US shippers call for urgent action on ‘punitive’ demurrage charges

4/15/2020

A coalition of 80 US agriculture shipper associations and groups are calling for urgent action by the US federal government to end ‘punitive’ demurrage charges that are compounding the damage that the Covid-19 coronavirus is doing to US agriculture.

Peter Friedmann, executive director of the Agriculture Transportation Coalition, explained that “the damage coronavirus is doing to US agriculture is compounded by injuries imposed by the ocean carriers on US exporters, already found by the Federal Maritime Commission (FMC) to be punitive, unwarranted, exacting a heavy economic toll”. He added: “For over 7 months, the Federal Maritime Commission has had on its desk a Proposed Rule providing urgently needed relief from abusive Detention and Demurrage practices. It is awaiting a long-delayed vote.”

He said 80 major agriculture associations, of which his Agriculture Transportation Coalition was just one signatory, “are requesting, by letter to Lawrence Kudlow at the White House, Secretary of Agriculture Sonny Perdue, and leaders of Congressional agriculture committees, intervention to end the delays at the FMC”.

He added: “We do not need more studies and reports, the coronavirus crisis is upon us. This Rule can and should be adopted forthwith.”

The letter states that the organizations, “representing virtually every sector in the US food and agriculture supply chain, request your urgent engagement to ensure the continued free movement via shipping containers to international markets of critical food and agricultural products. Specifically, we seek your engagement with the Federal Maritime Commission (FMC) regarding the ongoing unconscionable imposition of millions of dollars of unfair detention and demurrage penalties on US agriculture by ocean carriers and Marine Terminal Operators during the coronavirus crisis”.

It added: “The FMC has developed a Proposed Interpretive Rule to curtail these abuses, published for public comment last summer, and we urge you to work with the FMC to expeditiously adopt the Interpretive Rule as published.”

The letter explained that ocean carriers and terminal operators impose detention and demurrage charges on US agriculture businesses when ocean freight containers cannot be timely returned to, or picked up from, marine terminals within a short ‘free time’ window, “even when the delay is caused by the ocean carriers or terminals themselves – such as when the terminal is closed, or the ship is late. An FMC Investigation and Fact-Finding report found that such detention and demurrage fees appear to be punitive measures by the ocean carriers, not an incentive to increase container flow.”

The letter highlighted the findings of those reports that these detention and demurrage fees “impose unreasonable costs and significant burdens on the US shipping public, including agriculture and forest products exporters and truckers. These fundamentally unfair fees are frequently exorbitant in nature, even exceeding the negotiated freight rates in some cases, and render US agriculture exports less competitive in the global markets.”

The letter continued: “Following a three-year investigation and public engagement led by FMC Commissioner Rebecca Dye, the Commission unanimously voted on August 2019 to publish the Interpretive Rule to provide detention and demurrage penalty guidance. The public comment period closed October 31, 2019; and almost all US interests urged the Commission to expeditiously adopt the Interpretive Rule as published. In light of the urgency of this matter, and the challenges faced today by US agriculture exports, we believe six months has been more than sufficient for the Commission to read 104 comments, the overwhelming majority of which support the Rule (45 are virtually identical, supporting the Rule as published.).”

The letter also highlighted that the previous month, 67 organizations representing retailers, exporters, truckers and agriculture firms had urged the Commission to adopt the Rule as published.  

The coalition continued: “The ongoing injury to US agriculture and forestry industries as a result of these unjustified penalties is very real, especially with the challenges posed by the coronavirus. There is great concern about detention and demurrage fees being assessed when there are equipment issues beyond the control of the shipper or motor carrier as a result of the pandemic.

“We thank you for your consideration of our request to engage on behalf of U.S. agriculture and forestry on the immediate need for the Commission to adopt the Proposed Interpretive Rule as published, to provide guidance for when a detention or demurrage charge can or cannot be fairly imposed.”

Last week, European freight forwarding association CLECAT also called for fair and equal demurrage and detention charging during the COVID-19 pandemic, highlighting concerns among members about the impact of different national rules on the periods of time containers will need to stay in ports before import or export during the present crisis. CLECAT’s call came as it published a new document that provides recommendations for a more transparent process with regards to the determination of detention and demurrage practices in container shipping. 

Building on several years of concerns among freight forwarders and work by international organisations, the paper sets out a number of issues freight forwarders have encountered recently with detention and demurrage charges, including references to recent European court cases and US reports. 

Commenting on the paper, CLECAT director general Nicolette van der Jagt noted: “Over the last couple of months, we have collected the experiences and concerns of our members with regards to detention and demurrage charges. Today, with the present global crisis caused by the COVID-19 pandemic, these concerns become even more pressing.”