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FMC Demands Information on Detention & Demurrage Practices

While shippers and carriers continue to argue over detention and demurrage charges, Commissioner Rebecca F. Dye of the Federal Maritime Commission will issue information demand orders to ocean carriers and marine terminal operators (MTOs) to determine if legal obligations related to detention and demurrage practices are being met.

In a recent article from the American Shipper, the Agriculture Transportation Coalition took a swipe at ocean carriers for profiting hundreds of millions of dollars from demurrage and detention charges while importers and exporters have been pushed towards financial distress as port congestion worsens.

AgTC Executive Director Peter Friendmann was reacting to reports from a virtual press conference last month held in Germany by Hapag-Lloyd CEO Rolf Habben Jansen.

Mr. Jansen talked about the fairly extreme port congestion in ports of Los Angeles and Long Beach. He pointed to unprecedented demand for imports and COVID-19 outbreaks among longshore workers as major contributors to the the problem and further slowed the flow of goods.

Mr. Friedmann told American Shipper that the “lack of schedule integrity” as well as ocean carriers’ failure to provide reliable updates “has directly led to the demurrage and detention charges imposed on their customers.

Mr. Friedmann expressed doubt as to whether the carriers will take action to reduce the current service failures given that the current carrier, chassis and terminal dysfunction is so profitable for them.

The Information Demand orders are being issued under the authority Commissioner Dye has as the Fact Finding Officer for Fact Finding 29, “International Ocean Transportation Supply Chain Engagement”.

Targets of the orders will be ocean carriers operating in an alliance and calling the Port of Los Angeles, the Port of Long Beach, or the Port of New York & New Jersey. Marine terminal operators at those ports will also be subject to information demands.

Commissioner Carl W. Bentzel said he strongly supports the FMC moving forward on the information demand orders, noting reports that over 60 large ships lay at anchorage waiting for berth space at the LA/Long Beach port complex.

"In this time of operational duress, it is important that ocean carriers, marine terminal operators, and shippers honor their responsibilities in the legal obligations related to detention and demurrage. Detention and demurrage are intended to provide an incentive for the pickup of cargo, and the redelivery of equipment to ensure efficient operation, not to function as a separate revenue stream when operations break down," Commissioner Bentzel said.

The demand orders will also require carriers and MTOs to provide information on their policies and practices related to container returns and container availability for exporters.

Failure of carriers and MTOs to operate in a way consistent with the Interpretive Rule on Detention and Demurrage that became effective on May 18, 2020, might constitute a violation of 46 USC 41102(c) which prohibits unjust and unreasonable practices and regulations related to, or connected with, receiving, handling, storing, or delivering property.

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