FMC Investigating Detention, Demurrage & Per Diem Expenses

The Federal Maritime Fee (FMC) has launched an investigation into detention, demurrage, and per diem fees. And the shippers rejoice.

Eric Johnson reported in American Shipper:

The Federal Maritime Fee (FMC) on Monday voted to launch an investigation into the liner provider trade’s observe of assessing detention, demurrage, and per diem fees.

The investigation, headed by Commissioner Rebecca Dye, pertains to a petition filed in December 2016 by a coalition of shippers, associations and trucking organizations. The petition requested the FMC to undertake a coverage to limit ocean carriers’ capacity to evaluate what the coalition deemed unreasonable detention, demurrage, and per diem penalties, notably when the reason for the infractions was past the management of cargo house owners’ or their representatives.

Shippers have been making complaints to the FMC for years about demurrage, detention, and per diem fees.

In 2015, we blogged about the Los Angeles Customs Brokers and Freight Forwarders Affiliation (LACBFFA), together with 94 different organizations, sending a letter to the FMC to cease unfair practices of detention, demurrage, and per diem fees additional penalizing shippers who have been already struggling losses from port congestion past their management.

At the moment, port congestion had been an issue for a while, even earlier than slowdowns and mini-lockouts began taking place the earlier 12 months on the West Coast as a result of contentious contract negotiations between the Worldwide Longshore & Warehouse Union (ILWU) and the Pacific Maritime Affiliation (PMA). Congestion turned a lot worse through the negotiations that merchandise didn’t make it to retailer cabinets for the vacations and U.S. agricultural merchandise rotted on the docks as an alternative of being exported.

It was no shock that shippers have been offended when on high of dropping cash from items not shifting on the ports, together with many U.S. exporters dropping contracts and enterprise companions overseas, they have been charged charges for his or her cargo not shifting.

After all, extra than simply shippers have been damage by these charges. That’s why that 2015 letter to the FMC represented not solely importers and exporters, but additionally producers, retailers, distributors, wholesalers, farmers, truckers, and different provide chain stakeholders.

Eric Johnson’s American Shipper article brings up each that interval of congestion through the 2014-2015 labor contract strife and the congestion and cargo delays within the aftermath of Hanjin’s collapse as occasions this situation of demurrage, detention, and per diem fees has come to a head.

The December 2016 petition lastly bought the ball rolling on potential motion from the FMC on these fees shippers have lengthy hailed as unfair. The FMC held hearings earlier this 12 months the place shippers and shipper associations have been in a position to convey their complaints earlier than the commissioners.

Nevertheless, the hearings didn’t solely give an opportunity for shippers and members of the provision chain who’ve complaints concerning the detention, demurrage, and per diem fees to talk.

Johnson writes:

The FMC held two days of hearings in mid-January to listen to from a spread of stakeholders on the petition, together with importers, shipper associations, drayage suppliers, carriers, and terminal operators.

The latter two teams contend that the petition seeks to push the entire inherent danger in provide chains onto them by not letting them penalize shippers and shippers’ representatives when containers are saved in marine terminals or saved by shippers for too lengthy. Moreover, carriers have emphasised that the intensely aggressive nature of liner transport means they can’t excessively penalize shippers for detention and demurrage and preserve good business relationships with these prospects.

Advocates for the liner provider and terminal operator trade additionally urged the FMC to fastidiously weigh the results of appearing on the petition, because it may very well be perceived legally as an excessive amount of of an overreach into what they contemplate purely business exercise.

Whereas Johnson experiences there isn’t a presumed end result to the petition by the ordered investigation, I’d argue that the investigation in and of itself is a win for shippers.

Clearly, that there’s an investigation to seek out out the info behind demurrage, detention, and per diem fees doesn’t imply that such fees will likely be stopped, decreased, or regulated. Nevertheless, up to now, shippers’ complaints about these fees all the time appeared to fall on deaf ears.

From the quotes in Johnson’s American Shipper article, there appear to be sympathetic ears listening to shippers’ complaints now. And extra importantly, these sympathetic ears belong to folks with the facility to do one thing concerning the scenario.

“The coalition raised substantive points in each their petition and their testimony at our January listening to investigating provider and terminal detention and demurrage practices,” Performing FMC Chairman Michael A. Khouri stated in a press release. “Numerous alleged practices have been described that—with out countervailing or explanatory testimony and proof—could be troubling from my perspective…”

There isn’t any doubt shippers have a vested curiosity within the outcomes of the FMC’s investigation of those fees. Definitely, there are occasions when detention, demurrage, and per diem fees are justified; nevertheless, when the costs are being assessed solely to spice up profitability or due to port congestion attributable to labor strife, provider unreliability, or different components fully out of shippers’ management, these charges shouldn’t be positioned on importers, exporters, or their brokers.