Terminals Can’t Issue Detention Fees if Ports Closed

What began as a $510 small claims case brought by a trucking company has evolved into what some are calling a precedent-setting case, as the Federal Maritime Commission ruled that marine terminal operators may not impose detention and demurrage charges on days that port facilities are closed.

The four-to-one ruling, handed down at the end of March, stretches back to a complaint Nashville, Tenn.-based motor carrier TCW brought against ocean carrier Evergreen Shipping Agency after TCW was charged for three days of detention for container and chassis, also known as per diem. The changes were levied over the Memorial Day holiday weekend, when Georgia’s Port of Savannah was closed. The commission determined that such charges are a violation of its regulations.

An FMC officer had earlier ruled in TCW’s favor, and that decision worked its way up to the full commission for a review.

“If you can’t pick it up, why should you be charged for a day you can’t pick up the container,” said Jonathan Eisen, executive director of the Intermodal Motor Carriers Conference of American Trucking Associations. “In this case, the container was due back on a Friday. They didn’t get it returned and the port was closed, Saturday, Sunday and Monday for the holiday. TCW was charged for three days of per diem or detention for not returning the case on Monday.”

Eisen noted that FMC in 2020 published a rule establishing that detention and demurrage charges were legal, and could be used as an incentive to get trucking companies to move freight in a timely manner. But the TCW case pressed the agency to put a finer point on the rule, he said.

“This was the first time that the FMC laid out exactly what they meant by the incentive principle in this rule,” Eisen said. “The initial case was only about Evergreen, but now FMC has put out a press release saying they are checking with all the ocean carriers to make sure they are in compliance with the TCW decision. This is a big deal of a ruling from FMC.”

FMC Commissioner Carl Bentzel told Transport Topics that the agency is seeking information from ocean carriers and marine terminal operators to ensure they are in compliance with the regulation, and is inviting their questions about when per diem charges can be billed.

“What usually happens in most terminals is that they are open 9-to-5 or 9-to-11 on the West Coast, five days a week,” he said. “During the weekend they’ll continue to work ships as they come in, but [also] get ready for services on Monday for trucking again.” Bentzel was the dissenting vote in the ruling, but stressed that the regulator wants to now collect relevant information from the ocean carriers and others.

“The carrier/terminal operator should provide a reasonable amount of free time before imposition of the demurrage penalty, and a reasonable period for the redelivery of intermodal cargo equipment,” Bentzel wrote in his dissenting opinion. “The shipper must be aware of and prepared to pick up cargo and return equipment within the required free time or pay penalties for the delay.”

Since the ruling, at least two ocean carriers announced they would comply with the decision. However, Evergreen has appealed the FMC decision to the U.S. Court of Appeals in Washington, D.C.

Eisen said while motor carriers generally bill these charges back to shippers, carriers often pay upfront and then wait to be paid back. If a motor carrier doesn’t pay the fee, ocean carriers can prevent it from picking up any new freight.

“The carriers have to pay this money, because if they do not they risk being shut out,” Eisen said. “If you’ve got an outstanding bill that you don’t pay to an ocean carrier, the ocean carrier can say: ‘That’s it, you can’t pick up any more containers until you pay this bill.’ ”

Eisen stressed that containers not being returned in a timely fashion was a much bigger issue during the height of the pandemic, when ports were strained and trucking companies were operating at full capacity to move a surge of freight.

“All of this is an outgrowth of what was taking place during the supply chain crisis,” Eisen said. “FMC has certainly acted more aggressive to ensure that ocean carriers treat motor carriers and shippers fairly.”

By: Transport Topics