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Hanjin Shipping Disruption Worsens Quickly

Rivet's 2020 Denim Circularity report takes a deep dive into how the global denim industry is plotting its circular future amidst a worldwide pandemic.

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The shipping world is in a tizzy thanks to Hanjin Shipping’s bankruptcy.

After creditors rejected its restructuring plan, the South Korean shipper had to file for court receivership Wednesday and ports are already trying to cease all dealings with the company since there’s no telling whether they’ll be able to pay for anything.

According to the Los Angeles Times, shipping at the ports of Los Angeles and Long Beach has already been disrupted as massive container ships are being held out of port, some terminals aren’t accepting any new Hanjin imports or exports and others aren’t releasing any already-accepted Hanjin containers.

In short, it’s a mess not expected to go away any time soon and estimates of expected shipping delays as a result have been as high as three months.

The U.S. Federal Maritime Commission issued a statement Thursday trying to quell the surging uncertainty among the American shipping community.

Apart from the obvious (this is a non-United States legal matter, consult your attorney to find out what remedies may be available), the Commission said it “will be vigilant in watching for, and quick to act on, any 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.”

While there’s certainly more to it, the Shipping Act essentially says there should be a nondiscriminatory regulatory process for the carriage of goods by water, that the transportation system should be efficient, and that there should be an economically sound fleet of vessels that promote the growth of U.S. exports.

Hanjin’s bankruptcy filing couldn’t have come at a worse time for retailers who are trying to bring in holiday merchandise for the sector’s biggest shopping season.

“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, the National Retail Federation’s vice president for supply chain and customs policy. “Some of it is sitting in Asia waiting to be loaded on ships, some is already aboard ships out on the ocean and some is sitting on U.S. docks waiting to be picked up.”

While it isn’t surprising that terminal operators, truckers and railroads aren’t interested in not getting paid for their services, and as such won’t work with Hanjin anymore, Gold said all parties need to work together to avoid a broader impact on the economy.

“There are more questions than answers at this point, but retailers are working to get all issues addressed,” Gold said. “Retailers are working with all of their service providers to find ways to get their cargo moving to ensure that there is no or limited interruption in the supply of merchandise.”

As Richard Ormond, shareholder at Los Angeles-based law firm Buchalter Nemer added, “This will have a significant impact on supply chains and inventory for manufacturers, delaying shipments right before the holiday season gets started and, many lenders provide loans based on collateral that is funneling through these manufacturers, which will have an almost immediate impact on capital flows. Retailers, large and small, will be impacted significantly and customers will be facing either empty shelves or higher prices or both.”

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