Client Alert
New FMC Investigation on Demurrage and Detention Practices
November 23, 2020
By:
On November 19, 2020, the Federal Maritime Commission (FMC) issued a supplemental order expanding the scope of Fact-Finding Investigation No. 29 (FF No. 29). As you may recall, the FMC opened FF No. 29 earlier this year in response to the disruptive effects COVID-19 has had on trade and for the purpose of identifying solutions for some of the issues. 85 Fed. Reg. 19146-19147 (April 6, 2020). That investigation was quickly followed by the FMC’s release of the long-awaited result of Fact Finding No 28, Interpretative Rule on Demurrage and Detention Practices under the Shipping Act, FMC Docket No 19-05 (April 28,2020). Commissioner Rebecca Dye was once again appointed as the Fact-Finding Officer authority to establish one or more supply chain innovation teams (Innovation Teams). The current supplemental order was approved by unanimous vote—Chairman Michael Khouri, Commissioner Daniel Maffei, Commissioner Louis Sola, and Commissioner Carl Bentzel all issued statements in support.
The supplemental order is in response to discussions with industry stakeholders who have expressed concerns regarding certain vessel operating common carrier (VOCC) practices and regulations pertaining to empty container returns, demurrage, and detention. The information obtained indicates that VOCCs that call on the ports of Los Angeles/Long Beach (LA/LB) or New York/New Jersey (NY/NJ) may be engaging in unreasonable practices in violation of former section 10(d)(1) of the Shipping Act, now 46 USC 41102(c). In other words, numerous NVOCCs and shippers alleged that the carriers and marine terminal operators (MTOs) had not reformed their practices, and that demurrage and detention procedures were still being abused, notwithstanding an extensive record and the FMC’s clear signal that significant change was necessary. Chairman Khouri’s statement of support also indicated that certain carrier billing practices—as previously mentioned in the FMC’s Notice of Inquiry—will also be investigated in FF No. 29.
The FMC’s supplemental order comes just days after GKG Law submitted a letter to the FMC on behalf of the NCBFAA—in conjunction with 48 other national trade associations—requesting that it use its authority to order the carriers and MTOs to cease imposing demurrage and detention during times of extreme congestion. This, of course, is one of those times. The virtually unprecedented volumes of cargo being received at the LA/LB and the NY/NJ ports, coupled with the shortage of labor and chassis, inefficient management of the Southern California Pool of Pools, and the lack of communication by the carriers has led to the imposition of demurrage and detention charges in excess of $150 million this year alone.
As COVID-19 and the subsequent extreme congestion at the ports has greatly impacted the shipping industry, we encourage you to participate and provide comments. The FMC is encouraging all industry stakeholders—shippers, NVOCCs, MTOs, VOCCs, truckers, and others—to participate in the investigation. Anyone wishing to participate can do so by submitting information and/or comments to Commissioner Dye at ff29@fmc.gov. We recognize that there is often a sensitivity and reluctance to go public with complaints against the carrier and MTO's practices, however, comments can be submitted confidentially in a way that only the Commission would have access to details that could serve to identify parties.
Please contact a member of the GKG Law team if you have any questions or would like assistance in drafting/submitting comments.