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Shippers challenge container line demurrage fees in US courts

Photo: Bill Oxford - Unsplash Judge's gavel in court
Shippers set to challenge “disingenuous” shipping lines to claw back demurrage fees at Los Angeles and Long Beach ports.

Cash-rich container lines are facing a backlash from disgruntled shippers ready to turn to the courts to test who carries the responsibility for runaway demurrage fees in the principal gateway ports to the US.

The issue is expected to move into the courts this year, after FMC issued new guidelines on the issue of legal challenges on 28 December 2021 with the intention of making it easier for shipper associations to challenge lines and to deter “unfair and unreasonable conduct by carriers, marine terminal operators, and intermediaries”.

A legal complaint lodged with the FMC on 7 January 2022 by shipper group Orange Avenue Express Inc and One Banana against German carrier Hapag-Lloyd is likely to set a precedent for where responsibility for delays and costly demurrage and detention fees lies in US ports.

The complaint revolves around heightened difficulties experienced by One Banana since September 2021 to get its shipments to customers. The importer claims port congestion and unfair practices by Hapag-Lloyd have cost the company in excess of $687,470.50 in “unfair demurrage and detention charges, and costs in connection with dumping, inspection, and transportation of the perished cargo”.

“In sum, One Banana’s position is that Hapag Lloyd is in violation of 46 U.S.C. § 41102(c) because it has a practice of creating a situation in which it is impossible to return empty refrigerated containers and pick up new ones, and then it charges demurrage for the late pick up it created,” said the shipper’s lawyers.

The Florida-based shipper claims it faced delays on 77 containers in eight shipments at the end of 2021. Damages filed do not include the cost of perished cargoes, it says. Port delays of more than 30 days owing to requirements imposed by shipping lines on truckers to drop off empties at the port in order to be able to pick up an import shipment.

“Hapag-Lloyd does not waive demurrage or detention charges even if it does not make drop off locations available,” said the complainant.

A spokesman for Hapag-Lloyd declined to comment when contacted by Seatrade Maritime News on ongoing legal procedures.

According to Matt Schrap, Chief Executive Officer of the Harbor Trucking Association (HTA), the largest truckers’ association in California, the case is the tip of the iceberg and symptomatic of the complexity facing supply chain professionals trying to unblock congestion in the port. Whether it’s the terminals or the carriers causing the delays to boxes stuck in the dock is central to the case and the thorny issue of who should pay for containers stranded at the port.

“The response of the shipping lines that they ‘don't run the terminals’ is at best disingenuous,” says Schrap. “The attitude is encouraging motor carriers to challenge this in the courts.”

Resorting to legal action is one of the few areas left for shippers to seek recourse for the runaway costs they face at a time when freight and additional costs have soared to unprecedented levels. The issue of demurrage and detentions is costing truckers, shippers and logistics up to $150m a year in the city’s principal ports in California and New York / New Jersey, according to research by the HTA. “This is something that has put a lot of companies out of business,” says Schrap.

The desperate nature of the supply chain crisis, however, has also placed many shippers in a fearful position, afraid of antagonising shipping lines and reducing their access to vessels, something that was addressed by the new FMC guidelines issued on 28 December. “There is no leverage with the shipping lines,” states Schrap.

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