FMC grants public hearing on detention-demurrage fees

FMC grants public hearing on detention-demurrage fees

Shippers have long agitated for changes to the current practices governing detention and demurrage fees.

WASHINGTON — US federal maritime regulators have agreed to hold a public hearing on whether demurrage and detention fees can be considered unreasonable and therefore void.

It has been nine months since a shipper coalition submitted a petition seeking guidance on the matter shippers say costs them millions of dollars every year in fees container lines and terminal operators charge when uncontrollable forces make it impossible to pick up or return containers and chassis on time. There is no firm date yet on when the hearing will take place. The Federal Maritime Commission (FMC) will publish details on schedule and invited panel participants as soon as all arrangements are finalized, according to a notice Wednesday.

Those shippers have not had the opportunity to voice their concerns during any formal public proceedings, however. Ocean carriers and terminal operators have argued the FMC should remain out of the matter. They say that switching the financial burden to their shoulders is not a viable commercial solution and would make them de facto insurers.

Meanwhile, acting chairman of the FMC Michael Khouri has maintained since the petition was filed that the commission has more pressing priorities than clarifying its stance on detention and demurrage.

However, after John Thune, chairman of the US Senate Commerce Committee and the third-ranking Senate Republican, penned a letter dated Sept. 5 urging the FMC to deliver some guidance one way or another, the FMC held a closed-door session Wednesday and voted to move ahead with a public hearing.

“The stated purpose of the public hearings is to provide the commissioners an opportunity to question and discuss with the representative stakeholders the multiple causes of port congestion, the divergent array of demurrage, detention and per diem assessment practices,” the commission said in a statement.

According to the aforementioned notice on the hearing, witnesses to be invited to testify at the hearing will include legal representatives of the petitioners, trade and shipper associations, individual importers, exporters, customs brokers, freight forwarders, logistics companies, trucking and drayage companies, ocean carriers, port authorities, and terminal operators.

Many of those potential witnesses ostensibly include shippers who are part of the coalition fighting for detention and demurrage fee reform, but many also belong to the vocal and well-heeled groups of ocean carriers and terminal operators who oppose it.

The World Shipping Council (WSC), in particular, whose carrier members control 90 percent of global container capacity, has challenged many of the assertions made in the shipper coalition’s petition. John Butler, WSC president and CEO, said carriers and terminals should not bear all costs of port delays, as it would place them “in the role of insurance providers against adverse weather events, labor disruptions, and delayed government inspection of containers.”

The WSC’s compatriots at the National Association of Waterfront Employers (NAWE) have agreed, adding that “unique episodic conditions do not justify a blanket, broad-brush policy on demurrage charges.”

The shipper coalition’s legal team, however, has argued for months that granting a public hearing doesn’t require action and granting the petition doesn’t require a policy change.

“Granting this petition doesn’t result in a policy statement. We’re really just asking the FMC to open the proceedings,” Karyn Booth, head of Thompson Hine’s transportation practice, said at the National Customs Brokers and Forwarders Association of America’s annual government affairs conference in Washington on Sept. 11.

At the conference, Booth argued that while there are merits to carriers’ and terminal operators’ arguments for a more commercial solution, those solutions in practice have not been manageable or fair.

“They prefer a pure commercial solution, and we understand that, but the reality is, what we’ve seen is, when these port congestion events are seen, it gets chaotic for these things to get negotiated on the spot,” Booth said.

Contact Reynolds Hutchins at reynolds.hutchins@ihsmarkit.com and follow him on Twitter: @Hutchins_JOC.