Retailers are in crisis as cargo carrying sneakers, TVs and more products are stranded on the high seas.
Hanjin Shipping, the world’s seventh-largest shipping companies based in South Korea — which operates out of ports in Long Beach, Calif. and Los Angeles — filed for bankruptcy protection in a Seoul court on Thursday, sparking fears from port operators that have responded by denying services to Hanjin vessels.
The situation affects U.S.-bound cargo being delayed at origin ports, as well as ships with cargo remaining idle and unable to enter U.S. ports.
Hanjin’s shutdown “presents an enormous challenge to U.S. shippers,” Retail Industry Leaders Association president Kennedy said in a statement, adding that the situation “could have a substantial impact on consumers and the economy at large.”
The disruption could affect supplies for retailers looking to gear up for the upcoming holiday season — and the Retail Industry Leaders Association has urged the Department of Commerce and the Federal Maritime Commission to take action on the matter.
Some of the retailers affected include Walmart, Target, and J.C. Penney, Market Watch noted.
“While the situation is still developing, the prospect of harm is significant and apparent,” RILA President Sandy Kennedy wrote in a letter. “We urge that Department of Commerce and the Federal Maritime Commission work together with all stakeholders, including ports, cargo handlers and the South Korean government, to resolve the immediate disruption and mitigate the harms posed by the current situation.”
The fallout has been swift. So far, three of Hanjin’s vessels have been idle near L.A. and Long Beach ports, and another remains outside the Port of Prince Rupert in British Columbia, Canada, while another has been seized in Singapore, according to Bloomberg. A source tells the organization that ports have refused Hanjin ships “because they are worried port and other fees won’t be paid.”
“The impact on importers and exporters is having a ripple effect throughout the global supply chain. Further, the inability to return empty containers is causing backups and interfering with chassis availability. Finally, given that Hanjin is part of a larger shipping alliance, uncertainty about its future is effecting the ability to move cargo unassociated with Hanjin. We understand that U.S. exporters are experiencing similar disruptions, as outbound cargo is turned away for the same reasons,” Kennedy explained.
Total Terminals International at the Port of Long Beach, Calif. announced on its website: “Temporarily, TTI is not accepting Hanjin export.”
The company filed for court receivership after bank creditors cut off financial support on Tuesday, Reuters reports. The Korea Development Bank withdrew its backing of the company, citing its nearly $5 billion debt that it incurred last year.
Hanjin handles around 7.8% of the trans-Pacific trade volume for the U.S. market, according to the Retail Industry Leaders Association.