Cosco’s Unfair Fees Led to Almost $2 Million in Damages, US Shipper Tells FMC

A Texas shipper accused major Chinese ocean carrier Cosco Shipping Lines of violating U.S. shipping regulations through unfair detention and demurrage charges, costing it nearly $2 million in damages. Visual Comfort & Co, a shipper of lighting products, said Cosco “refused” to extend free days for containers that couldn’t be returned to the port and declined to divert shipments to less crowded ports, allowing the carrier to charge “astronomical” D&D fees.

In a January complaint to the Federal Maritime Commission, Visual Comfort said a “substantial majority” of the $1.2 million in D&D charges it was assessed by Cosco violated shipping regulations. The shipper also said it was forced to make “alternative transportation arrangements” for cargo that was supposed to be shipped by Cosco as part of a service contract, causing its financial damages to “approach” $2 million.

The company asked the FMC to investigate its allegations against Cosco, order the carrier to be in violation of the Shipping Act and require it to “compensate” Visual Comfort for damages.

Visual Comfort said it contracted with Cosco to ship “thousands of unique containers” in 2021 and 2022, including cargo to be delivered to the Port of New York and New Jersey. But even though congestion at the ports had “surged” during this period because of the COVID-19 pandemic, Visual Comfort said Cosco declined to ship to other ports or extend the free time for empty containers before it began assessing late fees.

These D&D charges “were not just or reasonable,” the shipper said, adding that Cosco knew “the lack of return locations” for empty containers “had reached crisis level proportions” at the ports. The terminals didn’t have enough storage space to take back all the empty containers “because carriers like COSCO were not loading back the boxes in sufficient quantities,” the complaint said. “As such, the financial and operational burdens for storing these containers were unfairly and inappropriately forced upon shippers, among other parties not at fault.”

The terminals soon became “flooded with truckers desperate to return the boxes, often leading to unsafe gridlock conditions, making it impossible to access the terminal,” Visual Comfort said. It also said Cosco’s fee dispute procedures required shippers and others to provide screenshots to prove there was no container return availability at the terminal, but drivers had no way to prove how many times they had unsuccessfully tried to access the terminal

Cosco’s free time was “grossly insufficient to address these conditions,” the complaint said. It also said Cosco in its records listed that a return location was available for times when there was no availability.

In a 2019 notice on how it assesses the reasonableness of D&D charges, the FMC said those fees are reasonable if they incentivize the movement of cargo to help clear port congestion (see 1909130026). But Cosco’s charges weren’t a “financial incentive to promote freight fluidity,” Visual Comfort said, and “instead operated only as a punitive penalty” on the shipper for “circumstances over which [Visual Comfort] and its agents and service providers had little to no control.”

The shipper also said Cosco didn’t include enough detail in its invoices to allow shippers to understand the reasons for its charges or contest them. Those invoices didn’t include the start or end date of any free time allocated for the containers, the detention or demurrage rule “on which the charges were based,” the rates applied, any “representation that COSCO's performance did not contribute to the underlying charge, or a statement that the Charges were consistent with the FMC rules.”

The commission is working on final regulations that would refine prohibited practices for demurrage and detention billings (see 2210070079, 2212210058 and 2309110033).

If the FMC doesn’t address Cosco’s unfair practices, they will “continue to contribute to a troubling industry standard under which all global container lines can impose improper detention and demurrage charges upon shippers because of delays and conditions that are of their own doing outside of shippers' control,” Visual Comfort said.

Cosco didn’t respond to our request for comment.