On February 26, 2024, the Federal Maritime Commission (FMC) introduced a final rule that significantly reforms the billing requirements for demurrage and detention charges in the shipping industry, as stipulated by the Ocean Shipping Reform Act of 2022 (OSRA 2022).
Read the full ruling here: Click Here
Our team will be working to include the elements of this new rule into our Demurrage and Detention Alarms® module as well as our Invoice Auditing enhancements prior to the legislation taking effect on May 28, 2024.
The new rule aims to bring greater clarity, fairness, and efficiency to the practices of vessel-operating common carriers (VOCCs), non-vessel-operating common carriers (NVOCCs), and marine terminal operators (MTOs).
The final rule limits the issuance of demurrage and detention invoices to the party who contracted for the ocean transportation or storage of cargo, or the consignee, but only one of the two parties may be invoiced, not both. The consignee is defined as “the person to whom final delivery of the cargo is to be made”.
Additionally, the rule mandates that demurrage and detention invoices must now include specific information to aid billed parties in understanding and verifying the accuracy of the charges.
The invoices must include:
- The date when the container is made available
- The port of discharge
- Container numbers
- The allowed free time in days
- The start and end date of free time
- The applicable detention or demurrage rule on which the daily rate is based
- The applicable rate or rates per the applicable rule
- The total amount due
- Contact information for questions or requests for mitigation of fees.
- And for export shipments, the earliest return date (ERD)
The new regulations require billing parties to issue demurrage and detention invoices within 30 calendar days from when the charges stop accruing. An exception is made for NVOCCs, who are granted an additional 30 days to issue invoices when they are passing through charges received from VOCCs.
Parties who receive a demurrage and detention invoice have 30 calendar days to make fee mitigation, refund, or waiver requests. For any valid requests that are filed within this timeframe, the billing party has 30 calendar days to attempt to resolve the issue, unless both parties agree to a longer timeframe.
Invoices must also include certifications confirming that the charges are consistent with FMC rules and that the billing party's performance did not cause or contribute to the underlying charges. If an invoice lacks the required information, the billed party is not obligated to pay the charge, according to 46 U.S.C. 41104(f).
MTOs, which sometimes do not have direct contractual relationships with shippers, are also subject to the same billing practices as VOCCs and NVOCCs when issuing demurrage and detention invoices to parties other than VOCCs.
The FMC has clarified that the new rule does not impact traditional cargo lien rights, allowing billing parties to decide whether or not to require payment of demurrage and detention charges prior to releasing cargo. Furthermore, the rule does not govern billing relationships between VOCCs and MTOs, as these are typically based on strong commercial relationships that ensure the accurate exchange of information.
The final rule aims to promote efficiency and fairness in the assessment and billing of demurrage and detention charges, ensuring that responsible parties receive accurate and understandable invoices. The FMC's approach is to foster better relationships between billing and billed parties, encouraging good-faith efforts for resolution when disputes arise. The rule also clarifies that parties can file a Charge Complaint with the FMC at any time during the dispute resolution process, without waiting for a specific period or triggering event.
This final ruling on demurrage and detention billing requirements by the FMC represents a significant step toward more transparent and equitable practices in the maritime shipping industry. By setting clear standards for invoicing and dispute resolution, the rule is expected to reduce confusion and disputes, ultimately facilitating the smoother flow of cargo and commerce.
For customers and users of the Container Lifecycle Management® platform, please reach out to your account management team if you have any questions about how this new rule or changes to your platform may impact you.