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Thread: Useless and boring information

  1. Default Useless and boring information

    The question came up to clarify a little bit about railroad revenue and billing, in particular with short lines. First, I should make it clear that by ‘revenue’ I mean how the railroad gets paid and by ‘billing’ that means how the railroad creates Bills of Lading (BOL)and/or Waybills.

    There are basically five types of revenue payments, but to make it confusing I’ll describe six. Some railroads, like the Class 1s and 2s, can actually have all six depending on the movement. Most Class 3s (short lines) only have one or two, but there are exceptions, as always.

    1. Interline. This is also called ‘waybill’, ‘full route’, ‘ISS’, and probably other terms that I can’t think of this early. This is where a railroad receives a division of the freight rate, and they can set their own rate. There are about 100 Class 3s which are interline, mostly older lines. In a prepaid move the first interline road is responsible for issuing the freight bill, in a collect move the last interline road does. The first interline road is also responsible for receiving the BOL and creating the waybill. The customer paying the freight bill

    2. Junction Settlement. This is mostly common in the east, and CSXT likes to have their connecting short lines setup this way. Here the short line gets a percentage (or division) of the total freight rate, but that percentage is just between, for example, CSXT and the connecting short line. Usually the Class 1 sets the rate the short line gets, but not always. The Junction Settlement charge is included as a separate charge on the freight bill. Confusingly, jct. settlement is also sometimes called switching.

    3. Switching. Here, the short line gets paid by the connecting Class 1, but the short line can set their rates. This is usually older and smaller short lines, but it can also be a Class 1 on behalf of another Class 1. There’s also what are called Reciprocal Switching Districts, where there’s one rate agreed on between Class 1s (sometimes Class 2s), these are usually in big cities.

    4. Handling. This is the most common method, especially for post deregulation short line spin offs. Here the short line is paid by the connecting Class 1, and the Class 1 sets the rates. Handling line carriers are a type of switching, and are often called switching too, but I’ve differentiated between them because of the difference in who can set the rates.

    5. Haulage. This is a bit complicated, but basically railroad A pays railroad B to move cars for them. These are negotiated rates between the two roads, but the shipper (or whomever pays the freight) doesn’t know that railroad B is actually moving the cars, or what the rate is. These rates can be ‘normal’ per car rates, or they can be ton mile, train mile, or almost anything else you can think of.

    6. Rule 11. This is technically a variation of interline. It refers to RR accounting rule 11 (creative accountants) which allows for one or more interline roads in a route to keep their rate secret from another road or roads in a route. In this case the customer will get more than one freight bill. You often see this on lumber movements where there will be one freight bill for the western lines and then a second one for the eastern lines. If you see an older waybill that says, “Prepaid Chicago, collect beyond”, that’s what this means. The freight bills can all go to the same freight bill party, or they can go to different ones.

    So, just to confuse you, I actually lied. There are really only TWO kinds of revenue – interline and switching. However, I think it is important to know of all the different kinds of ways that switching revenue can actually work.

    Billing, by which I mean waybilling, is then very closely related to how the revenue works. There are four main documents when it comes to billing.

    1. Bill of Lading – this is the document that the shipper prepares to give to the carriers to get them to move the shipment. It will specify route, price authority (tariff or contract), and all the obvious stuff like destination, weight, etc. Most shippers create these using the railroad’s websites, but some can send it via Electronic Data Interchange (EDI).

    The EDI message type for a BOL is a 404. Sometimes, mainly on the eastern lines, especially CSXT, the short line will actually act on behalf of the shipper and send the BOL for them. It makes it look like they’re sending a waybill, but technically it would be a BOL since only interline carriers send waybills. The BOL is sent directly to the first interline carrier in the route.

    2. Transportation Waybill – It used to be (about 10 years ago there was a major revision to the RR accounting rules) there was only one kind of waybill, which is why interline carriers were also called ‘waybilling’ carriers, since only interline carriers showed up in a waybill route and got a division, etc. Now, all carriers are supposed to be in a waybill route, and each carrier shows a role code which denotes what kind of revenue they get. The transportation waybill doesn’t show what the rates or divisions are, but it should show the price authority and other rate conditions like weight, count, etc.

    The EDI message type for a waybill is a 417. This is sent by the first interline carrier to Forward & Store (called RRWS technically) which is a central waybill clearing house. Forward & Store will then send copies of the waybill (electronically, of course) to all the other interline roads in the route. The connecting road is responsible for sending the 417 message to any switch carriers.

    3. Revenue Waybill. In the revenue waybill only the interline roads show in the route. The revenue waybill also has, of course, all the rates and divisions. Again, only interline carriers get to play with revenue waybills. The process of settling the through freight charges on a revenue bill is VERY complex and is called ISS.

    The EDI message type for a revenue waybill is a 426. They’re all sent via a central system (ISS) and are not sent directly between carriers. On Rule 11 movements there is one through revenue waybill (called the parent), and then a separate revenue waybill for each of the separate divisions, or the child.

    4. Freight Bill. This is the invoice sent by the carrier to the customer. It looks a lot like a waybill, which is why I include it. The EDI message type is a 410, although they still mainly use paper for freight bills.

    Clear as mud, I’m sure, but this is taking about 200 pages of rules and putting down in a ‘short’ summary. Any questions? Bueller?

  2. #2


    Ed - certainly not useless or boring. This is the nitty gritty business side of what we watch go by every day. I've always been interested ( to a point ) in this side of railroading. Keeping track of all of the rates and billing is just amazing to me. Even more amazing was how this was accomplished before the age of computers. Combine that with train order railroading and you gain a real respect for what it takes to run a railroad.

  3. #3
    Join Date
    May 2002
    Cypress (Houston), Texas, USA


    this is truly a hobby for all interests......
    More pics in Kenw's Gallery

    Have you broken any rules today? .....why not?

  4. #4


    Please post more of this useless and boring information! Like Jon, I am in awe of how this kind of stuff was accomplished before computers.
    Professional Big Bend Ferroequinarcheologist

    Check out my Big Bend Railroad History blog at:

  5. Default Hobby?

    Before computers which, by the way, was really the 1950s for the railroads, this was all accomplished with armies of clerks. A short line that, today, has maybe one or two people in "Customer Service" would have had, back in the day, a couple dozen clerks.

    Conductors actually had to do real work then, filling out wheel reports and sorting waybills from cars picked up en route. Each station was a real agency too, responsible for gathering and signing original bills of lading, with clerks who were responsible for filling out ledgers and forms for all cars arriving and departing their station. These forms were filled out in carbon copies and then mailed to other roads in the route of the waybill and to the car owner.

    Clerks at the head office then took these forms and ledgers and sorted them on giant wheels, again by multiple carbon copy, to then send this information to car accounting and to revenue accounting.

    For per diem, every agency had to make a list of all cars in their account at midnight (frequently leading to huge blocks of interchanges being dumped on another road around 23:00) and send this into the car accounting department. The car accounting department then took these forms and created several copies, and then sorted the individual car records by car owner and location. From these, they then created a monthly statement (Described in Appendix H of the car accounting rules if you’re really curious) and sent this off to the car owner. The poor car owner had to then piece all these together to make sure they were being paid for a full month, at the right rate (prescribed by the ICC and published in the back of the Equipment Register), and minus any reclaim amounts due under the rules. Some short lines, for example, didn’t own any equipment, but actually wound up having a receivable amount for per diem.

    Revenue accounting was also a mess. When the system finally went to electronic centralized settlement there were billions of dollars floating around in disputed settlement. They used a system called ‘abstracting’ where summary information was prepared by the terminating railroad showing all the rates and divisions and then sent to the other roads in the route. The overcharge and claims process was horrific, since frequently the freight billing carrier showed one amount and the abstracting road showed a different amount. Again, all these movements were ‘settled’ by people looking at pieces of paper and then creating more paper for more people to look at.

    Both car hire and freight abstracts took YEARS to actually settle and close, and originating roads frequently just sat on the money. Pity the poor roads in the middle of a route, who just got screwed.

    Knowing how all this stuff works is frequently the difference between being profitable, fat and happy, or being really interested in the price of scrap track material and having A&K's number on speed dial.

  6. Default

    Continuing the snooze fest into the business side of railroading, I’d like to outline a bit more information about how some of the business processes work on a short line.

    First, let’s assume that the short line in question is a western one, and is a handling or switching carrier. There are only a small handful of interline carriers out west: SRY, CLC, MRL (who is pretty different all around, so forget about them for now), Trona, STE, Apache, Utah, so most short lines work as described below.

    It makes some sense to start with pricing, and how a shipper goes about getting a rate. Customers at any railroad point are basically assigned to a particular railroad (if they’re captive or ‘closed’) or railroads (if they’re ‘open’). What that really means is that railroad is the ONLY one that can set rates from that particular shipper. So, if Acme Widgets is on a BNSF branch line at station Smalltown, Oregon they’re closed and captive to BNSF. Only BNSF can quote rates from Smalltown, OR to destination or interchange point. If Acme wants to ship widgets to Denver, then they have to start by getting a rate from BNSF. They can get a rate through to Denver, or they could get a rate to someplace where BNSF interchanges with UP. Then they’d need to get a point from that interchange to Denver from the UP. If they want to ship to Atlanta, they basically do the same thing, although usually they’ll go to BNSF and then BNSF will go get a rate from CSXT or NS to Atlanta. If the shipper decides they want to get all those rates themselves, and they don’t want to tell BNSF what they are, that’s when the Rule 11 comes into play. For example, suppose the BNSF rate for widgets (moved in RR owned equipment, single car shipments, 140k lb min.)from Smalltown to Denver is $2000 per car, but their rate from Smalltown to Portland is $400 and the UP rate from Portland to Denver is $1400. In this case, the shipper would save $200 by going with a BNSF Portland UP rate, but they probably don’t want BNSF to know what UP’s rate is, so they would make it a Rule 11 move with a breakpoint of Portland. In this case they’d get a freight bill from BNSF for the move from Smalltown to Portland and a second freight bill from UP for Portland to Denver. If it isn’t rule 11, then they’d only get one freight bill (from BNSF if is a prepaid move and from UP if it were collect) and then BNSF would give UP their division through ISS.

    Now, suppose BNSF spins off the branch that Acme and Smalltown is on to a short line that they setup as a switch or handling carrier. BNSF sets a rate they pay the short line to say, for example, that carloads of widgets from Acme to the interchange (call it 260town) with BNSF is $200. All the above, however, for how the shipper gets a rate and pays says EXACTLY the same. The short line will bring the cars to them, but Acme still goes to BNSF the same way they did before. Acme should have no idea what BNSF pays the short line. BNSF is also supposed to keep their rates the same as they were before they spun off the branch. In reality, BNSF will probably now build a widget Transload center in 260town, but that’s the short line’s problem. Too bad, sucks to be them.

    Car Ordering
    For the vast majority of customers on short lines, they order equipment directly with the Class 1. Some short lines will have their own cars, but these are pretty rare, although getting more common. The customers are SUPPOSED to order cars via the short line, and then the short line makes an order with the Class 1, but that is the exception. Only UP (out west at least, I try to not confuse my mind with what CSXT or NS does) actually tries to do it this way, or as they quaintly put it, “follow the rules”. BNSF explicitly demands their shippers order cars directly with them.
    So, since we’ve picked BNSF as our example and this is the most common method anyway, how does that work? Our customer, Acme Widgets, goes to and places an order for cars. They usually do this as a certain number of X type cars, per day, and then all that order is rolled up by week. BNSF then starts to assign cars to the order, and they get blocked in BNSF’s system (called TSS) to go to Acme widgets. A System Special Instruction (SSI) in TSS then tells the BNSF system they need to send a copy of various things to the short line (which we’ll call the Oregon Short Line – OSL. I know, this was the UP, but forget that.) like a waybill (EDI message type 417) and interchange list (EDI message type 418). The cars then show up on the OSL and they take them to the customer. If you can spot the problem in this process, you win a prize.

    Bill of Lading
    Once the OSL spots the car at the customer, they then go to the website and enter their bill of lading. If they’re a really big customer, they may have an internal system that can send a BOL electronically out of their ordering/shipping system. There are a VERY small number of customers who don’t do this, and have the short line send or do the BOL for them.

    If they’re slightly advanced, the OSL may request that BNSF send a copy (as an EDI 404 message) of the BOL to them, so the OSL can use that to load and release the car in their system. This saves the OSL a lot of data entry work, plus gives them the traffic data. Almost all short lines and regionals use the RailConnect system from RMI for handling all this EDI and other stuff. RailAmerica (who has a homegrown one called INFO) and MRL (who uses TSS) are exceptions. There are a few other small systems out there (ROCS, Command), but they’re really small.

    Work Orders
    As mentioned, most short lines use a system for tracking all this information. RailAmerica has INFO, and just about everybody else uses RailConnect. These systems function, more or less, like the big Class 1 systems. They track inventory, are used to exchange EDI with connecting lines, generate switch lists, create work orders, etc. INFO isn’t as sophisticated as RailConnect, but most short lines use both systems the same to create switch lists – they scan through inventory and select cars to put on a switch list. They then print this out and give it to the crews to switch with. The crews then send the completed list into a customer service center/clerk and the clerk inputs the data.

    How all these systems (TSS, TCS, RailConnect, etc.) work is pretty complicated. I don’t have a TSS manual, but the TCS manual and RailConnect ones are several thousand pages.

  7. #7
    Join Date
    May 2002
    Cypress (Houston), Texas, USA


    i actually read this. just don't ask me to explain it.....
    More pics in Kenw's Gallery

    Have you broken any rules today? .....why not?

  8. #8


    Ah, a big part of my job back in my clerk/agent days....

    Yes, interesting indeed, until you have to do it for a job day in and day out. Fortunately I was "relieved" of most of these duties after I moved from the field to the "CYO" in Atlanta. There I was mostly responsible for processing work orders and letting road trains know where to setoff/pickup among other things. I liked that better than working the business guts aspect.

    One thing not mentioned (I may have missed it) is demurrage, which is allowing a customer x amount of days to unload a car and release it back to the railroad before the railroad starts charging for each day past x.

    Railroads, for the most part, don't like charging demurrage. They would rather have the customer release the car quickly so that it can get loaded again soon. The better the utilization, the more the revenue.

    Of course, we have had some customers try to beat the demurrage system. One in particular was a feed/fertilizer business here in GA. They would get a few loads of fertilizer/potash about every week or so during the planting season. One day they started releasing the cars empty back to the railroad in less than a day. Hmmmm. We sent the local to pull the "empties", only to have them left there because the customer "accidentally" left one of their front end loaders over the track, blocking access to the cars. The conductor would bang the sides of the covered hoppers and look at the truck springs. Yup, still loaded. Nearly a week later the front end loader was finally out of the way, and the cars finally emptied.

    Eventually we called them out on it, only to have them huff and puff and say they were going to trucks.

  9. Default

    I figured going into demurrage was taking useless and boring a little too far.

    Here's something to consider about demurrage: BNSF's new "simplified" demurrage tariff is over 50 pages long.

    I have a pretty good story (mostly true) about demurrage that involves a goat and a monkey.

  10. #10


    No no no no, Ed!

    Bore us with the demurrage. This could be mind-numbing stuff to some, but makes for an interesting insight into how things work.

    I've had to run and understand the numbers for the people I have worked with and for in the grocery business. I've also had my own business. What you are posting makes sense to me, though I'm glad not to be involved in it.

    Please post more.
    Professional Big Bend Ferroequinarcheologist

    Check out my Big Bend Railroad History blog at:

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