Company Pays $85,000 Penalty for Allowing NVOCC Access to Contracts

The Federal Maritime Commission ordered Jiangsu Feiliks International Logistics, Inc., a registered NVOCC located in the People’s Republic of China, to pay $85,000 as compromise for letting another NVOCC access its service contracts.

The compromise agreement alleged that between January 8, 2015 and June 27, 2015, Jiangsu Feiliks knowingly and willfully permitted an unrelated, non-signatory party to access Kawasaki Kisen Kaisha, Ltd. service contracts Nos. SZH5002404 and SZH5002406, thereby obtaining ocean transportation for such third party at less than the rates and charges that would otherwise apply.

FMC Commissioners Weigh in on Expanded Supply Chain Investigation

Federal Maritime Commission Chairman Michael A. Khouri and three other Commissioners expressed their support of the issuance of the supplemental order to Fact Finding Investigation 29 as well as their own views as to how to address the problems.

Chairman Khouri disclosed that the issues raised -- return of empty containers, availability of empty containers for U.S. export cargos, and demurrage and detention charges in and around the marine terminals -- also caused related problems.

He noted that there have been assertions made that "vessel operators have required dray truck companies to pay detention levies in situations where the recent interpretative rule, now finalized in 46 C.F.R. section 545.5, might be applicable. Further, there have been allegations that vessel operator personnel have told dray truck operators and ocean transportation intermediaries (OTI) that they must pay such ancillary charges even in commercial situations where such party is not responsible for payment of such charges. Further, there have been allegations that the regulated entity has told the dray truck operator or the OTI that if they do not pay, they will be put on a “blacklist” and not receive any further business."

Chairman Khouri encouraged all ocean supply chain stakeholders to participate and cooperate in the investigation to bring forward verified evidence and constructive solutions to these disruptions and bottlenecks along the ocean supply chain.

Commissioner Daniel B. Maffei said that some carriers have taken positive steps to work with other groups in the supply chain to develop more fair and efficient practices as the pandemic crisis evolved over the past weeks.

"However, there are reports that some carriers are threatening high charges for failure to return empty containers on time, even in cases where congestion has made it difficult or impossible to do so. I fear there are too many in the industry who may be ignoring the principles set out in the interpretive rule when it comes to levying detention and demurrage charges," he said.

Commissioner Maffei identified two compelling problems facing the industry: (1) there are increasing reports that the delays and congestion problems are being exacerbated by carrier demands that a container, once emptied, be returned to a different location from that where it was obtained; and (2) the apparent lack of availability of containers needed to export chemical and agricultural products is concerning.

Commissioner Maffei said, "It is imperative that we determine whether these container return policies are being implemented in a reasonable manner." He also believes the FMC has a responsibility to ensure that carriers do not limit the containers for U.S. exports in a way that is inconsistent with the Shipping Act and other U.S. laws.

Commissioner Carl W. Bentzel believes these supply chain problems need to be addressed:

• Availability of intermodal chassis at the ports of Los Angeles and Long Beach and the availability of containers.

• Application of the new FMC interpretative rule on detention and demurrage, policies on the return empty loads that restrict empty container delivery, and charge detention during this time.

• Availability of skilled longshore labor to perform loading and unloading with larger than ever vessel sizes and vessel calls with all-time high cargo volume.

• Information that beneficial cargo owners have restocked their warehouses and are failing to pick up cargo at marine terminals, or alternatively storing cargo at their facilities, and failing to unload containers and release chassis back into trade.

Commissioner Louis E. Sola believes that the interpretive rule on detention and demurrage, if followed correctly by all sides, would address 98% of incidents.

According to Commissioner Sola, "Now is the time, more than ever, when we need technology, labor, terminals, truckers, rail, and other stakeholders to come together and ensure fast and efficient movement of all goods. We can not allow the current situation to unduly enrich some and penalize others nor can we allow the current congestion to create an imbalance in the flow of goods. Exports, as well as imports, must be given adequate attention and protection. We cannot focus exclusively upon the import side of the equation."

FMC Expands Investigation on Detention and Demurrage Charges

Photo courtesy of Port of Los Angeles.

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Detention and demurrage charges are getting out of hand as the chronic congestion problem in the ports of Los Angeles and Long Beach, and New York and New Jersey has worsened.

California Trucking Association (CTA), Harbour Trucking Association (HTA) and 50 other partner coalitions called on the Federal Maritime Commission to suspend the "unreasonable detention and demurrage penalties". (Coalition Letter to FMC)

Weston LaBar, CEO of the Harbor Trucking Association, relates that collectively their members have paid out over $100 million resultant from ocean carrier inefficiencies.

In response, the FMC approved a Supplemental Order that expands the authority of Fact Finding 29, “International Ocean Transportation Supply Chain Engagement”.

The Supplemental Order authorizes Commissioner Rebecca F. Dye, as the designated Fact Finding Officer, to investigate ocean carriers operating in alliances and calling the Port of Long Beach, the Port of Los Angeles, or the Port of New York and New Jersey.

The expanded Commission investigation will seek to determine if the policies and practices of those shipping companies related to detention and demurrage, container return, and container availability for U.S. export cargoes violate 46 U.S.C. 41102(c). Commissioner Dye said the FMC is concerned that certain potentially unreasonable practices of carriers and marine terminals regarding container return, export containers, and demurrage and detention charges in the Ports of Los Angeles, Long Beach, and New York/New Jersey "may be amplifying the negative effect of bottlenecks at these ports and may be contrary to provisions in the Shipping Act of 1984." Mr. LaBar noted that the detention fees were established to encourage the efficient flow of cargo. "Despite the motor carrier’s herculean effort to pick up and drop off loads to terminals, we are still blocked due to ocean carrier efficiencies. There is no reason the American trucker and shipper should pay for problems a foreign-owned carrier is creating." Maersk, a global integrator of container logistics, issued a press release that it is actively working with HTA whose membership of 15,000+ truck drivers performs the important role of harbor trucking from ports to warehouses and distribution centers – essential to supply chain success. Narin Phol, Maersk North America’s Regional Managing Director said “We are working closely with the HTA and our customers to manage through this peak season efficiently. Every week brings new volumes, new challenges and opportunities so it is essential we collaborate effectively with our HTA partners. We are exploring short-term and long-term solutions with all our key stakeholders to address the situation.” Port of Los Angeles Executive Director Gene Seroka, in a report by FreightWaves, acknowledged the severity of the container and chassis congestion and that is why he has been advocating for a comprehensive digitization strategy throughout the complex for many years. "We need to use real-time data to make smart decisions." “Demurrage and detention are not meant...to be weaponized,” Seroka told FreightWaves. He pointed out that the port is not a storage facility, but a transit center. “Exceptions have to be made and that’s up to the marine terminal operator, the liner shipping company. If the container is not accessible to the trucker for whatever reason, and especially in times of surge cargo like this, exceptions should be made."