By complaint filed on July 29, 1974, the Pillsbury Company alleged that a portion of the penalty demurrage charges collected by Delaware and Hudson Railway Company pursuant to service order No. 1124 was unjust and unreasonable under section 1(5) of the Interstate Commerce Act and prayed for an order requiring a refund of that portion. The Pillsbury Company contends that it is not responsible for $3,496 in penalty demurrage charges assessed during a Government embargo and that it acted with diligence in promptly unloading the cars upon cancellation of the embargo. In the initial decision, the Administrative Law Judge indicated that to be relieved from the penalty portion of demurrage charges, a shipper or consignee must show that it was not the proximate cause of the detention and that it exercised a very high degree of diligence in releasing or attempting to release the equipment. The Administrative Law Judge found after considering the evidence presented in the record, that the Government embargo was beyond the shipper's (Pillsbury) control; that the shipper should have exercised some prudent foresight in stopping the shipments which were not already in transit and arranging for additional storage space for shipments which were en route; and that the shipper failed to put forth its best efforts in unloading the cars quickly after they arrived, in that no work was done on Sunday. Consequently, the Administrative Law Judge concluded that the penalty demurrage charges assessed on railcars in the amount of $3,496 during the period from June 27, 1973, to July 10, 1973, were not shown to be unjust, unreasonable, or otherwise unlawful. Pursuant to exceptions filed by complainant Pillsbury, Review Board No. 4 by decision and order indicated that the initial decision correctly found that Pillsbury has failed to exercise the required degree of diligence since it had not done everything in its power to release the equipment as soon as possible, because it did not unload on Sunday. Citing Erwin Mills Inc. v. Southern Ry. Co., 287 I.C.C. 309, 312 (1952), and Oliver Mfg. Supply Co. v. Reading Co., 297 I.C.C. 654, 656 (1956), the board found that the penalty portion of the demurrage charges was not unjust and unreasonable. Furthermore, the board stated that notice of the mere possibility of restriction of export does not require Pillsbury to stop shipment in transit and arrange for additional storage space and that Pillsbury should not be required to suspend its normal operations to mitigate demurrage which might be caused by a contingent plan of the Commerce Department. DISCUSSION AND CONCLUSIONS The failure to unload on a single Sunday was the sole basis of the review board's decision for finding a lack of due diligence. We disagree with the review board in that regard. While the failure to unload on a single Sunday may constitute an instance of undue diligence, it is not of such degree by itself as to warrant a finding that the total penalty demurrage assessed is just and reasonable. In the Commission cases cited by the review board more than the failure to unload on a single Sunday was involved. However, we are in agreement with the initial decision that the record does not reveal the high degree of diligence required for an applicant to obtain relief from penalty demurrage charges. The Pillsbury Co. was warned of a possible embargo on June 13, 1973, yet the record does not disclose what, if any, alternative plans that Pillsbury might have made to avoid demurrage charges. While we disagree with the statement in the initial decision that Pillsbury should have stopped the cars not already shipped at the time of the June 13 warning of a possible embargo, we believe a prudent businessman would be expected to make alternative arrangements at the time of the warning for disposition of his product in the event the warned of embargo were imposed before export had been accomplished. Moreover, even after the embargo was imposed, Pillsbury still failed to establish that it made a diligent effort in releasing the cars. While Pillsbury apparently diverted the cars that were en route after the embargo was imposed to its U.S. customers, it contends it did not expect its U.S. customers to take the additional tonnage in the 17 cars here in issue as well. However, no evidence of record shows whether Pillsbury ever tried to dispose of the 17 cars to its U.S. customers. Furthermore, complainant gives no indication of any attempt to free the cars by finding an alternative storage facility. While a shipper is not required to divert or otherwise dispose of shipments at what might be a prohibitive expense, special efforts to minimize the detention must be made by the shipper. See Ormet Corp. v. Illinois Central R. Co., 341 I.C.C. 647 (1972). We find that the Pillsbury Co. failed to act with the high degree of diligence required, especially during a period of a serious car shortage, and accordingly find that the demurrage charges assessed have not been shown to be unjust, unreasonable, or otherwise unlawful. IT IS ORDERED, That the complaint herein be dismissed. 357 I.C.C. No. 36284 CLASSIFICATION OF SHORT-TERM OBLIGATIONS Decided February 13, 1976 Certain revised accounting regulations governing all carriers subject to our accounting rules are adopted to be effective January 1, 1976. REPORT AND ORDER OF THE COMMISSION BY THE COMMISSION: The Financial Accounting Standards Board (FASB), in May 1975, issued statement No. 6: "Classification of Short-term Obligations Expected to be Refinanced." This statement established criteria necessary for reclassifying short-term obligations as long-term debt, so that current liabilities may be properly represented on the balance sheet. Current liabilities are defined as those whose liquidation is reasonably expected to require the use of existing resources properly classified as current assets, or the creation of other current liabilities. Therefore, any obligation, which has a maturity date within 1 year, but is to be refinanced on a long-term basis, should not be classified as current. The exclusion of obligations expected to be refinanced on a long-term basis allows for a more accurate appraisal of the firm's working capital position, and its ability to meet current obligations from current funds. The proper classification of obligations also permits the calculation of more meaningful financial ratios involving current and long-term liabilities. We believe the standards set forth in FASB statement No. 6 will improve financial reporting to the Commission and we have amended the Uniform Systems of Accounts for all modes subject to our regulations, in accordance with those standards. These changes clarify the texts of certain accounts as they relate to FASB 'Accounting Research Bulletin No. 47, chapter 3A, paragraph 7. statement No. 6 and align our accounting rules with generally accepted accounting principles. We do not consider these changes burdensome because they do not involve any additional recordkeeping, but merely a reclassification of liabilities on the balance sheet. Also, many firms which prepare reports to stockholders have already made the reclassification in their financial statements to stockholders, in accordance with generally accepted accounting principles. Therefore, a rulemaking proceeding under section 553 and 559 of the Administrative Procedure Act (5 U.S.C. 553 and 559) is not necessary. FINDINGS We find that parts 1201 through 1210 of Chapter X of Title 49 of the Code of Federal Regulations should be amended as detailed in the appended statement of changes; and that such rules are reasonable and necessary to the effective enforcement of the provisions of parts I, II, III, and IV of the Interstate Commerce Act, as amended; that such rules are otherwise lawful and, to the extent so found in this report, consistent with the public interest and the national transportation policy; and that this decision is not a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environmental Policy Act of 1969. An appropriate order will be entered. APPENDIX A Amend part 1201-Uniform system of accounts for railroad companies GENERAL BALANCE SHEET ACCOUNTS The text of account 751 "Loans and notes payable" is revised by redesignating the note following the text of the account as "note A," and by adding "note B." The revised text reads as follows: Note B: This account shall not include obligations due within 1 year which are intended to be refinanced on a long-term basis. Long-term refinancing of short-term obligations means; (1) replacement with long-term obligations or equity securities, or (2) renewal, extension, or replacement with short-term obligations for an uninterrupted period extending beyond 1 year from the balance sheet date. The intention to refinance on a long-term basis shall be supported by the ability to refinance. Evidence of this ability includes either; (1) the actual issuance of a long term obligation or equity securities for the purpose of refinancing the short-term obligation, after the balance sheet date but before the balance sheet is issued, or (2) before the balance sheet is issued, the existence of a financing agreement which is long term and based on terms readily determinable with no existing violations of its provisions, and with a lender which is financially capable of honoring the agreement. The text of account 764 “Equipment obligations and other debt due within 1 year” is revised to read: 764 Equipment obligations and other debt due within 1 year. This account shall include the total amount of bonds, equipment obligations, and other long-term debt obligations, including obligations maturing serially or payable in installments which are due and payable within 1 year, and for which arrangements for long-term refinancing have not been made (see note B following account 751 “Loans and notes payable") or for which no sinking funds have been provided. This account shall be subdivided according to the different classes of debt so maturing. The text of account 765 "Funded debt unmatured," paragraph (a), is revised to read: 765 Funded debt unmatured. (a) This account shall include the total par value of unmatured debt (other than equipment obligations), maturing more than 1 year from the close of the accounting period, including obligations due within 1 year which are expected to be refinanced on a long-term basis (see note B following account 751, "Loans and notes payable"), whether the securities were issued by the accounting company or the payment was assumed by the accounting company after being issued as the debt of other companies. (See account 764, "Equipment obligations and other debt due within 1 year.") The text of account 766 "Equipment obligations," paragraph (a), is revised to read: 766 Equipment obligations. (a) This account shall include the par value of equipment securities and the principal account of contractual obligations for the purchase of equipment, excluding principal or obligations maturing serially or payable in installments within 1 year from the close of the accounting period, and including obligations due within 1 year which are expected to be refinanced on a long-term basis (see account 764, "Equipment obligations and other debt due within 1 year"; for explanation of long-term refinancing, see note B following account 751, "Loans and notes payable"). Amend part 1202-Uniform system of accounts for electric railways GENERAL BALANCE SHEET ACCOUNTS The text of account 427, "Funded debt unmature," is revised by the addition of "note D." The revised text reads as follows: Note D: This account shall not include obligations due within 1 year which are intended to be refinanced on a long-term basis. Long-term refinancing of short-term |