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FMC Issues Guidance on Long-Awaited New Detention & Demurrage Rules

The Federal Maritime Commission (FMC) recently published the long-awaited new guidance concerning how it will assess the reasonableness of detention and demurrage regulations and practices of ocean carriers and marine terminal operators (MTOs) under 46 U.S.C. 41102(c). This guidance comes after years of complaints from U.S. importers, exporters, transportation intermediaries, and drayage truckers about how existing practices unfairly penalized them for circumstances outside of their control.

In December 2016, a coalition of shipper groups petitioned the FMC to investigate detention and demurrage fees citing carriers that were excessively charging per diem fees when containers were not picked up after the agreed-upon “free time” even when cargo and equipment could not be retrieved or returned during events that cause the ports to be inaccessible. Petitioners also stated that permitting ocean carriers and marine terminal operators to levy these charges weakened any incentive for them to address their own operational inefficiencies. Carriers argued that these fees are in place to prevent their terminals from being used as storage facilities and prevent port congestion in the international ocean supply system.

After a 17-month long fact-finding investigation, the FMC issued proposed guidance in the form of an interpretive rule in September 2019. These proposed rules sought to address situations where penalties can and cannot be levied under specific circumstances, that importers should be notified when their cargo is actually available for retrieval and that demurrage and detention policies should be accessible, clear, and use consistent terminology.

The FMC considered over 100 comments to the proposed guidance from September and added two new provisions. These new provisions provide clarity into the context of government inspections and give more leeway to the FMC for considering additional factors, arguments, and evidence outside of their specifically listed circumstances for levying detention and demurrage fees.

The final rule, “Docket No. 19-05, Interpretive Rule on Demurrage and Detention under the Shipping Act”, will become effective upon its publication in the Federal Register.

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