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Peloton Files FMC Complaint Against Flexport, Citing ‘Millions’ in D&D Fees
Glenn Taylor
Thu, May 9, 2024 at 10:30 AM MDT·4 min read

https://finance.yahoo.com/m/92a8168d-d098-36b7-8d83-3df78229a4cb/peloton-files-fmc-complaint.html


Peloton is accusing Flexport of failing to move its cargo in a timely manner over a roughly three-year stretch, ultimately costing the lifestyle brand “millions” in unreasonable, improper demurrage and detention (D&D) charges.

The exercise equipment company, which gained popularity during the Covid-19 pandemic, filed a claim against the digital freight forwarder through the Federal Maritime Commission (FMC) on May 3.

Peloton says it incurred “substantial” injuries and monetary damages, but did not specify the amount of money it has spent on D&D fees. The company added that charges and damages are “continuing to be tabulated as of the filing of this complaint.”

“Flexport strictly complies with the Ocean Shipping Reform Act and all other rules and regulations within the Shipping Act,” a Flexport spokesperson said. “We go above and beyond to help all our customers ensure on-time delivery and minimize detention and demurrage charges, especially in times of stress like the supply chain crisis that many businesses faced during the pandemic.”

Sourcing Journal reached out to Peloton.

As part of their agreement, Peloton said that Flexport would transport its shipped goods between foreign ports and U.S. ports, as well as to designated U.S. inland locations. The inland transportation is where the problems took place, Peloton said in its 12-page complaint.

“From 2020 to 2023, Flexport repeatedly and chronically failed to properly perform its inland transportation obligations, including, but not limited to, failing to timely remove Peloton Containers from U.S. marine and intermodal terminals, failing to timely deliver Peloton Containers to their designated inland locations, and failing to timely return the empty containers within the applicable free time periods,” read the filing.

Flexport was responsible for arranging and paying for all aspects of the inland movement of Peloton’s goods, including the provision of chassis, and for ensuring the containers were removed from U.S. marine and intermodal terminals and delivered to the final designated inland destination. The freight forwarder subcontracted with motor carriers and railroads to conduct inland transportation, according to the complaint.

Additionally, Peloton says Flexport was supposed to ensure that empty containers would be brought back to their carrier-designated return locations.

Because of Flexport’s alleged failures, Peloton ended up working with another third-party logistics (3PL) provider to manage the inland intermodal transportation of some of its cargo.

Peloton’s filing is yet another claim against carriers and forwarders made through the FMC since 2022, following the passage of the Ocean Shipping Reform Act (OSRA).

The act was signed into law to create more transparency within the shipping community as more shippers claimed that carriers were sticking them with steep fees amid wider supply chain congestion. Furthermore, the claims were accruing as container shipping companies were raking in record profits throughout 2021 and 2022 amid the record-high freight rates at the time.

The fees arguably helped the firms maintain steady profits over that time frame. Between 2020 and 2022, nine of the largest carriers serving the U.S. liner trades individually charged a total of approximately $8.9 billion in demurrage and detention charges and collected roughly $6.9 billion, the FMC said.

But with OSRA in effect, the FMC has more oversight into areas like D&D charges, where the agency can now investigate complaints and enforce monetary penalties. With the expanded supervision, the FMC can also determine whether ocean carriers are unreasonable when they refuse to give shippers cargo space.

In 2024, companies have made claims against major shipping lines including Mediterranean Shipping Company (MSC), CMA CGM, Cosco Shipping, OOCL and Evergreen among others. Late last year, the estate of bankrupt Bed Bath & Beyond filed a $316 million claim against MSC, which was the biggest such complaint made with the FMC to date. The former retailer also filed similar claims against Yang Ming, OOCL and most recently against Evergreen, with all complaints including allegations of excessive D&D fees.

In February, the FMC updated regulations to clarify who can be billed, ensuring that middlemen like truckers that transport the cargo intermodally aren’t getting hit with the fees.

As of May 28, ocean carriers and marine terminal operators will be required to issue detention and demurrage invoices within 30 calendar days from when charges were last incurred. Under the new system, shippers will not be obligated to pay these fees if carriers fail to properly bill.

In the case of Flexport, Peloton is alleging that the freight tech company assessed the D&D charges against it without first evaluating who was responsible. The connected fitness brand pointed out that Flexport didn’t determine whether its own acts or omissions were a cause or contributing factor to the charges.

“Flexport assessed these D&D charges against Peloton and Peloton Containers in circumstances where Peloton was not the party responsible to pick up, move or return the Containers,” the complaint read.

Flexport’s invoices and billing information “lacked adequate detail” to determine the basis and responsibility for the individual D&D charges, Peloton claimed.

Peloton filed the complaint a day after CEO, president and board director Barry McCarthy announced that he would step down from all three of his positions. The fitness startup known for its series of exercise bikes plans to cut 15 percent of staff after having endured 13 straight quarters of financial losses.