Husch Blackwell’s Carlos Rodriguez says congestion related practices are unjust and unreasonable.
Several practices of ocean carriers and marine terminals that resulted in port congestion are unjust, unreasonable and should be declared unlawful by the Federal Maritime Commission, says a prominent maritime attorney.
Carlos Rodriguez, a partner in the Washington office of Husch Blackwell, says in an article appearing on the firm’s website, “Port Congestion Damages: The Politics of Low Hanging Fruit” that “in the context of the port congestion debacle that doesn’t seem to go away, some of the carrier practices are so outrageous that they clearly require the FMC to decide that particular practices are ‘unjust and unreasonable’ (and thereby unlawful).”
He adds, “There is a statutory basis for such legal conclusions. Some of the recent activities employed by ocean carriers are clear violations of the Shipping Act of 1998 (the Act), as amended.”
Rodriguez notes that under the Shipping Act, “A common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”
Those subjects, he says, are “squarely involved in the Port Congestion scenario, and the practices by ocean carriers and terminals that pertain to those activities are what have resulted in significant demurrage and detention charges to U.S. importers and exporters.”
He says there are certain obvious practices by ocean carriers and/or terminal operators that are unjust and unreasonable including:
- “On door delivery moves, the carriers, notwithstanding what the service contracts state to the contrary, inevitably have tariff regulations stating that any demurrage that results is for the account of the shipper (importer) even on a door move. This is clearly not a reasonable tariff rule—i.e., the carrier has undertaken the responsibility with its own truckers to deliver the goods to the shipper’s door but if they don’t do it timely, then the shipper pays demurrage or any resulting detention charges. Readily this is an unreasonable regulation by the carriers/terminals and thereby, unlawful pursuant to the Act. A shipper has no obligation to pick up the container from the terminal or the railhead, and has no control over the means of delivery, but is held responsible for demurrage and detention by a tariff rule. The carrier on the other hand, does have these obligations, collects the demurrage from the shipper for what it (the carrier) is unable to do.”
- “Activities at terminals such as chassis shortages (caused by carriers that have given up the means of delivery, the chassis), alliance practices, inadequate terminal operations (inability to find containers causing incredible delays), labor slowdowns, etc. – could all be the basis for a finding that charging detention due to inability to return equipment in a timely manner is an unjust and unreasonable practice. Common sense dictates that since all the contributing factors which have resulted in exaggerated detention charges to shippers and truckers is carrier/terminal related – and none shipper related – that such charges are being unreasonably levied. The carriers/terminals have taken a strict liability approach to the situation “no matter who is at fault, the shipper pays.” This is clearly, an unreasonable condition in this regulated environment.
Rodriquez notes the FMC “has yet to get directly into the fray” other than to issue its April 3 report on detention and demurrage.
He says that industry pressure on it to take action is mounting, pointing to an April 27 letter signed by 94 trade associations including groups such as the National Association of Manufacturers, National Industrial Transportation League, National Retail Federation, and Agriculture Transportation Coalition. The organizations are protesting that they and trucking firms are being charged detention and demurrage fees when factors beyond their control make it impossible for them to return chassis or empty containers, or pick up or drop off loaded containers within free time limits.
Rodriguez offers several suggestions, including addressing current damages by seeking reparations from ocean carriers and/or terminals based on violations of the Shipping Act and contract breaches through federal court, the FMC, or by initiating a petition for rulemaking at the FMC.
He also says in the longer term, the Shipping Act could be modified through legislation so that aggrieved parties do not have to engage in costly and protracted litigation to redress grievances.
Antitrust immunity for the shipping industry should be “revisited in view of the current state of affairs or there is a great likelihood we will be having this conversation repeatedly,” adds Rodriguez.
