Industry Still Facing Detention, Demurrage Penalties Despite FMC Rule

The Federal Maritime Commission said its May rule on detention and demurrage charges (see 2004290037) is helping to reduce unfair penalties imposed by carriers, but industry said the fees are continuing and the FMC’s guidance is not being followed. The rule “at first seemed to be a great victory,” said Rich Roche, vice president of international transportation at Mohawk Global Logistics, speaking during a virtual conference hosted by the National Customs Brokers & Forwarders Association of America Sept. 14. But Roche, who is also the chair for the NCBFAA’s Non-Vessel Operating Common Carrier Subcommittee, said some carriers increased their demurrage and detention fees the same week the rule was finalized.

“When challenged, the carriers continue to hide behind their tariffs despite the language of the interpretive rule,” Roche said.

FMC Chairman Michael Khouri said the rule, which provided guidance on how the FMC assesses the “reasonableness” of detention and demurrage charges, was mostly meant to outline how the FMC “will look at a complaint brought to us.” Even so, Khouri said he has heard “anecdotal evidence” that ocean carriers were “reducing or even canceling charges in certain situations” when they were “presented with the new rule as a defense to detention demurrage charges.”

Khouri urged industry to report examples of “where specific carriers have been blatantly ignoring or running contrary to the thrust of the interpretive rule,” but stressed that the rule will not stop all unfair carrier charges. “The big guy above sent down to Moses 10 laws and … people are still killing one another and people are still stealing,” Khouri said during the conference. “So [although] we write it down on a piece of paper, we can't just make it so.”

Earlier this year, agricultural exporters and shippers urged the FMC to move quicker on the rule, saying they were losing millions of dollars in detention penalties because their shipments were being delayed by complications caused by the pandemic (see 2004070037 and 2003190041). Penalties are also impacting truckers, said Edward Greenberg, a trade lawyer and NCBFAA’s general counsel, adding that the charges are a “particular problem” at California ports in Long Beach.

Khouri said carriers that do not follow the rule’s guidelines “risk alienating their customers.” But if unfair detention and demurrage penalties continue, Khouri said, “some modifications to the rule ... may be called for.”

Khouri also said the FMC is concerned about an increase in alliances by groups of ocean freight carriers to “restrict capacity and to unreasonably raise rates.” He said the commission will hold a closed meeting with its Bureau of Trade Analysis this week to discuss trends among ocean carrier alliances and will address concerns “with the carriers directly.” If the carriers are violating FMC regulations on anticompetitive agreements, Khouri said, the commission will “go to federal court to seek an injunction to enjoin future operations of such alliance agreements.”

The FMC is also considering revising its regulations on co-loading, Khouri said. He said differences in the definition for co-loading, particularly with CBP, has “created confusion among stakeholders.” The FMC recently created a 'cross-bureau working group” to consider changes, Khouri said, adding that the regulations are due for an update to reflect the “continuing evolution of the competitive container shipping industry.”