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NCBFAA: Possible impacts of Hanjin’s bankruptcy on current shipments

Friday, September 2nd, 2016
© 2016 Ingrid Taylar

© 2016 Ingrid Taylar

Update from Edward D. Greenberg, National Customs Brokers and Forwarders Association of America (NCBFAA) Transportation Counsel:

As you are probably aware, Hanjin filed for bankruptcy protection in Korea on Wednesday August 31st. The filing came just a day after the company creditors discontinued financial assistance of more than USD $896 million to keep the company operating. The Korean bankruptcy court will determine whether Hanjin should be liquidated or given a chance to restructure.

The press is reporting that one Hanjin vessel, the Hanjin Rome, was seized by a creditor in Singapore on Monday. The press is also reporting that a number of ports, including ports in China (Shanghai, Xiamen), Spain (Valencia) and the United States (Savannah), have blocked access to Hanjin ships due to concerns Hanjin would not be able to pay port fees. The bankruptcy filing and the actions of the ports and at least one creditor raise a number of questions. One issue is whether the court will issue a stay prohibiting Hanjin’s creditors from seizing assets (e.g., vessels) to satisfy their claims. It is likely that the Korean court will do so given Hanjin’s size and importance. A second issue, however, is whether any such stay would bind foreign creditors in ports where Hanjin vessels may call. Because it is doubtful that foreign creditors with no operations in Korea will pay much attention to an order of a Korean court, Hanjin likely would have to seek an injunction blocking vessel seizures in all countries where Hanjin ships are located. This would be a pretty large undertaking. And, while it is difficult to predict with certainty whether courts in various countries will issue injunctions blocking the seizure of Hanjin vessels, it is certain that the cargo on any vessel that is denied access to a port or seized will be delayed and will likely incur extra costs.

Any supplier of goods to Hanjin’s vessels has a lien on the vessel to secure payment of what they are owed so there are potentially a lot of foreign creditors that exist. And, once one of the vessels is seized, it is likely that other foreign creditors would rush to do the same thing to protect their interests. This is when events could take on a life of their own and spin out of control. There is not much that can be done about shipments that are already on Hanjin vessels. We have heard from an inside source at Hanjin that it intends to “protect” such current shipments, which probably means at the least that it will endeavor to complete voyages in progress and deliver the goods (to the extent that the vessel is allowed to enter the port.)

If a vessel is arrested, and Hanjin does not – or cannot – put up a bond to obtain its release, it is probable some third party will be appointed to arrange for disposition of the goods. The goods themselves will not be subject to a creditor’s lien; however, freight charges owed on collect shipments will probably have to be paid because they will be considered Hanjin’s assets. It is also probable that shippers may have to make their own arrangements for on-carriage of their containers. For containers that have been shipped with other carriers and loaded on Hanjin vessels pursuant to vessel sharing arrangements, the issue will be how much responsibility those carriers will take for making the arrangements for on-carriage in the event the Hanjin vessel is seized. As you can see, there are a variety of possible outcomes here. Which of the possible outcomes actually occur will depend upon how this situation unfolds and what actions third parties take.

We understand, again from the trade press, that Hanjin either already has or will be declaring force majeure with respect to its contractual obligations to provide transportation services. If so, it is possible – if not likely – that Hanjin will exercise the provisions of the “Hindrance” clause in its bill of lading to declare that the transportation services have been terminated, that it is entitled to full freight, and that the merchant now needs to make any necessary arrangements to complete the transportation services to destination. Consequently, whether or not any of its vessels are seized, it may well be that arrangements will need to be made to make sure that goods in Hanjin’s possession or control are released and then moved to final destination.

We recommend that you not pay Hanjin for the transportation of cargo until goods are actually delivered into your possession and control. We also recommend that you send notices out to your customers advising them of the situation. It might be helpful if your notice to customers includes reference to Hanjin’s exercise of force majeure and its Hindrance clause and that any additional costs required to get their cargo to destination will necessarily be passed along to the shipper pursuant to the provision of your company’s bill of lading and its Hindrance clause.


See also:

MSK legal update:  Hanjin Shipping Sinks in Korea

Seattle Times’ article, Bankruptcy of Hanjin, key Port of Seattle customer, worries retailers


Alibaba bests Wal-Mart

Thursday, April 21st, 2016

alibabaAccording to ChinaDaily, Chinese e-commerce giant Alibaba Group Holding Ltd said that it has officially become the world’s largest retail platform, with its total trading volume online in the fiscal year ended March 31, 2016 surpassing Wal-Mart’s annual sales.

The Hangzhou-headquartered e-commerce giant didn’t reveal the total gross merchandize volume (GMV) in the fiscal year.  But it announced on March 21 that its China retail marketplace platforms have already surpassed the milestone of 3 trillion yuan ($475.89 billion) in GMV in the latest fiscal year.  Wal-Mart Stores Inc posted revenue of $482.1 billion for its fiscal year ending Jan 31.

CBP: Counterfeit import seizures up 25%

Monday, April 18th, 2016

According to American Shipper*, US Customs has reported that seizures of imports containing intellectual property infringements

US Customs image

US Customs image

  • The top two products most seized for IPR infractions last fiscal year included apparel and accessories, such as handbags and wallets, and watches and jewelry, respectively.
  • In fiscal year 2015, China maintained its position as the top source for counterfeit and pirated goods seized by federal authorities, with a value $697 million or 52 percent of the total value of imports seized.
(*Site registration required)

Expanded Panama Canal set to open June 26

Friday, March 25th, 2016
© 2015

© 2015

The expansion of the Panama Canal, a $5.3 billion project almost two years behind schedule and plagued by cost overruns and contractor disputes, will open on June 26, according to Canal Authority Administrator Jorge Quijano.

The expansion may shift international trade routes, allowing ships to reach Asia from the U.S. Gulf Coast more than two weeks faster than they would going east through the Suez Canal. It’ll make room for vessels with the capacity to carry 12,600 containers, almost three times what the existing locks permit, and will be able to handle tankers carrying liquefied natural gas.

The Canal project has been a major force in driving US port improvement projects to accommodate the larger ships.


De minimis threshold for shipments increases from $200 to $800

Thursday, March 10th, 2016

Coins_in_a_JarPer CSMS #16-000181:

Starting today, March 10, 2016, shipments valued at $800 or less will be eligible for release under the same processes and with the same restrictions as currently apply for de minimis shipments of $200 or less.

CBP has the right to require a formal entry on any shipment where additional information, bonding or protection is required.  In the case of low value shipments, it is important to note that this treatment can be denied if used for the purpose of avoiding compliance with any pertinent law or regulation.  That is especially important where revenue, import safety or serious trade enforcement issues are present.


Coast Guard to address trade’s worry about new VGM requirement

Friday, February 12th, 2016

cargo shipAccording to American Shipper*, The US Coast Guard will meet with the Federal Maritime Commission on February 18 to hear the trade’s concerns about the new verified gross mass (VGM) requirement enacted by the International Maritime Organization.  Reportedly, a United States Coast Guard officer says the agency is not planning any special effort to enforce new regulations having to do with shipping container weights.

Terminal operators and shippers remain unsettled about a lack of clarity on how individual countries are going to implement the new IMO rules requiring shippers to provide the VGM of containers prior to their being loaded.

The IMO’s Maritime Safety Committee adopted the container weight requirement in November 2014 as an amendment to the international Safety of Life at Sea (SOLAS) treaty. It goes into effect on July 1, 2016.

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Chinese imports to US indicate “deepest drop” since Q3 2011

Thursday, February 11th, 2016

usimportsfromchinaFrom the Journal of Commerce*:

For the first time since the second quarter of 2013, US imports from China fell on a year-over-over basis, IHS Maritime & Trade Senior Economist Mario O. Moreno said. In the fourth quarter of 2015, China subtracted 0.5 percent from overall US containerized import growth. This also marked the deepest drop by China since the third quarter of 2011 (down 2.4 percent). High inventory levels and softer consumer spending prompted retailers to destock markedly. The retail sales-to-inventory ratio stood at 1.48 in November, up from 1.42 a year earlier.

Despite the sharp subtraction to overall import growth by China, the total inbound trade managed to post a 1.1 percent year-over-year gain in the quarter, mostly because of increased shipments from South America and the Mediterranean.

(*JOC site registration may be required)

NY/NJ ports reopen after shutdowns; retailers still worried

Monday, February 1st, 2016


From Retail Dive:

Dive Brief:

  • Cargo was stranded for nine hours Friday as some 1,000 members of the International Longshoremen’s Association staged an unscheduled work stoppage.
  • The port workers are reportedly frustrated with some actions of the The Waterfront Commission of New York Harbor, a New York/New Jersey agency established in 1953 to fight corruption and crime at the ports. The Waterfront Commission has been under fire for some time for what critics see as meddling in the shipping industry. New Jersey Gov. Chris Christie last year vetoed a bill to abolish the commission but admitted a need for reform. Efforts in that state to dissolve the commission and transfer operations to the state police are ongoing.
  • The Port of New York & New Jersey is the busiest port on the East Coast, with more than three million containers coming through annually and bringing in imports worth more than $200 billion. The stoppage last week was ultimately declared illegal by an arbitrator.

Dive Insight:

  • Friday’s port work stoppage came after a winter storm also shut down operations there for two days, and one retail group warned that such actions could be devastating for retailers, which are already battling inventory problems.
  • “This is déjà vu for retailers, and an unwelcome start to 2016. A shutdown on the East Coast of any meaningful duration will have dire consequences for those dependent on spring inventory deliveries,” Kelly Kolb, VP of government affairs for the Retail Industry Leaders Association, said in an emailed statement to Retail Dive. ”A long-lasting strike would ultimately impact thousands of jobs along America’s supply chain.”

Cargo pre-inspection to expedite US, Mexico customs clearance

Tuesday, January 26th, 2016

mexUSflagsAccording to the January 2016 edition of American Shipper*, the United States and Mexico have taken considerable steps towards an integrated border management system between the two countries that offers pre-inspection of cargo before it crosses the border.

  • Clearing cargo in advance relieves pressure on ports of entry that are often congested during peak traffic periods
  • Expediting the flow of cargo creates more efficiency for businesses  and provides incentives for them to increase their level of international trade
  • In October 2015, the US Department of Homeland Security and Mexican official signed a memorandum of understanding that allows customs officers from both countries “to work side-by-side for the first time enforcing their respective trade and security regulations on each other’s soil.”
  • Three pilot programs:
    1. Laredo, Texas airport — Mexican customs officers are physically located here and pre-screen air cargo shipments by looking at advance shipment information and the manifest.  Suspicious cargo can be pulled for inspection prior to loading.
    2. Otay Mesa crossing (San Diego and Tijuana) — Launching in early 2016, CBP officers and agricultural specialists will be stationed in the Mexican compound to inspect agricultural products moving on truck to the US.
    3. Santa Theresa, NM/Juarez checkpoint — Planning in place for joint inspections of shipments originating from, and arriving at, giant maquiladora assembly plant operated by Foxconn for Dell and other major electronics retailers.
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Antidumping — furniture importer on the hook for $15 million for duty evasion

Tuesday, December 29th, 2015



Last week, as reported in American Shipper, Texas-based University Furnishings agreed to pay $15 million to resolve a False Claims Act lawsuit for evasion of import duties.  The United States alleged that University Furnishings knowingly classified dormitory bedroom furniture imported from China as office or other types of furniture not subject to duties.  Interestingly, the suit originated as a whistleblower lawsuit, under that provision of the False Claims Act, by University Loft Co., a manufacturer of student furniture.