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New Legal Twist Rocks ‘Cargo Collusion’ Case

Swiss ocean liner Mediterranean Shipping Co. (MSC) is fighting back against a request for certain documents in a legal complaint lobbed against the ocean carrier by a home goods supplier to Amazon, Target and other retailers.  

The Switzerland-based ocean carrier said the information request creates a conflict between U.S. and Swiss law in a filing with the Federal Maritime Commission (FMC) last week. The argument potentially prolongs a swift default judgement requested by the shipper in the more than year-old case against MSC.

MSC had been asked to produce certain documents during the discovery phase of the case against it by home goods maker MCS Industries Inc. The carrier requested an extension for filing those documents and then later said offering those documents would place it in conflict with Swiss law to which MCS then asked that a default judgement be made by the administrative law judge overseeing the case. 

The ocean carrier called a default judgement “unwarranted and inappropriate” in last week’s filing.

It went on to say that if it were to comply with the additional document requests, it would “risk criminal sanctions” under Swiss law.  

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MCS now has until Oct. 6 to file a response, with the carrier then allowed to file a further reply by Oct. 14.

Pennsylvania-based MCS manufactures and supplies home products to customers such as Walmart, The Home Depot, Target, Bed Bath & Beyond, Amazon, HomeGoods, Wayfair and Burlington

The continuing case with MSC was part of a larger complaint filed with the FMC against MSC and Cosco Shipping Lines in July of last year by MCS in which it alleged carrier collusion and discriminatory practices against U.S. companies on the part of carriers who it said favored China-based businesses. Additionally, the home goods maker said the carriers were ultimately not adhering to terms of their contracts when it came to cargo capacity aboard their ships, in violation of the U.S. Shipping Act. 

Cosco agreed to settle its dispute with the home goods manufacturer about a year ago for an undisclosed amount. 

The ongoing dispute comes amid long-standing criticism from U.S. shippers alleging unfair practices on the part of carriers around detention and demurrage fees and vessels’ limited cargo capacity. 

The Ocean Shipping Reform Act of 2022 (OSRA) was largely positioned as a salve to shipper concerns with carriers and inflationary pressures.

The FMC, which is charged with now implementing OSRA, has taken various steps since its passage including the creation of a new Bureau of Enforcement, Investigations and Compliance. It’s also looking at a standardization effort for the collection of data and an emergency order that would require carriers and terminal operators to share information with shippers, truckers and railroads. 

The American Apparel & Footwear Association (AAFA) is backing the passage of an emergency order for information sharing, along with a number of trucking and logistics companies that have all written into the FMC to weigh in on the matter. 

“As we approach the critical holiday shopping season, an emergency order from the FMC requiring information sharing would enable the FMC to establish and implement data standards and data sharing to provide full, real-time transparency for what is happening at the ports to all stakeholders and provide all stakeholders the data necessary to compare data in an apples to apples format,” AAFA president and ceo Steve Lamar said earlier this month in a letter to the FMC. “That information could help importers, our members, make better, more informed decisions to mitigate the impact of port congestion on their shipments.” 

Higher prices coupled with declining customer service levels have marked the shipper experience, particularly over the past couple of years, Lamar said. 

“With 98 percent of all apparel, footwear and travel goods sold in the U.S. today being imported, our industry’s 3 million American workers depend on a smooth supply chain,” Lamar told the FMC. “However, over the last two years, we have paid 3-5X more to experience a severe deterioration of service and an explosion of unjust and exorbitant fees.” 

The Retail Industry Leaders Association (RILA) also weighed in with support for the emergency order as a means of addressing port congestion, container dwell times, empty returns and container access.  

“It has long been recognized that inadequate information sharing is a systemic issue affecting the operations of U.S. ports, and negatively impacts the global supply chain, impeding retailers’ ability to move freight and goods efficiently,” RILA director of supply chain Sarah Gilmore said in a letter sent this month to the FMC. “Over two-and-a-half years into the global COVID pandemic, supply chains and ports continue to experience significant disruption.”