By Benny Lim      Photo：Justin Lawson

Whether they are exporters or importers, they may be familiar with rail storage fees or completely unfamiliar with them if they need to use U.S. railway services. For containers imported by ocean, railway companies usually provide a free storage period of 24-48 hours, after which they start charging. Due to various reasons, the possibility of incurring rail storage fees is significant. For example, if a train arrives at the railway yard on a Friday evening, and the next two days happen to be weekends, this can lead to storage fees being incurred as the customer's customs broker cannot pick up the goods. During the period from the second half of 2021 to the first half of 2022, when the COVID-19 pandemic was ongoing, congestion was severe at many inland points in the U.S., resulting in millions of dollars in storage fees being generated, with additional costs for a single container reaching tens of thousands of dollars, which led to strong objections from cargo owners. Later, a cap on storage fees per single container was announced until operations returned to normal.

Previously, demurrage fees at ports, which had been heavily criticized by the industry, finally saw some relief for cargo owners with the introduction of the U.S. Shipping Reform Act OSRA 2022 last year and the later publication of the detailed rules by the FMC this year. So, who oversees the storage fees incurred by railway containers?

The answer is, no one. It sounds somewhat unbelievable that such an important fee is not regulated by a federal agency. But that is the reality, and it should be said that the regulatory responsibilities are not clearly defined.

On May 2nd, as many as 75 U.S. shippers, freight forwarders, and other association organizations openly wrote to the House Transportation and Infrastructure Committee of the U.S. Congress, requesting a resolution to the issues of charges and regulation of rail storage fees.

This open letter urges the House Transportation and Infrastructure Committee to pass legislation amending the U.S. Shipping Act to clarify the charging and regulatory issues regarding rail storage fees for containers transported by rail. Specifically, they propose adding the following language to the U.S. Shipping Act: "A common carrier shall be the billing party for third party demurrage or storage charges assessed by the carrier's contractors on containers transported under ocean through bills of lading and its invoices shall be issued in accordance with the requirements of Section 41104(a)(14) and (15), (d), (e) and (f)."

This legal language carries two implications: first, that rail storage fees at railway yards should be collected by the shipping companies; second, that the invoicing requirements for storage fees should be equivalent to the invoicing requirements for demurrage and detention fees as stipulated in OSRA 2022.

The open letter asserts that since shipping companies utilize third-party railway companies to provide services to rail gateways, any rail storage fees incurred as part of the overall service at railway yards should logically be collected by the shipping companies and subject to FMC regulation, as customers do not have direct contractual relationships with the railway companies. The current practice requires customers to pay rail storage fees to the railway companies before retrieving containers from the rail. They argue that allowing railway companies to directly charge storage fees violates the U.S. Shipping Act and contradicts the principle of promoting cargo mobility.

This actually highlights the current dilemma: there is no federal agency with direct regulatory authority over storage fees for intermodal inland services in shipping, nor is there anyone defining the reasonableness of charges. The U.S. Shipping Reform Act passed last year did not address this fee, and the proposed implementation plans for shipping reform laws introduced this year also do not touch upon this issue, leaving it in a regulatory gray area.

In the United States, railway transportation usually falls under the jurisdiction of The Surface Transportation Board (STB). However, the Staggers Act passed in 1980, which relaxed railroad regulation, did not grant the STB regulatory authority over the inland railway transportation of international shipping containers (International intermodal transportation). There are also many questions surrounding whether the FMC can regulate ocean carrier intermodal inland services.

Regarding the aforementioned suggestions, industry experts believe that railway companies would strongly oppose any changes to the regulatory authority of the STB. At the same time, John Butler, the CEO of the World Shipping Council representing shipping companies, believes that if the FMC wishes to regulate, they already have the authority to do so, making it unnecessary for Congress to pass new legislation. Even worse, the recommendation to include rail storage fees within the scope of FMC regulation would overlap with the regulatory authority of the STB, leading to further confusion. Additionally, he argues that if legislation does bring rail storage fees under FMC jurisdiction, shipping companies might become reluctant to provide intermodal rail services, which is not the outcome desired by cargo owners. Ultimately, whether Congress will enact legislation remains a significant unknown. The current state of ambiguity will likely persist until regulatory responsibilities are clarified.

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