MSC Assessed Civil Penalties Totaling $22.67 Million

An enforcement proceeding (Docket No. 23-08) involving MSC Mediterranean Shipping Company, S.A. (MSC) recently concluded with the Federal Maritime Commission (FMC or Commission). The Commission's decision assessed a civil penalty of $22.67 million for three types of Shipping Act violations. The Commission's Bureau of Enforcement, Investigations, and Compliance (BEIC), through its Offices of Investigation and Enforcement, investigated and prosecuted the matter.

BEIC's investigation alleged that MSC violated the Shipping Act over the course of several years. The first violation, which occurred during the period of 2018-2020, related to MSC's billing of customs agents as "notify parties" for demurrage and detention charges (late fees) through the "merchant clause" found in its bills of lading, even though such parties were not involved in moving the cargo. The Commission affirmed the initial decision of the Administrative Law Judge (ALJ) that MSC's use of its "merchant clause" violated 46 U.S.C. § 41102(c). The assessed civil penalties for these violations totaled $65,000.

Additionally, BEIC's investigation alleged that MSC violated 46 U.S.C. § 40501 by failing to include in its published tariff from 2021-2023 a statement of what such fees were for non-operating reefers (NORs). On this matter, the Commission affirmed the ALJ's finding that MSC violated 46 U.S.C. § 40501 from 2021 to early 2023, but modified the initial decision to reflect knowing and willful violations starting only from the point of MSC's March 2022 statement to the Commission that it would modify its tariff. The assessed civil penalties for those violations totaled $9,460,000.

Finally, BEIC alleged that MSC violated 46 U.S.C. § 41102(c) by overcharging its customers demurrage and detention fees for use of its NORs. In this decision, the Commission reversed the ALJ's determination that MSC's NORs "billing system" mistake did not violate 46 U.S.C. § 41102(c). Instead, the Commission held that the factual record indicated that the overcharging happened in about 23% of all NOR bills during the entire year of 2021. Therefore, the Commission concluded that MSC's billing was not merely the result of a mistake but rather that it constituted an unreasonable practice within the meaning of section 41102(c). For this conduct the Commission assessed a penalty of $5,000 per violation, or a total of $13,145,000.

The penalties assessed against MSC in this proceeding totaled $22.67 million. The FMC does not receive any revenue when assessing civil penalties. Civil penalties are paid directly to the General Fund of the U.S. Treasury.