Demurrage and Detention are on everyone’s minds in ocean logistics today. The FMC proposes to regularize the information and timing of billing practices.
This could be very helpful in reducing the chaos of D&D billing today. It’s impossible to tell exactly which incidents happened when, and even who should pay. Those kinds of questions must have evidence to settle them, and it’s not being provided in bills. That results in long conversations and debates over the bills. It’s a huge time-waster, and fertile ground for complaints, refusals to pay, and legal action. These add cost while reducing consumer value.
In any principal-agent situation, when the cost of monitoring rises too much, the overall deal can’t be made. D&D charges are part of the cost of monitoring ocean trade. And in principal-agent models, monitoring costs often take the form of data collection and verification.
For years, ocean container traffic flowed fairly smoothly, and the events that triggered D&D charges did not happen very often. In those days, perhaps we could get away with settling claims by email and phone discussion. But with massive congestion worldwide, and only weak motivation to pick up empty containers, those days have changed.
We need accurate information for the parties to be able to resolve the D&D charges, and get the right bills paid by the right party. The FMC has it about right to take this first step, to regularize the bills.
Once that happens, if the D&D problem continues to be big, firms will recognize the value of investing in correct data gathering, and sharing it, and establishing standards for handling it.
John Gallagher, Washington Correspondent Monday, February 7, 2022FMC to consider regulating ocean carrier billing practices – FreightWaves