THE Alliance reveals it has set aside $50m in the event one of its members does a Hanjin

THE Alliance, a new container grouping which launched this April, has revealed the amount it has set aside in the event  one of the five partners follows Hanjin Shipping by going bust. The five lines – Hapag-Lloyd, K Line, NYK, MOL and Yang Ming – have put $50m into an insolvency contingency fund designed to protect customers’ cargo and the ocean transportation chain should one of THE Alliance’s carriers experience financial distress or an insolvency event. The size of the contingency fund has however attracted criticism for being too small.

The agreement hatched among THE Alliance members also establishes procedures for the orderly removal and/or replacement of vessels and the rights of the remaining parties to negotiate directly with agents and subcontractors of the affected party. The contingency fund would be administered by a trustee.

The Federal Maritime Commission in the US has welcomed the move with one of the commissioners, William Doyle, commenting that Hanjin’s demise last year served as a “wake-up call” for the entire ocean transportation and logistics chain.

“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,” Doyle said.

However, whether $50m is enough to sort out the supply chain chaos from a liner collapse has been questioned. When Hanjin folded, more than $14.5bn worth of cargoes were left stranded on more than 100 ships around the world.

“The decision to set funds aside is commendable, but the amount seems underwhelming for the largest networks,” said Kris Kosmala, a Splash columnist and vice president at software firm Quintiq. “Without doubt, other alliances need to provide similar safeguards to assure shippers of their commitment to keep the cargo moving,” Kosmala added.