FMC Asks Law Judge to Approve $63M Penalty Against MSC for Shipping Act Violations
The Federal Maritime Commission's enforcement bureau is asking the agency's administrative law judge to fine major ocean carrier Mediterranean Shipping Company $63.2 million for violating U.S. shipping regulations. MSC used “overbroad” merchant clauses in its bills of lading, billed incorrect rates for certain containers and failed to publish certain container tariff rates, causing "obscurity" and "uncertainty" for shippers, the commission's Bureau of Enforcement, Investigations and Compliance said in an April 3 report.
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The FMC said it found over 3,000 violations that led to its recommended $63 million penalty, including 18 merchant clause violations for which it charged $73,045 each, and 2,629 violations for incorrect MSC rates billed for non-operating reefers, which are refrigerated containers with the refrigeration function turned off. The commission also said it found 798 violations for failing to publish tariff rates, charging $19,609 for each violation.
In its partially redacted 87-page report, the FMC argued that the civil penalties should be assessed because MSC "knowingly and willfully" violated the Shipping Act. MSC used its "market power" and used "heavy-handed tactics" to define standard bills of lading terms such as "'merchant'" to justify billing "nonconsenting and non-contracting third parties" for detention and demurrage, the agency said. The language of its bills of lading and written billing procedures were "generated and controlled entirely" by MSC, the commission said, adding that several companies even informed MSC that it was violating the law, and MSC continued to bill the companies.
MSC also failed to publish detention and demurrage rates for non-operating reefer containers "and consistently failed to correct the mistake, calling the resulting overcharges a “billing error," the FMC said. An MSC official said the issue was fixed in September 2021, but the FMC said multiple customers emailed the carrier after that date and said the issue was still occurring. The MSC official was also notified that the issue had been fixed at the Port of Houston while he was receiving emails from other ports that were still having issues, the commission said.
MSC's failure to conduct an internal audit and reconcile its billing processes "is a clear display of MSC’s reckless disregard and plain indifference to the requirements of the Shipping Act," the FMC said.
MSC acknowledged it didn't have non-operating reefer rates published in March 2022 but waited more than a year to publish these rates, the report said. The carrier should have taken the appropriate steps in response by "timely publishing" its non-operating reefer rates and clarifying its non-operating reefer container charges, the FMC said.
The commission asks that cease and desist orders be filed against MSC to stop the company from demanding money from parties that don't have a contract with MSC or that don't have a "benefical interest" in the cargo.
MSC is reviewing the brief and "will vigorously defend itself against the allegations and the excessive penalties sought," the company said in its response to our request for comment.
This investigation began in August 2023 after the commission received various complaints about MSC from freight forwarders, a customs broker and others (see 2308140039).