Demurrage and detention charges reach record highs
GENEVA : According to recent reports demurrage and detention charges have doubled, resulting in complaints across the US, Europe and Asia with a reported average increase in D&D charges of 104% over the past year.
Today’s maritime supply chain continues to undergo severe disruptions, exacerbated further by the ongoing COVID-19 pandemic. Schedule reliability in terms of transit and frequency are now at an all-time low resulting in a total absence of predictability, whilst freight rates are at record high levels. Freight forwarders and their customers – many of whom are small and medium-sized enterprises (SMEs) – are particularly hard hit by these rocketing prices, being increasingly subjected to spot contracts with high price volatility as compared to longer-term contracts held by beneficial cargo owners (BCOs).
These demurrage and detention charges have also been addressed by US President Joe Biden in a White House Executive Order signed on Friday, 9 July 2021. The order, aimed at promoting competitive markets across the US economy, encourages the Federal Maritime Commission (FMC) to ensure vigorous enforcement against exorbitant demurrage and detention charges. Said order comes amid the recent signature of an agreement between the FMC and the US Department of Justice for greater cooperation in assessing antitrust concerns in the maritime sector.
FIATA continues to call on policymakers and shipping lines to ensure that their demurrage and detention charges are proportionate and fair, in the interests of ensuring a level playing field for the fluidity of international trade. FIATA recalls the landmark guidance provided in US FMC’s final rule Docket No. 19-05, Interpretive Rule on Demurrage and Detention Under the Shipping Act (Final Rule) which was developed as a result of an extensive fact-finding investigation and industry consultation, and which brings together a non-exclusive list of factors that may be considered when the reasonableness of demurrage and detention practices is to be assessed. FIATA reminds all stakeholders of the comprehensive FIATA toolkit on the FMC Final Rule which was developed to help FIATA members and governments alike leverage this information in their national contexts.
Recognizing that these are exceptional times for all maritime supply chain stakeholders, FIATA regrets that demurrage and detention charges continue to reach record highs. FIATA calls on all maritime supply chain actors to take cognizance of, and apply, the valuable principles developed by the FMC. In that vein, FIATA also invites its members to raise awareness of the crucial information developed by FIATA on this subject and to leverage them in their discussions at the national level.
Disproportionately high and opaque charges hinder the ability for all stakeholders to operate on a level playing field, and this ultimately impacts the fluidity of international trade. FIATA reminds all maritime supply chain stakeholders of the importance of ensuring that policies protect shippers of all sizes, and that care is taken to ensure that SME shippers are not disadvantaged. FIATA continues to encourage all stakeholders to work together to develop strengthened and constructive dialogue and exchange of information. The entire supply chain, as well as economies at large, would benefit from a less opaque system with transparent, consistent and reasonable demurrage and detention practices.
Source : FIATA