New California law designed to rein in detention and demurrage charges

Date: Thursday, October 6, 2022
Source: FreightWaves

The California trucking community is celebrating the approval of a new state law that it believes will reduce detention and demurrage charges for containers that are not picked up or returned to ports in a timely manner.

Gov. Gavin Newsom last week signed Assembly Bill 2406, which prohibits intermodal equipment providers and marine terminal operators from imposing per diem detention or demurrage charges except in certain cases.

Demurrage and detention charges are levied under two circumstances. One occurs when a loaded container arrives on a ship and after several hours of “free time,” according to Chris Shimoda, head of government affairs at the California Trucking Association, charges are assessed if the container is not picked up by the drayage carrier. The second is when an empty container is not returned to the marine terminal by a certain time.

Shimoda said the congestion of the ports earlier this year led to a surge in detention and demurrage charges, rising to as much as $300 per day from what earlier had been about $150. “You had all these empty containers piling up at our members’ yards because the trucks were not being told where to take them,” he said.

“The whole concept of detention charges really broke down during the congested period, where even if you wanted to pick up a loaded container you were being prevented from doing so for reasons that were out of your control,” Shimoda added.

In the legislative counsel’s digest of what was in the bill, the new law prohibits intermodal marine equipment providers and intermodal marine terminal operators from levying detention and demurrage charges “under certain circumstances.” A partial list of the circumstances includes:

  • When a loaded container is not available for pickup when the motor carrier arrives at the terminal.
  • When the intermodal marine terminal is too congested to accept the container and turns away the motor carrier.
  • When the intermodal marine container provider decides to divert equipment from the original interchange location without notice.
  • When the motor carrier documents an unsuccessful attempt to make an appointment for either a loaded or empty container transaction.
  • When a return or delivery of an intermodal container is delayed because a booked vessel’s receiving date changes, and when the obstacle to the cargo retrieval or return of equipment are within the scope of responsibility of the carrier or their agent and beyond the control of the invoices or contracting party.

In a statement released to FreightWaves, Noel Hacegaba, deputy executive director of the Port of Long Beach, said the port had not taken a position on AB 2406.

Asked if it would impact the proposed dwell fee that has been repeatedly delayed for nearly a year, Hacegaba said that fee is not affected by AB 2406, which was to be levied by the ports against container carriers. “The fee on long-dwelling loaded containers at POLB terminals has not yet been levied, and the number of containers has been reduced by more than 50% since the fee was adopted in October 2021, thanks to the extraordinary cooperation of our supply chain partners.”

The fee’s implementation was recently delayed yet again until Oct. 21.

The California drayage industry’s trade group, the Harbor Trucking Association (HTA), was a strong supporter of the legislation. In a LinkedIn post, HTA CEO Matt Schrap said he was “definitely jumping on the AB2406 bandwagon here.” His post also offered praise for Shimoda and the work of the CTA.

“AB 2406 reflects the new reality and is a welcome update in light of appointment systems, chassis pools [and] Ocean Carrier Alliances,” Schrap wrote.

The “new reality” is a change from the conditions that prevailed when Senate Bill 45, approved in 2005, set rules on demurrage and detention charges. But Shimoda said many of those rules were inadequate to deal with changes in container port operations, such as the appointment system referenced by Schrap.

Shimoda said SB 45 was “written in a very different time,” before those changes, when trucks would just “[show] up at a port to try to get a container.” More organized systems are now in place, with a scheduled appointment system, and the law needed to be updated to reflect that.

“We were approached a couple of years ago by some of our port members saying we still have these issues with per diem charges,” Shimoda said. “The detention and demurrage law (SB 45) is not working as intended.”

In his signing statement, Newsom did not address the specifics in the legislation except to say that it would stop a container provider or terminal operator “from imposing extended dwell charges on a motor carrier, beneficial cargo owner or other intermediary relative to transactions involving cargo shipped by intermodal transport.”

Newsom also wrote that AB 2406 “does not limit or inhibit all-day continuous operations at California’s ports.”

He added, “It is critical that shipping industry stakeholders continue to use all available tools to find efficiencies and encourage the 24/7 movement of goods.”

The law goes into effect Jan. 1.

Signed by President Biden in June, the Ocean Shipping Reform Act of 2022 calls on the Federal Maritime Commission to take several steps, including investigating detention and demurrage charges.

In an email to FreightWaves, Schrap said that with California “leading the charge … ideally the FMC will follow with a formal rulemaking on detention and demurrage that puts an end to this unfair practice once and for all.”



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