Biden Administration Earmarks Exorbitant Demurrage and Detention Charges

Biden targets detention and demurrage charges

Biden Administration divulged an Executive Order on July 9, 2021, to “promote competition in the American Economy.” The EO mentions agribusiness, shipping, freight rail, and health care. The order gives due consideration to the global shipping industry to foster competition. The federal government with this order has made it clear that unjust shipping practices will be ending soon. White House Press Secretary, Jen Psaki while recounting EO divulged that for shipping merchandise to different countries, the American companies rely heavily on ocean carriers. He also stated that the shipping industry has “grown more concentrated over time.” During the pandemic, this increased concentration has imparted a sharp increase in shipping charges.

The order comprises the fact sheet that reveals the 10 largest shipping companies are ruling over 80% of the market. The EO accentuates that the global container shipping industry is under a small number of big foreign-owned alliances and lines. This is hugely causing adverse effects to American exporters. Other than the White House, a congressional hearing in June raises the same concern. There was an issue that raised great chaos. The ocean carriers had been denying loading the US agriculture goods for exports. Instead, they were returning to Asia with empty containers to fill them with valuable customer merchandise.

In another incident, there was a case on ocean carriers for an outrageous hike of detention and demurrage charges on the shippers. The shippers have taken the case to the House Subcommittee on Coast Guard and Maritime Transportation. Demurrage and detention charges are the ones that are charged when the shipper is not able to take the cargo containers back on time. It is taken when the maritime container and chassis are caught. The charges hiked during the pandemic as Americans changed their buying behavior ordering for more goods during the lockdown. The Federal Maritime Commission’s (FMC) got a new way as the EO and congressional inquiry joined in. The FMC is investigating ocean supply-chain disruptions and they are targeting overpriced demurrage and detention charges.

The EO appears to provide answers to all the concerns of the domestic shippers. It exclaims that few foreign-owned shipping lines are putting the domestic American exporters at disadvantage. The new FMC Chairman Dan Maffei said that the President’s EO will reduce the increased charges back to normal again. To which ocean carriers have said that the container rates and shipping rates’ increase was normal. And, there was an increase in tandem with current supply-and-demand situations.

The FMC will carry out these under EO specifications:

  • The higher and unethical demurrage and detention charges will be prohibited under the Shipping Act, “Interpretive Rule on Demurrage and Detention under the Shipping Act” 85 Fed. Reg. 29638 (18 May 2020)
  • The National Shipper Advisory Committee is recommended to enhance the demurrage and detention practices and enforce the Shipping Act Prohibitions as well.
  • The future rules are in line to increase the situation of demurrage and detention practices and enforce the Shipping Act Prohibitions as well.

On July 12, 2021, the FMC and the Department of Justice’s antitrust division signed an interagency memorandum. This document is to increase the cooperation and communication between exporters and ocean carriers. The FMC is the regulator of the industry according to the shipping act of 1984. The DOJ holds full jurisdiction over mergers and acquisitions and has the power to charge the unfiled anti-competitive agreements. The EO further states that in the case of overlapping authority, the agencies should cooperate. This would increase the Government's efficacy.

This EO from the White House has the capability to change the facet of the maritime industry and bring betterment to it. The stakeholders will have a say in the implementation of EO directives. To provide a better regulatory system, it is necessary to work on all sides because of its composite nature.

Let’s move ahead to demurrage and detention charges and get more clarity.

What are demurrage charges?

The demurrage charges are the ones that the shipper pays when they are not able to free the steel shipping container from container depot or terminal space. The more the shipping boxes stay there, the higher the charges jump. They have to pay a sum as a penalty and sometimes it goes too high that it goes beyond the whole shipping budget.

What are detention charges?

The detention charges spring up when the shipper has taken the metal shipping container from the container supplier. But they are not able to return back on time. This is when the shipper has to pay for detention charges.

Though it may sound difficult, but, yes you can avoid the charges. Below given are some known methods to avoid any such charges.

  • The shipper can avoid the charges by buying SOC containers. As when they own the cargo units, they don’t have to pay any detention charges to anyone.
  • They can avoid such charges by keeping all the documents handy.
  • One should manage every detail and make an outline for the whole time required. Right from loading and unloading and overall voyage time.
  • By communicating with suppliers and ocean carriers also, the shipper can lessen the burden of extra payment of charges.
  • A custom clearance certificate should be ready as it would save the shipper from the huge pain.

Thus, saving the shippers from higher demurrage and detention charges is on the cards. And the shippers themselves can save themselves from the charges by playing smart and buying SOC containers.