08 May 2020

CLECAT Welcomes the US FMC Interpretive Rule on Demurrage & Detention

CLECAT welcomes the newly published guidance by the US Federal Maritime Commission (FMC), which outlines its approach to assessing the reasonableness of detention and demurrage regulations and practices of carriers and marine terminal operators in the US.

“The Interpretive Rule will bring much needed clarity to the US freight forwarding community on fair and reasonable demurrage and detention practices, especially in the context of the unprecedented COVID-19 crisis,” said Ms Nicolette van der Jagt, Director General of CLECAT. “Albeit bound to the US rulemaking, the new guidance is expected to have a significant impact on demurrage and detention charging practices worldwide,” she underlined, adding that CLECAT in particular welcomes the FMC consideration of the need for equal treatment between merchant and carrier haulage, fair and reasonable free periods, as well as caps on demurrage and detention charges.

Published on 28 April 2020, the new rule, “Docket No. 19-05, Interpretive Rule on Demurrage and Detention under the Shipping Act”, will consider the extent to which detention and demurrage charges and policies serve their primary purpose of incentivising the movement of cargo and promoting freight fluidity. The rule also provides guidance on how the FMC may apply that principle in the context of cargo availability (and notice thereof) and empty container return. The FMC may also consider in assessing the reasonableness of detention and demurrage practices factors related to the content and clarity of carrier and marine terminal operator policies addressing detention and demurrage, as well as the clarity of carrier and marine terminal operator detention and demurrage terminology.

CLECAT also compliments the pragmatic approach to a stakeholder consultation process, taken by FMC Commissioner Rebecca Dye throughout the investigation. The Interpretive Rule is the culmination of a nearly four-year-long process, initiated by a petition from a coalition of shipper and forwarder groups, arguing that demurrage and detention practices unfairly penalised them for circumstances outside their control, which prompted the following Fact Finding 28 exercise. “The FMC has listened to the complains of various industry stakeholders and has over a period of a few years conducted extensive fact-finding meetings, making a real effort to understand the trade,” explained Ms van der Jagt. “By adopting the Interpretive Rule, the FMC provided full transparency to all the parties involved. This serves as a clear example for the decision-makers in the EU,” she argued.

To note, CLECAT has recently issued a Briefing & Industry Recommendations Paper on Demurrage & Detention Practices in Shipping, which calls for a more transparent process with regards to the determination of detention and demurrage practices in container shipping. The paper collects information on the detention and demurrage practices, which are of concern to freight forwarders in different parts of Europe as well as on a global level. On the basis of the discussions and the exchange of practices among its members, CLECAT has also drafted a number of industry recommendations.