Bed Bath & Beyond Files FMC Complaint Against Cargo Line That Sued it in April
Bed Bath & Beyond Inc.’s ongoing feud with ocean carriers over catastrophic service contract failures continues as the retailer seeks $7.5 million in damages from another shipping line.
Cargo issues could be a key factor in the inventory problems that helped topple the once-mighty home goods retailer into bankruptcy this spring.
More from Sourcing Journal
One Company Paid $2.4 Million to Skirt Panama Canal Congestion
What Extended Panama Canal Disruption Means for Retail Supply Chains
Bed Bath & Beyond’s latest Federal Maritime Commission (FMC) complaint comes after the company previously asked for $31.7 million from Orient Overseas Container Line Limited (OOCL). Now the company whose assets where acquired by Overstock claims ocean carrier Yang Ming deliberately failed to ship 85 percent of its cargo that was part of a year-long contract from May 1, 2021 to April 30, 2022, according to an FMC complaint.
The retailer alleged that Yang Ming committed 1,000 40-foot equivalent container units (FEUs) of vessel space as part of the contract’s minimum quantity commitments (MQC), but only ended up providing about 149.
“Instead of honoring its service commitments, Yang Ming undertook a practice of systematically failing to make space available under the Service Contract, resulting in mounting shortages,” according to the 27-page complaint.
Yang Ming failed to carry any containers for Bed Bath & Beyond during the first month of the service contract term, and only 3.38 FEUs during the second, the retailer said.
The company said the container shipping firm instead allocated its bargained-for space to higher-priced cargo from other shippers. As a result, Bed Bath & Beyond said it was forced to obtain space on the spot market “at enormous expense during a period of unprecedented high spot prices.”
Bed Bath & Beyond claimed that it was forced to either find carriage with other sources at higher rates, or just not ship the cargo at all.
The retailer said it suffered nearly $7.7 million in damages, including $6.5 million due to the higher rates, approximately $750,000 in demurrage and detention charges, as well as other injuries, including lost profits, to be calculated at trial.
“As alleged herein, Yang Ming’s behavior has caused significant harm to Complainant in numerous ways, such as producing delays in freight transportation, appropriating scarce resources for ocean freight expenses, causing uncertainty and scarcity within the business, and disrupting Complainant’s ability to operate and ensure the timely availability of merchandise for sale to U.S. customers,” the complaint said.
The complaint comes as the FMC’s powers have expanded under the Ocean Shipping Reform Act (OSRA), which aims to make it tougher for shipping lines to bypass service to U.S. exporters and create greater transparency around late fees assessed to customers.
Since the OSRA went into effect, the FMC has proposed multiple rule changes to the act, including requiring carriers to file an annual export policy with the agency. This would force them to submit detailed pricing strategies and service offerings.
These rule changes are designed to address complaints among retailers like Bed Bath & Beyond, which accuse the carriers of failing to fulfill service commitments and claim they unreasonably turned away cargo in favor of more lucrative shipments.
In one recent example, the FMC fined Hamburg Süd $9.8 million for refusing to fulfill shipping contract obligations with Florida-based furniture retailer OJ Commerce. In that case, the agency found that the ocean carrier violated the “refusal to deal” provision of the Shipping Act of 1984.
Bed Bath & Beyond cited the OJ Commerce-Hamburg Süd case in its complaint, noting that it similarly “caused a shortfall of container carriage for the shipper.”
Fueling the backlash from retailers has been the heady profits ocean carriers like Yang Ming and Hamburg Süd generated during 2021 and 2022 as freight rates soared to record levels.
In addition to allegedly failing to meet service commitments, Yang Ming is accused of unfairly coercing financial concessions beyond the service contract’s scope, such as peak season surcharges (PSS). Bed Bath & Beyond said Yang Ming’s imposition of the extracontractual surcharges, including PSS, caused it to overpay for the carriage that it did receive from Yang Ming, resulting in damages of nearly $295,000.
Yang Ming previously sued Bed Bath & Beyond in April in the Southern District Court of New York, disputing the claims that it breached contractual agreements. The container line sought a declaratory judgment that it did not owe the retailer for failing to meet its MQC, but the case was stayed in June after Bed Bath & Beyond filed a petition for relief as part of its bankruptcy.
