Negotiations are Not Enough, Stakeholders Seek Regulatory Action
The ocean carriers and terminals often suggest that commercial negotiations can address concerns over demurrage, detention, and per diem, rather than seeking federal intervention.
However, ContainerPort Group’s Bob Leef said that negotiations don’t always solve these problems, “In some cases, the carriers refuse to negotiate. And in the instances where issues are eventually resolved, the business owner has already incurred significant loss of time, resources and efficiency, which translates into lost revenue. This hurts American business and is all the more reason that the FMC should step in and help address unfair demurrage, detention, and per diem practices.”
Laura Crowe, senior director of global logistics at Wal-Mart Stores Inc., told the FMC in the hearing, “Once I’m locked into a market, [the terminals] have no reason to negotiate.”
“We want to be able to feel more like a partner, so we can have a conversation about it, versus being dictated to that we must pay a fee that we feel is unreasonable,” said Crowe, “We budget for demurrage. We know we’re going to have to pay some. We just want it to be fair.”
Multiple speakers said they weren’t asking the FMC to establish strict rules as to the rates carriers could charge and the number of days of free time granted either by port tariffs or within commercial contracts. They instead wanted the FMC to set boundaries for what constitutes unfair business practices.
“The FMC is uniquely positioned to set guidelines and a common understanding of what is fair and what is not fair,” said Alex Cherin, representing the California Trucking Association Intermodal Conference. “While a commercial solution may seem appropriate, I can tell you we have tried and tried again. Meetings after meetings, some facilitated by ports themselves, this commission. The core practices of charging fees when inappropriate remains. I remain convinced the FMC is the only entity positioned to referee this issue.”
Overall, the FMC’s response to the testimony was one of genuine concern and intrigue.
“While many questions remain after the hearing, I do believe it effectively established that the practices surrounding demurrage and detention charges can be out-of-date, confusing, inconsistent, and, in my view, often unfair,” said Commissioner Daniel Maffei.
“Various alleged practices were described that – without countervailing or explanatory testimony and evidence – would be troubling from my perspective,” said Michael A. Khori, acting FMC chairman. “However, without any filed complaints by cargo stakeholders, where the crucible of adversary proceedings can bring light and transparency to such practices, I supported this investigatory fact finding so as to more fully develop a tested factual record.”
FMC Investigation: A Factual Record of Current Port Practices
The investigation seeks to put together a factual record and assess the current state of affairs in the logistics industry. FMC Commissioner Rebecca Dye will lead the investigation, which will run through December 2nd 2018, when a final report of Commissioner Dye’s findings and are recommendations are due to the FMC.
The investigation will examine current practices and evaluate five key issues, including:
- Does the alignment of commercial, contractual and cargo interests enhance or aggravate the ability of cargo to move efficiently through U.S. ports?
- When has the carrier or MTO tendered cargo to the shipper and consignee?
- What are the billing practices for invoicing demurrage and detention?
- What are the billing practices with respect to delays caused by events in which there is not an ability to intervene?
- What are the practices for resolution of demurrage and detention disputes between carriers and shippers?
"As the Commission considers the Petition of the Fair Port Practices Coalition, my focus is how demurrage and detention approaches can optimize, not diminish, the performance of the American international freight delivery system. Improvements to demurrage and detention business processes may require closer cooperation and information visibility among ocean carriers, marine terminals, and American importers and exporters," said Commissioner Dye of the investigation.
To Regulate or Not to Regulate?
FMC is now left to weigh a tricky question: is the unfair application of detention and demurrage fees the norm in the industry (a revenue stream that often exceeds the cost of the freight rate, as suggested by the petitioning coalition), or are these grievances infrequent and not significant enough of a problem to regulate?
“Is a problem systemic or episodic? Are there places in between that we need to look at? Where do we step in?” said Khouri.
Karyn Booth, a partner at the law firm Thompson Hine, who spoke on behalf of the petitioners asking for FMC intervention, told American Shipper that the breadth of the cargo interests that formed the coalition behind the petition speaks volumes.
“Listening to carriers and terminals, you’d be led to believe that there’s no problem,” Booth said. “That’s simply not the case. You have a petition filed by 26 organizations. It’s not one company or one association. There are 100 comments in this record. American companies don’t hire D.C. lawyers and take time to come to hearings unless there’s a real problem.”
“This is a very complex issue that presents difficult choices,” Khouri said in a statement. “The question to be resolved is if the Commission, with a judicious hand, can help make things better, though we recognize, we will never be able to solve all the issues associated with the timely handoff of the container from carriers to shippers."
It is the hope of shippers and BCOs alike that something be done to address the controversial issue of unjust demurrage and detention fees. The fact that the FMC is actively listening to and investigating these grievances after many years of silence is a sign of greater things to come.
The 25 members of the coalition that filed the petition are: the American Apparel & Footwear Association; American Chemistry Council; Association of Bi-State Motor Carriers; Association of Food Industries; Auto Care Association; Foreign Trade Association; Green Coffee Association; Harbor Association of Industry & Commerce; Harbor Trucking Association; Intermodal Motor Carriers Conference of the American Trucking Associations; International Association of Movers; Juice Products Association; Juvenile Products Manufacturers Association; Meat Import Council of America; Motor & Equipment Manufacturers Association; National Customs Brokers & Forwarders Association of America; National Pork Producers Council; National Retail Federation; New York/New Jersey Foreign Freight Forwarders and Brokers Association; North American Meat Institute; Retail Industry Leaders Association; Tea Association of the USA; National Industrial Transportation League; Transportation Intermediaries Association; and U.S. Hide, Skin and Leather Association.