Reversal!The cargo owner’s huge claim of US$33.7 million was rejected!US FMC draws new boundaries fo

US$33.7 million claim, what is the core dispute?

Peloton had previously sought approximately $33.7 million in damages, and the dispute involved large volumes of cargo shipped during a period of severe congestion in the global supply chain from 2020 to 2023.The core of this case is not just the US$33.7 million claim itself, but an issue closely related to cargo owners, freight forwarders, NVOCCs and shipping companies: after adopting the "Store Door (door-to-door)" transportation mode, should the party responsible for inland transportation be responsible for the demurrage and demurrage fees incurred by the container?The answer given by FMC’s preliminary decision is not simply “who bears the responsibility”, but requires going back to the specific container, specific date, specific reason for the delay, and the attribution of responsibility for judgment.core controversy
The dispute began on May 8, 2024, when the FMC officially accepted Peloton’s complaint against Flexport.Peloton accused Flexport of violating the U.S. Shipping Act and implementing unreasonable detention, demurrage, warehousing and other related charges on more than 7,000 cargo shipments.The transportation time involved in the case mainly covers the period from 2020 to 2023, which is the period when U.S. port congestion, container shortages, truck and chassis equipment shortages and other supply chain problems are most serious.Peloton believes that Flexport assumes the responsibility of organizing transportation from the overseas departure point to the final destination in the United States in a large number of transportations, which belongs to "Store Door" transportation.Among them, Peloton specifically proposed that in some door-to-door transportation, Flexport is responsible for both ocean transportation and inland transportation, so it should not simply pass on the relevant demurrage and demurrage fees to the cargo owner when delays occur.According to the FMC's preliminary decision, the US$33.7 million related charges claimed by Peloton involve 3,249 Store Door shipments; and the number of cargo shipments involved in the entire case exceeds 7,000 shipments.Peloton also believes that Flexport automatically generates relevant fees according to its own rate schedule and does not fully prove the correspondence between these fees and specific delay events.FMC has not determined that "door-to-door detention fees cannot be charged"
This is also the most noteworthy point of this case.A core point of Peloton is that since Flexport assumes the responsibility for inland transportation in Store Door transportation, its scope of responsibility should also be expanded for the demurrage and demurrage fees incurred during transportation.But the ALJ did not accept this logic.The preliminary decision clearly states that FMC’s previous rules on demurrage and demurrage do not stipulate that “Store Door transportation shall not charge demurrage or demurrage”*.In other words, door-to-door shipping by itself does not automatically eliminate demurrage and demurrage charges.What really needs to be judged is: whether the specific charges are reasonable, who caused the delay, whether the charges play an incentive role in promoting the flow of goods, and whether the relevant charges have a corresponding relationship with the actual transportation events.Therefore, it is not enough to conclude that the carrier or NVOCC should be responsible for all relevant detention charges and demurrage charges based solely on the "Store Door".The FMC administrative judge also emphasized that charges in door-to-door transportation may still be subject to strict scrutiny.

Why was the US$33.7 million not compensated?

What really determines the outcome of this case is how the evidence corresponds to each specific charging event.FMC has previously established the "incentive principle": the main purpose of demurrage and demurrage should be to promote the timely flow of goods and equipment through economic incentives, rather than simply becoming a source of income.On February 23, 2024, FMC announced new demurrage and demurrage billing rules, and further clarified that charges need to be reasonably linked to actual transportation behaviors such as timely pickup of goods and timely return of equipment.The rules will take full effect on May 28, 2024.In this case, Peloton believes that Flexport failed to comply with this principle.However, the administrative judge believes that to judge whether a certain charge is reasonable, we cannot just conduct a comprehensive and summary statistical analysis, but need to further answer: Which container is it?What happened on that day?What causes the delay?Which party is responsible for the delay?Is this charge directly related to a specific incident?FMC pointed out that in the absence of sufficient specific information, it is impossible to judge whether each demurrage and demurrage violates the "incentive principle".Ultimately, Peloton failed to meet its burden of proof.

The owner of the cargo is not naturally without responsibility.

There is another important factual judgment in FMC’s decision.The administrative law judge believed that the record of the case showed that Peloton itself had a direct impact in some of the shipping delays.For example, in some cases, Peloton warehouses do not have enough space, or goods that have been delivered to the warehouse are not unloaded in time, resulting in containers and chassis not being returned to the supply chain in time.In addition, after some containers were delivered, Peloton required several weeks to arrange pickup; in other cases, the trucks arrived as scheduled, but the containers were not unloaded.In the opinion of the administrative judge, if these specific incidents prevent the equipment from being returned in time, the resulting related charges cannot simply be determined as "unreasonable charges."This also means that when serious congestion occurs in U.S. ports and inland transportation, "delay occurs" itself does not mean "toll violation".The key remains the specific reasons for the delay and where responsibility lies.

04Industry Observation

For Chinese freight forwarders and cross-border logistics companies, what is more noteworthy about this case is that the chain of evidence requirements are becoming increasingly important.The FMC administrative judge did not simply endorse Flexport’s logic of “just charge according to the rate schedule.”On the contrary, the decision clearly mentioned that Flexport’s internal system will generate relevant fees based on the rate schedule, but before the final bill is issued, information such as the transportation cycle, shipping company bills, internal operation records, and emails will also be reviewed; if the delay is found to be caused by Flexport or its partners, the fees can be adjusted or reduced.In other words, the rate table is only one of the basis for charging, and it does not mean that all automatically calculated charges are naturally reasonable.At the same time, if the cargo owner wants to claim that the relevant charges are unreasonable in the FMC case, he also needs to match the charges with specific transportation events.This effectively increases the data requirements for both parties in D&D disputes.Industry judgment analysis From several current cases, it can be seen that D&D disputes in the United States are gradually shifting from simply discussing "whether there is a fee" in the past to "why the fee is charged, who caused the delay, and whether the fee corresponds to a specific transportation event."For Chinese export companies, freight forwarders and NVOCCs, especially when U.S. port congestion, terminal closures, chassis shortages or inland transportation abnormalities occur, it may no longer be enough to keep only one bill when handling D&D disputes.Data such as container number, free period, pick-up time, actual pick-up time, empty container return time, appointment records, terminal status, truck records, and email communication between the two parties may all become important basis for determining liability.It should be noted that the Peloton case is still a preliminary decision by the administrative judge.According to the decision, the parties can raise objections within 22 days after service; if it is not reviewed by the FMC, the preliminary decision will become a committee decision.Therefore, at this stage, it is more appropriate to regard it as a case with reference value, rather than directly understanding it as having formed a binding national judicial precedent.