A US company demanding compensation of nearly 4 million for freight manipulation !Recently, a US manufacturing company MCS Industries sued several large shipping companies. Including container shipping giants MSC and COSCO, to the Federal Maritime Commission (FMC).
Claiming that they were suspected of manipulating the price of spot container freight and failed to fulfill their contractual obligations. they demanded compensation of 600,000 U.S. dollars, equivalent to nearly 4 million CNY.
In the report titled “Formal Indictment of Shippers Claiming: Collusion Shipping Companies Are Exploiting Shippers”, a word that shocked the industry appeared:’exploiting’-Exploitation!
The lawsuit mentioned that these shipping companies used “unfair and unreasonable” . Means in the process of developing customers to sacrifice the interests of small shipping companies to manipulate the container spot transportation market from China to the West Coast of the United States.
The collusion with other shipping companies. That has caused the spot container freight rate to soar from approximately US$2,700 in 2019 to over US$15,000 now.
Faced with the surge in shipping prices, some shipping companies, instead of taking control measures. They refused to negotiate on contract prices, thus violating the US Shipping Act of 1984 and undermining the stability of the ocean freight industry.
According to the lawsuit, generally speaking, cargo owners in the United States pay for the ocean freight through bilateral negotiations with shipping companies (ie, long-term contracts). While market freight is reserved for smaller shippers or one-time cargo transportation.
However, with the outbreak of the Covid-19 new crown epidemic, container liner companies have begun to collude to manipulate the market!
Allegedly, shipping companies are able to violate the contracts they have signed. Because these shipping companies form a maritime alliance and control 90% of the market share of the trans-Pacific trade capacity.
And it is this alliance structure that allows major shipping companies to take concerted action. Forcing shippers to take more actions to promote expensive market freight rates instead of transporting goods at much lower contract prices.
According to MCS Industries, shipping companies have “erased” the previously stable structure of the maritime industry. Shipping companies have begun to ignore the contracts they have signed with their customers, or provide only a small part of the space specified in the contracts, and force the contracted customers to use an outrageous market.
In the face of this lawsuit, the US Maritime Commission believes that the current global demand for containers remains high, and Biden also requires them to actively resolve the contradiction between shippers and transportation companies.
Dealing with problems in this context, they felt very pressured and said that they would set up a new audit department, and at the same time deepen cooperation with the legal department, and strengthen enforcement.
It is worth noting that the initiators of the previous lawsuits also mentioned that even if the epidemic improves, these shipping companies will not resume their previous business methods, but will “double” their manipulation of the market and artificially keep freight prices at a high level, leading to retail sales. The shortage of goods affects consumers.
At present, due to the surge in imports, American railroads, ports, and warehouses have been overcrowded with goods. The shortage of manpower and the chaos of shipping market prices have further impacted the US retail industry, and businesses and consumers are facing broader inflation. pressure.
Therefore, the rectification of the shipping industry is an urgent problem. James Hookham, an executive of the Global Shippers Forum, also said that the organization will “closely monitor developments.” This case will be a huge test for the FMC and the US regulatory structure.