FMC Issues Final Rule on Detention and Demurrage Billing

The Federal Maritime Commission (FMC) has issued a new rule that prescribes fresh regulations for how common carriers and marine terminal operators (MTOs) should bill demurrage and detention charges.

The FMC is an independent federal agency responsible for ensuring a competitive and reliable international ocean transportation supply system. The move is designed to bring much-needed clarity on who can be billed, the timeframe within which they can be billed, and the process for disputing such bills.

According to the new rule, demurrage or detention invoices can only be issued to the person who contracted for the ocean transportation or storage of cargo or the “consignee,” defined as “the person to whom final delivery of the cargo is to be made”. The rule clearly states that these bills cannot be issued to multiple parties simultaneously.

The regulation also stipulates that vessel-operating-common carriers (VOCCs) and MTOs must issue detention and demurrage invoices within 30 calendar days from when charges were last incurred. Non-vessel-operating common carriers have a similar timeframe from the issuance date of the invoice they received.

The rule further allows parties billed with at least 30 calendar days to make fee mitigation, refund, or waiver requests. If a valid request is made within this timeframe, the billing party must attempt to resolve the issue within 30 calendar days, unless both parties agree to a longer timeframe.

This rule is a significant step towards the Commission’s objective of promoting supply chain fluidity by ensuring a clear link between the failure to pick-up cargo or return equipment in a timely manner and the corresponding fee. The rule also makes it incumbent upon the billing party to include certain identifiable information on the invoice, thereby ensuring that the billed parties understand the demurrage or detention invoices they receive. If any of the required information is missing from a detention or demurrage invoice, the billed party is under no obligation to pay the applicable charge.

While most of the rule comes into effect on May 26, 2024, section 541.6, which pertains to the contents of the invoice, involves information collection and is yet to receive approval from the Office of Management and Budget. The Commission will announce the effective date of this section once it is approved.

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