November 30, 2023

Score One for Carriers, HMM Wins FMC Service Complaint from US Importer

Multiple shippers have turned to the Federal Maritime Commission seeking relief arguing that carriers failed to provide contracted space during the pandemic and that they were forced to pay higher rates in the spot market to transport their goods. In a newly released finding, the FMC however rules that the carrier worked with the shipper to address the challenges and finds for the carrier, HMM in this case, saying the shipper derived a substantial financial benefit from its dealing with the carrier.

The case is demonstrative of the ongoing struggle between carriers and shippers which contributed to the reforms to the U.S.’s Ocean Shipping Act as well as the pending decision by both the EU and UK to end the antitrust exemption for carriers. Shippers cite the concentration of the industry to a smaller number of carriers as well as the growth of the three main alliances which represent the vast majority of container capacity and key trade routes.

Like many smaller shippers, the complainant in this case, MSRF, an Illinois-based manufacturer and importer of gourmet foods and gifts, contends that it was squeezed out of the shipping market during the surge in volumes. They argued that smaller shippers lost their contracted volumes and were forced to make alternate transportation arrangements with other common carriers at substantially higher spot market prices. MSRF alleged that the carriers were reselling their contracted capacity in the spot market and its original filing alleged collusion among the carriers.

Administrative Law Judge Linda Harris Crovella however finds in a 32-page decision reviewing the history of interaction between HMM and MSRF that HMM carried almost double the minimum quantity commitments by extending the period of the contract. MSRF, the decision says derived substantial financial benefits through its dealings with HMM.

The original complaint filed in June 2022 was against HMM and Yang Ming and included allegations of collusion. The two complaints were later separated and the record shows a confidential settlement was reached with Yang Ming.

The FMC’s analysis shows that the shipper contracted with the two carriers plus two other unnamed carriers in 2021-2022. HMM’s minimum quantity commitment to MSRF was 25 FEUs and it came out in testimony that they agreed to carry no more than about two containers per 30-day period. MSRF contended that HMM only transported nine containers under the contract.

While there were challenges securing space, the testimony showed that the contract was amended 14 times with the judge writing that many of the amendments were “at the initiation or for the benefit of MSRF, including the addition of shipping lanes and the continuation of 2021 prices during the contract extension.” 

MSFR contended that it had incurred at least $1 million in damages, but the judge wrote that none of MSRF’s claims were successful. The conclusion was that MSRF “has not met its burden of establishing that HMM engaged in unjust or unreasonable conduct.”

The FMC experienced a dramatic increase in the number of complaints filed against carriers. Many were smaller value disputes over fees and specifically D&D charges that were easily resolved. However, there were also other complaints from smaller shippers similar to MSRF related to the allocation of space during the surge in volumes. This is the first decision affirming the actions of the carrier in support of the shipper.

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