FMC Issues Final Report on Demurrage and Detention Practices
Date: January 18, 2019
In December 2018, the Federal Maritime Commission (FMC) issued its Final Report in Fact Finding Investigation No. 28: “Conditions and Practices Relating to Detention, Demurrage, and Free Time in International Oceanborne Commerce” (Final Report). In it, the Fact Finding Officer, Commissioner Rebecca F. Dye, sets forth her findings throughout the investigation’s phases and makes recommendations related to demurrage and detention practices that would improve the performance of the U.S. freight delivery system.
Based on substantial information collected throughout the investigation, Commissioner Dye found that:
- demurrage and detention charges create valuable incentives for cargo interests to quickly pick up cargo from ports and marine terminals,
- the industry can benefit from transparent, consistent and reasonable demurrage and detention practices, which would improve throughput velocity at seaports and asset utilization, and
- the goals of demurrage and detention practices can be achieved by focusing port and marine terminal operations on notice of actual cargo availability.
Building on the finding that concerns about demurrage and detention in U.S. trades reflect more systemic issues and are not limited to weather- or labor-related port congestion in 2014–2015, a small subset of large ports or episodic events, Commissioner Dye recommends the organization of FMC Innovation Teams composed of industry leaders to establish commercially viable demurrage and detention practices concerning:
- Standardization of language. The Final Report highlights the need for standardized, transparent language for demurrage and detention practices but also points out the challenges with defining the terms and implementing standardization. As responses from various industry stakeholders demonstrate, there is no consensus on the definitions of demurrage and detention terms.
- Billing practices, dispute resolution processes and evidentiary guidelines. The Final Report discusses the lack of uniformity in demurrage and detention billing practices and the confusion created among the stakeholders. It concludes that the most effective way to address this problem is to explain the demurrage and detention billing practices on public web pages.
The Final Report also highlights problems associated with demurrage and detention dispute resolution processes and recommends that dispute processes and procedures be clearly established, be made available on public web pages and include contact information for the person or organization who can discuss and resolve any disputes.
In addition, the Final Report explains the benefits of establishing evidentiary guidelines that would identify the types of evidence that can be used to resolve demurrage and detention disputes more efficiently.
- Notice of cargo availability. The Final Report discusses concerns associated with ocean carrier and marine terminal operator practices involving container availability, accessibility and timely notice thereof. Specifically, it explains that carriers are responsible for tendering cargo for delivery, which includes providing requisite notice regarding cargo availability, making terminal facilities available, ensuring cargo is accessible for retrieval and providing adequate time for cargo retrieval. Carriers may rely on marine terminals to meet these obligations. The Final Report also clarifies that “[f]or demurrage and detention to be effective, and for demurrage and detention practices to be reasonable, they must be tailored (and limited) to those situations in which the container is actually available.”
The Final Report further explains that the following considerations are related to the issue of container availability:
- Whether carriers and marine terminals using appointment systems provide shippers and truckers a reasonable opportunity to make an appointment to pick up cargo following the notice.
- Whether carriers and marine terminal operators extend free time when there is a delay due to government inspections or holds.
- Whether carriers and marine terminals take into account terminal closures occurring after notice of availability is given.
- Shipper Advisory Board. The Final Report also recommends establishing a Shipper Advisory Board for the FMC to offer advice on emerging maritime issues.
Stakeholders who are interested in participating in the FMC Innovation Teams that will address these important issues should contact Commissioner Dye.
FOR MORE INFORMATION
For more information, please contact:
Karyn A. Booth
Jason D. Tutrone
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