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FMC Lays Out Considerations on Reasonableness of Detention, Demurrage Charges

The Federal Maritime Commission will look at multiple factors, including cargo accessibility and the transparency of involved terminology, when it considers whether detention or demurrage practices are reasonable, the agency said in a notice it posted ahead of publication in the Federal Register. The proposed interpretive rule is meant to help address issues with detention and demurrage charges and follows a multiyear effort on that front (see 1606130005). Comments are due Oct. 17, the FMC said in a news release.

Specifically, the rule would apply "to practices and regulations relating to demurrage and detention for containerized cargo," FMC said. "For purposes of this rule, demurrage and detention include any charges, including 'per diem,' assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries ('regulated entities') related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges."

The main factor involved in the FMC's analysis will be "the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity." Under this principle, "absent extenuating circumstances," a company's demurrage and detention practices and regulations "that do not provide for a suspension of charges when circumstances are such that demurrage and detention are incapable of serving their purpose would likely be found unreasonable," it said.

The point of demurrage charges is largely to keep cargo moving and accessible, it said. "Examples of demurrage practices that are expressly linked to container availability, and which the Commission would weigh positively in the reasonableness analysis, include: (a) starting the free time clock upon container availability as opposed to container discharge from a vessel; (b) public notice of terminal yard closures; and (c) stopping a demurrage or free time clock when a container is rendered unavailable, such as upon notice of a yard or terminal closure or when a trucker cannot get an appointment within a reasonable time of it becoming available," it said. Similarly, detention fees shouldn't be charged when an empty container can't be returned.

The agency would also look at how notice is provided about when cargo is ready for retrieval, the agency said. "The more notice is calculated to apprise cargo interests that cargo is available for retrieval, the more this factor favors a finding of reasonableness," it said. The FMC would also consider how companies go about describing their detention and demurrage policies.

The FMC is still deciding how it should treat government inspections of cargo as part of its analysis, it said. Among the interpretive rules it is considering are provisions that "the escalation of demurrage or detention while cargo is undergoing government inspection," a lack of mitigation of such charges during inspection, and the lack of a cap on the charges that may be imposed during inspections are all "likely to be found unreasonable," it said.