Posted on October 25, 2023
The number of complaints over the shipping industry’s business practices, and mostly detention and demurrage fees, have more than tripled in the past two years to the Federal Maritime Commission, according to a new report in the Financial Times. The newspaper reports according to data from the FMC that shippers have filed nearly 400 complaints in the 14 months since the Ocean Shipping Reform Act became law in July 2022.
One of the key drivers for the reform legislation in the U.S. Congress was the mounting complaints from shippers and especially exporters over the business practices of the major carriers. The FMC had already been very vocal on its position about fees charged by carriers and terminals but faced new pressures as the shipping volumes soared and backlogs and congestion grew at U.S. ports in 2021. The reform act places a greater burden on the carrier to justify the fees and with newly established investigative and enforcement authority, the FMC created new simpler methods for shippers to file complaints.
The number of complaints has soared, almost triple the rate two years earlier, according to data shared with the Financial Times. Complaints centered on D&D fees or congestion surcharges the carriers or terminals were imposing during the surge in volumes. Shippers complained chassis were not available to move containers or that reservation slots were not available to return empties. They also questioned the FMC about the practice of carriers including holidays and other times when terminals were closed among the free time provided for containers.
The FMC told the newspaper that they have completed 43 investigations into claims over charges and have resolved 36 cases as of September of this year. The FMC made it simpler for shippers to file claims but has also worked to help the parties settle smaller claims before launching a lengthy investigation. They reported that 101 cases have been resolved by the shipping companies working with the shippers, often issuing full refunds. However, there are also high-profile complaints against many of the largest carriers, and now carriers are turning the tables on intermodal companies and terminals also filing complaints.
The report cites a total of $2.89 million in civil penalties imposed by the FMC mostly against carriers over a 12-month period versus nearly no penalties two years earlier. This year’s total, however, includes a total of $2.65 million paid by Ocean Network Express (ONE) and Wan Hai to settle charges related to D&D fees.
The Financial Times writes the increase in the number of cases is demonstrative of a broader effort at reforming and reigning in the business practices of the carriers. The EU, for example, announced in 2024 that it will let the carriers’ exemption from antitrust rules expire, while regulators in various parts of the world have been looking at the business practices and anti-competitive behavior. The FMC, for example, is also investigating carriers for failure to honor long-term freight contracts or possibly retaliating against shippers.
Most of the carriers have agreed to work with the FMC. MSC for example, however, is fighting the FMC’s investigations citing Swiss law that prevents it from providing business information. Also, starting last Friday, October 20, a U.S. Court of Appeals started hearings into a suit brought by Evergreen calling into question the FMC’s investigations. The Journal of Commerce cites the case for its potential impact on the authority of the FMC.
The case stems from a complaint from a trucking company against Evergreen over D&D fees. The FMC set a precedent by siding with the trucker who was charged free time while the terminal was closed over a weekend and holiday. The FMC ruled that was not an appropriate business practice and while many carriers and terminals amended their policies, Evergreen has taken the questions of the investigative process and FMC’s authority to the U.S. courts.