When containers go by rail to or from ports, we would expect that any detention or storage fees would fall under the Surface Transportation Board (STB) which governs rail traffic in the US. And these fees have become more common, as railroads in the US struggle with manpower shortages, longer trains, lower traffic, and efforts to operate in a leaner fashion. But who to send the bill to?
Many containers are owned by ocean shipping firms, and it would seem like they should be billed if their containers are not picked up in a timely fashion. But it’s the shippers who get the bill.
The Federal Maritime Commission (FMC) has come down with some fairly explicit rules about detention and demurrage charges. The rules specify who is billed, what information must be provided and when, and how disagreements over bills can be resolved, through a process. But when the charges are from rail detention, the FMC claims they have no jurisdiction.
Shippers think the ocean carriers should be billed, and bill disputes be handled at the FMC under the new rules. But ocean carriers think the STB should handle rail demurrage.
I don’t think this can be settled without some Congressional input. It’s one of the gray areas that come up often in logistics, where many partners collaborate to move cargo or cause delays. The parties are never going to agree. For ocean carriers the divided authority is just fine; since they are not getting the rail bills, they have no stake in disputes.
We just need to get a single point of oversight, to lay down rules, like those of the FMC, for demurrage and detention charges including the rail lines. It’s a big ‘just’.
I don’t usually comment on shenanigans at specific firms. But here’s the case of a logistics unicorn, a startup with a valuation of over $1 billion, that so fits the pattern of many startups from my experience in Silicon Valley in the frantic 80’s and 90’s. Burning through cash like there’s no tomorrow. Beating down employees. Inadequate software for doing a large amount of business. A CEO who’s over the top, demanding performance and ridiculing or shunning those who don’t perform to his (most of them are men!) exalted standard based on false assumptions.
The idea behind Flock Logistics is a decent one. Try to pool smaller shipments that normally would need to travel as LTL cargo into a single trailer, and carry it as FTL cargo. How you load and unload it and how you schedule the trips is a complicated question, and software could play a big role. But the essential problem is one of the pooling concept. Can you put together enough small cargoes with similar destination from similar starting points and then meet the time schedules of all the shippers and receivers, with a single truck load? It’s a problem you face one load at a time, and you have to solve it to satisfy multiple customers for each truckload.
It’s not surprising that they have troubles with customer service. It’s not surprising that they can’t sell enough cargoes to fill a truck most of the time, so to meet commitments they have to ‘ship air’. It’s a hard problem to crack. And yelling at the sales folks won’t create business.
And it’s not surprising that the CEO would be a dingbat. Particularly in software, I met one of these a week in Silicon Valley. They think they are Steve Jobs, or Bill Gates (both with reputations like that), or more up to date, Elon Musk, and their idea is great and executable because they found some investors willing to throw millions if not billions at them. But very few have what it takes to make a great company out of a startup.
The employees are the ones who suffer. They have to have thick skins to submit to being beaten up for goals actually not feasible, and they are the ones who have to speak with disgruntled customers and try to preserve their personal reputation along with that of the firm. Especially these days after COVID, employees are much less likely to take that kind of abuse; working conditions are part of their package. They’d be gone even if they didn’t get laid off.
One startup CEO I can think of who seems to have succeeded is Ryan Petersen of Flexport. Despite the billions Flexport has been given, they seem to be able to keep meeting customers’ needs in logistics. And Ryan was smart enough to step away when the firm became so big and needed to be sustainable; I guess he didn’t see it as his mission to run that big a firm with such intense customer service needs.
The story below tells it all. Don’t bet on Flock Logistics being around long.
There’s no end to the confusion surrounding Detention and Demurrage (D&D) charges for ocean container movements landside. This recital of some recent lawsuits shows that firms are not passing on information that would allow actual determination of accurate D&D charges.
Tthe FMC is starting to crack down on billing that isn’t complete, but some firms may not comply right away, and of course there are older cases which did not come under the recent rule.
The recourse is the courts, and that’s what’s happening now. The supply chain ‘partners’ in the move are handing off responsibility one to another. The Hapag-Lloyd story, involving a forwarder ME Dey, their haulier New Age Logistics, CSX Rail, and Hapag, is just such a case. One claim being made is that the haulier asked to use their chassis to haul the containers to avoid the D&D charges; but they were told that they could not do that, because the containers “belonged to the steamship line”. This kind of nonsensical behavior is not cooperation, and does not facilitate good supply chain relations. Expect more lawsuits!