FMC calls on carriers to adopt best practices on detention and demurrage

The US Federal Maritime Commission has issued a formal notice urging the world’s ocean carriers to adopt a set of best practices related to when and how detention & demurrage fees are applied, as well as how to dispute the charges.

Since July the VOCC Audit Team has engaged with nine of the top ocean carriers calling in the US to assess their compliance with the FMC interpretive rule. The audit team also sought examples of model behaviour from individual carriers which the FMC felt should become industry standards.

The nine top ocean carriers who were engaged were Maersk, MSC, CMA CGM, COSCO, Hapag-Lloyd, ONE, Evergreen, HMM and Yang Ming.

The request was made by letter from FMC Managing Director Lucille Marvin to a total of 25 container shipping companies and to the World Shipping Council, the trade association representing liner companies.

The letter followed a Vessel-Operating Common Carrier (VOCC) audit into detention & demurrage practices among the world’s top shipping companies that had the US on their travel routes

The letter called for a “rapid” industry-wide adoption of three commonly-employed best practices that the FMC said would encourage “clarity and certainty” about how and when the fees will be assessed, as well as how to challenge disputed charges

Demurrage refers to the charge that the shipper pays for the use of a container within the terminal, beyond the free time period, while detention refers to the charge for the use of the container outside of the terminal beyond the free time period.

The recent dislocation to global supplies has led to an increase in the number of disputes between shippers and counterparties. In May 2020 the FMC published a final interpretive rule on the reasonableness of ocean carrier and marine terminal operator detention and demurrage practices.

“The underlying principle of the rule is that demurrage and detention serve the purpose of incentivizing cargo movement and equipment return. The practices in the letter were identified by the Audit Team as initial measures that can align carrier documents and policies with the goals of the rule”, the FMC said.

The FMC said the practices in the letter were identified by the Audit Team as initial measures to align carrier documents and policies with the goals of the rule.

In September, the Commission voted to begin work on an Advance Notice of Proposed Rulemaking on detention and demurrage billing practices due to be published in the coming months, as well issuing a policy statement concerning FMC private party complaints.

It is also moving forward implementing five of eight Interim Recommendations Commissioner Rebecca Dye made to address detention and demurrage from her work the Fact Finding Officer for Fact Finding 29. This was intended to address the current conditions contributing to congestion, as well as any other systemic other inefficiencies in the ocean freight system. The remaining three Interim Recommendations require action by Congress to change existing law.

The latest FMC correspondence asks carrier to display detention and demurrage charges clearly and prominently on their webpage or customer portal; to develop and document clear internal processes on all matters related to detention and demurrage where they have not already done so; and to delineate plainly any dispute resolution procedures, contacts, and required documentation on their website and invoices.