Vessel Sharing Agreements: Why Your Non-Hanjin Shipment Might be Stuck
In the wake of Hanjin Shipping’s collapse, shippers and importers were left wondering about the fate of roughly 500,000 TEUs (Twenty-foot equivalent units). This may have surprised some shippers because they did not actually book with Hanjin, yet their freight was still stuck on one of these “ghost ships.” This is because of vessel sharing — a common practice in the ocean shipping industry.
Hanjin is a member of the CKYHE Alliance, which is a vessel sharing agreement (VSA) between Cosco Container Lines, “K” Line, Yang Ming Line, and Evergreen Line. In this VSA, each steamship line agrees to provide vessels for certain trade lanes. This means one trade lane may be serviced by multiple steamship lines that all share space on each other’s vessels. This is how one can have a booking with Cosco and end up on a Hanjin vessel.
Another way in which different steamship containers end up on each other’s vessels is through a practice known as slot sharing. The steamship lines do not necessarily need to have a VSA in place, rather they just lease a certain amount of space on each other’s vessels. That is why whenever you see a picture of a container ship, it resembles a checkerboard comprised of different color containers.
So what happens now? All of the fellow members of the CKYHE Alliance have severed ties with Hanjin and will be committed to different consortiums beginning in 2017. Ocean rates continue to rise in response to the drop in capacity due to Hanjin’s departure. Meanwhile other steamship lines are deploying additional capacity in order to fill the void. There has been some movement toward rescuing some of the stranded Hanjin freight. Three ports outside of Korea including Los Angeles, Singapore, and Hamburg have been deemed safe for Hanjin to unload containers without fear of being seized. There will still be additional costs and delays to importers, but it’s a big step forward.
Make sure to speak with your freight forwarder about the different steamship lines they utilize. A diverse base of options on each trade lane is essential for mitigating the risk of one steamship line failing.