Apples, oranges and bananas, aka car hire, freight rates and division, and demurrage.

Malcolm Laughlin <mlaughlinnyc@...>

There’s been a lot of discussion of the above topic on both of these lists, and they do seem to get confused at times. I thought it might be helpful to make clear the distinctions among the several fruits. With the interesting discussion going on on related topics on both STMFC and OpSIG lists, it’s hard to remember which is on which so I’m putting this on both. What I’m saying here applies to the steam era and the diesel era up until the system started to change drastically after the Staggers Act in the 80’s. There were of course exceptions, but what I’m describing covers the vast majority of railroad freight traffic.

We’ve been discussing four major cash flows among railroads and customers. There were four independent systems here which did not have any direct numerical relationship.

The systems are:
Car Hire (aka per diem)
Freight rates (tariffs), which included
Freight classification
Class rates
Routing guides
Short line mileage table
Open and Prepay Station list

Car hire was the system by which railroads compensated car owners. Two methods were in effect.
- Private car owners were compensated on a mileage basis.
- Railroad owned cars were on a per diem basis, later expanded to hourly and mileage. There were four phases.
- Originally there was a daily per diem paid paid to the car owner by the railroad having the car on its line at midnight.
- In the 60’s this changed to a five level per diem scale based on value of the car.
- Later a mileage component was added. charges were to compensate for the cost of ownership age for the cost of maintenance.
- The final step was changing fro a per diem to an hourly basis.
Car hire was originally determined by the AAR and later the ICC was given regulatory authority over the level of charges.

Freight rates is about the price to the customer for moving the freight. This was a very complex system that I won’t even begin to try to describe. This sytem was fully regulated. All changes had to be published and were subject to suspension and investigation if any affected party objected to a change. Depending on the terms of trade, the origin or destination road would bill the customer and then pay each participating road its share.

Divisions had to do with how the railroads divided the revenue from freight charges. This was a private agreement among the railroads as to how the revenue was divided. It was mileage based with extra mileage being credited to originating and terminating roads in compensation for switching costs. Any two railroads could have a private agreement on traffic between them, but this was unusual. Divisions had nothing to do with freight chages or car hire.

Demurrage was the charge to a customer for delay to the car in loading or unloading. It was a fixed charge per day. It was billed to the customer by the railroad on which he was located and was a transaction only between that railroad and that customer. It was not related to car type, car hire or freight rates. There was a provision exempting private car owners when their cars were on sidings owned or leased by them.

Malcolm Laughlin, Editor 617-489-4383
New England Rail Shipper Directories
19 Holden Road, Belmont, MA 02478

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