Samsung Electronics has again taken legal action against a global shipping company, arguing that logistics costs incurred during the COVID-19 pandemic were unfair. The dispute over responsibility for the sharp rise in demurrage and detention charges during the pandemic appears to be spreading across the global shipping industry.

According to the U.S. shipping publication Journal of Commerce and the U.S. Federal Register on May 27, Samsung Electronics America has formally filed a complaint with the U.S. Federal Maritime Commission against Taiwan-based carrier Wan Hai Lines. The FMC has accepted the case and begun formal proceedings.

Samsung claims that Wan Hai improperly billed more than $1.2 million (about 1.6 billion won) in demurrage, detention and related charges arising from containers transported under “Store Door” terms. Store Door is a shipping arrangement in which the carrier assumes full responsibility for transport from the port to the inland destination. Samsung argues that it was improper to pass on delay-related costs to the shipper when the delays occurred within the carrier’s area of responsibility.

Demurrage and detention charges were introduced to improve container turnover, but they drew criticism during the pandemic for taking on a punitive character. Carriers continued to impose fees under existing practices even in cases where severe port congestion made it impossible for cargo owners to retrieve containers even if they wanted to do so.

In its complaint, Samsung stressed that responsibility for failing to remove containers from the terminal in a timely manner lay with the carrier, not the consignee. It said that beyond the charges directly imposed, it also had to absorb significant increases in logistics costs and operational disruptions. Industry observers say the case could become an opportunity to reexamine the shipping industry’s customary fee-charging practices during the pandemic period.

The outcome of the lawsuit is expected to hinge on whether Wan Hai complied with the FMC’s “incentive principle.” In 2020, the FMC issued guidance stating that demurrage and detention charges should be used only for the purpose of encouraging the swift movement of containers. The thrust of that guidance was that charges imposed when cargo owners were physically unable to move containers would be difficult to justify.

Attention is also focused on the result because Samsung Electronics has already prevailed in a similar case. Last year, Samsung secured an FMC order for approximately $3.68 million in compensation in a lawsuit against Israeli carrier ZIM. At the time, the FMC determined that imposing charges when the cargo owner had no ability to retrieve the cargo was improper.

A global shipping industry official said legal disputes aimed at determining final responsibility for the chaos during the pandemic are now beginning in earnest. The FMC’s decision is expected to have a significant effect on the future structure and standards of global shipping contracts.

Source:Business Korea