The Working Group – Sea Transport of the Fédération Internationale des Associations de Transitaires et Assimilés (FIATA) announced the publication of a Best Practices guide for Demurrage and Detention charges in Container Shipping.
The absence of regulatory action has resulted in detention and demurrage practices that vary widely from port to port and country to country. While these charges are intended to compensate the lines for use of their equipment and to encourage importers to promptly return containers, the rapid accrual of these charges is a burden on shippers and consignees that can sometimes act to frustrate a carriage or agreement of purchase and sale.
FIATA’s recommendations include:
- Detention and demurrage charges should not accrue indefinitely. There should be a limit on charges accrued that represent reasonable compensation for the shipping line, “ideally, the value of the purchase price of a new container.” Carriers should work proactively with industry partners to facilitate prompt delivery and return, rather than insisting on the continuous charging of detention and demurrage.
- Free time should cover delays outside the Merchant’s control. Merchant’s have no privity of contract with key supply chain partners at ports and no direct recourse for delays caused e.g. by customs inspections or port congestion. FIATA recommends that free time should be extended by the amount of delay caused by inability of the terminals to release or receive containers.
- Penalties for late pick-up / return should be waived during customs inspections. While it is reasonable for the lines to charge for demurrage to compensate for lost use of hardware, the portion of charges that is intended to prompt swift return should not be charged where the delay in delivery is the result of customs inspections.
- No preference for carrier haulage. Choice in carriers for delivery to customer from port encourages competition in service and prices. FIATA notes that in some cases where lines offer on-carriage services, they will waive detention and demurrage charges during their period of on-carriage, but they will not waive those charges where on-carriage is arranged by the Merchant. This preference is anti-competitive and FIATA encourages equal and fair treatment of Merchants and their cargoes.
- Reasonable export demurrage free time. Requirements for advanced commercial information and for safety information such as Verified Gross Mass under the SOLAS convention have the effect of increasing the amount of time pre-export in which the container may be required. In addition, carrier consolidation and steadily increasing vessel size contributes to congestion peaks that also increase pre-export delays. Carrier demurrage practices should accord with these longer periods so that Merchants are not exposed to detention and demurrage charges merely for proper regulatory compliance.
- No charge for vessel delay. Similarly, where containerized goods are stopped at port of departure as a result of vessel delays, Merchants should not be penalized with detention or demurrage charges.