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Commissioner recommends Congress give FMC more control over container markets

The US Federal Maritime Commissioner Rebecca Dye issued recommendations July 28 that Congress strengthen the shipping regulator's enforcement powers over detention and demurrage charges as it seeks to stamp out alleged unlawful practices amid the container shipping cost boom.

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The move comes after President Biden issued a wide-ranging executive order July 7 against alleged anticompetitive practices across several industries and called on the FMC to protect US exporters from exorbitant charges from shipping lines.

Shippers are sometimes charged "unlawful" detention and demurrage fees even if port congestion, chassis shortages or other factors out of their control cause them to be late in picking up or returning containers to the port, Dye said.

Shippers have been deterred from filing complaints about the fees either to the FMC or in litigation out of fear they would later be denied cargo space or face other forms of retaliation. The protections under the Shipping Act of 1984 have been narrowly interpreted as only applying to shippers and independent carriers, Dye said.

"It does not apply to retaliation by other regulated entities, and it does not apply to retaliation against non-shippers, such as truckers or others working on behalf of shippers," Dye said in recommending that this provision be amended by Congress to apply also to marine terminal operators, freight forwarders, shippers' agents and motor carriers.

Dye also recommended that Congress amend the Shipping Act to double reparations to a shipper if a carrier is found to have charged them unlawful detention and demurrage fees, since the cost of bringing a lawsuit against a shipping line or terminal operator can greatly exceed the amount to be recovered.

"It might not make sense for a shipper to file a private party complaint to recover hundreds or thousands of dollars of unlawful demurrage or detention if it will cost significantly more to obtain a reparations award. Congress can change these incentives," Dye said.

As container freight rates to North America from Asia and Europe have climbed to unprecedented levels over the past year, US importers and exporters have repeatedly complained to regulators that the power imbalance under current supply-demand fundamentals has exacerbated the issue of detention and demurrage charges.

The S&P Global Platts Container Index, a weighted average of the spot freight cost on key container trade routes, was assessed at $7,231/forty-foot equivalent unit on July 28, up 65% from the start of 2021 and an increase of 470% from the year-earlier date.