Last week, South Korea’s Hanjin Shipping Company (“Hanjin”) filed for bankruptcy protection under the Debtor Rehabilitation and Bankruptcy Act in the Seoul Central District Court in South Korea. As the world’s seventh largest container shipper servicing 8% of the Trans-Pacific trade in the United States, Hanjin’s bankruptcy filing is cause for concern for landlord retail anchor tenants, such as Target and JCPenney, as well as to other trade creditors and suppliers.

In an effort to extend the foreign Korean bankruptcy proceeding and to allay the concerns of customers in the United States, on September 2, 2016, Hanjin filed a petition in the United States Bankruptcy Court for the District of New Jersey seeking recognition of the Korean “foreign proceeding” under Chapter 15 of the United States Bankruptcy Code. On September 6, 2016, the Bankruptcy Court entered an interim order recognizing the Korean foreign proceeding. This allowed the powerful automatic stay provisions of the Bankruptcy Code to take effect, providing Hanjin with much needed protection in order to ship and offload goods into U.S. ports.

Hanjin also requested the application of Section 365 of the Bankruptcy Code in the Chapter 15 proceeding, where relief was granted on an interim basis as well. Application of this provision of the Bankruptcy Code would enable Hanjin to maintain contracts and prevent counter-parties from terminating contracts based on insolvency related termination provisions. The continuation of the relief granted in the interim is scheduled to be heard by the Bankruptcy Court this Friday, September 9, 2016.

Manufacturers such as HP, Inc. (formerly “Hewlett-Packard”) filed pleadings in support of Hanjin’s request for recognition of its foreign bankruptcy proceedings in the United States. HP raised concerns that products being shipped by Hanjin are the property of: 1) HP; 2) its factories; or 3) its customers, depending on the point in transit the goods are located. With over 500 of its containers under the control of Hanjin, HP has reason for concern. Delays to HP’s supply chain could result in significant liquidated damages or cancellation of purchase orders to the tune of millions of dollars. The trickle-down impact on retailers and end-users, without access to goods from HP and other wholesalers, is transparent – especially as retailers gear up for the approaching holiday shopping season.

While HP supports Hanjin’s request for recognition of the foreign bankruptcy proceeding, HP requests that the Bankruptcy Court in New Jersey impose a coordinated protocol to ensure timely delivery and turnover of goods. As part of its protocol, HP requests: (i) the Court recognize HP’s right of ownership in the goods; and (ii) Hanjin provide assurances that it has sufficient funds to pay for services needed to deliver goods to HP, or that it will or institute a strict protocol proposed by HP to stabilize US shipping operations.

The fears of HP and other Hanjin customers are substantial. As of last week, one Hanjin ship was seized by its owner in Singapore. Other Hanjin ships were drifting offshore near ports such as Long Beach, California, unable to access shipping terminals due to the inability to pay bills and fear of seizures.

Relief under Chapter 15 of the Bankruptcy Code may help alleviate concerns of Hanjin’s customers, by providing international cooperation among the courts. Chapter 15 divides foreign proceedings into two categories: main proceedings and non-main proceedings. If Hanjin’s foreign proceeding is recognized as a “foreign main proceeding” on a permanent basis, Chapter 15 will provide certain mandatory relief, including an automatic stay of proceedings by creditors against the foreign debtor’s assets in the United States.

As a retailer, supplier and/or trade creditor in Hanjin’s Chapter 15 bankruptcy proceeding, knowing your rights and the deadlines to assert those rights are keys to mitigating risk and enhancing recovery.