Hanjin Shipping Court Management - "The Shipper and Carrier’s Concerns”: 8.31. 2016
South Korea's largest shipping company and also ranking 7 in the world’s shipping, Hanjin Shipping filed a corporate rehabilitation proceeding (Court organization) on August 31. The industry is expected to have a lot of potential liquidation, and also reported the possibility of Hyundai Merchant Marine Shipping purchasing the assets and business authorities. Given that there weren’t any companies that filed for corporate rehabilitation proceedings that made it through, the dominant public opinion is that Hanjin will also sink.
US Line, which was the pride of U.S., was also the biggest bankruptcy filed in 1986 in the U.S. history, also did not survive and disappeared into history. The reason why companies that run large container vessels fail to survive to survive during the restructuring process is because regardless of the court decision, shipping companies are running shipping vessels all over the world, and the creditors of the companies can easily seize the shipping vessels or containers overseas. This seizure is often the starting point of bankruptcy, thus the shipper can fall into extreme panic, and rumors of financial instability itself can bring immense difficulties to the shipper.
This event- the bankruptcy of Hanjin Shipping is a reminiscent of the Choyang Shipping Co., Ltd. commercial vessels at the time of closure in 2001. It reminds me of the days where I spent numerous nights trying to take measure against the lawsuit filed against the detained container vessels.
Choyang Shipping Co., Ltd. who normally maintained enough funds to maintain smooth operation lost cash control with leasing companies and terminal agents requesting for large amount of prepayment requests, and the deterioration of cash flow which led to bankruptcy of the company. Bankruptcy of Hanjin Shipping has many similarities with the destruction of the Choyang Shipping Co., Ltd. Choyang, at the time, was one of the top 3 shipping companies of Korea, and although they disposed 70% of their assets and went into intense restructuring, they had to file bankruptcy for they could not receive any government support. In the case of Hanjin as well, although they claim they restructured itself, it is highly likely that they will not be able to receive government support and hide their traces in the shipping industry.
The company’s Account Payable will be discontinued or may not operate normally once it goes under court management. In the shipper’s perspective, they may need to pay unexpected sense for lawsuits from detained containers, or make advance payments for loading and unloading of such cargos.
Regarldess of court proceedings in Korea, U.S. already 1) Hanjin is already not receiving any outbound booking; 2) he railway companies CP and CN are not receiving any inbound shipments of Hanjin; 3) issues have been detected in the western port of arrival of Hanjin vessels; 4) APM and Evergreen Terminals are also attempting to detain Hanjin containers 5) Many trucking companies are beginning to reject Hanjin cargos; 6) Soon enough, U.S.’s major railway company BNSF/UP will declare their position regarding carriage of Hanjin containers 7) It seems to be that there will be difficulties when unloading fees are not paid in advanced at other ports other than Hanjin. In fact, once rental companies (Leasing Company) make a definite move, there will be a significant hindrance in the flow of trade volume.
Therefore, shippers and creditors of shipping companies (trucking company)s’ lawsuits to minimize their damages becomes inevitable. Also, as the shipper and creditor-debtor, there is expected to related lawsuits caused by events for legal rights and ownership of the cargo.
According to Jounrla of Commerce, large Freight Forwarders cancel booking and transship goods from Hanjin container to other containers. Following last year’s turmoil of Port of Los Angeles and Long Beach, this year seems to be a logistical disturbance due to Hanjin.
2016.08.31 J.J. Kim, Attorney at Law