Decoding OSRA – Section 6. Public Disclosure
We’re still only beginning to see how the changes to U.S. shipping law will affect businesses’ imports and exports as well as carriers’ and other industry stakeholders’ operations within maritime shipping. At Universal Cargo, we want to help shippers know how law changes will affect them. What exactly does the Ocean Shipping Reform Act of 2022 (OSRA) say and do? This blog series goes through it section by section, so you can see exactly what our lawmakers changed in the U.S. Code dealing with shipping.
We’ll give you the OSRA text; the text of the U.S. Code, usually in Title 46, before and after its amendments; and consider what those changes mean for U.S. importers and exporters.
Previously covered in this series:
Obviously, that means today we’re covering Section 6 of OSRA. Let’s see exactly what it says and changes…
Section 6 of OSRA makes a short addition to a section of Title 46.
The addition requires that, each year, the Federal Maritime Commission (FMC) publishes online for the public to see the commission’s findings against ocean carriers on the issue of demurrage and detention fees and include penalties the FMC imposes on the carriers.
Section 6 Text
SEC. 6. PUBLIC DISCLOSURE. Section 46106 of title 46, United States Code, is amended by adding at the end the following: ``(d) Public Disclosures. – <<NOTE: Web posting.>> The Federal Maritime Commission shall publish, and annually update, on the website of the Commission-- ``(1) all findings by the Commission of false detention and demurrage invoice information by common carriers under section 41104(a)(15) of this title; and ``(2) all penalties imposed or assessed against common carriers, as applicable, under sections 41107, 41108, and 41109, listed by each common carrier.''.
Portion of Title 46 Section 6 Amends
As we’ve seen earlier in this series from other OSRA sections, Section 5 does not edit text in Title 46 so much as it adds additional text. This time to Section 46106. As I’ve done in previous posts, I’ll still provide the full text of the section before the addition, so you can see what it already covers and how the new text fits in.
Luckily, the section isn’t long:
§46106. Annual report (a) In General.—Not later than April 1 of each year, the Federal Maritime Commission shall submit a report to Congress. The report shall include the results of its investigations, a summary of its transactions, the purposes for which all of its expenditures were made, and any recommendations for legislation. (b) Report on Foreign Laws and Practices.—The Commission shall include in its annual report to Congress— (1) a list of the 20 foreign countries that generated the largest volume of oceanborne liner cargo for the most recent calendar year in bilateral trade with the United States; (2) an analysis of conditions described in section 42302(a) of this title being investigated or found to exist in foreign countries; (3) any actions being taken by the Commission to offset those conditions; (4) any recommendations for additional legislation to offset those conditions; (5) a list of petitions filed under section 42302(b) of this title that the Commission rejected and the reasons for each rejection; and (6) an analysis of the impacts on competition for the purchase of certain covered services by alliances of ocean common carriers acting pursuant to an agreement under this part 1 between or among ocean common carriers, including a summary of actions, including corrective actions, taken by the Commission to promote such competition. (c) Definition of Certain Covered Services.—In this section, the term "certain covered services" has the meaning given the term in section 40102.
Section 6 of OSRA makes an interesting addition to Section 46106 of Title 46. That section of Title 46 outlined an annual report the FMC had to submit to Congress. Section 6 of OSRA adds an annual report for the public published through the commission’s website.
Let’s go through the addition in more detail.
After the initial paragraph of Section 6 of OSRA tells us where to add the new text, that new text begins with paragraph (d):
``(d) Public Disclosures. – <<NOTE: Web posting.>> The Federal Maritime Commission shall publish, and annually update, on the website of the Commission--
Nothing complicated here. The FMC is to publish and update once a year the information to be outlined in the following subparagraphs.
The first thing the FMC is to publish in this annual online report to the public is as follows:
“(1) all findings by the Commission of false detention and demurrage invoice information by common carriers under section 41104(a)(15) of this title;
This subparagraph sends us looking to another section of Title 46 to define what a false detention and demurrage invoice from an ocean carrier is. 41104(a)(15) states, “[a common carrier shall not] invoice any party for demurrage or detention charges unless the invoice includes information as described in subsection (d) showing that such charges comply with—
“(A) all provisions of part 545 of title 46, Code of Federal Regulations (or successor regulations); and
“(B) applicable provisions and regulations, including the principles of the final rule published on May 18, 2020, entitled “Interpretive Rule on Demurrage and Detention Under the Shipping Act” (or successor rule).”
This starts to take us down a little bit of a rabbit hole. When we find the referenced section of Title 46 to clarify what false detention and demurrage invoices are, it sends us to yet another part of Title 46 with which detention and demurrage invoices must comply and what’s commonly called the “interpretive rule” that the FMC published a few years ago.
41104(a)(15) says detention and demurrage invoices must show compliance with all of part 545, but there’s a specific section of 545 that deals explicitly with demurrage and detention. Furthermore, that section set up the guidelines for the FMC’s creation of the interpretive rule, which is too long to include in its entirety in this post. Still some will be included.
Here’s that text of the pertinent section of Part 545 of Title 46:
§ 545.5 Interpretation of Shipping Act of 1984—Unjust and unreasonable practices with respect to demurrage and detention. (a) Purpose. The purpose of this rule is to provide guidance about how the Commission will interpret 46 U.S.C. 41102(c) and § 545.4(d) in the context of demurrage and detention (b) Applicability and scope. This rule applies to practices and regulations relating to demurrage and detention for containerized cargo. For purposes of this rule, the terms demurrage and detention encompass any charges, including “per diem,” assessed by ocean common carriers, marine terminal operators, or ocean transportation intermediaries (“regulated entities”) related to the use of marine terminal space (e.g., land) or shipping containers, not including freight charges. (c) Incentive principle — (1) General. In assessing the reasonableness of demurrage and detention practices and regulations, the Commission will consider the extent to which demurrage and detention are serving their intended primary purposes as financial incentives to promote freight fluidity. (2) Particular applications of incentive principle — (i) Cargo availability. The Commission may consider in the reasonableness analysis the extent to which demurrage practices and regulations relate demurrage or free time to cargo availability for retrieval. (ii) Empty container return. Absent extenuating circumstances, practices and regulations that provide for imposition of detention when it does not serve its incentivizing purposes, such as when empty containers cannot be returned, are likely to be found unreasonable. (iii) Notice of cargo availability. In assessing the reasonableness of demurrage practices and regulations, the Commission may consider whether and how regulated entities provide notice to cargo interests that cargo is available for retrieval. The Commission may consider the type of notice, to whom notice is provided, the format of notice, method of distribution of notice, the timing of notice, and the effect of the notice. (iv) Government inspections. In assessing the reasonableness of demurrage and detention practices in the context of government inspections, the Commission may consider the extent to which demurrage and detention are serving their intended purposes and may also consider any extenuating circumstances. (d) Demurrage and detention policies. The Commission may consider in the reasonableness analysis the existence, accessibility, content, and clarity of policies implementing demurrage and detention practices and regulations, including dispute resolution policies and practices and regulations regarding demurrage and detention billing. In assessing dispute resolution policies, the Commission may further consider the extent to which they contain information about points of contact, timeframes, and corroboration requirements. (e) Transparent terminology. The Commission may consider in the reasonableness analysis the extent to which regulated entities have clearly defined the terms used in demurrage and detention practices and regulations, the accessibility of definitions, and the extent to which the definitions differ from how the terms are used in other contexts. (f) Non-Preclusion. Nothing in this rule precludes the Commission from considering factors, arguments, and evidence in addition to those specifically listed in this rule.
FMC’s Interpretive Rule on Demurrage & Detention
From the above 545 guidelines, we go to the FMC’s interpretive rule. As I said, it’s too long to include here in its entirety, but I’ll include some highlights. Ultimately, the FMC decides on case by case basis the justness of demurrage and detention fee disputes. The interpretive rule, with all its background and supplementary information the FMC laid out, doesn’t definitively cover every possibility for which its commissioners would decide demurrage and detention invoices are “false”.
The interpretive rule does, however, give a good sense as to the standards on which the FMC judges these cases. Here are highlights from the FMC’s interpretive rule:
The interpretive rule was intended to reflect three general principles:
1. Importers, exporters, intermediaries, and truckers should not be penalized by demurrage and detention practices when circumstances are such that they cannot retrieve containers from, or return containers to, marine terminals because under those circumstances the charges cannot serve their incentive function.
2. Importers should be notified when their cargo is actually available for retrieval.
3. Demurrage and detention policies should be accessible, clear, and, to the extent possible, use consistent terminology.
The main thrust of the rule is that although demurrage and detention are valid charges when they work, when they do not, there is cause to question their reasonableness. This derives from the well-established principle that to pass muster under section 41102(c), a regulation or practice must be tailored to meet its intended purpose, that is, “fit and appropriate for the end in view.” The Commission determined that because the purpose of demurrage and detention are to incentivize cargo movement, it will consider in the reasonableness analysis under section 41102(c) the extent to which demurrage and detention are serving their intended purposes as financial incentives to promote freight fluidity.
The Commission explained in the NPRM that practices imposing demurrage and detention when such charges are incapable of incentivizing cargo movement, such as when a trucker arrives at a marine terminal to retrieve a container but cannot do so because it is in a closed area or the port is shutdown, might not be reasonable. Similarly, the Commission stated, “absent extenuating circumstances, demurrage and detention practices and regulations that do not provide for a suspension of charges when circumstances are such that demurrage and detention are not serving their purpose would likely be found unreasonable.”
As you can tell from even the small portion of the FMC’s interpretive rule writing, its guidelines and authority to create this rule come from more than just Part 545 of Title 46. However, pulling the text from all of those would take us way too far off on a tangent.
As time has passed and the FMC has used the interpretive rule in deciding cases of unfair demurrage and detention fees, the idea of these fees being used for incentivizing the movement of cargo has become the most emphasized part of the rule. If the fees do not appear to serve this purpose, because of something like being assessed at times impossible for shippers and their truckers to remove or return shipping containers from or to port terminals, the relating invoices are the ones that would be deemed “false.”
Such decisions against carriers are what OSRA Section 6(d)(1) requires the FMC to publish online.
Subparagraph (2) gives the second thing the FMC is to publish online: the penalties against carriers it ruled issued false demurrage and detention invoices.
``(2) all penalties imposed or assessed against common carriers, as applicable, under sections 41107, 41108, and 41109, listed by each common carrier.''.
This subparagraph is straight forward, but it also references sections of Title 46 that define monetary and additional penalties as well as their assessment. I was going to include those here; however, later in OSRA, these sections of the U.S. code on shipping will be amended. Thus, I’ll wait until OSRA gets to changing these sections before including them, so the penalties listed are accurately up to date and this series doesn’t become too repetitive.
Section 6 of OSRA is short and straightforward. It simply requires the FMC to report to the public decisions the commission makes against carriers on the issue of demurrage and detention fees, including whatever penalties the FMC doles out to the carriers. This is to be published yearly and via the FMC’s website.
As we’ve generally been seeing in OSRA so far, lawmakers appear to have written this section to benefit shippers over carriers.
If there’s anything you think I missed in this section of OSRA, please share it in the comments section below.
Stay tuned for when Decoding OSRA continues, examining Section 7….