Re: Milling in Transit


soolinehistory <destorzek@...>
 

--- In STMFC@..., "Aley, Jeff A" <Jeff.A.Aley@...> wrote:

Dennis,

Thanks! One more question: I thought that Milling In Transit was somehow similar to "Diversion" in which a car might start its journey headed for New York City, and be changed en-route to be shipped to Los Angeles.
Is this kind of operation a part of Milling In Transit, or am I just confused?

Thanks,

-Jeff
Jeff,

Diversions were a totally different subject.

I had been hoping that Ross would chime in here, since he mentioned storage in transit, and I'm curious if this predates the Staggers Act of 1980 that changed the way railroads conduct their business, but I've decided it doesn't make any difference, because the basic precepts of ICC regulation was that nothing of value could be given away (lest it be given away such that if favored one group of shippers over another) and EVERYTHING had value. Heck, the ICC even found that the graphics painted on the outside of some refrigerator cars had value. So, if there was a provision for storage in transit during the steam era, it would have come at a price, and the purpose of playing the diversion game was to get something (storage for your product while you are trying to sell it) for free.

I'll also add the disclaimer that I'm no expert on railroad rate making, and in reality, thirty years after Staggers there are few people left who were placed highly enough in the pre-Staggers process to have had a full understanding, but my comments are based on conversations I've had with people over the years, both modelers and people who worked in industry. If anyone has better information, or wants ti correct points I make, feel free to do so; this is certainly not the last word on the subject.

There are legitimate reasons for a shipper to want to change where, or to whom, his shipment is delivered after it is under way. He may find that his customer's check bounced, or the customer has gone bankrupt, or even his customer's factory has burned to the ground. Recognizing that there are legitimate reasons for a shipper to divert a load, but requiring that all terms of railroad service be published publicly in the tariff, railroad tariffs had a clause that allowed a limited number of "diversions" of the load while in transit, the limited number being two, I believe. Once written into the tariff, people who sold commodities on commission, brokers, were able to use this provision to game the system to get free warehousing for their commodity while they sold it.

This is how the game was played, as I understand it. The broker could not send a car willy-nilly all over the US... well, he could, but would have to pay the local rate on each segment of the trip, which would be expensive. The idea was to pick an out of the way destination that had a through rate published to it, and pick a published route that was noted for its poor service. In this game, slowness, rather than speed, was desirable. Slowness could be enhanced by the number of times the car had to interchange between railroads, or go through yards where a single railroad had poor connections. The railroads, of course, didn't publicize that these were slow routes, but the brokers came to know over time which routes worked best for their purposes.

I also believe that the car did need a consignee named on the waybill, and it was most often the broker, care of the agent at the named destination. The broker was essentially shipping the load to himeslf, but in a different part of the country. Since the broker didn't have a business presence at that location, sending the car "care of" the agent would just get it spotted to the team track, and notification that he had two days to unload it before demurrage began to be charged. None of this was of any concern to the broker, as he had no intention of letting the car be delivered there.

The broker now has a couple weeks to sell the load. If priority perishable traffic could take seven days to cross the country, a poorly routed car of lumber could take two or maybe three times as long. The broker would try to sell the load in his western-most markets, shifting his efforts eastward as the car progressed. If the car was getting close to its destination and still hadn't sold, the broker would call the railroad and divert the car further east, again consigning it to himself, but at a different location.

When he did sell the car, he'd divert it once again, this time for actual delivery to his customer.

This sort of business, selling "rollers" as they were in transit, went on for years. There are occasional articles in the trade press decrying the capital costs of having all these cars tied up slowly moving across the country on less than optimum routings, but the railroads involved had no intention of cancellation these routings and losing the business, especially when most likely the capital costs were being paid by someone else. Staggers has changed all this, because railroads now can simply refuse unprofitable business, but that's now, and we're trying to model then.

Dennis

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