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Federal Maritime Commission (FMC) Chairman Daniel B. Maffei visited the Port of New York and New Jersey on Wednesday to meet with trucking representatives and marine terminal operators about growing congestion at the nation’s number two port for containerized cargo.
His visit comes after the National Industrial Transportation League (NITL) and Bi-State Motor Carriers Association (Bi-State) raised concerns with the FMC about equipment availability and demurrage and detention (D&D) charges, while also urging the FMC to suspend D&D at the port.
U.S. East Coast ports have gained this year due to a shift in container shipping capacity from the U.S. West Coast, where ongoing congestion and threats related to unsettled labor negotiations have caused shippers to look elsewhere for landing inbound cargo. The Port of New York and New Jersey has seen cargo volumes rise nearly 12% so far this year compared to 2021 and 34% compared to the same period in 2019 before the pandemic. This shift, unfortunately, has brought with it congestion issues.
As of Thursday, numbers from the Port Authority of New York and New Jersey showed 19 containerships at anchor awaiting berthing space. A glut of empty export containers awaiting pick-up by ocean carriers contributed to the problems, prompting the port authority to announce this week a new “container imbalance fee” for ocean carriers. Under the program, which will be effective as of September 1, 2022, ocean carriers’ total outgoing container volume must be 110% or more of their incoming container volume or face a $100 per container fee over the benchmark.
“When ocean carriers continue to bring thousands of containers per month to a port and only pick up a fraction of that number, it creates an untenable situation for terminals, importers and exporters, trucking companies, and the port itself,” said Chairman Maffei. “The Commission has already been investigating reports of carriers charging per diem container charges even when the shipper or trucker cannot possibly return the container due to terminal congestion. I will ask that this investigation be broadened and intensified to cover instances where shippers and truckers are being forced to store containers or move them without proper compensation.”
D&D charges are widely used in the container shipping industry and can be unclear or ambiguous in shipper contracts. The charges, levied by ocean carriers, cover the use of shipping containers beyond a time period and are applied to encourage timely pickup and return of cargo and equipment.
The recently enacted Ocean Shipping Reform Act of 2022 included a provision related to requirements for D&D billing, while also giving the FMC greater authority over certain ocean carrier practices and rulemaking. Central to the FMC’s oversight of D&D practices is its Interpretive Rule on Demurrage and Detention, issued in May 2020, which provides guidance and clarity on how the FMC assesses the reasonableness of D&D charges under existing law. In essence, the interpretive rule prescribes that D&D charges must facilitate freight fluidity.
“The Commission will ask the carriers that have fallen the most behind in picking up their empties what their plan is to rectify the situation. Whatever their answers may be, I will do everything in my power to ensure that carriers do not receive involuntarily subsidized storage for empty containers that belong to them,” said Maffei. “If it can be shown that a shipper or a trucker is not allowed to return a container then – not only should they not be charged per diem but – the carrier should compensate that trucker for the space it takes up. This is completely in line with the incentive principle set forth by the Commission in its rules in that it would promote the movement of cargo since chassis and space would be freed up by carriers taking full responsibility for the empty containers resulting from the increased volumes of import cargo they bring in.”
With the FMC’s announcement last week that it was reorganizing its investigative and prosecution functions by consolidating them into a newly created Bureau of Enforcement, Investigations, and Compliance (BEIC), combined with the agency’s closer collaboration with the Department of Justice over the last year, ocean carriers have once again been put on notice that any type of anti-competitive behavior will not fly.
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