CLECAT and FIATA have both issued statements welcoming the newly published guidance by the US Federal Maritime Commission (FMC), which outlines its approach to assessing the reasonableness of Detention and Demurrage regulations and practices of carriers and marine terminal operators in the US.
“This is a welcome decision for the Freight Forwarding community, providing certainty on the need for Detention and Demurrage practices to be reasonable and in line with the purposes they serve. In the context of the unprecedented difficulties faced due to COVID-19, this timely supports the continued functioning of the Supply Chain,” said Dr Stéphane Graber, FIATA Director General.
“The Interpretive Rule will bring much needed clarity to the US Freight Forwarding community on fair and reasonable demurrage and detention practices, especially in the context of the unprecedented COVID-19 crisis,” said Ms Nicolette van der Jagt, Director General of CLECAT. “Albeit bound to the US rulemaking, the new guidance is expected to have a significant impact on demurrage and detention charging practices worldwide,” she underlined, adding that CLECAT in particular welcomes the FMC consideration of the need for equal treatment between Merchant and Carrier Haulage, fair and reasonable free periods, as well as caps on Demurrage and Detention charges.
Issued on 28 April 2020, the Final Rule, Docket No. 19-05 Interpretive Rule on Demurrage and Detention under the Shipping Act, follows years of complaints from the Freight Forwarding community that Demurrage and Detention practices unfairly penalised them for circumstances outside their control. CLECAT and FIATA both compliment the pragmatic approach to a stakeholder consultation process, taken by FMC Commissioner Rebecca Dye throughout the investigation. The Interpretive Rule is the culmination of a nearly four-year-long process, initiated by a petition from a coalition of Shipper and Forwarder groups, arguing that Demurrage and Detention practices unfairly penalised them for circumstances outside their control, which prompted the following Fact Finding 28 exercise. “The FMC has listened to the complains of various industry stakeholders and has over a period of a few years conducted extensive fact-finding meetings, making a real effort to understand the trade,” explained Ms van der Jagt of CLECAT. “By adopting the Interpretive Rule, the FMC provided full transparency to all the parties involved. This serves as a clear example for the decision-makers in the EU,” she argued.
Demurrage and Detention charges can play an important role in the efficient movement of Container stock, however unjust practices in recent years have spurred concerns regarding their reasonableness in achieving their intended purposes, particularly in circumstances outside of the Freight Forwarder’s control. As stated in FIATA’s Best Practice Guide on Demurrage and Detention in Container Shipping, “…merchants should not be subjected to unjust and unreasonable charges. In this context, there are strong indications that shipping lines abuse the charging of demurrage and detention to maximise profits.”
The FMC’s Final Rule considers the extent to which Detention and Demurrage charges and policies serve their primary purpose of incentivising the movement of Cargo and promoting Freight fluidity, and is intended to reflect three main principles:
The Final Rule also comprises guidance as to: (1) the adoption of a policy regarding Demurrage and Detention practices and Government inspections; and (2) clarification that the rule does not preclude the Commission from considering additional factors outside those specifically listed, including extenuating circumstances.
To note, CLECAT has recently issued a Briefing & Industry Recommendations Paper on Demurrage & Detention Practices in Shipping, which calls for a more transparent process with regards to the determination of Detention and Demurrage practices in Container shipping. The paper collects information on the Detention and Demurrage practices, which are of concern to Freight Forwarders in different parts of Europe as well as on a global level. On the basis of the discussions and the exchange of practices among its members, CLECAT has also drafted a number of industry recommendations.