The Federal Maritime Commission has adopted three recommendations to address detention and demurrage charge issues uncovered during an 18-month investigation.
Demurrage is charged for cargo containers exceeding allotted free time at a terminal, while detention fees are assessed for use of carrier-provided containers beyond the allotted free time. In December 2016 the FMC received a petition arguing that free time periods have been reduced and demurrage and detention charges had increased considerably and that shipping lines had abused such charges to increase income and profits. In its December 2018 final report the FMC determined that while demurrage and detention are valuable charges when applied in ways that incentivize the prompt movement of cargo from ports and marine terminals, the concerns raised in the petition were valid and there are improvements that could be made.
As a result, the FMC has issued a proposed interpretive rule setting forth a non-exclusive list of considerations it will use in assessing whether a detention or demurrage practice is unjust or unreasonable. These include the extent to which demurrage and/or detention fees are (a) serving their intended purposes as financial incentives to promote freight fluidity, (b) related to cargo availability for retrieval, (c) imposed when a container cannot be returned, and (d) assessed during government inspections of cargo. Other considerations include whether regulated entities (a) provide notice to cargo interests that cargo is available for retrieval and (b) maintain and make available policies that reflect their practices, including dispute resolution policies. Comments on this proposal are due by Oct. 17.
The FMC has also approved the establishment of a Shipper Advisory Board that will first assist in the implementation of the investigation’s recommendations but will later provide advice on matters of concern and priority to domestic importers and exporters. The FMC states that information on the size of the board, who may apply, and how to express interest in serving as a member will be forthcoming.
Finally, the FMC voted to support Commissioner Rebecca Dye’s continued involvement in the supply chain innovation team in Memphis, which has been working to improve chassis availability at the railheads in that city via the establishment of a “gray pool” of equipment.
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