The U.S. Federal Maritime Commission has approved a $2 million settlement with German container shipping company Hapag-Lloyd over alleged violations related to their detention and demurrage practices.
The FMC is the independent agency of the U.S. government that overseas competition in the international ocean shipping supply chain.
The settlement agreement, announced late Wedensday, follows an initial decision handed down in April by the FMC that found Hapag-Lloyd violated the Shipping Act by “knowingly and willfully failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing or delivery property, by unreasonably refusing to waive detention charges, in violation of 46 USC 41102(c).”
The FMC’s Administrative Law Judge (ALJ) initial decision ordered Hapage Lloyd to pay a $822,220 civil penalty and for it to cease and desist their violative actions.
The latest settlement made with the FMC’s Bureau of Enforcement (BoE) comes as the FMC is cracking down on excessive demurrage and detention fees levied by ocean carriers and holding them accountable to the FMC’s Interpretive Rule on Demurrage and Detention. Issued in May 2020, the interprestive rule provides guidance and clarity as to how the FMC assesses the reasonableness of demurrage and detention practices under the Shipping Act. Central to the interpretive rule is that detention and demurrage fees must facilitate freight fluidity.
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“To restore full confidence in our ocean freight system, vigorous enforcement of FMC rules is necessary. Specifically, we must ensure powerful ocean carriers obey the Shipping Act when dealing with American importers and exporters. The case that was concluded today is just part of an ongoing effort to investigate any conduct alleged to violate FMC rules – and in particular, the interpretive rule on detention and demurrage charges,” Chairman Daniel Maffei said.
Following the conlusion of a more than two-year fact finding investigation into the ocean shipping supply chain led by FMC Commissioner Rebecca Dye, the FMC on Wednesday announced new initiatives aimed at addressing some of numerous concerns voiced by U.S. shippers and supply chain stakeholders amid issues in the ocean supply chain arising during the COVID-19 pandemic.
One of those initiatives was for ocean carriers, marine terminal operators, and ports to designate an FMC Compliance Officer responsible for FMC legal and regulatory compliance, including detention and demmurage practices.
The $2 million civil penalty agreed with Hapag-Lloyd will be paid to the U.S. Department of the Treasury. The FMC’s case against Hapag-Lloyd was launched in November at the request of the FMC’s Bureau of Enforcement (BoE).
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