The US maritime industry will be pushed towards greater transparency, accountability and efficiency with the Federal Maritime Commission’s (FMC) final rules on detention and demurrage and unreasonable refusal of ocean carriers to provide vessel space.
What will change is that the parties who are billing detention and demurrage will have to be more careful to ensure that the charges are correct, valid, timely and compliant.
The burden will now lie with the billing party and not the billed party to disprove a charge. The huge amount of time lost in verifying and disputing invoices will hopefully be lessened.
The new rules will also make clear that only the correct party should be billed. It should rein in the unreasonable practice of charging detention and demurrage to any party, even just customs brokers, appearing on a bill of lading under the justification that they fall within the definition of “merchant.” Carrier bills of lading have generally defined “merchant” so broadly that it has led to an abusive practice of billing any or multiple entities simultaneously whether they are a party to the contract of carriage or even named on the bill of lading. The proposed rule on the proper billing party essentially removes the unlimited liability created by the use of the term merchant for uninvolved parties.
The commission is to be commended for tackling this complicated issue. It has been a long road to get to this point from the 2016 Coalition of Fair Port Practices’ petition, followed by the brilliant Interpretive Rule in the spring of 2020, and then the Ocean Shipping Reform Act of 2022 making the FMC’s legal authority to write clarifying regulation. This just needs to be extended to the interior ports and rail ramps.