DK Butterfly-1 Inc. is looking to recoup costs and reparations for losses during the pandemic of up to US$347 million in a complaint filed with the Federal Maritime Commission (FMC) against MSC on 28 November.
The shipper, formerly known as Bed Bath and Beyond (BBBY) was forced to file for Chapter 11 bankruptcy protection in April this year as a result of MSC allegedly taking unfair advantage of the challenging market conditions to secure higher prices from its customers.
The complaint alleges that MSC failed to meet its minimum quantity obligations; was cutting capacity at a time when space was already scarce, in a move that would inflate spot rates; was encouraging its clients, including BBBY, to accept peak season surcharges in order to secure cargo space; was forcing BBBY to rebook contracted cargo onto the higher spot market and was unfairly levying detention & demurrage charges.
In its deposition to the FMC, BBBY claimed that reparations should be paid by MSC for its allegedly unlawful conduct and that should include the company’s legal costs plus interest and “An additional award doubling any award of reparations,” should be considered by the FMC “as a result of MSC’s retaliatory conduct,” the company said in its filing.
The filing includes claims for lost profits of nearly US$113 million, in addition, the shipper was forced to pay PSS charges amounting to more than US$5.5 million as well as a further more than US$9 million in extra rate costs after being forced onto the spot market, compared to its contract rates. In total, the claim could amount to in excess of US$347 million.
A further $23 million was paid in in detention and demurrage charges for the hire and redelivery of container equipment over which the shipper had no control.
BBBY cites recent similar cases in which the FMC had ruled in favour of shippers including the OJ Commerce case against Maersk subsidiary Hamburg Sud, which it says, like MSC had failed to meet its contractual obligations.
In what is seen as a precedent, BBBY, and its successor DK Butterfly-1, allege that MSC is not alone in breaching its service commitments, citing the case brought by MCS Industries Inc against Chinese carrier COSCO et al, in which MSC was a named respondent.
According to the shipper, MSC was found to have similarly been in breach of its contractual obligations in a case that the presiding judge described MSC’s failure to meet its contractual obligations as being of “national significance”.
The judge added, “That one of the largest container lines in the world ‘sought to take advantage of unprecedented high pricing by forcing shippers with service contracts, like the complainant, to resort to spot market purchases’ by the ‘practice of systematically failing to meet its quantity commitments.”
Moreover, the MCS case allegedly showed that a substantial majority of the detention and demurrage charges were unlawfully levied, given that they did not meet the requirement of speeding the flow of freight through the supply chain, but rather penalised the shipper, who had no means of picking up freight or redelivering container equipment due to port congestion or a lack of chassis equipment.
Mary Ann Evans
Correspondent at Large