Friday, November 20, 2020

Freight Forwarders Worldwide Rail Against Unfair Demurrage and Detention Charges

Associations Back FMC Ruling on Container Charges in Ports Globally
Shipping News Feature

UK – WORLDWIDE – It seems some of the problems we reported regarding delays, demurrage and detention charges caused by the ongoing problems at the Port of Felixstowe are in fact a worldwide phenomenon, and not necessarily linked to the current pandemic which has undoubtedly affected supply chains.

After a six year investigation, with the involvement of stakeholders the length of the supply chain, the US Federal Maritime Commission (FMC) laid out its Final Rule on Demurrage and Detention and the reasonableness of these practices in the container shipping sector. The FMC concluded that there has most likely been a long history of unjust and unfair demurrage and detention practices. The FMC rule is therefore intended to stop such practices to which shippers and freight forwarders alike say they have been exposed for years.

Now the British International Freight Association (BIFA) has joined FIATA (the International Federation of Freight Forwarders Associations) in calling for governments to support the key considerations and conclusions of the FMC findings. Whilst there are country and port-related variances, the FMC findings apply globally as demurrage and detention is a common and widespread topic of contention. FIATA has published a Toolkit giving guidance in great detail on the subject.

British International Freight Association Director General, Robert Keen says that freight forwarders and the shippers they work for are reeling from unjust demurrage fees linked to congestion in ports around the world. He tells how BIFA members are being inundated with these fees despite the fact that they are not responsible for the service delays and port congestion that is causing them, and have no control over the matters. He observed:

”[Our members] should not be penalised 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. If the FMC has identified demurrage and detention practices that are likely to be considered as unjust for the USA, these practices are also unjust and unreasonable for the rest of the world.

“It is wrong for container shipping lines not to respect the interpretative rule introduced by the FMC in May that sought to govern conflicts on the issue of demurrage and detention fees. Governments must therefore have greater scrutiny over demurrage and detention practices to ensure that they are considerate and reasonable for the good of their own economies. It is crucial to ensure fluidity and good function of the supply chain in unprecedented times, as illustrated by Covid-19 and the chaotic state of international container shipping at present.”

BIFA and FIATA are encouraging policymakers to consider the FMC’s non-exclusive list of factors for consideration when assessing the reasonableness of demurrage and detention fees. Such guidance will promote fluidity in freight delivery systems by ensuring that demurrage and detention serve their purpose of incentivising speedy cargo delivery, and that the interpretive rule will also mitigate confusion, reduce and streamline disputes, and enhance competition and innovation in business operations and policies.

BIFA is urging decision makers to ensure a level playing field for all actors in the supply chain of the reasonableness of demurrage and detention charges, with such practices serving their intended purposes as financial incentives to promote freight fluidity. BIFA believes that all international maritime supply chain stakeholders should also benefit from transparent, consistent and reasonable practices that improve this fluidity in global ports and terminals for the benefit of fair, reasonable and ethical interactions between stakeholders in the maritime supply chain.

Analysing the overall problem the FMC stated in May it finds unpersuasive the claim that ocean carriers and marine terminal operators compete on the basis of the demurrage and detention terminology they use, and dismisses the argument that they are at risk of antitrust prosecution or litigation due to their choice of terminology.

Unfortunately for the aggrieved parties, although the FMC makes it abundantly clear it therefore wishes ocean carriers and marine terminal operators to use consistent demurrage and detention language in their terms of trading, and the Commission having seemingly waived any perceived threat of breaking antitrust legislation, it confirms it can only encourage such behaviour, as opposed to mandating it, hence the forwarders appeal to policymakers.