Background

An interim report from the Federal Maritime Commission identifies several issues that will be further investigated as the FMC seeks to determine how demurrage and detention practices by ocean carriers and marine terminal operators can optimize rather than hinder the performance of the international freight delivery system in the U.S.

In December 2016 a coalition of trade associations representing U.S. cargo interests petitioned the FMC to adopt an interpretative rule that would clarify what constitutes “just and reasonable rules and practices” with respect to the assessment of demurrage (charges for exceeding allotted free time at a terminal) and detention (charges for use of carrier-provided containers beyond the allotted free time). Problems the coalition identified with the current system include (a) the lack of a clear or standard manner in which carriers and MTOs 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.

On the other hand, carriers said detention charges are used to facilitate “equipment velocity” and emphasized their need to maintain a balanced equipment flow and a fluid network, while MTOs said demurrage is used to move cargo through terminals and discourage the use of the expensive waterfront property housing marine terminal facilities as cargo storage. Both said they would prefer to find ways to meet those objectives other than imposing charges.

According to the FMC, the record developed in this investigation thus far strongly suggests that concerns about demurrage and detention in U.S. trades are not limited primarily to weather- or labor-related port congestion, a small subset of large ports, or episodic events unrelated to potentially systemic issues. The record also supports the following measures, which the FMC will further discuss with industry leaders. A final report is due by Dec. 2.

- transparent, standardized language for demurrage and detention that reflects the nature and source of these charges

- having all of a carrier’s or MTO’s detention and demurrage policies in one easily accessible website

- increased transparency into demurrage and detention dispute resolution procedures; more accessible, user-friendly information about whom a cargo interest or drayage provider should contact in the event of a dispute about a particular charge; how a dispute is resolved by a carrier or MTO; and how long the process can be expected to take

- explicit guidance regarding types of evidence relevant to resolving demurrage and detention disputes

- reasonable notice to shippers of container availability and reasonable opportunity for them to retrieve cargo

- an optional billing model wherein MTOs bill shippers directly for cargo storage on terminal and carriers bill shippers directly for use of containers

- the formation of a shipper advisory board or innovation team to provide continual input from U.S. shippers on issues affecting the international freight delivery system

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