DEMURRAGE, DETENTION, AND OPPORTUNITY COSTS: A PROPOSED CONTRACTING SOLUTION

Disputes are swirling amongst carriers, marine terminals, shippers, and policy-makers about demurrage and detention charges, with the shippers claiming that the carriers and marine terminals are using demurrage and detention more as a revenue generator than as a fee for holding onto assets (i.e., containers). The Federal Maritime Commission has signaled that it prefers a market solution rather than a governmental dictate. One of its six suggestions is an optional billing model wherein terminal operators bill shippers directly for demurrage and ocean carriers bill shippers for detention; or similar models to resolve disputes, provide clarity, and transparency. We propose a contracting model grounded in Agency Theory as part of a potential marketbased resolution.