Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Nearly a month after the collapse of Hanjin Shipping Co., the world's seventh-largest container line, the most pressing issue now facing the Korean carrier's customers is how to retrieve the estimated $14 billion worth of goods still on board its container ships.
Hanjin's collapse has left vessels and containers stranded at or near ports worldwide because there had been no money to pay for the loading and unloading of containers. Terminal operators at a number of ports have refused to release Hanjin's containers until the cargo's consignees paid either a security deposit or the terminal-handling fee that the carrier would have normally paid. The Hong Kong Shippers Council decried that practice, calling it an illegal lien on Hanjin's customers that should rightly be levied against the carrier.
Thanks to a late infusion of cash from investors and creditors, Hanjin can now cover the cost of docking and unloading for some of its ships. The carrier, which left the maritime supply chain in chaos when it filed for bankruptcy protection Aug. 31, has been discharging containers in countries or ports where its ships are protected from seizure.
Once containers leave the vessel, customers will have to pay to retrieve their own goods. It won't be cheap. Hanjin has said it will only provide port-to-port delivery and has "disavowed" any on-forwarding or inland delivery it had contracted to perform under its through bills of lading, according to Richard L. Furman, an attorney with the law firm Carroll, McNulty & Kull who specializes in international and domestic transportation and trade. The shipper, the consignee, or the ocean consolidator (also known as an NVOCC) can be responsible for paying any handling charges required to release the shipment, as well as on-forwarding and inland delivery, Furman said. As a practical matter, however, the importer in the country where those services are contracted will be responsible for payment, he said in an e-mail.
This creates a potential nightmare for importers. In many cases, containers are being discharged far from their intended destinations. The additional costs could include such things as freight charges for a substitute carrier, the container and chassis rental, and local and inland drayage for both the full and the empty container. All of this is on top of the freight and ancillary charges that were specified in the original bill of lading.
"A lot of shippers don't understand that the carrier holds the cards when you have a situation like this," said Rick Bridges, a vice president with the international insurance firm Roanoke Trade, in an interview. "The bill of lading is a contract the shipper and carrier have agreed to. The carrier can legally, by the 'hindrance' clause, end responsibility for the cargo wherever it chooses," he said. "For example, you could have cargo coming from the Far East to the U.S., and Hanjin could decide to unload in Australia. You still owe the full freight amount, and now you also have to pay to get your cargo to its original destination."
Things are only slightly better for exporters. Hanjin previously said it would require exporters that had already loaded their containers to strip out the contents and return the empty boxes at their own expense. The carrier told a federal bankruptcy court on Friday that it would not charge U.S. shippers for the late return of boxes.
CONTRACT COMPLICATIONS
Hanjin is a member of the CKYHE vessel-sharing agreement (VSA), and many of the containers on its ships belong to the other VSA members: COSCO Container Lines, "K" Line, Yang Ming Line, and Evergreen Line. Because those shipments were carried under the other carriers' bills of lading, Furman said, those carriers "are responsible for performance of their contracts of carriage as if they were on one of their own vessels."
But nothing is simple, he added. The other carriers' contract of carriage and tariff rules, any service agreement they may have with a shipper or NVOCC under which they agreed to transport goods, and the terms of the VSA agreement with Hanjin may also come into play.
"It is my opinion that VSAs will have the first responsibility to secure the offloading of their goods from the Hanjin vessels, at their expense, and then work out the rest with the cargo interests and their agents as to who will bear any additional costs as a consequence of the situation, and if and to what extent the VSA members bear any liability for loss, damage, or delay that occurred to the goods while held up on the Hanjin vessels," Furman said.
Although service contracts, the annual agreements between shippers (including importers, exporters, NVOCCs, and shippers' associations) that specify pricing, terms of service, and performance obligations for both customer and carrier, are legal contracts, Hanjin may now be off the hook to some extent, according to Furman. That's because, in general, the terms of such commercial agreements "cannot obviate or override the bankruptcy code or the discretion of the court to administer the estate of the bankrupt," he said.
Yet service contracts could potentially cause additional tension between Hanjin and NVOCCs, a major part of the liner's customer base. Carriers' rate agreements with consolidators generally provide cheaper box rates in exchange for a commitment to book a minimum number of containers over a specified period, said Furman. It is safe to assume, he said, that many of those agreements will not be fully performed by NVOCCs due to the bankruptcy. This would result in a technical breach of the agreement, which ordinarily would "entitle Hanjin to demand the higher container rate that would have been charged if no rate agreement existed," Furman said.
The concern for NVOCCs, he explained, is whether the trustee or receiver of Hanjin's bankrupt estate will seek to recover the additional freight charges due as a result of the NVOCCs' inability to meet the volume commitment in their rate agreements, even though they were prevented from doing so by the bankruptcy. "It seems illogical that such an eventuality might arise, but stranger things have happened," he said.
Shippers that are looking to their cargo insurance carriers to cover the extra costs they incur as a result of Hanjin's bankruptcy should clarify with their insurer what would be covered and what would not, Bridges said. For instance, a shipper can't just abandon cargo and expect insurance to pay for that loss. "Under most cargo policies you're obliged to get your shipment to the intended destination and to minimize physical loss or damage," he explained. "Abandonment is not an option unless the shipper wants to bear all of the costs itself." Every policy is different, however, and Bridges and other experts recommend that if they haven't already done so, cargo interests notify their insurance provider now that they may file a claim, and discuss coverage details.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.