FMC’s Final Rule on Demurrage and Detention Billing Practices, Continued

The Federal Maritime Commission (FMC) has issued a correction to its Final Rule on Demurrage and Detention Billing Requirements (Final Rule) to address reported ambiguity regarding when ocean carriers may bill detention and demurrage (D&D) to motor carriers (the Correction). (See 89 Fed. Reg. 39569 (May 9, 2024), as well as Holland & Knight's previous alert, "Federal Maritime Commission Announces Demurrage and Detention Final Rule," Feb. 27, 2024.) The FMC explained in the Correction that notwithstanding the Final Rule's "clear direction regarding who may be a 'billed party,'" language in the preamble discussion to the Final Rule may have been interpreted as more broadly permitting an ocean carrier to invoice a motor carrier with which it holds a contract.

The language in question centered around the following two sentences:

Nothing in this rule, either in the proposed or final version, prohibits a VOCC [vessel operating common carriers] from issuing a demurrage or detention invoice to a motor carrier when a contractual relationship exists between the VOCC and the motor carrier for the motor carrier to provide carriage or storage of goods to the VOCC. The definition of ''billed party'' is intentionally broad to capture any party to whom a detention or demurrage invoice is issued.

The ambiguity was the reported rationale for a petition challenging the Final Rule filed by the World Shipping Council (WSC) in the U.S. Court of Appeals for the District of Columbia Circuit (addressed further below).

The Correction replaces a paragraph in the Final Rule's preamble – removing and revising the language in question – with a more concise discussion reiterating that D&D invoices may only be issued "to either the person for whose account the billing party provided ocean transportation or storage of cargo and who contracted with the billing party for the ocean transportation or storage of cargo, or the consignee." The FMC explained that the intent of its original language was not to expand to scope of permissible "billed party," but merely to distinguish the FMC's jurisdiction generally over cargo moving inland on through bills of lading, from cargo moving inland not under through bills of lading that may be outside of the FMC's jurisdiction, such that any contracts between carriers and truckers not based on a through bill of lading would likely be outside the scope of the Final Rule.

WSC Petition

WSC filed a petition for review (Petition) with the D.C. Court of Appeals on April 18, 2024. WSC is challenging the Final Rule under 46 U.S.C. § 41102(c) and Section 7(b) of the Ocean Shipping Reform Act of 2022, 46 U.S.C. § 41102, as "arbitrary, capricious, an abuse of discretion, and otherwise contrary to law," as well as seeking an order vacating the Final Rule. In a press release, WSC stated that it had sought to have the FMC correct what it viewed as an internal contradiction in the FMC’s Demurrage and Detention Billing Requirements, 89 Fed. Reg. 14330 (Feb. 26, 2024) (Final Rule). On April 19, 2024, the D.C. Court of Appeals ordered that for both parties procedural motions and statement of issues are due May 20, 2024, and dispositive motions are due June 3, 2024.

WSC President and CEO John Butler stated that "[t]he preamble to the [Final Rule] clearly states that an ocean carrier may invoice a motor carrier with which it holds a contract. The language of the rule itself, however, appears to prohibit such billing." The scheduling order issued by the D.C. Court of Appeals requires the parties to submit any procedural motions by May 20, 2024, and any dispositive motions by June 3, 2024. The Correction does not have a direct effect on the pending Petition. It is up to WSC to determine whether the FMC's Correction adequately addressed WSC’s concerns with the Final Rule, and the Petition itself is not limited to the specific concerns WSC described in its press release.

For more information or questions about the Final Rule or the Correction, contact the authors or a member of Holland & Knight's Maritime Team.