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In February 2024, the Federal Maritime Commission (FMC) promulgated new regulations governing detention and demurrage (D&D) invoicing practices, codified at 46 C.F.R. Part 541 (D&D Final Rule, 89 Fed. Reg. 14330. These regulations were designed to bring clarity and fairness to a system long criticized for its opacity and unpredictability. Among other things, the D&D Final Rule limited which parties could be billed for D&D charges, aiming to restrict invoices to those with a contractual relationship with the billing party — typically ocean carriers (NVOCCs or VOCCs) or marine terminal operators.
However, on September 23, 2025, the US Court of Appeals for the D.C. Circuit issued a decision in World Shipping Council v. Federal Maritime Commission, partially vacating the D&D Final Rule. Specifically, the court set aside Section 541.4, which defined who may receive a D&D invoice, finding that the FMC's rationale in promulgating the rule was internally contradictory and thus arbitrary and capricious and invalid under the Administrative Procedure Act (APA).
Overview of the 2024 D&D Invoicing Rule
Section 541.4 of the D&D Final Rule mandated that D&D invoices could only be issued to either:
- The person for whose account the billing party provided ocean transportation or storage of cargo and who contracted with the billing party, or
- The "consignee," defined as the "ultimate recipient of the cargo" — not defined as the entity listed in the consignee box on the bill of lading.
Otherwise, Section 541.4 explicitly prohibited billing any other party for D&D charges. The FMC's stated logic during the rulemaking notice and comment period was that only parties with "contractual privity" to the ocean carrier have the ability and necessary knowledge of contractual terms and operative facts to dispute charges effectively.
During the rulemaking process Metro Group Maritime (a New Jersey based logistics receivables processing service provider) submitted a comment requesting an amendment to Section 541.4 to confirm that D&D invoices could be issued directly to motor carriers to the extent the motor carriers had a direct contractual relationship with the ocean carrier. The FMC's initial response in the D&D Final Rule preamble indicated that no such amendment was necessary because "[t]he definition of 'billed party' is intentionally broad to capture any party to whom a [D&D] invoice is issued"; and accordingly "[n]othing in this [Final D&D R]ule...prohibits a VOCC from issuing a [D&D] invoice to a motor carrier when a contractual relationship exists between the VOCC and the motor carrier for the motor carrier to provide carriage or storage of goods to the VOCC."
However, this comment response did not account for the fact that the definitions in Section 541.4(a)(1) are explicitly limited to contractual relationships linked to "provi[sion of] ocean transportation or storage" of cargo, which on their face would not extend to inland/non-ocean motor carriage services.
The Correction and the Court's Response
Shortly after issuing the D&D Final Rule, the FMC published a Correction in May 2024 (89 Fed. Reg. 39569, 39569–70), clarifying that motor carriers — even those in contractual relationships with ocean carriers — could not be billed under Section 541.4 of the D&D Final Rule. This reversed the FMC's earlier position in the D&D Final Rule's preamble, which had acknowledged that motor carriers who directly contract with ocean carriers should be eligible to receive invoices. The FMC's correction clarified that under the language of Section 541.4, a motor carrier could only be billed for D&D in the context of a through bill of lading issued by the VOCC — i.e. a contract of carriage related to "ocean transportation" as contemplated by Section 541.4(a)(1). Importantly, the correction also noted that the FMC's jurisdiction only extends to oceanborne commerce (46 C.F.R. § 501.2), such that the D&D Final Rule arguably could not legally extend to non-ocean carriage contracts between motor carriers and ocean carriers.
The DC Circuit found this reversal logically untenable and internally inconsistent with other aspects of the D&D Final Rule, and thus unlawful. The court emphasized that the FMC's central rationale was based on contractual privity, yet the FMC's "corrective" clarification excluded motor carriers even if they were in direct privity with the ocean carrier (which is frequently the case, as truckers and VOCCs often enter discrete contracts regarding D&D/storage charges, typically under the Uniform Intermodal Interchange & Facilities Access Agreement (UIIA)):
"Even so, the Rule still prohibits ocean carriers from invoicing their partners in contractual relationships in one notable situation: if the billed party is a motor carrier ... The seeming discrepancy was pointed out to the Commission, and the Commission gave no reasonable explanation for it. To the contrary, to the extent the Commission engaged with whether the Rule's rationale should allow for invoicing a motor carrier in privity with the billing party, the Commission reached the opposite conclusion from the one dictated by the Rule"
In outlining the FMC's failure to provide a suitable rationale for this logically inconsistent approach to motor carriers, the Court noted that the FMC's analytical position was lacking when it simply restated the terms of the D&D Final Rule:
"[R]estating the terms of the Rule does not explain why the logic of the Rule does not extend to truckers in contractual privity, as the Commission had initially assumed it did."
The court concluded that the FMC failed to provide a reasoned explanation for this inconsistency, rendering the rule arbitrary and capricious under the APA standard. Importantly, the court noted that its decision did not prevent the FMC from ever issuing a rule that might otherwise address the D&D issues implicated in Section 541.4. However, the current text of Section 541.4 but could not pass muster under APA review:
"None of this is to say definitively that the Commission could never give a satisfactory explanation for categorically excluding motor carriers from the field of parties that may be assessed demurrage and detention fees, should the Commission opt to maintain that policy. Rather, it is to say that the Commission has yet to give such an explanation"
Questions About Consignees
The court separately raised concerns about the internal inconsistence of the D&D Final Rule by inclusion of consignees as eligible billed parties under the express terms of Section 541.4(a)(2), which explicitly allows for consignees to be billed for D&D charges (Section 541.4(a)(2)), but does not require that a billed consignee have a "contractual relationship"/ "contractual privity" with the ocean carrier. In this regard, it is important to note that Section 541.3 of the D&D Final Rule defines a "consignee" as the "ultimate recipient of the cargo" as opposed to the entity listed in the consignee box on the bill of lading. While consignees are not necessarily in contractual privity with carriers, the rule allowed them to be billed without qualification. Thus, non-contractually linked consignees could ostensibly be billed for D&D charges, while at the same time contractually linked motor carriers could not be. The DC Circuit Court concluded that this fundamental logical inconsistency within Section 541.4 and the D&D Final Rule was also untenable and questioned whether this overinclusive approach was consistent with the FMC's stated rationale.
What Was Set Aside — and What Remains
The court severed and vacated only Section 541.4, the provision defining who may be billed. The remainder of the D&D Final Rule — including requirements for invoice content, timing, and dispute procedures — remains intact. The court found that these provisions function independently and continue to serve the FMC's regulatory goals.
What Happens Next?
The court has withheld issuance of the mandate pending disposition of any petition for rehearing or rehearing en banc. This means the vacatur is not yet final, but parties should prepare for its likely effect. The FMC has 45 days from the September 23, 2025, date of the decision to petition for rehearing.
What This Means for Our Clients
This decision reinforces that D&D invoices remain challengeable. The teeth of the D&D invoicing requirements are still in place. Importers, exporters, NVOCCs, and motor carriers should continue to scrutinize D&D invoices and assert their rights to dispute charges and seek refunds or waivers.
On the other hand, the DC Circuit's ruling (pending the outcome of any potential rehearing) would ostensibly affect any pending proceedings before the FMC regarding claims stemming from alleged Section 541.4 violations. Looking ahead, the DC Circuit's decision will presumably also lead to additional rulemaking under the express mandate in the Ocean Shipping Reform Act of 2022 (Public Law 117-146, 136 Stat. 1272, §7(b)(2) (June 16, 2022) for the FMC to promulgate rules "including a determination of which parties may be appropriately billed for any demurrage, detention, or other similar per container charges." Given the high-profile nature of previous D&D rulemaking, any renewed efforts by the FMC in this area will be equally closely watched. In particular, the fundamental question of the physical and notional limits of the FMC's jurisdiction may be front and center. This jurisdictional scope concern is currently at issue in a dispute pending before the FMC that implicates the D&D Final Rule generally, and in particular certain aspects of the Section 541.4 conundrum that the DC Circuit has (at least for now) resolved. See S.P.F. Logistics, Inc. v. Hapag-Lloyd AG (FMC Docket No. 24-24).
In the meantime, there may still be a path (albeit more complex and indirect) to pursuing claims for invalid/improper D&D invoicing under the Shipping Act, which (regardless of the Section 541.4 problems) still broadly mandates that ocean carriers "may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property" (46 U.S.C. §41102(c)). This could potentially provide a cause of action for non-contractually related parties to dispute D&D charges if they are invoiced for such charges by an ocean carrier. However, any such claim would ostensibly be highly fact-specific (unlike what would be an otherwise straightforward claim under the now-vacated discrete definitions under Section 541.4).
Our firm has successfully represented clients in recovering unlawful D&D charges. This ruling maintains the basic legal foundation for such challenges.
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