ON BOARD THE HANJIN ROME—For almost three weeks, two dozen men have been whiling away the hours off the coast of Singapore on a rusty old cargo ship loaded with frozen meat and other goods. They had been headed from South Korea to the Persian Gulf. Now they’re stuck, not allowed to dock or to leave. The crew spends its days tending to the cargo and googling for news on their phones about their ship’s ill-fated owner, Hanjin Shipping Co., which filed for receivership in South Korea last month. Mostly “at ease,” they surf the Web, chat, play cards, go the gym and watch movies—“legally downloaded,” according to the captain, Kwon Do-moon. “Family is worried, but we are in touch,” said one crewman. Their biggest concern: When will they get off the ship, and will there be any jobs left in the industry for them when they do?

Hanjin, one of the world’s largest shipping lines, fell victim to a world-wide capacity glut resulting from the slump in global trade. Creditors have already moved to seize some of its assets. A Singapore court on Aug. 29 granted a provisional request to seize the Hanjin Rome filed by Rickmers, a Hamburg-based company, which says Hanjin owes it money. That means the container ship, with a gross capacity of 65,000 metric tons, is banned from any shipping operations. A security guard has been posted on board to ensure it doesn’t leave. The men aren’t allowed off, unless there is a medical emergency, because the ship can’t dock. Hanjin owes money to the port operator, PSA International Pte. Ltd, as well.

Since Hanjin filed for bankruptcy protection, dozens of its ships carrying more than half a million containers have been denied access to ports because of uncertainty about who would pay docking, unloading and storage bills. As much as $14 billion worth of cargo has been stranded at sea at a time when retailers are stocking up for the Christmas season. The company had 89 cargo vessels—74 container ships and 15 bulk carriers—stranded as of late Wednesday, according to a Hanjin spokeswoman in Seoul.

Capt. Kwon had the guard buy local SIM cards for his crew—10 other South Koreans and 13 Indonesians—so they could call home and keep up with the news. The crew is free to top-up when the cards run out—as long as they can pay for it. No one knows how long they are stuck there. The last they heard from Hanjin headquarters was a greeting for the Korean Thanksgiving holiday, which began Wednesday. “They don’t have enough information,” said Capt. Kwon, a portly, 36-year-old father of twin 8-year-old girls.

Food hasn’t been a problem; supplies were delivered on Aug. 29 and the captain said he was expecting another shipment this weekend, to be paid for with funds the company gave him at the start of the journey. The Korean crew cherishes kimchi and pork, while the Indonesians, who are Muslim, have beef and lamb. To drink, machines turn seawater into fresh water—16 tons to 17 tons every day, he said. “That’s the magic.” They also have bright-blue cans of Pocari Sweat, a Japanese sports drink. The ship has four generators on board and 200 days-worth of fuel. The captain said he expects there will be an end to the stalemate before that runs out, possibly by the end of November.

He has been on board since the ship started its journey from Busan, South Korea, on Aug. 19. It stopped in China before reaching Singapore, from where it was scheduled to go to Malaysia, Sri Lanka, the United Arab Emirates, Iran and Oman before returning. He wouldn’t give much detail on his cargo, aside from saying it included frozen meat and poultry. The crew has special instructions from the Korean office on handling special cargo, he said, without elaborating.

For a reporter’s visit to the ship on Wednesday, organized by three trade unions, crew members were reluctant to speak, but had prepared neatly lettered placards in English and Korean appealing for help. Most had gloomy faces. The youngest was a 22-year old apprentice and the oldest was 53. The union members brought two bags of treats—fried rice, chicken drumsticks and buttercake from a Singapore bistro—and assured the men they were doing everything possible to help them. Two young officers said they worried about finding work again, given the state of the industry. “I don’t know what’s next,” one said. “Maybe I’ll prepare my CV and look for a new job. [We’ve got] enough time.” The officers received their monthly pay last week as usual; the next payday for the seamen is Sept. 20. Under Korean law, Hanjin has to pay them for three months—meaning through November—and three years of retirement benefits, according to the seamen. Hanjin officials weren’t immediately available for comment. Meanwhile, the men are stuck on the rusting Hanjin Rome, which was commissioned in 1998 and is nearing the end of its 20-year lifespan.

Capt. Kwon joined the company in 2000 and like his men is used to life at sea. “Mentally it’s a tough time,” he added. Still, he said he worries more about another Hanjin vessel stalled outside Singapore, which hasn’t been seized but isn’t being allowed into port. “They can’t get any food from the shore,” he said. “If someone’s sick, nobody can help. It can take half a day or one day to contact with coast guard.” He said he hasn’t been able to talk to anyone on that ship. “My colleagues only send emails.”

THE collapse of Korean boxship major Hanjin stands to hurt everyone from blue-overall indie truckers to bankers and all points in between, according to a new report published today from leading broker Marsh. While the document inevitably devotes considerable space to the insurance aspects of the high-profile bankruptcy, as detailed in an accompanying article, it also spotlights potential pain for huge swathes of the maritime industries.

Problems are already in evidence for the CKYHE alliance, in which Hanjin sits alongside Cosco, K Line, Yang Ming and Evergreen. The others have announced that they will no longer ship goods on Hanjin vessels, and will not carry Hanjin containers on their own vessels. Many ports are refusing Hanjin vessels entry, for fear of not being paid port fees. A number of Hanjin ships are also reported arrested. Additionally, goods due to be loaded onto Hanjin vessels barred from entry have begun to build up in ports. Cargo interests are thus exposed to financial risks, as contractually agreed delivery dates are likely to be missed. Goods will need to be stored, and extra expenses incurred as alternative routes for delivery are arranged.

The timing could not have been worse, as August to October is generally the busiest time of the year for the container shipping industry, with retailers stocking up for the holiday season. The majority of vessels operated by Hanjin were chartered rather than owned. Owners are likely to terminate charterparties and retake possession, with a view to chartering the vessels out elsewhere. The increased supply of tonnage could put downside pressure on rates. “As a result, owners may face a reduction in income when they do find a new charterer, or, failing that, be forced to have the vessels laid up and suffer a complete loss of earnings,” Marsh predicts.

Terminals and ports may need to protect their own financial position, to ensure that they are covered for port fees and tug and pilot services. Ships owned by Hanjin may be subject to mortgages from banks, which could seize vessels under the terms of the finance agreements if the Korean outfit defaults on loans.

Freight forwarders could find themselves over a barrel if they have taken goods into their care, or contractually agreed to do so, as contracts may impose financial penalties if goods are not delivered to the right place at the right time. If goods are scheduled to load onto a vessel that does not arrive, forwarders will have to find an alternative. That could prove expensive, particularly as other forwarders will be chasing the same slots with the same carriers. All this could lead to ports becoming rapidly inundated with containers that cannot be shipped quickly, Marsh adds. Some might even close their gates to Hanjin-scheduled containers.

This could mean knock-on effects for truckers, rail freight companies and hauliers, as those refused entry to ports will have to find somewhere to park a backlog of boxes. Alternatively, they may have to refuse to load boxes scheduled to be carried on Hanjin vessels. “Since many trucking companies work on very tight financial margins, the financial insolvency of Hanjin could lead to the financial default of others all along the supply chain,” Marsh suggested.

Crews are at risk of not being paid, or receiving reduced pay, or being left stranded at various ports around the world. Hanjin’s port agents stand to see loss of income if their agency fees are unpaid. Bunker, food and equipment suppliers may also be in the firing line.

Shipping restructuring specialists speaking at the Capital Link New York Maritime Forum on 13 September predicted that Hanjin Shipping will ultimately be liquidated, not rehabilitated. “Clearly, it’s not ‘too big to fail’, because the Korean government did not want to pump capital into what could be considered a mismanaged company for a very long period of time,” said Deloitte managing director Robert Frezza. “It was a very big signal to the rest of the industry.”

Frezza predicted that an “orderly liquidation” will be attempted for Hanjin, “which will probably lead to some other bankruptcies in the near term”. Frezza does not believe the Korean government will save Hanjin Shipping and referred to recent cash injections by major shareholders as “too little, too late. We don’t see other parties rushing in to create a consortium to help and we don’t believe the Korean government will be part of any kind of bailout,” said Frezza. “Honestly, given where the company is today, I think it’s virtually impossible to restart, in terms of confidence and everything else – it’s kind of done,” said AMA Capital Partners president Paul Leand.

Hanjin’s Chapter 15 bankruptcy filing in the United States will protect the company’s ships from arrest in American waters during cargo unloading, but that protection does not extend to non-US ports. According to Leand, “There is a commitment to at least try to get these cargoes off, but unfortunately, what happens after that [outside the United States] is that every single one of these ships will be susceptible to maritime liens for bunkers, crew, and everything else. This company did not file in the US [as a primary Chapter 11 proceeding that provides global protection]. It filed in Korea and there is no global stay [under Korean bankruptcy law] that can be imposed, so nature will take its course in terms of the maritime process,” said Leand.

Miller Buckfire managing director Kevin Haggard also predicted that Hanjin will not be rehabilitated. “If the Korean government was going to invest [in Hanjin’s rescue], it would have done so by now. It looks more likely to me that it may just be liquidated and the assets will get absorbed into the market,” said Haggard. If so, there will be broad fallout. Leand warned, “When you release over 80 ships into the market – and I don’t think it will take all that long for those ships to get into the market – it’s going to have an overall negative impact. A lot of these ships are chartered-in and those are the companies that are going to take it on the chin first. But beyond that, any companies that have charter rate options or extensions that are coming up in the next 18–24 months are going to have to be paying attention as this tonnage comes in,” said Leand.

Yet another argument against rehabilitating Hanjin is that its owned fleet is simply not high-quality enough, according to Leand. He pointed out that ship design and fuel-efficiency advances have had a major impact in the container sector, unlike in other shipping sectors where ‘eco ships’ have not met expectations. “When you look at the [Hanjin] fleet, it’s just not that great of a fleet,” opined Leand. “That’s going to be one of the challenges of redeploying those assets. At a price, you can make up for those fuel differentials, particularly in today’s oil price environment. But if the oil price starts to come back and bunker prices start to come back, what you’re going to find is that a lot of those ships are not very favourable in the market. Also, they have a whole group of ships in the 5,000 teu range, which the market doesn’t seem to care about. “Those ships will have to be absorbed and they will get absorbed,” said Leand. “At some price, they will trade. But in the medium term, this is just going to put more supply into the sector, which is not what anybody needs right now.”

Star Bulk has finalised an agreement with 15 banks to defer USD223.9 million in debt payments until June 2018 and relax financial covenants until the end of 2019. “This agreement assists our company to successfully weather current market conditions even if they were to last well into 2019, and positions us to take advantage of a subsequent market upturn,” Star Bulk CEO Petros Pappas confirmed in a 14 September statement. Pappas added that the deal was “based on the strong relationships” with its lenders and credit agencies “and their faith in Star Bulk’s high quality management and low cost operations.”

The NASDAQ-listed bulk vessel operator announced in June it had made a standstill agreement with the group of lenders to give the company time to finalise the restructuring. The final agreement, executed on 31 August, waives 100% of principle repayments for 25 months for the period starting 1 June 2016 and ending 30 June 2018. The agreement will also waive or “substantially relax” financial covenants until 31 December 2019.

To comply with the conditions of the restructuring, Star Bulk also announced on 14 September it agreed to raise USD51.5 million, and noted that three major shareholders intend to buy “at least their pro rata share” of the stock sale.

The agreement was announced at the same time Star Bulk revealed a net loss of USD32.9 million during 2Q16, which follows a loss of USD48.8 million in 1Q16 and compares with a loss of USD65 million in 2Q15.

The loss included several non-cash items, including a loss of USD200,000 on the vessels Indomitable, Obelix, Star Taurus and Star Michele, the company stated. Voyage revenues fell 5.6% to USD52.6 million in the quarter.

The dry bulk major had USD1.01 billion of average total debt during 2Q16, up 5.8% from an average of USD958.8 million in the same period last year.

Star Bulk also announced it had agreed on 26 July and 10 August to sell the vessels Star Aline and Star Monisha, respectively, to third parties. The 2004-built, 76,417dwt Star Aline is expected to be delivered at the end of September, the company said. IHS data lists the 2001-built, 164,218dwt Star Monisha as being sold for USD6.9 million and scheduled to be broken up.

Star Bulk has a 73-vessel fleet consisting of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax vessels with carrying capacities of between 52,055 and 209,537 dwt, and aggregate capacity of 8.2 million dwt. The fleet includes five newbuildings under construction in China that are expected to be delivered in 2017 and 2018.

As logistics crisis of Hanjin Shipping lengthens, the toll on cargoes and crew on vessels stranded at sea as well as its clients around the world due to delays and possible ruins in their products is getting bigger and bigger.

More than 40 vessels of Hanjin Shipping cannot dock in fear of losing the ships and cargoes to creditors.

Sources say the vessels are struggling to save fuel as a containership typically uses up 100 tons of fuel a day for engine propulsion and power generation although some variance exists depending on vessel size and cargo volume.

Vessels that carry perishables consume more fuel to keep them chilled and frozen.

Any shipping delay will be especially detrimental to food freight owners because food past the shelf life would have to discarded, said Cha Mi-sung, vice president of Korea International Freight Forwarders Association.

Conditions onboard are getting tougher for the crew. A captain of a ship told the Wall Street Journal that his crew was trying to get by without air conditioning despite the heat to save power.

Some companies fretting over state of their cargoes have taken matters in their own hands but only to be upset by various hurdles due to different set of rules in different jurisdictions.

Samsung Electronics last Thursday filed a petition to a U.S. bankruptcy court, offering to pay the overdue port service fees for their cargoes on behalf of Hanjin Shipping. The U.S. court issued stay order to protect Hanjin Shipping cargoes at U.S. ports. But the situation remains in a stalemate in ports elsewhere around the world.

For smaller cargo owners, the matter is not as simple as paying the port service providers as Samsung Electronics has done to recover and unload its cargoes. It is not easy for them to track their cargoes and also find them from a bulky container.

“It is almost impossible to find specific cargoes and get them out of a packed container box,” one industry official said.

The matter would get more complicated and beyond control if ship owners get involved in the crisis for cargo owners and shipping companies. The ship owners that charter carriers to shippers have the right called cargo lien, or claim to the properties onboard. The fate of cargoes will become more uncertain if any of the ship owners exercise the right over the company in court administration.

The crisis surrounding Hanjin Shipping has rocked the industry, but even more shipping lines could find themselves in trouble thanks to the huge amount of overcapacity in the industry, warns the CEO of a logistics company.

Hanjin, which had around 3 percent of market share in shipping, filed for court receivership at the end of August, which has meant that its ships have been denied access to ports and, in some cases, have been seized.

One result of Hanjin’s troubles is that shipping rates have spiked. Prices for shipments between Asia and the U.S. have risen 50 percent through September, according to data from Freightos, an online shipping rate marketplace. However, this is likely to prove temporary, as prices will fluctuate and currently empty container slots are brought into use, the company added.

Not only have shipping rates risen, but companies which were using Hanjin have received charges from some ports, according to Philip Damas, director for supply chain advisors at Drewry.

“Some ports have imposed surcharges on exporters and importers who used Hanjin as a carrier and are waiting for their products in the destination port to cover the port costs unpaid by Hanjin. This is also increasing exporters’ costs,” he told CNBC in an email.

Hanjin has been a shock to the system, but a glut in the number of ships carrying goods around the world is still an issue, warns Dr. Zvi Schreiber, CEO of Freightos, an online logistics marketplace.

“There has been a significant overcapacity, which is why rates have been so low and that’s why Hanjin went bankrupt in the first place, but it’s not clear if that’s enough,” Schreiber told CNBC in a phone interview on Thursday.

“Hanjin is only 3 percent of world trade and it seems the overcapacity in the industry is more than that. This is just one of the painful steps for the industry correcting its overcapacity, but there may be more.”

The shipping industry is in dire straits. Because of overcapacity, shipping rates have fallen and the value of vessels has dropped. A market report released last week by market analyst’s VesselsValue showed that the total number ships being sold for demolition for all ship types had risen 50 percent this August, compared to the same month last year.

Schreiber outlined three scenarios which may help solve the overcapacity issue: economic growth; further collapse; or consolidation.

“Perhaps the world economy will get back into growth and catch up with capacity, which would be the best solution for everyone. If there’s economic growth and people are buying more products again, then you can utilise the capacity better,” Schreiber said.

“I’m afraid we’ll see more collapse,” he warned. “There could easily be another bankruptcy or two. I hope not, but that certainly can happen.” Shipping companies are likely to merge and consolidate, and this could support prices, according to Damas.

“We expect that the rapid consolidation of the shipping line industry through carrier failures and M&As, the inability of most shipping lines to continue the current price war and the possible avoidance by exporters of financially vulnerable shipping lines will push shipping rates up even after the short-term market shock caused by Hanjin,” he said.

However, Schreiber warned that consolidation may have some negative consequences.

“If you have consolidation and fewer players, they could find it easier to fix prices and keep them high, which would be good for them, but we don’t want to go back to a situation of cartels and price fixing in the industry,” said Schreiber.

Rear Admiral Paul Thomas, assistant commandant for prevention policy at the U.S. Coast Guard, has welcomed the news that the 2004 International Convention for the Control and Management of Ships’ Ballast Water and Sediments (Ballast Water Management Convention) has been ratified and will now enter into force in September 2017. It is an important step forward in controlling invasive species spread by ballast water and meeting the challenge of reducing the environmental footprint of international shipping, he says.

“We also understand that the announcement heightens concerns in the industry about the differences between the Ballast Water Management Convention and the U.S. ballast water regulations.” Thomas says the entry into force of the Convention will not change the U.S. Coast Guard approach to or enforcement of the U.S. ballast water regulations.

“Ships operating in U.S. waters must comply with U.S. requirements, including using one of the ballast water management practices described in 33 CFR Part 151.2025 and 2050. Therefore, ships in U.S. waters will not be subject to Port State Control verification of compliance with the Ballast Water Management Convention.

“Ships equipped with a Coast Guard approved Alternative Management System (AMS) will remain in compliance with U.S. regulation until five years after the compliance date (for an individual ship) is set. Compliance dates will be determined on a vessel-by-vessel basis after Coast Guard type approved ballast water treatment systems are commercially available. After five years, the AMS must either achieve Coast Guard type-approval, or be replaced with a type-approved system.”

The discharge standards required by U.S. regulations are the same as the standards proposed in the IMO Ballast Water Management Convention. However, there are differences found in the testing and verification protocols as well as confusion about the definition of “viable” as meaning living and non-viable as meaning dead.

U.S. type-approval testing procedures are mandatory and specify testing that is independent from manufacturers. They are also very detailed and require more testing than foreign type-approval procedures.
Currently, there are 19 ballast water treatment system manufacturers with systems approved by other administrations (AMS) that are seeking type-approval from the Coast Guard. Three of these manufacturers report they have recently completed testing with the Coast Guard independent lab.
“On the basis of information provided from manufacturers and independent labs, we expect to receive applications for Coast Guard type-approval in the next few weeks,” says Thomas.

“In the meantime, the Coast Guard continues to work with the IMO to harmonize the international testing procedures within the Ballast Water Management Convention, known as the G8 Guidelines, with U.S. type-approval processes.” The IMO type-approval guidelines are currently under review, and recommendations for revisions are being developed for the Marine Environmental Protection Committee (MEPC 70) meeting in October 2016.

“The Coast Guard is committed to protecting our waters from invasive species and supports a strong national and international solution that does not disrupt the continuous flow of maritime trade which drives the global economy. We will continue to work with all stakeholders to encourage and facilitate Coast Guard approval of ballast water treatment systems.”

The Wall Street Journal has recently observed that if Hanjin Shipping Co. Ltd. fails in its attempts to reorganize and emerge from bankruptcy proceedings in Korea, it would represent the largest container shipping company to date to collapse. In the meantime, its creditors have apparently been active in Chinese, Singaporean, and American ports. At this time, the federal district court in Los Angeles has allowed the arrest of one vessel (the Montevideo) on account of unpaid bunkering charges, and is still considering two requests for the attachment of Hanjin’s assets on behalf of two owners who charter vessels to Hanjin.

Hanjin’s decision to file a chapter 15 ancillary bankruptcy proceeding in the United States this past Friday does not put an automatic freeze on further ship seizures. However, the U.S. Bankruptcy Court judge assigned to that proceeding has indicated that he will consider Hanjin’s petition this afternoon, and if granted, the automatic bankruptcy stay will begin protecting Hanjin within the United States (and within U.S. waters). Not much time remains for further creditors to obtain maritime attachments or arrest orders against Hanjin’s vessels or other assets.

Beyond the effectiveness of the automatic bankruptcy stay, not much is else is so settled in the law concerning bankruptcy shipping companies. The Second Circuit’s 2005 decision in In re Millenium Seacarriers, Inc. points out the continuing uncertainty in U.S. law concerning the boundary between exclusive bankruptcy jurisdiction and exclusive maritime jurisdiction. As Judge Sotomayor (as she then was) observed in Millenium Seacarriers, while a bankruptcy judge can preside over the distribution of maritime assets, only a federal district court judge sitting in admiralty can dispose of a vessel by judicial sale, free and clear of maritime liens. In the meantime, there seems little disagreement that judges sitting in admiralty recognize the paramount impact of the automatic bankruptcy stay. Thus, once an automatic stay is instituted for Hanjin, there can be no more vessel seizures in U.S. waters.

If any maritime attachment has been perfected prior to entry of the automatic stay, there is precedent in the form of last year’s In re Daebo International Shipping Co. decision, in which the bankruptcy judge vacated the attachment without requiring the debtor to post any security, in part on the basis that the Korean bankruptcy judge’s order in that case was meant to have worldwide effect. In the current Hanjin petition before the U.S. Bankruptcy Court, part of Hanjin’s submission is that the Korean court’s protection is worldwide and is merely being confirmed by the use of U.S. chapter 15 proceedings. Thus, there is a good chance that attachments obtained on or after September 1 will be vacated by the U.S. Bankruptcy Court.

There is much less chance that the arrest of the Montevideo will be summarily vacated without the obligation to provide “protection” to the arresting lien holder. The bunker supplier who arrested the Montevideo will claim the existence of a “maritime lien” for the supply of bunker fuel, since this was a prerequisite to the arrest itself. Maritime liens create great headaches for bankruptcy judges, as they do not fit within the usual definitions or categories normally provided for liens in bankruptcy (or much else in non-admiralty matters). There is precedent in bankruptcy and admiralty court decisions for allowing the bankruptcy judge to release an arrested vessel upon the payment of adequate security for the release of collateral, but also for the bankruptcy court’s reliance on the arresting admiralty court for ultimate disposal of the vessel. Whether it is the bankruptcy judge in Newark or the district court judge in Los Angeles who ultimately has authority to release or auction the vessel will be sorted out in the coming weeks and months.

The collapse of Hanjin Shipping (117930.KS) will boost the cost to U.S. businesses and consumers of a wide range of imported goods, from furniture and clothing to fresh fruit and frozen meat, according to federal agencies, shippers and retailers. With Hanjin’s future in doubt, carriers have announced they will hike container freight rates by as much as 50 percent beginning next month as retailers scramble to secure shipping ahead of the peak year-end holiday season, industry sources said.

United Parcel Service Inc (UPS.N) said on Thursday it is seeing a bump in demand for its freight services and is working with customers in Asia to shift goods from Hanjin containers to other ocean freight operators or air freight services. About $14 billion worth of cargo was stranded by the collapse of the seventh largest container carrier in the world. “Right now, there is much more (freight) demand than there is supply. People are scrambling to find a carrier with space,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition shipping industry group. “But the biggest challenge right now is for people with cargo on Hanjin ships,” he said.

Cargo shippers have been forced to pay thousands of dollars in fees to terminal owners and truckers to reclaim their goods from Hanjin ships to prevent perishable foods from spoiling and to avoid losing sales because goods are not available when customers want them. Hanjin would normally pay the fees for port usage and container handling as part of its freight services. With the South Korean shipper in receivership, it is unclear if shippers would recoup any added costs they pay out of pocket to retrieve their goods. Singapore-based crop shipper Agrocorp International said that DP World, terminal operator at Port Metro Vancouver, last week held 24 containers, or 600 tonnes, of its Canadian lentils that were bound for India and Bangladesh, demanding a release fee of $450 per container.

Industry analysts expect the freight increases to be short-lived as more shipping capacity comes on line. “The Hanjin ships are going to be off the market for the holiday seasons. It will take several months to sort through the legalities, but any rate increase will be temporary,” said David St. Amand, president of Navigistics Consulting.

In the short term, retailers are likely to take hits to their profit margins as they try to shield customers from any more price rises in a hyper-competitive retail market. “We believe that (the Hanjin collapse) will likely increase our short to medium term ocean freight costs which will minimally impact product cost in all of our operating segments to varying degrees. However, inventory availability is good,” Paul Toms, CEO of Hooker Furniture (HOFT.O), said on an earnings conference call on Thursday.

Joe Parsons, CFO for Michael Kors (KORS.K), said from the Goldman Sachs retail conference on Wednesday that the company does not expect a significant long-term impact on its business. But “there is going to be some pricing pressure. At this point, we are continuing to evaluate it,” he said. The American Apparel and Footwear Association said it expects gross margins to be pressured in the near term by the higher shipping prices and additional unloading fees.

Hanjin’s collapse could wreak havoc on port operations and shipping lines over the next two to three months and could impact trade between the United States and South Korea, the U.S. Department of Agriculture said in a report published on Thursday. Container freight charges have more than doubled since May and could appreciate further, the agency said. The average cost to move goods in 40-foot containers from the U.S. West Coast to Asia was quoted at $1,700 this month, up from $788 in May.

Reuters (Aditional reporting by Nandita Bose in Chicago, Rod Nickel in Winnipeg and Liz Hampton in Houston; Editing by Bernard Orr)

Hanjin Shipping’s New Jersey bankruptcy filing has yet to calm chaos across the US, as a swathe of creditors from all walks of the maritime industry urged a judge not to rush to recognise fully the operator’s South Korean court proceedings without greater measures to sort out the tangle. Detractors of the company’s restructuring filing included shippers, bunker suppliers, terminal operators, container lessors, tug owners, rail companies and chassis lessors expressing doubts about how their rights to collect on past debts will be protected and how to ensure they will be paid for services provided as Hanjin ships float out of limbo.

And before US Bankruptcy Judge John Sherwood entered an order on Tuesday night putting a freeze on litigation, as is standard procedure in Chapter 15 petitions to recognise foreign bankruptcies, the litigation against Hanjin grew. At least nine lawsuits by six plaintiffs are on public dockets in US courts and at least two arrest orders have been issued against Hanjin vessels. But the allegations in those cases pale in comparison to the potential claims that some creditors disclosed in a hearing this week in the US Bankruptcy Court in Newark, New Jersey.

An estimated 15 ships are waiting in limbo off the US coast, either to avoid arrest or because ports will not let them enter as long as there are doubts about Hanjin’s ability to pay its bills. In the bankruptcy case, terminal operators have complained that they are saddled with Hanjin containers that they cannot move, and they asked Sherwood for protections to ensure suppliers will be paid once the idled vessels move to a berth to unload. Even lawyers for Total Terminals International (TTI), a joint venture that has Hanjin as its largest shareholder, complained that there are no provisions in the ship operator’s Chapter 15 bankruptcy filing that deal with the process for discharging these vessels. “This lack of a short-term plan for these vessels will lead to mayhem,” wrote the company’s lawyers, led by Douglas Deutsch of Clifford Chance. In the packed courtroom, he said Hanjin is $50m behind on its payments to the terminal operator, which is no longer accepting the Korean shipping giant’s cargoes.

Hanjin’s lawyer, Ilana Volkov of New Jersey firm Cole Schotz, said Hanjin is aware that service providers will need confidence that they will be paid but added that the company is seeking the litigation freeze as a first step in the process. “Everybody is working around the clock to secure the funds for this international operation to continue,” said the lawyer.
Shippers, meanwhile, complained that hundreds of millions of dollars-worth of cargo is stuck on Hanjin vessels.

Lawyers for computer maker HP proposed establishing protocol in the bankruptcy to turn over containers to cargo owners and said the company would be willing to put money into a trust fund to pay for the effort. Other cargo interests expressed approval of the protocol. “HP faces the prospect of loss of customers, business reputation, market share and other irreparable harm,” wrote the company’s lawyers at Pachulski, Stang, Ziehl & Jones. “This is especially the case because the potential for any recovery of damages from the foreign debtor, who is currently insolvent, may be remote at best.” Other cargo interests complained that in some cases Hanjin has refused to turn over containers.

Simms Showers lawyer Stephen Simms, who is representing several bunker suppliers, tug owners and container lessors, urged Sherwood to safeguard his clients’ maritime liens against Hanjin ships by ensuring that his ultimate order does not allow the ship operator to take vessels to jurisdictions where the US protections would not apply. “That wipes out our security entirely,” he said. Simms told the judge that one client, bunker supplier OceanConnect, has secured an arrest order against the Hanjin-chartered, 4,590-teu Seaspan Efficiency (built 2003) over $837,000 in unpaid bills and it has filed papers to intervene in World Fuel Services’ arrest of the 4,250-teu Hanjin Montevideo (built 2010). Sherwood responded by ordering Hanjin not to take its ships away from US waters until he can consider the maritime lien arguments.

Shipowners, meanwhile, have been without charter hire from Hanjin for months, legal and security filings reveal. As TradeWinds has reported, an affiliate of Idan Ofer’s Eastern Pacific Shipping, for example, has filed lawsuits in California and Illinois over $1.38m in unpaid charter hire for the 3,670-teu Hanjin New Jersey (built 2013). And brother Eyal Ofer’s Zodiac Maritime has filed three lawsuits in California and Baltimore over $1.69m allegedly owed on the 3,670-teu Hanjin Louisiana (built 2013) after charter payments stopped at the end of June. New York-listed Danaos has told the US Securities & Exchange Commission (SEC) that Hanjin was behind on $16.9m as of the end of June, while rival Seaspan had $18.6m in unpaid Hanjin charter hire as of 18 August.

As TradeWinds has reported, Hanjin filed for court-supervised restructuring in Seoul last week with some KRW 6.03 trillion ($5.04bn) in total liabilities and KRW 6.62 trillion in assets. The three-judge panel, which approved commencement of the company’s rehabilitation proceedings, noted that Hanjin faces some KRW 3.14 trillion in loans maturing within one year but no possible way to pay it off.