A group of American agriculture product shippers has developed draft service contract guidance that sets parameters for when ocean carriers can justify demurrage and detention charges for late pickup and delivery of containers at marine terminals.
The action follows the U.S. Federal Maritime Commission’s (FMC) recently proposed interpretive rulemaking for when it is appropriate to assess demurrage and detention charges, as well as precipitates the start to the annual service contract negotiations between ocean carriers and shippers.
“This contract language is proposed as a means for our members to ensure that their ocean carriers spell out why demurrage and detention or per diem fees are justified, not just hand out blanket bills to exporters and importers and expect them to pay,” said Peter Friedmann, executive director of the Washington-based Agriculture Transportation Coalition (AgTC), which represents numerous U.S. importers and exporters, as well as truckers and other service providers in the agriculture and forest products supply chain.
Demurrage pertains to the time an import container sits in a container terminal, with carriers responsible for collecting penalties on behalf of the marine terminals. Detention, also known as per diem, relates to shippers holding containers for too long outside the marine terminals.
In December 2016, the Coalition for Fair Port Practices filed a petition with the FMC, requesting regulatory action against unfair demurrage and detention fee assessments, which was followed by public hearings at the commission in early 2018.
The FMC approved the initiation of the Fact Finding 28 investigation in the spring of 2018 and put Commissioner Rebecca Dye in charge. The commission unanimously approved Dye’s final container availability recommendations on Sept. 6, which was followed by the publication of the notice of proposed interpretive rule.
Many shippers continue to view the $150 to $350 demurrage and detention fees assessed against them by the ocean container carriers and marine terminals as unfair, particularly when they are unable to pick up or drop off containers due to operational problems at the terminals that are outside their control.
“The ocean carriers are spitting them out like parking tickets,” Friedmann said, adding that “collectively millions of dollars are being imposed on U.S. importers and exporters and their truckers.”
Some of the concepts covered in the AgTC’s service contract provision include:
- Actual availability is defined;
- The contract would set forth eight specific circumstances that prevent actual availability (and thus any demurrage and detention charges) set forth in the contract;
- Carrier/terminal/shipper may agree that “free time” will be in business hours, not just days;
- If actual availability ceases prior to the full allotment of free time, the free time “clock” stops and does not restart until actual availability begins again, with actual notice to the shipper or designated agent;
- Penalties related to early return date (ERDs) are addressed and limited;
- Carrier/terminal must assure, with each invoice, that actual availability (defined with specificity in the contract) was in place and timely notice was conveyed;
- Acceptable form(s) of notice of availability will be negotiated and agreed upon between the shipper and carrier/terminal in the contract;
- The contract will set forth the number of days that the carrier/terminal has to invoice after each demurrage or detention occurrence and the number of days for the carrier to review and respond to submitted disputes from shippers;
- In any invoices to the shipper, the carrier/terminal must set forth each occurrence as a separate line item;
- Carrier/terminal may only invoice or enforce demurrage and detention against the shipper with whom it has a contract, not the shipper’s agent (trucker).
Friedmann said AgTC shipper members can use the contract provision during their upcoming service contract negotiations with the ocean carriers.
“Hopefully, in the next year or two, this will be refined and become boilerplate language, as well as standard negotiated items, for all shippers — large and small — in their service contracts,” he said.