September 23, 2019 Practice Points

FMC Seeks Comments on Demurrage and Detention Rules

This notice arose from a complaint filed with the FMC by a group of trade associations representing various importers, exporters, drayage providers, freight forwarders, customs brokers and third-party logistics providers who sought better demurrage practices.

By David Y. Loh

On September 13, 2019, the Federal Maritime Commission (FMC) issued a Notice of Proposed Rulemaking and has issued a deadline of October 17, 2019 for the submission of public comments.

This notice arose from a complaint filed with the FMC by a group of trade associations representing various importers, exporters, drayage providers, freight forwarders, customs brokers and third-party logistics providers who sought better demurrage practices. In response to this complaint, the FMC conducted a lengthy investigation which included gathering written statements from various stakeholders in the maritime industry, including container lines and terminal operators.

Based on this investigation, the FMC recommended there should be standardization of terminology. For example, while most in the industry agree that demurrage refers to use of terminal space and detention means a charge for use of a container, these terms are not always used consistently. Some carriers charge demurrage and detention interchangeably. In other cases, a rental fee for other equipment such as chassis are included but in others there is a separate charge for other equipment.

The FMC also recommended standardization in how demurrage and detention charges were assessed. Cargo interests were especially interested standardized billing practices.

The FMC further considered whether the industry would benefit from consistent and transparent dispute resolution practices for demurrage or detention disputes. On this point, there was a wide range of views. For example, cargo interests believe that the free time and demurrage clock should be stopped if a container-not-available ticket is issued because the container could not be moved due to factors beyond the control of cargo. Marine terminals and carriers affirmative stated that they do regularly waive demurrage charges but were hesitant in agreeing to wholesale change in how they assess and calculate free time or demurrage.

The FMC noted there was divergence of views when a container should be considered “available” for pick up. Traditionally, a notice of the vessel’s arrival has been relied by the industry to determine a cargo’s availability. However, there are many times—due to port congestion, terminal closures or lack of appointments—when containers cannot be picked up. Moreover, the cargo sometimes needs clear customs and there may be freight and other charges outstanding before the container can be released.

Given these various interests and differing points of view, the FMC is looking for public comment by October 17, 2019.

The Admiralty Litigation Committee will continue to monitor these and all changes that might be of interest to the bar and clients generally.

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David Y. Loh is a member with Cozen O'Connor in New York City, New York.

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