FMC Publishes New Rules on Detention and Demurrage Charges

 

The Federal Maritime Commission on Friday released its highly anticipated update and clarification on the rules for detention and demurrage (D&D) charges. These fees became one of the most hotly contested elements of the industry contribution to the passage of the U.S.’s Ocean Shipping Reform Act of 2022 and hundreds of complaints ranging from hundreds to millions of dollars filed with the FMC.

“The new rule will advance the Commission’s goal of promoting supply chain fluidity by ensuring a clear connection between the failure to pick up cargo or return equipment in a timely manner and the appropriate fee. The rule ensures that billed parties understand the demurrage or detention invoices they receive by requiring certain identifiable information be included by the billing party on the invoice,” the FMC writes in announcing the publication of its 115-page Demurrage and Detention Billing Requirements.

The review and revision of the rules was required by the Reform Act and is the result of an extensive process. The FMC has been dealing with hundreds of individual complaints that range from unreasonable behavior to issues such as can the fees include days when the facilities are unavailable, who can be billed, the process for informing and billing, and the process for billing and appealing.

The final rule issued today establishes new requirements for how common carriers and marine terminal operators must bill for demurrage and detention charges, providing clarity on who can be billed, within what timeframe, and the process for disputing bills.

A key provision of the rule determines that demurrage or detention invoices can only be issued to either the entity that contracted with the billing party for the ocean transportation or storage of cargo, removing truckers who complained they were also being billed by the terminals and carriers. The rule however does permit the “consignee,” defined as “the ultimate recipient of the cargo or the person to whom final delivery of the cargo is to be made,” to also be billed. As such it fails to address the complaints of receivers who argued they never contracted the shipment but were still being billed D&D fees.

In addition to defining who can be billed the final rule defines steps in the process. Vessel operators and terminals now have 30 calendar days from when the last charge was incurred to send a bill. Also, it eliminates issuing bills to multiple parties simultaneously.

An appeal process is defined giving 30 calendar days to make fee mitigation, refund, or waiver requests. The billing party must attempt to resolve the matter within 30 calendar days, unless both parties agree to a longer timeframe while failing to supply required (and defined) information eliminates any obligation of the billed party to pay the applicable charge.

Most of the rule takes effect on May 26, 2024, although the portion covering “Contents of Invoice” also requires approval by the Office of Management and Budget. 

The goal was to provide better order and processes to the D&D fees. The Reform Act also provided new obligations for the carrier on how it operates. It remains to be seen if this will satisfy the complaints expressed by many of the leading trade organizations about the unjustified fees and shippers who complained of the excess fees with little response from carriers or terminal operators.