FMC Fines Hapag-Lloyd in First Prosecution of Detention, Demurrage Rule
Hapag-Lloyd was ordered to pay $822,220 by a U.S. administrative law judge after a Federal Maritime Commission investigation determined the carrier imposed unfair detention fees, according to an April 22 decision. Hapag-Lloyd “acted unreasonably” by charging detention fees on a drayage provider that was unable to make appointments to return empty containers, the FMC’s Bureau of Enforcement said, and continued to impose the charges after they were disputed alongside “corroborating evidence.”
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The case was the first enforcement ruling alleging a violation of the FMC’s May 2020 rule on detention and demurrage charges, which outlined how the agency views the “reasonableness” of the fees (see 1909130026 and 2004290037). Although the FMC had sought at least a $16.5 million penalty against the carrier -- in part to “deter” future violations -- Administrative Law Judge Erin Wirth pointed to Hapag-Lloyd’s lack of prior violations and that the ruling was the first under the agency’s 2020 rule.
But Wirth also said Hapag-Lloyd was clearly in breach of the FMC's rule, saying the carrier "continued to impose detention charges in violation of the Shipping Act” after the rule was issued, failed to change its policies and never sought guidance from the commission about its practices surrounding empty containers. “The evidence is therefore sufficient to find that this was a knowing and willful violation,” Wirth wrote.
The violations stemmed from a 2021 dispute between Hapag-Lloyd and Golden State Logistics, a California drayage company that was assessed, at most, $10,135 in detention fees for 11 empty containers that were returned from one to 11 days after free time expired. Hapag-Lloyd imposed the detention fees even though there weren’t “sufficient appointments” for GSL to return the containers, the FMC said.
The agency also said Hapag-Lloyd admitted that it was “aware” of the FMC’s demurrage and detention rule but didn’t train its staff or “create any policies to ensure compliance with the rule,” according to the decision. The carrier also failed to provide guidance when “rejecting disputes” over detention fees.
Hapag-Lloyd argued that it has a “reasonable policy” of charging detention on empty containers that aren’t returned to the terminal within free time when there is “reasonable evidence that it was possible for the motor carrier to return the empty container.” The carrier also said it provides “at least as much advance notice of empty return locations as the rest of the industry.”
Hapag-Lloyd said the FMC “gravely exaggerate[d] the nature of the alleged violation,” Wirth wrote, partly because the containers were all returned shortly after the free time expired. Hapag-Lloyd also said the detention charges have not been paid and GSL was able to “continue transporting containers despite non-payment of the invoices.”
Wirth ultimately found Hapag-Lloyd at fault, but ruled that not all the 11 empty containers were unfairly assessed with detention fees. “Hapag-Lloyd charged detention for fourteen days when there is evidence that sufficient appointments were not available,” the judge wrote. “This policy and practice is unreasonable because no amount of detention could have incentivized the return of the containers on those fourteen days.”
And because Hapag-Lloyd “has been clear that this was their normal policy and practice,” the judge wrote the unfair fees likely affected other shippers and logistics companies. “It may be presumed that this issue was not isolated to these shipments but that detention was imposed, and not waived, on other empty containers that could not be returned due to insufficient appointments.”
A Hapag-Lloyd spokesperson said the company is "thoroughly looking into this ruling and will then decide upon further legal action."