Hanjin Bankruptcy Fiasco Still Hurting Apparel Importers

Sitting on the water somewhere between here and Asia are 17 containers of private-label menswear valued at around $1.5 million that Pacific Textiles & Sourcing in Los Angeles is importing from Pakistan.

But when some of those containers will arrive is a question that no one can answer because they are stacked on Hanjin Shipping vessels anchored off Singapore awaiting instructions about what to do after the South Korean shipping company’s bankruptcy filing on Aug. 31.

Alex Rasheed, Pacific Textiles & Sourcing’s president, is hoping that two of the containers will arrive in the next few days and that another nine that were shipped from Pakistan to South Korea, taken out of their Hanjin containers and repacked into non-Hanjin containers will make it to the Los Angeles/Long Beach port complex by the end of October. But what happens to the other six containers sitting off the Singapore peninsula is anyone’s guess.

“None of this is good news for us,” he said. “We have our pick between bad and awful.”

The bankruptcy of the world’s seventh- largest cargo-container shipper has created a mess that is becoming costly for many importers like Rasheed. His goods were destined to be on the shelves of JCPenney and Macy’s in time for the holiday season. If they don’t arrive soon, the stores could cancel their orders.

In addition, transferring all that merchandise from Hanjin containers to other boxes cost the company $5,000 a container—money Pacific Textiles & Sourcing probably won’t be recouping from Hanjin.

“We have to pay that money. We have no other choice,” said Atif Nazir, Pacific Textiles’ merchandising and sales manager, who has been tracking the containers.

Of the 97 Hanjin Shipping vessels that were on the water when the bankruptcy was filed, 29 are still anchored in the open sea and another six ships have been arrested by port authorities and Panama Canal officials trying to recoup money owed them.

Cargo aboard those ships could take weeks to months to arrive at their final destination.

“It is like someone turned a switch off and nothing is coming in that was in a Hanjin container,” said an industry person who asked not to be identified.

Looking for a parking lot

Not only is merchandise stuck on the water, but the empty Hanjin cargo containers left behind have created havoc at the Port of Los Angeles and the Port of Long Beach.

Industry people estimate that at one time there were 10,000 empty cargo containers either owned or leased by Hanjin sitting around Southern California. That has been reduced to about 8,700.

Not only has it been a problem to store these 40-foot containers, but each container is sitting on a chassis that is idle and needs to be turned around to collect more cargo containers at the ports.

Port of Los Angeles Executive Director Gene Seroka estimated that the idle chassis equipment has reduced by 30 percent the efficiency level of trucks picking up cargo at the port. Cargo containers being transferred on to railcars have not been affected.

“It has definitely been a challenging situation on both coasts,” said Port of Los Angeles spokesman Phillip Sanfield.

On the East Coast, a Hanjin ship that was to dock at Maher Terminals at the Port of New York and New Jersey will be landing at the Global Container Terminal in Bayonne, N.J. The concern was if the ship left the port filled with empty cargo containers it would sit too high and not be able to pass under the Bayonne Bridge.

So cargo will be unloaded in Bayonne, loaded onto a barge and taken to Maher Terminals.

On the West Coast, the chassis problem is slowly being resolved. Noel Hacegaba, the chief commercial officer at the Port of Long Beach, said there are 73,000 chassis in the pool shared by the two Los Angeles ports. Having 8,700 chassis that are out of commission is serious.

“Three weeks ago, the percentage of our chassis out of service [due to mechanical problems] was 10 percent. Today that figure is closer to 7.5 percent. Our immediate first step was to fix as many of the out-of-service chassis as we could,” Hacegaba said. “We also urged the chassis leasing companies to inject more chassis in the shared pool.”

Port of Long Beach officials tried to get Total Terminals International—a cargo-container terminal majority owned by Hanjin, to accept the empty Hanjin cargo containers. They refused until Oct. 11, when the bankrupt company said it would get ready to take empty Hanjin-owned containers at the terminal located at Pier T in Long Beach as well as at Terminal 46 in Seattle.

This will make a slight dent in the problem. Hanjin has 1,140 empty company-owned cargo containers in the Los Angeles/Long Beach area and 131 in Seattle. Some transportation experts are concerned there could be a massive traffic jam at the Hanjin terminal as trucks line up to drop off the empty containers.

With 1,140 containers being collected, that still leaves 7,500 Hanjin-leased containers that need to find a storage space or be returned to the container-leasing companies.

For a while, the solution seemed to be placing the containers at a 100-acre yard in Ontario, Calif., east of Los Angeles. But Ontario city officials objected to that plan.

The Port of Los Angeles said it has set aside eight to 10 acres of land within the port complex to lease to terminals that needed to store Hanjin containers. One acre can hold about 500 containers when stacked six high, but that still leaves more than 2,000 containers that need to find a temporary resting spot.

After Hanjin said it would collect its own cargo containers, it issued a list of its leased cargo containers, matching cargo-container identification numbers with the companies that own the containers. The container owners should be providing a location to drop off the boxes.

Until then, trucking companies stuck with the containers are on the hook for paying the daily rental chassis fee of $25 a day, one source said. “I know importers who have as many as 200 empties sitting in the Inland Empire,” the source said. “Two hundred times 25 dollars [a day] is a lot of money.”

Meanwhile, the Port of Long Beach noted that its cargo-container volume in September was down 16.6 percent from a year ago because of the Hanjin bankruptcy. Hanjin containers account for about 12.3 percent of the port’s total containerized volume.