Ocean carriers will face new billing requirements designed to provide more transparency and accountability for shippers into container late fees, which came under scrutiny during a pandemic supply chain meltdown that slowed global trade.
The Federal Maritime Commission on Feb. 23 released its final rule on detention and demurrage billing practices as part of its compliance with the Ocean Shipping Reform Act of 2022. The rules, set to take effect May 26, will require carriers give shippers a full 30 days to pay invoices, among other changes.
Detention and demurrage fees are charged when a shipper has not picked up cargo in a certain number of days or are late in returning containers back to terminals. Shippers have long noted a lack of transparency around these fees, which fees soared during the pandemic after supply chain breakdowns sparked a container backlog at ports.
“Those [billing] practices contributed to massive financial injury to US shippers, from small ‘main street’ businesses to the nation’s very largest ag exporters and retailers,” Peter Friedmann, executive director of the Agriculture Transportation Coalition, said in a statement. “Such abusive practices included billing ... without informing the shipper what or when or where the detention/demurrage occurred, waiting months (in some cases years) to impose the charges, [and] refusing to accept or act upon requests for explanation.”
Ocean carriers collected about $6.9 billion in detention and demurrage costs from 2020 to 2022, according to the FMC. The final rule allows these fees to be issued to the ultimate recipient of the cargo instead of the shipper. It also places limitations on who can receive a bill, clarifying that trucking companies that don’t have contracts with ocean carriers cannot be charged.
“This is a great step forward the industry. Standardized billing practices will only serve to drive efficiency gains,” Harbor Trucking Association CEO Matt Schrap said in an email. “Once fully implemented, the rule will ultimately eliminate the rampant of extortion motor carriers through unjust and unreasonable per diem and detention charges.”
Invoices must include information around why shippers were fined and for which dates. They must also include details on how to file a dispute. Failure to include this information voids a shipper’s obligation to pay the fine.
The FMC said most of the rulings will take effect on May 26. Section 541.6, which states what information an invoice must contain, is yet to be approved as the agency plans to collect further information.
“The pandemic brought many supply chain issues to a head,” FMC Commissioner Carl Bentzel said in a statement. “Current geopolitical events are drastically impeding the movement of containerized cargo through both the Panama and Suez Canals and once again illustrating the need for better data on cargo shipping, and the need for more to be done to ensure industry transparency.”
