Truckers may face demurrage fees once more after a court decision overturned a Federal Maritime Commission (FMC) regulation that prohibited such charges.
A case initiated by the World Shipping Council led the U.S. Court of Appeals for the District of Columbia to declare last month that the FMC’s rule preventing demurrage fees against motor carriers was “arbitrary and capricious.”
The court stated, “While the Commission initially aimed to limit demurrage and detention charges to parties in a contractual relationship with the billing entity, it failed to justify excluding some entities while including others without contracts.”
FMC Restricted Detention Fee Payees
The 2024 rule was the result of an effort that started in 2020 to establish acceptable practices for demurrage and detention. The court noted that the rule specified that invoices should only be issued to the individual who contracted with the carrier for goods transportation or storage.
In a summary of the challenged rule, attorneys Julie Maurer and Benjamin Nashed from Husch Blackwell emphasized that the 2024 guideline “mandated that only the shipper—who contracted for ocean transportation with either an ocean carrier or a non-vessel operating common carrier (NVOCC)—receive invoices for demurrage and detention.”
Weak Justifications
The appellate attorneys noted, “The court concluded that the FMC did not sufficiently clarify why motor carriers that contract with ocean carriers could never be invoiced for demurrage and detention.”
The Scopelitis law firm highlighted that there was an inconsistency, as the FMC allowed invoices only to those with direct contractual relationships with steamship lines while permitting those lines to bill consignees regardless of their contractual ties. The firm pointed out that while the court’s ruling invalidated the ban on billing motor carriers for demurrage, it didn’t mandate such billing to happen.
The court stated that motor carriers had complained about being charged for demurrage and detention fees despite lacking contracts with the billing parties, which include ocean carriers and marine terminal operators. The court focused on the inconsistency challenge brought forward by the WSC and determined that the FMC did not adequately explain its rationale regarding contractual relationships.
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