Who Pays the Price? D.C. Circuit Overturns FMC’s Rule on Demurrage and Detention

World Shipping Council v. Fed. Mar. Comm'n, No. 24-1088, 2025 WL 2698837 (D.C. Cir. Sept. 23, 2025).

By Fraser K. Mitchell, Associate Attorney at Galloway Johnson Tompkins Burr and Smith

     The United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) overruled a Federal Maritime Commission (“FMC” or the “Commission”) regulation, Code of Federal Regulation § 541.4, that limited the parties against whom demurrage and detention charges could be billed.[1]

     After growing concerns and pressure by various groups, including motor carriers, the FMC issued an interpretive rule in 2020 stating that, when assessing reasonableness of demurrage and detention charging practices, it would consider “the extent to which demurrage and detention are serving their intended primary purposes as financial incentives to promote freight fluidity.”[2]

     In 2022, at Congress’s instruction, the Commission proposed a rule specifying which parties could be assessed demurrage and detention charges.[3] The FMC’s proposed rule outlined an approach under which only “the person who contracted with the common carrier for the carriage or storage of goods may be issued an invoice.”[4] This was intended to address the concerns of groups, primarily truckers, who were being billed for demurrage and detention despite not being parties to the shipping contract.[5] This approach was adopted in the Commission’s 2024 Final Rule, although cosignee, the ultimate recipients of the cargo, could still be billed for demurrage and detention regardless of whether they were a party to the shipping contract.[6]

     The World Shipping Council challenged the FMC’s Final Rule on various grounds, including that it was arbitrary and capricious.[7] The D.C. Circuit agreed, reasoning that the FMC failed to explain two internal inconsistencies within the Final Rule.[8] First, the Final Rule exempted motor carriers from demurrage and detention charges even when the motor carrier had contractual privity with an ocean carrier.[9] Second, the Final Rule allowed cosignees to be billed regardless of whether they had contractual privity with the ocean carrier.[10] This dichotomy ran counter to the stated rationale for adopting the Final Rule – namely, to limit demurrage and detention charges to parties in contractual privity with an ocean carrier.[11]

     The D.C. Circuit invalidated Code of Federal Regulation § 541.4 but declined to invalidate other provisions within the Final Rule.[12]

[1] World Shipping Council v. Fed. Mar. Comm'n, No. 24-1088, 2025 WL 2698837, at *1 (D.C. Cir. Sept. 23, 2025).

[2] Id. at *2.

[3] Id.

[4] Id.

[5] Id.

[6] World Shipping Council, 2025 WL 2698837 at *3.

[7] Id. at *4.

[8] Id. at *4–6.

[9] Id. at *4–5.

[10] Id. at *6–7.

[11] World Shipping Council, 2025 WL 2698837 at *7.

[12] Id. at *8