US furniture manufacturer MCS Industries is based in Easton, Pennsylvania. The company accuses COSCO, MSC, and their competitors in the Asia-US Pacific trade of violating the US Shipping Act since the start of the pandemic. Specifically, it claims they charged exorbitant rates on the spot market and increased profits at the expense of customers.
MCS Industries presented the complaint to the Federal Maritime Commission. The company declares “to have experienced firsthand this misconduct on the part of global shipowners, since they have unreasonably refused to negotiate”. Unlike pre-pandemic practice, several shipping companies refused to negotiate or provide service contracts to MCS. Furthermore, those who did provide contracts, including COSCO and MSC, refused to provide the needed carrying capacity. They did this despite continuing to operate near pre-pandemic capacity. Maritime carriers refused to execute even those limited service contracts. This forced MCS to buy space on the inflated spot market instead. This practice allowed COSCO, MSC, and other carriers “unprecedented bumper profits”. A container on the US West Coast-China route cost about $2,700 in 2019. Today, it costs $15,000 or more on the spot market.
MCS’s complaint comes after the FMC announced plans to monitor nine of the largest container operators in the US market. The FMC wants to find out if they are using their power to raise customer costs. Subsequently, FMC Commissioner Rebecca Dye issued a series of interim recommendations. These include amending the Shipping Act to address congestion and disruption along the container supply chain. Lawmakers have already drafted a bipartisan bill. This law would ban sea carriers from refusing to book exports.
In its complaint, MCS explained that it had entered into a contract with COSCO under the US Shipping Act regulations. The agreement took effect on January 1. It provided a minimum number of TEUs for COSCO to ship from China, Hong Kong, and/or Indonesia to the United States at agreed prices. As of May, COSCO refused to provide MCS with more than a small share — 1.6% — of the allocated contract space. This forced MCS to book on the spot market with other carriers at higher prices, or not ship at all.
This practice has cost MCS over $600,000 so far. Therefore, the company asks the FMC to investigate the matter. They want to verify whether carriers have “unreasonably refused to deal or trade with MCS”.
The Mediterranean Shipping Company (MSC) announced its surprise regarding the complaint. MSC reported that it had not received “any formal complaint from MCS Industries prior to filing”. It also stated that many allegations are vague, unsubstantiated, and erroneously address MSC. The carrier does not acknowledge the alleged deficiencies in booking cargo assignments planned for this customer. Finally, it denies illegally selling the space allocated for MCS Industries to other shippers.
Furthermore, MSC strongly rejects the allegation of collusion between carriers. Indeed, MSC and COSCO do not belong to the same container shipping alliance. They maintain no active cooperation via Vessel Sharing Agreement (VSA) or Slot Charter Agreement (SCA) anywhere in the world.
