MSC’s D&D Fees to Be Investigated by FMC for Possible Violations
Mediterranean Shipping Company’s (MSC) detention and demurrage charges and its billing procedures are coming under the scrutiny of the Federal Maritime Commission. In an order of investigation and hearing filed August 10, the commission reports based on information from its Bureau of Enforcement, Investigations, and Compliance, it is proceeding in instituting the action looking into possible violations of the Shipping Act.
As the number of complaints over D&D fees rose during the surge in shipping volumes during the pandemic, the commission was outspoken in its instructions and warnings to the shipping industry on the use of D&D fees even before its authority was expanded under the revisions to the Shipping Act. The high-profile actions to date, however, have been in response to individual shippers’ complaints against carriers. The FMC has also sought to encourage carriers to resolve disputes and settle smaller claims from shippers.
The new action however is a broader overall investigation against MSC, citing a few specific instances which the commission suggests could be indicative of a broader issue with the carrier. They note that MSC was reported to have the largest imported TEUs from January 2022 to 2023 while saying that based on the initial investigation they have found a series of potential issues.
The largest example cited relates to charging the same demurrage, detention, or per diem rate for both operating and non-operating reefers in 2021 in MSC’s U.S. trade. The investigation showed that MSC failed to publish its tariff rates for non-operating reefers in several non-U.S. markets. MSC’s agent responded by telling the FMC that different rates were charged for non-operating reefers, but the FMC believes the tariffs were not published as required until March 2023.
The commission’s audit revealed at least 925 occasions where customers disputed the fees resulting in refunds of over $1.2 million. The FMC believes in 2021, however, that 1,704 overcharges went undisputed. MSC, they assert retained nearly $858,000 in additional revenues from these undisputed charges.
Another practice that is cited is the billing of D&D fees to ocean freight companies listed on a Bill of Lading even though it was not a party to the contract. They cite three companies as examples with some claims dating to 2017 and 2018 while others were 2021. The FMC cites approximately $16,000 in 2021 fees that were improperly billed to these companies as well as $3,195 billed in 2017-2018 to one of the freight companies. MSC had refused the individual companies’ request to waive the fees.
MSC has 25 days to file an initial response to the FMC order and the case is being assigned for a hearing before an administrate law judge. Under the proscribed process, the judge has a year to issue a decision, and the commission would issue its final decision by late February 2025.
Last year, an administrative law judge issued a default decision against MSC in another case involving a shipper’s complaint that MSC have not fulfilled its contract. The case ran into complications with MSC saying it could not provide some of the ordered information during discovery due to Swiss law. After the judge issued the decision, MSC vowed to appear saying that the case had not been decided on the merits of the claims.
