South Korea’s beleaguered Hanjin Shipping is being asked to pay over the odds to bring freight into US ports, and this is creating a backlog of goods awaiting delivery, the company and some of its customers have claimed.
A Newark New jersey bankruptcy court was told on Friday that dockside servicers and transportation companies were demanding higher fees to unload and deliver cargo. Creditor protections granted to Hanjin by the US court should have helped it avoid these logistical problems, but the difficulties have continued, said restructuring specialist attorney James Van Horn of McGuireWoods LLP, representing Hanjin client Eastman Chemical Co.
Van Horn estimated that the cost of shipping goods from Asia to the US had almost doubled since Hanjin slid into bankruptcy at the end of August, and that this could have economic repercussions for the US. “I don’t see a scenario where there isn’t a minimally shortened holiday retail season, and I see the potential for a very shortened retail season,” he told Bloomberg.
Hanjin Shipping’s lawyer Ilana Volkov told Judge John K. Sherwood that the increases in fees made doubtful the accuracy of previous unloading cost estimates.
“I’m not sure estimates will hold,” she said, adding that costs of between $1m and $2m a ship were no more than “a best guess”.
Hanjin said that it has approached the railways, marine terminals and container suppliers about the alleged price-gouging, and had notified the Federal Maritime Commission.
Judge Sherwood said he was troubled by “complaints of profiteering by people in the supply chain” but that he did not know if he had the authority to get involved.
The legal representatives for the service providers objected to the term “price-gouging”. They said that clients were only trying to get Hanjin to cover losses already incurred because of delays.
As of Thursday, 40 terminals and yards were at capacity, Hanjin said in Thursday’s filing. The company said it’s been working with more than 70 marine terminals to make returns.
Hanjin also told the court that cargo owners were withholding up to $80m in payments for completed shipments, and that this was complicating the company’s ability to move stranded freight. “Hanjin is not the only bad guy here,” said Volkov,
adding that that many cargo owners had received their goods on credit but were yet to pay the shipping company.
HP told the judge that there were now concerns about who is responsible for any damage to goods in containers. Talks between the owners of the goods and the container lessors were currently not progressing. “They paid Hanjin money, including container charges,” he told the judge. “They don’t want to pay twice. They don’t want to have to pay ransom.”
Wisconsin-based Ashley Furniture Industries told the court that it was losing between $6,000 to $7,000 a day in late charges for container chassis because the containers on them haven’t moved, and that it anticipated these costs would eventually exceed what it owed for past shipments. Other retailers also complained that they had been left in possession of empty Hanjin containers that ports would not take back.
“To hold onto this money is important,” said Ashley attorney Jeremy Ryan. Hanjin had been paid to deliver the furniture to its destination, but at the moment it is stuck in a dockside bottleneck.
Judge Sherwood told Hanjin’s legal representatives that the company was right to try to get cargo moving “but there has to be some recognition you might be able to deliver on the terms you promised to deliver on.”
Only four Hanjin vessels have docked in port in the US in the past four weeks.
Meanwhile, South Korea finance minister Yoo Il-ho said on Friday that the country would announce measures to bolster the shipping industry in October, and urged the swift unloading of cargo trapped on Hanjin Ships.
About 90% of Hanjin’s container ships are expected to finish offloading cargo by the end of October, with vessels in close vicinity of Korea returning to port, Yoo said during a visit to a port in Busan.
“The government will provide help through related ministries and offshore offices while it will also ask the court to help allow Hanjin to use the funds necessary for cargo offloading and to pay offloading fees for ships returning to Korea as a priority,” Yoo said.