Date: 27.06.2024

New US demurrage and detention regulations in force

The Federal Maritime Commission (FMC) final rule on demurrage and detention billing requirements came into force on the 28th May, except for two provisions that are delayed.

The rule applies to ocean common carriers trading to or from the US, including vessel-operating common carriers (VOCCs) and non-vessel-operating common carriers (NVOCCs), and to marine terminal operators (MTOs).

The rule mandates that common carriers and MTOs include specific minimum information on demurrage and detention invoices, with set timeframes for issuing invoices, disputing charges, and resolving disputes.

Financial Impact
The FMC reports that between 2020 and 2022, nine of the largest carriers serving US liner trades charged a total of approximately USD 9 billion in demurrage and detention fees and collected roughly USD 7 billion.

Demurrage and detention refer to charges assessed by ocean carriers and terminals for the use of shipping containers and marine terminal space, in addition to agreed freight charges.

During pandemic-related supply chain delays, many cargo shippers were surprised by large bills, leading to numerous complaints to the FMC.

Final rule
The final rule follows a notice of proposed rule-making published in October 2022, and incorporates changes based on feedback from shipping industry stakeholders. The FMC has been considering these rules since at least 2021, when its Fact Finding Investigation No. 29 recommended industry input on minimum requirements for demurrage and detention billing.

The US Congress addressed this topic in the Ocean Shipping Reform Act of 2022 (OSRA 2022), which listed the minimum information that common carriers must include in a demurrage or detention invoice. OSRA 2022 authorised the FMC to revise these requirements and to define practices for assessing charges. The final rule announced on the 26th February 2024, implements these provisions.

New Regulation Details
The new regulation will appear in the Code of Federal Regulations at 46 CFR Part 541—Demurrage and Detention. For now, it is published in the Federal Register at 89 Fed. Reg. 14362-14363.

Compliance Highlights
Applies to invoices issued by VOCCs, MTOs, or NVOCCs for demurrage or detention charges, excluding the billing relationship between MTOs and VOCCs.

If an invoice fails to include all required information, the billed party does not have to pay it.

The detailed information that must be included in any invoice, such as identifying details, timing, rate, dispute procedures, and certifications, will be specified at a future date.

Invoices must be issued within 30 days of the last incurred charge; otherwise, the billed party is not required to pay.

NVOCCs receiving invoices from VOCCs or MTOs must issue their invoices within 30 days. 

The billed party has 30 days to contest charges, and the billing party must attempt to resolve disputes within 30 days.

The primary purpose of the new regulation is transparency, allowing billed parties to understand and verify the accuracy of demurrage or detention invoices and the origins of the charges.

Detention and demurrage (D&D) cases handled by the Federal Maritime Commission (FMC) in the United States have trebled since the pandemic and are set to reach historical highs by the end of the year.

This briefing is not legal advice and does not address any specific situation. Should you have any questions about this topic or FMC regulations in general, please EMAIL our Chief Commercial Officer, Andy Smith.