Importers, Brokers Say Much Clearer Detention and Demurrage Billing Practices Needed

Inaccurate invoices, charges for cargo that sits around because the ship left early, demurrage charges that start before the container reaches the terminal, charges for not retuning empty equipment when no appointments were available -- importers and brokers have many complaints about the detention and demurrage billing practices, and are telling the Federal Maritime Commission that they hope it standardizes how ocean carriers and marine terminals bill, and puts guardrails around their practices.

The Federal Maritime Commission rulemaking comment period, which ended April 16, also drew comments from ports and truckers who cautioned that some changes may not be helpful. And ports, which charge demurrage, said that incentives are necessary to reduce congestion.

The National Customs Brokers & Forwarders Association of America said how firms set the start dates or end dates of detention and demurrage are not standard. "On the import side, the clock for demurrage fees should only start once an MTO makes the container available, rather than before the container has reached the terminal. For the export side, in situations where an ocean common carrier has rolled a container, demurrage should not be billed to the shipper or the NVOCC. Further, detention fees should not be charged until delivery appointment windows are actually available to shippers to drop off containers," NCBFAA said.

The trade group asked that FMC standardize demurrage fees across ports, and asked that the fee be connected to the value of the equipment. The group asked that terminals accept credit cards or electronic funds transfers without charging a convenience fee, and asked that the FMC require that invoices are available online for detention.

The group also said the time to pay an invoice needs to be equal to the time the firms have to bill. The FMC asked those who commented if 60 days is an appropriate limit on the time to bill; many said yes, though many also said 30 days would be more appropriate. Some said that if the bill didn't arrive within the 30- or 60-day window, it should be moot. The World Shipping Council, which represents the ocean carriers, said setting a deadline isn't a good idea, but if the FMC insists on a 60-day default, companies and carriers should be able to establish a different time period through contracts.

"Some NCBFAA members have been charged with late payment penalties merely 14 days following the issued invoice during pending charge disputes," the NCBFAA said. The American Chemistry Council said some members have received invoices that say there is no grace period to pay.

Some commenters expressed frustration that they receive bills that they cannot assess the accuracy of because they don't know how much free time was contracted with the terminal.

The California Trucking Association and the Harbor Trucking Association wrote: " If the demurrage is not paid, the container will not be released, so payment must be made in order to leave the Marine Terminal. Nevertheless, if a motor carrier is paying demurrage, it is impossible to know if the billing is accurate since the motor carrier is not party to the contractual arrangements and agreed upon free time."

The World Shipping Council said if the FMC's work is done right, it may help reduce the number of billing disputes. "To the extent disagreements do arise, all parties are best served if those disagreements can be resolved promptly and amicably by the parties involved without the need for an outside adjudicator such as the FMC or an arbitrator," the council said.

The WSC cautioned, "It is important that the Commission focus on preventing what is unreasonable as opposed to seeking to re-make the waterfront in the image that it believes is most desirable."

The WSC said bill of lading numbers, container numbers, billing dates, payment due dates, the start and end of free time, the start and end of the demurrage or detention clock should all be required on invoices, and for imports, the vessel arrival date is also reasonable.

But the WSC said including a container availability date is complicated. "Container availability is a function both of the unlading date and operational availability within the terminal. Additional factors impacting container availability include clearance by U.S. Customs and whether any required payments have been received by the carrier and/or the terminal. If the Commission moves forward with a requirement related to 'container availability', it will be necessary to examine how realistic it is to define this term in a way that is practically implementable,"

Making changes such as this for invoices would take a year for companies' IT systems to catch up, the WSC said.

The Meat Import Council of America, North American Meat Institute, and U.S. Meat Export Federation jointly filed comments, and said: "An invoice should only be sent to one party, ideally with an importer receiving demurrage charges and a drayage company receiving invoices for detention charges. Sending invoices to multiple parties causes confusion, avoidable payment delays, and could yield additional costs."

Most comments said demurrage charges tend to be more accurate than detention charges. Researching the inaccuracies in detention bills is also hard, they said, because those bills often arrive a month or two or more after the transaction. "More than 50 percent, and as high as 80 percent, of bills U.S. agriculture shippers receive contain inaccurate information," the meat trade groups said. The National Association of Manufacturers said its members get detention invoices 30 days to nearly two years after the shipment.

The Toy Association said how much information billers provide on why detention is being charged varies greatly among ocean carriers, marine terminal operators and freight forwarders. It said bills should be issued 10 days after the charge stops accruing. "There should be a better system of tracking appointment availability. (The terminals know when there are no appointments available, but it is still up to Drayage to prove they attempted to schedule an appointment). Drayage is required to take screenshots to prove nothing was available (on a daily basis, for multiple containers)," the association said.

Sony Electronics said it is charged when there are no available appointments, or when there is a requirement of pickup and return of equipment on the same date, which is not reasonable. These charges don't promote fluidity at the ports, the company said.

While the California Trucking Association and the Harbor Trucking Association said they wanted companies to lay out requirements on what evidence is needed to dispute a detention invoice successfully, and how to submit it, the American Coffee Corporation cautioned against that approach. "We do not believe it necessary to identify specific circumstances or evidence as situations vary and VOCCs may use strict interpretations to refute any valid appeals for consideration," it said.

The trucking associations said more than half the invoices are inaccurate. The Intermodal Motor Carriers Conference said at least 15% are inaccurate

The Coffee Corporation said only 10% of demurrage bills are wrong, but 30% of detention billing has free days incorrect. The trucking associations also complained that it's not uncommon for refunds to take more than six months.

The American Association of Exporters and Importers said it doesn't think requiring the company to identify why it invoiced the party it did is useful. " A shipper should know when they are not liable and respond accordingly if they receive a bill," AAEI said.

But the New York New Jersey Foreign Freight Forwarders & Brokers Association said the beneficial cargo owner, or an agent accepting the charges on behalf of that owner, should be the one charged, and that companies should not be allowed to bill multiple parties for the same charge. The IMCC said sometimes both a trucking company and a cargo owner end up paying.

The World Shipping Council said on that issue: "As a practical matter, creating a detention or demurrage invoice cannot become a law school exam."

Trade groups disagreed on whether the FMC should require marine terminals to bill directly to shippers, rather than to middlemen.

Although the large majority of the comments said the rule should cover marine terminal demurrage, not just ocean carrier practices, the American Association of Port Authorities said its terminals' practices have not been the source of complaints, and so it shouldn't be covered. "These fluidity charges provide the impetus for ports and MTOs to move cargo and sustain efficient freight operations," AAPA said. It also said that adding more data to what's currently on invoices would be costly and add to congestion. "An important point to consider is that ports do not bill ocean carriers for individual containers. Rather, for efficiency, a bill is sent to carriers each month assessing the demurrage fees for that entire month."