Hamburg Sud Hit with $10 Million FMC Judgement in Shipper Retaliation Case

  • Hamburg Sud Hit with $10 Million FMC Judgement in Shipper Retaliation Case

    Hamburg Sud Hit with $10 Million FMC Judgement in Shipper Retaliation Case

    Hamburg Sud has been ordered to pay almost $10 million to an e-commerce home goods retailer for refusing to fulfill a shipping contract with the company in retaliation for a previous complaint it filed against the carrier, an administrative law judge for the Federal Maritime Commission (FMC) ruled Wednesday.

    The ruling also found Hamburg Sud, now under the brand of parent company Maersk, refused to engage in new negotiations with the complainant because of potential litigation risk.

    It’s the largest penalty levied by the agency since broad US shipping reform was enacted a year ago.

    “We are reviewing the decision and considering next steps,” Maersk said in a statement to the Journal of Commerce. 

    The ruling from Erin Wirth, the FMC’s chief administrative law judge, is noteworthy in that it says the agency found evidence that a container line both refused to negotiate a new contract with a shipper and engaged in retaliatory practices, something the container shipping industry has long vehemently denied. Congress, via the Ocean Shipping Reform Act of 2022 (OSRA-22), voted to beef up protections in those areas for cargo owners.

    “Commission case law is clear that an ocean common carrier does not have a duty to grant a contract to every potential party,” Wirth said in her order. “However, long-standing Commission precedent prohibits common carriers from shutting out any person for reasons having no relation to legitimate transportation-related factors and from retaliating against shippers.”

    Retaliation claims 

    OJ Commerce (OJC), a Florida-based importer of home goods, filed its initial complaint against Hamburg Sud in November 2021 for alleged improperly billed demurrage fees totaling $40,680 for 15 containers. While Hamburg refunded the full amount of the charges at issue, the case morphed into claims of refusal to deal and retaliation after Hamburg Sud allegedly failed fulfill the remaining minimum quantity commitment in OJC’s 2020-21 contract and the retailer threatened new legal action. The carrier then allegedly further refused to renew or negotiate a new contract with the retailer for 2021-22, making it too late for OJC to procure a contract with another carrier, the FMC order said.

    Hamburg Sud refuted the claims in FMC filings, but Wirth said she found ample evidence that carrier executives suggested not providing further vessel space for OJC under existing contracts and then disengaging from negotiating a new contract due to the “litigation risk” posed by OJC.

    While OJC sought $100 million in relief, Wirth took into account the 15 containers and calculated damages for the lost 2021-22 contract based on trade routes and volume, resulting in a total actual injury of $4.6 million. But then she more than doubled the amount to $9.8 million after ruling that “the violation was knowing and willful.”

    OJC’s legal representation declined to comment.

    The FMC has 30 days to review Wirth’s order.

    By: Teri Errico Griffis / JOC

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