By Land and By Sea
By Land and By Sea
S4.E16 - Holidays and Weekends subject to Detention and Demurrage billing? FMC has something NEW to say about it...
Topic of the Week (2/21/25):
Did the FMC just clear up D&D billing on holidays and weekends? Yes, but don’t count your chickens yet—it may still be fluid…
⚓ The Maritime Professor® presents By Land and By Sea Podcast 🎙️ – an attorney breaking down the week in supply chain
with Lauren Beagen (Founder of The Maritime Professor® and Squall Strategies®)
Let’s dive in...
🔹 Top Three Stories of the Week:
1️⃣ Trump’s Executive Order on Independent Regulatory Agencies
📜 A new Executive Order asserts greater presidential oversight over independent agencies, including the FMC. This could change how shipping regulations are reviewed before being finalized.
📖 Read the full Executive Order: https://www.federalregister.gov/documents/2025/02/24/2025-03063/ensuring-accountability-for-all-agencies
2️⃣ Proposed Tax on Foreign-Flagged Ships
💰 The newly confirmed U.S. Commerce Secretary suggested taxing foreign-flagged ships, including cruise ships and supertankers, to level the playing field for U.S. interests. Could this lead to a push for U.S.-flagged cruise ships?
📖 Read Greg Miller’s Lloyd’s List report: www.lloydslist.com/LL1152653
3️⃣ USMX & ILA Master Contract Update
⚓ The ILA and USMX master contract vote is scheduled for February 25, 2025, with an extension filed at the FMC until March 31, 2025, allowing time for ratification.
📖 View the FMC filing: https://www2.fmc.gov/FMC.Agreements.Web/Public/AgreementHistory/8153
⬛ Deep Dive: FMC’s Decision on D&D Charges Over Holidays & Weekends
The FMC ruled (after an appeal and remand) that charging detention fees on days when ports are closed does not promote freight fluidity—a key principle in demurrage and detention regulations.
🛑 Why does this matter?
🔹 The FMC reaffirmed that detention charges should incentivize cargo movement, not serve as penalties.
🔹 Holidays and weekends should generally not accrue detention charges if terminals are closed.
🔹 The decision could still be challenged, but for now, it seems to be a win for shippers and truckers.
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🔹 The Maritime Professor® provides training and education for global supply chain professionals. Learn more: www.TheMaritimeProfessor.com
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❗ This content is for educational purposes only and not legal advice. If you need an attorney, contact one.
#ByLandAndBySea #FMC #MaritimeLaw #SupplyChain #DetentionCharges #Regulations
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Speaker 1:Hi, welcome to Buy Land and Buy Scene Attorney Breaking Down the Weekend Supply Chain presented by the Maritime Professor me. I'm Lauren Began, founder of Maritime Professor and Small Strategies, and I'm your favorite maritime attorney. Join me every week to 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 considered to be legal advice and there's no attorney client privilege created by this video or this podcast. If you need an attorney, contact an attorney. So 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 Trump signed an executive order this week on independent regulatory agencies.
Speaker 1:Now you know that I often talk about the Federal Maritime Commission being a independent regulatory agency, which is contrasted to MARAD. Marad is part of Department of Transportation, which is Secretary of Department of Transportation is one of the cabinet members, and so there's that direct oversight from the executive office, from the administration, whereas the Federal Maritime Commission falls under that independent regulatory agency, where it enjoys independence. The directives from the administration, from the office of the president, usually come by way of recommendations instead of directives saying you have to do it this way. I don't know the history of independent regulatory agencies as a whole. Ever since this executive order came out, I've been looking a little bit further into it just to kind of get a sense of it. But this is a really interesting one because and I'm going to read mostly off of the executive order here this is eliminating the independent regulatory agency across the board, right? So not just the Federal Maritime Commission, there's other agencies that they list here, and I think that it's probably telling. The ones that they're listing are probably the ones that they're concerned about, at least from this administration, being concerned about the independent nature. The argument is, if they're independent and they're not well monitored or there isn't like a good directive over them, then perhaps they can do things without oversight or without check.
Speaker 1:You know, one of the things about independent regulatory agencies is that Congress is in charge, right, congress gives the authority through statutes to that these agencies enjoy this authority. It can be challenged through legal cases, right, it can be challenged through exceeding authority, right. Some of the petitions that we have against some of the final rules are just that Chevron deference, right was kind of clawed back and so it created more of a check on the independent regulatory agencies because they couldn't just automatically be deferred to. Right, that was the Chevron deference, it was a case. Now there had to be a closer connection to the statutory interpretation or the statutory meaning, and if it's not there, then the court, right, this is going along with that Chevron deference being clawed back or overturned. I should say, if the independent regulatory agency issues a rule, the court, then who's being asked to review that rule can't use Chevron deference as just, oh, we're deferring to the agency. Because they're the experts in this area, they would have to kind of take the whole thing into their own reasonable interpretation. So that was a little bit of a tangent into the Chevron deference, but that created a little bit more of a judicial check over independent regulatory agencies. And that's what we saw last summer.
Speaker 1:Now we're seeing independent regulatory agencies being kind of recaptured by the executive, which is the president, and the administration, the administration of the office of the president. So let me just jump into the language here and then I'll kind of break it down. So it says under section one, policy and purpose of the executive order, and the executive order itself is called ensuring accountability for all agencies. So the constitution vests all executive power in the president and charges him with faithfully executing the laws. Since it would be impossible for the president to single-handedly perform all of the executive businesses business of the federal government, the Constitution also provides for subordinate officers to assist the president in his executive duties. In the existence of their often considerable authority, these executive branch officials remain subject to the president's ongoing supervision and control. And then I'm going to jump forward a little bit ongoing supervision and control, and then I'm going to jump forward a little bit.
Speaker 1:It says, however, previous administrations have allowed so-called independent regulatory agencies to operate with minimal presidential supervision. These regulatory agencies currently exercise substantial executive authority without sufficient accountability to the president and, through him, to the American people. Moreover, these regulatory agencies have been permitted to regulate significant regulations without review by the president. Continuing on here, it says these practices undermine such regulatory agencies' accountability to the American people and prevent a unified and coherent execution of federal law. For the federal government to be truly accountable to the American people, officials who wield vast executive power must be supervised and controlled by the people's elected president. Therefore, in order to improve the administration of the executive branch and to increase regulatory officials' accountability to the American people, it shall be the policy of the executive branch to ensure presidential supervision and control of the entire executive branch. Moreover, all executive departments and agencies, including so-called independent agencies, shall submit for review all proposed and final significant regulatory actions of the Office of Information and Regulatory Affairs, oira, within the executive office of the president, before publication in the Federal Register.
Speaker 1:Independent regulatory agency change here, it looks like, is really focused on the regulations that may come out of the independent regulatory agencies, meaning that now instead of just publishing it and we've seen this with the detention to merge rule, for example there was an advanced notice of proposed rulemaking, engagement with the community, with the supply chain world, I mean the public right. And then we went through a notice of proposed rulemaking which is kind of the next step, and then we went through a final rule. So now, instead of after the final rule publication and it says after 30 days or 60 days this will become effective, a review for all proposed and final significant regulatory actions have to go to OIRA for review. So there's a few things right, being a lawyer, I can kind of I'm seeing different things proposed and final significant regulatory actions. So what's a significant regulatory action? So there might still be opportunity that this might not be incredibly impactful.
Speaker 1:But who knows? I mean if they say basically all regulatory actions are going to be significant regulatory actions or anything other than direct final rule, which sometimes direct final rules are allowed to forego the comment period, kind of that back and forth engagement. Sometimes those direct final rules are a little bit more administrative. Maybe it's changing of a civil penalty amount or somehow just kind of fixing things up, maybe cross-references within regulations. They're just kind of cleaning up the regs. That might be a direct final rule. It's not controversial, it's not significant. Maybe that's the threshold, maybe it's I don't know the D&D probably would be a direct final rule. It's not controversial, it's not significant. Maybe that's the threshold, maybe it's, I don't know the D&D probably would be a significant regulatory action. So, instead of it being allowed to just go through into final regulatory publication now under this executive order, it would have to go through OIRA, the Office of Information and Regulatory Affairs All this to say I don't know what through OIRA, the Office of Information and Regulatory Affairs.
Speaker 1:All this to say I don't know what this exactly means. I'm kind of you know, kind of talking through it, kind of breaking it down here. My hunch is that this might not be as big as it sounds, but we'll see. We'll see. You know, it just came out this week. It just came out this week, and I think that this is one that I'd like to see reactions on. As I said, I'm going to be diving into kind of what exactly is an independent regulatory agency a little bit more, just for my own curiosity, I guess. So I'm going to keep an eye on this one Again, the reason why this is important for us in our conversation. The Federal Maritime Commission is an independent regulatory agency, excuse me, so in that this executive order would affect it.
Speaker 1:All right, story number two. So this week, greg Miller put out an article saying Trump administration officials vowed to tax foreign flagships, calling it US ports. Did you feel a shake in the oceans? It wasn't an earthquake, it was the loss of $9 billion in market cap, immediately after the newly confirmed US Commerce Secretary made remarks on Fox News this week. So that's what it was. It was a Fox News interview and in it the newly minted US Commerce Secretary said that he was going to be taxing foreign flag ships, calling it US ports. But what does that mean? I'm actually just going to read from the article that Greg wrote here, because he summarized it well and really framed it clearly. So here it is.
Speaker 1:Howard Lutnick, the newly confirmed US Secretary of Commerce, said during a televised Fox interview on Thursday morning Donald Trump has announced the external revenue service and his goal is very simple to abolish the internal revenue service and let all the outsiders pay. So, continuing on with the quote of Secretary Lutnick, I'll give you an example Cruise ships. You ever see a cruise ship with an American flag on the back. They have flags of Liberia or Panama. None of them pays taxes. Every super tanker none of them pays taxes. Every supertanker none of them pays taxes. He said this is going to end under Donald Trump, said Blutnick, those taxes are going to be paid. Now the rest of the article goes into kind of the tax structure associated with cruising and ship owners generally.
Speaker 1:And, look, I'm not an expert on tax law, but what I do see is the continuation of the theme of not only maritime is important with this administration, but finding all of the areas where the US is kind of not that preeminent country, and this feels like a leveling of the playing field, an attempt to level the playing field. And what I mean by that is I wouldn't be surprised if there was a push to reflag perhaps the current cruise ships that are not US flagged, perhaps maybe there might be a push to flag those as US flagged, right If they're going to get taxed. Maybe that's the impetus, that's the push. Now US flag comes with certain restrictions of US built levels, of US crew on board, etc. And so it's not just as easy as reflagging to US. There's certain criteria, but I could also maybe I don't know potentially see in the interim that maybe there would be a waiver to reflag the vessels and like this, who knows right? I don't know where this is going.
Speaker 1:This was just said on an interview, but I'm kind of trying to think through the theme of, okay, us dominance, maritime interests. If we're going to be flagging non-US flag vessels but we don't have the capacity of our own US flag cruise ships, well, we do have some, but we don't have nowhere near the size and number of those foreign flag vessels and kind of all the cool things that are on these giant vessels, these floating hotels, if you will. But in the interim, maybe there would be waivers there, maybe this would help push to get more US merchant mariners on board. I don't know, I don't know. I find it all so interesting. I find all of this so interesting to kind of run down the playbook of okay, what does this mean? What could this mean? What is the intended end goal here? It feels like probably they're trying to beef up US flag presence and so one of those is cruising. Perhaps, I don't know, we'll see. Like I said, to be fair, we do have some US flag cruising fleets, but it's nowhere near the size and numbers. Many of these are Panamanian flagged, which, if you've been listening to the last few episodes of this podcast, you'll know that the FMC, the Federal Maritime Commission, holds a very large tool with respect to foreign flagged vessels and the ability to turn them away entirely if the foreign country, the host foreign country, is found to have unfavorable shipping additions. It's part of that Section 19 of the Merchant Marine Act of 1920 and the Foreign Shipping Practices Act authorities. We've covered it, I think, the last two episodes, so go take a listen. But maybe this is it's paralleling again. I've been seeing a few different ways that things are paralleling around the Section 19 of the Merchant Marine Act of 1920 and the Foreign Shipping Practices Act. Those are very strong authorities of the FMC that rarely get called in. We might see those authorities have a little bit more importance in the next year or certainly in the next couple of years, I don't know. Just I want to bring it to your attention. This is very interesting and things are still moving pretty quickly here.
Speaker 1:All right, story number three let's go back to the US Maritime Alliance and the International Longshoremen's Association, the USMX and the ILA, their master contract. It is set for a vote next week, which is February 25th, allegedly right. That's what they're saying. That's what ILA president has put on Facebook. As you may remember, facebook was the platform of preference for the ILA making announcements. It said that they filed an amendment. Actually, I saw this in the FMC's agreements library, which we've talked about that before. You can go find some of these agreements that are filed with the FMC as long as they're not confidential in nature. So the service contracts are confidential, but the vessel sharing agreements, these alliances and the USMX ILA master contract agreement and the amendments are filed with the FMC and you can go look them up on the agreements library. So they filed their amendment at the FMC extending their interim agreement. So the previous interim agreement was for the January 15th. Then they extended that because they agreed, and that's what they're doing now. They've extended this interim agreement until March 31st and they said to allow time for the parties to ratify their tentative agreement. So I'm going to read the memorandum of agreement that they agreed to. That is this amendment, which expired on September 30th 2024, and was extended from October 1st 2024 through and including January 15th 2025. It's further extended through and including March 31st 2025 to allow time for the presentation of the agreed upon terms to the ILA wage scale committee and ratification by the parties. This extension shall be subject to termination prior to March 31st 2025, upon subsequent agreement of the undersigned parties.
Speaker 1:Now I keep saying it feels like everybody's taking victory laps. This is kind of a no big deal thing, I believe just the other day, or there seems to be a little bit of a message starting to come across saying this isn't a slam dunk. I don't know if that's just like a clickbaity type thing or if that's real. I still think that February 25th if Harold Daggett's saying that they're going to vote that day, I think that it's going to go forward. This feels like something that they have both sides have said was a win. So we'll see, we'll check it next week and we'll see what comes. I think that this one the USMX and ILA master contract hopefully, hopefully, the drama will subside on this and we'll move forward in labor. In six years we'll talk about it again.
Speaker 1:All right, so let's get into the meat and potatoes of the day here, all right? So what's going on? We have a case here. This is the Evergreen and TCW case. You may remember that this case previously was being decided about a $500 charge. That happened in 2020. That happened over a holiday and a weekend, and so this was challenged through the settlement officer's claim.
Speaker 1:Then it went to the full commission or small claims, I should say small claims officer, it used to be either way, small claims officer. Then it went to the full commission. The full commission agreed with it essentially. Then it got appealed and brought to the federal court of appeals for the DC circuit and that's where we saw the court of appeals said they vacated and remanded it back to the commission, and so it was a little bit the way that I had understood it was that they didn't like the way that the FMC had made their incentive principle agreements or arguments, that they wanted it to be a little bit more of a complete argument, because they basically went along their incentive principle saying look, if the terminal or porch is closed over the weekend or the holiday, then there is no incentivization for getting goods in. But then at one point the FMC in their filing said but if it's closed on the weekend, you'll see increased activity on Friday. And so the court was like, well, isn't that incentivization, isn't that? And that's exactly what the petition was saying the petitioner was saying on the other side look, fmc, like it is an incentive to get your goods because it's going to be locked up over the weekend when you can't get it. So that's what the petitioner saying. The FMC was saying no, that's, that's not right. You can't charge on those Saturday, sunday, monday, holiday days because there's no way to pick it up, even though there might be that day on Friday. So the court basically said look, you can't just dismiss it, you have to discuss that argument a little bit more. And so here we are.
Speaker 1:The FMC now has issued a new decision, I guess on this, trying to kind of hit at what the court had told them, and so decision, I guess on this, trying to kind of hit at what the court had told them. And so what I want to? I'm going to read off of what the FMC said here because I think it's really interesting and I think that they did a much better job of explaining and we'll see if it's good enough for the court or if it gets appealed again. But yeah, let me read this off. So it says, as the commission explained, when adopting the interpretive rule, and it quotes to pass muster under section 41102C, a regulation or practice must be tailored to meet its intended purpose. Close quote. And the commission, open quote continues to understand demurrage and detention as primarily being financial incentives to promote fluidity. So they were quoting that from the interpretive rule on detention demurrage, that's from Docket 1905. That's that interpretive rule of May 18th 2020. We talk about that periodically here, but that's where the incentive principle came from and so they were quoting themselves. The FMC is quoting themselves from this May 18th 2020 interpretive rule saying understanding that demurge and detention as primarily being financial incentives to promote freight fluidity. So, continuing on in here, neither of the parties dispute the initial decisions Finding of facts at the port where the equipment was to be returned was closed for business May 23, 2020 to May 25, 2020, and thus claim it could not return the equipment on those days, right?
Speaker 1:So they're saying it was a holiday and a weekend that week. Nobody's disputing that, so continue on. The commission previously determined that the incentive principle was not being served when respondent invoiced for detention charges on the three days when the port was closed, because no amount of detention can incentivize the return of a container when the terminal cannot accept the container. So the commission's saying look, we determined that the incentive principle isn't there because on a Saturday there's no incentivizing somebody to get off their couch and go pick it up because it's a Saturday and it's closed under this fact pattern, right? So there is no incentivization. At that point it becomes the commission kind of almost suggests, like a penalty, not an incentivization. There's nothing happening on that day that you can control to go get your cargo. And that's kind of what the commission is essentially arguing here.
Speaker 1:Continuing on, it says, per the direction from the DC Circuit, the commission now utilizes a broader lens. So they're saying, look, the DC Circuit told us to explain it a little bit further. So they're saying, look, the DC Circuit told us to explain it a little bit further. And so they said they're now utilizing a broader lens when applying the incentive principle as one facet of its reasonableness analysis to determine if the charges issues are furthering the goal of promoting freight fluidity. So they're kind of like a nod to the DC Circuit saying, look, all right, you said that we were too quick with our interpretation and our assessment here, so we're going to use a larger reasonableness standard and include the incentive principle as one facet of it.
Speaker 1:So, continuing on, the commission acknowledges that there's an incentivizing effect for claimant or a similarly situated party to return equipment before scheduled port closures to avoid accruing detention charges. That's what they're saying. Look, they understand that there is an incentivizing effect to return your goods if you know that over the weekend it's going to be closed. They continue on and say it is logical that a party would want to avoid paying a penalty that will grow over multiple days when it knows in advance that a port is scheduled to be closed and will be unable to accept equipment returns, as respondent argues in its brief. So they're saying look, the other side is right here. The other side is right in that it is logical that you're going to try to get your goods out of the port if you know that if you don't get it out by Friday, saturday, sunday, monday, holiday, maybe it's the 4th of July week, you know, maybe you got a Tuesday, potentially a Wednesday, in there. Maybe Monday, tuesday might be the biggest that they're saying look, of course you're going to try to avoid those four days of demurrage and detention by trying to get everything taken care of on Friday. They said that's logical, so continuing on. It said yet the goal of the incentive principle is to ensure that reasonable detention charges promote freight fluidity, a concept that is broader than simply the quickest equipment return and which requires balancing competing incentives. So they're saying, look, it's more than just returning that equipment.
Speaker 1:So continuing on incentivizing equipment to be returned just before scheduled closures will not always have a positive impact on freight fluidity. Common carriers and other ports would likely not be able to process and turn around equipment returned late on a Friday before a weekend closure, because they too likely would not be working during a port closure. So they're saying, look, there might be bunching effects. That happens on a Friday afternoon. While it does serve the purpose of you might be incentivized to return. They're really hinging on that freight fluidity. They're saying, look, it's just going to potentially cause a problem for the port or terminal by returning on that Friday afternoon because they're not going to be able to process and turn around the equipment either. So continuing, they said, there's a likely minimal positive effect on freight fluidity for these containers returned right before the port closes. Thus, detention charges in these circumstances would not serve the ultimate goal of promoting freight fluidity, but rather are serving to penalize shippers and truckers unreasonably.
Speaker 1:So they're saying, look, if you turn it back in on a Friday. You can't get it scooting, it's just going to sit there anyways. And so what does that mean for the Saturday and Sunday? Well, had they not been charged and they kept it and brought it back after the holiday, then it would have. They're basically saying look, it doesn't make a lot of sense that the equipment needs to be returned to increase freight fluidity because nothing's going to be used over that weekend. They're not going to be able to pack it back and keep it on its way. That's why they're hinging on this freight fluidity. I hope that's clear. I feel like this is getting a little bit muddy. But they're really sticking to that freight fluidity. Meaning, if the cargo box is just going to be sitting around anyways, you can't convince me that you had any other plans for it, because Friday afternoon you're not able to fill it back and push it along. So it says detention charges.
Speaker 1:Additionally, multi-day scheduled closures could lead to congestion and log jams at ports when truckers rush to return equipment to avoid harsher penalties, which also hinders freight fluidity. So, like if it were a multi-day. Or you know, a snowstorm is coming after a Monday holiday and now you're looking at potentially you have the two days of the weekend plus the Monday holiday, plus a potential snowstorm, that's a Tuesday, maybe even a Wednesday. I mean that's five days. So they're saying, look, you might get everybody showing up on that Friday and this would lead to congestion and log jams when everybody's trying to rush and that would hinder freight fluidity. They're also saying there are also disincentivizing effects created by allowing charges over scheduled closures.
Speaker 1:So amicus filings and supportive respondent contend that not charging detention over scheduled weekends and holidays closures, so amicus filings and supportive respondent contend that no charging, that not charging detention over scheduled weekends and holidays closures would disincentivize prompt equipment return and thereby harm freight fluidity. So saying, look, there was an amicus brief filed a friend of the court trying to kind of fill out the information here saying that not charging detention would disincentivize that prompt equipment. Right, because they're saying look, if you charge over the weekend, of course everyone's going to try to rush in to get it on that Friday. If you don't charge over the weekend, people will stick around until that Monday, tuesday just sitting on the equipment because they didn't have that incentive to show up on that Friday. So the commission continues these arguments, overlook that truckers and shippers have their own commercial reasons, separate from avoiding detention charges to promptly return equipment, including contractual timelines between the parties, space constraints, storing the containers and truckers' incentive to earn greater revenues through additional equipment pickups and returns. Right, so what they're kind of hitting at is in the detention, perhaps right so they want to return the equipment. It's perhaps an empty, they want to return it. The amicus saying it's a disincentivizing, it's not encouraging you to turn it back in on Friday if you're not charged over the weekend.
Speaker 1:The FMC saying just because you're not being charged over the weekend doesn't mean that those truckers and shippers don't want that gone, because now the trucker has to find a place for it through that weekend. If it's ready and available on Friday to be returned, they want to return it. They want their chassis back to be able to go pick something else up so that maybe even if the port's closed on Saturday, they could still work on Saturday, they could still go pick up from the warehouse and pick up a box that needs to be moved and then that way they're ready on the Monday or Tuesday or whatever day the port is back open again. That's what the FMC is trying to argue here is look, there are still reasons why the shipper or the trucker wants to get the stuff moving, the freight fluidity piece. Continuing on, let me see where. And then it says and most importantly, these contentions assume that incentives can only flow in one direction to promote freight fluidity.
Speaker 1:This is the FMC. They overlook that allowing detention charges over scheduled closures have their own disincentivizing effect on the entities assessing the charges. So it says allowing detention charges over the weekend might have a disincentivizing effect for the port or the terminal. So that's articulated in the final rule. These charges may also lessen the incentive for ocean carriers and marine terminal operators to perform efficiently. So they're kind of alluding and saying here, look, if the terminal or the ocean carrier can charge demurrage or detention over that holiday weekend and they know that there might be three days of charges coming, the FMC is kind of saying, look, they may try to push this equipment or this movement of goods, because then they can collect on those three days, because there's a financial incentive for them, because if the cargo stays on their yard or if the equipment stays inside the box through detention, inside the box, through detention, they get to charge for it. I mean it kind of looks like we made. This was just, this was just posted what I think a week ago and kind of what this is saying, and, granted, this is newly into the new commission chairmanship, but it almost looks like no favors are being given to the ocean carriers here, especially in this explanation. So continuing on.
Speaker 1:It says detention charges that place all financial risk on the shippers and their intermediaries during scheduled port closures, do not encourage the carriers and marine terminal operators to be creative or innovative about how they could promote freight fluidity, and so they continue on. This is probably the best. It says. For example, ocean carriers have considerably more leverage over MTOs, marine terminal operators and shippers and truckers. If the carrier could not count on receiving revenue from these charges, they would be incentivized to take action, such as encouraging ports to expand their hours over weekends, which could significantly increase freight fluidity. So what the FMC is saying here and I think you're probably getting this but they're saying the weekends, the MTOs, the Marine Terminal Operators, can charge. If they can charge, why would they try to open on that Saturday and be productive when and this is I mean, this is just what the FMC is saying. But they're saying why would the MTO try to open? Because by even staying closed, they can collect on that box.
Speaker 1:Now, of course, I think that that's I get their point. But I also think that MTOs, ports and terminals want to move equipment as well. I think that they don't want things dwelling equipment as well. I think that they don't want things dwelling. It's a loading zone, it's not a warehouse. Right, the yard is one that the terminal report really wants to keep things moving here and so.
Speaker 1:But their point is well made. I think that their point is really kind of hinging on. Look, if they can just sit there and collect money, why would they be incentivized to be creative and open on the weekend or expand their hours or to try to increase the freight fluidity? It's an interesting argument and I think that it's one that's well-received, but I think that it's also a little a touch unfair. But their point is why would they be encouraged to do that? It said accordingly, when balancing the competing incentives, the commission finds that detention charges over scheduled closures do not incentivize behavior that will best promote freight fluidity.
Speaker 1:Now, this is a much more complete argument and this is just a section of what the FMC said. But this is a much more complete argument than what they gave previously, where they kind of just said look, it's not incentivizing and because you can't charge on a day, you can't do anything. It's not incentivizing and perhaps that's overly unfair on the argument that the FMC made, but this one point is. This one is a much more complete argument. It's interesting too that the well they go into the conclusions and I want to point this out so the amount was $510. That's how much we're talking about for this Saturday, sunday, Monday, holiday that this whole case hinges on. So it was a small claim, so it wasn't very much anyways.
Speaker 1:But here we are. It has the potential to really define weekends and holidays for whether detention and demurrage can or cannot be charged over $510. And actually they're saying the interest is $70 on that and running on the reparations award from it said that respondents pay reparations to claim it in the amount of 510, with interest running on the reparation award from June 6th 2020, totaling $580.03. So they've I mean they've certainly paid more than that in legal fees for all of this, but this is truly going to be one of those marquee case law cases where, like I said, we'll find out. Does this stick? Is this something that has that weekends and holidays cannot be charged or not?
Speaker 1:So it says the commission reverses the initial decisions order the absent extenuating circumstances, evergreen Shipping Agency Corporation and Evergreen Line Joint Service Agreement cease and desist from imposing per diem or detention charges. So they reverse their cease and desist. That's what they kind of interpreted of the. It was the you had to pay the $500, but then they also said Evergreen cannot. They were cease and desisting from charging on weekends and holidays. Now they're saying look, it's going to be more of a complete discussion, a complete look. So they're reversing that. Yeah, yeah, that's basically what they're saying.
Speaker 1:This is interesting, though, because then chairman, now Commissioner Maffei wrote an interesting concurrence, which a concurrence is just like I agree, and here's a few extra thoughts. So Commissioner Maffei wrote an interesting concurrence where he said he agrees with the decision in full, but he also added some emphasis to the per diem discussion. So he notably said and I'm going to read off his concurrence at least in part I concur with the majority's opinion in full. I write separately, however, to express my additional concerns related to the use of the term per diem in the party's contract to describe the respondent's detention charges.
Speaker 1:Now we've seen the FMC come in and talk about per diem versus detention and kind of the argument felt like well, if it quacks like a duck, it's a duck, we don't care what you call it. Now here Commissioner Maffei is coming in and kind of picking that apart a little bit and he says, as the majority notes, the commission has discouraged the use of per diem because it is unclear, adds additional complexity to an argument and is subject to inconsistent application across the industry. So I say if it quacks like a duck, we're going to call it detention, to be fair. Right, he's right. The commission in recent years has said look, we really we prefer you to kind of stick with detention or demerge, because per diem kind of takes on a different connotation. But as it relates to the regulation or the regulatory authority of the FMC over per diem, they're saying look, per diem quacks like a duck, we're going to call it detention.
Speaker 1:So, continuing on here, commissioner Maffei says per diem is defined as by the day for each day, and he relies on Black's Law Dictionary, which is kind of the official dictionary of lawyers. This definition is clear, as should be its application in the context of the interpretative rule. He goes on to say in my opinion, the validity of this per diem provision necessarily depends on the bilateral ability of the parties to perform under its terms. So the existence, in other words, the existence of reciprocal risks and responsibilities between the parties, not a unilateral shift of all risks to the shipper, not a unilateral shift of all risks to the shipper.
Speaker 1:Put another way, I believe that the interpretive rule allows the respondent to charge a daily detention fee only when the complainant has an opportunity to cure the default at least once before each additional daily fee is charged. So he's saying, look, I think that there should be an opportunity to fix it. And he continues to say you need to be. So. The whole argument right, no weekends or holiday charges is because you can't get in there to do anything about it. And he's saying, look, put another way, if you can't do anything about returning and I don't know if he's kind of nodding to like if there's no return windows but if he's saying, look, if there's no opportunity for detention to be rectified, like that you return the equipment, return the box, right, because detention is kind of that charge over the use of the box, and so when you return it, then that charge of the use of the box stops. But he says to charge a daily detention fee only when there's an opportunity to cure the default so that there's an opportunity for them to actually bring it in. They're ready, they're willing and there's an opportunity to cure the default so that there's an opportunity for them to actually bring it in, they're ready, they're willing and there's an opportunity to return the equipment.
Speaker 1:So the fallacy of the respondent's position lies in its oversimplified presumption that detention is akin to rent. Detention is a fee, not rent, and is distinguishable because its primary purpose is to incentivize the movement of cargo and equipment. So here, however, the respondent's argument unreasonably shifts the burden of all potential detention charges to the complainant without regard for the root cause of the detention, much like a renter. So he's kind of just getting into, like that larger detention. It's supposed to incentivize the movement. And because it's supposed to incentivize the movement, and because it's supposed to incentivize the movement if there is no opportunity to actually incentivize right, like it's saying look, I'm going to charge you another day if you don't bring it in, but if on the other side, the person trying to bring it in, the motor carrier, whoever is saying I'm trying to bring it in, there are no opportunities, there's no appointments, the port is closed, my area of the port is closed, the yard isn't open, so I can't bring it.
Speaker 1:That's kind of what he's getting at here is, if there is no opportunity, but that person, that motor carrier who has the empty and they're trying to return it, is trying to return it, you can't charge detention. That's what he's saying Commissioner Maffei here. He's saying you shouldn't be able to charge detention because they're trying, you're not incentivizing anything because they're already incentivized and they are trying to bring it in but there's no opportunity to bring it in. I think that might be a larger discussion. I've been hearing a lot about appointments and the inability of certain motor carriers to be able to get appointments and I think that that's what he's talking about here. You'll recall that there was a letter sent from the Bi-State Motor Carriers Association to then Chairman Maffei saying look, we have this equipment, we're trying to bring it back by saying not only should you not be charged detention when you can't, when there's no opportunity for you to return, but you should be, you should be charging storage because you're now having to hold this equipment even though you're ready, willing and able to return it, but there's no opportunity to return it. So he kind of flips it on its side and he's like that was before and not a lot came from that, but that was his position was that he thought that if you're really ready, willing and able to return the box, it can't be returned for whatever reason, but it's blocked. That, he said you should be compensated for having to hold that box because you're you're wanting to get it out, because it's now gumming up your ability to use the chassis. That's kind of what it comes down to. That's what he had said previously. He doesn't totally talk about that here, but he does allude to that right when he says it's not a rent, it's an incentive principle, it's an incentive fee, and if you're not being incentivized, then what the heck are we doing here? Right, yeah, so it's interesting, though One thing that I want to caution overall here is that, even though the way that I read this for the most part is that, look, it looks like weekends and holidays as a general statement, but will be assessed case by case.
Speaker 1:So here we are with the FMC's guardrails approach as a general statement, it feels like weekends and holidays are probably not something you want to be charging, detention or demurrage on in the immediate, because the FMC is saying, look, even though it might incentivize for drop-offs on Friday, they're finding less positive incentive for the freight fluidity movement, for the actual movement of the goods, because it's just going to be sitting there anyways. But this is not legal advice, this is just educational discussion. So interesting, right, this is an all over $500 charge. But, look, this might still be something that can be challenged and if so, the FMC may have to defend this new expanded explanation as well, which may throw everything back into the gray area. But it seems, at least for now, like I said, as a general general statement, they are really encouraging not charging detention and demurrage on weekends or holidays or any other time when you cannot be incentivized by the charge. And, right, I talked about Maffei's concurrence. That's not the majority opinion where he talks about the actual incentive. But it goes to the overall discussion here. Right, again, not legal advice, just general education and discussion. But that's it for this week.
Speaker 1:Keep it here for all the updates on what you need to know in global supply chain. We're going to keep breaking it down. I'm going to keep watching this weekends and holidays, because this has a potential to be very impactful for operations. As always, the guidance here is general, for educational purposes. It should not be legal advice directly related to your matter. If you need an attorney, contact an attorney, but if you do have specific legal questions, feel free to reach out to me at my legal company, squall Strategies. Otherwise, for the non-legal questions, the e-learning and general industry information and insights, come find me at the Maritime Professor.
Speaker 1: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 Bysy and if you prefer to see the video, they live on my YouTube page by Landon by Sea, presented by the Maritime Professor. While you're at it, check out the website MaritimeProfessorcom. There are live webinars on there that you can sign up for. There's going to be e-courses dropping very soon. The website has a nice refresh to it. Take a look and sign up for the newsletter. You'll be alerted to all the new events and happenings and when those e-courses get dropped. So until next week. This is Lauren Began, the Maritime Professor, and you've just listened to by Land by Sea. See you next time.