On Friday, news broke that Hanjin had filed a Chapter 15 bankruptcy in New Jersey. A court hearing is possible as soon as Tuesday, but don’t expect the results to help shippers to a large extent. What is most likely is the bankruptcy court will enter an order that allows Hanjin to arrange the freeing of any ships seized in the U.S., the stay of any pending lawsuits against it, and the spending of money that will allow the company to make arrangements for any ships held out of port to dock and unload. Shippers should not be surprised if the first port of call for these vessels is also the location where all the Hanjin cargo on the ship is unloaded, and they are left to fend for themselves to get the goods to destination (yes, that means possibly paying twice for the same freight move).
The FMC said on Friday it has established a protocol for shippers to use as they encounter issues with Hanjin cargo. Specifically, shippers should send an email to firstname.lastname@example.org and state “URGENT—HANJIN SHIPPING” in the subject line. For more details about what should be included in any such complaint, see http://www.fmc.gov/NR16-18/?CategoryId=1. What exactly the FMC intends to do remains a mystery, other than try to negotiate resolutions. Past activity suggests the FMC has neither the staff needed nor the philosophical disposition to really come down on miscreants, so we can only hope the criticism it took for its lack of aggressive action during the West Coast dock strike will lead to forceful and timely action.
It is important to keep in mind that exactly what will happen with Hanjin cargo is driven in large measure by bankruptcy law, and in that context, the FMC has no say. Where it could do good for the maritime industry right now is in two key areas, besides having cautioned parties to not price gouge:
- For a great many NVOCCs, they are going to be faced with the difficult situation of having to pay money out to get goods released, that for perfectly legitimate customer service reasons, they do not want to collect from their customers. However, not doing so could be seen as a violation of an NVOCCs tariff provisions. As such, the FMC should declare as a matter of enforcement policy, it will not seek fines in these circumstances.
- What about the empties? Right now, there are many locations where they cannot be returned. The daily rate assessed for late returns is significant, especially when this goes on for weeks. Hanjin may say it is not going to charge that cost, but the company’s statements likely contradict the requirements of its tariff. As such, the bankruptcy trustee can be expected to eventually turn his/her attention to the revenue likely to be generated by empties and see a goodly amount of money which could be collected for the bankrupt estate. Surely, the FMC is in a position to protect the interests of the maritime community by jawboning a resolution across the country so this does not become a major headache many months down the road?
This situation is a mess for everyone, but do not expect those holding cargo to be willing to go into further debt in conjunction with Hanjin cargo. So, be smart about how you proceed. For tips on what to consider, please see the earlier blog post entitled Hanjin Sinks in Korea.