The U.S. container shipping industry is eager to weigh in on recommendations produced and approved by the Federal Maritime Commission that promise to bring clarity and fairness to the assessment of demurrage and detention fees.
To put these recommendations into practice, the FMC said it will soon publish a notice of proposed rulemaking to establish “interpretive” rules to address future demurrage and detention disputes brought before the commission by the industry.
“We will be reviewing the proposal with interest to see how the commission has proposed to bring additional certainty to all parties while respecting the commercial relationships among marine terminals, carriers, shippers, truckers and other affected participants in the market,” said John Butler, president and CEO of the World Shipping Council, which represents the global container carriers.
Peter Friedmann, executive director of the Agriculture Transportation Coalition, said in a statement, “This is a long-awaited step forward to address one of the most costly and unfair burdens imposed by ocean carriers on shippers.”
FMC Commissioner Rebecca Dye delivered her recommendations from the year-and-a-half-long Fact Finding 28 investigation to Chairman Michael Khouri and Commissioners Daniel Maffei and Louis Sola for their consideration and approval on Aug. 27. The commission approved the recommendations on Sept. 6.
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 the past five years, shippers have become increasingly outspoken about the way these 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.
“Virtually all shippers have been assessed these penalties, ranging from $125 to as high as $325/container per day,” Friedmann said. “Some AgTC members have had millions of dollars of these penalties imposed, even when delay was not their fault — due to closed terminals, congestion in the terminals, delays at terminal gates, Customs inspections, etc.”
Rich Roche, vice president of international transportation at Mohawk Global Logistics and the NVOCC subcommittee chair for the National Customs Brokers and Forwarders Association of America, said, “In my view, detention and demurrage charges definitely have their place as a way to incentivize rapid pickup and return of equipment within the established free time.
“There are times, however, when retrieval or return of equipment is impeded by the very terminals or carriers that stand to gain from the detention and demurrage charges they assess,” Roche said. “In such cases there should be an automatic extension of free time so that detention or demurrage charges are not charged unfairly. As an industry, I’m sure we all welcome the clarity and a commonsense approach to this.”
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 Dye in charge.
“Commissioner Dye has done a commendable job of making sure that everyone has been heard, and the record that the commission has compiled reveals just how factually complex these issues are,” Butler said.
National Industrial Transportation League Executive Director Jennifer Hedrick said the organization was “grateful to Commissioner Dye for her leadership throughout the duration of the fact-finding investigation and to all of the commissioners for moving forward on this issue of importance to NITL members. We’re looking forward to reviewing the proposal and providing further comment.”
Roche said, “This interpretive rule is a long time coming and will help level the playing field for all sizes of cargo interests. It may also have an effect on the terminals and carriers to be more competitive when assessing these charges once the rules of engagement are clarified.
“I look forward to reviewing the interpretive rule and providing input on the NPRM (notice of proposed rulemaking) when released,” he said. “I believe it is important to hear everyone’s voice on this topic.”
The FMC said the interpretive rule will incorporate the general guidance contained in the Fact Finding 28 Final Report 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.
“The AgTC and all others representing exporters, importers, forwarders/NVOs and truckers must make it clear: The time has come for the FMC to fulfill its statutory responsibility to protect the interests of the U.S. shipping public,” Friedmann said.