Shippers Continue to Press FMC on Red Sea Surcharges

Shippers continued to press the Federal Maritime Commission on why it allowed carriers to bill Red Sea-related surcharges without a 30-day notice, saying during a March 6 meeting of the National Shipping Advisory Committee that carriers failed to justify those charges.

Carl Varner, vice president of logistics at Fornazer International, said the decision to approve these surcharges was "out of order."

"I've been in the business 30 years, and I've never seen anything like that," Varner said during the meeting. "We had shipments that were already on the water in transit," and "all of a sudden we're looking at $200,000 that we can't add to our sales."

Commissioner Max Vekich stressed that the FMC is scrutinizing charges assessed by carriers and pointed to the said public hearing held by the commission earlier this year on Red Sea-related shipping challenges (see 2401120057). "It's not an open season on customers," Vekich said at the meeting. "Our agency reacted in a prompt manner, but those surcharges certainly were not going to go without scrutiny."

In addition to the discussion on Red Sea surcharges, shippers brought up concerns they have with a recent final rule that set new requirements on the types of information carriers and marine terminal operators must include on their detention and demurrage invoices (see 2402230049). One concern is that the final rule doesn't address who has authority over storage charges from railroads, said Rich Roche, senior vice president at Mohawk Global and an NSAC member. While the FMC does have jurisdiction over detention and demurrage, it's still unclear if that includes storage at the rail terminals, Roche said (see 2304280057).

Roche said the NSAC was told to meet with the Surface Transportation Board, which it did, and the STB pointed to legislation that it said prevents it from having that authority. One recommendation the NSAC made was that the word "marine" be stricken from the definition of detention and demurrage so that the FMC has authority on rail detention and demurrage, Roche said.

In September, Rep. John Garamendi, D-Calif., was drafting legislation that would require the FMC and the STB to get together and decide who should regulate those changes (see 2309060067).

Another issue that NSAC wants addressed is the earliest return date, which is the first day containers can return to the terminal. Roche said when that date is changed, it can prevent the return of a container, and this can cost shippers money in extra fees for trucking, storage, redelivery and demurrage charges that shippers don’t have control over, Roche said. One solution would be that demurrage resulting from a change in the early receipt date can be challenged, Roche said.

Commissioner Rebecca Dye proposed in July 2023 that the earliest return date would be the date in effect "at the time the empty container has been picked up from the terminal" (see 2307280051).

Shippers hope also hope the FMC will address whether detention and demurrage should be charged for government inspections or government holds. While some holds can be inconsequential, other holds can cause over millions of dollars in detention and demurrage fees, Roche said. The NSAC suggested that shippers only be responsible for 25% of the total detention and demurrage, Roche said.

Roche also noted that the final rule didn't address the definition of availability for containers. Having a data element and defining it would be helpful, Roche said. “I think there's an outcry within the industry” that a definition is needed, he said.

Another issue shippers brought up is standardizing the number of free days for all beneficial cargo owners (BCOs). Larger BCOs have been able to get favorable terms from ocean shippers, Mike Shaughnessy, a senior vice president at Balsam Brands said. Balsam paid over $10 million in demurrage after the company couldn't move its containers out because “some” BCOs kept containers in the port for 30, 60 or 90 days, blocking Balsam's access, Shaughnessy said.

“Sharing the cost equally on a shared resource is maybe a good idea that the committee should take up,” Shaughnessy said.