train and enginemen wages related to a particular State. It identifies and compares the crew wage cost per loaded car mile on interstate and intrastate service. The crew wages are the major expenses item representing 50 percent or more of the costs and are the only expense that can reasonably be allocated between interstate and intrastate service. While useful with particular facotrs, extending it to all facts is a totally unrealistic undertaking because of the complexity. For example, the crew wage study presented here took 126 man-days for Montana alone. Obviously, such a study could be measured in man-years if all factors were to be studied with this method. I doubt that Montana would care to have its rates include the allocated costs of such an undertaking. 357 I.C.C. DECISION No. 36739 INTERCONTINENTAL MANUFACTURING CO., INC.-PETI TION FOR DECLARATORY CHARGES ON BOMB CASINGS ORDER-DEMURRAGE Decided May 15, 1978 SUMMARY The sole issue in the proceeding is whether penalty demurrage charges, assessed against Intercontinental Manufacturing Company, Inc. (IMCO), by the Atchison, Topeka and Santa Fe Railway Co. (Santa Fe), pursuant to a Commission car service order are just and reasonable. IMCO claims that it should be relieved of those charges because it was not the proximate cause of their accrual and exercised due diligence in attempting to abate excessive demurrage. Santa Fe believes that the accrual of demurrage was the result of the quirks and foreseeable risks of IMCO's business and that IMCO was responsible for the detention of the railcars within the meaning of prior Commission decisions. We find that the proximate cause of the disputed charges is attributable to IMCO and that Santa Fe's assessment of those charges was just and reasonable. BACKGROUND This proceeding has been referred to the Commission by the United States District Court for the Northern District of Texas for a determination of the lawfulness of certain penalty demurrage charges on 35 railcars. The cars were detained by IMCO at Garland, Tex., between February 15 and June 19, 1974. IMCO incurred $155,050 in demurrage charges during this period. Of this amount, $92,650 was attributable to normal demurrage charges (including both compensatory and penalty elements) which accrued under the standard terms of the Santa Fe's tariff. IMCO only disputes the remaining $64,400 which was attributable to the provisions of the Commission's car service order No. 1124.' On October 28, 1977, IMCO petitioned the Commission to issue a declaratory order to resolve this controversy. This proceeding is being handled under the modified procedure, and this initial decision is being made pursuant to section 17(9)(b) of the Interstate Commerce Act. Requested findings not discussed in our decision have been considered and found not justified. DISCUSSION AND CONCLUSIONS Was IMCO the proximate cause of the disputed demurrage charges? In determining whether waiver of demurrage charges is justified, the first question is whether the proximate cause of the accrual of demurrage was attributable to the shipper, the carrier, or neither party. If the shipper was the proximate cause, the analysis need proceed no further. Ormet Corp. v. Illinois Central R. Co., 341 I.C.C. 647, 651-52 (1972). We find that the proximate cause of accrual of these charges is attributable to IMCO. The record shows that IMCO's contractual dispute with the United States Navy, outlined below, was reasonably foreseeable consequence of their business relationship and of IMCO's production process. IMCO is a major manufacturer of rocket motor parts, ordnance, and other items for the United States Government. Since 1965, it has manufactured bomb casings for the Navy at Garland. Its contract with the Navy provided that production would conform to Government drawings and specifications of the dimensions, tolerances, and other significant bomb casing characteristics. The contract also permitted the Government to make changes in specifications during its performance and to insist on continued. performance pending resolution of contractual disputes. In the course of performance of these contracts, IMCO discovered that it was often impossible or impractical to comply exactly with the contract specifications. In these situations, IMCO would usually request and the Navy would grant, waivers and modifications of the contract specifications. IMCO's production line is designed to permit immediate loading of completed bomb casings into waiting railroad cars. The cars are 'That emergency car service order, as later amended, imposed higher levels of demurrage charges because of an acute car shortage. The amended car service order did not expire until July 1, 1974. then released to the railroad upon issuance of “Form DD 250”2 by the Government's chief onsite inspector. Prior placement of the railroad cars is coordinated with IMCO's production schedule. No facilities are available for storing completed casings other than the cars themselves. On February 14, 1974, IMCO loaded bomb casings, bound for Crane, Ind., and McAllester, Okla., into cars supplied by the Santa Fe. However, the Government inspector refused to issue the required form on the ground that the casings did not conform to contract specifications and tolerances. Thereafter, IMCO began negotiations with Navy representatives to resolve the contract dispute and release the loaded cars. However, production continued even though the loaded cars could not be moved. After several unsuccessful negotiating sessions, IMCO was advised that progress payments under the contract were being stopped and it was forced to shut down its production lines on April 16, 1974. By that time, 35 railcars had been loaded with bomb casings. Finally, on June 13, 1974, IMCO reached an agreement on inspection methods and acceptance criteria with the Navy. Twenty-three loaded cars were released to Santa Fe on June 15. The others were tendered on June 19, 1974. IMCO has argued that the charges resulted solely from a sudden unforeseeable change in a longstanding course of conduct by the inspectors responsible for acceptance of the loaded bomb casings. It claims that it had no reason to anticipate the refusal of the inspector to issue the needed form. While the reason for rejection is not clear, it appears that it may have resulted from use of a thickness gauge (which had not previously been extensively used) to inspect the casings. IMCO also contends that the Navy's assurances that the problem would be quickly resolved and its insistence that production not be halted indicate that IMCO was not the proximate cause of the delay. IMCO has failed to show that the delay was caused by some intervening, superseding cause beyond its control. Rather, the evidence indicates that it was a foreseeable risk of IMCO's business. The actions of the Navy do not constitute an intervening cause. It is not necessary for us to determine whether IMCO or the Navy was at fault in their dispute. It is sufficient to say that the dispute itself and its consequences (including detention of cars) were reasonably foreseeable to IMCO. IMCO's reliance on previous instances where similar disputes had been resolved through waiver of contract specifications is 'Issuance of this form indicates that the goods are acceptable and allows them to be shipped. Without it, the loaded cars cannot be released to the railroad. misplaced. Prior amicable resolution of difficulties did not guarantee that the Navy would not tighten or alter its procedures. The fact that the Navy was unilaterally entitled to change the contract terms at any time should have put IMCO on notice that this sort of dispute was likely, if not inevitable. We are not convinced that the Navy inspector's action was arbitrary, as IMCO attempts to characterize it. During the course of negotiations, other Navy personnel apparently also considered the inspector's act to have merit. The circumstances relied on by IMCO to excuse the demurrage are the sort of risks of doing business which the Commission has previously found to be within the control of the shipper or consignee. In Biltbest Construction Corp. v. New York Central R. Co., 292 I.C.C. 151 (1954), demurrage charges, increased by a Commission service order, had been assessed for the detention of cars loaded with lumber to be made into ammunition boxes for the Government. The complainant shipper had contracted with the Army for the sale of its product, but found that the contract price did not cover its cost of production. While it sought readjustment of the contract, the Government insisted on continued production. Meanwhile, the financial predicament of the shipper led to the accrual of demurrage. The Commission stated: The circumstances relied upon by the complainant here as ground for relief, grew out of contractual obligations between the parties with which the defendant had no concern. The fact that it was the Government which insisted upon continued performance does not put the matter in a different light. The ordinary economic vagaries and risks of doing business are not beyond the control of a shipper in the same sense as are instances in which exemption from penalty charges was granted upon a showing of the exercise of due diligence in the avoidance of car detention. [Emphasis supplied.] In Apex Tire & Rubber Co. v. New York, N. H. & H. R. Co., 277 I.C.C. 1 (1949), the Commission rejected the argument that demurrage accruing under a car service order should be excused because shipments were forwarded by the consignor, the War Assets Administration, contrary to a contract between it and the consignee who sought to be relieved of the charges. The consignee had contracted for, and could readily handle, only shipments forwarded as requested. The Commission refused to accept that the contractual difficulties could be used to excuse demurrage stating, 277 I.C.C. at 3: The railroads were not parties to that contract and it may be assumed that they had no knowledge that such a contract existed. Complainant's redress is with the consignor |