Nearly two years after Congress passed the Ocean Shipping Reform Act of 2022 (“OSRA 2022”), the Federal Maritime Commission (“FMC”) issued a final rule on February 26, 2024 fulfilling its mandate under OSRA 2022 to ‘‘further clarify reasonable rules and practices related to the assessment of detention and demurrage charges to address the issues identified in the [previous] rule published on May 18, 2020.”  These issues relate to costly demurrage and detention fees that carriers and marine terminals charge customers for delays in retrieving their cargo upon arrival at a port, or in returning empty containers after the cargo has been delivered.  According to the FMC, nine of the largest carriers serving the U.S. charged $8.9 billion in detention and demurrage fees between 2020 and 2022, during the peak of the COVID port congestion crisis.  The FMC’s focus has been to ensure that carriers and marine terminal operators treat detention and demurrage charges as a way to incentivize freight fluidity, rather than as a revenue stream.

The most significant changes introduced by the new rule relate to (i) the limitations on the number and identity of parties that can be billed for demurrage and detention, (ii) the timeline for common carriers and marine terminal operators to send invoices for such charges, and for shippers or consignees to dispute them, and (iii) the required contents of invoices, including bill of lading numbers, specific rate information, and digital means of accessing information about how to dispute the charges. 

Limitations on the Parties That Can Be Billed for Demurrage and Detention

The new rule limits the parties that may be billed for detention and demurrage charges to those that are in contractual privity with the carrier or marine terminal that is issuing the charges. The billed party can be either be the person that contracted with the billing party for the ocean transportation or storage of cargo (i.e. the shipper), or in some circumstances, the consignee (when in contractual privity with the biller). A billing party may not issue an invoice to both the consignee and the shipper and may not issue an invoice to any other person.  Further, consignees may only be billed as an alternative to the shipper where the consignee is in contractual privity with the billing party.  Merely listing the consignee on the bill of lading is not sufficient to support billing the consignee.

Timeline for Sending Demurrage and Detention Invoices and Disputing Such Charges

Importantly, the FMC’s new rule places a time limit on issuing detention and demurrage invoices.  A billing party must issue a demurrage or detention invoice within 30 calendar days from the date the charge was incurred.  In the instance where a non-vessel operating common carrier (“NVOCC”) is passing along an invoice to the customer from a carrier or terminal, the NVOCC must issue the invoice within 30 calendar days from the issuance day of the invoice it received from the carrier or terminal.   If the invoice is not issued within that timeframe, the billed party is not required to pay the charge.  If the invoice is sent to an incorrect person, the billing party may issue a corrected invoice if it is issued within 30 calendar days from the date the charge was last incurred.  If the billing party does not issue a corrected invoice within that timeframe, then the billed party is not required to pay the charge.  Further, the billing party must allow the billed party at least 30 calendar days from the date of issuance to request mitigation, refund, or waiver of fees from the billing party.  If a billing party receives a fee mitigation, refund, or waiver request from a billed party, the billing party must attempt to resolve the request within 30 calendar days of receiving such a request or at a later date as agreed upon by both parties.

Required Content of Demurrage and Detention Invoices

In its new rule, the FMC also added several pieces of information that need to be included in the demurrage or detention invoice, the goal being to provide shippers with enough information to identify if the charges they have received are accurate.  The newly required information includes of (i)clear identification of the container(s) at issue, (ii) the timeframe at issue, (iii) details relating to the billed amount;, (4) a point of contact for questions/concerns and (5) a certified statement of compliance with FMC rules.

Specifically, the rule clarifies that billing parties must provide sufficient identifying information to enable the billed party to identify the container(s) to which the charges apply.  In addition to the elements mandated by OSRA 2022 (which include the container number(s) and port of discharge for imports), the new rule also requires the billing party to include the bill of lading number and the basis for why the billed party is the proper party of interest and thus liable for the charge.

The new rule clarifies that the billing party must also include sufficient timing information to easily identify the relevant timeframe for which the charges apply and the applicable due date for the invoiced charges.  The timing information that OSRA 2022 mandated includes allowed free time in days, start date of free time, end date of free time, the container availability date, and the earliest return date.  The new rule also requires the billing party to include the specific dates for which demurrage and/or detention were charged.

Regarding rates, under the new rule invoices must be accurate and contain sufficient information to enable the billed party to identify the amount due and readily ascertain how that amount was calculated.  The rate information requirements under OSRA 2022 include the total amount due and the applicable detention/demurrage rule on which the daily rate is based.  The new rule provides examples of the latter, including the tariff name and rule number, terminal schedule, applicable service contract number and section, or applicable negotiated arrangement, on which the daily rate is based.  In addition, the new rule requires the billing party to include the specific rate(s) per the applicable tariff rule or service contract.

The new rule clarifies that detention and demurrage invoices must include sufficient information to allow the billed party to readily identify a point of contact to whom they may address questions or concerns related to the invoice, and to understand the process to request fee mitigation, refund, or waiver.  OSRA 2022 required that invoices include an email, telephone number or other appropriate contact information for questions or requests for mitigation of fees.  The new rule adds the requirement that the billing party must include digital means (e.g. a website link or QR code) directing the billed party to a publicly accessible website with a detailed description of information or documentation that must be provided to request mitigation, refund, or waiver, and defined timeframes that comport with the billing practices in the new rule, during which the billed party must request a fee mitigation, refund, or waiver and within which the billing party must resolve such requests.

Finally, the new rule fleshes out the certifications that billing parties must include on an invoice.  Under OSRA 2022, detention and demurrage invoices must include a statement that the charges are consistent with any of the FMC rules with respect to detention and demurrage, and a statement that the common carrier’s performance did not cause or contribute to the underlying charges.  The new rule specifies that invoices must include a statement that they are in compliance with the FMC’s rules on detention and demurrage, including without limitation this new rule and the FMC’s previous interpretive ruling on detention and demurrage from May 18, 2020. 

Final Thoughts

When the FMC issued a notice of proposed rulemaking on this topic, the issue of most concern to carriers and marine terminal operators appeared to be the limitation on the number of parties who may be billed for detention and demurrage. Marine terminal operators also expressed concern about the technological burden that the new rule creates, which may require them to overhaul websites and establish new security mechanisms. 

The FMC appears to accept that the new rules will force major changes in the way that the industry handles detention and demurrage charges. Carriers and terminal operators must issue bills in a timely manner to just one person that has contracted for the transportation or storage services.  They cannot invoice intermediaries or other parties to pay in the first instance, or to cover late payments.  They will also need to provide enough information directly on the invoice to allow a customer to understand the charges, which may require changes in the way that carriers track and record the status of each container during each phase of transportation.  Finally, they will likely need to review their rates, detention and demurrage policies, and dispute resolution mechanisms to ensure that they can pass along enough information for the customer to understand and challenge the charges.