Who pays the demurrage?

Who pays the demurrage?

During last month's wildcat strike of East Coast ports by independent truckers, one liner company executive asked rhetorically who would wind up paying for demurrage and other charges for delayed containers. "The carriers aren't going to, and the terminals aren't going to, so who is?"

The Journal of Commerce editorial policy forbids anonymous quotes, but to illustrate the passions involved in the strike, its editor decided to suspend that ban. Here's how one motor carrier executive responded to the liner executive's question as published by The Journal of Commerce Online: "I could reach out and strangle him."

That more-than-rhetorical response leaves unanswered the question of who will pay for delays caused by the strike. In normal times, most container terminals charge shippers for dwell time beyond the nominal free time they allow. Because they act as the shippers' representatives when they handle their containers, carriers are routinely billed for demurrage. "We have no more space in our terminals now, so we can't afford not to charge," said D.K. Kim, manager, marketing team, Hanjin Shipping, which operates terminals in Long Beach, Oakland and Seattle.

"We are also customers of the marine terminals, and they are getting tougher with us for free time." said William Rooney, Hanjin's vice president of sales. Rooney said that in the past, when there was plenty of capacity to store containers at terminals, terminal operators would build free-time charges into their stevedoring rates. But now that space is scarce, terminal operators have to charge for dwell time on the pier beyond the nominal amount of free time because the space is needed to handle revenue-generating shipments.

Independent truckers who pick up and deliver containers at a port often must pay demurrage charges on behalf of the shipper whose cargo they are delivering, said Ron Carver, assistant director of the Teamsters union's port division. The truckers are supposed to be reimbursed for the charges by the motor carriers who employ them once they have been reimbursed by the liner companies. Carver questions whether some motor carriers that use independent truckers are actually passing the demurrage charges along to the truckers.

The spitting-mad motor carrier executive claims the trucking industry has already been subsidizing the liner industry for the past 20 years because they have to carry the cost of demurrage they pay to terminal operators for as long as six months before they get paid by carriers. "I get stuck with the cost of demurrage," the executive said.

When the dust from last month's strike finally settled, the answer to the question of who pays the demurrage will probably be settled by allowing shippers and carriers to pay terminal operators a discounted demurrage charge - a solution adopted by terminals following the 2002 lockout of the International Longshore and Warehouse Union in West Coast ports.