Too Little, Too Late!

By Susan Kohn Ross

First published by the Journal of Commerce – May 2015

On April 3, 2015, the Federal Maritime Commission (FMC) issued a report entitled: “Rules, Rates and Practices Related to Detention, Demurrage and Free Time for Containerized Imports and Exports Moving Through Selected United States Ports.” The report summarized the results of a series of listening sessions the FMC conducted during the recent port congestion challenges. While it is understandable the FMC wanted to report what it learned, the FMC missed a golden chance to be relevant during a critical time. Yes, it is true the steamship lines wanted to charge a $1,000 congestion fee which the FMC stopped by pointing out such a surcharge was not provided in the carriers’ tariffs, but that really did nothing to help the shipping public not get stuck with ridiculous amounts of demurrage and detention in circumstances where the carriers could not deliver the cargo due to their own actions. There should be no confusion – the unions are not off the hook. They made mess of the economy, too, but in this context, it is the carriers which the FMC oversees, and they were totally ridiculous in how they dealt with port congestion and their inability to release cargo!

The listening sessions took place in Los Angeles, Baltimore, Charleston and New Orleans. What the FMC heard was relatively uniform. Shippers were repeatedly told cargo could not be picked-up due to on-dock congestion and gate delays, and demurrage and detention were still charged even though there was nothing the beneficial owner could do to get his goods moving. A corresponding problem which the FMC did not report on was the mess the situation caused for truckers, many of whom reported multiple occasions of being told a shipment was available only to arrive, find out it was not, and have this happen time and again – in at least one case 13 times!

The FMC report also acknowledged that after its listening sessions were completed, many more informal complaints were received. The Commission then instructed its staff to prepare a report about demurrage and detention free times, rates, practices and the like, and also to summarize situations where charges were assessed even though it was the carrier causing the delays and charges.

This report has some interesting facts in it, but little more which is truly useful. For example, the FMC found demurrage and detention charges are higher for imports than exports. There is also no generally used formula to determine free time, or when it might be increased or decreased. There were shippers who reported steamship lines waived or reduced fees arising due to terminal congestion, but no clarification as to how many of those instances arose because the cargo owner had a service contract (i.e., buying clout) on which to rely. Another fact reported was there is no standard measure of terminal velocity as terminals and truckers have different opinions as to how to measure wait time, and then finally, there was the point that steamship lines/terminals set detention charges which vary widely.

One common factor for imports and exports was the inability to move goods. On top of that, exporters suffered the indignity of rolled booking fees. To that gets added the widespread reports of truckers not being able to timely return empties and the mess of how the G6 members stow their vessels. East Cost terminals have a habit of extending free time in the face of bad weather, but shippers using those ports made clear to the FMC, adding one day’s free time is not enough to clear out the congestion.

The critical point the FMC did report was that vessel operators have the power to “stop the clock” and waive, reduce or compromise their fees if so provided in their tariffs or service contracts. What the FMC did not do was publicize to cargo owners during the port congestion mess those carriers with such provisions in their tariffs. Anyone with a service contract with such a provision is likely a sophisticated shipper with little need for assistance, but few individual shippers know what is in a carrier’s tariff (or how to get that data) and the carriers certainly were not advertising their flexibility. Oddly, even if one knew of the provision, the carriers still put the burden on the claimant to document the delays. What – they couldn’t tell from their own records?

The FMC report also points out that both terminals and ports have the ability to require productivity standards. In the real world, what may exist on paper often has nothing to do with how things work. One need only look at what happened in Portland to realize how bad things can get, even if labor understands that job loss is a real risk.

The FMC report acknowledged truckers will need to resolve their steamship lines/terminals disputes through the arbitration provisions in their interchange agreements, but there again, how does that help cargo owners? The trucker faced a Hobson’s choice – refuse to pay and arbitrate (thereby holding up cargo release) or pay and arbitrate later (but not get paid by your customer in the meantime)!

Finally, the FMC outlined its options. It begins by stating that since the Ocean Shipping Reform Act, and based on Congressional instruction, the Commission should rely more on complaints about Shipping Act violations to take action. While understandable as a statement of how the agency is proceeding, this really does nothing to address the mess. First, now that the labor situation seems resolved, businesses are going about getting their cargo and trying to fill orders. They are not focused on making complaints, nor are they likely to do so in the future. Once things get back to normal (however that is defined), even should the FMC decide to take action, the parties who shelled out the tens of thousands of dollars which were assessed are not going to get those funds back. If the FMC ever decides to do something, it will likely proceed with enforcement efforts which, at their core, collect fines from violators. That money does not result in refunds to aggrieved shippers or consignees.

The report acknowledges the FMC could proceed on a public petition or its own initiative. It could explore the establishment of a public-private advisory committee whose recommendations would be non-binding. The FMC could also seek reports about certain filed agreements or even explore whether vessel operators’ charges were “unreasonable revenue sources.” Other options the Commission could employ are also mentioned. While each one of them carries unique outcomes to the parties, the one recommendation the FMC has consistently made is it wants the shipping public to file complaints. While a few will do so, the basic question one has to ask is why bother? What good does a complaint do as it will not get money back into the pockets of those aggrieved?

Any question about why filing complaints will not solve the underlying issues can be found in the statement at the end of the report: “In the absence of documented facts that provide a basis for the Commission to take action, issues regarding application of demurrage and detention charges will continue to be reviewed as part of the broader examination of port congestion.” There is only one way to read that conclusion – the FMC blinked! Instead of getting out in front of the port congestion problem by publicizing to the shipping public the contents of carriers’ tariffs, the FMC missed a golden opportunity to show its relevance to cargo owners. Despite statements from FMC Commissioners about wanting to take action, anything done now by the FMC is too little, too late!

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