AgTC’s Friedmann hails FMC rule implementing Ocean Shipping Reform Act

Peter Friedmann, executive director, Agriculture Transportation Coalition (AgTC) hailed the new rule issued by the Federal Maritime Commission (FMC) implementing the Ocean Shipping Reform Act which also addresses Detention and Demurrage fees assessed on shippers by ocean carriers.

In an interview with AJOT, Friedmann said: “The real effect of the (FMC) rule was the requirement that under the Ocean Shipping Reform Act, that carriers must disclose to shippers why it is that they are charging the fee for Detention and Demurrage. What was the event? Often the carriers did not know. The carriers need to know why it is that they were charging the fee. When they found out in many cases the issue could be resolved … Sometimes the Detention and Demurrage charges were justified… We often have seen that … carriers did not know and did not know why the charges were assessed. Under the new rule, they need to tell you why the detention and demurrage charge was assessed against the shipper. And they need to do that in 30 days.”

He noted: “The 30-day invoicing requirement is also a major improvement, and again, reflects a primary motivation for the U.S. shipping public to pursue relief from the Commission, and subsequently from Congress. While it is unfortunate that it took an Act of Congress to gain this … achieve this … we are glad that thus far, most carriers say they can comply. We will be glad to share with the carriers those instances when our members receive ‘outdated’ invoices, so they can be addressed consistent with this Final Rule. “

Ocean Carrier Lawyers

Friedmann blamed ocean carrier lawyers: “Often, the problem was lawyers from the ocean carriers misled the carriers about what was going on. In a number of cases, detention and demurrage fees should not (have been) assessed because the container was not available.”

In an earlier ruling, “the FMC said in that kind of case, ‘don't charge a detention or demurrage fee’ but the carriers ignored this rule.”

Even so, we saw carrier lawyers “continued to fight (against) passage of the law just as they opposed the FMC rule … they also fought against the rule that was just issued implementing the law.”

Eventually, Friedmann said, “we were forced to push Congress to pass the Ocean Shipping Reform Act, which then made this rule part of federal law. And as we know, Democrats and Republicans often don't agree on anything. But in this case, both Democrats and Republicans agreed in the Senate and in the House to pass the Ocean Shipping Reform Act. “

Protecting Third Parties

The mandate of this new rule, “prohibiting carriers from imposing Detention & Demurrage charges on parties with whom they have no contractual relationship, such as the "notify parties' including customs brokers, is welcomed, and frankly should never have had to be the subject of a Rulemaking. Carriers should have known that coming after the customs broker who had no contract with the ocean carrier, did not book the cargo, did not pay the freight, did not handle any part of the shipment, was not going to fly for long.”

Furthermore, “foisting Rottweiler law firms on the small family-owned and operated U.S. customs brokers was not going to endear the carriers to members of Congress or the FMC Commissioners. I mean, how 'tone deaf' can they be? Just because their lawyers say something, doesn’t mean they should do it.”

Praise for A.P. Moeller- Maersk

Friedmann is hopeful that ocean carriers will now work more constructively with shippers: “The fact is, the ocean carrier executives have much better judgement than their U.S. lawyers, they immediately back off when this was raised to their level. A.P. Moller - Maersk gets kudos for directing its internal documentation teamwork with the customs broker to understand how these charges came to be imposed, and then fixing its process to avoid it in the future. That's the way all these carrier-customer challenges can and should be resolved. Not by carrier lawyers treating the carriers' customers as the enemy. Shippers need carriers, carriers need shippers. It's long past time that carriers' lawyers understand.”

Harbor Trucking Association Also Hails FMC Ruling

The Harbor Trucking Association (HTA) also hailed the ruling and noted: “Under the new rule, demurrage and detention invoices must be issued by the party that has a contractual relationship with the billed party for the carriage or storage of goods. ​ This requirement is intended to ensure that the party receiving the invoice has first-hand knowledge of the terms of the contract and is in the best position to understand and dispute any charges if necessary.”

​ ​HTA said the rule also prohibits billing parties from issuing invoices to persons with whom they do not have a contractual relationship: “This provision is designed to protect third parties, such as motor carriers who do not have a contractual relationship with the ocean carrier from unfair billing practices. ​ It ensures that invoices are only sent to parties who have a direct contractual relationship with the billing party, thereby reducing confusion and disputes over payment responsibility.”

“This is a great step forward (for) the industry” said Matt Schrap, CEO of the Harbor Trucking Association (HTA).

Schrap believes that the implementation of this rule will lead to more accurate and transparent demurrage and detention invoicing practices, benefiting all stakeholders in the maritime industry. ​ It will provide greater clarity on who is responsible for payment and promote a more efficient and reliable freight delivery system.

“Standardized billing practices will only serve to drive efficiency gains and most importantly, once fully implemented, the rule will ultimately eliminate the rampant … extortion (of) motor carriers through unjust and unreasonable per diem and detention charges.”

A Long Struggle

Friedmann said that AgTC and shippers pursuit of “reform of D & D practices began before but accelerated during the pandemic supply chain crisis. Those practices contributed to massive financial injury to U.S. shippers, from small ‘main street’ businesses to the nation’s very largest ag exporters and retailers (and literally billions of dollars of profits to the ocean carriers). Such abusive practices included billing D & D without informing the shipper what or when or where the detention/demurrage occurred, waiting months (in some cases years) to impose the charges, refusing to accept or act upon requests for explanation, imposing the charges on ‘notify parties’ such as customs brokers, who had no role in booking the cargo or relationship with the carrier, locking out truckers with whom neither carrier nor terminal had any contractual relationship, etc.”

Friedmann noted: “This has been a long struggle. It is, on one hand, the culmination of years of effort by the US exporters and importers and intermediaries, initiated and led by (Federal Maritime) Commissioner Dye, leading to the Commission’s adoption of Commissioner Dye’s draft of the “Interpretive Rule on Detention and Demurrage”, providing the basis for Congressional intervention in the form of the Ocean Shipping Reform Act of 2022.”

Bi-Partisan Support

AgTC recognized the unity of the Federal Maritime Commission, “combined with White House support for reform, and the bipartisan nature of the Act’s authors and legislative managers of the original drafts in the House, Congressmen John Garamendi (D-CA) and Rusty Johnson (R-SD), and of the Senate version by Senator Maria Cantwell (D-WA) in the Senate, demonstrates that the Commission is “on the right side of history.”

Finally, Friedmann noted: “An important lesson should be learned: had the ocean carriers taken the Interpretive Rule seriously and given even the slightest indication they were changing their practices to conform, there may not have been the need for the AgTC and the U.S. shipping public to seek Congressional intervention. There may never have been OSRA, revisions to the long-standing Shipping Acts of 1984 and 1998, … Carriers were ill-advised to ignore the Interpretive Rule. Wiser would have been for carriers to work with organizations representing their customer shippers, to learn what was transpiring with Detention and Demurrage billing ‘in the field’ and fixing those. We have found that once informed of some of the realities of the billing, at the AgTC’s Ag Shipper Workshops with individual ocean carriers, most ocean carriers were grateful to be informed, and expressed the desire to address them.”