Coming Down the Pike: California governor signs legislation regarding detention and demurrage fees




LONG BEACH, October 4 – California has passed AB 2406, a new state law concerning per diem charges imposed by intermodal marine equipment providers or intermodal marine terminal operators.

Governor Gavin Newsom signed the bill to stop “extended dwell charges on a motor carrier, beneficial cargo owner, or other intermediary relative to transactions involving cargo shipped by intermodal transport.” 

Introduced by California Assembly member Cecilia Aguiar-Curry, AB2406 would prohibit an intermodal marine container provider from commencing or continuing free time if cargo is unavailable for retrieval and timely notice of cargo availability has not been provided.

Widespread support 

Early on, the proposed bill won widespread support from a coalition of 79 intermodal motor carriers, importers and exporters who sent a letter to California’s transport committee expressing their backing. 

The supporters include the American Trucking Associations, Harbor Trucking Association, California Trucking Association, Agriculture Transportation Coalition and the US Forage Export Council. 

“Abusive detention and demurrage practices worsen the supply chain crisis by monetizing delays to the benefit of equipment providers at the cost of California businesses and consumers,” the Long Beach-based Harbor Trucking Association said.

Tougher than federal law 

More precisely, the California Legislature describes the bill as “an act to amend Section 22928 of the Business and Professions Code, relating to business” – a decisive point according to Chris Micheli Esq., a lobbyist with law firm Aprea & Micheli

“This bill would specify that, where certain provisions are addressed by future federal law or regulation, and the federal law or regulation permits states to exceed the requirements set forth in the federal law or regulation, the more stringent provision is to govern,” Mr Micheli told Cargomatic. 

In a word, AB 2406 comes as additional legal support for shippers and truckers even as Congress and the Biden administration begin to weigh in against ocean carriers and marine terminal operators through passage of the Ocean Shipping Reform Act.

FMC wins more powers 

Passed by both Houses of Congress and signed into law by President Biden on June 16, 2022 OSRA gives greater powers to the Federal Maritime Commission, especially when it comes to matters of detention and demurrage, a sore point among shippers and motor carriers for decades.

FMC Chairman Dan Maffei gave a hint of his determination to use those new powers in August while visiting the Port of New York New Jersey at the request of the facility’s new director, Bethann Rooney. 

“The Commission has already been investigating reports of carriers charging per diem container charges even when the shipper or trucker cannot possibly return the container due to terminal congestion,” Chairman Maffei said.  

“I will ask that this investigation be broadened and intensified to cover instances where shippers and truckers are being forced to store containers or move them without proper compensation,” he told the New York gathering. 

Chairman Maffei’s visit came after the National Industrial Transportation League and Bi-State Motor Carriers Association wrote to the FMC about equipment availability, in particular seeking to suspend demurrage and detention charges at the Port of New York and New Jersey.

California’s new law is a timely reaffirmation of the need to protect the interests of the state’s shippers and motor carriers from unfairly imposed fees for detention and demurrage, an extra safeguard even as Congress and the Administration undertake actions of their own.

PHOTO: Fees pile up as containers linger. © Cargomatic