Hanjin Shipping Bankruptcy Update
On August 31, 2016, Hanjin Shipping, one of the world’s ten largest container shipping companies, filed to enter receivership in South Korea.This change followed months of negotiations and attempts to restructure the company’s debt and has quickly had a major impact on trans-Pacific shipping prices and capacity during a critical time of the year. Hanjin quickly filed for Chapter 15 bankruptcy protection in the United States, at the U.S. Bankruptcy Court in Newark, N.J on Friday, September 2, 2016. The Wall Street Journal reports that the company will eventually file for court protection in as many as 43 jurisdictions in order to ensure that creditors cannot seize its ships and other assets.
Hanjin Shipping’s financial difficulties create major dilemmas for shippers and forwarders who must find a way to recover their cargo, and book passage for new freight on other ocean carriers. Initial industry estimates were that approximately 500,000 containers holding $14 billion in cargo were initially stranded on Hanjin vessels following the bankruptcy filing. Overall, Hanjin accounted for around 7 percent of Asia-U.S. cargo trade and operated a daily capacity of 25,000 shipping containers. While the spot prices for trans-Pacific freight initially jumped in the week after the bankruptcy filing in South Korea, those prices have stabilized as other ocean carriers in those lanes were able to absorb that freight on their vessels without significant operational changes.
The Journal of Commerce reports that Hanjin ships that have been waiting off the Coast of the U.S. may be able to dock and unload their cargo under protection from the U.S. bankruptcy court. However, once unloaded, it will still be costly for the beneficial cargo owners to reclaim the imported containers. On the U.S. West Coast, the Port of Los Angeles and the Port of Long Beach are holding onto imported Hanjin containers until they are paid up front for charges related to container unloading and handling. On the U.S. East Coast, the Port of New York and New Jersey, Maher Terminal (which is the terminal at that port that receives Hanjin ships) had not yet announced the cost to shippers and cargo owners for recovering imported Hanjin containers, the Port of Virginia announced that the charge to release import containers will be $325, and the South Carolina Ports Authority announced that it will collect charges totaling $350 per container.
In the U.S., the Federal Maritime Commission (FMC) and Customs and Border Protection (CBP) have issued guidance on the handling of cargo from Hanjin vessels. As there are updates to cargo handling guidelines from the agencies, or legal developments in the bankruptcy case, TIA will reach out to its members who are most affected. For more information on this issue, or to get involved in TIA’s International Logistics Conference, please contact Will Sehestedt at sehestedt@tianet.org.
