Flexport is going at it with another shipper over detention and demurrage (D&D) fees.
In April, the San Francisco-based digital freight forwarder sued tire manufacturer Giti Tire in a California court for not paying $12.3 million in detention fees accrued from 2021 to 2023.
During that stretch, Flexport arranged for the transportation of “hundreds of shipments of tires” from overseas to the Port of Long Beach, took on ocean carrier liability and issuing bills of lading for the movement of cargo. The company also arranged for the drayage of these shipment to their final destinations.
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A month after Flexport filed its suit, Giti Tire fired back via a complaint to the Federal Maritime Commission (FMC), asserting that both the invoices and charges violated the Shipping Act.
Giti Tire cited four major reasons for what it called a violation.
First, it claims Flexport levied hundreds of invoices with “unreasonable” D&D charges for days on which the relevant port was closed, including holidays and weekends, when the container could not be returned.
The charges also failed to include the detailed information required by the Shipping Act, which prevented Giti from determining the validity of individual charges. Additionally, the invoices to Giti already had invoiced to other parties, the tire manufacturer claims.
Finally, Giti alleged that Flexport’s accessorial charges in many instances were four or five times the market rate for equivalent services.
The accusation is the one of two recent complaints that insist Flexport’s D&D practices are over the top.
Earlier this month, Peloton filed its own complaint with the FMC, accusing Flexport of both failing to move its cargo in a timely manner and charging improper D&D fees as a result of the transportation delays.
A Flexport spokesperson denied the allegations from Giti, with the company previously saying in its April lawsuit that it repeatedly advised the tire company of the charges.
“As mentioned in Flexport’s April 2024 federal complaint, this was a situation where we tried everything we could for over two years with a customer who refused to pay their obligations,” said the spokesperson. “Flexport considers our legal action a last resort after working hard to minimize charges and work through payment issues. We are confident in our ability to prevail on the merits of our lawsuit.”
Sourcing Journal reached out to Giti Tire.
The Shein partner also said in the initial suit that Giti failed to return the containers to the ports and allowed the charges to accumulate.
“Giti refused to pay the detention charges, which were the direct result of Giti’s failure to return the containers despite repeated urging from Flexport to do so,” Flexport’s complaint read.
On the other hand, Giti said in its own filing that it repeatedly requested Flexport to provide supporting documentation on the charges so the company could assess the validity and accuracy of the charges. The Georgia-based firm alleged that while the forwarder provided an addendum on the charges, it did not issue new invoices which met legal requirements.
“Considering the passage of time and Flexport’s steadfast refusal to provide any supporting documentation, Giti has no way to assess the accuracy of Flexport’s charges,” the company said.
In total, Giti says it has incurred over $12.7 million in damages, and asked the California court to close Flexport’s case.
According to the company, $5.3 million of the D&D fees were charges on holidays and weekends or when ports were closed, while $4.5 million were for fees that lacked the required details to impose a charge. Giti also cites $7.2 million in “excessive” charges; and $66,675 in duplicate charges already invoiced to other parties. Some of these charges overlap with one another.
Flexport, in its own suit, claims Giti already admitted it owes at least $7 million in unpaid detention and related charges.
Flexport must respond to the FMC by June 14.
Like the Peloton filing, the back-and-forth between Flexport and Giti is another example of the spotlight D&D fees have since the 2022 passage of the Ocean Shipping Reform Act (OSRA). Under that act, the FMC has more oversight into areas like D&D charges, where the agency can now investigate complaints and enforce monetary penalties.
Ocean carriers are usually the firms that have been under the microscope for slapping shippers with D&D fees. In the most extreme example yet, the estate of bankrupt Bed Bath & Beyond filed a $316 million claim against Mediterranean Shipping Company (MSC) late last year.
