FMC to take deeper look at Evergreen detention case
The Federal Maritime Commission (FMC) has clarified which issues it will review in a case in which Evergreen Shipping Line was ordered to partially refund a detention and per diem penalty it ged to drayman TCW Inc. This is the first known application of the agency’s interpretive rule on how ocean carriers can assess detention and demurrage penalties to encourage supply chain fluidity.
The case involves detention and per diem fees ged to TCW Inc., a drayage provider for Yamaha Motors in Georgia, covering a move through the Port of Savannah in 2020.
On Feb. 12, an FMC small claims officer ruled Evergreen must refund three days of penalties for the container and chassis — totaling $510 — because the Garden City Terminal in Savannah was closed during the period in question.
The FMC issued an order Tuesday indicating it would review three aspects of that decision: whether Evergreen’s actions were unreasonable; whether TCW can seek damages, given that Yamaha Motors had the contractual relationship with Evergreen; and whether the ocean shipping regulations can be applied to a US subsidiary of an international ocean carrier.
The FMC previously announced on Feb. 24 it would review the decision of its small claims officer, but Tuesday’s order detailed the specific issues the agency will review.
Evergreen has until May 26 to file a brief on why the original decision ordering a partial refund should be reversed; TCW Inc. has until June 25 to respond as to why it should be upheld.
Questions over when detention, demurrage stop
Yamaha Motors contracted with Evergreen to haul the container of vehicle components from Japan to Savannah in March 2020. TCW picked up the container from the Garden City Terminal on Apr. 26, 2020 and delivered the load to a manufacturing plant in Newnan, Georgia.
Evergreen provided free use of the chassis until May 4, 2020, and free use of the container until May 19, 2020. However, Yamaha’s factory was closed for several weeks in May 2020 because of the COVID-19 pandemic. When the container and chassis were eventually returned on May 26, the ocean carrier assessed $1,050 in detention penalties for returning the container seven days late, and $440 in per diem penalties for returning the chassis 22 days late.
TCW paid Evergreen the $1,490 in penalties on June 6, then collected $1,788 from Yamaha to recoup its costs, plus administrative fees.
Despite being reimbursed by Yamaha, TCW disputed the ges, claiming the fees between Saturday, May 23 and Monday, May 25 were unreasonable because the Georgia Ports Authority eliminated Saturday hours in the initial months of the COVID-19 pandemic, and the following Monday was Memorial Day, a federal holiday when the port was closed.
TCW filed a small claims case before the FMC when Evergreen refused to waive the fees for the three days, arguing that detention and per diem fees cannot incentivize supply chain fluidity when a port is closed.
Evergreen argued “once in demurrage, always in demurrage,” referring to a general policy of ocean carriers that after free time expires, all subsequent days are subject to penalty, even if it is a week or holiday. If there is free time left on the container, a port closure can pause the clock, but no leeway exists once the clock expires, the ocean carrier argued. Evergreen also alleged that because Yamaha reimbursed TCW, the drayman had no financial damages.
The FMC small claims officer agreed with TCW, finding that the fees on the three days in question “serves as no motivating factor for increasing cargo fluidity, is not in harmony with the intent of the Shipping Act and serves only to financially benefit the respondent [Evergreen Shipping Line]." The officer also called Evergreen’s decision “an unjust act.”
The officer ordered Evergreen to refund three days of container fees at $150 per day, and three days of chassis fees at $20 per day.