On September 9, 2016, Hanjin Shipping Co. won a ruling protecting its assets in the U.S. against creditors, while the shipping line proceeds with its reorganization in South Korea. Hanjin filed for relief under Chapter 15 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey (U.S. Bankruptcy Court Judge John K. Sherwood in Newark, N.J.).

A case ancillary to a pending insolvency proceeding in a foreign country is commenced by a “foreign representative” under chapter 15 of the Bankruptcy Code. Tai-Soo Suk, an inside director of the company, is Hanjin's foreign representative in the South Korean bankruptcy. As the foreign representative, Tai-Soo Suk had the right to file a petition for recognition of a “foreign proceeding.” After notice and a hearing, the New Jersey court was authorized to enter an order recognizing Hanjin's Korean insolvency proceeding.

Upon recognition – which provisionally occurred on September 9 – the automatic stay and various other provisions of the Bankruptcy Code apply as to Hanjin's assets within the U.S. The New Jersey bankruptcy court's order provided that Hanjin's Chapter 15 filing stayed "the commencement or continuation of any actions against Hanjin or its assets located within the territorial jurisdiction of the United States" and "sections 362 and 365(e) of the Bankruptcy Code are hereby made applicable …. [to] the property of Hanjin within the territorial jurisdiction of the U.S. including owned, operated or chartered (leased) vessels or property thereon (including bunkers) and any other transportation equipment (containers and chassis)."  

The immediate effect of this stay is that ships outside U.S. ports may now be permitted to enter those ports since the principal reason for the denial of entry was fear by the ports that the ships would be seized and unable to leave the port. Over the weekend, one of Hanjin’s ships – the Greece – docked in Long Beach and unloaded cargo.  The ship is scheduled to next dock in the Port of Oakland.  While this one ship has docked  and unload cargo, it does not resolve the issue as to how cargo from other ships will be treated, and whether such cargo will be unloaded once the ships have docked. In certain circumstances, ports, stevedores, and ground transportation companies may refuse to touch cargo carried by Hanjin ships without guarantee of payment for those services.  Dozens of ships owned and leased by Hanjin are believed to hold $14 billion in goods, with one party estimating roughly 93 vessels stranded at 51 ports.

An immediate concern for sellers and buyers which have goods stranded on stranded Hanjin ships is whether agreements between the buyers and sellers have been breached by non-delivery of goods as required by the terms of their agreements. This will require careful analysis of the agreements as well as shipping documents to determine who has title to the stranded goods.

Another concern relates to potential customs issues with respect to pre-filed entries, Importer Security Filings and other documentation filed with respect to the entry. Customs has just released guidance, available here, to detail the applicable requirements for various Hanjin scenarios, including where ships intended for arrival in the United States are diverted to foreign ports and the cargo is discharged, where they are anchored off-shore, and where they are diverted to other U.S. ports and discharged there.

On September 12, 2016, the Seoul Central District Court revised its timeline for the submission, filing of, and objection to claims in the Hanjin Korean insolvency proceeding.  In particular: (1) on October 10, 2016, the Korean receiver must submit a list of recognized claims (secured and unsecured) to the Seoul Central District Court; (2) on October 25, 2016, all creditors and shareholders must to file secured claims, unsecured claims and shares (to be submitted to the Court along with supporting evidence); and (3) on or before November 15, 2016, the receiver and any creditors may submit objections to claims filed against Hanjin.