Friday, October 21, 2016

International Shipping Spawns a Brace of Unusual Stories with Illegal Flaggings and False Bankruptcy

Tanzania Criticised Whilst the Fate of a Major Player Threatened by Falsehoods
Shipping News Feature
NORTH KOREA – TANZANIA – JAPAN – Two of the more unusual stories arising from the logistics community in the past month, as Tanzania is accused of breaching UN sanctions having apparently reflagged several North Korean ships (an accusation incidentally which the country refutes outright), whilst, as many readers know, last month, Japanese shipper K Line found itself centre stage after employees at APL Logistics started circulating false rumours that the Japanese carrier was facing bankruptcy, completely untrue, and of which details follow.

Starting with Tanzania, an investigation carried out by NK News states that it found that ‘nearly fifty vessels owned by or linked to North Korea have changed their flag to Tanzania’. Having apparently collected data from Marine Traffic, the Equasis maritime database, and inspection records from Port State Control (PSC) authorities, NK News suggests that the Tanzania Zanzibar International Register of Shipping (TZIRS) has, since March, been part of a frenzied campaign by North Korea to attempt to keep its maritime industry alive following fresh sanctions imposed by the UN that month, restricting the hermit country's cargo options.

This of course is actually nothing new, in 2014/15 more companies were added to the list of sanctioned shipping groups after weapons were found under bags of sugar aboard the North Korean registered Chong Chon Gang and that vessel, a ship with a very chequered history, seized. It took payment of a fine equivalent to two thirds of a million dollars to have the ship released from Panamanian custody and the vessel was renamed and possibly later reflagged together with several sister ships, to avoid the blacklist.

Paragraph 19 of the recently imposed UN Resolution 2270 that further restricts trade with North Korea calls upon Member States to ‘de‑register any vessel that is owned, operated or crewed by the DPRK,'with further calls upon Member States 'not to register any such vessel that is de-registered by another Member State pursuant to this paragraph’. Reportedly since the resolution passed, various countries have removed North Korean vessels from their registries.

Representatives from the Zanzibar Maritime Authority (ZMA) denies any claims that it, through TZIRS, registered the vessels. TZIRS was established by the ZMA in 2008 and is mandated to register foreign vessels that need to fly the Tanzanian flag temporarily or permanently. The society uses organisations that fall under the International Association of Classification Societies (IACS) and non-IACS organisations to undertake marine surveys and issue certificates to foreign vessels, and according to the ZMA, these agents are the ones that registered vessels from the pariah state. As a result of this situation, the ZMA has taken the decision to dispense with the use of agents and has taken the responsibility to register vessels itself.

Since the NK News report came out, Tanzania has undertaken an investigation into the vessels sailing under its flag and has apparently begun the process of deregistering the North Korean vessels and has subsequently reported the seizure two of the vessels for using the Tanzanian flag.

And so to the K Line debacle, following the demise of Korean shipping firm Hanjin, tensions in the worldwide shipping industry are understandably high, so when rumours of another bankruptcy of a major ocean freight firm surface things can spiral out of control quite quickly. Last month, a handful of employees at APL Logistics ‘conveyed opinions to several customers that touch on the potential financial position or viability of K Line’, according to a statement by APL Logistics and its parent, Japanese global logistics group, Kintetsu World Express (KWE), in a full blown apology for the incident.

The rumours also exacerbated reports that K Line is in line for a takeover, given its supposed financial difficulties (name a major container line which hasn’t been rumoured to have difficulties). Stakeholder Effissimo Capital Management recently increased its stake in K Line, now holding around a 37% share in the company, which the fund management company says is for investment purposes, not a takeover.

Reports suggest that the rumours started as a case of mistaken identity as another company with a similar name to Kawasaki Kisen Kaisha, or K Line, instead filed for bankruptcy. The company in question, Kawasaki Keihin Kaisha , is a small Yokohama based line which filed for bankruptcy early in September. This practice of abbreviating company names to a series of letters is almost bound to bring on misunderstandings of this type, with the potential for disastrous consequences for the innocent parties such as K Lin; the China Ocean Shipping Agency apparently advising against booking cargo on K Line vessels last month.

APL Logistics, owned by KWE is not related to APL, the shipping line and owned by CMA CGM, the agency having been sold by NOL to KWE. We trust that makes the whole situation clear?

Photo: Panamanian Customs officials look into the hold of the Chong Chong Gang where the hidden container containing the weapons was discovered.