How Freight Car Hire Works...

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 (OT-10) should be reviewed for a clear understanding of this process and its many exceptions]