MSC Gayane – Photo: HHM / Dietmar Hasenpusch

Yesterday, US Customs seized the 9,962 TEU container ship MSC Gayane.  The MSC Gayane was the ship on which 18,000 kilograms of cocaine, worth an estimated $1.3 billion, was seized by Federal agents while at the dock in the Port of Philadelphia in late June. From the US Customs press release: 

“The MSC Gayane is the largest vessel seized in U.S. Customs and Border Protection’s 230-year history and follows the record seizure of almost 20-tons of cocaine discovered on the vessel,” said Casey Durst, CBP’s Director of Field Operations in Baltimore. “Seizing a vessel of this size is an unusual enforcement action for CBP, but is indicative of the serious consequences associated with an alleged conspiracy by crewmembers and others to smuggle a record load of dangerous drugs through the United States.  This action serves as a reminder for all shipping lines and vessel masters of their responsibilities under U.S. and international law to implement and enforce stringent security measures to prevent smuggling attempts such as this.”

“A seizure of a vessel this massive is complicated and unprecedented – but it is appropriate because the circumstances here are also unprecedented.  We found nearly 20 tons of cocaine hidden on this ship,” said U.S. Attorney McSwain. “When a vessel brings such an outrageous amount of deadly drugs into Philadelphia waters, my Office and our agency partners will pursue the most severe consequences possible against all involved parties in order to protect our district – and our country.”

This has been at least the third major cocaine seizure on MSC container ships within a hundred-mile radius of Philadelphia in this year alone. In March, nearly 1,000 pounds of cocaine, worth around $15 million, was seized on the 9,400 TEU container ship MSC Desiree in the Port of Philadelphia and in February, almost 1.5 tonnes of cocaine was found in a container on the MSC Carlotta in Port Newark.  

U.S. Attorney William McSwain said that seizure of the MSC Gayane was “complicated and unprecedented.” What are the complications and why aren’t container ships regularly seized for smuggling? 

While any ship, vehicle or plane can be seized for smuggling drugs, there is a clear exception for “common carriers.” A common carrier is an entity that transports goods or passengers on regular routes at set rates.  Container ship operators are common carriers. As long as the Bill of Lading and other related paperwork is in order, the common carrier is not liable is someone smuggles illegal goods inside a shipping container. That is not the case, however, if the common carrier is negligent or complicit in the smuggling. 

That appears to be the case being made by the U.S. Attorneys.  Six crew members have been charged with loading or tampering with containers related to the cocaine seized aboard the MSC Gayane. No doubt that they will argue that the ship’s owner was negligent or complicit in the smuggling, which would justify the seizure and possible sale of the ship. 

There are several factors that add to the complexity of the case, including:

 Mediterranean Shipping Company doesn’t own the ship. 

While it may seem obvious that the Mediterranean Shipping Company (MSC) would own the MSC Gayane, that is not necessarily the case. MSC is the second-largest container ship operator in the world, with a fleet of around 537 ships, but it owns only about a third of the fleet. The rest are chartered in on long term contracts. In terms of container capacity, MSC controls about 3.4 million twenty-foot-equivalent units (TEUs), of which about 2.36 million TEU are chartered capacity.

So, while MSC has a multi-year term charter on the MSC Gayane, it doesn’t actually own the ship. Who does? Until recently, SinOceanic AS, a Norwegian ship investment firm, controlled by the Chinese conglomerate, the HNA Group, was the owner until late last year.

SinOceanic is also reported to provide ship management services to MSC. The HNSA Group, however, has been struggling under a burden of debt and reportedly has been actively selling off assets.  In October of last year, Fairplay reported that SinOceanic has sold MSC Gayane, with its charter, to JPMorgan Global Maritime Investment Fund.  If the ship is sold by Customs, MSC may not be taking the hit.  

The crew may have been hired by SinOceanic and not MSC.

In addition to chartering in tonnage, MSC often uses third party ship management companies to provide manning services to their ships. MSC handles all the logistics, from booking cargo to planning stowage and scheduling. Several sources have listed SinOceaninc as the ship manager for the MSC Gayane.

SinOceanic has also been identified as the ship manager for the MSC Desiree and the MSC Carlotta, the two other ships also involved in cocaine seizures.MSC may argue that it met its responsibilities as a common carrier and that their sub-contractor engaged in illegal activities over which they had no control. Whether that would hold up in court remains to be seen.

If one had conspiratorial tendencies or was writing an international thriller, one might imagine that SinOceanic financial strapped Chinese parent was branching out into drug smuggling. That seems far fetched, but one never really knows. 

McSwain’s assertion that the case is “complicated and unprecedented” is definitely not an overstatement.

Thanks to Irwin Bryan for contributing to this post.