Hanjin Bankruptcy Fiasco May Accelerate Rate Spike Amid Fresh Concerns Over Freight Visibility

Shippers across America and the globe are still grappling with the direct – and ripple – effects of the Hanjin Shipping bankruptcy fiasco. In addition to accelerating a likely freight rate spike and capacity shortage by this Christmas, the collapse of the world’s seventh largest container line serves as a dose of cold sea water to companies who value transparency, visibility, and accountability from firms that move their goods.

Hanjin is still struggling to unload $14 billion of cargo left stranded on more than 100 ships worldwide. Many of those U.S. bound containers were filled with toys and electronics – notably $38 million worth of Samsung merchandise – threatening to disrupt the holiday shipping/shopping season. The container backup at U.S. ports could be the final lynchpin in a rate boom expected to slam shippers by the end of the year. Experts say looming trucking regulations (particularly the Electronic Logging Device or ELD mandate), an expected rise in fuel prices, and the perpetual driver shortage were already forming a perfect storm of upward pricing pressure.

A more fundamental concern is the sloppy (some might say secretive) way in which Hanjin handled its impending demise, leaving its shipping customers out to dry. The New York Times even compared the lack of insolvency planning to the Lehman Brothers collapse:

“Perhaps what is most surprising about this entire event is the apparent lack of planning that went into this bankruptcy case. It certainly does not reflect well on the company’s board, which should have gotten bankruptcy professionals involved early to prepare the bankruptcy filing and account for the company’s assets throughout the world.” – New York Times, Sep. 15, 2016

A fair question seems to be: when did Hanjin officials know bankruptcy was a certainty? A fair followup: were ships set adrift anyway?

Having no foresight about Hanjin’s financial collapse is just one way shippers got the shaft. Some shippers didn’t even know their cargo was plopped on Hanjin vessels – and may still not know. Hanjin operates as part of an alliance of shipping companies, which means it may have been carrying cargo that was tendered to another carrier.

The practice of “outsourcing” freight shipments to carrier partners – without telling shippers – is an even bigger issue in U.S. trucking than it is on the high seas. A recent LaneAxis report highlighted the prevalence of freight outsourcing by large U.S. carriers – further contributing to a “visibility gap” many shippers didn’t realize existed.


Related: LaneAxis Responds to Critics of its Freight Outsourcing Report

Related: What is Virtual Freight Management?


Whether dealing with a behemoth transportation company like Hanjin, or one of the 500,000+ trucking companies in the U.S., brokers and shippers deserve full visibility into the movements of their carrier partners. At the end of the day, you should know if the carrier you’re booking your shipment with is the same carrier actually moving your freight.