US furniture manufacturer, MCS Industries has filed a formal complaint against Mediterranean Shipping Company (MSC) and COSCO Shipping Lines to the Federal Maritime Commission (FMC).
Documents lodged on 28 July alleged that MSC, COSCO and their peers on the Trans-Pacific lane have reneged on their long-term service contracts to force MCS to pay exorbitant spot rates.
MCS, whose clients include Wal-Mart, Target and Amazon, said in its complaint, "MCS has experienced this misconduct by global ocean carriers firsthand, as they have unreasonably refused to deal and negotiate with MCS.
“In a stark break from pre-pandemic practice, several ocean carriers refused to negotiate or provide service contracts to MCS, and those that did provide such service contracts, including Respondents (COSCO and MSC), refused to provide more than a fraction of the cargo capacity that MCS requested and needs, despite the fact that the Respondents overall have continued to operate at or near pre-pandemic capacity.”
MCS added that COSCO and MSC “then proceeded to engage in a common practice of refusing to perform even under those limited service contracts, instead forcing MCS to buy space on the inflated spot market.”
Noting that China-US West Coast freight rates have skyrocketed from US$2,700 in 2019 to at least US$15,000 in today's spot market, MCS said that the liner operators' practice has resulted in unprecedented windfall profits for them.
Seeking US$600,000 in damages, MCS claimed that it had a written service contract with COSCO that was effective as of 1 January. The contract obliged COSCO to provide a minimum number of TEU for shipment from China, Hong Kong and/or Indonesia to the US at fixed rates.
However, MCS alleged that in breach of the contract, COSCO began refusing to provide more than 1.6% of the agreed TEU from May, leaving the furniture maker with no choice but to book spot shipments with other liner operators at much higher rates.
MCS also accused MSC of providing just 35% of the agreed slots under their contract.
MCS said, “Upon information and belief, COSCO is violating the Shipping Act in similar fashion with respect to other shippers, as well as discriminating against US shippers such as MCS by favoring Chinese shippers with greater space allotments than those provided to MCS.”
MSC and COSCO had not responded to Container News’ requests for comment at the time of publication.
MCS' complaint follows FMC's announcement that it will audit nine of the largest container carriers operating in US markets, including COSCO and MSC, to ascertain if they are using their market power to overcharge shippers on detention and demurrage fees.