May 1, 2024

The Final Word: Helping Our Customers with the New FMC Rules for Per Diem and Demurrage Charges

The Federal Maritime Commission (FMC) reports that between 2020 and 2022, Steamship lines (SSLs) and other supply chain partners charged $8.9 billion in per diem and demurrage charges. This reality helped prompt a fact-finding recommendation in September of 2021 to examine supply chain vulnerabilities. Five months later, the Commission issued an ANPRM (Advanced Notice of Proposed Rulemaking) to examine industry billing practices and collect comments. In October of 2022, the Ocean Shipping Reform Act (OSRA) was enacted into law, with requirements with the final rules for per diem and demurrage charges to be determined.  

The Federal Maritime Commission (FMC) published its final Detention and Demurrage Practices ruling on February 23, 2024. In a nutshell, the rule states that an invoice or detention or demurrage charges can be issued only to:

(1) the person for whose account the billing party provides ocean transportation or storage of cargo and who contracted with the billing party for the ocean transportation or storage of cargo; or 

(2) the “consignee,” defined as “the ultimate recipient of the cargo; the person to whom final delivery of the cargo is to be made.”

What does the new FMC rule mean for supply chain partners and steamship lines (SSLs)?  

The new rule institutes a 30-day timeframe for vessel-operating-common carriers (VOCCs) and marine terminal operators (MTOs) to issue detention and demurrage invoices from when the charges were last incurred. The party receiving the invoice has 30 calendar days to mitigate the fee, or request a refund or waiver. The billing party has the same amount of time to resolve matters unless both parties agree to a longer timeframe. 

The goal of the new ruling was to promote supply chain fluidity and the timely pick-up of cargo and return of empty equipment. OSRA 2022 paved the way for requirements that common carriers must now include on their per diem and demurrage invoices. These now include: 

  • Date that container is made available;
  • The port of discharge;
  • The container number or numbers; 
  • For exports, the earliest return dates;
  • The allowed free time in days; 
  • The start date of free time;
  • The end date of free time;
  • The applicable detention or demurrage rule on which the daily rate is based;
  • The applicable rate or rates per the applicable rule;
  • The total amount due; 
  • The email, telephone number, or other appropriate contact information for questions or requests for mitigation of fees;
  • A statement that the charges are consistent with any of Federal Maritime Commission rules with respect to detention and demurrage; and
  • A statement that the common carrier’s performance did not cause or contribute to the underlying invoiced charges.

Shippers should understand that billing parties must now include all the required information on the invoice, or they are not obligated to pay. 

The rule will also eliminate the common problem of motor carriers being presented with invoices for per diem and demurrage charges, even though they are not privy to the contracted terms of the shipping containers. The rule helps invoices get into the right hands. 

When does the new ruling take effect?  

The new rule will take effect in late May, which gives supply chain partners time to prepare.

How should SSLs and supply chain partners prepare for the new ruling?

The best way to prepare for the new ruling is to have management for per diem and demurrage charges in place to automatically review and handle all issues arising from the new invoicing rules. With the new 30-day timeframe, moving quickly is more critical than ever. Inaccuracies on invoices for per diem and demurrage charges must be quickly disputed or you risk paying non-compliant or incorrect invoices.

Is there technology devoted to processing these invoices?

AV Logistics has introduced a new per diem management tool to enhance our supply chain visibility platform, Coreviz. The PDR will help SSLs and other supply chain partners effortlessly remit invoices for per diem and demurrage charges so we can reconcile or dispute them on their behalf within 30 days. We launched the PDR last year to rave reviews and regularly help them discover inaccuracies and dispute charges or process payments faster on their behalf.  

Here’s how it works:

  • SSLs remit their per diem invoices by scanning them into our customer’s 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) on the invoice
  • AV Logistics reconciles or disputes any charges based on our information on each shipping container
  • AV Logistics makes necessary payment or reimbursement
  • SSLs can check the status of any invoice at any time through the portal

Customers who already rely on AV Logistics to handle their logistics can currently benefit from the per diem reconciliation tool. With technology already in place, we are here to help you reduce your per diem and demurrage charges and eliminate the hassle of reviewing and addressing invoices. Incorporate our technology into your regular operations so you do not need to worry about complying with the new FMC rules again. To find out more, contact us at 888-209-3524 or email sales@av-logistics.com.