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FMC investigation into demurrage and detention fees "absolutely necessary" and has come at "the right time", says iContainers

According to iContainers, the current practices often lead to shippers incurring delay fees for circumstances beyond their control. And the investigation is needed before the situation gets any worse.

23 April 2018 - 05:44 - Update: 23 April 2018 - 11:37

The Federal Maritime Commission’s investigation into port demurrage, detention, and free time fees is “absolutely necessary”, says 100% online freight forwarder iContainers.

Led by Commissioner Rebecca Dye, the FMC launched the first phase of its investigation focusing on the practices of vessel operating common carriers and marine terminal operators related to delay charges last month.

According to iContainers, the current practices often lead to shippers incurring delay fees for circumstances beyond their control. And the investigation is needed before the situation gets any worse.

“This investigation is absolutely necessary given the prevalent situation shippers find themselves in,” says Klaus Lysdal, vice president of sales and operations at iContainers.

“Billing and rate levels skyrocketed as ocean rates took a dive years ago, resulting in plenty of situations where charges and cost are accrued for something the shipper cannot control nor have influence over. But the cost is accrued and someone has to pay. That usually ends up being the shipper.”

The FMC investigation was launched following a petition filed by a coalition of shippers, associations and trucking organizations in January asking the FMC to restrict ocean carriers’ ability to impose what it says are unreasonable and unfair penalties.

The investigation will focus on cases in which shippers are unable to retrieve their cargo as a result of circumstances over which they have no control which, according to Mr Lysdal, are not uncommon.

“For example, it's not uncommon to encounter extra charges due to customs exams, which can sometimes take days if not weeks to complete. Sometimes, the container is pulled off the terminal to a customs-approved warehouse, which adds to the delay. The exam is completely beyond the client’s control because the container is outside of the port and yet he can get billed demurrage charges,” explains Mr Lysdal.

“Bad weather and strikes are also examples of situations where the client cannot do anything to move their cargo. Carriers do offer extended free time. But after the dust have settled, these disruptions will have eaten into the free time and you may end up only having 1-2 days to effectively pull out the cargo, instead of the usual 4-5 days.”

Such practices may have been ongoing for years. But Mr Lysdal says the investigation has come at the right time, given the large pool of data available now for the FMC to make an informed decision.

“We’ve been seeing the pattern for a while now. One could argue that investigations should have started years ago,” says Mr Lydal.

“But an investigation now is the right time, given the way these charges have escalated in recent years, and it’s really only just now that there’s sufficient data to confirm such practices and to determine if and what new regulations are needed.”

The investigation will aim to develop a record of the types of situations and charges that arise as a result, and the steps taken by NVOCCs and BCOs to avoid such charges.

As the middleman, freight forwarders are often not spared of the problems arising from these practices, often having to borne the collateral damage, such as the fees or an angry client, with no clear answer to give.

“Sometimes, the forwarder gets stuck with the fees, which happens just about every time there’s a vessel delay and cut-offs are moved, or after equipment is pulled and earliest return date is moved back, or while driver is in line to pick up the equipment and the release date changes, or there is no equipment available when he gets to the container yard despite having checked before making the drive. Now the driver ends up with a dry run that someone has to pay for. These are things that happen,” says Mr Lydal.

The Florida Customs Brokers and Forwarders Association has been gathering materials to present in their meeting with FMC’s Commissioner Dye, and iContainers says it will be submitting a few examples of their own.

“We have one case where it took the carrier over two weeks to internally process the telex release on a shipment which caused it to run into demurrage which our client had to pay for prior to getting his cargo released,” explains Mr Lysdal.

“Transparency is definitely lacking here. Some carriers cannot even provide you with the actual amount you will be billed for until they process the invoice. This means that as a shipper, you will be stuck with knowing you have delay fees pending but not know the amount until you get hit with the invoice, which for some carriers can take six months to process.”

An interim report of the findings and recommendations will be issued in early September, with a final report due three months later. Mr Lysdal says he hopes that the investigation will bring about more transparency into the way the types of charges and the circumstances under which they can be billed.

“I hope for clearer and more transparent rules on when and how these fees can be applied, which should be fairly easy and straightforward to introduce. Hopefully as simple as possible to avoid complicated variations,” says Mr Lysdal.

“A concern could be that these rules may become very complicated and hard to see through for all parties involved. In most cases, we all just want to make sure we are on the same page and that the charges that are due can be settled at the appropriate levels. So nobody gets stuck with charges they shouldn't have to pay.”

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