Railroad Overcharges

Railroad Overcharges

Copyright 2004, Traffic World, Inc.

Q:

This is in response to your Jan. 19, 2004 column in which Larry Herzig, associate director of the Surface Transportation Board''s Office of Compliance and Enforcement, told you that the board''s Rail Consumer Assistance Program helps shippers recover overcharges from railroads.

We are a third-party overcharge claims agent that works for all kinds of shippers. We are all in fear of retaliation from the railroads, and therefore please withhold my name. But I can tell you the Rail Consumer Assistance Program is a joke.

We have tried to get assistance and have been completely amazed at the railroads'' arrogance and the results. And we simply cannot afford the expense or the time to pursue a formal complaint.

The RCAP offers for arbitration aren''t binding on the railroads, and therefore the railroad just refuses, making the arbitration unproductive. Actually, the railroads have forced us to go away from railroad claims because of the difficulty in collecting them, which is exactly what they want. Let me remind you that if the railroads only overcharge in small increments at a rate that the former Interstate Commerce Commission once agreed might be correct (about half a percent) then in the three years available to be audited and collected that could amount to $1 billion in overcharges. That doesn''t sound like a reasonable amount for the railroads to overcharge.

Please keep in mind the shipper is only paying the invoice as presented. The shipper should have a reasonable expectation of the accuracy of a billing, especially given the large dollar amounts that railroad invoices tend to be.

We think arbitration should be a requirement and a special circumstance should be set up for "small claims." The average railroad overcharge claim is probably in the $2,000 range. We envision a procedure like that which was in force in the regulated days for informal complaints. Even small claims then could be handled and shippers given a little justice. Believe you me, the railroads are keeping a huge pile of cash from overcharges.

The following letter from a major railroad''s "director of customer billing" will explain that their policy is not to worry about what they charge, or how correct their invoice is, but only if the customer pays the correct amount:

"I have consulted with our legal department about overcharge claims. Upon advice from ... our legal counsel, an overcharge ... is the amount that a customer pays in excess of the legal rate. The basis is not the amount that was charged the customer, but rather the amount that was paid by the customer. A valid overcharge claim must be supported by proof of payment by the customer in excess of the legal rate. According to [our counsel], we can return any overcharge claims that are not properly submitted.

"We will be glad to process any of your overcharge claims, including any re-submissions, provided that you supply proof of customer payment and the appropriate rate authority."

We have been thinking about going to the Attorney General of the United States about this, it is so blatant. We think the RICO Act would fit this crime quite well.

A:

Crime?

I was more or less with you until I read the letter you enclosed. I, too, am not fond of the way many carriers - of all modes, not just railroads - discourage overcharge claims by demanding all sorts of irrelevant and unreasonable red tape requirements.

But there''s nothing irrelevant or unreasonable, much less "criminal," about insisting on proof of payment, which is all this carrier is doing. In my business I''ve occasionally had situations where I have no record of receiving a payment a client says it made to me, and I routinely ask for a copy of both sides of the canceled check; and I''ve also been asked for such copies when a supplier contends that I failed to pay or underpaid its bill and my records show otherwise. Sometimes I''ve been wrong, sometimes the other party has, but the proof of payment (or lack thereof) quickly settles the matter.

I can understand your frustration with inaccurate freight bills; to err is human, but carrier billing departments sometimes push the definition. Still, the railroad is 100 percent correct that it''s the paid amount, not the billed amount, that''s dispositive. Many shippers do not "pay ... the invoice as presented"; they routinely pre-audit freight bills and pay only what the pre-audit shows to be correct. Obviously you can''t both cut back the original billing and then demand a duplicative refund off the billed amount by means of an overcharge claim.

I have no problem with your suggestion about some sort of claims arbitration program; indeed, that''s more or less the process by which the STB''s Rail Consumer Assistance Program works.

But if you''re calling the RCAP a "joke" because the board won''t pressure railroads into refunding overcharges without proof that they were paid in the first place, you''re way off base. Any carrier (indeed, any business in any economic sector) that paid such claims without this proof in my view would be financially irresponsible in the extreme; and any government agency that tried to make them do so would be abusing its authority in equal measure.



-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at P.O. Box 76, Morganton, Ga. 30560; phone, (706) 374-7201; fax, (706) 374-7202; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.