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Wan Hai pays $850,000 fine to settle FMC detention case

Home News Wan Hai pays $850,000 fine to settle FMC detention case

Wan Hai pays $850,000 fine to settle FMC detention case

Carrier Wan Hai has agreed to pay an $850,000 civil penalty to settle an investigation into detention fees it assessed on 21 containers in Southern California last year, according to an agreement with the US Federal Maritime Commission’s (FMC’s) Bureau of Enforcement (BOE).

It is the second major penalty in two weeks related to the assessment of detention fees by shipping lines, following an April 21 ruling by an administrative law judge hitting Hapag-Lloyd with an $822,220 penalty.

The Wan Hai agreement, made this week, is not yet final, with the same judge needing to approve the settlement. The FMC would then have 30 days to determine if it wants to review the approved agreement, with any one of the five commissioners able to trigger such a review.

The Wan Hai penalty is tied to a period in the spring of 2021 in which the FMC’s BOE determined the container line assessed detention fees on 21 empty containers in Southern California when the party responsible for the container was “either offered no return locations, the designated terminal was not accepting the containers’ chassis, or appointments were unavailable for the subject containers.”

The original complaint described Wan Hai’s behavior in assessing detention when the containers could not be returned “knowing and willing.”

Detention refers to a penalty carriers assess to shippers or their drayage representatives for failure to return an empty container by a time specified in an ocean freight contract.

The issue of Wan Hai assessing the detention fees came to light in late December, part of an FMC investigation into whether the carrier had provided the parties responsible for the 21 containers adequate means to do so. Invoiced amounts for detention on the 21 containers ranged from $125 to $1,550.

Acknowledging intent to return empties 

At issue is whether container lines have a right to assess shippers and drayage providers detention fees when those parties make earnest efforts to return empties, but are thwarted by a lack of terminal space or insufficient return appointment slots.

The Dec. 30 FMC notice of investigation noted that the invoiced party provided Wan Hai with screenshots verifying these restrictions and requested a waiver, which was denied by the shipping line. That process echoes the Hapag-Lloyd case, where drayage operator Golden State Logistics attempted to return 11 empty containers in mid-2021, but was unable do to so owing to factors outside its control. Its requests to waive the fees were denied by Hapag-Lloyd.

In the Hapag-Lloyd case, where a judge ruled against the German shipping line, the carrier told JOC.com it was “looking into…[the] ruling and will then decide upon further legal action.” The Wan Hai penalty comes as part of a settlement between the BOE and the Taiwan-based shipping line.

The carrier has agreed to pay a civil penalty and refrain from collecting detention from unnamed parties related to the 21 containers. The agreement said it is not to be construed as an admission by Wan Hai of the violations set out in the December investigation. The agreement also stipulates that the BOE will take no further action against Wan Hai as it relates to the 21 containers originally investigated.

HTA praises settlement 

Matt Schrap, CEO of the Harbor Trucking Association, which represents Southern California drayage providers, called the decision “another chink in the armor for carriers on this issue. The veil has been pulled back.”

The penalties could well be a signal for other parties to file cases involving what they deem excessive or improper assessment of detention and demurrage fees by carriers. The FMC invited such complaints in a Dec. 28 notice as part of an ongoing investigation into excess dwell fees, with a shipper advisory group urging the commission to expand its scope from carriers to terminal operators as well.

The volume of complaints has ramped up since March, while federal and state legislation in California is targeting the issue as well.

Source: Eric Johnson at The Journal of Commerce (JOC)

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