Federal Maritime Commission continues to address detention and demurrage issues | Holland & Knight LLP

The Federal Maritime Commission (FMC or the Commission) met in open and closed session on January 27, 2022 to discuss the Commission’s efforts to address shipping carrier detention and demurrage practices, as well as to improve supply chain data transparency. The session is the latest in the ongoing saga of the reasonableness of various detention and demurrage practices that have come under intense scrutiny by the FMC since before the COVID-19 pandemic.

The pandemic, however, has fueled growing supply chain congestion across the transportation industry, which has exacerbated freight flow issues and shipper community concerns about costs and related costs. Therefore, FMC continues its efforts to monitor, investigate, and seek creative solutions during the current supply chain crisis.

Overview of the meeting and ANPRM

Topics discussed during the closed session included: 1) an information session on the proposed Notice of Proposed Rulemaking (ANPRM) project, which would seek public comment on whether the CMF should require carriers public authorities and maritime terminal operators that they provide certain information concerning (or with) the invoicing of demurrage and detention charges; 2) an update from Commissioner Carl Bentzel on the Maritime Transportation Data Initiative, an effort to use data to speed up the nation’s cargo delivery system; and 3) matters relating to the Vessel-Operating Common Carrier (VOCC) audit program established in July 2021.

During the public session, the Commission discussed data from the audit team which showed large increases in demurrage and detention charges in 2021. FMC staff and Chairman Daniel Maffei explained that increases were expected in the context of the overall supply chain congestion situation, but Chairman Maffei noted that the data also warranted the Commission’s continued attention to detention and demurrage best practices across Of the industry.

The ANPRM discussed at the meeting was published as a pre-publication on 4 February 2022. As stated in the ANPRM, the Commission intends to solicit comments on whether the Commission should require shipping carriers and terminal operators that they “include certain minimum information… [and] to adhere to certain practices regarding the timing of demurrage and detention billings. It is important to note that the ANPRM invites comments on a wide range of detailed questions, including:

  • distinctions in practices and interests between different stakeholders – e.g. VOCCs, Non-Vessel Operating Common Carriers (NVOCCs) and Marine Terminal Operators (MTOs)
  • a wide range of charges (which seem to potentially include congestion-based charges)
  • billing information potentially required and questions about regulation of billing practices and billing deadlines
  • disclosure and substance of policies and practices relating to demurrage and detention waivers and litigation

Responses to the ANPRM will be due 30 days after publication in the Federal Register. Potentially affected stakeholders should seriously consider preparing and submitting comments in response to the ANPRM.

Increased focus of the executive branch, DOJ

In addition to the FMC’s efforts, smooth freight and increasing costs have been flagged as priorities by the executive branch, and echoed by the FMC’s partnerships with other agencies regarding competition. For example, on July 9, 2021, President Joe Biden signed an “Executive Order on Promoting Competition in the American Economy”, which aims to promote competition in various aspects of the American economy and undo monopolies. perceived. Regarding the shipping industry, President Biden has ordered U.S. transportation agencies to crack down on anti-competitive behavior and charges that the rail and shipping industries view as unfair in their efforts to reduce costs for consumers. (See Holland & Knight’s previous alert, “New Presidential Executive Order Targets Maritime Industry and Ocean Carriers”, July 12, 2021.)

In their first-ever joint memorandum of understanding, the US Department of Justice’s (DOJ) Antitrust Division and the FMC pledged to cooperate and assist the agencies to promote “healthy competition in the shipping industry” and “protect market integrity. ” with respect to the international liner shipping industry between the United States and the United States, including marine terminal services. The express purpose of the MOU is to improve the efficiency of each agency in exercising its legal responsibility in “enforcing antitrust and other laws related to the [i]industry.”

For the DOJ, this means criminal law enforcement capabilities, and for shipping in general, this means a thorough examination of competition issues both under the Shipping Act and potentially outside the merchant shipping law. Although the FMC and DOJ have different jurisdictional mandates with respect to shipping, the DOJ has previously prosecuted violations in the shipping industry – including price fixing and bid-rigging in the shipping industry. roll-on/roll-off (Ro-Ro). it led to criminal charges of antitrust conspiracy against 13 industry executives and five companies, and resulted in prison terms and criminal fines of more than $255 million.

In light of the MOU, along with renewed aggressiveness from the DOJ and the Biden administration’s Executive Order on Competition, the shipping industry can well expect its practices to come under scrutiny. increased scrutiny for criminal and civil offences. Therefore, now is the time for shipping lines and other industry players to proactively review their existing compliance policies to determine whether they are effective or whether changes are warranted.

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