Interpretive Rule on Demurrage and Detention Under the Shipping Act

Federal RegisterMay 18, 2020

Ask Donna

What actually matters in this document.

Text

FEDERAL MARITIME COMMISSION

46 CFR Part 545

[Docket No. 19-05]

RIN 3072-AC76

Interpretive Rule on Demurrage and Detention Under the Shipping Act

AGENCY:

Federal Maritime Commission.

ACTION:

Final rule.

SUMMARY:

The Federal Maritime Commission is clarifying its interpretation of the Shipping Act prohibition against failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property with respect to demurrage and detention. Specifically, the Commission is providing guidance as to what it may consider in assessing whether a demurrage or detention practice is unjust or unreasonable.

DATES:

This final rule is effective May 18, 2020.

FOR FURTHER INFORMATION CONTACT:

Rachel E. Dickon, Secretary; Phone: (202) 523-5725; Email:

secretary@fmc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

On September 17, 2019, the Commission published proposed guidance, in the form of an interpretive rule, about factors it may consider when assessing the reasonableness of demurrage and detention practices and regulations under 46 U.S.C. 41102(c)

and 46 CFR 545.4(d).

The rule followed years of complaints from U.S. importers, exporters, transportation intermediaries, and drayage truckers that ocean carrier and marine terminal operator demurrage and detention practices unfairly penalized shippers, intermediaries, and truckers for circumstances outside their control.

These complaints led the Commission to open a Fact Finding Investigation that substantiated many of these concerns. Based on the investigation and previous experience with demurrage and detention issues, the Commission developed guidance and sought comment in a Notice of Proposed Rulemaking (NPRM).

The interpretive rule was intended to reflect three general principles:

Section 41102(c) represents the recodification of section 10(d)(1) of the Shipping Act of 1984. Some authorities cited herein refer to section 41102(c) while others refer to section 10(d)(1). For ease of reading, we will generally refer to section 41102(c) in analyzing these authorities.

Notice of Proposed Rulemaking: Interpretive Rule on Demurrage and Detention Under the Shipping Act, 84 FR 48850 (Sept. 17, 2019).

The term “ocean carrier” in this document refers to ocean common carriers subject to 46 U.S.C. 41102(c).

See

46 U.S.C. 40102(18). Although the rule focuses on the practices of ocean carriers,

i.e.,

vessel-operating common carriers, and marine terminal operators as defined in the Shipping Act, section 41102(c) also applies to ocean transportation intermediaries, and some entities, specifically, non-vessel operating common carriers, are both “common carriers” and “ocean transportation intermediaries.” 46 U.S.C. 40102(17), (20).

84 FR at 48850-56.

1. Importers, exporters, intermediaries, and truckers should not be penalized by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals because under those circumstances the charges cannot serve their incentive function.

2. Importers should be notified when their cargo is actually available for retrieval.

3. Demurrage and detention policies should be accessible, clear, and, to the extent possible, use consistent terminology.

See

84 FR at 48851-53;

Fact Finding Investigation No. 28 Final Report

at 32 ((Dec. 3, 2018) (Final Report),

https://www2.fmc.gov/readingroom/docs/FF%20No.%2028/FF-28_FR.pdf.

The NPRM attempted to provide guidance on these principles while making sure that the proposed interpretive rule was flexible enough to account for the variety of marine terminal operations nationwide and to allow for innovative commercial solutions to commercial problems.

Consequently, instead of prescribing practices that ocean carriers and marine terminal operators must adopt or avoid, the Commission's proposed rule was a non-exclusive list of factors that the Commission may consider when assessing the reasonableness of demurrage and detention practices under 46 U.S.C. 41102(c) and 46 CFR 545.4(d). Each section 41102(c) case would continue to be decided on its particular facts, and the rule would not foreclose parties from raising, or the Commission from considering, factors beyond those listed in the rule.

The Commission received just over one hundred comments to the NPRM, the vast majority of which supported the Commission's rule. In particular, American importers, exporters, intermediaries, and truckers urged that the Commission adopt it, and, in many instances, implored the Commission to do more. Ocean carriers and their marine terminal operator partners opposed the proposed guidance on legal and policy grounds.

Having considered the comments, the Commission adopts the rule as set forth in the NPRM, with a few minor changes. In particular, the Commission is revising the regulatory text to: (1) Adopt a policy regarding demurrage and detention practices and government inspections; and (2) to make clear that the rule does not preclude the Commission from considering additional factors outside those specifically listed.

Importantly, the rule is not intended to, and cannot, solve every demurrage and detention problem or quell all disputes. Rather, it reflects the Commission's finding that all segments of the industry will benefit from advance notice of how the Commission will approach the “reasonableness” inquiry under section 41102(c). The Commission continues to believe that such guidance will promote fluidity in the U.S. freight delivery system by ensuring that demurrage and detention serve their purpose of incentivizing cargo and equipment velocity, and that the interpretive rule will also mitigate confusion, reduce and streamline disputes, and enhance competition and innovation in business operations and policies.

The Commission is also making minor changes in the final rule, described in more detail below. The Commission has also made technical formatting changes to the paragraph levels in the final regulatory text.

II. NPRM and Summary of Comments

A. Background

Although the rule is derived from Commission's Fact Finding Investigation No. 28, that investigation itself was just the Commission's latest attempt to reconcile shipper and trucker complaints about ocean carrier and marine terminal operator demurrage and detention practices with the latter groups' insistence that the transportation system was working well and that Commission action was unnecessary.

The Commission's recent focus on demurrage and detention began in 2014, when the Commission hosted four regional port forums regarding congestion in the international ocean supply system.

These forums were catalyzed in part by severe winter weather and the expiration of the labor agreement covering most West Coast port workers. Although demurrage and detention were not the focus of the forums, shipper and trucker discontent with free time, demurrage, and detention practices was “palpable.”

See

Fed. Mar. Comm'n, 2014 Port Forums,

https://www.fmc.gov/about-the-fmc/2014-public-port-forums/;

Fed. Mar. Comm'n,

Report, Rules, Rates, and Practices Relating to Detention, Demurrage, and Free Time for Containerized Imports and Exports Moving Through Selected United States Ports

at 3 (April 3, 2015) (FMC Demurrage Report),

https://www.fmc.gov/wp-content/uploads/2019/04/reportdemurrage.pdf.

Fed. Mar. Comm'n,

Report, U.S. Container Port Congestion & Related International Supply Chain Issues: Causes, Consequences & Challenges

at 75 (July 2015) (FMC Congestion Report),

https://www.fmc.gov/wp-content/uploads/2019/04/PortForumReport_FINALwebAll.pdf.

In response, Commission staff issued a report, subsequently published by the Commission in 2015, that compiled shipper concerns about demurrage and detention, examined potential private-sector approaches to addressing those concerns, and surveyed possible ways the Commission could serve as a catalyst for those efforts.

Among other things, the report noted that: (1) It appeared that ocean carriers, rather than marine terminal operators, generally control demurrage and detention practices; and (2) there was little uniformity in demurrage and detention terminology or the circumstances under which ocean carriers would waive, refund, or otherwise mitigate demurrage and detention, making comparisons across the industry difficult.

The report also noted “shippers' perceptions that demurrage charges are not serving to speed the movement of cargo, the purpose for which those charges had originally been intended.”

FMC Demurrage Report at 1.

FMC Demurrage Report at 2,4, 32.

FMC Demurrage Report at 44.

Aggrieved shippers, intermediaries, and truckers took action in 2016 by petitioning the Commission to adopt a rule specifying certain circumstances under which it would be unreasonable for ocean carriers or marine terminal operators to collect demurrage or detention.

The petitioners were chiefly concerned that although demurrage and detention are intended to incentivize efficient cargo retrieval and container return, “these charges did not abate consistently even though shippers, consignees, and drayage providers had no control over the events that cause[d] the ports to be inaccessible and prevented them from retrieving their cargo or returning equipment.”

Petitioners argued that not only were current ocean carrier and marine terminal demurrage and detention practices unjust and unreasonable, but permitting ocean carriers and marine terminal operators to levy these charges even when cargo and equipment could not be retrieved or returned weakened any incentive for them to address port congestion and their own operational inefficiencies.

The Commission received numerous comments on the petition and held two days of public hearings.

Coalition for Fair Port Practices Petition for Rulemaking, FMC No. P4-16, Ex. A (Dec. 7, 2016) (Pet. P4-16). Petitioners' rule would “essentially revive rules that the Commission had in place for the port of New York for over 40 years.”

Id.

at 32.

Pet. P4-16 at 3.

Pet. P4-16 at 4-5 (“But the incentive placed upon ocean common carriers and marine terminal operators to address port congestion is weakened if they can levy demurrage, detention, and per diem charges against parties who have no influence over the operations and conditions that prevent shippers, consignees, and drayage providers from promptly picking up cargo and returning equipment.”).

In light of the petition, comments, and testimony, on March 5, 2018, the Commission launched a non-adjudicatory fact finding investigation into “current conditions and practices of vessel operating common carriers and marine terminal operators, and U.S. demurrage, detention, and per diem charges.”

In so doing, the Commission acknowledged the petitioners' concerns, highlighted the nationwide scope of the Commission's jurisdiction and the variety of demurrage and detention practices across the country, and recognized that

“[t]he international ocean liner trade has changed dramatically over the last fifty years, driven in large part by the advent of containerization.”

The Commission named Commissioner Rebecca F. Dye the Fact Finding Officer and charged her with developing a record on five subjects related to demurrage and detention: (a) Comparative commercial conditions and practices in the United States vis-à-vis other maritime nations; (b) tender of cargo; (c) billing practices; (d) practices regarding delays caused by intervening events; and (e) dispute resolution practices.

The Commission stated it would use the resulting record and Fact Finding Officer's recommendation to determine its policies with respect to demurrage and detention.

Conditions and Practices Related to Detention, Demurrage, and Free Time in Int'l Oceanborne Commerce,

1 F.M.C.2d 1 (FMC 2018) (Order of Investigation),

https://www2.fmc.gov/readingroom/docs/FF%20No.%2028/ff-28_ord2.pdf/.

Id.

at 2.

Id.

at 2-3.

Id.

at 2.

The Fact Finding Investigation lasted 17 months and involved written discovery, field interviews, and group discussions with industry leaders.

The investigation revealed a situation marked by: (1) Increasing demurrage and detention charges even after controlling for weather and labor events; (2) complexity; and (3) a lack of clarity and consistency regarding demurrage and detention practices, policies, and terminology.

On December 3, 2018, the Fact Finding Officer found that:

In the first phase of the investigation, the Fact Finding Officer (FFO) obtained information and documents from twenty-three ocean carriers and forty-four marine terminal operators and operating ports, as well as importers, exporters, truckers, and intermediaries. Final Report at 7-8. In the investigation's second phase, the FFO met in-person and telephonically with representatives from a cross section of the industry, including over twenty-five ports and marine terminal operators.

Id.

at 11. In the third phase, the FFO met with stakeholders in groups to discuss the feasibility of implementing some of the recommendations from the first two investigatory phases. Letter from Rebecca F. Dye, Commissioner, to Michael A. Khouri, Chairman, Daniel B. Maffei, Commissioner, Louis E. Sola, Commissioner, Federal Maritime Commission (Aug. 27, 2019) (FF28 Letter).

Fact Finding Investigation No. 28 Interim Report

at 5-14 (Sept. 4, 2018) (Interim Report),

https://www2.fmc.gov/readingroom/docs/FF%20No.%2028/FF28_int_rpt2.pdf/;

Final Report at 25, 29-30.

• Demurrage and detention are valuable charges when applied in ways that incentivize cargo interests to move cargo promptly from ports and marine terminals;

• All international supply chain actors could benefit from transparent, consistent, and reasonable demurrage and detention practices, which would improve throughput velocity at U.S. ports, allow for more efficient use of business assets, and result in administrative savings; and

• Focusing port and marine terminal operations on notice of actual cargo availability would achieve the goals of demurrage and detention practices and improve the performance of the international commercial supply chain.

Final Report at 32.

The Fact Finding Officer further found that the U.S. international ocean freight delivery system, and American economy, would benefit from:

Transparent, standardized language for demurrage and detention practices;

Clear, simplified, and accessible demurrage and detention billing practices and dispute resolution processes;

Explicit guidance regarding the types of evidence relevant to resolving demurrage and detention disputes;

Consistent notice to cargo interests of container availability; and

An FMC Shipper Advisory Board.

Final Report at 32.

The Fact Finding Officer ultimately recommended that the Commission: (a) Implement the guidance from the investigation's Final Report in an interpretive rule; (b) establish a Shipper Advisory Board; and (c) continue to support the FFO's work with stakeholders in Memphis.

As to the first recommendation, the Fact Finding Officer emphasized the “longstanding principle that practices imposed by tariffs, which are implied contracts by law, must be tailored to meet their intended purpose.”

Accordingly, the Fact Finding Officer explained, “when incentives such as demurrage and detention no longer function because shippers are prevented from picking up cargo or returning containers within time allotted,” absent extenuating circumstances, “charges should be suspended.”

The Fact Finding Officer also recommended that the Commission make clear in its proposed guidance that it may consider other factors in the “reasonableness inquiry” under section 41102(c), including the “existence, accessibility, and transparency of demurrage and detention policies, including dispute resolution policies (and related concepts such as clear bills and evidence guidelines), and clarified language.”

FF28 Letter at 1.

FF28 letter at 2.

FF28 Letter at 2.

B. Notice of Proposed Rulemaking and Comments

The Commission adopted the Fact Finding Officer's recommendation on September 6, 2019, and on September 13, 2019, issued its proposed guidance in an NPRM.

The proposed rule took the form of a non-exclusive list of factors that the Commission may consider when assessing the reasonableness of demurrage and detention regulations and practices under 46 U.S.C. 41102(c).

Consistent with Commission caselaw on section 41102(c), the chief consideration was whether ocean carrier and marine terminal operator practices are tailored to meet their intended purposes.

In the case of demurrage and detention, the rule stated, this means considering the extent to which demurrage and detention serve their purposes as financial incentives to promote freight fluidity.

The rule also set forth illustrations of how the Commission might apply this principle, and additional considerations the Commission might weigh, in various contexts,

e.g.,

empty container return.

The Commission discussed government inspections in the NPRM but deferred issuing guidance with respect to that issue until it received industry comment.

See

Fed. Mar. Comm'n,

Commission Approves Dye's Final Recommendations on Detention and Demurrage

(Sept. 6, 2019),

https://www.fmc.gov/commission-approves-dyes-final-recommendations-on-detention-and-demurrage/;

Fed. Mar. Comm'n,

Proposed Interpretive Rule on Demurrage and Detention Issued

(Sept. 13, 2019),

https://www.fmc.gov/proposed-interpretive-rule-on-demurrage-and-detention-issued/.

84 FR at 48855-48856.

84 FR at 48852.

84 FR at 48855.

84 FR at 48855-48856.

The industry responded to the NPRM with over one hundred comments.

Most commenters supported the proposed guidance.

This support came primarily from importers, exporters, transportation intermediaries, and truckers, large and small, and their trade associations, from across the United States. To the extent their comments departed from the rule, it was to ask the Commission to do more: To be more prescriptive and require ocean carriers to take certain actions and refrain from others, to apply the proposed guidance to more situations and contexts than described expressly in the NPRM, and to consider more

circumstances as justifying mitigation of demurrage and detention.

In promulgating this final rule and as discussed below, the Commission has considered all comments filed on or before the comment deadline of October 31, 2019, as well as all comments filed between November 1, 2019 and March 31, 2020. Although we received additional comments in April 2020, it was not possible to consider these comments given the drafting schedule for the final rule.

Approximately 60 commenters expressly supported the proposed guidance, and another 20 commenters supported the proposed guidance implicitly or in part.

In contrast, ocean carriers, marine terminal operators, chassis lessors, and cooperative working agreements of ocean carriers and marine terminal operators

opposed the rule. Also opposing the rule were trade associations such as the World Shipping Council (WSC), a trade group representing the interests of approximately 90 percent of the global liner vessel capacity, whose members include companies such as China COSCO Shipping Corporation, Mediterranean Shipping Company, and A.P. Møller-Maersk.

They argued that the Commission lacks the authority to issue the rule, and that the rule is unnecessary, costly, burdensome, and unfair to ocean carriers and marine terminal operators.

The Ocean Carrier Equipment Management Association (OCEMA) (FMC Agreement No. 011284), the Port of New York and New Jersey Sustainable Services Agreement (PONYNJSSA) (FMC Agreement No. 201175), and the West Coast MTO Agreement (WCMTOA) (FMC Agreement No. 201143) are cooperative working agreements filed with the Commission under the Shipping Act.

http://www.worldshipping.org/about-the-council/member-corporations.

III. Discussion of Particular Issues

A. General Legal Challenges to Rule

Ocean carrier and marine terminal operators raise a number of legal objections to the rule, many of which are based on misinterpretations of the guidance.

WSC describes the rule as “prescrib[ing] sweeping new standards that would make ocean carriers financially responsible for circumstances beyond their control” and “impose significant regulatory costs on carriers in order to comply with those standards.”

Similarly, the National Association of Waterfront Employers (NAWE) contends that the rule “would require wholesale changes in the way ocean carriers and marine terminal operators do business.”

And the Pacific Merchant Shipping Association (PMSA) insists that the NPRM's “rigid standards of reasonableness” “seek[ ] to mandate a `perfect world.' ”

The Institute of International Container Lessors' (IICL) argument that “the FMC had no jurisdiction to permit the chassis management limited liability corporations that were formed by the ocean carriers to become parties to FMC agreements with resultant antitrust immunity” is beyond the scope of this rulemaking.

WSC at 2;

see also id.

at 4 (describing rule as a “blanket rule”).

NAWE at 8. NAWE represents marine terminal operators.

Id.

at 1.

PMSA at 1, 4. PMSA is an association of marine terminal operators and ocean carriers.

Id.

at 1.

These characterizations bear little resemblance to the proposed rule.

The rule consists of a

non-exclusive

list of

factors

for the Commission to consider when determining whether demurrage and detention practices are “just and reasonable” under 46 U.S.C. 41102(c).

And aside from the general incentive principle, which the proposed rule indicated the Commission

will

consider,

the particular applications of that principle and other factors listed are things the Commission

may

consider. The Commission also sought in the preamble of the NPRM to give a sense of how those factors might weigh in particular contexts

and gave some examples of the attributes of demurrage and detention practices that might, in the abstract, weigh favorably or unfavorably in the analysis.

WSC implicitly concedes that the rule does not set forth requirements by using the adverb “effectively” when portraying what it believes the guidance would do.

See

WSC at 10 (“The NPRM effectively prohibits . . . .”);

id.

at 11 (“the NPRM effectively requires . . .”);

cf.

(“This new interpretation of reasonableness would essentially require . . . .”).

84 FR at 48851, 48855-56;

see also

FF28 Letter at 2 (noting that interpretive rule includes factors that the Commission may consider as contributing to the reasonableness inquiry).

84 FR at 48855-56. As noted in the NPRM, the “incentive principle” is simply another way of stating the preexisting test for reasonableness under section 41102(c): Whether a regulation or practice is “tailored to meet its intended purpose.” Id. at 48852 (quoting

Distribution Servs. Ltd.

Trans-Pac. Freight Conference of Japan and Its Member Lines,

24 S.R.R. 714, 722 (FMC 1988)).

E.g.,

84 FR at 48852;

see also id.

48853 (“The more notice is calculated to apprise cargo interests that cargo is available for retrieval, the more this factor favors a finding of reasonableness.”);

id.

(“The more these factors align with the goal of moving cargo off terminal property, the less likely demurrage practices would be found unreasonable.”).

84 FR at 48852 (listing “[e]xamples of demurrage practices that are expressly linked to container availability and which the Commission would weigh positively in the reasonableness analysis”);

id.

at 48853 (“Imposing detention in situations of uncommunicated or untimely communicated changes in container return location also weighs on the side of unreasonableness, as might doing so when there have been uncommunicated or untimely communicated notice of terminal closures for empties.”);

id.

(“[D]emurrage practices that link the start of free time to notice that a container is available weigh in favor of reasonableness. . . . .”);

id.

at 48854 (listing attributes of dispute resolution policies that will weigh in favor of reasonableness).

The Commission emphasized that although the factors in the proposed rule would guide its analysis, “each section 41102(c) case would continue to be decided on the particular facts of the case.”

The application of the “incentive principle,” the Commission reiterated, would “vary depending on the facts of a given case.”

Moreover, the Commission specified that the illustrations of how the factors might apply in the NPRM were subject to “extenuating circumstances.”

In other words, the Commission would consider any additional or countervailing arguments or evidence raised by the parties in a particular case.

84 FR at 48851.

84 FR at 48852.

84 FR at 48855 (“Absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.”);

id.

at 48853 (framing guidance as “[a]bsent extenuating circumstances”).

It appears from ocean carrier and marine terminal operator comments, however, that some may have misunderstood the nature of the proposed rule. Consequently, the final rule includes a new paragraph confirming that nothing in the rule precludes the Commission from considering other factors, arguments, and evidence in addition to the ones specified.

1. APA Considerations

Turning to the ocean carriers and marine terminal operators' specific legal objections, these commenters first argue that despite the Commission characterizing the proposed rule as guidance and interpretive, it is actually a legislative rule subject to all the Administrative Procedure Act's (APA) rulemaking requirements.

Because the Commission did not comply with these requirements, they argue, the rule violates the APA.

WSC at 6.

The APA's notice-and-comment requirements apply to legislative rules, not “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.”

A legislative rule is “[a]n agency action that purports to impose legally binding obligations or prohibitions on regulated parties—and that would be the basis for an enforcement action for violations of those obligations or requirements.”

Interpretive rules and policy statements, in contrast, are explanatory in nature; they do not impose new obligations.

The key consideration is whether the rule has “legal effect,” which courts assess by asking:

5 U.S.C. 553(b).

Nat'l Mining Ass'n

McCarthy,

758 F.3d 243, 251 (D.C. Cir. 2014).

Id.

at 252. Although the Commission refers to its guidance as an interpretive rule, whether it is an “interpretive rule” or “general statement of policy” within the meaning of the APA is not relevant to WSC's argument that the rule is legislative.

(1) Whether in the absence of the rule there would not be an adequate legislative basis for enforcement action or other agency action to confer benefits or ensure the performance of

duties, (2) whether the agency has published the rule in the Code of Federal Regulations, (3) whether the agency has explicitly invoked its general legislative authority, or (4) whether the rule effectively amends a prior legislative rule. If the answer to any of these questions is affirmative, we have a legislative, not an interpretive rule.

Am. Mining Cong.

Mine Safety & Health Admin.,

995 F.2d 1106, 1112 (D.C. Cir. 1993).

None of the factors support treating the Commission's non-exclusive list of considerations as a legislative rule. WSC argues that the rule meets the first prong because it “without question proposes new, enforceable obligations on carriers with respect to detention practices.”

According to WSC, the rule and NPRM would require substantial changes in how carriers operate, and “the proposed rule would create new grounds for reparations actions.”

WSC at 4.

WSC at 5.

The rule does not, however, have “legal effect” within the meaning of the

American Mining

test. The rule could not be the basis for a Commission enforcement action or a private party reparation action. There are no “requirements” or mandates or dictates in the rule for an ocean carrier to violate. In other words, one cannot bring an action based on the rule alone—the basis for any legal action would be section 41102(c). Similarly, the rule does not subject regulated entities to any new legal authority. They were already subject to section 41102(c)'s requirement that their practices be “just and reasonable.” Further, the NPRM makes clear that each demurrage and detention case under section 41102(c) would be decided on its own facts, and the Commission is adding a provision to the final rule to expressly reflect that the Commission may consider additional factors, arguments, and evidence presented in individual cases. A set of factors issued as guidance does not constitute a legislative rule.

Cf. Inv. Co. Inst.

CFTC,

720 F.3d 370, 381 (D.C. Cir. 2013) (noting that guidance in form of a seven-factor test was not subject to the APA's notice-and-comment provision).

Moreover, that the industry might rely on the guidance in the Commission's rule, and that ocean carriers and marine terminal operators might feel “pressure to voluntarily conform” does not make the rule legislative.

The Commission is issuing guidance in part to mitigate confusion about how the Commission may apply section 41102(c) with respect to demurrage and detention.

Providing advance notice “facilitates long range planning within the regulated industry, and allows the public a chance to contemplate an agency's views before those views are applied to particular factual circumstances.”

Commission guidance will not only help ocean carriers and marine terminal operators avoid section 41102(c) liability, but it will also raise awareness of shipper, intermediary, and trucker obligations. The “mere fact” that an interpretive rule could have a “substantial impact does not transform it into a legislative rule.”

Sec. Indus. & Fin. Mkts. Ass'n

CFTC,

67 F. Supp. 3d 373, 422 (D.D.C. 2014). In determining that the agency issuance was a policy statement as opposed to a legislative rule, the court reasoned that “[p]ractical consequences, such as the threat of having to defend itself in an administrative hearing should the agency actually decide to pursue enforcement pursuant to the policies within the Cross-Border Action are insufficient to bring an agency's conduct under [the Court's] purview.”

Id.

(internal quotation marks omitted).

84 FR at 48851.

Sec. Indus.,

67 F. Supp. 3d at 422 (internal quotation marks and citations omitted).

Cent. Texas Tel. Coop.

FCC,

402 F.3d 205, 214 (D.C. Cir. 2005).

Additionally, the rule is not legislative because the Commission published the NPRM in the

Federal Register

and because the final rule will be codified in the Code of Federal Regulations (CFR). While publication in the CFR is a factor courts look at, it is based on a presumption,

and publication or its absence is nothing more than a “snippet of evidence of agency intent”; it is not determinative.

The Commission customarily publishes non-legislative rules in the CFR in a part titled “Interpretations and Statements of Policy.”

For instance, the Commission published an interpretive rule regarding section 41102(c) in the CFR as recently as December 2018.

Here, the Commission reasoned that publication in the

Federal Register

and CFR was not only consistent with its normal practice, but would promote public notice of the guidance.

Am. Mining Cong.,

995 F.2d at 1109 (“Second, an agency presumably intends a rule to be legislative if it has the rule published in the Code of Federal Regulations . . . .).

Health Ins. Ass'n of Am.

Shalala,

23 F.3d 412, 423 (D.C. Cir. 1994).

46 CFR part 545.

Final Rule: Interpretive Rule, Shipping Act of 1984, 83 FR 64478 (Dec. 17, 2018).

Cf. Am. Mining Cong.,

995 F.2d at 1112 (“The protection that Congress sought to secure by requiring notice and comment for legislative rules is not advanced by reading the exemption for `interpretive rule' so narrowly as to drive agencies into pure ad hocery—an ad hocery, moreover, that affords less notice, or less convenient notice, to affected parties.”).

The Commission's guidance also does not qualify as a legislative rule under the final two

American Mining

criteria. The Commission did not invoke its general legislative authority to issue its interpretive rule. The Commission's authority to issue interpretive rules and policy statements derives from the APA.

The only reference to the Commission's general rulemaking authority under 46 U.S.C. 305 in the NPRM copies the preexisting authority citation for part 545 of the Commission's regulations.

And the Commission's rule does not amend any prior legislative rule.

See Splane

W.,

216 F.3d 1058, 1066 (Fed. Cir. 2000) (“[A]n agency's statutory authority to issue interpretive rules is implicit in sections 552(a)(1) and 553 of title 5.”). Because the source of the Commission's authority to issue guidance is the APA and 46 U.S.C. 41102(c), the National Federation of Independent Business's argument that 46 U.S.C. 305 does not grant the Commission power to prescribe regulations to implement section 41102(c) is unpersuasive. Nat'l Fed. Ind. Business at 2-3. Moreover, as described in further detail in Part III.A.2,

infra,

the Commission has the authority to prescribe regulations under section 41102(c). The commenter also correctly points out that the Commission could achieve results similar to the rule via adjudication.

Id.

at 3. The choice whether to proceed via adjudication or rulemaking, however, “lies primarily in the informed discretion of the administrative agency.”

SEC

Chenery Corp.,

332 U.S. 194, 203 (1947).

84 FR at 48855.

Because the Commission's guidance is not a legislative rule, APA requirements applicable solely to legislative rules are inapplicable here. That said, commenters' APA-related arguments are unpersuasive. The primary distinction under the APA between legislative rules on one hand and interpretive rules and statements of policy on the other is that the former require notice and comment while the latter do not.

While not required to engage in notice-and-comment rulemaking, the Commission nonetheless provided notice and requested comment on the proposed rule in this case, and ocean carriers, marine terminal operators, importers, exporters, intermediaries, and truckers also had the opportunity to weigh in on possible Commission action during the Fact Finding No. 28 investigation.

5 U.S.C. 553.

WSC argues that the Commission failed in the NPRM to discuss the record in detail or link the evidentiary record to the “reasonableness” standard under section 41102(c).

But the principles in the interpretive rule flow directly from information the Commission received during the Fact Finding No. 28 investigation and described in the Fact Finding reports, which the Commission cited in the NPRM. The Commission focused on the “incentive principle” because section 41102(c) requires that regulations and practices be tailored to meet their intended purpose,

and because fact finding participants repeatedly told the Commission that demurrage and detention were incentive

charges.

The Commission's guidance emphasizes cargo availability and notice thereof because ocean carrier and marine terminal operators generally agreed that their carrier obligations were related to the concepts of reasonable notice of cargo availability and reasonable opportunity to retrieve cargo, and because the “issue most frequently discussed during Phase Two was notice of container availability and the relationship between container availability and demurrage free time.

The Commission's guidance focused on the existence, clarity, content, and accessibility of demurrage and detention dispute resolution and billing practices, and demurrage and detention terminology, because the Commission's review of ocean carrier and marine terminal operator records (some of which are public,

e.g.,

tariffs) and discovery responses showed that the practices were rife with complexity, inconsistency, lack of transparency, and variability.

WSC at 6-8.

Distribution Servs.,

24 S.R.R. at 722.

Final Report at 12 (“Importantly, almost every Phase Two respondent characterized demurrage as an incentive, to get containers out of the terminal.”); Interim Report at 2-3.

Interim Report at 9; Final Report at 18.

Interim Report at 5-6, 10-11, 12, 14;

see also

Final Report at 11-18.

WSC's objection appears to be that the Commission did not cite or discuss the specific documents it reviewed during the Fact Finding Investigation. The Commission does not, however, typically make public its investigatory records in such proceedings.

Additionally, most ocean carriers and marine terminal operators requested confidentiality for the responses and documents they submitted to the Commission during Phase One of the investigation. The Commission assumes that WSC is not suggesting that the Commission should ignore those requests for confidentiality.

See, e.g.,

Order of Investigation (authorizing the fact finding officer to hold public or nonpublic sessions); 46 CFR 502.291.

Several ocean carrier and marine terminal operator commenters also argue that the Commission's rule would depart from Commission precedent without adequate explanation.

The rule, however, with a few exceptions explained in more detail below, is consistent with the Commission's approach to applying section 41102(c) and its predecessors (

i.e.,

section 17 of the Shipping Act of 1916). Further, the commenters provide no support for their suggestion that the Commission cannot change agency precedent via an interpretive rule.

Commission precedent is not “binding” on the Commission—the Commission can change course in a subsequent case.

NAWE has not explained why Commission could not also change course via an interpretive rule,

especially when the Commission recently did so in a 2018 interpretive rule that ocean carriers and MTOs supported.

Am. Ass'n of Port Authorities at 2; NAWE at 5-6; OCEMA at 5; PMSA at 8-9; WCMTOA at 7, 8, 12; WSC at 8, 13.

NAWE at 6 n.2 (asserting that “the NPRM raises additional legal issues in that it seeks to change binding precedent through a non-binding, interpretative rule”).

See Gen. Am. Transp. Corp.

ICC,

872 F.2d 1048, 1060 (D.C. Cir. 1989) (“It seems to us presumptively reasonable that a controlling principle announced in one adjudication may be modified in a subsequent adjudication . . . .”);

id.

(“As we have said before, `adjudicatory decisions do not harden into “rules” which cannot be altered or reversed except by rulemaking simply because they are longstanding.' ”) (quoting

Chisholm

FCC,

538 F.2d 349, 365 (D.C. Cir. 1976)).

Cf. Health Ins. Ass'n,

23 F.3d at 424-25 (noting that disincentivizing the issuance of interpretive rules would lead to the “ironic result” that “the entities affected by the agency's interpretations would be left more in the dark than before, for clues to the agency's reading of the relevant texts would emerge only on an ad hoc basis”).

See

Final Rule: Interpretive Rule, Shipping Act of 1984, 83 FR 64478, 64478 (Dec. 17, 2018); NPRM: Interpretive Rule, Shipping Act of 1984, 83 FR 45367, 45367-68 (Sept. 7, 2018).

Many of these same commenters further contend that the interpretive rule would shift the burden of proof in section 41102(c) cases in violation of the APA.

But nothing in the rule changes the burden of proof. Under the APA and Commission regulations, “the proponent of a rule or order has the burden of proof.”

This burden of persuasion does not shift, even if the burden of producing evidence does in some cases.

In a section 41102(c) case, the complainant has the burden of persuading the Commission that a practice or regulation is unjust or unreasonable, and if that burden is met, the burden of refuting that conclusion is on the respondent.

In all instances, the complainant bears the ultimate burden of proving unreasonableness.

NAWE at 6 (“Here, the NPRM would have the effect of shifting the burden of proof from a complaining shipper, receiver or motor carrier to the marine terminal operator, which would be required to overcome the presumption of unreasonableness effectively established by the NPRM and demonstrate the reasonableness of assessing the charge in that situation.”); Am. Ass'n of Port Authorities at 2; OCEMA at 2-3; WCMTOA at 5 n.2.

5 U.S.C. 556(d); 46 CFR 502.203.

Maher Terminals, LLC

Port Auth. of N.Y. & N.J.,

FMC Case No. 08-03, 2014 FMC LEXIS 35, at *41-*43 (FMC 2014),

remanded on other grounds, Maher Terminals, LLC

Fed. Mar. Comm'n,

816 F.3d 888 (D.C. Cir. 2016).

Maher Terminals,

2014 FMC LEXIS at *35 (citing

River Parishes Co.

Ormet Primary Aluminum Corp.,

28 S.R.R. 751, 765 (FMC 1999));

Exclusive Tug Arrangements in Port Canaveral, Fla.,

29 S.R.R. 1199, 1222 (ALJ 2003).

Id.

at *42.

The rule does not change that framework. A complainant would still have the burden of proving all the elements of a section 41102(c) claim under 46 CFR 545.4, including proving by a preponderance of the evidence that the demurrage or detention practice or regulation at issue is “unjust or unreasonable.” It is true that the rule might help a complainant prove that element by giving guidance about what sort of arguments and evidence the Commission is likely to find relevant. Setting forth factors that the Commission might consider in a case, however, does not shift the burden of proof.

Maher Terminals, LLC

Port Auth. of NY. & N.J.,

for instance, the Commission listed a number of factors it would consider in determining whether a respondent granted an unreasonable preference, and in so doing it did not change the burden of proof. FMC Case No. 08-03, 2016 FMC LEXIS 61 *9-*11 (FMC Oct. 26, 2016).

2. Statutory Authority

Another objection raised by commenters is that the Commission lacks authority under the Shipping Act to issue the interpretive rule.

Commenters point out that section 17 of the Shipping Act of 1916, the predecessor of section 41102(c), stated that not only must regulated entities establish, observe, and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing, or delivering of property, but also the Commission, upon finding that any such regulation or practice is unjust or unreasonable, may determine, prescribe, and order enforced a just and reasonable regulation or practice.

The Shipping Act of 1984, however, replaced this language with: “No common carrier, ocean freight forwarder, or marine terminal operator may fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”

According to commenters, by removing the second sentence of section 17 of the 1916 Act” from its 1984 equivalent, Congress “eliminated the Commission's

authority to determine, prescribe and order enforcement of a just and reasonable regulation or practice.”

NAWE at 3-4 (“Because the NPRM would have the effect of specifying those regulations and practices which are reasonable and those which are not, it is beyond the scope of the Commission's authority under the Shipping Act and would be unlawful.”); WSC at 10-11.

Shipping Act, 1916, Public Law 64-260, 17, 39 Stat. 728, 734-35 (1916).

Shipping Act of 1984, Public Law 98-237, 10(d)(1), 98 Stat. 67, 89 (1984). This is substantially similar to how the statute appears today. 46 U.S.C. 41102(c).

NAWE at 4.

This argument misses the mark, however, because the rule does not determine, prescribe, or order enforcement of a reasonable practice; that is, it does not prescribe specific practices that regulated entities must adopt.

The Commission avoided doing so because it did not want to inhibit stakeholders from developing new and better practices. Consequently, even if the differences between section 17 of the 1916 Act and section 41102(c) removed some Commission authority, the present rule is not implicated.

Put differently, the Commission is not saying “regulated entities must do X;” it is saying “here are factors the Commission may apply when determining whether Y practices are unreasonable.”

In addition, although the Commission has not elected to issue a legislative rule in this case, the Commission disagrees with the contention that it lacks the authority to issue rules prohibiting practices or regulations determined to be unjust or unreasonable. The Commission has broad general rulemaking authority under 46 U.S.C. 305, which provides that the Commission “may prescribe regulations to carry out its duties and powers.”

The Commission has relied on this authority and section 41102(c) to issue regulations prohibiting certain practices determined to be unjust and unreasonable,

and the D.C. Circuit has affirmed this authority.

This section represents a recodification of two similarly worded provisions, section 201(c) of the Merchant Marine Act of 1936, Public Law 74-835, and section 17(a) of the Shipping Act of 1984.

See

H.R. Rep. No. 109-170, at 28 (2005)

See, e.g.,

NPRM: Filing of Tariffs by Marine Terminal Operators Exculpatory Provisions, 51 FR 15655 (Apr. 25, 1986) (“Tariff provisions that exculpate or otherwise relieve marine terminal operators from liability for their own negligence, or that would impose upon others the obligation to indemnify or save harmless the terminals from liability for their own negligence, are, as a rule, unjust and unreasonable and, therefore, contrary to the provisions of section 17 of the Shipping Act, 1916 and section 10(d)(1) of the Shipping Act of 1984.”); NPRM: Exemption of Certain Marine Terminal Services Arrangements, 56 FR 22384, 22387-22388 (May 15, 1991) (concluding that the differences between section 17 of the 1916 Act and section 10(d)(1) of the 1984 Act did not preclude the Commission from requiring filing of marine terminal operator tariffs, and relying on section 10(d)(1) and section 17 of the 1984 Act as authority to continue those requirements);

see also

FMC Demurrage Report at 18 (“There are exceptions to the application of demurrage fees known sometimes as “stop the clock” provisions.”);

id.

at 33 (“Carriers may “stop the clock,” waive, reduce or compromise fees relating to congestion if they have the flexibility to do so under their tariff or service contract.”).

But see

Interim Report at 12 (“[S]everal produced tariffs that specifically state that free time is not automatically extended for events outside the terminal's control, including labor strikes or weather, and at least one said that in those circumstances free time would not be adjusted.”).

115

Univ. Cargo Mgmt., Inc.

Hyundai Merchant Marine Co.,

1996 FMC LEXIS 57, *21-22 (ALJ Dec. 11 1996) (“[T]he Commission long ago began to allow parties in cases involving disputes over the proper rating under filed tariffs to settle their disputes even though this meant that shippers ended up paying something less than what the filed rate otherwise required.”).

B. General Policy Comments to Rule

The commenters also raised several policy issues relating to the rule in general rather than specific sections. These comments fall into several general categories: (a) The desirability of

guidance, (b) the specificity of guidance, (c) the consequences of guidance, and (d) the Uniform Intermodal Interchange and Facilities Access Agreement.

1. Desirability of Guidance

The Commission issued the rule after a hearing on a petition and a Fact Finding Investigation. It did so after determining that guidance in the form of a non-exclusive list of factors will promote fluidity in the U.S. freight delivery system, mitigate confusion, reduce and streamline disputes, and enhance competition and innovation in business operations and policies. As noted by the petitioners in Docket No. P4-16, guidance will help regulated entities avoid incurring liability under section 41102(c) and will encourage shippers, intermediaries, and truckers to examine their practices as well.

116

Pet. P4-16 at 22-23.

A few commenters, however, assert that Commission guidance is not necessary because the current freight delivery system is working,

117

commercial solutions to demurrage and detention issues are adequate,

118

and complaints by shippers, intermediaries, and truckers are not subject to cross examination and could contain hyperbole.

119

117

E.g.,

Ports Am. at 4 (“There is no showing in the Commission's fact-finding or rationale expressed for the proposed rule that suggests this is a material problem in the industry. This is demonstrated conclusively by the virtually total absence of Commission complaint proceedings for many decades.”).

118

E.g.,

Ports Am. at 3 (“As the Commission found, when major disruptions occur, such as storms or labor disputes, the terminals work out waivers or other suitable accommodations in individual cases. Terminals are already highly disincentivized by the marketplace from having disputes with their customer vessel operators and their shippers.”); PONYNJSSA at 3 (“The PONYNJSSA has long made available at their own cost commercial solutions to provide enhanced cargo information and transparency.); PMSA at 4-5 (“[I]t appears from the Commission's report that the free market has voluntarily addressed the conditions raised in its NPRM.”).

119

IICL at 2 (“We note, however, that statements and contentions by interested parties are generally reflections of the problems they have had; they have not been subjected to cross-examination; they may be true or partially true; they may reflect a single occurrence or many; they may be legally admissible or inadmissible; they frequently contain hyperbole.”).

The majority of the commenters, however, advocate for the proposed rule's prompt adoption.

120

Although the freight delivery system works in the sense that cargo gets delivered, the notion that there are no problems is belied by the consistent complaints of shippers, intermediaries, and carriers.

121

In light of these complaints, the Commission cannot assume that the lack of Shipping Act proceedings about demurrage and detention means these complaints are illusory or hyperbolic.

122

There a number of reasons why a particular shipper, trucker, or intermediary might not file a formal complaint with the Commission, including relatively low amounts in dispute as compared to litigation costs, fear of retaliation from ocean carriers, or the

absence

of Commission guidance on section 41102(c).

123

120

E.g.,

Letter from 67 Organizations to Michael A. Khouri, Chairman, Fed. Mar. Comm'n (Mar. 16, 2020) (“urg[ing] the Commission to promptly adopt the rule as published which will assist the maritime industry in evaluating the fairness of these charges and resolving potential disputes”).

121

See

Part II,

supra.

122

Shippers, intermediary, and trucker comments are no more self-interested than comments from ocean carriers, marine terminal operators, or chassis providers.

123

Pet. P4-16 at 23 (“Ambiguity has a chilling effect on valid claims.”).

As for commercial solutions, to the extent that they adequately resolve demurrage and detention issues, then the Commission's guidance will arguably have little effect. Commenters correctly note that the Fact Finding Investigation revealed that most ocean carriers have policies for extending free time or mitigating demurrage and detention charges caused by circumstances outside the control of cargo interests or truckers.

124

But not all did, and a shipper's right under the Shipping Act to be free from unreasonable practices under section 41102(c) does not turn on the identity of the regulated entity at issue. Further, several ocean carriers noted that their policies give them the discretion to waive demurrage under certain circumstances.

125

But if application of demurrage in those circumstances would be unreasonable, a shipper, intermediary, or trucker should not have to rely on an ocean carrier or marine terminal operator's discretion for a remedy. In other words, while the Commission prefers commercial solutions to demurrage and detention problems, the Fact Finding record showed that commercial solutions are only adequate from the perspective of ocean carriers and marine terminal operators.

126

124

Interim Report at 12.

125

Interim Report at 12.

126

WCMTOA points out that in the FMC Congestion Report, the Commission's Bureau of Trade Analysis stated that at the FMC port forums, “[w]ith appropriate leadership and support, constant encouragement, and a willingness to cooperate, industry stakeholders' thoughtful insights and expressions of concern seemed to demonstrate that the intermodal industry itself is well-capable of accurately diagnosing the problems and crafting enduring solutions.” WCMTOA at 4 (quoting FMC Congestion Report at 7). While that may have been the case at the port forums in 2014, the record in Fact Finding No. 28 suggested that demurrage and detention collections have only increased since then, Interim Report at 7-8, and shipper complaints have not abated.

2. Specificity of Guidance

The second category of policy-related comments relate to the specificity of the rule. On one hand, some commenters argue that the rule is too broadly applicable and prescriptive and ignores the complexity of the transportation system.

127

According to these commenters, “[t]he NPRM's approach, which seeks to impose nationwide standards for all terminals and carriers, fails to reflect the nuances of the hundreds and thousands of different factual situations,” and “tries to mandate standards that may not be feasible or cost effective for many situations.”

128

The commenters also argue a “national standard such as the NPRM” is inconsistent with the Commission's statement that it would continue to consider the facts of each case.

129

127

E.g.,

IICL at 10 (noting that “while the FMC is well-intentioned,” “in IICL Providers' view the Interpretive Rule presents more problems than it attempts to resolve because the problems at issue exist at many levels and across multiple jurisdictions”); PMSA at 3 (“The NPRM is a broad-brush approach to a very complex subject.”).

128

PMSA at 3;

see also

WCMTOA at 5 (“The NPRM seeks to mandate the same practices nationwide, without regard to geography, terminal configuration (including operating ports vs. landlord ports), cargo volumes, and other local conditions.”).

129

WCMTOA at 5 n. 2 (“If each case depends on an analysis of the facts of each case, as has historically been the case under Section 10(d)(1) cases, it is unnecessary, and in fact counter-productive, to have a national standard such as in the NPRM.”); Nat'l Fed. of Indep. Business at 3; PMSA at (arguing that the NPRM erodes the “broad and fact-specific” standard of section 41102(c)”). WCMTOA also states that the rule, even if just guidance, might cause stakeholders to adjust their practices in light of the guidance to avoid regulatory risk. According to WCMTOA, this might mean that no cases are filed and the specific facts of cases are not reached. WCMTOA at 5 n.2. WCMTOA does not, however, explain why this would be a problem.

On the other hand, many commenters request that the Commission be more specific and prescriptive. WSC argues that Commission did not provide enough guidance on how the rule would apply in specific situations,

130

and takes issue with the Commission not stating, for instance, what the proper format, method, or timing of notice of cargo availability would be.

131

Likewise,

several shipper, intermediary, and trucker commenters want the Commission to do more—to declare certain practices unreasonable or to require various practices. For example, these commenters would have the rule:

130

WSC at 15-16.

131

WSC at 16;

see also id.

at 18-19 (asserting that references to “extenuating circumstances” in NPRM are so vague as to be useless in shedding any light on what particular circumstances would counter-balance those situations that the NPRM would deem likely unreasonable); NAWE at 13-14 (describing hypothetical questions that NPRM does not address); Ocean Network Express at 1-2 (listing hypotheticals); SSA Marine (asserting that because the list of factors is non-exclusive, “there could be

any number of circumstances brought to the FMC depending on what it views as `unreasonable' ”).

• Require that regulated entities extend free time when an ocean carrier requires an empty container to be returned to a location other than where it was retrieved;

132

See

Part III.G.,

infra.

Moreover, one commenter suggests that street turns should be cheaper than returning a container to the terminal. Transways Motor Express at 1.

• Specify what information ocean carriers or marine terminal operators must provide to shippers and their agents regarding cargo availability;

133

See

Part III.H,

infra.

• Mandate specific requirements for ocean carrier and marine terminal operator dispute resolution and billing processes, such as timeframes and internal appeals processes;

134

See

Part III.K and Part III.L,

infra.

• Prescribe reasonable free time periods;

135

E.g.,

Int'l Fed. of Freight Forwarders Ass'ns at 10 (“FIATA would appreciate guidance on fair and reasonable free periods that are in line with market developments of higher peaks.”)

cf.

John S. Connor Global Logistics at 3 (“Further to this understanding of availability, there must be a clear and consistent method for calculating Free Time” and “[a]ll parties (carriers, MTOs, rail operators) that provide Free Time should be utilizing the same method of calculation”); New Direx, Inc. (“[F]ree time would not count on days when the terminal or rail yards are not open.”).

• Define uniform demurrage and detention terminology;

136

John S. Connor Global Logistics at 6.

• Specify that all cargo on a bill of lading be available before demurrage accrues on any container;

137

CV Int'l, Inc. at 1; Shapiro at 1.

• Set caps on the levels of, or total amount of, demurrage or detention that may be charged.

138

E.g.

Int'l Fed. of Freight Forwarders Ass'ns at 7; Int'l Motor Freight at 2 (“Finally, the rates we are charged for per diem and demurrage need to be looked at. Every year, per diem charges increase, regardless of the economic climate, for the same container that sits out year after year.”); Nat'l Retail Sys. at 1; Thunderbolt Global Logistics, LLC at 2 (“We feel that ocean carriers use detention charges as a profit center. There should be a formula for detention charges that can be applied across the board by all carriers at all ports.”).

These comments do not justify withdrawing or substantially altering the rule. The Commission proposed general guidance in the form of factors because the operations of industry stakeholders are too varied nationwide, and the risk of inhibiting commercial innovation is too great, for the Commission to prescribe or prohibit specific practices, at least in this rulemaking.

139

Nor is issuing guidance inconsistent with case-by-case adjudication, especially when the Commission expressly states that it will continue to consider all arguments raised in an individual case.

140

139

WCMTOA points out that in the FMC Congestion Report, the Commission's Bureau of Trade Analysis stated that the “idea here is not to recommend or suggest `best practices' ” regarding congestion and that it would “be invidious for the Commission to declare `best practices.' ” WCMTOA at 6 (quoting FMC Congestion Report at 10). The Commission generally agrees with the idea that it should not be telling regulated entities what the “best practices” are. But the Commission is authorized and required to determine what practices are unreasonable, and it is thus appropriate for the Commission to provide guidance about what sorts of practices might or might not trend in that direction.

140

The suggestion that case-by-case adjudication means analyzing every case in a vacuum could result in inconsistent agency decisionmaking.

It was because the Commission was issuing guidance applicable to all regulated entities within its purview that the Commission declined to issue a legislative rule or the rule proposed by the petitioners in Docket No. P4-16.

141

It is also why the Commission's rule is not as granular as some commenters would prefer, even if many of the proposals suggested by shippers, truckers, and intermediaries appear to have merit.

141

That rule would have “essentially revive[d] rules that the Commission had in place for the port of New York for over 40 years.” Pet. P4-16 at 32. But those rules only applied to one port—the Commission's guidance here must be flexible enough to account for operations at all ports and marine terminals within the Commission's jurisdiction.

The Commission understands that there may be questions about how the rule would apply in practice. Regarding “extenuating circumstances” specifically,

142

the Commission used that phrase as a way of indicating that it would consider all arguments raised by the parties, including those involving considerations not listed in the rule. As to what these “extenuating circumstances” could be, the NPRM specified one: “An example of an extenuating circumstance is whether a cargo interest has complied with its customary responsibilities, especially regarding cargo retrieval (

e.g.,

making appointments, paying freight, submitting paperwork, retaining a trucker). If it has not, this could be factored into the analysis.”

143

Many of the arguments raised by ocean carriers and regulated entities about things such as cost, technical feasibility, and the conduct of shippers, intermediaries, and truckers are issues that could be raised as “extenuating circumstances” in a particular case.

144

142

WSC at 19.

143

84 FR at 48852. WCMTOA and PMSA read this incorrectly to mean that a shipper who was sloppy in its paperwork or did not pay its freight would get extra free time under the rule. WCMTOA at 12; PMSA at 6. The statement in the NPRM means the opposite: If a shipper does not pay its freight, or does not submit timely or correct paperwork, it would likely have difficulty showing that the application of demurrage or detention because of resulting delays was unreasonable.

144

WSC at 16 (discussing technical feasibility of practices); WCMTOA at 11-12.

The guidance was drafted with the complexity and variety of the U.S. freight delivery system in mind. Further refinement of the Commission's approach would be accomplished by adjudication. Comments by ocean carriers and marine terminal operators suggesting that the rule is fatally flawed because it does not address every fact pattern that could possibly arise set a standard that no Commission guidance could possibly meet. But, as the Commission noted at the outset, the inability of the Commission to solve every problem does not justify doing nothing.

145

For instance, SSA Marine Inc. points out that “[r]equiring that demurrage be waived when a terminal fails to provide appointments is not a panacea to solve congestion.” The Commission is not attempting, however, to provide a panacea; rather it is providing guidance in an effort to ensure that marine terminal operator and ocean carrier practices involving demurrage and detention are reasonable.

3. Consequences of Guidance

Ocean carrier and marine terminal operator commenters also contend that the rule would have a number of deleterious consequences. They argue that the rule is impracticable,

146

that it ignores the costly burden it would impose on ocean carriers and marine terminal operators and others,

147

that it limits contract flexibility and risk allocation.

148

Additionally, these commenters contend that the rule could lead to an “explosion of time-consuming and expensive litigation,”

149

increased container dwell time;

150

and chassis shortages.

151

146

NAWE at 12; OCEMA at 4; Ocean Network Express at 1-2; SSA Marine at 2; Ports Am. at 2-3; WCMTOA at 5, 10-11.

147

IICL at 3; NAWE at 8; OCEMA at 4; Ocean Network Express at 3; WSC at 12; WCMTOA at 5; Am. Ass'n Port Auth. at 2.

148

OCEMA at 3; Ports Am. at 2-3; WSC at 11, 12; Am. Ass'n Port Auth. at 2.

149

SSA Marine at 2; WCMTOA at 5 n.2 (asserting that rule “will encourage an explosion of litigation by shippers and truckers who do not want to pay demurrage or detention”);

see also

NAWE at 13.

150

Ocean Network Express at 2; WO at 1, 3

151

IICL at 3. This commenter argues that if a carrier waives or deviates from the provisions in its bill of lading, “it could theoretically” void its protection and indemnity insurance. This concern is on its face speculative and was not raised by ocean carrier commenters themselves.

Some of these comments, particularly those about the practicability and costliness of the rule, are based on

unwarranted assumptions about what the rule does. These arguments are belied by the text of the rule. For instance, commenters insist that the practical difficulties of starting demurrage free time based on cargo availability instead of vessel discharge of a container are insurmountable.

152

Even assuming that is true, the rule does not go so far as to require this change.

153

Statements in the NPRM that certain practices might weigh favorably in the analysis do not mandate their adoption, and the rule cannot reasonably be read as doing so.

154

The same goes for commenters' assumptions that the rule requires things like starting and stopping the free time clock each time a container becomes unavailable on a minute-by-minute basis

155

or waiving a full day of demurrage due to a container being unavailable for less than an entire day

156

or implementing new information technology systems

157

or creating new dispute resolution teams.

158

The rule, in its final form, makes clear that parties will have ample opportunity to argue the merits of any such practices should their absence be challenged as section 41102(c) violations. And, to reiterate, the standard under section 41102(c) is reasonableness, not exacting precision.

152

NAWE at 13; Ports Am. at 3; WSC at 15-16.

153

84 FR at 48855 (stating that the Commission may consider “the extent to which demurrage practices or regulations relate demurrage or free time to cargo availability”).

154

84 FR at 48852.

155

NAWE at 13; OCEMA at 4. A few commenters assert without citation that free time contemplates that there are “pockets within that time where units will be unavailable for various reasons.” Ocean Network Express at 1; OCEMA at 4. The Commission would make clear that the reasonableness of free time turns on the needs of a shipper or its agent.

Investigation of Free Time Practices—Port of San Diego,

9 F.M.C. 525, 539 (FMC 1966). Relatedly, a frequent complaint of ocean carriers and marine terminal operators is that shippers wait until the last free day to retrieve cargo and that the rule does not account for whether there might be other times within the free time that a shipper could have retrieved its cargo.

E.g.

WCMTOA at 11. Shippers and cargo interests are entitled to reasonable demurrage free time, and it is unclear why regulated entities would have the right to determine unilaterally when within that free time period shippers or their agents should pick up their cargo.

156

Ocean Network Express at 1.

157

NAWE at 15; OCEMA at 4; WSC at 12; WCMTOA at 4.

158

WSC at 12.

Additionally, fears of an explosion of litigation due to the rule are speculative. If, as ocean carriers and marine terminal operators claim, commercial solutions have been adequate to address demurrage and detention problems, then the Commission's guidance will not lead to lawsuits. There have historically been very few formal Shipping Act complaints filed regarding demurrage and detention. If the issuance of guidance results in more disputes because shippers are better able to challenge unreasonable practices, that is a feature, not a bug, of the rule. An increase in valid claims is not a negative result, and guidance is just as likely to reduce disputes because it allows parties to better assess the merits of a dispute before resorting to litigation. At present, there is little to no guidance on demurrage and detention and section 41102(c) in the containerization context.

159

Two commenters point out that some of the practices mentioned in the NPRM regarding notice would require “significant additional sharing of information between the terminal and the carriers and clear guidelines as to who bears what responsibility.” Ocean Network Express at 2; WSC at 16. The Commission does not believe this would be a negative consequence of the proposed rule.

Similarly speculative are concerns about increased container dwell time and chassis shortages. The rule might result in an increase in free time extensions, but extending free time is just one way to mitigate demurrage and detention charges. Additionally, the rule's primary focus is situations where demurrage and detention do not work because cargo cannot move. Not charging a penalty because a container cannot move would not appear to increase its dwell time.

As for inhibiting the freedom to allocate risk by contract, this is discussed in more detail below. That said, commenters appear to object to the rule because it would “interfere with private and lawful commercial arrangements” wherein ocean carriers and shippers have negotiated free time.

160

But whether commercial arrangements are

lawful

is the point. Ocean carriers and marine terminal operators (and ocean transportation intermediaries) do not have an unbounded right to contract for whatever they want. They are limited by the prohibitions of the Shipping Act, one of which is section 41102(c). Although the general trend in the industry has been deregulatory, Congress retained section 41102(c) when it enacted the Ocean Shipping Reform Act in 1998.

161

In this sense, ocean carriers and marine terminal operators are no different from participants in other regulated industries.

160

OCEMA at 3 (arguing the rule would deprive both shippers and ocean carriers of the ability to negotiate for competitive terms); Ports Am. at 3; Am. Ass'n of Port Auth. at 2 (claiming rule would “effectively prohibit private parties from negotiating how the risk of events beyond either's control . . . are to be allocated, putting all the burden completely on the terminal operator and or/carrier”); WSC at 10-11 (describing rule as substantially restricting parties from defining the commercial terms and conditions of their own contractual relationships”).

161

Ocean Shipping Reform Act of 1998, Public Law 105-258, 112 Stat. 1902. (May 1, 1999).

Ocean carriers and marine terminal operators benefit, however, from limited antitrust immunity for their agreements with their competitors,

162

and they are also the beneficiaries of cargo lien law

163

and law regarding tariffs and published marine terminal schedules, all of which may affect the negotiating playing field vis-à-vis shippers, intermediaries, and truckers. Whatever their merits, both tariffs and marine terminal schedules share elements of contracts of adhesion:

164

they are presented on a take-it-or-leave-it basis, without the chance for much negotiation.

165

And, like contracts of adhesion, the terms of tariffs and marine terminal schedules “may be drafted with a view to protect to the maximum degree the enterprise that propounds the form, thus minimizing the realization of the reasonable expectations of the adhering party.”

166

162

46 U.S.C. 40307.

163

See infra

note 365.

164

See Huffman

Sticky Fingers,

Case No. 2:05-2108-DCN-GCK, 2005 U.S. Dist. LEXIS 55481, at *26-*27 (D.S.C. at Dec. 20, 2005) (defining a contract of adhesion as “a standard form contract offered on a take-it-or-leave-it basis” where the terms are “not negotiable”—“an offeree faced with such a contract has two choices: Complete adherence or outright rejection”).

165

See

AgTC at 3 (“The opportunity to negotiate is a myth . . . .”).

166

1 Corbin on Contracts § 1.4 (2020).

This is not to say that shippers and intermediaries do not negotiate certain aspects of demurrage and detention, such as free time, in service contracts. But many, if not, most, shippers lack significant bargaining power as compared to ocean carriers. The same goes for intermediaries and truckers.

167

Under such circumstances, there is reason for the Commission to carefully scrutinize arguments that shippers, intermediaries, and truckers have the ability meaningfully to negotiate contractual terms relating to demurrage and detention.

168

167

See Pet. of the World Shipping Council for an Exemption From Certain Provisions of the Shipping Act of 1984, As Amended, For a Rulemaking Proceeding,

1 F.M.C.2d 504, 514 (FMC 2019) (“VOCCs hold market power through the antitrust immunity secured pursuant to their filed agreements as well as their ability to discuss and coordinate freight rates and/or vessel capacity and services. . . . Because VOCCs have stronger negotiating positions, they are able to set service contract terms and conditions with NVOCCs; indeed, the majority of service contracts on file with the Commission use boilerplate terms and conditions written by the VOCC.”).

168

In prohibiting certain exculpatory provisions in marine terminal schedules under section 41102(c), the Commission rejected the argument “that there is nothing unreasonable, and hence

unlawful, about a terminal operator and user agreeing upon a liability-shifting arrangement after an arms-length negotiation over the terms and conditions for the use of such facilities. Final Rule: Filing of Tariffs by Marine Terminal Operators Exculpatory Provisions, 51 FR 46668, 46668 (Dec. 24, 1986). Given the vastly unequal bargaining power between the parties in that instance, the Commission saw “little validity to the suggestion advanced in some comments that `free market forces' exist and should govern the promulgation of liability provisions in terminal tariffs.”

Suffice it to say, ocean carriers and marine terminal operators do not have an inviolate right to contract with their customers free from government scrutiny, and there is reason to question whether demurrage and detention practices are normally the subject of arms-length negotiation between parties with remotely equal bargaining power.

169

Consequently, that the guidance in the rule, when applied in a case, might put some limits on the ability of ocean carriers or marine terminal operators to impose, or negotiate, demurrage and detention practices vis-à-vis shippers, intermediaries, and truckers, is not itself a reason not to issue guidance. For the same reasons, ocean carrier and marine terminal operator arguments that they are being treated unfairly by the rule are taken with a grain of salt, though the Commission agrees that shippers, intermediaries, and truckers have an equally important role to play in enhancing the efficiency of the transportation system.

170

169

See, e.g.,

Mohawk Global Logistics at 10 (“These [detention] transactions are in many cases much more than arm's reach away, billed by a terminal, to a trucker that is contracted to a consignee, not necessarily related to the NVOCC, whose detention free time is added to the contract by the ocean carrier.”).

170

E.g.,

WSC at 18 (arguing that a “common thread” in the NPRM is that it is completely one-sided). In a similar vein, WCMTOA requests that the Commission apply the incentive principle in the rule to shippers and truckers. WCMTOA 11-12. Most of WMCTOA's suggestions, however, would effectively limit shipper free time without any regard to whether it represents a reasonable amount of time to retrieve cargo. Moreover, the Commission does not have authority over shippers or truckers under section 41102(c), and the impetus for the fact finding and the NPRM were complaints about ocean carrier and marine terminal operator practices.

4. The Uniform Intermodal Interchange and Facilities Access Agreement

The final general category of policy comments involved the Uniform Intermodal Interchange and Facilities Access Agreement (UIIA). The UIIA “is a multimodal negotiated interchange agreement that serves as the standard interchange agreement for most intermodal equipment interchanges except chassis.”

171

Generally, it governs relationships between signatory ocean carriers and truckers. Some commenters pointed out that the UIIA has provisions related to empty container return, billing, and billing disputes, and expressed concern that the rule could potentially conflict with this.

172

Others noted problems with the UIIA or the extent to which other parties adhere to it.

173

171

FMC Congestion Report at 27;

see also

Joni Casey,

Letter: The UIIA and Street Turn Fees,

Transport Topics (Feb. 19, 2019), (“[T]he UIIA is the only standard industry contract that governs the interchange of equipment between intermodal trucking companies and equipment providers such as ocean carriers, railroads and leasing companies.”),

https://www.ttnews.com/articles/letter-clarifying-uiia-and-ianas-role.

172

OCEMA at 4; Ocean Network Express at 3-4; WSC at 17.

173

IMC Companies at 2 (arguing that UIIA billing process may conflict with service contract language); S. Counties Express at 4 (“Terminals do not have appointments to receive an empty container, steamship line holds the motor carrier responsible until unit has a secured appointment and terminates the container. UIIA violation, no agreement in place.”).

A few points about the UIIA. First, not all ocean carriers and truckers are parties to the UIIA. In addition, although there is a standard UIIA agreement, many terms are dictated by each equipment provider's addendum to the UIIA, which is defined as the provider's “schedule of economic and commercial terms not appropriate for inclusion in the uniform Agreement and other terms and conditions of Equipment use.”

174

UIIA § B.2;

see also

Casey,

supra

note 175 (“Notably, to comply with antitrust law, the UIIA cannot include or dictate economic and commercial terms that are specific to each equipment provider. Such terms are handled through individual addenda to the UIIA.”).

Because not all ocean carriers or truckers participate in the UIIA, and because ocean carrier practices may be contained in their addenda as opposed to the standard UIIA itself, the Commission cannot simply assume that the processes outlined in the UIIA sufficiently address concerns about ocean carrier detention practices vis-à-vis truckers. This is especially true given complaints that participants do not always abide by the terms of the UIIA or the addenda. That said, the UIIA has been in effect for decades and was negotiated with the participation of carriers, truckers, and railroads.

175

Ocean carrier practices, whether incorporated in the UIIA or not, are within the Commission's purview under section 41102(c).

176

To the extent UIIA terms or conditions are relevant to determining the reasonableness of particular detention practices, nothing precludes parties from raising these issues in individual cases.

175

PMSA at 14.

176

PMSA asserts that the Commission “probably does not have jurisdiction” to “mandate wholesale changes that are inconsistent with the UIIA.” PMSA at 14. PMSA cites no authority for this proposition. To the contrary, ocean carrier demurrage and detention practices and regulations are within the Commission's jurisdiction under section 41102(c).

C. Purpose of Rule

The first paragraph of the proposed interpretive rule in the NPRM describes its purpose: To provide guidance about how the Commission will interpret 46 U.S.C. 41102(c) and 46 CFR 545.4(d) in the context of demurrage and detention.

177

None of the comments specifically addressed this paragraph of the rule, and the Commission will include it without change in the final rule.

177

84 FR at 48851-52, 48855.

D. Applicability and Scope of Rule

The next paragraph of the rule outlines its applicability and scope. The rule applies to practices and regulations relating to demurrage and detention for containerized cargo. For purposes of the rule, demurrage and detention includes any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (

e.g.,

land) or shipping containers, not including freight charges.

178

84 FR at 48852, 48855

In the NPRM, the Commission explained that the reference to containerized cargo included cargo in refrigerated (reefer) containers.

179

Given that the lack of standard terminology in the industry,

180

the rule defines “demurrage” and “detention” broadly to cover all charges customarily referred to as demurrage, detention, or per diem.

181

The rule specifically limits these definitions to “shipping containers” to exclude charges related to other equipment, such as chassis, because depending on the context, “per diem” can refer to containers, chassis, or both.

182

179

84 FR at 48852.

180

Interim Report at 5-7, 17; Final Report at 11-13, 30.

181

84 FR at 48852.

182

For instance, commenters such as International Motor Freight and Wheaton Grain Inc. refer to container charges in terms of per diem rather than detention. Int'l Motor Freight at 2; Wheaton Grain Inc. at 1. Similarly, the UIIA defines per diem as charges related to “equipment,” which includes containers and chassis.

See

UIIA § B.22.

Commenters did not object to limiting the rule to containerized cargo, to defining demurrage and detention broadly, or to including reefer cargo within the rule's ambit. And while some commenters believe that the Commission's guidance should account

for chassis availability

183

or the interests of chassis lessors,

184

none argued that the scope of the rule should be enlarged to include charges imposed by chassis owners.

185

183

See

Part III.F,

infra.

184

IICL at 2.

185

Section 41102(c) does not cover chassis providers who do not otherwise fall within the definition of a regulated entity under the Shipping Act.

Commenters did, however, raise questions about the scope of the rule. Several commenters urged that the rule apply to export shipments as well as imports, and they raised issues unique to exports, such as rolled bookings due to vessel and schedule changes and ocean carrier changes to container return cutoff dates and insufficient notice of such changes.

186

See

Florida Customs Brokers & Forwarders Ass'n; IMC Companies at 2; John S. Connor Global Logistics at 7; Int'l Fed. Of Freight Forwarders Ass'ns at 7; Miami Global Lines; New England Groupage; New York New Jersey Foreign Freight Forwarders and Brokers Ass'n (NYNJFFF&BA) at 5.

To be clear, the rule is not limited to import shipments and applies to export shipments as well. In particular, the guidance on the incentive principle, demurrage and detention policies, and transparent terminology would apply in situations involving exports. The NPRM preamble focused on import issues because imports were the focus of the Fact Finding Investigation and most of the complaints.

Another scope-related comment involved the application of the rule outside of marine terminals. The American Cotton Shippers Association noted that ocean carriers, “responding to the demands of consumers, have crafted service contracts that incorporate inland movements and services” and “[t]hus the reasonableness of detention and demurrage practices and regulations, as they apply to inland movements in point-to-point service contracts, have an equally significant impact on the fluidity of all ocean-borne trade.”

187

It urges that the rule account for the inland components of ocean-borne shipping transactions and apply to point-to-point service contracts.

188

Similarly, IMC Companies believes there is a “gray area of jurisdiction” in intermodal shipping, and requests “greater clarity directed to ocean carriers['] intermodal shipments moving on a through bill of lading with regard to application of the incentive principles the FMC has outlined.”

189

187

Am. Cotton Shippers Ass'n at 7-8.

188

Am. Cotton Shippers Ass'n at 8.

189

IMC Companies at 3-4.

Nothing in the rule limits its scope to shipping activities occurring at ports or marine terminals. Rather, section 41102(c) concerns ocean carrier, marine operator, and ocean transportation intermediary practices and regulations “relating to or connected with receiving, handling, storing, or delivering property.” Ocean carrier demurrage and detention practices are subject to section 41102(c) and Commission oversight, regardless of whether the practices relate to conduct at ports or inland, with some caveats. First, not everything an ocean carrier or marine terminal operator does is within the Commission's purview—an ocean carrier or marine terminal operator must be acting as a common carrier or marine terminal operator as defined by the Shipping Act with respect to the conduct at issue.

190

This is often not a difficult question, but the further one gets away from the terminal, the more complicated the inquiry may become, and it is not a question that can always be answered in the abstract.

191

190

See, e.g.,

Auction Block Co.

Fed. Mar. Comm'n,

606 Fed. Appx. 347, 348 (9th Cir. 2015) (“The Commission reasonably concluded that it makes little sense to bring into its regulatory ambit all facilities operated by an entity merely because a single one of them is connected to international marine transportation.”);

Crocus Investments, LLC

Marine Transp. Logistics, Inc.,

1 F.M.C.2d 403, 415 (FMC 2019) (“The approach supported by the text of section 41102(c) and Commission caselaw asks: was the respondent acting as a regulated entity with respect to the conduct at issue?”).

191

Crocus,

1 F.M.C.2d at 415 (noting that determining whether respondent is a regulated entity, in this case an ocean transportation intermediary, is a “fact-intensive analysis” taking into account statutory definitions and evidence about the parties' conduct during the relevant time frame).

Second, the Commission must be careful not to encroach into the jurisdiction of other agencies, such as the Surface Transportation Board, which is itself considering issuing guidance to railroads similar to that in the Commission's rule.

192

Surface Transp. Bd., Policy Statement on Demurrage and Accessorial Rules and Charges (STB Oct. 4, 2019),

https://www.stb.gov/decisions/readingroom.nsf/UNID/F844367E52874F138525848C0042BFB3/$file/47133.pdf

. STB's proposed policy statements also references the incentive principle:

First, demurrage rules and charges are not reasonable when they do not serve to incentivize the behavior of shippers and receivers to encourage the efficient use of rail assets. In other words, charges should not be assessed in circumstances beyond the shipper's or receiver's reasonable control. It follows, then, that revenue from demurrage charges should reflect reasonable financial incentives to advance the overarching purpose of demurrage and that revenue is not itself the purpose.” Second, transparency and mutual accountability by both rail carriers and the shippers and receivers they serve are important factors in the establishment and administration of reasonable demurrage and accessorial rules and charges.

Id.

at 21.

Commenters were also concerned about railroads and railyards.

193

To be clear, section 41102(c) of the Shipping Act applies to common carriers, marine terminal operators, and ocean transportation intermediaries. The Commission is without authority to address practices of railroads or rail facilities unless they fall within one of those statutory definitions. That said, if the practice at issue relates to rail but is nonetheless an ocean carrier practice,

e.g.,

is contained in an ocean carrier tariff or service contact, then the guidance in the rule would likely apply.

193

Aluminum Bahrain (“The rail carrier and the yard itself made sure that every container paid extra for the chassis and for detention”); APL Logistics (“APL Logistics seeks clarification whether the proposed interpretive rule applies to railroad terminals when an international shipment passes through a marine terminal operator and is then transported to its final destination via rail on a through bill of lading”); Global Fairways LLC (complaining about rail practices and ocean carriers not providing sufficient information); IMC Companies; Wheaton Grain.

In sum, the rule is not limited, in its language or intent, to import shipments, nor is it limited solely to ocean carrier practices related to conduct at marine terminals. The precise outer bounds of the Commission's authority, however, is a subject better resolved in the context of a particular factual scenario. Consequently, the Commission will adopt paragraph (b) of the proposed rule in the final rule with only grammatical changes that do not affect its substance.

It is important to emphasize, however, the Commission's focus here is on practices related to charges imposed by regulated entities on shippers, intermediaries, and truckers and not the contractual relationships between ocean carriers and marine terminal operators. Ocean carriers must provide adequate terminal facilities.

194

It appears that most carriers accomplish this by “contract[ing] for the facilities of another person such as a terminal operator, in which case the terminal operator is in effect the agent of the carrier.”

195

This relationship—how marine terminal operators are compensated by ocean carriers for use of their terminal facilities—is not the primary concern of the guidance in the rule, even if marine terminal operators are compensated by carriers via charges called “wharf demurrage” or “terminal demurrage.”

196

The rule might be relevant to that compensation if marine

terminal charges to ocean carriers are passed on to shippers and their agents via demurrage.

197

In those instances, however, the Commission would be assessing the reasonableness of ocean carrier demurrage practices vis-à-vis shippers, intermediaries, and truckers, not marine terminal operator practices with respect to ocean carriers.

194

Final Report at 27;

Boston Shipping Ass'n

Port of Boston Marine Terminal Ass'n,

10 F.M.C. 409, 415 (FMC 1967).

195

Boston Shipping Ass'n,

10 F.M.C. at 415.

196

This should allay some of the concerns raised by commenters like the American Association of Port Authorities that the rule would prevent marine terminal operators from being compensated for use of terminal space. Am. Ass'n of Port Auth. at 2.

197

Interim Report at 16 (“The VOCC's tariff rates and practices may also directly pass through or refer to those of the relevant port authority's or MTO's schedule.”).

E. Incentive Principle

The main thrust of the rule is that although demurrage and detention are valid charges when they work, when they do not, there is cause to question their reasonableness.

198

This derives from the well-established principle that to pass muster under section 41102(c), a regulation or practice must be tailored to meet its intended purpose,

199

that is, “fit and appropriate for the end in view.”

200

The Commission determined that because the purpose of demurrage and detention are to incentivize cargo movement, it will consider in the reasonableness analysis under section 41102(c) the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.

201

198

84 FR at 48852.

199

84 FR a 48852 (citing

Distribution Servs. Ltd.

Trans-Pac. Freight Conference of Japan and Its Member Lines,

24 S.R.R. 714, 722 (FMC 1988)).

200

Distribution Servs.,

24 S.R.R. at 722 (quoting Port of San Diego, 9 F.M.C. at 547).

201

84 FR at 48852, 48855.

The Commission explained in the NPRM that practices imposing demurrage and detention when such charges are incapable of incentivizing cargo movement, such as when a trucker arrives at a marine terminal to retrieve a container but cannot do so because it is in a closed area or the port is shutdown, might not be reasonable.

202

Similarly, the Commission stated, “absent extenuating circumstances, demurrage and detention practices and regulations that do not provide for a suspension of charges when circumstances are such that demurrage and detention are not serving their purpose would likely be found unreasonable.”

203

202

See

84 FR at 48852.

203

84 FR at 48852.

The commenters did not dispute that demurrage and detention practices must be tailored to meet their purpose. But several commenters objected to the rule because: (1) Demurrage and detention serve purposes other than acting as financial incentives for cargo movement, (2) the rule will disincentivize cargo movement, (3) the rule might conflict with the principle of once-in-demurrage-always-in-demurrage, and (4) the rule unfairly allocates risks better allocated by contract.

1. Purposes of Demurrage and Detention

The Commission stated in the NPRM that the “intended purposes of demurrage and detention charges are to incentivize cargo movement and the productive use of assets (containers and port or terminal land).” This understanding was based on what shippers, ocean carriers, and marine terminal operators told the Commission.

204

Many commenters agreed that the “incentive principle” is “supported by law and Shipping Act policies” and assert that charges should be mitigated when efficiency incentives cannot be achieved.

205

Commenters also recognized that “the primary purpose of detention and demurrage is to provide an incentive for cargo interests to remove their cargo from the terminal promptly or to return equipment in a timely manner.”

206

204

84 FR at 12 (citing Interim Report at 2-3; Final Report at 12, 13).

205

E.g.,

Wal Mart at 1 (“Wal Mart has also experienced abuse of such charges in ways that do not incentivize efficient movement and therefore applauds FMC's identification of efficient cargo movement as the key consideration in assessing reasonableness of demurrage and detention practices under 46 U.S.C. 41102(c).”); Cal. Cartage Co. at 1; Dreisbach Enter. at 1.

206

SSA Marine at 1; Nat'l Indus. Transp. League at 5 (“Demurrage and detention practices should be applied to serve their intended purpose, with correct financial incentives to promote freight fluidity.”); NCBFAA at 5.

Several commenters asserted, however, that demurrage and detention serve other legitimate purposes. Ocean carriers argued that demurrage and detention function to compensate them for costs associated with their equipment.

207

Marine terminal operators asserted that these charges are appropriate to compensate terminal operators for the use of terminal space.

208

Shippers and intermediaries, too, indicated that demurrage and detention have a compensatory element.

209

As a few commenters pointed out, the Final Report in Fact Finding Investigation No. 28 noted that “some cases refer to demurrage also serving a compensatory purpose.”

210

Additionally, some commenters asserted that demurrage and detention actually serve an illegitimate purpose: serving as a revenue stream for ocean carriers and marine terminal operators.

211

207

OCEMA at 2; WCMTOA at 8-9.

208

Am. Ass'n Port Auth. at 2; NAWE at 10-11; WCMTOA at 2-3.

209

E.g.,

Am. Coffee Corp. at 2; Int'l Fed. of Freight Forwarders Ass'ns at 1-2; Nat'l Indus. Transp. League at 13; Sea Shipping Line at 2;

see also

IICL at 2.

210

Final Report at 28 n.36.

211

AgTC at 3 (“It is also clear that the penalties have now become a significant revenue source for the carriers.”); Mohawk Global Logistics at 5; NCBFAA at 7; Lee Hardeman Customs Broker, Inc. at 1 (arguing that demurrage and detention are “CLEARLY revenue streams from frequently unreasonable application of them”); Bunzl Int'l Servs. Inc. at 1; Int'l Motor Freight at 2; The Judge Org. at 1; Mondelez Int'l at 2; Thunderbolt Global Logistics at 2; Transp. Intermediaries Ass'n at 4; Retail Indus. Leaders Ass'n at 2

; see also Free Time and Demurrage Charges at New York,

3 U.S.M.C. 86, 107 (FMC 1948) (NYI) (“We hold, however, that demurrage charges

at penal levels

are not justifiable by reference to a carrier's need for revenue.”).

Historically, the Commission recognized that demurrage has “penal elements which are designed to encourage the prompt movement of cargoes off the piers” and includes a compensatory element which accounts for “the use of the pier facilities, for watchmen, fire protection, etc., on the cargo not picked up during free time.”

212

It is important to specify, however, what this compensatory aspect of demurrage traditionally meant. To the extent demurrage had a compensatory aspect, it was to reimburse ocean carriers for costs incurred

after

free time expired—“costs” in this context meant

additional

costs associated with cargo remaining on a pier after free time.

213

In other words, demurrage and detention are not the mechanism by which ocean carriers recover all costs related to their equipment,

214

and the Commission cannot assume that these charges are the primary method by which ocean carriers recover their capital investment and container costs, as some commenters suggest.

215

212

In re Free Time and Demurrage Practices on Inbound Cargo at New York Harbor,

9 S.R.R. 860, 864 (1967) (

NYII

);

NYI,

3 U.S.M.C. at 107.

213

NYII,

9 S.R.R. at 864.

214

For example, in the “ideal” situation, where a container is retrieved and returned with free time, an ocean carrier would collect no demurrage or detention. The Commission cannot assume that in this preferred scenario that ocean carriers would have to absorb their equipment costs. Rather, they presumably recover their equipment costs in other ways, such as in their freight rate.

215

WSC at 9 (“From the carrier's perspective, detention charges are structured to serve as a recovery mechanism for the capital investment and cost of the container, including repair, maintenance, and leasing, as well as opportunity costs associated with not having the equipment available for revenue-producing cargo transport.”).

A second point is that Commission in

Free Time and Demurrage Charges at New York

assumed that the minimum demurrage charge in that case—the first period demurrage—represented a compensatory charge for that period.

216

This assumption was based on Commission caselaw requiring ocean carriers to charge at least compensatory

demurrage.

217

Given that that this caselaw pre-dated containerization, its precedential value is an open question, and in the absence of evidence establishing the extent to which ocean carrier demurrage or detention are compensatory, the Commission cannot assume that demurrage and detention have compensatory aspects in every case. As noted above, however, the rule does not preclude ocean carriers and marine terminal operators from arguing and producing evidence regarding the compensatory aspects of demurrage and detention in individual cases.

216

NYI,

9 U.S.M.C. at 109.

217

NYI,

9 U.S.M.C. at 93, 109.

Accordingly, because the participants in Fact Finding Investigation No. 28 and the commenters consistently emphasized the utility of demurrage and detention in incentivizing cargo movement and productive asset use, the Commission continues to understand demurrage and detention as primarily being financial incentives to promote freight fluidity. That said, the Commission is amending the final rule to recognize that the demurrage and detention might have other purposes. First, the Commission is adding the word “primary” to the “Incentive Principle” paragraph of the rule. Second, the Commission is adding a new “Non-Preclusion” paragraph of the interpretive rule, which confirms that the Commission may consider additional factors, arguments, and evidence in addition to the factors specifically listed in the rule. This would include arguments and evidence that demurrage and detention have purposes other than as financial incentives.

218

Shippers, intermediaries, and truckers do not necessarily oppose ocean carriers and marine terminal operators recovering, in certain circumstances, legitimate costs. Mohawk Global Logistics at 6 (noting that in government hold situations, “[t]here should be compensation to both the terminals and the carriers in these cases.”); Agregar Consultoria at 1. Nor do most of them deny that demurrage and detention have a necessary place in ocean commerce.

E.g.,

Mohawk Global Logistics at 2. Their primary concern is avoiding “punitive” demurrage and detention. John S. Connor Global Logistics at 1; AgTC at 1; ContainerPort Group at 1; Mohawk Global Logistics at 6-7.

2. Incentives

Ocean carrier and marine terminal operators also object to the “incentive principle” on the grounds that it will effectively disincentivize cargo movement and equipment return. According to NAWE: “If the cargo interest knows that its free time will be extended because of terminal closure due to a force-majeure-type situation, the cargo interest is not incentivized to retrieve its cargo before the event.”

219

Some commenters also suggest that the rule would permit shippers to get extra free time by withholding the payment of freight or by being careless with paperwork.

220

219

E.g.,

NAWE at 11;

see also

OCEMA at 4; WCMTOA at 1, 10. A “force majeure” clause is a contract provision that excuses a party's performance of contractual obligations when certain circumstances arise outside the party's control, making performance inadvisable, impracticable, or impossible. 14 Corbin on Contract § 74.19. These clauses usually list circumstances that trigger the clause, such as acts of God, fires, floods, labor disputes, etc.

Id.

Presumably, commenters use the phrase “force majeure” as shorthand for events outside their control.

220

WCMTOA at 12; PMSA at 6.

As to the former concern, the Commission does not believe that shippers will be disincentivized from retrieving their cargo in a timely fashion. This assumes that shippers are willing to run the risk of paying demurrage charges on the off chance a “force majeure” event occurs. Moreover, shippers have commercial incentives to get their cargo off terminal, including “contractual delivery deadlines and perishable condition time limits.”

221

In addition, one could easily argue the flip side of the commenters' position, namely that the ability of ocean carriers and marine terminal operators to collect demurrage even if it is impossible for a shipper to retrieve cargo or a truck to return equipment might disincentivize ocean carriers and marine terminal operators from acting efficiently.

222

221

AgTC at 4. Truckers likely have commercial and other incentives to return equipment in a timely fashion. It may be true that some “importer-consignees operate on small margins of profit, and because public warehouse charges are generally higher than demurrage charges, some consignees tend to use the piers as warehouses.”

NYII,

9 S.R.R. at 864. But this possibility is insufficient reason to ignore the incentive principle.

222

Cf.

EMO Trans Atlanta, GA USA at 1 (“To ask the forwarding community to pay the price for operational issues of ports and carriers must stop.”) F.O.X. Intermodal Corp. at 1 (arguing that “terminals directly benefit from their inability to service the truckers in a timely fashion”); The Judge Organization at 1 (same).

As for concerns that shippers will game the system to get more free time, the rule presupposes that shippers, intermediaries, and truckers have complied with their customary obligations, including those involving cargo retrieval.

223

Any evidence that these obligations were not met can be raised in the context of a case. Relatedly, the National Industrial Transportation League requests that the Commission “clarify that not making an advance payment of freight charges, where the parties have a credit arrangement in place, should not be viewed as failure to comply with customary cargo interest responsibilities.”

224

The Commission agrees that as a general matter, paying freight in advance may not necessarily be a “customary cargo interest responsibility” if a shipper or intermediary has a credit arrangement with an ocean carrier, but such determinations will depend on the facts of each case and the specific arrangements between the shipper and carrier.

223

84 FR at 48852.

224

Nat'l Indus. Transp. League at 6.

3. Once-in-Demurrage, Always-in-Demurrage

Ocean carriers and marine terminal operators further urge the Commission to reaffirm that notwithstanding the rule, the principle of “once-in-demurrage, always-in-demurrage” still governs.

225

According to these commenters, under this principle shippers “bear the risk of any disability that arises after free time has ended.”

226

In other words, once free time ends, it would not be unreasonable to impose demurrage on a shipper even if the shipper is unable to retrieve the container due to circumstances outside the shipper's, or anyone's, control. Conversely, other commenters request that the Commission expressly overrule the once-in-demurrage, always-in-demurrage principle.

227

225

J. Peter Hinge at 3; NAWE at 14 n.5; OCEMA at 5; PMSA at 7-8.

226

WCMTOA at 9 (“If any final rule is adopted, it should make clear that it is reasonable for a terminal operator to charge demurrage if a container becomes unavailable for any reason after free time has expired.”); NAWE at 14 n.5.

227

Green Coffee Ass'n at 2 (“We also contend that the demurrage clock should be suspended during “non-accessible” periods when the container may already be incurring demurrage charges thus eliminating the practice of `once in demurrage, always in demurrage.' ”); Commodity Supplies, Inc. at 2 (same, but for detention).

As an initial matter, it is useful to describe the legal context before and after the expiration of free time.

228

Prior to the expiration of free time, there are two relevant legal principles in play relevant to demurrage. First, as part of its transportation obligation, an ocean carrier must allow a shipper a “reasonable opportunity to retrieve its cargo,”

i.e.,

free time.

229

Free time is “free” because during this time period, an ocean carrier cannot assess any demurrage.

230

Nor can marine terminal

costs be shifted to a shipper during free time, even in the event of a strike.

231

Second, during free time ocean carriers remain subject to section 41102(c)'s reasonableness standard: its practices must be tailored to meet their purposes.

228

The caselaw involves demurrage, but similar concepts would apply in detention context.

229

Final Report at 27 (citing

Port of San Diego,

9 F.M.C. at 539).

230

NYII,

9 S.R.R. at 874 (noting obligation to “tender for delivery free of assessments of any demurrage”);

NYI,

3 U.S.M.C. at 101 (“This is an obligation which the carrier is bound to discharge as a part of its transportation service, and consignees must be afforded fair opportunity to

accept delivery of cargo without incurring liability for penalties.”).

231

Boston Shipping Ass'n,

10 F.M.C. at 416 (“No one would argue that the carrier should pay the terminals' cost of providing the pier for the free time period itself.”);

id.

at 417 (“We would place the burden upon him who at the time of the strike owes an undischarged obligation to the cargo. Thus, where the cargo is in free time and a strike occurs, it is the vessel which has yet to discharge its full obligation to tender for delivery and it is to the vessel that the terminal is at this point in time supplying the attendant facilities and services.”).

Once free time expires, however, the first of these legal principles drops away because the transportation obligation of the carrier has ended.

232

At that point, ocean carriers can, and should, charge demurrage. As the Commission recognized in the NPRM, demurrage is a valuable charge when it incentivizes prompt cargo movement.

233

Ocean carriers remain subject, however, to section 41102(c) and its requirement that demurrage practices be tailored to meet their purposes—acting as financial incentives for cargo and equipment fluidity. If demurrage cannot act as an incentive for cargo and equipment fluidity because, for instance, a marine terminal is closed for several days due to a storm, charging demurrage in such a situation, even if a container is already in demurrage, raises questions as to whether such demurrage practices are tailored to their intended purpose in accordance with section 41102(c).

232

Boston Shipping Ass'n,

10 F.M.C. at 417; NYII, 9 S.R.R. at 874.

233

84 FR at 48852.

The ocean carrier and marine terminal operator commenters have two answers: precedent and incentives.

234

According to the commenters,

Boston Shipping Association

stands for the proposition that it is “reasonable for a carrier to continue assessing demurrage against cargo that had exceeded free time when a strike broke out, thus precluding pick up.”

235

Commenters rely on a single quotation: “Thus, in our view, it is only just and reasonable that the consignee, who has failed to avail himself of the opportunity to pick up his cargo during free time, should bear the risk of any additional charges resulting from a strike occurring after free time has expired.”

236

234

NAWE at 14 n.5; OCEMA at 5; PMSA at 7-8; WCMTOA at 9.

235

OCEMAT at 5.

236

10 F.M.C. at 417-18.

But this quotation must be read in context. The question in

Boston Shipping Association

was who should be responsible, the ocean carrier or the consignee, for paying the terminals' cost: “Thus, where the terminal is the intermediate link between the carrier and the shipper or consignee, one of these two persons must pay the terminal's

cost

of providing the services rendered.”

237

The Commission held that during free time, this burden was on the ocean carrier; once free time expired, it was on the shipper. The Commission in

Boston Shipping Association

said nothing about the penalty aspect of demurrage. At most, it stands for the proposition that once free time ends, a shipper may be responsible for any compensatory aspect of demurrage.

237

10 F.M.C. at 417 (emphasis added);

id.

(“It is therefore just and reasonable to require the vessel to pay the

cost

of the supervening strike which renders the discharge of that responsibility impossible.”) (emphasis added).

This interpretation of

Boston Shipping Association

is consistent with the

New York

cases.

In Free Time and Demurrage Charges at New York,

the Commission held that even after free time expired, levying penal demurrage charges when a consignee, for reasons beyond its control, could not remove cargo from a pier was unjust and unreasonable:

When property lies at rest on a pier after free time has expired, and consignees, through reasons beyond their control, are unable to remove it, the penal element of demurrage charges assessed against such property has no effect in accelerating clearance of the pier. To the extent that such charges are—penal,

i.e.,

in excess of a compensatory level—they are a useless and consequently unjust burden upon consignees, and a source of unearned revenue to carriers.

238

NYI,

3 U.S.M.C. at 107.

The Commission further held, however, that in such circumstances, the ocean carrier is entitled to fair compensation for sheltering and protecting the cargo.

239

The Commission reached a similar conclusion almost 20 years later in

In re Free Time and Demurrage Practices on Inbound Cargo at New York Harbor,

explaining that “[d]uring longshoremen's strikes affecting even a single pier, the penalty element of demurrage affords no incentive to remove cargo from the pier because the consignee cannot do so for reasons entirely beyond his control.”

240

239

Id.

at 107-108.

240

9 S.R.R. at 875. The Commission reiterated that ocean carriers were entitled to compensation for use of their piers during longshoremen's strikes for cargo in demurrage when strike began and also allowed the assessment of demurrage (penal and compensatory) after the end of a strike, despite post-strike congestion, on containers in demurrage when the strike began.

Id.

at 877, 880.

To the extent, then, that these pre-containerization cases are relevant, they stand for the proposition that insofar as demurrage is a penalty

i.e.,

an incentive to retrieve cargo, it is unreasonable to assess it on cargo “in demurrage.” This is consistent with the guidance in the rule. And, while those cases allowed ocean carriers to recover certain costs, as noted above, the rule does not preclude the Commission from considering whether demurrage and detention have some compensatory aspect when determining the reasonableness of specific practices in individual cases.

As for incentives, the commenters' second argument in favor of “once-in-demurrage, always-in-demurrage” is that it provides an incentive for shippers and truckers to retrieve cargo and return equipment during free time. According to PMSA, “[i]f a cargo interest knows that if it does not pick up cargo or return equipment during the original free time period, it will be subject to charges even if a no-fault event occurs during the demurrage/per diem, it will have a strong incentive to pick up the cargo during the original free time, promoting container velocity.”

241

PMSA at 8.

This is a corollary to the argument that the rule disincentivizes shippers from retrieving containers during free time. As noted above, shippers and truckers have commercial reasons for wanting to get containers off-terminal or returned in a timely fashion.

242

Moreover, the prospect of having to pay demurrage or detention alone is an incentive. And, as noted above, once-in-demurrage, always-in-demurrage may also lessen the incentive for ocean carriers and marine terminal operators to perform efficiently.

242

E.g.,

AgTC at 4,

The Commission therefore does not agree with some commenters' arguments that it is always a reasonable practice to charge detention and demurrage after free time regardless of cargo availability or the ability to return equipment. The rule and the principles therein apply to demurrage and detention practices regardless of whether containers at issue are “in demurrage” or “in detention.” That is, in assessing the reasonableness of demurrage and detention practices, the Commission will consider the extent to which demurrage and detention are serving their intended primary purposes as financial incentives to promote freight fluidity, including how demurrage and detention are applied after free time has expired.

4. Risk Allocation

Finally, ocean carriers and marine terminal operators argue that the rule unfairly allocates all risks in force majeure situations to ocean carriers and marine terminal operators and prevents allocation of those risks by contract.

243

Commenters refer to “risk related to fluctuations in terminal fluidity,” “risk and all of the attendant costs related to events beyond their control,”

244

and “the entire financial responsibility for no-fault situations.”

245

Similarly, NAWE's states that “the NPRM would legally mandate that all risk of demurrage/detention costs in force majeure-type situations be placed on terminals and carriers.”

246

243

Am. Ass'n of Port Auth. at 2 (“However, the proposed rule would effectively prohibit private parties from negotiating over how the risk of events beyond either's control (such as weather event or actions of a third party) are to be allocated, putting all the burden completely on the terminal operator and/or carrier.”);

see also

NAWE at 11; OCEMA at 2-3; PMSA at 6; Ports Am. at 5;

244

OCEMA at 2-3.

245

PMSA at 6.

246

NAWE at 11.

The Commission interprets these comments as saying that in a “force majeure” situation,

e.g.,

a port is completely closed due to weather, commenters incur costs related to containers and terminal property, and if they cannot charge demurrage or detention, they have to absorb those costs. Again, part of the problem is that the commenters treat a factor in the reasonableness analysis—the incentive principle—as creating bright line rule, and they further assume the Commission would be incapable of exercising common sense when applying the factors. As explained above, nothing precludes the Commission from considering whether demurrage and detention have some compensatory aspect when determining the reasonableness of specific practices in individual cases.

F. Cargo Availability

In addition to describing how section 41102(c) may apply in the demurrage and detention context—the incentive principle—the Commission in the NPRM also sought to explain how that principle might work in particular contexts. First, the Commission clarified that it may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval.

247

If, the Commission stated, shippers or truckers cannot pick up cargo within free time, then demurrage cannot serve its incentive purpose.

248

Put slightly differently, if a free time practice is not tailored so as to provide a shipper a reasonable opportunity to retrieve its cargo, it is not likely to be reasonable.

249

247

84 FR at 48852, 488555.

248

84 FR at 48852.

249

84 FR at 48852 (“The more a demurrage practice is tailored to cargo availability, the less likely the practice is to be found unreasonable.”).

The Commission emphasized that concepts such as cargo availability or accessibility refer to the

actual

availability of cargo for retrieval by a shipper or trucker. The Commission did not go so far as to define what availability means, but it said that certain practices would weigh favorably in the reasonableness analysis, including starting free time upon container availability and stopping a demurrage or free time clock when a container is rendered unavailable, such as when a trucker cannot get an appointment within free time.

There was significant support for the Commission's guidance from shippers, truckers, and intermediaries, and the Commission will include the language on container availability from the proposed rule in the final rule. A number of commenters request bright line rules. For instance, several commenters argue that free time should not start until a container is available, and that starting free time before availability should be deemed an unreasonable practice.

250

Others assert that free time and demurrage and detention clocks should stop when containers become non-accessible due to situations beyond the control of shipper or trucker.

251

Still others request that the Commission define “container availability,”

252

that the Commission expressly address things like terminal hours of operation vis-à-vis free time,

253

appointment systems,

254

and that the concept of availability should include chassis availability.

255

250

E.g.,

Dow Chemical Co. at 2 (“Free time should be tied to actual cargo availability and not vessel arrival since efficient cargo pickup cannot be incentivized if the cargo may not yet be available.”); Am. Cotton Shippers Ass'n at 4; Am. Coffee Corp. at 2; Commodity Supplies at 1; CV Int'l at 1; Harbor Trucking Ass'n at 1-2; Int'l Fed. of Freight Forwarders Ass'ns at 2; John S. Connor Global Logistics at 2; New Direx Inc. at 1; NYNJFFF&BA at 4; Retail Indus. Leaders Ass'n at 2; Transp. Intermediaries Ass'n at 4.

251

E.g.,

Nat'l Indus. Transp. League at 8 (“The League agrees wholeheartedly that the reasonableness of demurrage practices and charges, including free time rules, should be related to actual physical availability of the cargo.”); Am. Cotton Shippers Ass'n at 4; Commodity Supplies at 2; Int'l Fed. of Freight Forwarders Ass'ns at 2; John S. Connor Global Logistics at 2

252

E.g.

EMO Trans Atlanta, GA USA at 1; FedEx Trade Networks, Inc. at 1; Int'l Motor Freight at 1.

253

E.g.,

Mondelez Int'l at 1 (“All free time should be defined as business days as not all ports allow pick up/return on weekends.”); Rio Tinto at 1.

254

E.g.,

Retail Indus. Leaders Ass'n at 2 (“A terminal's volume of appointment times and appointment availability are a critical component of cargo owners' ability to collect cargo. It is essential to consider the details of a terminal's appointment system, including availability and time frames of appointments, when assessing if fees are justified.”); Harbor Trucking Ass'n at 2 (“Important to consider the workings of terminal appointment systems in evaluating reasonableness—should be some minimum period of appointment availability.”).

255

E.g.,

Am. Cotton Shippers Ass'n at 5; CV Int'l, Inc. at 1; John Steer Co. at 1; John S. Connor Global Logistics, Inc. at 2-3; Yusen Logistics (Americas) Inc. at 1.

But see

Thunderbolt Global Logistics at 1 (“The lack of an available chassis should not be considered a requirement of availability unless the steamship line is supplying the chassis as part of their contract of carriage.”).

As explained in the NPRM, it makes sense that if free time represents a reasonable opportunity for a shipper to retrieve a container, it should be tied, to the extent possible, to cargo availability, and the Commission recognizes the merits of that approach. But the Commission will not in this general interpretive rule make a finding that failure to start free time upon “availability” is necessarily unreasonable. The operational environments and commercial conditions at terminals across the country vary significantly, and in some situations, there might not be much difference between tying free time to vessel discharge and tying it to availability.

256

For similar reasons, while the Commission will consider in the reasonableness analysis how demurrage and detention practices address interruptions in availability during free time, requiring specific “stop-the-clock” procedures is beyond the scope of this rulemaking.

257

The Commission is sympathetic to shipper, intermediary, and trucker arguments that bright line rules will be more beneficial to them and would be clearer than the Commission's factor-based approach. But imposing bright line rules could inhibit the development of better solutions.

256

See

Final Report at 21-22.

257

Accordingly, many ocean shipper and marine terminal operator concerns about the “unworkability” of the rule are unfounded.

See

NAWE at 12-13; WMCTOA at 10-11.

As for defining “container availability,” the Commission declines to do so here, as it can vary by port or marine terminal. Suffice it to say, availability at a minimum includes things such as the physical availability of a container: Whether it is discharged from the vessel, assigned a location, and in an open area (where applicable).

258

Depending on the facts of the case, the Commission may consider things such as appointment systems and appointment availability and trucker access to the terminal,

i.e.,

congestion.

259

258

84 FR at 48853; Final Report at 20.

259

84 FR at 48852-53;

id.

at 48852 n.16; Final Report at 20. That the Commission in an appropriate case could consider appointment systems and appointment availability is by no means a requirement that all terminals must adopt appointment systems.

Contra

WCMTOA at 11; SSA Marine, Inc. at 2.

The chassis situation is more complicated. It is undeniable that chassis availability impacts the ability of a shipper or a trucker to remove a container from a port.

260

But the Commission has held that “[p]ersons importing merchandise may reasonably be assumed to have, or be able promptly to obtain, the equipment needed to receive it,” and, therefore, “[i]t is not necessary, in fixing free time, to allow for delays that may be encountered in the procurement of equipment.”

261

Additionally, chassis supply models vary. Sometimes a trucker provides his or her own chassis. Sometimes chassis are provided via third-party chassis providers, over whom the Commission does not have authority under section 41102(c). And, although ocean carriers in many cases sold their chassis fleets, sometimes they substantially affect chassis availability via chassis pools owned by ocean carrier agreements such as OCEMA.

262

Ocean carriers also exert control over chassis via “box rules,” under which ocean carriers determine which chassis a trucker must use in a carrier haulage situation.

263

According to the Agriculture Transportation Coalition (AgTC), “carriers' `box rules' limit availability of chassis, forcing trucker to `hunt' for a container brand designated by the carrier, and cannot use other containers more conveniently located.”

264

260

84 FR at 48851 at n.7 (“Current variations in chassis supply models have frequently contributed to serious inefficiencies in the freight delivery system.”);

id.

(“Timely and reliable access to roadworthy chassis is a source of ongoing and systemic stress to the system.”).

261

NYI,

3 U.S.M.C. at 100.

262

Inst. of Int'l Container Lessors at 7.

263

See

Bill Mongelluzzo,

Box rules hold back interoperable chassis pools: truckers,

JOC.com (Dec. 12, 2019) (defining “box rules”).

264

AgTC at 5.

Suffice it to say, the assumption in

Free Time and Demurrage Charges at New York

that a shipper is able promptly to obtain equipment” might, in the case of a trucker and chassis,

in some circumstances,

no longer be valid.

265

Accordingly, the Commission may, in an appropriate case, consider chassis availability in the analysis. In doing so the Commission would be especially careful to analyze how the chassis supply model at issue relates to the primary incentive purpose of demurrage and detention.

265

NYI,

3 U.S.M.C. at 100. To be clear, the Commission agrees in general with the assumption that a shipper or its agent has or can obtain the equipment necessary to retrieve cargo. In ordinary circumstances, a shipper could not escape liability for demurrage because it is unable to procure a trucker or because its trucker cannot obtain a chassis. There could, however, be circumstances when the Commission could consider chassis availability in the reasonableness analysis.

G. Empty Container Return

The second application of the incentive principle discussed in the rule is empty container return.

266

The rule states that absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable.

267

The Commission explained that such practices, absent extenuating circumstances, weigh heavily in favor of a finding of unreasonableness, because if an ocean carrier directs a trucker to return a container to a particular terminal, and that terminal refuses to accept the container, no amount of detention can incentivize its return.

268

In addition to refusal to accept empty containers, the Commission listed additional situations where imposition of detention might weigh toward unreasonableness, such as uncommunicated or untimely communicated changes in container return, or uncommunicated or untimely communicated notice of terminal closures for empty containers.

269

266

84 FR at 48853, 48855.

267

84 FR at 48855.

268

84 FR at 48853;

see also id.

(“Absent extenuating circumstances, assessing detention in such situations, or declining to pause the free time or detention clock, would likely be unreasonable.”).

269

84 FR at 48853.

Most of the comments about this aspect of the rule were supportive.

270

Several commenters suggest additional ideas. Some argue that an ocean carrier should grant more detention free time when the carrier requires an empty to be returned to a location other than where it was retrieved, or when a marine terminal operator requires an appointment to return an empty container.

271

Commenters also raised issues with marine terminal “dual move” requirements.

272

In the import context, a “dual move” is where a trucker drops off an empty container and picks up a loaded container on the same trip to a terminal. Mohawk Global Logistics described some of the issues that arise when a marine terminal operator requires a dual move to return an empty container:

270

E.g.,

A.N. Deringer, Inc. at 1 (“If we cannot return a container because the terminal will not take it, detention should not accrue.”); Int'l Fed. of Freight Forwarders Ass'ns at 2; Mohawk Global Logistics at 7; NYNJFFF&BA at 3; Transp. Intermediaries Ass'n at 4; Transways Motor Express at 1; Yupi at 1; NCBFAA at 7.

271

E.g.,

Best Transp. at 2; F.O.X. Intermodal Corp. at 1; Int'l Motor Freight at 1 (“All empty equipment should be returned to the marine terminal it was picked up from in order to increase truck efficiency and reduce the number of chassis splits.”); Mohawk Global Logistics at 7 (“Some carriers argue the containers should be returned to a different facility, but typically they are more distant, or also closing down.”); S. Counties Express at 2.

272

E.g.

Mohawk Global Logistics at 7; S. Counties Express at 2 (“Empties only being received as a `dual transaction' when the motor carrier has no load to pull from the terminal. Steamship line charges motor carrier for not returning the empty and pulling a load.”); Quik Pick Express, LLC (“Typically, this is due to terminals only receiving empty containers as part of a dual transaction. If our company does not have an import container to extract from that terminal, we are unable to bring them our empty. We have no viable option to return the container, but are still faced with Detention charges by the Steamship line.”).

When winding down peak season, there are typically more empty containers being returned than full containers available to pick up, so single empty returns are more commonly needed, and without inbound loads, dual moves are hard to effect. When terminals go for days without accepting single moves, the trucker is stuck holding the container, usually on a chassis that is being charged for daily, and in a storage yard that is also charging daily. When a few single slots open up, everyone scrambles to get there with empties, quickly closing the yard down again.

273

Mohawk Global Logistics at 7.

Changes in return location, and requiring dual moves, are certainly practices that the Commission could review under section 41102(c) in light of the guidance in rule.

274

While the rule does not discuss the extension of free time when containers must be returned to a different terminal than that from which they were retrieved, the approach may have merit. The NPRM referred to the similar situation when container return location changes and the change is not communicated in a timely fashion.

275

The Commission is particularly concerned about the reasonableness of dual move requirements, or more specifically, an ocean carrier imposing detention when a trucker's inability to return a container within free time is due to it not being able to satisfy a dual move requirement.

276

Although the

CommCission assumes there are operational reasons for dual move requirements, they effectively tie a trucker's ability to avoid charges to doing additional business with a carrier or at a terminal. In an appropriate case, the Commission would carefully scrutinize such practices.

277

274

Assuming the other elements of a section 41102(c) case are met.

275

84 FR at 48853.

276

As between ocean carriers and marine terminal operators, in this context the focus would

likely be on ocean carrier practices.

See

FMC Demurrage Report at 7 (“For the return of their empty containers, VOCCs instruct the consignees and terminal operators who serve them when, where, and how this equipment can be returned.”).

277

Some commenters also asserted that off-terminal empty container storage areas should have the same hours as marine terminals. Int'l Motor Freight at 1; Transways Motor Express at 1. While that is something regulated entities may consider, delving into the hours of operation of particular facilities is beyond the scope of the rule, which is to provide general guidance.

The National Customs Brokers and Forwarders Association of America (NCBFAA) also advocates that the Commission “expand” the rule to reflect the railroad concept of constructive delivery of empty containers.

278

Under this approach, the detention clock should stop once a container “has been or could be delivered back to the port, VOCC or CY [container yard], but for the recipient's inability or unwillingness to receive the asset.”

279

The Commission views this approach as one option an ocean carrier could use to mitigate detention under circumstances where the charges cannot serve their primary purpose of incentivizing freight fluidity. To the extent that NCBFAA is suggesting that the Commission should adopt the constructive delivery principle, the Commission believes that importing this concept from the railroad context is something better addressed in the context of a specific case or a future proceeding devoted to that topic, so that it can receive comments and arguments from all sides.

278

NCBFAA at 7.

279

NCBFAA at 7.

In sum, the Commission is adopting this paragraph of the rule without modification.

H. Notice of Cargo Availability

The rule also states that in assessing the reasonableness of demurrage practices and regulations, the Commission may consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The rule further states that the Commission may consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice. This factor reflects that: (1) Ocean carriers are obligated under their contracts of carriage to give notice to consignees so that they have a reasonable opportunity to retrieve the cargo; (2) that notification practices must be reasonably tailored to fit their purposes under section 41102(c); and (3) the notion that aligning cargo retrieval processes with the availability of cargo will promote efficient removal of cargo from valuable terminal space.

280

Final Report at 18-20, 27-28; Interim Report at 9, 18; 84 FR at 98853 (“The more these factors align with the goal of moving cargo off terminal property, the less likely demurrage practices would be found unreasonable.”).

In applying this factor, the most important consideration is the extent to which any notice is calculated to apprise shippers and their agents that a container is available for retrieval.

281

The Commission explained that the type of notice is important—types of notice that are expressly linked to cargo availability weigh favorably in the analysis—and listed examples.

282

The Commission also noted the merits of “push notifications” of cargo availability, notifying users of changes in container availability, linking free time to notice of availability, and appointment guarantees.

283

The Commission stopped short, however, of specifying any particular form of notice.

281

84 FR at 48853.

282

84 FR at 48853 (“[n]otice that cargo is discharged and in an open area,” “notice that cargo is discharged, in an open area, free of holds, and proper paperwork has been submitted,” and “notice of all of the above and that an appointment is available.”).

283

84 FR at 48853.

The comments about this paragraph of the rule were generally of two types. Shippers, intermediaries, and truckers strongly support notice of cargo availability and urged that the Commission require such notice and specify what information a notice must contain.

284

Marine terminal operators opposed the Commission requiring any particular type of notice.

285

284

E.g.,

Mohawk Global Logistics at 2; NCBFAA at 13; Airforwarders Ass'n at 1; ContainerPort Group at 1; CV Int'l, Inc. at 2; FedEx Trade Networks, Inc. at 1-2; Florida Customs Brokers & Forwarders Ass'n at 1; Int'l Fed. of Freight Forwarders Ass'ns at 2; John S. Connor Global Logistics at 3-4; Thunderbolt Global Logistics at 2;

cf.

Int'l Logistics; ContainerPort Group.

285

PMSA at 5-6; WCMTOA at 10-11. In contrast, WSC argues that the rule is too vague in this regard because the Commission did not specify “what it considers to be the proper format, method, or timing” of notice.” WSC at 16.

The substantial supportive comments bolster the Commission's belief that consistent notice that cargo is actually available for retrieval would provide significant benefits to ocean freight delivery system, especially if that notice is tied to free time.

286

As pointed out by a commenter, notice of availability “would serve the important function of clearly identifying when the cargo is truly available for pick up and thus when the free time clock should start and end.”

287

The Commission remains concerned that legacy forms of notice might not be providing shippers with a reasonable opportunity to retrieve cargo.

288

Those concerns militate in favor of the Commission keeping “notice” as a factor in its guidance.

286

NYI,

the Commission declined to require that free time start upon issuance of a notice of availability.

NYI,

3 U.S.M.C. at 105-06. The Commission noted that “[c]onsignees are universally apprised of the arrival of vessels” and reasoned that “[i]nsistence upon a notice of availability would subject the carriers to extra work and expense that would be largely futile and which appears quite unjustifiable.”

Id.

at 106. The advent of containerization and the technological advances that have occurred over the past 72 years raise serious questions as to the continuing validity of these conclusions. As the Fact Finding Officer found, and shippers, intermediaries, and trucker commenters persuasively asserted, notices of availability would have benefits. Final Report at 19-20.

287

NYNJFFF&BA at 4.

288

Final Report at 19 (noting that some terminal operators as well as cargo interests “believed that vessel arrival is a poor proxy for notice that a container is available”);

see also

Transp. Intermediaries Ass'n at 4 (“TIA supports tying free time to actual cargo availability and not to vessel arrival: As FMC points out, demurrage cannot incentivize efficient cargo pickup if the cargo is not truly available yet.”).

That said, the Commission is not requiring specific types of notice. The Commission's guidance is intended to apply to a wide variety of terminal conditions. What constitutes appropriate notice in one situation might not in another. Ocean carrier and marine terminal operator customers have varied needs, and the Commission is wary of asking regulated entities to develop tools that their customers are unwilling to use.

289

Consequently, while the Commission may consider the factors listed in the NPRM in the analysis, it is not requiring any specific form of notice.

289

Final Report at 19 (“In other words, the terminal operators stated, they are being asked to create tools that are not effective for the market.”).

Marine terminal operators argue that by noting the merits of things like “push notifications” and updates regarding container status, the Commission is “requiring” marine terminal operators to do these things. This is based on an misreading of the NPRM.

290

The marine terminal operators also make a number of claims about the costliness and technical feasibility and necessity of some of the suggestions.

291

These are

arguments that the commenters would be free to make if relevant in a particular case.

290

WCMTOA insists that the NPRM “seeks to mandate the optimum level and type of notice for all terminal operators and carries in all circumstances.” WCMTOA at 11. The language of the rule, however, belie WCMTOA's inferences.

291

PMSA at 10-11 (noting that few industry players use push notifications because existing technology does not accommodate them.”);

PONYNJSSA (“[T]he NPRM suggests that if such a system does not `push' relevant information, then such a system might not be considere

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.