The Alliance has reported that the group has set aside an insolvency contingency fund amounting to $50M in case one of its members suffers financial distress, like what happened to Hanjin Shipping. The fund’s purpose is to protect customer’s cargo and the ocean transportation chain, if ever an insolvency event occurs to the members’ carriers.
The settlement agreed by The Alliance members also establishes procedures for the orderly removal and/or replacement of vessels and the rights of the remaining parties to negotiate directly with agents and subcontractors of the affected party. The contingency fund would be administered by a trustee.
As the Federal Maritime Commission acknowledges the groups’ action, FMC Commissioner William Doyle, states that Hanjin’s demise last year served as a “wake-up call” for the entire ocean transportation and logistics chain.
“It is so important that another Hanjin debacle does not happen again. 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 expressed.
On the contrary, the said fund was criticized for being too small. Whether $50M is enough to sort out the supply chain chaos from a liner collapse has been questioned. When Hanjin folded, more than $14.5bn worth of cargoes were left stranded on more than 100 ships around the world.
“The decision to set funds aside is commendable, but the amount seems underwhelming for the largest networks,” Kris Kosmala, a Splash columnist and vice president at software firm Quintiq, commented.
“Without doubt, other alliances need to provide similar safeguards to assure shippers of their commitment to keep the cargo moving”
The Alliance are consists of the five lines – Hapag-Lloyd, K Line, NYK, MOL and Yang Ming.