Making money with a railroad


Kurt Laughlin <fleeta@...>
 

I'm having a little trouble following these freight car movement discussions because I have some simple - perhaps infantile - questions about how railroads make money:

Let's say the AAA RR gets an order to ship a boxcar full of shlurm from some point on their road to a point 1500 miles away on the CCC RR. To get there it must travel 500 miles on the AAA, 500 on the BBB, and 500 on the CCC.

a) Does AAA get paid the same whether it loads it's own car or someone else's?

b) Who pays the per diem charge for the car - the road on which it sits at midnight or the road who is using it to ship a product, i.e., the AAA. (I'm pretty sure it's the former.)

c) I assume the BBB and CCC each get paid for hauling the equivalent of 500 car-miles across their road. Would the shipper get a bill from each RR or would AAA charge them them for 1500 car-miles and pay off the BBB and CCC as billed later?

d) I also assume that there were fixed mileages (and rates?) established between various points, otherwise there'd be no incentive to move things to their destination rather than taking the grand tour. If this is true, how could RRs "sell" themselves to various shippers (as has been described on this list in the past) - wouldn't the charge to get from point A to point B be the same no matter which way it went?

Thanks for your forebearance,

KL


Tim Gilbert <tgilbert@...>
 

Kurt Laughlin wrote:

I'm having a little trouble following these freight car movement discussions because I have some simple - perhaps infantile - questions about how railroads make money:

Let's say the AAA RR gets an order to ship a boxcar full of shlurm from some point on their road to a point 1500 miles away on the CCC RR. To get there it must travel 500 miles on the AAA, 500 on the BBB, and 500 on the CCC.

a) Does AAA get paid the same whether it loads it's own car or someone else's?
The amount paid by the shipper (or consignee depending upon the terms of sale) for the transport of the shipment is specified in the published tariff for that commodity between the point of origin to the terminus.


b) Who pays the per diem charge for the car - the road on which it sits at midnight or the road who is using it to ship a product, i.e., the AAA. (I'm pretty sure it's the former.)
Per diem was paid by the RR on whose the car was on at midnight to the car owner. For reefers and tank cars which were considered to be privately owned , however, instead of per diem, the railroad had to pay the car owner mileage for loaded car miles plus empty car miles equal to the loaded car mileage. Shippers (or consignees) could receive mileage, but this was as per the agreement between the car owner (lessor) and shipper/consignee (lessee) outside the purview of the railroads.


c) I assume the BBB and CCC each get paid for hauling the equivalent of 500 car-miles across their road. Would the shipper get a bill from each RR or would AAA charge them them for 1500 car-miles and pay off the BBB and CCC as billed later?
The division of rates was agreed to in advance so long as the routing of the loaded was published in a blue Tariff (#4) Routing Book. Usually, the shipper (or consignee depending upon the terms of the sale) would get the bill from the railroad for transportation, and have five days to pay it.

Tim Gilbert


Anthony Thompson <thompson@...>
 

Kurt Laughlin asked:
Let's say the AAA RR gets an order to ship a boxcar full of shlurm from some point on their road to a point 1500 miles away on the CCC RR. To get there it must travel 500 miles on the AAA, 500 on the BBB, and 500 on the CCC.
a) Does AAA get paid the same whether it loads it's own car or someone else's?
For transportation, yes (and gets more because it's the originating road). For per diem, it would of course pay nothing for its own car, but as we've discussed at some length, that's a small factor compared to the transportation.

b) Who pays the per diem charge for the car - the road on which it sits at midnight or the road who is using it to ship a product, i.e., the AAA. (I'm pretty sure it's the former.)
Yep, the former.

c) I assume the BBB and CCC each get paid for hauling the equivalent of 500 car-miles across their road. Would the shipper get a bill from each RR or would AAA charge them them for 1500 car-miles and pay off the BBB and CCC as billed later?
The shipper pays AAA, and AAA pays BBB and CCC. Imagine the amount of paperwork for all the cargoes over all the railroads.

d) I also assume that there were fixed mileages (and rates?) established between various points, otherwise there'd be no incentive to move things to their destination rather than taking the grand tour. If this is true, how could RRs "sell" themselves to various shippers (as has been described on this list in the past) - wouldn't the charge to get from point A to point B be the same no matter which way it went?
No, no set mileage. But if the car had to be returned empty, it returned over the route it followed outbound with a load, so that each road gaining from the original shipment had to also bear the expense of moving the empty. No one wanted a circuitous routing. Tariffs are a VERY complex subject and were in general NOT linear with distance nor with route. Some on this list will be able to add much more detail on that part.

Tony Thompson Editor, Signature Press, Berkeley, CA
2906 Forest Ave., Berkeley, CA 94705 www.signaturepress.com
(510) 540-6538; fax, (510) 540-1937; e-mail, thompson@...
Publishers of books on railroad history


david zuhn
 

If this is true, how could RRs "sell" themselves to various shippers (as has been described on this list in the past) - wouldn't the charge to get from point A to point B be the same no matter which way it went?

Yes. Which is why sales wasn't done on the basis of price, but on
something else -- availability or quality of empty cars, service (does
your load get bogged down in Chicago? interchange via Peoria on the
M&StL instead), or simply who provides the most regular bottle of
scotch to the shipping manager.



--
david d zuhn, St Paul Bridge & Terminal Ry., St. Paul, Minn.
http://stpaulterminal.org/


Tim Gilbert <tgilbert@...>
 

Kurt Laughlin asked:

d) I also assume that there were fixed mileages (and rates?)
established between various points, otherwise there'd be no incentive
to move things to their destination rather than taking the grand tour.
If this is true, how could RRs "sell" themselves to various shippers
(as has been described on this list in the past) - wouldn't the charge
to get from point A to point B be the same no matter which way it
went?
Tony Thompson replied:

No, no set mileage. But if the car had to be returned empty, it
returned over the route it followed outbound with a load, so that each
road gaining from the original shipment had to also bear the expense of
moving the empty. No one wanted a circuitous routing. Tariffs are a
VERY complex subject and were in general NOT linear with distance nor
with route. Some on this list will be able to add much more detail on
that part.
Reloading empty foreign boxcars made the reverse routing rule could be insane. For instance in June 1947, CIL #1 was loaded with merchandise in Crawford IN for Louisville (L&N). #1 worked its way down to Miami carrying merchandise. It then was loaded with merchandise by the SAL for Savannah. It then yoyoed about in Georgia and the Carolinas carrying merchandise. Finally about a month after it left Crawfordsville, it was loaded with signal equipment in Cayce SC for the SAL in Apex NC. It was then loaded with lumber in Sanford and routed for the Poconos via SAL-RF&P-PRR-D&H and NYO&W.

The NYO&W could not reload #1. So did they follow the reverse routing D&H-PRR-RF&P-SAL-L&N-MONON or the more direct line DL&W-NKP-MONON? #1 was routed the DL&W, but was reloaded on the NKP at Northeast PA (near Erie) with tomato juice for Nashville (TC) and routed NKP-B&O-SOU-TC.

In the early 1950's, the AAR established SCS-90 which simplified the return routing so that DL&W would get all CIL empty cars from the NYO&W in Scranton, and route them home via the NKP. If the empty car was owned by, say the C&EI, NYO&W could have delivered the empty to the D&H-PRR-C&EI or ERIE-C&EI, or LV-WAB-C&EI to get it home. (The above are hypotheses because the only SCS-90 I have seen was the B&M's.)

Tim Gilbert


Russell Strodtz <sheridan@...>
 

Tony,

Close but no cigar. Prepaid movements are a newer way of doing business and
in the steam era collect would be the most common form of payment.

The fact that three roads are handling the car equal distances does not mean
each would get the same revenue. The "Divisions" were also part of the
tariff structure.

As I think was mentioned elsewhere if the route was not in the routing
tariff then it would be financial suicide to ship it that way. Each road
would bill the car on a local or intrastate rate.

Terminating road would collect the freight charges. Charges that were
"Advanced" such as diversion, perishable service, livestock FWR, would
be peeled off and paid to the party due. The rest, just like per diem, would
be handled through a settlement process that only paid balances due.
There were of course some special circumstances like the pool roads that
divided the Eastbound UP traffic revenue without taking into account who
handled it. That would be handled in a settlement all by itself.

As some roads got financially desperate they would cheat the system.
Once had a car of fertilizer that had been billed to a point on the
St Paul. Had been diverted before they had handled the car. Kept working on
finding the revenue waybill. Finally talked to someone in Milwaukee and they
had gotten the waybill in the mail and immediately taken it into account.
Asked the guy how they could do that on a movement that they had not
handled. He laughed and said that all they were supposed to be doing is
generating revenue. If they lost it later through the claims or settlement
process it didn't matter because they had been able to use it for some
period of time and would drag their feet on the settlement process.

High finance as applied to railroading.

Russ

----- Original Message -----
From: Anthony Thompson
To: STMFC@...
Sent: Monday, 18 December, 2006 20:02
Subject: Re: [STMFC] Making money with a railroad


> c) I assume the BBB and CCC each get paid for hauling the equivalent
> of 500 car-miles across their road. Would the shipper get a bill from
> each RR or would AAA charge them them for 1500 car-miles and pay off
> the BBB and CCC as billed later?

The shipper pays AAA, and AAA pays BBB and CCC. Imagine the
amount of paperwork for all the cargoes over all the railroads.


Jack Burgess <jack@...>
 

Russ wrote:

Prepaid movements are a newer way of doing business and
in the steam era collect would be the most common form of payment.

This comment reminded me that I have a number of Yosemite Valley Railroad
forms (pre-1945) which are entitled "Freight Bill For Prepaid Charges". The
form has spaces for information on the shipper, destination, route (Via),
car number, consignee, and waybill date. There is space for the number of
Packages, Articles and Remarks along with the weight of each package and the
rate. The last column is labeled Prepaid. At the bottom of the Prepaid
column are spaces labeled "To Collect" and "Total to Collect" with a note
"Make checks payable to the company" meaning the YV.

It would seem that this form was used to record prepaid charges. Or I am
misinterpreting the use of the form or your comment?

On hopefully a related note, I also have several Freight Bills (one dated
1912 for items shipped from San Francisco [not on the YV] to Bagby for a
store near there) which has columns for listing the items carried, Weight,
Rate, Freight, and then Advances and Total. Note this is a Freight Bill and
not a Waybill. The items are listed by description then the weight and rates
are listed in the columns to the right. The weight multiplied by the rate
equals the amount in the Freight Column. Those rates are added together and
then the Advance is added which results in the Total Charges. What is the
Advance? Is that the freight charges due the railroad that moved the load
from the origin to the YV interchange?

Jack Burgess
www.yosemitevalleyrr.com


Anthony Thompson <thompson@...>
 

Russell Strodtz wrote:
Terminating road would collect the freight charges. Charges that were "Advanced" such as diversion, perishable service, livestock FWR, would be peeled off and paid to the party due. The rest, just like per diem, would be handled through a settlement process that only paid balances due.
Was this always true? I have seen PFE shipments on SP waybills that clearly show loads outbound to the East, originating on SP, which are marked to be paid by the shipper to SP. Is that an "advance" payment?

Tony Thompson Editor, Signature Press, Berkeley, CA
2906 Forest Ave., Berkeley, CA 94705 www.signaturepress.com
(510) 540-6538; fax, (510) 540-1937; e-mail, thompson@...
Publishers of books on railroad history


Malcolm Laughlin <mlaughlinnyc@...>
 

Posted by: "Kurt Laughlin" Let's say the AAA RR gets an order to ship a boxcar full of shlurm from some point on their road to a point 1500 miles away on the CCC RR. To get there it must travel 500 miles on the AAA, 500 on the BBB, and 500 on the CCC.

a) Does AAA get paid the same whether it loads it's own car or someone else's?
The ownership of the car was not involved in the freight billing process in any way that I've heard of.

b) Who pays the per diem charge for the car - the road on which it sits at midnight or the road who is using it to ship a product, i.e., the AAA. (I'm pretty sure it's the former.)
In the STMFC era, i.e. before computers, it would not have been feasible to do car accounting on such a basis. The paper trails of car movement and freight billing took very different courses.

> c) I assume the BBB and CCC each get paid for hauling the equivalent of 500 car-miles across their road. Would the shipper get a bill from each RR or would AAA charge them them for 1500 car-miles and pay off the BBB and CCC as billed later?

The freight bill would be rendered by either the originating railroad or the terminating railroad, depending on whther the shipment charges were on a collect or prepaid basis. Most shipments were collect with freight billing being done by the terminating railroad. The reason for that is that the majority of freight traffic was sold FOB point of origin. The title to the goods passed top the purchaser at the time that the shipper presented the bill of lading to the originating freight agent. The purchaser was responsible for paying the freight, just as today when you usually select the shipping method and pay shipping charges when you order something. There were many exceptions, but this applies to a large majority of shipments.

There were agreed divisions of revenue among all railroads based primarily on mileage blocks with additional mileage blocks for originating and terminating carriers.

d) I also assume that there were fixed mileages (and rates?) established between various points, otherwise there'd be no incentive to move things to their destination rather than taking the grand tour. If this is true, how could RRs "sell" themselves to various shippers (as has been described on this list in the past) - wouldn't the charge to get from point A to point B be the same no matter which way it went?
Rates were usually based on short line miles. There was a separate tariff publication that showed the mileage from every station to every other station.

This brings to mind an interesting story. There was a bunch of cars every day to the east through the Chicago gateway that was routed (western roads)/Chicago/CSS&SB/Pine(In.)/NYC, etc. The South Shore's part of the haul was less than 100 miles and the route added at least a day to the transit time. It was said that the South Shore salesmen had the biggest expense accounts of any railroad.


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


Russell Strodtz <sheridan@...>
 

Jack,

You are doing just fine. Keep in mind that a waybill is not a freight bill.
Normally the destination Agent had to make up a freight bill for every
inbound car. While I can not recall ever seeing one I'm sure there was
another form for a prepaid freight bill. In order to ship prepaid the
Shipper would have to have credit established with the Railroad. Even in the
21st century this is not always the case. You need a good check before your
prepaid shipment goes anywhere.

Normally advances are charges that are not subject to divisions.

For example:

GN gets a car of spuds from a shipper at Crookston MN. It's January and it
is moving under the carriers protective service rules. WFE/GN is going to
get paid for supplying the heaters and fueling and lighting them. The car is
billed collect to a broker in Centralia IL via GN - CB&Q. Car gets to Union
Yard and the heaters are checked and fueled. That's another charge payable
to GN/WFE. At Galesburg the CB&Q/BRE would provide the same service. During
the period of movement down to Galesburg the CB&Q GST's office in Chicago
gets a diversion on the car to Fort Wayne IN via
the TP&W - PRR. When accomplished this makes another charge payable to the
CB&Q. While I don't know for sure let's say Logansport is also a designated
heater service point. If so that is the PRR's money.

The car gets to Fort Wayne and the Consignee gets an arrival notice.
If the Consignee has credit with the PRR it is spotted where he wants it.
If a no credit Customer they will prepare a freight bill for him to pay
before he gets the car. This is going to require a rate calculation since
the car did not move to it's billed destination. (Even if it had would
require the calculation anyway, rates were a subjective science.) This
process gives us a freight bill for the freight charges and the various
advanced charges along the way. PRR collects the money and assigns the
advances directly to the carrier that performed the service. After that is
done then the freight charges are taken into account and the proper
divisions applied.

It was common practice to create a waybill with a diversion charge the only
thing on it and attach it to the original waybill. The face of a waybill
could get rather crowded and this was a good way of clarifying who and where
the diversion was done.

There are many, many ways these scenarios could be played out in the days of
regulation. This is a fairly simple one.

Russ

----- Original Message -----
From: Jack Burgess
To: STMFC@...
Sent: Tuesday, 19 December, 2006 10:34
Subject: RE: [STMFC] Making money with a railroad


Russ wrote:

> Prepaid movements are a newer way of doing business and
> in the steam era collect would be the most common form of payment.


This comment reminded me that I have a number of Yosemite Valley Railroad
forms (pre-1945) which are entitled "Freight Bill For Prepaid Charges".
The
form has spaces for information on the shipper, destination, route (Via),
car number, consignee, and waybill date. There is space for the number of
Packages, Articles and Remarks along with the weight of each package and
the
rate. The last column is labeled Prepaid. At the bottom of the Prepaid
column are spaces labeled "To Collect" and "Total to Collect" with a note
"Make checks payable to the company" meaning the YV.

It would seem that this form was used to record prepaid charges. Or I am
misinterpreting the use of the form or your comment?

On hopefully a related note, I also have several Freight Bills (one dated
1912 for items shipped from San Francisco [not on the YV] to Bagby for a
store near there) which has columns for listing the items carried, Weight,
Rate, Freight, and then Advances and Total. Note this is a Freight Bill
and
not a Waybill. The items are listed by description then the weight and
rates
are listed in the columns to the right. The weight multiplied by the rate
equals the amount in the Freight Column. Those rates are added together
and
then the Advance is added which results in the Total Charges. What is the
Advance? Is that the freight charges due the railroad that moved the load
from the origin to the YV interchange?

Jack Burgess
www.yosemitevalleyrr.com


Russell Strodtz <sheridan@...>
 

Tony,

If we are talking about freight charges then it would mean it was prepaid.

If the charges are for icing or pre-cooling then that would be an advance.
I would not be surprised if the tariffs allowed charges at origin to be
collected by the providing party. Once the car was "In Transit" I think they
were usually passed along and collected at destination.

Considering the volume being loaded it would not be a bad idea for SP/PFE to
get that money up front.

I have a lot of waybill copies. Need to look some over to give a more
definitive answer.

Russ

----- Original Message -----
From: Anthony Thompson
To: STMFC@...
Sent: Tuesday, 19 December, 2006 10:45
Subject: Re: [STMFC] Making money with a railroad


Russell Strodtz wrote:
> Terminating road would collect the freight charges. Charges that were
> "Advanced" such as diversion, perishable service, livestock FWR, would
> be peeled off and paid to the party due. The rest, just like per diem,
> would be handled through a settlement process that only paid balances
> due.

Was this always true? I have seen PFE shipments on SP waybills
that clearly show loads outbound to the East, originating on SP, which
are marked to be paid by the shipper to SP. Is that an "advance"
payment?

Tony Thompson Editor, Signature Press, Berkeley, CA
2906 Forest Ave., Berkeley, CA 94705 www.signaturepress.com
(510) 540-6538; fax, (510) 540-1937; e-mail, thompson@...
Publishers of books on railroad history


Kurt Laughlin <fleeta@...>
 

Thanks everyone for the responses.

Geez, what an arcane system - no wonder railroads went out of business.

I realize that the ICC had a part to play in maintaining that byzantine system, but I recall from White's book on American freight cars that the railroads were quite capable of coming up with bizarre systems on their own, decades before there was an ICC.

From a business standpoint, I can't see how it was tolerated for so long. First off, it created - nay, required - a "priesthood" to interpret the rate structures for everyone else. This amounted to large group of non-value added employees that drove up costs. Secondly and maybe most importantly, it denied cost certainty to the customers. With all the options, the prepaying, and the collect charges on top of the unpredictable nature of actual delivery, a small to medium business not only didn't know when something was going to show up, they didn't know how much they would be charged when it got there. Were there any champions of the idea that "carrying 100 tons 100 miles costs the same whether it's coal, flour, or steel" before, say, the 1960's?

Thanks again,
KL


Russell Strodtz <sheridan@...>
 

Kurt,

Moving structural steel that was long enough to require a 65' foot car
increased the freight bill by about 25%. Rates were often based on the
value of the product and the transportation options available.

Russ

----- Original Message -----
From: Kurt Laughlin
To: STMFC@...
Sent: Wednesday, 20 December, 2006 20:24
Subject: Re: [STMFC] Making money with a railroad


From a business standpoint, I can't see how it was tolerated for so long.
First off, it created - nay, required - a "priesthood" to interpret the
rate structures for everyone else. This amounted to large group of
non-value added employees that drove up costs. Secondly and maybe most
importantly, it denied cost certainty to the customers. With all the
options, the prepaying, and the collect charges on top of the
unpredictable
nature of actual delivery, a small to medium business not only didn't know
when something was going to show up, they didn't know how much they would
be
charged when it got there. Were there any champions of the idea that
"carrying 100 tons 100 miles costs the same whether it's coal, flour, or
steel" before, say, the 1960's?

Thanks again,
KL




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