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Why FMC’s Restructuring Is Good News for Shippers

The Federal Maritime Commission (FMC) is making it clear the Ocean Shipping Reform Act of 2022 (OSRA) will be enforced under its watch.

The FMC said Friday it created a new Bureau of Enforcement aimed at bolstering its efforts around enforcement and compliance with the law. The Bureau of Enforcement, Investigations and Compliance rolls up previously separate departments within the FMC and will be led by an attorney.

“Robust enforcement of the Shipping Act is absolutely key to the effectiveness of the Federal Maritime Commission,” FMC chair Daniel Maffei said of the reorganization.

The chairman went on to say the new bureau “enhances FMC’s capacity to closely scrutinize the conduct of the ocean carrier companies and marine terminal operators to ensure compliance with the law and fairness for American importers and exporters.”

OSRA, which was signed into law in June, charges the FMC with implementation and enforcement.

Since that time, the commission has notified carriers of detention and demurrage compliance, while also bolstering its headcount to help carry out investigations.

The FMC said it’s now working on an online portal where comments and complaints can be submitted during an interim period before a more permanent solution is created.

OSRA was signed into law with the idea being that it would help tame high shipping costs at a time of record profits for carriers. The goal was also to make it harder for shipping lines to bypass service to U.S. exporters and create greater transparency around late fees assessed to customers.

The FMC made it clear implementation is immediate on the fee front and it will “pursue enforcement action against any conduct perceived to establish open-ended obligations or include coercive tactics circumventing the clear direction of Congress.”

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The detention and demurrage fees assessed to shippers by the carriers had been front and center in the debate around OSRA prior to its passage, with many shippers complaining about the lack of transparency around the charges and why they were being assessed.

Detention references the fees that are levied after a container remains outside of a port past the allotted amount of free days. Demurrage is incurred on the containers that remain filled and unpacked at a port past a specified timeframe.

OSRA aimed to address shipper concerns with greater transparency around the charges and placed the burden of justifying the charges on the carriers.

In the case of demurrage and detention charges, shippers must now receive invoices with detailed information that includes, among other things, container numbers, start and end dates of free time for when a container or equipment can be used, contact information for questions related to the fees and a citation of the rule that was expressly broken.

Mediterranean Shipping Company (MSC) told its U.S. customers Monday it had a new digital tool that would allow them to track the status of disputes around demurrage and detention that promises a response within 24 hours. The carrier said shippers with questions regarding their charges would have to use the new digital system or certified mail and that phone calls to discuss disputes would no longer be accepted.

Hapag-Lloyd said last month it had a new online system for customers to generate invoices for demurrage. The carrier, in April, was fined for 14 Shipping Act violations by an administrative law judge with the FMC for detention fees assessed on 11 empty containers moved by Golden State Logistics.

Maersk, in May, warned shippers of a new off-dock drayage policy for long-dwelling containers and not only reiterated the purpose behind the program on Monday, but also announced a further reduction in dwell time before containers are moved.

The carrier had previously said drayage containers that had been sitting idle for more than 14 days would be moved to off-dock facilities. On Monday, it changed the policy to a nine-day dwell time for its Pacific Southwest and New Jersey terminals, with the idea behind the change an attempt to address congestion at those ports.

“Unfortunately, persistent congestion continues to impact operations in our key Los Angeles/Long Beach and Newark/Elizabeth gateways,” Maersk told customers Monday. “To proactively manage container flows and protect the supply chain ahead of the peak season, effective August 8 we will begin transferring container dwells for nine or more days that are customs cleared and have no appointment confirmed for pick-up at the terminals.”

The shipping line said containers that “have been routinely missed or cancelled” appointment times would also be transferred.

“We had until now focused on draying containers with no activity for more than 14 days,” Maersk said. “However, average dwell times remain excessive across the United States, so we feel it’s important to do more to free up capacity and improve productivity in our marine terminals so we can provide a more reliable service to you.”

The company pressed for greater urgency on pickups and also customs clearance prior to ships arriving at port, pointing to too many containers without clearance as being “one of the root causes affecting dwell times” at congested ports.

The thinking in some ways reflects a broader carrier position that was the reason why the World Shipping Council (WSC), an association representing shipping lines, pushed back against OSRA. The group has maintained that port, rail and warehouse infrastructure has been unable to keep up with increased trade and logistics infrastructure is something OSRA ultimately does not address.

The container returns process can be cumbersome with customers required to set a return appointment, which can be difficult to confirm, or truck chassis are not available. Maersk acknowledged as much in its advisory, when it said “we truly recognize there are other factors impacting fluidity at the ports such as empty container returns, chassis availability” and that those factors would be taken into consideration.