Main U.S. maritime agency’s probe into practices of ocean carriers and terminals winds down, but no changes yet seen.
Drayage carriers see little, if any, improvement among ocean carriers and marine terminals in when and why they charge fees for the length of time a container sits on or off port, much less the underlying causes for delays in moving containers.
This, despite a year-long U.S. probe into the issue.
Last Friday, the Federal Maritime Commission released its final report on detention and demurrage practices. The report was the culmination of hearings and field interviews at major U.S. ports into what goes into those charges, which are borne by both shippers and drayage carriers.
The amount of such fees collected remains unclear. But Laura Crowe, Wal-Mart’s (NYSE: WMT) senior director of global logistics, testified earlier this year her company incurred demurrage fees “in the millions” at a U.S. Southeast marine terminal due to containers remaining on-site two days longer than allowed under the terminal’s demurrage policy.
The FMC’s interim report on the topic said these fees rose 30% in 2017, reaching the level seen toward the end of the West Coast port strikes. A.P. Moller-Maersk (Nasdaq OMX: MAERB) said revenue unrelated to ocean shipping rose 22% to $2.5 billion so far this year, in part “supported by increases in demurrage and detention.”
In its year-long look at the issue, the FMC found the definition of detention and demurrage varied across ocean carriers and terminals; there was no consistent way to address disputes; and it was not even clear at times which entity was actually charging the fees.
To that end, the FMC’s final report recommends “transparent, consistent, and reasonable” practices for billing and dispute resolution. It also recommended setting up a shipper advisory board to look further at the issue.
Even with the hearings, ocean carriers and terminal operators have done little to take those steps already, says Bob Leef, East Coast vice president for Ohio-based intermodal logistics firm Container Port Group.
“If the carriers or terminals put into practice any type of form dispute resolution or something like that, it’s not one that I am aware of,” Leef said.
In his own testimony before the FMC, Leef says the main issue was having a clearer understanding from ocean carriers on the rules for determining the fees. Indeed, the FMC said “clear, simplified, and accessible“ billing would help resolve detention and demurrage disputes.
Leef, whose firm faced $369,000 in such fees last year, says each phone call to an ocean carrier to dispute a fee can result in different outcomes, with little clarity as to when fees should be waived.
“If three ships get backed up because of bad weather and they all hit in two days instead of three to five days apart, the terminal is now congested,” Leef said. “It’s unclear when something like that should be taken into account for waiving fees.”
For Fred Johring, president of California-based Golden State Express, says the detention and demurrage issue over the last year has “actually gotten worse.”
Johring agrees with the FMC’s final report that one of the major problems is finding appointments within the time allotted to pick up a container. Likewise, he says there are inconsistent practices among marine terminals as to the length of free time before fees kick in and when they notify drayage carriers of container availability.
The terminals “are welcome to make an appointment and push it out to us,” Johring said. “Often times, we cannot get appointments for loads we are trying pull.”
Johring adds the requirement by ocean carriers to use chassis pools also increases delays for drivers at ports. High numbers of container imports to the U.S. has resulted in an overall shortage of available chassis.
Golden State Express has invested in its own chassis to improve its efficiency. But it still faces the fact that some shippers opt for chassis pools paid for by carriers.
“In many cases, we have no choice but to go in and try to find one of the pool chassis that are paid for by the steamship line,” Johring said. “That increases our dwell time significantly and dry runs, all of which are paid for by the customer.”
Leef agrees that consistency across marine terminals would also help relieve the congestion that gives rise to detention and demurrage in the first place. In the Port of New York and New Jersey, only Global Container Terminal’s Bayonne site has an appointment system for drivers. But nearby Maher Terminals offers longer operating hours to accommodate drivers.
“The more uniformity, the better it is for drivers,” Leef said. “When I go rent a car at the airport, and Hertz and Avis open and close at different times, that’s going to be a problem.”