MSC Could Face FMC Civil Penalty Over Tariff’s Congestion Surcharge
The Federal Maritime Commission is continuing to move aggressively against what it sees as unreasonable charges and business practices of the major carriers. In a filing dated last week, the Office of Enforcement is recommending that the commission review the tariffs of Mediterranean Shipping Company (MSC) for a possible civil penalty related to its insistence on continuing to maintain an “ambiguous surcharge” in its tariff for congestion. The effort seeking to impose a civil penalty comes from what appeared to be an innocuous case over a $1,000 congestion fee issued by MSC to a shipper. The carrier recently refunded the charge, but the FMC’s Office of Enforcement found that the carrier continues to have the questionable clause within its tariff which it sees as a possible violation of the Ocean Shipping Reform Act of 2022. SOFi Paper Products had filed a complaint with the FMC when it was unable to resolve a $1,000 “congestion surcharge,” issued by MSC on a shipment delivered to the Port of Seattle in July 2022. The shipper contended that “MSC neither justified the charge nor explained why the charge was applied.” The FMC reviewed data for the port finding that at that time there were often no vessels waiting and never more than two vessels waiting for a berth. The FMC says that it believes the number of vessels at anchor serves as a “key congestion indicator…Therefore, MSC’s claims of ‘congestion’ as justification for the surcharge appears contrary to facts.” After the FMC issued an “Order to Show Cause,” MSC sent a check refunding the charges in full to SOFi. The company cashed the check on March 6, 2023. The Office of Enforcement considers this matter closed saying it does not propose any further relief for the complainant. Reviewing MSC tariffs, however, they are recommending that the commission determine whether the charge was noncompliant and where a civil penalty should be issued. They raise the possibility that similar surcharges may have been levied on other customers. “MSC’s insistence on actively maintaining in its tariff the congestion surcharge is at the heart of this proceeding.” The FMC has recently taken an aggressive stance against a series of tariffs and fees historically charged by the carriers and which the reform act specifically targeted. As part of its efforts to implement the elements of the act, the FMC last month sent a request for information to large carriers to confirm that they had amended the policies for detention and demurrage (D&D) fees. The FMC is contacting the 11 largest ocean carriers calling the United States to confirm these shipping lines are adjusting their D&D practices after it ordered Evergreen to “cease and desist from imposing per diem charges when imposition of per diem charges does not serve its incentivizing purposes, such as when empty equipment cannot be returned on weekends, holidays, and port closures.”
Import Volumes Climbing at US Ports but Projected Below Pandemic Peaks
Import cargo volume at the U.S.’s major container ports is expected to start a steady climb lasting into the summer of 2023 but will remain below record-setting levels seen during most of the pandemic, according to the Global Port Tracker report released today by the National Retail Federation. The retail trade association believes that container volumes bottomed out in February and will rise slowly over the next five months through August as retailers slowly grow inventories in preparation for the traditionally busy end of summer and holiday season sales. “Last spring and summer were the busiest ever as consumers spent freely and retailers brought in merchandise to meet demand,” said Jonathan Gold, the NRF’s Vice President for Supply Chain and Customs Policy. “This year won’t repeat that, but the numbers we’re expecting would have been considered normal before the pandemic. The priority at the moment is resolving labor negotiations at the West Coast ports and avoiding any self-inflicted supply chain challenges on top of those we’ve faced the past three years.” The NRF’s statements came as the ports of Los Angeles and Long Beach came to a halt during Thursday’s evening shift and again on Friday as ILWU Local 13 members who operate the cranes and cargo-handling equipment failed to report for work. The NRF highlights that it sent a letter signed by 238 national, state, and local trade associations to President Biden encouraging further engagement by the administration in the West Coast talks. In addition, NRF President and CEO Matt Shay met with Port of Los Angeles Executive Director Gene Seroka to hear the latest developments regarding the status of negotiations. Seroka has publicly said that he believes shippers are diverting volume away from the West Coast and that it is critical to quickly complete the negotiations. The Biden administration has been closely monitoring the talks regularly in contact with the Pacific Maritime Association, which represents the employers, and the union. A prolonged disruption it is feared could step back the expected growth in container volumes projected for the coming months. The NRF in its report notes that February, which is traditionally a slow month, was at levels last seen in May 2020. February’s container volume at 1.55 million TEU was down more than 14 percent from January and nearly 27 percent year-over-year. “Compared with last year, the flow of import containers on the West Coast continues to decline along with demand as carriers increasingly drop service to Los Angeles-area ports but stretch voyages to include other ports of call to help absorb excess capacity,” said Ben Hackett founder of Hackett Associates. “Meanwhile, freight rates have been impacted by the fall in demand, but new ships are starting to show up and more have been ordered – a sign that carriers expect demand will improve by the time the new vessels are delivered.” The NRF expects that monthly container volumes will remain below 2022’s peak levels but rise month-over-month. When March’s volumes are tallied, they project it will come in at 1.68 million TEU which would be down 28 percent from last year. However, they project it will rise surpassing the 2 million TEU level in July and August. The first half of 2023 is forecast at 10.8 million TEU, down 20 percent from the first half of 2022. Imports for all of 2022 totaled 25.5 million TEU, down just over one percent from the record of 25.8 million TEU set in 2021.