Hanjin Shipping told a bankruptcy court in Newark, New Jersey Friday that railways, terminal operators and container lessors are price gouging the South Korean line’s shippers by asking those cargo owners to pay more than usual to bring freight into US ports, in the wake of Hanjin’s recent bankruptcy filing.
The world’s seventh-largest container line has told courts that cargo owners are withholding up to $80 million in payments due to the company for completed shipments.
Meanwhile, in the court documents filed Thursday, Hanjin refuted media claims that a South Korean judge ordered the ocean carrier to return all chartered vessels that have completed unloading their cargo to their shipowners and to cancel their charter agreements.
“Although Hanjin believes such price gouging is wholly inappropriate and has tried to intervene (including notifying the Federal Maritime Commission), there is nothing more Hanjin or the Foreign Administrator can do,” the shipping line said in a court filing Thursday.
Those transportation providers could end up in hot water after Hanjin said in its progress report to the court it has notified US maritime regulators of what it describes as a “wholly inappropriate” industry response to its financial woes.
Even though US courts have granted Hanjin creditor protections to help avoid chaos at US ports, logistical problems have persisted and ships have remained stranded at sea as transportation providers have refused to touch the South Korean carrier’s assets. Some of those companies that are willing to help are demanding higher fees to unload and deliver cargo, according to progress report Hanjin submitted to the court.
The new court documents reveal that the South Korean ocean carrier is aware and is attempting to resolve the reports of price gouging. The container line added, however, that other than notifying the US maritime regulators, there is little or nothing it can do to rectify the situation shippers now face.
The FMC has had some success in helping cargo interests minimize costs and retrieve cargo stranded by the bankruptcy, according to FMC Commissioner William P. Doyle.
“Based on past experience during tumultuous times, we know that ocean carriers and marine terminal operators begin charging detention and demurrage charges that become extremely expensive in short order,” Doyle said. “The FMC is monitoring this scenario closely. In the current state affairs, the shipper, through no fault of its own, is precluded from returning equipment and/or picking up cargo.”
The FMC has received more than three dozen Hanjin-related complaints since the South Korean carrier filed for receivership on Aug. 31, Doyle said. Now Hanjin’s recent progress report suggests there could be more victims and that number could jump if additional shippers step forward.
“There have been reports in the media that the Korean Court ordered Hanjin to return all (US and non-US bound) chartered ships to their owners. That report is inaccurate,” Hanjin said in the filing.
Five of the 14 vessels that were bound for US ports at the start of the Korean bankruptcy proceeding are currently outside US waters or anchored at sea in those waters, according to Hanjin. Four of those 14 vessels have been arrested: the Hanjin Montevideo at Long Beach, the Hanjin Vienna at Vancouver, the Hanjin Scarlet at Prince Rupert and the Hanjin Baltimore at Panama. Hanjin said in its Thursday progress report that it has made payments to all bunker suppliers for the Montevideo and the company is still in the process of trying to resolve the other liens on that vessel.
The other vessels listed in the court document have departed from their final destinations or are en route now. The Hanjin Miami is currently berthed in New York and will soon sail to Wilmington, North Carolina and then to Savannah. The Hanjin Chongqing is expected to arrive in New York on Oct. 27.
Other vessels though, like the Hanjin Switzerland, are not listed in the court filing at all. According to shippers with cargo on board and data from AIS Live, a sister product of JOC.com within IHS Markit, the Switzerland is destined for New Jersey but is sitting in the Red Sea, apparently unable to transit the Suez Canal because — like many other Hanjin vessels — the ship is unable to pay the canal tolls.
The situation, and the ongoing lack of information, has been described as “disastrous” for one shipper’s business already. Moreover, there are concerns that the lengthy proceedings ahead could reduce capacity and raise spot rates. The gaps in supply chains could also produce a backlog that, while short in term, might keep some goods off shelves during the holiday shopping season.
In a positive step, there have been continuous and ongoing efforts to raise financing for continued operations, according to the Hanjin progress report. Since the filing for rehabilitation in Korea Aug. 31, Hanjin has secured approximately $45 million in financing. Approximately $37 million of that is from Hanjin’s chairman. The remaining approximate $8 million was contributed by Hanjin’s former chairwoman.
Korean Airlines, Hanjin’s parent company, is also finalizing a loan agreement whereby the airline would loan $54 million to the ocean carrier. The funds are planned to be earmarked for continued business operations, including the berthing of ships and the loading and unloading of containers throughout the world, Hanjin said.
“All port-service providers and terminal operators have been paid in cash, in advance, for all work required to be performed on Hanjin vessels that have called ports in the United States,” the Hanjin said. “Additionally, Hanjin has, or will, issue amended and re-rated bills of lading and invoices to the BCOs (beneficial cargo owners) to reflect charges only up to the port of discharge for containers that were originally contracted to be delivered to the BCOs inland.”
Contact Reynolds Hutchins at firstname.lastname@example.org and follow him on Twitter: @Hutchins_JOC.