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A federal appeals court has upheld a landmark Federal Maritime Commission (FMC) decision finding that ocean carriers cannot impose detention charges that do not serve their intended purpose of promoting the efficient movement of cargo through the supply chain.
In a unanimous ruling, the U.S. Court of Appeals for the District of Columbia Circuit rejected all of Evergreen Shipping Agency (America) Corp.'s challenges to an FMC order that found the carrier's detention fees were unreasonable after a trucking company was unable to return equipment during a three-day closure of the Port of Savannah.
The ruling stems from a closely watched dispute between Evergreen and Georgia trucking company TCW Inc. over $510 in detention charges assessed during a three-day Memorial Day 2020 closure of the Port of Savannah. In April, the U.S. Court of Appeals for the D.C. Circuit unanimously upheld the Federal Maritime Commission's decision that the fees violated the Shipping Act because the trucker had no practical ability to return the equipment while the port was closed.
The court agreed with the FMC that the charges violated the Shipping Act's requirement that carriers establish and enforce "just and reasonable" practices because they could not have encouraged an earlier return of the equipment under the circumstances.
Writing for the court, Senior Circuit Judge Harry Edwards said the Commission reasonably concluded the charges failed to serve detention's "primary purpose[] as financial incentives to promote freight fluidity" because TCW could neither retrieve the equipment sooner nor return it while the port gates were closed. The court also noted Evergreen conceded it suffered no costs as a result of the three-day delay.
The decision reinforces the FMC's 2020 Interpretive Rule on detention and demurrage, which directs the agency to evaluate whether such charges function as financial incentives to improve freight fluidity rather than simply as revenue-generating penalties. The rule also states that, absent extenuating circumstances, detention charges imposed when empty containers cannot be returned are likely to be found unreasonable.
Evergreen argued that detention fees during planned port closures still encouraged truckers to return equipment before the closure began and that the Commission improperly replaced the rule's "incentive principle" with a broader "freight fluidity" standard.
The appeals court rejected that argument, finding freight fluidity has always been central to the FMC's interpretation. The court said the Commission was entitled to rely on its expertise in determining whether detention charges would improve the overall flow of cargo and equipment through the supply chain rather than simply encourage the fastest possible return of containers.
The ruling also affirmed that carriers seeking to justify detention charges on the basis of compensation—not just incentive—must provide evidence showing the fees reflect actual costs incurred. In this case, the court found Evergreen failed to present evidence that the delayed return during the port closure imposed additional costs on the carrier.
The decision is expected to strengthen the FMC's oversight of detention and demurrage billing practices, an area that has been a major focus of the agency since supply chain disruptions during the COVID-19 pandemic prompted widespread complaints from shippers, truckers and cargo owners over container fees that continued to accrue even when equipment could not be moved.
