July 22, 2023

How AV Logistics is Responding to FMC Detention and Demurrage Reform

As part of the Ocean Shipping Reform Act of 2022, the Federal Maritime Commission (FMC) has been investigating supply chain vulnerabilities to create recommendations for greater efficiency and transparency. After extensive interviews and investigation, FMC created a ruling to restrict per diem (detention) and demurrage billing to contracted parties only. That means demurrage and per diem fees will no longer be shared with third parties but only between the shipping line and the party responsible for the shipping containers. The FMC will release the final rule in Summer 2023.

What does the new FMC rule mean for the logistics industry?

Shippers, 3PLs, and steamship lines (SSLs) will need to adjust to the new rule. The new restrictions will increase security for contractual information about per diem and demurrage billing between the SSL and the owner or responsible party for the shipping container. The rule also provides transparency for shippers and relieves intermodal transportation third parties from having to reconcile per diem charges.

What does the FMC rule mean for drayage and SSLs?

The FMC mention of third parties includes the partner carriers of AV Logistics, who transport the shipping containers from the ports to railyards, container depots, warehouses, or other final destinations. Partner carriers are often presented with invoices for demurrage or per diem after picking up containers from the port or dropping off the empty containers late.  They are then put in the position of reconciling charges, even though they are not privy to the contractual arrangement between the SSL and the owners of the containers they are transporting. The new FMC rule will allow those in charge of containers (including 3PLs like AV Logistics) to communicate directly with supply chain parties and SSLs to reconcile and/or dispute charges more efficiently. It will relieve those who haul shipping containers from the responsibility of having to reconcile per diem charges.

That’s good news for all our partner carriers! However, as this transition is made, AV Logistics will continue to simplify the reconciliation of charges with our new per diem reconciliation (PDR) tool.

What the FMC rule means for AV Logistics

AV Logistics is responding to the new FMC rule with an innovation that will simplify the communication of charges between contracted parties–our Per Diem Reconciliation tool (PDR).

The PDR tool has been in development at AV Logistics for many months. It dovetails seamlessly into the new FMC rule because it eases communication between SSLs and parties responsible for shipping containers, like AV Logistics. The PDR will help the SSLs, partner carriers, and other supply chain partners who work with us to effortlessly remit per diem and demurrage invoices so we may reconcile or dispute them based on the activity of their containers.

Our PDR is an enhancement to Coreviz, our supply chain visibility tool. The PDR automates the per diem reconciliation process for those in our system and dramatically reduces the time it takes parties to remit, reconcile, dispute, and receive reimbursement for per diem charges. Here’s how it works:

  • Partner carriers and SSLs remit their per diem invoices by scanning them into the customer portal.
  • The PDR uses OCR (optical character recognition) to reduce manual data entry and input the invoice data into Coreviz
  • Coreviz verifies and matches key data (ex., ingate/outgate) for the shipping container(s)
  • AV Logistics reconciles or disputes any charges based on our information on each shipping container
  • AV Logistics makes necessary payment or reimbursement
  • Partner carriers and SSLs can check the status of any invoice at any time through the PDR portal

Overall, the FMC rule enables us to better serve our customers and partner carriers through our PDR. We intend the PDR to simplify communication between our partners in the supply chain and serve as a central repository for invoices from SSLs and partner carriers.  We will even pay the invoice directly if it helps the cash flow for our partner carriers.

Can our PDR tool help you when the new FMC rule takes effect? Yes, and we look forward to helping our customers and partner carriers communicate more effectively by incorporating this tool into their regular operations. To find out more, contact us at 888-209-3524 or email sales@av-logistics.com.