The conversation regarding the fairness of detention and demurrage fees, which began over a year ago, continued in Los Angeles and Long Beach last week when ocean carriers were being asked by trucking operators to temporarily suspend these charges. Rules addressing the purpose of detention and demurrage were made final by the Federal Maritime Commission (FMC) earlier this year, on May 18th, 2020.
“The Commission determined that because the purpose of demurrage and detention are to incentivize cargo movement, it will consider in the reasonableness analysis under section 41102(c) the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.”
The Southern California supply chain has been swamped with imports for over three months, and terminal operators say that are working to address the problems with congestion. However, ocean carriers and marine terminal operators assert that there are other valid purposes for these fees, such as functioning as compensation related to the cost of their equipment and the use of their terminal space, respectively.
In an effort to improve terminal productivity and workflow, terminal operators have been communicating with truckers to help facilitate more dual transactions and make additional gates available. However, domestic carriers contest that port authorities and terminal operators can still do more to clear terminal space. With congestion issues ongoing, truck turn times at the terminals in Los Angeles and Long Beach continue to rise with averages in October of 81 minutes, up 10 minutes from averages in August. Truckers and shippers are being charged detention and demurrage fees yet their ability to pick up import cargo and return empty containers is currently blocked by import congestion.
“Instead of charging truckers and shippers for port inefficiency, fix the problems,” Rebecca Dye, an FMC commissioner stated on Tuesday during a Coalition of New England Companies for Trade virtual conference. “Addressing port performance will remove the staggeringly large charges for demurrage and detention and allow charges that incentivize good behavior.”
The FMC soon plans to discuss the upsurge in non-compliance with its detention and demurrage rule from May. Poor port efficiency is everyone’s problem and will require ocean carriers, terminals and truckers to work together to fix the issues.
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