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Railroad Clearing House for Car Hire

ACACSO May 7, 2008Chicago, Illinois

Anthony Glover

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What’s it all about?

• For companies that report on the Car Hire Data Exchange tape (CHDX) the details will be used as a basis for cash settlement.

• Appendix H payable car hire reports will not be used to settle cash.

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What’s it all about?

• Railroad owned rail cars, trailers and containers are the only equipment involved at this time.

• New language in Car Hire Rules 3 & 14 and Trailer and Container Rules 3-T & 14-T to use CHDX as basis for cash settlement for CHDX participants when RCH is implemented.

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Current Cash Settlement

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Current Cash Settlement

• Appendix H’s are mailed 40 days after the service month and are used for cash settlement.

• Many methods are used to process payments. E.g. ACH drafts, MICR drafts, checks, etc.

• Several months can lapse before payments are completed due to a variety of reasons.

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The different modes of transportation we used to come to Chicago

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Current Cash Settlement

• Would you wait several months for your paycheck?

• In many cases Appendix H payable car hire reports do not agree with the CHDX details.

• If you have your paycheck deposited electronically would you want your employer to send a different amount to your bank than what your pay stub shows? Would you want your credit card details to be different from the total you are billed?

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How does RCH improve the process?

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How does RCH improve the process?• No more differences between Appendix H car

hire reports and CHDX.

• On the 19th (if a holiday or on weekend will be next business day) RCH will use CHDX to calculate the net/net position the following business day and funds are due at the central bank. Settlement takes place on 21st. RCH will send money to companies in receivable position.

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How does RCH improve the process?

• Eliminates the need to balance Appendix H paper car hire reports and CHDX details.

• Treasury functions will be changed from each carrier individually processing payments and collecting receivables to reviewing and handling wire transactions involving RCH. Debtors will wire funds to RCH and creditors will receive wires from RCH.

• Shortens the settlement window and eliminates reported car hire going to a past due status.

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How can you protect yourself from large negative car hire amounts you do not agree with?

• None of us would want a large dollar amount drafted on our bank account that we do not approve.

• An equipment user could report high dollar value reclaims that result in negative payables or receivable to them.

• In your personal life would you want drafts on your bank account more than you are comfortable with?

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How can you protect yourself from large negative car hire amounts you do not agree with?• The negative payable tolerance table will be

installed the same time RCH is implemented.

• Prior to implementation of RCH, equipment owners and equipment users need to review past activity, seasonal trends and existing agreements to determine reasonable amounts that the equipments owners will populate in the table are realistic and not too low.

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How can you protect yourself from large negative car hire amounts you do not agree with?

• Do not make any changes past 11th of month due to processing schedule of incoming CHDX details @ Railinc.

• If negative payables exceed the table they will be excluded from RCH settlement.

• Debtor and creditor roads will be notified by email.

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How can you protect yourself from large negative car hire amounts you do not agree with?

• Outgoing CHDX file sent by Railinc will include details processed in RCH and unprocessed details that were higher than the table will be identified with an indicator.

• Settlement arrangements can be made outside of RCH if equipment owner and equipment user agree CHDX details are valid and supported by agreements.

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How can you protect yourself from large negative car hire amounts you do not agree with?

• In the next slide, the car mark owner has multiple negative payables set up for each carrier in the tolerance table. This general limit will most likely be based on experience, review of negative payable activity, and its acceptable risk tolerance levels.

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What happens with CHDX detail records?• RCH will use Account Type 9 (Total Summary Records)

as the basis for CHDX payable car hire details. If they do not add to Account Type 1 records this will create problems in crediting the equipment user for car hire allowances, claims and reclaims.

• Account Type 1 (Detail Summary Records) need to total to Account Type 9 (Total Summary Records).

• Carriers are responsible for the validity of their CHDX submission.

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What happens with CHDX detail records?

• Currently, RAILINC does not edit the CHDX and will also not edit CHDX after RCH is implemented.

• Would you want your employer to report taxes withheld on your W-2 to the IRS or to your State that are different from shown on your paychecks?

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What happens with CHDX detail records?

• In the next slide $ 10,000 was reported in CHDX for Total Summary Account Type 9’s that was used in RCH for settlement.

• Detail Account Type 1’s total to $ 5,000.

• $ 5,000 more paid than supported by Detail Account Type 1’s.

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Equip User: ABC Equip.Owner: DEF Month Allowed: Feb 2008

Total Summary DifferenceDetail (Type 1) (Type 9) of Type 1

Item Total Amount Total Amount and Type 9

Car Hire $5,000 $10,000 ($5,000)

Car Hire Receivable Detail/Summary Out of Balance

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What happens with CHDX detail records?

• Equipment user would need to provide the extra $ 5,000 of details to support

$ 10,000 in RCH.

• If not provided equipment owner would deduct as 024 Miscellaneous Adjustment in their next payable car hire report.

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What will RCH not improve?

• If equipment users do not voluntarily report car hire equipment owners will continue to issue car hire claims.

• Same delays will exist with equipment users not working and eventually allowing car hire as a result of claims being issued.

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What will happen if you are not on CHDX• If you send an Appendix H payable car

hire report to an equipment owner you will be charged $ 5 a cycle for car hire details to be input into CHDX format.

• Railinc is developing web site application free of charge for non CHDX participants to enter car hire details by car.

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Impact on equipment users if banking info is not provided

• Some equipment owners want to allow roads who have not submitted their banking info to be allowed to submit their car hire details on the CHDX. Appendix H and car hire reports would still need to be submitted.

• RAILINC has informed us that this is not possible because they pull the CHDX records to calculate the net/net position.

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Timeline/Milestones to implement RCH

3 Phases of Testing

– Phase 1- User Interface testing – April 7 – 18 – Completed

– Phase 2 - RAILINC internal testing – To be installed June 1st

– Phase 3 - CHDX Settlement testing – May 26 – June 13

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Timeline/Milestones to implement RCH

• On June 16th the industry will determine if the RCH should be implemented on July 1st and the service month of May 2008 will be the 1st month to be settled in RCH. The decision to implement will depend on the success of the testing and how many companies have submitted their bank account information.

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Questions & Answers