The Federal Maritime Commission released a new rule on detention and demurrage billing practices as part of its compliance with the Ocean Shipping Reform Act of 2022.
Detention and demurrage billing practices were major problems for shippers during the pandemic. Ocean carriers collected about $6.9 billion in detention and demurrage costs from 2020 to 2022, according to the FMC’s final rule shared on Feb. 23.
A key regulation the FMC outlines is the distinction of who receives an invoice.
- Detention or demurrage invoices can be issued to either the person for whose account was provided services from the billing party and the person who contracted with the billing party.
- Another option is the consignee, meaning “the ultimate recipient of cargo; the person to whom final delivery of the cargo is to be made.”
- An invoice cannot be issued to both parties mentioned in the first bullet and the second bullet. Nor can a billing party issue an invoice to any other person.
Another regulation from the final rule establishes a timeframe of 30 calendar days for which detention and demurrage invoices must be issued. Billed parties have 30 days to make any fee mitigation, refund or waiver requests. If a request is made in a timely manner, the billing party must attempt to resolve the matter within 30 days unless both parties agree to a longer timeframe.
The FMC said most of the rulings will take effect on May 26. Section 541.6, which states what information an invoice must contain, is yet to be approved as the agency plans to collect further information. To ensure supply chain fluidity, the FMC wants to make a clear connection between failure to pick-up cargo or to return equipment in a timely manner.
The new rule from the FMC is being welcomed by some stakeholders.
“This is a great step forward the industry. Standardized billing practices will only serve to drive efficiency gains. Once fully implemented, the rule will ultimately eliminate the rampant of extortion motor carriers through unjust and unreasonable per diem and detention charges,” Harbor Trucking Association CEO Matt Schrap told Supply Chain Dive in an email.
New guidelines from the FMC are a long time coming as shippers have been raising concerns from previous ocean carrier billing practices.
In October 2022, the FMC proposed ocean carriers to provide more information on fees and to only send invoices to whom they have contractual relationships with. In March 2023, the FMC also requested details from 11 ocean carrier on their policies and practices when it comes to issuing detention and demurrage invoices.
