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, 2022
Apparently some ships are departing for the Ports of Los Angeles and Long Beach without notifying US Customs of their estimated arrival. They’re required to do so, but don’t know about the rule. The reason is that many newly chartered ships are sailing, chartered by firms who do not ordinarily manage shipping, or are being handled by forwarders who are new to the practice. They appear to be unaware of the requirements.
When the ship fails to notify the port at departure, and just ‘drops in’, there is no place in the schedule to unload it. The ship must wait offshore. The Maritime Exchange says that essentially all positions for waiting ships off LA and Long Beach are full; drop-ins must steam around until their place in the queue can be found. The waits can be upward of a month.
This operational gap is just one of the reasons for the supply chain logjam. If it’s happening at LA and Long Beach, you can bet it’s happening at other West Coast ports.
We know that queues to unload are lengthening at all the West Coast Ports. Tacoma announced detention surcharges for containers not moved from their yard on time, following the lead of Los Angeles and Long Beach.
The other ports are seizing up because of diversions to them from the usual LA and Long Beach stops, especially by chartered vessels, which can choose any route; they do not have fixed routes like the linear alliances.
People have to start addressing the issues that seem small regarding maritime supply chains. Only an across-the-board effort will get things unsnarled soon.