Federal regulators have recently amended rules on demurrage and detention, leading to significant implications for drayage truckers and shippers alike. The Federal Maritime Commission (FMC) introduced new billing standards to curb abusive container late fees charged by ocean carriers and terminal operators. However, the simplified billing provision unintentionally places the responsibility for late-fee bills on shippers, according to the National Industrial Transportation League (NITL).
Under the revised rule, drayage truck drivers are no longer subject to demurrage and detention charges for cargo contracted between ocean carriers and shippers, even if the delay was caused by the trucker. This shift places an administrative burden on shippers, as the rule does not explicitly specify an agreement where the responsibility falls on truckers. NITL raised concerns about the potential increase in administrative costs for its members.
Truckers are not usually included in ocean transportation contracts. This was cause for some analysis from NITL general counsel and Thompson Hine LLP partner Karyn Booth.
“It really seemed like [the FMC] wanted to carve the truckers out of the billing process, and the best way to do that was with this billing provision within the rule,” Booth said. “But if the trucker knows they’re not going to pay demurrage and detention invoices — unless contractually obligated to do so with the shipper — the rule could reduce their incentive to do everything in their power to get the container out of the port or return it, in a timely way? That’s where our members have concerns. They’re going to have to pay even when they’re not at fault for delays in picking up or returning containers and will have to have contractual relationships that will allow them to get reimbursed. That’s the practical implication of this rule — shippers are going to have to look at their contracts carefully with their ocean carriers and truckers.”
Nancy O’Liddy, Executive Director of NITL, highlighted that larger shippers with established departments might manage these contract changes more effectively. Her opinions on smaller shippers, however, were different.
“I think they’re very distressed about this,” she said. “And their costs are going to go up, because they’re going to have to pay the invoice and then try and get reimbursed from the trucker if they’re not at fault.”
On the other hand, the American Trucking Associations’ Intermodal Motor Carriers Conference, representing drayage carriers, supported the change, seeing it as a more accurate assessment of invoicing responsibilities.
“The new rule will require ocean carriers to work directly with their customers, increasing incentives for faster dispute resolutions and bringing greater efficiency to the supply chain,” said Jonathon Eisen, IMCC executive director Jonathan Eisen.
Daniel Maffei, testifying at a Senate Commerce Committee hearing for his reconfirmation as FMC chairman, asserted that the new rule would address and eliminate abuses in container late-fee billing by ocean carriers.
“These fees are for the promotion of the movement of cargo. They’re not to pad the bottom line of an ocean shipping company,” Maffei said. “If they’re not used for [promoting cargo movement], they’re unreasonable, and we will do whatever it takes” to enforce the rule, he said.
However, there are concerns about the “contract-based” billing provision, placing sole responsibility on the contracting shipper, potentially misaligning incentives for freight fluidity.
The NITL proposed a “conduct-based” rule that would assign responsibility for demurrage and detention charges to the party affecting the timely pickup or return of containers. The ongoing debate between different stakeholders underscores the complexities of balancing accountability and fostering efficient freight operations within the maritime industry.
“We’re going to have to wait and see whether or not this improves fluidity — we don’t know yet,” Booth said. “Because if you’re going to get the bill when you’re at fault, you’re going to check your conduct to avoid getting that bill. But this rule requires the bill to be the responsibility of the shipper no matter who’s at fault.”
Source: Freightwaves
