FMC Launches Investigation into Port Demurrage and Detention Practices: What This Means for Freight Forwarders

Introduction: A New Era of Scrutiny in Maritime Practices

In a significant move that's set to shake up the maritime industry, the Federal Maritime Commission (FMC) has launched a formal investigation into port demurrage, detention, and free time practices. This investigation, initiated last month, comes in response to a petition filed by a coalition of shippers, associations, and trucking organizations in January. The coalition's claim? That some of these fees are unfair, particularly when circumstances beyond their control prevent them from retrieving their cargo or returning equipment promptly.

This investigation marks a crucial turning point in the logistics industry, one that could potentially reshape how ports and ocean carriers operate. Let's delve into the details of this investigation, its potential impacts, and how FreightAmigo's Digital Logistics Platform can help freight forwarders navigate these uncertain waters.

The Catalyst: Why Now?

The FMC's decision to investigate these practices didn't come out of the blue. It's the culmination of long-standing complaints from shippers about carriers allegedly abusing detention, demurrage, and per diem fees. Shippers argue that these "exorbitant fees" are being used as a revenue driver rather than a legitimate operational cost.

The problem reached its peak during two critical periods:

• Late 2014 and early 2015: A time of intense congestion at West Coast ports
• August 2016: In the aftermath of Hanjin Shipping's bankruptcy

These events highlighted the vulnerability of shippers to circumstances beyond their control, yet still resulting in hefty fees.

The Investigation: What's Under the Microscope?

The FMC's investigation is set to be comprehensive, focusing on five main issues:

1. The impact of commercial, contractual, and cargo interest alignment on cargo movement efficiency through U.S. ports
2. The process of cargo tendering by carriers or marine terminal operators to shippers and consignees
3. Billing practices for invoicing demurrage or detention
4. Practices related to delays caused by various outside or intervening events
5. Practices for resolving demurrage and detention disputes between carriers and shippers

This investigation aims to develop a record of the types of situations and charges that arise, as well as the steps taken by NVOCCs and BCOs to avoid such charges.

The Freight Forwarder's Dilemma: Caught in the Middle

As the intermediaries in the logistics chain, freight forwarders often find themselves caught in the crossfire of these disputes. They frequently bear the brunt of the collateral damage, whether it's in the form of unexpected fees or dissatisfied clients.

Klaus Lysdal, Vice President of Sales & Operations at iContainers, highlights some of the common scenarios:

"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."

These situations underscore the need for greater transparency and clearer rules around when and how these fees can be applied.

The Impact on Shippers: A Call for Fairness

Shippers have long complained about what they perceive as unfair practices. The investigation is particularly focused on situations where shippers are unable to retrieve their cargo for reasons beyond their control. These include:

• Delays due to customs exams, which can take days or weeks to complete
• Bad weather conditions
• Strikes and labor disputes

In such cases, shippers argue that it's unjust to impose fees when they have no control over the situation. As Lysdal points out:

"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 settles, 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."

The Need for Transparency: A Common Thread

One of the key issues that emerge from this investigation is the lack of transparency in the current system. Lysdal provides a striking example:

"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. 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."

This lack of transparency makes it challenging for shippers and freight forwarders to plan and budget effectively, often leading to unexpected costs and frustrated clients.

The Road Ahead: What to Expect

The FMC has set a timeline for this investigation:

• Early September: An interim report of findings and recommendations will be issued
• Three months later: A final report is due

Commissioner Rebecca Dye emphasizes the significance of this investigation:

"The ultimate resolution of this investigation will have the potential to affect every ocean common carrier calling the United States. It is vital that the information we gather is representative of business and operational practices, as well as market conditions, nationally."

The industry is hopeful that this investigation will lead to more transparent and fair practices. As Lysdal states:

"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. 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."

How FreightAmigo Can Help Navigate These Challenges

In light of these ongoing investigations and potential changes in the industry, freight forwarders need robust tools to help them navigate these complex waters. This is where FreightAmigo's Digital Logistics Platform comes into play.

1. Real-Time Tracking and Transparency

FreightAmigo's platform allows you to track shipment status anytime, anywhere. With connections to more than 1000+ reputable airlines and shipping lines, you can stay informed about your cargo's location and status, helping you anticipate and potentially avoid demurrage and detention fees.

2. Comprehensive Quote Comparison

Our platform enables you to compare door-to-door freight quotes for international courier, airfreight, sea freight, rail freight, and trucking solutions. This comprehensive view allows you to choose the most cost-effective and efficient options, potentially reducing the risk of delays and associated fees.

3. Streamlined Customs Clearance

FreightAmigo's one-stop solution for arranging customs clearance can help expedite the process, potentially reducing the time your cargo spends in port and minimizing the risk of incurring demurrage fees.

4. Automated Documentation

Our automated shipment documentation feature can help reduce errors and delays in paperwork, which can be a common cause of detention and demurrage charges.

5. 24/7 Expert Support

With round-the-clock access to logistics experts, FreightAmigo ensures that you have support when you need it most. This can be crucial when dealing with unexpected delays or disputes over fees.

Conclusion: Embracing Digital Solutions in an Evolving Landscape

The FMC's investigation into port demurrage, detention, and free time practices signals a potential shift in the maritime industry. As freight forwarders, it's crucial to stay informed about these developments and be prepared to adapt to any changes that may come.

In this evolving landscape, embracing digital solutions like FreightAmigo's Digital Logistics Platform can provide the transparency, efficiency, and support needed to navigate these challenges successfully. By leveraging these tools, freight forwarders can better manage their operations, reduce the risk of unexpected fees, and provide better service to their clients.

As we await the results of the FMC's investigation, one thing is clear: the future of logistics lies in digital transformation. By partnering with FreightAmigo, you're not just keeping up with these changes – you're staying ahead of the curve.