The U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) on Sept. 23, 2025, issued its decision in World Shipping Council (WSC) v. Federal Maritime Commission (FMC or Commission), vacating a central provision of the FMC's recently enacted rule for Demurrage and Detention Billing Requirements. Final Rule, 89 Fed. Reg. 14330 (D&D Rule).
The Ocean Shipping Reform Act of 2022 (OSRA 2022) required the FMC to initiate a rulemaking "further defining prohibited practices by common carriers, marine terminal operators, shippers, and ocean transportation intermediaries under the Shipping Act regarding the assessment of demurrage or detention charges." OSRA 2022, § (7)(b)(1). U.S. Congress specifically limited the scope of the rulemaking to further "address the issues identified in the final rule published on May 18, 2020, entitled 'Interpretive Rule on Demurrage and Detention Under the Shipping Act' ... including a determination of which parties may be appropriately billed for any demurrage, detention, or other similar per container charges." OSRA 2022, § 7(b)(2). The FMC published the final D&D Rule on Feb. 26, 2024. 89 Fed. Reg. at 14330. The D&D Rule, codified at 46 C.F.R. § 545.5, took effect on May 28, 2024. The WSC filed a petition with the D.C. Circuit challenging the D&D Rule on April 18, 2024, and the court held oral argument on March 13, 2025.
The WSC specifically challenged § 541.4 of the D&D Rule, which limited the persons who can be invoiced for demurrage and detention charges to "(1) [t]he person for whose account the billing party provided ocean transportation or storage of cargo and who contracted with the billing party for the ocean transportation or storage of cargo; or (2) [t]he consignee." 46 C.F.R. § 541.4. The WSC argued that in promulgating the D&D Rule, the FMC had exceeded OSRA 2022's statutory authority, the D&D Rule was arbitrary and capricious, and that the FMC failed to comply with the National Environmental Policy Act (NEPA) during the rulemaking process.
Particular exception was taken to the Commission's treatment of whether a motor carrier in a contractual relationship to a billing ocean carrier (VOCC) could be invoiced, even if the motor carrier was not a "person for whose account the billing party provided ocean transportation or storage of cargo." The Commission initially responded in the rulemaking that such a motor carrier could indeed be invoiced: "Nothing in this rule ... prohibits a VOCC from issuing a demurrage or detention 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." 89 Fed. Reg. at 14362.
However, the Commission later issued a "Correction" to the D&D Rule in response to "several inquiries concerning a possible discrepancy between the rule text and one paragraph in the preamble" (referring to the response on motor carrier billing noted above), stating that the Commission was correcting the discussion in the D&D Rule to state its position that motor carriers cannot be billed even if they are in a contractual relationship with the billing party. Demurrage and Detention Billing Requirements (Correction), 89 Fed. Reg. 39569, 39569-70 (May 9, 2024) (Correction).
In its decision, the D.C. Circuit set aside § 541.4 of the D&D Rule, finding that the Commission's rationale for restricting billing to certain parties was inadequately explained and internally inconsistent. Specifically, the court held that the Commission's categorical prohibition on billing motor carriers – regardless of their contractual relationship with the billing party – was arbitrary and capricious, especially when contrasted with its blanket allowance to invoice consignees.
Although the D&D Rule did not explicitly prohibit billing motor carriers, its practical effect following the Correction was to exclude them – even when they had a contractual relationship with the billing party. While WSC did not specifically challenge the D&D Rule's application to consignees, the court nonetheless reasoned that the D&D Rule's categorical inclusion of consignees – without regard to contractual privity – also conflicted with the Commission's stated emphasis in the D&D Rule's Preamble on contractual relationships as a prerequisite for invoicing D&D charges. WSC v. FMC, No. 24-1088, 2025 WL 2698837, at *7 (D.C. Cir. Sept. 23, 2025).
The D.C. Circuit declined to remand the issue back to the Commission, finding that the challenged invoicing provision at § 541.4 was severable from the reminder of § 541. Significantly, although the preamble to the D&D Rule still contains references to the "contractual privity" policy behind the D&D Rule, the court's decision to vacate § 541.4 in its entirety reopens the question of which parties may be properly invoiced for D&D charges – which was a specific question that Congress directed the Commission to regulate in the rulemaking. OSRA 2022, § 7(b)(2). While that question is once again unregulated, nothing in the decision prevents the Commission from undertaking a new rulemaking to address this regulatory mandate in OSRA 2022.
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