The ocean freight carrier that Bed Bath & Beyond complained about to a federal agency last month is clapping back at the bankrupt home goods retailer‘s attempt to win $31.7 million damages.
Orient Overseas Container Line Limited (OOCL) filed a rebuttal to the Federal Maritime Commission (FMC), calling the retailer’s allegations that it “drove up freight rates, created artificial scarcity, unjustly and unreasonably exploited customers” entirely false. The company also contested the notion that it “refused to deal” with Bed Bath & Beyond, citing the retailer’s claims that the shipping firm failed to meet minimum quantity commitments in 2020 and 2021.
The Cosco Shipping subsidiary pointed to the wider supply chain constraints that emerged during the Covid-19 pandemic as reasons for the retailer’s complaint—including spiking e-commerce demand, record U.S. imports growth, global intermodal supply chain delays and congestion and Covid-related port and factory restrictions.
“These factors caused severe and protracted transpacific vessel delays, which removed a significant proportion of functional capacity from the market, disrupted vessel schedules, and stretched to the limit every part of the inland intermodal supply chain,” OOCL’s filing said. “Respondents took no action to drive up freight rates, nor did they create artificial scarcity. Rather, respondents invested in providing new capacity and service options, and worked cooperatively with BBBY and other shippers to provide the highest levels of service quality under extraordinary circumstances.”
Bed Bath & Beyond declined to comment.
In the filing, OOCL said there were no monthly or quarterly carriage requirements, or guaranteed space per sailing in the contract between the two parties.
According to the Hong Kong-based container shipping firm’s filing, “BBBY is asking the commission to invent contract requirements that were not bargained for or agreed to between the parties. Respondents performed all the commitments as required by the service contracts, which were amended by mutual agreement before their expiration, and duly filed with the commission.”
The bankrupt retailer claimed in April that OOCL agreed to an MQC of 2,100 forty-foot equivalent units (FEUs) for the contract covering July 1, 2020 to June 30, 2021, but fell 624 FEUs short. Bed Bath & Beyond claims this forced it to seek service from other sources at higher rates, equating to $2.2 million in extra shipping costs.
It also alleged that OOCL was 1,363 FEUs short of the agreed 3,796-FEU commitment for the contract covering May 1, 2021 to April 30, 2022, amounting to $9.4 million in extra shipping charges.
But OOCL’s side of the story contrasts with how Bed Bath & Beyond portrayed the issue.
For the 2020-2021 contract, OOCL maintains that minimum quantity was mutually revised downward to 1,085.5 FEUs during the period. It also claims that Bed Bath & Beyond did not use all the space that the shipping company made available to it during the contract year, contrary to the retailer’s claims that OOCL gave it less space than initially committed.
The next year’s commitment was scaled down during the contract terms to 1,530.5 FEUs, OOCL said.
The company also denied allegations from Bed Bath & Beyond that the $6.4 million in demurrage and detention fees OOCL had charged were “not reasonable or fair,” and that it tried to “coerce premium pricing” by forcing the retailer to agree to premium rate contracts as a precondition to carry “just a fraction” of the previously committed volume.
While the retailer said it paid a premium of $12.6 million to OOCL in its initial complaint, the shipping company also denied any deliberate coercion into paying the extra fees.
OOCL also claimed that the FMC doesn’t have jurisdiction over the case, saying a breach of service contract complaint should go toward “an appropriate court” and not the commission.
The global logistics company pointed to the Shipping Act of 1984, which removed the FMC’s authority to regulate the reasonableness of cargo space accommodations when it came to service contracts.
While Congress restored the FMC’s authority to regulate these specific accommodations in the Ocean Shipping Reform Act of 2022, this law took effect after the period covered in Bed Bath & Beyond’s claims.
“BBBY cannot unilaterally expand the agency’s jurisdiction by relabeling contract-based claims as Shipping Act violations,” OOCL said. “The commission cannot repurpose other provisions of the Shipping Act in novel and unintended ways, in order to reclaim regulatory powers that Congress specifically removed.”
The beleaguered Union, N.J.-based retailer also is fighting with another ocean freight company over similar contractual issues. After announcing that it was pursuing $7.8 million in damages from Yang Ming, the Taiwanese carrier sued Bed Bath & Beyond, seeking a declaratory judgment that it does not owe the retailer for failing to meet its MQC.