Detention & Demurrage Hearing January 16 & 17, 2018 Shipper and Intermediary Panel


one o’clock we can reconvene madam
secretary if you would proceed with our next panel
will do I just want a housekeeping matter when you’re not speaking if you
could turn the microphone off that would help us avoid some feedback problems we
were having this morning thank you your second panel mr. chairman we’ll
begin with Peter Friedman followed by Stephen Hughes Sam Sorbello Tim
Avanzato and Franz De Jong Mr. Friedman go ahead good afternoon commissioners
and thank you very much for conducting this proceeding this is clearly
something that is challenging the entire gamut of the organizations and entities
that over which you have jurisdiction and I’m going to talk today on behalf of
US agriculture and forest products exporters their freight forwarders and
customs brokers the trucker’s all those who are members of the AG TC and which
is the entire agriculture and forest products supply chain it’s an export
supply chain we need to move our agriculture forest products exports
rapidly through the entire supply chain because there’s nothing that we produce
in agriculture forest products which is the largest containerized cargo going
out of the United States there’s nothing we produce here in the United States
that cannot be sourced somewhere else in the world and if we’re not dependable
suppliers as we’ve learned the hard way those foreign customers will go
somewhere else there’s plenty of other places that can buy they’re in Korea in
Japan they can buy their pork and beef from a lot of places other than South
Dakota or Kansas or Wisconsin all those places so when you hear
some of the responses and read the responses I was frankly disappointed by
the responses for the other side this is not black and white this isn’t
something where you can with anybody any carrier or any terminal can say there’s
no problem here there’s no problem here that’s not what the pork producers are
telling Chairman Thune right now that’s not what the lumber exporters are
telling senators from Kentucky or Washington State or elsewhere this is
a problem because it impacts our ability to export now keep in mind nobody no
exporter and no importer wants to keep their cargo on a terminal one minute
longer than they absolutely have to there’s sort of this view that maybe
people like to store things there no and here’s an example you can take chilled
pork out of South Dakota and send it to Korea after the United States has spent
years trying to negotiate an opening market in Korea and in China for our
pork and beef exports if it’s chilled which means it’s not frozen its chilled
it gets over there and it’s worth about two hundred and twenty five thousand
dollars that’s the base base value sale over in Korea if there’s any delay any
delay along that supply chain way and at the port’s there’s only one choice to
turn the temperature down and freeze it and then you deliver a product for which
you’re going to get 50 thousand dollars that’s a massive loss to the US exporter
when there’s any delay so the carriers and the terminal operators do not need
to convince the importers and exporters to move their cargo faster through to
the contrary we want them to move our cargo through quickly so there’s there’s
definitely a problem here there you know some of the responses you heard you
don’t have the authority come on give me a break that’s exactly what some of the
same people who wrote those same petitions and the same briefs that they
gave you on this one that’s what they said on the solas vgm there if I
girls math let’s say you didn’t have the authority you can’t move on it well you
didn’t and so the US Coast Guard stepped in and then the Congress stepped in
because I said there was a problem and we are gonna fix it and I think this
agency has the authority to step in and fix and I think this agency has the
authority to self initiate you’ve heard from the whole gamut this isn’t
something was just when people say this is a commercially negotiated item you’ve
heard from Walmart so okay only retailers that are smaller than what
Walmart and smaller are impacted by this which means everybody in the United
States we have as a member the nation’s largest trucking company paid almost
four million dollars worth of these fees they didn’t have the ability to
negotiate so the fact is the industry is depending on you this agency to do what
the Shipping Act calls you to do and I hate to admit it but I was around in
1984 and I was a Senate draftsperson of this act you need to protect the
shipping public that’s the purpose of this agency is to protect the American
shipping public because things aren’t an even playing field and when you talk
about selecting terminals things are moving in a different direction used to
be three carriers you pick the carrier because you like the terminal they call
on but now those three terminal carriers are on one ship as part of an alliance
right and that one ship that one Alliance ship calls on one terminal so
you no longer have as much ability to select the terminal based on their
practices I would say this there are people I’ll finish up here there are I
could pull six people out of the group of witnesses that you have assembled
including three that will testify tomorrow probably against decommission
doing anything and I believe you could pull those six people together and get a
solution just like we did on V GM we had some terminal operators private terminal
operators who said forget what the lawyers are telling you that
can’t do anything they came forward and we found a solution I think some of the
carrier representatives know what the solution is on this and it’s not just
telling you to stay out of this area there are some solutions here and
finally to Commissioner chairman Khouri you asked
you said something that really resonated with me we found that the
people the ocean carrier representatives and terminal representatives that are
closest to the cargo that have the closest relationship to the shipper they
understood how unfair and inappropriate these detention demurrage and per diem
charges were they were flabbergasted because they know the injury that was
imposed by you know the delays at the ports and congestion to their customers
the shippers and then on top of that we lost sales damaged cargo and so forth on
top of that being assessed penalties that were outrageous if it cost $600
Freight to move hay across the ocean and you’re collecting demurrage if you’re a
carrier at a hundred and eighty five dollars a day hey what’s the hurry
keep it going right I mean there is a financial incentive hopefully the
carrier’s don’t do that they want to move things across but the damage is
significant and there are people closest to the cargo working for the carriers
that I believe think a policy by the Commission and they’ll never say it but
a policy by the Commission that would encourage upper management maybe not
just here in the United States being problem but upper management overseas to
understand that they have to treat their customers differently on this issue
thank you on behalf of the Auto Care Association
my name is Steve Hughes of HCS international I welcome this opportunity
to provide testimony on how an incidence of port operations and severe congestion
and container terminals here in the US ports have affected our membership their
customers and how a policy statement on fair and reasonable demurrage detention
business practices will benefit our industry the Auto Care Association is
nearly three thousand member companies and affiliates that manufacture
distribute and sell motor vehicle parts accessories tools equipment and services
our member companies operator otherwise represent more than one hundred and
fifty thousand manufacturing facilities repair shops parts stores and
distribution outlets US auto carrier industry employs 4.6 million people 3.2
percent of our workforce and accounts for more than two percent of the nominal
GDP the integrated grid of companies and organizations is dedicated to providing
and this keeps moving too fast I’m sorry I apologize providing quality parts products vehicle
service and repair for all 278 million cars and trucks on our US roads today
it’s estimated that 226 billion dollars of auto parts flowed through our parts
during 2017 and imports and exports over recent years are members of reported
issues at US ports involving poor congestion caused by labor strife ocean
carrier bankruptcy inclement weather and or other substantial changes made by
marine terminals and carriers affecting their ability to process containers
efficiently these circumstances are beyond our members controls and prevent
them from picking up cargo or returning empty containers in a prompt an
efficient manner the 2014-15 West Coast labor
negotiations were the most disruptive causing significant delays in the flow
of imports and exports through tightly integrated global supply chains many
firms had to expend additional resources to find solutions modify supply chains
or divert shipments to other ports in addition the Hanjin bankruptcy in 2016
left cargo stranded at sea while dozens of ships were denied access to ports
more importantly while these are the bigger cases our membership experiences
issues on virtually a daily basis which cause them to be unnecessarily charged
demurrage or detention our drayage partners at the syrian we are doing a
good job of eliciting the various causes but regardless of the reasons our
members have a minute assessed excessive detention indemurraged penalties due to
circumstances that they could not have foreseen and could not control many of
our members are small and medium-sized firms that do not have the ability or
volume to negotiate reasonable terms or effective solutions to resolve demurrager
detention charges associated with these issues and until recently very few of
our members were even aware of your CADRS Department or its ability to act
as an intermediary to help in this kind of type of situation consequently these
companies are forced to absorb these unfair and unreasonable
costs across what continues become thinner and thinner profit margins in
our industries in essence our members negotiate what they believe to
be fair and competitive freight rates with their NVOCC or carrier only to find
out that they’re charged a fee at the destination terminal for something that
they have no control over as a result the competitive freight rate that they
negotiated and calculated into their costs and selling prices is a false
number when they get blindsided by unreasonable and unfair charges to be
clear we’re not looking for demurrage or detention charges to go away on the
contrary we’re pragmatists we understand the absolute necessity of these fees to
maintain the velocity of cargo through the ports and terminals and to prevent
bad players from taking advantage of the system what we are looking for is simply
to be treated fairly when we as bcos and our drayage partners are prevented from
picking up our containers by circumstances that are well beyond our
control let’s consider an example that will probably hit home with everybody
let’s assume you order something from Amazon they charge you for the goods and
the freight you’re happy and ready to receive your order Amazon processes your
order and hands it off to FedEx for delivery while you’re waiting for the
shipment FedEx has an internal problem delays your shipment for a period of
time when they’re finally ready to deliver your shipment they demand that
you pay a fee to cover their cost of their own internal issues that caused
the delay I don’t see where a reasonable mind we would consider this a fair and
just business practice consequently we feel that the practices of the terminals
and carriers charging the BCOs and Drayage companies demurrage and detention when the
reason for the delay is totally out of the bcos control is a patently
unreasonable business practice when the when the terminals and carriers have
internal employee-employer problems or issues with efficiently running their
terminals that negatively affect making cargo available to their customer in an
efficient and timely manner the terminals and carriers should do
what every other business does write it off as a cost of doing business and look
for ways to improve their efficiency in their own operations in conclusion the
Auto Club pardon me Auto Care Association strongly supports a policy
statement as proposed by the Coalition for fair port practices which would ensure
us-based companies importing exporting products whether they ship 20 containers
or 20 thousand containers a year are not burdened with unfair and unreasonable
demurrage and detention charges thank you again for the opportunity to testify and
I’m available for questions my name is Sam Sorbello my name is Sam
Sorbello I’m the owner and president of Atlantic Coast freezers located in Vineland
New Jersey my company is the cold storage warehouse facility and one of
the largest receivers of imported meat products in the port of Philadelphia
ACF provides USDA inspection and warehouse services for our clients the
importers of record for imported meat products in my testimony today I’m going
to focus primarily on the impact that mandatory government inspections has on
these practices ACF receives approximately 4,000 ocean containers per
year of imported meat products by federal law 100% of all imported meat
containers are subject to inspection clearance by customs Border Protection
officers before they can be released from the terminal after they are
released the products are transported to a cold storage facility that is improved
to inspect meat and must be inspected by USDA food safety inspection service
personnel at that facility once a container of imported meat meat products
arrives at the I house every carton is offloaded by hand and staged in the cold
storage warehouse facility for FSIS inspection each container can take three
to four hours in the staging area for the most basic FIS FSIS government
inspection process we finalized if the containers selected randomly or
otherwise for an intensive examination it can take several more hours for the
product any container to be inspected by FS is in performing their mandatory
inspection activities customs Border Protection officers at the port and food
safety inspectors personnel at the I house sometimes cause delays and release
of the imported meat cargo to the importer or his agents which is outside
the control of the importer yet during these mandated government inspection
activities the clock is running with regards to detention and demurrage free
time our industry association has established a code of practice with a
number of ocean lines that provides voluntary
protocols that govern this issue for imported meat products are originating
from Australia New Zealand not all shipping lines are a party to this
voluntary code of practice nor does it cover originating from other countries
such as South and Central America under the current code of practice their
demurrage and detention expenses charged by the shipping lines are assessed for
days following the day of discharge from the vessel and four days following the
day of interchange respectively there is no standard in the code of practice for the
fees a shipping line may charge for detention or demurrage cost the fees vary
wildly in some of the shipping lines charging up to $400 per day for an empty
container that has exceeded the free time allotment allotment this dollar
amount is significant yet significantly out of line for what should be charged
the purpose of these fees is thing to encourage the importer to return the
container within the allotted free time it should not be a revenue stream for
the shipping lines this is especially true when the reason for the delay often
arises for mandatory government inspections of a container and the
interest of public health and safety government inspection delays beyond the
control of a CF or especially a parent during a recent port congestion on the
East Coast in 2014 and 15 starting in 2014 and throughout through 2015 US meat
import volumes from Australia New Zealand Central and South America were
much heavier than the past several years the primary contributor was the labor
issues taking place on the West Coast ports during the same time period and
avoid an effort to avoid the West Coast ports during that period many importers
shifted their products using the East Coast ports import volumes increased
nearly 50% over the normal hours during this period however the government
inspection activities did not likewise increase in capacity as volumes
increased during this period creating a bottleneck at the government inspection
points in the system despite this delay being caused by the
government’s action bottlenecks and not the actions
of ACF or the importer of record the shipping lines continue to assess
significant detention demurrage fees I would project based on the expenses
charged by the shipping lines for per diems during that time period that 30%
of the total meat imports in our facility was affected purely by pork and
congested related to government inspections activities in 2015 for ACF
1 2015 we had a total $266,000 in per diem charges from the shipping lines
but a mandatory government’s inpections of imported meat products is in the
interest of Public Health and Safety shipping lines and terminal operators
should not be able to access the detention or demurrage fees to importers or their
agents for delays arising for these government mandated activities therefore
I request the FMC to issue a policy statement clarifying you know
unreasonable free time on demurrage detention and free time practices or
rules that address this issue the policy statements would reduce inefficiencies
and companies supply chains by removing confusion and uncertainty that exists
today regarding and wildly inconsistent practices and rules of the ocean
carriers and terminals throwing a period support congestion thank you for your
time thanks for having me commissioners I’m Tim Avanzato sighted from lanca
Sales I’m an exporter of approximately 5,000 containers of paper and plastic
products used for the food service industry you know throughout the globe
per 20 of great examples today of how the current system terminal operators
Steamship Lines have done the shipping community wrong and I agree with all of
them but I’m gonna take a little bit a different tactic here just to kind of you
know broaden the spectrum our ports terminals become their lifeblood of our
country the current situation is not able to be painted with one broad brush each
port as our own authorities you know an active operating authority like Savannah
or Norfolk versus the landlord as as I have in
my native New York jurisdiction for my business different operating hours their
own climate you know with or without winters Florida versus New York in
addition each player each cog in the wheel have their own struggles and
opinions what’s most important on this process is that we all need the proper
health of the industry and not make the MTO’s just a dartboard we have to look
at the industry as a whole to see what parts might be broken and none of us
wakes up in the morning to lose money so we need to look at the whole of the
whole body of work as a car go on I can say that winter 2002 zap 2013 was no
fun in New York I was forced to pay thousands of dollars in per diem the
cascading effect of closed days and persistent cold weather back to the
gates of the terminals but it did not stop the influx of vessels and discharge
of thousands of containers as a shipper my truckers abilities were cut in half
due to horrendous turn times and putting my shipments into per diem I’m a 90%
exporter yes I’m not happy about this and do not think I should have to pay
when it’s not any fault of my own but let’s put the MTO shoes on and like what
they had to deal with massively there’s massive labor shortage at the time I was
working 24/7 not only doing snow removal but also handling regular
responsibilities of stevedoring unable to add to the work roles in New York
because of the waterfront Commission that’s outdated and restrictive the
hiring people snow and ice accumulation on the roofs
impact in the corner post making lifted lifting the containers difficult if not
extremely dangerous taking the winter weather issues out of
the equation let’s look at the historical challenges that MTOs is faced
in New York very high rent rates are not that are also incomparable APM
terminals pays $19,000 per acre while LMR pays 39,000 $17,750 per acre
ultra large container vessels discharged two to three times more cargo than they
did 15 years ago most terminals do not have an appointment system and I have no
idea how many trucks will show up on any given day or any given time
not enough land or space to have a wheeled operation in the case of New
York a political entity that decides how many longshoremen can be hired as well
as who can be hired Steamship Lines abandoning the chassis
business their customers are steamed supplies are historically unprofitable
when the only people paying your bills on the verge of bankruptcy most weeks
most like your fees are getting squeezed as a result electronic log for trucks
now also a great reduced amount of time a truck driver can drive I think perhaps
we should look work in an exemption for a local port driver let’s take a look at
what has worked to improve terminal facility and cost reduction the
appointment system in global terminals has been fantastic
very well done they rolled it out right they did all the preliminary work
fantastically they got everybody involved and they did their very small
steps huge huge success getting the government out of determining how many
employers employees are needed to run a terminal Governor Christian just signed
the to abolish the waterfront Commission hopefully New York does the same as I
said eliminating a segment of the electric electronic logs to allow local
port drivers to possibly go beyond the bigger mandate
well infrastructure is important and to the health of any port system reducing
the rents paid so that the MTO can put more of their more of their own capital
work as they see fit and afternoon I and not have to rely on demurrage and
detention as a profit Center While the demurrage system is needed to keep the
needed space open there are times when common sense needs to justify this and
not a calendar Knicely a profitable Steamship community
yeah I wish my trucker can get in and out of a terminal in thirty minutes and I
never saw a per diem or demurrage bill again before we regulate MTO’s and we
know operation what we can do to help them we all need to look at this you
know through the through their lenses as well
I see that my things almost up but anyway I’ll make
this quick what’s not so clear is a way to make this steamship lines profitable
I’m not a person in favor of regulations nor am I a fan of monopolistic
price-fixing wouldn’t be nice of this steamship line started becoming profit
on charge proper amounts evenly throughout the year on head haunt lanes
into the United States right now it would cost you more money to truck a
container from Chicago to North Jersey than it would move a container from
Shanghai to New York I think there’s a problem with that especially now we have
the elimination of of China importing scrap metal and scrap plastic so what do
you think that’s going to do you know this can reduce the small amount of
stuff that we do export that’s you know very quickly evaporating so that’s gonna
make this steanship supplies even more unprofitable and just real quickly
January 1st 2017 through September 30th 2017 there was one point 1 million four
hundred fifty one thousand TEUs imported into New York five hundred
eighty one thousand forty years and eight hundred and thirty one thousand
empty TEUs we’re everywhere exported Web D containers we are exporting
product I think that’s another fundamental you know problem for the
industry and and for our country but we’ll get to that later thank you my
name is France De Jong I I’m the president of R1 International I’m
also the president of the rubber trade association of North America
I deal solely in natural rubber you may not know it but the tires that you drive
around and in your car still have to be 33 percent of that rubber and that tire
has to come from a tree we bring that stuff in natural rubber has always been
a strategic defense material as well as an integral and inelastic component of
numerous manufactured goods I’ve read both sides of these arguments here and
and no doubt we have two sides on the one side we have the importers and
exporters who in my mind clearly represent
the US economy because after all it is the importers and exporters who create
and represent the demand side for port services on the other hand we have the
MTOs and the steamship companies who supply the services and the expertise
necessary to meet the demand for the importers and exporters and you the FMC
has to work with all of us together and I as my name shows obviously of Dutch
descent and I was always told that we come from a very small country and we
have to work with everyone and it is with that intent that I came here so the
fomc mission is actually to ensure a competitive and reliable international
ocean supply system which comes from the MT OS and the steamship companies and
that supports the US economy it protects the public from unfair and deceptive
practices and I hope to present some insight and some possible solutions to
the current seemingly stalemate here that we have from common sense and a
sense of patriotism from the FMC’s own mandate to protect competition and
integrity for America supply chain and finally from a pure economic point of
view because that’s what I studied when I went to school first I’ll tell you
about my specific grievance my company imported some five containers of natural
rubber about a hundred tons worth of product from Guatemala using an NVOCC
and ultimately shipping on MSC lines we paid about six thousand dollars for the
use of those containers including about a three-week voyage time being the the
the the the drayage expense from Guatemala to the port in Norfolk these
containers were pulled over for a routine and random customs Patrol x-ray
examination of our cargoes which we have no never have any objections to and we
actually paid for an intensive examination it cost us twenty five
hundred dollars I think this is part of our patriotic duty in complying with our
Border Patrol and Department of Homeland Security’s efforts in the war against
terror examination went seven days beyond our four-day container free time
and then MSC detained our cargoes would not release same while threatening to
pile on additional Demurrage I’m sure you’ve heard all this until we pay
$10,000 in detention and demurrage fees I complain to the port Norfolk they told
me as you’ve heard numerous times in these discussions the steamship company
is our customer and you are the customer of the steamship company and I thought
about that and I you have to let me give you an analogy you want to take a train
ride from here to New York how many choices do you have one do you want to
take rubber from a beach and to Norfolk you might have two choices have you ever
seen the bill back of a bill of lading of a steamship company of a railroad
company basically they can bump the cars wreck your cargo you can open the doors
and it’s a complete mess and it’s your fault
likewise it’s the same with the steamship companies you have no recourse
you have to remember is a lot of people said here before that the steamship
companies are having a tough time and as a result they’ve formed all these
alliances what you have out there is an oligopoly you don’t have a lot of choice
they if you want to go from here to there as I said you know your choices
are limited anyway let me go on from here so you have to ask yourself the
question why would MSC a steamship company with whom our our 120 person
global company does have a long-term supply contract with MSC why would they
ding us for $10,000 for seven days demurrage beyond the allotted free time
while I was complying with the war on terror what why would my supplier and
why might the customer relationship be allowed to fall apart like that why do
they do it and the answer is because they can and this is why you are here
the FMC because railroads needs regulated steamship companies need to be
regulated and what I’ve seen in this business is I think the in and every
single MTO is as we’ve seen they are all different my particular grief is a port
in Norfolk but I’m actually I like the port in Norfolk we are this number two
as a user of the barge service that goes from Norfolk to Richmond and so we’re
actually part of the solution to to to stop the to limit the congestion in
Norfolk that’s why they have the barge service so I get along real well with
the people in Norfolk but they tell me that there’s nothing that they can do
that’s wrong and the reason it’s wrong is because we have these operating
agreements between the between the MTOs and the steamship company clearly
and you guys are supposed to be looking over those agreements and I think
several years ago you you decided that they didn’t need to go public I can’t
get access to it but clearly in that agreement there could must be some kind
of writing that would prevent what happened in my case which is
profiteering on the war on terror now earlier we brought up this issue about
compensate compensatory compensatory charges versus punitive well I have a
couple letters really the the port of Norfolk because I wrote a lot of letters
to him and I got him back and and they said that basically we charge $20 per
container per day and we understand that the steamship companies charged about
$60 per container per day seems reasonable and and and I believe
in the whole idea of demurrage because it is an incentive for importers to pick
up containers but it is clearly a disincentive for steamship companies to
hurry up the process because it’s a revenue item for them now okay now in
our case we were charged two hundred and seventy five dollars a day and another
thing you have to think about is America is a net importer unless I’m mistaken
we’re and and and Tim I’m sorry just told just
said how many containers come in and how many go out so we actually have a glut
of containers so why are the steamship companies saying that they’re valuable
cargo is being held up it’s only being held up so that they can charge
demurrage and they only have to store it at the
port and otherwise pay a bill so remember that no so from a common sense
and patriotic viewpoint how and why should American citizens and importers
while representing and carrying essential imported raw material inputs
to American manufacturing processes and I bring stuff into Tenneco goodyear 3m
all kinds of a big American company some of whom were exporters and while
complying with and paying for the compliance for a US inspection why
should I be beholding and essentially hijacked by foreign steamship companies
operating at US ports how can MSC say that Mike that five
containers are worth $6,000 for three weeks enroute to the US and all of a
sudden worth ten thousand dollars for seven days in demurrage
why should exporters be faced with a premium container option I don’t even
know anything about this but I read this your report a premium container option
concerning its you know in order to make containers available when there’s a glut
of them so that we have time for question can leave am I gonna have eight
minutes anyway simple economics will tell you that there’s a supply side and
the demand side for the services the port and one of the things I think you
should look at is the fact that you I went to all the ports and they say that
the steamship company is their customer why is that I pay all the duties that
pay for you know when we when we import stuff we pay merchandise processing and
and in Harbor maintenance which essentially goes back to the ports so we
were supplying a lot of the money that they used for their operating budget but
we’re not even in the picture so I would I would ask you to consider the fact
that certain ports and I talked to the guy from Houston he says importers and
exporters are on their board of commissioners I looked at the port of
Norfolk for instance there wasn’t an importer exporter anywhere on the border
committee we need better representation that would help us work better with the
with everyone thank you on customer service and resolving disputes who does
that well I’ll throw something out is your question of which carriers do a
well in which ports and so forth I think the carriers that give some
Authority and and take seriously the input from the customer service folks
closest to the customer are the ones who do it best I can give you an example two
carriers the agriculture transportation coalition does an ocean carrier
performance survey yes every year and we get it from all the exporters and in the
past the ocean carriers they had the best documentation systems tended to
rate right at the top and APL at one time ocl and so forth but in the last
couple of years I think our results reflected the willingness of the carrier
to listen to the people closest to the cargo at the ports and that was Hamburg
Zoo and Hapag-Lloyd and I can tell you that I
know their local sales folks and customer service folks and they
absolutely would disagree I believe with the idea that’s being presented in
several legal briefs and not only them but all the carriers I can mention all
of them Maersk also had some very good people up in Puget Sound who are very
good in helping the customers who are trying to export and import through the
tumultuous situation there at the Seattle and Tacoma terminals at the time
very close I’m sure on the record nobody’s going to speak but I can tell
you I couldn’t find people at every carrier who believed that there needs to
be some way for higher management all the way up to Europe and Asia and so forth
to understand the realities of what’s happening at our ports from time to time
and so whether it’s this proposal or another proposal or some other
initiative by this commission you need to help those people at those carriers
and all those carriers who want to maintain the relationship in a
reasonable fashion with their customers import and export should should the
system be simpler along the lines that I hear it’s administered in European ports
for example say something about the last question you said because okay please
good because I think most of the steamship companies are good guys but
there are a few rogue candidates out there I mentioned one but I really
haven’t had any problems other than there’s one particular one which was so
egregious that I that’s the only reason I came here but I said I think I know I
figured if if this can happen to me for complying on the war on terror and the
only reason they did it is because they can and so somebody has to slap their
wrist well conversely with when you mentioned
the the war on terror one of you guys explore the biggest force of the entire
process is the necessity to have this AES number filed we you know in the
characters that was safe hypothetically cargo cuts off at the pier in this Friday
but today’s a Tuesday they won’t mind needing my documents today yes I have
even pulled a container out yet but I have to file this AES number which and
again people using guise of port security for it which is nonsense
I could type in anything right now into the AES system I can say that I’m
shipping judge Ito dolls whatever and and it’s gonna spit a number back out
at me and I think I’m like and what point again like who exporting a bomb
out of the country yes him Tim let me say I think that I agree a hundred
percent we’ve been working on that but that is under the jurisdiction of
Department Homeland Security and Customs and Border Protection and I’d love the
Commission to jump into that one too but I doubt you are gonna take on CBP that’s
really a CV okay but but I appreciate then and I’ll make it very quick that
but the Steamship Lines are allowed they have made export documentation of profit
center so you have to submit your documents which are gonna be false
because you haven’t loaded the cargo
yet even put a container out yet because then you have
to revise them and now so happen I’m for example of which I’m gonna legal
dispute with which I’ll probably write you guys a letter on very shortly about so in order for me to revise those documents
I have to pay would start out as like $25 then they figure out this this this is
this is for all of you if you can especially for export if you can provide
me with the types of problems whether it’s
inspections of various types by the government or paperwork or what types
the problems show up that caused demurrage overcharges holdups this is
this is a very odd situation that you’re faced with because if you were to read
the briefs and you’re gonna hear the testimony tomorrow it’s just black and
white that’s a terrible idea don’t pursue this proposal that was submitted
by the petitioners you know forget it but like vgm many of the carriers many
of the terminal operators and many of the port authorities we’ve heard Port of
Long Beach several times already today know that that’s wrong that testimony
you’re gonna hear tomorrow and are that you’re reading at least if you better
hear what I’ve been reading it does not really reflect well they’re gonna be up
here so we’ll hear what yeah what’s actually what’s actually going going on
so that’s why I say I think this this matter some guidance is appropriate you
can provide the guidance and I bet you if we could find six people I can
identify six people and we could sit together and have a representative of a
carrier or a terminal and so forth we’ll come up with something
yeah because keep in mind the exporters and the importers do not want their
cargo to be idle the damage is huge when that cargo is sit so there doesn’t have
to be really an incentive to move the cargo through so if you do it if you can
give me the worst problems oh yeah that call that cause that caused demurrage
holdups paperwork government what whatever whatever in your experience and
the sudden that wasn’t mentioned before earlier in the first panel but it shows
you just how much we need the Commission to step in and protect the shipping
public when the demurrage attention or per diem charge is assessed against a
trucker that brings all the cargo in that trucker pays that right away or
they’re locked out right they’re locked out of the terminal that’s it
there’s a gun at these guys heads you’re out is that back to my question is that
is that the work one of the worst problems for export yes and import
right so what’s what’s the second worst problem then we’ll get it that way the
port of Philadelphia let me just start a terminal exceptional there’s probably
not a better terminal in Philadelphia so I just want to say kudos to that the us
about customer service they’re average about you’re probably looking business
owners here that pride themselves on customer service that’s why we’re who we
are and we’re successful is our ability to serve our customers it’s probably
average at best with the stripping line somewhere better than others for an
example this past we’d be or whatever it was we had a little snowstorm some
somewhere we said there’s some were absolutely shutout we’re not giving an
extra day trucks had a a dismal time trying to get out into the port trying
to get our round continues thankfully we’re able to get them out but we heard
some maybe tell us what the problems are will move and then others told us well
no one other problem is there a billing system if there is a problem what per
diems order demurrage I don’t know if you guys see this it may be two three four
months before you get the actual invoice and then you gotta go back and try and
figure it out in a meantime you know like somebody says they have a gun
you’re ahead and then fact their invoices are wrong careful fine
you better not just pay him you better you better go through them and look at
the steamship companies it is the steamship companies it’s
because the MTO’s and I’ve brought up Norfolk but they were very helpful
they’re very nice they they really don’t think that there’s anything they can do
although I disagree because in the operating agreement the language could
be such it could be put right in the operating agreement because that sets
the environment in which the steamship can operate am I right I thank you that’s your
solution anything if I may one other thing that’s being overlooked here in
general I think is we’ve got several large medium to large importers or
exporters here you’re talking people that are bringing in two thousand four
thousand six thousand containers we’ll have you or the the Walmarts of the
world twenty thousand six days what it what it may be these are companies that
have various ranges of negotiating power which as we’ve heard is just only so
much what I think we’re missing is they’re really small importance the guys
that are bringing in 20 containers a year they’ve got zero leverage they’ve
got zero leverage on every single level to try and mitigate these types of
issues nor did their nor are they educated as to how they could as I said
before CADRS helped the my former company that I work for gets some
remediation on our demurrage that to this day is still unfair that demurrage we
were charged but these little guys don’t know this and the small importers need
to be protected just as much as Walmarts of the world or the centric parts or the
the Lanca’s or whoever and I’m afraid we’re missing this point because if we
don’t also protect the entire range of importers we’re missing that we’re
really not doing a great job I mean I’m the the Auto Care Association has every
size customer that you can imagine importing and exporting they all need
protection from unfair and unreasonable practices like this and if I can in just a in a brief way
the treatment I’m appreciate your the wisdom of having been in the room when
the 84 act was written the 1984 act not the 16th maybe maybe there should have
been more wisdom in the room but you know and as as I know you would concede
the the 98 amendments to the Act were meant to bring much more freedom of
contract and a withdrawal of government intervention and I think there has been in a number of commercial aspects great
progress and I think the fact that everyone is has testified to that there
are wide disparities good ports Philadelphia I see my my friend Chairman
Cordero Oh his I don’t see him here and today but Long Beach and in their
particular position on how to handle free time these are the government
inspections etc but here’s what we wrestle with and again not to be
determinative but if the FMC can and this is not a matter of strictly of
authority some of it is wisdom so if we can order the terms to be homogenized
made the same in terms of free time to demurrage well does that then further open the door to about liability provisions what
insurance provisions above and beyond cogs of issues and before you know it you
know we’re going to be into rate differentials between a big-box shipper
and a small shipper is is that fair and so you know I’m just saying that these
are things that we wrestle with as to do we be very careful as to what what we
impose on the shipping public when to say and this is going to be a common
position for all terminals so again not trying to be determinative on at this
point but there are these policy issues that we I think quite appropriately wrestle with and struggle with and where
is that balance so I think you y’all this this Commission has already
demonstrated that you can shoot with a rifle shot you know when the congestion
was really bad ocean carriers there was a talk the ocean carriers were going to
impose a congestion surcharge so all that pork was going down to $25,000 and
then just being destroyed and then the carriers were going to impose a
congestion surcharge on the port exporter right you all stepped in and
you know however you want to approach your responsibility is that is up to you
but that was some conversations I believe was using the bully pulpit but
not in a public way not in a formal way not with legal documents back and forth
about whether you had the authority or not but as some conversation basically
not don’t do this it’s unreasonable and it didn’t happen kudos to all of you for
doing that that
did not mean that there was a slippery slope and thereafter you were going to
review every single surcharge and you didn’t
that was a rifle shot and the second thing is well I neither admit or denies
to having those conversations if it executives it may have all been hearsay
or you know on my door may have been closed on occasion with people inside
okay good well whatever information or die and yes okay I said you all I didn’t
say anybody specifically here good southern border oh yeah yeah the other
one element is when you’re talking about it’s cooking when you’re talking about
one size fits all for all terminals you can do that if that one size is big
enough in other words if you’re telling everybody to wear size 9 and 1/2 shoes
that’s the problem but if you tell everybody you gotta wear shoes you pick
the size and kind and so forth then it’s less of a problem and I think this
petition is on that broader one here it’s a broad direction without the
specificity which can be developed by negotiation otherwise for each port
within the scope of this broader petition thank you um Commissioner
Maffei thank you very much Mr. Chairman and thank you to the witnesses on this
panel so many of you many it’s been mentioned by the previous panel and many
of you mentioned how these charges detention demurrage are being used as a
revenue stream I think mr. sir Bella specifically asked maybe rhetorically
but you asked should it be a revenue stream for the carriers and I’ll ask mr.
Friedman and anyone else who wants to is is it inherently unreasonable for the
carriers to use these as revenue streams is that is that part of it I mean really
anybody on the panel go ahead go ahead well you know what listen nobody wakes
up in the morning and wants to lose
money and and there is a certain cost associated with them but
a revenue stream I mean a problem I mean I mean the profits okay I think that’s
why I think that’s what out of usual yeah it’s out of control it’s not
unreasonable for the to to charge for it and it’s not
unreasonable for them to make some money off it but when you have was just say
for argument’s sake you you bring a container from you know Shanghai in
New York called 30 days we’ll call the ocean freight rate was on the spot
markers about $2,000 four months of the year
Franz your menu that math Lapham is about $60 a day which to say whatever
was when it’s on the water and they’re getting revenue for that at $60 a day
why after you know a bit off of being off a ship and in my possession after
four days does it become worth $150 a day I think I think that’s you above and
beyond which yes it’s it’s more but you’re being penalized okay sure
so these five Chassis company I paid three dollars and 20 cents a day so
anybody that has to you know chassis problems don’t get it from the tracklist
and rather than the other guys support you’re paying $30 day go rent them from
really some on your honor not be happy about the phone number okay but so to
have that out so if I paid $3 20 cents a day for five of them the steamship line
is leasing an awful you know I get it I know but let me finish this math here so
so and they’re charging 30 $30 a day for chassis so that’s marking up you know
whatever it’s that’s little boy almost with a container you lease a container to
probably pay 50 cents a day what I’m trying to get to is is where we trigger
the definition of unreasonable I mean the Shipping Act has this word
unreasonable and well where we get to that and and and what I’m trying to do
is it linked to it being a profit Center for the carriers or not and it sounds to
me from what you’re saying is is that it doesn’t matter it’s just cuz the
carrier’s might be making a profit well that’s okay in itself as long as it’s
not an unreasonable amount they’re charging so it sounds like to me like
okay you know it’s been brought up pepperoni would repeats it’s $10 when he
had pepperoni rosenberg towards $50 i am italian mr. Eben’s ah knows everything about necessities in my household
there you go I think what the reason we’re here today is because something
that’s within the discretion of the carriers and the terminals has been
abused if they hadn’t abused it we wouldn’t be
here in other words if it’s $250 is the rate for hay from LA Long Beach to China
based ports and five days of demurrage is nine hundred and twenty five dollars
to the carrier in terminal you know it just feels wrong doesn’t it and I think
that’s to you but I think this is one of those things why this is weird
the carers and terminals can solve this they know what’s reasonable what’s not
and I know that there are carriers all the way up to the president North
America and above who know that some of these things that they were charging
them were unreasonable so they have to police themselves otherwise then the
sheriff comes in right right okay let me ask mr. DeJong in particular I sort of
asked this question earlier but in a more general way and you had a very
specific example and we appreciate you bringing that example to us so well but
let me ask you this did just on the surface just looking at me I would have
no idea but I think you could certainly make a very credible argument that what
would happen there is unreasonable well that’s already against attendee one of
the shipping act so why not bring a case and of course I’ll you know have the
same follow-up question what’s you statue of limitations I’m going to find
you know there is one is there three years or something well that you know
I’m not like everybody else doing it’s such a nuisance in its and I don’t want
to get a lawyer that’s that’s actually thought if I talked to a steamship
company they’d be reasonable okay I’m sorry
yeah let me ask this question its to you so you can answer and then answer any
other question you want to so let’s say in theory we pass
so we you know we we offer some guidance which is what the petition is asking you
still and they don’t follow that guidance in order to have satisfaction
you still have to bring them through the same process and I are the same lawyers
why would that be less of a burden then under we’re currently in other words I I
understand why I could be a burden to go through that process but why would it be
different if we offer some sort of guidance and that they choose not to do
it you mentioned because they do it because they can well if you’re not
willing to file a case and I don’t mean to pick on just you I mean this is throw
it’s a good question do you have the authority will people listen to you we
don’t have our own police force it’s not like we can send people down there if
people don’t file a case we don’t have we cannot enforce I’m part of the guilty
party I didn’t file I mean we could agree well we have we and we have a
bureau of enforcement we can investigate but we don’t have what here so here’s
another one I am actually CTPAT certified I spent a lot of money to
become CTPAT certified and I believe that the steamship companies also have
to be CTPAT certified and it means customs trade partnership partnership
against terror so we’re all in the same partnership my container gets pulled
over for the war on terror why why is my partner kicking me in the butt because
he’s all and why is my cargo worth less than his container Commission of fate to
answer your question one of the best things the Commission has done in the
last 15 20 years is create a mechanism is to recognize that the barrier to
getting justice here if you will is very very high for the shipping public which
does not retain lawyers full time to bring cases here at the Commission and
so forth to bring a case a couple hundred thousand dollars by the time
you’re through and there’s no likelihood that you can predict that you’re going
to be successful it may be depending if they follow the
precedent of a 1949 case that doesn’t sell very well all around the country
for a that is trying to be competitive
globally and have $200,000 maybe more Plus maybe a full-time person working on
it internally don’t have it see you all formed CADRS and CADRS is the
mechanism that recognized that there is that barrier of going through and
bringing a case and then the CADRS is extremely important I wish it had more
resources we have conveyed that to Capitol Hill that they should get more
resources because they are the Gateway for you to get the information you need
to do your job it’s realistically one of the few if
maybe only gateways you have to get that information I appreciate that I know mr.
Hughes mentioned that he felt few in the industry or were even aware that we had
a CADRS Department and I don’t we can if you would answer it for the record
you know not orally now but any ideas you have on what we could do to help
publicize that in the appropriate communities would be appreciated well
for now I’ll yield back the balance of my non-existant time I’m going to ask
one more question and take a break and see if we can get to our next panel in
one the mistreatment I’m gonna look to our general counsel to help with this
and can be posted on the my memory as as you know the issue on legal fees changed
recently here year before last my memory on fee petitions per party is far less
than 200,000 but I’m just going I’m without trying to do is I’m gonna ask to
see if we can’t for the I think those are for public record is to see what our
recent over the last few years what those feed petitions were and if they
confirm yours we’ve had some very long running ones that might get
into a six-figure but any event let me ask my last question and this is one
that sort of goes to a core of your so many people’s frustration my admiralty
hornbook Gilmore and black is probably older I don’t look this old but I am is
older than probably half the people in this room and the the law on lens is
older than all of the panel here taken added up taken together and it simply
says it’s a possessory land and once you release the cargo you release the limb
and that being right or wrong as to whether the charges are fair is that is
an animus as to why they’re not releasing cargo until those possess real
ends are paid with that in mind are there some alternate ways to say
I’ve got a dispute we’re going to go ahead and release the cargo maintain
some legal status but but expedite the release of the cargo and we’ll settle
the other stuff and not have you fellas having to go deep into your reserve
funds or lines of credit or anything else are there some other solutions to
handle that part of the frustration I wish there was I mean sometime just gray
areas and and again like we all I think we all agree that we want to work with
you know work with steamship lines and and again like if the fees were not
exorbitant you know it’s it’s but we wouldn’t you know what I’m sorry
opposed to writing your checks sometimes but the problem is as our friend down
here that stated $250 removal hey and then $903 demurrage you know
it’s it’s usually not chump change so you know when it comes down these things
and the steamship lines are great it like especially the term operators if you’re
demurrage you’re not there’s nothing really ever a scenario that I’ve
ever seen where they something come pick it up and we’ll talk about tomorrow you
got you got to pay and conditional really conditional release would be
great because that way the onus isn’t a hundred percent on the person picking it
up now the steamship company also has to think about getting a lawyer and much
greater chance for settlement and that’s really what you would like in my case
particularly thinking dude I’m being sued for thirty thousand dollars in the
detention demurrage that I should not depend I’m not going to get into the
specifics but they filed it in federal court now I have to get a lawyer then I
have to save myself and again in the in the lawsuit if I lose I have to pay
their legal fees well you can run through thirty thousand dollars it so
what do i do I just paid a thirty grand because you know I if you read that you
know again if you read a bill of lading or a service contract everything’s
against you so I could fight you know it means it’s a tough call right and
there’s it I have a collection jar out front if they wants to contribute to by
the way and there’s no other element I don’t I I would be lying if I said I
knew for certain but I’ll find out
you know there’s other element if there were
twenty five ocean carriers calling and you could pick and choose if somebody
treated you miserably or so forth but now we’re down to about eleven carriers
and three alliances and so forth so as as you mentioned for the product come
from Guatemala you got two carriers right one of the things you could do to
answer your question Mister Khouri is prohibit the the terminals
from enforcing if you will the the collection of the payment of demurrage and
detention in a period that’s what it is today
in a few days or locking people out in other words conditional release could be
but give them 60 days what have you so that there’d be an opportunity for that
trucker to keep moving the import or export cargo in and out of that terminal
without being locked out and that’s where the rubber hits the road on a lot
of these issues that’s why we have in the AG TC truckers as members because
all the whether it’s a family walnut grower in Modesto or whether it’s well
you had Walmart here everybody is subject to draconian results if they
don’t comply and simply accept what the ocean carrier and terminal operator are
imposing they get locked out and if I may during the West Coast labor
negotiations we had the company I was working for had serious issues with
detention demurrage and rather than hire lawyers I came down here and filed with
CADRS after I found out about CADRS but even that process is so long it’s it
some of the carrier’s we were able to settle with in three to six months one
carrier we didn’t settle and it was one of the ones that you said was so good
earlier took us a year and and then once we settled on a number it took them
another six months before they even gave it to us as a credit now a big company
that may have lots of cash reserves couldn’t deal with that but a small
company a small importer that can drive them right out of business and the
amount of time for myself or for any any executive and a company to chase down
and follow through with this is expensive all on its own so you know we
could you can set up a mechanism that says okay you can take your your cargo
but then you are probably going to have process is going to take months or even
years to settle and how many times how many different cases are you going to
have I think how about arbitration settlement
by arbitration when we set up an arbitration panel even a conditional
release settlement and everybody has to agree to the arbitration board well it’s
it’s cheaper than gone to the lawyers is my phone’s lighting up on from all over
the court country I’m getting texts saying I mentioned the right carriers or
I mentioned the wrong carrier I get any examples here we still what so forth so
there are hundreds of people that care about what you’re doing here in the
hinterland of this country well thinking let me do this we’re going to
take a break come back at promptly at 2:30 for the intermediary panel if I may
Thomas Adamski is he here he’s to go on the panel the Drayage panel tomorrow
Thomas J Adamski not here okay thank you we’d be back at 2:30 thank you I will well begin today with
mr. Richard Roche will be followed by Charles Riley Jeannette Gioia Cameron
Roberts Joseph Quinn and Brian Vickers you can begin push again okay sorry and I’d like to be
able to shorten the proceedings by just saying ditto I I agree with just about
everything said here today and hope not to repeat much of it I’ve shortened my
prepared remarks just to do that my name is rich Roche I’m the vice president of
international transportation at Mohawk Global Logistics I also serve as
chairman of the NVOCC subcommittee at NCBFAA a role I’ve held for the past
eight years and I speak here today not just as an active nvo but as the voice
of the many small to medium sized NVOCCs that are part of our membership and
for the customers who ultimately bear the brunt of unexpected costs I’ve been
in the industry for just about 40 years first sailing on cargo ships working on
the carrier side and shifting to the nvo side 24 years ago I’m here today not to
eliminate demurrage and detention I’ll just refer to as d and d to keep it shorter
but rather to seek a solution that such charges may be applied fairly with more
transparency in their application and more standardization where additional
free time should be granted as an active NVOCC Mohawk regularly works within the
confines of standard free time four days to evacuate containers from the pier two
days from the rail ramps our clients expect us to pull their containers
within free time so as to avoid DND charges otherwise we would pull and
store them off dock we understand that d and d as it exists today is designed to
incentivize rapid pickup and return of containers with punitive consequences
for those that don’t perform that system works most of the time it’s the
deviation from the norm that becomes the basis for our complaints congestion from
any cause labor system crash vessel bunching and weather or terminal
glitches like lost containers closed sections of yard in some cases equipment
shortages may contribute to D&D being assessed unfairly due to circumstances
beyond our control we talked a lot about congestion so I’ll keep this brief when
caught in heavy congestion scenario it is extremely difficult if not impossible
to find anyone at the carrier or the term
to negotiate extended free time when we do get somebody they might argue that
the line is not six hours long because they only see two hours of the backup
but meanwhile our truckers geofence shows him slowly advancing in line
wrapped around to the other side of the port there’s an interesting difference
in the point of view of those collecting the charges and those paying we have an
agreement with our house drayman to pick up 25 containers a day at the Port of
New York if we have a hundred containers arrived with first availability on
Monday we can get them all out by Thursday and we don’t incur demurrage in
those cases but when there’s a problem at the terminal on Monday and we can’t
get 10 of those containers out on that day without making other arrangements
will be in 10 days of demurrage by Friday and if we have 10 days each 10
containers each day that we don’t pick up through the course of the week will
have 40 containers in demurrage on Friday and in these periods of congestion there
are no other drayman to go to they’re all in the same situation so we’re stuck
we just have to get that pushed out and there’s no control that we have over
collecting those containers Commissioner Dyes report on supply chain highlighted
the disconnect between MTOs carriers and shippers certainly there is a
disconnect we’re left to beg for refunds after the fact because we don’t have a
voice at the table and and when we begged many times this falls on deaf
ears we’ve heard a lot today about congestion and in the variety of
situations that are caused through congestion but I want to talk a little
bit more today about the daily day-to-day problems that we have that
are not congestion related and I’ll give you an example I have one live situation
working right now our trucker got availability for our container on the
west coast terminal in mid-november but the first available appointment was four
days into demurrage the trucker began an appeal for extended free time with the
terminal but had to pay the demurrage on the day of the Dre appointment
because the extended free time was not granted until later that day and this is
cash on the Barrelhead when he got there the container could not be located for a
couple of hours and so he was terminated from the
terminal he was escorted out when he he then went back onto the line to apply
for the demurrage again or a to apply for an appointment again he was also put
in four days of demurrage prepaid those charges and then went to get the
container for a second time at that point he went to the spot that they
assigned him for the container demonstrated to the terminal that it
wasn’t there and went out again out of the terminal third time was the charm he
was able to collect the container though no clear response was given on extension
of free time again and we’re still trying to get a refund of $1700 in demurrage
paid by the trucker we talked earlier this morning about
risk and demurrage notwithstanding we assumed risk in this case with
additional costs of two weeks of delay truck waiting time in the terminal both
times and two dry runs that’s the risk on our side that that we have to bear in
addition very likely to demurrage I’m still waiting to have this $1,700
refunded getting back to congestion we polled our membership at NCBFAA about
statements made by MOL in this proceeding regarding its ability and
willingness to negotiate demurrage and detention our association had 89
responders to this survey that’s about 10% of our members 93% of them said they
have been assessed demurrage in detention charges in periods of congestion 94% of
the respondents did not agree that mo L worked out an acceptable arrangement or
compromise and 89% indicated the same for the rest of the industry in other
words that they were not able to work out an acceptable arrangement or
compromise to mitigate demurrage and detention charges the reality is there’s
little incentive for the carrier’s or MTO’s to want to change the current
process it remunerated them when the delays are caused by the shipper trucker
or NVOCC and rightfully so when the carrier a terminal is the cause of the
problem however they can simply stand behind their towers to print money with
no incentive to fix the problems or even entertain the arguments
further they have unilateral power to decide who pays and who gets absolved
after the fact this has to change we agree with the remedies proposed by the
coalition so that there’s some equitable shift of burden in these cases in our
view the FMC should issue an interpretive rule so that triggers are
established that automatically extend free time for certain causes carriers
are not permitted to hold up container release when claims are asserted only to
add even more demurrage and that the punitive portion of demurraged charges be
rescinded in force majeure cases in conclusion the status quo is unfair
patently discriminatory and burdensome at best we would like to see the
Commission put the burden on carriers and MTO’s to justify detention and
demurrage costs when the importer/exporter
and their agents are not at fault and we would also ask the Commission to
consider exempting detention and demurrage charges of tariffs from the shipping act
so that they cannot be enforced under filed rate doctrine thank you for your
time good afternoon I’m Charles Riley I’m the chairman of the New York New
Jersey foreign freight forwarders and brokers Association and also vice
president John steer company and I will be giving a joint statement also with
miss Jeannette Gioia who is our vice president of the New York New Jersey foreign
freight forwarderss and broke Association acting Chairman Michael Khouri Commissioner
Rebecca Dye Commissioner Daniel Maffei and Federal Maritime Commission staff
experts good afternoon and thank you for allowing us the opportunity to comment
on the rulemaking issue raised by the fair port practices coalition the NY NJ
f FBA celebrates hundredth anniversary this year is one of the oldest US trade
associations for licensed ocean freight forwarders and we NVOCCs and customs
brokers it has 100 regular members and 25 industry related affiliate members
ranging from the largest global logistics carriers to smallest
mom-and-pop shops all these companies operate on a daily basis facilitating the movement of imports and exports through
any port in the United States our comments today will largely focus on
those issues in the Port of New York New Jersey where our membership is located
and the support for FMC guidance on what would constitute unreasonable practices
in assessing the merge detention or per diem they are provided in the context of
a strong belief in the role of competition and the effectiveness of
commercial solutions to business problems our members interest in having
the FMC provide guidance on this issue stems from a deep frustration that a
full market solution is not possible the economic structure in the Port of New
York New Jersey is more characteristic of an oligopoly
rather than a competitive market in the oligopoly barriers to entry are high
thus restricting the number of companies providing services and limiting pricing
flexibility in New York New Jersey Port over 3.6 million general cargo
containers are moved through five main terminal operators the shipper receiver
does not have a choice of which terminal to use this is determined by the
steamship line while there are 32 steamship line calling in New York New
Jersey port this number is significantly reduced for any particular port pair
this structure supports an in flexibility and pricing and service
options that allows the shipper receive it to be assessed charges even in
circumstances when they’re not in control of the cargo our membership
believes they should not be responsible for the payment of the demerrag detention
in situations when their ability to move the cargo is clearly outside their
control the NY NJ fffb a has polled its members and found strong approval of the
need to clarify what would be considered unreasonable assessments we had over 70%
response from a regular membership this would be on the high end of survey
completion rates an indicative of the intense interest in this issue even some
our affiliate members answered to the survey we asked just a couple of questions
because we really were trying to understand what how deep the problem is
and the focus was always on what was reasonable what was unreasonable because
we fully understand the importance the need for Steamship Lines terminals to be
reimbursed for you to their equipment in space but what what we’ve all suffered
is a situation that is is actually out of control
so we asked we asked a question should the FMC establish a rule with a policy
statement clarifying when the assessment of demurrage and/or detention would be
considered unreasonable in circumstances that are beyond the control of the
shippers the receivers the motor carriers and prevents them from picking
up or delivering cargo so we were really only focused in in those instances of
unreason ability we have a hundred members regular members we had more than
seventy as percent as Charles pointed out responding this is a high number for
a survey 72 out of 74 answered yes yes the FMC should establish a policy
statement in the three instances where our rate amongst the regular members
where they said no two of the companies had actually not been experiencing this
any kind of a problem in this area one of the two respondents is one of the top
10 global logistics companies and they actually said not surprisingly the
terminals are cooperative so we’d like to really bring to the attention of the
Commission that the current system is inherently skewed against companies that
do not have a negotiating leverage with the ocean carriers in the terminals to
to reduce or eliminate that demurrage and these are charged per tariff rules
and rates and and often that is exactly the way it’s expressed to our community
second question that we asked was has your company your company or your
clients had to pay demurrage and or detention charges in the Port of New
York of New Jersey when equipment could not be picked up or dropped off again
the emphasis was due to circumstances beyond your control and we divided it up
we asked prior to 2017 63 responded yes out of out of the 74 and and then we
asked during this past year 2017 49 responded yes so there was a reduction
what we found interesting was that among the members that had not experienced
problems with being unfairly charged demurrage and detention
there still was support for clarification on on what would
constitute an unreasonable charge the comments indicated that companies are
also experiencing unreasonable assessments at other US ports so we were
asking the question in terms of New York and New Jersey and and some hadn’t
experienced it but they’re also experienced it at other ports survey
results show that that the assessment had diminished had lessened in 2017 we
actually believe in port that is a direct reflection of the very existence
of this petition submitted by the coalition fair port practices that it
actually even had some effect in in mitigating circumstances that arose in
2017 and how there was a response on the part of the terminals and the carrier’s
even though members commented that the terminals are showing more flexibility
they’ve also pointed out the ongoing challenges of moving the cargo
efficiently through the port as the trade volumes have grown and the size of
the ships discharging the cargo have gotten larger and larger
so it’s it’s not a one-off problem it’s it’s a it’s it’s something that is is
continuing the issues that the members expressed in terms of under what
conditions they were experiencing unreasonable detention and demurrage it
relates related to poor congestion created by extraordinary events the
weather labor computer failure government action many many of our
members expressed a lot of situations where cousins examinations related both
to import and export shipments they found it very frustrating the Steamship
Lines are charging for the equipment usage when containers are moved off the
New York New Jersey port into one of the few central examination sites before the
CES system was put in place and when the examinations were being done actually on
the terminal Steamship Lines were not charging before the equipment usage only
the clock would only start after the government released from an exam
substantial costs are now accruing as soon as those containers exit the
terminal they’re going to the CES is the the steamship line equipment charges
kick in the importer has absolutely no control over when or where the cargo
will be examined and we believe they should not be in a position to bear the
punitive extra cost in addition the other other areas that were cited
causing for the detention demurrage lack of equipment truckers an instance
members said trucker was not able to pick up I had a terminal because there
were no gensets available and this truck was on the line
then finally was turned left left to terminal no gensets genset came free
trucker goes back on the line it was already too late and free time
was charged in that instance also there are in abilities to obtain a terminal
appointment which which moves into the expired time and then Steamship Lines
delaying or changing action which leads to the demurrage for goods at the terminal
at the rival terminal or at the rail yard in fact when we were just prior to
coming into the meeting Charles phone lit up with exactly an
example of of a situation at the rail yard yeah what what happened was there
there was an inland move to an inland terminal watching to Columbus Ohio the
vessel called Norfolk Virginia my company was a customs broker cleared the
shipment before it even hit Norfolk we sent out the delivering information to
the carrier before he even got to Norfolk so they had plenty of time to be
able to issue the delivery instructions before the container even arrived in
Columbus Ohio we then received information that from
the streamship line to be able to guarantee five days of the demurrage at
the rail head because they could not have the truck power to be able to move
it out of the rail yard and we find that really hard to believe when we gave them
the instructions way beforehand what our understanding is is that it is possible
since I don’t want for the steamship line but that their SOP is that they
issue the instructions to the motor carrier they don’t hand them out until
the trailer is actually available at the rail yard so we have two days to be able
to pick it up so they’ve put us in the BCO they’ve
really put the BCO at a disadvantage and what it what you know a lot of this
comes down when you hear the testimony before us before the in the last session
you know the risk when these containers come in the risk is all thrown as rich
said the risk was all on the bco so even if there’s a weather-related incident or
any other information you’re in business you have to accept a certain amount of
risk being in business and it seems like all the risk for these containers is
thrown on to the bcos the line doesn’t want to accept any and the terminals
don’t want to accept so basically the New York New Jersey
favors and brokers Association freight fowarders FMC provide additional clarification
interpretation of what would be considered an unjust and unreasonable
practice and not allowable on the section 10 d of the Shipping Act of 1984
unless our membership is an agreement with a pro statement policy in the
fair port practices petition exhibit a the ocean common carriers marine
terminal operators we acted unreasonably if they are unable to tender the cargo
for delivery in order to receive equipment due to circumstances beyond
the control of the shipper this would mean that one free time should be
extended if the occurrence preventing cargo delivery or equipment receipt
happens within the free time also that the free time should be granted for the
period in which occurrence happens even if the free time has expired
in conclusion the New York New Jersey freight forwarders and brokers Association
supports the petitions comment that the FMC guidance and detention demurrage
practice to ensure that ocean common carriers and marine terminal operators
use these charges as intended and to find incentive for the efficient
handling of cargo and equipment and not as an additional revenue source
our membership supports the FMC establish a rule guidance to help
clarify when the assessment the demurrage and/or detention would be considered
unreasonable in circumstances beyond the control of the shippers receivers and
motor carriers and preventing them from picking up with delivering cargo to
terminals the current system does not have sufficient checks and balances to
ensure that demurrage and detention are properly assessed FMC guidance and what
is unreasonable to assist in providing such a check in New York New Jersey
freight forwarders and brokers association would like to thank the Commission for
the opportunity to express our strong feelings or our membership on this issue
and the hope that a more reasonable practice for results this can only help
facilitate the trade and I would like to remark that they were too quick in the
time frame there are instances that we also haven’t here that we can also
address a later time that you know state is
is that have happened to our members so that you understand what’s going on
because it really recently within the last couple weeks because of weather
issues and all it’s really compound the problem where there’s a lot of
congestion in the port in New York New Jersey thank you and as I said in the
beginning every witness should feel free to supplement answers and but not post
hearing so thank you thank you and good afternoon Chairman Khouri Commissioner
Dye and Commissioner Maffie on behalf of the foreign trade association and
Robertson & Kehagiaras LLP I want to thank the Commission for holding this
hearing and accepting our request to provide witness testimony on the
assessment of demurrage detention per diem charges during the periods of port
congestion my name is Cameron Roberts I’m the foreign I’m the foreign trade
associations chairman and a partner at Roberts and Kehagiaras LLP as a native
Southern Californian who commutes to the port on a daily basis I know what
traffic looks like you think you know what traffic is come to LA and I can
show you and I can assure you that I know what port congestion looks like
I’ve seen it out my window on a daily basis during the period of congestion
last looked at it from the Vincent Thomas bridge and all I can tell you is
that it is looks what it looks like is dozens and dozens of ships is sitting at
anchor and thousands of trucks all waiting waiting and waiting they’re
waiting for someone to take action and we hope that the FMC is the appropriate
party to take that action the FMC members are part of a 1.4
trillion dollar logistics industry equaling eight percent of the annual
gross domestic product of the United States founded in 1919 the FTAs member
ship reflects the logistics industry as a whole including freight forwarders
NVOs customs brokerage drayage operators importers exporters and the like who
like the FMC are committed to encouraging just an efficient and
reliable ocean trade transportation system I am here today because port
congestion delay and the assessment of these charges that we’ve been discussing
during periods of congestion have created a huge inefficiencies in the
market place putting ocean logistics industry at risk damaging the
credibility of United States importers exporters and our ability to compete in
a fair and free trade environment that we seek to participate in the OTIs and
their customers the American importer and exporter rely and righteously on the
custodial carrier and the terminal operator if Chairman Khouri would dust
off that book of Gilmore and black he would concur I’m sure that the carrier
has a obligation under the general common law and under statute to deliver
the goods on a fit and proper Wharf a fit and proper Wharf is one that
operates with reasonable efficiency that Duty is not being discharged and that is
why we are here today in the ports of Los Angeles and Long Beach poor
congestion is a byproduct largely of terminal negotiations vessel alliances
and divestment of the custodial carriers in intermodal equipment these are the
primary issues it is undisputed to the Shipping Act prohibits a custodial ocean
carrier or marine terminal operator from engaging in an unjust and and reasonable
practice and thus you have the authority to involve the Commission in giving
guidance the collection of charges in the midst of court congestion is an
unjust and reasonable practices especially if the gate is closed this
would also be a violation of California law however the gate closure issue has
begun become a shell game and they open for business sign is an illusion fraught
with frustration commercial impossibility and outright refusal by
terminal operators to interchange containers even when they have valid
appointments despite these known causes of port congestion custodial ocean
carriers and terminal operators have continued these practices despite
flagrant violations of both policy and law the practice of collecting these
charges during port congestion encourages future congestion and
unjustly unreasonably shifts the cost of the
inefficiency of the terminal on the oti if you believe that they do have the
duty to deliver and on a fit and proper Wharf this cost shifting should be
reflected not in demurrage assessed after the fact but in the underlying
rate this is a backdoor way of assessing and shifting the fee and the risk that
is unreasonable on its face importers exporters rely on the rates that they
pay to create a landed cost calculation that landed cost calculation assesses
what is or is not a reasonable sale if they cannot rely on the system they have
no sale and we might as well just walk away from the global transactions and
the global marketplaces that are necessary to help the American economy
compete OTIs and their customers need a reliable access to markets the Hanjin
bankruptcy created a catastrophic inefficiency when thousands of
containers were randomly abandoned around the world to offset the cost of
the inefficiency and delay marine terminal operators refused to handle
release or receive Hanjin containers without upfront special off tariff
charges that were simply nothing more than a creation and one person’s
imagination in an effort to offset a cost of what they saw coming but did
nothing about charges to offset those losses and expenses were shifted to
OTIs and their customers oftentimes saddling only the OTI who was caught in
the middle and through no fault of their own as I am on this OTI panel it is
important to point out that the oti cannot prevent or resolve poor
congestion OTIs do not determine the size of the vessel or its scheduling
OTIs do not control the decisions made by the custodial carrier in the course
of loading or offloading the vessel OTIs do not control custodial carrier’s
choice of a terminal operator OTIs are not parties to labor negotiations
accordingly it is unjust an unreasonable practice to demand payment of
charges by an oti in this position during court periods of poor congestion
I’ve been involved in international trade for 29 years and negotiated
hundreds of detention demurrage in per diem cases and the ports of Los Angeles
Long Beach the United States and across the world my testimony is based on my
experience is a licensed customs broker a former oti executive an attorney
representing hundreds of OTIs and motor carriers past president of two local
Southern California Association and as an adjunct professor at the California
State University Long Beach and its global logistics specialist program the
FMC should adopt the petitioners policy statement frustration and poor
congestion and the charges associated with unjust and unreasonable business
practices are the reason I am here today those are real-world impacts that have a
potential to choke the international commerce that we seek to promote it will
stunt economic growth if it is allowed to happen again I respectfully submit
that the Commission is in the best position to understand the real world
situations when it hears from people such as the members on this panel and
the witnesses from the industry have come before because it is essential to
this Commission’s understanding the perspective of those who are being
injured it will be useful to the Commission to consider the petitions
proposed policy and I thank you again for the opportunity and I thank staff
for providing these this forum here today thank you very much Chairman Khouri
commissioners and FMC staff thank you let me repeat thank you for the
opportunity to comment on the Coalition for fair port practices petition my name
is Joseph Quinn president of Cefco export management company and hold an FMC
OTI ocean freight forwarders license since 2007 I’ve been engaged in the
business of US exports of several decades starting in my family owned
export company in the late 70s today I perform oti ocean freight forwarding
services acting on behalf of often small businesses and individual shippers in
all parts of the US and world I’m here today to speak up in strong
support for the coalition’s petition I support their call for the FMC to issue
a policy statement to give support and guidance that will set boundaries for
what is deemed reasonable conduct there was a need for clarity regarding what
could be considered unreasonable assessments particularly in
circumstances beyond the control of shippers and forwarders regarding my own
experiences over the past thirty years plus one incident in particular is
etched on my mind for almost four years from August 2010 up through to 2014 I
had to contend with an informal docket nineteen fourteen I before the FMC it
proved to be terribly onerous and its outcome to me seemed very unfair and
unjust the particulars can be read online at pro export us at the heart of
the issue was port demurrage in brief the issue I had to contend with began
with a trucker’s overtime bill and add or move arranged by the nvo we booked
the shipment with although valid it was strongly contested by the shipper who
self loaded the container per our offer in terms all charges were to be prepaid
prior to export we had to wait for payment which eventually came in however
late once that fee was received from the shipper I immediately paid the exact
amount to the NVO the freight which had already arrived in Miami was
released for export the nvo informed me that the originalism vessel it was
booked for was missed therefore thereafter NBO informed me
that solely due to the steamship line scheduling issues subsequent sailings
were cancelled it took approximately three weeks more before the cargo was
eventually loaded on the next available ZIM vessel when the ocean container was
finally loaded on the ship I was informed that over $4,100 in demurrage
had accrued in the load Port of Miami a big shock neither the shipper nor the
forwarder had any control over Zim’s canceled sailings nor the dwell time at
the port once the freight was released at the time of its occurrence I sought
guidance including from the FMC which would have been very helpful in
addressing the issue but I was placed in a defensive mode having to answer an
informal docket I answered personally thinking and
hoping that the matter could be handled quickly the alternative of hiring a
specialist attorney particularly for the several years time it actually took
would have meant tens of thousands of dollars in legal fees alone as someone
who has dedicated the majority of my life and career to facilitating exports
shipments I would have hoped to have had someone at the FMC and oti Ombudsman to
offer positive help and guidance if and when such problems might occur fruitful
collaboration would have been so much better in some places and circumstances
container demurrage is a near certainty given the short amount of free time
versus the time necessary to clear and deliver it’s one of the biggest perils
in this industry small shippers and forwarders simply do not have the
leverage that large commercial shippers may have with the carriers and MTO’s to
mitigate or dismiss demurrage but particularly when the clock is ticking
in the u.s. it seems as certain port operators have over time been decreasing
the amount of free time at the ports to such an extent that avoiding demurrage
is like threading a needle the general public has little knowledge of such
things that is this is why holding a public hearing today in itself is so
important even the formation and existence of the coalition can itself
have a beneficial impact on providing checks and balances of course the prompt
moving of cargo is critically important to the operation of MTOs demurrage and
detention certainly serve a purpose but by but by and large MTO seem to have
practically free rein on such matters demurrage and ever increasing decreasing
free times may increase their bottom-line profits but I’ve become a
hidden tax the kind of unjustified punishment particularly on small
businesses and a bane on individual shippers in some ways it seems like
extortion each port and terminal is different some streamship line some
Steamship Lines like the Ro-Ro carrier Hoegh have been fortunate to be in a
position to buy the real estate in several ports where their ships berth they have become MTO’s in their own right that
gives them much greater leeway in how they can accommodate their customers
other MTOs such as in New York New Jersey and Miami may not have the same
incentive as Hoegh’s operations so in regulatory terms there was no
one-size-fits-all solution this is not a perfectly free marketing shippers often
have no choice in what terminals to use in some ports MTOs when left unchecked
have no incentive to negotiate or waive D and D charges incurred even when
resulting from conditions beyond anyone’s control it’s quite clear in
reading the verified statements and letters included in the in the petition
that even large shippers often act lack the leverage to negotiate better
outcomes small shippers are in far worse shape having little to no recourse it’s
practically impossible to mitigate or dismiss demurrage particularly when the
clock is ticking circumstances beyond anyone’s control such as bad weather and
congestion can vary greatly so there is no one regulation that will ever be able
to match each situation however a policy statement by the FMC can help provide
clear guidance and boundaries in regard to what is deemed fair versus
unreasonable behavior the FMC can help provide better understanding for both
the problem and to find solutions for all parties involved without having to
result too often frustrating and lengthy processes and costly litigation
whereas happened in the past for good or bad is not going to change but we can
and must do better I am in full agreement with the proposed statement of
policy in petition Exhibit A it’s certainly a step in the right direction
thank you good afternoon acting Acting Chairman
Khouri Commissioners Dye Maffei my name is Brian Vickers
I’m with the here on behalf of the International Association of movers I am
I am as the household goods moving in for forwarding industries largest global
trade association with more than 2000 members its companies provide moving
forwarding shipping logistics and related services in more than 170
countries for household goods shipments IAM fully supports the policy statement
put forth by the coalition which would help bring about more reasonable to
demurrage and detention practices for household goods and other cargo moving
through our nation’s seaports in addition to delays associated with the
weather labor contracts negotiations and and the arrival of very large
ships I remember IAM member companies frequently experience additional costs
and delays resulting from customs inspections and examinations due to the
nature of the cargo household goods are obviously packed
differently and they will very unlike many commercial shipments headed through
the ports page 39 of this but of the petition reviews this detail in part
delays arising from governmental inspections of cargo before free time
expires are beyond the shippers ability to control the shipper or cosignee has
no control over the decision of the government to inspect a particular
shipment or to the timing as to when an inspection may occur this is
particularly and true in the case of household good inspections regardless of
whether all the paperwork is there and whether it’s packed properly or not
household good shipments are unique from the majority of commercial and retail
shipments as the contents are not for commercial retail resale and are often
shipped at personal expense by a US citizen without any foreknowledge that
the clearance process through a u.s. port could result in thousands of
dollars in extra fees for the government to clear the shipment this guilty and
prove guilty until proven innocent process unfairly burdens the shipper and
and the family in many cases that are moving the household goods these
examples are unknown and therefore unable to be included
the quotes and move the household goods there’s an expectation that there’s a
potential there but there’s no standard essentially for how much it might cost
both in terms of moving it to an intensive exam to be examined at the
warehouse or the time in in delay that could be created as a result of getting
it there packing of household goods are done by professional movers when they’re
when they go to an intensive exam things are often yanked out there put back in
but there’s no requirement that that folks are trained at the at the
warehouse is to to put them back in the proper manner and they can be
susceptible to further damage during the inspection process the frequency of the
exams cannot be understated while we don’t have a 100% mandated as as the
earlier panelists did with the with the meat counsel we’ve had members come to us
within the past six months saying seventy-five percent of their household
goods shipments leaving the country to the Port of Long Beach
we’re taken apart as part of an intensive examination cost for exams can
be 600 dollars they can be three or four thousand dollars there’s there’s really
no there’s really no way to know it just how long will it take
will there be folks at the warehouse in order to do it in a timely and efficient
manner that being said I am as is asking the Commission to consider in any
forthcoming policy statement either looking at future of recommend
recommendations to to the terminals of in the owners of the of the intensive
warehouse a flat fee a max fee some level of expectation we don’t we we’re
not requesting that all detention and demurrage charges be removed as no one here
has just that we have an expectation of what we might expect particularly for
our industry we’re just more susceptible to having having these exams done and
it’s it’s often not done you know on site it’s got to be picked up it’s got
to be moved and it’s got to be sent over to the warehouse
resulting in more charges so many any policy statement that would look at you
know you know recommendation of how and when things are done in the exam world
would be would be great you all have put so much time and effort
as an agency and looking at poor congestion issues and meeting with all
the stakeholders we really appreciate that
and we look forward to working with you in the future thank you thanks to all
very good presentations start with one that’s sort of maybe on the small side
but just cut my attention and that you were talking about chassis charges if
you recall and as I when you caught it at a terminal this was again within the
context of government inspections etc now the chassis holding the container
that’s getting inspected the chassis people get paid don’t they my reference
was more directed to the steamship line and the detention charges for use of the
steamship line equipment chassis charges do also come into play and obviously the
it’ll depend on who is the owner of the chassis if that’s a trucker if it’s a
steamship line if it’s the rented rented chassis of of the trucker so forth so
if I may add that because what happened was in the point New York New Jersey
that we’re a little bit different with our exams and there are in the other
ports a nation we actually have our exams done off-site and not done at the
terminal so in the past when they’ve done at the terminal believe me had
problems when they were done at the terminal they wouldn’t get done on time
everybody’s point your fingers they’re in there there’s no transparency
in the system now they’re being drained off to exam sites but what happened was
prior and not have to pay for detention charges as long as it was on the pier
now what happens is when they get moved off to exam site as soon as that
containers moved off the pier the clock starts ticking before the detention on
the free time when the container and normally it doesn’t get out of the
exam station within one or two days so it’s there for two days three days
clock’s ticking and by the time it comes out of that now you’ve time starting
went to detention with the line so it takes another day or two to go to the
BCO gonna load it and get back so then they get bill a couple months later they
get a bill from line saying you owe these types of charges where previously
they would not incur those charges okay but I guess the rather loose line I’m
sort of pointing to there is a principle where the chassis provider everybody’s
not in their head of course they get paid per day but the owner of the
container doesn’t get paid under under current situation now in the Port of New
York New Jersey the owner of the container is getting paid
I said that’s but your proposal is that they don’t be paid we really question
why why the change even at one time it was part of the port process now it’s no
longer part of the port process and the container held at the examination side
it’s a wild card when when an exam properly efficient circumstances it will
turn around fairly easily but in moments of poor congestion it’s very difficult
sometimes even once the container is released getting it back to the terminal
so it’s a situation for us that’s totally out of the control of the
importer it does relate back to the issues of security for the nation
clearly there’s a need to examine products this really should be somehow
treated in a in a in a different way so these costs aren’t afraid maybe by a
larger community that’s that’s not something necessarily that the
Commission’s are gonna be able to solve but the point here is it’s definitely a
charge that one importer or one BCO should not have to defray it is totally
out of their control so when we look at the set of circumstances that are beyond
the control in which punishing costs occur that is one of them so so what
would be probably reasonable is that the container the charges would start when
the cargos released I think it’s absolutely because then the VCO should
make every opportunity to be able to pull that container from the exam site
as quickly as possible to be able to not incur charge they’re not going to
let the products sit there for three or four days in any event so then this way
they could avoid those charges if it goes out of the exam site they have 48
hours to return that container they’ll be able to get that container back
within 48 hours mr. Roche your example of three different times having to go
back how did that how did that end up getting resolved on the third time they
got the container and they left but they paid demurrage charges each of the three
times a total of $1,700 it has not been resolved since November so we even had
waiver or extension of free time during that period that was
acknowledged by the terminal after the fact and we still can’t collect it back
there’s it’s one of those and and I used that example specifically because it had
a lot of components to it that you have to pay cash on the Barrelhead there’s
there’s no ability to go in and really argue the fact after and it was a
escalating type of a condition that just kept getting worse and worse and worse I
will say you know and I did point out here there there is that risk that we
assume that there’s a waiting time and and the trucker does not get compensated
for that there’s dry runs and the trucker does not get compensated for
that and so if we don’t get this thing resolved here shortly I will be going to
CADRS because that’s above and beyond the $1700 – correct yes the $1,700 is
the straight demurrage and detention time just is your merge
time sorry straight immersion appointment systems I know in the Port
of New York and the group that has been working up there for what the last three
years I think and from what I understand doing good work it seems very careful as
they move forward this is a polite way to say but I asked previous panels the
the appointment systems how often are we are you saying that you make a call for
an appointment or your your dray designated dray company does and
they’re told and it’s not on the fifth day at the eleventh hour it’s that a
reason because there’s all sorts of ways that things can get pained we all agree
with that but that you make a reasonable request at a reasonable time and you’re
told there just are no we’re not talking about snow we’re not talking about
anything else no windows till next week how prevalent is that
so from our standpoint out in the west coast we’re seeing that on a regular
basis okay what is regular basis mean mr. Roche I I wouldn’t be able to put a
number on it but you know it at least monthly that we’re seeing that there is
that kind of a condition I would also say that I have another live example
right now in Dallas where there’s just no chassis so the container comes in the
carrier has to dilute the the responsibility to deliver that container
to us they have to use the fleet chassis that are the pool chassis is out of
dallas and we’re told all of last week until Friday that there was no no
chassis is available in Dallas so you’re basically in demurrage for eight days
very similar to the appointment system it’s just there’s no availability for
you to go and get that container finally on goes so we just say with it
you’re saying those are door moves and the merchant haulage but you have to use
the pool chassis provided and not bring your own chassis
I see yes because they are a wield operation but they’ve got everything in
the stack now because there’s no chassis the chassis went from Dallas to Houston
and a lot of them haven’t been returned yet so there’s just a big shortage of
chassis in Dallas it’s a similar kind of a situation with the appointments that
you know basically the last three day was Friday the week before and we didn’t
finally get a chassis until Friday the week of and no agreement to waive to
demrrage until that final day it took a week worth of arguing with the steamship
line to get them to waive the demurrage so that we can go in and pick it up
which we did within two hours and delivered that container but if we
hadn’t we were then going to lose free time on the following day and go back
into demurrage again so we quickly picked it up okay
we could add further this kind of an exercise throws additional and
efficiencies into the system and then there’s a tremendous hidden cost to all
the parties understood Gracie do you know who operates that
chassis fool the chassis pool in Dallas I believe that is track is the operator
Hapag Lloyd was the steamship line and it’s the Dallas rail ramp in your
experience assume that the Commission was to accept and accept the petition
guidance what would you expect the consequences to be on behalf of the
terminals and the Steamship Lines do you have any yeah and I don’t think they
would be bad consequences the consequences that I would expect is that
there would be a greater increase in free time so that the terminals or the
steamship lines are not actually collecting when there’s issues that are
beyond everyone’s control not collecting the demurrage and detention so I don’t think
that when we talk about consequences it’s it’s an extension of free time to
them it’s a consequence of not collecting the money that they’re
collecting today but should they be is the question that’s on the table we
would actually if we may add point to the situation with the cyber attack on
the Maersk system it was absolutely crazy in the Port of New York and free
time was sort of extended incrementally it seemed it there was an indication on
the part of the terminals that definitely storage storage bills were
issued but at the end of the day the free time was extended to accommodate
the period and we believe we truly believe that that kind of flexibility
which was a very positive thing was a direct result of this kind of a
discussion so camera what is the issue most often
litigated in these in these cases in your in your experience the actual
litigation goes to those containers that tend to be abandoned for a period of
time because a collection of the demurrage has actually worked to defeat
the intended objective objection excuse me the intended object which is to
expedite the delivery of the goods it has had the counter effect of creating
merchant disputes between the parties recently litigated approximately two
million dollar demurrage case where there was in transit demurrage assessed on an
export shipment there was a request by the merchant to not send a hundred and
fifty ocean freight containers to the port that it was originally consigned to
but to a different port because the merchants had made an election to do
this they requested a quotation from the custodial carrier of what would that
diversion cost be they got a quotation in reliance on that quotation they then
acted when the containers showed up the following week at the new port of
destination they were told that the charges included $75,000 in demurrage
that was assessed at the transshipment port the irony of all of this was that
amount was actually not accurately calculated and it took the steamship
line over two months to admit to that and in that course of course the
demurrage at the new destination port only increased commodities that are
exported by the United States tend to be raw commodities in this case it was
untreated logs from the south when I have a Savannah Georgia largely and you
can imagine what happens to raw timber sitting in
wouldn’t in a metal box on the Chinese port in the middle of September nothing
good can come of this but none of the parties accurately
on the carrier side reported the amount of demurrage that should have been
assessed that it was even being assessed and when asked what the basis for it
were given misleading and incorrect answers it was not until forced in
litigation that we were given a direct answer to the question of what is the
basis of these charges and it’s that kind of inefficiency and a lack of
accountability that I think is going to drive large litigation these cases of
per diem and smaller demurrage amounts frankly don’t you know if you do the
math on it tend not to work out but I will say that smaller amounts especially
in the aggregate during port congestion especially on per diem it is almost
impossible commercially to deal with that because of the UIIA agreement that
is in place with the motor carriers that agreement requires arbitration and I
would note that that arbitration clause has been deemed by a court in California
and in Texas to be both procedurally and substantively unconscionable so you have
commercial agreements that are been litigated there is the method of
resolution has been deemed to be unconscionable by at least two courts
and this causes me to wonder is there a viable commercial solution at least in
the question of per diem on specific cases especially when you have to submit
it and can only submit them approximately the numbers five at a time
and you’re really subject to the contractual overreach because you have
basically the carrier’s driving the terms and conditions of the UIIA
and there’s while there is opportunities for some negotiation I would argue that
the footing is unequal and I think courts have validated that position
thank you one more briefly how does the California law operate that removes
demurrage detention charges against truckers in certain cases there’s a
California law California business and Professions Code that it was written to
address intermodal motor carriers being assessed demurrage during times of gate
closure or inaccessibility due to forces generally beyond everyone’s control and
also labors and in other circumstances but the bellwether of that legislation
that law is gate closure and what we have here is a it they if you ask the
terminal they’ll say well we’re open for business
okay the open for business sign is there and you become in a huge argument about
whether they were truly open or was the gate closed and what does that mean I
see so good as it sounds for the truck that bright line you know we’ve been
talking a lot about trying to make a one-size-fit-all situation that’s why we
have case-by-case examination of issues we cannot regulations never historically
have addressed all facts in all cases they are broad and then we look at the
facts when we make a determination based on the fact and circumstances of what is
or it is not inequitable and if the gate is closed or not closed thank you and I
think that’s the point that Commissioner Maffei you know several of his questions
has been trying to drill too but thank you thank you mr. chairman just pointed
clarification mr. Roche were you wears Mohawk global logistics headquartered
the best medium-sized city in the United States but perhaps tied with Louisville
perhaps time in Kentucky shame it’s it’s off topic a
little bit Mr. Roche but do you consider the Washington DC weather to be cold or
winter like at all it’s very comfortable right but IIIi
ting a little snowmen we might have later today I concur I concur I do want
to ask you though some some serious questions about what you’ve been saying
about risk because you’ve been talking about sort of there’s a level of risk
and and I’ve been trying to unwind kind of what is it’s reasonable for the
shipper or intermediary to assume in fact you know part of the advantage of
hiring an intermediary is that shipping particularly internationally is somewhat
unpredictable and risky and so you you know you it’s not something maybe to
just go into you want to hire an expert in it so it’s it’s in fact part of the
reason why people hire all of you so how do we figure out how much risk is
reasonable for you to assume of these unpredictable things and and where
there’s a level of risk that if it’s passed on to you by carriers or MTO’s is
unreasonable yes so I would have to say you know when we look at risk and it was
brought up earlier today by Mr. Khouri that the the carriers and the MTOs
assume an awful lot of risk the carriers especially if they have to park their
vessels the cost for that is enormous MTO’s if they can’t flow their terminals
the cost to them also enormous the extra things that they have to do and we heard
about you know shoveling the snow and and that sort of thing
I think that when when I bring this point to the table what I’m really
trying to establish is that we’re not asking an unfair burden on them to to
that we because we did we do have risk as well we’re asking them that they
cover their side and we cover ours you know when you look at some of the the
the charge backs that our customers face when they can’t deliver contractually
their container on time there that’s an enormous risk that that BCO takes when
you look at truckers that are they get paid by the
run so they when they deliver that container they get paid for that but
they don’t always get paid or sometimes never get paid for dry runs or for
waiting time the time that they spend in line
it’s just accepted that that’s part of the risk well eight hours is
unreasonable so where do you draw the line and say that okay
you know we heard thirty minute turn times we’re never going to see that
again but a one-hour or two hour turn time in the terminal is proper and a
four-hour wait in line or an eight-hour wait in line or in some cases even ten
which we’ve experienced in the Port of New York in recent years that that’s
just not proper at all we can’t compensate those drivers and
and then to add insult to injury we have we end up with demurrage charges because
we couldn’t pick up those containers the example that I drew before about doing a
25 container a day flow for the course of that week and I can’t pick up those
containers because of some weather event or for whatever reason of the meltdown
of a system or whatever it is I end up then with ten or fifteen or twenty or
forty containers in demurrage is that risk mine so I don’t know if I’ve answered
your question but I think I have to say that there’s there is risk on both sides
and we don’t charge them for the dry run so we don’t charge them for the waiting
time that we have you know we fight the demurrage detention with the geofence
stats that we that we can keep on this but we we don’t have a way of going back
and charging them because they didn’t perform
we’re actually performing right we don’t need to be penalized for lack of their
performance think you address the questions I’m gonna in feel free to jump
back in here but let me ask mr. Vickers cause you have sort of a more precise
business and that sort of thing it seems to me that the transporting household
goods is in inherently very high risk from a fight you know from a financial
perspective so just trying to examine it isn’t that I mean isn’t that part of
your business I mean isn’t it including your business model this this level of
risk that can there might be an inspection and if
there’s an inspection that could cause other and to the extent it I mean do you
it is can you pass the sum of the cost of that risk on to your customers and is
there a market failure somewhere along the line that I’m not accounting for
yeah well some of the cost is obviously passed on it it’s difficult because
there’s very little leverage okay so these are all one-off shipments you know
you’re not going to keep moving in and out in and out of the country into the
leverage is the kind of first disadvantage on what’s there the second
part is is is understanding the cost is there a greater chance that it’s going
to be examined yeah probably versus a you know see keep had a commercial
shipment coming through the ports or even leaving the ports in in the case of
Long Beach as we’ve seen recently on the intensive exams going out so so there’s
so there’s the risk there absolutely what’s not understood is how much how
much is it gonna cost we we have anecdotal information from our members
that would would reach us highest for $5,000 for the exam that’s that’s not
including any of any of the any of the free time lost in getting the household
goods to the offsite exam or or waiting if we have to wait to have to have their
staff go through and examine put everything back then and put it there
not to mention equipment rentals that come with that as well that’s all part
of the process so yes to answer your question there is a there is a greater
likelihood of it however understanding what those costs would be is still
unknown and you know as a company you know packing up properly having all the
documentation and then and then just getting pulled for random you know from
an inspection it’s not necessarily fair I guess you could put it that way to
have no understanding of how much it’s going to cost or who’s gonna end up
paying for it obviously the cost goes back to the moving company the moving
company was a pathway with with either the you know the family to say well
we’ve got these costs coming in or if it’s a corporate reloj they might sit
down and be able to work out something with the company right but
parameters in themselves the king is our there aren’t there insurance products
and things like that you can buy in other words okay they’re not is is so
Mr. Quinn feel free to come in here obviously but are there reasons why
there are not are the reasons why your organization’s don’t offer insurance
products that would allow they don’t exist well you could create them right I
mean isn’t that what trade organizations do in other and other industries I mean so there’s a good that’s helpful
actually they’re talking about here yeah because it’s it’s so difficult to
predict and where’s Denmark and where’s the harm it becomes a consequential and
you don’t know what it is okay so several of you I mean I think mr. Roche
mentioned your lateral power somebody on the last panel mentioned oligarchy or
Aligarh I’m sorry oligopoly look you know I mean maybe I’m anticipating some
of the arguments tomorrow but many carriers say that that they’ve been
struggling with years of losses because of the low frame rates if they have so
much market power how come they just don’t increase their freight rates and
in action mr. Roberts you mentioned you know this is a backdoor way and that you
you know if they would just include it in the rate would be why wouldn’t they
just include it in the rate what I’ll ask you because they’re in the best
position to know their rate matrix and what their their cost structure is
anything from an NVOCCs perspective we look to the carrier’s because the
carrier’s frankly dictate to us what the rates are that we can get in a service
contract or in an essay or on a spot market rate for an NSA so all of those
tools are available to the NVOCC but we’re not freight rate makers we’re
takers in the marketplace and we seek to make a fair living off of the hundred
dollar differential that we can often make in the transaction so as a
practical matter if suddenly the rates went way up it’s not like you could you
still what you wouldn’t be able to change it it’s that the fact that there
I guess relatively low or relatively low compared to historical standards is just
it’s good for you but it’s not something you can control or go to somebody else
rink the margins that the NVOCC is able to use the euphemism enjoy are based in
not on what anything other than what that value of the service is it’s it’s
not a markup that is we can’t say okay the frame rate increased you know my
experiences in oti selling rates when I was in the industry we couldn’t just
mark everything up 30% I mean it didn’t work like that we had to publish a
tariff we had to compete in the marketplace and certainly now with the
NSA we have that shorter term but we undertake also risks that the market
rate may change because of surcharges or something else that we can’t pass I
guess one of the things I’m trying to ascertain is as an alternative to a
substantive rule describing what practices would be unreasonable if if
there were rules to increase transparency or set procedural
requirements related to how these whether there’s practices whether that
would would address some of the issues in the petition or not in other words
and it gets back a little bit to our discussion about whether the carriers
are using this as a profit Center or whether these are you know if there were
more sort of transparency requirements so that they had to tell you how much of
this of these charges they were they had to then pass so you know pave or how
much were profits or whatever I’m going to address the profits under the UIIA
if I take the container and interchange it and I move it by truck to an inland
point and it’s involved in an accident and it’s the constructive total loss
under the carrier’s terms of the addendum to that agreement there would
be an adjustment based on the book value and depreciation of the asset and that’s
what I would owe I would estimate that to rough numbers be $3,000 maybe a
little more maybe a little less depending on the line in the condition
of the container whether it’s a 20 or 40 demurrage at 350 dollars a day 10 day
period you’re exceeding the the value of the box I might as well
getting an accident with it I mean pragmatically that’s an economic
decision that’s not ridiculous just like in during the course of this
we actually advise the client to consider the possibility of letting
cargo go General Order rather than make an entry and letting it go into the
normal stream it would have been more economically efficient to have customs
seize the box as a banded merchandise move into a general order warehouse and
make an entry when that is a realistic opportunity to consider yeah your market
is broken yeah that’s crazy to do what I just said because of the cost but yet
those costs would be lower than the cost of three hundred and fifty dollars a day
even if you have to change some of the names I’d love if you could provide that
example that that’s very interesting to me I can’t okay you know for the record
I guess yeah I mean I I think trying to work out how we would get our hands
around where even this definition of reasonable I think is it is it as a
challenge we don’t finish my questioning so thank you mr. chair I think that
transparency is is should be one of your central focuses because I realize how
difficult your job is because you have a lot of people yelling and they want some
help then you gotta figure out what the hell
to do amazingly like no one makes money in this entire industry I don’t
know how everybody in stays employed deserve a raise yeah yeah but but no the
transparency part and I have a lot of sympathy for the gentleman from the IAM
because they have a terrible time because in reality the household goods
shippers role one-shot deals and they most of the shippers have no idea no
clue what to expect one thing I’m hoping that in in whatever policy announcement
that you have you see I do a lot of export and reality of exporting demurrage
for me is extremely rare I see it more overseas which is not
your jurisdiction but I’m hoping that there might be a ripple effect for what
what you do perhaps you can analyze and and provide statistics as to how much de
demurrage is costing and at what ports they’re costing that kind of data that
you could perhaps broadcast that would be good but for example I had a client
who had to ship into France and it has no you know you have no jurisdiction in
that but about a month after his shipment landed and was cleared and
delivered he gets the bill for $1,200 he didn’t even know about it and sometimes
I’ve seen in this industry where people would get bills after the cargo has been
delivered and it hasn’t been held up but something comes out of the blue saying
oh there’s something more you know so transparency is the mean yeah if that if
that case does involve the entities we regulate CADRS might be able to help
obviously I mean you know this but I’ll say it for the record and even even the
you know that’s part of the reason why we have it for those kind of one-offs
yeah well the household goods industry they’re all one offs and and mostly it’s
going to be borne by the cargo owner you know people their companies kick in for
examination if they’re lucky maybe they will but 95% of the people will have to
pay it themselves okay I have one further question but I’ll yield unless
there’s time well just I mean this whole issue of the contracts and whether you
have any control over them I mean it seems to me that as any well as anyone
ever tried to or any of your members just try to renegotiate some of these
contracts or in fact are the contracts just not accessible they’re you’re not
parties to the contracts that we’re talking about in other words we talked a
little bit today about contract law and you know if you it sounds to me lease
contracts basically our course designed to protect the MTO’s and that sort of
thing but contracts can be renegotiated you can say well I’m not going to follow
that contract we need another contract is there any has there been an attempt
to go back and renegotiate these contracts after one of these ostensibly
unreasonable issues or simply no opportunity to take
that and we do know negotiate some contracts and and members of our
association negotiate contracts I think you heard before there’s tends to be a
boilerplate a reference also to the tariffs in the contracts these are
things that are very very difficult to change in trying to change the
boilerplate especially at the size level that I’m representing here today the
medium to smaller size shipper and NVOCC so you know the there and then when you
ya ask in the context of demurrage and detention that’s not even a discussion
in the contract that’s a contract between the MTO and the carrier so we
don’t have a seat at that table we don’t get to negotiate that free time extended
free time for detention at a warehouse we can negotiate that into a contract
but on the port demurrage not a chance comment in question I just want I
understand your your point Mr. Roberts about Book value of of a container but
let’s recognize especially so I understand the newest tax law that you
can write off certain investments the book value on a containerized I assume
I’m not an accountant but I’ve been in business would go to zero because it’s
written down to zero in one year Book value is not the market value or the
value that that piece of equipment could earn if it continued to work in the
trades for the next 3-4 years but we understand let me go back to mr. Quinn
because you were right on the edge of something that was there’s been
interesting and it’s certainly going to be some questions for tomorrow so if the
fellows are still here they can make note so a part of the purpose
of shipping act as Congress gave gave it to us is to to whatever extent possible
harmonized with our trading partners other countries what happens overseas I
mean if would there be this kind of meeting then in Shanghai Rotterdam etc I
because I’m in this business I’ve always loved international you know this is why
I’m in it I like it and I investigate a lot myself and I look at different ports
in different parts of the world and I was remarking recently in northern
Brazil there’s a port and they were advertising their services and they said
one month free at their ports I said my god that’s terrific you know and then I
compared that with some ports and in India and they were giving 20 days free
but of course an India takes so damn long to go through customs they have to
do that so it would be perhaps instructive for the Commission to look
at some of the practices elsewhere I don’t think that some of these other
entities other countries in Europe and so on are really doing what you’re doing
here but I’m hoping that there can be a ripple effect where the FMC can in fact
take a leadership role that necessarily put down a like a you know harsh rules
and regulations but a guidance because I’ve seen surged demurrage in Europe and
and perhaps if they say well you know this is what the FMC just did in the
United States we might try to do the same thing to harmonize so so I’m hoping
for the ripple effect I can’t really give you all the answers I’d be happy to
look into it and have an ongoing dialogue about this but I don’t think
that anyone else that I’ve seen is having this kind of meeting and I think
that the issue demurrage is is incredibly important most people in the
public have no idea it took me years to figure out how to spell it
oh one two you know so so the people in the general public especially household
goods people people in the trade know you know it’s like asking a priest you
know what do you think of a devil you know it’s terrible but the
in exactly all right you know but with household goods that’s where you get
into the fairness things because people just don’t know and they have no
bargaining power whatsoever you know they’re they’re simply stuck and
unfortunately sometimes the oti and the Packers and the movers
they’re the ones who get the blame but it’s really part of what happens and and
and for example I I had an agent recently in Switzerland to give me a
rate and and they said from Rotterdam to a Geneva it’s gonna take 18 days to have
it cleared and delivered however most of the carrier’s not only giving maximum 10
days so on their quote they have to say that demurrage is a certainty and
they can’t tell you how much it will be so a lot of movers will simply give sort
of like this is what our rate includes and this is what the rate does not
include and it never includes the demurrage no one knows how much is that’s
going to be so it’s a big you know people fear the unknown and that is a
big it’s a problem so so the amount you’re never gonna cure any of these
problems but to shed a light upon it and to give broad direction it would be very
helpful for example Long Beach has been cited I think a half dozen times in
terms of government inspection and their policy which assume you all like that
but your your point is spot-on of do they give unlimited free time as long as
the government may take do they just recognize it may take three extra days
and then at some point free time begins to run and I’m sure there’s all sorts of
variations there but your point is the the allocation of risk and when does it
shift from one side to another it’s pretty strict I don’t think that they do
they really don’t care for whatever reason
just gonna say this is how many days and it doesn’t matter if it’s because it’s
gonna be inspector and or what have you my last comment is is this that I think
we have just one mic on is what help that mr. Roche was one of the first
notes I made about transparency and then mr. Quinn you picked up on it again and
in your all’s discussion and and I just have an open question that I may want to
explore with my colleagues about is there a transparency process that we may
want to engage in to help bring there’s a lot of very good today’s been very
instructive very helpful but is there a process that we might capture this on a
on a rather strict basis in mr. Roche you know and I said so how often this is
on the appointment question and I fully appreciate you can’t put a number on it
that give me a little time I can come back with some stats okay my colleagues
anything else has been a good day let me do a little housekeeping because of the
weather actually I saw you come in a little late it’s already starting to
snow no I didn’t mean pick up but I just want to say you come in I wonder if it’s
already but they’re predicting snow tonight people with for tenure here in
DC than I I only have eight years our guess was if it’s only one to two inches
it may be a two-hour delay from the government
OPM if that be true then what I commit is staff you’re going to grit your teeth
please try to get as early as possible understand it’s a
10 would be a 10 a.m. start time and I will try to be here at 10:00 and we will
start at 10 o’clock or as soon as we have the first panel in the morning and
enough FMC staff to to work all the electronics etc etc if it’s a full
shutdown I assume we’re just gonna have to figure
out what we do from there but it’s more of a delay than that we’ll certainly
post it on the website right on the front so you can see it yep
for I guess probably most everyone here knows if you just go on your google OPM
and it will come up immediately it’ll say status you click status and they’ll
tell you what the what the work schedule is for the day two hours in less delay
time we’ll be here with reasonable everyone agree on that yes ma’am just a
separate comment just to remind participants if there’s any information
that needs to be submitted for the record subsequent to the hearings you
have until the 26 next Friday to do that very good thank you again for all the
witnesses and they’re excellent and look forward to tomorrow so thanks again for
clapper absolutely


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