On April 22, 2022, the Federal Maritime Commission (FMC) fined Hapag-Lloyd A.G. and its agent, Hapag-Lloyd (America) LLC (collectively referred to as "Hapag-Lloyd"), for violating § 41102(c) of the Shipping Act of 1984. The FMC determined that Hapag-Lloyd unreasonably and unjustly assessed and invoiced detention charges against drayage company Golden State Logistics (GSL) for some of the eleven (11) containers in dispute. Hapag-Lloyd erroneously assessed the detention charges even though it "failed to provide an equipment return location" and "appointments were unavailable for equipment return during the allocated free time."
Section 41102(c) of the Shipping Act of 1984 requires that common carriers, marine terminal operators, and ocean transportation intermediaries establish, observe, and enforce just and reasonable practices and regulations for the receipt, handling, storage, and delivery of property. In this matter, the FMC addressed whether the application of detention "when empty containers cannot be returned because there are insufficient appointments available" is just and reasonable. The FMC determined that some of Hapag-Lloyd's detention charges were unreasonable for the following reasons:
- GSL provided evidence of email notifications to Hapag-Lloyd of the lack of available appointments to return containers, screenshots of the appointment calendars with date and time stamps, and copies of Hapag-Lloyd's responses.
- Hapag-Lloyd did not provide alternative locations for container returns, aid, or waivers for days where GSL provided evidence of insufficient appointments available with screenshots.
- The detention charges assessed were unreasonable because no amount of detention could have incentivized the return of the containers at issue on the identified days.
As a result, the FMC assessed a civil penalty of $882,220 and issued a cease and desist order against Hapag-Lloyd.
This enforcement action underscores that the FMC is ready and willing to address detention and demurrage-related concerns. Furthermore, the action provides insight into the types of evidence that may establish the unreasonableness of detention and demurrage charges and the necessity of assessing only charges that are designed to incentivize efficient freight flow.
We continue to monitor developments impacting the maritime trade sector. If you have any questions regarding on ocean shipping reform, recent FMC actions, or how these developments may impact your business, please reach out to Venable's International Trade Group for guidance.