The Federal Maritime Commission (“FMC”) has published its final regulations to implement and supplement the new demurrage and detention invoicing requirements on international ocean shipping that became U.S. law as of June 16, 2022, with the enactment of the Ocean Shipping Reform Act of 2022. Public Law No: 117-146. (“OSRA 22”).While many of the key provisions of OSRA 22 regarding demurrage and detention invoicing became law on June 16, 2022, OSRA 22 also required the FMC to adopt implementing regulations supplementing the statutory legal requirements. The final rules were published in the February 26, 2024, edition of the Federal Register. FMC, Final Rule, Demurrage and Detention Billing Requirements, 89 Fed. Reg. 14330-14363 (Feb. 26, 2024).
The new rules take effect on May 28, 2024. The one exception is that implementation of the FMC’s new rules governing the mandatory minimum information content of demurrage and detention invoices are indefinitely delayed until they receive final approval from the Office of Management and Budget (OMB). Until then, the invoice content provisions mandated by OSRA 22 remain in effect.
The new regulations govern the issuance of demurrage and detention charges by marine terminal operators (MTOs); ocean common carriers (VOCCs); and non-vessel-operating common carriers (NVOCCs). They significantly change the time frames in which demurrage or detention charges can be billed; the parties that can be billed; and the time frame to dispute the charges. The new rules establish special rules for NVOCCs with respect to demurrage and detention charges. They also clarify and refine the new statutory minimum information requirements for demurrage and detention invoices that became law with the enactment of OSRA 22.
The new FMC regulations will affect all participants and services involving demurrage and detention in the international ocean supply chain, including services provided pursuant to through ocean intermodal bills of lading. They will require a review and possible changes of operating procedures and contractual relationships between beneficial cargo owners; shippers; shippers’ associations; ocean carriers; NVOCCs; marine terminal operators; motor and rail carriers, and other service providers and their agents. NVOCCs in particular will need to review how they charge and/or pass-through demurrage and detention charges. The new rules govern only demurrage and detention invoices, not invoices for freight charges.
Summary of the Key FMC Demurrage and Detention Billing Rules
As of May 28, 2024, the FMC’s new regulations:
(1) Limit the ability of MTOS, VOCCs, and NVOCCs (“billing party”) to issue invoices for detention and demurrage charges. Invoices can be issued to just one person. The billed party can be either:
(a) the person for whose account the billing party provided ocean transportation or storage of cargo and who contracted with the billing party for those services; or
(b) the consignee, if the consignee is responsible for the charges. The FMC regulations define a consginee as the “ultimate recipient of the cargo; the person to whom final delivery of the cargo is to be made.”
(2) Require the issuance of an accurate demurrage or detention invoice within thirty (30) calendar days from the date on which the charge was last incurred. If the billing party is an NVOCC, it must issue a demurrage or detention invoice to a proper party (either the person for whose account the services were provided or the consignee) within thirty (30) calendar days from the issuance date of the detention or demurrage invoice it received from the billing party.
(3) If an MTO, VOCC, or NVOCC invoices an incorrect person, they may issue an invoice to the correct person provided that the invoice is issued within the thirty (30) calendar day time frame.
(4) The billing party must allow a billed party at least thirty (30) calendar days from the invoice issuance date to request mitigation, refund, or waiver of fees from the billing party. If a request to mitigate, refund, or waive a detention or demurrage invoice is received, the billing party must then attempt to resolve the request within thirty (30) calendar days of receiving such a request – or at a later date as agreed upon by both parties.
(5) NVOCCs that are acting in both the role of a billing party and a billed party in relation to the same charge can inform its billing party that the charges have been disputed by the NVOCC’s billed party. The NVOCC’s billing party must then provide an additional thirty (30) calendar days for the NVOCC to dispute the charge upon such notice.
(6) OSRA 22 requires demurrage and detention invoices to contain certain minimum information. As noted, the FMC’s new regulations refine the required minimum information that needs to be included in such invoices. However, the FMC has delayed the implementation of the new requirements to a date which will be announced in the future, after regulatory review.
(7) A billed party is not required to pay the applicable detention or demurrage charge if the invoice for the charges is not accurate; does not contain the required minimum information; or is not issued within the required thirty (30) calendar day time frame.
In issuing its new regulations, the FMC noted that between 2020 and 2022, the nine largest carriers serving the U.S. liner trades charged a total of approximately $8.9 billion in demurrage and detention charges and collected roughly $6.9 billion. The purpose of both OSRA 22 and its new regulations is to simplify and clarify demurrage and detention invoicing for billed parties. While the new rules will do so, at this time all participants in the international ocean shipping supply chain should take advantage of the 90-day delay in implementing the new regulations that the FMC has provided to review and adjust their operational procedures and contractual relationships in preparation of the May 28th implementation date.
This update is for informational purposes only and does not constitute legal advice. For further information about OSRA 22 and the FMC’s new demurrage and detention invoicing regulations, please contact Andrew M. Danas, Partner, Grove, Jaskiewicz and Cobert, LLP, Washington, D.C.; 202.416.0219; adanas@gjcobert.com
