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Crate & Barrel Says Ocean Carriers Failed to Honor Service Contracts
Glenn Taylor
4 min read
Crate & Barrel and former home decor wholesaler NBG Home have filed complaints with the Federal Maritime Commission (FMC) accusing various ocean carriers of failing to provide adequate cargo space on their ships and tacking on excessive surcharges and late fees during the Covid-19 pandemic.
The companies join the likes of Samsung, Bed Bath & Beyond and another home furniture and goods retailer, OJ Commerce, who have all taken their gripes with ocean carriers to the federal agency in recent years.
Both complaints filed Jan. 8 accuse the carriers of taking advantage of the supply chain congestion experienced during the pandemic, and using the environment to unfairly exploit customers by colluding to restrict capacity, refusing to compete for volume and failing to honor their respective service contracts during the 2021-2022 period of high spot market rates.
During the period, the carriers’ profits surged to record levels, while shippers had to deal with increased freight costs.
Filing its complaint under its parent company Euromarket Designs Inc., Crate & Barrel came after a litany of container shipping firms including Mediterranean Shipping Company (MSC), Ocean Network Express (ONE), Evergreen, HMM, Maersk, CMA CGM, Apex Maritime, China United Transport, Cosco Shipping and Wan Hai.
Across its four service contracts with MSC, HMM, ONE and Evergreen from May 1, 2021 through April 30, 2022, the home goods retailer said the carriers only moved 15,414 40-foot containers out of a total initial minimum quantity commitment of 19,293 boxes.
NBG Home, whose holding company Nielsen & Bainbridge, LLC filed the complaint, targeted Evergreen, ONE, Orient Overseas Container Line (OOCL), Yang Ming and Italia Marittima in its case.
The brand said the carriers transported only 6,799 20-foot equivalent units (TEUs) of the 16,842-TEU minimum quantity commitments initially agreed upon—marking an even steeper 10,044 TEU-shortfall.
Both Crate & Barrel and NBG Home said the damages to their respective businesses were “extreme and debilitating” due to the costs of replacing their shortfalls in cargo. Additionally, both furniture sellers had to make alternate transportation arrangements at high spot market prices or forgo shipping some cargo altogether, resulting in excess freight charges paid, lost profits and/or other business damage.
Crate & Barrel said it paid roughly $30 million more than what it would have spent had its carriers with service contract honored their service commitments. NBG Home said it paid $46.6 million more in incremental costs than expected to replace the cargo shortfall.
Demurrage and detention (D&D) charges, which the FMC has sought to generate more transparency on as it hears more of these cases, were another major contention of both shippers. Carriers tack on these fees if containers are stored at a port, or outside the port’s terminals, beyond an initially agreed upon time.
However, shippers have long argued that the state of the supply chain at the time made many of these charges unreasonable, as circumstances often out of their control prevented them from moving the containers.
From 2021 through 2022, Crate & Barrel paid approximately $31.4 million in total D&D fees, which are designed to incentivize cargo movement and equipment return. NBG Home did not disclose the fees it had to pay, but paid the extra money in both the 2020-2021 and 2021-2022 shipping years.
Both companies are seeking reparations for the “exorbitant” fees.
For Nielsen & Bainbridge, the damage done had “significantly contributed” to the company’s Chapter 11 bankruptcy filing in February 2023.
“In NBG’s first day declaration filed in support of its bankruptcy, both ‘supply chain disruption’ and ‘elevated freight costs (nearly 400 percent at peak compared to historic norms)’ were described as contributing factors limiting NBG’s ‘ability to continue operating in the ordinary course without a significant recapitalization through these Chapter 11 cases,’” the complaint said.
The move mimics that of Bed Bath & Beyond, which also held ocean carriers like MSC, Evergreen, OOCL and Yang Ming partially responsible for its Chapter 11 bankruptcy filing in separate complaints against the liners.
Complaints to the FMC have come out of the woodwork after U.S. Congress passed the Ocean Shipping Reform Act of 2022 (OSRA), which effectively widened the scope of the agency’s powers. Under OSRA, the FMC could investigate complaints related to carrier D&D charges, and aim to ensure U.S. exporters are not unfairly bypassed for service by ocean carriers.
The FMC also can levy and enforce penalties for the carriers.
Early in January, the FMC reiterated to shippers that it is an appropriate venue where they can resolve class action disputes.
The current complaints by American businesses against the mostly foreign ocean carriers also served as a backdrop for the labor negotiations at East Coast ports between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX)—which includes most of the major container shipping firms.
In that labor battle, which ended with a tentative deal earlier this year to avoid a second strike, both President Joe Biden and President-elect Donald Trump sided with the ILA, citing the record profits reeled in by the international shipping lines.
