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Small FMC Complaint Against MSC Sets Precedent on Fixed Fees

MSC containership
FMC declined to rule against MSC's imposition of a congestion surcharge (file photo)

Published Oct 3, 2023 5:25 PM by The Maritime Executive

A complaint to the Federal Maritime Commission over a small, $1,000 charge levied by Mediterranean Shipping Company (MSC) is likely to set a precedent that will impact the shipping industry. The FMC found for the carrier in the first of its kind complaint addressing a congestion surcharge billed by MSC providing insights into how the commission views the legitimacy of fees and the boundaries of the 2022 reforms to the Shipping Act.

The case itself was small in scope as SOFi Paper Products, a Florida-based company that sells paper products for home and business use, filed a complaint seeking a refund for the $1,000 fee placed on a single July 2022 bill of lading. Asserting that MSC failed to show the reasonableness of the surcharge or provide justification, the company filed the FMC complaint seeking to link the charge to the FMC’s rules of detention and demurrage fees and new authority to investigate fees.

In a 15-page decision dated September 29 and concurred with by Chairman Daniel Maffei and Commissioners Rebecca Dye and Carl Bentzel, the FMC sides with MSC and its ability to impose fees such as this that are not based on time, free time, or other individual items. The decision segregates the fee from D&D charges based on these issues and the FMC rules that as such it is not subject to the interpretive rule it issued on how D&D fees are imposed. The commission has taken an aggressive stance to protect shippers going against carriers in many of the prior complaints, including outstanding ones against MSC, when it comes to D&D fees.

In this case, the FMC finds “It does not appear, however, that the assessment of the congestion surcharge depended on the expiration of any free time. Nor does it appear that the amount of the congestion surcharge depended on any period of use. The congestion surcharge appears to be assessed equally to all customers regardless of free time and length of use of land or containers. Rather than specific use of land or containers, it appears that the congestion surcharge was assessed for each container with respect to the overall flow of transportation.”

In its response to the FMC, MSC had argued that the congestion surcharge did not relate to receiving, handling, storing, or delivering property, but instead it relates to the transportation of property as an ocean carrier. Like fuel surcharges, bill of lading surcharges, hazardous goods charges, overweight cargo surcharges, and other charges, MSC contended the FMC lacked the authority to challenge the amount of the charge.

The ruling determined that in addition to excluding the congestion surcharge from rules for D&D fees, the information was insufficient to rule that there was a violation under the Shipping Act. While the chairman and two commissioners agreed with the ruling, Commission Sola warned in an adjunct comment that the FMC must be prepared to address and set forth a framework regarding auxiliary charges and fees such as these to serve the best interests of the shipping industry.

Other elements of SOFi’s complaint were dismissed. This includes the claim for a refund, as MSC despite arguing that it was not the correct party for the complaint, had issued a refund to the company after the FMC investigation began. The FMC, however, proceeded with the investigation, noting that there was a possibility that the surcharge may have been levied upon more MSC customers.

Only Commission Vekich dissented saying he would find MSC’s congestion surcharge is in violation saying it appears that it was neither clear or definite. He argues that the charge falls under the tariff rule and requires sufficiently identifying the degree of congestion warranting the charge. He argues for a penalty proceeding, saying the MSC charge was not clear and definite.