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Coalition on demurrage/detention charges seeks intervention from Federal Maritime Commission

Photo: Jim Allen/FreightWaves

The coalition led by the Harbor Trucking Association is looking at two routes to get relief from growing demurrage and detention charges on the key East and West Coast ports.

In a press conference Monday led by HTA CEO Weston LaBar, two key approaches were spelled out. One is a letter sent by the coalition to the Federal Maritime Commission asking the FMC to find a way to impose relief, possibly through taking steps permitted under the FMC’s “Interpretive Rule” approved earlier this year, including a suspension of demurrage and detention charges. 

“We would further ask that the commission review and disallow carriers from filing or collecting any surcharges for congestion, trucking or equipment for moving in and through these ports until they have made a constructive action to remedy the problems,” the letter adds.

The other route the coalition seeks is to persuade companies beyond Maersk to step forward and indicate willingness to discuss steps to rein in the demurrage and detention charges. Those charges, at their root, are being caused by heavy traffic into the port and a big imbalance between containers coming and those going out.

Several times during the call, LaBar praised the willingness of Maersk to meet with representatives to the HTA, following a general call to action recently released by HTA and the California Trucking Association. But beyond that, LaBar said, “the ocean carriers have not been coming to the table or when they do, they give us little in the form of constructive feedback.”

The new Interpretive Rule, the FMC said back in April, will allow the commission to “consider the extent to which detention and demurrage charges and policies serve their primary purpose of incentivizing the movement of cargo and promoting freight fluidity.”

During the question-and-answer portion of the press conference, LaBar said he understood that looking to a government agency to bring about relief can be a laborious process. He said there have been meetings with FMC over the issue, “and we’re dealing with and looking at what they can and can’t do. We’re very confident that something can be found and rather quickly there could be some sort of announcement.”

Dan Maffei, a member of the FMC, said the commission is “going to take this seriously.” There have been numerous conversations among the commissioners themselves, Maffei said, adding that he would expect the commission to take action on the issue. 

While he didn’t offer specifics about what the FMC could do under the Interpretive Rule, he said the rule would question where demurrage and detention charges are not reasonable. “The FMC can’t force a specific action, but we can look into potentially unreasonable practices,” Maffei said.

He added that he was speaking as an individual commissioner rather than for the FMC itself.

The letter to the FMC commissioners, dated Monday, is signed by a coalition of more than 50 associations and other groups, including the American Trucking Associations and the California Trucking Association. The CTA had teamed with HTA to produce the statement that did get a response from Maersk. 

While that HTA/CTA statement focused just on the ports of Long Beach/Los Angeles, the letter to the FMC commissioners also brought in similar problems at the ports of New York/New Jersey. The coalition members, according to the letter, have paid “well over $150 million in unreasonable detention and demurrage charges this year” between the two ports, according to the letter.

Those sorts of charges, according to the letter, go “against the heart of the Interpretive Rule.”

Demurrage and detention charges are not new. But in the public statements HTA and others have made on the current situation, a confluence of events has created the crisis, including labor tightness at both the ports and among drayage drivers, as well as the huge inflow of imports into the LA/Long Beach port. It has helped create what the coalition said in its letter to the FMC was “the biggest chassis shortage in the history of the San Pedro Bay port complex,” with a growing inability for a driver to perform dual transactions, where an empty and full container are swapped out at the same location.

Both LaBar and Maffei made the same point about demurrage/detention charges: They are supposed to be levied when there is inefficiency in the market and therefore act as a spur to create efficiency. “People should be making money from moving cargo, not from cargo not moving,” LaBar said.

The press conference was an outlet for other panelists to express frustration at the state of the ports. A major issue that LaBar’s coalition has raised is the appointment schedule and the fact that drivers can remain in the dark until a fairly short period of time before they are notified of where and when to drop off or pick up a container. Peter Friedman, president of the Agriculture Transportation Coalition and one of the presenters on the press conference, gave the analogy of being in an airport and “your phone is buzzing every two minutes about any delays.”

“Why don’t ocean carriers invest in the technology to do that?” he said. 

In the letter to the FMC, the coalition said it had sent a letter in late August to the ports of Long Beach and Los Angeles asking that ocean carriers provide at least 48 hours’ notice of appointments. “Thus far, no ocean carrier has been willing to provide truckers and shippers with the data necessary to mitigate the challenges,” the letter says. A meeting between the coalition and the carriers “yielded no tangible results and a refusal to help solve these issues.”

The third member of the trio presenting the coalition’s case on the press conference, Vincent Iacopella of the Pacific Coast Council of Customs Brokers and Freight Forwarders, said the situation has gotten bad enough that it is threatening activities at the port. It has long been the entire ecosystem of the ports of Los Angeles and Long Beach that has attracted ships to that destination; there is more there than just a discharge point.

“But in the last two weeks we have been  in discussions with beneficial cargo owners on how we can avoid the ports of Long Beach and Los Angeles,” he said. “These are serious discussions.”

He cited a recent cargo that went “all water” to Norfolk in part to avoid the problems in Southern California. “They were so grateful,” he said. 

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.