I know I have asked this before, but never quite figured it out.
What are proportional rates? I am looking at Chicago, Fort Wayne, and Eastern’s tariff and they have Proportional Rates in effect on shipments of soybeans coming off of the CN or CP. They also state they will “absorb one intermediate IHB switch at Chicago”. Rates are also based on railroad provided or private provided cars.
For example:
Private 50+ car rate to Decatur, In is $418 per car.
Railroad car rate to Decatur is $467 per car.
So, as I understand it, a train I saw which contained 50 cars of beans, with the cars being ICE, CP, and Soo marked cars would charge a rate of $467 per car. Why would CFE get more per car, since the cars being used are not their own cars anyway? They do not have the investment in the cars. Perhaps they pay a per diem charge for the use of the cars.
Also, out of that $467, they would pay for the IHB’s switching, no doubt at Blue Island Yard where the cars are transfered from CP to CFE. Anyone have an idea of what IHB charges for that service?
As I understand it, the IHB is the Chicago terminal for the CFE, so I can imagine that they build a daily train for them.
I’m sure that the rate mavens on this forum can provide better answers, but I’ll start the ball rolling. The rate difference between private vs. railroad car rate has been around for a while. A private car is one that is supplied by the shipper, either shipper-owned or leased; while a railroad car is one provided by the carrier. The shipper gets a break by supplying his own cars.
Switching charges within a terminal district, be it from IHB or BRC in Chicago or TRRA in St. Louis, have customarily been absorbed by the line-haul carriers.
Proportional rates are a variation on joint through rates. For the total amount to ship a car, each road gets a proportation or percentage division of the rate often based on mileage. A joint rate is similar except that the division is contract based by agreement between the roads involved.
The rate differance between “X-Line” cars and “RR-Line” cars is based on ownership costs and is a direct reflection of the per-diem rate. The railroad may or may not be required to pay the owner of an X-Line car depending on how it is operating (owner of car, shipper of car, tariff provisions, receiver of car, owner of the commodity being transportated being just a few of the variables), but a railroad ALWAYS must pay the other railroad owner the perdiem.
X-Line cars usually have charges based on mileage - one for loads and one for empties - and these charges vary as mentioned in the above paragraph.
Staggers changed almost all of the earlier rate arrangements with a flat per car single line rate. To go from one road to another then required a new waybill and a switch charge by both the delivering road and the receiving road. This onerous arrangement has now been changed with contract interline rates being permitted, but this arrangement can be cumberson at times. Contract interline rates are, for all intents and purposes, a joint ra
Thanks for the explanation. Back in my previous life, I was a traffic manager for a small local LTL trucking company. I am familiar with tariffs, very familiar. I cant imagine what the railroad tariffs looked like back in the day. For LTL it was pretty detailed.
Trucking and rails are similar. Prior to de-reg in 1980 and then for several years thereafter, small local LTL carriers were similar to the short line railroads today. We would make pickups and deliveries with the “big-boys” such as CF, Yellow, Roadway, Holland, etc. We had agreements (legal concurrences or contract agreements) in how the revenue would be shared.
On a typical night, we would have 400+ shipments (and thus 400+) freight bills to be correctly rated and division of revenue. Of course, if it was single line,then we got the entire revenue.
It was a fascinating world which changed rapidly with the developement of class rates based on zip codes. Still divisions of revnenue had to be figured. These were interesting old books, based on class railroad rates in the 1920’s.
I still dont quite understand the proportionate rates, as applied. What is the difference between having a rate of $418 per carload as a proportionate rate vs simply charging $418 for the movement? Perhaps it is that the $418 is billed to the railroad, rather than cutting another bill to the payor of the freight bill.
I can see how carriers today would create joint line rates and then divide the revenue. With more and more run thru trains (particularly thru Chicago, St. Louis, Memphis, etc) there is a much smoother flow of the traffic, without costs associated for the transfer and classification at the point of interchange.
The CFE used a “prop” rate because it wants the rate to only apply on traffic it receives from another carrier in Chicago. It does not want the rate to apply on traffic originating in Chicago. They could have tried to establish through rates with each originating carrier, but it’s simpler just to establish their own “proportional” rate.
Rail rates that require prior/subsequent movement by another carrier are called “proportional” rates. Why? I don’t know.
They’re not covering the cost of rounding up empty equipment, moving it to a shipper, letting it sit there, then going to get it when its loaded. So they restrict the rate to traffic received in interchange.
It’s as if you established a rate that applied only on traffic that was delivered to your terminal where Landgreeb didn’t have to do the pick up.
You probably learned, as I did, that you have to write the tariff item “narrow” or it will come back to bite you.
We had some private emails a while back (everybody just forgets about ME!) and I sent you a paper I had writen on railroad pricing. You then told me that you had worked in pricing for Landgreeb.
I wouldn’t say this except that some on this board will falesly accuse me of investigating you.
I don’t know. Were you guys in the ICG LTL Plan 5 program. We tried to work with local motor carriers to build LTL loads.
It just stunned me that anyone would know where I was 16 years ago!
We never got anything going with the ic…in fact we really had no marketing or sales effort. Poor ownership and management, living off of regulation and nonunion then that faded away. Fortunately, I moved on.
I am not going to get into too much here with you and Greyhound, both of you have written rates and I just got to work with them, so my comments come from that viewpoint.
All of the following comments are pre-Staggers unless otherwise noted.
With exceptions being so noticable because of their rarity, billing took place in one of three ways.
First - there is the “Open and Shut” – Leland’s Open and Prepay Tariff. The general rule was that any station that had an Agent could accept collect and COD shipments and was considered “Open”. At non-Agency stations, shipments could only be sent Prepaid and the station was considered “Closed” or “Shut”. Of course, then you needed to check the notes section to see what the exceptions were because, for instance, one or more customers at a “Shut” station could receive collect shipments if so listed in the Tariff and certain customers at an “Open” station may be Prepaid Only. Once you had this information, you could then look up the STCC to see how to figure the charges from the proper Tariff.
Rates for railroads were made through Rate Bureaus. These were established after the anti-trust laws to permit railroads to make and publish rates in coorporation with each other and not run afoul the law. You had LOCAL rates (your own railroad only); SWITCHING DISTRICT rates (usually these were recirocal and absorbed by the final line-haul railroad); INTERLINE JOINT and INTERLINE RECIPROCAL (made in conjunction with the interchange road(s)); and UNIT TRAIN rates both LOCAL and INTERLINE.
PREPAY shipments were waybilled, rated and extended, freight bill made and collected, and the divisions made with any interchange carrier(s) by the ORIGINATING road.
COLLECT shipments were waybilled by the originating carrier and the TERMINATING carrier rated, extended, made and collect the freight bill and made the appropriate divisions.
And then there were ROLLERS - cars on which the load was owned b
and railroads (at least some of them ) managed to make money and stay in business? Wow. And all of this was BEFORE automated systems to keep track of all the complexities.
A couple of years ago there was a strike at the LA container Terminal, because the management was trying to computerize the “waybill” handeling of containers. The unions didnt want to lose dues paying members their jobs, so everyone went on strike. I wonder if the complexity of the billing process was similar for containers, or if it was already simplified/automated, but required that a human handle the paper to comply with union contracts…
In our little world of LTL things were a lot simpler than that. Lets say there was a shipment of ball bearings from Valparaiso, In to Portland, Oregon. We would:
Determine the class rate of the bearings (class 65 if I recall).
Determine the rate basis (basically the mileage)
Determine the rate, based on the weight of the shipment, rate basis, and class
Go to the class tariff and determine the rate
Pro-rate revenue between carriers
This could be done manually in about 1 minute per freight bill, perhaps less if you had “cheats”, such as a rolodex of common points.
If you had to look everything up it was a little longer.
Experience sure helped. An experienced rate clerk could just fly thru tariffs.
Computerization really helped…enter origin and destination zip codes and the weight and class and there was your rate and charges.
It was interesting, but I am glad I moved on.
Cant imagine the world of railroad tariffs and rating bills, checking routes, dividing revenue, etc.
I have a HHG mileage tariff upstairs from the 70’s and it was based on the shortest actual distance between points. In other words using any highway combination. Reality was different as the interstate routings are usually longer.
LTL used a system called rate basis, which was very similar to mileage. That system was based on a central geographic location. These central locations were typically 50 miles or so apart. Then the rate basis was determined between these central locations. For example:
Valparaiso, In was “rated” on Michigan City, In. Dont ask me why…it just was.
A shipment from Valparaiso to Detroit had a rate basis of 216. Do a Yahoo Map request and the mileage is shown as 265.
Valparaiso to St. Louis was 283. Actual mileage was 322.
The “rate basis” was determined, I was once told back in Tariff 101 on the railroad mileage. Go figure…trucking industry using railroads for rates.
One extra step with motor carrier rates was checking the operating authority. Railroads could carry virtually all commodities between any point in the country. Motor carriers on the the other hand would have operating authorties for specific commodities and traffic lanes.
In addition I beleve motor carriers often got into the wonderful world of rating mixed shipments of four or five different commodities.
Railroads did not start to use HG miles untill after Staggers. Prior to that the had a similar system based on short railroad miles at the time ICC Docket 28300 case was done back in the 1920s or 30s. Dockest 28300 miles applied on shipments originating and terminating East of a North/South line through about Denver and El Paso. West of the line in Trans Con territory they used a zone system between the East and West and God knows what else for traffic within the West.
Quite often, particularly if the shipper was a distributor, their bill of lading would have several different items, saw some preprinted bills of ladings with up to 50 items…also saw some 4 page freight bills too.
Each item had to be rated according to the class of the item.
Later, most savvy shippers began to negotiate for FAK (freight all kinds) rates and also big discounts. The LTL trucking industry and the airlines were very similar in their operations (hub and spoke) and their pricing (based to fill the capacity), and seasonal or backhaul pricing.
You need to remember, my illustration was a simple move![}:)][banghead]
Railroads, historically, have been required to make their rates to cover variable costs, fixed costs and a regulated margin. Mileage came into the picture, but not as the factor that determined the rate as you illustrated. A “fomula” of 180% of the variable costs was a rule of thumb.
The only place in railroad pricing structures that mileage was the factor was “X-Line” (privately owned cars with reporting marks ending in “X”) which had an ICC mandated set mileage figure that was supposed to cover the actual cost of hauling the empty weight of the car. If it was a load, the per-mile charge was a combination of empty rate plus a rate based on how much it was supposed to cost to haul the load around. The owner of the car was responsible for ALL maintenance costs, including the costs for the running inspections. Customers who could afford to own cars tended to clean up in the rate department - usually saving gobs of money. Actual Timetable mileage (station sign to station sign) was used. Combination through rates were not (normally) permitted and incidental charges generally not absorbed by the railroad as they would be for a shipment in a RR owned car.
The cost structure rational for X-Line cars would be similar to having a loaded semi-trailer and then hiring a contractor to supply a tractor and then haul the trailer around.
We could sit there and write them all day. Then they went into some kind of ‘library’ without any kind of directory system that I could ever firgure out. If you could figure out which tariff item applied, you were a good, experienced clerk.
There was a whole line of business that developed to sharpshoot you guys. People made their livings reviewing your work and taking a percentage of the mistakes they found. It was insane, but people could just sit at home and go through freight bills. If they found a lower rate that should have applied they made a claim against the railroad and took a percentage of what they saved the shipper.
We had one guy who was in charge of establishing through rates with motor carriers. So he established one rate in a motor freight bureau tarriff. No clerk could ever find that rate. It was in a motor carrier tariff. They didn’t have the tariff.
He left the railroad and I got stuck with correcting the billing. I got the rate moved to an ICG tariff, but not without some trouble. I was putting a truck rate in a railroad tariff and that just wasn’t done.
Ah, we knew them well. They had two of their favorites.
One was originating a unit train off the BN in Montana and just like majic 25 or so of the cars would go bad order at Spokane. Tariff permitted these cars to operate “loose” after repair either rebilled by diversion or to original final on a single car copybill. Original demurrage rates and rules to apply. Well, since these unit trains were scheduled to meet ships for export, the so-called Bad Orders would never make the ship so they would be resold and diverted, per the tariff. The only clue on these moves concerning an ex-unit rate was “Origin Station” (would remain the same as on Unit Bill) and “Billing Station” would be Spokane or Pasco.
Greyhound known immediately what happened next. Both halves of this maneuver were prepaid by the relevant Broker - he having owned the billing on the Unit move and als