The Office of Enforcement of the Federal Maritime Commission (FMC) has called for a $63.3-million civil penalty against MSC Mediterranean Shipping Company for its alleged “unreasonable and unjust actions and inactions” in violation of the Shipping Act of 1984.
The commission has made the recommendation in a report it recently released after its more-than-six-month probe into the shipping line’s agents' billing practices. The investigation was launched in August 2023 following complaints from shippers about alleged abuses by large cargo lines.
Shippers complained about the practices of carriers during the Covid-19 pandemic when there was a surge in global cargo volumes and the industry was concentrated in the hands of a small group of carriers. The potential for abuse had precipitated the reforms to the Shipping Act in 2022.
The commission’s investigators probed the billing practices of MSC and filed an 87-page report to an administrative law judge at the FMC on April 3. The report highlights what the investigators allege are the violations of the Shipping Act.
“At the core of this proceeding is MSC’s billing practices that resulted in MSC unjustly profiting at the expense of its customers,” the report said.
The investigation covered issues such as third-party billing for companies that might not have been directly a part of the bill of lading, tariffs and fees for non-operating refrigerated containers (reefers), how rates were published, and if they were following the published rates as well as exploring how penalties should be assessed if they found violations.
The findings of the report are that MSC allegedly knowingly employed unreasonable and unfair practices that did not promote economic ocean commerce. It claims that MSC used a broad definition of “merchant” to invoice charges to third parties, that it incorrectly billed for non-operating reefers and that it did not publish rates for the containers.
“For years, MSC used its market power and wielded heavy-handed tactics to define standard bill of lading terms such as ‘merchant’ to justify billing non-consistent and non-contracting third parties detention and demurrage,” the report alleges.
The report highlights 18 alleged violations of the Act, mostly for overcharging for non-operating reefers, and cites more than 2 600 examples with a penalty of over $17 600 per incident. It hones in on almost 800 examples of failure to publish rates for containers with a fine of $19 600 per incident.
The investigators justify the penalties, which total $63.3 million, alleging that the line instituted the practices “in the pursuit of higher profits”.
However, when confronted by customers, MSC did issue refunds but allegedly did not proactively take action to “return millions of dollars in overcharges”, the report claimed. MSC participated in the discovery during the investigation.
MSC has not yet filed a response to the allegations in the report, nor indicated whether it will appeal the matter at this stage.
