GKG Law Wins Major Victory for NVO Against Shipper Who Refused to Pay Detention and Demurrage Charges
GKG Law Wins Major Victory for NVO Against Shipper Who Refused to Pay Detention and Demurrage Charges
By John H. Kester
GKG Law recently prevailed in an action brought against a non-vessel operating common carrier (“NVO”) before the Federal Maritime Commission (“FMC” or the “Commission”) by a shipper alleging violations of the Shipping Act of 1984 and the Ocean Shipping Reform Act of 2022 (“OSRA 2022”). The shipper had refused to pay more than $1 million in detention and demurrage charges and was seeking a refund of more than $1 million of such that it had paid the NVO.
The Complainant had wrongly contended that the NVO was contractually responsible for all detention and demurrage charges assessed, while GKG asserted that the NVO was only responsible for any such charges it caused to accrue. GKG also presented evidence that much of the delays triggering the charges at issue were caused by systems failures at the shipper’s own warehouse.
In an Initial Decision issued in January 2024, the Chief Administrative Law Judge, Erin Wirth, flatly rejected the complaint, holding that the shipper had failed to establish that the NVO had violated the Shipping Act, and explicitly recognized that pursuant to Commission rules and regulations, the NVO was entitled to pass through detention and demurrage charges to its customers, unless the charges were attributable to the NVO. After a thorough review of extensive invoices and related correspondence dating back over a period of years, the Presiding Judge concluded that the NVO had acted reasonably and exercised due diligence in passing through the detention and demurrage charges at issue. Judge Wirth also recognized that passing through such charges was consistent with the parties’ negotiated rate agreements and in compliance with the NVO’s tariffs. The Initial Decision further recognized, as had been pointed out by GKG, that the shipper’s reliance on certain OSRA 2022 provisions was misplaced given that the shipments at issue predated enactment of OSRA 2022.
Following the Presiding Judge’s Initial Decision, the shipper filed Exceptions to the full Commission. The Commission rejected the Complainant ‘s Exceptions to the Initial Decision in its entirety. Instead, the Commission affirmed the initial Decision and dismissed all of the Complainant’s claims with prejudice.
Both the Initial Decision and the subsequent Commission Order affirming it mark a major victory for NVOs and confirm their ability to pass-through detention and demurrage charges to those parties ultimately responsible for payment of the charges.
Please contact us if you have any transportation-related (or other litigation-related) issues. Brendan Collins may be reached by telephone at (202) 342-6793 or by email at bcollins@gkglaw.com; John H. Kester may be reached at (202) 342-6751 or by email at jkester@gkglaw.com; Rachel Amster may be reached at (202) 342-2542 or by email at ramster@gkglaw.com.
