Shipping Strategy – Avoid Demurrage and Detention

Posted on: March 11, 2021

Shipping Strategy – Avoid Demurrage and Detention. Importers have been suffering equipment shortages and congestion all along the ocean supply chain.

One consequence of the equipment shortages and congestion is a proliferation of demurrage and detention invoicing to the shipping public. Everyone knows that this problem began last year when ocean cargo shipments surged.

In a survey conducted recently with top local, regional and national trucking organizations, the Harbor Trucking Association (HTA) and TradeLanes, Inc. uncovered that costs and disruption arising from detention and demurrage are threatening the nation’s intermodal carriers with more than half reporting critical negative effects on their business. It is also reported that more than 15% of ocean containers incur demurrage and detention charges, with over 80% of respondents incurring more than $200 demurrage and detention charges per container. In addition, there is an administrative burden, as invoice auditing and disputing takes 45 minutes or more per invoice on average.

These supply chain challenges have led to calls from industry and California state authorities asking the Federal Maritime Commission (FMC) to step in and provide some relief. The FMC issued Fact Finding No. 29 on March 31, 2020. The Fact Finding has been updated twice and is ongoing.

FMC commissioner Rebecca Dye, who has been leading the organization’s investigation into the application of detention and demurrage fees, will issue orders to determine if “legal obligations related to detention and demurrage practices are being met”. It is expected that the FMC will order container lines serving Los Angeles, Long Beach and New York, and marine terminal operators (MTOs) in the same ports, to explain how they calculate detention and demurrage charges.

The FMC will seek information related to the FMC’s rule that says demurrage and detention charges should be suspended when shippers are prevented from picking up cargo or returning containers within time allotted – a key issue when container supply chains are as entangled in congestion as they are.

Some carriers have threatened high charges for failure to return empty containers on time, even in cases where congestion has made it difficult or impossible to do so.

Importers need to weigh the various delays, costs and options when choosing a port of discharge for their cargo.

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