# Appendix — Baltimore & Ohio Chicago Terminal Railroad Co. v. United States (Nos. 78-1069, 78-1049) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2309%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1978 ## Text 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 = heen 3S i eA Me ee Rane -_ 4 q4 24a . x he Saale 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 7 2 ¢ i Whee a yo pe ee etd ah ty 0 AD ere . 1 ’ afi -: 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 “AQuIDY2 UO UONSIZUO) JO DIY “| Lel LEstl 4L9b «6SIS’S «6GEL)|OCLES‘T «=G6s—«é«iS'Ds«CGI 689 LII 1686 8zl 6S6'8 °° IL6E 4e2Q CEI ssl O6€ ELF 191 611 2 Cn 3 IL¢ aS —SséSal 9€Z €SI 3 ee 220 L4gix JLol'l 6€ §&¢ Ltt = 901 OFZ E8E 80 OF Zé! obs cI a. —228**3 AON Sg #o8 921 #61 9fIr Ol €l4Z1 16¢ Lag ¢¢—s« GSI €8z FEI ee 2, Hore vO -#6Ir 918 $661 6S S8€Ir 96 OLZr CLE 8Sr O8 Ilr S19 6S Fee ee gs: idag L6It #2¢ #L¢ 496G El 66 $931 #86 Olt 19 I2l €8L ee tae hs sny OSI SFI Ze GLSCiCSSCiéGSG FIZ «(OS «= «96 49 Zit sgol LII etal Atnf ScI SISI ¢9¢ Lec O€irt L6 923 39 ~—s«GE 6+ ~=« SII ar) Se Se ee aunf gsi LE9'l G66Fr 6S sl 601 922 = €99 Chl oz sitll ssl Lzi eae Avy ran | LES‘ «= Sx 16S SII 901 CZz)C#89—Ctti«éOSGE oo: Cy “G60 Gis er ady SEI SIvI I9F 869 OFIr &§I zo. $99Ss« VD. 98 Oll zal «OZ ae Sr Ie LEI 6631 82S Z0F IS] Sal C61 sS6F ISF €$ S0Ilr OSOI I2l at te” ink a4 aa ssl S&F 6c ELI 8SI #$Z SCG 19 1Z¢ 29S’ +96 s0l a ae rae! 1261 €SI SSU'LI «(Ol )«6sL€89.sdSSEsCTE «=CTESSCLS'Q. SEF 46L II 66L‘Il 82l aber teas OL6I OFI LOs‘9I 26S 0989 Stl E€E9I 62e OOL'L ZIt 1s9 «TIT 996°S1 SI ange 8 ***=* 6961 OF ZOO‘LI GEE +889 SSI Z68'l 922 9192 8 ce COSI ISFFI OI StS‘Ol **°**** S896T ll 009LT 99 LI9'9 SLI SIS’ 982 9S LEF 989 6II Zel‘bl = Gal geet he L961 (000) (000) (000) (000) (000) (000) (000) HaidL suoy HadLSuoy, HaAdLSuoy HAdLSUOY HIdLsSHoL HIdL SHO_ HaAdL suo pouldd 9 sUIeD J quiere q rue q J9UIrD 9 Joep q Joule) V J9UeD (HadL = YNOH ANIONA Wd SNOL) (ano ANIONA Wid GTIGNVH SNOL SOSHIA GFIGNVH SNOL T¥.LOL) aaisnjout ‘1261 08 £96] savak ‘sauy ysoys aaxvjuasasdas fo Kourtnffa puv aunjo, [ FHV 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2309%3A2. Public record. Not legal advice.