S4.E16 - Holidays and Weekends subject to Detention and Demurrage billing? FMC has something NEW to say about it... - By Land and By Sea

Episode Transcript
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Speaker 1 (00:26):
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oh, oh, oh, oh, oh, oh, oh, oh,oh, oh, oh, oh, oh, oh, oh, oh,
oh, oh, oh, I got On top.
When you see me, come Make someroom good night.
I'm living bold, this is whatit looks like.
I'm addicted to the world.
Did the FMC just clear updetention and demurrage billing

(01:02):
on holidays and weekends?
Up detention and demergebilling on holidays and weekends
?
Yes, kind of, but don't countyour chickens just yet.
It may still be a fluidsituation.
Hi, welcome to Buy Land and BuyScene Attorney Breaking Down the
Weekend Supply Chain presentedby the Maritime Professor me.
I'm Lauren Began, founder ofMaritime Professor and Small
Strategies, and I'm yourfavorite maritime attorney.
Join me every week to walkthrough both ocean transport and

(01:25):
surface transport topics in thewild world of supply chain.
As always, the guidance here isgeneral and for educational
purposes only.
It should not be considered tobe legal advice and there's no
attorney client privilegecreated by this video or this
podcast.
If you need an attorney,contact an attorney.
So before we get into thediscussion of the day, let's go
through my top three stories ofthe week.
All right, story number oneTrump signed an executive order

(01:48):
this week on independentregulatory agencies.
Now you know that I often talkabout the Federal Maritime
Commission being a independentregulatory agency, which is
contrasted to MARAD.
Marad is part of Department ofTransportation, which is
Secretary of Department ofTransportation is one of the
cabinet members, and so there'sthat direct oversight from the

(02:09):
executive office, from theadministration, whereas the
Federal Maritime Commissionfalls under that independent
regulatory agency, where itenjoys independence.
The directives from theadministration, from the office
of the president, usually comeby way of recommendations
instead of directives saying youhave to do it this way.

(02:29):
I don't know the history ofindependent regulatory agencies
as a whole.
Ever since this executive ordercame out, I've been looking a
little bit further into it justto kind of get a sense of it.
But this is a reallyinteresting one because and I'm
going to read mostly off of theexecutive order here this is
eliminating the independentregulatory agency across the

(02:54):
board, right?
So not just the FederalMaritime Commission, there's
other agencies that they listhere, and I think that it's
probably telling.
The ones that they're listingare probably the ones that
they're concerned about, atleast from this administration,
being concerned about theindependent nature.
The argument is, if they'reindependent and they're not well
monitored or there isn't like agood directive over them, then

(03:16):
perhaps they can do thingswithout oversight or without
check.
You know, one of the thingsabout independent regulatory
agencies is that Congress is incharge, right, congress gives
the authority through statutesto that these agencies enjoy
this authority.
It can be challenged throughlegal cases, right, it can be

(03:39):
challenged through exceedingauthority, right.
Some of the petitions that wehave against some of the final
rules are just that Chevrondeference, right was kind of
clawed back and so it createdmore of a check on the
independent regulatory agenciesbecause they couldn't just
automatically be deferred to.
Right, that was the Chevrondeference, it was a case.

(04:00):
Now there had to be a closerconnection to the statutory
interpretation or the statutorymeaning, and if it's not there,
then the court, right, this isgoing along with that Chevron
deference being clawed back oroverturned.
I should say, if theindependent regulatory agency

(04:22):
issues a rule, the court, thenwho's being asked to review that
rule can't use Chevrondeference as just, oh, we're
deferring to the agency.
Because they're the experts inthis area, they would have to
kind of take the whole thinginto their own reasonable
interpretation.
So that was a little bit of atangent into the Chevron
deference, but that created alittle bit more of a judicial

(04:46):
check over independentregulatory agencies.
And that's what we saw lastsummer.
Now we're seeing independentregulatory agencies being kind
of recaptured by the executive,which is the president, and the
administration, theadministration of the office of
the president.
So let me just jump into thelanguage here and then I'll kind
of break it down.

(05:06):
So it says under section one,policy and purpose of the
executive order, and theexecutive order itself is called
ensuring accountability for allagencies.
So the constitution vests allexecutive power in the president
and charges him with faithfullyexecuting the laws.
Since it would be impossiblefor the president to
single-handedly perform all ofthe executive businesses
business of the federalgovernment, the Constitution

(05:27):
also provides for subordinateofficers to assist the president
in his executive duties.
In the existence of their oftenconsiderable authority, these
executive branch officialsremain subject to the
president's ongoing supervisionand control.
And then I'm going to jumpforward a little bit ongoing
supervision and control, andthen I'm going to jump forward a
little bit.
It says, however, previousadministrations have allowed

(05:50):
so-called independent regulatoryagencies to operate with
minimal presidential supervision.
These regulatory agenciescurrently exercise substantial
executive authority withoutsufficient accountability to the
president and, through him, tothe American people.
Moreover, these regulatoryagencies have been permitted to
regulate significant regulationswithout review by the president
.
Continuing on here, it saysthese practices undermine such

(06:11):
regulatory agencies'accountability to the American
people and prevent a unified andcoherent execution of federal
law.
For the federal government tobe truly accountable to the
American people, officials whowield vast executive power must
be supervised and controlled bythe people's elected president.
Therefore, in order to improvethe administration of the
executive branch and to increaseregulatory officials'

(06:32):
accountability to the Americanpeople, it shall be the policy
of the executive branch toensure presidential supervision
and control of the entireexecutive branch.
Moreover, all executivedepartments and agencies,
including so-called independentagencies, shall submit for
review all proposed and finalsignificant regulatory actions
of the Office of Information andRegulatory Affairs, oira,

(06:52):
within the executive office ofthe president, before
publication in the FederalRegister.
Independent regulatory agencychange here, it looks like, is
really focused on theregulations that may come out of
the independent regulatoryagencies, meaning that now

(07:16):
instead of just publishing itand we've seen this with the
detention to merge rule, forexample there was an advanced
notice of proposed rulemaking,engagement with the community,
with the supply chain world, Imean the public right.
And then we went through anotice of proposed rulemaking
which is kind of the next step,and then we went through a final
rule.
So now, instead of after thefinal rule publication and it

(07:40):
says after 30 days or 60 daysthis will become effective, a
review for all proposed andfinal significant regulatory
actions have to go to OIRA forreview.
So there's a few things right,being a lawyer, I can kind of
I'm seeing different thingsproposed and final significant
regulatory actions.

(08:00):
So what's a significantregulatory action?
So there might still beopportunity that this might not
be incredibly impactful.
But who knows?
I mean if they say basicallyall regulatory actions are going
to be significant regulatoryactions or anything other than
direct final rule, whichsometimes direct final rules are
allowed to forego the commentperiod, kind of that back and

(08:24):
forth engagement.
Sometimes those direct finalrules are a little bit more
administrative.
Maybe it's changing of a civilpenalty amount or somehow just
kind of fixing things up, maybecross-references within
regulations.
They're just kind of cleaningup the regs.
That might be a direct finalrule.
It's not controversial, it'snot significant.

(08:44):
Maybe that's the threshold,maybe it's I don't know the D&D
probably would be a direct finalrule.
It's not controversial, it'snot significant.
Maybe that's the threshold,maybe it's, I don't know the D&D
probably would be a significantregulatory action.
So, instead of it being allowedto just go through into final
regulatory publication now underthis executive order, it would
have to go through OIRA, theOffice of Information and
Regulatory Affairs All this tosay I don't know what through

(09:07):
OIRA, the Office of Informationand Regulatory Affairs.
All this to say I don't knowwhat this exactly means.
I'm kind of you know, kind oftalking through it, kind of
breaking it down here.
My hunch is that this might notbe as big as it sounds, but
we'll see.
We'll see.
You know, it just came out thisweek.
It just came out this week, andI think that this is one that

(09:28):
I'd like to see reactions on.
As I said, I'm going to bediving into kind of what exactly
is an independent regulatoryagency a little bit more, just
for my own curiosity, I guess.
So I'm going to keep an eye onthis one Again, the reason why
this is important for us in ourconversation.
The Federal Maritime Commissionis an independent regulatory
agency, excuse me, so in thatthis executive order would

(09:52):
affect it.
All right, story number two.
So this week, greg Miller putout an article saying Trump
administration officials vowedto tax foreign flagships,
calling it US ports.
Did you feel a shake in theoceans?
It wasn't an earthquake, it wasthe loss of $9 billion in

(10:13):
market cap, immediately afterthe newly confirmed US Commerce
Secretary made remarks on FoxNews this week.
So that's what it was.
It was a Fox News interview andin it the newly minted US
Commerce Secretary said that hewas going to be taxing foreign
flag ships, calling it US ports.
But what does that mean?

(10:34):
I'm actually just going to readfrom the article that Greg
wrote here, because hesummarized it well and really
framed it clearly.
So here it is.
Howard Lutnick, the newlyconfirmed US Secretary of
Commerce, said during atelevised Fox interview on
Thursday morning Donald Trumphas announced the external
revenue service and his goal isvery simple to abolish the
internal revenue service and letall the outsiders pay.

(10:56):
So, continuing on with thequote of Secretary Lutnick, I'll
give you an example Cruiseships.
You ever see a cruise ship withan American flag on the back.
They have flags of Liberia orPanama.
None of them pays taxes.
Every super tanker none of thempays taxes.
Every supertanker none of thempays taxes.
He said this is going to endunder Donald Trump, said
Blutnick, those taxes are goingto be paid.

(11:16):
Now the rest of the articlegoes into kind of the tax
structure associated withcruising and ship owners
generally.
And, look, I'm not an expert ontax law, but what I do see is
the continuation of the theme ofnot only maritime is important
with this administration, butfinding all of the areas where
the US is kind of not thatpreeminent country, and this
feels like a leveling of theplaying field, an attempt to

(11:39):
level the playing field.
And what I mean by that is Iwouldn't be surprised if there
was a push to reflag perhaps thecurrent cruise ships that are
not US flagged, perhaps maybethere might be a push to flag
those as US flagged, right Ifthey're going to get taxed.
Maybe that's the impetus,that's the push.

(12:00):
Now US flag comes with certainrestrictions of US built levels,
of US crew on board, etc.
And so it's not just as easy asreflagging to US.
There's certain criteria, but Icould also maybe I don't know
potentially see in the interimthat maybe there would be a
waiver to reflag the vessels andlike this, who knows right?

(12:21):
I don't know where this isgoing.
This was just said on aninterview, but I'm kind of
trying to think through thetheme of, okay, us dominance,
maritime interests.
If we're going to be flaggingnon-US flag vessels but we don't
have the capacity of our own USflag cruise ships, well, we do
have some, but we don't havenowhere near the size and number

(12:42):
of those foreign flag vesselsand kind of all the cool things
that are on these giant vessels,these floating hotels, if you
will.
But in the interim, maybe therewould be waivers there, maybe
this would help push to get moreUS merchant mariners on board.
I don't know, I don't know.
I find it all so interesting.

(13:05):
I find all of this sointeresting to kind of run down
the playbook of okay, what doesthis mean?
What could this mean?
What is the intended end goalhere?
It feels like probably they'retrying to beef up US flag
presence and so one of those iscruising.
Perhaps, I don't know, we'llsee.
Like I said, to be fair, we dohave some US flag cruising

(13:26):
fleets, but it's nowhere nearthe size and numbers.
Many of these are Panamanianflagged, which, if you've been
listening to the last fewepisodes of this podcast, you'll
know that the FMC, the FederalMaritime Commission, holds a
very large tool with respect toforeign flagged vessels and the
ability to turn them awayentirely if the foreign country,

(13:46):
the host foreign country, isfound to have unfavorable
shipping additions.
It's part of that Section 19 ofthe Merchant Marine Act of 1920
and the Foreign ShippingPractices Act authorities.
We've covered it, I think, thelast two episodes, so go take a
listen.
But maybe this is it'sparalleling again.
I've been seeing a fewdifferent ways that things are

(14:07):
paralleling around the Section19 of the Merchant Marine Act of
1920 and the Foreign ShippingPractices Act.
Those are very strongauthorities of the FMC that
rarely get called in.
We might see those authoritieshave a little bit more
importance in the next year orcertainly in the next couple of
years, I don't know.

(14:28):
Just I want to bring it to yourattention.
This is very interesting andthings are still moving pretty
quickly here.
All right, story number threelet's go back to the US Maritime
Alliance and the InternationalLongshoremen's Association, the
USMX and the ILA, their mastercontract.
It is set for a vote next week,which is February 25th,
allegedly right.
That's what they're saying.

(14:48):
That's what ILA president hasput on Facebook.
As you may remember, facebookwas the platform of preference
for the ILA making announcements.
It said that they filed anamendment.
Actually, I saw this in theFMC's agreements library, which
we've talked about that before.
You can go find some of theseagreements that are filed with
the FMC as long as they're notconfidential in nature.

(15:11):
So the service contracts areconfidential, but the vessel
sharing agreements, thesealliances and the USMX ILA
master contract agreement andthe amendments are filed with
the FMC and you can go look themup on the agreements library.
So they filed their amendmentat the FMC extending their

(15:31):
interim agreement.
So the previous interimagreement was for the January
15th.
Then they extended that becausethey agreed, and that's what
they're doing now.
They've extended this interimagreement until March 31st and
they said to allow time for theparties to ratify their
tentative agreement.
So I'm going to read thememorandum of agreement that

(16:05):
they agreed to.
That is this amendment, whichexpired on September 30th 2024,
and was extended from October1st 2024 through and including
January 15th 2025.
It's further extended throughand including March 31st 2025 to
allow time for the presentationof the agreed upon terms to the
ILA wage scale committee andratification by the parties.

(16:26):
This extension shall be subjectto termination prior to March
31st 2025, upon subsequentagreement of the undersigned
parties.
Now I keep saying it feels likeeverybody's taking victory laps.
This is kind of a no big dealthing, I believe just the other
day, or there seems to be alittle bit of a message starting

(16:48):
to come across saying thisisn't a slam dunk.
I don't know if that's justlike a clickbaity type thing or
if that's real.
I still think that February25th if Harold Daggett's saying
that they're going to vote thatday, I think that it's going to
go forward.
This feels like something thatthey have both sides have said
was a win.
So we'll see, we'll check itnext week and we'll see what

(17:12):
comes.
I think that this one the USMXand ILA master contract
hopefully, hopefully, the dramawill subside on this and we'll
move forward in labor.
In six years we'll talk aboutit again.
All right, so let's get into themeat and potatoes of the day
here, all right?
So what's going on?
We have a case here.

(17:32):
This is the Evergreen and TCWcase.
You may remember that this casepreviously was being decided
about a $500 charge.
That happened in 2020.
That happened over a holidayand a weekend, and so this was
challenged through thesettlement officer's claim.

(17:55):
Then it went to the fullcommission or small claims, I
should say small claims officer,it used to be either way, small
claims officer.
Then it went to the fullcommission.
The full commission agreed withit essentially.
Then it got appealed andbrought to the federal court of
appeals for the DC circuit andthat's where we saw the court of

(18:20):
appeals said they vacated andremanded it back to the
commission, and so it was alittle bit the way that I had
understood it was that theydidn't like the way that the FMC
had made their incentiveprinciple agreements or
arguments, that they wanted itto be a little bit more of a
complete argument, because theybasically went along their

(18:45):
incentive principle saying look,if the terminal or porch is
closed over the weekend or theholiday, then there is no
incentivization for gettinggoods in.
But then at one point the FMCin their filing said but if it's
closed on the weekend, you'llsee increased activity on Friday

(19:05):
.
And so the court was like, well, isn't that incentivization,
isn't that?
And that's exactly what thepetition was saying the
petitioner was saying on theother side look, fmc, like it is
an incentive to get your goodsbecause it's going to be locked
up over the weekend when youcan't get it.
So that's what the petitionersaying.
The FMC was saying no, that's,that's not right.
You can't charge on thoseSaturday, sunday, monday,

(19:28):
holiday days because there's noway to pick it up, even though
there might be that day onFriday.
So the court basically saidlook, you can't just dismiss it,
you have to discuss thatargument a little bit more.
And so here we are.
The FMC now has issued a newdecision, I guess on this,

(19:49):
trying to kind of hit at whatthe court had told them, and so
decision, I guess on this,trying to kind of hit at what
the court had told them.
And so what I want to?
I'm going to read off of whatthe FMC said here because I
think it's really interestingand I think that they did a much
better job of explaining andwe'll see if it's good enough
for the court or if it getsappealed again.
But yeah, let me read this off.
So it says, as the commissionexplained, when adopting the

(20:10):
interpretive rule, and it quotesto pass muster under section
41102C, a regulation or practicemust be tailored to meet its
intended purpose.
Close quote.
And the commission, open quotecontinues to understand
demurrage and detention asprimarily being financial
incentives to promote fluidity.
So they were quoting that fromthe interpretive rule on

(20:31):
detention demurrage, that's fromDocket 1905.
That's that interpretive ruleof May 18th 2020.
We talk about that periodicallyhere, but that's where the
incentive principle came fromand so they were quoting
themselves.
The FMC is quoting themselvesfrom this May 18th 2020
interpretive rule sayingunderstanding that demurge and

(20:51):
detention as primarily beingfinancial incentives to promote
freight fluidity.
So, continuing on in here,neither of the parties dispute
the initial decisions Finding offacts at the port where the
equipment was to be returned wasclosed for business May 23,
2020 to May 25, 2020, and thusclaim it could not return the
equipment on those days, right?
So they're saying it was aholiday and a weekend that week.

(21:13):
Nobody's disputing that, socontinue on.
The commission previouslydetermined that the incentive
principle was not being servedwhen respondent invoiced for
detention charges on the threedays when the port was closed,
because no amount of detentioncan incentivize the return of a
container when the terminalcannot accept the container.
So the commission's saying look, we determined that the

(21:34):
incentive principle isn't therebecause on a Saturday there's no
incentivizing somebody to getoff their couch and go pick it
up because it's a Saturday andit's closed under this fact
pattern, right?
So there is no incentivization.
At that point it becomes thecommission kind of almost
suggests, like a penalty, not anincentivization.
There's nothing happening onthat day that you can control to

(21:57):
go get your cargo.
And that's kind of what thecommission is essentially
arguing here.
Continuing on, it says, per thedirection from the DC Circuit,
the commission now utilizes abroader lens.
So they're saying, look, the DCCircuit told us to explain it a
little bit further.
So they're saying, look, the DCCircuit told us to explain it a
little bit further.
And so they said they're nowutilizing a broader lens when
applying the incentive principleas one facet of its
reasonableness analysis todetermine if the charges issues

(22:20):
are furthering the goal ofpromoting freight fluidity.
So they're kind of like a nodto the DC Circuit saying, look,
all right, you said that we weretoo quick with our
interpretation and ourassessment here, so we're going
to use a larger reasonablenessstandard and include the

(22:41):
incentive principle as one facetof it.
So, continuing on, thecommission acknowledges that
there's an incentivizing effectfor claimant or a similarly
situated party to returnequipment before scheduled port
closures to avoid accruingdetention charges.
That's what they're saying.
Look, they understand thatthere is an incentivizing effect
to return your goods if youknow that over the weekend it's

(23:04):
going to be closed.
They continue on and say it islogical that a party would want
to avoid paying a penalty thatwill grow over multiple days
when it knows in advance that aport is scheduled to be closed
and will be unable to acceptequipment returns, as respondent
argues in its brief.
So they're saying look, theother side is right here.
The other side is right in thatit is logical that you're going

(23:26):
to try to get your goods out ofthe port if you know that if
you don't get it out by Friday,saturday, sunday, monday,
holiday, maybe it's the 4th ofJuly week, you know, maybe you
got a Tuesday, potentially aWednesday, in there.
Maybe Monday, tuesday might bethe biggest that they're saying
look, of course you're going totry to avoid those four days of

(23:47):
demurrage and detention bytrying to get everything taken
care of on Friday.
They said that's logical, socontinuing on.
It said yet the goal of theincentive principle is to ensure
that reasonable detentioncharges promote freight fluidity
, a concept that is broader thansimply the quickest equipment
return and which requiresbalancing competing incentives.
So they're saying, look, it'smore than just returning that

(24:15):
equipment.
So continuing on incentivizingequipment to be returned just
before scheduled closures willnot always have a positive
impact on freight fluidity.
Common carriers and other portswould likely not be able to
process and turn aroundequipment returned late on a
Friday before a weekend closure,because they too likely would
not be working during a portclosure.
So they're saying, look, theremight be bunching effects.

(24:37):
That happens on a Fridayafternoon.
While it does serve the purposeof you might be incentivized to
return.
They're really hinging on thatfreight fluidity.
They're saying, look, it's justgoing to potentially cause a
problem for the port or terminalby returning on that Friday
afternoon because they're notgoing to be able to process and
turn around the equipment either.
So continuing, they said,there's a likely minimal

(25:00):
positive effect on freightfluidity for these containers
returned right before the portcloses.
Thus, detention charges inthese circumstances would not
serve the ultimate goal ofpromoting freight fluidity, but
rather are serving to penalizeshippers and truckers
unreasonably.
So they're saying, look, if youturn it back in on a Friday.
You can't get it scooting, it'sjust going to sit there anyways

(25:20):
.
And so what does that mean forthe Saturday and Sunday?
Well, had they not been chargedand they kept it and brought it
back after the holiday, then itwould have.
They're basically saying look,it doesn't make a lot of sense
that the equipment needs to bereturned to increase freight
fluidity because nothing's goingto be used over that weekend.

(25:41):
They're not going to be able topack it back and keep it on its
way.
That's why they're hinging onthis freight fluidity.
I hope that's clear.
I feel like this is getting alittle bit muddy.
But they're really sticking tothat freight fluidity.
Meaning, if the cargo box isjust going to be sitting around
anyways, you can't convince methat you had any other plans for

(26:03):
it, because Friday afternoonyou're not able to fill it back
and push it along.
So it says detention charges.
Additionally, multi-dayscheduled closures could lead to
congestion and log jams atports when truckers rush to
return equipment to avoidharsher penalties, which also
hinders freight fluidity.
So, like if it were a multi-day.

(26:24):
Or you know, a snowstorm iscoming after a Monday holiday
and now you're looking atpotentially you have the two
days of the weekend plus theMonday holiday, plus a potential
snowstorm, that's a Tuesday,maybe even a Wednesday.
I mean that's five days.
So they're saying, look, youmight get everybody showing up
on that Friday and this wouldlead to congestion and log jams

(26:45):
when everybody's trying to rushand that would hinder freight
fluidity.
They're also saying there arealso disincentivizing effects
created by allowing charges overscheduled closures.
So amicus filings and supportiverespondent contend that not
charging detention overscheduled weekends and holidays
closures, so amicus filings andsupportive respondent contend
that no charging, that notcharging detention over
scheduled weekends and holidaysclosures would disincentivize
prompt equipment return andthereby harm freight fluidity.

(27:07):
So saying, look, there was anamicus brief filed a friend of
the court trying to kind of fillout the information here saying
that not charging detentionwould disincentivize that prompt
equipment.
Right, because they're sayinglook, if you charge over the
weekend, of course everyone'sgoing to try to rush in to get
it on that Friday.
If you don't charge over theweekend, people will stick

(27:29):
around until that Monday,tuesday just sitting on the
equipment because they didn'thave that incentive to show up
on that Friday.
So the commission continuesthese arguments, overlook that
truckers and shippers have theirown commercial reasons,
separate from avoiding detentioncharges to promptly return
equipment, including contractualtimelines between the parties,
space constraints, storing thecontainers and truckers'

(27:52):
incentive to earn greaterrevenues through additional
equipment pickups and returns.
Right, so what they're kind ofhitting at is in the detention,
perhaps right so they want toreturn the equipment.
It's perhaps an empty, theywant to return it.
The amicus saying it's adisincentivizing, it's not

(28:14):
encouraging you to turn it backin on Friday if you're not
charged over the weekend.
The FMC saying just becauseyou're not being charged over
the weekend doesn't mean thatthose truckers and shippers
don't want that gone, becausenow the trucker has to find a
place for it through thatweekend.
If it's ready and available onFriday to be returned, they want
to return it.
They want their chassis back tobe able to go pick something

(28:35):
else up so that maybe even ifthe port's closed on Saturday,
they could still work onSaturday, they could still go
pick up from the warehouse andpick up a box that needs to be
moved and then that way they'reready on the Monday or Tuesday
or whatever day the port is backopen again.
That's what the FMC is tryingto argue here is look, there are
still reasons why the shipperor the trucker wants to get the

(28:57):
stuff moving, the freightfluidity piece.
Continuing on, let me see where.
And then it says and mostimportantly, these contentions
assume that incentives can onlyflow in one direction to promote
freight fluidity.
This is the FMC.
They overlook that allowingdetention charges over scheduled
closures have their owndisincentivizing effect on the

(29:17):
entities assessing the charges.
So it says allowing detentioncharges over the weekend might
have a disincentivizing effectfor the port or the terminal.
So that's articulated in thefinal rule.
These charges may also lessenthe incentive for ocean carriers
and marine terminal operatorsto perform efficiently.

(29:37):
So they're kind of alluding andsaying here, look, if the
terminal or the ocean carriercan charge demurrage or
detention over that holidayweekend and they know that there
might be three days of chargescoming, the FMC is kind of
saying, look, they may try topush this equipment or this

(30:04):
movement of goods, because thenthey can collect on those three
days, because there's afinancial incentive for them,
because if the cargo stays ontheir yard or if the equipment
stays inside the box throughdetention, inside the box,
through detention, they get tocharge for it.

(30:25):
I mean it kind of looks like wemade.
This was just, this was justposted what I think a week ago
and kind of what this is saying,and, granted, this is newly
into the new commissionchairmanship, but it almost
looks like no favors are beinggiven to the ocean carriers here
, especially in this explanation.
So continuing on.
It says detention charges thatplace all financial risk on the

(30:47):
shippers and theirintermediaries during scheduled
port closures, do not encouragethe carriers and marine terminal
operators to be creative orinnovative about how they could
promote freight fluidity, and sothey continue on.
This is probably the best.
It says.
For example, ocean carriershave considerably more leverage
over MTOs, marine terminaloperators and shippers and

(31:07):
truckers.
If the carrier could not counton receiving revenue from these
charges, they would beincentivized to take action,
such as encouraging ports toexpand their hours over weekends
, which could significantlyincrease freight fluidity.
So what the FMC is saying hereand I think you're probably
getting this but they're sayingthe weekends, the MTOs, the

(31:27):
Marine Terminal Operators, cancharge.
If they can charge, why wouldthey try to open on that
Saturday and be productive whenand this is I mean, this is just
what the FMC is saying.
But they're saying why wouldthe MTO try to open?
Because by even staying closed,they can collect on that box.
Now, of course, I think thatthat's I get their point.

(31:51):
But I also think that MTOs,ports and terminals want to move
equipment as well.
I think that they don't wantthings dwelling equipment as
well.
I think that they don't wantthings dwelling.
It's a loading zone, it's not awarehouse.
Right, the yard is one that theterminal report really wants to
keep things moving here and so.
But their point is well made.
I think that their point isreally kind of hinging on.

(32:12):
Look, if they can just sitthere and collect money, why
would they be incentivized to becreative and open on the
weekend or expand their hours orto try to increase the freight
fluidity?
It's an interesting argumentand I think that it's one that's
well-received, but I think thatit's also a little a touch
unfair.
But their point is why wouldthey be encouraged to do that?

(32:36):
It said accordingly, whenbalancing the competing
incentives, the commission findsthat detention charges over
scheduled closures do notincentivize behavior that will
best promote freight fluidity.
Now, this is a much morecomplete argument and this is
just a section of what the FMCsaid.
But this is a much morecomplete argument than what they
gave previously, where theykind of just said look, it's not

(32:57):
incentivizing and because youcan't charge on a day, you can't
do anything.
It's not incentivizing andperhaps that's overly unfair on
the argument that the FMC made,but this one point is.
This one is a much morecomplete argument.
It's interesting too that thewell they go into the

(33:18):
conclusions and I want to pointthis out so the amount was $510.
That's how much we're talkingabout for this Saturday, sunday,
Monday, holiday that this wholecase hinges on.
So it was a small claim, so itwasn't very much anyways.
But here we are.
It has the potential to reallydefine weekends and holidays for

(33:42):
whether detention and demurragecan or cannot be charged over
$510.
And actually they're saying theinterest is $70 on that and
running on the reparations awardfrom it said that respondents
pay reparations to claim it inthe amount of 510, with interest
running on the reparation awardfrom June 6th 2020, totaling

(34:06):
$580.03.
So they've I mean they'vecertainly paid more than that in
legal fees for all of this, butthis is truly going to be one
of those marquee case law caseswhere, like I said, we'll find
out.
Does this stick?
Is this something that has thatweekends and holidays cannot be

(34:31):
charged or not?
So it says the commissionreverses the initial decisions
order the absent extenuatingcircumstances, evergreen
Shipping Agency Corporation andEvergreen Line Joint Service
Agreement cease and desist fromimposing per diem or detention
charges.
So they reverse their cease anddesist.
That's what they kind ofinterpreted of the.

(34:52):
It was the you had to pay the$500, but then they also said
Evergreen cannot.
They were cease and desistingfrom charging on weekends and
holidays.
Now they're saying look, it'sgoing to be more of a complete
discussion, a complete look.
So they're reversing that.
Yeah, yeah, that's basicallywhat they're saying.

(35:13):
This is interesting, though,because then chairman, now
Commissioner Maffei wrote aninteresting concurrence, which a
concurrence is just like Iagree, and here's a few extra
thoughts.
So Commissioner Maffei wrote aninteresting concurrence where
he said he agrees with thedecision in full, but he also
added some emphasis to the perdiem discussion.
So he notably said and I'mgoing to read off his

(35:34):
concurrence at least in part Iconcur with the majority's
opinion in full.
I write separately, however, toexpress my additional concerns
related to the use of the termper diem in the party's contract
to describe the respondent'sdetention charges.
Now we've seen the FMC come inand talk about per diem versus
detention and kind of theargument felt like well, if it

(35:56):
quacks like a duck, it's a duck,we don't care what you call it.
Now here Commissioner Maffei iscoming in and kind of picking
that apart a little bit and hesays, as the majority notes, the
commission has discouraged theuse of per diem because it is
unclear, adds additionalcomplexity to an argument and is
subject to inconsistentapplication across the industry.

(36:16):
So I say if it quacks like aduck, we're going to call it
detention, to be fair.
Right, he's right.
The commission in recent yearshas said look, we really we
prefer you to kind of stick withdetention or demerge, because
per diem kind of takes on adifferent connotation.
But as it relates to theregulation or the regulatory
authority of the FMC over perdiem, they're saying look, per

(36:38):
diem quacks like a duck, we'regoing to call it detention.
So, continuing on here,commissioner Maffei says per
diem is defined as by the dayfor each day, and he relies on
Black's Law Dictionary, which iskind of the official dictionary
of lawyers.
This definition is clear, asshould be its application in the
context of the interpretativerule.

(36:59):
He goes on to say in my opinion, the validity of this per diem
provision necessarily depends onthe bilateral ability of the
parties to perform under itsterms.
So the existence, in otherwords, the existence of
reciprocal risks andresponsibilities between the
parties, not a unilateral shiftof all risks to the shipper, not

(37:20):
a unilateral shift of all risksto the shipper.
Put another way, I believe thatthe interpretive rule allows the
respondent to charge a dailydetention fee only when the
complainant has an opportunityto cure the default at least
once before each additionaldaily fee is charged.
So he's saying, look, I thinkthat there should be an
opportunity to fix it.
And he continues to say youneed to be.
So.
The whole argument right, noweekends or holiday charges is

(37:43):
because you can't get in thereto do anything about it.
And he's saying, look, putanother way, if you can't do
anything about returning and Idon't know if he's kind of
nodding to like if there's noreturn windows but if he's
saying, look, if there's noopportunity for detention to be
rectified, like that you returnthe equipment, return the box,

(38:05):
right, because detention is kindof that charge over the use of
the box, and so when you returnit, then that charge of the use
of the box stops.
But he says to charge a dailydetention fee only when there's
an opportunity to cure thedefault so that there's an
opportunity for them to actuallybring it in.
They're ready, they're willingand there's an opportunity to
cure the default so that there'san opportunity for them to
actually bring it in, they'reready, they're willing and
there's an opportunity to returnthe equipment.

(38:25):
So the fallacy of therespondent's position lies in
its oversimplified presumptionthat detention is akin to rent.
Detention is a fee, not rent,and is distinguishable because
its primary purpose is toincentivize the movement of
cargo and equipment.
So here, however, therespondent's argument
unreasonably shifts the burdenof all potential detention
charges to the complainantwithout regard for the root

(38:47):
cause of the detention, muchlike a renter.
So he's kind of just gettinginto, like that larger detention
.
It's supposed to incentivizethe movement.
And because it's supposed toincentivize the movement, and
because it's supposed toincentivize the movement if
there is no opportunity toactually incentivize right, like
it's saying look, I'm going tocharge you another day if you

(39:07):
don't bring it in, but if on theother side, the person trying
to bring it in, the motorcarrier, whoever is saying I'm
trying to bring it in, there areno opportunities, there's no
appointments, the port is closed, my area of the port is closed,
the yard isn't open, so I can'tbring it.
That's kind of what he's gettingat here is, if there is no

(39:28):
opportunity, but that person,that motor carrier who has the
empty and they're trying toreturn it, is trying to return
it, you can't charge detention.
That's what he's sayingCommissioner Maffei here.
He's saying you shouldn't beable to charge detention because
they're trying, you're notincentivizing anything because
they're already incentivized andthey are trying to bring it in

(39:50):
but there's no opportunity tobring it in.
I think that might be a largerdiscussion.
I've been hearing a lot aboutappointments and the inability
of certain motor carriers to beable to get appointments and I
think that that's what he'stalking about here.
You'll recall that there was aletter sent from the Bi-State
Motor Carriers Association tothen Chairman Maffei saying look

(40:11):
, we have this equipment, we'retrying to bring it back by
saying not only should you notbe charged detention when you
can't, when there's noopportunity for you to return,
but you should be, you should becharging storage because you're
now having to hold thisequipment even though you're
ready, willing and able toreturn it, but there's no

(40:32):
opportunity to return it.
So he kind of flips it on itsside and he's like that was
before and not a lot came fromthat, but that was his position
was that he thought that ifyou're really ready, willing and
able to return the box, itcan't be returned for whatever
reason, but it's blocked.
That, he said you should becompensated for having to hold

(40:54):
that box because you're you'rewanting to get it out, because
it's now gumming up your abilityto use the chassis.
That's kind of what it comesdown to.
That's what he had saidpreviously.
He doesn't totally talk aboutthat here, but he does allude to
that right when he says it'snot a rent, it's an incentive
principle, it's an incentive fee, and if you're not being
incentivized, then what the heckare we doing here?

(41:16):
Right, yeah, so it'sinteresting, though One thing
that I want to caution overallhere is that, even though the
way that I read this for themost part is that, look, it
looks like weekends and holidaysas a general statement, but
will be assessed case by case.
So here we are with the FMC'sguardrails approach as a general

(41:39):
statement, it feels likeweekends and holidays are
probably not something you wantto be charging, detention or
demurrage on in the immediate,because the FMC is saying, look,
even though it mightincentivize for drop-offs on
Friday, they're finding lesspositive incentive for the

(41:59):
freight fluidity movement, forthe actual movement of the goods
, because it's just going to besitting there anyways.
But this is not legal advice,this is just educational
discussion.
So interesting, right, this isan all over $500 charge.
But, look, this might still besomething that can be challenged
and if so, the FMC may have todefend this new expanded

(42:22):
explanation as well, which maythrow everything back into the
gray area.
But it seems, at least for now,like I said, as a general
general statement, they arereally encouraging not charging
detention and demurrage onweekends or holidays or any
other time when you cannot beincentivized by the charge.
And, right, I talked aboutMaffei's concurrence.

(42:46):
That's not the majority opinionwhere he talks about the actual
incentive.
But it goes to the overalldiscussion here.
Right, again, not legal advice,just general education and
discussion.
But that's it for this week.
Keep it here for all the updateson what you need to know in
global supply chain.
We're going to keep breaking itdown.
I'm going to keep watching thisweekends and holidays, because
this has a potential to be veryimpactful for operations.

(43:08):
As always, the guidance here isgeneral, for educational
purposes.
It should not be legal advicedirectly related to your matter.
If you need an attorney,contact an attorney, but if you
do have specific legal questions, feel free to reach out to me
at my legal company, squallStrategies.
Otherwise, for the non-legalquestions, the e-learning and
general industry information andinsights, come find me at the
Maritime Professor.
If you like these videos, let meknow, comment, like and share.

(43:30):
If you want to listen to theseepisodes on demand or if you
missed any previous episodes,check out the podcast by Landon
Bysy and if you prefer to seethe video, they live on my
YouTube page by Landon by Sea,presented by the Maritime
Professor.
While you're at it, check outthe website MaritimeProfessorcom
.
There are live webinars onthere that you can sign up for.
There's going to be e-coursesdropping very soon.
The website has a nice refreshto it.

(43:52):
Take a look and sign up for thenewsletter.
You'll be alerted to all thenew events and happenings and
when those e-courses get dropped.
So until next week.
This is Lauren Began, theMaritime Professor, and you've
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S4.E16 - Holidays and Weekends subject to Detention and Demurrage billing? FMC has something NEW to say about it...

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}S4.E16 - Holidays and Weekends subject to Detention and Demurrage billing? FMC has something NEW to say about it...