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It took a NY court decision to let Maersk move business between 2 terminals. Why?

Maersk wanted to move business from GCT's New York container terminal (left) to its APM Terminals Elizabeth, New Jersey (right)

PortandTerminal.com, April 28, 2020

NEWARK, NJ – A New York District Court ruled against the Global Container Terminals’ (GCT) request to stop Maersk from moving three of its shipping services from GCT’s New York container terminal to a different one that Maersk owns, APM Terminals Elizabeth, New Jersey.

To simplify it even further — it took a court decision to allow a shipping company to move its business from one container terminal to a different one.

How did all this get started?

GCT's New York container terminal
GCT’s New York container terminal

This all got started when Maersk notified GCT that it planned to stop calling at GCT New York as of 1 May and offered a “generous” settlement to terminate the agreement.

Maersk said in a letter on April 10 that Maersk Line and Hamburg Sud vessels would cease calls at GCT New York by May 1. It said it was willing to pay a settlement of $5.5 million, including an early termination fee of $2.1 million and additional consideration of $3.4 million.

GCT wasn’t having any of that though.

We had a deal through to the end of 2022

GCT USA President John Atkins claimed in a court filing Monday that its agreement with Maersk ran through Dec. 31, 2022, and could only be terminated early on Dec. 31, 2021, and only if six months’ notice is given.

He said that Maersk and Hamburg Sud are attempting to move to Port Elizabeth “for the financial benefit of their sister company, APMT, which is a direct competitor of GCT,” and that Maersk’s “reprehensible conduct [its early contract termination] is magnified by the fact that Maersk is essentially stealing business from GCT to give to its own corporate affiliate, APMT.”

Atkins is probably correct. Maersk likely did do it to help themselves out. If you could move cargo away from a terminal that you don’t own to help out a terminal that you do own, wouldn’t you? We would.

Atkins also said that the services run by Maersk and Hamburg Sud through GCT’s Staten Island site account for 60% of the terminal’s ocean container business and 46% of all box throughput including local barge business.

Maersk’s departure “will have immediate and catastrophic effects on the business and financial well-being of GCT and its employees, which are exacerbated by the timing of the purported termination.”

Atkins maintained that GCT is one of the top employees on Staten Island and the early loss of Maersk’s business would put 100% of Staten Island longshoreman jobs “at risk as it jeopardizes the viability of GCT’s business.”

GCT alleged in its complaint that the Maersk action could cause the Staten Island terminal to “cease to be a going concern” and would “reverberate through the Staten Island economy and have adverse tax-revenue effects for the city and state of New York.”

What does Maersk say in reply?

 APM Terminals Elizabeth, New Jersey
APM Terminals Elizabeth, New Jersey

Maersk sent the publication Freightwaves a written response to their questions which essentially boiled down to ‘Why did you do it?”. This is what they had to say (with our summary up-top of each point)

Yes, GCT has told us that they will go out of business if we move to another terminal

“We can also confirm that Global Container Terminals alleged in its lawsuit that if Maersk ceases to call [at] Global Container Terminals that Global Container Terminals will cease to be a going concern”

Give us a break. GCT is owned by a massive, billion-dollar investment fund. They aren’t going to go out of business.

“We believe claims that Global Container Terminals, which is owned by multi-billion-dollar investment funds, will go out of business as a result of this contract dispute to be intentionally inflated to create unnecessary fear during this time of uncertainty and the product of a litigation strategy to distract from the contractual rights and remedies that Global Container Terminals previously negotiated and now regrets,”

We offered them a financial deal that is more than fair. These days given the mess in the shipping industry caused by COVID-19 they were lucky to get it.

In its termination letter, Maersk said its $2.1 million termination fee was “a generous estimate given the uncertainty related to COVID-19,” on top of which it was offering the “additional consideration” of $3.4 million to “satisfy all obligations.”

In the end, it took a court to decide who was right and the court went with Maersk.

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