Regulating Demurrage and Detention
As ocean freight spot rates gradually come down, we’ve seen the additional costs associated with ocean containers unfortunately continue to reach extreme levels. Charges like demurrage and detention have become a significant source of additional income for steamship lines. Both of these charges, according to the Federal Maritime Commission, are to be incentive-based charges for importers and exporters to use steamship line equipment as needed and to return this equipment within the provided amount of free time. However, it is becoming more frequent that even when ready, the availability for ports and rails to receive empty equipment for import containers is at times nonexistent and while this is not something that may be caused by an importers’ failure to contribute to freight fluidity many steamship lines aim to collect thousands of extra dollars per container at times when this occurs. The FMC’s recent conclusion of their investigation into excessive charges related to “earliest return” and “empty return” issues indicates that the recent pandemic has been an advantageous period for steamship lines to collect additional funds on import and export containers as a result of congested ports and severe equipment shortages affecting the container drayage industry.
Fortunately, the conclusion of this investigation has led to series of proposed changes and rules to provide more clarity on empty container return and early return date policies to ensure steamship lines and ports operate within the guidelines stated by the FMC. The ongoing push to require an FMC Compliance Officer to be employed within each steamship line, port and terminal will continue as well. The supply chain strains experienced over the past couple of years has brought with it equipment shortages of many varieties and some locations have seen much higher levels of equipment dislocation than others. While not the fault of an importer or exporter, they are the ones who have been left with an exorbitant bill for something entirely out of their control. According to the FMC’s commissioner, an extreme focus on balancing equipment availability at all rail locations around the country will be a priority to aid in reducing the additional costs and hassle importers and exporters have seen with many of their shipments. While it may be a slow process, it is a step in the right direction for regulating the power the steamship lines and ports hold over others in the ocean shipping industry.
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