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USA Final Rule on Detention and Demurrage Billing Practices goes LIVE – What it means..


  • D&D invoices issued from May 2024 should be compliant with FMC’s final rule
  • Action can be enforced for incorrect issuance against non-compliant parties
  • Affected parties have several options for recourse through the FMC

Demurrage and Detention are two words that have been and continue to be the bane of the existence of many BCOs, creating a big rift between carriers, BCOs and forwarders..

While demurrage and detention are a big issue for several customers globally, these issues are most vocal in the USA.. While this could be because the USA is one of the most expensive countries for demurrage and detention, with operational practices more complicated than other countries, it is also due to the actions taken by the Federal Maritime Commission (FMC) in this regard..

Several BCOs have filed claims and complaints against demurrage and detention practices by carriers with the FMC with some BCOs taking their forwarders and/or NVOCCs to task on the exorbitant charges in the USA..

Enter Ocean Shipping Reform Act of 2022

To address these issues, on Thursday, the 16th of June 2022, the 46th President of the United States – Joseph Robinette Biden Jr. signed S. 3580, the “Ocean Shipping Reform Act of 2022,” into Law..

On the back of this act, the FMC issued its Final Rule on Detention and Demurrage Billing Practices, in February 2024, which came into effect on the 28th of May 2024..

The final rule establishes clear guidelines for billing and disputes over detention and demurrage charges requiring common carriers and marine terminal operators to include specific minimum information on demurrage and detention invoices and outlines detention and demurrage billing practices..

To clarify, below is the definition of Common Carrier and Marine Terminal Operator as per The United States Code:

  1. Vessel-Operating Common Carriers (VOCCs), also called ocean common carriers means a person that
    (i) holds itself out to the general public to provide transportation by water of passengers or cargo between the United States and a foreign country for compensation;
    (ii) assumes responsibility for the transportation from the port or point of receipt to the port or point of destination; and
    (iii) uses, for all or part of that transportation, a vessel operating on the high seas or the Great Lakes between a port in the United States and a port in a foreign country; but
  2. NVOCC or non-vessel-operating common carrier means a common carrier that
    (A) does not operate the vessels by which the ocean transportation is provided;
    (B) is a shipper in its relationship with an ocean common carrier.
  3. The other party involved in the demurrage and detention story is the “Marine Terminal Operator’’ (MTO) – The term “marine terminal operator” means a person engaged in the United States in the business of providing wharfage, dock, warehouse, or other terminal facilities in connection with a common carrier, or in connection with a common carrier and a water carrier..

For reference, what is termed demurrage and detention charges by the MTO is known in many parts of the world as “port storage” as the action happens inside the port/terminal..

It is related to the ground rent that the container occupies in the port/terminal and not related to the usage of the container itself as the container belongs to the VOCC or NVOCC..

While this is a story for another day, you can read the article on the difference between demurrage, detention, and storage to understand further..

What makes the Final Rule important for demurrage and detention practices..??

The OSRA 2022, on which the Final Rule is based, prohibits common carriers from issuing an invoice for demurrage or detention charges unless the invoice includes specific information to show that the charges comply with part 545 of title 46, Code of Federal Regulations, and applicable provisions and regulations..

OSRA 2022 lists the minimum information that common carriers must include in a demurrage or detention invoice:

  • date that container is made available;
  • the port of discharge;
  • the container number or numbers;
  • for exported shipments, the earliest return date;
  • the allowed free time in days;
  • the start date of free time;
  • the end date of free time;
  • the applicable detention or demurrage rule on which the daily rate is based;
  • the applicable rate or rates per the applicable rule;
  • the total amount due;
  • the email, telephone number, or other appropriate contact information for questions or requests for mitigation of fees;
  • a statement that the charges are consistent with any of Federal Maritime Commission rules with respect to detention and demurrage; and
  • a statement that the common carrier’s performance did not cause or contribute to the underlying invoiced charges..

Failure to include the required information on a demurrage or detention invoice eliminates any obligation of the billed party to pay the applicable charge21..

In addition, OSRA 2022 authorizes the Commission to revise the minimum information that common carriers must include on demurrage or detention invoices in future rulemaking..

The final rule involves determining which parties may be billed for demurrage or detention charges and sets timeframes for issuing invoices, disputing charges with the billing party, and resolving such disputes..

2nd RFI for Maritime Transportation Data Initiative (MTDI)

Commissioner Carl W. Bentzel of the U.S. Federal Maritime Commission (FMC) has taken another significant stride in advancing transparency and efficiency within the maritime industry with the release of the second Request for Information (RFI) for the Maritime Transportation Data Initiative (MTDI) published on the 16th of April 2024..

This 2nd RFI for which the responses should reach the Commissioner by the 16th of June 2024 is part of Commissioner Bentzel’s ongoing endeavor to develop a transparent information-sharing process..

As per the Commissioner, it will help enhance the reliability and predictability of container shipments including information relating to data accuracy, cargo availability (part of the final rule requirements), and operational efficiency..

Conclusion

The industry is hopeful that the issuance and go live of the Final Rule for Demurrage and Detention Practices will hopefully put an end to the several disputes that have been plaguing the American trade landscape..

In summary, invoices issued for demurrage or detention charges from May 28, 2024, must be fully compliant with all requirements of the Commission’s final rule..

Billing the proper party is an important part of the final rule and entities issuing non-compliant invoices or to the wrong parties are subject to enforcement action..

Parties receiving non-compliant invoices have several options for recourse through the FMC including filing a Charge Complaint, requesting informal assistance from the Commission’s Office of Consumer Affairs and Dispute Resolution Services, or filing an action before the Commission’s Administrative Law Judges..

Good luck America..


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Hariesh Manaadiar
Hariesh Manaadiarhttps://www.shippingandfreightresource.com
I am Hariesh Manaadiar, the Founder of Shipping and Freight Resource.. I have been in the dynamic shipping and freight industry for over three decades and have worked in several sectors.. I share my experiences and knowledge of the industry through this blog for those looking for help in the industry.. Stay subscribed for more free useful content about shipping, freight, maritime, logistics, supply chain and trade..

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