The Federal Maritime Commission will adopt a final rule to give industry guidance on how it assesses the “reasonableness” of detention and demurrage charges, the agency said. The rule, which was proposed in September and has garnered new attention due to charges caused by COVID-19-related shipping delays, is expected to give industry clarity on how FMC will consider whether detention and demurrage policies incentivize the movement of cargo or whether they are unjustified. The rule will become effective upon its publication in the Federal Register.
The Federal Maritime Commission is using newly formed Supply Chain Innovation Teams to look into potential agency actions to reduce supply chain slowdowns related to the COVID-19 pandemic, the FMC said in an April 6 news release. Commissioner Rebecca Dye, who is overseeing the effort, and the teams will “begin work this week to identify what actions can provide immediate relief to the most pressing challenges the American freight delivery system faces from COVID-19 related disruptions,” it said. The information provided by team members about possible FMC actions “will dictate the scope and priorities of the Teams’ work,” it said. Dye said the teams “are committed to minimizing disruptions to the Nation’s cargo delivery system and will be prepared to offer practical solutions about what must be done to promote the competitive advantage of our supply chain networks,” The teams are an offshoot of the FMC's investigation into detention and demurrage fees that resulted in a proposed interpretive rule (see 2003170058).
Eighty agricultural trade groups are asking the Trump administration to push through a proposed Federal Maritime Commission rule that would provide guidance about how the FMC assesses the fairness of demurrage and detention practices. The rule would help mitigate the “ongoing unconscionable imposition of millions of dollars” of detention penalties being faced by agricultural exporters, whose shipments are being delayed by the COVID-19 pandemic, the groups said in an April 3 letter. The groups -- which include dairy, meat, grain, vegetable and fruit trade associations -- urged White House Economic Council Director Larry Kudlow and U.S. Department of Agriculture Secretary Sonny Perdue “to work with the FMC to expeditiously adopt the Interpretive Rule as published.”
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After 47,000 stores in the U.S. closed in a week, Flexport says that so many companies can't take shipments arriving at East Coast ports that those ports are now shopping for more warehouse space. Because importing companies' warehouses are either full or closed, they tell the ports they'll pay demurrage charges for the goods to stay there. “The ports are actually worried now they won’t have enough space,” said Chandrakant Kanoria, Flexport's head of network operations, during a webinar March 31. He said Savannah is hoping to almost double its warehouse space, and the New York and New Jersey terminals are talking with warehouse providers to try to make room, as well. There are problems in the warehouse logistics ecosystem, as well, because Amazon warehouses stopped accepting any goods other than essentials.
Agricultural exporters and shippers are losing “hundreds of millions of dollars” due to shipping uncertainty and cargo detention penalties caused by the response to the coronavirus pandemic, said Peter Friedmann, executive director of the Agriculture Transportation Coalition. Friedmann was critical of the Federal Maritime Commission, which has yet to finalize a proposed rule issued last year that would provide guidance about how the FMC assesses the fairness of demurrage and detention practices. The rule’s public comment period ended in October.
The Federal Maritime Commission should quickly adopt its proposed interpretive rule for addressing detention and demurrage charges (see 1909130026), trade associations said in a March 16 letter to the FMC. “With ongoing challenges posed by the coronavirus, there is real concern about these fees being assessed when there are equipment issues beyond the control of the shipper or motor carrier,” the groups said. “Thus, these fees appear to be punitive measures by the ocean carriers, not an incentive to expedite container flow.”
Although Chinese ocean operations and domestic trucking activities are returning to normal, there remains significant concerns over equipment and space availability for ocean fighters around the world, according to a March 17 emailed alert from Crane Worldwide Logistics. Air cargo transportation also remains uncertain, with availability of ports in China constantly changing and countries canceling flights to regions with high concentrations of coronavirus cases, the alert said.
The Agriculture Transportation Coalition is urging U.S. exporters, before loading their containers, to confirm with ocean carriers that the cargo will reach their Chinese customers and will have proper refrigeration in case of delays at Chinese ports due to the coronavirus outbreak. The AgTC also said it is continuing to urge ocean carriers to refrain from imposing detention penalties on containers that are stuck at ports due to the virus containment measures in place (see 2002030034). “Within China, the supply chain has been compromised, starting at the China maritime terminals extending all the way to the ultimate inland destination points,” the AgTC said in a Feb. 11 emailed press release.
As the coronavirus outbreak disrupts supply chains, U.S. agricultural exporters are unsure when normal cargo processing will resume and are concerned about penalties from ocean freight carriers, according to a Feb. 3 open letter to ocean carriers by Agriculture Transportation Coalition Executive Director Peter Friedmann.