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FMC filings signal strong enforcement of detention and demurrage rules

By Michael Angell

Recent filings to the US Federal Maritime Commission ( FMC ) signal the extent to which regulators plan to scrutinize and punish carriers for unreasonable detention and demurrage charges under final rules issued in February .

In two separate complaints filed in late March , Samsung Electronics , the eighth largest US importer , said it paid “ staggering costs ” from more than 26,000 detention and demurrage charges levied against it by Cosco Shipping and its subsidiary OOCL , alleging the two ocean carriers did little to address truck and rail delays and retaliated when it complained about paying for the delays .

In a filing April 4 to one of the agency ’ s administrative law judges , the FMC ’ s Bureau of Enforcement , Investigations , and Compliance ( BEIC ) proposed a record $ 63 million civil penalty for Mediterranean Shipping Co . ( MSC ) over multiple alleged violations of US shipping law , including excessive late fees on non-operating refrigerated ( NOR ) containers and incorrectly billing companies with which it had no contractual relationship .

The long-anticipated final rules , issued in February , stipulate that port truckers and other supply chain stakeholders that do not contract directly with ocean carriers cannot be billed for detention and demurrage .

The bulk of the BEIC ’ s record fine for MSC , $ 46.3 million , relates to how the carrier charged for detention and demurrage on NOR containers used as regular dry containers . FMC attorneys who led an investigation into the carrier ’ s billing practices that began last August said the recommended penalty is necessary because MSC “ knowingly and willfully ” violated the Shipping Act by overcharging its customers .

“ Each one of these violations negatively impacted the wider shipping community , displaying that the nature , circumstances , extent and gravity of these violations to be pervasive ,” the BEIC said .

The BEIC has proposed a record $ 63 million fine for MSC , primarily over incorrect detention and demurrage charges . Shutterstock . com

According to the filing , MSC claimed to have refunded customers $ 1.2 million after incorrectly charging detention and demurrage for NOR containers at a higher rate than regular dry containers , but an FMC audit found the carrier did not pay shippers back for all 2,629 instances in which they were charged the higher rate .

In addition , the Geneva-based container line incorrectly billed third-party logistics providers in 18 instances starting in 2018 , the filing said . MSC argued that those bills were past the five-year statute of limitations for such violations , but FMC attorneys countered that the carrier ’ s repeated attempts to collect the bills in 2021 and 2022 negated that argument .

MSC — which will be given an opportunity to respond to the filing , with a final decision on the allegations and fine amount to be made by an FMC administrative law judge — “ is reviewing the office of enforcement ’ s brief and will vigorously defend itself against the allegations and the excessive penalties sought ,” it said in an April 5 statement to the Journal of Commerce .

Fourth time around

Samsung ’ s complaints lean heavily on the Ocean Shipping Reform Act of 2022 ( OSRA-22 ), which requires detention and demurrage charges to follow the FMC ’ s “ incentive ” principle to encourage cargo flow . It was not clear , however , what portion of Samsung ’ s freight linked to the complaints was moved after the law was implemented in June 2022 , and the company did not disclose the total dollar amount of the charges it said it paid .

The South Korea-based electronics giant said it started using Cosco and OOCL in 2020 for carrier haulage shipments , but the carriers “ began repeatedly and chronically

“ Each one of these violations negatively impacted the wider shipping community .”

failing to properly perform [ their ] inland transportation obligations ,” leaving containers at marine and rail terminals for extended periods .

Samsung further alleged Cosco and OOCL charged “ dramatically increasing ” detention and demurrage fees on those boxes , as well as similar charges for empty containers and chassis because OOCL was not able to provide a return location . The carriers , according to Samsung , blamed the delays on a lack of truck capacity , chassis shortages and port congestion .

The complaint is the fourth this year alleging unfair billing practices by Cosco , which did not respond to a request for comment . The Chinese state-owned carrier faces more than $ 3 million in additional claims from smaller shippers that allege it assessed millions in unfair detention and demurrage charges between 2021 and 2022 .

email : michael . angell @ spglobal . com

30 Journal of Commerce | April 22 , 2024 www . joc . com