Over the last two years, US cargo owners have been hit with demurrage penalties at inland rail ramps that were never issued before the market-altering dynamics of the COVID-19 pandemic, and some truckers want the practice to stop.

The new iteration of demurrage fees occurs after a combination of events — an ocean container is made available on Friday afternoon, and while the railroad is open on weekends, the chassis providers are closed.

For example, if Norfolk Southern Railway (NS) makes an OOCL container available in Cincinnati on Friday afternoon, then a shipper could face demurrage fees because the railroad is open Saturday and Sunday while OOCL's chassis partner — TRAC Intermodal — is closed.

NS provides free time for the day of notification, plus 24 additional hours, so demurrage applies on Sunday if a container made available Friday afternoon is not retrieved.

The issue is complex because of how chassis operations work in smaller cities. Chassis providers house bare units within third-party container depots, so it is the depot owners who control the hours.

Some trucking companies want railroads and chassis depot locations to sync their hours on weekends. It did not necessarily make sense to open depots on weekends last year when there were few, if any, available bare chassis in these smaller US cities. However, there is a greater equilibrium between chassis supply and demand this year, making the conversation more relevant.

Annmarie Kerr, president of Kansas City Drayage and the Intermodal Association of Kansas City, believes it is her company's responsibility to proactively plan for weekends rather than blaming others.

"As an intermodal trucker in Kansas City, I have adapted to chassis location hours for many years, so I know that chassis [for the weekend] can be picked up Friday morning, or I need to use my own private chassis," she told the Journal of Commerce.
Kerr said truck dispatchers must anticipate which containers will become available Friday afternoon based on when trains arrive in cities such as Kansas City.

The Journal of Commerce identified five locations where at least one railroad is open on Saturday or Sunday, but the chassis depot locations are closed — Buffalo, Cincinnati, Detroit, Kansas City, and St. Louis.

Still, there are some workarounds to get shippers their cargo. For example, in Kansas City and St. Louis, a trucker may secure a bare chassis from BNSF Railway or Union Pacific Railroad and use it for a container in an NS terminal.

Pandemic caused new problem

Demurrage on the weekends was not a major concern in smaller US cities before the COVID-19 pandemic because railroads provided 48 hours of free time to retrieve the boxes. Ocean containers available Friday afternoon did not incur demurrage on the weekend, especially because railroads were not always open on weekends.

Since 2021, however, US railroads have slashed free time to the day of notification of availability, plus an additional 24 hours, while also adding new weekend hours.

Less free time and more weekend hours have forced all stakeholders to be nimbler. Truckers must plan for weekend deliveries before Friday. Chassis providers must consider weekend hours, shuttling a safety stock of chassis to rail terminals ahead of the weekend, or working with railroads to keep some chassis in the terminals.

TRAC Intermodal said the issue is an ongoing one.

"This issue is still a work in progress, and it would be premature to draw conclusions at this point," the chassis provider said in a statement to the Journal of Commerce. "We continue to actively work with our rail partners, regional depots, and our customers to collaboratively provide best-in-class service and solutions."

Mike O'Malley, DCLI's senior vice president of public and government relations, said weekend hours are not a major issue among its customers.

"DCLI has an extensive national network of railroad facilities and depots where our chassis can be sourced," he told the Journal of Commerce. "We have not been approached by any truckers about weekend availability concerns but would be happy to work with customers to identify solutions that meet their needs."

Flexi-Van did not directly address the question of weekend demurrage, only saying in a statement it has "a long-standing tradition of working with our customers to adapt and refine our service delivery capabilities to meet our customers' evolving needs."
The demurrage issues have been firmly in the sights of federal regulators.

In M.E. Day v. Hapag Lloyd, a Federal Maritime Commission (FMC) hearing examiner is reviewing a complaint about rail demurrage assessed when Hapag Lloyd's chassis partner failed to provide the necessary equipment in Nashville. The ocean carrier filed a cross-complaint against CSX Transportation, lumping a railroad, an ocean carrier, demurrage, and chassis issues into one case.

In TCW v. Evergreen, the FMC ruled that demurrage penalties are inappropriate when a port is closed on the weekends. Some trucking companies believe access to a chassis should also be a prerequisite to charging demurrage.

Complex issue for chassis providers

Providing weekend hours comes with business implications. For one, business would be minimal on the weekends because gate traffic in marine and rail terminals falls off significantly on Saturdays and Sundays.
Chassis providers might have to raise daily rental charges to recoup the costs, so solutions such as keeping some units inside the rail terminal on weekends could be a cost-effective solution.

In some cities, it is an issue affecting small business owners.

International Express Trucking of Kansas City is both a drayage and container depot provider. Owner Karen Duff told the Journal of Commerce that she cannot open the gates without consideration of her business expenses.

Both Duff and Kerr said the solution is not a federal mandate.

"Just like the railroads, the chassis depots are privately-owned companies, and who is to say what their business hours should be?" Kerr said. "Railroads should not have the leverage to shape when other companies are open. Where does that stop? If we regulate those hours, then they can regulate trucking company hours, and who knows what else from there."

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.