FMC To Audit Ocean Carrier Demurrage and Detention Practices

Transportation Update

Date: July 23, 2021

On July 20, the Federal Maritime Commission (FMC) announced that it has established a new “Vessel-Operating Common Carrier Audit Program” and a dedicated team to assess ocean carriers’ compliance with the FMC’s interpretive rule regarding the reasonableness of detention and demurrage charges. The audit program is intended to address widespread and prolonged complaints from importers, exporters and motor carriers regarding increasing demurrage and detention charges assessed during periods of port congestion and growing scrutiny by Congress.

Ocean carriers assess detention fees for using containers and demurrage charges for storing cargo at ports. Both charges begin to accrue if the equipment is detained or cargo is stored beyond an allotted free time period. The FMC established the audit program at the direction of Chairman Daniel Maffei and will launch it immediately.

The program will focus on the nine largest global ocean carriers’ compliance with the demurrage and detention principles the FMC established in an interpretive rule it issued in the spring of 2020. In his remarks, Chairman Maffei said that the FMC would monitor trends in demurrage and detention practices and revenue and will take appropriate action if the audit team uncovers prohibited activities. Information gathered by the audit team may be used to promulgate changes in FMC regulations and industry guidance and to establish industry best practices.

The FMC’s announcement comes shortly after President Biden’s executive order directing federal agencies to take action to promote competition in various industries, including the ocean transportation sector. The executive order “encourages” the FMC to adopt initiatives to address unjust and unreasonable practices related to detention and demurrage charges. These charges have gained attention in recent years, especially during the pandemic, as imports have surged, creating significant port congestion. There have been widespread concerns that carriers are assessing these charges even when shippers cannot return containers or pick up their cargo for reasons beyond their control.

The audit program will begin with a request for information that will be used to establish a database of quarterly reports on demurrage and detention, which will be followed by individual interviews with the carriers. The top nine ocean carriers will be audited irrespective of whether a formal or informal complaint has been filed with the FMC. FMC Managing Director Lucille Marvin will lead the audit program and team.

FOR MORE INFORMATION

For more information, please contact:

Karyn A. Booth
202.263.4108
Karyn.Booth@ThompsonHine.com

Jason D. Tutrone
202.263.4143
Jason.Tutrone@ThompsonHine.com

Kerem Bilge
202.263.4104
Kerem.Bilge@ThompsonHine.com

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