THE Alliance Sets Up $50 Million Safety Net

container ship

By The Maritime Executive 09-15-2017 07:17:48

THE Alliance is establishing a $50 million insolvency contingency fund in case one of its members faces financial distress or insolvency.

THE Alliance members submitted an amendment for the creation of the fund with the U.S. Federal Maritime Commission (FMC) on September 14. Federal Maritime Commissioner William P. Doyle said: “I support the goal behind this amendment: the smooth and continuous flow of cargo even in the face of another ocean carrier bankruptcy or catastrophic failure.”

Shipping lines in THE Alliance are Hapag-Lloyd and Hapag-Lloyd USA (acting as one party); Kawasaki Kisen Kaisha,; Mitsui O.S.K. Lines; Nippon Yusen Kaisha and Yang Ming Marine Transport Corp. 

Each carrier will initially contribute $1 million into the contingency trust fund and a further $9 million in additional funds or through a letter of credit. 

“Last year’s collapse of Hanjin Shipping was a wake-up call for the entire ocean transportation and logistics chain,” Doyle says. “Over $14 billion worth of cargo was stranded at sea on 100 ships scattered around the globe. 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.

“Looking back, things could have been done differently. Looking forward, things must be done differently. And, things are being done differently with the establishment of this contingency trust fund by THE Alliance.  Hopefully the contingency fund will never have to be tapped.

“I firmly believe that if a carrier joins an alliance, it is the responsibility of the alliance members to ensure the cargo gets to where it needs to go. If a carrier fails and that carrier is party to an alliance, the cargo carried on the failed company’s ships may equate to a fraction of the container volume carried. Many containers may belong to the other carriers in the alliance. My point is this — Hanjin was carrying the cargo not only of Hanjin but of the other alliance members of CKYHE as well.

“Everyone suffered in the ocean maritime transportation chain.  So it is essential that all take responsibility. The responsibility is to get the ship into port and get it unloaded, get the empties onboard and get the ship back out to sea.”

The contingency fund will be used to ensure that the affected company:

•             continues to make port calls in accordance with the services provided by THE Alliance, pay costs, losses or liabilities reasonably incurred by the Parties as a result of the arrest of a vessel;
•             to advance funds or payments related to carriage, handling, storage or delivery of containers carried by an affected Liner;
•             pay claims of third parties which could lead to the arrest or detention of a vessel;
•             reimburse the non-affected Parties for costs, losses or liabilities incurred by the other members of THE Alliance.

The fund is designed to be a living instrument and will be replenished if required.