Observe and Report: Federal Maritime Commission Reviews Detention/Demurrage at US Ports

3 min

On April 13, the Federal Maritime Commission (FMC) released a report covering detention, demurrage, and free time issues stemming from congestion at many US ports. While the report stops short of recommending any specific agency action, it outlines a variety of options for the Commission, as well as industry stakeholders.

The report is based on comments received during a series of four forums held at major ports, as well as a review of the tariff publications of six vessel-operating common carriers (VOCCs)—Maersk Line, Mediterranean Shipping Company, CMA CGM, Evergreen, COSCO, and OOCL—and the public rules of the port authorities of Los Angeles, Long Beach, Oakland, New York/New Jersey, Tacoma, Seattle, Houston, Georgia, South Carolina, and Virginia.

Overall, FMC found that the average total prices for both demurrage and detention may be higher for importers than for exporters, and that demurrage charges are typically higher than detention charges. Additionally, the report noted that it appears VOCCs generally control the prices and policies related to these issues, as marine terminal operators (MTOs) seem to collect detention and demurrage charges from the cargo according to the rates and free time as instructed by the VOCC.

The report details the frustrations and concerns expressed by the entire shipping community caused by port congestion. In general, shippers feel the normal free-time period is no longer sufficient, and that they should not be responsible for charges associated with congestion when they have no control over their cargo at the ports. Conversely, VOCCs and MTOs may argue that they are not the cause of the slow downs, and, at least for VOCCs, their own vessel operating costs have increased because of the delays.

The Commission detailed a variety of potential actions that can be taken both by itself and by other industry stakeholders.

VOCCs: Carriers can "stop the clock" on free time—waive, reduce, or compromise on charges relating to congestion if there is flexibility under their tariff or service contract.

MTOs: Operators with agreements on file with FMC can address congestion issues collectively in order to reduce costs, as well invest in technology improvements for gate operations.

Port Authorities: Ports can add requirements and/or incentives for terminal productivity to help the free flow of containers into and out of ports.

Shippers and Truckers: Frustrated parties can seek to change current practices by:

  1. Requesting mediation before the FMC;
  2. Bringing a complaint to the FMC;
  3. Petitioning the Commission for a declaratory order or rulemaking; or
  4. Initiating litigation in state or federal court.

FMC: The Commission has a variety of options to address detention and demurrage charges, including:

  1. Establish a Federal Advisory Committee to provide the agency with non-binding recommendations;
  2. Use its Shipping Act authority to require reporting from regulated parties on these issues;
  3. Initiate an adjudicatory proceeding to determine whether the free time and demurrage practices of a particular MTO or VOCC violate the Shipping Act;
  4. Respond to a petition filed to the Commission;
  5. Commence a non-adjudicatory fact-finding proceeding; or
  6. Issue a rulemaking.

Importantly, the Commission staff report does not recommend any of the actions described above, nor did it authorize any action to be taken. Rather, FMC Chairman Cordero encouraged parties to submit "substantive documentation and information of unreasonable practices regarding the application of demurrage or detention" and reminded stakeholders that they may file complaints for adjudication at the Commission that involve alleged violations of the Shipping Act. Indeed, the report concludes that "in the absence of documented facts that provide a basis for the Commission to take action, issues regarding application of demurrage and detention charges will continue to be reviewed as part of the broader examination of port congestion."

Please contact Venable's International Trade Group if you have any questions.