Innovation teams of industry stakeholders “will meet on a limited, short-term basis to refine commercially viable demurrage and detention approaches.”
While the U.S. Federal Maritime Commission signed off on a report’s recommendations to improve the container shipping industry’s approach to demurrage and detention, the commissioners said it’s just the starting line to bringing clarity to a complex issue.
“When we started with this, we knew it was a complicated issue,” said FMC Acting Chairman Michael Khouri during a public meeting at the commission on Friday. “There are an awful lot of terminals with a lot of different practices.
“Clearly, this report is not the end,” he added. “But it’s a very productive, very encouraging and very promising beginning.”
Khouri praised Commissioner Rebecca Dye, who spent the past year leading the agency’s Fact Finding 28 investigation into the industry’s demurrage and detention concerns. During the past two months of the investigation’s “phase two,” she conducted field interviews with mostly port authorities and marine terminal operator representatives in Everglades and Miami, New York and New Jersey, and Los Angeles and Long Beach.
“My findings in this investigation emphasize the value of demurrage and detention charges when applied in ways that incentive all cargo interests to move cargo promptly from ports and marine terminals,” Dye said at the commission meeting, during which the Fact Finding Investigation No. 28 Final Report was publicly unveiled.
“I also find that international supply chain actors benefit from transparent, consistent and reasonable demurrage and detention practices, which would improve throughput velocity at U.S. ports, allow for more efficient use of business assets and result in administrative savings,” she said.
“I continue to believe that we can all agree that demurrage and detention processes should support prompt, efficient cargo delivery,” Dye added. “Improvements in these processes may require closer coordination and visibility among ocean carriers, marine terminals, intermediaries, truckers, shippers and chassis providers.”
The final fact-finding investigation report largely follows the recommendations of the interim report, which called for:
• Transparent, standardized language for demurrage and detention practices;
• Clear, simplified and accessible demurrage and detention billing practices and
dispute resolution processes;
• Explicit guidance regarding the types of evidence relevant to resolving demurrage
and detention disputes;
• Consistent notice to cargo interests of container availability;
• And establishment of an FMC shipper advisory board.
The final fact-finding investigation report also recommended that the commission set up FMC innovation teams composed of industry stakeholders “who will meet on a limited, short-term basis to refine commercially viable demurrage and detention approaches.”
“The success of the innovation team concept depends on having the right industry leaders at the table,” Dye said, adding that she “encourages those of you who want to be involved as this project moves forward to be in touch with my office.”
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 2016 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, when numerous shippers and ocean transportation intermediaries complained of mismatched fee assessments by ocean carriers and marine terminals that make it difficult for them to avoid.
The FMC commissioners concluded that further investigation was warranted and on March 5 initiated a fact-finding investigation into the conditions and practices related to these fees. Dye was put in charge of Fact Finding Investigation No. 28. Dye solicited further information from 23 ocean carriers, 44 marine terminals and numerous shippers and ocean transportation intermediaries, as well as drayage providers, during the past six months to develop the findings for the interim report, which was released Sept. 5.
Dye continued to meet with industry representatives both at the ports and her office during the drafting of the final report.
The industry generally praised the commission for completing the final report and its call for continuing to keep a spotlight on the demurrage and detention issue.
“I think the commission has taken a practical and logical approach in the investigation,” said John Butler, president and CEO of the World Shipping Council. “The system is complex, and there are lots of moving parts that fit together differently in each port.
“What was a radical idea five years ago — that supply chain partners should find a way to share information with the right people at the right time — is now a common goal across the industry,” he added. “There is a lot of work being done today to make that a reality, and the commission is right that this is the key to making the system work at its best.”
Jennifer Hedrick, executive director of the National Industrial Transportation League and member of the Coalition for Fair Port Practices, said, “We are encouraged that the commission is committed to taking further steps toward efficient port operations and reasonable detention and demurrage practices.
“NITL looks forward to participating in the innovation teams that the commission is establishing and working collaboratively with port terminal operators, carriers, NVOCCs, truckers and others to address these important issues and create workable solutions that will increase the efficiency of the maritime supply chain,” Hedrick said.
FMC’s demurrage report a ‘promising beginning’
