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November 25 2019

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26 The Journal of Commerce | November 25 2019 www.joc.com Government When the free time clock starts and stops is just one element in the disagreement over the FMC's proposed detention and demurrage rules. Shutterstock.com CONTAINER SHIPPING INDUSTRY play- ers remain divided on the US Federal Maritime Commission's (FMC) pro- posed rules on detention and demur- rage, disagreeing on when the clock to retrieve cargo should start ticking, what events should pause the clock, and who pays when terminal fluidity is disrupted. Oct. 31 marked the deadline for public comment in the latest round of a long-running dispute among benefi- cial cargo owners (BCOs), truckers, marine terminals, and carriers on detention and demurrage fees. Cargo owners complain they shouldn't be held responsible when factors such as weather prevent timely pickup of cargo and return of equipment, while carriers and terminals assert they can't just eat higher operating costs. Further complicating matters, some BCOs accuse carriers and terminals of using the fees as a revenue generator. Commissioner Rebecca Dye has said the agency isn't seeking to deter - mine "fault" or whether the fees are fair. Instead, she said, the recommen- dations focus on how the agency will consider whether fees are reasonable to encourage supply chain fluidity. Exceeding authority? The World Shipping Council (WSC), representing ocean carriers, has filed a 20-page comment arguing the interpretive rule "is neither an interpretive rule, nor is it properly constructed. "In short, the commission uses a broad brush to make new substantive law under the guise of merely provid- ing guidance, and in so doing exceeds its authority under the Shipping Act of 1984," WSC wrote. The National Industrial Trans- portation League (NITL) and the National Retail Federation (NRF), representing BCOs, maintain the FMC proposal is appropriate. "We believe the commission has produced thoughtful guidance that will have a significant beneficial impact on the working relationships between and among cargo interests and will ultimately improve the flow of cargo at the nation's ports," said David French, senior vice president for the National Retail Federation. Cloudy issues When Hurricane Dorian closed port terminals in the Southeast this September, shippers could not retrieve containers. Is it fair for them to lose a free day when trucks cannot access the terminal? "Weather is everyone's problem," pointed out J. Peter Hinge, who spent nearly 20 years with container carrier CMA CGM. "Why should marine ter - minals and ocean carriers be the only ones to bear the cost of idle contain- ers in such cases? "What if a container were available for pickup during the free time period, but after the expiration of free time, circumstances beyond anyone's control made the container unavailable?" Hinge wrote. "Would the free time and detention and demurrage clocks stop? That would clearly be unreasonable." Also at issue is the larger question of when a container is actually available. When customs officials take a box for further inspection, for example, should BCOs lose free time, or should the clock stop? "When a container is on hold, the application of demurrage is just bad practice," said Tracy Dsilva, vice president for third-party provider Yusen Logistics (Americas) Inc. "If the container has been pulled out for inspection, then it already moves to a designated area that is assigned to the government. Why, then, should the carriers charge a demurrage-de- tention [fee] to logistics providers and, ultimately, to the customer who is importing these goods?" The Sea Group Shippers' Associa- tion, a non-vessel-operating common carrier (NVO), disagrees. "The FMC is correct these charges are designed to provide an incen- tive to shippers to keep containers moving and to get them off the ter- minal. However, these charges also are designed to allow the carriers, terminal operators, and inspection facilities to recover certain costs they incur when a container is taken out of circulation or is taking up space on their facilities," the group wrote. NITL pointed out push notifi- cations from carriers could "reduce the inefficiencies associated with repeatedly having to check on con- tainer status on either or both carrier or terminal web sites to inquire as to status, even when the cargo is not yet available." "Knowing when cargo is actually available will help ensure that pickup is timely," added the Tea Association of the USA. "You cannot incentivize effi- cient cargo pickup if the cargo may not yet be available (i.e., held in a closed yard or location at the terminal)." Billing practices One proposal called for marine terminal operators (MTOs) to invoice for excessive use of land and for ocean carriers to charge separately for excessive use of land to prevent carriers from padding revenue by marking up demurrage penalties. Sometimes, however, terminal operators deny entry to a driver due to a shipper's nonpayment of an outstanding bill, noted the NRF. "We believe that policies where the ocean carrier bills the BCO for detention and demurrage are the most straightforward and least likely to become complicated and non-trans- parent, and the easiest to dispute because of the underlying relation- ships involved," French wrote. "NRF's members do not have commercial relationships with MTOs." JOC email: ari.ashe@ihsmarkit.com twitter: @arijashe International | Washington | Customs | Security | Regulation Buying time FMC's detention-demurrage proposal divides shipping industry By Ari Ashe

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