Minor complaint re congestion to FMC is rejected; likely to set precedent on fixed fees

A complaint to the Federal Maritime Commission over a small, $1,000 charge levied by Mediterranean Shipping Company (MSC) was likely to set a precedent on fixed fees that will impact the entire shipping industry.

The FMC found for the carrier in the first of its kind complaint addressing a congestion surcharge billed by MSC. The ruling indicated how the FMC saw the legitimacy of fees and its interpretation of the boundaries of the Biden Administration’s 2022 reforms to the Shipping Act, iintroduced after a number of complaints against international shipping companies for various charges they imposed.

Florida-based SOFi Paper Products, which 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.

SOFI said that MSC failed to show the reasonableness of the surcharge or provide justification. It filed a complaint with the FMC, seeking to link the charge to the FMC’s rules of detention and demurrage fees and its new authority to investigate such fees.

In a 15-page decision dated September 29th, with which Chairman Daniel Maffei and Commissioners Rebecca Dye and Carl Bentzel all agreed, the FMC sided with MSC and its ability to impose fees such as this, which are not based on time, free time, or other individual items.

The FMC decision segregated the fee from D&D charges based on these issues. The FMC ruled that as such it was not subject to the interpretive rule it issued on how D&D fees were to be 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 found that “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.”

MSC had argued in its response to MSC that the congestion surcharge did not relate to receiving, handling, storing, or delivering property, but instead it related 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 had to 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 included 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 might have been levied upon more MSC customers.

Commissioner Vekich dissented from the majority decision saying that he would find MSC’s congestion surcharge to be in violation. He argued that the charge fell under the tariff rule and required sufficiently identifying the degree of congestion warranting the charge. He argued for a penalty proceeding, saying the MSC charge was not clear and definite.