FMC – Proposition regarding New Demurrage and Detention Billing Requirements

We noted earlier this year that the FMC (Federal Maritime Commission) were seeking comment from the public with regards to demurrage and detention charges and whether or not the practice should apply to marine terminal operators (MTOs), non-vessel operating carriers (NVOCCs) as well as vessel operating common carriers (VOCCs).

Further to their initial consultation, the FMC is now determined to bring an air of transparency to current practices surrounding detention and demurrage billing.

The FMC has proposed a new rule that VOCCs, NVOCCs and MTOs are only permitted to issue invoices in respect of detention and demurrage to those parties with whom they have a contractual relationship. Privity of contract is once again paramount. 

The FMC has proposed 4 actions: -

• I. Adopting the list of minimum information that common carriers must include in demurrage or detention invoices as mandated in OSRA and codified at 46 U.S.C. 41104(d)(2)
• II. Adding to the list additional information that must be included in or with a demurrage or detention invoice
• III. Further defining prohibited practices by clarifying which parties may be billed for demurrage or detention charges
• IV. Establishing billing practices that billing parties must follow when invoicing for demurrage or detention charges

A properly issued invoice can only be rendered to the entity that has contracted with the billing party for carriage and/or storage, and it is that billed party who is responsible for payment of that invoice.

In addition, the billing requirements are such that: i) the nature of the charges must be clear: ii) an invoice must be issued within 30 days after the charges cease accruing: and iii) the billed party has 30 days in which to dispute the charges (the billed party having been provided with a clear methodology as to how to challenge those charges). 

To facilitate their proposals, the FMC has invited further comment from the public as to whether it would be appropriate to include the consignee named on the bill of lading as a further party who can be invoiced for detention or demurrage charges, as an extension to the contractual provisions discussed above. We suspect that forwarders will be vociferous in their support for including such a provision.

Interested parties will have 60 days to submit comments to the commission once the NPRM is published in the Federal Register. Submissions can be made using number FMC-2022-0066 at https://www.regulations.gov.

The proposals will no doubt be welcomed by those who are regularly caught by the wide definition of merchant within Bills of Lading, but maybe less so by forwarders who will now be the key focus for parties pursuing demurrage and detention charges. They will then be forced to seek indemnities from their customers, who will no doubt dispute the charges, and will expect forwarders to have done all they can to reduce the level of the charges presented. It will be interesting to note the content of the final rules, and whether similar proposals are implemented in other jurisdictions.