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Hanjin Creditors Seek to Keep Ships Anchored in U.S. Waters

The Washington Post

Creditors of Hanjin Shipping Co. 117930 0.78 % , fearful of having their collateral disappear over the horizon, have asked a U.S. bankruptcy judge to reconsider a ruling preventing them from seizing several of the South Korean carrier’s ships.

A group of creditors who have gone unpaid for services such as towing and fueling say that the judge’s order shouldn’t apply to vessels chartered by Hanjin because they aren’t legally its property. The creditors have liens against Hanjin ships that would ordinarily allow them to foreclose on the vessels.

Unless the U.S. judge intervenes, ships that have unloaded their cargo in the U.S. are free to set sail for foreign ports that may not recognize the creditors’ rights.

At least seven Hanjin vessels have been “arrested” at ports in China, Singapore, India and elsewhere, according to a carrier’s vessel status report.

Dan Harris, a lawyer at the boutique Seattle law firm of Harris Moure, often works with businesses with operations in China. He said shipowners and other Hanjin creditors will be looking to arrest vessels in places that won’t enforce a U.S. court order.

“China does not enforce U.S. judgments,” Mr. Harris said. “They’re not required to under any international law and they don’t.”

Hanjin filed for the equivalent of chapter 11 bankruptcy in South Korea last month and sought recognition of its bankruptcy in the U.S. days later by filing for chapter 15 protection, the section of the U.S. bankruptcy code that deals with insolvencies overseas.

The immediate aftermath of Hanjin’s bankruptcy left the company fearful that its ships would be arrested by creditors as soon as they pulled into port. And it was unclear whether terminals, tugboats crews, crane operators and the army of other workers needed to unload ships would be paid for docking the ship and unloading its cargo.

Hanjin’s many customers, meanwhile, have some $14 billion worth of goods on board Hanjin’s ships and are anxious to have the vessels unload at ports as soon as possible. It is unclear, however, what would happen to shipments if the ships carrying containers are seized. Many cargo terminals around the world have refused to allow Hanjin ships to reach docks, and cargo workers have refused to handle the carriers containers without up-front payments.

The carrier still has a total of 93 of its cargo vessels—79 container ships and 14 bulk carriers—stranded at sea globally, a Hanjin Shipping spokeswoman said Tuesday. Some Hanjin vessels are running low on supplies for crew, and to keep the ships running the company says it has begun supplying daily necessities—including food and water—to stranded crews on certain ships.

On Friday, Judge John Sherwood of the U.S. Bankruptcy Court in Newark, N.J., handed down a provisional order granting recognition of the South Korean proceeding and extending legal protections to Hanjin that prevent creditors from foreclosing on ships or other assets. The decision effectively allowed container ships operated by Hanjin to dock safely in U.S. ports and unload their cargo without an intrusion by creditors.

Creditors such as World Fuel Services Inc., which provided fuel to the Hanjin Montevideo, urged Judge Sherwood to reconsider his ruling, saying its right to take over the ship under maritime law is both “ancient and venerable.”

Following Judge Sherwood’s order, which applies only to U.S. ports, the Hanjin Greece, one of its chartered vessels, docked in Long Beach, Calif.,on Saturday and began unloading cargo Sunday. The Hanjin Gdynia, the Hanjin Jungil and the Hanjin Montevideo are expected to follow suit.

The Port of Oakland, Calif., said Wednesday that it expected the Hanjin Greece to dock in Oakland by the end of the day, and the Hanjin Boston should arrive Friday.

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