S3.E11 - FMC's Final Rule on D&D Billing Requirements - Part 2 - Operational Implementation Challenges

Topic of the Week (4/12/24):

Now that we’ve had a few weeks with the detention and demurrage rule, let’s talk key takeaways and things I think everyone should be paying attention to. What do I think will have the biggest growing pains? – the 30 calendar days on the invoice for the billed party to pay – stick around and I’ll explain why.

D&D Final Rule:

https://www.regulations.gov/document/FMC-2022-0066-0286

The Maritime Professorᵀᴹ presents By Land and By Sea - an attorney breaking down the week in supply chain

with Lauren Beagen (Founder of The Maritime Professorᵀᴹ and Squall Strategiesᵀᴹ)

Let's dive in...

1 - Checking in on the Federal Maritime Commission open rulemakings and stakeholder engagement: defining unreasonable refusal to deal or negotiate w/r/t vessel space accommodations provided by an ocean common carrier, defining unfair or unjustly discriminatory methods // MTDI RFIs)

2 - A quick overview of two notable actions at the FMC: Samsung Electronics America cases (still waiting on the replies; all we have are the initial complaints) and the MSC Mediterranean Shipping Company $63M enforcement action (still pending, likely to be appealed; waiting on MSC response due May 3))

Samsung v. COSCO (Samsung Complaint)
https://www2.fmc.gov/readingroom/docs/24-16/24-16%20Verified%20Complaint%20date%20stamped.pdf/

Samsung v. OOCL (Samsung Complaint)
https://www2.fmc.gov/readingroom/docs/24-17/24-17%20Verified%20Complaint%20date%20stamped.pdf/

OPENING BRIEF OF THE BUREAU OF ENFORCEMENT, INVESTIGATIONS, AND COMPLIANCE
https://www2.fmc.gov/readingroom/docs/23-08/23-08%20BEIC%20Opening%20Brief%20(public%20version)%20redacted.pdf/

3 - United Steelworkers (USW) petition to Office of the U.S. Trade Representative is now supported by SIX United States Senators (Tammy Baldwin (D-WI), Elizabeth Warren (D – MA), John Fetterman (D-PA), Bob Casey (D- PA), Sherrod Brown (D-OH), Mazie Hirono (D-HI))

Tomer Raanan's Article:

https://www.lloydslist.com/LL1148801/US-senators-rally-behind-labour-groups-urging-China-shipbuilding-probe

USW Petition to USTR:

https://ustr.gov/sites/default/files/Section%20301%20Petition%20-%20Maritime%20Logisitics%20and%20Shipbuilding%20Sector.pdf

Letter to USTR from six US Senators:

https://www.brown.senate.gov/imo/media/doc/baldwin_casey_grow_support_for_usw_petition_on_chinese_commercial_shipbuilding.pdf

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Transcript

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Impact of FMC D&D Rule

Speaker 1 0:27

Oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh , oh . I got soul coming through . Won't stop in the peace and on top of the world . Yeah , walk to the beat when you see me coming next to you . Everywhere I go , I'm in the spotlight . This is a good life . I'm living bold . This is what it looks like On the 16th of the world .

Speaker 1 0:56

Now that we've had a few weeks with detention and demurrage , let's talk some key takeaways and maybe some things that I think everybody should be paying attention to . What do I think will have maybe one of the biggest growing pains of this new final D&D rule out of the FMC ? I mean maybe the 30 calendar days on the invoice for the billed party to pay it right , or certainly ask for a dispute . Stick around and I'll explain what I mean there . Hi , welcome to , by Land and by Sea , an attorney breaking down the weakened supply chain presented by the Maritime Professor me . I'm Lauren Began , founder of the Maritime Professor and Small Strategies , and I'm your favorite maritime attorney . Join me every week as we walk through both ocean transport and surface transport topics in the wild world of supply chain . As always , the guidance here is general and for educational purposes only . It should not be construed to be legal advice and there is no attorney-client privilege created by this video or this podcast . If you need an attorney , contact an attorney . But before we get into the discussion of the day , let's go through my top three stories of the week . All right . Story number one Look , it's been a busy few weeks of travel so I really haven't done an overview of the other rules that we're watching out of the FMC .

Speaker 1 2:10

I like to periodically check in on it . Still nothing really to report , and that's okay . Right , the D&D rule is the final rule is out . We're waiting on the effective date to hit May 28th . But we're also looking for some other rules we have defining unreasonable refusal to deal and negotiate with respect to vessel space accommodations provided by an ocean common carrier . That last closed July 2023 . So here we are it's April 24 . So that's nine-ish months that we've been waiting since that one last closed . I think we'll probably get some movement on that this summer , hopefully , or probably hopefully , before the one year date and maybe even before the two year date of ASRA , even though it's supposed to be done one year after within . Actually , this one's supposed to be done six months after ASRA .

Speaker 1 3:00

Chairman Maffei of the FMC has said it's better to get it right than get it fast . Chairman Maffei of the FMC has said it's better to get it right than get it fast . This one is a tricky one . They've also said that this rule this defining unfair , unreasonable refusal to negotiate kind of started to edge into the other rule that we're waiting on , which is defining unfair and justly discriminatory methods . We're waiting on independent language on this . We haven't seen anything come out from the FMC independently on this rulemaking . But , like I said , they have said that they included some of this required rulemaking discussion in that unreasonable if we still negotiate rulemaking . So it hasn't been not worked on . Certainly they've been working on it , right , I think they started working on all three of the rules that were dictated to them under ASRA 22 when that passed , but we're still waiting on the final rules here . So defining unreasonable refusal to deal and negotiate with respect to vessel space accommodations . That one I expect it to come out in a final rule next time we see something on that .

Speaker 1 4:01

Defining unfair or unjustly discriminatory methods we're probably going to see that in a notice of proposed rulemaking . So again we have the advanced notice of proposed rulemaking , which is way early stage , which is usually just questions to the industry , no real language yet . Then we have notice of proposed rulemaking as kind of the next stage in the Administrative Procedures Act for how to do a rulemaking Notice of proposed rulemaking . That's where you start to have some actual language drafted and the agency says what do you think about this ? Here's the language We'd like weigh in from the industry . The unreasonable refusal to negotiate took an additional step , which is where they created a supplemental notice of proposed rulemaking , which was another bite at the apple . Another notice of proposed rulemaking round , and then usually what happens next is a final rule right , and so that's where I think that unreasonable physical deal is going to go into final rule next , defining unfair , unjustly discriminatory methods like I said , I think that's going to go notice of proposed rulemaking because I think that they have some preliminary information that they don't need to poll the crowd .

Speaker 1 5:08

They don't need to send that out in a question form . They can start writing some language there , although I think that one's going to be a tricky one as well , and so they want to get that right , because it's anytime you're defining things . You want to get it right and not have unintended consequences . So I think the FMC is going to be careful , cautious , take their time , but will clearly take their time . They're already taking their time right . We're about a year and a half almost two years since Oswald 22 . Now that we're in 24 , june 16th is that date . So I think we're going to see movement on both of those before the June 16th date . I hope so . I think that the FMC is probably hoping so too . I think they are very aware of that June 16th date .

Speaker 1 5:50

But look , we have the final rule out for the billing practices on detention and demurrage . That one goes into effect May 28th . The information collection still has to go through an OMB review . That really just has to do with a reduced paperwork act and making sure that they're not overly burdening the industry and the public . So that's why OMB is reviewing that information collection piece of the D&D rule . But generally everything else is going into effect May 28th . So we have about a month and a half right before that goes into final effect .

Speaker 1 6:27

Recently the FMC put out a notice saying hey , we're watching everything that's going on in Baltimore . Don't forget , d&d rules aren't in effect yet , but all Shipping Act rules and regulations are so a little bit confusing , but basically they were just saying , look , we're paying attention , we're watching , are so a little bit confusing , but basically they were just saying look , we're paying attention , we're watching , we're making sure that surcharges and D&D are moving in normal due course . But to remind everybody , d&d rules were coming , but that they don't apply yet . And so , look , why am I kind of talking so much about this D&D rule ? We're going to be talking about it more in the specifics of the content in a minute , but I think if you had thoughts on the D&D rule , it's not a closed door , right ? It's certainly here , right ? So this is a final rule . It's been released , it has an effective date . That's not to say that you can't still submit a comment on it . The FMC has also made some indication that they're going to be watching how the D&D rules kind of get settled into the industry and kind of out in the wild . So I don't think that this is the end of the conversation and so submitting a comment now might not , probably won't stop anything .

Speaker 1 7:42

Significantly adverse is kind of the standard usually used for direct final rules . So like if an agency just decides to not go through the notice and comment period and just submit that rule out there , usually they're less controversial . Usually it's that significantly adverse or some sort of negative comment can stop that direct final rule and throw it into a comment period . I like to think that a comment , if it was significantly adverse to even this final rule and throw it into a comment period , I like to think that a comment if it was significantly adverse to even this final rule probably could create a pause with the FMC . But it would have to be significantly adverse because they have gone through quite a bit of noticing comment . So all this to say , you can still probably submit a comment . I'm not sure , but I mean worth a try if you really feel strongly . But also another point of doing comment or kind of conversation with this is that I think the FMC is still listening . I think they want to make sure that these rules are not the end of the conversation , that they're going to be watching and that if there's any kind of supplemental rule adjustment that needs to happen in the future that that will be taken into consideration . But for now this point is done . They're moving forward .

Speaker 1 8:48

May 28th is the billing practices of detention to merge and , like we said , it's mostly about clarity . There's clarity coming that there are guardrails coming . They didn't want to get two in the weeds . I think in general the FMC doesn't want to get two in the weeds . They prefer to have case law do that . But they wanted to provide some guardrails to the industry because really there weren't many rules around what an invoice needed to look like . I mean , there weren't any rules around what an invoice needed to look like in D&D billing . So here we go , we have it from OSRA 22 . We have now kind of the interpretation , the solidification , the defining the parameters around billing practices of detention and demurrage . May 28th that'll be hitting the industry so we'll watch for that . Like I said , the contents of the invoice still has to go through OMB review . Still might even align with the May 28th . But that's not in the FMC's court right now that they're waiting on OMB . So we'll see how long that takes .

Speaker 1 9:48

The other thing that we're watching , since we're kind of going through this checking back in moment is we're watching the MTDI . We saw a request for information go out a little bit ago . I've been hearing that we might be getting another request for information , another RFI round coming . Haven't seen anything yet , but that's something to keep an eye out for . If you're interested in the MTDI , the Maritime Transportation Data Initiative that was spearheaded by Commissioner Carl Bensel , I think it's a really interesting move in the industry and I think that it's something that everybody should be really paying attention to . So watch for that RFI . That's why I keep it up there , kind of on par with the other rulemakings , because I think that this is also something to be paying attention to . Nothing there yet , though , but I will certainly let you know when I see something come up .

FMC Cases and Inland Charges

Speaker 1 10:41

So story number two . Let's keep moving here . So story number two I wanted to talk a little bit about . There's been some FMC case law , or or um FMC cases and movement in the docket . I should say that I think are worth noting and worth paying attention to , uh , but it's still just one side of the story , right ? So we have Samsung has been filing at least two recent cases and then we have the uh office offorcement , which is part of the Bureau of Enforcement , investigations and Compliance of the FMC , both having some movement . So there's been some interesting cases and decisions out of the FMC recently and , like I said , I'm not going to go into too much detail on them just yet because they really are just one side of the story , even on the FMC enforcement side . It's just one side of the story and I really like to have at least responses filed so that I can get a little bit larger of a conversation to pull from and see what happened .

Speaker 1 11:38

But yeah , so Samsung filed two complaints with the FMC , one against OOCL and another against Costco . So in these two complaints they assert that the carriers had offered store door service and , like I said , this is just the complaint . These are all kind of alleged things that have been filed from Samsung . So the store door service , so essentially saying taking care of all the intermediate movements of the goods all the way to the final door . But according to the complaint , the carriers were charging demurrage , detention and other surcharges on the inland portions of the movement of those goods and they were charging those to Samsung despite what the complaint says essentially is that , despite their understanding that those charges were supposed to be part of the store door terms . That had been kind of negotiated .

Speaker 1 12:21

And , like I said , I want to be very careful , because it is preemptive , to talk about only complaints and not the responses . Responses have not been received here , but I do want to highlight it because I think that this is interesting . This may have some implications for inland surcharges and it might force the FMC to look closer and make some kind of statements , and certainly jurisdictional statements , on whether they have jurisdiction in this inland rail jurisdiction piece of containerized cargo movements . We've talked about this gray area before between the FMC and the Surface Transportation Board , stb . Stb has said that they for kind of a few different reasons , are not responsible for that rail storage piece of regulation and then the FMC mostly , though a little inconsistently , have said that they have jurisdiction over , through bills of lading that cover the inland rail storage detention , to merge the per diem charges right . So this case has the potential to kind of force that discussion to kind of force that discussion .

Speaker 1 13:29

There was also some discussion of being charged or recharged for charges that were already paid . That's what Samsung is alleging in their complaint here Recharge for charges already paid . But I think that the crux of these two Samsung cases that were just filed is really kind of twofold , right ? So is the FMC the regulator of the inland storage charge ? I think that that , like I said , is going to be something that we're going to be seeing . Hopefully they talk about it , hopefully that's part of ultimately right , we have a lot of procedural stuff that's going to happen between now and then , but hopefully that comes into the ALJ's initial decision and ultimately what turns into a final decision , right ? But the second part the twofold here is that D&D charges I think that we're going to find some information on D&D charges when they are out of the shipper or BCO's control and on a through bill of lading , right , because that's what they're saying is that Samsung was saying that they were being charged even though it was a store door move , as what they're calling it .

Speaker 1 14:28

So if Costco or OCL had the containers and was responsible under the agreement right under their terms that they agreed to to move the containers , but then still charged detention and demurrage in the interim , the FMC may have to address that . And I guess if they're going to be addressing that , they would have to be talking about the incentive principle , right , because that's what was signed into law under OSRA 22 . And not to further confuse things , but right , but OSRA 22, . The incentive principle is something that actually a few congressmen have called FMC's application of that principle into question , certainly as it relates to , like , mtos and ports . They said that they think that MTOs and ports should have their own say in how to incentivize the movement of goods off their yards . But yeah , so I mean the FMC has basically been saying that holidays and weekends shouldn't be included under the incentive principle . The congressmen are saying , look , sometimes holidays and weekends are required or important and something that the ports or the MTO should have the ability to determine . So look , getting back to kind of the same thing discussion , right ?

Speaker 1 15:33

The ultimate question on the second part being if the BCR or the shipper , now known under the D&D rule as kind of the build party , right is not responsible for the movement of the goods at that stage , right ? If the inland part , if the store door move , if the inland part is supposed to be on the carrier , then is the assessment of the D&D ? If they're being charged D&D but they don't have control over the goods , as they're alleging in this complaint , is that incentivizing the movement of the goods ? Right , because the shipper couldn't or wasn't supposed to do anything about it . And that's the point , right . Incentive principle is supposed to be incentivizing the movement of the goods . If you charge somebody something , it's supposed to wake them up and say , oh gosh , I don't want to keep getting charged for this , I got to move my stuff . So here they have no control over the movement of the stuff . What's being alleged right ? This is the complaint they have no control . They're saying they had no control over the movement of stuff and yet they were being charged to move the stuff . So that's .

Speaker 1 16:31

That's the thing that I think is this is going to have some interesting discussions on um , if they weren't responsible for the movement right , and the assumption that the D&D wouldn't have had the effect of incentivizing the movement of goods , then can Costco or OCL , under these two filed complaints , properly charge D&D to Samsung ? I mean , to me it seems like the answer would be no . But , like I said , this is just the complaint . I am so interested to see the response here and we'll see . We'll see what happens . These are two separate filings , right ? So it's Costco on one and then OCL on the other , so perhaps we'll get two very different or maybe very similar responses , but this is just the one side , right . I always want to be very careful . I want to be very fair . We haven't seen these responses yet and I'm going to be sure to watch for it and I'll certainly update when they're posted on the e-doc . It's on the library e-learning library of the FMC .

Speaker 1 17:26

The other matter and , like I said , this is still just story number two , but topic number two , I should say the other matter that I want to just briefly mention is docket 2308 . So this is the FMC's Office of Enforcement's proceeding against MSC . So this is the case that you , this Office of Enforcement's , proceeding against MSC . So this is the case that you . This is the enforcement action that you probably heard about . Right , this is the 63 million in civil penalties .

Shipping Act Violations and Penalties

Speaker 1 17:47

This case was actually initially started August 10th 2023 . So you may have heard of it previously and then now we're hearing about it again . So it was started August 10th 2023 with an issue , issued , order of investigation and hearing from the office of enforcement against MSC for possible violations of the shipping act and those . Those violations were specifically named by by USC number Um . But what happened just this month and hit the trade press uh is a filing from the FMC's office of enforcement , their opening brief , which lays out their arguments and proposed penalty . That's where we found the over 63 million in civil penalties that's being proposed by the Office of Enforcement and in that filing they highlighted the alleged unreasonable and unjust actions and inactions , they say in violation of the Shipping Act , and they listed it out in three different ways .

Speaker 1 18:41

So the first one they said was MSC's alleged I'm going to throw in alleged right , because this is just the one side MSC's alleged ongoing practice of broadly wielding its definition of merchant in its bill of lading to hold underlying third parties liable for invoice charges in the absence of such third parties having privity of contract or any beneficial interest in the cargo and without consent by those third parties to be bound by the terms of MSC's bill of lading . So that's the first thing that they're bringing up . Two and I'm going to say alleged again , because this is just the one side . This is the FMC side , or I should say the Office of Enforcement side , but this is just their side . There will be a response .

Speaker 1 19:20

Msc's alleged practice of incorrectly billing non-operating reefer containers NORs as operating reefers , resulting in overcharges to its customers less free time and more days of detention . And number three is MSC's alleged I say alleged failure to publish NOR , the non-operating reefer containers in its US tariff , causing obscurity , uncertainty and the aforementioned overcharges for the shipping public around MSC's rates and charges . So those are some pretty hefty allegations , right . And so the way that they work it out , they highlight and they have a table at the end of their filing here where they get to that $63 million number . And so they said the first thing the merchant clause had 18 violations and the penalty per violation is $73,000 . They had the non-operating reefer containers . They had 2,629 number of violations .

Speaker 1 20:20

That's part of this filing from the Office of Enforcement . The penalty per violation is 17,609 . So that's over 2,500 numbers of violations , right , 2,629 . Penalty per violation is 17,609 . So that is , I mean , the bulk of this right . That's $46 million of a civil penalty proposed and alleged . And then the third one , that failure to publish rates , that's 798 numbers of violations . That's $19,609 per violation , that's penalty per violation and that amounts to 15.6 million essentially , so that all rounds up together to be over $63 million . That's $63,256,853 . That is hefty , that is a big civil penalty . But again , this is just one side , and I want to be very careful because the news is all over this saying , oh my gosh , $63 million .

Speaker 1 21:19

But the story's not over yet . This is far from over . We've yet to see MSC's response and , according to the scheduling order , that's actually due out May 3rd . So we should have MSC's response within the next few weeks . It's going to be interesting to see how they respond to this . And this is a conversation , right , this is a legal conversation , but it's a conversation .

Speaker 1 21:40

So a little procedural explanation here because this all might be a little bit confusing . So the FMC's Office of Enforcement must bring the action against the party . So here , msc , and then they have to go through the administrative law judge for the final determination . So that's what's happening now , right ? So this case is is in front of the ALJ of the FMC for review and then , once the ALJ issues their initial decision , then we go into , kind of the next stage , which might be the FMC can pull the case , which is called the sua sponte review . There's also a chance for appeal , right , and we've talked about that before , where those are called exceptions . So even if we get an initial decision , it could be pulled for further review by the FMC , it could be called for exceptions by one of the parties . We're not done here , right , that's the point . We're not done here , not by a long shot .

Speaker 1 22:33

This that was released is just the Bureau of Enforcement , investigations and Compliance , essentially the Office of Enforcement . This is just one side . I'm going to update , I'm going to watch MSC , I'm going to watch what they weigh in with their reply . It's May 3rd , so I'll update here once MSC weighs in on this . One thing that I didn't really like , though look , I want to be fair and I want to just be . You know that I kind of respond to things as I see them here .

Speaker 1 23:08

One thing that I didn't really like about the Office of Enforcement's brief is the opening sentence . It said this proceeding involves a titan of the US shipping industry Mediterranean Shipping Company , msc or Swanson and it's unreasonable and unjust actions and inactions in violation of the shipping act . I didn't like that . They identified them as a titan in that first sentence , right ? I mean , on the one hand , sure they're laying out their case for why these civil penalties should be applied , and maybe they're also kind of introducing the idea of , look , this is a giant civil penalty that we're going to be recommending . But it's acceptable because the very first instance they call them a Titan .

Speaker 1 23:41

But on the other hand it kind of seems to introduce a little drama right off the bat . I mean , I don't know , titan just feels a little . It feels a little off and certainly not a clearly definable term , right , in this case , I mean they could have easily just said the largest carrier by TEU or the largest carrier of all ocean carriers , or some sort of factually based statement . Right , I don't know , I guess I just prefer kind of straightforward arguments . And it wasn't even an argument , it was just a little blip where they said this proceeding involves a titan of the US shipping industry . Fine , I just noticed it . I wanted to mention it , all right , well that . So that was story number two , topic number two . So this is story number three now that we're moving into . Oh , my goodness , we're already 20 minutes in and we're only on story number three , so it'll go a lot faster here .

Speaker 1 24:32

All right , so this a few weeks ago we talked about the US Steel Union's filing a petition with the US Transportation US Trade Representative's Office , ustr , and they were alleging discriminatory practices . That petition was filed in early March and then USTR actually has 45 days from that filing , which I believe it was May 12th , to determine whether to open an investigation . This would be under Section 301 of the Trade Act of 1974 . And just so that this seems a little familiar , right , this was the same 301 tariffs that former President Trump was using for his tariff proposals . So 45 days , so really I mean we're what ? A month after the filing here , we probably have less than two weeks until we are going to hear from USTR as to whether they're going to open this investigation or not .

Senators Call for China Investigation

Speaker 1 25:23

But now it's getting a little bit more interesting . So we're seeing that six US senators are joining the US steel unions in calling for an investigation and also accusing China of these predatory practices . So we have Tammy Baldwin , a Democrat from Wisconsin , we have Elizabeth Warren , democrat from Massachusetts , we have John Fetterman , democrat from Pennsylvania , bob Casey , a Democrat from Pennsylvania , sherrod Brown , a Democrat from Ohio , and Mazie Hirono , a Democrat from Hawaii . Those are the six senators that have joined in on this letter . So I'm actually in the story notes . I'm going to be linking the story that highlighted this it was Lloyd's List senior maritime reporter Tomer Renan and also the letter from the senators and the original petition to the USDR so you can go check it , all of this out and see for yourself , kind of all the all the conversation that's happening here , but notably in the letter the senators say and I'm going to be reading from the letter now the petition suggests several remedies which aim to create the incentives to encourage the PRC , the People's Republic of China , to eliminate the anti-competitive action it has taken in its shipbuilding sector .

Speaker 1 26:28

Most notably , the petition calls for a fee to be placed on vessels built in the PRC so China that docks in US ports , the proceeds of which would be used to finance a shipbuilding revitalization fund . We encourage the USTR to fully consider these and other remedies recommended in the petition in order to properly address and discourage the PRC's unreasonable and discriminatory practices . So what the petition said and what this letter is now recalling is that the petition was calling for a fee to be placed on vessels built in the People's Republic of China that dock at US ports , so not owned , not operated , but vessels built in China , so just simply built in China that call on the US . I'm interested to see if that gets legs . I understand that it sounds good If that gets legs . I understand that , that you know it sounds good , but I'm not exactly sure how that could go into effect right and place that fee on all vessels coming , all originally Chinese-built vessels coming in and docking or calling at US ports and then turning those proceeds over toa shipbuilding revitalization fund for the US . I mean , we got to get money somewhere for shipbuilding revitalization .

Speaker 1 27:54

I'm not exactly sure if this has legs , but an interesting , interesting idea . I'm going to be watching this with with great interest , certainly to see what if USTR decides to do an investigation and certainly if , at the end of that investigation , if they decide that something built in a in a foreign country , but not necessarily owned or operated , right , the letter and I don't believe the petition talks about that built or the owned and operated , it really is just built . So the other part , the concluding part of the letter that I'll read here too , is in closing we urge you to expeditiously initiate a full Section 301 investigation and consider the relief measures identified in the petition to address the injury that the PRC's policies and actions have had on our commercial shipbuilding , transportation and logistics sector . I think it's interesting I think that this is interesting that we're getting six senators joining in . It wasn't a bipartisan letter , it was all Democrats on this letter . Interesting because I think that this would have been an easy thing to get bipartisan support on . But regardless , there's about , like I said , less than two weeks left probably before the USTR either does nothing or responds or opens that investigation . So I'll keep watching . It's kind of interesting , right . I mean , anytime there's engagement right with these agencies , I love it , I love to see it , I love to see the engagement . All right , so let's get into the meeting , for today this is not going to be a big one , this is not going to be a ton that we're going to be covering , but I do have some concerns that I do want to just bring to your attention . Always , this is not legal advice directly related to your matter . Always , this is just educational information . And these are just some of the observations that I've made that I think that are interesting and worth you paying attention to or everyone paying attention to .

Speaker 1 29:46

So the FMC has released , like we know , the final rule on detention to merge . The final rule will become effective on May 28th 2024 , except for that , contents of invoice . So that's section 541.6 , and that's due to the pending OMB Office of Management Budget Approval . So this , as we know , this new rule defines billing practices for detention and demurrage , with the main purpose of simplicity and identifying what is being billed by whom . So the FMC said , when they announced it , what is being billed by whom ? That is what they really wanted to find out . And through this final rule , the FMC clarifies who may be invoiced .

Speaker 1 30:24

The information to be included in the invoice is the timeline for invoicing . So we're going to be talking about tonight or today and requirements for clear invoice dispute processes . So key takeaways right , I think we've talked about this before . Clarity that's a big one . Clarity . There wasn't a lot of clarity here before . Now we have guardrails , we have just simple basic clarity . Timeliness there are now 30 calendar days 30 calendar days for the invoice to be issued and the dispute resolution filing and an attempted resolution to a dispute filing . So 30 , 30 , 30 , and the emphasis on the direct contractual relationship . So those are my four major takeaways clarity , timeliness , dispute resolution process and and it's a B2B , it's a business to business dispute resolution . Right , it's not FMC dispute resolution , this is business to business . This is like work it out amongst yourself . And then the fourth one , like I said , is that direct contractual relationship Anyone can pay the invoice , notably , but only the direct contractual relationship or the consignee can be sent , can be issued the invoice . So we have a whole bunch of stuff that's going to be hitting May 28th right .

Speaker 1 31:42

The purpose establishes minimum information that must be included . The scope identify or includes ocean common carriers , marine terminal operators or NVOCCs . This was a big one . This is what I highlighted when it first dropped . I think we went live maybe an hour or two after it first dropped and that was the biggest thing that I just kept talking about was MTOs did not get removed . They stayed in the final rule . There was talk about maybe having them removed . They stayed .

Speaker 1 32:08

We're getting some definitions . So defines demerge or detention as any charges , including per diem charges assessed by ocean common carriers , marine terminal operators , nvoccs related to the use of marine terminal space , for example , land , occs related to the use of marine terminal space , for example , land , which is kind of a nod to that inland part , but certainly that's demurrage too . Or shipping containers , but not including freight charges . They talk about properly issued invoice , that direct contractual relationship for properly issued invoices , also adding consignee when ultimate recipient of cargo or final delivery timelines , and that's what we're going to be talking about . I'm going to come back to this , but billing party must issue within 30 calendar days and then at least 30 calendar days must be allowed from invoice issuance for dispute and the disputes must be attempted to be resolved within 30 days of receipt . And then the part that we're still going to be waiting on hopefully can line up with that .

Speaker 1 32:59

May 28th effective date is the contents the invoice content , so it's identifying information , it's timing information , so invoice date , if invoice due date , it's rate information , it's dispute information and it's certifications . Now , initially there were 13 invoice requirements under ASRA 22 . Invoice requirements under ASRA 22 . Those are obviously law because they were part of ASRA , so those are in effect . Technically , those went into effect June 16 , 2022 . What we are seeing , what will be happening with this final rule and this yet-to-be-determined effective date , is those 13 invoice requirements were actually expanded to 20 invoice requirements and some of the things that were added or kind of expanded I should say it's not even really an ad , it's an expansion is like invoice date , invoice due date , clarifying some of that , some of the dispute information . So they certainly talked about contact information for dispute requests , but also the publicly accessible website showing detailed description of info , defined timeframes for dispute requests . So those are some of those additional seven things , or expanded seven things that we saw in the D&D final rule .

Speaker 1 34:15

But the part that I want to draw your attention to today is the timeliness section . Right , the 30-30-30 . So the billing party must issue within 30 calendar days . So detention to merge , the detention to merge charge is done within 30 days of that day .

Speaker 1 34:36

The issuance of the invoice must happen . Right , the billing party must issue within 30 calendar days . I keep saying calendar days because it goes quick , right , calendar days go fast . And then if there's an NVOCC and this is where I don't want to get too off topic here , but if there's an NVOCC then they must issue within 30 calendar days from the issuance date of the invoice received . Because , right , sometimes they can be the bill build party and sometimes they can be the billing party . So they can be the receiver , the build party , but then they also can be the billing party .

Speaker 1 35:07

And so this is where it switches from the actual occurrence , the the demurrage happening . So that's , the billing party must issue within 30 calendar days . And then , if it's an MV , if it goes to an MVBOCC , they have 30 calendar days from the issuance date of the invoice received , so the issuance date . So like if they send it in the mail and it's like three to five days later they're , you lose those three to five days . They have 30 calendar days . So you see how this starts to go fast and you throw in a holiday weekend and you're already down a week almost for days that you don't have .

Speaker 1 35:43

So this is the point that I'm trying to make today , right ? So then you have at least 30 calendar days must be allowed from invoice issuance for disputes . So same thing , right ? So invoice issuance . So if they send it in the mail , if the billing party issues within 30 days of the last demurrage day or detention day , then they have to allow for at least 30 calendar days for disputes . But it's from the invoice issuance date .

Speaker 1 36:12

So if they send it in the mail , I mean email , right ? Hopefully this is all email and itance date . So if they send it in the mail , I mean email , right ? Hopefully this is all email and it goes quick . But if there's paper , if there's paper documents , you can almost bet that it's still in the maritime industry , right ? First off , let's take care of that , guys . But the other thing is , if they send it in the mail and it takes a week to get to you , or three to five days or whatever it is . Those are three to five or seven days that you lose just by mail movement . And then if you have some sort of intake of the bills , I mean you can see how 30 calendar days goes really quick .

Speaker 1 36:45

And then disputes must be attempted to be resolved within 30 calendar days of receipts , so that one is less concerning , that one just says , look , try to work it out within 30 , make this a priority , but it's that 30 calendar days from issuance of invoice for disputes to be allowed right . And so you got to be on top of it , you have to know . So what concerns me and this is the part that I want you to pay attention to and , like I said , this is not legal advice , this is just something that I want you to pay attention to and , like I said , this is not legal advice , this is just something that I want you to pay attention to there are plenty of 3PLs or drayage providers or kind of the people who take care of this kind of stuff for the shipper or the BCO , and so that's where I want people paying attention , because no longer is that 3PL going to be able to be receiving the invoice or being issued the invoice ? The shipper of the BCL will be issued the invoice and they are going to be receiving it or the consignee . It's that direct contractual relationship . So I want to read the actual text of the

Demurrage and Detention Invoice Issuance

Speaker 1 37:48

final rule here .

Speaker 1 37:48

So section 541.4 , properly issued invoices . A properly issued invoice is a demurrage or detention invoice issued by a billing party to and you have two options here really the person for whose account the billing party provide ocean transportation or storage of cargo and who contracted with the billing party for the ocean transportation or storage of cargo . So that direct contractual relationship or the consignee . Those are the only two right . So then , secondly , here so B , if a billing party issues a demerger detention invoice to the person identified in paragraph A1 , so that's that direct contractual or the consignee . It cannot also issue a demerger detention invoice to the person identified in A2 . So , like , if it goes to the direct contractual , it cannot also issue to the consignee . It's not an or or . It's not an and it's an or . It's one or the other . And then the rule doubles down on that by saying , in case you didn't notice , it's an or . This cannot also be issued to the other person of the one two identified people who are allowed to even receive it . And then it goes even further here .

Speaker 1 38:59

C under 541.4 says a billing party cannot issue an invoice to any other person . And I want to be clear here A billing party cannot issue an invoice to any other person . That doesn't necessarily say can't send it , and that's where I think it's going to be a little bit tricky . But it cannot issue an invoice to any other person . So this is important because where it might've been sent somewhere else I think a lot of the system is now going to be okay . Well , who am I issuing it to , that's who I'm sending it to , and where it might've been a 3PL or some sort of , I'll take care of this service . That might not be the case , and so I want all of these direct contractual relationship people or consignees to be paying attention to these bills , because come May 28th , and maybe even before that , but certainly by May 28th , these invoices and their issuance are going to be going to one of two people 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 .

Speaker 1 40:07

I just want you to pay attention to this right . I want you to kind of take a look back , think about your situation . I also want you to find your own legal advice on this . I want you to , I really urge you to make your own legal determination . This is not legal advice , this is just general education and information . This is something that I'm just saying pay attention to and do your own legal review of , because this could have some operational hiccups and I'd hate for anybody to miss a bill , right , because you lose that 30-day dispute resolution and again , that's only for B2B . You're not going to lose the ability to go in front of the FMC , you will just lose the ability to have that easy business to business . We have a dispute and we'd like to work it out , and so I also want to point out this other piece that I think isn't getting as much attention , and rightfully so . There's a lot going on here , but I want to point this out because I think this is also interesting .

Speaker 1 41:11

541.7 , so under the proposed rule or final rule , 541.7 , issuance of demerge and detention invoices D . If the billing party invoices an incorrect person , the billing party may issue an invoice to the correct billed party so they can fix that If they send it to the wrong person . If they issue to the wrong person or if they invoice the wrong person , they can correct . The billed party , providing that such issuance is still within 30 calendar days , is within 30 calendar days from the date on which the charge was last incurred . So that same initial 30 days . They don't get a new 30 days If they can correct that mistake within those same 30 days . What I interpret this to say is they're okay , I mean right . So , like I said , this is not direct legal advice , but I'm saying be careful here , because if they issue it to the wrong person and they correct that within those same 30 days , it seems like the FMC is saying that's okay , that's okay .

Speaker 1 42:14

If the billing party does not issue this corrected demerge or detention invoice within 30 calendar days from the date on which the charge was last incurred , then the billed party is not required to pay the charge . This part , be so careful . I want to make sure that everybody is getting legal advice for that . Even though the rule says then the billed party is not required to pay the charge . You got to be dang sure that you don't have to pay . I'm just that part makes me so , so , so nervous . I think where that will be helpful is when it gets to case law . You can then move back and point back to this and say , see , we didn't have to pay it , but to just not be paying invoices . Just be very careful .

Speaker 1 42:49

Again , not legal advice , general discussion here . Consult with your own attorney , right , but consult with your own attorney before not paying invoices . Consult with your own attorney on how all of this applies to you , because there's a lot of nuances involved here . A lot of things are happening in a short amount of time and I just simply want to encourage everyone to pay attention . Right , take another look at this . Make sure that your billing systems are ready . The 30 calendar days calendar days so like Saturday , sunday calendar days are for the dispute resolution opportunity . Like I said , that's just B2B , this business to business . You'll still have the other opportunities for dispute resolution with the FMC , but this B2B mechanism is really trying to push that expediency right , like the you guys work it out feeling . So that's it for today . That's what I wanted to cover . This was a longer podcast than what I thought it might be , but we had a lot to cover . We had a lot to catch up on . Look , tune in every week as we continue to break down the D&D rule periodically we're not going to cover it every week , but periodically as I kind of notice things or there's concerns that I have and continue to provide updates really on just some of the hottest topics in ocean and surface transportation .

Speaker 1 44:02

As always , the guidance here is general , for educational purposes . It should not be construed to be legal advice directly related to your matter . I cannot stress that enough . If you need an attorney , contact an attorney , but if you do have specific legal questions , feel free to reach out to me . My legal companies call strategies Otherwise for the non-legal questions , the e-learning and the general industry information and insights . Come find me at the Maritime Professor . If you like these videos , let me know , comment , like and share . If you want to listen to these episodes on demand , or if you missed any previous episodes , check out the podcast by Landon by Sea . If check out the podcast by Landon by Sea , if you prefer to see the video , they live on my YouTube page by Landon by Sea , presented by the Maritime Professor , and while you're at it , check out the website maritimeprofessorcom . So until next week . This is Lauren Began , the Maritime Professor , and you've just listened to by Landon by Sea . See you next time .