New FMC Demurrage & Detention Billing Proposal and How It Impacts You

FMC Demurrage & Detention Billing Proposal and How It Impacts You

The Federal Maritime Commission (FMC) proposed a new policy regarding demurrage and detention billing in 2020 and will be voted on in June 2023. Demurrage and detention fees are charges that shipping lines and marine terminal operators impose on importers and exporters when they exceed the allotted free time for using shipping containers at ports.

The FMC proposal aims to improve the transparency and accountability of these fees by requiring shipping lines and terminal operators to provide clear and accessible information about their billing practices, including their policies for assessing demurrage and detention fees. The proposal would also establish new rules for when these fees can be charged, as well as procedures for resolving disputes between parties.

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The FMC's proposal includes the following provisions:

1. Clear and Accessible Information: Shipping lines and terminal operators must provide clear and accessible information about their demurrage and detention policies, including how to contest a fee.
2. Reasonable Practices: The proposal requires that the fees assessed must be reasonable and related to the actual cost incurred by the shipping line or terminal operator.
3. Grace Period: The proposal requires that shippers must be provided with a reasonable grace period before demurrage and detention fees can be charged.
4. Resolution Process: The proposal establishes procedures for resolving disputes over demurrage and detention fees, including a formal complaint process that would allow shippers to challenge the charges.

What does this mean for shippers/importers?

For importers, the FMC's proposal means that there will be greater transparency and clarity regarding the fees they are charged, which should help to reduce costs and improve efficiency at ports. Importers will have access to clear and accessible information about the billing practices of shipping lines and terminal operators, and will be provided with a reasonable grace period before demurrage and detention fees can be charged.

The proposal also ensures that the fees charged to importers are reasonable and related to the actual cost incurred by the shipping line or terminal operator. Additionally, the establishment of formal procedures for resolving disputes over demurrage and detention fees means that importers will have a clear process for challenging any fees they believe to be unjustified or unreasonable.

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What does this mean for motor carriers?

The vast majority of detention charges are caused by one of two things: (1) long dwell time at shipper facilities or (2) lack of return appointments with the steamship lines. Neither of these things are the fault of motor carriers. Yet, detention charges are billed to motor carriers who are then expected to front the cost of these bills and ultimately bear the risk of nonpayment by having their access to the ports cut off.  

Large shippers/importers push the cash burden onto small motor carriers and steamship lines deny motor carriers the opportunity to return containers yet continue charging the motor carrier for detention. Requiring steamship lines to bill shippers/consignees for detention charges would be a big step toward more effectively distributing the burden between those primarily responsible for the detention charges in the first place.

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“We will update our US import detention billing practices to no longer invoice motor carriers by default on merchant haulage moves,” Maersk said in a customer advisory Monday. “Instead, all import detention invoices will by default be issued to the consignee on the bill of lading.”

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It is important to note that the proposal is still under review, and it is not yet clear when or if it will be implemented. However, Maersk has already taken action to shift their billing practices as of April 1, 2023. “We will update our US import detention billing practices to no longer invoice motor carriers by default on merchant haulage moves,” Maersk said in a customer advisory Monday. “Instead, all import detention invoices will by default be issued to the consignee on the bill of lading.” We will see if the steamship lines follow suit.

Overall, the FMC's proposal aims to create a more transparent and fair system for assessing demurrage and detention fees, while also incentivizing shipping lines and terminal operators to improve their operations and reduce congestion at ports. 

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