WASHINGTON — A shipping crisis sparked by the South Korean Shipping giant Hanjin Shipping Co.’s bankruptcy last week is still far from settled and continues to raise serious concerns for brands and retailers worried about their holiday merchandise.
While recent developments have given companies some hope that progress is being made to try to mitigate the impact, more work needs to be done, industry groups said.
Hanjin filed for Chapter 15 protection under U.S. bankruptcy laws in U.S. Bankruptcy Court in Newark, N.J., on Friday, seeking to protect its assets and shield itself from creditors, some of whom have reportedly seized its ships.
A bankruptcy court judge was set to hold a hearing on Hanjin’s filing for protection Tuesday afternoon. Industry groups saw that as a positive step in addition to reports that Hanjin Group, the parent of the shipping company, has offered to raise $90 million to help ease the crisis.
Brands and retailers have been slammed by Hanjin’s bankruptcy, which has potentially left tens of thousands of cargo containers carrying their merchandise in limbo.
Nike Inc. was listed in Hanjin’s bankruptcy court filings as one of several companies that have pending litigation against the South Korean shipper, although it could not be learned if the activewear giant’s case is directly linked to Hanjin’s bankruptcy.
Nike has filed an arbitration case with the Society of Maritime Arbitrators in New York, according to court documents. The U.S. brand is currently in a quiet period ahead of its quarterly earnings release and declined to comment.
In the past six days since Hanjin filed for bankruptcy in South Korea, American companies have been able to obtain some of their merchandise from the handful of ships that were already docked at U.S. ports by essentially paying double to have the cargo released, officials said.
But the fate of thousands of cargo containers aboard bound for U.S. ports remains uncertain and several Hanjin ships or ships carrying Hanjin containers are in limbo, waiting in U.S. waters unable to dock.
Compounding the problem is rising freight costs, which have either already, or are soon to be, increased by $600 per 40-foot container, according to reports.
Hanjin said in its court filings that it ranks as the world’s ninth-largest container shipping company, transporting more than 100 million tons of cargo a year. The company said it operates 60 regular lines worldwide and 140 container bulk vessels. It also operates 13 container terminals, two distribution centers and six “off-dock container yards” in major ports and inland areas around the world.
Nate Herman, vice president of international trade at the American Apparel & Footwear Association, said there are reports of three boats waiting off of the Long Beach port, one off of New York and one off of Boston.
“All of that cargo remains stuck with no clear resolution in sight,” Herman said. “There are also ships on the ocean between here and Asia and we have seen reports of up to a half a million containers on those ships.”
But companies were encouraged by the U.S. bankruptcy court proceedings, which could allow the ships sitting outside of U.S. ports to dock and unload without the fear of being seized.
Rising freight costs, which have been at a historic low and were expected to rise before news of the Hanjin bankruptcy, are also raising concerns, Herman said.
Jessica Dankert, senior director of retail operations at the Retail Industry Leaders Association, said there have been a couple of positive steps but for the most part the situation has not “changed dramatically” for retailers still facing delays and uncertainty surrounding thousands of containers at sea.
“From the perspective of shippers, there is a lot of concern about fees and other sorts of impacts to the movement of goods through the ports,” she said. “There is still lingering uncertainty and a lack of clarity around the situation.”
While store shelves are still stocked with plenty of inventory, the longer the situation and delays drag on, the more likely there will be an impact on holiday merchandise, she said.
Danker said retailers hope the outcome of the bankruptcy hearing will “lend a little stability so there is more of a possibility of bringing those ships [currently stranded outside of ports] in and get cargo moving again, which is obviously retailers’ goal.
“The hearing today is just one piece of the puzzle. There are a lot of moving parts to this so having bankruptcy protection will be a good step just like a [reported] cash infusion of $90 million announced earlier today is a good step but it is still a significant problem out there and cargo with uncertain fate wait out at sea. More needs to be done to address the situation,” Danker added.
Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation, said companies still have a lot of outstanding questions and concerns about their cargo, despite the positive developments.
Gold noted there are still concerns about whether dock workers, truckers and others will do the work because of uncertainty about being paid.
While retailers continue to try to find alternative shippers in Asia to move their cargo, they are also facing higher fees being put in place by terminal operators and others, Gold said.
“There are a lot of new charges being put in place by terminal operators and others,” Gold said. “From our perspective as the Federal Maritime Commission noted late last week, they will be paying very close attention to charges to make sure they do not violate the Shipping Act. We want to make sure any charges put in place actually follow the requirements [in the law].”
The FMC issued guidance late Friday, instructing companies on how to file complaints in the Hanjin case.