FMC Probing MSC for Shipping Violations

The Federal Maritime Commission is investigating the Mediterranean Shipping Company for violating U.S. shipping regulations, including by using “overbroad” merchant clauses in its bills of lading, mishandling fees and failing to publish tariff rates. The agency may fine MSC if it determines the carrier violated the Shipping Act.

The FMC, which partially relied on complaints from two freight forwarders and a customs broker to begin the investigation, said MSC relies on its own definition of merchant to charge third parties that were "not in privity of contract" and that have "no beneficial cargo interest being shipped." MSC also uses the definition to invoice parties that "had not consented to the bill of lading" and/or conditions for a specific shipment. The FMC's order of investigation, released last week, also is based on its own probe of MSC allegedly charging detention and demurrage rates incorrectly for refrigerated shipping containers when the refrigeration was turned off.

In one instance, the FMC said MSC billed ocean freight forwarder V. Alexander & Co. for detention and demurrage charges from March 2021 to July 2021 despite not obtaining consent from V. Alexander to bind them to the cargo and the bills of lading, the complaint said. MSC also had knowledge that V. Alexander did not have a "beneficial cargo interest" in the merchandise they were being charged for, the FMC said, and the carrier declined to remove the detention and demurrage charges unless the charges were accepted in writing.

In another case, MSC issued five rail detention invoices worth more than $2,000 to forwarder John S. Connor despite the fact that the forwarder was "neither the shipper nor consignee on these bills of lading," the order said. J. Connor was listed as the "notify party" for shipments, the order said, and while the forwarder did provide "customs clearance services" for the containers, MSC had "no indication" J. Connor had a "beneficial cargo interest" in the merchandise nor that they had accepted responsibility for any rail payments for the cargo, the FMC said. "MSC did not obtain consent from J. Connor before binding them to the terms of its bill of lading."

Customs broker Welke Customs Brokers USA also was listed as a notification party even though it was not the shipper or the consignee on the bills of lading, the FMC said. MSC allegedly "opened an account in the name" of Welke "without its consent" and posted truck detention charges, later threatening "legal action" if the charges were not paid.

MSC also was accused of charging the same demurrage, detention or per diem rate for both operating reefers, which are refrigerated container units, and non-operating reefers, which are refrigerated shipping containers with the refrigeration unit turned off, in 2021. The carrier also failed to publish rates for NORs in the U.S. despite doing so in non-U.S. markets, the complaint said.

The FMC requested and performed an audit of MSC's detention and demurrage charges for 2021 and found at least 1,704 NOR overcharges that went "undisputed," leading to more than $857,000 "in additional revenue," the FMC said. At least 925 of those were disputed and a total of $1,201,639.80 was refunded. In all, MSC "appears to have billed NOR shipments the operating reefer detention and demurrage rate instead of the dry rate" for at least 1,700 containers, the commission said.

MSC did not immediately respond to our request for comment.

MSC has 25 days after being served the order to answer the allegations, the FMC said. Other parties can file to intervene, and any proceeding should be emailed to secretary@fmc.gov. An initial decision is scheduled to be issued by Aug. 12, 2024, and a final decision by Feb. 24, 2025.

This is not the first time MSC has been accused of unfair detention and demurrage practices. In May, MSC settled with U.S. metal trader CCMA, which accused MSC of charging $114,000 in unfair detention and demurrage charges (see 2305300040).