Hapag-Lloyd Agrees to $2M Settlement with FMC Over D&D Charges

Seeking to highlight the seriousness it places on the growing number of complaints from shippers over demurrage and detention fees, the Federal Maritime Commission is highlighting a $2 million settlement agreement reached with Hapag-Lloyd in a case that many viewed as a bellwether for the FMC and the industry. The FMC approved a settlement agreement reached between its Bureau of Enforcement and Hapag-Lloyd that increased the civil penalties initially set by an administrative judge while also agreeing to steps to clarify the carriers’ fee policies and enhance employee understanding of the FMC regulations.

“To restore full confidence in our ocean freight system, vigorous enforcement of FMC rules is necessary.  Specifically, we must ensure powerful ocean carriers obey the Shipping Act when dealing with American importers and exporters,” said FMC Chairman Daniel Maffei announcing the settlement.

The case stemmed from a complaint filed with the FMC from a California-based trucking company over the return of 11 containers in May and June 2021 on which Hapag had imposed fees saying the containers were returned after the free time provided by the carrier expired. The trucker argued that the return locations specified by Hapag were unavailable and that elements of the return policy were unclear. The trucker submitted evidence to Hapag demonstrating that there were no reservations available at the specified return locations but the carrier had continued to impose the D&D fees.

In April, an administrative judge ruled in favor of the FMC finding that Hapag had violated the rule regarding the charging of D&D fees. The judge imposed a civil penalty for a total amount of $822,220 along with cease and desist orders. 

The settlement agreement announced yesterday with the FMC states that “Hapag-Lloyd knowingly and willfully failed to establish, observe, and enforce just and reasonable regulations and practices” relating to receiving, handling, storing, or delivering property, by unreasonably refusing to waive detention charges. This included a period between May 2020 and May 2022, in violation of the Shipping Act of 1984.

The FMC and Hapag agreed it was in “the best interests” of the company and the industry to resolve the matter. Without admitting that any of its practices constituted a violation, Hapag will pay a $2 million fine and modify its practices. Among the steps the carrier agreed to is publishing detailed information on its return policy and practices on its website as well as clarifying the process for disputes. Further, the carrier will conduct training sessions regarding the FMC rules for all employees involved in the billing of D&D fees and handling disputes.

Chairman Maffei highlighted that, “the case is just part of an ongoing effort to investigate any conduct alleged to violate FMC rules – and in particular, the interpretive rule on detention and demurrage charges.” 

The FMC recently acknowledged that one of the two most common complaints Commissioner Rebecca Dye heard during her recently completed two-year fact finding into the container industry and supply chain was the excessive amounts of demurrage and detention fees shippers and truckers were charged. The FMC has received an increasing number of complaints despite the commission having issued a rule on D&D Fees in March 2020 and repeated follow-up communications.

During the Hapag case, a second trucking company sought to intervene contending it experienced similar problems. During the settlement process, that second company argued the proposed settlement might adversely affect its claims and establish a “safe harbor” for Hapag against additional claims. The FMC cited the remedial measures agreed to by Hapag-Lloyd saying if those agreements were established and followed it would address the concerns raised against the proposed settlement.

Pending before the FMC are claims against other carriers and terminals for their fees. The settlement with Hapag is seen as a demonstration to the industry over the FMC’s concern regarding these complaints from shippers.