Federal Register :: Interpretive Rule on Demurrage and Detention Under the Shipping Act

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The Federal Maritime Commission is clarifying its interpretation of the Shipping Act prohibition against failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property with respect to demurrage and detention. Specifically, the Commission is providing guidance as to what it may consider in assessing whether a demurrage or detention practice is unjust or unreasonable. The Commission did not, as OCEMA insists, “propose to limit billing practices by function such that terminal would bill solely for land use and ocean carriers would bill for equipment use.” OCEMA at 7.

Commenters did, however, raise questions about the scope of the rule. Several commenters urged that the rule apply to export shipments as well as imports, and they raised issues unique to exports, such as rolled bookings due to vessel and schedule changes and ocean carrier changes to container return cutoff dates and insufficient notice of such changes. It was because the Commission was issuing guidance applicable to all regulated entities within its purview that the Commission declined to issue a legislative rule or the rule proposed by the petitioners in Docket No. It is also why the Commission’s rule is not as granular as some commenters would prefer, even if many of the proposals suggested by shippers, truckers, and intermediaries appear to have merit. Executive Order 13777, like Executive Order 12866, is not binding on the Commission.

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  • 265.NYI, 3 U.S.M.C. at 100.
  • 169.See, e.g., Mohawk Global Logistics at 10 (“These transactions are in many cases much more than arm’s reach away, billed by a terminal, to a trucker that is contracted to a consignee, not necessarily related to the NVOCC, whose detention free time is added to the contract by the ocean carrier.”).
  • To clarify, the Commission’s goal in the NPRM was to emphasize the importance of ocean carriers and marine terminal operator bills aligning with contractual responsibilities.
  • Ocean carriers and marine terminal operators argue that it is permissible to treat government inspections differently under Commission precedent.
  • In the event of default, the State reserves the right to pursue any other remedy available by law.

This concern is on its face speculative and was not raised by ocean carrier commenters themselves. While that may have been the case at the port forums in 2014, the record in Fact Finding No. 28 suggested that demurrage and detention collections have only increased since then, Interim Report at 7-8, and shipper complaints have not abated. 120.E.g., Letter from 67 Organizations to Michael A. Khouri, Chairman, Fed. Comm’n (Mar. 16, 2020) (“urg the Commission to promptly adopt the rule as published which will assist the maritime industry in evaluating the fairness of these charges and resolving potential disputes”). Nat’l Retail Sys. At 1 (requesting “KPI’s for terminal operators to be agreed upon with the import community terminal operators”); Transways Motor Express at 1 (“Free time should be extended on all cargo at a terminal when service levels (turn times/congestion) fall below an acceptable level”); Transworld Logistics Shipping Servs.

B. Notice of Proposed Rulemaking and Comments

A number of commenters request bright line rules. For instance, several commenters argue that free time should not start until a container is available, and that starting free time before availability should be deemed an unreasonable practice. Others assert that free time and demurrage and detention clocks should stop when containers become non-accessible due to situations beyond the control of shipper or trucker. Still others request that the Commission define “container availability,” that the Commission expressly address things like terminal hours of operation vis-à-vis free time, appointment systems, and that the concept of availability should include chassis availability. Nor does the Shipping Act necessarily require common carriers to apply all tariffed charges without exception. Section requires that ocean carriers provide service in accordance with their rules and practices.

Mohawk Global Logistics at 6 (noting that in government hold situations, “here should be compensation to both the terminals and the carriers in these cases.”); Agregar Consultoria at 1. Nor do most of them deny that demurrage and detention have a necessary place in ocean commerce. E.g., Mohawk Global Logistics at 2.

Overseas Corp. at (describing situation in which ocean carrier was unable to find a trucker on a door move resulting in imposition of demurrage on importer because the carrier “had a provision in their tariff that allowed this to happen” and arguing that “he whole point in making these books a door move was” so that the ocean carrier would make the delivery arrangements”). NTNJFFFBA at 9 (“Where detention is concerned the steamship lines routinely have ignored the , which holds the trucker accountable for the charges incurred when equipment is not returned on time.”); see also PMSA at 13 (“Specifically, equipment charges are generally assessed against motor carriers, not cargo interests, under the provisions of the .”). NYNJFFFBA at 7 (explaining that locking out an intermediary can affect cargo of unrelated shipments handled by that intermediary and “when carriers threaten to cutoff truckers from picking up any containers for any of their customers all shippers are affected when detention is not paid for one of them due to a dispute”).

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See NAWE at 12-13; WMCTOA at 10-11. WCMTOA at 9 (“If any final rule is adopted, it should make clear that it is reasonable for a terminal operator to charge demurrage if a container becomes unavailable for any reason after free time has expired.”); NAWE at 14 n.5. 191.Crocus, 1 F.M.C.2d at 415 (noting that determining whether respondent is a regulated entity, in this case an ocean transportation intermediary, is a “fact-intensive analysis” taking into account statutory definitions and evidence about the parties’ conduct during the relevant time frame). For instance, commenters such as International Motor Freight and Wheaton Grain Inc. refer to container charges in terms of per diem rather than detention.

NAWE at 13; OCEMA at 4. A few commenters assert without citation that free time contemplates that there are “pockets within that time where units will be unavailable for various reasons.” Ocean Network Express at 1; OCEMA at 4. The Commission would make clear that the reasonableness of free time turns on the needs of a shipper or its agent. Investigation of Free Time Practices—Port of San Diego, 9 F.M.C. 525, 539 . Relatedly, a frequent complaint of ocean carriers and marine terminal operators is that shippers wait until the last free day to retrieve cargo and that the rule does not account for whether there might be other times within the free time that a shipper could have retrieved its cargo. Shippers and cargo interests are entitled to reasonable demurrage free time, and it is unclear why regulated entities would have the right to determine unilaterally when within that free time period shippers or their agents should pick up their cargo.

Climate Change

In determining that the agency issuance was a policy statement as opposed to a legislative rule, the court reasoned that “ractical consequences, such as the threat of having to defend itself in an administrative hearing should the agency actually decide to pursue enforcement pursuant to the policies within the Cross-Border Action are insufficient to bring an agency’s conduct under [the Court’s] purview.” bdswiss broker review Id. . Although the Commission refers to its guidance as an interpretive rule, whether it is an “interpretive rule” or “general statement of policy” within the meaning of the APA is not relevant to WSC’s argument that the rule is legislative. Approximately 60 commenters expressly supported the proposed guidance, and another 20 commenters supported the proposed guidance implicitly or in part.


WSC at 17 (“In addition, the Commission does not acknowledge or address the fact-specific nature of all dispute resolution policies, which are created by each individual carrier.”). CV Int’l at 2 (“Accelerated D/D charges should not be permitted for cargo under government hold.”); Meat Import Council of Am. At 3; John S. Connor Global Logistics at 5 (“e do not believe it is appropriate for the carriers and/or MTO operators to escalate charges (i.e., impose penalty demurrage) in these situations.”). 135.E.g., Int’l Fed. of Freight Forwarders Ass’ns at 10 (“FIATA would appreciate guidance on fair and reasonable free periods that are in line with market developments of higher peaks.”) cf. John S. Connor Global Logistics at 3 (“Further to this understanding of availability, there must be a clear and consistent method for calculating Free Time” and “ll parties that provide Free Time should be utilizing the same method of calculation”); New Direx, Inc. (“ree time would not count on days when the terminal or rail yards are not open.”). Interpretation of Shipping Act of 1984—Unjust and unreasonable practices with respect to demurrage and detention.

Change in Bank Control Notices

The Commission may consider in the reasonableness analysis the existence, accessibility, content, and clarity of policies implementing demurrage and detention practices and regulations, including dispute resolution policies and practices and regulations regarding demurrage and detention billing. In assessing dispute resolution policies, the Commission may further consider the extent to which they contain information about points of contact, timeframes, and corroboration requirements. Some commenters argue that ocean carriers should not be able to charge shippers demurrage or detention on carrier haulage moves because in those situations the ocean carrier, not the shipper or consignee, is responsible for ensuring that containers are timely retrieved from the terminal and delivered to the appropriate location.


In the event of any proceedings by or against either Party in bankruptcy, insolvency or for appointment of any receiver or trustee or any general assignment for the benefit of creditors, the other Party may terminate this Agreement. If the Customer increases the capability or the capacity of the Facility to exceed 4.999 MW, this Agreement shall immediately terminate. The Company shall not be liable to the Customer for damages resulting from a termination pursuant to this paragraph. If the Customer’s generating equipment produces zero kilowatt-hours during any period of twelve consecutive Billing Periods after the Commercial Operation Date, the Company may terminate this Agreement. For the avoidance of doubt, if an Exchange occurs after the Corporation makes the Early Termination Payments with respect to all Members, the Corporation shall have no obligations under this Agreement with respect to such Exchange, and its only obligations under this Agreement in such case shall be its obligations to all Members under Section 4.03. 398.See Final Report at 17 (“The Phase Two respondents generally agreed that cargo interests seeking a demurrage waiver or free time extension should substantiate their arguments with corroborating documentation and that having guidelines could resolve disputes more efficiently.”).

But not all did, and a shipper’s right under the Shipping Act to be free from unreasonable practices under section does not turn on the identity of the regulated entity at issue. Further, several ocean carriers noted that their policies give them the discretion to waive demurrage under certain circumstances. But if application of demurrage in those circumstances would be unreasonable, a shipper, intermediary, or trucker should not have to rely on an ocean carrier or marine terminal operator’s discretion for a remedy. In other words, while the Commission prefers commercial solutions to demurrage and detention problems, the Fact Finding record showed that commercial solutions are only adequate from the perspective of ocean carriers and marine terminal operators. In sum, none of these features of government inspections distinguish them from other circumstances that prevent shippers from retrieving cargo.

But those rules only applied to one port—the Commission’s guidance here must be flexible enough to account for operations at all ports and marine terminals within the Commission’s jurisdiction. Many of these same commenters further contend that the interpretive rule would shift the burden of proof in section cases in violation of the APA. But nothing in the rule changes the burden of proof. Under the APA and Commission regulations, “the proponent of a rule or order has the burden of proof.” This burden of persuasion does not shift, even if the burden of producing evidence does in some cases. In a section case, the complainant has the burden of persuading the Commission that a practice or regulation is unjust or unreasonable, and if that burden is met, the burden of refuting that conclusion is on the respondent.

Subsequently, however, the Supreme Court held that to determine reasonableness under section 41102’s predecessor, one should look at how well charges correlate to their benefits. Consequently, Commission precedent does not bar the Commission from applying the incentive principle to government inspections—it supports its application. Accordingly, oanda autochartist because the participants in Fact Finding Investigation No. 28 and the commenters consistently emphasized the utility of demurrage and detention in incentivizing cargo movement and productive asset use, the Commission continues to understand demurrage and detention as primarily being financial incentives to promote freight fluidity.

Further, the commenters provide no support for their suggestion that the Commission cannot change agency precedent via an interpretive rule. Commission precedent is not “binding” on the Commission—the Commission can change course in a subsequent case. NAWE has not explained why Commission could not also change course via an interpretive rule, especially when the Commission recently did so in a 2018 interpretive rule that ocean carriers and MTOs supported. WSC’s objection appears to be that the Commission did not cite or discuss the specific documents it reviewed during the Fact Finding Investigation. The Commission does not, however, typically make public its investigatory records in such proceedings. Additionally, most ocean carriers and marine terminal operators requested confidentiality for the responses and documents they submitted to the Commission during Phase One of the investigation.

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Because the Commission did not comply with these requirements, they argue, the rule violates the APA. As between ocean carriers and marine terminal operators, in this context the focus would likely be on ocean carrier practices. See FMC Demurrage Report at 7 (“For the return of their empty containers, VOCCs instruct the consignees and terminal operators who serve them when, where, and how this equipment can be returned.”). In addition to describing how section may apply in the demurrage and dowmarkets detention context—the incentive principle—the Commission in the NPRM also sought to explain how that principle might work in particular contexts. First, the Commission clarified that it may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval. If, the Commission stated, shippers or truckers cannot pick up cargo within free time, then demurrage cannot serve its incentive purpose.

It is beyond the scope of this guidance, though, for the Commission to decide what those timeframes should be. Similarly, in the abstract, it is not immediately clear why an ocean carrier or marine terminal operator would require payment of demurrage before releasing cargo if there is a credit arrangement involved. But specific situations may not so simple.

There is nothing discriminatory about the Commission describing factors that would help ensure that ocean carriers and marine terminal operators comply with their preexisting duty under section to ensure their practices are reasonably tailored to match their purposes. Further, the “discrimination” the Shipping Act is concerned with is discrimination by ocean carriers and marine terminal operators against shippers and others in the industry, not so-called discrimination by the Commission against the entities it oversees. This general purpose aligns with the more specific mandate in section that the Commission determine the reasonableness of certain carrier and marine terminal operator practices. In sum, it is consistent with the purposes of the Shipping Act for the Commission to address the concerns of American importers, exporters, intermediaries, and truckers.

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