Bed Bath & Beyond, now in Chapter 11 bankruptcy, insists it was a victim of shipping line greed amid the supply chain crisis.
It filed a high-profile complaint with the Federal Maritime Commission (FMC) on April 27 against Hong Kong-based shipping line OOCL, seeking at least $31.7 million in compensation. District court documents reveal Bed Bath & Beyond (BBBY) also sought at least $7.8 million from Taiwanese carrier Yang Ming.
OOCL filed a stern rebuttal with the FMC on Tuesday, casting the blame back at BBBY.
The shipping line said that during the supply chain crisis, ocean carriers faced “unprecedented challenges arising from spiking demand,” disruptions, congestion and COVID restrictions, causing “severe and protracted trans-Pacific vessel delays.”
OOCL said it “invested in providing new capacity and services” and “took no action to drive up freight rates nor … create artificial scarcity,” as alleged by BBBY.
In contrast, Bed Bath and Beyond “repeatedly and without explanation failed to manage its own supply chain, exacerbating the bottlenecks faced by other shippers and the ability of [OOCL] to reposition its containers to Asia in order to serve customers’ unprecedented demand for service,” said the carrier.
OOCL called Bed Bath & Beyond’s FMC complaint “an unfortunate campaign to distort and obfuscate the relevant facts, contracts and law in order to secure an unwarranted return.”
OOCL says service contracts were amended
BBBY’s claims against the shipping line fall in three categories: failure to meet the minimum quantity commitments (MQCs) under 2020 and 2021 service contracts, unfair use of peak season surcharges, and unfair detention and demurrage charges.
The bankrupt retailer claimed that OOCL agreed to an MQC of 2,100 forty-foot equivalent units for the contract covering July 1, 2020-June 30, 2021, but was 624 FEUs short, equating to extra shipping costs incurred by BBBY of $2.2 million.
It further alleged that OOCL was 1,363 FEUs short of the agreed 3,796-FEU MQC for the contract covering May 1, 2021-April 30, 2022, equating to extra shipping charges to BBBY of $9.4 million.
Not true, countered OOCL.
It said the 2020 MQC was mutually amended downward to 1,086 FEUs and the 2021 MQC to 1,531 FEUs. BBBY “did not utilize all the space that [OOCL] made available,” it maintained, noting that amended agreements with the reduced MQCs were filed with the FMC.
“There were no monthly or quarterly carriage requirements or guaranteed space per sailing in the contract,” continued OOCL. “BBBY is asking the [FMC] to invent contract requirements that were not bargained for or agreed to.”
FMC has no jurisdiction, says carrier
The container line further maintained that the FMC has no jurisdiction to decide the matter in the first place.
It said that under the Shipping Act, the law that regulates the container industry, “the exclusive remedy for a breach of a service contract is an action in an appropriate court.”
According to OOCL, the FMC “has long held that this … bars all claims premised on the obligation to meet one’s contract commitments. BBBY cannot unilaterally expand the agency’s jurisdiction by relabeling contract-based claims as Shipping Act violations.”
It said the Shipping Act of 1916 authorized the FMC to “broadly regulate the reasonableness of cargo service accommodations,” but the Shipping Act of 1984 “removed that authority with regard to service contracts” and the 1998 Shipping Act only barred unfair or unjustly discriminatory practices for cargo accommodation “in connection with service pursuant to a tariff.”
“Congress purposefully eliminated the Commission’s power to regulate the reasonableness of cargo space accommodations for service pursuant to a service contract in favor of a deregulatory market-based approach,” wrote OOCL in its FMC response.
Congress restored the FMC’s authority to regulate space accommodations under service contracts in the Ocean Shipping Reform Act of 2022. However, that law went into force after the period of BBBY’s claims.
“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,” said OOCL.
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