Hapag-Lloyd said it was “pleased” with a deal agreed with the Federal Maritime Commission to pay the US government a $2 million civil penalty to address alleged Shipping Act violations connected to its detention and demurrage policies.
The FMC’s Bureau of Enforcement (BOE) and Hapag-Lloyd reached an agreement in mid-May after an administrative law judge determined the ocean carrier was “in violation of 46 U.S.C. 41102(c), assessed civil penalties, and ordered to cease and desist from future violations, including imposing demurrage or detention when there are insufficient appointments available,” according to a settlement petition.
The FMC authorized the settlement on Wednesday, and the $2 million will be transferred to the general fund of the United States Treasury.
“We are delighted with this resolution since it develops a common understanding in close cooperation and coordination with the authorities on the future management of demurrage and detention costs in the United States,” a Hapag-Lloyd spokeswoman said in an email to American Shipper on Thursday.
The FMC would “drop the detention fee case” under the conditions of the agreement, according to the spokeswoman.
“Strong enforcement of FMC standards is required to restore full confidence in our ocean freight industry.” “In particular, we must ensure that powerful ocean carriers comply with the Shipping Act when dealing with American importers and exporters,” FMC Chairman Daniel Maffei said in a statement, adding that the Hapag-Lloyd case was “part of an ongoing effort to investigate any conduct alleged to violate FMC rules — particularly the interpretive rule on detention and demurrage charges.”
In April, an administrative law judge found Hapag-Lloyd violated the law by “knowingly and willfully failing to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property by unreasonably refusing to waive detention charges.”
Following a BOE investigation, the FMC launched the lawsuit against Hapag-Lloyd in November.
According to FMC documents, Orange Avenue Express (OAE), a Long Beach, California-based drayage carrier, filed an unsuccessful motion to block the agreement on the grounds that the “settlement terms may adversely affect its claims against Hapag-Lloyd and establish a’safe harbor’ that will insulate Hapag Lloyd from future 46 U.S.C. 41102(c) claims challenging its detention policy or practices as unreasonable.”
In December, OAE sued Hapag-Lloyd over $258,000 in chilled container storage expenses.
OAE complained to the FMC that Hapag-Lloyd would charge detention “in an unreasonable, arbitrary, and capricious” manner, in breach of the Shipping Act.
In December, the FMC assigned OAE’s complaint to an administrative law judge. Within a year, an initial decision was to be issued.
The FMC expanded a fact-finding expedition in November 2020 to evaluate whether ocean carriers’ policies and procedures “related to detention and demurrage, container return, and container availability for US export cargoes” violated the Shipping Act.
Last Thursday, Commissioner Rebecca Dye presented her findings, recommending further FMC inquiry into the “many charges collected by ocean common carriers, seaports, and marine terminals through tariffs.”
