By Kristi Ellis
with contributions from Kari Hamanaka
 on September 1, 2016
Ports respond to Hanjin bankruptcy.

WASHINGTON — Brands and retailers scrambled to find alternative shippers for their holiday merchandise a day after South Korean shipping giant Hanjin Shipping Co. filed for bankruptcy protection.

The impact was felt almost immediately, as terminal operators and ports stretching from Singapore to the complex of Los Angeles-Long Beach reacted to the shake-up.

Hanjin, said to be the world’s seventh largest container shipper, filed for receivership in a South Korean court Wednesday after banks terminated financial support, according to news reports.

Reports of seizures of some of Hanjin’s vessels, ports blocking the company’s ships from docking and unloading and freight rates spiking, raised serious alarms for companies.

“As the seventh largest container shipper in the world, Hanjin filing for bankruptcy has and will continue to impact many of our members,” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association. “We urge all of the stakeholders involved in the Hanjin situation to not hold our members hostage as they work to resolve payment and other issues with Hanjin, especially as we approach the critical holiday season.”

Herman said there hasn’t been a bankruptcy of a major carrier since 1986.

“Obviously, trade has grown tremendously over those last 30 years, particularly in our industry. This is a big deal,” he added.

One of AAFA’s member companies reported that a Hanjin ship with the company’s merchandise has been seized at the Port of New Jersey.

Herman said some terminal operators are demanding that companies pay for all of the fees that the shipper typically pays to unload cargo and load onto trucks, even through the companies paid Hanjin up front for those fees.

“Another concern of ours is that various stakeholders could take advantage of the situation and start charging premiums to take cargo off a ship and load it onto a truck to get out of the yard,” Herman said.

Companies are reporting paying $400 to $800 per box, depending on the number of containers they have on a ship on the East Coast to get their goods released at the ports. That also appears to be the rate for companies to get their Hanjin cargo off shared vessels though an alliance or non-Hanjin-owned vessels, he said.

Herman said there are reports that payment for the release of goods is not an option on the West Coast and that no cargo is moving. For cargo that recently left Asian ports, ships are reportedly anchoring off the Korean coast and staying in place, Herman said.

Jessica Dankert, senior director of retail operations at the Retail Industry Leaders Association, said the immediate impact on retailers is a delay of goods at various points along the supply chain but the “ripple effects” from the bankruptcy could have a greater effect.

“There are instances of vessels being impounded in certain areas of the world by creditors, there are instances of ports turning away the ships [because] they don’t have the ability to unload those ships and they would be taking up berth space,” Dankert said. “There are Instance of terminals and ports detaining cargo if it hasn’t been offloaded and requiring additional fees to recoup some of their potential losses. At every point along the way, things are breaking down.”

While retailers are putting contingency plans in place and working to reposition their inventory and find other shipping lines to carry their goods, the uncertainty around stranded and inaccessible merchandise in transit is compounding the problem, she said.

“What we are asking for and hoping for is federal agencies to work together on this. It is such a large problem and has potentially large effects both in the U.S. and globally,” Dankert said.

However, it doesn’t look like retailers will get much help in the short term from at least one key federal agency.

The Federal Maritime Commission issued a statement Thursday declaring the Hanjin bankruptcy is a “non-United States legal matter at the moment” and advising companies and shippers to consult with their own attorneys on potential remedies.

But the commission did note it is concerned about the operational and competitive impacts on Hanjin’s status on the shipping industry” and will closely monitor the situation. The FMC said it will monitor for “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.”

The FMC said it has no jurisdiction over resolving bankruptcy claims and does not “intercede legal actions between parties that will be heard in the courts.”

“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,” said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation.

Gold said some of the goods are still in Asia waiting to be loaded onto ships, while some of it is already on ships on the ocean and other merchandise 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,” Gold said. “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.”

He noted that retailers are working with service providers to find ways to move their cargo and minimize disruptions in the supply of merchandise.

The terminal operators at the Port of Long Beach who regularly handle Hanjin cargo and ships said for the time being they will not accept any more Hanjin cargo coming in or out of the port, other than some cargo that is already there, a spokesman for the port said.

On the subject of what sort of timing in terms of when that stance might change, he said: “We don’t know and I don’t know that it’s been determined yet. The news of the filing just came out so everyone’s just kind of got to decide what they want to do.”

Long Beach has one Hanjin ship anchored just outside the port and another scheduled to come into Pier T at LB, but that ship has also been sent to anchorage. He said he’s not sure when those ships might be allowed to berth or if they’d be directed somewhere else.

A spokeswoman for the port of Los Angeles said they had not seen any disruptions as of early Thursday morning but were continuing to monitor the situation. She said there was one Hanjin ship 40 miles north and one ship 40 miles south of the port.