FMC Final Rules on Detention and Demurrage

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FMC Final Rules on Detention and Demurrage

The Federal Maritime Commission (FMC) issued its interpretive rules on the reasonableness of carrier and marine terminal operator (MTO) policies and practices when assessing demurrage and detention. In 2016 a petition was filed by the Coalition for Fair Port Practices, along with several trade associations, citing examples of unreasonable charges for detention and demurrage.

The associations and their members submitted testimony, comments and arguments throughout the process. The petition included examples of situations where Non-Vessel Operating Common Carriers (NVOCC) and shippers were assessed these charges although they were not responsible for delays resulting in the charges. The petition requested that the FMC initiate a rulemaking proceeding for the purpose of clarifying what constitutes just and reasonable practices with respect to the assessment of detention and demurrage by the carriers and MTOs.

After three and a half years, rounds of investigations by FMC Commissioner Dye and multiple filings of briefs and comments, the FMC has now acted and issued final rules. The rules are set forth in a 95-page decision, which conveys the issues and contentions. The final rules state that the “incentive principle” when assessing the reasonableness of detention and demurrage practices, the Commission will look to whether they are meeting their intended purpose as financial incentives to facilitate the prompt and efficient movement of freight.

The rules list several factors the FMC will consider when determining the reasonableness of these charges. The FMC also specified that the factors listed were not meant to be exclusive and they will consider additional factors if presented in any case. The factors the Commission might consider when determining reasonableness include:

  1. Cargo Availability

  1. Empty Container Return

  1. Notice of Cargo Availability

  1. Government Inspections

  1. Detention and Demurrage Policies

  1. Transparent Terminology

  1. Non-Preclusion

The Surface Transportation Board (STB) has also issued three separate decisions concerning railroad demurrage and accessorial charges policies and practices. The STB policy statement includes two fundamental principles: (1) “demurrage rules and charges may be unreasonable when they do not serve to incentivize the behavior of shippers and receivers to encourage the efficient use of rail assets. In other words, charges generally should not be assessed in circumstances beyond the shipper’s or receiver’s reasonable control,”; and (2) “transparency, timeliness and mutual accountability by both rail carrier’s and the shippers and receivers they serve are important factors in the establishment and administration of reasonable demurrage and accessorial rules and charges.”

The final rules do not mean that there will be an end to unreasonable detention and demurrage charges, it provides guidance on how the Commission is likely to rule IF a complaint is filed with the agency. If you have any additional questions, please contact your Krieger Worldwide representative.

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