International Experience in Demurrage Regulation

Brazilian National

Waterway Transportation

Agency

International

Experience in

Demurrage

Regulation

Federative Republic of Brazil

Jair Bolsonaro

President

Ministry of Infrastructure

Tarcísio Gomes de Freitas

Ministry of Infrastructure

Brazilian National Waterway Transportation Agency –

ANTAQ Collegiate Board of Directors

Eduardo Nery

Director

General

Adalberto Tokarski

Director

Gabriela Coelho

Interim Director

SEPN Quadra 514, Conjunto “E”, Edifício ANTAQ, SDS, 3º andar, 55 61 20296764

CEP: 70760-545, Brasília – DF

[email protected]

Partial non-profit reproduction is permitted, by any means, if the source is cited.

Technical team:

Superintendence of Performance, Development and Sustainability (SDS)

José Renato Ribas Fialho – Superintendent

Development and Studies Management (GDE)

José Gonçalves Moreira Neto – Manager

Specialists in Waterway Transport Services Regulation: Ana Paula Harumi

Higa

Arthur Felipe de Menezes Il Pak Rodrigo

Guimarães Trajano

Formatting: José Antonio Machado do Nascimento

A265e

Brazilian National Waterway Transportation Agency (Brazil).

International experience in demurrage regulation. / National Waterway Transportation Agency. Brasília: ANTAQ, 2021.

78p.:il.

1. Regulation. 2. Demurrage. 3. Maritime carriers. 4. Logistics. I. Brazilian National Waterway Transport Agency (Brazil). II.

Superintendence of Performance, Development and Sustainability (SDS). III. Development and Studies Management (GDE).

CDD: 387.5.

Brazilian National Waterway

Transportation Agency

International Experience

in Demurrage Regulation

Brasilia

2021

List of figures and tables

Figure 1 - Contributor profile. Source: Subsidy Collection 03/20 - Preparation 43

GDE/SDS/ANTAQ.

Figure 2 – Legal nature of container demurrage. Source: Taking 44

Grants 03/20 – Preparation GDE/SDS.

Figure 3 – Is the Term of Responsibility an adhesion contract? Source: Taking 44

Grants 03/20 – Preparation GDE/SDS/ANTAQ.

Figure 4 – Favorable to some form of demurrage regulation? Source: Taking 45

Grants 03/20 – Preparation GDE/SDS/ANTAQ.

Table 1 – Accumulated movement, in TEU, between Brazilian and foreign ports 47

(2018). Source: ANTAQ. Statistical Yearbook (2018).

Table 2 – Sampling of ports by continent. Source: Preparation GDE/SDS. 47.

Table 3 – Market share and demurrage data source for each 48

maritime carrier. Source: Market share. Available at:

https://alphaliner.axsmarine.com/PublicTop100/. Access on 11/13/2020. Preparation

GDE/SDS.

Table 4 – Average Demurrage price per carrier on import on the 14th day 54

(USD/day).

Table 5 – Average Demurrage price per carrier on import on the 14th day 56

(USD/day).

Table 6 – Term of free stay on import, by shipowner. 57

SUMMARY

List of figures and tables IV

1. INTRODUCTION 5

2. LEGAL NATURE OF DEMURRAGE 11

2.1. Origin 11

2.2. Doctrinal differences 16

2.3. Dominant jurisprudence 19

3. INTERNATIONAL EXPERIENCE 21

3.1. FMC interpretive rule 22

3.2. FIATA recommendations 30

4. DEMURRAGE CHARGE

IN BRAZIL 31

4.1. Term of liability for

container return 32

4.2. Customs broker role 35

4.3. Spread charge on demurrage 38

4.4. Brazilian logistical problems 39

4.5. Positioning of interest groups

5.5.1. Import demurrage values 54

5.5.2. Export demurrage values 56

5.5.3. Free stay periods on import 57

5.5.4. Free stay periods on export 58

5.6. Comparative analysis of demurrage

values and free stay periods 59

5.6.1. Average demurrage on import 60

5.6.2. Average demurrage on export 62

5.6.3. Free stay on import 64

5.6.4. Free stay on export 66

6. CONCLUSIONS 67

7. REFERENCES 71

8. ATTACHMENTS 76

1 - Interpretive Rule of Demurrage and Detention

under the Maritime Navigation Act – United States

Federal Maritime Commission 76

2 - Quantitative and Summary of Contributions in Subsidy

Collection nº 03/2020

in taking grants

Subsidy Collection nº 03/2020 78

5. VALUES COMPARISON 46

5.1. Sampling 47

5.1.1. Ports 47

5.1.2. Maritime carriers 48

5.1.3. Types of containers 48

5.2. Average demurrage

calculation methodology 49

5.3. Methodological observations 50

5.4. Type of research 53

5.5. Demurrage fees and

free stay periods 54

International experience in demurrage regulation

1. INTRODUCTION

As Silveira (2018) points out, in the early 1990s, concomitantly with the imports’

explosion caused by the opening of the economy, maritime navigation began to suffer

from the lack of containers. Brazilian importers, used to receiving goods and taking

them to their facilities, used the containers as warehouses taking months to return

them, without incurring any burden. Faced with this situation, some shipowners started

to enforce the “container clause” in the bill of lading, where the free days and days on

demurrage were noted.

The objective, at first, was to promote the awareness of importers for

the quick return of the units used to package the goods, but it soon

became a major source of income, because importers were not able

to spawn the units and return them in time to meet the deadline.

(SILVEIRA, 2018, p.5)

Therefore, the demurrage of containers stems from the imbalance in the movement of

containers in export and import. The logistical bottleneck demanded a positioning by

the carriers to guarantee that the containers would be returned within the agreed

period and that the logistics chain would not be interrupted.

The causes for non-return within the agreed period are numerous, but they become

more relevant when the system does not work optimally. Despite pioneering efforts, a

decade after the opening of the economy it was still necessary to publish articles in the

specialized press that pointed to the institute of container demurrage as a legal

solution for the reinsertion of containers in the logistics chain.

The reasons for the delay in returning the empty unit are the most

varied: delay in starting the procedures with the shipowner;

documentary failures; goods that get stuck in the bureaucracy of

Customs agencies; seizure of imported goods without meeting legal

requirements; commercial disagreements between exporter and

importer, causing the abandonment of the cargo and its forfeiture

decree; lack of space or conditions to receive the goods at the

importer's premises, with the use of the container as packaging; and,

finally, where the cause and consequence of the problem are

confused, some importers, aware of the difficulty in obtaining empty

containers, retain the unit deliberately in order to use it in future

exports.

[...]

International experience in demurrage regulation

One of the ways to overcome the lack of containers obstacle is the

awareness of all players in the sector that any problems with the

goods do not affect the cargo unit and cannot harm its immediate

return to the shipowner. The most suitable way to create this culture

in the market is through the charging of container demurrage.

Although the legal provision does not have the force to oblige the

importer to promptly return the cargo safe, there is a clause in the

transportation contracts that obliges the importer to pay a fine for its

unreasonable retention.

[...]

The receipt of amounts as demurrage by itself would already have a

fairly positive effect minimizing the losses caused by the unavailability

of the container, indirectly contributing to moderate eventual

increases in freight. However, it is the long-term effects of demurrage

collection, carried out in an effective, orderly, and permanent way by

all shipowners, which are the most interesting.

The certainty, on the part of importers, that demurrage will be

charge, will contribute to avoid delays in the return of the container.

The importer, fearful of paying the fine, will be more attentive and

diligent, creating mechanisms and procedures to enable the unloading

and return of the container in the shortest possible time. The importer

will be able to differentiate the load from the load unit. Any problems

with the goods will be awaiting solution, prioritizing the delivery of the

empty container, with the immediate request for its unloading by the

importers.

(GAZETA MERCANTIL, 2004, p. 2)

Currently, charging for container demurrage is already a widespread practice in the

Brazilian market, but its legal institute needs to be further discussed. Conceptually, it is

a daily amount agreed by the parties in favor of the owner or possessor of the

container, resulting from the container not being returned within the agreed-upon

period of free time.

It is, in fact, a pre-fixation of the indemnity for the delay in the return

of the container, precisely carried out to avoid uncertainty in the

quantification, as is the case with the conventional penalty clause.

This value works as a means of repression for the user to return the

cargo unit within the deadline provided in the Ocean Bill of Lading

and, in case of non-compliance, early settlement of losses and

damages due to the injured party. (CECAFÉ, 2020 – Subsidy

Collection)

1 Subsidy Collection N

03/2020/SRG – ANTAQ was carried out from 09/21/2020 to 10/16/2020 and was

later extended until 11/03/2020. Its objective was to send contributions and subsidies for the

implementation of topic 2.2 of the 2020/2021 Biennium Regulatory Agenda, which seeks to develop a

methodology to determine abusive charging for container demurrage.

International experience in demurrage regulation

Thus, one of the few consensuses in the analysis of the issue is the dual purpose of

container demurrage: (i) compensation for losses and damages of the maritime carrier

(freight that has not been obtained and logistical losses with the repositioning of

containers, for example); and (ii) to compel the return of the container.

These inherent and inseparable functionalities are responsible for conflicting

understandings as to the legal nature of container demurrage. The purpose of the

indemnity is to compensate for losses and damages and the purpose of the penalty

clause is to compel the return of the container. The discussion is relevant because its

definition has significant consequences for the need to prove intent, the limitation of

amounts, the statute of limitations, tax effects, among others.

It should be noted that there is no law that specifically deals with container demurrage.

In the absence of specific legislation, it is the national jurisprudence that has been

guiding interpretations about the applicable legal regime. In this context, container

demurrage is now charged from users in analogy to the demurrage of ships,

consolidating itself as a specific institute for the maritime transportation of

containerized cargo.

It is worth mentioning that

Lex Maritima

is recognized by Brazilian Legislation as a

criterion for contractual interpretation, as per art. 113, §1, II of the Civil Code and

article 4 of the Law of Introduction to Brazilian Rules of Law

2. However, the

internalization of international usages and customs is not unconditional, as it is limited

the precepts of Brazilian Law, which require the observance of solidary contractual

principles, such as the social function of the contract, objective good faith, and the

principle of contractual justice.

2 As already explained, there has never been a federal legislation in Brazil that specifically deals with the

legal provision and legal obstacles arising from container demurrage charges. In the absence of specific

legislation on the subject, Decree-Law nº 4.657/1942, known as the Law of Introduction to the Norms of

Brazilian Law, expressly provides the content of art. 4, which governs the following: “When the law is

silent, the judge will decide the case according to analogy, customs and general principles of Law” – and

this is what has been effectively constructed by jurisprudence. [...] Our Commercial Code (Law nº

556/1850) includes maritime trade in its second part, but only issues related to the chartering of ships,

being completely silent on the subject of container demurrage, which can even be explained by a temporal

aspect, since the phenomenon of containerization in international maritime transportation effectively

occurred in Brazil after the 1980s – more than a hundred years after the enactment of the Commercial

Code, which, it is worth noting, dates from 1850. (WINTER, 2019, p.42)

International experience in demurrage regulation

The statements of maritime carriers, exemplified in the excerpt transcribed below,

emphasize that the transportation of cargo is a private activity, linked to the activity

and performed by parties with equal capacities:

3. The maritime transportation contract reflects a convergence of

wills. It is not an essential public service and the parties, as legitimate

and capable legal entities, are free to choose with whom to contract.

In this sense, contractual freedom is a corollary of the principles of

Private Law applicable to maritime transportation contracts.

(CENTRONAVE, 2020 – Subsidy Collection)

On the other hand, scholars, and advocates of users' rights postulate that the Bill of

Lading (BL) has previously stipulated clauses with no room for negotiation, which

would limit isonomy in the definition of the clauses.

In fact, although the contract of carriage is formally considered a

bilateral contract, it expresses the concrete will of only one of the

parties, the carrier.

The carrier imposes its will through a written contract with printed and

previously stipulated clauses. Hence the term contract of adhesion.

The will of the shipper or the recipient of the cargo is limited to the

adherence to the contractual terms previously stipulated by the

carrier. (CREMONEZE, 2012, pp.33 and 34)

The numerous disputes in all instances of the Brazilian judiciary indicate that the issue

is far from being settled. If on one hand there are those who defend the existence of

isonomy between the parties and the prevalence of the

Pacta Sunt Servanda

principle,

others demand some state regulation as to the values stipulated by the carrier. Faced

with this situation, ANTAQ has been called upon several times to take a stand.

Currently, in addition to the applicable Civil Code provisions, especially those related to

the statute of limitations, we have in force ANTAQ Normative Resolution nº 18/2017

(RN-18), which provides for the rights and duties of users, intermediary agents and

companies that operate in maritime support navigation, port support, cabotage and

long distance, and establish administrative infractions. The normative reserved Section

III (Container demurrage) to address the issue and contributed to reduce information

asymmetry, defining, after extensive discussion with the regulated sector, the concept

of container demurrage and the concept of free time. Furthermore, RN-18 determined

the obligation of transparency and prior knowledge of the amounts charged, in addition

to establishing clear milestones for the start and end dates of the free time.

International experience in demurrage regulation

Despite the regulatory advances introduced by RN-18, there are still many disputes and

legal actions regarding the amounts charged for container demurrage. Many users of

waterway transportation services allege the existence of abusive charges. To analyze

the issue, ANTAQ included in its Regulatory Agenda, Biennium 2020/2021, the topic

2.2 – Development of a methodology to determine abusive charges for container

demurrage

(ANTAQ Resolution nº 7.754/2020).

Thus, seeking to support the analysis of the theme, the Department of Research and

Development (GDE/SDS) was asked to conduct the study “International Benchmark of

Demurrage Regulation,” in line with its regulatory competences

This study contributes to the understanding of the international experience on the

charge for container demurrage and aims to map the treatment applied in other

countries to the regulatory problem under analysis, to subsidize the survey of possible

actions and identify effects or impacts not yet detected by the Agency.

As specified in the General Guidelines and the Guidance Guide for the Preparation of

Regulatory Impact Analysis (RIA) of the Presidency of Brazil

4, the study of international

experience can contribute to the various RIA stages. Example:

Bringing other perspectives on the regulatory problem.

Pointing out approaches and possibilities for action not yet identified

by the agency, body, or entity.

Pointing out impacts of the problem or action alternatives not initially

identified by the agency, body, or entity.

3 According to ANTAQ's Internal Regulations (ANTAQ Resolution N

5.585/2014, art. 63, it is up to the

Department of Research and Development– (SDS), [...] to “IV - carry out studies applied to the definitions

of tariffs and prices practiced in cargo handling and storage activities in organized ports and authorized

port facilities and transport of passengers and cargo in navigation, in comparison with the costs and

economic benefits transferred to users by the investments made; V - carry out studies and research that

promote continuous improvement of knowledge of the regulated market, with a view to strengthening the

management quality of operators operating within the scope of the national waterway system; VI - carry

out studies that support the formulation of public policies within the scope of the national waterway

system.”

4 General guidelines and guidance for the preparation of a Regulatory Impact Analysis – AIR/Sub-office of

Analysis and Monitoring of Governmental Policies – Brasília: Presidency of Brazil, 2018.

International experience in demurrage regulation

Bringing useful data to analysis.

Anticipating problems observed in action alternatives already tested.

Anticipating unexpected reactions from agents to already tested action

alternatives.

Assisting in the definition of intervention monitoring indicators.

Bringing benchmark performance parameters. (PRESIDENCY OF

BRAZIL, 2018, p. 66)

Therefore, the study presented here aims to identify the international experience in the

regulation of demurrage of containers and analyze the applicability of international

concepts to the Brazilian legal system and the national logistics reality.

Accordingly, the first chapter, entitled “1 – LEGAL NATURE OF DEMURRAGE,”

addresses the origin of the institute, differentiating the demurrage of containers from

that of ships. Then, the doctrinal divergences about the legal nature of demurrage and

the dominant jurisprudence are presented. The chapter discusses the practical effects

of each possible framework.

The following chapter, “2 – INTERNATIONAL EXPERIENCE,” analyzes the solutions

pointed out by some countries, bringing other perspectives to the issue, with the

suggestions of the International Federation of Freight Forwarders Associations

(FIATA)5

and the regulatory proposal of the Federal Maritime Commission (FMC) being especially

analyzed

Then, chapter “3 – CHARACTERISTICS OF DEMURRAGE CHARGE IN BRAZIL” focuses

on specific Brazilian regulatory problems and makes a statistical analysis of the

taxpayers' positions in Subsidy Collection.

Chapter “4 – COMPARISON OF VALUES” compares the demurrage values of containers

and days of free time charged internationally by the main shipowners operating in

Brazil, in comparison with the values charged in the national territory.

5 FIATA is a non-governmental organization that represents freight forwarders and cargo agents in around

150 countries, being a reference source in international policies and regulations that govern the freight

forwarding and logistics industry. (Source: https://fiata.com/who-we-are.html)

6 The FMC is the US waterway transport regulatory agency, whose goal is to ensure that neither the

activities of liner shipping groups nor the laws or regulations of foreign governments impose unfair costs

on US exporters or US consumers of imported goods. (Source: https://www.fmc.gov/about-the-fmc/)

International experience in demurrage regulation

Finally, chapter “5 – CONCLUSIONS” presents the main notes of the previous chapters,

making a critical summary of what was presented.

Considering the stipulated objectives, the methodology applied was exploratory

research, gathering information about the international experience in the regulation of

container demurrage to support an analysis in Comparative Law. Therefore, the subject

was investigated, formulating more precise problems and hypotheses, without

intending to end the discussion.

In this sense, the procedural methodology applied was bibliographic research, in which

knowledge and information about the topic were collected from different published

materials, putting different authors, data and points of view into dialogue.

2. LEGAL NATURE OF DEMURRAGE

2.1. Origin

When starting the analysis of the origin of the container

demurrage charge, it's worth emphasizing Collyer's (2007)

etymological analysis. In addition to delving into the meaning of

the term, the text indicates the spread of the fee in several

countries and languages.

Demurrage is a compound word, formed

by agglutination (demur + rage). The definition of the term is based

on demur: period agreed between the contractual parties during

which the owner or operator of the vessel places and keeps it at the

disposal of the charterer (or the consignee of the goods) for loading

and discharge operations during which no payment is owed.

According to this time approach, demurrage is the utilization of a

vessel beyond its stay; it is the extra time used.

This concept can be confirmed by the simple observation of the words

used to indicate demurrage:

överliggetidsersättning

överliggedagspenge

, in Scandinavian countries;

overliggeld

, in the

Netherlands;

Überliegegeld

, in Germany;

surestaries

, in France and

Belgium and even

contro-stallie

, in Italy (TIBERG, 1971, p. 2). The

prefix (over, Uber, sur) is evident in all of them, meaning beyond,

over the stay. It is easy to conclude that the intrinsic meaning of the

word carries with it the notion of time, or excess of time. (COLLYER,

2007, pp. 3 and 4)

Its origin goes back to the first charter contracts and is related to the time that the

ship remained in the port beyond the established term.

International experience in demurrage regulation

Demurrage was born out of the

Lex Mercatoria

, the uses and customs rooted in customary Maritime Law which is

traditionally applied to delayed vessel return based on charter contracts instrumentalized in the charter party.

However, after the emergence of containers and their widespread use

in global transport, especially in the maritime modal, the first cases of

container demurrage took place, originating from the maritime

transportation contract, not from the charter contracts.

Container demurrage was accepted in our country without ever having

been properly regulated or affirmed in Brazilian Law. It was

introduced by usage and customs and by analogy with the demurrage

of a ship existing in the Commercial Code of 1850. This circumstance

calls for urgent discussion about its application and its effects on

contemporary reality. (WINTER, 2019, p. 10)

The term is currently used both to define delay and to refer to the amount paid

because of the delay. Frequently, the expression is used with different meanings,

which can lead to a confusion of concepts. At the wharf, some relate demurrage with

the occupation of space in the port, describing it as the overextension of time a

container remains in the terminal, and the amount charged if the container does not

return to its owner within the agreed time is known as detention. For others,

demurrage is the amount paid for prolonged use of the container within the port and

detention for prolonged use outside the port. In the present work, the term detention

is not used. In addition, the terms “demurrage” or “container overstay”

are

permutable and refer only to the delay in returning the container, with no relation to

the additional stay in port.Although it is relatively easy to adjust the understanding of

the term, defining its legal nature brings many controversies. Even in relation to the

demurrage of ships, which has been charged for centuries now, there is great

disagreement in the doctrine as to its legal nature.

7 The concept adopted in this work is that of ANTAQ Normative Resolution N

18/2017, art. 2, XX -

container demurrage: amount due to the maritime carrier, the container owner or the forwarding agent for

the days that exceed the agreed period of free time of the container for shipment or for its return.

8 Defending the indemnity character of the demurrage, DINIZ (1998, p. 56); SAMPAIO DE LACERDA (1984,

p. 191); and GILBERTONI (2005, p. 196) apply. Attributing the nature of a fine, KEEDI and MENDONÇA

(2002, p. 100); ANJOS and CAMINHA GOMES (1992, p. 187); and LOSTADO (2000, p. 1) stand out.

International experience in demurrage regulation

In comparative Law, French Law and German Law frame the nature of demurrage as a freight supplement if

contemplated in the contract. In the same sense, Portuguese Law expressly sustains the nature of demurrage as a

freight supplement.

In American Law, demurrage has a compensatory nature.

(OCTAVIANO MARTINS, 2015, p. 419)

The French framing of demurrage as a freight supplement is not a consensus and there

are those who understand it as an indemnity, as indicated in the transcript below.

Georges Ripert himself (1954, p. 234), however, states that the legal

nature of demurrages is debatable, but he takes the following

position: “When considering compensation paid by the charterer to

the shipowner for having exceeded the period provided for in the

contract, it must be said that demurrages represent damages.” He

clarifies that French jurisprudence, considering that the term

demurrage can either indicate additional time or compensation, ends

up concluding that demurrage is a supplement to the freight.

Ripert explains that, for the aforementioned jurisprudence to reach

this conclusion, it certainly started from the definition of charter

existing in article 286 of the French Commercial Code: convention or

contract for the leasing of a vessel; thus, if the loading and/or

unloading operation is extended for a certain time beyond the

contracted stay, the rent is extended. Ripert, however, rebels against

this position. He states that “the legal analysis is certainly false” and

goes back to expressing himself in the sense that demurrages are,

legally, “damage and losses fixed conventionally between the parties

for the delay in the performance of the charterer's obligations”

(RIPERT, 1954; apud COLLYER, 2007, p.5)

This issue in English Law has the distinction between a fine and a pre-fixed indemnity

as a peculiarity

9. This interpretation, based on Common Law, indicates that

Salgues (2005, p. 2) sustains the character of a penalty clause in demurrage. In the same sense,

according to Sorrentino, Higa, D'Antonio and Ribeiro (2006, p. 12), and since demurrage is provided for in

the contract, it cannot be attributed to a fine for non-compliance with the obligation. Esteves (1988, p. 61)

maintains, based on the Portuguese legislation referred to above, that demurrage is a freight supplement,

because although it implies delay, demurrage must not be understood as a situation of delay incurred by

the charterer or as a breach of a contractual duty, but a right of the charterer. He also maintains that

demurrage consists, at the same time, of a new term granted to the charterer and an additional amount to

the freight, to be paid in cash. (OCTAVIANO MARTINS, 2015, p. 418)

9 The institute of “pre-fixed indemnity” was not established in the Brazilian legal system. In the Civil Code,

there is the indemnification, corresponding to the compensation for losses and damages (arts. 402 to 405

of the CC) and the penalty clause, whose value cannot exceed the main obligation (arts. 408 to 416 of the

CC). Judicial decisions that understand the demurrage of containers as a pre-fixed indemnity do so based

on uses and customs, internalizing this institute of English Law.

International experience in demurrage regulation

demurrage has the nature of a “liquidated indemnity” according to the teachings of

Clive M. SCHMITTHOFF (1980)

apud FARIAS (2020):

In English Law, a fixed amount to be paid for breach of contract may be either a pre-fixed indemnity or a fine. (...) With

regard to the treatment of contractual penalty clauses in other legal systems, Peter Benjamin adds that -the extreme

complexity of the French, German and Soviet legislations with regard to penalty clauses, assuming that penalty clauses

are or are not susceptible to modification, each system elaborated its own rule, adopting a series of exceptions that

gave rise to considerable uncertainty in practice. These observations, however, do not apply to Common Law countries,

where the English distinction between pre-fixed damages and fines prevails. (FARIAS, 2020 – Collection of Subsidies)

It is further added that:

In English Law, for a long time, demurrage was the sum or amount paid (under a contract) for the detention of a vessel

in a loading or discharge harbor, beyond the contracted stay. Nowadays, the prevailing understanding, based on Case

Law, is that demurrage is a pre-fixed indemnity for breach of contract (liquidated damages for such a breach), as stated

by John Schofield (2000, p. 317).

It is interesting, however, the understanding of Lord Brandon, of the

House of Lords (apud SCHOFIELD, 2000, p. 315), when judging the

case “President of India v. Lips Maritime Corporation (The Lips).” For

him, demurrage is liability in (or for) liquidated damages, which we

could translate as a (contractual) liability or obligation to indemnify

(according to the pre-fixed amount) the loss or damage caused by the

breach of contract. Other forms used by English Law to conceptualize

demurrage are liquidated damages, agreed additional value for

an allowed detention, e sum payable under and by reason of

a contract for detaining a ship.

However, demurrage should not be confused with damages for

detention. This expression is commonly used to mean compensation

(to be fixed) for detention of the ship, and it can be charged in

addition to demurrage or in replacement of it, although the English

and American courts resist this claim, which will be detailed below. As

a result of what we have said, therefore, we can conclude that

demurrage is a species of the indemnity genus (damages for

detention).

Therefore, demurrage can either mean the time used beyond the

permitted stay, or the agreed amount that must be paid in

compensation for the use, or detention of the ship, beyond the

permitted stay. In the first case it is time, or delay, and in the second,

according to English jurisprudence, it is an (pre-fixed) indemnity for

breach of contract. (COLLYER, 2007, p. 5)

10 SCHMITTOFF, Clive M. Export Trade: The Law and Practice of International Trade, 7th Edition, London,

Ed. Stevens & Sons, 1980, pg. 87.

International experience in demurrage regulation

However, it is crucial to note that most Comparative Law considerations and analyses

refer to the demurrage of ships. When it comes to the demurrage of containers,

frequent transpositions of legal concepts are seen in the doctrine and jurisprudence

11,

giving rise to significant distortions in interpretation, since each institute originates

from a completely different contract.

Demurrage of ships should not be confused with demurrage

(detention) of containers.

Despite the many differences between the two institutes, both use the

same terminology in some legal systems (such as Brazil), due to a

common point: lay days, extrapolation of the stay period.

(OCTAVIANO MARTINS, 2015, p. 535)

The demurrage of ships is formalized by the ship charter contract, or departed letter,

being negotiated between the freighter and the charterer of the vessel. Demurrage of

containers, on the other hand, results from the instrumentation of the transportation

contract, which binds the carrier (or its representative) to the service taker (shipper or

consignee).

As an example of imprecision, when referring to the provision of demurrage of

containers in Brazilian legislation, many authors cite the Commercial Code

12 in the

chapter that deals with the nature and form of the charter contract and the letters of

departure.

With all due respect to the historical

Lex Mercatoria

, based on usages

and customs, and to the adoption of the analogy, there is no way,

nowadays, to accept the interpretation that the commercial,

contractual and legal treatment destined to demurrage in cases of

chartering of ships , as well as its consequences, is the same to be

given to container demurrage, as they are, in fact, absolutely different

situations, as will be shown below. (WINTER, 2019 p.26)

11 “Another reason for the legal uncertainty seen in the courts is the confusion of various concepts. This

confusion is often generated by specialists in Maritime Law, in order to protect the interests of their clients

(generally shipowners), which have been causing the distortion of several concepts and, mainly, the

formation of dangerous judicial precedents that do not match the general principles of Private Law, such

as the social function of the contract, the balance between the parties, among others.” (MOYSES FILHO,

Marco Antônio and SILVA, Renã Margalho. In: MARTINS, Eliane M. Octaviano; OLIVEIRA, Paulo Henrique

Reis de (Orgs.). Maritime, port, and customs Law: contemporary issues. Belo Horizonte: Arraes Editores

(2017, p. 371).

12 Commercial Code (arts. 567, nº 5 and nº 6; 591/593, 595, 606, 609, 611, 613 and 627).

International experience in demurrage regulation

Therefore, there is no factual support for treating the two concepts as analogous.

Corroborating the arguments raised, the renowned American legal dictionary Black's

Law Dictionary

13 brought in its edition published in 2004, different definitions of ship

and container demurrage. On the demurrage of ships, it defines that it is

“pre-fixed

indemnity due by the charterer to the shipowner for the charterer's inability to load

embark and disembark the cargo at the agreed time”

; and the demurrage of containers

defined as

“charge derived from the late return of maritime containers or other

equipment.”

12. The conclusion is that ship demurrage and container demurrage

are completely different institutes: while in the first case the charge

takes into account that the service has not yet been completed, in the

second the amount charged is based on the incentive to return the

cargo units for a brief resumption of the shipping carrier's logistical

flow, and also to indemnify for the impediment in providing a new

maritime transport service with the respective cargo box.

(CENTRONAVE, 2020, pp. 2 and 3 – Charging of Allowances)

2.2. Doctrinal differences

The legal nature of the demurrage of containers generates great doctrinal and

jurisprudential discussion, as its framework has consequences for the need to prove

intent, the limitation of amounts, the determination of the statute of limitations, tax

effects, among others.

The relevance of investigating the different positions in the doctrine about the legal

nature of demurrage, framing it in one of the existing institutes in the Brazilian positive

system, stems from the dogmatic science of Law, which, according to Tercio Sampaio

Ferraz Jr. (

apud

ROSSI and CASTRO JÚNIOR, 2018, p. 10),

“is thus constructed as a

process of subsumption dominated by a binary schematism, which reduces legal

objects to two possibilities: it is either about this or about that.”

Basically, there are three exponent theories that attempt to determine

the core of container demurrage as: (i) additional freight (or

supplementary freight); (ii) penalty clause, whose terminology is best

used when there is a contractual provision regarding pre-established

amounts (demurrage) or not (detention), due as demurrage (when

there is none, it is preferable to refer to it only as a fine); and (iii)

indemnity. (MARCHIOLI, 2020 – Subsidy Collection)

13 GARNER, Bryan A., Black’s Law Dictionary, Edition 8, U.S.A., Ed. Thomson West, 2004, p. 465, apud

FARIAS, 2020 – Subsidy Collection.

International experience in demurrage regulation

The examination of the matter is a challenge for both the factual analysis, since its

presence in maritime transport relations is inevitable due to logistical and

administrative problems in Brazilian ports, and the legal analysis, due to the enormous

confusion regarding doctrinal concepts and the diametrically opposed interests

involved.

Regarding the doctrinal understanding to define the legal regime

applicable to container demurrage, there is a tendency for some

scholars to defend and define the indemnity nature of the institute

without limitation of values, based on the principle of

“Pacta Sunt

Servanda,

” which favors the maritime carrier.

On the other hand, there is part of the specialized doctrine that

understands that container demurrage must be interpreted under the

legal regime of a penalty clause.

Specifically, regarding the framework of the legal regime to be applied

to container demurrage, there have been many doctrinal theses, for

example: freight supplement, lending, fine, lease, pre-fixed indemnity

(penalty clause) and simple indemnity.

Notably, those who defend the interests of shipowners use legal

arguments in favor of the indemnity legal regime, and those who

defend the interests of cargo or importers use the legal grounds for

applying the legal regime of penalty clause. (WINTER, 2019, p. 56).

It is worth remembering that container demurrage collection does not have an express

provision in Brazilian legislation at the level of ordinary law. In the absence of a

positive reference, there are those who defend the analogy with the rules for

demurrage of ships provided for in the Commercial Code of 1850, especially regarding

what must be stated in the charter contract (known as charter party). However, as

highlighted above, the container demurrage originates in the transportation contract

and not in the charter contract.

Given the inapplicability of the Commercial Code, it is within the scope of the Civil

Code, Law Nº 10.406, of January 10, 2002 (CC), that the issue can be settled.

The current that understands demurrage as a penalty clause is based on the fact that

demurrage is an accessory obligation, since there is no demurrage without the main

obligation, which is the transportation contract. From this point of view, it must be

previously fixed in the contract, with a determined deadline and amounts for the delay.

This framework would result in the application of art. 412 of the Civil Code (CC), which

determines the limitation of the value of the sanction imposed in the penalty clause to

that of the main obligation.

International experience in demurrage regulation

However, article 408 of the CC provides: “The debtor incurs by right in the penal

clause, provided that, culpably, he fails to fulfill the obligation or constitutes a delay.”

Important information brought by the aforementioned article is that only the culpable

default of the obligation will incur in a penalty clause.

In that regard, the framing of the container demurrage as a penalty clause would

depend on the assessment of the debtor's fault or willful misconduct, which would go

against the grain of international practice. On the other hand, in the agreed penalty

clause (provided for in the contract), it is not necessary for the creditor to claim

damage (art. 416 CC), that is, it would waive the effective proof or settlement of the

damage.

In summary, the text below describes the understanding of the current that defends

that demurrage is a penalty clause:

Notably, it is an ancillary obligation derived from the Maritime Bill of

Lading, which main purpose is to transport the cargo from one point

to another upon payment of freight. As the container is an integral

part of the ship from the moment it is made available to the

consignee, it must be returned within the agreed period of time.

Its character as a penalty clause arises precisely from the prefixation

of an amount already paid to compensate for any damage in the face

of non-compliance with the accessory obligation, that is, the non-

timely return of the container. Hence, arises the penalty, already

predetermined in the contract, either in the Bill of Lading or in the

Term of Commitment to Return the Container, in the exact terms of

article 408 of the Civil Code.

Due precisely to the dynamics of maritime transport, the penalty

clause does not require proof of damage, in order to prevent the

carrier from having to, in each situation, survey and prove, on a case-

by-case basis, its losses, which would really affect its activity, given

the difficult procedure to be carried out on a case-by-case basis.

(WINTER, 2019, p. 67)

The current that defends that container demurrage is an indemnity bases its argument

on the fact that it derives from a contract resulting from a private relationship between

actors with isonomy of decision and based on the autonomy of the parties' will. In

addition, it reinforces the jurisprudential understanding, which, with a large majority,

understands it to be an indemnity.

The aforementioned doctrine has already shown a strong inclination

towards the indemnity nature of demurrage, and national

jurisprudence although in isolated situations it has stated that it is a

lease, a lending, and even a fine, tends to accept a container

demurrage as compensation for the loss of the carrier in not being

able to have the equipment for other international trips for the

transportation of goods, the value of which to be indemnified is pre-

International experience in demurrage regulation

adjusted by the parties

International experience in demurrage regulation

involved or, as others prefer to say, the demurrage is pre-determined

by the carrier and admitted by the consignee or importer of the

transported goods, which does not change the obligations assumed

since it comes from some form of pact. (SILVEIRA, 2018 p. 36)

By understanding the demurrage of containers as an indemnity, it would fit into art.

402 of the CC and it must be considered that the losses and damages owed to the

creditor cover, in addition to what he lost, what he reasonably failed to profit from.

However, it cannot be forgotten that the amounts owed only include actual losses and

lost profits as a direct and immediate effect of the debtor's non-performance (art. 403

of the CC), that is, the creditor's obligation to prove the losses would be unavoidable.

2.3. Dominant jurisprudence

Currently, the prevailing jurisprudence understands that demurrage collection or

container demurrage has the legal nature of a pre-fixed indemnity for breach of

contract, in order to compensate the owner for the retention of the safe for a longer

period than the one previously agreed upon, regardless of the demonstration of guilt or

injury. Thus, the judgments of the Superior Court of Justice (REsp 1.286.209-SP; AgInt

in AREsp 842151-SP; AgRg in REsp 1451054-PR, among others) stand out, which

understand the legal nature of container demurrage as a pre-fixed indemnity and not

as a penalty clause.

Among the judgments that caused the greatest repercussion in the maritime sector

was the one that decided, in 2016, Special Appeal nº 1.286.209, of which João Otávio

de Noronha was the Minister Rapporteur. By unanimous decision of the Third Panel,

the following amendment was generated:

SPECIAL RESOURCE. ACTION FOR COLLECTION OF CONTAINER

OVERSTAYS (DEMURRAGES). DENIAL OF JURISDICTIONAL

PROVISION. NON-OCCURRENCE. LEGAL NATURE. INDEMNITY.

CONTRACTUAL BREACH. DEBTOR'S LIABILITY. LIMITATION OF

INDEMNITY VALUE.

PACTA SUNT

SERVANDA

. 1. The negative allegation of delivery of full jurisdictional

provision is unreasonable if the Court of origin examined and decided,

in a motivated and sufficient manner, the issues that delimited the

controversy. 2. Demurrages have a legal nature of indemnity, and not

of a penalty clause, which excludes the incidence of art. 412 of the

Civil Code. 3. If the value of the demurrages reaches an excessive

level only due to the negligence of the party obliged to return the

containers, the

Pacta Sunt Servanda

principle must be privileged,

otherwise the Judiciary will reward the wrongful conduct of the debtor

party. 4. Special resource known and provided.

International experience in demurrage regulation

With due respect, the main criticisms of the positioning emanated derive from the lack

of differentiation between the charter contract (which gives rise to the demurrage of

ships) and the transportation contract (which gives rise to container demurrage).

The doctrinal quotes by J. C. Sampaio de Lacerda113, Carla Adriana

Comitre Gibertoni

114 and Carlos Rubens Caminha Gomes/Edson

Antônio Miranda

115, all used to support the vote, are clearly directed to

charter contracts, not to maritime cargo transportation contracts (as,

in fact, it occurred in the specific case).

Notably, the wrong direction of the vote remains clear due to the

basis of interpretation used, confusing the demurrage of a ship

(chartering) with the demurrage of a container (transportation

contract – BL or Term of Commitment). (WINTER, 2019, p. 58

)

To exemplify the importance of not exchanging the concepts of demurrage of ships

and containers, it is enough to verify how each contract is carried out and what is the

bargaining power of each party.

Even more attention should be given to these differences in cases

where the “consignee” did not even have prior access to the

transportation contract, or who, due to the requirement to release the

cargo, signed the Container Return Commitment Term by their legal

representative. (WINTER, 2019, p. 59)

Despite the prevailing understanding, one cannot forget the discordant positions. In

this sense, it is worth mentioning the position of Judge Cauduro Padin, of the São

Paulo Court of Justice, when reporting an Appeal involving container demurrage,

especially as it occurred after the STJ judgment (Resp Nº 1.286.209-SP), as shown in

the excerpt below:

Action of obligation to do c.c. damning request. Sea freight transport.

Demurrage overstay. Similar nature to the penalty clause. Anticipation

of loss and damage. Incidence of the sanction value in accordance

with the terms of the liability waiver. Guilty conduct that is equivalent

to the delay/default itself. Exclusion of liability only in fortuitous cases.

Innocence. Non-incidence of the Consumer Protection Code. Sentence

maintenance. Resource not provided.

The argument previously discussed Is extracted from the above decision:

Demurrage has an effect and nature comparable to the penalty clause

and this is a lawful agreement between the parties. It seeks to

achieve the disincentive to the total or partial breach of the obligation

or even to remove the delay in the performance. The clause brings

with it a prior assessment of the losses and damages freely adjusted

by the

International experience in demurrage regulation

parties. As a result, it does not depend on proof of damage. (ROSSI

and CASTRO JÚNIOR, 2018, p. 16)

Thus, despite the existence of discordant opinions, Brazil adopted through

jurisprudential decisions, demurrage as a pre-fixed indemnity. Although in Brazil there

is no distinction between pre-fixed indemnity for damages and a penalty clause, as it

exists in the law originating from countries that apply the Common Law, Brazilian

Courts continue to understand that container demurrage should not be treated as a

penalty clause.

Finally, it is noted that despite the prevailing jurisprudence there are still many

complaints from users and those who defend their interests, as can be seen in the

excerpt below.

We realize, with undisguised concern, that the legal nature of

demurrage has been subverted over the years, in such a way that it is

no longer a legitimate protection mechanism for the shipowner

against possible abuses by their container users, to become a

reprehensible form of oppression and undue enrichment. Not all, but

many shipowners profit more from demurrage charges than from the

freights themselves, and the demurrage charge does not serve the

purpose of profit, it serves only to “punish” possible abuses by cargo

consignees regarding the use of containers for longer than is due and

agreed. (CREMONEZE, 2012, apud ROSSI and CASTRO JÚNIOR,

2018, p. 32)

3. INTERNATIONAL EXPERIENCE

In recent years, the demurrage rate has increased considerably worldwide, and the

free time has decreased. There were indications that shipowners abused demurrage

charges to maximize profits, not necessarily from freight. (ROEMER, 2018)

The increase in demurrage charges generated many disputes, complaints, as well as

legal disputes.

Other factors like port congestion, such as the one that occurred in the United States

between 2014 and 2015, due to climate and labor problems, also partly influenced the

increase in the collection of this fee.

This chapter addresses how the demurrage issue was dealt with by the Federal

Maritime Commission (FMC), as well as the suggestions given by FIATA (International

Federation of Freight

International experience in demurrage regulation

Forwarders Associations) for handling commercial disputes around the practice and

charging of demurrage.

3.1. FMC interpretive rule

On May 18

2020, the final interpretive rule (FMC, 2020) of the Federal Maritime

Commission (FMC) dealing with container demurrage came into force. This decision

represented an important reference for a problem repeatedly pointed out in

international maritime transportation and related to the high charge for container

demurrage in several ports around the world.

Under this new interpretive rule, the FMC can assess the extent to which the container

demurrage rate and policy fulfill the objective of encouraging the movement of cargo

and promoting the fluidity of transportation. The rule also provides guidance on how

the Commission can apply this principle in the context of cargo (and information)

availability, considering factors related to the content and clarity of shipowners' and

maritime terminals' policies, as well as in relation to the terminology used and the

return of empty containers.

Although the final interpretive rule is the result of Fact-Finding Investigation Nº 28,

from 2018, the FMC's attention to the issue of demurrage dates back to 2014 when

this Commission hosted four regional forums on ports that addressed congestion in the

international maritime chain. Although these forums did not directly address the issue

of demurrage, it was clear that shippers and truck drivers were unhappy with the

demurrage practices and free time stay period of the container.

In 2015, the FMC published a Report on demurrage rules, fees, and practices (FMC,

2015). This Report contained the following definitions

14:

Demurrage is a charge for the use of space; detention is a charge for

the use of equipment. Free time is the grace period for which neither

of these charges will be incurred. Both are meant to compensate for

the use of space and equipment, and to encourage the efficient

movement of cargo by importers, exporters, and drayage providers.

14 It is noteworthy that the definition of container demurrage in the present study is based on the RN-18

and, as explained in Chapter 1, does not cover the costs related to the occupation of space in the port

terminal.

International experience in demurrage regulation

While the 2015 FMC Report provided a definition, terms and practices related to

demurrage are not uniform even among shipowners, as noted by the Fact-Finding

Investigation Nº 28 research team, which identified two main approaches used to

determine demurrage charges:

Based on whether the container is (a) on-terminal (inside the gate)

or (b) off-terminal (outside the gate). In this case:

“Demurrage” is a charge for exceeding allotted free time on the

terminal – i.e., between when cargo is off-loaded from a ship until it

moves out the terminal gate. Such “demurrage” may represent use of

terminal space (terminal demurrage) and the use of equipment

(carrier demurrage – i.e., in-port detention).

“Detention” is a charge for use of equipment (containers) beyond

the allotted free time outside the port – i.e., after the full container

has left the port and until the empty container is returned.

Based on whether the container is: (a) being charged for extended

use of terminal space, or (b) for extended use of carrier equipment

(container). In this case:

“Demurrage” is the MTO’s charge for exceeding allotted free time

on the terminal (but not for carrier equipment use). If there is a

carrier charge for use of the container while cargo is on the terminal,

it would be labelled as some form of “detention” – e.g., in-port

detention.

“Detention” is the charge for use of equipment (containers) beyond

the allotted free time – whether at the terminal or outside the port.

(FMC, 2018)

As pointed out in the FMC preliminary Report (2018), the different approaches to the

definition regarding the term and occurrence of demurrage give rise to doubts and

questions, mainly for users of maritime transport:

Under the first approach, it might be less clear to a VOCC’s customer

what it is being charged for – terminal space usage or container

usage, or both. Moreover, because MTOs sometimes collect carrier

demurrage on a VOCC’s behalf, it might not be clear to a customer to

whom their payment goes.

Under the second approach, it is clear the MTO who controls the

terminal is charging for extended use of its asset (terminal space),

and the carrier who controls the container is charging for the use of

its asset (the container).

From the FMC Report (2015), the following main points can be highlighted: the total

average of demurrage and detention prices can be higher for importers than exporters;

demurrage rates are higher than detention rates; US ports have similar rates, except

New York/New Jersey ports that have higher prices; demurrage practices seem to be

International experience in demurrage regulation

under the control of shipowners than of maritime terminal operators15 (MTOs); the

terminology is not uniform, nor are the circumstances in which these fees are not

charged, get reimbursed, or have another form of mitigation, making comparison in

the sector unfeasible.

The FMC Report (2015) also corroborated the perception that demurrage was not

serving the purpose of speeding up the movement of cargo, which was its original

goal.

It should be noted that the final interpretive rule is the result of a process that began

in December 2016, when a coalition of shippers called the “Coalition for Fair Port

Practices” submitted a petition to the FMC for the adoption of an interpretive rule that

would clarify what “fair and reasonable rules and practices” would be regarding the

assessment of “demurrage,” “detention” and “per diem”:

The Coalition for Fair Port Practices (“Petitioners” or “Coalition”), a

group of 26 trade associations representing importers, exporters,

drayage providers, freight forwarders, Customs brokers, and third-

party logistics providers (“3PLs”), requests that the Federal Maritime

Commission (“FMC” and “Commission”) initiate a rulemaking

proceeding, pursuant to 46 C.F .R. § 502.51, for the purpose of

adopting a rule that will interpret the Shipping Act of 1984, as

amended, and specifically 46 U.S.C. § 41102(c), to clarify what

constitutes “just and reasonable rules and practices” with respect to

the assessment of demurrage, detention, and per diem charges by

ocean common carriers and marine terminal operators when ports are

congested or otherwise inaccessible. Specifically, Petitioners are

proposing a rule for adoption by the Commission and request specific

guidance as to the reasonableness of such charges when port

conditions prevent the timely pick up of cargo or the return of carrier

equipment because of broad circumstances that are beyond the

control of shippers, receivers, or drayage providers. (COALITION,

2016)

For some years now, North American importers and exporters, transportation

intermediaries, and truck drivers complained that shipowners and maritime terminal

operators (MTOs) were adopting unfair demurrage practices that penalized shippers,

intermediaries, and truck drivers for circumstances beyond their control.

Thus, the intermediaries and truck drivers petitioned the Commission to adopt a rule

specifying certain circumstances in which the charge for demurrage

15 As defined by the FMC, MTOs include public port authorities and private terminals.

International experience in demurrage regulation

and detention would be unreasonable. They requested that shipowners and terminals

not be allowed to charge for demurrage when cargo and equipment could not be

recovered or returned, and that charging in these situations weakened the incentive for

these companies to seek solutions to port congestion or their own operational

inefficiencies.

Thus, in early March 2018, the FMC approved the initiation of an investigation headed

by Commissioner Rebecca Dye

16, focusing on practices related to demurrage. This

investigation, called Fact-Finding Nº 28, aimed to clarify five main points:

 Whether the alignment of commercial, contractual, and cargo interests

increases or worsens the ability to efficiently move cargo through US

ports.

 If, and when, the carrier or MTO delivered the cargo to the shipper or

consignee.

 What are the demurrage and detention collection practices.

 What are the practices regarding delays caused by external events or

stakeholders.

 What are the practices regarding dispute settlement.

During the investigation, hearings, field interviews, meetings with industry leaders, and

information gathering were carried out to ascertain the facts. In September 2018, a

preliminary Report was published, and in December 2018 the Final Report was

published.

Among the findings of the investigation and presented in the Final Report (FMC, 2018)

the following points can be highlighted:

 Demurrage and detention are valuable charges when applied to

encourage the prompt movement of cargo from ports and maritime

terminals.

 The entire international maritime logistics chain can benefit from

transparent, consistent, and reasonable demurrage practices.

The FMC's governing body consists of the President and four Commissioners, all appointed by the

President of the United States and confirmed by the US Senate for a four-year term.

International experience in demurrage regulation

 The performance of the international logistics chain can be improved by

providing information on the status of the cargo.

 Standardized and transparent demurrage language would also improve

the international freight system.

 Billing practice and dispute settlement process should be clear,

streamlined, and accessible.

 There should be explicit guidelines as to the types of evidence that are

relevant to resolving disputes.

In August 2019, Commissioner Dye recommended the FMC to issue an interpretive

rule

17 to implement the general guidelines contained in the Final Report on the

application of demurrage charges. She also recommended that the Commission

establish an Advisory Board of Shippers and continue to support the work of the Supply

Chain Innovation Team in Memphis (FMC, 2019).

According to Commissioner Dye’s recommendation, the suggested interpretive rule

seeks to clarify how the Commission will assess the reasonableness of demurrage and

detention practices. In this sense, the purpose of charging these fees is to serve as a

financial incentive for those interested in the cargo to timely remove it and return the

equipment. However, when the incentives no longer work, as shippers are unable to

collect cargo or return containers within the agreed time frame, the charges must be

suspended.

As for the Advisory Board of Shippers, Commissioner Dye points out that it will allow

the assessment of the implementation of the recommendations of Fact-Finding Nº 28,

as well as contributing to obtain advice from North American importers and exporters

on other matters of the Commission.

In September 2019, the FMC published a proposed interpretive demurrage rule that

received several comments. After analyzing these, the Commission published the final

interpretative rule in May 2020 (FMC, 2020), the full text of which can be viewed in

Attachment I of this Report.

17 Interpretive rule is an agency rule that clarifies or explains existing laws or rules/regulations. An

interpretive rule does not need to satisfy the requirements set out in the Administrative Procedure Act,

e.g., notifying the public and providing an opportunity for comment.

International experience in demurrage regulation

The rule sets out a non-exhaustive list of factors that the FMC may consider in the

analysis to assess whether demurrage practices are fair and reasonable, and builds on

the understanding that demurrage charges serve to expedite the movement of cargo in

terminals, as they are an incentive for the various agents acting in the logistics chain to

seek to move with agility in order to give fluidity to transportation. Considering this,

the interpretive rule of the FMC premises that the more the demurrage practices are

aligned with the search for agility and fluidity of transportation, the less they should be

considered unreasonable.

The guidelines adopted by the FMC in the final interpretive rule aim to help shipowners

and MTOs to avoid penalties provided for in the Shipping Act, as well as to increase the

awareness of shippers, intermediaries and truck drivers about their obligations in order

to promote fluidity of the freight system, bring clarification, reduce and speed up

disputes, in addition to increasing competition and innovation in operations and

commercial policies, emphasizing the issue of providing information, especially

regarding cargo availability.

It is worth noting that shipowners and maritime terminals agree that these points are

part of their list of obligations.

With the rule, the FMC can consider whether the regulated entities are providing

adequate information to those responsible for the cargo. Thus, in practice, the

Commission may consider the type of notice and to whom the notice is addressed,

providing the format, method of distribution, timing, and effect. As a result, shipowners

must include in their contracts the obligation to inform consignees when they can

remove the cargo. The alignment of this information between shipowners, MTOs,

intermediaries, and truck drivers contributed to an efficient removal of cargo from the

terminal space.

In addition, the Commission’s guidelines (FMC, 2020) focused on the existence, clarity,

content, and accessibility of dispute settlement and demurrage charging practices.

They also highlighted the issue of terminology used, as investigations found that

demurrage practices and rules were complex, inconsistent, variable, and lacked

transparency. Some of the main points addressed by the FMC are listed below:

The interpretive rule applies to container demurrage practices and

regulations. Thus, for the purposes of the rule demurrage includes

International experience in demurrage regulation

all charges, including per day, determined by shipowners, maritime

terminals, or maritime intermediaries for the use of terminal space

(onshore) or container, not included in freight (FMC, 2020).

Historically, the FMC recognizes that demurrage has penal elements that

were established to encourage the prompt movement of cargo off the

pier, but also includes an element compensating for the use of facilities,

security, fire protection, etc., in the case of non-withdrawal in the free

period.

While the focus of the FMC is on the incentive principle and its

applications, the guidelines presented in the interpretive rule also

include other factors that the Commission may consider as contributing

to the reasonableness of the matter. For example, the existence of

accessibility to regulations and the practice of demurrage. This is due to

the fact that, during investigations, it was found that there was a lack of

transparency regarding demurrage practices, including dispute

settlement processes and collection procedures.

Regarding dispute settlement, the FMC considers it important that

information such as contact channels, deadlines and requirements for

conciliation be made available.

A controversial point that emerged in the investigations concerns the

burden of proof, that is who should gather evidence relevant to the

issue of demurrage. The FMC points out that demurrage disputes can be

settled more efficiently if the shipper or truck driver knows in advance

what kind of documentation or other evidence the shipowner or terminal

needs to extend the free period or not charge demurrage fees.

The interpretive rule states that the Commission may consider in the

reasonableness analysis the extent to which the regulated entities have

defined demurrage terms, the accessibility of definitions, and how much

the definitions differ from terms used in other contexts. The FMC

understands that a basic principle of demurrage practices is the clear

definition of the terms used.

International experience in demurrage regulation

While not a rule-specific subject, the term “carrier haulage” appeared

many times during the rule-building process. “Carrier haulage” is a

transportation arrangement also referred to as “store door” or “door

move” or “door-to-door” delivery, as we know it in Brazil. In this type of

transportation arrangement, the shipowner is responsible for arranging

the container's transportation from one terminal to another location,

such as a consignee warehouse. The “merchant haulage” is also known

as CY (“container yard”

18) or “port-to-port” transportation. In the latter

case, the shipper makes the arrangements for land transportation.

Some argue that in the case of “door-to-door” transportation, the

shipowner does not charge for demurrage, as he is responsible for

ensuring that the containers are picked up in time from the terminal and

delivered to the appropriate place.

During the investigation, it was recorded that some shipowners charged

demurrage to businessmen who do “port-to-port” arrangements but did

not charge businessmen who do “door-to-door” arrangements. When

shipowners make a “door-to-door” arrangement, they compete with

cargo intermediaries. In this sense, markets tend to be less efficient

when companies have the power to collect unreasonable charges from

their competitors.

The interpretive demurrage rule does not address this specific situation,

but the Commission has concerns about this matter and will seek ways

to appropriately address practices involving “door-to-door” and “port-to-

port” transportation.

In this way, it was possible to verify that the interpretative rule of the FMC consists of

a series of general guidelines about container demurrage, which seek to clarify the

motivation for the charge, in addition to establishing parameters that allow the

evaluation and punctual action of the FMC in each concrete case.

Finally, it's important to highlight that although most of the guidelines are of a general

nature with universal application, special care must be taken to

18 Container yard.

International experience in demurrage regulation

internalize the rule in other countries outside the North American reality, considering

the local arrangement of the economic agents involved in the logistics chain, as well as

the current regulatory framework.

3.2. FIATA recommendations19

The FIATA International Federation of Freight Forwarders Associations is a non-

governmental organization that represents, promotes, and protects the interests of the

international freight intermediary industry. FIATA members cover 108 logistics

associations and cargo intermediaries in 97 countries, approximately 6,000 logistics

and freight service providers worldwide.

The FIATA Maritime Transport Working Group has developed a Best Practices Guide to

support both FIATA National Associations and individual members acting as freight

forwarders in commercial disputes (FIATA, 2018).

The guide brings the understanding that, in principle, the demurrage charge has two

main purposes: to compensate the owner for the use of the container, and to

encourage the cargo holder to return the container as soon as possible. On the other

hand, it is the duty of shipowners to grant a realistic free period to the cargo holder so

that he can fill and deliver a container for export, and remove a container, unload it

and return it empty in the case of an import.

In the guide, demurrage is understood as the fee that the cargo holder pays for the

use of the container inside the terminal in addition to the free period, and detention is

the fee that the cargo holder pays for the use of the container outside the terminal or

deposit in addition to the free period. FIATA also presents the concept of “merged

demurrage & detention,” which adds the demurrage and detention periods, combining

them into a single period, which is the same concept adopted in RN-18 and used in this

Report.

The Best Practices Guide released by FIATA (2018) recognizes that demurrage and

detention rates are important and valid instruments for shipowners to ensure the

return of their equipment as soon as possible, and users who exceed the contractual

duration must be billed accordingly.

19 Fact-Finding Nº 28 encouraged FIATA to develop a Best Practices Guide regarding demurrage that was

released in September 2018 (FMC, Final Report, 2018).

International experience in demurrage regulation

However, FIATA does not believe that shippers should be subject to unfair or

unreasonable charges of this nature, especially when the delay is due to the owner's

fault.

FIATA suggests that a range of issues related to demurrage and detention be analyzed

and an agreement be negotiated including, but not limited to:

 Limit accumulated demurrage to a maximum amount.

 Extend the free time period if the terminal is unable to release

/ receive a container within a period equal to the duration of the

inability.

 Ensure a level playing field for containers in port-to-port transportation

and negotiate terms to reduce unfair differentiation.

 Support the modal shift to more environmentally friendly modes of

transportation, increasing the period of freedom from detention.

 Amend the calculation of export demurrage to transfer responsibility for

ship delays to the shipping company.

 Make sure that demurrage charges on import shipments are collected

faster, preferably within a week.

 Contribute to relieving congestion at the terminal, as well as the on-land

concentration of pickups and deliveries due to larger ships and higher

peaks and allowing cargo holders more flexibility increasing periods of

free time.

 Encourage greater data sharing in the maritime logistics chain, which

would lead to greater transparency of information related to these fees.

4. DEMURRAGE CHARGE IN BRAZIL

In addition to the international experience analysis, some singularities of the container

demurrage charge in Brazilian national territory are detailed, such as the Term of

Responsibility for the Return of the Container (or Term of Commitment for the Return

of the Container – TCDC), the adherence of the Customs broker as jointly responsible,

the charging of differentiated values by the cargo agent, and the Brazilian logistical

difficulties that can increase the incidence of collection.

International experience in demurrage regulation

4.1. Term of Responsibility for the container's return

Regarding comparative foreign Law, considering that the focus of this

study is container demurrage in Brazil, in which there are practical

operational peculiarities that do not exist in other countries, such as

the requirement to sign the TCDC and some specific regulations of our

legal system, different from Common Law, [...]. (WINTER, 2019, p.

14)

The requirement to sign the Term of Responsibility was created by the carriers to

facilitate the execution of demurrage collection actions, but it is presented as a

document that facilitates the bureaucratic procedures for the release of containers, as

observed in the text below:

By means of this document, whoever signs and delivers it to the

carrier's local agent aims to expedite the release of the cleared cargo

unit, reiterating the terms of the maritime transport bill, if it is the

consignee or importer in the contract, or a third party that claims to

be personally responsible for the fulfillment of obligations arising from

the transport relationship, expressly assuming the joint liability for the

payment of any incidental debts that are not paid by the consignee or

importer. (SILVEIRA, 2018, p. 23)

To capture the dynamics involved in signing the Term of Responsibility, it is necessary

to understand how international maritime transport is contracted. In summary, it can

be said that the maritime sale is embodied in two international contracts: a purchase

and sale contract, which is the main one, and a transportation contract. It should be

emphasized that there is no contract legally typified as “sea sale.” This denomination

arises in the doctrine due to the incidence of maritime transport in the purchase and

sale contract.

That said, it appears that the contracting of waterway freight results from a prior

negotiation made between the buyer/importer and the seller/exporter, without the

carrier's participation.

The purchase and sale proposals are formalized by issuing a Proforma Invoice and/or a

Letter of Intent. Usually, the proformas mention the Incoterms® Rules (International

Rules for Interpretation of Trade Commercial Terms), which are not mandatory, but

given the safety of the standardized and unison language of their terms they facilitate

the understanding of the parties guaranteeing the efficiency of operations and

contracts regarding obligations related to the transportation of negotiated cargo. These

rules specify costs and

International experience in demurrage regulation

responsibilities of the exporter and the importer in the transaction. Through the

Incoterms

®, it is defined who will hire transportation.

The use of the Incoterms® Rules, therefore, makes it possible to

define the party involved in the purchase and sale contract that

assumes the procedures for contracting transportation, and assumes

the costs of freight and other expenses related to transportation. It

therefore designates who the shipper is and specifies the party that

will be at risk during transportation and that eventually will bear the

burden of damage.

Despite the existing link between the contract for the purchase and

sale of goods and the transport, charter and maritime insurance

contracts, each contract retains its autonomy, the effectiveness of

which is limited to the contractual relationship itself. Interconnection

does not affect the relationships emanating from each type of

contract.

The incidence and interference of the maritime modal's designation in

the trade of goods affects the system of rights and duties relating to

the purchase and sale of goods and the relations between the seller

and the buyer, but the parties of the related transport or charter and

maritime insurance contracts remain separate. (OCTAVIANO

MARTINS, 2015, p. 500 – no emphasis in the original)

Considering the legal autonomy between purchase and sale contracts and maritime

transportation contracts, it should be noted that container demurrage arises solely

from the transportation contract.

19.

Container demurrage derives from the Maritime Transportation

Contracts, instruments that, as a rule, involve three actors: the

shipper, the maritime carrier, and the consignee. In fact, the

Transportation Contract is the legal basis for charging demurrage, the

amount due by the recipient, shipper, or consignee of the container –

jointly and severally – per day of container retention beyond the

franchise term (free time) agreed between the parties.

20.

According to maritime practice, the issuance of the Bill of Lading

containing the clauses that will govern the contracted transport,

occurs when the goods are shipped. This contract is issued in at least

three copies, two of which are delivered to the shipper, who, after all

commercial aspects have been agreed, sends an original copy to the

consignee at the port of destination, so that he can present it to the

carrier, and, thus, remove the goods. (CENTRONAVE, 2020 – Subsidy

Collection)

It should be noted that, according to the Civil Code, Section III – Transport of Things20,

the only requirement regarding the consignee in contracting the transport is that he

20 Art. 743. The thing, delivered to the carrier, must be characterized by its nature, value, weight, and

quantity, and whatever else is necessary so that it is not confused with others, and the addressee must be

indicated at least by name and address.

International experience in demurrage regulation

is nominated at the time of delivery of the goods. This unequivocally demonstrates that

contracting can take place even without his direct participation. Indeed, it is not up to

the consignee to establish the terms and conditions for charging demurrage fees.

However, it is up to him to answer before the shipowner in the event of delay in

returning the container.

Thus, despite the interconnection between the contracts, the lamented bilaterality

between the carrier and the consignee in the contracting of transport does not match

the factual reality, since in most cases the consignee does not even participate directly

in this contracting

21.

The cargo's consignee is the main actor in cases of container

demurrage, as he will be responsible for returning the container within

the free time to the shipowner in cases of import. He will be entitled

to respond in court in the passive part of the lawsuit, being able, in

practice, to be the real owner of the cargo, the trading company

(which appears as a consignee in imports on behalf of third parties),

the cargo agent, the NVOCC and even, in some cases, the Customs

broker himself. In the situations mentioned above, those responsible

may subrogate the right to subsequently collect reimbursement from

the actual importer, who is the owner of the cargo and contracting

services. (WINTER, 2019, p. 17)

Furthermore, although demurrage is a customary and usual right, it is often not

included in the Bill of Lading. Some shipowners neglect the charge forecast clause.

However, the demurrage continued to be charged and considered due, even without

legal or contractual provision, but justified in terms of usage and customs.

It happens that the fact that an institute is inserted in the uses and

customs does not make it enforceable in any, and all, business

relationships without any contractual provision. Container demurrage

is a matter already consolidated in

Lex Maritima

. However,

Lex

Maritima

does not determine its collection without any provision, and

the contrary interpretation is wrong, because Comparative Law,

especially English Law which is the supporting pillar of Maritime Law,

does not determine this. (FÓES, 2017, apud ROSSI and CASTRO

JÚNIOR, 2018, p. 4)

Traditionally, Brazil imports CIF (Cost, Insurance and Freight). In this Incoterm, the responsibility for the

payment of insurance and freight is the supplier's, who is responsible for all costs and risks with

transportation until arrival at the port of destination.

International experience in demurrage regulation

From the moment the Judiciary started demanding the express clause of demurrage in

the Bill of Lading, the Term of Responsibility for Returning Containers was created

22.

Fóes (2017) also highlights that the Term of Responsibility “[…] only integrates the

relationship after the arrival of the cargo at the port of destination, which makes

evident the inexistence of any negotiation between the parties.” However, it should be

noted that the Term of Responsibility is not an essential document and should not be

required for cargo release.

This new way of formalizing the relationship with the final recipient of

the cargo was demanded by shipowners, to oblige consignees of

cargoes to sign a return commitment and, thus, establish a formalized

liability in writing. Said document has no relation to the Bill of Lading

(or BL) and is required by the carrier (shipowner) when the cargo

arrives at the port of destination, because without the consignee or

his legal representative signing the document, the shipowner, in a

very contestable way, does not release the BL so that the recipient of

the cargo can initiate the release and nationalization of cargo with the

SISCARGA system. (WINTER, 2019, p. 19)

4.2. Customs broker role

Initially, it should be noted that the retention of cargo (or BL) for not signing the Term

of Responsibility is illegal. Decree-Law Nº 116/67, art. 7, establishes that: “The

shipowner is entitled to determine the retention of the goods in the warehouses, until

the freight due or the payment of the contribution for declared gross average have

been settled.” That is, only two cases are presented in which the retention of goods is

allowed: non-payment of freight or declared gross average. The legal order was

reinforced in art. 12 of RN-18.

Art. 12. Maritime carriers and intermediary agents may withhold

goods or the issuance of the bill of lading or BL, until the settlement

relating to the payment of freight or general average contribution,

withholding being prohibited for any other justification. (Normative

Resolution-ANTAQ nº 18/2017)

Despite this, retention of goods is a recurrent practice due to the non-signature of the

Term of Responsibility. According to Winter (2019), some scholars when dealing with

the

22 “In this context, the container demurrage scenario, which, until 1995, was totally against the carrier,

became favorable to the latter. If before they lost, they started to win all the actions on the subject, using

the powerful term of responsibility signed by the representative (Customs broker), the consignee/importer

or exporter.” (CASTRO JÚNIOR, Osvaldo Agripino (org.). Container demurrage theory and practice. São

Paulo: Customs, 2018, p. 225)

International experience in demurrage regulation

subject vehemently refute the usual way in which the Container Return Liability Terms

are required by shipowners, usually imposed improperly as true adhesion contracts

required under coercion

23.

However, it cannot even be argued that the retention aims to prevent,

preserve, defend, and ensure the effectiveness of the right to

demurrage credit, as a preventive act promoted because there is

supposed gravity or certain factual particularity that demonstrates the

risk of injury of a heritage nature. Even if the requirements are

present – (i) lawful and peaceful retention of another's property; (ii)

conservation of someone else's property; (iii) net credit, certain and

payable, with connectivity to the thing withheld; and, (iv) the absence

of a convention or law excluding the right of retention are present –

the impossibility of matching makes retention unfeasible.

Therefore, regardless of the existence of a fair reason, retention

cannot be used as a guarantee to prevent imminent damage, or to

cover the value of obligations related to demurrage. Therefore,

despite its main function being to induce the debtor to fulfill his

obligation, he cannot be deprived of possession of the property that

belongs to him until he has satisfied the demurrage debt, regardless

of whether present or past, that is, of previous shipments, even when

dealing with a foreign legal entity. Because, according to international

practices, retention clause itself, when it exists, is only applicable for

non-payment of freight. (MARCHIOLI, 2020 – Subsidy Collection)

Thus, to start the internalization process of goods in SISCARGA, the carriers demanded

that the consignee, or his representative, sign the Term of Responsibility. In this way,

the document began to reflect the adhesion not only of the importer or consignee of

the transported cargo, but also of those who through it enter the legal relationship as a

new subject, the Customs broker.

The Customs broker is the professional qualified by the Brazilian

Federal Revenue Office (RFB) to clear bureaucratic orders in the

import or export, acting before the intervening agencies of foreign

trade, such as ANVISA, MAPA, INMETRO, DECEX and, mainly, with

Customs for release and agility in the dispatch of the goods included

in the processes under their care, checking and providing all the

documentation, fees and licenses required on a case-by-case basis. Its

activities are contemplated in art. 808 of Decree Nº 6.759/2009

(Customs Regulation).

“In the same vein, when the supposed Term of Agreement is “offered” with the signature of the

importer's representative, normally his Customs broker, the cargo is already at the port. This is because

freight payments cannot be processed before the cargo has been unloaded at the port of destination, but

only after signaling the presence of cargo launched in SISCARGA, a system created by Normative

Instruction RFB n. 800/07.” (CREMONEZE, 2012, pp. 35 and 36, apud SOUZA. Sávio José Di Giorgi Ferreira

de. NVOCC, container and demurrage: the systemic controversies of multimodalism – Law 9.611/98.

Curitiba: Institute of Education and Promotion, 2014, pp. 163-165).

International experience in demurrage regulation

The Customs broker does not participate, in any of its phases, in the

formation of the international maritime transportation contract, which

is signed between the shipper and the shipowner, consigning the

cargo to the final recipient, so it should not be a legitimate party to

answer for questions linked to cargo transportation or demurrage.

This professional, acting by mandate whether of the exporter or the

importer, has the primary function of making the correct

nationalization of the cargo. (WINTER, 2019, pp. 17 and 18)

The Customs broker plays an important role in the import process, providing preventive

guidance to ensure compliance with all legal, tax and Customs rules. However, in some

cases

24, he appears on the defendant side of lawsuits for demurrage collection due to

having signed alone or jointly the Term of Responsibility as the legal representative

(mandatory) of the cargo's consignee. This accountability is a reason for harsh criticism

by dispatchers.

There is a crime being committed every day by shipowners and their

representatives, which is to demand from the Customs broker, from

the legal entity of the Customs clearance commissioner who are only

hired to carry out the Customs clearance of goods, a TERM OF JOINT

RESPONSIBILITY, obliging the broker to be the GUARANTEE of the

importer. When the importer defaults on the demurrage, the

demurrage credit holders legally, jointly, and severally sue the

importer and the broker who gave in to pressure and signed the

Term.

The dispatch commissioner, the Customs broker, is not an economic

agent in the operation, does not participate in the purchase or sale of

goods or freight, is only included in the process to carry out the

Customs clearance, but in order to expand the range of possibilities

for receiving the possible demurrage, numerous difficulties are

created to deliver the BL, which, in order to avoid delay in clearance,

is solved by presenting the Term as guarantor. It's almost extortion.

The regulation must be clear: when the Customs broker or

representative of the dispatch commissioner signs the term of

commitment to return the container, he can only sign as the

importer's representative, never under any circumstances as the

importer's “GUARANTEE.” (Dispatcher's Manifestation – Subsidy

Collection, 2020)

SÃO PAULO (State). São Paulo Court of Justice. Civil Appeal Nº 1016902-81.2017.8.26.0562. Demurrage

charges for the use of containers. Judge Rapporteur Gilson Delgado Miranda. Judged August 6, 2018.

Appeal granted in part. Also: SÃO PAULO (State). São Paulo Court of Justice. Civil Appeal Nº 1066830-

29.2017.8.26.0100. 22nd Chamber of Private Law. Rapporteur Roberto Mac Cracken. Judged May 22,

2019, in SANTA CATARINA, Santa Catarina Court of Justice. Civil Appeal Nº 0019631-65.2012.8.24.0033.

3rd Chamber of Commercial Law. Rapporteur Tulio Pinheiro. Judged November 22, 2018. (WINTER, 2019,

p. 18)

International experience in demurrage regulation

4.3. Spread charge on demurrage

The spread refers to the difference between the purchase and sale price of a share,

security, or monetary transaction. In the context of container demurrage, it occurs

when an intermediary agent increases the amount initially charged by the shipowner or

when he reduces the previously stipulated free time.

To start this discussion, it is important to point out that the shipping agent acts largely

on behalf of the shipping carrier but should not be confused with him as he acts as an

agent

25.

In general terms, the shipping agent represents the interests of the

shipowner when the vessel arrives at the port, acting and endeavoring

to resolve bureaucratic, operational, and emergency issues (if

applicable), always as an agent, to guarantee the best loading and

unloading operation, port-to-port. He can also perform the commercial

function of the sea freight sale, when it will be the legitimate party to

charge the demurrage in the event of non-return of the container

within the established period (free time). (WINTER, 2019, pp. 15 and

16)

The impossibility for the shipping agent to charge for demurrage is already expressed

in art. 13 of RN-18:

Single paragraph. The shipping agent may only charge the shipper,

consignee, endorser, or Bill of Lading (BL) holder for those amounts

that are due to the represented maritime carrier.

In the case of the cargo agent26, which is the intermediary agent hired by the user to

meet their interests, there is no rule preventing the collection of the demurrage fee.

One of the distorted practices in demurrage charges occurs when the

intermediary agent (NVOCC or cargo agent), without the shipowner's

own knowledge, unilaterally decreases the free time granted to the

consignee of the cargo, and increases the demurrage daily rates,

precisely to increase his profit in the shipping agency operation

because in this way the cargo's consignee

25 The designee role of the maritime agent is reinforced in RN-18, art. 24. Single paragraph. “The

maritime agent, in the designation of ships under his agency, is not responsible for the

obligations of the one who appointed him, except for the responsibility that corresponds to

him for his personal faults.”

26 The freight forwarder is called a forwarding agent on RN-18. Art. 2, II,

a) forwarding agent: anyone who

coordinates and organizes the transport of third-party cargo, acting on behalf of the user, in order to

execute or arrange for the execution of operations before or after the maritime transport itself, without

being responsible for issuing the Bill of Lading – BL.

International experience in demurrage regulation

(importer) will pay demurrage to the intermediary without in fact it

having occurred.

In an article published on its website, the company specialized in foreign trade

consultancy reports the indication of an abusive increase in freight:

We have noticed a progressive increase in the practice of abusive

demurrage collection by some cargo agents. Charges received by

customers in 2017, when compared to the shipowners' table, were up

to 220% above these. Which is not correct, considering that the agent

only forwards the charge, often claiming not to profit from it

27. [...]

We understand that the conditions signed up to the confirmation of

the ship's place reservation must reflect the same understandings in

the BL or in the Term of Commitment to Return the Container, under

penalty of characterizing the abusiveness and nullity of the

documents, under the principle of contractual good faith. (WINTER,

2019, p. 32)

This characteristic in charging for demurrage in Brazil makes users and their

representatives demand action from the Regulatory Agency, as can be seen in the

excerpt below, extracted from Subsidy Collection:

ANTAQ's effort to regulate the problem is commendable, but the

Agency's regulatory option, at this point, by allowing the intermediary

agent to charge a higher demurrage value than the effective maritime

carrier, is a serious problem and one of the main obstacles to the

affordability of the proper service. (AGRIPINO, 2020 – Subsidy

Collection)

However, it should be borne in mind that hiring a cargo agent differs substantially from

hiring a maritime carrier. It is worth mentioning that the cargo agent is hired directly

by the consignee and the number of providers of this service is indeed greater than

that of maritime carriers. In this case, competition facilitates the self-regulation of the

market, reducing abuses. This does not mean that the issue dispenses all types of

regulation but, comparatively, ANTAQ's action is less necessary.

4.4. Brazilian logistical problems

As mentioned before, the reasons for the delay in returning the empty unit are the

most varied and logistical inefficiency is at the root of most of them. Thus, to analyze

demurrage charges in different countries, it is first necessary to understand logistical

problems in Brazil.

27 VASCONCELLOS, M. Alert on abusive demurrage charges. Kotah BR. Rio de Janeiro, Nov. 2, 2017, apud

WINTER (2019).

International experience in demurrage regulation

According to Bazani, Pereira and Leal (2017), to facilitate comparisons between

countries regarding logistics competitiveness, the World Bank published the Logistics

Performance Index (LPI) with the objective of diagnosing the main areas with

symptoms of logistics inefficiency. In composing the LPI, the World Bank uses six

indicators: 1) Customs efficiency – border transit (speed, simplicity, predictability,

formalities); (2) infrastructure – quality of trade and transport infrastructure; (3)

international shipments – ease of arranging shipments at competitive prices; (4)

logistics competence – competence and quality of logistics services; (5) tracking –

traceability of shipments; and (6) punctuality.

It can be concluded that Brazil appears as a country of average logistical performance,

however it is still far below most of its main competitors. Its worst logistical

performance consists in Customs dimension, while its best performance refers to

predictability. Considering the evident relationship between Customs inefficiency and

the delay in returning containers, it would be necessary to equalize free time with the

logistical reality of the country to reduce the occurrence of demurrage.

Winter (2019) also points out the Customs problems among the main logistical

problems in Brazil that result in demurrage:

Lack of logistics infrastructure at ports/terminals in relation to

the speed and capacity of handling containerized cargo, which

eventually leads to the occurrence of congestion or even internal

accidents that cause delays in the removal of loads or queues.

ii)

Issues related to the beginning of Customs clearance, such as

the registration of the Import Declaration (DI) of the loads in

SISCOMEX and its parameterization channels (green; yellow; red;

gray), according to article 21 of IN SRF nº 680/200636, and the

Customs conference, pursuant to article 564 37 of Decree Nº

6.759/2009.

iii)

Problems related to land road transportation, widely used in

Brazil to remove goods packed in containers from ports/terminals and

take them to the industries or warehouses indicated by the

consignees of the cargo or importers and to later return the container

to the place agreed upon in the BL or TCDC, among which are risk

factors such as queues or congestion, possible accidents in the

transport route, possible theft of cargo and stoppages or strikes by

truck drivers, locally, statewide or nationally.

International experience in demurrage regulation

iv)

Public agents involved in the import process. Especially for the

case of this study directed to containerized loads, we will highlight for

the purposes of exemplifying situations involving strikes and

stoppages, which generate effects on the import process the three

most recurrent:

Brazilian Federal Revenue Office (RFB) (RFB), an agency in

which, in addition to declared strike situations, tax operations called

“standard,” “target zero” or “red tide” are not uncommon, in which,

purposefully so that they are not considered strikers, employees carry

out the analyses slowly causing absolute slowness in the Customs

clearance procedures, and still, in other cases, they implement, also

on purpose, a high level of rigor in the documental and physical

analyses causing accumulations and delays in Customs clearances.

Brazilian National Health Surveillance Agency (ANVISA), which

stands out for its intervention in granting the Import License (LI) for

various products, especially those subject to the sanitary surveillance

regime.

Brazilian Ministry of Agriculture, Livestock and Supply (MAPA),

responsible for the inspection and licensing of products of animal and

plant origin and their derivates.

The carelessness or lack of diligence of the cargo's consignee

(importer), either due to commercial disagreement, lack of tax

planning for the collection of taxes, or possible lack of planning and

economic difficulty caused (WINTER, 2019, pp. 27 and 28).

The National Federation of Maritime Shipping Agencies – FENAMAR (2020) presents

another point of view on the issue, pointing to a less bleak picture and redeeming the

shipowner's responsibility.

From the results of the research carried out, we highlight some points that we believe

are important in the evaluation of this topic:

•

For each container released or received, there is a document issued

by the depot

28 or terminal called EIR that demonstrates unit data,

reception time, driver data and carrier name.

•

The cases that generate demurrage are mostly caused by problems

of the importer himself or by problems caused in the cargo's release

before the authorities.

•

When there is a blockage at Mercante/Siscomex-cargo, the importer

can unload the unit and return it empty to the shipowner, keeping the

cargo under the terminal's responsibility,

28 The depot is a warehouse or yard for storing and moving empty containers. It is where transport and

logistics companies keep their containers until it is time to reload (receive the empty import container

and/or release the empty export container).

International experience in demurrage regulation

thus, avoiding entering a period of demurrage according to the

agreement between the parties.

•

Several companies responded that there is prior, abundant, and

available information on the demurrage format applied and agreed by

the shipowner to its customers regarding the use and return of

containers.

•

The use of the container as a deposit/warehouse, for periods

beyond the established, causes an imbalance in the logistics of the

shipowner who, in the absence of equipment retained by importers,

must resort to container rental companies to meet the demand.

(FENAMAR, 2020 – Subsidy Collection).

Considering the sometimes-antagonistic interests involved in charging for container

demurrage, it is expected that there will be disagreements about the reasons leading

to the collection of values and what should be done to mitigate the cost.

4.5. Positioning of interest groups in taking grants

From September 21

to November 3

, 2020, ANTAQ carried out the Public Subsidy

Collection Nº 03/2020, aiming to send contributions and subsidies, for the

implementation of theme 2.2 of the Biennium Regulatory Agenda 2020/2021, which

seeks to develop a methodology to determine abusiveness in charging for container

demurrage.

It is not the scope of this study to respond to the statements made therein. But the

analysis of the taxpayers' position allows us to visualize how each interest group

understands the demurrage charge in the national market and what would be the need

to regulate the subject.

Thirty (30) contributions were recorded

29, divided into five interest groups30 classified

as follows:

 Attorney (academics, Maritime Law operators and their representatives).

29 Contributions made by the same person representing the same entity/company were counted only once.

30 It should be noted that in the Subsidy Collection, it was asked which interest group each contributor

identified with. However, because the “others” option exists, the vast majority of taxpayers indicated it,

and it's necessary to make a subsequent classification to better frame them. The list of counted

contributors, classification and manifestations is in Attachment II.

International experience in demurrage regulation

5

8

9

6

Attorney

Intermediary

PortTerm.

Carrier

User

2

 Intermediary (shipping agents, cargo agents/forwarders, cCstoms

brokers, and their class entities).

 Port terminal.

 Carrier (representatives of companies and their national and

international class entities).

 User (class representatives and entities).

Figure 1 – Contributor profile

Source: Subsidy Collection 03/20 – Preparation GDE/SDS/ANTAQ

It can be seen from Figure 1 that the group with the greatest representation in

contributions is the group of transporters (30%), followed by the group of attorneys

(26.7%), intermediaries (20%), and only then the group of users (16.7%) and port

terminals (6.7%).

As will be shown below, the group of lawyers (second largest) aligned itself primarily

with the understanding of transporters. On the other hand, the group of

intermediaries, including maritime agents, was aligned, in general, with the users.

This underrepresentation of users in Subsidy Collection may have influenced the fact

that a significant majority of taxpayers (83%) frame the legal nature of container

demurrage as compensation and not as a penalty clause, as shown below in Figure 2.

International experience in demurrage regulation

80%

63%

67% 67%

50% 50%

38%

17% 17%

22%

20%

11%

17%

83%

Penaltyclause Indemnity

Figure 2 – Legal nature of container demurrage.

Source: Subsidy Collection 03/20 – Preparation GDE/SDS

When analyzing the position of taxpayers about the Term of Responsibility being or not

an adhesion contract, it appears that the answer changes drastically according to the

interest group. On one hand, we have the group of transporters, accompanied by the

group of attorneys, with the majority understanding that it is not. In opposition, we

have the group of users and intermediaries, whose majority of contributions

understands that the Term of Responsibility is a contract of adhesion.

Figure 3 – Is the Term of Responsibility an adhesion contract?

No yes N/R no yes no yes N/R no yes N/R yes

Attorney Intermediary PortTerm. Carrier User

Source: Taking Grants 03/20 – Preparation GDE/SDS/ANTAQ

The understanding of intermediaries that the Term of Responsibility is an adhesion

contract may be a consequence of the significant participation of forwarding agents,

who, in general, fight the obligation to sign the document for the release of cargo. The

positioning of law firms denying the framework as an adhesion contract may be an

indication that these taxpayers are more aligned with the defense of transporters than

users in legal disputes.

International experience in demurrage regulation

The last examination carried out refers to how interest groups position themselves

regarding the need to regulate demurrage. After an interpretive verification of the

contents, the manifestations were divided into three categories of contributors: those

who are against any type of regulation, which were grouped as “no” and those who

are in favor were identified as “yes.” Among those in favor of regulation, two groups

were created: those in favor of regulation by increasing transparency – yes

(transparency); and those in favor of a regulation where there is some value limitation

– yes (value limit).

Figure 4 – Favorable to some form of demurrage regulation?

Source: Subsidy Collection 03/20 – Preparation GDE/SDS/ANTAQ

The dichotomy of interests was once again remarkable. All users were in favor of some

type of regulation, with 80% wanting a limitation on the amount of demurrage and the

other 20% believing that an improvement in transparency would be enough. In the

group of transporters, the majority (77.8%) was against any form of regulation. Once

again, the lawyers aligned themselves with the understanding of the transporters, and

the intermediaries with that of the users.

77.8%

80.0%

50.0% 50.0% 50.0%

37.5%

33.3%

20.0%

12.5%

16.7%

11.1%

Attorney Intermediary

Port

Term.

Carrier User

no

yes(valuelimit)

yes(transparency)

no

yes(valuelimit)

yes(transparency)

no

yes(transparency)

no

yes(valuelimit)

yes(transparency)

yes(valuelimit)

yes(transparency)

International experience in demurrage regulation

5. VALUES COMPARISON

This chapter refers to the carrying out of a quantitative research of container

demurrage values and container free time in Brazil and in other countries of the world,

using as research data, primary sources, that is, those obtained via individualized

search, on the websites of maritime carriers, in the form of demurrage prices and free

time terms, both tabulated/over-the-counter prices, by type of container, by port, in

import and export.

As for the applicability of tabulated/over-the-counter values, it should be clarified that,

in the case of users with considerable volumes of cargo, negotiation between

shipper/consignee and maritime carrier may occur through service contracts

31, which

grant special conditions.

32 In addition, there are cases in which NVOCC and freight

forwarders apply demurrage and free time values that are different from the

tabulated/over-the-counter prices and terms. Finally, there are exceptional

circumstances in which demurrage fees are not charged, are reimbursed, or have some

other form of mitigation.

Having made these initial observations, the following will be presented: I) sampling; II)

methodology for calculating average demurrage fees; III) methodological observations;

IV) type of research; V) demurrage values and free time periods; and VI) comparative

analysis of demurrage values and free time periods.

31 Demurrage (is) imposed on cargo interests by carriers via tariffs and service contracts. Source: FMC

Fact-Finding Investigation nº 28 – Conditions and Practices Relating to Detention, Demurrage, and Free

Time in International Ocean-borne Commerce. Final Report. December 3, 2018.

32 By way of example, Maersk stipulates that customers with special conditions of demurrage and free time

negotiation apply different rules: “(…) for customers with special deals, after the extended free

time expires, any additional days will be subject to the demurrage and detention charges as

per the relevant day count in our tariff tier structure. This means that the subsequent

demurrage and detention charges beyond extended free time will not automatically be

calculated basing on the tariffs of 1st tier.” Source: https://www.maersk.com/local-information/latin-

america/brazil/import

33 There was little uniformity in demurrage and detention terminology or the circumstances

under which ocean carriers would waive, refund, or otherwise mitigate demurrage and

detention, making comparisons across the industry difficult. (Italics not included in the original)

(FMC, Interpretive Rule on Demurrage & Detention under the Shipping Act, 2020).

International experience in demurrage regulation

5.1. Sampling

To conduct the study, the following sample cut was carried out:

6 ports

4 sea carriers

4 types of containers

5.1.1. Ports

For the sampling of foreign ports, ports with greater participation in the transportation

of containers with Brazil were selected (ANTAQ, 2018).

Table 1 – Accumulated movement, in TEU, between Brazilian and foreign ports (2018)

Name of

the

Port

EU commercial

rel.

Brazil

accumulate

EU percentage

Accumulated

Shan

hai 391,942 391,942 5%

Buenos Aires 384,740 776,681 11%

Sin

apore 377,590 1,154,271 16%

Carta

ena 313,563 1,467,834 20%

Nin

bo 302,508 1,770,342 25%

Antwerp 270,294 2,040,636 28%

Rotterdam 246,221 2,286,857 32%

Hon

Kon

245,248 2,532,105 35%

Hambur

225,049 2,757,154 38%

Source: ANTAQ. Statistical Yearbook (2018).

By methodological choice, among the ports in the table above, two (2) ports were

selected per continent:

Table 2 – Sampling of ports by continent

Continent Port

South America

Santos

Buenos Aires

Europe

Antwerp

Rotterdam

Asia

Singapore

Shanghai

Source: Preparation GDE/SDS

34 ANTAQ. Statistical Yearbook. (2018). Available at: www.web.ANTAQ.gov.br/anuario. Accessed on:

August, 2019.

International experience in demurrage regulation

For the selection of the Brazilian port, the Port of Santos was chosen as it is the port

with the highest movement of containers in Brazil (ANTAQ, 2018).

5.1.2. Maritime carriers

Sampling of ocean carriers was based on the table below which lists the world's largest

maritime carriers, presented in descending order of market share, and the respective

sources of demurrage and free time data.

Table 3 – Market share and demurrage data source for each maritime carrier

Maritime

Carrier

Market

Demurrage and free time data available at:

Maersk 16.9%

https://www.maersk.com/local-information

MSC 16.0%

https://www.msc.com/country-

uides

COSCO 12.6%

https://elines.coscoshippin

.com/ebusiness/demurra

etentionTariff

CMA CGM 12.1%

https://www.cma-c

m.com/ebusiness/tariffs/demurra

detention

Hapag-Lloyd 7.2%

https://www.hapa

-lloyd.com/en/online-

business/tariffs/detention-demurrage.html

ONE 6.5%

https://ecomm.one-

line.com/ecom/CUP_HOM_3701.do?sessLocale=en

HMM 2.9%

http://www.hmm21.com/cms/business/ebiz/tariff/demdet

Freetime/index.jsp

Yang Ming 2.6%

https://www.yan

min

.com/e-

service/demdet/demdet.aspx

PIL 1.2%

https://www.pilship.com/en-pil-lms-det-dem/200.html

Source: Market share available at: https://alphaliner.axsmarine.com/PublicTop100/.

Access on 11/13/2020.Preparation GDE/SDS.

Once again, by methodological choice, among the maritime carriers in the table above,

the sample cut included four (4) companies: Maersk, MSC, CMA CGM and Hapag-Lloyd.

5.1.3. Types of containers

The selection of containers was based on the importance of the following types of

containers in world maritime transport (source: “Comparative study of THC values in

container terminals in Brazil and worldwide” available at:

http://portal.antaq.gov.br/index.php/estudos/):

International experience in demurrage regulation

 20-feet dry containers – dry container (DC): 20’ DC

 40-feet dry containers – dry container (DC): 40’ DC

 40-feet dry high cube containers – dry high cube (HC): 40’ HC

 20-feet refrigerated containers – reefer: 20' Reefer

For this study, 40' Reefer and 45' HC containers were not considered.

5.2. Average demurrage calculation methodology

Demurrage is charged with reference to a daily price per container which is generally

forecasted for periods or ranges of days. In a hypothetical example:

Free time: 5 days

1st period 3 days (from the 6th to the 8th day): US$50 a day

2nd period 4 days (from the 9th to the 12th day): US$80 a day

3rd period following days (from the 13th day onwards): US$100 a day

Day

1 º

2 º

3 º

4 º

5 º

6 º

7 º

8 º

9 º

10 º

11 º

12 º

13 º

14 º

Price per

day

$50

$80

$100

Accumulat

demurrage

$50

$100

$150

$230

$310

$390

$470

$570

$670

Averag

demurr

age

$8.

$14.

$18.

$25.

$31

$35.45

$39.

$43.85

$47.

In the example above, at the end of 10 days the user would accumulate a total amount

of payable demurrage of US$310.

Comparison of demurrage values is not trivial, as each carrier determines different

periods and different days of free time. Both directly influence the total accumulated

demurrage value.

As an example, a higher daily demurrage value will not necessarily result in a higher

accumulated demurrage value, if the free time is also high.

International experience in demurrage regulation

Thus, the methodology of “average demurrage” was developed, according to which:

é 

Which equates to:

 é ∗ ú

The “average demurrage” methodology makes it possible to compare different ports

and carriers that use different periods and different free time, provided that a certain

day is arbitrated for the analysis.

Thus, for free stay periods and demurrage prices to form a single comparable value,

the present research uses the 14th day as a comparable basis.

5.3. Methodological observations

 Data were collected on prices and deadlines referring exclusively to the use of

the container (use of equipment only), charged by the shipowner, whenever

this information is clearly indicated on the maritime carrier's website

36. On the

other hand, prices and terms related to the use of terminal space, sometimes

called demurrage

37, charged by the terminal or by the shipowner, was not

collected. This is because the definition of container

35 In 2015, the FMC published a Report in which it adopts the 12th day as a comparable basis for

calculating demurrage. “Report: Rules, Rates, and Practices Relating to Detention, Demurrage, and Free

Time for Containerized Imports and Exports Moving Through Selected United States Ports, 2015 (available

at: https://www.fmc.gov/wp-content/uploads/2019/04/reportdemurrage.pdf). In turn, the Container

xChange survey adopts the 14th day as a comparable basis for calculating demurrage (available at:

https://container-xchange.com/blog/demurrage-detention/)

36 “The terminology and application of charges with similar names are distinct across these

VOCCs, making direct comparisons difficult” (FMC Report: Rules, Rates, and Practices Relating to

Detention, Demurrage, and Free Time for Containerized Imports and Exports Moving Through Selected

United States Ports, 2015 Report). More on terminology: “It is apparent, then, that there are a

number of different, often conflicting, and not always clear ways that demurrage and

detention are used in the industry. (…) Such “demurrage” may represent use of terminal

space (terminal demurrage) and the use of equipment (carrier demurrage – i.e., in-port

detention). (…) it might be less clear to a VOCC’s customer what it is being charged for –

terminal space usage or container usage or both.” (FMC Fact-Finding Investigation nº 28 –

Conditions and Practices Relating to Detention, Demurrage, and Free Time in International Ocean-borne

Commerce. Interim Report. September 4, 2018)

37 Sometimes called demurrage, storage costs, port storage, terminal storage, terminal demurrage, among

others.

International experience in demurrage regulation

demurrage38 in this study is based on RN 18 and as already mentioned does not

cover the costs related to the occupation of space in the port terminal.

 Most of the time, the shipowner provided data for the so-called Merged

Demurrage and Detention, also called Combined Demurrage and Detention,

which is nothing more than the combination in a single demurrage amount and

in a single free time of the franchises for the container inside or outside the

port terminal.

o In a few cases, the data is provided as Split Demurrage/Detention, which

means that there is a specific demurrage value and demurrage period

for containers located inside the terminal and specific demurrage values

and demurrage periods for containers located outside the terminal.

39 In

these cases, the following criterion was adopted:

 On import: the experience of a user who uses the entire free

time of the full container inside the terminal (gate-in free time)

was simulated, after which the container is removed to spawn in

its facilities using the entire free time outside the terminal (gate-

out free time), returning the empty container on the 14th day.

Thus, on the 14th day, the demurrage value is calculated

considering the detention value (demurrage value outside the

terminal) and the sum of the gate-in free time and the gate-out

free time (e.g., free time = 3+5).

 On export: the experience of a user who uses all the free time

outside the terminal to stuff the empty container (gate-out free

time) was simulated, after which he enters the full container at

the terminal and uses the entire free time inside the terminal

(gate-in free time). Thus, on the 14th day, the demurrage value

is calculated considering the demurrage value (demurrage value

inside the terminal)

38 Container demurrage is very commonly known internationally as Demurrage & Detention and depending

on the sea carrier and/or country it is also called per diem. In turn, the free time of a container is

commonly called free time or free days.

39 Data in split demurrage/detention format occurred in this research: on import, only in Singapore, for

shipowners CMA CGM and Hapag-Lloyd; and on export, only to CMA CGM in Santos and Buenos Aires,

and Hapag-Lloyd in Singapore.

International experience in demurrage regulation

and the sum of the gate-out free time with the gate-in free time

(e.g., free time = 5+3).

 When there is no data available by the shipowner, the result is indicated in the

spreadsheets by a hyphen (-). On the other hand, whenever the free time is ≥

14 days, the average price on the 14th day, logically, will be equal to zero ($0),

given that there was no demurrage in the period.

 In terms of counting deadlines:

o Differentiation in the treatment of data between shipowners/countries

that use calendar days and/or working days

40 to count deadlines was not

equalized.

o Start and end time of the free time was not equalized. Maritime carriers,

depending on the country or even the route, include or exclude the first

day of the free time (first/last day included/excluded), differently from

what is strictly stipulated by RN-18 for Brazil.

o Notice of cargo availability was not equalized, which varies according to

the shipowner/port/country

42, influencing the start of the import period.

 No data was collected for specific types of cargo.

 Data were collected for FCL (Full Container Load) and not for LCL (Less than

Container Load).

 When data on demurrage and free time that consider the transport mode in the

hinterland (railway, highway, waterway) were available, data were collected for

the road mode.

Like the CMA CGM in the US that uses working days to count.

41 Art. 20. The free time of the container will be counted:

I - on embarkation, from the date of removal of the empty container(s) by the shipper at the agreed

location; and II - on disembarkation of the full container(s), as of the following day after delivery of the

cargo at the agreed location.

42 Issue widely discussed by the FMC in Fact-Finding Investigation Nº 28.

43 Like Maersk with specific free time deadlines for importing fruits and cod in Brazil.

44 Like Hapag-Lloyd in the ports of China.

45 Like Maersk in the ports of Belgium.

International experience in demurrage regulation

 Maersk Spot demurrage and free time data were not collected.46

 For purposes of comparison, demurrage prices when provided in the currency

of the country of origin have been converted to US Dollars on the exchange

date of December 9

, 2020, at 5pm (Brasilia time) according to quotes

provided by the Central Bank of Brazil (https://www.bcb.gov.br/conversao).

 Data were collected throughout the month of December 2020.

5.4. Type of research

The type of research is, in terms of purposes, exploratory. This type of research is

carried out when there is little information previously systematized

47, and thus, does

not include a priori hypotheses. (VERGARA, 2007)

Typically, exploratory research uses a small sample, which makes it possible to choose

appropriate techniques for collecting and processing data and verifying potential

difficulties. Thus, this type of research is a survey that allows for the provision of an

approximate view of a given fact, so that future research can be designed for greater

understanding and precision.

In this context, it is important to highlight the reduced sampling of 6 ports for this

research. As an example, the conclusive study on the affordability of THC in Brazil, and

even conclusive as to the THC “not constituting an impedance for Brazilian foreign

trade by sea”

50, sampled 48 ports in 23 countries.

46 About Maersk Spot consult: https://www.maersk.com/news/articles/2019/06/25/maersk-introduces-

maersk-spot

47 In this sense, “ANTAQ still does not have a methodology for compiling (demurrage) data in a systematic

way (...) Therefore, it is of fundamental importance to know the values charged in other world ports so

that it is possible to analyze the compliance of the values charged in Brazil.” (Study and Research

Execution Project SEI 1187829)

48 Vergara, S. C. Projects and research reports in administration. São Paulo: Atlas, 2007.

49 Exploratory research. Wikipedia. Available at:

https://pt.wikipedia.org/wiki/Pesquisa_explorat%C3%B3ria. Access on December 12, 2020.

50 “Comparative study of THC values in container terminals in Brazil and worldwide” available

at: http://portal.antaq.gov.br/index.php/estudos/

International experience in demurrage regulation

Therefore, due to the reduced sampling, notably from 6 ports and 4 maritime

carriers

51, this research only allows to:

 Conclude on the feasibility of comparing the data.

 Propose hypotheses to be tested in a future study.

 State that the data are, due to the small sampling:

o insufficient to conclude about the abusiveness or compliance of

demurrage prices in Brazil compared to other ports in the world; and

o insufficient to explain possible quantitative distortions of prices and

terms in relation to other foreign ports.

And it allows, at most:

 Comparing the prices and terms of 4 maritime carriers in 5 foreign ports and

Santos, that is, it's good for a mere comparison of the values available there,

and not new conclusions.

5.5. Demurrage fees and free stay periods

5.5.1. Import demurrage values

Table 4 – Average demurrage price per carrier on import on the 14th day (USD/day)

Maersk – Average demurrage price on import in USD (14th day)

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

$26 $49 $49 $62

Argentina Buenos Aires

$20 $40 $40 $64

Belgium Antwerp

$47 $62 $62 $93

Netherlands Rotterdam

$51 $67 $67 $102

Singapore Singapore

$23 $37 $37 $41

China Shanghai

$7 $14 $16 $30

Avera

e demurra

e price in Maersk imports comparin

domestic and forei

n ports. Available

at: https://www.maersk.com/local-information/. Access on: December 2020

51 Of the 4 shipowners, one of them, MSC provides, via its website, demurrage values only for Santos and

Singapore, among the ports in the sample.



International experience in demurrage regulation



MSC – Average demurrage price on import in USD (14th day)

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

$20 $34 $34 $94

Argentina Buenos Aires

- - - -

Belgium Antwerp

- - - -

Netherlands Rotterdam

- - - -

Singapore Singapore

$19 $32 $32 $69

China Shanghai

- - - -

Average demurrage price in MSC imports comparing domestic and foreign ports. Available at:

https://www.msc.com/country-guides. Access on: December

of 2020



CMA CGM – Average demurrage price on import in USD (14th day)



Country



Port



20' DC



40' DC



40' HC

20'

Reefer

Brazil Santos

$22 $42 $42 $80

Argentina Buenos Aires

$24 $49 $49 $70

Belgium Antwerp

$27 $44 $44 $103

Netherlands Rotterdam

$27 $44 $44 $103

Singapore Singapore

$19 $38 $38 $87

China Shanghai

$6 $13 $15 $42

Avera

e demurra

e price in CMA CGM imports comparin

domestic and forei

n ports.

Available at: https://www.cma-cgm.com/ebusiness/tariffs/demurrage- detention. Access on:

December 2020.



Hapag Lloyd – Average demurrage price on import in USD (14th day)



Country



Port



20' DC



40' DC



40' HC

20'

Reefer

Brazil Santos

$20 $39 $39 $74

Argentina Buenos Aires

$56 $61 $61 $148

Belgium Antwerp

$45 $54 $54 $72

Netherlands Rotterdam

$45 $54 $54 $72

Singapore Singapore

$20 $39 $39 $34

China Shanghai

$9 $17 $17 $39

Average demurrage price in Hapag-Lloyd imports comparing domestic and foreign ports.

Available at: https://www.hapag-lloyd.com/en/online-

business/tariffs/detention-demurrage.html. Access on: December 2020.

International experience in demurrage regulation

5.5.2. Export demurrage values

Table 5 – Average demurrage price per carrier on import on the 14th day (USD/day)

Maersk – Average demurrage price on export in USD (14th day)

Country

Port

20' DC

40' DC

40' HC

20'

Reefer

Brazil Santos

$0 $0 $0 $29

Argentina Buenos Aires

- -

$30

Belgium Antwerp

$44 $57 $57 $85

Netherlands Rotterdam

$44 $57 $57 $85

Singapore Singapore $17 $30 $30 $67

China Shanghai

$8 $13 $15 $15

Average demurrage price in MSC export comparing domestic and foreign ports. Available at:

https://www.maersk.com/local-information/. Access on: December 2020

MSC – Average demurrage price on export in USD (14th day)

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

$21 $41 $41 $83

Argentina Buenos Aires

- - - -

Belgium Antwerp

- - - -

Netherlands Rotterdam

- - - -

Singapore Singapore

$19 $32 $32 $69

China Shanghai

- - - -

Average demurrage price in MSC export comparing domestic and foreign ports. Available at:

https://www.msc.com/country-guides. Access on: December 2020

CMA CGM – Average demurrage price on export in USD (14th day)

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

$0 $0 $0 $16

Argentina Buenos Aires

$0 $0 $0 $0

Belgium Antwerp

$7 $9 $9 $109

Netherlands Rotterdam

$7 $9 $9 $109

Singapore Singapore

$9 $19 $19 $72

China Shanghai

$6 $13 $15 $42

Average demurrage price in CMA CGM export comparing domestic and foreign ports.

Available at: https://www.cma-cgm.com/ebusiness/tariffs/demurrage-

detention. Access on: December 2020.

International experience in demurrage regulation

Hapag-Lloyd – Average demurrage price on export in USD (14th day)

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

$26 $50 $50 $109

Argentina Buenos Aires

$11 $19 $19 $94

Belgium Antwerp

$38 $42 $42 $78

Netherlands Rotterdam

$41 $45 $45 $85

Singapore Singapore

$20 $39 $39 $44

China Shanghai

$15 $31 $31 $39

Average demurrage price in Hapag-Lloyd export comparing domestic and foreign ports.

Available at: https://www.hapag-lloyd.com/en/online-

business/tariffs/detention-demurrage.html. Access on: December 2020.

5.5.3. Free time periods on import

Table 6 – Term of free stay on import, by shipowner

Maersk – Free time on import

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

5 5 5 5

Argentina Buenos Aires 7 7 7 3

Belgium Antwerp

4 4 4 4

Netherlands Rotterdam 3 3 3 3

Singapore Singapore

7 7 7 6

China Shanghai

7 7 7 4

Free time in Maersk import comparison between national and forei

n ports. Available

at: https://www.maersk.com/local-information/. Access on: December 2020

MSC – Free time on import

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

7 7 7 2

Argentina Buenos Aires

- - - -

Belgium Antwerp - - - -

Netherlands Rotterdam

- - - -

Singapore Singapore

7 7 7 7

China Shanghai - - - -

Free time in MSC import comparison between national and foreign ports. Available at:

https://www.msc.com/country-guides. Access on: December 2020

International experience in demurrage regulation

CMA CGM

–

Free time on import

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

6 6 6 5

Argentina Buenos Aires

7 7 7 3

Belgium Antwerp

7 7 7 5

Netherlands Rotterdam

7 7 7 5

Singapore Singapore

3+3 3+3 3+3 3

China Shanghai

7 7 7 4

Free time in CMA CGM import comparison between national and forei

n ports. Available at:

https://www.cma-cgm.com/ebusiness/tariffs/demurrage-detention. Access on: December 2020.

Hapag-Lloyd – Free time on import

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

7 7 7 5

Argentina Buenos Aires

5 5 5 3

Belgium Antwerp

4 4 4 4

Netherlands Rotterdam

4 4 4 4

Singapore Singapore

3+4 3+4 3+4 3+4

China Shanghai

10 10 10 4

Free time in Hapa

-Lloyd import comparison between national and forei

n ports. Available at:

https://www.hapag-lloyd.com/en/online-business/tariffs/detention- demurrage.html. Access on:

December 2020.

5.5.4. Free time on export

Maersk

–

Free time on export

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

14 14 14 10

Argentina Buenos Aires 14 - - 7

Belgium Antwerp 5 5 5 5

Netherlands Rotterdam

5 5 5 5

Singapore Singapore 7 7 7 7

China Shanghai

7 7 7 7

Free time in Maersk export comparison between national and forei

n ports. Available

at: https://www.maersk.com/local-information/. Access on: December 2020

MSC – Free time on export

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos

7 7 7 5

Argentina Buenos Aires

- - - -

Belgium Antwerp

- - - -

Netherlands Rotterdam

- - - -

Singapore Singapore

7 7 7 7

China Shanghai

- - - -

Free time in MSC export comparison between national and forei

n ports. Available at:

https://www.msc.com/country-guides. Access on: December 2020

International experience in demurrage regulation

CMA CGM

–

Free time on export

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos 7+7 7+7 7+7 6+6

Argentina Buenos Aires 14 14 14 14

Belgium Antwerp 12 12 12 5

Netherlands Rotterdam 12 12 12 5

Singapore Singapore 8 8 8 5

China Shanghai 7 7 7 4

Free time in CMA CGM export comparison between national and foreign ports. Available at:

https://www.cma-cgm.com/ebusiness/tariffs/demurrage-detention. Access on: December

of 2020.

Hapag-Lloyd

–

Free time on export

Country Port 20' DC 40' DC 40' HC 20' Reefer

Brazil Santos 6 6 6 3

Argentina Buenos Aires 10 10 10 7

Belgium Antwerp 4 4 4 4

Netherlands Rotterdam 4 4 4 4

Singapore Singapore 3+7 3+7 3+7 3+5

China Shanghai 7 7 7 4

Free time in Hapag-Lloyd export comparison between national and foreign ports. Available at:

https://www.hapag-lloyd.com/en/online-business/tariffs/detention-

demurrage.html. Access on: December 2020.

5.6. Comparative analysis of demurrage values and free time periods

This topic compares the demurrage prices and free time periods shown in the tables

above. Due to the exploratory nature of the research, and due to the small sample,

notably of ports and maritime carriers, the data are insufficient to conclude about the

abusiveness or compliance of demurrage prices in Brazil compared to other ports in the

world. Thus, it should be clarified that the conclusive inference, if it occurred, would

imply a high margin of error.

Continuing, for the data analysis, a new tabulation of the same prices and periods of

demurrage and free time set out in the previous tables was carried out, this time

tabulating them by type of container for better comparability between the different

maritime carriers in each port on import and export.

International experience in demurrage regulation

5.6.1. Average demurrage on import

20’DC Containers: Average demurrage price on import in USD (14th day)

20'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$26 $20 $47 $51 $23 $7

CMA CGM

$22 $24 $27 $27 $19 $6

MSC

$20 - - - $19 -

HAPAG-

LLOYD

$20 $56 $45 $45 $20 $9

Average import demurrage price for 20-feet dry containers, comparative between ports.

Looking at the data in the table above, one can see the reduced standard deviation of

the sample of average demurrage prices at the port of Santos for 20-feet dry

containers among maritime carriers, with an average of $22.

Maersk and CMA CGM present, respectively, approximate prices in the ports of

Santos and Buenos Aires, for 20'DC containers.

Prices in Santos are close to prices in Singapore, for all shipowners in the sample

transporting 20’ DC containers on import, with averages of $21 in Santos and $19 in

Singapore. It is worth noting, however, that the tabulated values refer to the 14th day

of average demurrage, even though the dwell time

52 at import in Singapore is only

1.46 days, compared to 12.7 days in Santos.

Prices in Santos are markedly higher than prices in Shanghai, averaging respectively

$21 and $7 for 20’ DC containers.

Other comparisons are impaired due to the reduced sample and high data dispersion

for the same port, expressed through the following relative standard deviations (RSD)

54: 58% Buenos Aires; 29% Antwerp; 31% Rotterdam.

52 Dwell time is the average storage permanence time of full containers at import.

53 Dwell time in Santos Brazil (2018): http://ri.santosbrasil.com.br/wp-

content/uploads/sites/36/2018/03/SBPar_ERelease-4T17_final.pdf. Dwell time in Singapore (2018):

https://www.customs.gov.sg/news-and-

media/publications/Time%20Release%20Study%20for%20Singapore%20(2018).pdf

54 Relative Standard Deviation (RSD), also called Coefficient of Variation (CV), is a standardized measure of

data dispersion expressed as a percentage (%). The RSD is defined as the ratio of the Sample Standard

Deviation(s) to the Simple Arithmetic Average. The use of RSD has the advantage of

International experience in demurrage regulation

The high Standard Deviation in a tiny sample causes a considerable standard error,

which affects the confidence interval (normal distribution hypothesis) necessary to infer

that the sample average represents the whole average (population). Thus, in cases of

high standard deviation

55 it would be likely that the sample average price at a given

port would be an unrealistic representation of the true average price at that port.

Similar behavior to that described occurs for 40 feet dry and 40 feet high cube

containers, according to the following tables.

40’DC Containers: Average demurrage price on import in USD (14th day)

40'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$49 $40 $62 $67 $37 $14

CMA CGM

$42 $49 $44 $44 $38 $13

MSC

$34 - - - $32 -

HAPAG-

LLOYD

$39 $61 $54 $54 $39 $17

Average import demurrage price for 40-feet dry containers, comparative between ports.

40’HC Containers: Average demurrage price on import in USD (14th day)

40'HC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$49 $40 $62 $67 $37 $16

CMA CGM

$42 $49 $44 $44 $38 $15

MSC

$34 - - - $32 -

HAPAG-

LLOYD

$39 $61 $54 $54 $39 $17

Avera

e import demurra

e price for 40-

eet dry hi

h cube containers, comparative between

ports.

Note that the averages in Santos and Singapore are close, respectively $40 and $38

(for 40’DC and 40’HC containers). Here, the same observation regarding dwell time is

inserted for this methodology that adopted the average demurrage on the 14th day,

eliminating the effect of expressing the Standard Deviation (SD) in different orders of magnitude (e.g.,

Reefer containers, with average demurrage of $100, and dry containers with average demurrage of

$10) or different units of measurement (e.g., days of free time and dollars of demurrage).

55 In this research, a high Standard Deviation was considered whenever the Relative Standard Deviation (RPR) ≥

15%.

International experience in demurrage regulation

given the time of only 1.46 days in Singapore versus 12.7 days in Santos for the

average storage stay of full containers on import.

Prices in Santos are markedly higher than prices in Shanghai, averaging respectively

$40 and $15, for 40’DC and 40’HC containers.

Regarding 20’ Reefer containers, the following table summarizes the average demurrage

data:

20' Reefer Containers: Average demurrage price on import in USD (14th day)

20'Reefer Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$62 $64 $93 $102 $41 $30

CMA CGM

$80 $70 $103 $103 $87 $42

MSC

$94 - - - $69 -

HAPAG-

LLOYD

$74 $148 $72 $72 $34 $39

Average import demurrage price for 20-feet Reefer containers, comparative between ports.

Maersk presents close prices in the ports of Santos and Buenos Aires.

Other comparisons are impaired due to the reduced sample and high data dispersion

for the same port, expressed through relative standard deviations (RSD) of up to 50%

(Buenos Aires).

5.6.2. Average demurrage on export

The average export demurrage prices in the surveyed sample have an even more

dispersed distribution:

20’DC Containers: Average demurrage price on export in USD (14th day)

20'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$0 $0 $44 $44 $17 $8

CMA CGM

$0 $0 $7 $7 $9 $6

MSC

$21 - - - $19 -

HAPAG-

LLOYD

$26 $11 $38 $41 $20 $15

Average export demurrage price for 20-feet dry containers, comparative between ports.

International experience in demurrage regulation

40’DC Containers: Average demurrage price on export in USD (14th day)

40'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$0 - $57 $57 $30 $13

CMA CGM

$0 $0 $9 $9 $19 $13

MSC

$41 - - - $32 -

HAPAG-

LLOYD

$50 $19 $42 $45 $39 $31

Average export demurrage price for 40-feet dry containers, comparative between ports.

40’HC Containers: Average demurrage price on export in USD (14th day)

40'HC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shangh

MAERSK

$0 - $57 $57 $30 $15

CMA CGM

$0 $0 $9 $9 $19 $15

MSC

$41 - - - $32 -

HAPAG-

LLOYD

$50 $19 $42 $45 $39 $31

Avera

e export demurra

e price for 40-

eet dry hi

h cube containers, comparative between

ports.

20' Reefer Containers: Average demurrage price on export in USD (14th day)

20'Reefer

Santos

Buenos

Aires

Antwerp

Rotterda

Singapore

Shangh

MAERSK

$29 $30 $85 $85 $67 $15

CMA CGM

$16 $0 $109 $109 $72 $42

MSC

$83 - - - $69 -

HAPAG-

LLOYD

$109 $94 $78 $85 $44 $39

Average export demurrage price for 20-feet Reefer containers, comparative between ports.

From the simple observation of the data, Maersk and CMA CGM present the average

demurrage price of $0 for the 14th day, in the ports of Santos and Buenos Aires, for

20-feet dry containers. The same occurred in the CMA CGM, this time for 40'DC and

40'HC containers. For 20' Reefer containers, Maersk has average demurrage prices of

$29 in Santos and $30 in Buenos Aires. On the other hand, Hapag-Lloyd presents high

prices for dry containers on export in Santos when compared to Buenos Aires.

International experience in demurrage regulation

Other comparisons remain hampered due to the reduced sample and high data

dispersion for the same port. The following relative standard deviations (RSD) are

observed: 117% (dry containers) and 75% (refrigerated containers) in Santos; in the

other ports, ranging from 27% to 173% (dry containers) and 18% to 116%

(refrigerated containers).

5.6.3. Free time on import

The following tables summarize the free time periods on import of dry containers in the

sample, by type of container.

20’DC Containers: Free time on import

20'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

5 7 4 3 7 7

CMA CGM

6 7 7 7 6 7

MSC

7 - - - 7 -

HAPAG-

LLOYD

7 5 4 4 7 10

Free time on import for 20 feet dry containers, comparative between ports.

40’DC Containers: Free time on import

40'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

5 7 4 3 7 7

CMA CGM

6 7 7 7 6 7

MSC

7 - - - 7 -

HAPAG-

LLOYD

7 5 4 4 7 10

Free time on import for 40 feet dry containers, comparative between ports.

40’HC Containers: Free time on import

40'HC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

5 7 4 3 7 7

CMA CGM

6 7 7 7 6 7

MSC

7 - - - 7 -

HAPAG-

LLOYD

7 5 4 4 7 10

Free time on import for 40 feet high cube dry containers, comparative between ports.

International experience in demurrage regulation

The free time periods for dry containers in the tables above, in descending order of

averages, are Singapore and Shanghai (7 days); Santos and Buenos Aires (6.5 and 7

days, respectively); Antwerp and Rotterdam (4 days).

Despite the averages comparison, Antwerp and Rotterdam have a relative standard

deviation (RSD) for the free time of dry containers of 35% and 45%, respectively. This

implies that the increase in the sample will probably affect the result described in the

previous paragraph for these ports.

For 20ft refrigerated containers, the following table:

20’ Reefer Containers: Free time on import

20'Reefer

Santos

Buenos

Aires

Antwerp

Rotterda

Singapore

Shang

hai

MAERSK

5 3 4 3 6 4

CMA CGM

5 3 5 5 3 4

MSC

2 - - - 7 -

HAPAG-

LLOYD

5 3 4 4 7 4

Free time on import for 20 feet reefer containers, comparative between ports.

The free time periods for reefer containers in the table above, in descending order of

averages, are Singapore (6.5 days); Santos (5 days); Shanghai, Antwerp, Rotterdam (4

days); and Buenos Aires (3 days).

Despite the averages comparison, Santos, Singapore, and Rotterdam have relative

standard deviation (RSD) for reefer containers of 35%, 33% and 25%, respectively.

This implies that the increase in the sample will probably affect the result described in

the previous paragraph for these ports.

International experience in demurrage regulation

5.6.4. Free time on export

Below, the tables consolidate the free time periods on export of the sample.

20’DC Containers: Free time on export

20'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

14 14 5 5 7 7

CMA CGM

14 14 12 12 8 7

MSC

7 - - - 7 -

HAPAG-

LLOYD

6 10 4 4 10 7

Free time on export for 20 feet dry containers, comparative between ports.

40’DC Containers: Free time on export

40'DC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

14 - 5 5 7 7

CMA CGM

14 14 12 12 8 7

MSC

7 - - - 7 -

HAPAG-

LLOYD

6 10 4 4 10 7

Free time on export for 40 feet dry containers, comparative between ports.

40’HC Containers: Free time on export

40'HC Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

14 - 5 5 7 7

CMA CGM

14 14 12 12 8 7

MSC

7 - - - 7 -

HAPAG-

LLOYD

6 10 4 4 10 7

Free time on export for 40 feet high cube dry containers, comparative between ports.

International experience in demurrage regulation

20' Reefer Containers: Free time on export

20'Reefer Santos

Buenos

Aires

Antwerp Rotterda

Singapore Shang

hai

MAERSK

10 7 5 5 7 7

CMA CGM

12 14 5 5 5 4

MSC

5 - - - 7 -

HAPAG-

LLOYD

3 7 4 4 8 4

Free time on export for 20 feet reefer containers, comparative between ports.

It is possible to notice that the data dispersion is considerable. The relative standard

deviation (RSD) for free time in Santos is 42% for dry containers and 56% for reefer

containers. Thus, the increase in the sample will likely have a substantial impact on

average comparisons, which is why the comparison of measures of central tendency is

not carried out.

6. CONCLUSIONS

The charge for demurrage of containers emerged with the objective of raising

awareness about the timely return of containers but resulted in a significant increase in

logistical costs for waterway transportation contractors.

Although arising from the transportation contract and not from the charter contract, as

it does not have an express provision in Brazilian legislation at the level of ordinary law,

container demurrage was initially interpreted in analogy to the rules for demurrage of

ships provided for in the Commercial Code of 1850.

However, the maturing of the debate demonstrated the impossibility of accepting this

interpretation, since the commercial, contractual, and legal treatment for demurrage in

cases of chartering ships, as well as its consequences, fundamentally differs from the

treatment to be given to container demurrage. Given the inapplicability of the

Commercial Code, it is with the Civil Code that the debate on the issue is intensified.

Regarding the doctrinal understanding to define the legal regime applicable to

container demurrage, it was presented that part of the doctrine defends the indemnity

nature of the institute, without limitation of values, based on the principle of

Pacta

Sunt Servanda,

which would privilege the sea carrier. On the other hand,

International experience in demurrage regulation

part of the specialized doctrine understands that the demurrage of a container must be

interpreted under the legal regime of a penalty clause.

In view of the arguments brought up, it was found that, in the national legal system,

the institute of indemnity is necessarily restricted to effective losses and lost profits

arising from the action or inaction of the debtor, that is, the obligation of the creditor

to prove the losses, and the collection cannot go beyond what was effectively lost or

what reasonably was failed to profit.

On the other hand, if container demurrage is understood as a penalty clause, it would

be an accessory obligation, derived from the Maritime Bill of Lading, which main

purpose is to transport the cargo from one point to another upon payment of the

freight. Its character as a penalty clause would arise from the prefixation of an amount

already paid to compensate for any damage in the face of non-compliance with the

accessory obligation, that is, the non-timely return of the container. In these terms, the

demurrage value could not, a priori, be higher than the freight value.

Currently, the prevailing jurisprudence understands that demurrage collection or

container demurrage has a legal nature of pre-fixed indemnity for breach of contract,

to compensate the owner for the retention of the safe for a period longer than the

agreed upon period, regardless of the demonstration of guilt or injury.

To analyze how other countries regulate the amounts charged for container

demurrage, the “Interpretive Rules” of the FMC and the recommendations of FIATA

were examined.

In this context, it should be noted that the FMC recognizes that demurrage has penal

elements that were established to encourage the prompt movement of cargo off the

pier, but also includes a compensatory element.

In addition, the FMC understands that demurrage charges serve to speed up the

movement of cargo at the terminals, as they are an incentive for the various actors

working in the logistics chain to seek to move with agility to provide fluidity to

transportation. Considering this, the interpretive rule of the FMC premises that the

more the demurrage practices are aligned with

International experience in demurrage regulation

the search for agility and fluidity of transportation, the less they should be considered

unreasonable.

However, the rules make it clear that it is up to the Commission to analyze the

reasonableness of the charge in cases of disagreement. To this end, it will consider the

extent to which regulated entities have defined demurrage terms, accessibility to

definitions, and how much the definitions differ from terms used in other contexts. The

FMC understands transparency as a basic principle of demurrage practices.

In turn, the Best Practices Guide published by FIATA recognizes that demurrage and

detention rates are valid instruments for shipowners to ensure the return of their

equipment as quickly as possible. However, FIATA does not believe that shippers

should be subject to unfair or unreasonable charges of this nature, especially when the

delay is due to the owner's fault.

FIATA suggests that a series of issues related to demurrage be analyzed and that the

negotiation seeks to:

 Limit accumulated demurrage to a maximum amount.

 Extend the free period if the terminal is unable to release / receive a

container within a period equal to the duration of the inability.

 Ensure a level playing field for containers in port-to-port transport and

negotiate terms to reduce unfair differentiation.

 Support the modal shift to more environmentally friendly modes of

transport, increasing the period of freedom from detention.

 Amend the calculation of export demurrage to transfer responsibility for

ship delays to the shipping company.

 Make sure that demurrage charges on import shipments are collected

faster, preferably within a week.

 Contribute to relieving congestion at the terminal, as well as the

concentration on land of pickups and deliveries due to larger ships and

higher peaks and allowing cargo holders more flexibility, increasing

demurrage-free periods.

International experience in demurrage regulation

 Encourage greater data sharing in the maritime logistics chain, which

would lead to greater transparency of information related to these fees.

Finally, exploratory research was carried out using a small sample of four maritime

carriers in five foreign ports (Buenos Aires, Antwerp, Rotterdam, Singapore and

Shanghai) and Santos. This research served to compare the values displayed there, as

a form of probing that allows for an approximate view of the facts, so that future

research can be designed for greater understanding and precision.

Therefore, due to the small sample, notably of ports and maritime carriers, the data

are insufficient to conclude about the abusiveness or compliance of demurrage prices

and free time terms in Brazil compared to other ports in the world.

Despite the limitations pointed out, the comparison of over-the-counter values of

average demurrage for the 14th day, points to the following research findings.

For all types of containers on import, prices in Santos are markedly higher than

prices in Shanghai, averaging respectively $21 and $7 for 20'DC containers, and

$40 and $15 for 40-feet dry containers.

 For all types of containers on import, prices in Santos are close to prices in

Singapore, averaging $21 in Santos and $19 in Singapore for 20' DC containers,

and $40 and $38 for 40' DC and 40'HC containers. However, it should be noted

that the methodology adopts the 14th day of demurrage for all ports, even

though the dwell time (average time of storage of full containers) for imports in

Singapore is only of 1.46 compared to 12.7 days in Santos.

 For all types of dry containers (20’ DC, 40’ DC and 40’ HC) upon import, the

free time periods have the following averages: Santos,6.5 days; Singapore, 7

days; Shanghai, 7 days; and Buenos Aires,7 days.

International experience in demurrage regulation

Other comparisons were jeopardized due to the reduced sample and the high

dispersion of data for the same port, under penalty of incurring an unrealistic

representation of the reality of prices in each port.

Still regarding data dispersion, there is a greater dispersion in exports, both in terms of

demurrage and free time periods, among maritime carriers in the port of Santos. As

the specialist in regulation of waterway transportation services Arthur Felipe de

Menezes Il Pak observed, in FOB exports, exporters do not choose the maritime carrier.

This may raise the possibility of a need for greater regulatory monitoring in imports,

given that in CIF imports (usually practiced in Brazil), the user does not have any

interference in the choice of the shipowner who will serve him.

Thus, this study brought factual elements on container demurrage, with a focus on

international benchmarking, in order to provide the Agency with facts and evidence

that can support ANTAQ's regulatory options on such an important topic in the

Brazilian national logistics chain.

7. REFERENCES

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. Access on

11/13/2020.

ALPHALINER. Public top 100. Market share. Available at:

https://alphaliner.axsmarine.com/PublicTop100/. Access on: 11/13/2020.

BAZANI, Camila Lima; PEREIRA, Janser Moura; LEAL, Edvalda Araújo. Brazil's logistics

performance in the international market: analysis of the LPI index. In: BRAZILIAN

COSTS CONGRESS, 24., 2017, Florianópolis, 2017. pp. 1-16.

CECAFÉ. Brazilian Coffee Exporters Council – CECAFÉ. In: ANTAQ. Subsidy Collection

03/2020/SRG-ANTAQ. Brasília: Process Nº 50300.010899/2020-14, 2020. pp. 40-43.

(nº SEI 1198641).

International experience in demurrage regulation

CENTRONAVE. National Center for Transatlantic Navigation – CENTRONAVE/ KINCAID I

Mendes Vianna Advogados Associados. In: ANTAQ. Taking Grants 03/2020/SRG-

ANTAQ. Brasília: Process Nº 50300.010899/2020-14, 2020. pp. 139-

142. (nº SEI 1198641).

CMA CGM. Demurrage & Detention. Available at: https://www.cma-

cgm.com/ebusiness/tariffs/demurrage-detention Access on: December 7, 2020.

COALITION FOR FAIR PORT PRACTICES. Petition for Rulemaking. Washington,

December 7, 2016. Available at: https://www2.fmc.gov/readingroom/docs/P4- 16/P4-

16_petition.pdf/. Access on: 12/29/2020.

COLLYER, Wesley. Demurrage of ships: the “once on demurrage, always on

demurrage” rule. In: CASTRO JÚNIOR, Oswaldo Agripino de (org.). Maritime Law Made

in Brazil. São Paulo: Lex, 2007. pp. 214 and 215.

CREMONEZE, Paulo Henrique. Maritime Law Practice: the maritime transportation

contract and the carrier's civil liability. 2. ed. São Paulo: Quartier Latim do Brasil, 2012.

p. 454.

FARIAS, Diogo. In: ANTAQ. Subsidy Collection 03/2020/SRG-ANTAQ. Brasília: Process

Nº 50300.010899/2020-14, 2020. pp. 105-107. (nº SEI 1198641).

FEDERAL MARITIME COMMISSION (FMC). Fact-Finding Investigation nº 2828 –

Conditions and Practices Relating to Detention, Demurrage, and Free Time in

International Ocean-borne Commerce. Order of Investigation. March 5, 2018. Available

at:

https://www2.fmc.gov/readingroom/docs/FF%20No.%2028/ff-

28_ord2.pdf/. Access on: 12/29/2020.

FEDERAL MARITIME COMMISSION (FMC). Fact-Finding Investigation nº 28 –

Conditions and Practices Relating to Detention, Demurrage, and Free Time in

International Ocean-borne Commerce. Interim Report. September 4, 2018. 19 p.

FEDERAL MARITIME COMMISSION (FMC). Fact-Finding Investigation nº 28 –

Conditions and Practices Relating to Detention, Demurrage, and Free Time in

International Ocean-borne Commerce. Final Report. December 3, 2018. p. 35.

International experience in demurrage regulation

Available at: https://www2.fmc.gov/readingroom/docs/FF%20No.%2028/FF-

28_FR.pdf/. Access on: Dec 11, 2020.

FEDERAL MARITIME COMMISSION (FMC). Fact-Finding Investigation nº 28. Final

Recommendation to the Commission. August 27, 2019. Available at:

https://www.fmc.gov/wp-content/uploads/2019/09/FF28FinalReportLetter.pdf.

Access on: 12/29/2020.

FEDERAL MARITIME COMMISSION (FMC). Interpretive Rule on Demurrage And

Detention Under The Shipping Act. Washington: Federal Register,

May 18, 2020. v. 85, n. 96. Available at: https://www2.fmc.gov/readingroom/docs/19-

05/19-05_fnl_rul_fr.pdf/. Access on: Dec 11, 2020.

FEDERAL MARITIME COMMISSION (FMC). Rules, Rates, and Practices Relating to

Detention, Demurrage, and Free Time for Containerized Import. Washington: Federal

Maritime Commission, 2015. 64 p. Available at: https://www.fmc.gov/wp-

content/uploads/2019/04/reportdemurrage.pdf. Access on: Dec 11, 2020.

FIATA. Demurrage and Detention in Container Shipping: best practices as proposed by

FIATA. Geneva: FIATA, 2018. 10 p. Available at:

https://fiata.com/fileadmin/user_upload/documents/recent_views/MTI/FIATA_World

_Congress_2018_-_Presentation_New_Working_Group_Sea_-

Best_Practice_Guide_on_demurrage_and_detention-.pdf. Access on: Dec 11, 2020.

GAZETA MERCANTIL. Lack of containers and legal exits. São Paulo, Aug 19, 2004.

HAPAG-LLOYD. Demurrage & Detention. Available at: https://www.hapag-

lloyd.com/en/online-business/tariffs/detention-demurrage.html Access on: December 7,

2020

MAERSK. Demurrage & Detention. Available at: https://www.maersk.com/local-

information/ Access on: December 7, 2020.

MARCHIOLI, Rodrigo. In: ANTAQ. Subsidy Collection 03/2020/SRG-ANTAQ. Brasília:

Process Nº 50300.010899/2020-14, 2020. pp. 13-16. (nº SEI 1198641).

International experience in demurrage regulation

MSC. Demurrage & Detention. Available at: https://www.msc.com/country-guides Access on:

December 7, 2020.

LEGAL NATURE OF CONTAINER DEMURRAGE CHARGE, IN LIGHT

OF RFB CONSULTATION SOLUTION N°108-2017. Rio de Janeiro: Biblioteca Almirante

Adalberto Nunes – Maritime Court, n. 38, 2017. Bimonthly. May-Jun / Special Section

– Commented Jurisprudence.

PARREIRAS, Fábio Ataíde Silva. Container logistics and demurrage payment: a case

study. 2012. 49 f. Monograph (Specialization) - Course in Strategic Logistics and

Transport Systems, School of Engineering, Federal University of Minas Gerais, Belo

Horizonte, 2012. Available at: https://repositorio.ufmg.br/bitstream/1843/BUOS-

9C5GFG/1/monografia_f_bio_parreiras.pdf. Access on: Dec 03, 2020.

PRESIDENCY OF THE REPUBLIC. SUB-CHIEF OF ANALYSIS AND MONITORING OF

GOVERNMENT POLICIES [ET AL.]. General guidelines and guidance for preparing a

Regulatory Impact Analysis – AIR. Brasília: Casa Civil, 2018. 108 p. Available at:

https://www.gov.br/casacivil/pt-br/centrais-de-

conteudo/downloads/diretrizes-gerais-e-guia-orientati. Access on: Dec 17, 2020.

OCTAVIANO MARTINS, Eliane M. Course on Maritime Law: volume iii: contracts and

processes. Barueri - SP: Manole, 2015. 810 p.

ROEMER, Jens. Demurrage and detention charges in container shipping. Unctad

Transport and Trade Facilitation Newsletter, Geneva, n. 80, p. 1-2, 12 Dec. 2018.

Quarterly. Available at: https://unctad.org/news/demurrage-and-detention- charges-

container-shipping. Access on: Dec 10, 2020.

ROSSI, Catiani; CASTRO JUNIOR, Oswaldo Agripino de. The legal nature of container

demurrage. 2019. 37 f. Monograph (Specialization) – Legal Science Course, No Prelo,

Florianópolis, 2019.

SILVEIRA, Eliana Aló da. 20 years of the judicialization of container collection and

demurrage: what is and what has changed in demurrage. Belo Horizonte: Arraes

Editores Ltda., 2018. 165 p. (Pantalassa Collection).

International experience in demurrage regulation

WINTER, James. The charge of container demurrage in the importation by

international maritime transport: the Brazilian case. 2019. 83 f. Thesis (master's

degree)

– Professional master's Course, São Paulo Law School, Fundação Getúlio Vargas, São

Paulo, 2019. Available at:

http://bibliotecadigital.fgv.br/dspace/handle/10438/28491. Access on: Nov 24, 2020.

International experience in demurrage regulation

8. ATTACHMENTS

1 - Interpretive Rule of Demurrage and Detention under the Maritime

Navigation Act – United States Federal Maritime Commission

§ 545.5 Interpretation of the Sea Transport Act 1984 – Unfair and Unreasonable

Practices Regarding Demurrage and Detention.

(a)

Purpose. The purpose of this rule is to provide guidance on how the

Commission will interpret 46 U.S.C. 41102 (c) and § 545.4 (d) in a detention

and demurrage context.

(b)

Applicability and scope. This rule applies to practices and regulations

concerning demurrage and detention of cargo in containers. For the purposes

of this regulation, the terms demurrage and detention include any charges,

including “per diem,” determined by common maritime carriers, maritime

terminal operators or maritime transport intermediaries (“regulated entities”)

related to the use of maritime terminal space (e.g., land) or containers, not

including freight charges,

(c)

Incentive Principle — (1) General. When analyzing the reasonableness of

demurrage and detention practices and regulations, the Commission will

consider the extent to which demurrage and detention are serving the primary

purposes as financial incentives to promote the fluidity of transport. (2)

Particular applications of the incentive principle:

(i)

Cargo availability. The Commission may consider in the reasonableness

analysis the extent to which practices and regulations relate demurrage

or free period to the availability of cargo for removal.

(ii)

Empty container return. Absence of mitigating circumstances, practices

and regulations that mandate detention when it does not serve the

purposes of incentive, such as when empty containers cannot be

returned, are likely to be considered unreasonable.

(iii)

Cargo availability notice. When analyzing the reasonableness of

demurrage practices and regulations, the Commission may consider

whether and how the regulated entities provide information to those

responsible for the cargo that it is available for removal. The

International experience in demurrage regulation

Commission may consider the type of information, what the information

is provided for, the format of the information, the method of distributing

the information, the timing of the information and the effect of the

information.

(iv)

Government inspections. When assessing the reasonableness of

demurrage and detention practices in the context of government

oversights, the Commission may consider the extent to which

demurrage and detention are serving their intended purpose and may

also consider mitigating circumstances.

(d)

Demurrage and detention policies. The Commission may consider in the

reasonableness analysis the existence, accessibility, content, and clarity of

policies implementing demurrage and detention practices and regulations,

including dispute settlement policies and practices and regulations with respect

to charging demurrage and detention. When reviewing dispute settlement

policies, the Commission may also consider the extent to which it contains

information on points of contact, deadlines, and substantiation requirements.

(e)

Transparent terminology. The Commission may consider in the reasonableness

analysis the extent to which regulated entities have clearly defined terms used

in demurrage and detention practices and rules, definitions of accessibility and

the extent to which definitions differ from terms used in other contexts.

(f)

No preclusion. Nothing in this rule prevents the Commission from considering

factors, arguments, and evidence in addition to those specifically listed in this

rule.

International experience in demurrage regulation

2 - Quantitative and Summary of Contributions in Subsidy Collection

Nº 03/2020

Contributor

al Nature

Adhesion

Agreemen

In favor of any

Regulation?

Fábio Diez (Itapoá Port) Indemnity No No

lvaro Oliveira (Itaoca Offshore) Penalty clause Yes Yes (transparency)

Fabrício da Silveira (Martarello Advogados)

Indemnity

Yes

Yes (value

limit)

Rodrigo Marchioli (Marchioli & Minas Advogados)

Indemnity

Yes

Yes (value

limit)

Douglas Brito (Ônix Assessoria Aduaneira)

Indemnity

Yes

Yes (value

limit)

Daniel Rodri

ues (Metropolitan Transportes) Indemnity Yes Yes (transparency)

Paulo Germano (RJM serviços aduaneiros)

Penalty clause

Yes

Yes (value

limit)

Emerson Noronha (Transportes Bertolini)

Indemnity

Yes (value

limit)

Daniella (Revoredo Advocacia) Indemnity No Yes (transparency)

Osvaldo Agripino (CECAFÉ)

Penalty clause

N/R

Yes (value

limit)

André de Seixas (Logística Brasil)

Indemnity

Yes

Yes (value

limit)

John Butler (World Shippin

Council) Indemnity N/R No

Simone Assenheimer (Lo

in S/A) Indemnity No No

Marcelo Sammarco (OAB Santos) Indemnity No No

André Zanin (FENAMAR) Indemnity N/R No

Grupo A. P. Moller Maers

Indemnity No No

Priscila Fabretti (Ass. Bras. Distr. Prods. Químicos e

Petroquímicos)

Indemnity

Yes

Yes (transparency)

Marcelo Sammarco (Sammarco e Associados

Advocacia)

Indemnity

Cristina Wadne

(Unima

enciamentos

Marítimos LTDA)

Indemnity

Luciana Rodri

ues (MSC do Brasil) Indemnity No No

Pedro Neiva (Centronave e Kincaid) Indemnity No No

Usuport - BA

Indemnity

Yes

Yes (value

limit)

Forei

n Trade Companies Union o

SC – SINDITRADE

Penalty clause

Yes

Yes (value

limit)

Bruno Tussi (Tussi & Platcheck Advo

ados) Indemnity No No

Luiz Oliveira (Asia Shippin

Ltda) Indemnity Yes Yes (transparency)

Gisely Horsth (Hapa

-Lloyd) Indemnity No No

Luiz Oliveira (V3 Shipping do Brasil)

Indemnity

Yes

Yes (value

limit)

Marie-Lorraine (CMA-CGM) Indemnity N/R No

João Braun (Reis, Braun e Re

ueira Advo

ados) Indemnity No No

Diogo Farias

Penalty clause

Yes

Yes (value

limit)