Why is the World’s Largest Shipping Line Facing a Penalty of USD 63 Million?

Mediterranean Shipping Co. (MSC) has been alleged to violate the Shipping Act in the oceans of the US, encompassing at least 2,629 reefer overcharges and 1,704 undisputed reefer charges directed at various clients.

The world’s largest shipping line has been accused by the US Federal Maritime Commission’s (FMC) Bureau of Enforcement, Investigations, and Compliance of charging excessive late fees on non-operating reefers and billing companies that were not originally part of the contractual agreement, following which the liner is looking at a potential fine of USD 63 million.

In the case filed by Alex Chintella, the Office of Enforcement (OE) alleged MSC knowingly and willfully employed unreasonable and unfair practices that did not promote or “ensure an efficient, competitive, and economical transportation system in the ocean commerce of the United States.”

It also accuses MSC of targeting US logistics service providers such as non-vessel operating common carriers, ocean freight forwarders, customs brokers, and truckers.

“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 nonconsenting and non-contracting third parties for detention and demurrage. In this case, MSC invoiced third parties listed as ‘notify parties’ found on its standard bill of lading, regardless of their contractual or beneficial cargo status,” OE said in a filing.

“Instead of working to bill the proper party, MSC had a policy of invoicing the ‘notify party’, which effectively turned many third parties into its unwilling and nonconsenting billing departments.”

MSC has also been alleged to not be able to meet other basic Shipping Act requirements, such as clearly publishing non-operating reefer (NOR) detention and demurrage rates in its US tariff for several years, and has consistently failed to correct the mistake, calling the resulting overcharges a “billing error.”

The case argues that the lines only issued refunds after confrontation with customers rather than proactively taking responsibility for their actions and returning millions of dollars that were taken in overcharges.

The case stems from an investigation that was initiated last August. The inquiry uncovered 18 infractions concerning the application of its “merchant clause” for imposing and gathering fees from third parties, as well as over 3,000 violations pertaining to non-operating reefers. Consequently, the OE is pursuing civil penalties totaling no less than $63,256,853.

“The fact that MSC failed to conduct an internal audit and proactively reconcile its billing processes, resulting in at least 2,629 reefer overcharges and 1,704 undisputed reefer charges, is a clear display of MSC’s reckless disregard and plain indifference to the requirements of the Shipping Act. Thus, these 2,629 reefer overcharges were either a deliberate act in flagrant contravention of the Shipping Act or a grossly negligent accounting error that MSC should have been aware of and more proactive in resolving,” FMC attorneys said.

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