The U.S. Federal Maritime Commission has published on its website the notice of a proposed “interpretive” rule to address future demurrage and detention disputes brought before the commission by the container shipping industry.
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.
The FMC will publish the notice of proposed rulemaking in the Federal Register on Sept. 17. Public comments are due to the agency by Oct. 17.
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.
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.
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 Sept. 6.
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.”
The agency said for demurrage and detention fees to “pass muster,” they should be imposed to “incentivize cargo movement and the productive use of assets.”
However, the FMC may view the assessment of the fees 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.
“Cargo availability is key to demurrage serving its intended function,” the FMC said in the Federal Register notice. “The more a demurrage practice is tailored to cargo availability, the less likely the practice is to be found unreasonable.”
The FMC said the same reasonableness for the assessment of these fees also should apply to the timely return of empty containers at 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.
The commission said it would “consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice and the effect of the notice.”
The FMC said another key area for which the agency is looking for industry input is the imposition of demurrage and detention fees during government inspections of cargo, which it called “a significant problem for cargo interests and truckers.”
In addition, the FMC said it wants the ocean carriers and marine terminals to provide shipper accessibility to clearly defined demurrage and detention policies, including those for dispute resolution.
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