IAM welcomes FMC’s Final Interpretative Rule on Demurrage and Detention Charges
Alexandria, VA, 11 May 2020 – The International Association of Movers (IAM) welcomes the US Federal Maritime Commission’s (FMC) guidance issued recently specifying its new approach to assessing the reasonableness of detention and demurrage regulations and practices by shipping lines and U.S. port operators.
“The Commission's Final Interpretive Rule represents a significant milestone for the shipping public, particularly individuals moving their household goods to or from the United States. For too long, these shippers faced the prospect of thousands of dollars in excess costs due to the unregulated detention and demurrage environment” said Charles White, IAM President.
The FMC issued the Final Rule, Docket No. 19-05 Interpretive Rule on Demurrage and Detention under the Shipping Act, on April 28, 2020. The final rule outlines the FMC’s reasoning for jurisdiction to initiate policy under the Shipping Act of 1984 to address issues surrounding detention and demurrage. The FMC determined they did have jurisdiction, and that an interpretive rule was an appropriate avenue to take, and within the spirit of the Shipping Act.
IAM has long advocated for greater transparency on this issue and sought to reduce demurrage and detention costs stemming from reasons beyond a shipper’s control. The Association joined the Coalition for Fair Port Practices (CFPP), an industry group collective, which was formed in 2016 to address port congestion and related issues. To support the industry and our customers, IAM testified in-person before the Commission and via written testimony several times, highlighting the delays, costs and damages that often occur as a result of the HHG inspection process.
While other members of the CFPP focused on reducing demurrage and detention costs due to weather or port congestion, IAM centered its testimony on the frequent and routine nature of HHGs inspection, which incurred both costs and damage to shipments of household goods and personal effects. The Commission found legitimacy in shippers' arguments, and formally began a rulemaking process to address concerns raised, balancing input from both port/carrier operations and the broader shipping community.
In addition to how the Commission will define detention and demurrage for purposes of applicability across ports, they also indicated that charges to shippers when cargo is unable to be retrieved or empty containers unable to be returned, are likely to be found unreasonable. The Commission may also consider extenuating circumstances surrounding government inspections, with respect to fee assessments. At the core of all considerations, is whether or not the detention/demurrage charges are assessed in order to "incentivize movement of freight", or if they are more punitive in nature/outside of the shipper's control.
Next Steps: With government inspections formally in the final rule and statute, the Commission will be able to proceed with additional information requests and actions. This would likely begin with a Notice of Inquiry (NOI), which permits the FMC to gather specific data from companies and industries surrounding demurrage and detention fee assessments, frequency and circumstances under which fees were assessed. Company data received would be held in a confidential manner by the Commission, and submission voluntary in nature. From the NOI, more formal and prescriptive Commission policies may be developed, should information provided warrant such action by the Commission.