COSCO & MSC Deny Allegations of Profiteering, Say Claims Are Bogus

COSCO Shipping Lines Co., Ltd., and MSC Mediterranean Shipping Company S.A. denied allegations that they colluded with other carriers to drive up freight rates.

Last month, MCS Industries, Inc., a furniture and home furnishing company based in Pennsylvania, filed a complaint with the Federal Maritime Commission (FMC) alleging that since the beginning of the COVID-19 pandemic, global ocean carriers have unjustly and unreasonably exploited customers, vastly increasing their profitability at the expense of shippers and the U.S. public generally, which bears increased freight cost in the form of inflation.

MCS said COSCO and MSC flouted their contractual service commitments, providing MCS with only fractions of the agreed allotments of space on their respective ocean vessels, and instead forcing MCS to make alternate transportation arrangements at substantially—often outrageously—higher spot market prices.

"As a result of the collective conduct and profiteering by COSCO and MSC and their fellow global ocean carriers, ocean carriage costs on the spot market have risen to crisis levels, threatening shippers’ businesses and generating price inflation to support massive windfalls for the carriers at the expense of the public. This conduct is unjust, unreasonable, and unlawful," the furniture company said.

MCS Industries wants the FMC to investigate COSCO and MSC and order them to cease and desist from further violations as well as pay MCS reparations for their unlawful conduct.

In its Answer, COSCO said it has done its level best to provide as much cargo-carrying capacity as it possesses to meet the extraordinary demand created by the U.S. import market. COSCO insists it id not deprive shippers of capacity or create any artificial scarcity. Moreover, COSCO said it did not refuse to negotiate with MCS. The allegations are false, COSCO pointed out that MCS also did not provide any evidence to support its allegations.

MSC, for its part, expressly denied that it has exploited customers. Rather, MSC said, it has dealt reasonably with unprecedented dislocations in international ocean shipping caused by substantial increases in demand at the same time that unprecedented port congestion has effectively limited available vessel capacity and created substantial operational difficulties for carriers, and has endeavored to comply at all times, and believes it has complied, with its contractual obligations to its customers, including MCS.

MSC objected to MCS’s mischaracterization of ocean carrier alliances such as the “2M Alliance” as “collusive”. MSC noted that such alliances are authorized by the FMC so that carriers can engage in related cooperative operating activities in various trades that create efficiencies that benefit exporters, importers, and consumers.

Both COSCO and MSC asked the FMC to dismiss the MCS Complaint.

Documents related to the proceeding -- 21-05 - MCS Industries, Inc. v. COSCO Shipping Lines Co., Ltd. and MSC Mediterranean Shipping Company SA -- can be viewed here.

FMC Questions 8 Ocean Carriers About Surcharges

The Federal Maritime Commission's Bureau of Enforcement (BoE) is giving eight ocean carriers until August 13, 2021, to provide details that confirm any surcharges were instituted properly and in accordance with legal and regulatory obligations.

The companies contacted are CMA CGM, Hapag-Lloyd, HMM, Matson, MSC, OOCL, SM Line; and Zim. Each ocean carrier was identified as having recently implemented or announced congestion or related surcharges.

The FMC has launched an expedited inquiry into the timing and legal sufficiency of ocean carrier practices with respect to certain surcharges. The BoE wants the ocean carriers to provide details about congestion or related surcharges they have implemented or announced.

This action was taken in response to communications received by the Commission from multiple parties reporting that ocean carriers are improperly implementing surcharges.

Ocean carriers are subject to specific requirements related to tariff changes or rate increases, including providing a 30-day notice to shippers and ensuring that published tariffs are clear and definite.

In reviewing ocean carrier responses, the Commission will determine if surcharges were implemented following proper notice; if the purpose of the surcharge was clearly defined; if it is clear what event or condition triggers the surcharge; and is it clear what event or condition has been identified that would terminate the surcharge. The Commission can initiate enforcement actions for improperly established tariffs.

“The COVID-related spike in demand for imports has pushed cargo rates to record highs,” said Chairman Maffei. “Now, we hear increasing reports of ocean carriers assessing new additional fees, such as ‘congestion surcharges,’ with little notice or explanation.”

“The congestion is due mostly to the tremendous volume of traffic coming from ocean carriers and through ports to satisfy the record demand for imports. Far from being a sudden occurrence or isolated to a port or geographical area, congestion of the freight transportation system is everywhere and has been going on for many months. It seems to me that these factors would already have been included into the record high rates charged by the carriers. As Chairman, I want to know the carriers’ justifications for additional fees and I strongly support close scrutiny by the FMC’s Bureau of Enforcement aimed at stopping any instance where these add-on fees may not fully comply with the law or regulation,” concluded Chairman Maffei.

FMC Hears Proposals Addressing Supply Chain and Cruise Issues

Recommendations to address ongoing port and supply chain congestion, and proposed changes to agency regulations related to refunds for cancelled cruise ship voyages, were topics addressed during the open session of a Federal Maritime Commission meeting held July 28, 2021.

Commissioner Rebecca F. Dye provided the Commission with Interim Recommendations to address current conditions contributing to inefficiencies and congestion in the freight delivery system due to impacts associated with the ongoing COVID-19 pandemic. Commissioner Dye, who serves as the Fact Finding Officer for Fact Finding 29, presented a set of eight Interim Recommendations for actions the FMC can take to address many of the most common problems she has identified through her work. The recommendations are aimed at minimizing barriers to private party enforcement of the Shipping Act, clarifying Commission and industry processes, encouraging shippers, truckers, and other stakeholders to assist Commission enforcement efforts, and bolstering the ability of the Office of Consumer Affairs and Dispute Resolution Services to facilitate fair and fast dispute resolution. Commissioner Dye also reported that she plans to hold meetings of Supply Chain Innovation Teams in Memphis and the Port of Los Angeles to address supply chain disruptions and increase supply chain visibility.

Commissioner Carl W. Bentzel provided a summary of his examination of container and chassis manufacturing and the availability of intermodal equipment to support US international containerized trade. The Commissioner noted that congestion and increased demand for equipment has led to shortages of chassis and containers in the United States and other nations as well. This demand has led to increased prices for new intermodal equipment. Commissioner Bentzel plans on completing his work by September.

The final item covered in the open session of the meeting Commission was a briefing by staff on proposed changes to agency regulations governing “non-performance” of transportation by Passenger Vessel Operators and circumstances under which cruise passengers can receive refunds for cancelled voyages. The Commission is contemplating a slate of amendments that will establish a new definition of “non-performance”, changing how cruise lines treat unearned passenger revenue and establishing a new process for obtaining refunds. The Commission will vote on this matter at a later date.

The Commission received in closed session an update on an agency investigation into Conditions Created by Canadian Ballast Water Regulations in the U.S./Canada Great Lakes Trade.