New, more onerous demurrage rules implemented by BNSF Railway July 1 will negatively impact the warehousing industry and create unnecessary delays in rail shipments, according to a leading trade association of third-party logistics (3PL) providers.
In a letter to BNSF, Joel Hoiland, president and CEO of IWLA ' The International Warehouse Logistics Association, objected to the railroad's new demurrage policy and predicted that it will:
- Cause additional harm to warehouses that are already burdened by the unreasonable application of current demurrage rules;
- Reduce railcar velocity by forcing inefficient operations at local rail switch yards; and
- Force cargo traffic away from rail to trucks.
The BNSF proposal changes the demurrage calculation from an "average" plan to a "straight" demurrage plan. Therefore, instead of monthly balancing of car days used against car credits obtained, the new system calculates demurrage for each car individually. Charges are increased after the third day.
"The new BNSF rules will compel warehouses to order the oldest cars first to minimize demurrage. Therefore, instead of cooperating with local rail crews to improve efficiency and service, warehouses will need to order specific cars and forgo serving crew efficiencies. In a system already stretched by capacity issues, the additional work created by the new rules will produce more congestion and fewer switched cars," IWLA wrote.
IWLA's Rail Council has been active proposing demurrage policy change whereby warehouses would only be responsible for actions over which they exercise control. Namely, warehouses would agree to pay demurrage fees for failure to unload cars within one day of Actual Placement (AP) at their facilities.
To prevent the new rule's negative impact on the nation's supply chain, IWLA is asking BNSF Railway to:
- Suspend the proposed demurrage rules that went into effect July 1
- Adopt the IWLA Rail Council's demurrage proposal of calculating demurrage
- Provide additional switching to eliminate car congestion in local rail yards and increase car velocity.
