What’s Being Done About Surging Detention and Demurrage Fees?
Years of customer complaints regarding unfair ocean carrier detention and demurrage fees have been met with little in the way of meaningful progress in the fight for fairness. Back in January of 2018, the FMC conducted their Fact Finding 28 program, which investigated ocean carrier detention and demurrage practices across the industry. The FMC conducted a thorough investigation involving intensive research and interviews with industry leaders and trade bodies.
However, detention and demurrage fees continued to rise even after the FMC released their final report with recommendations for standardized and transparent demurrage and detention practices. The FMC released their Interpretive Rule on Demurrage and Detention Under the Shipping Act in May of 2020.
This new rule called for clear and consistent detention and demurrage policies throughout the industry, notifications for importers when their cargo is available for retrieval, and a cease to charging shippers and transporters demurrage and detention fees when the circumstances preventing the retrieval of their cargo was deemed to be out of their control.
Even with these FMC safeguards put in place, COVID-19 brought about historic events that had a massive impact on the global shipping industry. Impacts that are still rippling across the globe as the world attempts to shake off the pandemic. These circumstances have led us to historically high shipping rates, detention, and demurrage fees occurring at the same time, marking an especially tough time for shippers.
Historically High Detention and Demurrage Fees
According to Container Xchange’s Demurrage & Detention Benchmark 2021 report, detention and demurrage fees for containers arriving in the Ports of Los Angeles and Long Beach are more than triple the current global average at over $2,500 for containers left waiting for two weeks. This figure is even more staggering when combined with the fact that this year’s average global detention and demurrage fees have more than doubled, with a 104 percent rise from last year’s average.
Even at the same port, not all ocean carrier companies have the same demurrage and detention rules. Some ocean carriers are more prone to charging customers demurrage and detention fees while others are a bit laxer. According to Container Xchange’s report, customers can save up to $1,354 in fees depending on the ocean carrier with which they choose to do business.
However, comparing fees isn’t the only way to find the best deal when it comes to competing ocean carriers. The carrier’s detention and demurrage policies will often provide a certain allowance of free time that can vary as much as a week between different companies, making finding the best deal a bit more complicated than just comparing rates.
Ocean Carrier Regulation on the Rise?
The current state of the industry has resulted in US lawmakers from both sides of the aisle to step up and begin drafting a bill that would address the unprecedented demurrage and detention fees we’re seeing today, among other issues like blank sailings. The Ocean Shipping Reform Act of 2021 is a draft bill which seeks to increase the power of the FMC and to put more safeguards in place to protect ocean carrier customers from unjust charges.
Many in the industry and even members of the FMC itself are opposed to the changes found in the current draft bill as it would drastically increase government regulation of ocean trade—something to which most industry professionals are vehemently opposed.
The FMC believes it already has all the power it needs to enact effective change and that the current state of demurrage and detention fee rates is a symptom of the current global pandemic--a symptom that should resolve itself in due time.
While the industry waits to see if Demurrage and Detention fees will go back to normal, many shippers are turning to third party logistics companies to help navigate them through the extremely complicated waters of today’s global supply chain. Contact the experts at ClearFreight today for more information on how our logistics solutions can help you make your supply chain simpler.