1. 1 © 2013 Railinc Corp. All rights reserved. R ECAP OF THE C AR H IRE R ULES ACACSO Workshop/Breakout Session Albuquerque, NM November 11 & 12, 2015

2. 2 © 2013 Railinc Corp. All rights reserved. Movement Events TOL CASS Car Hire Receivables Railroad Clearinghouse Claims DDCT Liability Continuity System - LCS Event Repository - ER Car Hire Data Exchange - CHDX Haulage Flags CHLF Car Hire Rate Negotiations CHARM Carriers Report Car Hire Payables Reclaims

3. 3 © 2013 Railinc Corp. All rights reserved. Rule 1 – Registration and Rates In order to be eligible to earn car hire, cars and appurtenances must: – Be registered in Umler by the end of the month prior to active service – Must pass the completeness and accuracy edits Equipment in Umler with the following transportation codes is not eligible to earn car hire – S_To be scrapped – SXScrapped – XAOverage per AAR Interchange Rule 90 – YAOverage per AAR Interchange Rule 88

4. 4 © 2013 Railinc Corp. All rights reserved. Rule 1 – Registration and Rates (cont'd) Appurtenance rates are contained in Appendix S to Circular OT-10, Code of Car Hire Rules If the registered value of an appurtenance (rack) is altered, car hire overpaid by users of the equipment must be reimbursed within five months of the correction to Umler Car hire for equipment delivered to entities that do not subscribe to the car hire rules is the responsibility of the delivering carrier

5. 5 © 2013 Railinc Corp. All rights reserved. Rule 1 – Registration and Rates (cont'd) When new equipment is registered in Umler™ a default car hire rate is assigned – The default rate is the lowest, positive negotiated in effect for the car type during the previous quarter – The default rate assigned when a car enters service is applied to the car through its life – Rebuilt cars are assigned new default rates – Grandfathered box cars will earn the prescribed rates in Appendix R to Circular OT-10, Code of Car Hire Rules

6. 6 © 2013 Railinc Corp. All rights reserved. Rule 2 – Calculation of Hours and Mileage Minutes are disregarded The first hour is not paid The last hour is paid Mileage is paid based on the actual line haul miles – “from make up to break up” of the train Car hire should be paid through the end of the month for cars that are on hand at the end of the month

7. 7 © 2013 Railinc Corp. All rights reserved. RULE 3 — Reporting/Settlement Procedures and Record Retention Reporting Schedule – Current Car hire - Within one month and ten days from the end of the service month – Voluntary Adjustments - Within two months and ten days from the end of the service month – Adjustments made after two months and ten days from the end of the service month include a 15% penalty – Only one report may be furnished monthly

8. 8 © 2013 Railinc Corp. All rights reserved. RULE 3 — Reporting/Settlement Procedures and Record Retention (cont'd) RCH/CHDX Settlement – Car Hire Data Exchange (CHDX) participants may settle car hire through the Railroad Clearinghouse (RCH) – By the 19 th of the month, participants can get a report of amounts due/receivable – Settlement occurs by the 21 st All amounts due are sent to the clearinghouse Receivable amounts are paid by the clearinghouse

9. 9 © 2013 Railinc Corp. All rights reserved. RULE 3 — Reporting/Settlement Procedures and Record Retention (cont'd) Non CHDX/RCH Settlement – Reports of amounts due car owners must be prepared May be via CHDX May be via paper car hire report – Amounts must be paid by the 21 st

10. 10 © 2013 Railinc Corp. All rights reserved. RULE 3 — Reporting/Settlement Procedures and Record Retention (cont'd) Carriers must retain all records necessary to support car hire receipts and payments for three calendars years prior to the current – Records must kept to support audits and any appropriate adjustments

11. 11 © 2013 Railinc Corp. All rights reserved. RULE 4 — Exemptions from Charges Car hire for empty cars under revenue billing is the responsibility of the car mark owner – Railinc creates TOL messages to move car hire – Reclaim is only allowed when a waybill is created with an invalid revenue, empty STCC EDI 417 (waybill record) is the source of the relief Empty revenue STCC’s are defined in Rule 4 Relief is available two ways: – TOL (TRAIN 28) – Car Hire Liability File (CHLF)

12. 12 © 2013 Railinc Corp. All rights reserved. RULE 4 — Exemptions from Charges (cont’d) If a revenue, empty STCC is used in error, a reclaim may be filed to by the car mark owner to recover the car hire owed Processing Relief – Review cycles and STCC information on the CHLF – A revenue, empty STCC on the EDI 417 will result in CHR4 – There are two ways to create relief: The CHLF moves car hire to the mark owner’s account TOL messages are issued

13. 13 © 2013 Railinc Corp. All rights reserved. RULE 4 — Exemptions from Charges (cont’d) Timing of Relief – CHR4 TOLs are issued the 21 st of the next month A February TOL is distributed on March 21. – CHR4 relief is finalized on the CHLF actual file For example, the actual CHLF distributed on April 1 will contain February relief

14. 14 © 2013 Railinc Corp. All rights reserved. RULE 5 — Switching Car Hire Expense Recovery TOL messages must conform to LCS Cars handled in terminal switching service – Up to 120 hours can be transferred A different limit can be negotiated and registered with Railinc – A transfer of liability (TOL) message must be sent through Railinc – No reclaims are authorized by Car Hire Rule 5

15. 15 © 2013 Railinc Corp. All rights reserved. RULE 5 — Switching Car Hire Expense Recovery (cont'd) Cars handled in intermediate switching service – Up to 24 hours can be transferred to the inbound carrier A different limit can be negotiated and registered with Railinc – A transfer of liability (TOL) message must be sent to Railinc – No reclaim is authorized by Car Hire Rule 5

16. 16 © 2013 Railinc Corp. All rights reserved. RULE 5 — Switching Car Hire Expense Recovery (cont'd) Timing of TOL Messages – Must not be created before six days from the interchange – Must be created within 25 days of the interchange – These limits accommodate LCS and account closing

17. 17 © 2013 Railinc Corp. All rights reserved. RULE 6 — Provisions for Audits Audits – AAR and carrier audit staffs may perform audits to ensure compliance with the Code of Car Hire Rules – AAR audits may cover a period of three years – Carrier audits may cover a period of two years

18. 18 © 2013 Railinc Corp. All rights reserved. RULE 7 — Damaged Equipment- Handling Line Responsibility Damage must be reported via the AAR Damaged and Defective Car Tracking system (DDCT) – See AAR interchange Rule 107 DDCT will use LCS messages to allocate car hire – Effective January 5, 2011 no reclaims authorized by Car Hire Rule 7

19. 19 © 2013 Railinc Corp. All rights reserved. RULE 7 — Damaged Equipment-Handling Line Responsibility (cont'd) Acceptance of Settlement Value – Car hire transferred to car mark owner – LCS will create an interchange to “DEAD” – No further analysis will be performed by LCS – Car hire will be the responsibility of the car mark owner

20. 20 © 2013 Railinc Corp. All rights reserved. RULE 7 — Damaged Equipment-Handling Line Responsibility (cont'd) Non Acceptance of Settlement Value – Car hire will remain with the handling carrier until: Interchanged off line Car is reported as arriving at a shop – Car hire while in shop will be the responsibility of the car mark owner – Car hire while on intermediate carrier(s) will be the responsibility of the car mark owner

21. 21 © 2013 Railinc Corp. All rights reserved. RULE 8 — Defective Equipment - Owner's Responsibility Damage/defect must be reported via the AAR Damaged and Defective Car Tracking system (DDCT) – See AAR interchange Rule 108 DDCT will allocate car hire – Effective January 5, 2011 no reclaims authorized by Car Hire Rule 8

22. 22 © 2013 Railinc Corp. All rights reserved. RULE 8 — Defective Equipment - Owner's Responsibility (cont'd) Car hire transfers to car mark owner when disposition is requested Car hire transfers to car mark owner when car arrives at shop Car hire while car in shop will be responsibility of car mark owner

23. 23 © 2013 Railinc Corp. All rights reserved. DDCT Special Carrier Marks – Car Hire Rule 7 DVR7 – Disposition requested but not provided within 15 days – Car mark owner responsible for car hire DEAD – Settlement Value accepted – No further processing of events by LCS – Car mark owner responsible for car hire SHP7 – Car in shop – Car mark owner responsible for car hire

24. 24 © 2013 Railinc Corp. All rights reserved. DDCT Special Carrier Marks – Car Hire Rule 7 (cont'd) DSP7 – Car on intermediate carrier – Car mark owner responsible for car hire

25. 25 © 2013 Railinc Corp. All rights reserved. DDCT Special Carrier Marks – Car Hire Rule 8 DSP8 – Disposition requested – Car mark owner responsible for car hire SHP8 – Car in shop – Car mark owner responsible for car hire

26. 26 © 2013 Railinc Corp. All rights reserved. RULE 9 — Interchange Reporting Car Service Rule 7 contains rules for interchange Car Hire Rule 9 facilitates accurate calculation of car hire – Reporting instructions – Correction procedures Interchanges must be reported timely – LCS analyzes activity after 120 hours – Reports more than 120 hours after the event cannot be used in LCS analysis

27. 27 © 2013 Railinc Corp. All rights reserved. RULE 9 — Interchange Reporting (cont'd) LCS Interchanges are the official records for car hire purposes LCS interchanges must be used in the calculation of car hire obligations

28. 28 © 2013 Railinc Corp. All rights reserved. RULE 10 — LCS Default Logic and Junction Reports Basic Rules: – Three events reported to TRAIN system establish continuity for LCS analysis – LCS logic benefits a carrier that reported events over one that did not report events – LCS interchanges are communicated via TRAIN messaging The TRAIN 6X series of messages is used

29. 29 © 2013 Railinc Corp. All rights reserved. RULE 10 — LCS Default Logic and Junction Reports (cont'd) Events used by LCS: – Interchange (Receipt & Delivery) – Placement (Actual & Constructive) – Arrival – Departure – Release – Pull

30. 30 © 2013 Railinc Corp. All rights reserved. RULE 10 — LCS Default Logic and Junction Reports (cont'd) Default Logic: – Both carriers report - reports agree: date/time of interchange accepted by LCS – Both carriers report – time differs by four hours or less: delivering carrier time accepted by LCS – Both carriers report – time differs by more than four hours: LCS creates a gap record that “splits the difference” between reports – One carrier reports – reported interchange accepted by LCS

31. 31 © 2013 Railinc Corp. All rights reserved. RULE 10 — LCS Default Logic and Junction Reports (cont'd) Default Logic – Continued – Neither carrier reports: LCS creates a gap event one minute prior to first event reported by receiving carrier

32. 32 © 2013 Railinc Corp. All rights reserved. RULE 11 — Claim Handling Data used to process claims – LCS interchanges – Rule 5 Transfer of Liability messages – Rule 15 Transfer of Liability messages Internal records are not sufficient to issue or decline a claim Appendix J, Code of Car Hire Rules shows proper format for car hire claims.

33. 33 © 2013 Railinc Corp. All rights reserved. RULE 11 — Claim Handling (cont'd) All payments received must be on the claim – Current payments – Voluntary payments – Claim payments Claims must not be issued when all hours for a month have been paid

34. 34 © 2013 Railinc Corp. All rights reserved. RULE 11 — Claim Handling (cont'd) Applicable car hire rates – time and mileage – must be on claim LCS interchange information must be on claim Valid responses to claims – Provide LCS record that disproves responsibility – Provide TOL record that disproves responsibility – Pay additional car hire owed – Claims not handled properly become due and payable with 30% penalty

35. 35 © 2013 Railinc Corp. All rights reserved. RULE 12 — Settlements vs. Reclaims and Recoveries Car hire must be allowed without regard for reclaims that may be involved

36. 36 © 2013 Railinc Corp. All rights reserved. RULE 13 — Time Limits for Processing Reclaims Rule 13 provides time limits for processing reclaims outside the Car Hire Data Exchange (CHDX) process Appendix O, Code of Car Hire Rules outlines the time limits for processing each type of transaction covered by Car Hire Rule 13

37. 37 © 2013 Railinc Corp. All rights reserved.

38. 38 © 2013 Railinc Corp. All rights reserved. RULE 13 — Time Limits for Processing Reclaims (cont'd) Rule 13 Example – Original Reclaim – Service Month January – Issue Reclaim by April 30 – Issue Supplemental Reclaim by June 30 Rule 13 Example – Counter Reclaim – Reclaim Allowed in March Car Hire Report – Counter by December 31

39. 39 © 2013 Railinc Corp. All rights reserved. RULE 13 — Time Limits for Processing Reclaims (cont'd) Rule 13 Example – Allowing a Reclaim – Received in February – Allow by March Car Hire Report

40. 40 © 2013 Railinc Corp. All rights reserved. RULE 13 — Time Limits for Processing Reclaims (cont'd) Car Hire Rule 13 Time limits not followed – Receivable reclaims not submitted timely – may not be allowed – Payable reclaims not processed timely – due and payable with a 10% penalty

41. 41 © 2013 Railinc Corp. All rights reserved. RULE 14 — Time Limits for Deducting Reclaims Rule 14 provides time limits for processing reclaims through the CHDX process – Receivable reclaims shown as reductions in car hire due the car mark owner – Payable reclaims shown as additional amounts due the car mark owner

42. 42 © 2013 Railinc Corp. All rights reserved. RULE 14 — Time Limits for Deducting Reclaims (cont’d) Appendix P, Code of Car Hire Rules outlines the time limits for processing each type of transaction covered by Car Hire Rule 14 – Reclaims not included in the CHDX process timely may not be deducted Supplementary reclaims must not be deducted through the CHDX process – Supplementary reclaims must be handled under the provisions of Car Hire Rule 13

43. 43 © 2013 Railinc Corp. All rights reserved.

44. 44 © 2013 Railinc Corp. All rights reserved. RULE 14 — Time Limits for Deducting Reclaims (cont’d) Rule 14 Example – Deducting Reclaims – January Service Month – Deduct by March Car Hire Report Rule 14 Example – Countering Reclaims – Deducted in March Car Hire Report – Deduct by July Car Hire Report

45. 45 © 2013 Railinc Corp. All rights reserved. RULE 15 — Cars Not Accepted When Offered When cars cannot be accepted in interchange the receiving carrier is responsible for car hire Delivering carrier creates a TRAIN 08 or TRAIN 10 (type 82) message – Advises Railinc that interchange cannot be accomplished

46. 46 © 2013 Railinc Corp. All rights reserved. RULE 15 — Cars Not Accepted When Offered (cont'd) Railinc sends a TRAIN 26 message to the receiving carrier – Class 1 Carriers must respond within 6 hours – Other than Class I carriers must respond within 12 hours

47. 47 © 2013 Railinc Corp. All rights reserved. RULE 15 — Cars Not Accepted When Offered (cont'd) Two possible responses to TRAIN 26 messages – Cars cannot be accepted – Railinc creates a TRAIN 28 TOL message – Cars can be accepted – Railinc creates a TRAIN 29 message – No TOL will be created

48. 48 © 2013 Railinc Corp. All rights reserved. Rule 16 – Intentionally Not Used

49. 49 © 2013 Railinc Corp. All rights reserved. RULE 17 — Arbitration Committee Safety & Operations Management Committee (SOMC) acting as Operations Transportation General Committee is responsible for formally interpreting Car Service and Car Hire Rules The Equipment Assets Committee (EAC) is usually asked to advise SOMC when questions involve the Car Service or Car Hire Rules

50. 50 © 2013 Railinc Corp. All rights reserved. RULE 17 — Arbitration Committee (cont'd) Request for arbitration is sent to AAR Assistant Vice President of Business Services Each carrier advised of request for arbitration Each carrier may prepare an abstract to outline its position After both abstracts are received, each carrier will get a copy of the other’s abstract Each carrier may prepare a rebuttal abstract

51. 51 © 2013 Railinc Corp. All rights reserved. RULE 17 — Arbitration Committee (cont'd) Abstracts and rebuttals are referred to a Technical Advisory Group (TAG) formed by EAC The TAG makes a recommendation to EAC EAC considers recommends a course of action to SOMC SOMC renders its decision

52. 52 © 2013 Railinc Corp. All rights reserved. RULE 18 — Interpretation and Revision of Rules The Equipment Assets Committee can informally interpret Car Service and Car Hire Rules Railroads are classified as Class I, II or III based on annual operating revenue

53. 53 © 2013 Railinc Corp. All rights reserved. RULE 19 — Plenary Powers of Business Services The Assistant Vice President of Business Services has the power to do the following: – Supervise the application of Car Service and Car Hire Rules – Suspend or permit departures from Car Service Rules 1 - 6 – Exempt select types of cars from Car Service Rules 1 - 6 – Transfer cars from one railroad or territory to another – Conduct investigations to ensure observance of the Car Service and Car Hire Rules – Assess railroads for failing to comply with Car Distribution Orders, Directives and Special Car Orders

54. 54 © 2013 Railinc Corp. All rights reserved. RULE 20 — Agreement of Canadian Roads Departure from Car Service Rules 1 - 6 involving US owned railcars on Canadian railways or Canadian owned railcars on US railways requires the agreement of the Association of American Railroads and the Railway Association of Canada

55. 55 © 2013 Railinc Corp. All rights reserved. RULE 21 — Reclaims - “D” Transportation Code New cars that have not been on the owning railroad are assigned a transportation code D Car hire can be reclaimed on cars with transportation code D that cannot be moved toward the owning carrier

56. 56 © 2013 Railinc Corp. All rights reserved. RULE 22 — Reclaim for Loading Delay - Owner Responsibility Car Hire Rule 22 allows the reclaim of car hire on cars that are: – Empty – Idle cars – And assigned to national pools or to specific customer pools Two basic types of Rule 22 reclaims – Loading point reclaims - cars are at their loading point – Held short reclaims - cars are not at their loading point

57. 57 © 2013 Railinc Corp. All rights reserved. RULE 22 — Reclaim for Loading Delay - Owner Responsibility (cont'd) Loading point reclaims – Cars must be empty, idle and assigned to a national customer pool or to a specific customer pool – Reclaim starts on arrival at the loading point – Reclaim ends when demurrage free time starts

58. 58 © 2013 Railinc Corp. All rights reserved. RULE 22 — Reclaim for Loading Delay - Owner Responsibility (cont'd) Held Short Reclaims – Cars must be empty, idle and assigned to a national customer pool or to a specific customer pool – Reclaim begins on arrival at a holding point – Reclaim ends on departure from the holding point – Cars must be idle at least 24 hours – Once a car has been idle 24 hours, all time at the holding point is reclaimable

59. 59 © 2013 Railinc Corp. All rights reserved. RULE 22 — Reclaim for Loading Delay - Owner Responsibility (cont'd) Reclaims on multi-level equipment are deducted from the appurtenance owner Cars in the North American Boxcar Pool (NABP) are exempt from Rule 22 reclaims Cars in equipment pools – like the spine car pool – are not subject to Rule 22 reclaims

60. 60 © 2013 Railinc Corp. All rights reserved. RULE 22 — Reclaim for Loading Delay - Owner Responsibility (cont'd) If a car mark owner disagrees with a reclaim, a counter reclaim is processed – The first counter reclaim can be deducted via the Car Hire Data Exchange process – Subsequent counter reclaims must be handled outside the data exchange process – Car mark owner and carrier should agree on whether reclaim is valid and what funds should be exchanged – Once agreement has been reached adjustments can be effected through the data exchange process

61. 61 © 2013 Railinc Corp. All rights reserved. RULE 23 — Storage Reclaim under 49 CFR 1039.14(c) (1) (ii) Carriers may reclaim car hire payments on boxcar equipment as authorized by 49 CFR 1039.14(c) (1) (ii)

62. 62 © 2013 Railinc Corp. All rights reserved. RULE 24 — Empty Mileage Charges under Car Service Rule 5 Car Service Rule 5 provides that empty boxcars moved at the request of the owner, ICC or AAR under the provision of 49 CFR 1039.14 (c)(1)(i) may be subject to the optional charge per mile Statement of charges must be presented within three months from the month in which the movement occurred Charges must be allowed within three month and ten days of receipt

63. 63 © 2013 Railinc Corp. All rights reserved. RULE 25 — Car Hire Arbitration Car owners and car users are encouraged to negotiate car hire rates When negotiations fail to reach agreement, arbitration can be requested by either party The parties will split the first $2,000 in expenses The party whose rate is not chosen will bear the costs in excess of $2,000

64. 64 © 2013 Railinc Corp. All rights reserved. RULE 25 — Car Hire Arbitration (cont'd) Step 1: Request a Best and Final Offer (BFO) – This rate becomes the arbitrated rate Step 2: Request arbitration from the American Arbitration Association for arbitration – One arbitrator with experience in complex matters will review the available information Step 3: Each party may provide confidential, documentary justification for its rate

65. 65 © 2013 Railinc Corp. All rights reserved. RULE 25 — Car Hire Arbitration (cont'd) Step 4: Once both supporting files are received, each party will receive a copy of the other’s documentation Step 5: Each party may provide a reply statement Step 6: The arbitrator will select the rates that are closest to the fair market value

66. 66 © 2013 Railinc Corp. All rights reserved. RULE 26 — Contact Registration Carrier must register Contact information in FindUs.Rail – Car Accounting – Car Hire Rate Negotiation

67. 67 © 2013 Railinc Corp. All rights reserved. Questions?