Evergreen Challenges FMC on D&D Fees in US Court of Appeals
Evergreen is using the decision in a small claim case related to detention and demurrage fees (D&D) to challenge the Federal Maritime Commission (FMC) on both its policies and its administration. In an upcoming hearing, the U.S. Court of Appeals for the District of Columbia will hear arguments in a case that has the potential to have a broader impact on the contentious issue of D&D fees.
The FMC has been outspoken on its views about D&D fees including issuing an Interpretative Rule which they contend was designed to provide guidance to the industry on the commission’s views and how it would approach the growing number of complaints related to the fees. During the surge in container volumes in the past two years, which resulted in port backlogs and shortages of equipment, shippers and trucking companies increasingly complained about how the carriers were imposing D&D fees. These fees became one of the driving issues for the 2022 reform of the Shipping Act.
The underlying case that is leading to the challenge from Evergreen stems from a small claim dispute in 2020 between a trucking company and Evergreen. Yamaha Motor Company was shipping a container with a motorcycle from Japan to its plant in Newnan, Georgia. A trucking company, TCW, picked up the container on April 28, 2020, at the Port of Savannah but did not return the container and chassis till May 26.
Evergreen imposed a late fee of $1,490 to TCW which asked Evergreen to waive $510 of the fee due to the Port of Savannah being closed for three days during the U.S.’s Memorial Day holiday, causing a portion of the delay. Further, the trucking company reported that the Yamaha plant had experienced a COVID-related closure contributing to the delay. Evergreen, however, refused the refund prompting the trucking company to file a complaint with the FMC seeking relief for the $510.
The FMC’s Small Claims Officer agreed finding the late fees was “unjust and unreasonable” in violation of the Shipping Act and ordered Evergreen to refund the money with interest. Indeed, subsequent to that, the FMC is working on additional rules toward D&D including its position that it opposes shippers being charged the fees on days when a port or terminal is closed. Large carriers have begun to amend their policies to reflect this position.
After a review of the Evergreen case by the full commission that upheld the decision of the Small Claims Officer, Evergreen in February 2023 filed a petition for the review of the case with the Court of Appeals. The carrier seeks to defend the use of D&D fees by itself and the broader industry as well as calling into question the FMC’s procedures and application of its rules in the review of the D&D complaint.
Evergreen takes the position that D&D fees “serve a critically important transportation and trade purpose – keeping cargo flowing by incentivizing cargo interests to efficiently remove their cargo from ports and return empty containers.” They argue if the FMC decision is upheld the resulting “blanket, fact-insensitive rule prohibiting these charges will only cause more equipment shortages at the expense of U.S. exports and create more congestion at U.S. ports.” They argue that the shipper and trucking company had been advised of the port’s holiday schedule and having the fees was an incentive to return the equipment before the holiday.
The case also seeks to raise a broader issue of whether the FMC is adhering to its own rules and considered all important aspects and provided a reasoned explanation for its decision. The brief in the case argues the FMC ignored its own Interpretive Rule, improperly limited its reasonableness analysis, and abandoned its “factor-based approach.”
The FMC’s position on the fees being charged for the days the port was closed during the holiday is that “incentivizing the impossible” is unjust and unreasonable behavior by the carrier. They also argue that the rule does not require, as Evergreen argues, that the FMC must consider other factors while noting that they did consider numerous elements.
The FMC in its response filed with the court argues that there was no error in its administration or the well-reasoned and straightforward application of a rule that Evergreen finds contrary to its own interests.
The decision of the Appeals Court has the potential to impact how the FMC administers its rules and the basic question of charging D&D fees to shippers on days when a port’s facilities are closed. Both the World Shipping Council and the National Association of Waterfront Employers have submitted amicus briefs for Evergreen in the case. Oral arguments have been set for October 20.