Major reform of demurrage/detention charges on American Line

The FMC's new regulations on demurrage/detention charges in the United States were finally announced last Friday, more than half a year later than originally scheduled. The FMC's new regulation combined with the feedback received from the previous public consultation, has given clear regulations on who should be issued invoices for demurrage/detention, and has also given clear instructions on the relevant time period. It is no exaggeration to say that whether it is for the cargo owners or freight forwarders in China and the United States, the impact of this new regulation on the United States line is the biggest in recent years. Here I also want to highlight one "special group" : U.S. swap agents. It is foreseeable that the FMC's new regulations will bring great changes to this group and the subsequent agent operations.

Here's the point. Who should be invoiced for demurrage/detention? FMC gives two choices: the object to which the invoicer provides shipping and storage services, and which has signed a shipping and storage service agreement with the invoicer; The final consignee. Invoices can only be issued to one of the parties, not both companies, and invoices cannot be issued to other companies (such as tow trucks).

The second type of company is simple and clear, is the final consignee, in practice is MBL direct consignee. The first type of company has a difficult legal definition, which is translated into plain English as a party that has signed a contract (contract or prompt) with the shipping company, such as a freight forwarder.

Let's discuss the situation where the MBL consignee is a freight forwarder. If the contract is signed between the consignee (freight forwarder) and the shipping company, then it is reasonable to issue the invoice for detention to them. However, there is a very common situation, which is the "exchange agent" I mentioned earlier. The American exchange agent is generally the consignee on MBL, but the contract is not signed by them, and basically the contract is signed by the consignor (freight forwarder at the port of shipment). According to the new regulations of FMC, the invoice for detention should be issued to the one that has an appointment with the shipping company, that is, the freight forwarder at the port of departure.

Us shipping companies usually issue invoices to MBL's consignee (whether the actual consignee or forwarder). If FMC's regulations are strictly followed, the US exchange agent should not receive the invoice from the shipping company unless it is booked with their contract. If this is the case, the previous concern that the exchange agent is about to take a big risk can be lifted.

However, does the definition of "contracted" in the regulations also differ between a narrow sense and a broad sense? The narrow understanding is that there is an agreement with the shipping company (whether it is a fixed contract price or a floating spot contract price), and the general exchange agent does not use their negotiated price. A broad understanding can be that since the exchange agent appears on MBL as the consignee, is it considered as having an agreement with the shipping company? This depends on how the subsequent shipping company operates. One thing's for sure: Towing companies won't be getting those bills.

If the invoice is still issued to the agent to change the order, and the agent only changes the order and does not make the trailer customs declaration, the payment of detention is a great burden. In addition to spending manpower to verify the amount (because the client drags the container by himself, the agent has no first-hand information), if there is a dispute, it will take longer to file a complaint. The freight forwarder at the port of departure requires the exchange agent to pay in advance, which will also increase the financial pressure. The bill of the shipping company waits for no one, the exchange agent pays first, if there is a dispute in the later period, the exchange agent may face the result of loss, dozens of exchange fees and potential risks are not proportional.