Shippers have repeatedly complained about the abusive business practices of the major carriers since the beginning of the surge in volumes that grew with the onset of the pandemic. In the last week, the Federal Maritime Commission has received two complaints from U.S.-based companies against Evergreen Lines and CMA CGM for denial of service and failure to honor 12-month service contracts. Both shippers are accusing the carriers of violations of the Shipping Act seeking relief through hearings conducted by the FMC.
“Since the onset of the Covid-19 pandemic, global ocean freight carriers including Evergreen have unjustly and unreasonably exploited customers by substantially increasing their profits at the expense of shippers,” a complaint filed on behalf of Foreign Tire Service headquartered in New Jersey contends. It goes on to charge that the carriers followed business practices forcing them into the spot market for their shipments.
“While FTS and its vendors have continuously requested space from Evergreen, Evergreen has refused and failed to provide sufficient space,” the tire company argues. Royal White Cement headquartered in Houston, Texas filed a similar charge against CMA CGM for not providing space under a freight contract.
Foreign Tire Service entered into a contract with Evergreen for the transport of 100 40 HQ containers from Asia including Thailand and China to the United States, but the company reports after nearly 11 months Evergreen has only provided 19 spaces under the contract. They said they were forced to buy space on the spot market and incurring added expense of over $1 million to ship their goods. The expense continues to rise as Evergreen is still denying the company space under its contract.
The complaint contends that “Evergreen and other global ocean carriers began taking steps to artificially create a scarcity of space thereby manipulating the market by increasing pricing and their profits.” Evergreen and others they write employed "blank sailings" among other tactics to deprive shippers FTS of capacity. The company says that Evergreen was repeatedly told that there was no space on ships bound for the USA while giving slots to “Non-Vessel Operators at much higher rates than the rates promised” in its contract.
Foreign Tire Service says that Evergreen provided less than 20 percent of agreed numbers forcing it into the spot market at higher prices. They cite an example of a 40-foot high cube container which in 2019 cost $2800 to ship from Thailand to New York now costs $20,000.
Royal White Cement contracted with CMA CGM to carry containers with large bags of cement from Egypt to the U.S. West Coast. The agreed rate was just over $2,000 per container with a minimum of 2,000 containers. The rate was to cover shipments through April 30, 2022.
“After the effective date of the agreement, RWC attempted to book containers for shipment. But after 10 containers were transported, CMA refused to accept any bookings. This was after the market rates increased significantly for the shipment of containers, substantially over the agreed rates in the service contract. Although RWC repeatedly sought to book containers, such requests were rejected.”
The company contents it was told it would have to pay the spot price and could not take its business elsewhere. They argue that they were not being turned away due to lack of space but instead price with CMA CGM seeking to more than triple the cost of shipments under the contract from $4.35 million to over $13.6 million.
“Due to the refusal of CMA to honor the service contract and try to force R WC to pay over three times the agreed rate, RWC chose to not succumb to such approach and shipped the cement by alternative means,” the company writes in its complaint. They report that alternate shipping has cost the company more than $9 million to date.
Both companies are seeking relief from the FMC with Foreign Tire Service also asking the FMC to implement practices to prevent shippers from refusing to provide space at the rates stipulated in their service contracts.
A U.S. furniture manufacturer, MCS, filed the first such complaint during the pandemic in August 2021 against COSCO and MSC. Like these new complaints, the Pennsylvania furniture manufacturer accused the carriers of violating the 1984 US Shipping Act by not honoring terms of their contracts and not making space available to MCS Industries. MSC fired back in a public response denying accusations of collusion and space allocation. COSCO reportedly settled with the manufacturer.
