Contents
Similarly speculative are concerns about increased container dwell time and chassis shortages. The rule might result in an increase in free time extensions, but extending free time is just one way to mitigate demurrage and detention charges. Additionally, the rule’s primary focus is situations where demurrage and detention do not work because cargo cannot move.
Terminal charges to ocean carriers are passed on to shippers and their agents via demurrage. In those instances, however, the Commission would be assessing the reasonableness of ocean carrier demurrage practices vis-à-vis shippers, intermediaries, and truckers, not marine terminal operator practices with respect to ocean carriers. Nothing in the rule limits its scope to shipping activities occurring at ports or marine terminals. Rather, section concerns ocean carrier, marine operator, and ocean transportation intermediary practices and regulations “relating to or connected with receiving, handling, storing, or delivering property.” Ocean carrier demurrage and detention practices are subject to section and Commission oversight, regardless of whether the practices relate to conduct at ports or inland, with some caveats. First, not everything an ocean carrier or marine terminal operator does is within the Commission’s purview—an ocean carrier or marine terminal operator must be acting as a common carrier or marine terminal operator as defined by the Shipping Act with respect to the conduct at issue.
Even assuming that is true, the rule does not go so far as to require this change. Statements in the NPRM that certain practices might weigh favorably in the analysis do not mandate their adoption, and the rule cannot reasonably be read as doing so. The same goes for commenters’ assumptions that the rule requires things like starting and stopping the free time clock each time a container becomes unavailable on a minute-by-minute basis or waiving a the little book that beats the market review full day of demurrage due to a container being unavailable for less than an entire day or implementing new information technology systems or creating new dispute resolution teams. The rule, in its final form, makes clear that parties will have ample opportunity to argue the merits of any such practices should their absence be challenged as section violations. And, to reiterate, the standard under section is reasonableness, not exacting precision.
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For purposes of this rule, the terms demurrage and detention encompass any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges. Shippers, intermediaries, and truckers, like WSC, would also like specific guidance on what sort of attributes dispute resolution policies must have to pass muster. The former suggest that the Commission should set specific timeframes for dispute resolution and billing, processes for internal appeals of disputes within an ocean carrier or marine terminal operator, and points of contact with actual authority to settle disputes. The next paragraph of the rule outlines its applicability and scope.
The Commission may consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice. To clarify, the Commission’s goal in the NPRM was to emphasize the importance of ocean carriers and marine terminal operator bills aligning with contractual responsibilities. This does not mean, however, that every billing mistake is a section violation. Section applies to acts or omissions that occur on a normal, customary, and continuous basis. Further, billing mistakes can presumably be addressed under contract law or other legal theories. In sum, the rule is not limited, in its language or intent, to import shipments, nor is it limited solely to ocean carrier practices related to conduct at marine terminals.
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Business at 3; PMSA at (arguing that the NPRM erodes the “broad and fact-specific” standard of section 41102”). WCMTOA also states that the rule, even if just guidance, might cause stakeholders to adjust their practices in light of the guidance to avoid regulatory risk. According to WCMTOA, this might mean that no cases are filed and the specific facts of cases are not reached.
Option B is the most popular option among the shipper, intermediary, and trucker commenters. This option is essentially a restatement of the general incentive principle. As explained in the NPRM, it makes sense that if free time represents a reasonable opportunity for a shipper to retrieve a container, it should be tied, to the extent possible, to cargo availability, and the Commission recognizes the merits of that approach. But the Commission will not in this general interpretive rule make a finding that failure to start free time upon “availability” is necessarily unreasonable. The operational environments and commercial conditions at terminals across the country vary significantly, and in some situations, there might not be much difference between tying free time to vessel discharge and tying it to availability. For similar reasons, while the Commission will consider in the reasonableness analysis how demurrage and detention practices address interruptions in availability during free time, requiring specific “stop-the-clock” procedures is beyond the scope of this rulemaking.
III. Discussion of Particular Issues
To the contrary, ocean carrier demurrage and detention practices and regulations are within the Commission’s jurisdiction under section 41102. Int’l Fed. of Freight Forwarders Ass’ns at 7; Int’l Motor Freight at 2 (“Finally, the rates we are charged for per diem and demurrage need to be looked at. Every year, per diem charges increase, regardless of the economic climate, for the same container that sits out year after year.”); Nat’l Retail Sys. At 1; Thunderbolt Global Logistics, LLC at 2 (“We feel that ocean carriers use detention charges as a profit center. There should be a formula for detention charges that can be applied across the board by all carriers at all ports.”). 84 FR at (“Absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.”); id. at (framing guidance as “bsent extenuating circumstances”).
The Commission also supported defining demurrage and detention in terms of what asset is the source of the charge as opposed to the location of a container . The Commission discouraged use of terms such as “storage” and “per diem” as synonyms for demurrage and detention because these terms add additional complexity and are apparently inconsistent with international practice. CommCission assumes there are operational reasons for dual move requirements, they effectively tie a trucker’s ability to avoid charges to doing additional business with a carrier or at a terminal. In an appropriate case, the Commission would carefully scrutinize such practices.
Subsequently, however, the Supreme Court held that to determine reasonableness under section 41102’s predecessor, one should look at how well charges correlate to their benefits. Consequently, Commission precedent does not bar the Commission from applying the incentive principle to government inspections—it supports its application. Accordingly, because the participants in Fact Finding Investigation No. 28 and the commenters consistently emphasized the utility of demurrage and detention in incentivizing cargo movement and productive asset use, the Commission continues to understand demurrage and detention as primarily being financial incentives to promote freight fluidity. That said, the Commission is amending the final rule to recognize that the demurrage and detention might have other purposes. First, the Commission is adding the word “primary” to the “Incentive Principle” paragraph of the rule.
In the absence of extenuating circumstances, demurrage and detention practices and regulations that lack a cap on the amount of demurrage or detention that may be imposed while cargo is undergoing government inspection are likely to be found unreasonable. The Commission emphasized that concepts such as cargo availability or accessibility refer to the actual availability of cargo for retrieval by a shipper or trucker. The Commission did not go so far as to define what availability means, but it said that certain practices would weigh favorably in the reasonableness analysis, including starting free time upon container availability and stopping a demurrage or free time clock when a container is rendered unavailable, such as when a trucker cannot get an appointment within free time. Commenters did, however, raise questions about the scope of the rule. Several commenters urged that the rule apply to export shipments as well as imports, and they raised issues unique to exports, such as rolled bookings due to vessel and schedule changes and ocean carrier changes to container return cutoff dates and insufficient notice of such changes. It was because the Commission was issuing guidance applicable to all regulated entities within its purview that the Commission declined to issue a legislative rule or the rule proposed by the petitioners in Docket No.
- Intermediaries Ass’n at 4.
- It would seem to be in the best interests of ocean carriers and marine terminal operators to provide this sort of guidance and to avoid imposing onerous evidentiary requirements on their customers, as legitimate disputes that do not get resolved informally can lead to formal action in the form of Shipping Act claims or calls for additional Commission regulation.
- The UIIA “is a multimodal negotiated interchange agreement that serves as the standard interchange agreement for most intermodal equipment interchanges except chassis.” Generally, it governs relationships between signatory ocean carriers and truckers.
- Setting forth factors that the Commission might consider in a case, however, does not shift the burden of proof.
WSC’s objection appears to be that the Commission did not cite or discuss the specific documents it reviewed during the Fact Finding Investigation. The Commission does not, however, typically make public its investigatory records in such proceedings. Additionally, most ocean carriers and marine terminal operators requested confidentiality for the responses and documents they submitted to the Commission during Phase One of the investigation. The Commission assumes that WSC is not suggesting that the Commission should ignore those requests for confidentiality.
II. NPRM and Summary of Comments
Many of these same commenters further contend that the interpretive rule would shift the burden of proof in section cases in violation of the APA. But nothing in the rule changes the burden of proof. Under the APA and Commission regulations, “the proponent of a rule or order has the burden of proof.” This burden of persuasion does not shift, even if the burden of producing evidence does in some cases. In a section case, the complainant has the burden of persuading the Commission that a practice or regulation is unjust or unreasonable, and if that burden is met, the burden of refuting that conclusion is on the respondent.
Under this approach, the detention clock should stop once a container “has been or could be delivered back to the port, VOCC or CY , but for the recipient’s inability or unwillingness to receive the asset.” The Commission views this approach as one option an ocean carrier could use to mitigate detention under circumstances where the charges cannot serve their primary purpose of incentivizing freight fluidity. To the extent that NCBFAA is suggesting that the Commission should adopt the constructive delivery principle, the Commission believes that importing this concept from the railroad context is something better addressed in the context of a specific case or a future proceeding devoted to that topic, so that it can receive comments and arguments from all sides. But commenters’ points are well-taken, and the Commission would avoid any interpretation of section that would be inconsistent with other Shipping Act provisions or Commission regulations or that would subject regulated entities to incompatible requirements. Consequently, to the extent the Commission considers the “accessibility” of demurrage and detention policies under section 41102, the factor will not be construed or weighed such that compliance with the minimum tariff and schedule obligations under the Shipping Act or the Commission’s regulations would tend toward a finding of unreasonableness. On the other hand, providing additional accessibility above and beyond the minimum tariff and schedule requirements would weigh in favor of a finding of reasonableness.
Government Contracts
This is often not a difficult question, but the further one gets away from the terminal, the more complicated the inquiry may become, and it is not a question that can always be answered in the abstract. There was significant discussion during the investigation about who should be providing notice related to cargo availability. Ocean carriers have a notice obligation under their contracts of carriage, which they purport to fulfil by providing notice of vessel arrival.
Harbor Trucking Ass’n (“Notice must be timely and readily accessible to the contracting party or its designee, must provide clear information as to when and where cargo may be retrieved, and `push notices’ are favored.”); Mohawk Global Logistics at 2 (“Truckers must proactively and continuously po over aaafx review multiple websites to check on availability of containers they have been assigned.”). But see PMSA at (arguing that there is little difference between getting a push notification and “accessing the website or app to get the information at the shipper’s or trucker’s convenience”). 271.E.g., Best Transp.
WCMTOA claims that the Commission “would seem to impose a requirement for a terminal operator to update cargo interests on a minute-by-minute basis as to the availability status of individual containers.” But nothing in the rule requires “minute-by-minute updates” of changes in container status. Rather, the Commission may consider whether and how notice of changes in cargo availability is provided, with the focus being how well ocean carrier and marine terminal operator practices are reasonably tailored to their purposes. The guidance was drafted with the complexity and variety of the U.S. freight delivery system in mind. Further refinement of the Commission’s approach would be accomplished by adjudication. Comments by ocean carriers and marine terminal operators suggesting that the rule is fatally flawed because it does not address every fact pattern that could possibly arise set a standard that no Commission guidance could possibly meet.
Consequently, that the guidance in the rule, when applied in a case, might put some limits on the ability of ocean carriers or marine terminal operators to impose, or negotiate, demurrage and detention practices vis-à-vis shippers, intermediaries, and truckers, is not itself a reason not to issue guidance. For the same reasons, ocean carrier and marine terminal operator arguments that they are being treated unfairly by the rule are taken with a grain of salt, though the Commission agrees that shippers, intermediaries, and truckers have an equally important role to play in enhancing the efficiency investment manager job description of the transportation system. Additionally, fears of an explosion of litigation due to the rule are speculative. If, as ocean carriers and marine terminal operators claim, commercial solutions have been adequate to address demurrage and detention problems, then the Commission’s guidance will not lead to lawsuits. There have historically been very few formal Shipping Act complaints filed regarding demurrage and detention. If the issuance of guidance results in more disputes because shippers are better able to challenge unreasonable practices, that is a feature, not a bug, of the rule.
