Unjust and unreasonable practice: the five-part test

Almost every argument about an unfair demurrage bill ends up at the same statute. 46 U.S.C. 41102(c) says a common carrier, marine terminal operator or ocean transportation intermediary “may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.” Demurrage and detention are charges for the use of terminal space and of containers, so they are inside that wording without any stretching.

What gets quoted far less often is the Commission’s own interpretation of what it takes to win under it.

Five elements, and the second one is the wall

46 CFR 545.4 interprets the statute “to require the following elements in order to establish a successful claim for reparations”, and then lists five. Not a balancing exercise, not a list of factors: elements.

Element (b) is the one that ends most conversations: the claimed acts or omissions must be occurring on a normal, customary, and continuous basis. A single invoice, however indefensible, is an event. The statute is about a practice.

That distinction is not a technicality invented to keep importers out. 41102(c) is addressed to a failure to “establish, observe, and enforce” practices, which is a failure of standing arrangements. One clerk billing one box wrongly on one Tuesday is not the thing the sentence describes.

Which means the incentive principle is one element, not the test

This is worth stating plainly because the opposite impression is everywhere, including in a good deal of vendor writing on the subject.

46 CFR 545.5 is the interpretive rule that gives us the incentive principle, and the one most often cited in a demurrage dispute. It says in its own first paragraph that its purpose is “to provide guidance about how the Commission will interpret 46 U.S.C. 41102(c) and § 545.4(d) in the context of demurrage and detention.”

Section 545.4(d) is element four. Reasonableness. So the whole incentive principle, with its particular applications for cargo availability, empty container return, notice of cargo availability and government inspections, is the interpretation of one of the five things that have to be true. It is the most useful of them, and it is not a shortcut past the other four.

For one invoice, the route is somewhere else

None of this means a single unfair charge has no remedy. It means the remedy is not this one.

The billing rules in 46 CFR part 541 operate per invoice and need no pattern proved. Section 541.5 is blunt about it: failure to include any of the required minimum information “eliminates any obligation of the billed party to pay the applicable charge”. Section 541.7(a) does the same for lateness: no invoice within thirty calendar days of the date the charge was last incurred, and the billed party is not required to pay. Those are checks against what the invoice has to carry, done one invoice at a time, and the charge complaint is the procedure built on them.

So the honest shape of it is two routes, used for different things:

• One invoice, wrong on its face. The billing rules and the charge complaint. Fields, dates, the thirty-day window, and whether you are the right party to bill at all.
• A carrier or terminal that does this as a matter of course. 41102(c), all five elements, reparations.

The second route is an evidence problem, and that is the point

Element (b) asks for a pattern and element (e) asks for proximate cause. Both are answered from records, not from recollection, and the records are per shipment: when the cargo became available, when and how notice reached you, when the empty could be returned, who was chased and on what day, what the invoice said at the time.

An import desk that keeps that per container has the makings of both elements. One that keeps it in a mailbox and a spreadsheet has neither, and will usually settle. Document packs routinely run about eight days late against free time on ordinary imports, and a week of demurrage on a single container has been reported at around US$12,000. That is roughly the point at which the difference between having the dates and remembering them stops being an administrative detail.

That is the unglamorous case for demurrage and detention software that keeps the dated record per shipment: not that it argues the law, but that it is the only thing standing between a desk and element (e).

What this entry is not

It is not legal advice and it is not a complete account of FMC practice. It is the text of one statute, the Commission’s own five-element interpretation of it, and the sentence in which the Commission says which element the incentive principle interprets. Everything above is quoted or cited; a reparations claim is run by people who do that for a living.