Truckers Hail New FMC Rule on Overseas Container Fees
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The Federal Maritime Commission has issued a final ruling to simplify international container billing practices in a move hailed by truckers who’ve been stuck paying ocean carrier detention and demurrage fees until later reimbursement by shippers.
“The FMC final rule on detention and demurrage is a game changer for intermodal motor carriers, and we are extremely happy with the outcome. Keep in mind that this doesn’t eliminate D&D but simply redirects them,” Armand Patella, executive vice president of the Maryland Motor Truck Association, told Transport Topics.
Demurrage charges are levied for containers that sit on docks beyond an allocated free time. Detention charges (also called per diem) occur after free days lapse when a container is taken off the dock.
“The Ocean Shipping Reform Act recognized the increasingly complex and interdependent supply chain, and this ruling is a move toward keep-it-simple accountability by recognizing that motor carriers have distinct responsibilities in the supply chain which do not include charges for delays or circumstances beyond their control,” Patella said.
The FMC’s rule on D&D billing requirements, issued Feb. 26, takes effect May 28, except for two forthcoming amendments.
Patella
It contains a key feature: Ocean carriers must submit an invoice for these charges within 30 days instead of the previous 60.
“Placing billing and payment accountability directly between contracting parties will allow motor carriers to have more accurate and robust conversations about haulage rates and service expectations with their customers instead of the merry-go-round of finger-pointing for who’s responsible for these D&D invoices,” Patella said.
Jonathan Eisen, executive director of American Trucking Associations’ Intermodal Motor Carriers Conference, praised the new ruling. IMCC and ATA pressed Congress to include this clarification in the Ocean Shipping Reform Act when it passed in 2022 because motor carriers have faced major D&D charges from ocean carriers when shipping containers are delayed.
“During the supply chain disruptions of the pandemic, these charges resulted in major increases in costs for shippers that ultimately were passed onto American consumers,” according to an ATA/IMCC statement favoring the new ruling.
Eisen
Eisen explained that trucking companies had to pay these bills and seek reimbursement from shippers. “This is going to make a big difference for motor carriers,” he noted. “This is a big change to the supply chain.”
The new rule will impact drayage companies working at ports and trucking companies that carry international containers from inland rail facilities.
“These have become pretty considerable charges, and certainly during the pandemic, they were extraordinarily significant. These charges can add up very, very quickly and have become a major source of contention within the supply chain,” Eisen said. “It’s important that contracting parties work together because it means that ocean carriers have greater incentive to accurately bill them and when there are disputes, both parties have greater incentive to resolve those disputes.”
Matt Schrap, CEO of the Harbor Trucking Association, said issues with the billing practices have been taking place for more than 20 years.
Schrap
“It’s crazy to me that it finally took this long for us to pull back the veil. It had to be this world-changing event of the pandemic and the subsequent supply chain fallout for the veil to be pulled back to see how unjust and unreasonable a lot of these charges have been,” Schrap said. “We’re talking millions of dollars. I’ve seen per-diem invoices collectively over a few month period [total] over a million dollars. A couple of hundred thousand, or tens of thousands is not uncommon because the charges just start piling up. When you have no place to return the empty container, and it’s sitting in your yard on top of a chassis that you can’t use elsewhere in the supply chain, it also creates opportunity costs and starts constraining chassis supply.”
His association represents 520 motor carrier members — which have anywhere from one truck to 1,000 trucks — that do business from San Diego up to the Seattle-Tacoma area.
“I think the easiest way to describe the positive nature of this ruling is accountability,” Schrap said. “It’s not about how much is being charged. It’s not about the type of equipment that’s being charged or how much free time is being allowed. It’s about who gets the bill, and that is very cut and dry. Let’s get better together, foster accountability, foster responsibility. These are good things that are just going to enhance efficiency.”
He wants to clear up misconceptions about trucking’s role within the new ruling. “We are not abandoning our shipper partners,” he added. “We’re going to be in lockstep with our shipper partners to make sure that they’re protected. We’re not just going to leave them flapping in the wind.”
Eisen agreed that motor carriers will still play an important role.
“Motor carriers are still going to have to work with their shipper customers to determine whether these bills are accurate,” he said.
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