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HomeDemurrage and DetentionUnpacking the FMC's Final Rule on detention and demurrage billing practices

Unpacking the FMC’s Final Rule on detention and demurrage billing practices

The Federal Maritime Commission’s (FMC) Final Rule on Detention and Demurrage Billing Practices, announced on February 23, 2024, marks a significant shift in the container shipping landscape.

This Final Rule establishes clear guidelines for billing and disputes over detention and demurrage charges and is seen as a monumental step toward enhancing transparency and fairness in maritime transport operations.

The container shipping industry has been ensnared in the complexities and ambiguities surrounding detention and demurrage charges for a very long time.

FMC clarifies billing guidelines for demurrage and detention

Shippers and receivers have been complaining about unclear billing guidelines, often finding themselves entangled in unwarranted fees and convoluted disputes with carriers. As per the FMC’s final rule,

demurrage or detention invoices can only be issued to either: (1) the person for whose account the billing party provide ocean transportation or storage of cargo and who contracted with the billing party for the ocean transportation or storage of cargo; or (2) the “consignee,” defined as “the ultimate recipient of the cargo, the person to whom final delivery of the cargo is to be made”. Demurrage and detention bills cannot be issued to multiple parties simultaneously.

The final ruling nips the possibility of simultaneous billing in the bud. This issue has been a chronic industry grievance and this ruling is seen as setting a precedent for fair and focused accountability.

Furthermore, the regulation requires the issuance of invoices within a specified timeframe – notably, 30 calendar days from the last day charges were incurred.

This standardization streamlines the billing process, ensuring that all parties are promptly informed and able to take necessary actions without undue delay.

The establishment of a structured approach to dispute resolution, offering billed parties a minimum of 30 days to seek fee mitigation, refunds, or waivers, is yet another notable aspect of the rule.

The FMC’s initiative to link demurrage and detention fees directly to the efficiency of cargo pickup and equipment establishes a direct correlation between service usage and fees, which incentivizes more efficient operations, fostering supply chain fluidity.

The rule’s emphasis on invoice transparency is particularly noteworthy. The requirement of invoices to contain specific, identifiable information, is a significant step toward ensuring that billed parties fully understand the charges levied against them, thereby reducing the potential for unjust penalties due to invoicing errors.

Currently, most of the rule is set to take effect on May 26, 2024. However, the delayed implementation of the “Contents of Invoice” section, pending approval from the Office of Management and Budget, highlights the ongoing challenges in refining maritime billing practices.

The Commission will announce the effective date of section 541.6 once approved. The swift approval and enforcement of this section are crucial to unlocking the full potential of the new regulations.

Conclusion

In summation, the FMC’s Final Rule is a bold and necessary stride toward rectifying the longstanding issues plaguing billing practices relating to demurrage and detention in container shipping.

The detailed provisions of the FMC’s final regulations, as outlined in the accompanying document, underscore the Commission’s commitment to addressing the nuances of detention and demurrage billing.

These measures, reflecting industry feedback and legal analysis, are critical in enhancing supply chain fluidity and accountability, thereby supporting the broader objectives of fairness and clarity in maritime billing practices.

In light of these developments, the FMC’s actions represent not just regulatory adjustments but a profound shift towards greater transparency, efficiency, and justice in global trade and shipping logistics.

Their measures are not only commendable but vital as the maritime industry continues to navigate the evolving tides of global commerce.


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