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Fashion Companies Straining to Pay ‘Unexpected’ Cargo-Related Charges: AAFA

Federal Maritime Commissioner Rebecca F. Dye said she will issue information demand orders to ocean carriers and marine terminal operators (MTOs) to determine if legal obligations related to detention and demurrage practices are being met.

The issue has been percolating for months and earlier this month Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA), sent a letter to the Federal Maritime Commission (FMC) urging it to take immediate steps to stem the surge in contract violations and the spike in detention and demurrage charges.

“Because of the pandemic, our members are already facing enormous challenges, battling a huge slump in demand that has led to store closings, furloughs, layoffs and bankruptcies, while trying to respond to the crucial need for face masks and other personal protective equipment (PPE) and the swings in demand for different types of clothes, shoes, and accessories,” Lamar wrote.

“Meanwhile, a convergence of issues, exacerbated by the COVID-19 pandemic, has created unprecedented shipping problems and delays, for beneficial cargo owners (BCOs), for truckers, for ports, for terminals and for carriers,” Lamar continued. “However, BCOs have borne the brunt of this impact. Despite having contracts in place, our members have had to pay unexpected and unplanned surcharges, premiums, and/or spot rates to get their cargo on ships. Even then, their cargo has still been rolled, forcing them to miss key delivery dates, leading to further lost sales (particularly for seasonal product) or further charges from their customers.”

In addition, Lamar said AAFA members have faced a spike in detention and demurrage charges “for situations completely out of their control.”

The FMC orders are being issued under Dye’s authority as the Fact Finding Officer for “International Ocean Transportation Supply Chain Engagement.” Targets of the orders will be ocean carriers operating in an alliance and calling the Port of Los Angeles, the Port of Long Beach, or the Port of New York & New Jersey. Marine terminal operators at those ports will also be subject to information demands.

The demand orders will also require carriers and MTOs to provide information on their policies and practices related to container returns and container availability for exporters. Failure of carriers and MTOs to operate in a way consistent with the Interpretive Rule on Detention and Demurrage that became effective on May 18 might constitute a violation of a statute that prohibits unjust and unreasonable practices and regulations related to, or connected with, receiving, handling, storing or delivering property.

“We urge the Federal Maritime Commission to fulfill its oversight role to ensure that contracts are honored and that its new policy on detention and demurrage charges is followed,” Lamar addd.

The FMC said information received from parties receiving demands may be used as a basis for hearings, enforcement action or further rulemaking.

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