How FMC’s Incentive Principle Limits Weekend Detention Charges

A $500 bill shouldn’t be able to move markets, but that’s exactly why we wanted to unpack the Evergreen detention case and the DC Circuit’s latest word on the FMC’s incentive principle. We walk through the real-world question hiding inside a tiny invoice: if a terminal is closed for a holiday weekend and the gates are literally shut, can detention charges still be “reasonable” under the Shipping Act? I break down how the Federal Maritime Commission ties detention and demurrage to freight fluidity, why the court pushed for fact-driven analysis, and what this means for weekend charges, holiday closures, return restrictions, and any scenario where equipment cannot physically move.

Then we shift to a much bigger dollar headline with major shipper implications: the initial FMC decision awarding more than $46.5 million in reparations to Bed Bath and Beyond’s successor against OOCL. We talk through the claims and findings around service contracts, minimum quantity commitments (MQCs), space allocation, premium pricing, refusal to deal, and retaliation, plus why this ruling may add structure to how MQC failures can be treated as potential Shipping Act violations rather than just private contract disputes.

We close by connecting global policy to daily logistics. The FMC Chairman’s appearance at the International Maritime Organization (IMO) MEPC for net zero framework talks raises a practical concern: new vessel compliance costs do not stay on the vessel, they show up in surcharges, freight rates, and the prices paid by importers, exporters, retailers, and consumers. And even with DHS funding restored, we explain why the US Coast Guard cannot be collateral damage in political fights if we’re serious about maritime security, port operations, and supply chain resilience. Subscribe, share this with your team, and leave a review so more people can follow the rules that shape how ocean shipping really works.

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(Cont.) How FMC’s Incentive Principle Limits Weekend Detention Charges

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$500 detention fight. A$500 detention fight may have just set a new standard in the world of incentivizing the movement of goods. The FMC's incentive principle is back in the spotlight. And honestly, both sides here had a point, right? Terminals and carriers say weekends and holiday charges can help actually incentivize cargo, right? Push it out to move before the closure of the weekend or the holiday. Whereas the shippers are saying and the truckers are saying, but if the terminal is closed and equipment actually physically cannot move, then what exactly are we incentivizing? Like somebody had to make the call. And it looks like in this case, the shippers have won. The FMC said the incentive principle means detention and demurance charges have to be tied to the actual possibility of movement. And the DC circuit backed that up in a holiday weekend closed terminal scenario. I'm telling you, the wild part. This is all over$500. They spent more on the lawyer fees and the initial filing of the complaint than they did on the$500. So this was always a very principled case. But it was a small claims case.$500. Supposed to be lighter, faster, less formal record. But we have some decisions here. We are starting with the Evergreen TCW and why one tiny detention dispute may have just sharpened one of the biggest rules in FMC enforcement. Hi, welcome back to Byland and by C, an attorney breaking down the weekend supply chain presented by the Maritime Professor. Me. I'm Lauren Beegan, founder of the Maritime Professor, former FMC International Affairs Attorney, and founder of School Strategies. By Land and By C is your go-to resource for navigating the regulatory side of global ocean shipping. And me, I'm your favorite maritime attorney, aren't I? As always, this podcast for educational purposes only and should not be considered legal advice. There is no attorney client privilege created by this video or this podcast. If you need an attorney, contact an attorney. So let's get into it because as you know, ocean shipping moves the world. All right, segment number one. We are starting with the FMC, of course. We are starting with the Court of Appeals for the DC Circuit because they just gave the FMC a very important win in the Evergreen detention case. Now I want to spend a little time here because this is one of those cases where the facts sound perhaps small at first, almost too small to become a major industry signal. But the legal principle underneath it all is anything but small and is something that will have some impact on the industry. Like I said, it's about$500 that we're talking about here. That's it. That's it. The question behind the$500, though, was much bigger. Can detention charges be reasonable when the party being charged could not actually return the equipment? The port was closed. The terminal closed. That's where the case becomes important, right? So TCW, let's take you back, let's give you a little framework of what was happening here. So TCW, a trucking company, a drage provider, was involved in moving cargo on behalf of Yamaha. Evergreen provided the container and the chassis, right? As as happens, the cargo was delayed because Yamaha's facility was closed during COVID. This was all 2020. And then when TCW was finally able to go retrieve the equipment, go retrieve that empty and take it back to the Port of Savannah, Port of Savannah was closed. It was a holiday weekend. It was Memorial Day weekend. So we all knew, right? Memorial Day weekend, of course they're closed. They're going to be closed Saturday, Sunday, and Monday, Memorial Day. Evergreen charge detention for those closed terminal days. TCW challenged the charges. And that challenge ended up putting the FMC's incentive principle right in the center of this conversation. So all of that happened during the 2020 May, right? Memorial Day timeline. The interpretive rule was May 18th, 9, May 18th, 2020. So here we are, right about the same time that this rule just before it had gone into effect, this incentive principle under the ins under the interpretive rule of May 18th, 2020, just not less than two weeks later, here was a case that now is testing that. It's the core concept, right? It's all about the incentive principle comes from that FMC 2020 interpretive rule on detention to merge in plain language. It's basically saying detention and demerge charges are supposed to serve a purpose. They're supposed to incentivize the movement of goods, the cargo and the equipment. They're supposed to promote freight fluidity. Now that's the core concept. But you could argue both sides are saying that, right? Well, it promotes the freight fluidity or it incentivizes the movement because if we're going to be good gone for three days, you bet your butt they're coming in on Friday. But if they are actually closed Saturday, Sunday, and then Monday, there's no possibility. They can't get in there Saturday. They can't get in there Sunday. So you're charging for something that they can't get in there for. That was really the core concept here. That was really the core debate. Tension reverts are not supposed to be automatic punishments. They're not supposed to be the meter runs no matter what. They're supposed to help the system move. And so that's where this case really got going because both sides really did have a good argument. Like I said, the terminal carriers, weekend, and holidays create that pressure before the closure begins. And if a shipper or trucker knows the meter is going to keep running over a Saturday or Sunday or a holiday, maybe they hustle on Friday. Maybe they make that extra push. But from the operations perspective, that argument's not ridiculous, right? It's a real part of how incentives can work. And they certainly do work. But from the shipper and trucker perspective, once the terminal is closed, the gates are closed, and the equipment physically cannot be returned. The question becomes what is the charge actually doing during that closed period? Is that still an incentive? Is it just a charge? That's where the tension was. And the DC Circuit had already told the FMC once before that it needed to be careful here. This case we talked about before had already come before the DC Circuit. The court didn't want the commission to treat the incentive principle like a shortcut or like an automatic bright line rule. It said it wanted real analysis. It wanted the FMC to look at the facts, consider the incentive effect, and respond to Evergreen's arguments. So it sent it back to FMC and said, uh do this again. It sent it back to the FMC on remand. It looked at the specific facts, FMC, TCW could not retrieve the equipment earlier because of the Amaha closure because of COVID-19. The Port of Savannah gates were closed during the disrupted days, and Evergreen did not show that it suffered costs from the delayed return. And I think that that's the piece that's worth watching. Evergreen could not show or didn't show that it suffered costs from the delayed return. I think that hinged here. Based on those facts, the FMC said the charges did not promote freight fluidity. And then Evergreen took it back to the DC Circuit. And this time the DC Circuit agreed with the FMC, and that's what this week made a big deal of. The court reinforced that the FMC can look at detention and demurrage through the lens of actual freight fluidity. The question is not only does the tariff or contract allow the charge, the question is does the charge realistically incentivize cargo or equipment movement under the facts? And that's the major validation of this incentive principle. And the court also made clear that freight fluidity is not some new idea that the FMC invented after the fact. It is built into that interpretive rule that came out as a standalone. And this interpretive rule had a standalone announcement, right? May 18, 2020. It was not part of a larger case. It was part of an investigation, actually, but it was not part of a tied to specific case fact pattern. It was May 18, 2020 came out, and the incentive principle was within it. This had been something that the FMC had been chewing on for a while, but it was May 18, 2020, where we actually got some clarity. I it was an interpretive rule. It was basically saying this is how we interpret or will be interpreting these things to go. A little clarity around the issue. Now, I want to say this is extra fascinating because it was a small claims case. Look, small claims, and it's not necessarily right large claims, small claims, but this was$500. There are two paths at the FMC for the administrative law judges. There's the regular complaints, the regular docketed cases, and then there is a small claims settlement officer-driven side of where all of these dockets go that are less than a certain amount of money. And I'm pointing this out because small claims proceedings are supposed to be faster, lighter, and less formal in how their kind of legal procedure goes. What that also usually means is there's probably less formal evidence, right? Discovery, back and forth, all of those things that make the larger regular cases, the larger docketed complaints, a little bit more lengthy because they have a lot more to the record. But this is a small claims case, the lighter administrative record. And it ended up sharpening one of the, I mean, this is a big FMC enforcement incentive principle thing that's happening here. So this doesn't mean that every weekend charge or every charge during every closure is automatically unreasonable because the court said this is still fact pattern based. But the incentive principle, the incentive effect, I mean, it gave a lot of credibility to that. The actual ability to move cargo or equipment, whether you can or you can't, whether it's incentivized by the charge, I mean, this is this is pretty significant stuff. The commission can look at the real world circumstances and ask whether the charge is actually doing what detention or demerits are supposed to do. Is it helping to move the cargo? Is it helping to move the equipment? Is it promoting freight fluidity? And if not, the charge has a problem. And that has major implications. So if you were a carrier, a terminal, a shipper, a trucker, weekend charges, holiday closures, appointment availability, return restrictions, and every other scenario where cargo or equipment physically cannot move, you might want to just take another look at. Look, this was a small dollar case, right? 500 bucks. I mean, going to the DC Court of Appeals, Court US Court of Appeals for the DC circuit twice, well exceeded the$500 in that alone. But it was never about that, right? It was about incentive as a principle. And that's something if you actually go back and listen to my guest interview with Commissioner Dye, she talked about why she wanted to go with a principle instead of some other form. She wanted to create some sort of guardrails around this concept. And so it was the incentive principle that came out of the May 18, 2020 interpretive rule. And now here we have an appellate level marker that the FMC's detention to merge framework has some real legal force behind it. All right, segment number two, staying with the FMC, of course. Bed, bath, and beyond. We haven't talked about Bed, Bath and Beyond for a while, but one of the cases shook free this week. Bed, Bath and Beyond versus OOCL. An initial decision came through. It's another major post-pandemic accountability case, but it sits in a very different part of the FMC world. The FMC's chief administrative law judge awarded Bed Bath and Beyond successor. So it was it because they went bankrupt and now it's the successor of the entity. The administrative law judge of the FMC awarded more than$46.5 million in reparations against OOCL. That appears, I mean, I don't think there are any larger cases in all of FMC history. We had the$32 million case prior. This is about the biggest one that I can think of. 46.45.6 million in reparations against OOCL in FMC history. Now, the important caveat, this is an initial decision. It just came out this week. This is not necessarily the final word. It can still be reviewed, suasponte review, so any of the commissioners can pull it and say, I want to look at this closer. It could still be put on appeal. It has 22 days, I believe, where either party could put it on appeal. And I'm I always hesitate here because it's the 22 days for the Suez Ponte review. It might be an additional, either way, it's not final, is what I'm trying to get here. I don't want to go too far down that side. But look, the case came out of this pandemic era marker, right? This is the minimum quantity commitments question that keeps coming up. Bad Bath and Beyond was alleging the OCL failed to meet service commitments during that disruption of COVID congestion. The claims included space allocation, premium pricing, service not in accordance with service contracts, refusal to deal, retaliation, and detention to merge. The ALJ found violations related to service commitments and the filed rate doctrine, refusal to deal and retaliation, but the ALJ said detention and demurrage did not have a violation here. But what's important here is this is a minimum quantity commitment issue, an MQC. We've been watching these. There have been a bunch of MQC rulings. Excuse me, I should say there's been a bunch of MQC cases filed. Most of the rulings recently seems like they've been more around retaliatory. And so they've been having awards based on retaliatory behavior, not necessarily the minimum quantity commitment. But this one was important because it seems to start to put a little bit more structure on minimum quantity commitment failures as shipping act violations rather than just commercial contract disputes or retaliatory. Certainly this had elements of both, but this decision does not mean that every minimum quantity commitment dispute becomes an FMC case or that every minimum quantity commitment or missbooking or rolled shipment suddenly becomes a shipping act violation. But it does suggest, and it's starting to pave the pathway a little bit, I would say, that when you have a common carrier, a service contract, and a minimum quantity commitment, a space allocation decision, premium pricing, and conduct that affects how cargo is received, handled, or delivered, the FMC may be willing to look at that carrier practice and not just the contract label and not just say it's hard to enforce. It looks like the enforceability of some of these minimum quantity commitments is starting to be paved. So this one is worth looking at. It is a lengthy case, but I wanted to bring it to your attention because this is where minimum quantity commitments, I think, are going, we're going to start having more legal discussions and perhaps legal authority on minimum quantity commitments. Because previously we were getting a lot of retaliatory, which is which is fine and not all retaliatory, right? But that was one of the things that sometimes it would get decided on that as the main where they would kind of decline to go too far in the minimum quantity commitments. This one to me felt like they were moving closer to the minimum quantity commitments as an enforceability issue. Take a look at this one. All right, segment number three, Chairman Jabella back to the news. This is interesting. This is an interesting change. Chairman Jabella was at the IMO this week. And I say interesting because for the most part, Coast Guard has been the one to go to the IML. We might have a little bit of State Department, we might have a little bit of Department of Transportation, Mayorad, but it's really kind of been Coast Guard and State Department. But the FMC's role is interesting and arguably rooted in FMC authority. I'm kind of loving these new applications, whether I'm just loving that we're using the authorities that the FMC has. The FMC announced that Chairman Dabella joined the U.S. delegation to the International Maritime Organization for the Marine Environment Protection Committee, MEPC in London. And this was talking about net zero frameworks. Now you might be thinking, what the heck does the FMC have to do with environment? Well, really, not much. But you know what they do have to do with? Fairness in the movement of goods and unreasonable or unfair restrictions. We've talked about the Foreign Shipping Practices Act a lot. We've talked about Section 19 of the Merchant Marine Act of 1920. That is why the FMC has entered the geopolitics conversation. Now, this was a creative use of it, but they're not wrong. I mean, this is foreign shipping practices that disadvantage U.S. ocean board trade. And what was happening here is she was there to have general policy conversations, but also specific policy conversations on whether unfavorable shipping conditions would be imposed by a tax, right? Ships operate fuel routes, schedules, contracts, cargo commitments, and margins. And when global framework adds a new compliance cost, and I've talked about this before, I always say be careful of the costs that get passed over to ships, to vessels, because they don't just sit there with a vessel. And because we went through the 2010s where we actually had a giant ocean carrier go bankrupt. Hansin went bankrupt. These ocean carriers making billions of dollars is a new thing. It has not always been this way. And so while they might be having big years, this is not always the way it will go. And actually, just today and yesterday, I was seeing some not great news for ocean carriers on some of their rates going down. So I would say this is interesting, not for the net zero on a policy perspective, but for the another tax going on to vessels perspective. And that's where freight weight, freight rates, surcharges, contract negotiations, and eventually the price paid by importers, exporters, and retailers, manufacturers, and consumers, that's why the FMC chairman de Bello was there and at the IMO. Look, marine environmental policy and maritime commercial policy are not necessarily separate lanes. And when this international framework could affect U.S. foreign commerce or create unfavorable shipping conditions, and we're again it might just be a specific application, but it's important, I think, to look at it from a commercial standpoint as well. IMO is very operationally based, International Maritime Organization. That is where a lot of the safety of life at sea and other operational-based things live. But this one was, as I've heard it, right, and I haven't gone too far into the net zero, but it was going to be a charge on the vessels for environmental purposes. And so any charges on vessels, the FMC has authority to review and figure out are there unfair or unfavorable conditions being assessed here. And so that's why she was there. I support the authority hook that she should have been there. They don't necessarily regulate environment, but they certainly do regulate the commercial aspects of ocean shipping that affects the U.S. So this is one I'm going to keep watching. I think this is a really interesting perspective on FMC authority. And also, I think that this is, I mean, the sleepy agency, it was never there. I'll tell you, it was never there. You might not have known who the FMC was prior to COVID, but it was always there and it was always working hard on these issues. But these new applications of the exact same authorities that they've always had, almost this confidence to use them, it's it's fascinating to watch. I'm supportive of it because these have always been the authorities that they've had, and these are very significant authorities. The FMC has always been a very important, very significant commission. So, all right, story number four. This one is, I want to put this at the end. This is great news. The last two episodes we've been talking about DHS funding and how the Coast Guard just totally getting screwed. Look, great news, DHS funding was approved overnight, which means Department of Homeland Security is back to being fully funded, which means US Coast Guard, you got your money. Great. This is incredible. This is wonderful. Now we can't just say problem solved and moved on because look, we cannot forget what we have been talking about the past two, three, four weeks, also two to three months since February. The Coast Guard is one of the central operating systems of maritime commerce in the United States. They support vessel inspections, port safety, search and rescue, maritime security, pollution response, credentialing mariner readiness, both at the homeland, but also they are all over the world. They are part of the everyday that helps cargo move. And during the shutdown, they were caught in the middle of a DHS funding fight that had little to nothing to do with them. And we cannot be there. We cannot be there. Department of Homeland, Homeland Security Secretary today put some specifics to what just happened. And he said the Coast Guard had to have their gas pay, gas bill paid by the Department of War so they can continue operating. They couldn't even pay for their fuel, but they had to. These were mission essential. But it wasn't necessarily, it was certainly that all of the employees of the Coast Guard, whether they were military, enlisted, or civilian getting paid, but all of the other things, keeping the lights on. The DHS secretary also said that CISO was down about 1,100 people, and that's about one-third of its workforce. That's the Cybersecurity and Infrastructure Security Agency. Cybersecurity, it's giant. Not just maritime cybersecurity, all cybersecurity and infrastructure. Look, supply chain resilience is not just ships, cranes, docks, all the things. It all has to work together. And we cannot have Coast Guard get caught in a political fight that has nothing to do with it. It cannot be collateral damage in a funding fight. I don't know what needs to happen, but something needs to happen. It needs to be moved out of DHS if that's what has to happen, but it needs to be protected so this can never happen again. We cannot have Coast Guard down like this. It's not fixed. This is this temporary. Funding, but battle is over. But we can't say that maritime readiness is ready if this whole division of important work of U.S. Coast Guard is just going to be treated like an afterthought. This can't happen again. I'm going to keep watching this. I'm going to keep raising the issue of this because this cannot happen again. It happened. Let's learn from it. Well, it was a positive note. Right. We got funding, but the warning still remains. Look, this was a week of some really interesting stuff shaking free, right? We had new applications of environmental, commercial conversations. We had minimum quantity commitments. We had the maritime readiness conversation. As you know, as we always say, right? The system works as a system. This is a supply chain ecosystem. It's not just a chain, it's not just a link, it's a full ecosystem. And when the system breaks, everybody feels that it and we cannot get maritime ready if we're gonna let some of these areas, they're not fringe, but if we let some of these areas go as afterthoughts. I love the motion and the movement, and I love that we just had almost a half a million dollars in funding go out to the port infrastructure and development projects, PIDP grants. Did I get the last P wrong there? Either way, it's the PIDP grants. I love that we had a half a million go out. We need more, but I love that we had a half a million go out. Some of those projects are really interesting and really important. All of them are important, but some are really fascinating. Go take a look at the ones that were awarded. It was just two days ago that they were announced. But look, ocean shipping doesn't move in one lane. It's everywhere, obviously. It's law, it's policy, it's operations, infrastructure security, cost, and cargo all at the same time. And look, here's what I always say: when you understand the rules, you make better decisions. So keep paying attention, keep following here on this episode, on this uh podcast by Landon Bicey. We love having you. If you like this episode, be sure to follow, subscribe, and leave a review. Want to go deeper on these topics or bring this kind of insight to your team, visit the maritimeprofessor.com to explore corporate trainings, tailored briefings, and on-demand webinars, all designed to make complex maritime regulations practical and easy to understand. And if your organization needs help navigating the legal or strategic side of ocean shipping regs, head over to Squell Strategies. That's where I provide consulting services, regulatory guidance, policy support for clients working directly through these issues. As always, this podcast is for educational purposes only and should not be considered legal advice. If you need an attorney, contact an attorney. Until next time, I'm Lauren Beegan, the Maritime Professor, and you've just listened to Byland and By C. See you next time.