May 13, 2021

TO:               , 

SUBJECT:  Excess Shipping Costs – There May be a Way to Recover Them

Understanding the high shipping charges incurred by many APA members this year, the APA Board requested that APA General Counsel Barry Hartman, K&L Gates, explore avenues of possible relief. Please review and respond to the memo he prepared below which will assist him in evaluating possible avenues of recourse. While it is possible that each company may have separate claims for refunds, there is a case pending now in which APA could file something that might help everyone achieve that, but we need information from you to know if that is a possibility.

Background

The Shipping Act prohibits maritime common carriers and intermediaries, and ports, from engaging in unreasonable practices, most notably charging shippers like fireworks companies, unreasonable amounts for delays and demurrage if for some reason the goods were ‘stuck’ with the carrier(s) through no fault of the shipper.

The Federal Maritime Commission (“FMC”) enforces this law when complaints are filed.  Last year the FMC issued an interpretation that basically said that where there are increased costs associated with shipping, and they aren’t the fault of the shipper (the beneficial cargo owner), they cannot be imposed on the shipper even if the increased costs are not the fault of the carrier either. In other words, as between two innocent parties, the carrier should bear the brunt of these increases.

Earlier this year a complaint was filed against Evergreen, claiming that demurrage fees charged through to the shipper, (via a middleman) by the carrier, were unreasonable.  In this case the “late” charges were imposed by the carrier because the equipment in question could not be returned to the Port because it was closed.  The FMC is now considering that case after one of its judges ruled that the charge to the shipper was unreasonable because there was nothing the shipper could have done to get the equipment back to the carrier. 

The carriers are saying it was not their fault and they should not be responsible. The shippers are saying that it was not the shipper’s fault, and the charges would not increase the chances that the equipment would be returned more quickly to the carrier, because the port was closed, they are not to blame. (It is not unreasonable for a carrier to charge a shipper for not returning equipment that the shipper if it could have been reasonably done.)

The FMC has invited any interested parties to file ‘friend of the court’ briefs by July 2. APA as an industry made up of shippers is considering doing this. In order to do so, we need to compile specific examples of charges that you are being assessed, either by the carrier or by a middleman, that reflect an effort to make you pay for delays or higher costs for delivery of goods, that were not in any way caused by you and that there was nothing you could have done to avoid the problems. Most of these might be detainer or demurrage charges - just about anything except a simple General Rate Increase (GRI). But even a GRI could be found unreasonable if it is imposed INSTEAD of other and the increases but around the same time and was unreasonable OR if it imposed the GRI AND the demurrage charges. It is our understanding that these charges come in all shapes and types.

Our goal is to demonstrate how pervasive the problem is and demonstrate the wide variety and nature of these charges, and why there is nothing that can be done to avoid them. We would then argue that the carriers, which are effectively exempt from antitrust laws and that have made incredible amounts of money, are able to absorb these costs better than can the pyrotechnics industry shippers. We will not reveal ANY names of companies. 

If we are successful in persuading the FMC to issue a favorable decision, then each of you who have incurred and paid those increased costs, could potentially files claims to recover these increased costs. (That won’t happen for at least 6 months).

Response Needed

If your company has been impacted, you are encouraged to send an email to both Barry Hartman [email protected] and John Longstreth at [email protected]

In your email, please provide the following:

              - the total amount of excessive charges you think have been imposed over the last 6 months to a year.

              - specific breakdowns of these increased costs - include invoices and an explanation of what it was for and why it was totally out of your control. (Again, it doesn’t matter if it was out of EVERYONE’S control; what matters is that whatever the circumstances were, they were out of your control).

Mr. Hartman and Mr. Longstreth will review your responses and armed with that information, plan to prepare a brief to file with the FMC on July 2, to illustrate how bad the situation is for APA members.

Time is of the essence.  Please provide your response details to Mr. Hartman and Mr. Longstreth NO LATER THAN JUNE 1. The brief is due July 2. 

Advisory #2021-13