According to reports from international media, the world’s fourth-largest ocean freight forwarder, DSV – Global Transport and Logistics, is taking legal action against its American client, Hubbell, seeking compensation of approximately $2.5 million to cover the losses incurred due to Hubbell’s unilateral termination of the agreement.
DSV’s lawyers stated in the lawsuit filed with the U.S. court that Hubbell’s refusal to honor the signed agreement has caused substantial damages to DSV.
In April 2022, DSV and Hubbell signed two container shipping agreements from China to the United States. According to these agreements, DSV ensured fixed freight rates for Hubbell’s goods, and Hubbell committed to providing a certain amount of container cargo every week for three years.
However, just one month after signing the agreements, Hubbell sought to terminate the deal, claiming that the agreed-upon freight rates were too high. This termination coincided with a sharp decline in container shipping prices from their peak.
In seeking compensation, DSV bases its claim on the contract terms, which specified that Hubbell would pay a freight rate of $4,000/TEU in the first year, $3,750/TEU in 2024, and further reduced to $2,750/TEU in 2025.
Additionally, Hubbell had committed to shipping 8 containers per week from Shanghai to Houston, and 44 containers per week from Yantian to Savannah and Georgia, utilizing the vessels provided by Hapag-Lloyd.
Despite agreeing to renegotiate the terms as requested by Hubbell, the two companies failed to reach an agreement on the new prices, leading to Hubbell’s termination of the contract in December 2022.
DSV contends that since March of this year, Hubbell has considered the agreement terminated and consequently did not fulfill some of its contractual obligations. On the other hand, Hubbell claims that the two agreements with DSV were part of service contracts and included a 90-day notice period for termination. It’s noteworthy that DSV had been involved in another similar freight forwarder-customer dispute earlier, but in that case, DSV was the defendant.
The shipping market has experienced roller-coaster-like fluctuations since the onset of the pandemic, causing drastic fluctuations in freight rates and putting significant strain on relationships between shipping companies and cargo owners.
Amidst such supply-demand fluctuations, it is crucial for both shipping companies and cargo owners to uphold the spirit of contracts. Actions like blank sailing and cargo rolling should be avoided. Only through cooperation can shipping companies and cargo owners stabilize the market and achieve mutual success.