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FMC Probe Fines MSC $63 Million

[ April 12, 2024   //   Gary G Burrows ]

The U.S. Federal Maritime Commission’s Office of Enforcement has recommended a US$63.3 million civil penalty against MSC Mediterranean Shipping Co., due to “unreasonable and unjust actions and inactions in violation of the Shipping Act of 1984.”
The recommendation follows a more than six-month investigation, ordered in August 2023, after shippers complained to the FMC about carriers’ business practices during the pandemic and the resulting cargo surge. Shippers complained to FMC that carriers have grown larger and consolidated the market among a handful of ocean carriers. The commission initially attempted to addressed potential abuses through reforms to the Shipping Act in 2022.
The FMC’s investigators concluded their discovery of MSC’s billing practices in early February, and filed an 87-page report to an administrative law judge at the FMC. Discussing what it believes are the violations of the Shipping Act, the Office of Enforcement wrote.
“At the core of this proceeding is MSC’s billing practices that resulted in MSC unjustly profiting at the expense of its customers,” the Office of Enforcement wrote in discussing what it believes are Shipping Act violations.
The report concludes that MSC knowingly and willfully employed unreasonable and unfair practices that did not promote economic ocean commerce. They cite an ongoing practice of a broad definition for “merchant” used to invoice charges to third parties, as well as incorrectly billing for non-operating reefers and a failure to publish rates for those containers.
The published order covered issues including third-party billing for companies not directly a part of the bill of lading, tariffs and fees for nonoperating 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, according to a report by Maritime Executive.
“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 Office of Enforcement concluded. It detailed 18 specific violations and using the schedules established in the Shipping Act, set the penalty per violation adjusted for inflation at more than US$73,000 or a total of US$1.3 million.
Overcharging for non-operating reefers was the largest source of violations, with more than 2,600 examples with a penalty of more than US$17,600 per or a proposed total of more than US$46 million. There were also nearly 800 examples of failure to publish rates for those containers with a fine of US$19,600 each or a total of more than US$15.6 million.
The FMC reported that MSC issued refunds when confronted by customers, but never initiated any action to “return millions of dollars in overcharges.” They report that MSC participating in the discovery indicated it was not possible to review each invoice.
The Office of Enforcement highlights that the Shipping Act calls for civil penalties that are significant to deter and mitigate behaviors, and also for issuing an appropriate cease and desist order which they recommend is warranted in this case.
MSC has yet to respond to the Office of Enforcement’s recommendation.
The full report (redacted) can be viewed at https://www2.fmc.gov/readingroom/docs/23-08/23-08%20BEIC%20Opening%20Brief%20(public%20version)%20redacted.pdf/

Tags: MSC Mediterranean Shipping Co.