“What shippers most need to know — are desperate to know — is when their cargo is actually available for pickup,” FMC Commissioner Rebecca Dye said.
U.S. Federal Maritime Commission officials told attendees of the American Association of Port Authorities’ Spring Conference in Washington, D.C., Wednesday that the third and final phase of the agency’s investigation to bring commercial clarity to the system of accessing detention and demurrage is underway.
“What shippers most need to know — are desperate to know — is when their cargo is actually available for pickup. We call this ‘availability plus,’” said FMC Commissioner Rebecca Dye, who is leading the demurrage and detention investigation, known within the agency as Factfinding Investigation No. 28.
“Getting that information in a timely and accurate way is one of the crucial keys to improving throughput velocity and freight fluidity in our international freight delivery system,” she said.
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 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 2017 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 2018, when numerous shippers and ocean transportation intermediaries complained to the commission of mismatched fee assessments by ocean carriers and marine terminals that make it difficult for them to avoid.
The FMC launched the related factfinding investigation on March 5, 2018. The second phase of the investigation during the summer months included field interviews led by Dye with ocean carrier and marine terminal representatives at the ports of Los Angeles and Long Beach, the Port of Miami and the Port of New York and New Jersey, as well as interviews at her office in Washington, D.C. The commission released its report for the second phase, including recommendations, on Dec. 21.
The third and final phase of the FMC’s investigation, which was announced March 1, will bring together groups of industry representatives in the form of “innovation teams” to develop “transparent and standardized language for detention and demurrage practices.”
These innovation teams will be composed of a broad range of representatives from the industry, including shippers, freight forwarders, non-vessel-operating common carriers, ocean carriers and marine terminal operators.
“Soon we will hold meetings of industry leaders to discuss commercially practical demurrage and detention approaches in four of the areas identified: standardized language, clear billing and dispute resolution processes, guidance as to relevant evidence and consistent notice of actual availability of cargo and a reasonable opportunity to pick up that cargo,” Dye said.
“All of the discussions will take place in the context of the purpose of demurrage and detention: to provide incentives to shippers to pick up cargo and return containers,” she said. “The crucial question is: Are demurrage and detention charges, as currently applied, working as intended, as incentives to shippers to pick up cargo and return equipment?”
Last week Dye met with Dave Thomas, deputy executive director at the Port of Baltimore, and a group of terminal, trucking and logistics company officials to discuss port operations and detention and demurrage charges.
She said that unlike the commission’s Supply Chain Innovation Teams project, which was established in 2016-17 to develop recommendations for a national port information system to better coordinate cargo movement in the U.S., the industry participants in the FMC’s demurrage and detention discussions will not be asked to reach agreement, “although we expect there to be substantial agreement on many points, thanks to the cooperation of all the interested parties.”
The details gathered from the industry discussions will contribute to Dye’s final recommendations to the commission, which is scheduled for completion by Sept. 3.
“I am confident that we can develop practical guidance in this area that will address customer frustration and also improve the operation of our freight delivery system to move more cargo,” she said.
FMC Chairman Michael Khouri, who initiated and supported Dye’s demurrage and detention investigation, said, “A ‘one size fits all’ regulatory response is most often not the best solution to operational problems and especially when we are dealing with a wide variety of business and operational practices in over 300 different ports and marine terminals along the U.S. coastline from Maine around to Alaska and over to Hawaii.”
Khouri added, “A valuable and important role for the commission is its ability to bring stakeholders together and facilitate commercial rather than regulatory solutions to problems.”
