Monday, May 11, 2020

Final Rule on Demurrage and Detention of Shipping Containers Welcomed by Freight Community

International Forwarding Association Wins Argument for More Concise Interpretation
Shipping News Feature

US – International freight forwarding association FIATA has welcomed the US Federal Maritime Commission's (FMC) new landmark guidance on its approach to assessing the reasonableness of detention and demurrage regulations and practices of ocean carriers and marine terminal operators, a bone of contention which the Association raised last month with regard to a worldwide problem for its members.

Demurrage and detention charges can play an important role in the efficient movement of container stock, however FIATA says unjust practices in recent years have spurred concerns regarding their reasonableness in achieving their intended purposes, particularly in circumstances outside of the freight forwarder’s control. Put bluntly the forwarders see the charges as an unwarranted profit centre for the ports.

FIATA made that point quite clearly a couple of years ago in its Best Practice Guide on Demurrage and Detention in Container Shipping thus, ‘merchants should not be subjected to unjust and unreasonable charges. In this context, there are strong indications that shipping lines abuse the charging of demurrage and detention to maximise profits’.

Now, issued on 28 April 2020, the Final Rule, Docket No. 19-05 Interpretive Rule on Demurrage and Detention under the Shipping Act considers the extent to which detention and demurrage charges and policies serve their primary purpose of incentivising the movement of cargo and promoting freight fluidity, and is intended to reflect three main principles:

  • Importers, exporters, intermediaries, and truckers should not be penalised by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals, because under those circumstances the charges cannot serve their incentive function
  • Importers should be notified when their cargo is available for retrieval
  • Demurrage and detention policies should be accessible, clear, and, to the extent possible, use consistent terminology

The Final Rule also comprises guidance as to: (1) the adoption of a policy regarding demurrage and detention practices and government inspections; and (2) clarification that the rule does not preclude the Commission from considering additional factors outside those specifically listed, including extenuating circumstances. Dr Stéphane Graber, FIATA Director General, commented:

“This is a welcome decision for the freight forwarding community, providing certainty on the need for detention and demurrage practices to be reasonable and in line with the purposes they serve. In the context of the unprecedented difficulties faced due to Covid-19, this timely supports the continued functioning of the supply chain,”

Photo: Image courtesy of Goodwood Scenics Ltd. suppliers of scale industrial models.