In late April, Bed Bath & Beyond, an American home furnishing retail giant that had just filed for bankruptcy protection, filed a claim of US$31.7 million against OOCL, accusing it of unfair business practices during the epidemic.
The company is also preparing to pursue claims of at least $7.8 million from Taiwan-based shipping company Yang Ming, according to a legal filing in the Southern District of New York.
BBBY, now in Chapter 11 bankruptcy, insists it is a victim of shipping company greed amid a supply chain crisis.
OOCL filed a stern rebuttal to the FMC on Tuesday, placing the blame on BBBY.During the supply chain crisis, ocean carriers faced "unprecedented challenges from surges in demand, disruptions, congestion and COVID-19 restrictions," resulting in "significant and prolonged delays for trans-Pacific vessels," the shipping line said.
OOCL said it had "invested in providing new capacity and services" and had "taken no steps to drive up freight rates or artificially create shortages", as BBBY alleged.
In contrast, BBBY repeatedly failed to manage its own supply chain without explanation, exacerbating bottlenecks faced by other shippers and OOCL's ability to reship its containers back to Asia to meet customers' unprecedented service demands.
OOCL called BBBY's complaint against FMC an "unfortunate act of misrepresenting and obfuscating relevant facts, contracts and laws for the purpose of obtaining baseless rewards."
OOCL says service contract has been amended
BBBY’s claims against the shipping line fall into three categories: failure to meet minimum booking quantity commitments (MQC) under service contracts for 2020 and 2021, imposition of unfair peak season surcharges, and unfair (Demurrage and Detention, D&D) container demurrage.
The bankrupt retailer claims that OOCL agreed to provide 2,100 FEU of MQC for the contract period from July 1, 2020 to June 30, 2021, but is short of 624 FEU, equivalent to $2.2 million in additional shipping generated by BBBY cost.
It further claimed that during the contract period from May 1, 2021 to April 30, 2022, OOCL was 1,363 FEU less than the signed MQC of 3,796 FEU, equivalent to an additional freight charge of US$9.4 million to BBBY.
OOCL counters that this is not the case.It said that after negotiation between the two parties, the MQC for 2020 was lowered to 1086FEU, and the MQC for 2021 was lowered to 1531FEU.BBBY "did not take advantage of all the space offered by OOCL," noting that a negotiated revised lower MQC agreement was presented to the FMC.
“There are no monthly or quarterly shipping requirements in the contract, and no guaranteed space on each voyage,” OOCL added."BBBY this is asking (FMC) to invent contractual requirements that were not negotiated or agreed upon."
OOCL says FMC has no jurisdiction
OOCL further insisted that, first of all, the FMC has no jurisdiction to decide this matter.It said that under the Shipping Act, which regulates the container shipping industry, "the sole remedy for a breach of a service contract is to institute proceedings in an appropriate court."
OOCL said the FMC "has long held the view that all claims that are conditioned on performance of contractual commitments are barred. BBBY cannot unilaterally expand the agency's jurisdiction to relabel contract-based claims as violations of the Shipping Act."
It said the Shipping Act of 1916 empowered FMC to "extensively regulate the rationale for cargo service accommodation," but the Shipping Act of 1984 "repealed this power in relation to service contracts," and the Shipping Act of 1998 Unfair or unjustly discriminatory practices in cargo accommodation "in connection with customs services" are prohibited only.
In its response to the FMC, OOCL wrote: "Congress intends to abolish the Commission's power to regulate the reasonableness of cargo slot arrangements in service contracts in favor of a market-based approach to deregulation."
Congress restored FMC’s regulatory authority to adjust space arrangements under service contracts under the Maritime Transportation Reform Act of 2022, but that law was not yet in effect at the time of BBBY’s claim.
"The Commission cannot repurpose other provisions of the Shipping Act in novel and unintended ways to reclaim regulatory powers expressly removed by Congress," OOCL said.
Release time: 2023-05-29