by The Federal Maritime Commission’s recent ruling update on detention and demurrage charges may have truckers feeling like they’ve hit a stretch of open road.
Here’s why: When the Ocean Shipping Reform Act passed in 2022, it required that the Federal Maritime Commission clarify who should be billed for detention and demurrage charges.
According to Maersk, a major shipping and logistics company, “Demurrage and detention are typically found together in logistics. They are two separate things, but they’re closely linked.
- Demurrage: the time the filled containers spend inside the terminal. This is measured from when they are offloaded from the vessel or train until they are picked up at the port (gated out).
- Detention: the time the containers spend outside the terminal. Measured between picking them up at the port when they’re full and returning them to the port or a depot when they’re empty. For an importer, this is usually the time to unpack.”
Prior to this recent ruling update, motor carriers, despite not being party to shipping contracts between the ocean lines and shippers, often faced those charges from ocean carriers when shipping containers were delayed — either dockside or after being taken from the ports.
Many observers also believe that the recent FMC ruling will halt what some have called “power abuse” by container carriers who took unfair advantage of the global supply chain crippled during the pandemic.
In fact, in its update, the FMC reports that in the period between 2020 and 2022, nine carriers serving the U.S. container trades made a staggering $8.9 billion in demurrage and detention charges — charges that were often put in the hands of trucking companies.
Now, under the new rules, ocean carriers will have to work directly with the customer, a move that many say has set the stage for speedier dispute resolutions and smoother supply chain procedures.
In speaking to several logistics executives in our sector, they also pointed out that during the pandemic, the detention and demurrage charges resulted in skyrocketing costs to shippers and those hikes ultimately were passed on to consumers.
The problem became so overbearing that over a year ago, President Biden told Congress that, “During the pandemic, ocean carriers increased their prices by as much as 1,000%. And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead.”
Under the new ruling, as of May 26, ocean carriers and operators at marine terminals must send detention and demurrage invoices within 30 calendar days from when charges were last incurred.
For their parts, shippers and other parties invoiced will have 30 calendar days to request that charges be refunded.
Also under the updated rules, unless the parties agree to a longer period, the carriers and terminal operators must try and resolve the matter within 30 calendar days.
The rules also outline the minimum information required on the invoices and include things such as the date of invoice, due date, allowed free time, specific dates for which the fees were charged, etc.
The new rules also warn that, “Failing to include any of the required information in a detention or demurrage invoice eliminates any obligation of the billed party to pay the applicable charge.”
I will be the first to say that as business remains soft, we all have an uphill battle.
But I will also say that this ruling will hopefully make that uphill drive a bit easier.
