stated:
Another proceeding, Ex Parte No. 289, Remittance of Demur-
rage Charges by Common Carriers of Property by Rail, con-
es
Al8 Court of Appeals Opinion
Supreme Court's holding in Zuber v. Allen*® that an
agency’s interpretation of the statute it is charged with im-
plementing “carries most weight when the administrators
participated in drafting and directly made known their
views to Congress in committee hearings .... In such
circumstances, absent any indication that Congress differed
with the responsible department, a court should resolve
any ambiguity in favor of the administrative construction,
ii such construction enhances the general purposes and
policies underlying the legislation.”*’ In addition, we
find substantial support for the ICC’s interpretation of the
demurrage provision in the Joint Explanatory Statements
of the Conference Committee. It declared with regard to
the section: “Other amendment made by this rule: . . .
requires the Commission to establish rules and regulations
for the computation of demurrage charges, so that freight
utilization is maximized and car owners receive adequate
compensation ....” *°
27. (Cont'd. )
cerns 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 erder 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).
28. 396 U.S. 168 (1969).
29. Id. at 192.
30. Final Conference Reports, S. Rep. No. 595 and H.R. Rep.
No. 781, 94th Cong., 2d Sess. 135, reprinted in [1976] U.S. Code &
Ad. News 149, 150 (emphasis added). Similar statements are
found in other committee reports which discussed the demurrage
rovision. See Conference Reports, S. Rep. No. 585 and H.R. Rep.
No. 768, 94th Cong., Ist Sess. 128 (1975); Report of the Committee
on Interstate and Foreign Commerce, H.R. Rep. 725, 94th Cong.,
Ist Sess. 73 (1975).
Court of Appeals Opinion A19
In light of this statutory history, and the goals of the
legislation, we are unable to say that the ICC’s view that
§ 1(6) authorizes it to promulgate the present demurrage
remittance rule is an unreasonable one.
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 ap-
plicable standard of review is the one established by the
APA, 5 U.S.C.A. § 706 (1977), and that the ICC determina-
tion, by failing to demonstrate a sufficient nexus between
demurrage 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
notice 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
31. Id. 5 U.S.C.A. §§ 556 and 557 (1977) establish procedural
requirements for hearings mandated by §§ 553 or 554.
32. 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... .” “Rule making” is defined in that
same section as “agency process for formulating, amending, or re-
pealing a rule.” Id. Ex Parte No. 289 clearly falls within this
category of proceeding.
33. 5 U.S.C.A. § 706(2)(E) (1977).
A20 Court of Appeals Opinion
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 proceedings
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 unani-
mous Supreme Court noted in United States v. Allegheny-
Ludlum Steel ** that “[w]e do not weigh the evidence in-
troduced before the Commission; we do not inquire into
the wisdom of the regulations that the Commission promul-
gates, and we inquire into the soundness of the reasoning
34, See, e.g., Weinberger v. Hynson, Westcott & Dunning, Inc.,
412 U.S. 609, 622 n.19 (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 Nutri-
tional Foods Ass’n v. Weinberger, 512 F.2d 688, 700-701 (2d Cir.),
cert. denied, 423 U.S. 827 (1975); K. Davis, Administrative Law of
the Seventies, § 29.01-3 (1976).
35. 569 F.2d 196 (3d Cir. 1977), cert. denied, 46 U.S.L.W.
3753 (June 6, 1978).
36, See id. at 198.
37. See, e.g., Bowman Transp. v. Arkansas Best Freight Sys.,
419 U.S. 281, 285-86 (1974); United States v. Allegheny-Ludlum
Steel Corp., 406 U.S. at 749; Citizens to Preserve Overton Park, Inc.
v. Volpe, 401 U.S. 402, 416 (1971); Ford Motor Co. v. United
States, 569 F.2d at 198-99. Several courts of appeals, including
this one, have observed that in notice and comment rulemaking
the “arbitrary and capricious” and “substantial evidence” 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 (1975); Associated Indus., Inc. v. United States Dep't
of Labor, 487 F.2d 342, 350 (2d Cir. 1973) (Friendly, J.). See
enerally Friendly, “Some Kind of Hearing”, 123 U. of Pa. L. Rev.
267, 1313 (1975); Pedersen, Formal Records and Informal Rule-
making, 85 Yale L.J. 38, 46-51 (1975). Of course, an agency deci-
sion 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
aunty, action. See Almay Inc. v. Califano, 569 F.2d 674, 680-81
(D.C. Cir. 1978).
38. 406 U.S, 742 (1972).
Court of Appeals Opinion A21
by which the Commission reaches its conclusions only to
ascertain that the latter are rationally supported.” Ac-
cordingly, we examine the evidence and arguments offered
by the ICC in order to determine whether the demurrage
remittance rule is “rationally supported.”
In its Interiin 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
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
39. Id. at 749. Accord, Ford Motor Co. v. United States, 569
F.2d at 199,
40, 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 en-
titled 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 de-
tained and unavailable for further use, and thereby loses rev-
enue. 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 ex-
cess 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
2 certainly have a significant positive impact on car supply.
I
—_—_
A22 Court of Appeals Opinion
tend to encourage such decision. Moreover, the agency
concluded that the remittance rule would have an affirma-
tive effect upon the supply of cars. Pointing to evidence
adduced in earlier proceedings that large sums of demur-
rage 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 rigor-
ous in their collection of the charges. This, the agency
maintained, would enhance the general regulatory effect of
the demurrage system."*
41. 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 de-
ciding 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 — shifts the payment of part of these charges from one
group, the receiving carrier, to another, the car owner. Since
it can 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
car 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-
ion, 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 demur-
—_ charges remained uncollected by the carriers or that such
debts were canceled because carriers did not maintain ade-
quate records, Other indications that carriers do not always
collect demurrage charges appear in Demurrage Rules and
Charges, Nationwide, 340 1.C.C. 83, 92 (1971), and Incentive
Per Diem Charges—1968, 337 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.
Court of Appeals Opinion A23
Further, the ICC carefully weighed the benefits of the
proposed rule against the claims of its opponents that de-
murrage remittance, by reducing railroad revenues and re-
quiring additional administrative expenses, would place
undue economic burdens upon many carriers.” The ICC
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 out-
weighed the burdens.** Having reviewed the ICC’s rea-
41. (Cont’d.) J eisbicatntmiod or Rowland
Faced with the necessity of paying these sums to the car owner,
the delivering carrier coal 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 eaninably be expected.
Id.
42. The short-line railroads, in particular, have expressed their
strong concern about the possible detrimental impact of the remit-
tance 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 the
ICC’s rule, As a unanimous Supreme Court reasoned in a proceed-
ing 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 occasion to cause serious inconvenience .... If
the Commission were thrusting these regulations upon an ad-
mittedly smoothly functioning transportation industry . . . the
mticmality 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 (uphold-
ing car service rules re soap | the return of freight cars in the
direction of the lines of the railroads owning the cars).
43, 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 indi-
cate how it arrived at this igure.) However, despite our res-
ervations as to the accuracy of the cost data presented, even
taking it at face value, we are nevertheless unable to find that
re
A24 Court of Appeals Opinion
soning, we are unable to say that the agency’s solution is
not “rationally supported.” “
Cc,
Petitioners further contend that the ICC’s order in Ex
Parte No. 289 must be set aside for failure to comply with
certain procedural requirements of the APA, 5 U.S.C.A.
§553(c) (1977), and of the ICA, 49 U.S.C.A. § 17(14)
(b) (Supp. 1978).
43. (Cont'd. )
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 burden-
some. Even if expenses were slightly higher, the evidence of
record still supports the finding that the costs of administering
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-
counted amount would constitute between a $10 and $11 re-
turn on a car owner's investment for each excess demurrage
day. When this amount is compared to the costs of admin-
istering the rule, it becomes evident that the costs are not so
burdensome as to outweigh the rules’s benefit in providing an
incentive for the purchase of additional equipment and, there-
by, in increasing car supply.
Id, at 590-91,
44, 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 pro-
vide this Court with a basis for determining whether the proposed
rule comports with the National Transportation Policy, 49 U.S.C.A.
rec. § 1 (Supp. 1978). See generally A. L. a Barge Lines,
ne. V. United States, 376 U.S, 375 (1964); Schaffer Transp. Co. v.
United States, 355 U.S. 83 (1957).
Court of Appeals Opinion A25
1,
Section 553(c) provides in pertinent part that “[a]fter
consideration of the revelant 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 assertions,
and that the ICC remittance rule is invalid because of the
agency's failure to comply with this requirement.
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
45. See, e.g., Tabor v. Joint Bd. for Enrollment of Actuaries,
566 F.2d 705, 709-12 (D.C. Cir. 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, 46 U.S.L.W. 3541 (Feb. 28, 1978); National Nutritional
Foods Assoc’n v, Weinberger, 512 F.2d at 701. See generally Peder-
sen, Formal Records and Informal Rulemaking, 85 Yale L,J. 38, 73-4
(1975); Note, The Judicial Role in Defining Procedural Require-
ments for Agency Rulemaking, 87 Harv. L. Rev. 782 (1974). See
also Atchinson, T. & S.F. Ry. Co. v. Wichita Bd. of Trade, 412 U.S.
800, 807 (1973); SEC v. Chenery Corp., 332 U.S. 194, 196-97
(1947); American Iron & Steel Inst. v, EPA, 568 F.2d at 296-7; Dry
Colors Mfrs. Ass’n Inc. v. Department of Labor, 486 F.2d 98, 104
n.8 (3d Cir. 1973).
46. See Tabor v. Joint Bd. for Enrollment of Actuaries, 566
F.2d at 710.
47. Id.
A26 Court of Appeals Opinion
agency decision-making.“ As the District of Columbia
Court of Appeals made clear in Tabor v. Joint Board for
Enrollment of Actuaries, the mere failure to publish the
statement 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 inquiry must be
whether the rules and statement are published close enough
together in time so that there is no doubt that the statement
accompanies rather than rationalizes the rules.” °°
In the present situation, the ICC’s notices in the Fed-
eral 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 judi-
cial review.”
2.
The contention of petitioners regarding the time re-
quirements set forth in the ICA, 49 U.S.C.A. § 17(14) (b)
(Supp. 1978), presents a more difficult problem. That
section provides: “Within one year after February 5, 1976,
[the date of the enactment of this subdivision] the Com-
mission 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
48, Id.
49, 566 F.2d at 711.
50, Id. at n.14,
51. See 40 Fed. Reg. 18797 (1975); 42 Fed. Reg. 19146 (1977).
52. The Supreme Court has previously found a “comprehen-
sive” ICC report to “fully comply” with the requirement of
§553(c). See United States v. lndbatiy Lasts Steel Corp.,
406 U.S. at 747, 758.
Court of Appeals Opinion A27
pending before the Commission for a period of three or
more years following the date of the order which instituted
the proceeding.”
Petitioners argue that the proceeding here was a
“formal investigative proceeding”, that it was pending
before the ICC for a period of more than three years sub-
sequent to the initiation of the proceeding, and that it
continued for more than one year after the enactment of
§ 17(14)(b). They maintain that the appropriate sanc-
tion 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 Rulemaking 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 in-
sist 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
purposes of the APA, it is also “informal” for purposes of
the ICA, 49 U.S.C.A. § 17(14)(b) (Supp. 1978).
53, 49 U.S.C.A. § 17(14)(b) (Supp. 1978) (emphasis added).
54. See, e.g., National Ass’n of Food Chains, Inc. v. ICC, 535
F.2d 1308, 1313 (D.C. Cir. 1976); Buckeye Power, Inc. v. EPA,
481 F.2d 162, 170 (6th Cir. 1973); Phillips Petroleum Co. v. FPC,
(197 ta 842, 851 (10th Cir. 1973), cert. denied, 414 U.S. 1146
A28 Court of Appeals Opinion
We disagree. The ICC offers no evidence or reason-
ing to support the assertion that Congress, when drafting
§ 303 of the 4R Act, which amended the procedural re-
quirements of the ICA, had in mind the characterization
that several courts have given to notice and comment rule-
making under the APA, 5 U.S.C.A. § 553. In the absence
of any evidence, such a congruence seems to us im-
plausible. While the purpose of the APA is to establish
general procedural guidelines for a broad range of admin-
istrative agencies,” the ICA applies to a much narrower
set of circumstances. Thus, it is reasonable to believe that
Congress, when drafting the 4R Act amendments to the
ICA, was thinking in terms of the particular problems of
the ICC and the railroad 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 proceeding
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
55. See Wong Yang Sung v. McGrath, 339 U.S. 33 (1950).
56. This is evident from the text of the 4R Act itself. See
Pub. L. No. 94-210, 90 Stat. 31 (1976).
Court of Appeals Opinion A29
proceedings such as Ex Parte No. 289 to be exempt from a
statutory time requirement.”
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, infor-
mal proceedings have included such ICC activities as ap-
plications for temporary authority to operate a motor
vehicle, applications to deviate from regular routes, and
applications for temporary authority to lease or control.
It is most likely that it was this categorization of proceed-
ings that Congress had in mind when drafting § 17(14)(b).
Consequently, we hold that Ex Parte No. 289 consti-
tuted a “formal investigative proceeding” under the ICA,
49 U.S.C.A. § 17(14)(b), and that the statute’s time re-
quirements 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), apply-
ing to proceedings initiated prior to the enactment of that
57. Indeed, that Congress intended §17(14) to be applied
broadly is indicated by the congressional comments, aihoerk few
in number, 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: “The conference substitute follows
the House bill except that it incorporates the Senate provision that
. . . all proceedings instituted by the Commission shall be con-
cluded with administrative finality, within 3 years after such pro-
ceeding was initiated.”
58. See, e.g., 91 ICC Ann. Rep. 111 (1978); 89 ICC Ann. Rep.
101-2 (1976).
59. 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 lan-
age in the Interim Report and the April 1975 notice to the effect
that the reopening was simply a continuation of the earlier pro-
ceeding, we find the ICC’s argument before us to be unconvincing.
A30 Court of Appeals Opinion
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
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 junc-
ture would appear to be inappropriate. Furthermore,
petitioners have failed to offer any evidence that they have
been unduly prejudiced by the iditional 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.
——
60. 49 U.S.C.A. §17(14)(a) (Supp. 1978) provides: “Any
formal investigative proceeding with respect to a common carrier
by railroad 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.”
61. 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
— the eventual enforcement of the order to which they
object.
Court of Appeals Opinion A31
D.
Petitioners’ final claim is that the ICC rule, by includ-
ing private car owners in the demurrage remittance
scheme,” permits the payment of unlawful rebates in viola-
tion of 49 U.S.C. §§ 15(15)* and 41(1). It is contended
that these sections will be violated by the order, since the
payment 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
allowance which will not be published in its tariffs for the
use of a car.
We have given careful consideration to these argu-
ments and conclude that petitioners have misconstrued the
purposes 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-
62. 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 trans-
portation system. These investors should receive a fair return on
their investment as well as carriers.” 352 4.C.C. at 594.
63. 49 U.S.C.A. § 15(15) (Supp. 1978) provides: “If the owner
of property transported . . . directly or indirectly renders any serv-
ice connected with such transportation, or furnishes any instrumen-
tality used therein, the charge and allowance therefor shall be
publiihed in the tariffs . .. and shall be no more than is just and
reasonable, and the Commission may . . . determine what is a rea-
sonable charge as the maximum to be paid... .”
64. 49 U.S.C.A. Besa (Supp. 1978) makes it unlawful “to
offer, grant, or give, or to solicit, accept, or receive any rebate, con-
cession, or discrimination in respect to transportation of any prop-
erty ... whereby any such property shall by any service whatever
be transported at a less rate than that named and published by
such carrier . . . or whereby any other advantage is given or dis-
crimination practiced.”
A32 Court of Appeals Opinion
portation rates."° In contrast, the essential nature of
demurrage is that of a car service regulation. Conse-
quently, 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 remit-
tance 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, demurrage is a cost imposed upon
the receiver, the penalty portion of which will be trans-
mitted to the owner by the delivering carrier.
As Judge Prettyman observed in his oft-quoted opin-
ion 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 re-
spect to penal impositions. They are sui generis. His-
torically, 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
regulations. They could not have been sustained as
carrier charges or as penalties.
65. See United States v. Braverman, 373 U.S. 405, 406 (1963)
crc aa El Dorado Oil Works v. United States, 328 U.S. 12
1 :
66. See ICC v. Oregon Pac. Indus., Inc., 420 U.S. 184, 190
(1975) (unanimous).
67. See notes 64 and 65 supra.
5) 63 F. Supp. 1001 (D. D.C. 1946), affd mem., U.S. 767
l : ;
69. Id. at 1005, cited with approval in ICC v. Oregon Pac.
Indus., Inc., 420 U.S. at 190 n.7 (emphasis added). In reaching
Court of Appeals Opinion A33
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.
Ill.
For the reasons herein set forth, the petition to set
aside the order of the ICC in Ex Parte No. 289 will be
denied.
69. (Cont'd. )
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 dis-
cussion of that case is of particular relevance to the present pro-
ceeding:
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:
“Thescompany 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 un-
loading beyond seventy-two hours from the time that the car
was placed at the disposal of the shipper or consignee, 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 aan
The court sustained the charge on the ground that after
allowance of a reasonable time for unloading, the railroad “can
make reasonable rules and So 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 car,
the purpose being to prevent delay in loading and unloading.
Iversen v. United States, 63 F. Supp. 1003-4.
A34 Court of Appeals Order Denying Rehearing
UNITED STATES COURT OF APPEALS
For THE Tuirp Circuit
Nos. 77-1714 and 77-1732
BALTIMORE AND OHIO CHICAGO TERMINAL
RR. CO., et al.
Petitioners in 77-1714
ALIQUIPPA AND SOUTHERN RR. CO., et al.,
Petitioners in 77-1732
0.
U.S.A. and INTERSTATE COMMERCE COMMISSION,
Respondents
SUR PETITION FOR REHEARING
EN BANC
Present: Srrrz,° Chief Judge, ALpisErtT, ADAMS, GIBBONS,
Hunter, Weis, GARTH and HIGGINBOTHAM,
Circuit Judges
The petition for rehearing filed by Petitioners in the
above entitled case having been submitted to the judges
who participated in the decision of this court and to all the
other available circuit judges of the circuit in regular active
service, and no judge who concurred in the decision having
asked for rehearing, and a majority of the circuit judges of
the circuit in regular active service not having voted for
rehearing by the court in banc, the petition for rehearing
is denied.
By THE COURT,
ARLIN M. ADAMS
Circuit Judge
Dated: October 5, 1978
® Chief Judge Seitz recused in No. 77-1714. Hon. Max Rosenn
recused in both cases.
ICC Interim Report A35
Served April 25, 1975
INTERSTATE COMMERCE COMMISSION
Ex Parte No, 289
REMITTANCE GF DEMURRAGE CHARGES BY COMMON
CAKRIERS OF PROPERTY BY RAIL
Decided March 28, 1975
Upon investigation, adoption of a rule 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, found warranted in principle. Pro-
ceeding reopened to develop data concerning the
feasibility of implementation of a rule.
Leonard D. Brown, Oliver Callson, H. Richard George,
R. M. Heinan, James J. Irlandi, Marvin R. Johns, A. E.
Leitherer, John G. McGowan, Frederic W. Mild, Robert
P. Post, A. T. Walters, Edwin M. Wheeler, and G. W.
Wright for private car owner or lessee proponents.
Curtis H. Berg, W. Donald Boe, Jr., William P. Hig-
gins, William R. Power, and John S. Walker, Jr., for carrier
proponents.
Lionel Topaz for Richard W. Sabin, Public Utility
Commissioner of Oregon, proponent.
Samuel P. Delisi, Kemper A. Dobbins, Hollis G. Duen-
sing, Patrick E. Hackett, Richard A. Hollander, James L.
Howe III, C. H. Johns, Howard D. Koontz, Albert W.
Laisy, Sam H. Lloyd, John G. Makris, John MacDonald
Smith, Robert Swajkos, William H. Teasley, Walter G.
Treanor, T. M. von Sprecken, Malcolm C. Warnock, and
Sidney Weinberg for carrier opponents.
A36 ICC Interim Report
Gordon P. MacDougall and Israel Packel for Com-
monwealth of Pennsylvania, opponent.
James C. Schultz, Jerome E. Sharfman, and J. Thomas
Tidd for United States Department of Transportation, op-
ponent.
INTERIM REPORT OF THE COMMISSION
O’NEAL, Vice Chairman:
This is a rulemaking proceeding instituted on our own
motion pursuant to Part I of the Interstate Commerce Act
(49 U.S.C. 1, et seq.), including sections 1(4), 1(5), 1(6),
1(10), 1(11), 1(13), 1(14), 1(15), 1(17), 1(21), 6(7),
13(4), and 15(1) thereof, the national transportation pol-
icy (49 U.S.C. preceding section 1) and the Administrative
Procedure Act (5 U.S.C. sections 553 and 559) to deter-
mine whether facts and circumstances warrant adoption
of the proposed regulation, or other regulations of similar
purport.
The Notice of Proposed Rulemaking and Order, dated
October 12, 1972, set forth the following rule for consid-
eration: “The nonowning railroad, on whose lines a car is
being detained under demurrage, shall remit to the rail-
road car owner all demurrage charges collected in excess
of $10 per day.”
In the Notice of Proposed Rulemaking, we indicated
that the first increment of demurrage after expiration of
free time, $10 per day, appeared adequate to compensate
the delivering railroad for the payment of per diem charges
and use of track space resulting from the detention of
foreign freight cars on their lines, and to provide an incen-
tive for the prompt loading and unloading of freight cars
by shippers and receivers. Further assumptions underly-
ing the proposal stated in the notice included: that reten-
tion of the amount in excess of $10 per day by the railroad
ICC Interim Report A37
on whose lines the foreign freight car is detained does not
comport with the purposes, goals, and objectives of the
Interstate Commerce Act, the rules and regulations pro-
mulgated by the Commission thereunder, and the national
transportation policy, in that the railroad owner of the
car receives only a small portion of the demurrage charge
through the per diem rate; that the nonowning railroad
has little incentive to expedite return of the car when it
retains demurrage collections exceeding its own per diem
expenses on the car; that the owner is deprived of the use
of the car to earn revenue, which revenue potential ex-
ceeds the per diem rate paid by the nonowning railroad
for use of the car; and that as a result, the owner is dis-
couraged from acquiring additional cars for revenue pur-
poses. The purposes of the proposal are to create an added
incentive for the railroad car owner to acquire additional
cars and to remove any inducement to the nonowner rail-
road to encourage detention of foreign cars in order to ben-
efit from collection of demurrage charges.
All common carriers of property by railroad subject to
the Interstate Commerce Act (the Act) were made re-
spondents and invited to submit comments on the proposal.
Ninety-seven parties, including 64 rail carriers or carrier
organizations, expressed interest in this proceeding.
Twenty-six initial and seven reply statements were filed.
Most carriers subsequently consolidated their views with
those of the Association of America Railroads or the Ameri-
can Short Line Railroad Association. In addition, a few
other parties also consolidated their views.
By order served April 17, 1973, petitions for clarifica-
tion of the Notice of Proposed Rulemaking and Order filed
by the Association of American Railroads, the Louisville
and Nashville Railroad Company, the Grand Trunk West-
ern Railroad Company, and the Atlanta and Saint Andrews
Bay Railway Company were denied.
A38 ICC Interim Report
For convenience we will not refer to the carriers as
respondents but will separate them, as well as the other
participants herein, into three categories according to their
major viewpoints. They are (1) carrier proponents, (2)
private car proponents, and (3) opponents, who consist
mainly of carriers and carrier organizations.’
Several shippers or companies which own or lease
private freight cars’ (hereinafter called private car pro-
ponents) appeared in support of the proposed rule, and
advocated an extension of it to require remittance of excess
demurrage to private car owners or lessees as well as to
railroad owners. Richard W. Sabin, Public Utility Com-
missioner of Oregon, advocated adoption of the proposal
and supported the private car proponents’ position. Three
carriers * (hereinafter called carrier proponents) also sup-
port the proposed remittance scheme but not the proposed
extension of it to private cars.
The Commonwealth of Pennsylvania and the United
States Department of Transportation appeared in opposi-
1, As we shall explain later, the Burlington Northern, Inc., a
proponent, also opposes the suggestion of the private car propo-
nents that the proposed rule be extended to include remittance of
the excess demurrage charges to owners or lessees of private cars.
Union Pacific Railroad Company states that its failure to comment
on certain positions should not be taken as agreement therewith.
2. Allied Mills, Inc.; Bay State Milling Company; Cargill, In-
corporated; Champion International Corporation; Garvey, Inc.;
General American Transportation Corporation; General Mills, Inc.;
Georgia-Pacific Corporation; Glass Container Manufacturers Insti-
tute, Inc.; International Multifoods Corporation; Miller Brewin
Company; Peavey ee Swift Edible Oils Company and Swi
Fresh Meats aoe i ivisions of Swift and v0 The
Fertilizer Institute; The Pillsbury Company; and Westinghouse
Electric Corporation.
3. Burlington Northern, Inc., ‘The Denver and Rio Grande
Western Railroad Company, and the Union Pacific Railroad Com-
pany.
ICC Interim Report A39
tion. Several carriers‘ also filed statements opposing the
proposal. Moreover, most other carriers are presumed to
oppose the rule in accordance with the objections set forth
thereto in the statements of (1) the Association of Ameri-
can Railroads (AAR), to which certain members specifi-
cally excepted,’ and (2) the American Short Line Railroad
Association (ASLRA), (hereinafter collectively called op-
ponents ).
Before discussing the arguments presented on the
merits, challenges to the Commission’s jurisdiction and
procedures will be addressed.
JURISDICTION
Certain parties, principally the AAR and ASLRA,
argue that the Commission lacks jurisdiction to allocate
demurrage revenues. They deny the existence of any
authority for the instant proposal in the various sections of
the Act cited by the Commission in the Notice of Proposed
Rulemaking and Order. For example, these opponents
contend that section 1(14)(a) is specific, limiting Com-
mission authority to the prescription of incentive per diem,
and that it provides no basis for increasing car supply by
other devices. Furthermore, that section allegedly does
4. Robert W. Meserve, Trustee of Property of Boston and
Maine Corporation, Debtor; Detroit Terminal Railroad Company;
John F. Nash and Robert C, Haldeman, Trustees of the Property
of Lehigh Valley Railroad Company, Debtor; Mississippi Export
Railroad Company; Savannah State Docks Railroad Company; and
the Western Pacific Railroad Company.
5, Atchison, Topeka and Santa Fe Railway Company, Burling-
ton Northern, Inc, Missouri-Kansas-Texas Railroad Company,
Pittsburgh and Lake Erie Railroad Company, and Union Pacific
Railroad Company. Presumably the Denver and Rio Grande
Western Railroad Company is also excepted, although it should be
noted that its statement sometimes agrees with the AAR, particu-
larly as to the issue of administrative feasibility. The Union
Pacific’s initial statement also agreed with several of the AAR’s
arguments, though not its conclusion.
A40 ICC Interim Report
not permit payments which would result in receipts above
the present incentive per diem scheme to the car owners.
The opponents assert that demurrage cannot be used for
compensation because, among other things, unlike per
diem it is not adjustable to the particular type of car.
Opponents state that allocations of revenues between
carriers are specifically provided for in the Act where such
allocation is intended, as, for example, in section 15(6).
They depict section 1(15) as containing only emergency
authority. Section 1(11) is regarded as restricted to the
provision for reasonable compensation. Opponents simi-
larly maintain that no authority can be based on the other
sections of the Act relied upon in the Notice of Proposed
Rulemaking because the specific language of those sections
precludes their application to this proceeding. Thus, they
conclude that no section of the act gives the Commission
general authority either to act to increase car supply and
utilization or to divide demurrage.
Counterarguments are made, principally by Burling-
ton Northern, Inc. (Burlington Northern), and Union Pa-
cific Railroad Company (Union Pacific) supporting Com-
mission jurisdiction to enact the proposed rule on various
grounds, They note that the furnishing of cars depends
to a great extent on demurrage. They rely in part upon
the car service rules as well as upon the suspension author-
ity of section 1(15) of the Act as support for Commission
jurisdiction. Additionally, they contend that sections 1
and 3 of the Act give the Commisssion power to regulate
demurrage in order to prevent discrimination as well as for
other purposes.
Conclusion.—Inasmuch as demurrage directly affects
car service, and since it is the duty of carriers to establish,
observe, and enforce just and reasonable rules, regulations,
and practices with regard to car service, the Commission
has jurisdiction under section 1(11) of the Act to oversee
ICC Interim Report A4l1
demurrage rules and collection of demurrage charges and
to determine the just and reasonable nature thereof. Sec-
tion 1(14)(a) gives the Commission authority to establish
reasonable rules, regulations, and practices with regard to
car service by common carriers by railroad. The inclusion
of provisions on incentive per diem in that section does
not limit car service rules to that device, however. Section
1(15) also provides the Commission with a variety of
powers with respect to car service when a car shortage,
traffic congestion, or other emergency exists. Moreover,
the national transportation policy directs, among other
things, that the Commission foster sound economic condi-
tions among carriers and discourage unfair or destructive
competitive practices in preserving an adequate transpor-
tation system. The wide authority and variety of possible
actions under car service rules is exemplified in prior pro-
ceedings, such as Regulations for the Movement of Loaded
Freight Cars, 298 I.C.C. 371 (1956).
Finally, we point out that demurrage rules and regu-
lations have been administered by the Commission since
the turn of the century. See Iversen v. United States, 63
F. Supp. 1001, 1004 (D.C. 1946). Ample authority, there-
fore, clearly exists under our car service powers, among
others, to support the Commission’s jurisdiction in this
proceeding.
HEARING
Various opponents of the proposed rule, principally
the AAR and ASLRA, advance several arguments contend-
ing that an oral hearing is required in this proceeding.
They maintain that this proceeding is only possible, if at
all, under the authority of sections 15(1) or 15(6) of the
Act, which would mandate a hearing in accordance with
section 556 of the Administrative Procedure Act (APA).
Alternatively, they submit that if jurisdiction is predicated
A42 ICC Interim Report
on any other grounds, a full hearing is needed by implica-
tion. Such parties regard this proceeding as essentially
adjudicatory since they believe that the contemplated rule
pertains to the division of revenues.
On a slightly different basis, these opponents contend
that serious due process questions may arise if revenues are
transferred among carriers under questionable substan-
tive jurisdiction and after only limited procedural access to
the affected parties. Therefore, they urge that this pro-
ceeding requires a full hearing and a major investigation
on these grounds alone. Furthermore, they charge that
adoption of the contemplated rule will threaten the finan-
cial integrity of some railroads, which rely heavily on the
use of other carriers’ cars, and that in any event the limited
submissions under the procedures used herein will preju-
dice all railroads. They deem a true and full disclosure of
facts possible only after full, oral hearing.
The opponents suggest that the agency has the burden
of proof in this situation, making a full hearing mandatory.
Among other problems asserted to dissuade what is char-
acterized as precipitous action by the Commission are the
matters raised in the petition for clarification, including
questions regarding application of the rule and the han-
dling of remittances in connection with average agree-
ments.
Proponents of the rule, principally the Burlington
Northern and Union Pacific, maintain that this is not a
division of revenue case under section 15(6) of the Act or
a ratemaking investigation, but instead is a car service pro-
ceeding within the purview of section 1(15). They state
that demurrage is not a source of revenue. This proceed-
ing is depicted as one to decide the rightful recipient of the
penalty portion (or abitrary level) of demurrage by re-
mittance, in which case such considerations as fair return
and revenue requirements are remote. Proponents posit
ICC Interim Report A43
that the conducting of a full hearing in past proceedings of
a similar nature does not necessarily mandate that proce-
dure here. Since proposed rules and regulations are in-
volved here, they assert that only the opportunity to par-
ticipate as allowed is required. Finally, because this
proceeding, as a rulemaking, would fall under section 553
of the APA, proponents conclude that a full adjudicatory
hearing is unnecessary.
Conclusion.—As indicated in the Notice of Proposed
Rulemaking, this proceeding was initiated in accordance
with section 553 of the APA, and consequently no oral
hearing is required. Moreover, no hearing is mandatory
under section 1(15) of the Act, which in itself constitutes
sufficient statutory basis for Commission authority to con-
sider the proposed rule. The procedures employed are
adequate generally to develop a record upon which an in-
formed decision may be predicated.
Under the procedures used herein, all interested par-
ties were accorded ample notice and opportunity to com-
ment on the matter under consideration, and to reply to
the statements of other parties. The 7-month interval be-
tween the service date of the Notice of Proposed Rulemak-
ing and the due date for initial statements, caused by the
petitions for clarification, allowed ample time for parties
to prepare comments.
Thus, in this posture, this proceeding is not dissimilar
from United States v. Florida East Coast R. Co., 410 U.S.
224 (1973), which held that the same procedures as em-
ployed here were not unlawful in a rulemaking proceeding
where the establishment of incentive per diem was being
considered. We conclude that the procedures used are
adequate and an oral hearing is unnecessary.
We recognize that many problems were raised in the
initial submissions which remain unsolved. Although we
support the principles embodied in the rule, we find it nec-
A44 ICC Interim Report
essary to reopen this proceeding to secure more concrete
and comprehensive data on a variety of issues. This fur-
ther proceeding will obviate the difficulties and claims of
prejudice suggested by the supporters of an oral hearing.
However, we believe that written initial statements within
120 days of service of this report and written replies within
30 days thereafter can produce the necessary information,
and can do so with the least delay and expense to the
parties. After that period participants may petition the
Commission for cross-examination, oral hearing, or oral
argument within a 30-day period, which we will allow
them for study of the record. Upon good cause shown,
and in its discretion, but not as a matter of right, the Com-
mission may grant such motions.
ARGUMENTS
All evidence and arguments not mentioned have been
considered and given due weight. Discussion of many of
the various examples given in support of arguments has
been omitted, since its inclusion would unduly lengthen
this opinion without advancing its disposition. Moreover,
many such examples are of little evidentiary value because
of the absence of underlying data or explanation as to
methodology. Repetitions of arguments without elabora-
tion or underlying support are omitted to the extent pos-
sible
We shall group the arguments of the parties in ac-
cordance with the three distinct interests mentioned above.
After each set of arguments we will discuss briefly the
major points in direct reply. It should be understood,
however, that the sections containing major arguments of
each of the three groups must be considered in order to
determine the totality of their individual arguments.
Contentions of carrier proponents.—The carrier pro-
ponents (essentially, Burlington Northern, Inc., and Union
ICC Interim Report A45
Pacific Railroad Company ) assert that the current rules are
historical remnants of the era prior to free interchange of
cars and high penalty elements in demurrage charges.
Burlington Northern submits that the present system does
not reflect current economic considerations and does not
take present recordkeeping and computerization into ac-
count.
The Denver and Rio Grande Western Railroad Com-
pany proposes that the proceeding be continued in order
to develop practical accounting and policing procedures.
Although this carrier expresses support for the concept of
the proposed rule, it does not believe there is presently a
practical accounting system which would allow for the
scheme’s implementation. It also fears the cost of record-
keeping might be excessive.
Union Pacific’s initial statement expressed doubt that
a significant incentive for acquisition of equipment would
be generated by the instant proposed rule since the
amounts to be remitted would probably be far less than
those paid under the incentive per diem system. Union
Pacific also contends that the carrier has little control over
the length of time a car is held, which it believes demon-
strates that the rule will not be efficacious in improving
utilization. The Union Pacific relies mainly on the argu-
ment that it is inequitable for a nonowning railroad to
profit at the investor’s expense, though it believes that the
amount of money which may change hands is small. There-
fore, it urges the Commission to examine the costs of the
rule since it is conceivable that administrative costs might
drain off a substantial portion of the net remittances.
Burlington Northern, which supports the proposal in
principle, stresses the inequity of a serving line retaining
demurrage in excess of its expenses (including per diem,
recordkeeping, and storage facilities) while the railroad
car owner is being deprived of a return on its investment
A46 ICC Interim Report
during the detention period. Burlington Northern points
to its substantial investment in cars and the fact that a
substantial segment of its fleet is off line at all times. When
so detained, Burlington Northern states that it is being
deprived of a substantial return on equipment in which it
has invested. It states that incentive to invest is stifled by
the asserted penalizing of the car owner under current
rules and that increased return will induce the acquisition
of additional cars.
The carrier proponents state that average daily per
diem, which is the amount returned to owners, is far less
than demurrage receipts. They contend that the penalty
element of demurrage is easily separable from the amount
necessary to meet the serving carriers’ expenses. Further-
more, in fairness these funds should be remitted to the
investing owner who took the investment risk and might
be more inclined to continue investing in freight cars if its
return on investments is increased. Union Pacific also
urges that there is no evidence to show the remittance pro-
posed would be unreasonable or excessive.
The proponents argue that demurrage need not be
used to offset all per diem since demurrage is not intended
as a source of revenue. Reclaim allowances exist, and pro-
visions for the costs of per diem are included in line-haul
and switching rates. Burlington Northern maintains that
average per diem cannot exceed $4 per car per day, thus
making it reasonable to consider remittance of the penalty
portion of demurrage which exceeds $10 per day, since the
remainder of the $10 should cover costs.
Burlington Northern claims (as does Union Pacific in
its reply) that the administrative procedures required for
implementation of the remittance scheme, as well as its
costs, are feasible. It contends that available data, includ-
ing present car detention records, can be utilized to obtain
needed information, including the identity of and amounts
ICC Interim Report A47
due foreign owners, with minimal expense. Assertedly,
only excess cars, not every car, need be accounted for.
Moreover, eventual computerization of demurrage records,
with resultant efficiencies, is envisioned, although it is ad-
mitted that under the present demurrage system, the dis-
position of excess demurrage charges from an accounting
standpoint would need to be handled manually.
Burlington Northern admits that additional effort
might need to be applied in connection with cars held un-
der average agreements and that obviously, a uniform plan
for handling remittance of charges collected under average
agreements is essential.in order to treat all car owners
fairly and equally. It suggests that amounts remitted to car
owners which are computed under average agreements
could be handled as follows: debits and credits under aver-
age agreements could be applied to the cars involved on a
first-in, first-out basis, thus affording credit for “runaround”
cars. With ultimate computerization in mind, such a pro-
posal is assertedly entirely feasible. Alternatively, excess
demurrage under average agreements might be divided
equitably between all cars involved in the average agree-
ment.
Union Pacific’s comments on recordkeeping are con-
tained in its reply statement and will be discussed in the
“Replies to Opponents” section.
Proponents reject arguments that no incentive to buy
cars will result from the rule. Such argyments are assailed
as defying common sense since the additional income to
various railroads will correlate with their ability to pur-
chase cars and will provide them some return on their in-
vestment curing periods of detention.
Replies to carrier proponents.—Opponents AAR and
ASLRA present detailed argument and examples pur-
porting to show that Burlington Northern grossly miscal-
culated the costs and administrative feasibility involved in
A48 ICC Interim Report
remitting excess demurrage, especially for smaller roads.
It is submitted that the accounts will require specific and
detailed knowledge of tariffs on the part of employees in-
volved and, in many instances, will require manual ac-
counting. Additional costs are also anticipated for claim
procedures, It is argued that the considerable expense of
implementing the proposal would needlessly dissipate
presently available funds.
An AAR witness familiar with both demurrage and
computerization severely criticized Burlington Northern
for underestimating the expense of implementing the pro-
posal. Great effort is envisioned in order to computerize
demurrage remittances and some problems may not be
solvable by computer, requiring costly manual accounting.
The witness suggests that Burlington Northern’s run-
around adjustment on average agreement accounts ignores
the technical rules currently existing concerning such ad-
justments, which can only be made when the carrier causes
the runaround. Separate computations are required when
there is no relationship between involved commodities.
In case a shipper subsequently prevails in an over-
charge claim based on a runaround adjustment the collect-
ing carrier might, according to the witness, need to seek a
re-remittance of accounts paid to owners which might in-
volve several foreign owners (and could involve further
remittances to other owners involved in the adjustment).
Since demurrage is already divided in diversion and
reconsignment situations (between roads which may not
be the owners in some cases), further remittances to the
owner, which could not be easily handled by computer,
might be required by the scheme. These are among the
examples given in attacking the technical feasibility and
expense of the proposal.
AAR contends that per diem charges adequately com-
pensate owners, that per diem proceedings are the proper
ICC Interim Report A49
forums for considering car ownership costs and that in-
centive per diem is a more reliable tool to stimulate invest-
ment than the present proposal. It is further contended
that additional payments to owners would exceed a maxi-
mum reasonable level. Moreover, since there is no as-
surance that the funds will be used for investment in
equipment, AAR argues that the rule will not achieve its
purposes. Increased expenses on arbitrary cars,’ including
costs of congestion, extra switching and handling, and
storage on railroad-owned tracks, in addition to per diem
expenses, are alleged to justify, in part, retention of all de-
murrage by the serving carrier. It is asserted that the total
demurrage collected on cars during the arbitrary period
often will not be enough to cover the per diem incurred
during the time the car is in the possession of the shipper.
The opponents charge that the proponents’ statements
reveal a complete absence of support for the objectives set
forth in the Notice of Proposed Rulemaking and merely
constitute an attempt to gain greater revenues, AAR con-
cludes that proponents have offered nothing to support the
premise that the proposal will stimulate investment, accus-
ing them of merely reiterating the Commission’s statements
in the Notice of Proposed Rulemaking.
Contentions of private car proponents—The main
contention of the private car proponents (shippers, owners,
or lessees of private cars) is that remittances should also
accrue to private car owners or lessees. The foodstuff
lessees are willing to postpone determination as to whom
remittances should be made. Swift Edible Oils Company
and Swift Fresh Meats Company, divisions of Swift and
Company (hereinafter called Swift) asserts that remit-
tances should go to the lessee. The private car owners
6. Arbitrary cars are those cars which are detained beyond the
time when first level demurrage accrues and upon which arbitrary
(second and third) level demurrage accrues.
A50 ICC Interim Report
express concern about car shortages and inadequate rail-
road investment, discussing the necessity and ability of
private cars to help remedy these problems. They state
that increased incentive to invest in private cars will aid
in solving the car supply problem.
The foodstuff interests,’ Miller Brewing Company,
The Fertilizer Institute and others submit that expansion
of the car supply through the acquisition of private cars is
necessary in view of railroad inaction in increasing car
supply. The foodstuff interests cite an increase in private
hopper cars from 6 percent of the total number of hopper
cars in 1960 to 23 percent in 1970, a period during which
the total number of boxcars declined, as indicative of the
importance of private cars. Additionally, they and Cargill,
Incorporated, argue that an expanding private car fleet
frees railroad cars for other shippers’ use and allows rail-
road money to be invested elsewhere. Swift denies that
the identity of the car owner should be dispositive of
whether remittance should be made. Swift believes that
demurrage charges for private cars should continue to be
assessed, whether accrued on railroad or private tracks.
The foodstuff interests state that car owners and
lessees are damaged by detention because they receive no
return on investment on idle cars since mileage allowances
do not operate during detention periods. Furthermore,
they represent the carriers’ receipt of demurrage on private
cars as being windfall earnings. Westinghouse Electric
Corporation avers that no additional services are per-
formed on days when demurrage reaches arbitrary (pen-
alty) levels which might warrant carrier retention of the
higher receipts. It charges that the present system of
7. Bay State Milling Company, General Mills, Inc., Interna-
tional Multifoods Corporation, Seotee Company, and The Pillsbury
Company filed a joint statement. For convenience we refer to
them collectively as the foodstuff interests.
ICC Interim Report A51
profiting on foreign cars erodes the incentive to purchase
an adequate number of cars. Garvey, Inc., and Georgia-
Pacific Corporation, among others, assert that carriers can
inequitably trade on another’s investment under the cur-
rent system.
Most of these proponents focus on the supposed in-
adequacy of the mileage allowances by which they are
compensated as further justification for increased payments
through demurrage remittances. The foodstuff interests
indicate that their leasing expenses exceed their compensa-
tion. They stress that currently they receive no compen-
sation for idle cars. Inadequacy of allowances and the
inability of railroads to furnish special equipment are
urged as grounds to allow private car participation in the
proposal. Swift, and others, allege that investment in-
centive is curtailed by this inadequate compensation. Al-
though various private car proponents argue that the pro-
posal will stimula! their investment as well as that of the
railroads, they do not indicate the extent to which they
might invest, or why they would purchase any more cars
than they immediately require.
Swift and the foodstuff interests fear that remittance
of arbitrary demurrage only to railroad car owners will
create an opportunity for discrimination. Placement of
railroad-owned cars first in order to profit from demurrage
on delayed private cars could supposedly be secretly ar-
ranged, although this would violate several statutes.
The foodstuff interests insist that the argument that
total demurrage should meet total per diem charges is erro-
neous since there exists both an allowance for per diem
expenses in line-haul and switching rates and, in certain
situations, per diem reclaim allowances. They contend
that the first level of demurrage provides adequate com-
pensation to the serving railroad, as exemplified by the
refusal of division 2 to increase strike demurrage from $4
A52 ICC Interim Report
to $5 in Strike Demurrage Charge, Nationwide, 3A0 I.C.C.
179 (1971). They argue that recent increases in demur-
rage charges have been motivated principally by a desire
to encourage release of cars by increasing penalties to
shippers, implying that the lower levels previously assessed
adequately compensated the serving carrier for its expenses.
Swift and the foodstuff interests insist that remittances
on private cars would not be a form of rebate, as some
carriers maintain. They submit that currently mileage
allowances are less than leasing costs. Again, they cite in-
adequate car supply as requiring them to provide cars,
especially tank cars, upon which investments they feel
entitled to a return. Remittances are depicted as indirect
payments from one transportation user to another through
the railroads, and consequently should not be characterized
as rebates. This would be especially true since the rail-
road would still receive the full rate for the line-haul or
switching service. These proponents declare that remit-
tance rules of uniform application are possible. Counter-
ing another of their proponents’ contentions, Swift further
urges that section 15(13) of the Act does not prevent re-
mittances on private cars.
The foodstuff interests allege that the present system,
in failing to allow demurrage to accrue to the account of
private car owners or lessees violates section 1(11) of the
Act. Moreover, they assert that the increasing importance
of private cars results in different circumstances from prior
eras in which the Commission refused to allow demurrage
to go to private car Owners or lessees.
Champion International Corporation suggests that
private car owners retain the option to trip lease in order
to prevent demurrage from accruing. Allied Mills, Inc.,
favors remitting all demurrage on private cars, particularly
if detention occurs on private tracks. The Glass Container
Manufacturers Institute, Inc., would require the railroads
ICC Interim Report A53
to earmark remitted funds for maintenance and acquisition
of equipment. Otherwise, they fear such funds might be
channeled into a general fund and negate the purpose of
the proceeding.
The Public Utility Commissioner of Oregon supports
the arguments advanced by these proponents and further
contends that demurrage should be increased, a fair return
on investment allowed, and subsidization of inefficient
shippers (through low demurrage ) ended.
We do not believe that this is the proper proceeding
to deal with these issues.
Replies to private car proponents.—Burlington North-
ern joins with AAR and ASLRA in opposing inclusion of
the private car proponents in the remittance scheme.
ASLRA anticipates even greater administrative prob-
lems and costs than estimated in its initial statement, with-
out any countervailing benefits, if private cars are included
in the remittance scheme. It contends that the adequacy
of mileage allowances should be addressed in proceedings
specifically dealing with such allowances.
ASLRA accuses the private car proponents of solely
seeking to reduce their ownership costs without supporting
the objectives of the proposal. AAR further argues that
there is no assurance that remittances on private cars
would be used for equipment acquisition and believes that
the private car proponents would strenuously object to any
earmaking requirement as applied to them.
Burlington Northern and AAR maintain that it would
be a form of rebate if private car owners receive funds in
excess of ownership costs. Burlington Northern character-
izes remittances on private cars as possible discrimination
or concessions, as well as rebates, in violation of section
15(13), as interpreted in Allowances for Privately Owned
Tank Cars, 258 1.C.C. 371, 378 (1944).
A54 ICC Interim Report
Burlington Northern and AAR surmise that the mile-
age allowances by which private car owners or lessees are
compensated would need to be adjusted so that they would
not receive payments in excess of reasonable compensation,
Burlington Northern asserts that the private car owner is
only entitled to a return of ownership costs under section
15(3) of the Act. AAR further contends that the issue of
the adequacy of mileage allowances is improperly raised
here in that this is not a proper proceeding to review the
adequacy of the private car owners’ compensation (rather
than in one specifically instituted under section 15(13) ).
Finally, AAR asserts that if private cars are included
in an excess demurrage remittance scheme, the contribu-
tion of private detention charges and their total economic
consequences must be reviewed.
Contentions of opponents.—The railroads, principally
represented by the AAR (except certain roads specified
heretofore ) and the ASLRA, oppose the proposed demur-
rage remittance scheme.
These railroad interests quarrel with the assumption
that carriers encourage detention in order to profit from
demurrage. ASLRA points out that such an assumption is
inconsistent with the Commission’s undertaking in Ex
Parte No. 285, Maintenance of Records Pertaining to De-
murrage, Detention, and Other Related Accessorial
Charges by Rail Common Carriers of Property, wherein it
was assumed that demurrage is not being collected because
adequate records were not being kept. It also alleges that
the instant proposal would prove counterproductive to the
program proposed in that proceeding.
ASLRA believes that to require the serving line to
surrender a large portion of demurrage revenue to the
owning line would make still more difficult to justify, from
a revenue-expense standpoint, the continued maintenance
ICC Interim Report A55
of adequate records. AAR thinks that the assumptions
herein contradict the assumption, implicit in Ex Parte No.
285, that railroads are not collecting demurrage charges.
AAR and ASLRA contend that the railroads can do little
to influence the economic judgment of shippers who detain
cars when they perceive it to be in their best interest.
They aver that shippers are more influenced by the level
of demurrage charges than anything else. ASLRA states
that the congestion caused by excessive detention is too
costly to warrant its encouragement. Furthermore, AAR
and the Western Pacific Railroad Company (Western
Pacific) maintain that more revenue can be obtained by a
carrier if a car, even a foreign car, is in service rather than
accruing demurrage. Thus, it is argued that the carriers’
best interests are served by discouraging detention.
Western Pacific asserts that better means exist to in-
crease car utilization. Therefore, it urges the Commission
not to take precipitous action in implementing this pro-
posal, but to conduct a detailed evaluation of its reason-
able anticipated net financial result. Opponents generally
argue that car utilization will not be augmented by the
proposal since detention is largely controlled by the
shipper, who is not affected by the proposed rule. Western
Pacific further states that car service orders effectively dis-
courage motivation to detain rolling stock.
AAR, ASLRA, and Western Pacific further argue that
implementation of the proposal will require burdensome
administrative and recordkeeping costs which would dis-
sipate available demurrage funds because additional ac-
counting procedures and personnel will be needed if the
scheme is instituted. ASLRA contends that administration
would be complicated by audits and other considerations
required by demurrage rules variations. AAR and ASLRA
submit that many carriers would have to initiate costly
A56 ICC Interim Report
manual administrative procedures. Methods of accounting
and auditing, particularly of contested bills, allegedly
would be complicated and difficult.
The AAR and its witness from the Penn Central de-
clare that administration of the rule under average agree-
ments would be complex. The witness detailed various
problems and expenses, some of which are mentioned in
the “Replies to Carrier Proponents” section. He avers that
some problems which would arise could not be handled
by computer. Opponents foresee the necessity for accounts
for each owner and the recording of every car under the
proposal. Furthermore, the administrative feasibility of
the proposal is questioned, particularly in regard to prob-
lems concerning diversion, reconsignment claims, tariff
interpretations, runarounds, variances, exemptions, and
bunching, which allegedly would be expensive and diffi-
cult to handle under this system. AAR foresees collections
and the balancing of contested bills as producing particu-
larly difficult and expensive problems. Additionally, AAR
submits that the incentive for serving carriers to pursue
costly collection suits for sums of demurrage of only a few
hundred dollars may be lost if the small amounts recovered
must be divided, especially if the serving carrier must bear
the full cost of the suit.
ASLRA claims that a study of 36 representative lines
shows that if the proposal were implemented, administra-
tive costs of demurrage would increase 39.8 percent
($453,828), in addition to the one-time programming costs.
AAR states that it would be costly to determine amounts
which might be remitted but it believes that they would
be negligible compared to the scheme’s cost. Although
stating that it would be difficult and expensive to deter-
mine administrative cost increases, AAR offers estimates
by an eastern road of $25,000 in setup costs and $96,000
in annual expense; by a midwestern and southern road of
ICC Interim Report A57
$90,000 in annual expense; and by the Southeastern De-
murrage and Storage Bureau of $40,000 in annual costs,
plus costs to its members (which are estimated to be about
$40,000 in annual costs for two southeastern roads), AAR
also objects to these administrative costs because there
would be no corresponding production of revenues or
other foreseeable benefits to offset them. It believes that
an insignificant amount of funds would be shifted, at great
cost, which would actually lessen industry ability to ac-
quire equipment.
AAR contends that demurrage arises from local events
having to do with business practices of the serving lines’
customers, and bears no relationship to the identity of the
car owner. Moreover, demurrage charges are not in the
nature of reciprocal charges but are meant to encourage
release of cars. Furthermore, ASLRA and AAR assert that
cars held for extended periods produce increased and un-
compensated expenses such as yard and terminal conges-
tion and additional handling and switching. ASLRA con-
tends that short lines have little control over congestion,
which is both inefficient and costly to them. ASLRA pre-
sents the following table to demonstrate that efficiency is
in inverse ratio to congestion. Costs of arbitrary cars were
not detailed, however.
ICC Interim Report
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ICC Interim Report A59
ASLRA charges that the proposal misconceives and
subverts the entire pattern of per diem and demurrage ar-
rangements and that it constitutes a hybrid scheme which
confuses the two concepts. Opponents assert that the is-
sue of adequate compensation is raised improperly here,
since more appropriate procedures to deal with it exist.
Since the demurrage remittances in issue are not adjusted
by the type of car, the rationale underlying the proposal
supposedly cannot be compensation, according to oppo-
nents. AAR and ASLRA state that arbitrary level demur-
rage is a penalty and is not designed to provide compensa-
tion and produce revenue. These opponents point out
past Commission refusal to consider demurrage for reve-
nue purposes or as an offset for costs, at least not for those
costs not relevant to the accrual of demurrage.
AAR characterizes the proposal as an unwarranted ex-
tension of the purpose of demurrage charges in violation of
the principle that the serving railroad is entitled to demur-
rage because it provides the transportation service.
ASLRA submits that if compensation of car owners should
be increased, it should be accomplished through per diem
rates, which are presumably adequate to cover car owner-
ship costs; and if inadequate car ownership is to be reme-
died, it should be done through incentive per diem.
ASLRA argues that additional compensation to owners in
the form of demurrage remittances would result in pay-
ments above the just and reasonable maximum limits pre-
scribed in Incentive Per Diem Charges—1968, 337 I1.C.C.
217 (1970).
AAR and ASLRA contend that demurrage should
continue to compensate the serving carrier and be used to
offset per diem charges, especially given increased incen-
tive per diem levels, which on certain cars exceed $10 per
day. ASLRA claims that per diem charges exceed demur-
A60 ICC Interim Report
rage receipts generated on all cars not just foreign cars. It
presents examples of the amounts of per diem which could
accrue without offsetting demurrage receipts and further
emphasizes increased expenses on detained cars. There-
fore, it is argued that demurrage receipts do not always
compensate the collecting road for per diem, much less
for the other expenses associated with detained cars. The
following table demonstrates this argument:
ICC Interim Report A6i
TABLE 2
Demurrage charges versus per diem responsibility per car
handled for the year 1971
Railroad Diflerence
number Demurrage Per diem column B minus
column C
A B C D
GAIN CEE | nee $ 7.29 $11.24 $ (3.95)
iS ae dip ede bb Venki 48.53 10.72 37.81
Ans Cr ewer abner eh re 3.20 1.60 1.60
Ons « i wheh Ae obs e naka 7.19 3.53 3.66
elisa aie atin Sire Wak ss 0.54 1.28 (0.74)
Mt evhe cons eens kacck 2.12 4.10 (1.98)
ifaw is aa walkie eed surae 3.75 5.62 (1.87)
ie Naked ve ckiewees 5.61 4.25 1.36
SS gen Mle pie Ze 1.87 6.26 (4.39)
indus pin eselndats 3.93 6.70 (2.77)
ee 6.23 4.74 1.49
Sivan te ea eaewwadess 4.20 3.10 1.10
ny ee aiken Waste ak wit 6.74 6.11 0.63
6 huabeesde and onate 0.01 3.90 3.89
RES Sere ar ame F 1.06 2.40 ti'34
Ee ae 1,24 1.44 (0.20)
TE chew cae snendwevas 0.65 2.04 (1.39)
OU rd so aerd Satie oad en eG 1.63 2.29 (0.66)
ROP rere 0.39 2.39 (2.00)
Pt iatdemadess nehed«s 0.89 0.44 0.45
DC tatiaiks cbakew aes 2.30 2.90 (0.60)
a seen Fea bo Kee 6.90 3.59 3.31
BT aha vias peutweckns 2.38 3.72 (1.34)
DR a neheowdics 0.89 $.26 (2.37)
cha tvactuedese sees 3.55 2.54 1.01
PN abe we da Raeloies ea 3.71 8.37 (4.66)
a CO errr 4.46 10.42 (5.96)
aie ieeuiaeteaee bes 1.55 | Perr rere
Se eeedhaa wien dvekees 1.49 6.92 (5.43)
OP wuvabdanithhenkns as 1.07 5.02 (3.95)
OE iisiess tina oC Pacers 2.29 4.95 (2.66)
Oe eikeds Gu’ T ie ob 1.82 2.13 (0.31)
wWkkee cae keke aes bat 5.13 3.98 1.15
BS Gicldkanetie Laine hd 10.12 8.43 1.69
Ti Gin bance wee haired « 0.87 11.49 (10.62)
cys Rass ba ennanes 2.24 7.62 5.38)
Weighted average .... 2.68 3.30 {0.63
ASLRA asserts that a study of 36 representative lines
showed that only 13 lines offset all per diem charges with
demurrage revenue. The absence of underlying details,
however, detracts from the evidentiary value of this study.
A62 ICC Interim Report
ASLRA also states that 3.5 percent of the gross revenue of
the 36 representative lines is derived from arbitrary (above
the $10 per day level) demurrage on foreign cars. It be-
lieves that loss of this revenue would not result in im-
proved operations.
AAR declares that 80 percent of delivered cars are
under average agreements. It presents examples which
indicate, for instance, that a debit car may be detained
from 7 to 10 days and if offset by credits earned on other
cars only $20 demurrage might accrue on it for 1 day at
the first arbitrary level. Under the proposal, $10 of this
$20 would be remitted to the owning road although AAR
contends that per diem and administrative, truck rental,
and handling expenses would not be met on the car or, in
some cases, all the cars involved in the agreement.
ASLRA states that 90 percent of its patrons are par-
ties to average demurrage agreements. It avers that the
car detained for the maximum period before demurrage
income starts to accrue will incur substantial per diem
charges for the time factor alone. In addition, the per
diem on the four additional cars needed to offset the maxi-
mum car must be considered. The penalty demurrage
would not exceed per diem on this cycle until the 13th day
of detention on the maximum car, and not until the 21st
day under the proposal. The shortest car cycle would
involve 9 days per diem responsibility before demurrage
began to accrue. ASLRA posits that, conservatively, the
average four credit cars and four debit cars would incur
$172.50 per diem charges prior to the accrual of any de-
murrage revenue.
AAR maintains that credits and debits under the aver-
age agreement are computed on cars without regard to
their ownership. It alleges that there is no way to at-
tribute credits and debits to specific cars when balancing
ICC Interim Report A63
accounts. Although AAR admits being able to identify
cars in the agreement, and thus their owners, it argues that
carriers are unable to prorate the entire amount collected
and to determine whether the amount collected on indi-
vidual foreign cars met expenses due to the methods by
which the agreements are administered. These problems
are in addition to the administrative problems mentioned
above.
The opposing carriers assert that, in any event, the
proposal will not achieve its objectives because funds will
be siphoned off in administrative costs rather than allocated
to the acquisition of cars. ASLRA doubts the utility of
the proposal for increasing car supply and utilization, in
that revenues merely will be shifted among carriers and
funds dissipated in administrative costs. AAR notes that
every railroad will incur substantial additional costs under
the proposal.
AAR argues that since the plan will produce no reve-
nue, investment incentive will not be promoted. Although
some lines might be net creditors, all would incur addi-
tional costs under the scheme. Thus, AAR and Western
Pacific assert that the railroad industry's ability to acquire
cars will be diminished since the costs will result in less
total demurrage revenue. AAR contends that advanced
investment planning will be impossible because of the
uncertain nature of the receipts. AAR thus states that
there is no assurance that the additional revenue would go
to freight equipment purchases. It cites incentive per
diem as a better tool than demurrage, more accurately pro-
jected for investment decisions, for use in encouraging
adequate car supply. Western Pacific maintains that addi-
tional heavy administrative expenses will dissipate the
benefits of the proposal to “creditor” lines and further com-
pound the very factors which severely limit the ability of
“debtor” lines to contribute to the car supply.
A64 ICC Interim Report
Since earmarking of demurrage receipts was rejected
in Demurrage Rules and Charges, Nationwide, 340 I.C.C.
83, 90 (1971), and presumably would be here also as con-
flicting with incentive per diem earmarking, ASLRA sub-
mits that there would be no way to insure that demurrage
remittances would increase car acquisitions. Alsé, op-
ponents assume that private cars would be built only to the
extent owners or lessees require them, regardless of
amounts remitted.
The Mississippi Export Railroad Company, Savannah
State Docks Railroad Company, and Detroit Terminal
Railroad Company contend that the effect of the propesal
would be especially harsh on small switching or terminal
lines, for many of the same reasons presented above. Mis-
sissippi Export states that the $10 per day retained amount
is insufficient to cover the expenses incurred on detained
cars by destination carriers. Savannah State, a small
switching carrier, submits that it shows a net annual loss
of $60,000 and cannot afford to remit demurrage to large
carriers. It asks that if the proposal is implemented that
small switching lines be exempted. Detroit Terminal also
objects to small lines becoming collecting agents, without
compensation for additional expenses, for larger lines.
Demurrage revenue is assertedly needed by these smaller
lines for additional tracks, equipment, and wages directly
related to handling and storing detained cars.
The trustees of two bankrupt roads, the Boston and
Maine Corporation and the Lehigh Valley Railroad Com-
pany, entered separate statements in opposition to the
remittance scheme, stating that the proposal would further
harm their financial situation and would jeopardize their
ability to continue service. They agree with many of the
arguments set forth above. Boston and Maine estimates
that the proposal would divert approximately $400,000 of
its income annually at an annual expense in excess of
ICC Interim Report A65
$40,000. Lehigh Valley asserts that the program could
not be implemented on its current computer system. It
characterizes the effect of the proposal as making the rich
roads richer and the poor roads poorer.
Also opposing the rule are the United States Depart-
ment of Transportation and the Commonwealth of Penn-
sylvania, which advance arguments similar to those of the
opposing carriers. The Commonwealth of Pennsylvania
points out that the bankrupt eastern railroads are large per
diem debtors and that remittance of demurrage would
exacerbate their financial problems. DOT fears that the
proposal may force disruptive rate and division adjust-
ments as well as substantial administrative costs without
countervailing benefits.
Replies to opponents.—Burlington Northern declares
again in reply that the demurrage rules rest solely on his-
torical bases, ignoring economic considerations. It states
the issue in terms of who should receive the penalty por-
tion, which is presently the substantial element of demur-
rage. Burlington Northern believes average per diem
approximates $4 per day, which it believes indicates that
the retention of $10 per day would be adequate (it is un-
clear whether this figure includes incentive per diem or the
effect of average agreements). It further submits that the
$10 figure may be subject to adjustment if it can be shown
to be inadequate. Along with Union Pacific, Burlington
Northern believes that considerations of equity demand
that investing carriers receive this portion of demurrage.
Proponents regard some return on investment (rather than
none while cars are idle on another line) as necessarily
providing investment incentive. Proponents stress that the
investor is denied return on investment while a car is un-
duly detained off line.
Burlington Northern, Union Pacific, and the foodstuff
interests accuse opponents of not considering line-haul and
A66 ICC Interim Report
switching rate allowances for per diem or per diem reclaim
allowances in presenting their position. Thus, given these
other allowances, they maintain that there is no need for
total demurrage to offset total per diem. The foodstuff
interests aver that the proponents’ arguments do not allow
for other methods of per diem offset nor allow for railroad
inefficiencies in calculating the per diem and expenses to
be offset by demurrage.
Both Burlington Northern and Union Pacific defend
the administrative feasibility of the proposal. Burlington
Northern is convinced that its solutions as to average agree-
ments are workable. It submits that present demurrage
records, which it and Union Pacific believe can be com-
puterized, contain the data necessary to implement the
proposal which would only be an adjunct to the existing
record maintenance and reporting system. Union Pacific
contends that demurrage can presently be attributed to
individual cars. The only new process it envisions is sep-
aration and accumulation of data. Records allegedly will
be required only for excess foreign cars. Union Pacific
characterizes the opponents’ arguments concerning prob-
lems of administrative feasibility as exaggerated.
Burlington Northern, Union Pacific, and the foodstuff
interests argue that opponents’ studies (tables 1 and 2) are
invalid since they do not distinguish line-haul and switch-
ing roads or take into account per diem reclaim allowances
or line-haul or switching revenues. Burlington Northern
and Union Pacific contend that the AAR and ASLRA ex-
amples are misleading and atypical, but even if not, merely
show the failure of average agreements, not any lack of
merit in the instant proposal. They contend that average
or normal costs, including per diem charges, are not stated
by opponents and must be less than their examples would
indicate. Burlington Northern further accuses ASLRA of
relying heavily on demurrage for revenue, contrary to the
ICC Interim Report A67
purpose of demurrage. Furthermore, it states that short
lines have per diem relief provisions available to account
for their special situation. Burlington Northern notes that
payee roads will still have remittances returned to them
to the extent of their investment in cars.
Swift and the foodstuff interests again assert that
private car owners or lessees should also receive re-
mittances. They state that since they take the investment
risk, retention of demurrage by carriers is a windfall to
the carriers. Consequently, considerations of equity de-
mand that remittance be made to the private car owners
or lessees. Moreover, they further deny that such re-
mittances would constitute a rebate, especially since the
carrier will still receive the full rate for the transportation,
even if the shipper’s expense is reduced. They character-
ize the railroad as merely an agent for transfers of revenue
between industries and not as paying a rebate. The food-
stuff interests further contend that since private cars accrue
no compensation or per diem while idle, and because their
mileage allowances inadequately compensate them, per
diem is not the proper vehicle to increase compensation
to car owners. Finally, they argue that Private cars, In
Re, 50 I.C.C. 652 (1918), is no longer authority to deny
demurrage to private car owners because of changed cir-
cumstances including today’s pressing need to encourage
car building.
; Discussion AND CONCLUSIONS
In order for us to adopt the proposed rule under
which all demurrage receipts in excess of $10 per car per
day would be remitted by the delivering carrier to the
freight car owner, we must be satisfied that the proposal
will achieve its intended purposes of increasing car utiliza-
tion or car supply. As a necessary corollary we must de-
termine whether the proposal is administratively feasible
and whether the expense of the program outweighs any
A68 ICC Interim Report
benefits which might be derived from its implementation.
The participation of proponents of the rule advocating the
extension of its application to private car owners (or les-
sees ) necessarily presents the issue of whether these parties
should be allowed to participate in the remittance scheme.
We will discuss the issues in the order of car utilization,
private car participation, car supply, and administrative
feasibility and cost. Because of lack of sufficient data on
the final point, we reopen the proceeding for further hear-
ing.
Car utilization.—The shipper to whom the carrier de-
livers 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 demurrage charges.
This proposal does not alter the level of demurrage
charges. It merely shifts the payment of part of these
charges from one group, the receiving carrier, to another,
the car owner. Since it can 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 car 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 De-
murrage, Detention, 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 demurrage charges remained
uncollected by the carriers or that such debts were can-
celed because carriers did not maintain adequate records.
Other indications that carriers do not always collect de-
ICC Interim Report A69
murrage charges appear in Demurrage Rules and Charges,
Nationwide, 340 I.C.C. 83, 92 (1971), and Incentive Per
Diem Charges—1968, 337 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 those demur-
rage 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 ship-
pers and receivers. The incentive to release cars would
be greater and some improvement in car utilization could
reasonably be expected.
Private cars.——Before addressing the issue as to
whether the proposal will increase car ownership, we will
deal with the arguments of the parties who not only advo-
cate adoption of the proposed rule, but also its extension
to include private car owners or lessees.
Private cars recently have become an increasingly im-
portant component of the national freight car fleet. Al-
though such cars realistically cannot be expected to solve
the freight car shortage, they can make a contribution to
its solution. There are obvious economic and practical
limitations on the number of cars in which private owners
will invest under any circumstances and all shipper owners
of private equipment rely on railroad-owned cars to meet
some of their transportation needs. Moreover, the use of
and the necessity for private cars cannot relieve carriers
of their responsibility to provide equipment. However,
the private car owner should not be discouraged from in-
vesting in freight cars. Rather, any stimulus to increasing
the national car fleet should be encouraged, especially if
this can be accomplished without diminishing total car
investment or other services in other sectors of the railroad
system.
A70 ICC Interim Report
Transportation conditions have changed since the
World War I era decisions on private cars. The private
car fleet is no longer a relatively minor appendage to the
system, and this fact should be recognized. Settled rules
and proven methods of dealing with problems should not
be discarded lightly, especially when they have proven
dependable and are relied upon. But this Commission is
an administrative and quasi-legislative agency (as well as
a quasi-judicial agency), dealing with dynamic industries
and changing economic and transportation conditions. We
have a responsibility to change precedents made obsolete
by decades of change and which are no longer suited to
meet transportation problems. Facts must clearly support
these dissimilarities or changes. When they do we should
make the most appropriate decision under the circum-
stances to effectively interpret and effectuate the national
transportation policy. In recognizing the need for flexible
regulation and for avoiding overjudicialization of our
functions, we will encourage innovation and necessary
change as well as that degree of required stability which
will best serve the needs of carriers, shippers, and con-
sumers.”
8. The United States Supreme Court stated in American
Trucking v. A.T. & S.F. R. Co., 387 U.S. 397, 416 (1967):
*°° in any event, we agree that the Commission, faced with
new x Hon, Said or in light of reconsideration of the relevant
facts, and its mandate, may alter its past interpretation and
overturn past administrative rulings and practice. Compare
SEC wv. Chenery Corp., 332 U.S. 194 (1947); FCC v. WOKO,
329 U.S. 223 (1946). In fact, although we make no judgment
as to the policy aspects of the Commission's action, this kind
of flexibility and adaptability to changing needs and patterns
of transportation is an essential part of the office of a regu-
latory agency. eg agencies do not establish rules of
conduct to last forever; they are supposed, within the limits
of the law and of fair and prudent administration, to adapt
their rules and practices to the Nation’s needs in a volatile,
changing economy. They are neither required nor supposed
to regulate the present and the future within the limits of
yesterday.
ICC Interim Report A71
In Distribution of Privately Owned Freight Car, 346
I.C.C, 278, 288 (1974), the Commission recognized that:
“Generally, we can assume that a shipper will have little
incentive to acquire, or maintain investment in, private
cars unless he is compelled to do so by car shortages or he
feels that it will be profitable.” In adopting any rule de-
signed to encourage investment, we do not perceive how
we equitably could exclude a recognized, large segment
of investors and deprive them of some of the needed in-
centive to invest. This is true particularly when a primary
rationale for such a rule must be that fairness and general
economic principles dictate that an investor receive the
return on his own investment and the incentive to invest
in the future.
Moreover, we do not believe that there are persuasive
countervailing factors which should exclude private car
owners from participation in this program. The scheme
will provide that the delivering carrier's expenses, includ-
ing the costs of administering the remittance system, will
be covered by the retained amount. Since the delivering
carrier will not be harmed, it is proper that the investor,
no matter who it may be, receive the additional return on
investment, and thereby the additional investment incen-
tive, generated by excess demurrage (albeit that demur-
rage is not intended as a source of revenue; the means for
effectuating the purposes of high demurrage charges
necessarily result in the production of revenue ).
The considerations of fairness and economic principles
involved in allowing return to go to the investor are not
overcome by the fact that private car owners are compen-
sated by mileage allowances since these allowances are
intended to do no more than return the investors’ costs.
These same considerations allow private car participation
in this proposal despite the existence of private detention
charge arrangements. Moreover, we do not believe that
A72 ICC Interim Report
participation of private car interests will result in rebates
inasmuch as the delivering carrier will receive its full rate
and full compensation for all demurrage expenses in all
cases.
In treating private car owners equally with railroad
car owners in this proceeding, we merely recognize the
absence of prejudice to the railroad system, the fairness of
equal investor participation, and the importance of private
cars in preserving and enlarging the national car fleet.
Private car participation in a plan resulting in greater
investment incentives should provide a stimulus to the
maintenance and expansion of freight car investment even
though some current funds are diverted from the railroad
industry. Thus, it can be expected, under general eco-
nomic principles, that continued additions to the existing
transportation resources of the country will be encouraged
by private car participation and that the general public
will benefit thereby.
There is no evidence upon which to decide definitely
to whom the remittance should be paid. In the absence of
such evidence, we do not see how it could be paid to any-
one except the rate-payer, who undoubtedly will be the
lessee.
Car supply.—Although the problem of the inadequacy
of car supply may be temporarily abated during certain
periods of time, its chronic and recurring nature is too
familiar to require elaboration. For a variety of reasons
in recent years the car ownership and supply problem has
been especially acute. Recognizing its responsibility to
find remedies for this problem, the Commission has taken
action in a number of areas.
In Ex Parte No. 241, Investigation of Adequacy of
Freight Car Ownership, 346 1.C.C. 497 (1974), we ordered
certain class I railroads to show cause why they should
not be required to purchase additional equipment. Fur-
ICC Interim Report A73
thermore, in the orders in Ex Parte No. 305, Nationwide
Increase of Ten Percent in Freight Rates and Charges,
served June 4, 1974, and thereafter, we allowed a proposed
general rate increase to go into effect only on certain condi-
tions, including use of revenues generated by the increase
for capital improvements, deferred maintenance, and cer-
tain other specified purposes. By order served February
22, 1974, we extended the incentive per diem charges in-
stituted in Ex Parte No. 252 (Sub-No. 1), Incentive Per
Diem Charges—1968, to year-round application. Our
continuing interest in remedying the car supply problem
is exemplified by a recent initial decision in Ex Parte No.
252 (Sub-No. 1), served July 23, 1974, suggesting changes
in the incentive per diem regulations. Moreover, we have
approved innovations such as unit-train rates, annual vol-
ume rates and changes in transit and inspection rates and
practices as well as issuing car service orders whenever
needed. These actions demonstrate that we will not hesi-
tate to take any reasonably proper and necessary actions
to increase the car supply and to improve car utilization.
The variety of Commission action in the area of car
supply cannot allow us to refrain from further actions as
long as the problem remains unresolved. It must also be
recognized, in accordance with the principles discussed
earlier, that we will modify or even rescind actions that
demonstrably no longer effectively serve their intended
purposes. Thus, it is without fear of irreversible conse-
quences that we may experiment with innovations of sub-
stantially apparent merit.
Opponents of the proposal have not refuted the prin-
ciple that fundamental concepts of equity and fairness
logically require that the investor receive any return on
investment generated by demurrage charges above the
serving carriers’ total demurrage expenses. It is the car
owner who suffers most and who should receive compensa-
AT74 ICC Interim Report
tion when its equipment is used for warehousing. More-
over, there is no indication that greater return on invest-
ment will not be a stimulus to investment for carriers and
private car owners alike, in accordance with generally
accepted economic principles. This is true especially since
owners will perceive demurrage remittances (and amounts
set off due to current car ownership ) as direct return from
their investment in freight cars. We thus anticipate that
this proposal will result in additional motivation and in-
ducement for freight car investment.
As discussed earlier, antiquated precedents both in
the industry, and in its regulation, cannot be allowed to
impede modern, efficient, and economical development of
transportation in accordance with the national transporta-
tion policy. Experimentation which appears likely to yield
benefits should be encouraged. If the experiment fails, re-
turn to the status quo ante should not be prohibited. If
a rule or practice outlives its usefulness, change should not
be hindered. Even within a stable and prosperous sys-
tem, latitude for growth, improvement, and innovation
must be allowed .
Much of our discussion as to the reasons for allowing
private car participation in the proposal is equally applica-
ble when considering the merits of the proposal itself.
As we have noted, recurring car shortages requires us
to use all avaliable means under the Interstate Commerce
Act to secure the provision of adequate rail transportation
facilities. No effort reasonably calculated to achieve this
goal can be spared. Since we have determined the exist-
ence of our jurisdiction earlier in this report, and since we
have determined that equity favors the proposal, and that
it is likely to be beneficial to the railroad system, we adopt
the proposal, as extended to the private car fleet, in prin-
ciple.
ICC Interim Report A75
The next section deals with the reasons why we can-
not adopt and implement the proposal as promulgated
immediately, and why we must reopen the proceeding.
At this point, we note that we are not persuaded by
requests filed for exemption from the scheme. Short-line
and terminal railroads appear to be adequately protected
by per diem reclaim. If this proposal proves successful, if
finally implemented, and the reclaim does not satisfy these
carrier objections, an adjustment in the reclaim allowances
(or perhaps even in this proposal ) may prove to be proper.
We believe that all carriers have an interest in a strong
national car fleet and can contribute to this program as
long as their total expenses on detained cars are provided
for.
Feasibility and implementation; reopened proceeding.
—Even considering the degree of flexibility and innova-
tion which we rightfully must maintain, we also must not
succumb to the danger of applying generally valid princi-
ples which are inapplicable in particular situations, or
establishing programs which though meritorious in prin-
ciple, are unworkable in practice. In this proceeding, al-
though we believe that the principles underlying the
proposal are sound, the record leaves us no choice but
to reopen the proceeding for further evidence on a num-
ber of unanswered questions raised in the initial statements.
The evidence and contentions of the participants have
been set out in great detail in order to draw attention to
the various problem areas developed therein. The record
discloses that the opponents do not present persuasive ar-
guments against the merits or underlying principles of the
proposal. Rather, their criticism is mainly directly toward
the administrative feasibility and costs of the proposal
(especially as compared to its benefits). These problems
require resolution in a reopened proceeding before we
may implement the proposal.
A76 ICC Interim Report
Although the statement of facts discloses areas of in-
quiry, we will now focus on those areas which we urge the
participants to produce evidence and arguments to enable
us to make an informed and reasoned judgment on the
further disposition of this proceeding. We will outline
the broad areas and general questions to be addressed.
Although specific questions appear in appendix A which
participants may use as a detailed guide to assist them in
their preparation of further statements, rigid adherence to
that format is not necessarily required.
Participants have questioned whether the amount of
arbitrary demurrage which would be involved under the
proposed rule warrants the cost and effort involved in its
institution. To enable us to properly determine the effects
of the proposal, participants should produce specific evi-
dence as to total arbitrary demurrage revenue for a repre-
sentative period, the amount which would accrue on
foreign cars, and the identity of the carriers and private car
owners to which these amounts would be remitted. This
information will assist us in determining the net amounts
involved in the program and the identity of the payors and
payees. We will also be able to weigh this data against
other factors raised in the proceeding.
The year 1973 is suggested as a uniform study period.
Where this period is considered too lengthy for some par-
ticipants they may wish to limit their presentation to the
last 6 months of 1973. In the alternative, especially if past
records are unavailable, participants may conduct a 90-day
representative study during the 120-day period allowed for
initial statements.
An important issue raised in the initial statements is
the administrative feasibility of the proposal (at this point,
aside from the costs). Participants are urged to submit
specific information concerning the accounting and record-
keeping procedures and additional personnel required for
ICC Interim Report A77
implementation of the proposal. Opponents as well as
proponents should be specific and detailed in their objec-
tions or criticisms.
Participants should inform us in detail of the nature
of existing demurrage records, the modifications and addi-
tions necessary, in order to operate this program, and the
number of additional personnel which will be needed
should be specified. Comments on the feasibility of com-
puterization and the extent to which carriers can partici-
pate in computerization may be presented. In discussing
administrative procedures, participants should take into
account the various problems raised in the statement of
facts including the problems of attribution of ownership
and balancing of accounts under average agreements.
Other problems which appear to deserve comment include,
but need not be limited to, possible difficulties in connec-
tion with demurrage rule variations, exemptions, audits,
and the handling of contested bills.
Opponents have expressed further concern that the
proposal will impose burdensome administrative costs on
the carriers, particularly in connection with the administra-
tion of average agreements. Specific information should
be adduced concerning the costs of additional procedures
and personnel which will be required by this program,
considering the inclusion of the private car participants.
Attention should be given to both startup costs and the
continuing costs of implementation. We believe that the
owning roads should bear the additional costs of the pro-
gram through the mechanism of a portion of the retained
amount, and it appears that the proposed $10 figure would
adequately cover these costs.
The amount retained by the serving carriers, in fair-
ness, should be sufficient to cover all expenses incident to
demurrage and to the administration of this proposal. We
assume that the first level of charges, currently $10 per day,
A78 ICC Interim Report
will result in adequate retained revenue. Participants are
invited to show that total costs would not be covered by
this amount. They may take into account per diem
charges (the average of which is still apparently less than
$5 per day), costs of administration and collection of de-
murrage, the additional costs of this program, and any
verifiable average costs per day for additional handling
and congestion associated with arbitrary cars. Reliable
figures must be produced in order to overcome the pre-
sumption that these amounts are taken on a per car basis
and that the $10 figure is adequate. Allowance for any
of these factors in line-haul or switching rates or per diem
reclaim should be considered.
The effect of average agreements on these costs (espe-
cially in relation to the sufficiency of retained revenue )
may be presented. If models or examples are used, their
representative nature should be specified. Dollar amounts
involved are preferable, however, and the figures presented
should give a clear indication of the amount to which the
$10 figure must be increased so that the average amount
retained will equal the average cost per day. Stated dif-
ferently, total revenue from retained demurrage should
equal the total costs incurred by reason of demurrage.
The questions in appendix A focus more sharply on
the matters raised in the preceding paragraphs. These
questions are not meant to be exclusive and do not suggest
any required format. They are merely a further guide to
the parties to help them formulate the information and
arguments necessary to resolve the unsettled issues in this
proceeding.
(Participants are not precluded from concisely reiter-
ating relevant examples, evidence, or argument from the
initial presentations. However, they are cautioned that
many of these examples lack clarity or indications of their
ICC Interim Report A79
representative nature and should be modified (or updated),
accordingly, if presented again.) Furthermore, the issues
of jurisdiction and procedure have been settled and should
not be reargued. (Participants also are not precluded
from presenting other facts and arguments which they be-
lieve will aid in the Commission’s final determination in
this proceeding but the major emphasis of their statements
and replies should concern the issues raised above. )
As noted in the earlier section of this report entitled
“Hearing,” participants will be allowed 120 days from the
service date of this order to file initial statements. We be-
lieve that this period will provide ample time to gather the
necessary data, or to conduct 90-day studies if desirable,
and to formulate arguments. Leave to intervene will be
granted liberally during this period. Reply statements will
be due 30 days from the due date for initial statements.
Any further petitions or motions should be filed within 30
days thereafter.
We encourage participants (and any interested par-
ties) to produce the requested information with specificity
and detail in order to assist the Commission in determin-
ing the ultimate course of this proceeding. If the proposal
is implemented, we anticipate leaving the proceeding open
so that we might test its effects in the light of actual ex-
perience after a reasonable period of time.
FINDINGS
We find that the Commission has jurisdiction under its
car service powers to consider the proposed demurrage
remittance rule and that the hearing procedures used in
this rulemaking proceeding were adequate and not un-
lawful.
We further find that implementation of the proposed
rule may have a positive effect on car utilization.
A80 ICC Interim Report
We further find that the proposed rule is sound, equi-
table, and should provide incentive to invest in freight cars,
and that its principle should be adopted, subject to the
taking of more evidence in this proceeding.
We further find that private car owners or lessees
should participate in the proposed program on an equal
basis with carrier car owners.
We further find that this proceeding should be re-
opened fox the receipt of further evidence and arguments,
especially relating to the amounts involved under the pro-
posed rule and the administrative procedures and costs of
the program.
And we further find that this is not a major Federal
action significantly affecting the quality of the human en-
vironment within the meaning of the National Environ-
mental Policy Act of 1969.
CoMMISSIONER Murpuy, concurring in part:
While I am in agreement with the majority insofar as
it finds that the proposal is warranted in principle, I am
unable to agree with several aspects of the majority's de-
cision. |
Turning first to the proposal to include private car
owners, I am in agreement that since the matter of their
inclusion was not initially brought to the notice of inter-
ested persons that a further processing at this point without
adequate notice could be fatally defective. Nevertheless,
I believe that if the private car owners are to be embraced
within the provisions of the proposed rule, then that matter
could be handled more expeditiously in a separate sub-
numbered proceeding. In connection with the inclusion
of private car owners, one of the principal areas which
must be explored before the rule is extended to those per-
sons relates to possible violations of the Interstate Com-
merce Act and Related and Supplementary Acts, par-
ICC Interim Report A81
ticularly with respect to unlawful rebating among other
matters.
Turning next to the proposed processing of this pro-
ceeding, I believe it would be preferable if the proposal
were implemented at this time without any additional
protracted delay. Nevertheless, since a majority has
chosen to secure additional data under modified procedure,
I would suggest that the parties heed the admonition con-
tained in the interim report in submitting further data
herein. In that light, the parties should attempt to follow
the guidelines set forth in Rule 49 of the Commission’s
General Rules of Practice, 49 CFR 1100.49.
CoMMISSIONER MACF ARLAND, dissenting:
I cannot agree wtih the majority opinion in this interim
report. The proposal fails to induce more efficient freight
car utilization. There is no evidence to demonstrate that
the excess demurrage charges going to the owning rail-
roads or private car owners would be used to purchase
additional rolling stock. More appropriate methods are
available to induce further investment in freight cars such
as increasing per diem, incentive per diem, and mileage
allowances. Furthermore, the practical effect of adoption
of the proposed rule will be to further deteriorate the
financial condition of the bankrupt eastern railroads.
CoMMISSIONER Corser did not participate.
It is ordered, That this proceeding be reopened for
the receipt of further evidence and argument in accordance
with the views expressed in this interim report.
It is further ordered, That initial statements shall be
due 120 days from the date of service of this interim report
and that reply statements shall be due 30 days thereafter.
A82 ICC Interim Report
Any further motions or petitions should be filed within 30
days thereafter.
By the Commission.
Rosert L. Oswa.p,
(SEAL ) Secretary.
ICC Interim Report A83
APPENDIX
Question to be used as guidelines for participants in
the further presentation of evidence in this proceeding.
1. Under the proposed plan, what would be the amount
of demurrage payable to:
a. Each foreign railroad on whose cars demurrage was
collected?
b. Private car owners on whose cars demurrage was
collected?
2. What is the total amount of demurrage received for:
a. Home cars in:
1. Amounts of $10 per demurrage day or less?
2. Amounts in excess of $10 per demurrage day?
b. Foreign cars (broken down by individual road ) in:
1. Amounts of $10 per demurrage day or less?
2. Amounts in excess of $10 per demurrage day?
c. Private cars (broken down by individual owner) in:
1. Amounts of $10 per demurrage day or less?
2. Amounts in excess of $10 per demurrage day?
3. What are the total demurrage days on line for:
a. Home cars:
1. Amounts of $10 per demurrage day or less?
2. Amounts in excess of $10 per demurrage day?
b. Foreign cars by individual road:
1. Amounts of $10 per demurrage day or less?
2. Amounts in excess of $10 per demurrage day?
c. Private line cars by individual owner:
A84
ICC Interim Report
1. Amounts of $10 per demurrage day or less?
2. Amounts in excess of $10 per demurrage day?
The demurrage days in questions 3a, 3b, and 3c must
correspond to the demurrage amounts in questions 2a, 2b,
and 2c, respectively.
4,
What is the average amount per day paid by railroads
to car owners for the time portion of car hire payable
to each foreign railroad and each private car owner
whose cars are used on line?
What records are now maintained to handle demur-
rage?
Copies of these records would be desirable.
. What additional records would be required?
What existing records could be used with modifica-
tions in implementing the proposed plan?
Copies of the modified records would also be desir-
able.
What sepecific recordkeeping problems would be
caused by average agreements?
. What specific solutions do you propose for the han-
dling of the average agreement problem?
How much additional startup expense would be in-
volved to implement the proposed rule?
Separate these costs by ICC Account and indicate the
number of employees which would be required.
How much additional expense would be incurred to
administer the proposed rule on an annual basis once
it became operational?
15.
16.
ICC Interim Report A85
Separate tnese costs by ICC Account and indicate the
number of additional employees which would be re-
quired.
Comments on the following questions, which were
raised tangentially by a few participants, are not pre-
cluded.
Should the demurrage in excess of $10 be earmarked
for building or rebuilding freight cars?
17. What controls, if any, should be exercised over the use
18.
19.
of these funds?
Should minimums or standards be adopted to insure
that the funds are used for additional cars only?
What controls, if any, should be applied to funds gen-
erated from privately owned cars?
A86 ICC Report and Order
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 remit-
tance to the freight car owner by a nonowning rail-
road, on whose lines a car is being detained under
demurrage, of all demurrage charges collected in ex-
cess of $10 per car per day, modified in certain re-
spects, 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. Isbell,
Jr., A. E. Leitherer, J. W. McDermond, Thomas F.. McFar-
land, 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 proponents.
Robert C. Blinn, Emried D. Cole, Jr., Donald E. Cross,
Robert S. Davis, Samuel P. Delisi, Thomas C. Dorsey, Louis
T. Duerinck, Richard S. 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. 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, opponent.
ICC Report and Order A87
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 L.C.C. 411),
entered March 28, 1975, and served April 25, 1975, was
issued. 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
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,
A88 ICC Report and Order
the proceeding was reopened for the receipt of further evi-
dence on its feasibility and implementation. Participants
were asked to submit specific information concerning
present demurrage records and the modification and addi-
tional expenses which would be incurred by the imple-
mentation of the proposed rule. Nineteen guideline
questions were provided to aid participants in the presenta-
tion of the requested material.. The notice of amended
rulemaking proceeding was published in the Federal
Register, April 30, 1975 (Vol. 40, No. 84, p. 18797).
One hundred and eighteen parties including 101 rail
carriers 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 con-
solidated their views.
As in the interim report, we will group participants
according to their major viewpoints. They are (1) car-
rier proponents,” (2) private car proponents,’ and (3) op-
1. Petitions for leave to intervene filed by Duval Sales Cor-
poration, Evans Products Company, and International Minerals
and Chemical 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. jeg! and the Detroit Terminal
Railroad Company were striken for failure to serve a copy of
these statements on all parties of record. D&H’s statement was
subsequently admitted by order entered March 11, 1977.
2. Burlington Northern, Inc., and Union Pacific Railroad Com-
pany.
3. Archer Daniels Midland Company; Allied Mills, Inc.; Bay
State Milling Company; Cargill, Incorporated; Duval Sales Cor-
oration; Evans Products Company; FMC Corporation; Garvey,
ne.; General American Transportation Company; General Mills;
Hercules, Incorporated; International Minerals and Chemical Cor-
ICC Report and Order A89
ponents who consist mainly of carrier and carrier organi-
zations."
All
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