Rebecca Dye of the Federal Maritime Commission is scheduled to deliver her recommendations to bring clarity and conformity to the U.S. ocean shipping industry’s assessment of container demurrage and detention charges to her fellow commissioners on Sept. 3.
The recommendations will be presented in the form of “official guidance,” not as proposed regulations, said Commissioner Dye, who led the year-and-a-half-long investigation, known as Fact Finding 28, on behalf of the commission.
“I’m not a big proponent of regulation, except as a last resort,” she told American Shipper in an interview. “In this case, I think we can work this out in other ways, and I’m confident that we’ll get full cooperation from our ocean carriers and marine terminal partners.”
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 a container terminal.
Shippers have long contended that ocean carriers and marine terminals use these fees not only as punitive measures to combat excess free time but to generate revenue. The argument came to a head during a period of intense congestion at U.S. West Coast ports in late 2014 and early 2015 and again during the aftermath of Hanjin Shipping’s bankruptcy in August 2016.
After the filing of a petition by 26 trade associations of the Coalition for Fair Port Practices in December 2016 and subsequent public hearings in early 2018, the commission approved the initiation of the Fact Finding 28 investigation in the spring of 2018 and put Dye in charge. She conducted the investigation in three phases.
Dye’s Fact Finding Investigation No. 28 Final Report was publicly released on Dec. 21 and was followed in March by the announcement of the third phase related to developing the guidance for implementing the report’s four key recommendations:
- Creating standardized language for demurrage and detention.
- Simplifying the dispute resolution process and billing practices associated with the assessment of these fees.
- Providing guidance on what evidence is relevant to promptly resolving demurrage and detention disputes between shippers, carriers and marine terminal operators.
- Ensuring consistent industry notice for container availability and equipment returns.
To put these four recommendations into practical guidance, Dye enlisted two advisory groups, each composed of 15 industry representatives, which met at the FMC’s headquarters in Washington, D.C., for two days.
“These industry leaders focused on the freight delivery system as a whole, ensuring that decisions made in one part of the supply chain don’t end up with unintended negative consequences in another,” she said. “It was hard work.”
Dye said demurrage and detention fees remain necessary “to incentivize good behavior on the part of shippers” in how they efficiently collect their cargo at the terminals and promptly return the equipment. However, these fees should not be imposed on shippers who have taken the necessary care to provide the proper documentation, expeditiously collect their cargo and return equipment on time, but are shut out due to service breakdowns among ocean carriers and marine terminal operations, as well as unexpected Customs and Border Protection cargo holds for inspection, outside their control, she added.
“The most important thing for shippers is to get their cargo and keep the system moving. This is important to the carriers too. If their equipment keeps moving, then they can make more money from the use of it,” she said.
On April 1, the Ocean Carrier Equipment Management Association (OCEMA) took the proactive step of publishing a “Best Practice” document to address demurrage and detention issues identified in the FMC’s Fact Finding 28 interim report.
OCEMA identifies itself as an association of 11 major U.S.- and foreign-flag ocean carriers that provides a forum for its members to discuss operational, safety and efficiency issues pertaining to the intermodal transportation of ocean freight within the U.S. The association also operates the CCM chassis pool system of about 120,000 chassis in more than 200 intermodal locations nationwide.
Dye praised OCEMA’s Best Practice document as a constructive means to resolve demurrage and detention disputes with shippers. “It’s very good. We’re going to use it,” she said. “We appreciate them stepping up to do that.”
Once the recommendations are submitted to the commission on Sept. 3, Dye said the FMC will “continue to monitor” demurrage and detention practices and policies within ocean container shipping.
“I’ve been very frank with every shipper group which I have spoken to and met that this will not address every single problem for every shipper,” she said. “There is still work to be done within these recommendations.”
