By Phil Raymond, Staff Writer
If I asked you how you felt about the Hanjin crisis, what would your answer be? Well, as of early September, I would not have had a clue. That was until my father informed me that Hanjin Shipping, an international, top 10 shipping company, went bankrupt in the middle of the ocean. What happens after one of the world’s largest shipping companies goes bankrupt? The answer is that employees and cargo currently on departed Hanjin vessels are now stranded at sea.
Hanjin is, or was, South Korea’s biggest shipping firm, boasting shipments of 100 million tons of cargo annually.[1] Hanjin’s trouble started in April 2016 when the company applied for a creditor-led debt reconstruction in order to avoid bankruptcy.[2] Hanjin’s attempt at reconstruction failed, causing it to file for “receivership” in response to various Korean Banks withdrawing their support for it just one day prior.[3] “Receivership” is a form of corporate bankruptcy in which a “receiver,” a court-appointed trustee, is appointed by creditors or bankruptcy courts to run the company and manage its remaining assets.[4]
The banks claimed that a funding plan for Hanjin’s $5 billion debt (5.6 trillion Won) would be inadequate.[5] Accordingly, Hanjin ceased to be — sending waves through the international shipping community. Hanjin’s dissolution would be the largest bankruptcy in container transport industry history.[6] With the numerous Hanjin vessels still at sea, one vessel in particular faced additional issues: the Hanjin Rome.[7]
The Hanjin Rome was “arrested” in Singapore waters on Aug. 29 after its owner filed for bankruptcy.[8] According to Singapore maritime law, a ship or vessel arrested in Singapore must remain in its waters until there is a resolution.[9] The arrest, however, only applies to shipping vessels, not a ship’s 24-man crew onboard.[10]
[pullquote]We’re already struggling financially[,] and now this means our loans cannot be paid with the revenue from our game, which we expected to have arrived weeks ago.[/pullquote]
The crew members, in order to depart the vessel, must file for repatriation, which is common practice in this type of situation.[11] Of the 24-man crew onboard the Hanjin Rome, only five have been granted repatriation from the nation’s Supreme Court.[12] In the ensuing months after Hanjin Rome’s arrest, the remaining crew members survived off of two shipments of food provided by a fellow ship.[13] “There was Indonesian food, meat, lamb. Also, Korean ramyun (instant noodles), of course,” said Moon Kwon Do, captain of the Hanjin Rome.[14]
Hanjin Shipping’s recent troubles, however, involve much more than stranded crew members and bankruptcy. Most notably, the crisis is affecting companies large and small. Atheris Games, a Florida startup company, is now facing dire straits as its entire stock of a new card game it developed, “Cul-De-Sac Conquest,” is currently stranded.[15]
Atheris Games CEO Andrew Birkett noted in a recent email to ICv2 that “[f]or a small company like ours[,] this is a kiss of death. We’re already struggling financially[,] and now this means our loans cannot be paid with the revenue from our game, which we expected to have arrived weeks ago.”[16] Birkett additionally stated that he is worried Hanjin will port its ships containing Atheris merchandise and charge them quadruple the original shipping price, which Birkett said the company is unable to do.[17]
Ashley Furniture Industries, Inc., a large Wisconsin-based furniture company, was also affected by Hanjin’s bankruptcy.[18] Ashley Furniture is currently battling Hanjin in U.S. Bankruptcy Court in Newark, New Jersey.[19] Lawyers for Ashley Furniture asked Judge John Sherwood to help it recover almost $1 million in damages caused by Hanjin’s recent bankruptcy.[20]
Additionally, Ashley Furniture’s lawyers claim that the company sustained additional damages because it is forced to store empty containers and “chassis” — wheeled trailers used to transport the containers — that it normally returns to Hanjin.[21] Storing these chassis, Ashley Furniture alleges, is causing them to be charged daily for storage costs and is over-burdening the ports where they are stored.[22]
Hanjin lawyer Edward Kiel argued to Judge Sherwood that Ashley Furniture is just trying to “weasel out” millions of dollars that the shipping company needs to fund its business.[23] Judge Sherwood, however, fired back at Hanjin, criticizing it for holding onto cargo that would otherwise be unloaded. “You’re really playing hardball and using leverage against these people,” he said.[24] Judge Sherwood ultimately stated that he needed more time to consider the dispute, and deferred ruling until the scheduled hearing just this past Oct. 20.[25]
It is unclear just how long the effects of Hanjin’s bankruptcy will be felt by companies and consumers. One can speculate, however, that Ashley Furniture and Atheris Games were not the only companies injured, and further legal action is likely in the future for the South Korean company.
Sources
[1] http://www.hanjin.com/hanjin/CUP_HOM_1700.do?sessLocale=en
[2] http://www.reuters.com/article/us-hanjin-shipping-debt-idUSKCN11603N
[3] Id.
[4] http://www.investopedia.com/terms/r/receivership.asp
[5] http://www.reuters.com/article/us-hanjin-shipping-debt-idUSKCN11603N
[6] http://www.wsj.com/articles/troubled-hanjin-shipping-to-sell-healthy-assets-to-rival-1472611190
[7] http://news.asiaone.com/news/singapore/19-crew-members-still-onboard-arrested-hanjin-ship-0
[8] Id.
[9] Id. See also http://shiparrested.com/wp-content/uploads/2016/04/SingaporeSAP.pdf.
[10] Id.
[11] Id.
[12] Id. (The Hanjin Rome’s captain, Moon, was allowed to leave because he found out that his grandmother had intestinal cancer; two South Korean crew members were allowed to leave because they are university students, both involved in apprenticeships; two Indonesian crew members were repatriated for unknown reasons.)
[13] Id.
[14] Id.
[15] http://icv2.com/articles/news/view/35557/hanjin-bankruptcy-strands-shipment-start-ups-game
[16] Id.
[17] Id.
[18] http://www.wsj.com/articles/hanjin-ashley-furniture-battle-over-cargoes-storage-fees-1475880653
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id.
[25] Id.
