Port Congestion Costs and Possible Responses Examined in FMC Report

The Federal Maritime Commission released April 13 the first in a series of planned reports on U.S. port congestion, focusing on detention and demurrage charges for containerized imports and exports. This report is the result of four port congestion forums hosted by the FMC in 2014 as well as continuing complaints that vessel-operating common carriers and marine terminal operators are unfairly imposing these fees on importers, exporters and truckers for delays that are out of their control.

Demurrage is a charge for the use of space, while detention is a charge for the use of equipment. Both are meant to compensate for the use of space and equipment and to encourage the efficient movement of cargo by importers, exporters and drayage providers. Free time is the grace period during which neither of these charges will be incurred.

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This report details possible actions that can be taken by (a) VOCCs, MTOs and port authorities to help minimize congestion and attendant demurrage and detention fees, (b) beneficial cargo owners and truckers, such as requesting informal mediation and administrative or court action, and (c) the FMC to acquire additional information to examine and address concerns relating to free time, detention and demurrage practices.

For example, the FMC may:

• investigate policies and practices of regulated entities on a wide range of alleged violations (e.g., discrimination, unreasonable practices, anticompetitive practices), which could lead to rulemaking or adjudication;
• initiate an adjudicatory proceeding against VOCCs and/or MTOs or require VOCCs to file a periodical or special report, an account, or a memorandum of facts and transactions related to their business;
• direct MTOs and VOCCs to submit additional data related to demurrage, detention and free time issues involved in agreements filed with the FMC;
• direct its ombudsman to facilitate targeted meetings with industry and develop findings and recommendations for the FMC and industry; and
• issue a proposed rule or initiate a negotiated rulemaking to address practices that it has determined violate the Shipping Act.

Other possible actions include the filing of petitions by the public seeking relief or affirmative action by the FMC and the formation of an advisory committee of representative stakeholders that would offer suggestions for FMC regulation of MTO and VOCC demurrage and detention rates, rules and practices.

The report does not recommend any particular action and the FMC has not authorized any action to be taken. Instead, the FMC states, industry stakeholders must weigh in and inform it as to the kind of action desired, if any.