Update on Federal Maritime Commission Fact Finding 29: Demand Orders Announcement
Today the FMC issued an update to its approach for assessing the effectiveness and reasonableness of detention, demurrage, per diem practices and the impact of COVID-19 on the supply chain, known as Fact Finding 29. Per the November 2020 Supplemental Order, "The primary purpose of the Fact Finding was to identify operational solutions to cargo delivery system challenges related to recent global events.”
Commissioner Rebecca Dye announced that she will issue demand orders to ocean carriers and terminal operators to determine if legal obligations related to D&D practices are being met. Specifically, the demand orders target ocean carriers in an alliance calling on the Ports of Los Angeles, Long Beach or New York/New Jersey, as well as marine terminal operators at these ports. The demand orders will require carriers an
d terminal operators to submit information on their policies and practices for container returns and container availability for exports.
The FMC’s analysis of D&D and COVID-19's influence on the ocean supply chain has been an evolution. Commissioner Dye launched Fact Finding 29 in March 2020. The Commission issued a Supplemental Order in November 2020, which included the examination of whether detention and demurrage practices of ocean carriers operating in an alliance and calling at the ports in LA, Long Beach, and New York and New Jersey violate 46 USC 41102(c). This clause of the Shipping Act of 1984 prohibits ocean common carriers, marine terminal operators, and ocean transportation intermediaries from failing to establish, observe, and enforce “just and reasonable” regulations and practices for the receipt, handling, storage, or delivery of property. Today’s announcement highlights the growing concern documented in recent
FMC statements that maritime supply chains are out of balance, and without intervention, would remain so. As freight rates continue at record highs and equipment availability is constrained, the declaration indicates that the FMC is heeding the complaints of shippers. While that is nothing new, the FMC appears to be questioning whether the current system is sufficient to uphold principles of the Interpretive Rule as to what is considered unjust or unreasonable D&D practices. This update to Fact Finding No. 29 will further put the Incentive Principle at center stage whereby demurrage and detention serve as financial incentives to promote freight fluidity, the cycling of equipment and justification for such charges.