Truckers may be subject to demurrage charges once again following a court reversal of a Federal Maritime Commission (FMC) rule that blocked such an assessment.
In a case brought against the FMC by the World Shipping Council, the U.S. Court of Appeals for the District of Columbia ruled late last month that the FMC rule blocking demurrage assessments against motor carriers was “arbitrary and capricious.”
“While the Commission’s basic, stated rationale was to confine the parties against whom demurrage and detention charges may be levied to entities who are in a contractual relationship with the billing party, the Commission, without adequate explanation, left out entities who are in such a contractual relationship while seemingly including others who are not,” the court wrote.
The court’s action set aside the part of the 2024 FMC rule that blocked demurrage charges against trucks. No other parts of the rule were impacted by the court’s decision.
FMC limited who could pay detention fees
The 2024 rule was the culmination of a process that began in 2020 to set guidelines for acceptable demurrage and detention practices. In the court’s summary of the final rule, it said that its authors “adopted an approach under which only the person who contracted with the common carrier for the carriage or storage of goods may be issued an invoice.”
In a recap of the rule that was challenged by the WSC, attorneys Julie Maurer and Benjamin Nashed of the Husch Blackwell law firm, in an online commentary about the appeals court decision, said the 2024 rule “required invoices for demurrage and detention to be issued to only (their italics) the shipper that contracted with the billing party for ocean transportation or stage, i.e., the ocean carrier or a non-vessel operating common carrier (NVOCC).”
The FMC rule even barred motor carriers from being hit with demurrage charges even if the shipping company had a direct contractual relationship, known as privity, with a trucking company.
Reasoning is weak
The attorneys said of the appellate decision: “The court found that the FMC failed to adequately explain why motor carriers that contract with ocean carriers could never be the billed party for demurrage and detention.”
The trucking-focused Scopelitis law firm said in an emailed comment about the decision added that the inconsistency also was that the FMC mandated that invoices “should only be issued to parties in direct contractual privity with the steamship line, but then additionally allowing steamship lines to invoice consignees (regardless of whether the consignee was in privity with the steamship line) while disallowing invoices to motor carriers (even if in contractual privity with the steamship line).”
Scopelitis also noted that while the court rule blocked a ban on invoicing motor carriers for demurrage, it did not require that such billing occur.
In its decision, the court said motor carriers “have raised complaints that they have been billed for demurrage and detention fees even though they have no contractual relationship with the billing parties,” which were listed as ocean carriers and marine terminal operators.
While the WSC made several arguments, the court’s ruling focused on the consistency challenge and ultimately prevailed there. “The Commission failed to explain the seeming inconsistency between its contractual-privity-based rationale and its categorical bar against billing motor carriers even when in privity with the billing party,” the court argued.
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