Federal Maritime Commission.
Notice of proposed rulemaking.
The Federal Maritime Commission is seeking public comment on its interpretation of the Shipping Act prohibition against failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, Start Printed Page 48851storing, or delivering property with respect to demurrage and detention. Specifically, the Commission is providing guidance as to what it will consider in assessing whether a demurrage or detention practice is unjust or unreasonable.
Submit comments on or before: October 17, 2019.
You may submit comments, identified by the Docket No. 19-05 by the following methods:
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Email: email@example.com. Include in the subject line: “Docket 19-05, Demurrage & Detention Comments.” Comments should be attached to the email as a Microsoft Word or text-searchable PDF document. Only non-confidential and public versions of confidential comments should be submitted by email.
Mail: Rachel E. Dickon, Secretary, Federal Maritime Commission, 800 North Capitol Street NW, Washington, DC 20573-0001.
Instructions: For detailed instructions on submitting comments, including requesting confidential treatment of comments, and additional information on the rulemaking process, see the Public Participation heading of the SUPPLEMENTARY INFORMATION section of this document. Note that all comments received will be posted without change to the Commission's website, unless the commenter has requested confidential treatment.
Docket: For access to the docket to read background documents or comments received, go to the Commission's Electronic Reading Room at: https://www2.fmc.gov/readingroom/proceeding/19-05/, or to the Docket Activity Library at 800 North Capitol Street NW, Washington, DC 20573, 9:00 a.m. to 5:00 p.m., Monday through Friday, except Federal holidays. Telephone: (202) 523-5725.
FOR FURTHER INFORMATION CONTACT:
Rachel E. Dickon, Secretary; Phone: (202) 523-5725; Email: firstname.lastname@example.org.
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In 2018, the Commission initiated a non-adjudicatory fact-finding investigation, Fact Finding Investigation No. 28, into the conditions and practices relating to detention, demurrage, and free time.
On December 7, 2019, the Commission voted to accept the investigation's Final Report, in which the Fact-Finding Officer 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;
- All international supply chain actors could benefit from transparent, consistent, and reasonable demurrage and detention practices, which would improve throughput velocity at U.S. ports, allow for more efficient use of business assets, and result in administrative savings; and
- Focusing port and marine terminal operations on notice of actual cargo availability would achieve the goals of demurrage and detention practices and improve the performance of the international commercial supply chain.
Based on the Fact Finding's Final Report, Interim Report,
and investigatory record, the Commission is considering incorporating those findings in guidance as to the Commission's interpretation of 46 U.S.C. 41102(c) and 46 CFR 545.4(d) in the context of demurrage and detention. Although each § 41102(c) case would continue to be decided on the particular facts of the case, the Commission believes that guidance in the form of a non-exclusive list of considerations will promote fluidity in the U.S. freight delivery system by ensuring that demurrage and detention serve their purpose of incentivizing cargo and equipment velocity. The proposed interpretive rule will also mitigate confusion, reduce and streamline disputes, and enhance competition and innovation in business operations and policies. The Commission is issuing this notice to obtain public comments on this guidance.
This notice of proposed rulemaking arises from the Commission's Fact Finding Investigation No. 28, which itself derived from repeated criticisms of ocean carrier and marine terminal operator demurrage and detention practices.
The investigation was nationwide and industry-wide in scope and involved thousands of pages of written discovery and interviews with numerous representatives of cargo interests (shippers and consignees), truckers, ocean transportation intermediaries, ocean carriers, marine terminal operators, and ports.
The Fact-Finding Officer found that the primary purposes of demurrage and detention are to serve as financial incentives to encourage the productive use of assets (containers and terminal space) and promote optimal cargo velocity through marine terminals.
The Fact Finding Officer further found that the U.S. international ocean freight delivery system, and American economy, would benefit from: (1) “Transparent, standardized language for demurrage and detention practices;” (2) “Clear, simplified, and accessible demurrage and detention billing practices and dispute resolution processes;” (3) “Explicit guidance regarding the types of evidence relevant to resolving demurrage and detention disputes;” and (4) “Consistent notice to cargo interests of container availability.” 
III. Summary of Proposed Guidance
The guidance proposed by the Commission is in the form of an interpretive rule.
The proposed rule concerns financial incentives, particularly with respect to cargo availability, empty container return, notice of availability, and government inspections; accessible and user-friendly demurrage and detention policies; and transparent, consistent terminology. The following consists of the text of the proposed rule and comments on each subparagraph.
A. Purpose and Scope of Proposed Rule
The Commission's proposed rule would first specify that its purpose is to provide guidance about how the Start Printed Page 48852Commission will interpret 46 U.S.C. 41102(c) and 46 CFR 545.4(d) in the context of demurrage and detention The proposed interpretive rule would also make clear that it applies to practices and regulations relating to demurrage and detention for containerized cargo. For purposes of this rule, demurrage and detention would include any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges.
As for the scope and applicability of the proposed rule, first, it defines “demurrage and detention” broadly to encompass all charges customarily referred to as demurrage, detention, or per diem, however defined.
Second, the proposed rule would only apply to containerized cargo, including refrigerated (“reefer”) containers. Third, the proposed rule makes clear that it applies to charges related to shipping containers, not other equipment, such as chassis.
B. Incentive Principle
1. General Incentive Approach
The Commission proposes that in assessing the reasonableness of demurrage and detention practices and regulations, it will consider the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.
To pass muster under § 41102(c), “a regulation or practice must be tailored to meet its intended purpose.” 
The intended purposes of demurrage and detention charges are to incentivize cargo movement and the productive use of assets (containers and port or terminal land)—a point which ocean carriers and marine terminal operators have repeatedly emphasized to the Commission.
The “incentive principle” in the proposed rule is merely an application of the general § 41102(c) reasonableness standard to the demurrage and detention context.
As Fact-Finding Investigation No. 28 made clear, demurrage and detention are valuable charges when they work—when they are applied in ways that incentivize cargo interests to move cargo promptly from ports and marine terminals.
When circumstances are such that demurrage and detention do not work, i.e., when they do not incentivize cargo movement and productive asset use, there is cause to question the reasonableness of their application. For instance, if a cargo interest or its trucker cannot retrieve cargo from a marine terminal because the cargo is not available for retrieval due to circumstances such as weather, port or terminal closures, the container is in a closed area, or government inspections of the cargo, demurrage would not serve as an effective incentive for cargo retrieval.
The proposed rule states the incentive principle in general terms, but its application will vary depending on the facts of a given case. For example, under the incentive principle, absent extenuating circumstances, demurrage and detention practices and regulations that do not provide for a suspension of charges when circumstances are such that demurrage and detention are incapable of serving their purpose would likely be found unreasonable.
An example of an extenuating circumstance is whether a cargo interest has complied with its customary responsibilities, especially regarding cargo retrieval (e.g., making appointments, paying freight, submitting required paperwork, retaining a trucker). If it has not, this could be factored into the analysis. Another application of the incentive principle is if cargo cannot be retrieved, or empty containers cannot be returned, due to a lack of appointments, demurrage and detention cannot incentivize cargo retrieval or equipment return. The Commission may therefore consider in the reasonableness analysis how demurrage and detention practices and regulations account for the availability of appointments.
Particularly significant applications of the incentive principle involve cargo availability, empty container return, notice of cargo availability, and government inspections, as set forth below.
2. Cargo Availability
As for particular applications of the “incentive principle,” the proposed interpretive rule would clarify that the Commission may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval.
A particularly important context for the incentive principle, and one given its own subparagraph in the proposed rule, is cargo availability. If cargo interests or truckers cannot pick up their cargo within free time, then demurrage cannot serve its incentive purpose. Cargo availability is key to demurrage serving its intended function, and thus the Commission may consider the relationship between demurrage and cargo availability in its analysis under 46 U.S.C. 41102(c).
The more a demurrage practice is tailored to cargo availability, the less likely the practice is to be found unreasonable.
In this context, “cargo availability” or “accessibility” refers to the actual ability of a cargo interest or trucker to retrieve its cargo. Cargo is not available, for instance, if a cargo interest or trucker cannot pick it up because it is in a closed area of a terminal, or if the port is closed.
Examples of demurrage practices that are expressly linked to container availability, and which the Commission would weigh positively in the reasonableness analysis, include: (a) Starting the free time clock upon container availability as opposed to container discharge from a vessel; (b) public notice of terminal yard closures; and (c) stopping a demurrage or free time clock when a container is rendered unavailable, such as upon notice of a yard or terminal closure or when a trucker cannot get an appointment Start Printed Page 48853within a reasonable time of it becoming available.
3. Empty Container Return
The proposed interpretive rule would also indicate that absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.
The flip side of cargo availability is empty container return. Absent extenuating circumstances, practices and regulations that result in detention being imposed when a container cannot be returned weigh heavily in favor of a finding of unreasonableness. The paradigmatic example is that if the marine terminal designated by an ocean carrier refuses to accept empty containers, no amount of detention can incentivize the return of those containers. Absent extenuating circumstances, assessing detention in such situations, or declining to pause the free time or detention clock, would likely be unreasonable. Imposing detention in situations of uncommunicated or untimely communicated changes in container return location also weighs on the side of unreasonableness, as might doing so when there have been uncommunicated or untimely communicated notice of terminal closures for empties.
4. Notice of Cargo Availability
Additionally, the Commission would clarify that in assessing the reasonableness of demurrage practices and regulations, it may consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The Commission would consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice.
This subparagraph promotes aligning cargo retrieval processes around notice that cargo is available.
The Commission will consider in the reasonableness analysis whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The more notice is calculated to apprise cargo interests that cargo is available for retrieval, the more this factor favors a finding of reasonableness.
The Commission may consider the type of notice. Types of notice that are expressly linked to cargo availability will weigh toward reasonableness, and include: (a) Notice that cargo is discharged and in an open area; (b) notice that cargo is discharged, in an open area, free of holds, and proper paperwork has been submitted; and (c) notice of all the above and that an appointment is available.
Other factors include to whom notice is provided, the format and method of distribution of notice, the timing of notice, and the effect of notice. The more these factors align with the goal of moving cargo off terminal property, the less likely demurrage practices would be found unreasonable. For instance, while the Commission appreciates that many marine terminal operators make container status information available on websites and allow users to register to get electronic notice of changes in container status, cargo interests have persuasively explained the superior merits of “push notifications” related to cargo availability, including notice of yard closures.
Moreover, the Commission will consider how demurrage and detention practices account for cargo availability changes, such as when a container that is initially available becomes unavailable.
Regarding the effect of notice, demurrage practices that link the start of free time to notice that a container is available weigh in favor of reasonableness, as do practices that guarantee the availability of an appointment within a specified time of notice of container availability.
5. Government Inspections
The Commission is still considering its guidance related to government inspections of cargo. Imposition of demurrage and detention during government inspections of cargo, and the delays associated with such inspections, is a significant problem for cargo interests and truckers. Such inspections not only involve cargo interests and regulated entities but also government agencies, third-parties, and, in some cases, off-terminal facilities. In light of the incentive principle, the Commission is considering the following interpretive rules:
- In the absence of extenuating circumstances, demurrage and detention practices and regulations that provide for the escalation of demurrage or detention while cargo is undergoing government inspection are likely to be found unreasonable;
- In the absence of extenuating circumstances, demurrage and detention practices and regulations that do not provide for mitigation of demurrage or detention while cargo is undergoing government inspection, such as by waiver or extension of free time, are likely to be found unreasonable; or
- In the absence of extenuating circumstances, demurrage and detention practices and regulations that lack a cap on the amount of demurrage or detention that may be imposed while cargo is undergoing government inspection are likely to be found unreasonable.
The Commission is particularly interested in comments on such proposals and other suggestions for handling demurrage and detention in the context of government inspections, consistent with the incentive principle.
C. Demurrage and Detention Policies
The Commission further proposes making clear that it may consider in the reasonableness analysis the existence and accessibility of policies implementing demurrage and detention practices and regulations, including dispute resolution policies. In assessing dispute resolution policies, the Commission would further consider the extent to which they contain information about points of contact, timeframes, and corroboration requirements.
1. Existence and Accessibility of Policies
Cargo interests should be informed of who is being charged, for what, by whom, and how disputes can be addressed in a timely fashion.
The opacity of current practices encourages disputes and discourages competition over demurrage and detention charges. Accordingly, the proposed rule would have the Commission consider in the reasonableness analysis the existence of policies—whether a regulated entity has demurrage and detention policies that reflect its practices. The Commission would also consider the accessibility of policies—whether and how those policies are made available to cargo interests and truckers and the public. The more accessible these policies are, the greater this factor weighs against a finding of unreasonableness. This factor favors demurrage and detention practices and regulations that make policies available in one, easily Start Printed Page 48854accessible website, whereas burying demurrage and detention policies in scattered sections in tariffs would be disfavored.
As for dispute resolution policies, not only should they be accessible, but the Commission will consider whether they address things such as points of contact for disputing charges; time frames for raising disputes, for responding to cargo interests or truckers, and for resolving disputes; and the types of information or evidence relevant to resolving demurrage or detention disputes.
Other attributes of dispute resolution policies that will weigh in favor of reasonableness include step-by-step instructions for disputing a charge, dedicated dispute resolution staff at regulated entities, allowing priority appointments or waiving appointments after successful dispute resolution or when a container is not available; sufficient responses to cargo interests requests for free time extensions or waiver; processes for elevating disputes after an initial response; and allowing a trucker to continue to do business with a regulated entity during the pendency of a dispute.
As an example, the best practices proposal put forward by the Ocean Carrier Equipment Management Association (OCEMA)—and made available on OCEMA's website—is a useful model for demurrage and detention dispute resolution policies, which each regulated entity would tailor to fit its own circumstances.
That model supports including in demurrage and detention policies: (1) Points of contact for demurrage and detention disputes (names, phone numbers, and email addresses); (2) “[a] description of what information is required to be provided by the shipper in order to make a detention and/or demurrage dispute claim;” (3) timeframes for raising a dispute and providing a response; and (4) that individual entities' dispute resolution processes web pages be linked to the OCEMA website.
The efficacy (and reasonableness) of dispute resolution policies also depends on demurrage and detention bills having enough information to allow cargo interests to meaningfully contest the charges. Another proposal that could promote transparency and alignment of stakeholder interests is to tie billing relationships to ownership or control of the assets that are the source of charges.
Under this approach, marine terminal operators would bill cargo interests directly for use of terminal land. Ocean carriers would bill cargo interests directly for use of containers.
This approach is also consistent with the Commission's preferred definitions of “demurrage” and “detention.” 
Moreover, regardless of billing model, ocean carriers should bill their customers, rather than imposing charges contractually-owed by cargo interests on third parties. The Commission is interested in comments on this proposal.
3. Guidance on Evidence
Dispute resolution policies that lack guidance on corroboration requirements, that is, guidance about the types of evidence relevant to resolving demurrage and detention disputes, are likely to fall on the unreasonable end of the spectrum. Cargo interests and truckers have suggested several ideas regarding this topic, which, if implemented by regulated entities, would weigh favorably in the § 41102 analysis, including: (a) Providing truckers with evidence substantiating trucker attempts to retrieve cargo that are thwarted when the cargo is not available (e.g., a trouble ticket with information about container and container unavailability); and (b) providing cargo interests and truckers with log records that track attempts to make appointments. Dispute resolution policies should include evidentiary guidance. The OCEMA best practices proposal, for example, expressly contemplates such guidance.
D. Transparent Terminology
Finally, according to the proposed interpretive rule, the Commission may consider in the reasonableness analysis the extent to which regulated entities have defined the terms used in demurrage and detention practices and regulations, the accessibility of definitions, and the extent to which the definitions differ from how the terms are used in other contexts.
For demurrage and detention practices and regulations to be just and reasonable, it must be clear what the terminology means.
Accordingly, the Commission will consider in the reasonableness analysis whether a regulated entity has defined the material terms of the demurrage or detention practice at issue, whether and how those definitions are made available to cargo interests, truckers, and the public, and how those definitions differ from a regulated entity's past use of the terms, how the terms are used elsewhere in the port at issue, and how the terms are used in the U.S. trade.
The Commission supports defining demurrage and detention in terms of what asset is the source of a charge (land or container) as opposed to the location of a container (inside or outside a terminal).
Under the former, “demurrage” would be a charge related to terminal space, and “detention” would be a charge related to containers.
The Commission strongly discourages the continued use of terms such as “storage” and “per diem” in this context because not only do they add unnecessary complexity, the Commission has been informed that they are inconsistent with international practice.
IV. Public Participation
How do I prepare and submit comments?
Your comments must be written and in English. To ensure that your comments are correctly filed in the docket, please include the docket number of this document in your comments.
You may submit your comments via email to the email address listed above under ADDRESSES. Please include the docket number associated with this notice and the subject matter in the subject line of the email. Comments should be attached to the email as a Microsoft Word or text-searchable PDF document. Only non-confidential and public versions of confidential comments should be submitted by email.
You may also submit comments by mail to the address listed above under ADDRESSES.
How do I submit confidential business information?
The Commission will provide confidential treatment for identified confidential information to the extent allowed by law. If your comments contain confidential information, you Start Printed Page 48855must submit the following by mail to the address listed above under ADDRESSES:
- A transmittal letter requesting confidential treatment that identifies the specific information in the comments for which protection is sought and demonstrates that the information is a trade secret or other confidential research, development, or commercial information.
- A confidential copy of your comments, consisting of the complete filing with a cover page marked “Confidential-Restricted,” and the confidential material clearly marked on each page. You should submit the confidential copy to the Commission by mail.
- A public version of your comments with the confidential information excluded. The public version must state “Public Version—confidential materials excluded” on the cover page and on each affected page, and it must clearly indicate any information withheld. You may submit the public version to the Commission by email or mail.
Will the Commission consider late comments?
The Commission will consider all comments received before the close of business on the comment closing date indicated above under DATES. To the extent possible, we will also consider comments received after that date.
How can I read comments submitted by other people?
You may read the comments received by the Commission at the Commission's Electronic Reading Room or the Docket Activity Library at the addresses listed above under ADDRESSES.
V. Rulemaking Analyses
Regulatory Flexibility Act
The Regulatory Flexibility Act (codified as amended at 5 U.S.C. 601-612) provides that whenever an agency is required to publish a notice of proposed rulemaking under the Administrative Procedure Act (APA) (5 U.S.C. 553), the agency must prepare and make available for public comment an initial regulatory flexibility analysis (IRFA) describing the impact of the proposed rule on small entities. 5 U.S.C. 603. An agency is not required to publish an IRFA, however, for the following types of rules, which are excluded from the APA's notice-and-comment requirement: Interpretative rules; general statements of policy; rules of agency organization, procedure, or practice; and rules for which the agency for good cause finds that notice and comment is impracticable, unnecessary, or contrary to public interest. See 5 U.S.C. 553(b).
Although the Commission has elected to seek public comment on this proposed rule, the rule is an interpretive rule. Therefore, the APA does not require publication of a notice of proposed rulemaking in this instance, and the Commission is not required to prepare an IRFA.
National Environmental Policy Act
The Commission's regulations categorically exclude certain rulemakings from any requirement to prepare an environmental assessment or an environmental impact statement because they do not increase or decrease air, water or noise pollution or the use of fossil fuels, recyclables, or energy. 46 CFR 504.4. This rule regarding the Commission's interpretation of the 46 U.S.C. 41102(c) falls within the categorical exclusion for investigatory and adjudicatory proceedings, the purpose of which is to ascertain past violations of the Shipping Act of 1984. 46 CFR 504.4(a)(22). Therefore, no environmental assessment or environmental impact statement is required.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) requires an agency to seek and receive approval from the Office of Management and Budget (OMB) before collecting information from the public. 44 U.S.C. 3507. This proposed rule does not contain any collections of information as defined by 44. U.S.C. 3502(3) and 5 CFR 1320.3(c).
This rule meets the applicable standards in E.O. 12988 titled, “Civil Justice Reform,” to minimize litigation, eliminate ambiguity, and reduce burden.
Regulation Identifier Number
The Commission assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda). The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda, available at http://www.reginfo.gov/public/do/eAgendaMain.
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- Freight forwarders
- Maritime carriers
- Non-vessel-operating common carriers
- Ocean transportation intermediaries
- Licensing requirements
- Financial responsibility requirements
- Reporting and recordkeeping requirements
For the reasons set forth above, the Federal Maritime Commission proposes to amend 46 CFR part 545 as follows:
PART 545—INTERPRETATIONS AND STATEMENTS OF POLICY
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1. The authority citation for part 545 continues to read as follows: End Amendment Part
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2. Add § 545.5 to read as follows: End Amendment Part
Interpretation of Shipping Act of 1984-Unjust and unreasonable practices with respect to demurrage and detention.
(a) Purpose. The purpose of this rule is to provide guidance about how the Commission will interpret 46 U.S.C. 41102(c) and § 545.4(d) in the context of demurrage and detention.
(b) Applicability and Scope. This rule applies to practices and regulations relating to demurrage and detention for containerized cargo. For purposes of this rule, demurrage and detention include any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges.
(c) Incentive Principle. In assessing the reasonableness of demurrage and detention practices and regulations, the Commission will consider the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.
(d) Particular Applications of Incentive Principle.—(1) Cargo Availability. The Commission may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval.
(2) Empty Container Return. Absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.
(3) Notice of Cargo Availability. In assessing the reasonableness of Start Printed Page 48856demurrage practices and regulations, the Commission may consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The Commission may consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice.
(4) Government Inspections.
(e) Demurrage and Detention Policies. The Commission may consider in the reasonableness analysis the existence and accessibility of policies implementing demurrage and detention practices and regulations, including dispute resolution policies. In assessing dispute resolution policies, the Commission may further consider the extent to which they contain information about points of contact, timeframes, and corroboration requirements.
(f) Transparent Terminology. The Commission may consider in the reasonableness analysis the extent to which regulated entities have defined the terms used in demurrage and detention practices and regulations, the accessibility of definitions, and the extent to which the definitions differ from how the terms are used in other contexts.
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By the Commission.
[FR Doc. 2019-19858 Filed 9-16-19; 8:45 a.m.]
BILLING CODE 6731-AA-P