The Federal Maritime Commission (FMC) is to examine allegations that vessel operating common carriers (VOCCs) may be attempting to hold companies financially responsible for transportation services that they did not contract for and may not legally be required to pay.
In September last year, the US regulator invited stakeholders to provide comments on demurrage and detention under the Shipping Act, and concerns were raised about the billing practices of ocean carriers.
Allegations were made that VOCCs have expansively defined “merchant” in their respective bills of lading to include persons or entities with no beneficial interest in the cargo and who had not consented to be bound by the terms of the underlying bill of lading.
Hence, the FMC’s notice of inquiry (NOI) has invited interested members of the public to share their insights. Concurrent with the public comment period, the Commission’s Bureau of Enforcement will seek specific information from certain container shipping lines serving the US foreign trades.
In particular, the NOI seeks information related to how VOCCs apply the term “Merchant” in their bills of lading.
“For example, does the VOCC apply the term “Merchant” in a manner that subjects third parties that are not in a direct mutually agreed business relationship with the VOCC to liability?” asked the FMC in a statement.
FMC chairman Michael Khouri said: “We encourage ocean container stakeholders to share their experiences with bills of lading that contain these described “Merchant” clauses.
“Without public comment and involvement, it is difficult for the Commission to address alleged commercial abuse in this area.”
The NOI also asks whether ocean carriers have sought to enforce the definition of “Merchant” against third parties that have not consented to be bound by, or otherwise accepted, the terms of the bill of lading.
In its submission to the FMC in October 2019, the American Association of Port Authorities (AAPA) stated: “We do not support the Commission’s suggestion that marine terminal operators directly bill cargo interests, with whom they have no direct contractual relationship, for the use of terminal land.
“The suggestion would require revamping the commercial relationships that have existed in the industry for decades. Marine terminal operators (MTOs) do not have contractual relationships with the numerous cargo owners that may utilise their facilities and expecting MTOs to bill them all directly would not facilitate the efficient flow of cargo.”
Walmart, one of the numerous shippers to file comments, said at the time: “Demurrage and detention practices should be aimed at incentivizing cargo interests to move cargo promptly from ports and marine terminals, and when such practices do not incentive cargo movement, there is reason to question their reasonableness.
“Reasonable practices require clarity regarding demurrage and detention policies including, but not limited to, definition of charges, clarity regarding who is liable, notice (including that charges are accruing, of steps to be taken to terminate assessment of charges, and regarding resolution of disputes).”