Recently, our friend Eric Johnson at JOC.com wrote a great article explaining the intricacies of demurrage at ocean terminals (see article here). The article explains how the recent Ocean Shipping Reform Act of 2022 (“OSRA-2022”) has explicit language in it aimed at increasing transparency in the invoicing and reconciliation of demurrage, and talks about all the different parties involved.
In OSRA-2022, there is language surrounding the invoicing of demurrage and detention fees requiring common carriers to provide a succinct *thirteen* data points to shippers and related parties. These thirteen data points are common in the container shipping industry, with event dates like the start of free time, end of free time, etc.
There is one data point however, that exists within the thirteen that Eric describes as currently unavailable – the “Date that Container is Made Available”. The challenge with this data point is that there are a lot of different parties involved in making the container actually available, and the language around the responsibility for this is currently unclear.
In normal container shipping conditions, which we have not seen for a few years, the container’s free time at the port typically begins the moment it is discharged from its mother vessel at the ocean terminal. This usually means that the terminal has completed its job, and it is now up to the shipper and their partners to pick the container up and out-gate it at the terminal before the Last Free Day.
The shipping container is discharged and free time begins – however the container may still have a Customs Hold, Line Hold, outstanding fees, or a number of other potential issues that prevent the terminal or ocean carrier from releasing the container to a trucker. In these cases, the onus for clearing these holds lies with the domestic parties, not the terminal or ocean carrier, so the clock on free time continues to tick. A container can be under a customs hold for weeks, and the demurrage charges will accumulate throughout.
Now – let's examine some recent chinks in the armor of the ocean terminals where the demurrage picture gets a bit murky.
- Container is discharged from its mother vessel
- US Customs clears the container, and all fees are paid
- Container is placed in the container yard, but at the bottom of a stack of five other containers that may or may not have been cleared yet
In this scenario, a drayage carrier may come to pick up the container but the terminal turns them away. The customs broker has cleared US Customs, all fees on the container have been paid, and the terminal’s website even says “Available for Pickup”, but the container is actually at the bottom of a giant pile of containers. The ocean terminal’s operating system doesn’t currently have a way to account for this, so the demurrage fees starts to pile up like the containers around it.
Gnosis Demurrage and Detention Alarms start sending emails to truckers and shippers about the demurrage, but there’s nothing that can be done.
What happens then?
According to OSRA-2022, the ocean carrier is responsible for providing an actual “Container Available” date. As Eric mentions in his article, there is not currently a data point for this in most systems. And as our example above shows, even if the data point exists, how do we know it’s accurate?
At Gnosis Freight we often attempt to “manufacture” data points from existing data sources that may not explicitly give this information. For example, perhaps the binary “YES/NO” of the “Available For Pickup” data point could also have timestamps recorded to notate the first time this value says “YES”? Well, let’s consider another scenario:
- Container is discharged from its vessel and placed in an open area in the yard
- Fees on the container are paid
- US Customs decides that there’s something suspicious with the shipment and its documentation, so the container has a customs hold
- Due to the customs hold, the container is marked as “Not Available”
In this Scenario B, the demurrage clock should start. The job of the ocean carrier and ocean terminal has been completed, even though the Boolean "Available For Pickup” is still "FALSE". There are a lot of different hands in the cookie jar here, but there’s nothing the ocean carrier or ocean terminal can do to speed up the availability of the container.
So how do we move past the above scenarios?
As Eric states in his article, there is a strict mandate for the “Container Available” date, but that data point does not currently exist. And even if it did - how reliable would it be?
One possible answer - believe it or not - comes from the Class I Railroads in North America.
Rail Data vs. Ocean Terminal Data
At Gnosis it has taken us a few years to integrate all of the different providers of data in the container shipping world, including Class I rail carrier into our Container Lifecycle Management platform and provide true end-to-end supply chain visibility. Interestingly, the railroads have recently increased their efforts to provide APIs and other methods for shippers to track ocean containers that make their way across the United States to inland container yards.
When integrating with each of these rail carriers, our engineering team noticed a different data point than those at ocean terminals. Not only was an “Unloaded from Rail” data point provided, but an additional “Notified Date”. This notification date signals the beginning of the rail storage clock, like demurrage at ocean terminals. In this situation, the clock is started by the notification of availability, which can be verified later by email/other information.
At this point in time, the rail carrier absolves itself from further responsibility to the shipper. This data point is also completely independent of US Customs, the Ocean Carrier, etc. which is how this data point is supposed to work. If each of the individual ocean terminals were to provide a “Notification of Availability Date” to their respective customers, then the free time clock would be much more granular and transparent for future invoices.
While this all sounds great - we are probably a ways away from that happening everywhere, and we will still have to rely on the current systems that are in place to “manufacture” this data point.
Jake Hoffman - Chief Technology Officer at Gnosis Freight