Transportation Law Alert: Assessing Impact of Hanjin Receivership

The Hanjin receivership is causing widespread disruption to supply chains in the U.S. and elsewhere.  While a bankruptcy filing is expected in the U.S. (and ship-owners have already filed claims in the U.S. against Hanjin in light of Hanjin’s filing), the receivership was filed in South Korea.  The Firm has reached out to counsel contacts in South Korea to begin a dialogue regarding steps clients should be taking to protect their interests, but given the breadth and scope of Hanjin’s operations, counsel indicates that the proceedings will take time to develop to the point where specific operational guidance is available, and in any event, it remains to be seen whether and to what extent commercial parties in the U.S. and other foreign jurisdictions will abide by any guidance provided by a South Korean court.

In the interim, commercial parties are choosing how to address the filing with little or no guidance.  As such, reports are that terminal operators are refusing to load or offload Hanjin vessels.  With respect to cargo and containers that are already located in the U.S., we are hearing that container yards are refusing to accept the return of Hanjin empties, which is causing drayage carriers to refuse to retrieve cargo in Hanjin containers for delivery.

All of this is causing problems for the transportation companies in numerous ways, including the following:

1.    Hanjin “House” Carriers.  Those motor carriers that operate as house carriers to Hanjin appear to be hardest hit with large receivables owed by Hanjin.  The Firm will continue to follow this to determine whether such clients can file claims in the U.S. bankruptcy proceeding that we expect to be filed, or whether filings will be required in the South Korea proceeding.  In either event, we anticipate South Korean counsel to be well-positioned to provide valuable insight.

a.    A related concern for carriers that are paid directly by Hanjin involves whether they might face preference claims related to payments from Hanjin in the period preceding the filing.  Unfortunately, these claims are often delayed and not brought immediately at the outset of the proceeding.

2.    Other Drayage Carriers.  Even those carriers that are not retained by Hanjin directly are facing problems if they are unable to return empty Hanjin containers.  Technically, these carriers could face per diem charges related to containers outgated longer than the allowable free time.

3.    Non-Vessel Operating Common Carriers.  NVOCC companies are dealing with numerous issues including:

a.    Having to retrieve freight already tendered to Hanjin (which might require payment of freight charges to Hanjin notwithstanding the fact that Hanjin has not provided services) so that the cargo can be tendered to other carriers.  Such NVOCCs should review their bills of lading and tariffs to determine whether and to what extent incremental costs caused by Hanjin’s failure can be passed through to customers.

b.    Dealing with cargo that is sitting on Hanjin vessels, which could ultimately result in missed deliveries, and potential claims related to deterioration.

c.     Inability to find drayage carriers willing to accept cargo in Hanjin containers.

There is no playbook for how parties affected by the filing should proceed.  The Firm is actively working with counsel in South Korea and will be monitoring legal developments in the U.S. as well.  We will continue to keep interested clients apprised of the developments.  If you feel that your company might be impacted by the filing, please feel free to contact Nathaniel Saylor (nsaylor@scopelitis.com), Craig Helmreich (chelmreich@scopelitis.com), or Chris McNatt (cmcnatt@scopelitis.com) to discuss.