Final phase of demurrage investigation under way

Date: Friday, March 1, 2019
Source: American Shipper

FMC kicks off industry innovation teams in an effort to develop “transparent and standardized language for detention and demurrage practices.”

The innovation teams will be composed of a broad range of representatives from the industry, including shippers, forwarders, non-vessel-operating common carriers, ocean carriers and marine terminal operators. 

“We had the enviable problem of an overwhelming response to our request for industry leaders willing to serve on the innovation teams,” Dye (pictured above) said in a statement. “I am pleased to have the benefit of the experience and knowledge of so many industry leaders and also from those who have already contributed to the demurrage and detention investigation with written submissions, interviews and emails.”

In addition to developing standardized language for detention and demurrage practices, the FMC Fact Finding Investigation No. 28 report outlined other commercial approaches to refining demurrage and detention, including:
   • Clear, simple and accessible billing and dispute resolution processes for detention and demurrage charges;
   • Evidence that would be relevant to resolving demurrage and detention billing disputes;
   • Consistent notice to cargo interests of container availability.

“It is an enormous challenge to develop an industry-wide practice for demurrage and detention,” Dye said. “Our goal is to make focused, significant changes that will emphasize demurrage and detention incentives and boost freight fluidity.

“Contributions from industry experts and commitment to continuous supply chain process improvement are necessary to achieve this goal,” she added. 

Demurrage pertains to the time an import container sits in a container terminal, with carriers generally responsible for collecting penalties on behalf of container terminals. Detention relates to shippers keeping hold of containers for too long outside of a container terminal.

Shippers long have contended that ocean carriers and marine terminals use these fees not only as a punitive measure to combat excess free time but as revenue generators. The problem most recently came to a head during a period of intense congestion at U.S. West Coast ports in late 2014 and early 2015 and also during the aftermath of Hanjin Shipping’s bankruptcy in August 2016.

Twenty-six trade associations formed the Coalition for Fair Port Practices and filed a petition in December 2017 calling on the FMC to adopt rules to clarify what constitutes “just and reasonable rules and practices” for how demurrage, detention and per diem charges are assessed. This action eventually was followed by two days of public testimony before the commission in January 2018, when numerous shippers and ocean transportation intermediaries complained to the commission of mismatched fee assessments by ocean carriers and marine terminals that make it difficult for them to avoid.

The launch of the innovation teams is the final phase of an investigation that began on March 5, 2018, as Fact Finding 28. The second phase of Dye’s work on the demurrage and detention investigation included field interviews with ocean carrier and marine terminal representatives at the ports of Los Angeles and Long Beach, the Port of Miami and the Port of New York and New Jersey, as well as interviews at her office in Washington, D.C.

A final report to the commission reporting on the innovation teams, Commissioner Dye’s findings and any possible recommendations she may make is due by Sept. 3.



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