The Federal Maritime Commission issued its Docket 19-05 Interpretive Rule on Demurrage and Detention under the Shipping Act and seeks public comment by October 31, 2019. This notice of proposed rulemaking provides a new interpretation of the Shipping Act and provides guidance on to what the FMC will consider in assessing whether a demurrage or detention practice is unjust or unreasonable.
The Commission’s proposed rule would apply to practices and regulations relating to demurrage and detention for containerized cargo only, and not to breakbulk or ro/ro shipping. For purposes of this rule, demurrage and detention would include any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators or NVOCCs related to the use of marine terminal space or shipping containers, not including freight charges. It defines “demurrage and detention” broadly to encompass all charges customarily referred to as demurrage, detention, or per diem, however defined. The proposed rule makes clear that it applies to charges related to shipping containers, not other equipment, such as chassis.
The Shipping Act Section 41102(c) explicitly states: “A common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”
In assessing the reasonableness of demurrage and detention practices and regulations under the new interpretive rule the FMC will consider the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity. In its commentary on the new interpretive rule the Commission noted its Fact-Finding Investigation No. 28 concluded “the primary purposes of demurrage and detention are to serve as financial incentives to encourage the productive use of assets (containers and terminal space) and promote optimal cargo velocity through marine terminals.” The new rule emphasizes the “incentive principle” for demurrage and detention will be utilized in assessing the reasonableness of these practices and regulations.
Under the new interpretive rule, the FMC will consider notice of cargo availability provided by carriers and terminal operators, including the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice. The existence and accessibility of policies implementing demurrage and detention practices and regulations, including dispute resolution policies, will also be considered. These policies must be provided in “transparent terminology” in FMC tariffs.
Interested parties are invited to submit comments via email to email@example.com – include in the subject line: “Docket 19-05, Demurrage & Detention Comments.” Comments should be attached to the email as a Microsoft Word or text-searchable PDF document. Only non-confidential and public versions of confidential comments should be submitted by email. Confidential comments may be submitted by mail to Rachel E. Dickon, Secretary, Federal Maritime Commission, 800 North Capitol Street NW, Washington, DC 20573–0001.