Report: U.S. D&D Charges Highest in the World. What the FMC is Doing About it
According to Container xChange’s recently released Demurrage & Detention Benchmark 2022 report, “Demurrage and Detention (D&D) charges imposed on the US shippers by container lines continue to be the most expensive in the world and have increased this year even as global average fees have fallen from the record highs of 2021.”
Late last year, we covered demurrage and detention trends revealed in the company’s Detention & Demurrage 2021 report—as well as how the Federal Maritime Commission (FMC) was taking action at the time.
Here, we’ll provide an overview of the findings of this year’s report and recent moves by the FMC.
Report: Demurrage & Detention 2022
As a quick review, the following Container xChange video provides a brief explanation about demurrage and detention—as well as a few highlights from the 2021 report.
For this year’s report, Demurrage & Detention 2022, Container xChange:
Gathered over 20,000 data points from publicly available sources.
Used the data gathered to compare D&D rates charged by the eight largest shipping lines and across the top 60 container ports in the world.
Compared the data to that collected by Container xChange mid-year 2021 and 2020.
In a summary of the findings, a Container xChange press release noted that:
“U.S. ports occupy the top five spots in the list of ‘60 ports ranked by highest to lowest D&D charges across shipping lines’”
“Despite increased U.S. regulatory scrutiny of D&D charges, shippers using the port of New York now face the highest D&D fees on the planet. New York is followed by the ports of Long Beach, Los Angeles, Oakland, and Savannah in the rank list”
“All five ports were more than 2-3 times more expensive than Hong Kong in the 7th spot”
The release also described the “political spotlight on D&D” in the U.S.: “Under heavy pressure from shipper lobbyists, President Biden signed the Ocean Shipping Reform Act into law on June 16, 2022. OSRA gives the Federal Maritime Commission the power to act more assertively on D&D charges and shifts the burden of proof for the reasonableness of fees to ocean carriers instead of shippers.”
“Throughout this pandemic, as shipping costs have soared and inflation has become a threat to the U.S. economy, the focus on container line behavior by politicians and regulators has magnified,” said Christian Roeloffs, co-founder of Container xChange.
"U.S. agricultural shippers have been particularly outspoken about their inability to find affordable empty containers for exports. But importers have been equally outraged by what many believe has been profiteering on D&D charges by container lines. Some have started legal actions against carriers.
This really came into the cross hairs of President Joe Biden this year when he has been highly critical of container lines. His administration addressed D&D in the Ocean Shipping Reform Act and we’re now waiting to see how this will be implemented and whether it will change shipper or carrier behavior significantly.”
Also noted in the report:
“Global average D&D charges levied by container lines on customers two weeks after the cargo was discharged from the vessel increased by 38% for standard-sized containers from $586 in 2020 to $868 in 2021.”
“So far in 2022, average D&D charges by major ports have declined to an average of $664 per container by 26%, although fees remain far higher than pre-pandemic at around 12%.”
“Even so, the U.S. shippers are not benefitting from these global declines in D&D charges.”
To demonstrate the lopsided D&D trends in the U.S., Container xChange cited May 2022 data indicating that “the average charges levied by container lines on customers two weeks after a box was discharged from the vessel at the port of Long Beach was $2730 per container, up from $2638 a year earlier. At the port of Los Angeles in May 2022, the average D&D fees increased from $2594 per container in 2021 to $2672 per container.”
Container xChange noted that there can be a wide variance in D&D charges among ports and carriers: “Of the leading container lines across ports, COSCO currently has the lowest D&D charges while HMM’s D&D fees are the highest.”
Also quoted in the release, David Lademan, Associate Editor of the Container Markets division at S&P Global Commodity Insights, commented on the report.
“The issue of demurrage and detention as a part of the overall cost of freight has been brought to the fore because of the market imbalances that we have seen over the past two years,” Lademan said.
“Many shippers have reported that demurrage charges have been levied against them despite cargo being buried under stacks of containers at log jammed ports, which leaves them functionally unable to retrieve their containers. On the other hand, cargo owners have altered their behavior with inland moves, as detention fees have grown in value and frequency, with many ocean carriers stripping free time in a bid to keep container velocity elevated. Many shippers are now in the practice of cross-docking cargos, to return containers quickly and avoid elevated fees. This comes amid an already protracted period of turbulent market conditions.”
The FMC and D&D: Recent Efforts
As soon as the Ocean Shipping Reform Act of 2022 (OSRA) became law in June, the FMC started implementing it.
FMC’s implementation efforts included “Placing trade on notice that common carriers are required to immediately comply with detention and demurrage billing practices.”
And in response to “growing concerns” about congestion at the Port of New York and New Jersey, FMC Chairman Daniel B. Maffei and Managing Director Lucille Marvin (also the current Acting Director of the Bureau of Enforcement, Investigations, and Compliance) visited Newark on August 3rd and met with representatives from the trucking community and marine terminal operators.
A statement published on FMC’s website described why the visit was needed.
“Last week, both the National Industrial Transportation League (NITL) and Bi-State Motor Carriers Association (Bi-State) sent formal correspondence to the Commission raising concerns about equipment availability and demurrage and detention charges,” the statement said. “Both groups urged the Commission to suspend demurrage and detention at the Port of New York and New Jersey. In order to see conditions first-hand and acknowledge the importance of the issues, Chairman Maffei and Ms. Marvin traveled to the Port yesterday to meet with stakeholders directly.”
When the meetings were over, Chairman Maffei made the following statement.
“When ocean carriers continue to bring thousands of containers per month to a port and only pick up a fraction of that number, it creates an untenable situation for terminals, importers and exporters, trucking companies, and the port itself,” he said.
“The Commission has already been investigating reports of carriers charging per diem container charges even when the shipper or trucker cannot possibly return the container due to terminal congestion. I will ask that this investigation be broadened and intensified to cover instances where shippers and truckers are being forced to store containers or move them without proper compensation.”
“The Commission will ask the carriers that have fallen the most behind in picking up their empties what their plan is to rectify the situation,” Maffei said.
“Whatever their answers may be, I will do everything in my power to ensure that carriers do not receive involuntarily subsidized storage for empty containers that belong to them. If it can be shown that a shipper or a trucker is not allowed to return a container then – not only should they not be charged per diem but – the carrier should compensate that trucker for the space it takes up. This is completely in line with the incentive principle set forth by the Commission in its rules in that it would promote the movement of cargo since chassis and space would be freed up by carriers taking full responsibility for the empty containers resulting from the increased volumes of import cargo they bring in.”