You may recognise the quote in the title from the film "Ron Burgundy – Anchorman" about our favourite newsreader from San Diego in the 80's. Of course he was talking about a street fight with news teams from other San Diego stations but could just as easily been talking about the seemingly sudden financial demise of the Hanjin shipping line.
As Ron Burgundy may also have observed the financial demise of Hanjin is "kind of a big thing" creating massive waves not only in the shipping world but also in the larger world economy. The Korean national economic miracle was born in many ways on strong growth and economic collaboration by major national enterprises especially in the shipping world. For this state to have arisen, this flags some serious global issues, no doubt fuelled by massive uncertainty in the world economy which drives the demand for shipping.
There are a number of issues which immediately arise out of this which warrant close attention
- This now a "Korean court rehabilitation" like US–style "Chapter 11". It is far more serious and creates a whole set of new and alien concepts to consider and battle.
- There is likely to be some uncertainty for some time. The current ownership and operation of the Hanjin group is far from clear so people will, naturally enough act in a limited and cautious manner. When dealing with your clients there is no shame or failure in admitting that you are not sure how this will play out. Nearly everyone is in the same position.
- For the same reason there is nothing to be gained from getting frustrated and angry with those now representing Hanjin.
- My understanding is that there is currently an arrangement being proposed for the payment of $2,000 or even more per Hanjin container (depending on size) as a "security deposit" to allow for the release of the container which amount will be "returned" when the container is returned. To my mind this does not satisfy any of the usual aspects of a security deposit. By being paid to a "Hanjin" entity there is no security as to who will actually be the recipient of the deposit funds and whether it will actually be returned of merely disappear into some general pool of Hanjin revenue, unable to be recovered. The agreements relating to the containers already provide for the payment of significant additional costs if the containers are not returned on time. At the very least there should be a deal in which a "security deposit" fund is established akin to a trust account in which the deposit is paid in the names of both parties with specific arrangements for return (including in the case of dispute). Ideally it should be in the name of a third party.
- There will no doubt be all sorts of unusual offers arising from the situation including offers of "special" and "expedited" deals from third parties and access in exchange for additional payments. Don't be tempted. There are all manner of offences here and overseas which may punish such payments – and they are unlikely to work anyway.
- There are no guarantees as to when Hanjin ships will land and when (and if) they will unload and what will be required to secure cargo. You will need to watch the news and deal with the cargo carefully. Be prepared for requests for security in exchange for the release of containers and be prepared to pay them (such as described above) and take all necessary steps to ensure that the containers are returned properly and the securities repaid. It may be the only way that containers will be released and cargo secured.
- Make sure that your clients are ready and willing to support you in stern action to support rights to secure containers and the goods inside. There are a long line of parties who will be seeking to assert rights over those containers and goods. This rights need to be checked out carefully. Just because a financier has rights over a vessel does not necessarily give them rights over the contents of containers. Similarly, the rights of a LCB or freight forwarder against others (including clients) may well depend on your terms and conditions and whether you have properly established your rights under the PPSA.
- Freight forwarders may expect some clients to claim that there was negligence of some type involved in consigning freight to Hanjin vessels in the first place and further claiming damages through associated loss of business and profits. If that arises then your terms and conditions along with your insurance will assist in dealing with any claims.
- Whether your liability or those of your clients are covered will depend on the specific insurance held - if nothing else, check it exists.
- Prepaid freight may well be lost – like payments for gift vouchers from companies which go into insolvency. Those vouchers are treated as "unsecured" and cannot be enforced in the same way as prepaid freight cannot be enforced.
- If opportunities arise move quickly and record all actions thoroughly.
- I am sure that a number of clients/consignees may start to refuse to act to clear goods or take delivery in which case freight forwarders may need to consider actions over the goods on account of liability for freight, duty, GST and storage.
- Check your insurances to determine if they may cover liability arising from the insolvency of the shipping line.
- Make sure that BL and moneys owing to Hanjin actually get to Hanjin or its properly appointed representatives as otherwise there may well be further action by the trustee in bankruptcy to get those items and amounts again.
- If you are owed money by the Hanjin group don't expect payment as you go into the long line of unsecured creditors and be very careful on trying to exercise any rights of "set off" which may not survive against the Hanjin representatives.
- Make sure your customers and financiers are alerted – as this could be the cause of slow delivery and payments and you will need to clear any additional payments and security deposits with them. Ideally the clients would make the payments directly.
All in all you need to be alert to developments and opportunities which arise, only act properly on advice and with records – and do nothing that could void your insurances.
Remember - as always – if pain persists, both you and your client should see your lawyer.