Coalition Petitions FMC to Make Rule Prohibiting Port Fees During Uncontrollable Events
An industry coalition petitioned the Federal Maritime Commission to issue new rules preventing common carriers and marine terminal operators from charging demurrage, detention and per diem fees during events beyond the control of shippers, including port congestion or disruption, bad weather and delays spurred by government action, according to the American Association of Footwear and Apparel (here). The no-charge period would start whenever a circumstance out of the control of shippers, receivers or motor carriers precludes a marine terminal or ocean carrier from tendering cargo or receiving equipment for delivery, according to the proposal. The petition was filed by the Coalition for Fair Port Practices, a group of 25 trade associations including the National Customs Brokers & Forwarders Association of America (NCBFAA), the AAFA and the National Retail Federation.
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During situations beyond the control of shippers, receivers or motor carriers, the coalition's proposal says, if free time is already in effect, the carrier or terminal operator should extend free time for the duration of the “disability” of the carrier or terminal operator to tender cargo or receive equipment, and refrain from charging for demurrage, detention or per diem during the extended free time. If the disability of the common carrier or terminal operator begins after free time expires, it would be unreasonable for the carrier or operator to charge during the disability, but charges could be assessed between expiration of free time and the beginning of the disability, the proposed statement of policy says. On the other hand, if the common carrier or marine terminal operator is able to tender cargo and move equipment, but shippers are not due to events beyond their control, the carrier or operator may charge demurrage, detention or per diem fees, but only at a level that covers their costs, it says.
The petition cites “recent events involving port congestion, labor strife, an ocean-carrier bankruptcy, inclement weather, and other disruption events [that] have had crippling effects on U.S. ports and the stakeholders who rely on the efficient movement of goods through the ports.” It notes that during these events, demurrage, detention and per diem charges did not “abate consistently,” even though shippers, consignees and drayage providers didn’t have any control over the situations. The petition says that the proposed rule would provide needed industry guidance, ensure that demurrage and detention charges are levied in cases where they will properly incentivize removal of cargo and return of equipment, and help carriers and terminal operators more efficiently address the underlying causes of port delays.
NCBFAA highlighted (here) three specific examples of unfair port charges mentioned in the petition. Chico’s was charged $80,000 in demurrage during the 2014-2015 West Coast Labor Agreement Negotiation, when the time needed to retrieve containers “jumped to 7-9 days” even though free time remained at four days, according to the petition. Also during the West Coast labor disruption, MacMillan Piper was charged $1.25 million in detention fees after ports turned away containers it was trying to return. It recouped 80 percent of that money a year after it was forced to pay fees upfront. During that same negotiation, cargo diverted to the East Coast spurred long wait times at the Port of New York and New Jersey for empty container returns. Ocean carriers charged International Motor Freight more than $1.2 million in detention fees, threatening to terminate the company’s participation in its equipment interchange agreement.