Protecting the Supply Chain: U.S. Government Studies the Role of Federal Agencies in Ocean Carrier Bankruptcies
The shipping industry plays an integral role in international trade and commerce. The immediate consequence of an ocean carrier bankruptcy will be substantial disruption in the supply chain. The authors of this article discuss the issue in the context of Hanjin’s bankruptcy case and advise industry participants to take steps to insulate themselves from the potential bankruptcy of another participant in the supply chain.
In December 2018, the Frank LoBiondo Coast Guard Authorization Act (the “LoBiondo Act”) was enacted to, among other things, improve and support the operation and administration of the Coast Guard and update maritime and environmental policy. Section 713 of the LoBiondo Act directs the Comptroller General of the United States to “conduct a study that examines the immediate aftermath of a major ocean carrier bankruptcy and its impact through the supply chain.” In accordance with that mandate, in January 2020, the U.S. Government Accountability Office (“GAO”) published a report on the role of the Federal Maritime Commission (the “FMC”) and Department of Commerce (“Commerce”) in an ocean carrier’s bankruptcy case.
The study was prompted by supply chain disruption at sea and at numerous ports caused by the bankruptcy of Hanjin Shipping Co., Ltd. in August 2016. At the time, Hanjin was one of the world’s largest integrated logistics and container shipping companies transporting cargo to and from ports throughout the world. The GAO concluded that the FMC and Commerce played an important monitoring function in the industry, but did not recommend any changes to either agency’s role in an ocean carrier bankruptcy. This is because the GAO found that industry participants have already taken steps to mitigate the effects of another ocean carrier bankruptcy and current law does not authorize these agencies to have a more active role.
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“Protecting the Supply Chain: U.S. Government Studies the Role of Federal Agencies in Ocean Carrier Bankruptcies,” by Rick Antonoff and Evan Jason Zucker was published in the October 2020 edition of Pratt's Journal of Bankruptcy Law (Vol. 16, No. 7), an A.S. Pratt Publication, LexisNexis. Reprinted with permission.
This article was first published in Blank Rome’s MAINBRACE: Special Offshore Wind Edition (June 2020).