On March 5, 2018, the Federal Maritime Commission (FMC) issued an Order of Investigation into the practices of vessel operating common carriers and marine terminal operators (MTOs) related to detention, demurrage and per diem charges. The investigation stems from a petition filed with the FMC by the Coalition for Fair Port Practices on December 17, 2016 and FMC hearings on the matter in January 2018.
The Coalition (represented by Thompson Hine) raised substantive issues regarding the assessment of demurrage, detention and per diem, i.e., charges by ocean common carriers and MTOs for the use of terminal space and equipment, during port congestion or other incidents that prevent the timely pickup of cargo or return of equipment. Shippers, consignees, drayage providers and other stakeholders argued that such charges are unjust and unreasonable when they result from incidents over which they lack control, such as federal government inspections, truck shortages, chassis shortages, discrete weather events, labor disputes, lack of effective appointment systems, and general conditions in and surrounding port areas.
FMC will determine its policies regarding regulated entities’ detention, demurrage and free time practices based on the information obtained in this investigation and the recommendations of the fact-finding officer, Commissioner Rebecca Dye. Specifically, Commissioner Dye is expected to develop a report detailing:
- Whether, and if so, how, the alignment of commercial, contractual and cargo interests enhance or aggravate the ability of cargo to move efficiently through U.S. ports.
- Whether, and if so, when, the carrier or MTO has tendered cargo to the shipper and consignee.
- Billing practices for invoicing demurrage or detention.
- Practices with respect to delays caused by various outside or intervening events.
- Practices for resolving demurrage and detention disputes between carriers or MTOs and shippers.
The FMC has begun seeking information from ocean carriers and MTOs on the above and related topics. As Commissioner Dye has noted, the ultimate resolution in this matter has the potential to affect each stakeholder in the industry. Thus, it is critical to the FMC that shippers, dray truck companies and other affected parties also step forward and cooperate with the investigation.
An interim report of findings and recommendations is due no later than September 2, 2018, and a final report will be issued to the FMC for consideration, discussion and a vote no later than December 2, 2018.
Companies impacted by port demurrage, detention and per diem should consider participating in this proceeding to help shape the FMC’s policy determination.