As Nooshin Namazi, Partner at Nicoletti Hornig & Sweeney, IUMI Professional Partner, informs, the US Federal Maritime Commission (FMC) discovered that issues with charges for holding onto cargo beyond free time, traditionally referred to as demurrage or detention is prevalent among all actors in the international ocean supply chain, and not just shippers and consignees.
Charges regarding demurrage refers to charges for a carrier’s container within the terminal or for use of terminal space, while on detentions the charges are for use of a container outside the terminal.
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Nooshin Namazi notes that the interests between parties in the supply chain are not always the same and their complex contractual and operational relationships can lead to important risks for ocean intermediaries such as freight forwarders, logistics providers, and non-vessel owning common carriers (NVOCC) for demurrage and detention charges.
For instance, an NVOCC or logistics provider may be the ‘consignee’ in an ocean carrier’s bill of lading or fall within the wider definition of ‘Merchant’ to which the terms of the bill of lading apply. As a result, the NVOCC or logistics provider is exposed to all demurrage/detention charges if the ultimate consignee does not pick up a container.
These complex relationships, and ensuing demurrage and detention concerns, were the subject of a fact-finding investigation by the FMC. After meetings and comments from the industry, the FMC issued its final report.
The FMC found that ‘demurrage and detention are valuable charges when applied in ways that incentivize cargo interests to move cargo promptly from ports and marine terminals.’ Nonetheless:
All international supply chain actors could benefit from transparent, consistent, and reasonable demurrage and detention practices
For this reason, the FMC suggests the organisation of ‘Innovation Teams’ to refine commercially viable demurrage and detention practices to reconcile all interests in these contractual and operational relationships.
See more details in the PDF below
