The regulators are coming! (For the carriers - not the shippers)

The Federal Maritime Commission announced that it has established a new audit program and dedicated audit team to assess carrier compliance with the agency’s rules on detention and demurrage, as first reported in the Journal of Commerce.

The full release is available on the Commission’s site here, but the question to shippers is what this means in practical terms.

Despite our best efforts to get containers picked up and returned within the free time allotted by both the steamship line and the railroad, sometimes we find ourselves in the position of having to pay them – we believe improperly in many cases – for demurrage or detention.

These are fees imposed for the time a container waits to be picked up after arrival or if the container and chassis are out too long before being returned.

Whether at a seaport, inland rail facilities like the UP which embargoed ocean containers to Chicago for an entire week or in the northeast where wheels are in short supply, shippers and their truckers find themselves the unwilling recipients of invoices for delays that are outside of a shipper’s control.

The audit program will target the nine largest carriers by market share. Considering the handful of carriers which remain after decades of consolidation, this represents the overwhelming share of the cargo in transit today.

This audit program is another effort by the agency who, under Commissioner Rebecca Dye, launched a Fact Finding last year into the impact that COVID-19 is having on supply chains.

In addition to the President’s Executive Order on competition specifically including ocean carriers and railroads, the Federal Maritime Commission announced a first-ever inter-agency Memorandum of Understanding with the Justice Department, paving the way to share resources in the investigation of antitrust behavior. 

Much like crash investigators who arrive to piece together the scene of an accident and release their findings and actions months or years later, no action being taken today by a federal agency will lead to a drop in rates or supply chain fluidity in the coming days or weeks. What we do hope will come of this is at a time when costs are soaring across the supply chain – leading Salesforce to forecast a $223 billion increase in cost of goods to retailers for the second half of 2021 – is some relief or mitigation in the punitive costs of not being able to recover and return containers and equipment for delays outside a shipper’s control.