http://www.railcarphotos.com/PhotoDetails.php?PhotoID=31263
Can anyone explain how does RR charges to a supplier from LA to NY? It’s by ton or miles?
Is this a potentially huge subject?
How are customers billed for a shipment today?
Their traffic managers (my grandfather was one) used to be solicited and even feted by out of the usual route roads who had offices all over the country.
Here’s my PRO number and where’s my stuff?
How is all this handled on the railroad?
I hesitate to open this up, but how is per diem on interchanged cars handled.
I guess these questions have been on earlier threads, but I always picture punch card and teletype machines banging away in front of smiling clerks for the annual report.
RIX
I am fascinated by the marketing aspect of transportation. One can go to a major railroad’s website and with a little exploring find their tariffs (published rates) for moving commodities. Often the rates are by carload, based on if it is a railroad supplied car or a private car (cheaper rates due to ownership issues).
How much of the business today is under tariff rates vs contract rates is a point that I have no answer to.
There are many factors which go into the pricing of a carload of product, including competitive nature, value of the product, handling involved, hazardous material issues, etc.
My previous career in the 80’s was as a traffic manager for an LTL trucking company and the tariff material was quite large, computers made it fairly simple.
ed
Tariff rate: Flat rate for a carload or intermodal unit of a specific commodity between specific points, using specific equipment loaded to a maximum weight (but the shipper can underload if it so desires). Railroads are pushing for greater use of tariff rates. Fuel surcharges and other surcharges may apply. These are published by the railroad and have an expiration date. Tariff rates are generally what small- and medium-sized shippers use because they don’t have enough volume or regularity to get value from a contract rate. Lumber, scrap metal and paper, and carload bulk commodities often move on tariff rates.
Contract rate: Usually by ton if it is a bulk commodity and by unit (container of specified sizes or carloads of specified sizes) if it is not. For example, a coal delivery contract may specify $20.02 per ton for 4.2-5.2 million tons per year for five years between a Southern Powder River Basin origin and a specific power plant. Penalties apply if the railroad hauls less than the minimum or the shipper presents less than the minimum, and an escalation applies if the shipper wants more than the maximum. Contract rates have specific origin-destination pairs. Twenty-five years ago 10-year and even 20-year contracts were fairly common but now even 5-year contracts are becoming rare as no one knows what the future value of transportation will be. One-year contracts are common. Fuel surcharges and the AAR’s cost escalation formula (similar to COLA) are common. Most coal moves on contract rates, as do autos, containers and trailers of big intermodal shippers, chemicals from large shippers, and ores.
COTS rate: Certification of Transportation Services. These are a futures market for grain transportation, and auctioned weekly. The holder of a certificate is entitled to the face value of the transportation service at a guaranteed price at a future time. These are popular for grain be
Was there not a movement a few years ago for coal to move on tariff rates? Thought I read that somewhere.
Are most tariff rates for carload traffic (non unit train) point to point rates, when interlined? or are those rates proportional rates to the point of interchange?
Also, how do these rates apply with shortline/regionals? Do the shortlines negotiate a delivery rate per car with the class 1 railroad or with the shipper/consignee?
I guess my question in based on the following hypothetical:
Carloads of lumber from Oregon to Smalltown, Ohio (served by a shortline). Does each railroad charge for their portion of transportation…UP to Chicago, NS to Ohio, Shortline for delivery? Or is there a single thru rate to Smalltown, divided up by the three railroads?
ed
The railroad originating the shipment… perhaps switching the shipper to get the load out will get a share of the revenue.
The railroad taking this load to another railroad towards the final destination will get a share of the linehaul.
And so on until the load approaches the final delivery.
The delivering railroad recieves the load and tenders it to the reciever. They get the share of the revenue.
The bill is then added up and sent. All railroads involved in that move will settle up with each other all of that money from that one load.
Dont ask me any what if questions… Im not an expert.
Ed:
I think many people at railroads would like very much to have everything moving on tariff rates, but “want” and “make happen” are two different things.
Tariff rates are usually not interline rates between Class Is. The shipper pays two different tariff rates to two different railroads.
Short lines and regionals are either “feeder lines” with a contractual division with the connecting Class I per class of traffic, or participate in interline rates. Most short lines and regionals that were spun off from a Class I are feeder lines. In this case, the shipper establishes a contract with the Class I or pays the tariff rate, and the Class I then gives a division to the short line. Tariffs may not exist from the short line origin/destination, but they can be created as needed. Short lines that have interline agreements can choose to participate in a contract rate, a haulage rate, or a division. Short lines that are feeder lines do not separately market the traffic or even quote a rate; if a shipper calls them for a quote they will refer the shipper to the Class I. The short line has limited ability to renegotiate the division with the Class I; while the Class I has no interest in starving the short line out of existence assuming the short line can generate traffic that is economically viable for the Class I, the Class I does have an interest in optimizing its own revenues and is not impartial about its pricing strategies.
In your scenario, some of the possible variations are:
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Shipper is located on short line with feeder-line agreement with an eastern Class I. Shipper establishes a contract rate with eastern Class I, which negotiates separately with western Class I to establish a through rate. Shipper pays eastern Class I, which disburses divisions to short line and western Class I.
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Shipper is located on short line with interline agreement with eastern Class I. Shipper est
The idea of Tariff rates on Class I carriers passed with the implementation of the Staggers Act in 1980 and the passing of the ICC. Most freight that is hauled by Class I carriers is done under provisions of contracts between the shipper and the carrier/s. The considerations that go into negotiating these carriage contracts runs the gamut of things that can affect how much one charges someone to haul something. Things such as commodity and its intrinsic liability characteristics, commodities that present a low liability risk to the carriers will cost less to transport than commodities that present a high liability risk. Mileage of haul is a consideration, competition for the freight is a consideration, the overall importance of the shipper in all it’s dealings with the carrier is a consideration. Other considerations are the cost factors in supplying service, how many crews and locomotives are required to handle the business, where is the shippers location on the railroad and how much of the overall line maintenance would be attributable to providing service. Additional considerations to the rate negotiated would be who is supplying the cars…the carrier or the industry. If railroad owned cars are being used the rate will be higher than if private owner cars are used. There are probably another hundred considerations that have an effect on what the ultimate rate is charged for specific shipments.
RWM and Balt:
thanks for your replies. The answers are pretty much as I thought…a mixture of contract and tariff rates, with thru and proportionate rates in effect. Keeping track of all of it wouldnt be too hard today with computer pricing.
It would be costly as a shipper to have multiple payments on the same movements, but that is no doubt a situation that has been adapted to.
Anyone have any idea on the amount of overcharges or mistakes on rated freight bills out there. Back in the day, the auditors made a pretty good living, usually charging 40% of amounts collected.
ed
Let me throw another stone to the pot. What is the breakdown of charges from Class 1/Regional/Shortline RR? Keep in mind, I am using one box car as a example to transport from LA to Orlando,FL. [C=:-)]
Where tariff rates are involved, the settlement among the carriers would be based upon mileage each carrirer handled the car and the amount of terminal services necessary in placing the car for loading and unloading. Where contract rates are in effect the proportional sharing of the revenue is one of the items that is specified in the contract.
BaltACD: Are you sure you’re not thinking of the old class or commodity rates? The Class Is now publish tariff rates for specified commodity in specified equipment between specified O-D pairs. For example, the BNSF tariff for lumber moving from the Okanagon Station Group to the St. Louis Station Group in a system GT 74’ LT centerbeam weighing not more than 205,000 lbs. is, as of this morning, $5667/carload. Tariff rates are not mileage-based rates, they’re market-based rates.
RWM
Thanks for the information! [bow]