FMC issues report on detention, demurrage and free time

Fees are having “negative impact” on the fair, efficient and reliable movement of ocean cargo, according to a new report from the Federal Maritime Commission.    The Federal Maritime Commission has released a report on detention, demurrage and free time.
   The FMC posted a link for the report “Rules, Rates, and Practices Relating to Detention, Demurrage, and Free Time for Containerized Imports and Exports Moving Through Selected United States Ports” on its website.
   FMC Chairman Mario Cordero said the agency “has heard from many importers, exporters, and drayage trucking companies complaining about demurrage and detention charges that they must pay even though they cannot timely access their cargo or drop it off before free time expires.” Last year the FMC held forums on port congestion in Los Angeles, Baltimore, Charleston and New Orleans.
   The report notes that congestion “has recently become even more acute. Operationally, it appears that congestion begets further congestion, which in turn may result in higher costs for everyone in the supply chain.”
   The report “does not attempt to reflect the total cumulative effect of the additional expense of congestion on the national economy.”
   It notes, “U.S. importers and exporters have expressed their belief that the demurrage and detention practices of MTOs (marine terminal operators) and VOCCs (vessel operating common carriers) are unfair. One shipper has told Commission staff that it has paid over $100,000 in demurrage charges in the last year, as compared to paying approximately $10,000 for the previous year.
   “This disparity highlights shippers’ perceptions that demurrage charges are not serving to speed the movement of cargo, the purpose for which those charges had originally been intended,” said the report. “Shippers feel they are in a “catch-22” when they are not permitted to pick up their container because of MTO congestion, and yet are charged demurrage.”
   “Though the Commission has received anecdotal evidence, the industry is encouraged to submit substantive documentation and information of unreasonable practices regarding the application of demurrage or detention,” Cordero added.
   Demurrage is a charge for the use of space at a terminal; detention is a charge for the use of equipment such as containers and chassis; and free time is the grace period for which neither of these charges will be incurred.
   Commissioner William Doyle said FMC “has identified port congestion and the resulting costs in the form of demurrage and detention fees on the American shipping public as having a negative impact on the fair, efficient and reliable movement of oceanborne commerce to and from the United States.”
   Doyle suggested, “All stakeholders in the supply chain should read the report and actively engage with each other in the industry. I look forward to hearing from stakeholders with respect to their ideas for next steps now that this report has been made public.”
   He made a motion and the FMC voted 3-2 in favor of publicly releasing the report during a closed meeting of the FMC on Monday.
   Doyle said the FMC has fielded a number of complaints from importers, exporters and truckers related to the assessment of demurrage and detention charges by carriers and marine terminals.
   The report reviews the published rules tariffs of six vessel-operating common carriers at 32 terminals across the United States, and reveals that average total prices for both demurrage and detention may be higher for importers than exporters, higher for demurrage than detention, and that both charges appear similar across all ports, except for New York/New Jersey, where they are much higher on average.
   “It appears that VOCCs, rather than MTOs, generally control these prices and policies affecting importers and exporters directly. The demurrage and detention rates for the VOCCs whose tariffs were studied vary somewhat depending on port and terminal, but the terminology and application of charges with similar names are distinct across these VOCCs, making direct comparisons difficult.”
   Doyle noted the charges are for “delays out of the control of importers, exporters and truckers and widely viewed by the affected parties as unfair.”
   He said the report highlights the assessment of fees in connection with port congestion and the resulting increased costs for shippers and truckers, and details possible actions that carriers, terminal operators and port authorities can take to help minimize congestion and attendant demurrage and detention fees.
   He said the report also “notes possible actions that beneficial cargo owners and truckers may take such as requesting informal mediation and administrative or court action.”
   FMC could take a wide variety of actions, such as investigating whether there has been discrimination, unreasonable practices, or anti-competitive practices and possibly initiating an adjudicatory proceeding against a vessel carrier or terminal operator if found to be in violation of the Shipping Act.
   The FMC also has the ability to order shipping lines to file reports related to their business or could require lines or terminal operators to submit additional data related to demurrage, detention, and free time issues involved in agreements filed with the FMC.
   Doyle noted the public may file petitions with the FMC seeking relief or affirmative action by the Commission.
   Bruce Carlton, president and chief executive officer of the National Industrial Transportation League, the country’s largest shipper group said the report “provides a good and comprehensive starting point for further engagement on the problems of demurrage and detention charges assessed against importers and exporters for terminal congestion delays that are totally beyond their control.
   “Clearly it is not the final word,” said Carlton. “The message we take from this report is it is up to truckers, importers and exporters to bring ‘documented facts’ to the FMC to substantiate their claims, along with a request that the agency initiate one or more specific actions within its authority. We will be giving considerable attention to that in the weeks ahead.”
   Curtis Whalen, executive director of the American Trucking Associations’ Intermodal Motor Carriers Conference, said the report was a good summary of the four forums the FMC held around the country and laid out actions that various segments of the industry could take to protest or challenge charges as well as actions the FMC might pursue.
   Whalen, whose organization represents the interest of drayage drivers that pick-up and deliver containers at terminals, said, “I was a tad disappointed that they did not take any specific action at this point. One of the problems that we are dealing with right now is that there is congestion at the ports on both coasts. There are still long truck lines on both coasts, we are still having problems getting in and out and either pickling up or dropping of equipment. Since it is still ongoing – and perhaps this is wishful thinking – that they might have recommended or find a way to toll some of these fees until we get the ports running somewhat smoothly.”