Hapag-Lloyd will pay $2M to settle detention and demurrage case

Hapag-Lloyd said Thursday it was “pleased” with an agreement reached with the Federal Maritime Commission to pay the U.S. government a $2 million civil penalty to settle alleged Shipping Act violations related to its detention and demurrage practices. 

According to a settlement petition, the FMC’s Bureau of Enforcement (BOE) and Hapag-Lloyd came to agreement in mid-May, after an administrative law judge determined the ocean carrier was “in violation of 46 U.S.C. § 41102(c), assessed civil penalties and ordered to cease and desist from future violations, including imposing demurrage or detention when there are insufficient appointments available.”

The FMC approved the settlement Wednesday and said the $2 million will be paid to the U.S. Treasury’s general fund. 

“We are pleased with this settlement as it creates a common understanding in close cooperation and coordination with the authority on the future handling of demurrage and detention charges in the U.S.,” a Hapag-Lloyd spokesman told American Shipper in an email Thursday.

According to the terms of the agreement, the FMC will “drop the detention fee case,” the spokesman said.  

“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,” FMC Chairman Daniel Maffei said in a statement, adding the Hapag-Lloyd case was “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.” 

An administrative law judge issued an initial decision in April that found Hapag-Lloyd “violated the law by knowingly and willfully failing to establish, observe and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing or delivering property by unreasonably refusing to waive detention charges.”

The FMC filed the case against Hapag-Lloyd in November following a BOE investigation. 

According to FMC documents, Long Beach, California-based drayage carrier Orange Avenue Express (OAE) filed an unsuccessful motion to block the agreement on the grounds the “settlement terms may adversely affect its claims against Hapag-Lloyd and establish a ‘safe harbor’ that will insulate Hapag Lloyd from future 46 U.S.C. § 41102(c) claims challenging its detention policy or practices as unreasonable.”

OAE filed suit against Hapag-Lloyd in December disputing $258,000 in refrigerated container storage fees. 

In a complaint filed with the FMC, OAE said Hapag-Lloyd would charge detention “in an unreasonable, arbitrary and capricious” manner in violation of the Shipping Act.

The FMC assigned OAE’s complaint to an administrative law judge in December. An initial decision was to be issued within a year. 

In November 2020, the FMC expanded a fact-finding mission to determine if ocean carriers’ policies and practices “related to detention and demurrage, container return and container availability for U.S. export cargoes” violated the Shipping Act. 

Commissioner Rebecca Dye issued her findings last week and recommended further FMC investigation into the “numerous charges assessed by ocean common carriers and seaports and marine terminals through tariffs.”

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Click here for more American Shipper/FreightWaves stories by Senior Editor Kim Link-Wills.

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Editor: Kim Link Wills