News / FMC 'compensation for shippers' plan will push carriers to return boxes

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Shippers in the US may soon be able to claim compensation for the storage of empty shipping containers that also accrue detention and demurrage (D&D) charges.

These are imposed by carriers on customers unable to return empty containers before a certain deadline.

Federal Maritime Commission (FMC) chairman Daniel Maffei told representatives of the trucking and terminal operating community at the port of New York and New Jersey shippers should instead be compensated for storing empties.

“When ocean carriers continue to bring thousands of containers every month to a port and only pick up a fraction of them, it creates an untenable situation for terminals, importers and exporters, trucking companies and the port itself,” said Mr Maffei.

The FMC policy would increase incentives on carriers to promote the movement of cargo, as they would no longer “receive involuntarily subsidised storage for empty containers that belong to them”, shifting the responsibility for the empty containers onto carriers and alleviate port and supply chain congestion.

The commission further plans to facilitate the movement of empty containers out of US ports by asking carriers which are furthest behind schedule for picking up their empty containers to provide the FMC with a plan to rectify the situation.

Mr Maffei’s remarks came after the National Industrial Transportation League and the Bi-State Motor Carriers Association, a 170-member New York/New Jersey truckers’ association, asked the FMC to suspend D&D charges for shippers at New York/New Jersey unable to return empty containers through no fault of their own. The policy, if implemented could be transferable across the US.

Chronic port congestion in the US has seen terminal and warehouse storage space reach capacity, while chassis availability has also declined as shippers use equipment to store thousands of empty containers waiting to be returned to carriers.

Mr Maffei said the commission’s investigations into complaints about unreasonable D&D charges, set out by OSRA, will be “broadened and intensified to cover instances where shippers and truckers are being forced to store containers or move them without proper compensation”.

Complaints from shippers that attempts to return boxes have often failed through lack of communication with the lines, or a shortage of chassis to deliver boxes at the specified time and place, has seen D&D charges spiral out of control, according to some shippers.

Average D&D charges in the US were nearly five times higher in the US than in Europe, according to Container Xchange statistics for May.

The increase in cargo volumes post-pandemic, imbalances in volumes of containerships moving in and out of US gateways and congestion have all caused a build-up of empty containers at US ports. Carriers have been requiring shippers and truckers to pay daily charges for empty containers, despite port congestion making the return of these containers on specified dates virtually impossible in some cases.

This prompted the US government to introduce the Ocean Shipping Reform Act 2022 (OSRA) in an effort to deal with perceived injustices imposed on shippers by the terminal operators and the shipping lines.

One of the cases to reach its conclusion even before the enactment of OSRA saw Hapag-Lloyd fined $2m for infringements that will bring even greater scrutiny and the new legislation.

The FMC will alleviate this financial pressure on shippers and truckers by suspending the D&D charges for empty containers stuck in ports, and requiring carriers to provide compensation, if it can be shown that full containers cannot be picked up, or if shippers and forwarders are unable to return empties.

However, John Butler, CEO at the carrier representative, the World Shipping Council told The Loadstar: “The problem with general statements about detention and demurrage charges, whether those statements come from government officials or private actors, is that the facts of every case are different. It is precisely because each case must be evaluated on its own facts that the FMC does not have the authority to impose general bans or waivers of charges.”

Moreover, Mr Butler pointed out: “To date the actions threatened by ports are to add their own charges – not ban charges – in order to incentivise the movement of certain containers. These proposals underscore the importance of D&D charges as a tool to keep cargo moving.  The unworkable suggestions for blanket waivers would be a recipe for gridlock in America’s ports.”

Mr Butler did not address the issue of compensation for shippers and forwarders forced into involuntary storage of containers.