- The Federal Maritime Commission created a "Vessel-Operating Common Carrier Audit Program" Monday that will review the detention and demurrage billing practices of ocean carriers, the agency said in a release Tuesday.
- The FMC will audit the practices of the nine largest carriers as measured by market share. The agency said it will work with the carriers as it relates to their implementation of the FMC's interpretive rule on detention and demurrage that it released last year to "clarify any questions or ambiguities."
- The program was established through the direction of Chairman Daniel Maffei, who said in a statement that the agency "is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages." He added that if the audit uncovers issues in the detention and demurrage billing practices, the agency "will take appropriate action," but the release doesn't outline what this action would be.
News of the FMC's audit program comes just over a month since a congressional hearing in which Maffei and Commissioner Rebecca Dye provided support in their testimony for auditing ocean carriers on their compliance with the agency's detention and demurrage rule.
At the time of the hearing, Maffei said, "I don't know if we have the resources for that." The audit program and its team will be led by Lucille Marvin, the Commission’s Managing Director. And a spokesperson for the agency said four other employees will join Marvin on the team, but "other individuals will augment the core group" as necessary.
FMC will audit the detention and demurrage practices of 9 largest carriers
The ocean carriers received a letter from the FMC earlier this week asking for information on the companies' revenues and billing practices. The carriers have until the end of August to send in their replies.
The audit program has been met with some praise from stakeholders. Robin Wiener, president of the Institute of Scrap Recycling Industries, called it "a big step towards addressing many of the issues facing shippers, resulting in greater enforcement and carrier compliance," in a LinkedIn post. And Keith Holdsworth, a partner and senior supply chain consultant at U.K.-based Perfection Limited, said in a LinkedIn post it will be interesting to see what the agency considers acceptable.
The FMC has been looking into detention and demurrage practices as part of Fact Finding 29, the investigation into the pandemic's effects on the ocean shipping industry. The Fact Finding is led by Dye, who said at the hearing last month that audits should happen on a regular basis.
While Fact Finding 29 will eventually conclude, the Vessel-Operating Common Carrier Audit Program is now a permanent effort within the FMC that will regularly carry out audits as part of its oversight, the spokesperson said. The program will not require a formal complaint to look into the detention and demurrage billing practices.
Detention and demurrage fees have been hotly debated among supply chain stakeholders for years. And congestion at ports and other parts of the supply chain over the last year has made matters worse. Cargo owners and truckers say they're being charged when there's no way for them to get their containers. Detention of equipment has been one of J.B. Hunt's biggest obstacles in the last quarter, Shelley Simpson, chief commercial officer, said on an earnings call Monday.
FMC commissioners have said for months they're concerned that ocean carriers aren't following the agency's guidance for detention and demurrage.
Separately, the FMC and the Justice Department's Antitrust Division signed a Memorandum of Understanding last week. The MOU "supplements and strengthens the FMC’s ability to detect, address, and pursue violations of the law or anticompetitive behavior by those we regulate," Maffei said in a statement.