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FMC clarifying ‘reasonable’ demurrage, detention fees

An interim report released this week identifies how the application of charges by marine terminals and ocean carriers may be improved.

   An ongoing Federal Maritime Commission investigation hopes to bring much-needed clarity to how marine terminal demurrage and ocean carrier detention charges are levied on shippers to ensure the nation’s oceanborne commerce moves efficiently.
   During a closed-door meeting of the commission on Tuesday, FMC Commissioner Rebecca Dye released an interim report that identified six areas for improvement:
     • Transparent, standardized language for demurrage, detention and free-time practices;
     • Clarity, simplification and accessibility regarding demurrage and detention billing practices and dispute resolution processes;
     • Explicit guidance regarding types of evidence relevant to resolving demurrage and detention disputes;
     • Consistent notice to shippers of container availability;
     • An optional billing model wherein marine terminal operators bill shippers directly for demurrage and ocean carriers bill shippers for detention;
     • And an FMC shipper advisory or innovation team.
   “Throughout this process, my priority has been how ocean carrier and marine terminal demurrage and detention approaches can optimize, not diminish, the performance of the overall American international freight delivery system,” Dye said in a statement about the interim report Wednesday.
   Demurrage pertains to the time an import container sits in a container terminal, with carriers generally responsible for collecting penalties on behalf of container terminals. Detention relates to shippers keeping hold of containers for too long outside of a container terminal.
   Shippers long have contended that ocean carriers and marine terminals use these fees not only as a punitive measure to combat excess free time but as revenue generators. The problem most recently came to a head during a period of intense congestion at U.S. West Coast ports in late 2014 and early 2015 and also during the aftermath of Hanjin Shipping’s bankruptcy in August 2016.
   Twenty-six trade associations formed the Coalition for Fair Port Practices and filed a petition in December 2016 calling on the FMC to adopt rules to clarify what constitutes “just and reasonable rules and practices” for how demurrage, detention and per diem charges are assessed. This action eventually was followed by two days of public testimony before the commission in January during which numerous shippers and ocean transportation intermediaries complained of mismatched fee assessments by ocean carriers and marine terminals that make it difficult for them to avoid. 
   The FMC commissioners concluded that further investigation was warranted and on March 5 initiated a fact-finding investigation into the conditions and practices related to these fees. Dye was put in charge of Fact Finding Investigation No. 28. She solicited further information from 23 ocean carriers, 44 marine terminals and numerous shippers and ocean transportation intermediaries, as well as drayage providers, during the past six months to develop the findings for the interim report.
   Dye said she will speak publicly about the interim report at the commission’s next meeting on Sept. 19.
   “We look forward to reviewing the report with our members and coalition members,” Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation and a member of the coalition, told American Shipper. “We certainly appreciate the work of the FMC on this issue.”
   Jennifer Hedrick, executive director of the National Industrial Transportation League and a coalition member, said, “Detention and demurrage practices and associated fees are a significant concern for NITL members and we welcome the release of Commissioner Dye’s interim report. We’re pleased to see the FMC’s commitment toward addressing concerns raised by NITL and members of the Coalition for Fair Port Practices and look forward to commenting following review and analysis of the report’s findings.”
   The Agriculture Transportation Coalition said its members first brought the “unfair free time penalties” to the attention of the FMC commissioners during individual meetings in their offices in 2014, and since then have continued to engage the commissioners and their staff on detention and demurrage issue.  
   “After the Fact Finding 28 investigation was launched, AgTC members, including large and small exporters, importers, freight forwarders, truckers, provided volumes of unfair per diem documentation,” said Peter Friedmann, the group’s executive director. “Many confidential and detailed interviews were arranged with Commissioner Dye at our June annual meeting to share personal impacts, discuss potential solutions, and to share extensive documentation for FMC analysis.”
   He added that obtaining and returning containers within the free time limits remains a problem due to ongoing trucking, chassis and terminal congestion problems, as well as government security and compliance challenges. 
   “The demurrage/detention penalties continue to be extremely damaging to our exporters, who are already facing China-U.S. tariff barriers and the high value of the U.S. dollar making our exports very expensive in foreign markets,” Friedmann said.
   The final report for this FMC fact-finding investigation is scheduled for release by Dec. 2.

Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.