The United States Federal Maritime Commission (FMC) recently found that problems with charges for holding onto cargo beyond free time, traditionally referred to as “demurrage” (for charges for a carrier’s container within the terminal or for use of terminal space) or “detention” (for charges for use of a container outside the terminal) is prevalent among all actors in the international ocean supply chain, not just shippers and consignees. The interests between parties in the supply chain are not always aligned and their complex contractual and operational relationships create significant risk for ocean intermediaries such as freight forwarders, logistics providers, and non-vessel owning common carriers (NVOCC) — and by extension their insurers — for demurrage and detention charges.
For example, an NVOCC or logistics provider may be designated as the “consignee” in an ocean carrier’s bill of lading or fall within the broad definition of “Merchant” to which the terms of the bill of lading apply. The NVOCC or logistics provider is thereby exposed to all demurrage/detention charges if the ultimate consignee fails to pick up a container.
These complex relationships, and ensuing demurrage and detention concerns, have been the subject of a comprehensive fact-finding investigation by the FMC. After meetings and comments from the industry, the FMC has now issued its final report, which is available at https://www.fmc.gov/ff_no._28/.
The FMC found that “demurrage and detention are valuable charges when applied in ways that incentivize cargo interests to move cargo promptly from ports and marine terminals.” However, “all international supply chain actors could benefit from transparent, consistent, and reasonable demurrage and detention practices.” To that end, the FMC recommended the organisation of “Innovation Teams” to refine commercially viable demurrage and detention approaches to reconciling all interests in this complex web of contractual and operational relationships.