Shippers and brokers applaud FMC demurrage and detention guidelines

New ruling provides essential protections, but lingering issues remain.

Shippers, brokers and many others in the supply chain industry are praising a new final ruling from the Federal Maritime Commission (FMC) cracking down on unfair demurrage and detention (D&D) practices. (See sidebar on Enforcement Action)

FMC states that the ruling, Demurrage and Detention Billing Requirements — which was finalized in February, concluding a multi-year process to regulate D&D — “establishes new requirements for how common carriers and marine terminal operators (MTOs) must bill for demurrage and detention charges, providing clarity on who can be billed, within what timeframe, and the process for disputing bills.”

This ruling is welcome news for shippers, importers, freight forwarders, customs brokers, and trucking companies who often partner in supply chains, says Sandra Castro, director of business management at JF Moran.

“Overall, we believe the FMC’s rule on detention and demurrage billing will be positive for the supply chain,” Jonathan Gold, National Retail Federation (NRF) VP of Supply Chain and Customs Policy, concurs.

A Question of Fairness

“Detention and demurrage billing is a critical policy empowering terminal operators to incentivize cargo fluidity at ports,” states Cary S. Davis, president and CEO of the American Association of Port Authorities, (AAPA), and FMC agrees.

However, many industry experts feel D&D fees have overstepped that objective, unfairly penalizing shippers and others. Bill Westman, executive director, Meat Import Council of America (MICA), says some MICA members were billed millions in D&D charges in recent years. “It’s important to keep detention and demurrage charges limited to their intended purpose of incentivizing the movement of goods,” he warns.

Gold says NRF has been raising concerns about the lack of clarity around D&D charges for years. “These challenges were further highlighted by the significant costs we saw during the pandemic due to congestion and the inability of shippers to pick up their cargo because of issues beyond their control.”

Addressing this question of fairness, the ruling requires carriers and MTOs to state the reason D&D charges were assessed on the invoice and certify that “the billing party’s performance did not cause or contribute to the underlying invoiced charges.”

“This new rule will provide clarity to the billing process which was sorely needed,” Gold responds.

Not everyone agrees the ruling was necessary, however. “AAPA … is concerned that the Final Rule does not align with Congress’ intentions in the Ocean Shipping Reform Act,” says Davis. “Shippers should have fairness and redress to make sure D&D charges are correct and justified, but Congress examined this carefully and specifically decided port and terminal practices were consistent and fair.”

Robert Murray, President of the National Association of Waterfront Employers (NAWE), explains further, “The final version of OSRA 2022 struck MTOs from the law’s substantive demurrage billing requirements. MTOs and members of Congress urged the FMC to follow this Congressional intent, however, the FMC chose to adopt a broader final rule that included MTOs. While this aspect of the final rule was concerning, it is positive…