Demurrage and detention are two terms that often confuse people in global trade, shipping, freight, and logistics. This has also led to financial losses many a time for customers. Demurrage and Detention in the context of container shipments is defined as
- Demurrage relates to cargo (while the cargo is in the container before unpacking in imports or before shipment in exports)
- Detention relates to equipment (while the container is empty after unpacking in imports or before packing in exports)
On the 30th of Dec 2021, the Federal Maritime Commission (FMC) initiated an investigation into the charging of container detention fees by Wan Hai lines. Wan Hai is the 10th largest container shipping line in the world and the only line in the top 10 container lines of the world that is not part of a global container shipping alliance. Wan Hai is the 25th largest carrier for imports into the United States as per the FMC.
Whether this investigation is directly related to the three policy statements recently issued by the FMC providing new guidance to shippers and others on the complaints process for bringing private party complaints against disincentives is not clear.
These policy statements were proposed by Commissioner Rebecca F. Dye in a set of Interim Recommendations issued in July 2021 as part of her Fact Finding 29.
The investigation notice by the FMC read
“The Federal Maritime Commission (“Commission”) deems it appropriate and in the public interest that a proceeding be, and hereby is, instituted pursuant to 46 U.S.C. § 41102(c), against Wan Hai Lines, Ltd. and Wan Hai Lines (USA) Ltd. (collectively “Wan Hai”), a vessel operating common carrier (“VOCC”) for possible violations of 46 U.S.C. § 41102(c) with respect to charges relating to container returns.”
The allegation is that Wan Hai lines charged the customer detention charges ranging from USD125 to USD1550 per container on 21 different occasions although the line did not provide the customer with the option of an empty container depot to return the containers to within the specified free time. The filing also said that in some instances, the designated terminal of the line did not accept containers’ chassis, or appointments were unavailable for the return of the subject containers.
Empty containers sitting on chassis across the USA is said to be one of the reasons for the pile-up of full containers in the ports as those chassis are then unable to pick up full import containers.
In July 2021, the FMC established a new carrier audit program to assess carrier compliance with the Agency’s rule on detention and demurrage and Wan Hai has become the latest case to come before the commission these charges, with MSC having reportedly settled a dispute with one of their customers over unreasonable demurrage charges and it has been reported that Hapag-Lloyd is currently embroiled in a separate investigation.
On the 28th of April 2020, the FMC issued its final rule on its interpretation of the Shipping Act prohibition against failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property with respect to demurrage and detention.
The interpretive rule was intended to reflect three general principles:
- Importers, exporters, intermediaries, and truckers should not be penalized by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals because under those circumstances the charges cannot serve their incentive function ;
- Importers should be notified when their cargo is actually available for retrieval ;
- Demurrage and detention policies should be accessible, clear, and, to the extent possible, use consistent terminology
Point 1 of the interpretive rule above seems to be the crux of the case against Wan Hai lines as filed with the FMC.