As the effects of the coronavirus continue to spread throughout the supply chain, American shippers, freight forwarders and draymen want the U.S. Federal Maritime Commission (FMC) to quickly finalize and publish its interpretive rule for what constitutes the fair assessment of detention and demurrage charges by ocean carriers and marine terminal operators.
In a March 16 letter to FMC Chairman Michael Khouri, a group of 67 trade associations warned that shippers are “currently grappling with increased trade barriers and economic pressures, now exacerbated by the coronavirus crisis.”
They added, “The imposition of detention and demurrage charges when equipment cannot be returned or containers cannot be picked up during the free period, for reasons beyond the control of the shipper, receiver or motor carrier, render U.S. exports less competitive in the global markets, and imports more costly to U.S. consumers and manufacturers.”
Demurrage pertains to the time an import container sits in a container terminal, with carriers responsible for collecting penalties on behalf of the marine terminals. Detention relates to shippers holding containers for too long outside the marine terminals.
“With ongoing challenges posed by the coronavirus, there is real concern about these fees being assessed when there are equipment issues beyond the control of the shipper or motor carrier,” the trade associations warned. “Thus, these fees appear to be punitive measures by the ocean carriers, not an incentive to expedite container flow.”
The FMC published its proposed interpretive rule in September 2019 and received mostly positive comments from shipper groups.
Through the proposed rule, the FMC provides guidance under the Shipping Act on what it will consider to be fair and reasonable practices for ocean carriers and marine terminals to assess demurrage and detention fees on shippers.
During the past five years, shippers have become increasingly outspoken about the way demurrage and detention fees are assessed against them, often pointing out that they are financially penalized for industry events such as sudden marine terminal congestion, which are largely out of their control.
In December 2016, the Coalition for Fair Port Practices filed a petition with the FMC, requesting regulatory action against unfair demurrage and detention fee assessments, which was followed by public hearings at the commission in early 2018.
The FMC approved the initiation of the Fact Finding 28 investigation in the spring of 2018 and put Commissioner Rebecca Dye in charge. The commission unanimously approved Dye’s final container availability recommendations on September 6, 2019.
As part of a “general incentive approach,” the FMC said its interpretive rule “proposes that in assessing the reasonableness of demurrage and detention practices and regulations, it will consider the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.”
While the FMC said demurrage and detention fees should “incentivize cargo movement and the productive use of assets,” the fees may be viewed as unfair if, for example, a trucker is unable to retrieve a container from a marine terminal due to circumstances out of its control, such as an unscheduled terminal closure, severe weather or the cargo is undergoing government inspection.
In the current scenario, the trade associations point to coronavirus-related disruptions at U.S. marine terminals.
Through the interpretive rulemaking, the FMC wants to bring clarification to how ocean carriers and marine terminals provide notice to shippers when their cargo is available for retrieval, clearly defined demurrage and detention policies, and dispute resolution.
“If a dispute arises, the reasonableness of any particular charge can be evaluated through the commission’s complaint process based on the specific facts and circumstances,” the trade associations said.
Some of the large trade associations to sign the March 6 letter to the FMC chairman include the Agriculture Transportation Coalition, Airforwarders Association, American Chemistry Council, American Cotton Shippers Association, American Trucking Associations, Association of Bi-State Motor Carriers, California Trucking Association, Intermodal Motor Carriers Conference, National Customs Brokers and Forwarders Association of America, National Industrial Transportation League, National Retail Federation, Produce Marketing Association, Retail Industry Leaders Association, Transportation Intermediaries Association, and Wine and Spirits Shippers Association.
The letter was also sent to senior lawmakers of the Senate Commerce and House Transportation and Infrastructure committees.