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Mileage

What is the basis for mileage earnings?

Mileage earnings primarily apply to tank railcars in the United States and to tank and hopper railcars in Canada. When putting together a quote or a contract with a railroad, freight rates can be negotiated with reduced or eliminated mileage rates on private (leased) equipment, resulting in either a capped or zero rate mileage rate. Under full mileage, you pay the quoted freight rate to the railroad. The railroad then pays an amount for every loaded mile the car(s) travel, based on the car(s) value, age and commodity carried. For more information, refer to Item 195 in the 6007IS Mileage Tariff at the website of the Association of American Railroads.

 

How are mileage rates established in the United States?

Rates are determined by a formula based, in part, on the age and value of the railcar. Mileage rates are consistent across most railroads in the U.S.

 

How are full mileage credit payments made?

Credits are made to the owner of the railcar, generally within 60 days. If you lease cars from GATX, railroads pay mileage credits to GATX, which credits the lessee for that amount. The process generally takes about three months. It is your responsibility, as lessee, to review the reported mileage data and audit it for accuracy. If there appear to be errors, your customer service representative can provide information about filing a claim.

 

What is “zero-rated mileage” and how is it applied?

Zero-mileage rates have been offered since railroads were deregulated. A zero-mileage rate means no mileage compensation is received from the railroad. Instead, the railroad charges a lower freight rate because it will not pass on credits to the owner or lessor for the loaded mileage traveled. There are different benefits to full- and zero-mileage rate structures. Customers must determine which option is best based on discussions with the billing railroad. If you enter into a zero-mileage rate contract, please provide the following information to GATX in writing, so we can ensure the correct application of the terms:

 

 
  • The beginning and ending dates of the contract routes;
  • The railroads involved;
  • The commodity being shipped.

 

Do the same provisions apply to rail shipments in Canada and Mexico?

While Canadian railroad practices are similar to those in the United States, each railroad maintains its own rate schedule and tracks its own movement of loaded and empty cars. There also are differences in how equalization is handled. (See "equalization" below.) Railroads in Mexico generally do not issue credits for mileage.

 

How long does it take for a railroad to send mileage earned to the car owner?

Railroads generally process mileage earnings within 60 days following the month in which they were earned. As the owner of the cars you lease, GATX passes these earnings on to you when payment is received from the billing railroad. The whole process averages about 90 days. However, the tariff allows railroads to make adjustments up to 24 months after a move has been reported.

 

What is “equalization?”

If the combined empty miles traveled in a year by a customer’s leased tank railcars are more than 106% of combined loaded miles, a penalty will be assessed against the difference in the third quarter of every year. Canadian railroads have different penalty percentages, and apply equalization to both tank and hopper railcars.

 

What is an “excess mileage charge” and when does it apply?

In most new contracts, there is a clause noting that there will be a per mile charge for every mile a railcar travels in excess of a stated limit of miles during a calendar year. This provision offsets the greatly increased maintenance expenses associated with railcars traveling above the average number of miles.