A recent series of articles in the shipping business journal Trade Winds outlined the seizure and court ordered auctioning of two vessels in the South African port of Durban.
According to the articles the ships were not paying their mortgage bills, but given the lack of demand for small, aging bulk vessels the two ships did not do well at auction, selling for considerably less than their scrap value.
“The veteran pair had been under arrest off the port for several months following bank foreclosures. Neither were expected to attract trading buyers given their age and the state of the market,” one article, published in July reads.
The three short news pieces on the topic however omitted one important detail, the crew of both vessels were North Korean.
The case highlights how Pyongyang appears to hide its ties to vessels, even when they are seemingly engaged in legitimate transactions, and how loaning money to probable North Korean front companies can be a risky endeavor.
According to historical ship-tracking data, the two ships arrived in Durban in May, where a claim was filed against them by a Hong Kong based company which provided their mortgages.
Despite neither company being registered in South Africa, maritime law allows for such claims to be made in third party countries.
“There’s no requirement, as long as the ships are there, then in terms of admiralty act … they will enforce a maritime claim against the ship’s that are here. So even though it’s between a plaintiff that’s from abroad, and a defendant from abroad, it doesn’t matter. The court will assist the creditor,” Shane Dwyer, maritime lawyer at Shepstone & Wylie in South Africa told NK News.
Flickr user Pechristener snapped the two vessels sitting near Durban port in July, by which time the vessels had already been seized.
“The ships were arrested by the company that had the mortgage on the ships. A company called Newmax Investments. They arrested both ships, and applied for both ships to be sold.
Due to non-payment of the mortgages,” Struan Mundell, the attorney representing the crew told NK News.
“The applications were not opposed by the owners. The ships were sold,” Mundell added.
A general condition survey carried on the vessels in early June by the ship broker who eventually sold the vessels, found them to be in relatively poor condition.
“Maintenance on the main deck and surrounding areas appears to be have been neglected as there was a lot of rust build up/rust scale noted,” the document reads, although also noted that crew areas and the bridge were better kept.
Following the swift court proceedings, the ships were auctioned on July 22. Between them they fetched just over $2.5 million dollars, only enough “to cover the costs of the auction, and most of the crew claim,” Mundell added.
The lack of any legal opposition indicates the ship owners knew they wouldn’t be able to pay off their mortgages any time soon.
“If the owners all fall down and he knows he can’t handle the mortgage, he knows it’s in default, he knows it’s a losing battle,” Dwyer said.
Mundell also confirmed to NK News the North Korean nationality of the crew of both vessels, who remained on their respective ships until recently.
“The crew of the Glory Morning have been paid and have already returned home. The other (crew) will probably come off the ship tomorrow. There was a delay in finalizing that one. But they will probably go home next week,” Mundell said in mid-August.
NORTH KOREAN TIES
While usually the DPRK employs numerous techniques to hide vessels it owns or is linked to, in this instance the name of one vessel arrested in Durban was certainly an indicator of possible DPRK involvement.
In 2013 the Japanese built ship was renamed, seemingly after a region in the DPRK’s Kangwon Province and the home of North Korea’s newly built ski resort, Masik Ryong.
Though aside from the name, there is little to indicate the two bulkers were tied to North Korea. Ships flying the DPRK flag are rarely seen outside of Asian waters, and likely do their best to not advertise their presence when so far from home.
The last time a vessel with a North Korean flag was seen around Africa, it caused an international incident when it bought oil from a rebel captured offloading facility in Libya.
Coincidentally, that vessel’s name was very similar to one of the ships seized in Durban, the Morning Glory.
That ship however was raided by US commandos, and found to have bought the flag from the North Koreans some time before the incident.
Further complicating matters, both the Glory Morning and the Masik Ryong do not sail under North Korean flags, but are instead listed in the Tuvalu and Kiribati registries.
Re-flagging in this way is common in the maritime industry, often as a way of skirting national environmental and safety standards. However North Korea is well known to use these Flags of Convenience (FOCs) to hide its ownership of vessels.
IN BAD COMPANY?
Court documents obtained by NK News also show that at no point was North Korea mentioned in the legal process. The company on trial in South Africa which defaulted on its debt was the Hong Kong based Hua Heng Shipping Limited.
“The court accepted the claims based on the contracts … and ordered payment. So there was no further investigation necessary for our purposes,” Mundell added.
At first glance the company appears to have a relatively large online footprint, which is unusual for shipping companies tied to the DPRK. However closer examination of documents from the Hong Kong company register shows this is a different company, now wound up, called Hua Heng Shipping and Trading Limited.
The second Hua Heng however was incorporated in 2012. Its annual returns, as is usual with such companies, offer little information, listing no phone numbers other than that of the corporate secretary who handles the paperwork.
Analysis of data from ship tracking website Marine Traffic and numerous maritime databases is more fruitful, Hua Heng manages or owns at least five other vessels, which make frequent visits to North Korea.
One of their ships was last seen heading into the DPRK’s Nampho port on June 19. Another of the company’s ships is now named the “South Hill 2,” though in early June 2012 went by the name the Ryong Nam 2 and sailed under a North Korean flag.
Earlier in its career, the ship was owned by the now sanctioned Ocean Maritime Management, a DPRK shipping company caught smuggling weapons through the Panama Canal in 2013.
While linking a company to the DPRK can be difficult, Hua Heng’s involvement with North Korea’s shady network of Hong Kong paper companies appears substantial. The presence of North Korean crew aboard its vessels likely strengthen its ties to Pyongyang.
Even less information is available about the company which issued the mortgages to Hua Heng however. The Hong Kong companies register contains several companies bearing very similar names to “Newmax Investments,” though their company documents offer no contact information.
For their part, the North Korean crew could have also fared better after their involvement with Newmax and Hua Heng.
“The crew were not paid in full,” Mundell told NK News.
Additional reporting by Thomas Grevedon and JH Ahn
Picture: Sunset by MaxGag on 2011-12-13 16:43:06
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