A Chinese ocean carrier hit Amazon with a $96.4 million complaint via the Federal Maritime Commission (FMC) claiming that the e-commerce giant wrongfully terminated its contract and failed to meet its minimum quantity commitment without paying.
China United Lines, which began carrying cargo for Amazon from China into West Coast ports at fixed contract rates starting in May 2022, said in a Jan. 9 FMC filing that the tech titan skirted a $31.6 million early contract termination penalty, after initially agreeing to pay the amount upon exiting their deal in April 2023.
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After the contract’s termination, Amazon attempted to revise the terms of the break, classifying it as “for cause” as a “pretext to avoid paying the contractual liquidated damage,” the filing said.
Amazon, which has sought to bring more China-based sellers onto its platform in recent years, said China United Lines broke confidentiality by posting material on WeChat disclosing their partnership—thus justifying the “for cause” designation.
However, China United Lines said in its filing that Amazon published an extensive WeChat post on July 4, 2022, before the liner ever posted about the partnership.
“Amazon’s July 4 WeChat post identified China United as a ‘business partner’ and further discussed the parties’ commercial relationship in detail, including pricing and shipment schedules,” the filing said. “Amazon also provided information about its China United carrier relationship to the shipping trade press, leading to publication of articles in July 2022 containing this same information. Amazon made additional similar WeChat posts on August 9 and December 9, 2022.”
The container shipping company said none of its own posts revealed any confidential information, as defined in their nondisclosure agreement and service contract, which initially was slated to run through April 30, 2024.
Alongside the wrongful termination, China United Lines wants damages upon Amazon’s exiting of an agreement that provided “substantially lower rates and charges than China United’s published ocean rates and charges.” According to their two-year contract, Amazon would be contractually obligated to pay agreed liquidated damages if the Seattle-based company failed to meet its minimum quantity commitment.
The ocean carrier pointed out that trans-Pacific market shipping rates had fallen below the rates established in the contract by the time Amazon terminated the deal effective May 30, 2023.
Around the time the contract began on May 1, 2022, Shanghai-to-Los Angeles average spot rates were $8,564 per 40-foot container, according to Drewry’s World Container Index (WCI). That spot number plummeted a drastic 79.2 percent over the first year of the contract to $1,775 per container by the time Amazon first said it wanted out of the deal on April 1.
“By attempting to revise its termination of the Service Contract to ‘for cause’ in such a pretextual manner after having availed themselves of the Service Contract rates and charges…respondents attempted to obtain ocean transportation at less than the rates or charges that would have otherwise applied,” the complaint said.
China United Lines calculated the $96.4 million in damages by combining the early termination penalty of $31.5 million, along with the difference between the cheaper contract freight rates and actual freight rates for the Amazon shipments carried during the agreement.
Sourcing Journal reached out to Amazon.
The complaint is a role reversal of sorts compared to the grievances filed in recent years by importers and exporters against container shipping giants.
The day before China United Lines filed its complaint, Crate and Barrel and former home decor wholesaler NBG Home took their objections to the FMC over various alleged activities that started during the Covid-19 pandemic, including failing to provide adequate cargo space on their ships.
The two home brands pointed the finger at several ocean carriers for the offenses, following in the footsteps of businesses like bankrupt Bed Bath & Beyond and Samsung, which lodged their own complaints against multiple carriers.
China United Lines’ complaint would be the second largest brought to the FMC. Bed Bath & Beyond has an open complaint with the agency with Mediterranean Shipping Company (MSC) that is seeking $157.9 million in damages, but wants those doubled to $315.8 million due to what it claims is “retaliatory” conduct from the world’s largest ocean carrier.
China United Lines’ complaint with the FMC is its second such litigation brought against Amazon. The company first filed a lawsuit against Amazon in a New York federal court in Nov. 2023 on two counts of breach of contract for the early termination.
The ocean freight company amended its complaint in January 2024 and then again two months later, which included the $31.6 million figure and the WeChat posts detailing the companies’ relationship.
Amazon motioned to dismiss both counts of the complaint on Jan. 17, but Judge Kevin Castel denied the request.
Because key terms of the parties’ contract are redacted, and because neither party submitted a work order which had contents that were central to one of the counts, the court said it could not interpret the terms of the agreement to determine whether Amazon reasonably terminated the agreement for cause.
