joel-repThe 2014-2015 West Coast Port Slowdown was costly to parties that import and export goods. There were significant delays in loading and unloading containers from vessels, as well as returning empty containers and chassis; the delays were caused by the International Longshore and Warehouse Union’s labor slowdown. The combination of the above referenced delays resulted in terminal operators imposing millions of dollars of demurrage and detention fees on their behalf as well as that of Ocean Common Carriers; at least a plurality of the demurrage and detention fees were illegal.

Although that labor slowdown was resolved, now there is a new problem facing parties throughout the world that import and export goods. Hanjin Shipping Company, Limited, one of the world’s largest container shipping companies, recently declared bankruptcy both in the United States as well as in its home country, South Korea. Because of this, Ports via terminal operators throughout the United States, including Seattle, Tacoma, Los Angeles-Long Beach, New York-New Jersey, Houston, New Orleans, Oakland, and many others are refusing to load and/or unload Hanjin containers, and refusing to accept empty Hanjin containers and/or the chassis on which they are transported.

On August 31, 2016 the Hanjin Shipping Company, Limited (“Hanjin”) filed for bankruptcy in the Seoul Central District Court. The filing occurred the day after Hanjin’s  creditors rejected its latest funding proposal.  Hanjin subsequently filed for Chapter 15 bankruptcy with the United States Bankruptcy Court for New Jersey. Chapter 15 allows for a foreign corporation that files for bankruptcy in their home country to also file in the United States with the respective Courts coordinating on the bankruptcy.

The shipping industry, in general, has recently experienced a significant drop in demand due to a combination of over capacity, a significant slowdown in economic growth in China, and reduced demand for consumer goods. The Baltic Dry Index tracks the volume of worldwide shipping. It historically peaked in 2009, and its post-great recession peak was in 2014, however since that time, it has declined significantly.

The decrease in worldwide shipping along with a variety of other factors likely is what led to the Hanjin bankruptcy. Because of the bankruptcy, terminal operators are refusing to load and/or unload Hanjin containers, and rejecting empty containers and chassis, thereby causing Beneficial Cargo Owners (parties importing and exporting goods) that ship goods via Hanjin and Non-Vessel-Operating-Carriers (“NOVCC”) that transport Hanjin containers to have to pay or being told to pay demurrage and detention charges even though they did not cause the Hanjin bankruptcy.

Hanjin assesses a daily detention charge if an empty container is not returned by the party that receives it within a specific period of time. Chasis leasing companies also assess daily detention charges if the chassis accompanying the containers are not returned within a specific period of time. Because Hanjin does not currently need many of the empty containers, and because terminal operators do not allow their space to be used to store empty Hanjin containers, Hanjin and terminal operators are imposing detention fees, even though the reason for the delay is the terminal operators’ refusal to take Hanjin containers and chassis, and indirectly, the Hanjn bankruptcy.

The detention charges are being imposed on Beneficial Cargo Owners as well as NVOCCs. Moreover, the rejection of the chassis is creating a chassis shortage. Because such charges are accruing due to no fault of Beneficial Cargo Owners and/or NVOCCs, Hanjin and/or the terminal operators’ imposition of the charges is improper and likely illegal. Consequently, a Beneficial Cargo Owner and/or NVOCC that has already paid or has been assessed detention charges is likely legally entitled to dispute any and all of the detention fees.

Along with detention fees, Hanjin bankruptcy has also led Hanjin and terminal operators to impose demurrage fees. The reason that the Hanjin bankruptcy has led to demurrage charges to be imposed is that most United States terminal operators are refusing to load Hanjin export containers onto vessels, and the containers sit loaded in the storage yard accruing demurrage fees.

The terminal operator will release the containers to NVOCCs only if the terminal delivery fee and any demurrage charges are paid up front. The Beneficial Cargo Owners that pay these fees up front, generally via a NVOCC, then have the Hanjin containers transported to their warehouse where the contents are transferred into containers belonging to other shipping lines, and those containers are then delivered to the terminals where those shipping lines call.

Because the demurrage charges are accruing due to no fault of Beneficial Cargo Owners and NVOCCs, any and all demurrage charges imposed by terminal operators and/or Hanjin on Hanjin shipping containers that terminal operators refuse to load onto a vessel/ship are not legitimate and likely illegal.  Consequently, a Beneficial Cargo Owner and/or NVOCC that has demurrage charges imposed on them for Hanjin containers following the Hanjin bankruptcy, is likely legally entitled to dispute any and all of the charges given that the terminal operator and/or Hanjin bankruptcy caused the delay in removal of the container, not the Beneficial Cargo Owner or NVOCC.

If you or your company are facing a dispute over detention or demurrage charges with goods and/or containers that were shipped via the Hanjin Shipping Company, Limited following its bankruptcy, please feel free to contact MDK Law today.

MDK Law is based out of Bellevue, Washington (10 miles east of Seattle, Washington), we have attorneys experienced with disputing demurrage and detention fees who are licensed in California, New York, Texas, Washington and Oregon.

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