ACCC - CARGO OWNERS NEED PROTECTION FROM UNREASONABLE DETENTION FEES

In its recent Container Stevedoring Monitoring Report, the ACCC has highlighted the impact of container detention fees on supply chain participants and the need for legislative reform. The call for reform follows reporting by the ACCC that industry participants have suffered from shorter free periods, greater frequency of detention fees and less flexibility from shipping lines in waiving or reducing fees.

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What caused the increase in detention fees

The reported increase in container detention fees was due to a number of factors, including:

• Congestion at terminals causing delays in the collection of containers;

• Shortages of truck drivers causing delays in both the collection, and return, for containers;

• Cargo owners taking longer to unload and make containers available for collection;

• Lack of space at container parks for the de-hire of containers;

• Restricted operating hours at container parks;

• Full export containers being unable to be loaded due to vessel delays or the cargo being rolled onto a another vessel; and

• Customs and biosecurity related delays.

When does the ACCC believe that detention fees are unreasonable

The ACCC sees that detention fees do serve a useful purpose in incentivising the prompt return of containers. However, the ACCC is quick to note that detention fees do not serve this purpose where a delay occurs for reasons outside of the control of the cargo owner and/or there is nothing the cargo owner can do to facilitate the quicker return of the container.

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Most obviously, there can be no justification for imposing detention fees where it is the shipping line causing the delay in returning the container.

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While not mentioned by the ACCC, it could hardly be said that detention charges served any useful purpose when delays were due to:

• COVID related truck driver shortages;

• Intervention by the ABF or the Department of Agriculture; or

• Floods or train derailments.

Current avenues to dispute container detention

Non-legal options

Shipping lines do permit ad hoc review of their charges. However, this suffers from the problem that the shipping line is solely in control of the review process and the decision. Industry has noted that shipping lines are currently a lot less flexible in waiving or reducing detention charges.

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The ACCC does suggest that in the short or medium term, cargo owners could change shipping lines to those that are more reasonable. However, this suffers from the following:

• All shipping lines impose detention fees in similar manner;

• Detention fees are often paid by a party that is not in control of the choice of shipping line;

• The lack of space and limited competition amongst shipping lines means that there is rarely multiple options available to cargo owners.

Legal options

It is not the role of the ACCC to advise cargo owners on legal options. However, it is important to review whether the detention charges have been legally imposed. Issues to consider are:

• Is there a contract between the shipping line and the party that has received the detention invoice

• Even if there was a contract, was there agreement that detention would apply, and if so, the free time and daily rate

• Is the contract worded in a way that the detention charges are enforceable, or are they an unenforceable penalty

• Has the shipping line breached the contract – for instance, by not nominating a return location for the container

• Has the contract become frustrated or impacted by a force majeure event

The legal options available will be unique to each consignment. It is also appreciated that pursuing legal options may not be viable for relatively small amounts of detention fees.

Reform options

The ACCC raised the following reform options:

• Repealing the exemption for shipping contracts from the unfair contract terms regime

• Creating a distinct prohibition on such unfair or unreasonable conduct (either confined to the shipping industry or more broadly).

In is unlikely that extending the unfair contract terms regime to shipping contracts would solve the problem. The limitations of this approach include:

• The protection would only apply to small businesses

• Unfair contract term laws do not apply to contract terms that set a price (such as a daily hire charge)

• A term is not unfair if it is necessary to protect a legitimate interest. Shipping lines would argue that incentivising the prompt return of containers is a legitimate interest.

The US Government has imposed, and enforced, a requirement that shipping lines act reasonably in imposing detention charges. There will naturally be difficulties in determining when charges are, and are not, reasonable. However, such a requirement would at least provide redress in circumstances where charges are clearly unreasonable.

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Protect yourself now rather than waiting for legislative reform

Logistics providers can take steps to give themselves the best chance of avoiding, or being able to pass on, detention charges.

It is crucial to decide who in the supply chain will be liable for container detention. This agreement should be put in writing and signed. Usually there are two scenarios to account for:

• Where the party that causes the delayed can be identified; and

• Who will be liable where the delay was not due to the fault of any party (such as Government intervention or natural disaster).

It is also crucial to ensure that you always inform the relevant parties of when the free time ends and the daily rates that apply.

If it is likely that problems will arise in returning containers within the free time, inform your client prior to accepting the consignment or as early as possible.

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If a party in the supply chain provides a document stating that they will not be liable for detention, do not ignore this. Raise this with the party and reach a written agreement on who will be liable. This may be a difficult conversation, but it avoids the uncertainty and difficulty or determining liability months, or years, later where both parties deny liability.

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CGT Law regularly assists forwarders, cargo owners and transport companies with container detention disputes. Please contact us if you would like to discuss a current dispute or changes to your commercial and transport documents to address this issue.