Hamburg S ü d, a subsidiary of Danish shipping giant Maersk, has been fined the highest amount by the Federal Maritime Commission (FMC) in a case against American furniture importer OJ Commerce (OJC).
OJC, headquartered in Florida, has filed a lawsuit against FMC, accusing Hamburg South America of violating the contract and charging unreasonable fees, demanding compensation of $100 million.
On June 7th, the Federal Maritime Commission (FMC) ordered Hamburg S ü d to pay $9.84 million in compensation to OJC, citing the company's refusal to provide contracted space for its containers.

FMC found that the carrier had violated the "refusal to perform" provision of Section 41104 (a) (10) of the 1984 Shipping Act, and ruled that it unfairly excluded the Florida appellant from the contract agreement, but only awarded the shipper about 10% of the $100 million compensation it claimed.
FMC has reduced the compensation amount, stating that the "actual total loss" caused by Hamburg South America to furniture importer OJC is $4.9 million. However, due to the carrier's violation of the US Shipping Act, it is necessary to pay double the compensation.
Article 41104 (a) (10) of the bill prohibits carriers from "... filing complaints against the shipper or using other carriers for retaliation, refusing to provide space, or resorting to other unfair or unfair discriminatory methods".
FMC stated in its statement that "this case has raised new legal issues regarding the refusal to process claims, retaliatory claims, and compensation calculations." FMC has decided to impose a fine of $9.84 million on Maersk's Hamburg South America, which is more than three times the other fines announced by FMC this year.
FMC believes that the email exchange between J ü rgen Pump, Senior Vice President of Hamburg South American Shipping North America (HSNA), and Kevin Li, a logistics expert, proves that Hamburg South America "intentionally refused" 15 40 foot OJC containers regardless of availability of space, "in retaliation for potential litigation," and thus refused to fulfill its contractual obligations.
The FMC ruled that "as the violation of Article 41104 (a) of the Anti Retaliation Clause was knowingly and intentionally committed, additional damages can be awarded. Therefore, OJC received compensation in the amount of $9843766.40
According to FMC, the two companies differ on many factual allegations. FMC pointed out that both parties have filed multiple lawsuits during the litigation process, filed multiple motions to compel the submission of evidence, and claimed that the other party violated the evidence claim.

The case began in December 2021, with OJC, headquartered in Miami, Florida, filing a relatively simple complaint against Hamburg South America and its US business HSNA. The shipper emphasized that they have signed a long-term freight contract with Hamburg South America from June 2020 to May 2021, with an agreed minimum freight volume of 400TEU. The shipper claims that the carrier failed to transport 30 containers according to the contract and mistakenly charged a demurrage fee of nearly $41000 for 13 containers. The initial appeal cited economic losses exceeding $100000.
The court rejected the claim related to unreasonable business practices in August 2022. In addition, Hamburg South America fully refunded the demurrage fee and resolved this part of the claim. However, in February 2022, OJC revised its complaint to include allegations of retaliation and refusal to trade.
The shipper claimed that during the negotiation of the following year's freight contract in Hamburg South America, the company had sent a letter to Hamburg South America threatening to file a lawsuit with FMC. OJC said that on May 4, 2021, "suddenly, without prior notice", Hamburg South America Company informed it that it would not renew the service contract under any terms, but would use Spot market prices "case by case".
The judge pointed out that FMC case law clearly stipulates that maritime carriers are not obligated to award contracts to every potential customer. However, FMC explicitly prohibits carriers from excluding customers without legal transportation related factors, and also prohibits carriers from retaliating against shippers.
This is a case that is widely debated by both parties, but the judge believes that the communication in April 2021 indicates that Hamburg South America chose to "interrupt" contact due to the "litigation risk" posed by the shipper. The judge wrote in the ruling: "The evidence indicates that the executives of Hamburg South America knew that his decision violated shipping laws." She stated that the facts support the finding that the violation was "intentional and deliberate".
There is widespread debate in determining the level of punishment, with shippers demanding compensation for losses exceeding $100 million. The judge calculated the actual loss based on a measure of slightly less than $23000 per container, combined with trade routes and cargo volume from 2020 to 21, and determined that the actual loss exceeded $4.9 million. The FMC stipulates that the maximum compensation amount shall not exceed twice the actual injury, and the judge allows the final compensation to be rated at $9.84 million.
Both companies have stated that they are reviewing the verdict as it was only delivered on June 7th. Although these events occurred during the pandemic and surge in freight volume, they occurred before the reform law was passed. The FMC report states that since the reform was passed, complaints have increased, and carriers are still facing complaints about cost issues and failure to provide space according to transportation contracts. However, this case is unique as it involves retaliation and failure to reach an agreement, rather than other issues that have already been resolved.
Reprinted from - Maritime Network