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American ShipperContainerMaritimeOcean shippingRegulationShippers Perspective

Proposed demurrage and detention rule spotlights industry schism

Shippers and NVOs urge the U.S. Federal Maritime Commission to implement the interpretive rule, while ocean carriers and marine terminals say it needs further refining.

A proposed interpretive rule by the U.S. Federal Maritime Commission (FMC) to address demurrage and detention fee assessment practices under the Shipping Act drew heavy input from industry organizations and companies.

The comment period for the rule closed Thursday, Oct. 31. The agency estimates it received more than 70 comments but could receive more by mail in the next several days, an FMC spokesman said Nov. 1. The FMC originally requested that industry comments be submitted by Oct. 17 but agreed to a two-week extension at the request of the Washington-based Agriculture Transportation Coalition (AgTC).

The FMC published the proposed rule Sept. 17 after a nearly year-and-a-half-long investigation into complaints by multiple shippers and non-vessel-operating common carriers (NVOs) that they have been unfairly assessed demurrage and detention fees by ocean carriers and marine terminals.

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.

Through the proposed rule, the FMC provided guidance under the Shipping Act on what it will consider fair and reasonable practices for ocean carriers and marine terminals to assess demurrage and detention fees on shippers.

“The bottom line is that the exporters, NVOs and truckers are going to support this and urge the commission to adopt the proposed rule as is,” said AgTC Executive Director Peter Friedmann, who submitted his shipper organization’s comments to the FMC on Oct. 31. “The rulemaking shed some light on how difficult it has been for shippers and their truckers to challenge the demurrage and detention fees.”

Friedmann noted that ocean carriers and marine terminals commonly assess $150 to $300 demurrage and detention fees against shippers whose truckers are unable to pick up or drop off their containers within the allotted free-time windows.

He added that, through no fault of their own, shippers often cannot access their containers at the terminals but are still assessed the fees. “I don’t know any shippers who want their cargo to move slowly. That’s laughable. It’s the carriers who are slowing the process.” he said.

The AgTC noted in comments to the FMC that agricultural and forest products shippers are already being financially harmed by U.S. trade disputes, particularly with China and the European Union, which have either blocked their products or require them to maintain their overseas business at a loss.

“In the midst of the ongoing trade disputes, the demurrage and detention penalties being imposed on our exporters and their truckers by ocean carriers and terminal operators is adding hundreds of millions of dollars to the burdens of US agriculture,” the AgTC told the commission. “The FMC has the ability to relieve this burden, starting now by adopting the proposed rule.”

In addition to submitting its own comments to the FMC, the National Customs Brokers and Forwarders Association of America (NCBFAA) in the days leading up to the Oct. 31 deadline urged its individual NVO and freight forwarder members to submit comments to the FMC.

“It is imperative that the commission receives a flood of member comments on this issue,” the NCBFAA said. “This is our chance to make our voices heard on a problem that has been affecting our members for years. The NCBFAA will be weighing in on this issue as well, but the FMC is specifically looking to hear from companies that are being affected.”

The National Industrial Transportation League (NIT League) in its comments to the FMC said it “strongly believes that the proposed interpretive rule, if promulgated, will greatly benefit the U.S. maritime industry by promoting efficient cargo handling and delivery, improving commercial fairness in the assessment of charges, while also reducing confusion and disputes.”

The NIT League, the nation’s oldest shippers organization, added that proposed rule should “positively influence common carriers and MTO (marine terminal operator) tariff rules and practices and … potentially impact service contract terms addressing free time, demurrage and detention by promoting clarity and efficiency.”

The NIT League was part of the group of 26 trade associations, the Coalition for Fair Port Practices, that filed the initial petition for rulemaking with the FMC on Dec. 7, 2016.

Container carriers and marine terminal operators, as well as their trade associations, also took a sharply different view of the rule.

John Butler, president and CEO of the Washington, D.C.-based World Shipping Council, which represents the ocean container carriers, said his organization “a properly constructed rule could be useful in promoting fluidity and reducing confusion.

“However, the guidance the commission has proposed is neither an interpretive rule nor is it properly constructed,” Butler said. “In short, there is more work to be done here before a proper and useful interpretive rule can be adopted.”

“The commission grossly oversimplifies the underlying purposes of demurrage and detention to the sole criterion of whether the charge acts to incentivize the movement of a shipping container,” WSC said in comments filed with the FMC.

“With no analysis of the regulatory impact, the commission prescribes sweeping new standards that would make ocean carriers financially responsible for circumstances beyond their control, impose significant regulatory costs on carriers in order to comply with those standards, and greatly increase the potential for unproductive disputes and costly litigation,” WSC warned.

The FMC has not set a date for finalizing the rule.

“The commission will review all filed comments as expeditiously as possible, and following that, I look forward to moving to the next step in this process,” FMC Commissioner Rebecca Dye, who oversaw the commission’s demurrage and detention investigation, told American Shipper.

The vigorous response to the proposal highlights the importance of the issue, Dye said.

“It is just the latest example of the active interest industry has taken in addressing this issue, and I applaud the leadership many in the supply chain community have shown,” she said.

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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.

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