Dollar General is seeking $14.8 million in damages from Yang Ming on the grounds that the ocean carrier allegedly failed to provide the retailer with the sufficient cargo space agreed upon ahead of a yearlong contract.
In a complaint filed with the Federal Maritime Commission (FMC) on Tuesday, the discount retailer said the Taiwanese container shipping firm did not meet its minimum quantity commitment of freight to be shipped from May 1, 2021 to April 30, 2022, which would be a violation of the Shipping Act of 1984.
Related Stories
During this time, the retailer said the logistics company instead allocated its intended space to higher-priced cargo from other shippers.
As a result, Dollar General was forced to obtain space on the spot market “at enormous expense” during a period of “unprecedented high spot market prices.” In October 2021, ocean spot freight rates soared above $10,000 per 40-foot equivalent unit (FEU), according to Drewry’s World Container Index (WCI). The same container on average would be worth $2,812 as of Thursday.
Under the service contract, Yang Ming was required to provide enough capacity to store 2,226 FEUs on its vessels for the year, corresponding to an average monthly allocation of 185.5 FEUs. Dollar General alleged that the deal required the carrier to offer weekly container space at a level “not less than 130 percent” of the weekly prorated portion of that minimum commitment.
The requirement was contingent on Dollar General providing forecasts four weeks ahead of the scheduled shipping time.
However, Yang Ming provided only approximately 616 FEUs of space to the dollar store throughout the year, amounting to 73 percent less space than originally committed.
The 1,610-FEU shortfall led Dollar General to either seek service from other sources at higher freight rates, or skip shipments entirely.
One such 14-week stretch from August to October resulted in Yang Ming failing to meet the complainant’s forecasted volumes in 11 out of 14 weeks.
Yang Ming has already been alleged to have failed to meet service commitments by both Bed Bath & Beyond ahead of its Chapter 11 bankruptcy, as well as former home decor wholesaler NBG Home.
The carrier isn’t the only one that has been the subject of a shipper complaint stemming from the Covid-19 pandemic era, with Mediterranean Shipping Company (MSC) embroiled in its own legal battle with Bed Bath & Beyond on allegations of similar service commitment breaches.
Most recently, QVC and subsidiary Cornerstone Brands filed a complaint with the FMC against Ocean Network Express (ONE) on similar accusations. The plaintiffs allege that ONE failed to meet service minimums agreed upon within their contract, and that they were passed over for higher-priced cargo space bought on the spot market.
The Dollar General complaint pointed to Yang Ming’s alleged transgressions impacting numerous other shippers in 2021, noting that the company only accommodated 48 percent of the BCO (beneficial cargo owner) volume that it had previously committed to for the 2021 shipping year.
“Yang Ming’s representatives offered shifting explanations, initially claiming unavailability of space due to congestion and blank sailings, but later admitting that the lack of cargo space allocation was coming from Yang Ming’s headquarters,” the complaint said, also noting that the company’s U.S.-based representatives “were also very frustrated with their leadership,” and that “their hands were tied.”
Uber Freight named as second-largest creditor in Del Monte bankruptcy
As the ocean carrier remains under scrutiny, another logistics giant is awaiting a payout of its own from a customer falling into bankruptcy.
Uber Freight is owed $9.1 million in unsecured claims from canned foods company Del Monte Foods, which filed for bankruptcy on Wednesday. In the Chapter 11 filing, the transportation and logistics services provider was listed as the second-largest unsecured creditor after packaged fruits and vegetables provider Seneca Foods Corporation, which is owed $19.9 million.
Saddle Creek Logistics, the 14th-largest unsecured creditor, is owed $1.35 million for warehousing support, while CHEP USA still must claim $470,000 related to its pooled pallet services.
“Del Monte has been a valued customer of Uber Freight for many years. We are proud to serve a critical role to Del Monte’s business and remain committed to supporting them through this court-supervised restructuring process,” Uber Freight said in a statement. While the filing includes pre-petition balances, we’re confident those obligations will be addressed appropriately through the bankruptcy process. As a critical vendor of Del Monte, we are confident we will receive full payment for services rendered, and we remain focused on delivering uninterrupted support as a trusted, long-term logistics partner.”
There is no guarantee Uber Freight and the other creditors see a full recovery, with the final total depending on what the court approves during the reorganization process.
