Shipping companies sway in high profile profiteering affair

MCS Industries, a Pennsylvania-based furniture maker, filed a sweeping lawsuit against two of the world’s largest shipping carriers on August 3, alleging profits, collusive behavior and a violation of the US Shipping Act. The accused shipping companies – the Chinese Cosco and the Swiss company Mediterranean Shipping Co. – have just filed their responses. Unsurprisingly, they didn’t apologize.

In its complaint to the Federal Maritime Commission (FMC), MCS claimed that several carriers refused to negotiate with it and that those who did, including Cosco and Mediterranean Shipping Co., “refused to supply more. a fraction of the freight capacity MCS requested. “

Then, MCS alleged, the two carriers “changed their practices in a parallel and apparently coordinated fashion, depriving MCS of its contractually agreed space allocations and instead selling their respective capacity – including the space actually allocated to MCS in under its service contracts and then withdrawn – to the highest bidder in the very cash market to which their conduct forced MCS to turn.

MCS alleged that in May-July Mediterranean Shipping Co. provided only 35% of the space required under the contracts and Cosco provided “an infinitesimal of 1.6%”.

Shortly after the complaint was filed, Mediterranean Shipping Co. issued a press release vigorously denying the allegations, stating that it was “examining whether … any of the allegations constituted defamation”. He filed his official response with the CMF on Thursday. Cosco filed its response on Monday.

Cosco did not mention the defamation, but he questioned whether MCS had committed perjury.

The carrier said that MCS’s “infinitesimal 1.6%” space allocation claim “is simply a lie. It is clear that this eye-catching claim about the service during the period May-July 2021 – which was repeated twice in MCS’s complaint, attested to under penalty of perjury by MCS and repeated in several media accounts – is a bogus statement of material fact. to the court.

The carrier stated that “MCS has not confirmed any reservations with [Cosco] during the month of June in all ports of origin usually used by MCS to present its containers to [Cosco] for transport and did not even use all the space offered and confirmed to MCS in July.

Cosco said MCS has signed a contract that runs from January 1, 2021 to April 30, 2022, for 500 units equivalent to twenty feet. Cosco said it had carried 92 TEUs for MCS until August, with eight months left in the contract, and that the contract did not include any monthly or quarterly transport requirements.

Mediterranean Shipping Co. stated in its filed response that it had a service contract with MCS as of May 1 and that “any failure to transport MCS goods was in accordance with the agreement … and attributable to failure to comply with MCS or other causes outside MSC control.

The Swiss carrier denied having deprived MCS of its allocation of space in order to sell it to the highest bidder. “MSC does not sell the allocated space before the prescribed deadline,” he said.

He called the allegation that he colluded with Cosco “absurd” and “completely and utterly false”.

Both operators blamed today’s service issues and record high prices on disruptions in the COVID era.

According to Cosco, “The current congestion… and the challenges faced by carriers operating vessels to meet demand for capacity have been triggered by unprecedented and unforeseen record growth in US imports, coupled with COVID restrictions ashore. These unforeseen changes in world trade have exacerbated shipping delays and stretched every part of the domestic intermodal supply chain to the limit.

“[Cosco] did not lead to the precipitous decline of last year or the dramatic increase in demand this year, but both had an impact on available capacity [it] could bring to the market.

Mediterranean Shipping Co. has stated that it “has reasonably managed the unprecedented disruption in international shipping caused by a substantial increase in demand along with unprecedented port congestion effectively limiting vessel capacity and created substantial operational difficulties for carriers “.

He argued that the dispute should be resolved through New York arbitration, as specified in the ocean contract. Cosco also argued that the FMC lacked jurisdiction, calling the allegations of violation of the Merchant Shipping Act “false”.

The outcome of this high profile conflict is far from known. The discovery process will take another five months. The CMF will make its initial decision by August 3, 2022, and its final decision is not due until February 17, 2023.
Source: Freight Waves by Greg Miller

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