Federal regulators have relieved drayage truckers from late-fee bills associated with picking up and returning cargo containers, while inadvertently — and unfairly — shifting the burden onto shippers, a major shipper group contends.
The Federal Maritime Commission’s rule on demurrage and detention, issued last week, imposed new billing standards on ocean carriers and terminal operators in an effort to crack down on abusive container late fees, often to truckers as well as shippers.
But a simplified billing provision in the rule means drayage truck drivers can no longer be billed for demurrage and detention on cargo contracted between ocean carriers and their shippers, even if the trucker might have been responsible for the delay in picking up or returning the container to the port.
That burden — unless explicitly spelled out otherwise in an agreement — now seems to fall squarely on shippers, according to the National Industrial Transportation League, whose members could wind up having to pay more in administrative costs to manage the process.
Because truckers are not usually part of the ocean transportation contract, “it really seemed like [the FMC] wanted to carve the truckers out of the billing process, and the best way to do that was with this billing provision within the rule,” NITL general counsel and Thompson Hine LLP partner, Karyn Booth, told FreightWaves.
“But if the trucker knows they’re not going to pay demurrage and detention invoices — unless contractually obligated to do so with the shipper — the rule could reduce their incentive to do everything in their power to get the container out of the port, or return it, in a timely way?
“That’s where our members have concerns. They’re going to have to pay even when they’re not at fault for delays in picking up or returning containers, and will have to have contractual relationships that will allow them to get reimbursed. That’s the practical implication of this rule — shippers are going to have to look at their contracts carefully with their ocean carriers and truckers.”
NITL Executive Director Nancy O’Liddy pointed out that larger shippers have departments in place to deal with these types of contract changes. For smaller shippers, however, “I think they’re very distressed about this,” she said. “And their costs are going to go up, because they’re going to have to pay the invoice and then try and get reimbursed from the trucker if they’re not at fault.”
The American Trucking Associations’ Intermodal Motor Carriers Conference, which represents drayage carriers, praised the change as more accurately assessing invoicing responsibilities.
“The new rule will require ocean carriers to work directly with their customers, increasing incentives for faster dispute resolutions and bringing greater efficiency to the supply chain,” commented IMCC Executive Director Jonathan Eisen when the rule was announced.
Testifying on Wednesday at a hearing to be reconfirmed as FMC chairman, Daniel Maffei told the Senate Commerce Committee that the new rule will help eliminate container late-fee billing abuses by ocean carriers.
“These fees are for the promotion of the movement of cargo. They’re not to pad the bottom line of an ocean shipping company,” Maffei said. “If they’re not used for [promoting cargo movement], they’re unreasonable, and we will do whatever it takes” to enforce the rule, he said.
However, Booth questioned whether the FMC’s “contract-based” billing provision, which places sole responsibility on the contracting shipper regardless of fault, will put the incentives for freight fluidity in the right place.
NITL, in contrast, favored a “conduct-based” rule that would have placed responsibility for demurrage and detention charges on the party affecting the timely pick up or return of containers.
“We’re going to have to wait and see whether or not this improves fluidity — we don’t know yet,” Booth said. “Because if you’re going to get the bill when you’re at fault, you’re going to check your conduct to avoid getting that bill. But this rule requires the bill to be the responsibility of the shipper no matter who’s at fault.”