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  August 14th, 2017 | Written by

THE Alliance Proposes Insolvency Protections

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  • THE Alliance seeks to prevent another Hanjin Shipping debacle.
  • Hanjin bankruptcy left billions of cargo stranded at sea.
  • FMC Commissioner: Alliances responsible for members' cargo.

Parties to THE Alliance Agreement filed an amendment with the Federal Maritime Commission on August 7, seeking authority to contribute funds to a contingency fund designed to protect against the effects of one of the parties experiencing financial distress or insolvency.

The amendment comes, apparently, to prevent what happened when Hanjin Shipping went bankrupt last year. At the time, billions of dollars worth of cargo were stranded at sea as ports refused to handle Hanjin cargo, and it took months to resolve all of the complications that ensued.

Parties to THE Alliance Agreement are Hapag-Lloyd; Kawasaki Kisen Kaisha, Ltd.; Mitsui O.S.K. Lines, Ltd.; Nippon Yusen Kaisha; and Yang Ming Marine Transport Corp. Yang Ming is reportedly struggling with debt and reported losses of $43.7 million for the first half of 2017.

The parties have requested expedited review by the Federal Maritime Commission.

Federal Maritime Commissioner William Doyle expressed pleasure at THE Alliance filing. “Earlier this year, I served as a panelist on the fallout from the Hanjin bankruptcy at the TPM conference in Long Beach, California,” he related. “I highlighted that the August 2016 collapse of Hanjin Shipping was a wake-up call for the entire ocean transportation and logistics chain. Over $14 billion worth of cargo was stranded at sea on 100 ships scattered around the globe.

“It is so important that another Hanjin debacle does not happen again,” Doyle added. “Companies may fail, but the responsibility lies with everyone, at least to the extent that we do not have the damage that occurred post-Hanjin.”

Doyle stressed that things must be done differently in the future. “We need safeguards and THE Alliance is heading in this important direction,” he said.

“I firmly believe that if a carrier joins an alliance, it is the responsibility of the alliance members to ensure the cargo gets to where it needs to go,” Doyle added. “If a carrier fails and that carrier is party to an alliance, the cargo carried on the failed company’s ships may only equate to a fraction of the container volume carried. The majority of containers may belong to the other carriers in the alliance. My point is this—Hanjin was carrying the cargo not only of Hanjin but of the other alliance members as well.”

Doyle said he is studying the proposed amendment and will consider comments filed from stakeholders and the public on the issue. Interested parties may submit comments to the secretary of the Federal Maritime Commission.