Starting in mid 2014, at ports up and down the West Coast, including the Port of Seattle and Port of Tacoma, there was a significant reduction in the rate at which containers were being loaded onto and unloaded from cargo ships. A significant cause of the delays was a slowdown initiated by the International Longshsore and Warehouse Union; the motivation for the slowdown was a dispute between the union and Pacific Maritime Association over the terms of a new collective bargaining agreement; the proposed agreement’s predecessor expired in July of 2014.

Fortunately the dispute between the International Longshore and Warehouse Union (“ILWU”) and Pacific Maritime Association was resolved in February of this year, thereby preventing a shutdown of ports up and down the West Coast. Nonetheless, problems still remain in regards to the capacity of ports due to increases in the container capacity of the next generation of container ships, and increased shipping activity.

The latest generation of container ships can carry twice as many containers as the previous generation. Due to the increase in the size of container ships, shipping lines often lack enough containers to fully stock a cargo ship with containers, and take on containers from other shipping lines, which have different customers and supply chains. Because of this, finding the containers to remove them from the ship becomes significantly more complicated process, thereby causing delays. In addition, increased economic activity has caused ports with insufficient capacity to have delays moving containers to and from ships.

Ports have increased the depth of their channels and increased the capacity of their docks to accommodate the larger cargo ships, but the new generation of cargo ships, and increase in shipping activity have caused delays. In theory, all delays have some kind of economic cost as if a shipping container is sitting full on a cargo ship for more than several days it is merely acting as temporary storage as it no longer is transporting goods. Further, who is responsible for bearing or paying for the costs of the delays? As with many things in law, it depends.

Demurrage and detention charges appear to be the most likely form of the “cost” that shipping lines or carriers may attempt to impose on parties shipping goods. Demurrage and detention charges are generally governed by tariffs between the party shipping the goods, and the line with whom they are shipping the goods.

Detention charges relate to equipment while the container is empty after unpacking or before packing. A party shipping goods usually has five days (or a different period of time) to pick up the shipping container, load it, and return it to the carrier. If the party shipping goods exceeds this time period in returning the container, then they are liable for detention charges for each day that exceeds the five day period. Similarly, if the party receiving the goods takes more than the number of days allowed by the line to return the empty container, there may be additional detention charges.

Demurrage charges relate to cargo when it is located in the container. The day a container is removed or discharged from the ship, the party receiving goods generally has seven days to pick up the container from the port. If a party receiving exceeds this deadline, then they will incur demurrage charges. For example, if a container is removed from a ship on November 10, the party receiving the goods will have until November 16 to pick up the container without incurring demurrage charges.

Given the significant recent delays at ports in Washington State, California, and Oregon, and costs associated with them, it is possible that shipping lines may attempt to impose costs caused by the Port or their own actions customers in the form of purported detention and demurrage charges.

If you or your company is facing detention, demurrage or other charges from a shipping line or carrier, it advisable for you to review them in detail to ensure that they are accurate, and in compliance with demurrage and detention tariff and any other agreements that you have with them. If you believe the charges are invalid or frivolous, it is advisable to contact attorney, as a dispute over the charges could quickly escalate to the shipping line or carrier filing suit against you or your company.

In a matter involving demurrage charges, MDK Law recently saw a major North American carrier attempt to impose hundreds of thousands of demurrage charges on a small business in Bellevue. After the business refused to pay the charges, the major carrier brought a debt collection lawsuit against the owner, treating the dispute as a debt collection matter instead of breach of contract matter. The carrier attempted to persuade the business into paying the charges with a lawsuit that contained no information about how, why and/or when the charges were incurred, concluding that it was a foregone conclusion that the charges were legitimate.

MDK Law represented the owner in the lawsuit, and conducted extensive discovery against the carrier. Although the case settled for approximately 10% of the original amount of charges that were due, the carrier responses to MDK Law’s discovery requests suggested that there were little merit to the charges, and that the carrier was not properly tracking them.

While the data in the lawsuit does not necessarily suggest any systemic problem with carriers failing to maintain accurate records to support demurrage charges, particularly in light of recent delays in shipping times at West Coast ports, business owners who rely on foreign trade should be mindful of excessive demurrage charges that a carrier attempts to incur, and seek the advice of counsel before any potential dispute escalates into a lawsuit.

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