On 31 August, it was reported that Hanjin Shipping filed for bankruptcy protection and stopped accepting new cargo after its bankers withdrew financial support for the company.
Hanjin is reported to be the world's seventh-largest container shipper and the news left the trade finance community in shock and cargo headed to and from Asia in limbo. As of 5 September, and according to South Korea's maritime ministry, 79 Hanjin vessels including 61 container ships and 18 bulk carriers are stated to have been denied port access. This figure includes one vessel seized in Singapore by a creditor. Hanjin is stated to have 141 ships, of which 128 are presently operating.
According to the Korea International Trade Association, Hanjin vessels are currently carrying cargo worth 16 trillion won (US$14.5 billion) belonging to some 8,300 cargo owners.
As part of its efforts to gain legal protection for its ships, Hanjin has filed a Chapter 15 petition in a U.S. bankruptcy court in New Jersey. South Korea's financial regulator said Hanjin plans to pursue legal action in roughly 10 countries this week and later expand this to 43 jurisdictions to protect its vessels.
Trade finance banks are already starting to ask questions as to what to do if they are the issuing bank or the confirming bank of a letter of credit where a Hanjin bill of lading is presented. The answer under the UCP is quite simple - the documents will comply if they are otherwise in order. There are bound to be a number of attempts at obtaining court injunctions to stop issuing banks honouring presentations that include a Hanjin bill of lading. Whilst there is a lot of sympathy with applicants of letters of credit, that are anxious to know the whereabouts and status of their cargo, there is a need for issuing banks to understand their obligation towards a nominated or confirming bank that has acted according to the terms and conditions of the credit and the UCP, in particular article 5.