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Standardizing Cargo Container Storage and Use Fees to be Focus of FMC Teams

Tuesday, December 11, 2018
Sandler, Travis & Rosenberg Trade Report

The Federal Maritime Commission will assemble teams of private sector experts early in 2019 to determine the commercial viability of four ideas that could bring clarity and uniformity to when and how shippers pay demurrage (charges for exceeding allotted free time at a terminal) and detention (charges for use of carrier-provided containers beyond the allotted free time) fees.

In December 2016 the FMC received a petition requesting that it adopt an interpretative rule that would clarify what constitutes “just and reasonable rules and practices” with respect to the assessment of demurrage and detention. Problems identified with the current system included (a) the lack of a clear or standard manner in which carriers and marine terminal operators handle demurrage and detention issues, which makes it difficult for shippers to avoid charges; (b) the general inability of small shippers to negotiate free time with certain carriers and to negotiate directly with MTOs on demurrage charges; (c) the lack of control over circumstances in which charges are imposed; (d) the delays involved with U.S. government holds; (e) the effect on demurrage and detention charges of large ships; (f) the lack of sufficient marine terminal appointments for drayage truckers; (g) the lack of notice of partially-closed terminals to truckers; (h) the influence of periodic port congestion caused by weather complications; (i) the unavailability of chassis in inland rail yards; and (j) unclear demurrage and detention billing and dispute resolution systems.

In its final report on this investigation, the FMC has determined that demurrage and detention are valuable charges when applied in ways that incentivize the prompt movement of cargo from ports and marine terminals. However, the FMC also found that concerns about these charges go beyond a few severe episodes of inclement weather or labor-related port congestion problems and are relevant to more than just a small subset of major ports.

The FMC concluded that transparent, consistent, and reasonable detention and demurrage practices would improve the velocity of cargo movements at U.S. ports and that focusing port and marine terminal operations on providing notice of when cargo is actually available would likely eliminate many of the circumstances that lead to the imposition of detention and demurrage fees.

Toward that goal, the FMC will form innovation teams that will meet on a limited, short-term basis to address how to provide (a) transparent, standardized language for demurrage and detention practices, (b) clear, simplified, and accessible billing practices and dispute resolution process, (c) explicit guidance on the types of evidence relevant to resolving disputes, and (d) consistent notice to cargo interests of container availability. The FMC also agreed to create a shipper advisory board to provide continual input from U.S. shippers on issues affecting the international freight delivery system.

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