Logistics And Frieght Forwarding

Hanjin ordered by US judge to release cargo if freight costs paid

NEWARK, New Jersey — A federal judge ruled Thursday that Hanjin Shipping must release cargo for which a beneficial cargo owner had paid the freight charges, blocking the carrier’s efforts to use the freight to demand payment from the shipper of accounts receivable owed for other work.

The ruling by Judge John K. Sherwood in US District Bankruptcy Court in Newark prompted SchenkerOcean, part of third-party logistics provider DB Schenker, to immediately ask the court to order Hanjin Shipping to release cargo that had been held back in the ports of Seattle and Los Angeles.

Schenker had 24 containers unloaded from the Hanjin Marine sitting on the dock in Seattle, and 13 left by the vessel in Los Angeles. Schenker paid for the freight but Hanjin would not release it because the container line was demanding payment for other debts owed, attorney Joel R.

Glucksman told Sherwood.

The court is hearing issues related to the bankruptcy filing by Hanjin Shipping on Aug.

31[1] in South Korea, which left its more than 90 ships and 500,000 containers around the world in limbo as the the company searched for money to pay for unloading costs. Hanjin is seeking Chapter 15 status in the court, meaning it would recognize the South Korean bankruptcy case, allowing certain actions to be taken in the United States to move the case along.

Sherwood said in making Thursday’s ruling that he was simply reaffirming a set of guidelines, or protocols, that he approved on Sept.

9 to provide a framework for how BCOs or logistics providers could pay to have their cargo unloaded in the situation where Hanjin Shipping had no money to do it.

“There was never any discussion concerning giving Hanjin the ability not to comply with the protocol in situations where it had other claims against a BCO,” he said.

But Ilana Volkov, attorney for Hanjin Shipping, said the protocol did not impair the carrier’s rights in this situation.

“My point is, the BCO protocol did not affect in any way our right to receive the accounts receivable, or our lien on any of the cargo that we had in our possession,” she said. “It is our position that the ocean freight has to get paid, we have a lien on cargo until payment for all of the services.”

Schenker raised the issue in an earlier hearing after Hanjin refused to release 46 containers of goods shipped on the Hanjin Marine in line with its contract, even though the provider has paid the £55,206 required in the contract. Glucksman said that case had been resolved in discussions with Hanjin Shipping, which released the cargo.

The issue surfaced again Thursday, however, in discussions of a request by Ashley Furniture for permission to allow an “administrative freeze”[2] on payments owed to Hanjin for services that were only partially provided as a result of the carrier’s failure to fulfill contractual obligations.

The retailer is seeking to freeze payment of equal value to the costs it incurred contracting another container line to do the work.

The retailer said it had already accrued damages of £966,161.50. Ashley Furniture asked for permission to set up an escrow fund for freight payments owed Hanjin that could be used later as a “set off” to future expenses accrued in completing moves the carrier failed to perform. The company estimated they would amount to about £986.41 per container.

Sherwood said he would not rule on Ashley’s request for the administrative freeze and the escrow account, and suggested that the BCO may need to lodge its claim in Korea.

If the shipper has a claim for damages, “that’s got to go to the Korean bankruptcy court,” he said.

In a separate issue, Sherwood expressed concern that Hanjin Shipping had failed to notify[3] fuel company OceanConnect Marine in a timely fashion that the charter for the Hanjin-operated Seaspan Efficiency would expire on Saturday.

The timing was key because the judge in September granted the carrier a protective order that prevented the arrest of its ships in US waters, a measure designed to encourage the ships to unload cargo at U.S. ports rather than waiting at sea out of fear they would be arrested for unpaid debts. The order allowed a ship under charter to be arrested when the charter expired, however.

Attorneys for OceanConnect Marine, which was owed £837,338 by the Seaspan Efficiency, asked the court to require Hanjin Shipping to tell them when the charter expired. Last week, Sherwood ordered the carrier to inform the fuel company “promptly”[4] when it decided the date or a particular event that would mark the end of the charter.

But J.

Stephen Simms, a Baltimore attorney who represents OceanConnect, said that although the ship went off charter Saturday, after stopping the port of New York and New Jersey, attorneys for Hanjin did not inform him until Tuesday — by which time the ship had left US waters and the fuel company likely lost any opportunity to collect on the debt.

After Hanjin Shipping attorneys said they informed Simms of the charter’s termination as soon as they learned it from carrier executives in South Korea, Sherwood ordered them to find out who was responsible for deciding when a ship went off charter. The judge also ordered them to give the person Simms contact information, and tell him immediately when the charter ended on any ship in the future.

Simms said he represents clients that are owed money by two ships, Hanjin Seattle and Hanjin Switzerland.

Sherwood said he would sign an order that requires the foreign representative of Hanjin Shipping “to let Mr Simms know, as soon as he knows, within one hour,” and added, “It shouldn’t be that hard.”

“The foreign representative needs to know that to the extent that a ship is going off charter while it is in the US, then the foreign representative needs to let Simms know straight away,” Sherwood said.

Contact Hugh R. Morley at [email protected][5] and follow him on Twitter: @HughRMorley_JOC[6].


  1. ^ bankruptcy filing by Hanjin Shipping on Aug.

    31 (www.joc.com)

  2. ^ allow an “administrative freeze” (www.joc.com)
  3. ^ Hanjin Shipping had failed to notify (www.joc.com)
  4. ^ ordered the carrier to inform the fuel company “promptly” (www.joc.com)
  5. ^ [email protected] (www.joc.com)
  6. ^ @HughRMorley_JOC (twitter.com)

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