Home goods retailer Bed Bath & Beyond, which filed for bankruptcy protection last week, has now filed a $31.7 million claim against the container shipping lines that it claims willfully abandoned their service commitments during the pandemic so they could profit from supply chain disruptions.
Bed Bath & Beyond says that Orient Overseas Container Line (OOCL) ignored their contracted minimum quantity commitments for cargo and vessel space so they could sell the space to higher-paying customers in what they termed “brazen price gouging and profiteering”. As a result, Bed Bath & Beyond had to find space on the spot market, which is far more expensive.
They say that just 70 percent of their required capacity in 2020 was provided by OOCL. Moreover, they allege that “much of the freight actually moved … was moved only after [BB&B} agreed to [OOCL’s] demands for exorbitant premium pricing”. From October 2021 to March 2022, they provided just 52.9 percent of the contracted space.
In addition, Bed Bath & Beyond incurred numerous demurrage and detention charges because they could not pick up containers due to problems such as social distancing orders, shipping line policies and congestion. Between August 2021 and June 2022, they paid the company $1.5 million for demurrage and $4.9 million for detention, much of which was “unjustly and unreasonably assessed”. They are also seeking reparations for peak-season surcharges, which they say were supposed to be included in their contract rates.
In the filing, Bed Bath & Beyond included emails from OOCL that made it clear the shipping line was “auctioning space to the highest bidder, rather than meeting its service commitment.”
For example, one email read: “We are not looking to gouge, but stating the reality of the current market environment for any extra space. Please advise if BBB[Y] would accept a $5,800 per 40ft GP/HQ PSS on top of their primary contract pricing. This would position BBB[Y] at just around the $7,000 mark.”
According to Bed Bath & Beyond, this behavior allowed OOCL to note a 642 percent increase in its 2021 operating profit over the previous year.
Bed Bath & Beyond ultimately spent $31.7 million on extra freight charges alone, not to mention lost profits and other costs. Their filing with the Federal Maritime Commission came just days after they officially filed for bankruptcy protection.
Several importers are suing container lines over pandemic price gouging
There have been several similar cases recently involving importers suing container lines for their actions during the pandemic-related supply chain disruptions that led to skyrocketing transport costs, with carriers seeking sky-high spot rates from desperate businesses and imposing additional charges for boxes that were held at terminals. Some shippers saw their freight costs climb as much as tenfold, while carriers racked up record-setting profits to the tune of tens of billions of dollars.
Last summer, Congress passed the first significant overhaul of regulations governing ocean shipping in more than two decades. This made it easier for importers and exporters to file claims with the FMC against ocean carriers. So far, it has helped importers file hundreds of complaints that have seen nearly $950,000 in fees refunded and waived to date.
When Bed Bath & Beyond filed for bankruptcy protection on April 23, they announced they would be closing all 475 of their stores. They cited the supply chain disruptions seen during the pandemic as one of the main factors driving them out of business. Another major factor was the 2020 lockdown closures; Bed Bath & Beyond’s business model depended largely on sales at their brick-and-mortar stores.