NAWE Applauds Bipartisan Letter Urging the FMC Follow Congressional Intent Outlined in Ocean Shipping Reform Act of 2022

Washington, DC – (August 24, 2023) – The National Association of Waterfront Employers (NAWE) today applauded Representatives Jake Auchincloss (D-MA-04) and Brian Babin (R-TX-36), members of the House Transportation and Infrastructure Committee’s Coast Guard and Maritime Subcommittee, for urging Federal Maritime Commission (FMC) Chairman Daniel B. Maffei, to follow Ocean Shipping Reform Act of 2022 (OSRA) congressional intent throughout the law’s implementation and rulemaking process.

The letter comes on the heels of the FMC proposed rulemaking to establish demurrage and detention billing requirements under OSRA and outlines the specific provisions related to MTOs that were removed from the final bill, passed by both congressional chambers and signed into law by President Biden on June 16, 2022.

“The Port of Boston appreciates Representative Auchincloss for his work on the House Transportation and Infrastructure Committee, recognizing the importance of Conley Terminal to the supply chain and economy of Massachusetts,” said Joseph M. Morris, Port Director of Massachusetts Port Authority.  

“We applaud Congressman Babin and Congressman Auchincloss for their leadership in reaffirming the original intent of Congress established in OSRA 2022, to incentivize the timely retrieval of cargo from marine terminals,” said Port of Houston Director of Government Relations Cam Spencer. “The FMC’s recent interpretation to disallow terminal demurrage on weekends and holidays disincentivizes shippers from timely retrieval of cargo and reduces efficiencies of marine terminals. And, currently proposed rule-making that increases the burden of administrative billing processes will even further disrupt cargo fluidity through our nation’s ports. We believe MTOs will be able to better serve the supply chain and maximize the limited capacity available to America’s ports as a result of the initiatives of Congressman Babin and Congressman Auchincloss.”

“As the Commission proceeds with its proposed rulemaking, it is imperative that they follow Congressional intent. The current approach by the FMC blatantly disregards the law and would slow down a supply chain that is regaining its strength. NAWE’s members appreciate Reps. Auchincloss and Babin for taking the lead on this issue, recognizing the unique environment in which waterfront workers operate. NAWE’s top priority will continue to be the health and safety of its workforce,” said NAWE President Robert Murray.

Furthermore, the letter also highlights Commissioner Maffei’s March 23 congressional testimony wherein he stated that the FMC should avoid disincentivizing the timely retrieval of cargo from marine terminals and should adhere to the “incentive principle.” Recently the Commission determined that equipment detention charges for holiday weekends did not align with the “incentive principle.” The lawmakers state their continued concerns that extending the Commission’s recent interpretation to terminal demurrage would disincentivize the timely removal of containers from marine terminals, impeding cargo fluidity at America’s ports.

“The United States has just recovered from unprecedented supply chain congestion that caused great harm to our economy, and we cannot allow counterproductive government regulation to threaten the stability we have restored at American ports. Therefore, we urge you to remove MTOs from the OSRA detention and demurrage rulemaking and to ensure that the FMC does not extend its recent “Incentive Principle” interpretation to terminal demurrage,” the lawmakers wrote.

Full text of the signed letter can be found here and below.

Dear Chairman Maffei:

As members of the House Transportation and Infrastructure Subcommittee on Coast Guard and Maritime Transportation, we are writing with regard to the Federal Maritime Commission’s (“FMC’s” or “Commission’s”) proposed rulemaking to establish demurrage and detention billing requirements under the Ocean Shipping Reform Act of 2022 (“OSRA” or “Act”). Specifically, we urge the Commission to follow the intent of Congress by removing marine terminal operators (“MTOs”) from the rulemaking’s substantive demurrage billing requirements. In addition, we are deeply concerned that the Commission’s recent interpretation of the “Incentive Principle” could cause severe disruptions in America’s supply chain if applied to terminal demurrage.

Given our concerns over the impact of OSRA’s detention and demurrage provisions on shippers, marine terminal operators and the supply chain, we voted against the original House version of the bill (H.R. 4996), but we supported the final version of the bill that became law. The original House and Senate versions of OSRA each contained burdensome demurrage billing requirements, but the final version removed MTOs from those requirements to ensure that potentially negative impacts to the supply chain and established billing processes were mitigated. The Commission’s rulemaking should be based on the final legislation that became law, not on the provisions that were removed from the original House and Senate legislation.

Of particular note, the final OSRA legislation that became law did not contain the following provisions that were included in the original House or Senate bills:

• The prohibition of any ocean carrier or marine terminal operator from invoicing a party for demurrage and detention charges, unless such invoice was accompanied by an accurate certification that such charges comply with the FMC’s regulations and the Commission’s “Interpretive Rule on Demurrage and Detention Under the Shipping Act”
• The Commission’s requirement to publish all penalties imposed or assessed against both ocean common carriers and MTOs with regard to improper demurrage and detention charges. 
• A burden-shifting provision that would have required MTOs to prove that demurrage charges were reasonable whenever challenged by shippers.

During the House Transportation and Infrastructure Subcommittee’s March 23^rd  hearing on the FY2024 budget for federal maritime programs and OSRA implementation, you testified that the underlying purpose of OSRA was to help the FMC take a lead role in “untying the knots and mitigating the unfairness that seemed to be plaguing the supply chain,” and acknowledged the FMC’s responsibility to implement the new law “in the spirit intended by Congress.” However, mandating billing requirements for MTOs, which were already removed by Congress in the final legislation, do not serve the purposes of the underlying Act. Rather, mandating such requirements could potentially increase port congestion by disrupting established billing processes and the flow of cargo at marine terminals.  Moreover, the actions of American MTOs do not cause the negative impacts on U.S. shippers that OSRA was intended to address.

You also acknowledged during the March 23^rd hearing that the FMC should avoid actions that disincentivize the timely retrieval of cargo from marine terminals and, in response to questions, noted that detention and demurrage, while essential to keep cargo flowing, must adhere to the “incentive principle.” We understand that in a recent decision the Commission determined that the imposition of equipment detention charges on a holiday weekend was at odds with the “Incentive Principle” and therefore unreasonable under the Shipping Act. While the goal of the Incentive Principle is sound – ensuring that detention and demurrage charges incentivize the flow of cargo – we are concerned that extending the Commission’s recent interpretation to terminal demurrage would disincentivize the timely removal of containers from marine terminals and impede cargo fluidity at U.S. ports.  

Marine terminals are not warehouses, and it is not unreasonable for an MTO to be compensated by a shipper that improperly uses the marine terminal as such.  Moreover, the imposition of weekend and holiday terminal demurrage promotes cargo fluidity, consistent with the Incentive Principle. Such charges incentivize shippers to remove their containers before the weekend or holiday to avoid paying for such additional storage costs. This frees finite terminal space for containers discharged from vessels calling on U.S. ports during the weekend or holiday.  

The United States has just recovered from unprecedented supply chain congestion that caused great harm to our economy, and we cannot allow counterproductive government regulation to threaten the stability we have restored at American ports. Therefore, we urge you to remove MTOs from the OSRA detention and demurrage rulemaking and to ensure that the FMC does not extend its recent “Incentive Principle” interpretation to terminal demurrage.

Sincerely,

Jake Auchincloss (MA-4)                                                                    Brian Babin (TX-36)

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About NAWE 

The National Association of Waterfront Employers is a Washington based trade association whose member companies are privately owned stevedores, marine terminal operators, and other waterfront related employers. Member companies do business at major U.S Ports on the Atlantic and Pacific coasts, the Gulf of Mexico, the Great Lakes, Canada, and the Commonwealth of Puerto Rico. These firms are committed to keeping America’s international trade and commerce flowing to better serve our economy. Learn more at https://nawe.us/.