FMC launches investigation on MSC’s D&D fees

FMC launches investigation on MSC’s D&D fees

The Federal Maritime Commission (FMC) has launched an investigation into the detention and demurrage (D&D) charges levied by shipping giant Mediterranean Shipping Company (MSC) and its billing procedures.

Through an investigation and hearing order submitted on 10 August, the FMC reported that it is moving forward with initiating an inquiry into potential infringements of the Shipping Act.

This decision is based on details provided by its Bureau of Enforcement, Investigations, and Compliance.

The FMC set clear instructions and warnings for the shipping industry on the exploitation of D&D fees following the number of complaints of these charges spiked during the pandemic-ridden surge in shipping volumes.

However, the new action represents a more comprehensive investigation targeting MSC. Unlike the typical scenario of an isolated complaint lodged by a dissatisfied shipper, which has been the trend in recent years, this current investigation is more extensive in scope.

It encompasses thousands of contested charges directed at various clients, some of which have roots dating back to 2017.

The FMC points to specific instances that it believes might indicate a larger problem with the carrier.

READ: FMC empowered to block anticompetitive agreements

The most significant issue the FMC cite pertains to applying identical demurrage, detention, or per diem rates for both operational and non-operational reefers within MSC’s US trade in the year 2021.

The investigation found that MSC did not make its tariff rates for non-operational reefers publicly available in various international, non-US markets. MSC argued, however, that rates charged for non-operating reefers varied, yet the FMC held that the tariffs were not published despite its requirement.

Moreover, the FMC revealed that on at least 925 occasions, MSC’s customers disputed the operating reefer detention or demurrage, resulting in refunds totalling $1.2 million.

The commission are also of the belief that 1,704 overcharges were left undisputed in 2021, which resulted in MSC retaining approximately $858,000 in additional revenue.

READ: FMC mandates new criteria for carriers’ refunds

Another issue that the FMC cited in its report is the billing of D&D fees to ocean freight companies mentioned on a Bill of Lading, even if they were not originally part of the contractual agreement.

The report highlights three companies as examples, providing claims from different years – some from 2017 and 2018, and others from 2021.

The FMC points out instances where around $16,000 in fees for 2021 were billed inaccurately to these companies, alongside $3,195 charged to one of the freight companies during 2017-2018.

Despite the individual companies’ requests for fee waivers, MSC declined to comply.

The case is being assigned for a hearing before an administrative law judge, meanwhile, MSC has no longer than 25 days to file a formal response and answer to the allegations in FMC’s order, in accordance with the requirements of the commission’s regulations.

The judge will then have a year to levy a decision, which will then be followed by a final decision issued by the FMC on 24 February 2025.

Earlier this year, the FMC called on MSC to justify a congestion surcharge of $10,000 levied against US business, SOFi Paper Products, after the American firm lodged a complaint with the regulator.

More recently, the FMC levied a fine against Wan Hai Lines of $950,000. The FMC initiated this claim for the recovery of civil penalties for the alleged violations of 46 U.S.C. § 41102(c) of the Shipping Act of 1984.

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