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Industry digs into FMC’s container availability interpretive rule

The AgTC asked the U.S. Federal Maritime Commission to extend the comment deadline to Oct. 31, calling the rule “the most relevant and far-reaching initiative taken by the FMC in many years.”

Photo credit: Jim Allen/FreightWaves

A group of American shippers said the industry needs more time to comment on the U.S. Federal Maritime Commission’s recently released container availability proposed interpretive rule. 

The Agriculture Transportation Coalition (AgTC) on Sept. 13 asked the FMC to extend the deadline for comments on the proposed interpretive rule from Oct. 17 to Oct. 31.

“We believe this initiative to address unrelenting per diem fees, has the potential for being the most relevant and far-reaching initiative taken by the FMC in many years, in terms of its impact on the U.S. economy,” said AgTC Executive Director Peter Friedmann in an interview.

Friedmann said the assessment of demurrage and detention fees of $100 to $300 a day has become a “major burden on U.S. exporters and a major revenue generator” for ocean carriers. 

On Sept. 13, the FMC published on its website the notice of proposed interpretive rulemaking to address future demurrage and detention disputes brought before the commission by the container shipping industry.

Through the proposed rulemaking, 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 approved the initiation of its demurrage and detention practices investigation, known as Fact Finding 28, in the spring of 2018 following a petition from the Coalition for Fair Port Practices and a public meeting on the topic. Commissioner Rebecca Dye was put in charge of the fact finding. The commission unanimously approved her final container availability recommendations on Sept. 6.

The FMC said it’s now seeking public comments “on its interpretation of the Shipping Act prohibition against failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property with respect to demurrage and detention. 

“Specifically, the commission is providing guidance as to what it will consider in assessing whether a demurrage or detention practice is unjust or unreasonable,” the agency said. 

“All of the commission’s efforts show great commitment toward improving detention and demurrage practices at our nation’s ports, leading to better efficiencies within our maritime supply chain, not only for shippers but all who engage in maritime commerce,” said Jennifer Hedrick, executive director of the National Industrial Transportation League, which is a founding member of the Coalition for Fair Port Practices. 

“We expect hundreds of comments to be submitted by U.S. exporters and importers,” said Friedmann, who also complimented Commissioner Dye for her work on Fact Finding 28. 

The FMC’s proposed interpretive rule incorporates the general guidance contained in Commissioner Dye’s Fact Finding 28 Final Report, which was published in December 2018. Those recommendations include:

  •  Promoting standardized language for demurrage and detention.
  • Simplifying the dispute resolution process and billing practices associated with the assessment of these fees.
  • Providing guidance on what evidence is relevant to promptly resolving demurrage and detention disputes between shippers, ocean carriers and marine terminals.
  •  Ensuring consistent industry notice for container availability and equipment returns.  

Friedmann said shippers routinely experience an inability to pick up or return containers due to marine terminal congestion, which has been exacerbated in recent years by the arrival of ever-larger containerships. “It’s outrageous that the carriers are imposing penalties on shippers and truckers—the victims of the congestion caused by the carriers’ themselves.”  he said. 

Rich Roche, vice president of international transportation at Mohawk Global Logistics, who also serves as the NVOCC subcommittee chair for the National Customs Brokers and Forwarders Association of America, said “a new process of pushing ‘availability notices’ to the industry is most welcomed.” 

He said the majority of beneficial cargo owners want to pick up their containers from the marine terminals within the prescribed free time. The inaccessibility to these containers due to circumstances outside the shippers’ control, including U.S. government cargo inspections, should stop the clock on the assessment of demurrage and detention fees.  

“Reasonableness is the measurement that should be assessed, not pay now and argue later, which does not work well for any of the parties under the current process,” Roche said.

Roche noted that the 11-carrier members of the U.S.-based Ocean Carrier Equipment Management Association (OCEMA) have posted dispute resolution details on the group’s website in anticipation of this interpretive rule, “some of which fall a bit short on content.” He added, “That can be easily enhanced now with this new guidance from the FMC.”

Hedrick said the NIT League “agrees with the commission that encouraging notice of actual container availability at terminals, and linking the commencement of free time with such notice, would significantly improve efficiencies and fair practices because it would allow shippers, receivers and truckers to better plan their cargo movements.” 

The NIT League also supports the FMC’s efforts to promote improvements to carrier invoicing and dispute resolution processes, which were raised as areas of concern by the Coalition for Fair Port Practices members, in addition to the agency’s proposal to establish a Shipper Advisory Board.

“The League is reviewing the proposed rule in detail and will file comments by next month’s deadline,” Hedrick said. 

“We are still reviewing the commission’s proposal, and we look forward to providing written comments to the commission next month,” said John Butler, president and CEO of the World Shipping Council, which represents the international ocean container carriers.  

“At a first look, unfortunately, it appears that the proposal would cause a great deal more confusion than it removes,” Butler said. “The commission has called the proposal an ‘interpretive rule,’ but many of the examples in the proposal would change the law as it exists today, and that requires a different process. Some of the proposals would insert the commission deep into commercial relationships, a place the Shipping Act says the commission should not be.” 

Friedmann said it is imperative to American shippers for the FMC to act on the proposed interpretive rule. 

“The bottom line is that the FMC needs to do its job as set forth in Section 2 of the Shipping Act, which explicitly mandates that the agency advance the interests of U.S. exporters and commerce,” he said.

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.