Hanjin Cargo Owners Say Bid to Unload Vessels Isn’t Working

A Hanjin Shipping Co ship is seen stranded outside the Port of Long Beach, California, September 8, 2016. REUTERS/Lucy Nicholson

By Tiffany Kary

(Bloomberg) — Bankrupt Hanjin Shipping Co.’s efforts to unload vessels in the U.S. while it goes through bankruptcy in South Korea are meeting with complaints from cargo owners and from the companies that service and equip its fleet.

U.S. Bankruptcy Judge John K. Sherwood last week issued an order that was supposed to facilitate the unloading, but Thursday in his Newark, New Jersey, courtroom, lawyers described chaos and uncertainty at the docks and told him the confusion could pose a threat to American businesses.

“It’s not working,” said Alan Brody, a lawyer for Yamaha Corp. and Americo Group Inc. He said there was a lack of information and protocol to unload ships even as the “do or die” Christmas shopping season approaches.

Lawyers said Hanjin was asking to be paid in cash for the release of goods, or even to be paid twice. One said cargo was dropped at a port that hadn’t been agreed upon and retrieving it would cost more than the goods themselves.

“This could absolutely destroy American businesses,” Brody said. “We’re not just talking about millions, we’re talking about billions of merchandise. And if we can’t get it to retailers they’re going to look to other suppliers.”

Yamaha of America, an affiliate of the Japanese manufacturer, has filed to take part in the case but hasn’t described what cargo it has on Hanjin ships.

Service, Supplies

There’s also confusion over how suppliers of fuel, equipment and services to the Hanjin vessels are being paid, but the judge rebuffed an attempt to invoke maritime law to seize the ships until the matter is sorted out.

The suppliers say maritime liens give them the right to arrest ships or force Hanjin to post a bond ensuring payment. The group includes Glencore, World Fuel Services, OceanConnect Marine, McAllister Towing & Transportation, Moran Towing and Textainer, which leases Hanjin more than 20,000 containers.

The judge’s prior ruling, which gave ships the right to unload in U.S. ports without being seized, was “contrary not only to black-letter U.S. maritime law — but to Korean maritime law as well,” in part because Hanjin only charters the vessels and doesn’t own them, the group said in court filings.

Sherwood set another status conference for next week, to let the case “breathe” and give time for some of the issues to work themselves out.

Ilana Volkov, a lawyer for Hanjin, updated the U.S. judge on proceedings in South Korea, where the company sought court protection last month. She said that due to a national holiday that began Tuesday and goes until Sunday, little has happened there. She also said it isn’t clear whether the 13 or 14 Hanjin ships that were bound for the U.S. all contain cargo or were on their way to pick up goods.

Sherwood asked whether there will be an orderly liquidation, sale or reorganization of the company.

“There are a lot of balls up in the air, a lot of ships all over the world,” Volkov responded. “There’s really no clear visibility quite yet as to what will happen for this business.”

The case is Hanjin Shipping Co. Ltd., 16-27041, U.S. Bankruptcy Court, District of New Jersey (Newark).

© 2016 Bloomberg L.P

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