Hanjin Shipping receivership: supply lessons for buyers of packaging consumables

On 31 August 2016, Hanjin Shipping said it would seek court receivership after its banks, led by the state-run Korea Development Bank, withdrew support. As Reuters reported that day, Hanjin was the world’s seventh-largest container carrier, its debt stood at 5.6 trillion won (about USD 5 billion) at the end of 2015, and ports including Shanghai and Xiamen in China, Valencia in Spain and Savannah in the United States had blocked access to its vessels amid concerns over whether port fees would be paid. The consultancy Alphaliner said a bankruptcy would be the largest ever for a container line by capacity.

Within a week, the scale was clearer. According to a Reuters report of 7 September 2016, 70 Hanjin ships had been denied access to ports and three had been seized by creditors in Singapore and China. A US bankruptcy judge granted temporary protection so that vessels could dock in US ports, and the company’s parent said it would raise USD 100 million to meet cargo commitments. One shipper, HP, told the court it had products in more than 500 Hanjin containers.

At the time of writing, in September 2016, the court process in Seoul and the recovery of cargo were still under way. The neutral lessons for buyers do not depend on how it ends.

Why packaging consumables are exposed

Strap, buckles, seals and clips are rarely the most valuable items in a supply chain. They are, however, consumed every shift. A packing line that runs out of the specified buckle or strap either stops or improvises, and improvisation with an unapproved closure is a quality risk of its own.

When a container of consumables is held offshore or at a terminal that will not release it, the buyer’s problem is not the value of the goods. It is the time until replacement stock can arrive, and the cost and paperwork of getting the original cargo released.

Who can act depends on the contract

The first questions in a carrier failure are simple, and a buyer needs to be able to answer them within hours rather than days:

Question	Why it matters	Where the answer is
Which carrier and vessel hold the goods?	Determines whether the shipment is affected at all	Booking confirmation and bill of lading
Who contracted the carrier?	That party deals with the carrier, forwarders and terminals	The agreed trade term and freight booking
Who holds the original bill of lading?	Needed to claim the cargo when it is released	Document trail from supplier, bank or forwarder
Where is risk transferred?	Decides who bears loss or extra cost in transit	The trade term and named place in the sales contract
What does insurance cover?	Extra handling, storage and on-carriage may be costly	The cargo insurance policy; ask the broker

The HP filing showed one consequence. To get its goods moving, HP proposed putting up funds to pay for delivering its cargo, with ports and stevedores able to claim their fees and costs from that money. A cargo owner may end up paying extra simply to recover its own goods, and whether the buyer or the supplier carries that cost depends on the terms they agreed before shipment.

Practical steps for consumable supply

Keep a shipment register. For each open order, record the carrier, vessel, container number and bill of lading. It takes minutes per shipment and saves days when something goes wrong.

Hold a defined buffer. Decide how many weeks of strap and closures the line needs to bridge a missed shipment, and keep that quantity as a managed reserve rather than an accident of ordering.

Split critical orders. Where volumes allow, spread consumables across sailings or carriers so one failure does not take out a whole quarter’s supply.

Approve an alternative. If a second buckle size, strap grade or supplier has already been tested and approved, an emergency order is a purchasing task rather than an engineering one.

Agree communication. Ask suppliers to confirm shipment details at dispatch and to tell you promptly if a booking changes.

Pack for delay as well as distance

A container held at anchor or discharged at an unplanned port may sit for weeks longer than expected and be handled more often. That has consequences for the goods inside:

• Moisture. Long dwell times increase the chance of condensation. Cartons of metal components benefit from dry packing and should be checked on arrival.
• Tension retention. Loads that settle during long storage can lose strap tension. A system that tolerates some load movement is worth considering for long or uncertain routes.
• Extra handling. Units that may be restowed or transhipped need securing that copes with more lifts and moves than the original plan.

None of this prevents a carrier failure. It limits how much damage a delay does to the cargo.

Planning your next order

If the events of September 2016 prompted a review of consumable stock, specify the quantities, sailing preferences and packing requirements in your next enquiry. Compare woven strap, PET strap and galvanized wire buckles for your route, and send the request through the enquiry page so delivery terms are agreed alongside the product.