Statement of Commissioner Sola to Accompany Vote on Notation No. 20-20, Interpretive Rule on Detention and Demurrage
As our Nation continues to grapple with COVID 19’s impact on all our lives, we must continue to do everything we can to protect and promote the fairness and efficiency of our maritime industry. As a Commission, it is all that we can do. To date, we have witnessed historical fluctuations in volumes, rates, and the availability of equipment. Now is the time to do everything we can to promote efficiency in order to stabilize the markets and to ensure the security of our market participants.
Recognizing that our ports are overflowing with cargo backlogs as we adjust to differing cargo volumes and priorities for cargo delivery, the Commission can provide guidance to industry in exploring ways to manage the unpredictable flow of cargo during this crisis. That is why I supported the initiation of Fact Finding Investigation 28 to examine conditions and practices related to detention, demurrage, and free time in international ocean borne commerce and have voted in favor of the proposed interpretive rule on demurrage and detention that resulted from said investigation.
Beneficial Cargo Owners, and, by extension, the American public, need to know that they will not be required to pay unjustified and exorbitant fees due to no fault of their own. While detention and demurrage charges are sometimes justified, they cannot be a source of revenue for carriers or terminal operators seeking to unfairly shift costs down the supply chain.
Because of the significant slowdown in shipping, many carriers, marine terminal operators, and other maritime agents are facing financial ruin, which may lead some of these enterprises to rely upon “fees” to stay afloat.
Rather than simply charging a single rate determined by the cost of doing business and a desired profit margin, various business enterprises have over recent decades engaged in a shell game of advertising a low rate but then attaching “fees” later to bring the actual cost to the consumer that which is necessary to keep a business profitable. This technique has worked its way into the shipping business. Sometimes these fees are simply for services which have routinely been provided but are now singled out for attention and in other instances they are long standing and readily accepted fees that have been perverted from their original intent.
An unexpected turn of events has brought this practice to the fore. A clear example is the use of fees assessed for detention and demurrage. Originally, fees for demurrage and detention were assessed for the purpose of encouraging the timely pickup and return of cargo and equipment. Over time, they slowly morphed into revenue generators albeit a very small part of the calculation to profitability. Recently, however, these fees appear to be a means of sustainability in some cases, transferring the pain of the current economic crisis to those who are ill-suited to subsidize others. While fees for demurrage and detention are valuable tools to ensure the timely use and return of equipment, they should never be used as a profit center. The recently adopted interpretive rule will make this quite clear.
I would like to compliment Commissioner Rebecca Dye for her hard work and tireless efforts to not only study the issue of demurrage and detention and its impact on the global supply chain but to also present a reasonable and workable solution to identifiable problems. She is to be commended for bringing together stakeholders to produce such a thorough and well-crafted product. I first heard Commissioner Dye address the topic of demurrage and detention in my hometown of Miami, Florida, back in 2018. It was apparent to me then and continues to be reinforced that she is indeed a maven on the topic. Thank you, Commissioner Dye, for your dedicated service.
Louis E. Sola is a Commissioner with the U.S. Federal Maritime Commission. The thoughts and comments expressed here are his own and do not necessarily represent the position of the Commission.