FILE PHOTO: Shipping containers are pictured at Yusen Terminals (YTI) on Terminal Island at the Port of Los Angeles in Los Angeles, California, U.S., January 30, 2019. REUTERS/Mike Blake/File Photo

Detention and Demurrage Charges Targeted in White House Executive Order

Mike Schuler
Total Views: 3459
July 9, 2021

President Biden signed a wide-ranging executive order on Friday directing over a dozen federal agencies to take action to promote competition in the American economy and urge a crack down on anti-competitive practice.

The order includes a total of 72 initiatives aimed at tackling “some of the most pressing competition problems across our economy.” One of the initiatives directs the U.S. Federal Maritime Commission to take steps to protect American exporters high costs imposed by the ocean carriers and crack down on “unjust and unreasonable fees,” including detention and demurrage charges that have soared during the pandemic, costing shippers big.

Demurrage and detention charges are widely used in container shipping and are often unclear to shippers. The charges cover the use of shipping containers beyond a free time period and are applied to encourage timely pickup and return of cargo and equipment. D&D charges have gained a lot of attention at the Federal Maritime Commission during the pandemic as cargo flows are disrupted and often unpredictable.

A White House fact sheet describes shipping-related actions to be taken in the Executive Order:

“Shipping: In maritime shipping, the global marketplace has rapidly consolidated. In 2000, the largest 10 shipping companies controlled 12% of the market. Today, it is more than 80%, leaving domestic manufacturers who need to export goods at these large foreign companies’ mercy. This has let powerful container shippers charge exporters exorbitant fees for time their freight was sitting waiting to be loaded or unloaded. These fees, called “detention and demurrage charges,” can add up to hundreds of thousands of dollars.

In the Order, the President:

Encourages the Federal Maritime Commission to ensure vigorous enforcement against shippers charging American exporters exorbitant charges.

FMC Commissioner Rebecca F. Dye in February issued information demand orders to ocean carriers and marine terminal operators (MTOs) to determine if legal obligations related to detention and demurrage practices are being met. The demand orders follow a new Interpretive Rule on Detention and Demurrage, effective as of May 2020, which offered new guidance about how the FMC would assess the reasonableness of detention and demurrage under 46 U.S.C. 41102(c), which prohibits unjust and unreasonable practices and regulations related to, or connected with, receiving, handling, storing, or delivering property. Failure to abide by the guidance could constitute a violation.

Commissioner Dye is the appointed Fact Finding Officer for Fact Finding 29, “International Ocean Transportation Supply Chain Engagement,” initiated in March 2020 to identify solutions to cargo supply chain challenges related to the COVID-19 pandemic.

FMC Chairman Daniel B. Maffei issued the following statement in response to today’s Executive Order:

I applaud President Biden for his leadership in calling “all hands on deck” to ensure fair competition across the supply chain. The Federal Maritime Commission is an independent agency led by five independent Commissioners. However, as Chairman, I commit to doing all I can to have the Commission fully participate in this government-wide coordinated effort to benefit the U.S. economy.

In recent months, we have increased our scrutiny of the ocean carrier alliances to identify evidence of anticompetitive behavior regarding rates and capacity, and we will continue to do so as the COVID-19 and import surge crisis continues. We welcome the assistance and cooperation from other agencies, including the Department of Justice.

With regard to detention and demurrage charges, it remains a top priority of the agency to identify and take action against those who flout the Commission’s recent interpretive rule on reasonable regulations and practices. The President’s action today reinforces these efforts and indicates his prioritization of a fair and reliable supply-chain.

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