Accruing disputed D&D charges: how finance should treat what is in dispute

Why D&D breaks the close

Detention and demurrage arrive the way finance teams like least: unbudgeted, irregular, from a dozen billing parties, and frequently in dispute. The import team says half of last month's invoices are wrong. Accounts payable has them sitting in an approval queue. The controller has to decide what goes into the accrual, what goes into the cash forecast, and what to tell the CFO about next quarter.

The answer starts with recognising that not all disputed invoices are alike. Since Part 541 took effect on May 28, 2024, an invoice can be unenforceable on its face because of how it was issued, or contestable on the merits because of what happened at the terminal. Those are different risks, and they should be tracked differently. Treating them as one pool of "disputed D&D" either overstates the liability or overstates the expected recovery, and usually both at different points in the year.

Three buckets, three behaviours

Bucket one is Part 541 defects. Under 46 CFR § 541.5, an invoice missing any of the minimum elements in § 541.6 eliminates the billed party's obligation to pay. Under § 541.7, an invoice issued more than 30 calendar days after the charge was last incurred does not have to be paid. These invoices still need a request to the billing party, and a reissued invoice can change the picture, but the expected outcome is a full credit.

Bucket two is merits disputes: invoices that are complete and timely, but where the evidence shows days billed while cargo was unavailable, appointments were not open, or empties could not be returned. These are argued under the incentive principle in 46 CFR § 545.5, and outcomes vary by carrier, terminal and evidence quality. Your own credit history is the right planning input here.

Bucket three is undisputed charges. The audit found nothing, or the team decided the charge was fair. These are ordinary payables and should be paid on terms.

• Part 541 defects: missing § 541.6 elements or late under § 541.7; expected full credit
• Merits disputes: § 545.5 arguments with evidence; expected partial credit based on history
• Undisputed: pay on terms

Booking what is in dispute

Accounting policy here depends on facts, materiality and your auditors, so treat this as the questions to settle rather than a ruling. For unpaid invoices, many controllers keep the full invoiced amount in payables or accrued liabilities until a credit memo or written waiver arrives, and track the expected credit outside the ledger in the dispute log. Others reflect their best estimate of the amount owed. Under US GAAP, a liability is generally derecognised when it is paid or when the creditor or a court legally releases the debtor (ASC 405-20), which is one reason the conservative approach is common.

For charges already paid, the expected refund is usually treated as a gain contingency under ASC 450-30 and not recognised until it is realised, typically when the billing party confirms the credit or the refund arrives. Booking a receivable for a dispute that has merely been sent overstates assets.

Whatever the policy, document it once and apply it consistently. Write the policy down in a one-page memo that names the three buckets, the evidence threshold for moving an invoice into bucket one or two, and who approves the move. The worst outcome is an accrual that changes method every quarter depending on how optimistic the import team feels.

Worked example: one quarter of open invoices

Lakeshore Furniture Imports ends the quarter with $96,000 of open D&D invoices. The audit sorts them into $38,400 of Part 541 defects (missing availability dates, missing request URLs and two late invoices), $31,200 of merits disputes (appointment shortages and an empty-return restriction), and $26,400 undisputed. The check: $38,400 + $31,200 + $26,400 = $96,000.

Lakeshore's own history over the prior four quarters shows it was credited on 60% of disputed dollars in merits disputes. Its cash forecast therefore expects: undisputed $26,400 paid; merits disputes $31,200 x 40% = $12,480 paid after resolution; Part 541 defects $0 paid. Expected cash out is $26,400 + $12,480 = $38,880.

The booked liability under a conservative policy stays at $96,000 until credits arrive. The gap between booked and expected, $96,000 minus $38,880 = $57,120, is the amount finance expects to reverse as credit memos come in: $38,400 from bucket one plus $31,200 x 60% = $18,720 from bucket two. Reporting both numbers, with the reconciliation, gives the CFO a forecast and the auditors a clean trail.

Paying under dispute

Some importers pay disputed charges to keep their accounts current and avoid holds on future cargo. That is a commercial decision, and it is compatible with disputing: § 541.8 refers to requests for mitigation, refund or waiver, so a refund request on a paid charge is a normal Part 541 request. If a dispute later reaches the FMC as a charge complaint under 46 U.S.C. § 41310, the remedy the statute describes for a noncompliant charge is a refund of charges paid, and the FMC asks for proof of payment.

Paying has a cost beyond cash. Once a charge is paid, the billing party has less reason to act quickly, and the burden of chasing the refund sits with you. Track paid-and-disputed items as their own category in the dispute log, with the payment date, amount and request date, so they do not disappear into closed AP history.

If you pay under dispute, say so in writing at the time of payment and reference the open request. Keep the payment record in the dispute file so the refund, when it comes, can be matched to the original charge and booked against the same account.

Running the log on the regulatory calendar

Month-end is the wrong clock for D&D. Each invoice carries its own: the billed party has at least 30 calendar days from issuance to request relief under § 541.8(a), and the billing party must attempt to resolve a request within 30 calendar days of receipt under § 541.8(b), unless both sides agree to a later date. A dispute log that only shows invoice dates and amounts cannot tell finance which requests are still unsent, which are open, and which are overdue for a response.

The useful report ages each open invoice two ways: days remaining in the request window, and days since the request was sent. Anything past 30 days without a response is an escalation candidate, and anything with fewer than 7 days left in its request window needs action this week.

Budgeting the programme

When finance evaluates an audit programme, the inputs are annual D&D spend, the share that fails a Part 541 or § 545.5 check, the expected credit rate, and the cost. ATAHSKIA's standard worked example uses a 3,500 TEU importer with $480,000 of annual D&D. If 65% is disputable, that is $312,000; at a 75% success rate, $234,000 is recovered. On the Enterprise BCO plan the cost is $29,400 in platform fees plus a 12% success fee of $28,080, $57,480 in total, for a net of $176,520, about 4.1 times the cost.

Across ATAHSKIA's customer cohort, customers disputing under Part 541 recover 45% to 75% of billed D&D. Use your own audit to place yourself in that range; the free 12-month retrospective audit at /free-dd-audit produces the bucket split above for your actual invoices.