FMC Monitoring Hanjin Situation for 'Operational and Competitive Impacts' as Industry Uncertainty Persists

The Federal Maritime Commission is closely watching the fallout from the Hanjin Shipping bankruptcy filing (see 1608310038) but the FMC's role is largely observational for the time being, the agency said in a statement (here). South Korea's Hanjin filed for court receivership in recent days, stirring up questions as to the effect on future shipping rates and cargo currently being handled. The FMC "will be vigilant in watching for, and quick to act on, any improper behavior by other carriers and regulated parties (such as marine terminal operators, non-vessel-operating-common-carriers, and freight forwarders) that would constitute violations of the Shipping Act," it said.

The agency said it "is concerned about the operational and competitive impacts of Hanjin’s status on the shipping industry broadly" and FMC "staff will be closely monitoring for the foreseeable future for any developments that might impact shipping markets." Still, the FMC "has no jurisdiction when it comes to resolving bankruptcy claims and does not intercede in legal actions between third parties that will be heard by the courts." Hanjin didn't immediately comment.

What will happen to goods currently on Hanjin remains an open and worrisome question among industries dependent on shipping. “Retailers’ main concern is that there is millions of dollars worth of merchandise that needs to be on store shelves that could be impacted by this," Jonathan Gold, vice president for Supply Chain and Customs Policy at the National Retail Federation, said in a statement (here). "Some of it is sitting in Asia waiting to be loaded on ships, some is already aboard ships out on the ocean and some is sitting on U.S. docks waiting to be picked up. It is understandable that port terminal operators, railroads, trucking companies and others don’t want to do work for Hanjin if they are concerned they won’t get paid. However, we need all parties to work together to find solutions to move this cargo so it does not have a broader impact on the economy."

There are a "variety of possible outcomes here," said Ed Greenberg, lawyer with GKG Law and transportation counsel for the National Customs Brokers & Forwarders Association of America, in an email from the NCBFAA. "We recommend that you not pay Hanjin for the transportation of cargo until goods are actually delivered into your possession and control," he said. A wave of creditors, including the suppliers of goods on Hanjin's vessels, may seek to seize Hanjin vessels to protect their interests, Greenberg said. "There is not much that can be done about shipments that are already on Hanjin vessels," he said. "We have heard from an inside source at Hanjin that it intends to 'protect' such current shipments, which probably means at the least that it will endeavor to complete voyages in progress and deliver the goods (to the extent that the vessel is allowed to enter the port.)"

Once a ship is seized by creditors, the "goods themselves will not be subject to a creditor's lien; however, freight charges owed on collect shipments will probably have to be paid because they will be considered Hanjin's assets," Greenberg said. Shippers may then need to make separate arrangements for containers, he said. Even if no seizure occurs, "it may well be that arrangements will need to be made to make sure that goods in Hanjin's possession or control are released and then moved to final destination," he said. Meanwhile, the president of Import/Export Canada, Joy Nott, released a statement urging importers and exporters to check their insurance policies to help mitigate potential impacts to their Canadian operations (here).

Consumer electronics companies were among the heaviest users of Hanjin's services for importing into the U.S, according to trade data company Datamyne. "Samsung Electronics, with a steady flow of shipments from operations in Asia to its US-based companies, is both the top shipper and consignee using Hanjin Shipping US import routes," based on bills of lading for cargo arriving in U.S. ports from Aug. 1 through Aug. 20, Datamyne said in a blog post (here). LG Electronics was the next biggest shipper of products using Hanjin during that time frame, it said. Samsung and LG didn't immediately comment.

Using the same data broken down by tariff codes, furniture and bedding accounted for the largest single share of Hanjin's container space, at 15 percent, followed by energy-generating machinery, appliances and electronics, at 12 percent, the company said. Electric machinery, sound and TV equipment accounted for 10 percent, it said. Datamyne's data didn't include shipments in transit.