News / FMC orders record payback by shipping line for unfair fees during Covid

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The US Federal Maritime Commission (FMC) has awarded bankrupt shipper Bed, Bath, and Beyond’s administrator a record reparations payment, following three years’ deliberation over the pandemic-era practices of OOCL.

DK Butterfly-1’s effort to seek an award exceeding $165m may have been rejected, but the regulator did find in favour of the administrator and slapped the Chinese box line with a bill topping $45m.

The FMC said OOCL’s objections to the higher claim were “well-founded”, before noting that the total award of $45,600,599.25 was on the basis that the carrier’s service was “not in accordance with service contracts or refusal to deal”.

The largest single award of damages in FMC history, which included a finding of “retaliation” by the container line, may give some indication as to which way the regulator is looking at administrator Butterfly-1’s other claims.

It has also accused a plethora of carriers of breaching the US Shipping Act, lodging claims against BAL Container Lines for $9.5m, Evergreen ($1.25m), HMM (said to be $16m), as well as MSC and Yang Ming.

In each instance, a sense of déjà vu is apparent, as the complaints allege similar practices by carriers looking to take advantage of the pandemic-induced chaos.

In its initial filing, Butterfly-1 accused OOCL of having “exploited price inflation in container shipping during the Covid-19 pandemic and unjustly and unreasonably exploited customers”.

The administrator claimed the carrier had failed to meet minimum quantity commitments by more than a quarter, suggesting this was a widespread practice among carriers at the time. Consequently, Bed, Bath and Beyond had been forced to pay $9m to find space, with further damages arising from OOCL’s detention & demurrage charging policy, even as the carrier purportedly hobbled the furniture shipper’s capacity to collect its cargo.

Butterfly-1’s success will likely give hope that the effort pursuing claims through the FMC will pay off, with Cornerstone Brands and QVC seeking $18.1m from ONE, and Yang Ming facing a $14.7m suit from discount retailer Dollar General for failing to meet minimum volume commitments.

Sources argue that in ‘risk versus reward’ terms, it falls very much into carriers’ laps, as customers face “prohibitively expensive” costs to bring a claim.

“You’re not going to spend $20,000 on legal fees to get $5,000 back for Covid-era bullshit,” one source said, adding that carriers were being very open that they “are just waiting out the two-year statute of limitations to reduce what they have to pay out”.

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