Hanjin Shipping Bankruptcy Creating Chassis Problems at LA Ports

Cargo-container ships owned by bankrupt Hanjin Shipping have been arriving at the Long Beach/Los Angeles port complex this week after a U.S. bankruptcy judge cleared the way for vessels to dock without being seized by creditors.

Importers have been able to retrieve their cargo, but Hanjin Shipping is not accepting empty cargo containers or containers filled with export merchandise.

As a result, there is a glut of empty cargo containers around the two ports, creating a problem of where to store them. If they are leased cargo containers, the empty boxes can be returned to the leasing company. But if they are Hanjin-owned, they are stuck here.

“The Hanjin empties are an issue, and the port has been working with some of the terminals and third-party operators to create some space to store them,” said Phillip Sanfield, a spokesman for the Port of Los Angeles.

In turn, the chassis, or wheeled frames attached to the containers, are becoming scarce because they are remaining with the containers until they find a storage spot. “Now we are running out of chassis to pick up cargo at TTI [the Hanjin Shipping terminal at the Port of Long Beach],” said Mark Hirzel, a customs broker and district manager at A.N. Deringer and chair of the Los Angeles Customs Brokers & Freight Forwarders Association. “If you pick up a Hanjin container at the APM Terminal at the Port of Los Angeles, you have to come up with your own chassis. APM is making sure their chassis don’t go out with Hanjin boxes.”

Another wrinkle is that many importers using Hanjin Shipping did not want to pay for their ocean freight until it actually arrived in Los Angeles. But now Hanjin Shipping is holding the freight at the ports until the importers’ checks clear. That is taking about seven days.

Since Hanjin Shipping filed for bankruptcy in South Korea on Aug. 31, three Hanjin Shipping vessels were anchored off the coast of Southern California until everyone figured out what to do with the ships. They started docking at the Los Angeles/Long Beach port complex on Sept. 10 after the ships and their crews were stuck in a watery parking lot for more than a week.

The first to arrive was the Hanjin Greece, which docked at the TTI terminal at the Port of Long Beach. It then sailed on to the Port of Oakland on Sept. 12.

The Hanjin Boston arrived at the Yusen Terminals at the Port of Los Angeles on Sept. 13 and set sail on Sept. 16 for Oakland. Meanwhile the Hanjin Gdynia arrived from Asia and docked at the Port of Long Beach on Sept. 14 and left on Monday, Sept. 19 for Kwangyang, South Korea, while the Hanjin Montevideo remained anchored inside the Port of Long Beach breakwater where it has been for some time.

Hanjin Shipping has been in deep financial waters for some time, and many customs brokers earlier this year started urging their clients to use other shippers.

The South Korean carrier is the world’s seventh-largest cargo-container line and used frequently by big apparel makers such as Hanesbrands, Under Armour, and retailers J.C. Penney and Fred Meyer.

In a listing by Datamyne, a Miami company that compiles international trade data, Hanesbrands had 824 containers on Hanjin Shipping vessels expected to arrive in the United States between Aug. 1 and Sept. 3, and Fred Meyer had 1,412 containers.

The carrier’s financial woes are a result of rock-bottom ocean shipping rates that have plagued the industry ever since major shipping lines started taking delivery of new and bigger cargo container vessels, which created a capacity glut.

At one point this year, the price to ship a 20-foot container from Asia to the West Coast had dropped to as low as $700 but has more than doubled after Hanjin Shipping filed bankruptcy in South Korea and created a dearth of shipping capacity.

Hanjin Shipping filed for Chapter 15 bankruptcy protection in U.S. Bankruptcy Court on Sept. 2, allowing the Korean carrier to dock its ships at U.S. ports without its vessels being seized by creditors.

Also, some financial help came from Korean officials and companies. The bankrupt shipping line said it received $35.7 million from the personal assets of Hanjin Shipping’s chairman, Cho Yang-ho. And former Hanjin Shipping chair Choi Eun-young contributed $8.9 million.

Also, Korean Air Lines Co., which owns about a third of Hanjin Shipping, came up with $54 million to help pay for port charges and handling fees.

“There is a bit of a respite right now,” said Robert Krieger, president of Krieger Worldwide, a Los Angeles customs broker and freight forwarder that has several footwear, apparel and electronics customers. “The good news is that people are getting their cargo at the ports.”

But the bad news is that cargo containers that were to be delivered to warehouses beyond the ports or taken by rail to the East Coast are stuck at the ports. “Most people will have them to pull their containers out of the port, take them to a warehouse and then pay to truck them to their destination,” Krieger said. “It’s been a major headache for us.”