Hanjin Update – Oct 2016

Hanjin Shipping, the world’s seventh-largest container shipper, filed for Bankruptcy protection on August 31.  On September 6, 2016, the Bankruptcy Court for the District of New Jersey issued a blanket stay of collection or enforcement efforts against Hanjin or its assets in the U.S. Three days later, the Court established a protocol for cargo interests to claim their cargo from Hanjin or third parties such as terminal agents, warehousemen or others. Unfortunately, the protocol did not address all of the issues.

In order to protect our clients, reduce excess charges, and streamline the release process, we retained counsel jointly with other NVOCC’s to prepare a motion seeking to clarify and extend the Court’s September 9, 2016 Order. Specifically, our motion asked the court to affirm that the protocol described above applied to NVOCCs as well as to BCOs, and that it applies to export cargo, as well as import cargo. We also sought to prevent third party service providers, e.g. Terminal Operators; Cargo Transportation Carriers, etc., from gouging our clients by requiring them to provide their services to NVOCCs and BCOs at the same rate reflected in their contracts with Hanjin. Finally, the motion sought to prevent Hanjin and terminal operators from assessing detention or demurrage charges on empty containers whose return they refuse to accept. We filed the motion with the New Jersey Bankruptcy Court on September 15th and our Counsel argued the motion on September 23rd.

In summary, we were successful in having the Court afford NVOCCs the same protections given to BCOs in the court’s September 9th protocol. (We also were successful in arguing that the protocol remains in full force and effect.) It was more of mixed bag regarding whether third party service providers have to provide service at the same rates for BCOs and NVOCCs as they had contractually agreed to provide such service for Hanjin. Although the judge refused to enter an order to that effect at this juncture, he strongly indicated that third party service providers need to provide service at reasonable rates and, if we come forward with evidence regarding such parties charging excessive rates, the service providers will need to justify their departure from the rates they were charging Hanjin. The judge’s statements should be useful if we encounter any rail carriers, terminals, truckers or stevedores charging exorbitant rates. Should they continue to do so, we can seek relief from the court.

Regarding empty containers, the result was also mixed. Hanjin will not charge detention charges for the empty containers they refuse to accept. Further, should Hanjin not have a procedure in place for the return of its empty containers in a relatively short period of time, the court will be receptive to a motion forcing Hanjin to abandon them.

Finally, since Hanjin has agreed to pay the terminals for their handling services of import cargo, it is possible that some terminals may have been paid twice — once by the BCO or NVOCC to get cargo released and once by Hanjin. If we feel that this may be our situation, we’ll attempt to check with Hanjin and, if appropriate, submit a claim to the terminals.

Our current experience is that we are obtaining cargo release with little difficulty. In many cases, Hanjin has reissued freight bills/arrival notices reflecting only ocean freight. The terminal operators, cargo transportation carriers (i.e. railroads), etc. are not charging the Hanjin contract rates but there appears to be no gouging.