Topic of the Week (5/31/24):
The FMC's Final Rule on Detention and Demurrage Billing Practices became effective this week on Tuesday - and as part of our continuing discussion I have one question for you this week - do you know where your D&D invoice is being sent now?
Final Rule - 46 CFR Part 541:
https://www.ecfr.gov/current/title-46/chapter-IV/subchapter-B/part-541
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 - Federal Maritime Commission Commission Meeting, May 29, 2024
[includes a discussion on VOCC Audit Program Overview]
Commission Meeting Announcement/Agenda:
https://www.fmc.gov/commission-meeting-scheduled-for-may-29-2024/
VOCC Audit Program:
https://www.fmc.gov/detention-and-demurrage/vessel-operating-common-carrier-vocc-audit-program/
2 - FMC launched an investigation into the impact of Canadian Ballast Water Regulations on US Flag Carriers (a continuation of a review prompted in part by the Lake Carriers Association petition (P1-20) in March 2020)
[includes a discussion of Foreign Shipping Practices Act and Sec. 19 of the Merchant Marine Act of 1920]
FMC Announcement:
https://www.fmc.gov/fmc-launches-investigation-of-the-impact-of-canadian-ballast-water-regulations-on-u-s-flag-carriers/
3 - FMC announces three compromise agreements with CMA CGM, Vanguard Logistics Services, and Shipco Transport
[includes a discussion of civil penalties go to General Fund of US, NOT the FMC directly]
-------------------------------
The Maritime Professorᵀᴹ is an e-learning/educational based company on all things maritime and supply chain - we provide employee trainings, e-content/e-courses, general trainings/webinars, and executive recruiting. Make sure to sign up for the email list so that you will be alerted to when the e-learning content is available, but also, being on the email list will give you exclusive access to promo/discount codes!
Sign up for our email list at https://lnkd.in/eqfZJShQ
🎙 Thanks for tuning in to By Land and By Sea by The Maritime Professor! If you enjoyed today’s episode, don’t forget to subscribe ⭐ and leave a review 📝.
📚 Want to dive deeper into maritime topics? Join our live webinars 🎧, explore our e-courses 💻, and expand your industry knowledge with online learning 🌍.
🚢 Need customized corporate training? We offer expert-led sessions tailored to your team’s needs!
🔗 Visit www.TheMaritimeProfessor.com to learn more and stay ahead in global ocea
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:27):
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 piece and ontop of the world, yeah, walk to
the beat when you see me coming.
Make some room.
Oh, everywhere I go, I'm in thespotlight.
This is a good life.
Oh, I'm living bold.
This is what it looks like.
(00:47):
I'm a city of the world.
Whoa, whoa, whoa, whoa, whoa,whoa.
Did you feel that that shift inthe industry Just kidding, but
really a pivotal rule becameeffective this week?
We've been talking about it alot.
It effectively took us from thewild, wild west to the
(01:11):
beginnings of some mandatedorder in detention and demerge
invoicing.
But the big question now is doyou know where your D&D invoices
are?
Hi, welcome to, by Land and bySea, an attorney breaking down
the weekend supply chainPresented by the Maritime
Professor me.
I'm Lauren Began, the founderof the Maritime Professor and
(01:32):
Squall Strategies, and I'm yourfavorite maritime attorney.
Join me every week as we walkthrough both ocean transport and
surface transport topics in thewild world of supply chain.
As always, the guidance here isgeneral and for educational
purposes only.
It should not be construed withlegal advice and there is no
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
(01:54):
But before we get into thediscussion of the day, let's go
through my top three stories ofthe week.
All right, story number one thisweek the FMC, the Federal
Maritime Commission, held theircommission meeting.
In that meeting they discussed.
This was on their agenda.
They had two items that wereopen to the public and they had
one continuation of an item thatwas then closed to the public,
(02:16):
for usually it's for kind of thediscussion of some of those
non-public elements ofbusiness-related things.
So the two things that were onthe open session was a staff
update for BCL Bureau ofCertification and Licensing
Programs and that was talkingabout the OTI Ocean
Transportation Intermediary andthe Passenger Vessel Operator
(02:40):
Program, both really interestingtopics that they covered and I
really encourage you to go checkout the hearing they're always
recorded.
The other item that was up onboth the public, and the closed
to the public was the staffupdate on the Vessel Operating
Common Carrier Audit Program,the VOCC.
So, as you can imagine, thishad an open part, but was also
(03:04):
necessary in a Vessel OperatingCommon Carrier VOCC audit
program to have a section thatwas inevitably going to be
closed to the public.
Like I said, these meetings arestreamed on YouTube.
They're also available as arecording after the fact.
But one thing that I wanted tomention and highlight was there
was some discussion in thehearing of renaming the VOCC
(03:24):
audit program to now potentiallybe called the VOCC compliance
program, to kind of moreaccurately reflect what it is,
and so I actually thought thismight be a good time for a
little refresher on what thisprogram is.
Right from the FMC's website,I'm going to be linking to the
page in the show notes but theVOCC audit program.
So the Vessel Operating CommonCar show notes, but the VOCC
(03:44):
audit program.
So the Vessel Operating CommonCarrier Audit Program.
Vocc audit program wasestablished in July 2021.
The initial scope of theprogram I'm reading off of the
website here.
So this is what the FMC ispresenting this VOCC program to
be.
So the initial scope of theprogram was intended to analyze
the top nine carriers by marketshare for compliance with the
(04:06):
commission rule interpreting 46USC 41102C as it applies to
detention and demerge practicesin the United States.
So this was established in July2021, right.
So July 2021, we're still kindof in that COVID congestion wild
world, right?
So that's where this startedand it was part of that D&D
(04:28):
practices that they werestarting to try to get a handle
on.
Wrangle the D&D practices a bit.
The FMC that is.
Continuing on.
It says other areas of theaudit include practices relating
to billing, appeals procedures,penalties and other practices.
So it says the audit programincludes collection of
qualitative and quantitativedata related to carrier
(04:49):
detention and demurrage, as wellas regular meetings with
representatives from thecarriers.
The initial informationcollected on carrier approaches
to conveying information ontheir D&D policies with the
shipping public led to FMCidentifying best practices in
this area and it doesn't say ithere but I'm sure that that
informs some of their rulemakingapproaches as they were working
(05:13):
on their D&D rulemaking.
Like I said, it doesn't saythis here but I can imagine,
right, if they're identifyingbest practices that they're
highlighting here.
Continuing on, it says thesebest practices were shared with
a broader set of carriers andoutreach has resulted in many
carriers adopting these bestpractices.
Best practices are separatedinto the areas of one,
accessibility of dnd information, two, dnd dispute resolution
(05:37):
policies and practices, andthree, invoices and notification
of cargo availability.
So that's what the vocc programis, if you want to hear some of
the updates.
It was a pretty interestingoverall hearing.
It was about just over an hour,I believe it was.
But yeah, like I said, you cango onto YouTube and find the
(05:57):
recording there.
So story number two.
This next story didn't get aton of coverage but it really
potentially could have somesignificant effects in the Great
Lakes on Canadian flagged Lakerfleet vessels, and I mean
potentially on the north,northern, east and west coast of
the United States as well,Anywhere that there's kind of
(06:19):
that US-Canadian interchange.
There could be some bigramifications here, something to
pay attention to and, like Isaid, it didn't get a ton of
coverage.
So on May 21st the FMCannounced that it had launched
an investigation to determine ifpending Canadian regulations
governing ballast watermanagement systems of ships in
(06:41):
the US-Canadian Great Lakestrade have a disparate effect on
US-flagged vessels andconstitute a foreign shipping
practices violation under 46 USCChapter 423.
This is off the FMC pressrelease.
It continues to say US-basedcompanies operating ships in the
US-Canada Great Lakes trademaintain that Canadian
(07:03):
regulations, taking effect as tosome vessels in September 2024,
impose a severe burden on theoperations and put American
companies and vessels at adisadvantage relative to their
Canadian competitors.
The commission is authorizedthis is continuing on from the
press release authorized byTitle 46, chapter 423 of the US
(07:23):
Code to investigate whether thelaws, rules, regulations,
policies or practices of anothernation result in conditions
that adversely affect theoperations of United States
carriers and the United Statesocean-borne trade.
So the Commission hasdetermined that sufficient facts
exist related to the Canadianbattle swatter regulations to
warrant initiating a foreignshipping practices investigation
(07:46):
.
The investigation will be ledby the Commission's General
Counsel, who will prepare andpresent a report to the
Commission containing hisfindings and recommendations for
Commission action within 120days, unless an extension is
approved.
And it continues to say,interested members of the public
are invited to comment on thematters that have triggered this
investigation.
Comments should be submittedvia the federal e-rulemaking
(08:07):
portal by June 21st 2024.
So this is kind of a novelthing.
Like I said, there are somepotential large ramifications
from this.
Actually, I'm just going tocontinue reading off of the
press release here because itstarts to talk about that a
little bit.
(08:27):
There are significant potentialconsequences for Canadian flag
vessels calling at US ports ifthe commission determines that
there has been a violation ofthe foreign shipping practices
provisions.
Options for offsettingsanctions include limiting
Canadian flag vessels fromcalling at US ports and
assessing significant fees onCanadian flag vessels.
We're going to talk about thatin a minute here.
The commission's announcementsaid.
(08:49):
Today's announcement continueson an ongoing examination by the
Commission of CanadianGovernment Policies and
Regulations Impacting US FlaggedGreat Lakes Operators.
A petition filed by the LakeCarriers Association, lca, lake
Carriers Association PetitionP1-20, a trade association
representing US flaggedoperators in the Great Lakes,
(09:10):
originally directed thecommission's attention to this
matter in March 2020.
Subsequently, the commissioninitiated an investigation of
regulations affecting shippingand foreign trade using its
authority under 46 USC chapter421.
So one of those penaltiesthat's authorized to be assessed
under this Foreign ShippingPractices Act they say
(09:33):
significant penalties it can beup to a million dollars per
voyage that the FMC can assessthrough this Foreign Shipping
Practices Act investigation andnot to mention right they can.
Also, the FMC can also limit orsuspend access to US ports and
US trades.
This is all under the ForeignShipping Practices Act.
(09:55):
The Foreign Shipping PracticesAct, and kind of a partner
statute, is the Section 19 ofthe Merchant Marine Act of 1920.
Those two paired together givethe FMC very unique, very
powerful authority.
That doesn't often really gettalked too much about and so
(10:15):
this, like I said, didn't get aton of attention, at least not
that I saw in the trade pressesbut is something that is worth
paying attention to because thiscould have some significant
ramifications.
If we, the United States,through the Federal Maritime
Commission, say Canada, youcan't bring your ships to the US
anymore because we havedetermined and this is
(10:36):
hypothetical, right but if theFMC determines that Canada has
been enacting regulations thatcreate a significant what's the
threshold here?
But a disadvantage, and asignificant I've lost the word
(10:58):
today, I don't know if you cantell, but I have a little bit of
a cold here but a significantdisadvantage to the US and a
disparaging result for the US.
So an interesting section ofthe Foreign Shipping Practices
Act.
I'm going to be just kind ofreading off some of these
Foreign Shipping Practices Actsections that I think are pretty
(11:19):
interesting, worth mentioning.
We're going to see where thisgoes.
This is just an investigation,this is just the first step, but
interesting that it was evenopened in the first place
because there's some very largepotential from what they find.
So section 4-2-3-0-6 of the USCode Foreign Shipping Practices
(11:41):
Act before determination undersection 42304 of this title
becomes effective or a requestis made under section 42305 of
this title, the determinationshall be submitted immediately
to the president.
The FMC, before making theirfinal determination, has to
submit this to the president.
I mean, it goes straight up,and this is interesting because
(12:02):
the FMC is an independentregulatory agency, so they're
not beholden to theadministration, any
administration.
They're an independentregulatory agency, right,
they're beholden.
Their bosses are Congress.
Their boss really isn't thepresident.
The president can't direct themnecessarily and these are kind
of general but can't necessarilydirect the FMC to do anything.
(12:22):
But in this section of theForeign Shipping Practices Act
they have to get the sign off ofthe president.
Before determination under theForeign Shipping Practices Act
becomes effective or a requestis made, the determination shall
be submitted immediately to thepresident.
The president, within 10 daysafter receiving it 10 days,
(12:45):
that's so fast in terms ofthings going to the presidential
office and getting attentionand then being sent back within
10 days after receiving it, maydisapprove it in writing,
setting forth the reasons forthe disapproval.
(13:06):
If the president finds thatdisapproval is required for
reasons of national defense orforeign policy Makes sense,
right, because you can't havethe FMC going and starting beef
with Canada without at least atleast the president hearing
about it beforehand, just incase Maybe next time it won't be
(13:26):
with such a friendly Northerncountry.
But this is why I wanted tohighlight this, because this is
really interesting and largescale.
Right.
So it's just an investigation.
Not much has happened yet, butthis is a big deal.
Like I said, we're in theinvestigation stage here.
(14:05):
But the investigation result inthe existence of conditions
that one adversely affect theoperations of the United States
carriers and the United Statesocean-borne trade.
That's what I was looking foradversely affect Earlier, when I
was saying despair, I couldn'tremember the words, this is the
threshold Adversely affect theoperations of US carriers and US
(14:26):
oceanborne trade.
And it's an and and.
Two, do not exist for foreigncarriers of that country in the
United States under the laws ofthe US or as a result of acts of
US carriers or other personsproviding maritime or maritime
related services in the UnitedStates.
So they have to get over thathurdle of the FMC has to review
(14:46):
and they're going to beinvestigating laws, rules,
regulations, policies andpractices of the foreign
government, in this case Canada,to see if there's an existence
of conditions that adverselyaffect the operations of the US.
Now the announcement says thatthis is on ballast water,
ballast water systems.
So I think we're all about tolearn a lot about ballast water
systems and how it works in thelake or fleet of the Great Lakes
(15:10):
.
But this, this is reallyinteresting.
This is a really unique thingfor the FMC to be looking into
and I want to continue thatinvestigation section of the
Foreign Shipping Practices Acthere because I think it's
interesting reading the exacttext.
You know that I love to do that.
(15:36):
So B under investigationsinitiation of an investigation.
An investigation undersubsection A that was the part I
just read may be initiated bythe commission on its own motion
or on the petition of anyperson, including another
component of the United Statesgovernment.
So in this case it was the LakeCarrier Association, right, but
it says it could be initiatedby the commission totally on its
own or petitioned by any person, and that petition might even
come from the United Statesgovernment.
(15:58):
Time for decision.
The commission shall completean investigation under this
section and render a decisionwithin 120 days after it's
initiated.
So that's what we were.
That's what the announcementsaid is that they had 120 days,
unless extended.
Continuing on here, it says,however, the commission may
extend this 120-day period foran additional 90 days if the
(16:19):
commission is unable to obtainsufficient information to
determine whether a conditionspecified in subsection A exists
, a notice providing anextension shall state clearly
the reasons for the extension.
So they can't just say wedidn't get around to it, right,
they have to say like whythey're extending it.
But 120 days, that's not verylong to be doing an
(16:40):
investigation into whether theseadversely affecting practices
exist.
Now the announcement saidSeptember 2024.
So I mean there's a potentialI'd have to go back and read the
petition but there's apotential here that maybe the
adverse effect won't actually gointo effect until September
(17:02):
2024.
So perhaps there's some kind ofripeness to whether the adverse
effects are happening yet.
Maybe there's some preemptiveright.
So it says maintain thegovernment relations taking
effect, as to some vessels, inSeptember 2024, impose a severe
burden on the operations and putAmerican companies and vessels
(17:23):
at a disadvantage.
So I'm going to keep watchingthis one.
Anytime the Foreign ShippingPractices Act or Section 19 of
the Merchant Marine Act of 1920get talked about, it's worth
paying attention to because theyI don't think the FMC enters
into those investigations verylightly and certainly there
(17:43):
likely is a little bit of ageneral bilateral multilateral
negotiation that probably ishappening leading up to any of
these things.
But for an investigation to beopen, I mean this is a serious
matter and this is a seriousthing.
So I'll continue to watch itbecause there could be some
serious ramifications should theFMC find that there are adverse
(18:06):
effects on the operations of UScarriers.
All right.
Story number three.
We're still in the story.
Story number three the finalstory in yet another FMC issue,
right.
So on May 29th the FMCannounced that there were three
compromise agreements thatyielded over $2.3 million in
penalties and changes tobusiness practices.
Again, I'm going to read offthe FMC press release because I
(18:28):
think they do a good job of kindof encapsulating and that way
you get it right from them.
The FMC has entered intocompromise agreements with three
different companies, resultingin the collection of more than
$2.3 million in civil penaltypayments and commitments by each
company to reform specificbusiness practices.
The agreements are the resultsof investigations by the
Commission's Bureau ofEnforcement, investigations and
(18:49):
Compliance.
So again, the BEIC used to beOffice of Bureau of Enforcement,
now it's the Bureau ofEnforcement, investigations and
Compliance.
So the three companies it wasCMA CGM, it was Vanguard
Logistics Services and it wasShipco Transport Incorporated
services and it was shipcotransport incorporated.
So cmacgm, an ocean commoncarrier, paid 1 million 975
thousand dollars to resolveallegations that are over
(19:13):
broadly defined and applied itsdefinition of merchant in a bill
of lading to demand paymentfrom a third party who should
not have been billed.
So this isn't a bill of lading,they, they said.
Cmacgm has terminated thispractice and ensures future
compliance by amending its UStariff rules to limit the
definition of merchant in itsbills of lading to shippers,
(19:35):
consignees and persons with abeneficial interest in the cargo
.
Continuing on in the pressrelease, vanguard Logistics
Services, an oceantransportation intermediary, oti
, paid $175,000 to resolveallegations that it knowingly
and willfully accepted cargofrom or transported cargo for
the accounts of OTIs that didnot have bonds, insurance or
(19:56):
other assurities as required bylaw.
Vanguard has agreed toundertake an audit of its
internal practices andprocedures and will provide
quarterly updates to BEIC on theprogress of the audit as well
as a report of remedial actionsit takes in response to the
audit's findings.
And the third one here is shipgo transport, an oti as well,
(20:17):
paid 155 000 to resolve threeallegations of misconduct.
First, that it knowingly andwillfully accepted cargo from or
transported cargo for theaccounts of otis that did not
insurance or other sureties asrequired by law.
Second, that it allowed anunlicensed OTI to obtain
transportation for property atless than the rates or charges
(20:37):
that would otherwise beapplicable.
To obtain transportation forproperty at less than the rates
or charges that would otherwisebe applicable by providing
access to service contracts ofan Ocean Common carrier to which
the OTI was not a signatory.
So, continuing on in this pressrelease, both Vanguard and
Shipco have agreed in theirrespective compromise agreements
(20:58):
to fully cooperate with BEIC inany future investigatory or
enforcement efforts.
Compromise agreements arereached prior to the commission
initiating formal enforcementactions.
I'm going to say that again.
The commission in their newsrelease here is saying
compromise agreements.
These compromise agreements arereached prior to the commission
even initiating a formalenforcement action and they
(21:22):
highlight the three companieshere did not admit to any
violations of the law.
So right, it's a little bit.
This is a compromise agreement.
They are paying, but formallythey did not admit to any of the
violations of the law.
So penalty payments aredeposited.
This is really interesting andsomething that I've mentioned
here more than a few times.
(21:43):
They mentioned here and I lovethat the FMC is mentioning this
penalty payments are depositedinto the general fund of the
United States.
So when the FMC is issuingthese super beefy civil
penalties, they don't get thatmoney.
That goes into the general fundof the United States.
And they even say the FederalMaritime Commission receives no
(22:05):
portion from any financialpenalties collected.
So on the one hand, I mean 1.9in total, 2.3 million in civil
penalties would be great for theFMC because their annual budget
is only about $43 million.
So I mean, if they were to bumpthat up by another 2.3, and
then we've seen some othercompromise agreements recently
(22:28):
that were in the millions theycould, they could potentially
hire more people, take on moreright or turn around their
rulemakings, maybe a little bitfaster, but you know they don't.
This goes into the general fundof the United States.
This goes into the general fundof the United States.
So it can't, as it's writtennow, go into the FMC directly,
(22:51):
which, on the other hand, iskind of a good thing, because
then that means that when theFMC is going after these civil
penalties, they don't reallyhave a personal interest in it,
an agency interest in it.
It's not for them to make moneybecause they don't see the
money.
I guess you could argue it'sbased on the principle of the
thing.
So that was the press releaseof the compromise agreements
(23:13):
Interested, we have certainlyseen the FMC be more active in
recent years and certainly someof these larger compromise
agreements and larger civilpenalties are probably a
reflection of that.
All right, so let's get into themeat and potatoes of the day.
We're not going to spend awhole ton of time in the meat
and potatoes, but there are afew things that I wanted to
(23:34):
bring up that I thought youneeded to be aware of or
thinking about.
So, as we know, the FMCreleased its final rule on
detention demurrage billingpractices.
The final rule became effectivethis week and it even included
the contents of the invoiceright.
That was the piece that waspossibly delayed by the OMB
(23:54):
approval.
It received that OMB approval.
Everything was set.
The Paperwork Reduction Act didnot slow this down.
The entire rule, the entirefinal rule for detention
demurrage became effective onMay 28, 2024.
The petition did not slow thatdown, did not delay it, did not
pause it.
The petition still continues.
(24:14):
We'll probably talk about thatagain another time.
We didn't get a ton ofinformation on the May 20th date
for the docketed hearingschedule but, yeah, nothing
happened there that anybody'smade a mention of that affected
this rule.
This rule went into effect onMay 28th and they even mentioned
it at the hearing on May 29thYesterday.
(24:35):
The rule went into effect.
So what does that mean?
So Title 46, chapter 4, part541 is demurrage and detention
now, and subpart A, billingrequirements and practices.
There you will find all of thedifferent things for demurrage
and detention, part 541.
This new rule, as we know,defines billing practices for
(24:59):
detention and demurrage with themain purpose of simplifying and
identifying, as they said intheir discussion, what is being
billed by whom.
As they said in theirdiscussion, what is being billed
by whom.
So through this final rule, theFMC clarifies who may be
invoiced.
Information to be included inthe invoice is the timeline for
invoicing that's what I'm goingto talk about today and
(25:20):
requirements for clear invoicedispute processes.
But my question today is do youknow where that bill is going?
Do you know who will bereceiving the D&D invoice?
So we've talked about this abunch, right?
The key takeaways of what'sbeing changed here clarity
that's a big one.
There's clarity in this role.
Timeliness there are now 30calendar day requirements for
(25:42):
the invoice to be issued and thedispute resolution filing and
an attempted resolution to adispute filing.
And the emphasis on directcontractual relationship.
Anyone can pay the invoice, butonly the direct contractual
relationship or the consigneecan be sent, can be issued that
invoice.
And it's that last part, nowthat the rule is effective and
(26:03):
the billing party is required toonly send the invoice, or
mandated to only send theinvoice to the directly
contractual relationship buildparty or the consignee, but not
both and nobody else.
So issue the invoice.
Do you know where that invoiceis going?
Is it coming to you now?
Do you know which email it'sgoing to?
(26:24):
You basically have just under30 days now to figure that out
before you're going to have tostart chasing them down or
potentially risk losing yourability to dispute the invoice
under the business-to-businessB2B dispute guidelines under
this final rule.
So let's break this down alittle bit, right?
So what am I talking about here.
The new rule states so section5401.4, properly issued invoice.
(26:49):
So a properly issued invoice isa demerger detention invoice
issued by a billing party to theperson for whose account the
billing party provided oceantransportation or storage of
cargo and who contracted withthe billing party for the ocean
transportation or storage ofcargo.
So that's the directcontractual relationship or the
consignee.
It's on part two.
(27:09):
And then it says if a billingparty issues a demerit or
detention invoice to the personidentified in paragraph A1, so
that's a direct contractualrelationship it cannot also
issue a demerit or detentioninvoice to the person identified
in paragraph A2 of the section.
So direct contractualrelationship or the consignee
and this is saying not both,section C a billing party cannot
(27:33):
issue an invoice to any otherperson.
So that's why I say directcontractual relationship or the
consignee, not both and not toanybody else.
So what does this meanoperationally?
Well, so if you had a 3PL right, a warehouse or a drayman, a
dray provider, taking care ofthis previously, you may want to
check to see where thoseinvoices will be going now
(27:54):
Because, like I said, it needsto be, it will be issued to the
direct contractual relationship.
So where you might've hadsomebody taking care of that
previously.
One check those contracts rightCheck to see if the contract
still says that they will bepaying it, because anybody can
pay it.
But it is only going to beissued to the direct contractual
(28:16):
relationship or the consignee,not both and nobody else, and
that's issued to.
There's a little bit of aquestion on whether it can be
sent to other people, but asthis rule is rolling out, I just
want to encourage everybody totake a look at those contracts.
Take a look at maybe the actualspecific operational piece of
(28:39):
this.
What email address does thebilling party have for you as
the build party?
Where are they going to besending that?
You could wait to find out oryou can maybe be a little
proactive on it.
Just look into it to see if youknow where that's going to be
going, because it's going to bea lot easier if you know where
it's going before it leaves thebilling party, before it gets
(29:00):
issued, than to try to track itdown later and figure out where
the heck it went.
So, like I said, if you havethis 3PL, make sure that you
know, because the issuance ofthat D&D invoice is going to the
direct contractual relationship, which might not be that 3PL.
If you still want the 3PL totake care of it, figure out a
(29:22):
way to send it over there orsomehow work that out.
It's all.
It's all about those contracts.
What does your contract say?
What is the agreement on file?
But look, the other part ofthis rule is the 30-30-30
timeline.
Those are the 30 calendar days.
It's 30 days to issue theinvoice, 30 calendar days to
(29:43):
issue the invoice from the lastactivity, at least 30 days to
file a dispute, business tobusiness and then an attempt to
have it resolved in 30 days.
So that's that 30, 30, 30.
So this is section 541.7,issuance of demerge and
detention invoices.
So A a billing party must issuea demerge or detention invoice
(30:04):
within 30 calendar days from thedate on which the charge was
last incurred.
If the billing party does notissue a deferred detention
invoice within 30 calendar daysfrom the date on which the
charge was last incurred, thenthe billed party is not required
to pay the charge.
Be careful with any of these.
Doesn't require payment pieces.
Make sure that you are correct,because if you get that wrong
(30:27):
you might be affecting yourother cargo too.
But don't take my word for it.
Seek legal advice on any of theapplications for any of your
specific information.
This is not legal advicedirectly related to your matter.
This is just generaleducational discussion.
So a billing party must issue aD&D invoice within 30 calendar
days from the date on which thelast charge was incurred.
Request for mitigation, refundor waiver this is section 541.8.
(30:52):
The billing party must allowthe billed party at least 30
calendar days from the invoiceissuance date to request
mitigation, refund or waiver offees from the billing party.
So it said the billing partymust allow the billed party at
least 30 calendar days from theinvoice issuance date to request
mitigation.
So here's my point If they'reissuing that invoice and they're
(31:16):
allowing at least 30 calendardays for you to dispute it or
request mitigation, refund,waiver, whatever it is, you have
to receive it right.
But that's not part of what'sbeing said here.
It said a billing party mustissue a D&D invoice within 30
calendar days on which thecharge was last incurred.
I don't necessarily see andthis is not legal advice, but I
don't necessarily see receiptmust be confirmed.
(31:37):
It just says must issue a D&Dinvoice and then it says the
billing party must allow thebilled party at least 30
calendar days from the issuanceof that invoice to request
mitigation, refund or waiver offees.
So you got to be on it.
You got to know, if you're thebuild party, where's the invoice
(31:58):
, do you have it and can you getit within?
Do you do you know where it isand can you turn around within
30 calendar days, or at leastwithin 30 calendar days, to file
a dispute if needed?
If you don't need to file adispute, that's fine, that's
actually great.
So if a billing party receivesa fee mitigation, refund or
waiver request from a billedparty, the billing party must
(32:19):
attempt to resolve the requestwithin 30 calendar days.
That's that last 30.
So 30, 30, 30, right 30 toissue at least 30 from the
issuance date to requestmitigation.
And then from there, if abilling party receives a fee
mitigation from a billed party,the billing party must attempt
to resolve their request within30 calendar days of receiving
(32:40):
such a request.
So there is one receipt butit's receiving the request for
mitigation.
So that's what I wanted tobring up.
There was one other little thingthat I wanted to mention here,
section 541.7, that I wanted tomention in paragraph D.
If the billing party invoicesan incorrect person, the billing
party may issue an invoice tothe correct billed party,
(33:03):
provided that such issuance iswithin 30 calendar days from the
date on which the charge waslast incurred.
There was previously somequestions around that.
With the 13 invoicerequirements of ASRA, this
allows the billing party tocorrect their mistake, as long
as they do it within thatinitial 30 calendar days period,
right?
So provided that such issuanceis within 30 calendar days from
(33:26):
the date on which the charge waslast incurred, so that's the
same 30 days, for the issuanceis within 30 calendar days from
the date on which the charge waslast incurred.
So that's the same 30 days forthe issuance for the invoice in
general.
But if they send it to the wrongperson, if the billing party
invoices an incorrect person,the billing party may issue an
invoice to the correct billedparty.
That doesn't necessarily say tome that they sent it to the
wrong email although there mightbe some discussion as part of
(33:49):
that but it says invoice is anincorrect person.
So the correct person is thatdirect contractual relationship
or a consignee, not both andnobody else.
And that's my point.
Make sure that you know whowill be, who is supposed to be,
who is a properly issued invoicegoing to, and does the billing
(34:12):
party have the email address.
If that's how it's beingexchanged, do they have the
proper email address for whereit should go?
Because here we are, we'rethree days into this rule.
You have 27 days left becausethey're calendar days.
You have 27 days left, 26 daysleft because they're calendar
days.
You have 27 days left with 26days, really probably days left
(34:39):
if you had D&D happen on the28th.
And yeah, so that's my point.
It's not legal advice directlyrelated to your matter.
This is just simply somethingto consider educational
discussion on what theoperational impacts of the
detention to merge rule may looklike and things to just keep in
mind as we start to see thisrule unfold now that it's out in
the wild.
So that's it for today.
Tune in every week as wecontinue to break down the D&D
(35:00):
rule periodically and continueto provide updates on some of
the hottest topics in ocean andsurface transportation.
As always, the guidance here isgeneral, for educational
purposes.
It should not be construed tobe legal advice directly related
to your matter.
If you need an attorney,contact an attorney, but if you
have specific legal questions,feel free to reach out to me at
my legal companies, squallStrategies.
Otherwise, for the non-legalquestions, the e-learning and
(35:22):
industry information andinsights.
Come find me at the MaritimeProfessor.
If you like these videos, letme know, comment, like and share
.
If you want to listen to theseepisodes on demand, or if you
missed any previous episodes,check out the podcast by landed
by sea.
If you prefer to see the video,they live on my youtube page by
landed by sea, presented by themaritime professor.
While you're at it, check outthe website maritimeprofessorcom
until next week.
(35:43):
This is lauren vegan, themaritime professor, and you've
just listened to by land and bysea.
See you next time.
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 piece and ontop of the world, yeah, walk to
the beat when you see me coming.
Make some room.
Oh, everywhere I go, I'm in thespotlight.
This is a good life.
Oh, I'm living bold.
This is what it looks like.
(00:47):
I'm a city of the world.
Whoa, whoa, whoa, whoa, whoa,whoa.
Did you feel that that shift inthe industry Just kidding, but
really a pivotal rule becameeffective this week?
We've been talking about it alot.
It effectively took us from thewild, wild west to the
(01:11):
beginnings of some mandatedorder in detention and demerge
invoicing.
But the big question now is doyou know where your D&D invoices
are?
Hi, welcome to, by Land and bySea, an attorney breaking down
the weekend supply chainPresented by the Maritime
Professor me.
I'm Lauren Began, the founderof the Maritime Professor and
(01:32):
Squall Strategies, and I'm yourfavorite maritime attorney.
Join me every week as we walkthrough both ocean transport and
surface transport topics in thewild world of supply chain.
As always, the guidance here isgeneral and for educational
purposes only.
It should not be construed withlegal advice and there is no
attorney-client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
(01:54):
But before we get into thediscussion of the day, let's go
through my top three stories ofthe week.
All right, story number one thisweek the FMC, the Federal
Maritime Commission, held theircommission meeting.
In that meeting they discussed.
This was on their agenda.
They had two items that wereopen to the public and they had
one continuation of an item thatwas then closed to the public,
(02:16):
for usually it's for kind of thediscussion of some of those
non-public elements ofbusiness-related things.
So the two things that were onthe open session was a staff
update for BCL Bureau ofCertification and Licensing
Programs and that was talkingabout the OTI Ocean
Transportation Intermediary andthe Passenger Vessel Operator
(02:40):
Program, both really interestingtopics that they covered and I
really encourage you to go checkout the hearing they're always
recorded.
The other item that was up onboth the public, and the closed
to the public was the staffupdate on the Vessel Operating
Common Carrier Audit Program,the VOCC.
So, as you can imagine, thishad an open part, but was also
(03:04):
necessary in a Vessel OperatingCommon Carrier VOCC audit
program to have a section thatwas inevitably going to be
closed to the public.
Like I said, these meetings arestreamed on YouTube.
They're also available as arecording after the fact.
But one thing that I wanted tomention and highlight was there
was some discussion in thehearing of renaming the VOCC
(03:24):
audit program to now potentiallybe called the VOCC compliance
program, to kind of moreaccurately reflect what it is,
and so I actually thought thismight be a good time for a
little refresher on what thisprogram is.
Right from the FMC's website,I'm going to be linking to the
page in the show notes but theVOCC audit program.
So the Vessel Operating CommonCar show notes, but the VOCC
(03:44):
audit program.
So the Vessel Operating CommonCarrier Audit Program.
Vocc audit program wasestablished in July 2021.
The initial scope of theprogram I'm reading off of the
website here.
So this is what the FMC ispresenting this VOCC program to
be.
So the initial scope of theprogram was intended to analyze
the top nine carriers by marketshare for compliance with the
(04:06):
commission rule interpreting 46USC 41102C as it applies to
detention and demerge practicesin the United States.
So this was established in July2021, right.
So July 2021, we're still kindof in that COVID congestion wild
world, right?
So that's where this startedand it was part of that D&D
(04:28):
practices that they werestarting to try to get a handle
on.
Wrangle the D&D practices a bit.
The FMC that is.
Continuing on.
It says other areas of theaudit include practices relating
to billing, appeals procedures,penalties and other practices.
So it says the audit programincludes collection of
qualitative and quantitativedata related to carrier
(04:49):
detention and demurrage, as wellas regular meetings with
representatives from thecarriers.
The initial informationcollected on carrier approaches
to conveying information ontheir D&D policies with the
shipping public led to FMCidentifying best practices in
this area and it doesn't say ithere but I'm sure that that
informs some of their rulemakingapproaches as they were working
(05:13):
on their D&D rulemaking.
Like I said, it doesn't saythis here but I can imagine,
right, if they're identifyingbest practices that they're
highlighting here.
Continuing on, it says thesebest practices were shared with
a broader set of carriers andoutreach has resulted in many
carriers adopting these bestpractices.
Best practices are separatedinto the areas of one,
accessibility of dnd information, two, dnd dispute resolution
(05:37):
policies and practices, andthree, invoices and notification
of cargo availability.
So that's what the vocc programis, if you want to hear some of
the updates.
It was a pretty interestingoverall hearing.
It was about just over an hour,I believe it was.
But yeah, like I said, you cango onto YouTube and find the
(05:57):
recording there.
So story number two.
This next story didn't get aton of coverage but it really
potentially could have somesignificant effects in the Great
Lakes on Canadian flagged Lakerfleet vessels, and I mean
potentially on the north,northern, east and west coast of
the United States as well,Anywhere that there's kind of
(06:19):
that US-Canadian interchange.
There could be some bigramifications here, something to
pay attention to and, like Isaid, it didn't get a ton of
coverage.
So on May 21st the FMCannounced that it had launched
an investigation to determine ifpending Canadian regulations
governing ballast watermanagement systems of ships in
(06:41):
the US-Canadian Great Lakestrade have a disparate effect on
US-flagged vessels andconstitute a foreign shipping
practices violation under 46 USCChapter 423.
This is off the FMC pressrelease.
It continues to say US-basedcompanies operating ships in the
US-Canada Great Lakes trademaintain that Canadian
(07:03):
regulations, taking effect as tosome vessels in September 2024,
impose a severe burden on theoperations and put American
companies and vessels at adisadvantage relative to their
Canadian competitors.
The commission is authorizedthis is continuing on from the
press release authorized byTitle 46, chapter 423 of the US
(07:23):
Code to investigate whether thelaws, rules, regulations,
policies or practices of anothernation result in conditions
that adversely affect theoperations of United States
carriers and the United Statesocean-borne trade.
So the Commission hasdetermined that sufficient facts
exist related to the Canadianbattle swatter regulations to
warrant initiating a foreignshipping practices investigation
(07:46):
.
The investigation will be ledby the Commission's General
Counsel, who will prepare andpresent a report to the
Commission containing hisfindings and recommendations for
Commission action within 120days, unless an extension is
approved.
And it continues to say,interested members of the public
are invited to comment on thematters that have triggered this
investigation.
Comments should be submittedvia the federal e-rulemaking
(08:07):
portal by June 21st 2024.
So this is kind of a novelthing.
Like I said, there are somepotential large ramifications
from this.
Actually, I'm just going tocontinue reading off of the
press release here because itstarts to talk about that a
little bit.
(08:27):
There are significant potentialconsequences for Canadian flag
vessels calling at US ports ifthe commission determines that
there has been a violation ofthe foreign shipping practices
provisions.
Options for offsettingsanctions include limiting
Canadian flag vessels fromcalling at US ports and
assessing significant fees onCanadian flag vessels.
We're going to talk about thatin a minute here.
The commission's announcementsaid.
(08:49):
Today's announcement continueson an ongoing examination by the
Commission of CanadianGovernment Policies and
Regulations Impacting US FlaggedGreat Lakes Operators.
A petition filed by the LakeCarriers Association, lca, lake
Carriers Association PetitionP1-20, a trade association
representing US flaggedoperators in the Great Lakes,
(09:10):
originally directed thecommission's attention to this
matter in March 2020.
Subsequently, the commissioninitiated an investigation of
regulations affecting shippingand foreign trade using its
authority under 46 USC chapter421.
So one of those penaltiesthat's authorized to be assessed
under this Foreign ShippingPractices Act they say
(09:33):
significant penalties it can beup to a million dollars per
voyage that the FMC can assessthrough this Foreign Shipping
Practices Act investigation andnot to mention right they can.
Also, the FMC can also limit orsuspend access to US ports and
US trades.
This is all under the ForeignShipping Practices Act.
(09:55):
The Foreign Shipping PracticesAct, and kind of a partner
statute, is the Section 19 ofthe Merchant Marine Act of 1920.
Those two paired together givethe FMC very unique, very
powerful authority.
That doesn't often really gettalked too much about and so
(10:15):
this, like I said, didn't get aton of attention, at least not
that I saw in the trade pressesbut is something that is worth
paying attention to because thiscould have some significant
ramifications.
If we, the United States,through the Federal Maritime
Commission, say Canada, youcan't bring your ships to the US
anymore because we havedetermined and this is
(10:36):
hypothetical, right but if theFMC determines that Canada has
been enacting regulations thatcreate a significant what's the
threshold here?
But a disadvantage, and asignificant I've lost the word
(10:58):
today, I don't know if you cantell, but I have a little bit of
a cold here but a significantdisadvantage to the US and a
disparaging result for the US.
So an interesting section ofthe Foreign Shipping Practices
Act.
I'm going to be just kind ofreading off some of these
Foreign Shipping Practices Actsections that I think are pretty
(11:19):
interesting, worth mentioning.
We're going to see where thisgoes.
This is just an investigation,this is just the first step, but
interesting that it was evenopened in the first place
because there's some very largepotential from what they find.
So section 4-2-3-0-6 of the USCode Foreign Shipping Practices
(11:41):
Act before determination undersection 42304 of this title
becomes effective or a requestis made under section 42305 of
this title, the determinationshall be submitted immediately
to the president.
The FMC, before making theirfinal determination, has to
submit this to the president.
I mean, it goes straight up,and this is interesting because
(12:02):
the FMC is an independentregulatory agency, so they're
not beholden to theadministration, any
administration.
They're an independentregulatory agency, right,
they're beholden.
Their bosses are Congress.
Their boss really isn't thepresident.
The president can't direct themnecessarily and these are kind
of general but can't necessarilydirect the FMC to do anything.
(12:22):
But in this section of theForeign Shipping Practices Act
they have to get the sign off ofthe president.
Before determination under theForeign Shipping Practices Act
becomes effective or a requestis made, the determination shall
be submitted immediately to thepresident.
The president, within 10 daysafter receiving it 10 days,
(12:45):
that's so fast in terms ofthings going to the presidential
office and getting attentionand then being sent back within
10 days after receiving it, maydisapprove it in writing,
setting forth the reasons forthe disapproval.
(13:06):
If the president finds thatdisapproval is required for
reasons of national defense orforeign policy Makes sense,
right, because you can't havethe FMC going and starting beef
with Canada without at least atleast the president hearing
about it beforehand, just incase Maybe next time it won't be
(13:26):
with such a friendly Northerncountry.
But this is why I wanted tohighlight this, because this is
really interesting and largescale.
Right.
So it's just an investigation.
Not much has happened yet, butthis is a big deal.
Like I said, we're in theinvestigation stage here.
(14:05):
But the investigation result inthe existence of conditions
that one adversely affect theoperations of the United States
carriers and the United Statesocean-borne trade.
That's what I was looking foradversely affect Earlier, when I
was saying despair, I couldn'tremember the words, this is the
threshold Adversely affect theoperations of US carriers and US
(14:26):
oceanborne trade.
And it's an and and.
Two, do not exist for foreigncarriers of that country in the
United States under the laws ofthe US or as a result of acts of
US carriers or other personsproviding maritime or maritime
related services in the UnitedStates.
So they have to get over thathurdle of the FMC has to review
(14:46):
and they're going to beinvestigating laws, rules,
regulations, policies andpractices of the foreign
government, in this case Canada,to see if there's an existence
of conditions that adverselyaffect the operations of the US.
Now the announcement says thatthis is on ballast water,
ballast water systems.
So I think we're all about tolearn a lot about ballast water
systems and how it works in thelake or fleet of the Great Lakes
(15:10):
.
But this, this is reallyinteresting.
This is a really unique thingfor the FMC to be looking into
and I want to continue thatinvestigation section of the
Foreign Shipping Practices Acthere because I think it's
interesting reading the exacttext.
You know that I love to do that.
(15:36):
So B under investigationsinitiation of an investigation.
An investigation undersubsection A that was the part I
just read may be initiated bythe commission on its own motion
or on the petition of anyperson, including another
component of the United Statesgovernment.
So in this case it was the LakeCarrier Association, right, but
it says it could be initiatedby the commission totally on its
own or petitioned by any person, and that petition might even
come from the United Statesgovernment.
(15:58):
Time for decision.
The commission shall completean investigation under this
section and render a decisionwithin 120 days after it's
initiated.
So that's what we were.
That's what the announcementsaid is that they had 120 days,
unless extended.
Continuing on here, it says,however, the commission may
extend this 120-day period foran additional 90 days if the
(16:19):
commission is unable to obtainsufficient information to
determine whether a conditionspecified in subsection A exists
, a notice providing anextension shall state clearly
the reasons for the extension.
So they can't just say wedidn't get around to it, right,
they have to say like whythey're extending it.
But 120 days, that's not verylong to be doing an
(16:40):
investigation into whether theseadversely affecting practices
exist.
Now the announcement saidSeptember 2024.
So I mean there's a potentialI'd have to go back and read the
petition but there's apotential here that maybe the
adverse effect won't actually gointo effect until September
(17:02):
2024.
So perhaps there's some kind ofripeness to whether the adverse
effects are happening yet.
Maybe there's some preemptiveright.
So it says maintain thegovernment relations taking
effect, as to some vessels, inSeptember 2024, impose a severe
burden on the operations and putAmerican companies and vessels
(17:23):
at a disadvantage.
So I'm going to keep watchingthis one.
Anytime the Foreign ShippingPractices Act or Section 19 of
the Merchant Marine Act of 1920get talked about, it's worth
paying attention to because theyI don't think the FMC enters
into those investigations verylightly and certainly there
(17:43):
likely is a little bit of ageneral bilateral multilateral
negotiation that probably ishappening leading up to any of
these things.
But for an investigation to beopen, I mean this is a serious
matter and this is a seriousthing.
So I'll continue to watch itbecause there could be some
serious ramifications should theFMC find that there are adverse
(18:06):
effects on the operations of UScarriers.
All right.
Story number three.
We're still in the story.
Story number three the finalstory in yet another FMC issue,
right.
So on May 29th the FMCannounced that there were three
compromise agreements thatyielded over $2.3 million in
penalties and changes tobusiness practices.
Again, I'm going to read offthe FMC press release because I
(18:28):
think they do a good job of kindof encapsulating and that way
you get it right from them.
The FMC has entered intocompromise agreements with three
different companies, resultingin the collection of more than
$2.3 million in civil penaltypayments and commitments by each
company to reform specificbusiness practices.
The agreements are the resultsof investigations by the
Commission's Bureau ofEnforcement, investigations and
(18:49):
Compliance.
So again, the BEIC used to beOffice of Bureau of Enforcement,
now it's the Bureau ofEnforcement, investigations and
Compliance.
So the three companies it wasCMA CGM, it was Vanguard
Logistics Services and it wasShipco Transport Incorporated
services and it was shipcotransport incorporated.
So cmacgm, an ocean commoncarrier, paid 1 million 975
thousand dollars to resolveallegations that are over
(19:13):
broadly defined and applied itsdefinition of merchant in a bill
of lading to demand paymentfrom a third party who should
not have been billed.
So this isn't a bill of lading,they, they said.
Cmacgm has terminated thispractice and ensures future
compliance by amending its UStariff rules to limit the
definition of merchant in itsbills of lading to shippers,
(19:35):
consignees and persons with abeneficial interest in the cargo
.
Continuing on in the pressrelease, vanguard Logistics
Services, an oceantransportation intermediary, oti
, paid $175,000 to resolveallegations that it knowingly
and willfully accepted cargofrom or transported cargo for
the accounts of OTIs that didnot have bonds, insurance or
(19:56):
other assurities as required bylaw.
Vanguard has agreed toundertake an audit of its
internal practices andprocedures and will provide
quarterly updates to BEIC on theprogress of the audit as well
as a report of remedial actionsit takes in response to the
audit's findings.
And the third one here is shipgo transport, an oti as well,
(20:17):
paid 155 000 to resolve threeallegations of misconduct.
First, that it knowingly andwillfully accepted cargo from or
transported cargo for theaccounts of otis that did not
insurance or other sureties asrequired by law.
Second, that it allowed anunlicensed OTI to obtain
transportation for property atless than the rates or charges
(20:37):
that would otherwise beapplicable.
To obtain transportation forproperty at less than the rates
or charges that would otherwisebe applicable by providing
access to service contracts ofan Ocean Common carrier to which
the OTI was not a signatory.
So, continuing on in this pressrelease, both Vanguard and
Shipco have agreed in theirrespective compromise agreements
(20:58):
to fully cooperate with BEIC inany future investigatory or
enforcement efforts.
Compromise agreements arereached prior to the commission
initiating formal enforcementactions.
I'm going to say that again.
The commission in their newsrelease here is saying
compromise agreements.
These compromise agreements arereached prior to the commission
even initiating a formalenforcement action and they
(21:22):
highlight the three companieshere did not admit to any
violations of the law.
So right, it's a little bit.
This is a compromise agreement.
They are paying, but formallythey did not admit to any of the
violations of the law.
So penalty payments aredeposited.
This is really interesting andsomething that I've mentioned
here more than a few times.
(21:43):
They mentioned here and I lovethat the FMC is mentioning this
penalty payments are depositedinto the general fund of the
United States.
So when the FMC is issuingthese super beefy civil
penalties, they don't get thatmoney.
That goes into the general fundof the United States.
And they even say the FederalMaritime Commission receives no
(22:05):
portion from any financialpenalties collected.
So on the one hand, I mean 1.9in total, 2.3 million in civil
penalties would be great for theFMC because their annual budget
is only about $43 million.
So I mean, if they were to bumpthat up by another 2.3, and
then we've seen some othercompromise agreements recently
(22:28):
that were in the millions theycould, they could potentially
hire more people, take on moreright or turn around their
rulemakings, maybe a little bitfaster, but you know they don't.
This goes into the general fundof the United States.
This goes into the general fundof the United States.
So it can't, as it's writtennow, go into the FMC directly,
(22:51):
which, on the other hand, iskind of a good thing, because
then that means that when theFMC is going after these civil
penalties, they don't reallyhave a personal interest in it,
an agency interest in it.
It's not for them to make moneybecause they don't see the
money.
I guess you could argue it'sbased on the principle of the
thing.
So that was the press releaseof the compromise agreements
(23:13):
Interested, we have certainlyseen the FMC be more active in
recent years and certainly someof these larger compromise
agreements and larger civilpenalties are probably a
reflection of that.
All right, so let's get into themeat and potatoes of the day.
We're not going to spend awhole ton of time in the meat
and potatoes, but there are afew things that I wanted to
(23:34):
bring up that I thought youneeded to be aware of or
thinking about.
So, as we know, the FMCreleased its final rule on
detention demurrage billingpractices.
The final rule became effectivethis week and it even included
the contents of the invoiceright.
That was the piece that waspossibly delayed by the OMB
(23:54):
approval.
It received that OMB approval.
Everything was set.
The Paperwork Reduction Act didnot slow this down.
The entire rule, the entirefinal rule for detention
demurrage became effective onMay 28, 2024.
The petition did not slow thatdown, did not delay it, did not
pause it.
The petition still continues.
(24:14):
We'll probably talk about thatagain another time.
We didn't get a ton ofinformation on the May 20th date
for the docketed hearingschedule but, yeah, nothing
happened there that anybody'smade a mention of that affected
this rule.
This rule went into effect onMay 28th and they even mentioned
it at the hearing on May 29thYesterday.
(24:35):
The rule went into effect.
So what does that mean?
So Title 46, chapter 4, part541 is demurrage and detention
now, and subpart A, billingrequirements and practices.
There you will find all of thedifferent things for demurrage
and detention, part 541.
This new rule, as we know,defines billing practices for
(24:59):
detention and demurrage with themain purpose of simplifying and
identifying, as they said intheir discussion, what is being
billed by whom.
As they said in theirdiscussion, what is being billed
by whom.
So through this final rule, theFMC clarifies who may be
invoiced.
Information to be included inthe invoice is the timeline for
invoicing that's what I'm goingto talk about today and
(25:20):
requirements for clear invoicedispute processes.
But my question today is do youknow where that bill is going?
Do you know who will bereceiving the D&D invoice?
So we've talked about this abunch, right?
The key takeaways of what'sbeing changed here clarity
that's a big one.
There's clarity in this role.
Timeliness there are now 30calendar day requirements for
(25:42):
the invoice to be issued and thedispute resolution filing and
an attempted resolution to adispute filing.
And the emphasis on directcontractual relationship.
Anyone can pay the invoice, butonly the direct contractual
relationship or the consigneecan be sent, can be issued that
invoice.
And it's that last part, nowthat the rule is effective and
(26:03):
the billing party is required toonly send the invoice, or
mandated to only send theinvoice to the directly
contractual relationship buildparty or the consignee, but not
both and nobody else.
So issue the invoice.
Do you know where that invoiceis going?
Is it coming to you now?
Do you know which email it'sgoing to?
(26:24):
You basically have just under30 days now to figure that out
before you're going to have tostart chasing them down or
potentially risk losing yourability to dispute the invoice
under the business-to-businessB2B dispute guidelines under
this final rule.
So let's break this down alittle bit, right?
So what am I talking about here.
The new rule states so section5401.4, properly issued invoice.
(26:49):
So a properly issued invoice isa demerger detention invoice
issued by a billing party to theperson for whose account the
billing party provided oceantransportation or storage of
cargo and who contracted withthe billing party for the ocean
transportation or storage ofcargo.
So that's the directcontractual relationship or the
consignee.
It's on part two.
(27:09):
And then it says if a billingparty issues a demerit or
detention invoice to the personidentified in paragraph A1, so
that's a direct contractualrelationship it cannot also
issue a demerit or detentioninvoice to the person identified
in paragraph A2 of the section.
So direct contractualrelationship or the consignee
and this is saying not both,section C a billing party cannot
(27:33):
issue an invoice to any otherperson.
So that's why I say directcontractual relationship or the
consignee, not both and not toanybody else.
So what does this meanoperationally?
Well, so if you had a 3PL right, a warehouse or a drayman, a
dray provider, taking care ofthis previously, you may want to
check to see where thoseinvoices will be going now
(27:54):
Because, like I said, it needsto be, it will be issued to the
direct contractual relationship.
So where you might've hadsomebody taking care of that
previously.
One check those contracts rightCheck to see if the contract
still says that they will bepaying it, because anybody can
pay it.
But it is only going to beissued to the direct contractual
(28:16):
relationship or the consignee,not both and nobody else, and
that's issued to.
There's a little bit of aquestion on whether it can be
sent to other people, but asthis rule is rolling out, I just
want to encourage everybody totake a look at those contracts.
Take a look at maybe the actualspecific operational piece of
(28:39):
this.
What email address does thebilling party have for you as
the build party?
Where are they going to besending that?
You could wait to find out oryou can maybe be a little
proactive on it.
Just look into it to see if youknow where that's going to be
going, because it's going to bea lot easier if you know where
it's going before it leaves thebilling party, before it gets
(29:00):
issued, than to try to track itdown later and figure out where
the heck it went.
So, like I said, if you havethis 3PL, make sure that you
know, because the issuance ofthat D&D invoice is going to the
direct contractual relationship, which might not be that 3PL.
If you still want the 3PL totake care of it, figure out a
(29:22):
way to send it over there orsomehow work that out.
It's all.
It's all about those contracts.
What does your contract say?
What is the agreement on file?
But look, the other part ofthis rule is the 30-30-30
timeline.
Those are the 30 calendar days.
It's 30 days to issue theinvoice, 30 calendar days to
(29:43):
issue the invoice from the lastactivity, at least 30 days to
file a dispute, business tobusiness and then an attempt to
have it resolved in 30 days.
So that's that 30, 30, 30.
So this is section 541.7,issuance of demerge and
detention invoices.
So A a billing party must issuea demerge or detention invoice
(30:04):
within 30 calendar days from thedate on which the charge was
last incurred.
If the billing party does notissue a deferred detention
invoice within 30 calendar daysfrom the date on which the
charge was last incurred, thenthe billed party is not required
to pay the charge.
Be careful with any of these.
Doesn't require payment pieces.
Make sure that you are correct,because if you get that wrong
(30:27):
you might be affecting yourother cargo too.
But don't take my word for it.
Seek legal advice on any of theapplications for any of your
specific information.
This is not legal advicedirectly related to your matter.
This is just generaleducational discussion.
So a billing party must issue aD&D invoice within 30 calendar
days from the date on which thelast charge was incurred.
Request for mitigation, refundor waiver this is section 541.8.
(30:52):
The billing party must allowthe billed party at least 30
calendar days from the invoiceissuance date to request
mitigation, refund or waiver offees from the billing party.
So it said the billing partymust allow the billed party at
least 30 calendar days from theinvoice issuance date to request
mitigation.
So here's my point If they'reissuing that invoice and they're
(31:16):
allowing at least 30 calendardays for you to dispute it or
request mitigation, refund,waiver, whatever it is, you have
to receive it right.
But that's not part of what'sbeing said here.
It said a billing party mustissue a D&D invoice within 30
calendar days on which thecharge was last incurred.
I don't necessarily see andthis is not legal advice, but I
don't necessarily see receiptmust be confirmed.
(31:37):
It just says must issue a D&Dinvoice and then it says the
billing party must allow thebilled party at least 30
calendar days from the issuanceof that invoice to request
mitigation, refund or waiver offees.
So you got to be on it.
You got to know, if you're thebuild party, where's the invoice
(31:58):
, do you have it and can you getit within?
Do you do you know where it isand can you turn around within
30 calendar days, or at leastwithin 30 calendar days, to file
a dispute if needed?
If you don't need to file adispute, that's fine, that's
actually great.
So if a billing party receivesa fee mitigation, refund or
waiver request from a billedparty, the billing party must
(32:19):
attempt to resolve the requestwithin 30 calendar days.
That's that last 30.
So 30, 30, 30, right 30 toissue at least 30 from the
issuance date to requestmitigation.
And then from there, if abilling party receives a fee
mitigation from a billed party,the billing party must attempt
to resolve their request within30 calendar days of receiving
(32:40):
such a request.
So there is one receipt butit's receiving the request for
mitigation.
So that's what I wanted tobring up.
There was one other little thingthat I wanted to mention here,
section 541.7, that I wanted tomention in paragraph D.
If the billing party invoicesan incorrect person, the billing
party may issue an invoice tothe correct billed party,
(33:03):
provided that such issuance iswithin 30 calendar days from the
date on which the charge waslast incurred.
There was previously somequestions around that.
With the 13 invoicerequirements of ASRA, this
allows the billing party tocorrect their mistake, as long
as they do it within thatinitial 30 calendar days period,
right?
So provided that such issuanceis within 30 calendar days from
(33:26):
the date on which the charge waslast incurred, so that's the
same 30 days, for the issuanceis within 30 calendar days from
the date on which the charge waslast incurred.
So that's the same 30 days forthe issuance for the invoice in
general.
But if they send it to the wrongperson, if the billing party
invoices an incorrect person,the billing party may issue an
invoice to the correct billedparty.
That doesn't necessarily say tome that they sent it to the
wrong email although there mightbe some discussion as part of
(33:49):
that but it says invoice is anincorrect person.
So the correct person is thatdirect contractual relationship
or a consignee, not both andnobody else.
And that's my point.
Make sure that you know whowill be, who is supposed to be,
who is a properly issued invoicegoing to, and does the billing
(34:12):
party have the email address.
If that's how it's beingexchanged, do they have the
proper email address for whereit should go?
Because here we are, we'rethree days into this rule.
You have 27 days left becausethey're calendar days.
You have 27 days left, 26 daysleft because they're calendar
days.
You have 27 days left with 26days, really probably days left
(34:39):
if you had D&D happen on the28th.
And yeah, so that's my point.
It's not legal advice directlyrelated to your matter.
This is just simply somethingto consider educational
discussion on what theoperational impacts of the
detention to merge rule may looklike and things to just keep in
mind as we start to see thisrule unfold now that it's out in
the wild.
So that's it for today.
Tune in every week as wecontinue to break down the D&D
(35:00):
rule periodically and continueto provide updates on some of
the hottest topics in ocean andsurface transportation.
As always, the guidance here isgeneral, for educational
purposes.
It should not be construed tobe legal advice directly related
to your matter.
If you need an attorney,contact an attorney, but if you
have specific legal questions,feel free to reach out to me at
my legal companies, squallStrategies.
Otherwise, for the non-legalquestions, the e-learning and
(35:22):
industry information andinsights.
Come find me at the MaritimeProfessor.
If you like these videos, letme know, comment, like and share
.
If you want to listen to theseepisodes on demand, or if you
missed any previous episodes,check out the podcast by landed
by sea.
If you prefer to see the video,they live on my youtube page by
landed by sea, presented by themaritime professor.
While you're at it, check outthe website maritimeprofessorcom
until next week.
(35:43):
This is lauren vegan, themaritime professor, and you've
just listened to by land and bysea.
See you next time.
Popular Podcasts
United States of Kennedy
United States of Kennedy is a podcast about our cultural fascination with the Kennedy dynasty. Every week, hosts Lyra Smith and George Civeris go into one aspect of the Kennedy story.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com