The Railroad Consulting Network
Car Hire Primer
A brief tutorial on
the computation of car hire compensation
Car hire (sometimes referred to as "per diem") is
compensation paid by a user railroad to the owner railroad for the time and
mileage that the owning-railroad's freight car is on the user's railroad. Car
hire has four rate components:
-
Loaded hourly rate
-
Empty hourly rate
-
Loaded mileage rate
-
Empty mileage rate
Car hire rules of compensation, reporting, and
payment are documented in the Association of American Railroad's Circular
OT-10 Code of Car Hire Rules.
Example:
A shipment of widgets is shipped by rail from Los
Angeles, CA, to New York, NY. The movement will involve 2 railroads, Railroad
A who owns and supplies the boxcar to the shipper and Railroad B who receives
the boxcar from railroad A and linehaul delivers the boxcar to its destination.
After delivery, the car will be returned to the owning railroad empty using the
same route.
Boxcar A 123456 moves from origin (customer in
Los Angeles) to interchange with railroad B at St. Louis, Mo. Railroad B moves
the boxcar from St. Louis to the customer in New York. The delivery takes 48
hours and travels a distance of 1,350 miles. The return takes 50 hours and the
same distance.
Assuming
boxcar A 123456 has car hire rates of $0.50/hour loaded, $0.05/mile loaded,
$0.48/hour empty and $0.04/mile empty, the car hire
liability of Railroad B to Railroad A is computed as follows:
Loaded
Hour = $0.50 x 48 hours +
Loaded Mileage=
$0.05 x 1,350 +
Empty Hour= $0.48 x
50 hours +
Empty Mileage= $0.04
x 1,350
Liability = $169.50
(Railroad B pays Railroad A this amount)
[Note: this is an over-simplified example
of the process. The Code of Car Hire Rules should be reviewed for a clear
understanding of this process and its many exceptions]
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