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(1)DIPLOMA IN MARINE SURVEYING 2011 / 2012 MODULE 1. The Maritime Industry and Marine Survey Practice AUTHOR. Captain Rodger MacDonald MA, FNI, MM Secretary General of the International Federation of Shipmasters’ Associations, UK. Lloyd's and the Lloyd's crest are the registered trademarks of the society incorporated by the Lloyd's Act 1871 by the name of ‘Lloyd's’.

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(3) CONTENTS. Page No. PART ONE THE MARINE SURVEYOR’S CUSTOMER BASE. 6. 1. THE STRUCTURE OF THE MARITIME INDUSTRY. 1.1 1.2 1.3 1.4 1.5. The Main Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 The Cargo Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 The Vessel Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 The Management of Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 The Charterers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12. 2. THE PURPOSE OF MARITIME TRANSPORT. 2.1 2.2 2.3 2.4 2.5. Shipping Sophistication and Diversification . . . . . . . . . . . . . . . . . . . . . . . . . .16 Cargo and the Transfer of Risk and Title . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Cargo Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Seaworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Cargoworthiness and the Term “Carefully to Carry” . . . . . . . . . . . . . . . . . . .25. 3. THE PURPOSE OF MARITIME STRATEGY AND SAFETY. 3.1 3.2 3.3 3.4 3.5. The Role of the IMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Maritime Losses: Their Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Maritime Losses: Their Quantum and Cost . . . . . . . . . . . . . . . . . . . . . . . . . .30 International Strategy for Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 International Strategy for Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39. 4. OCCUPATIONAL HEALTH AND SAFETY. 4.1 4.2 4.3 4.4. The Role of ILO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Shipboard Safety and Safety Committees . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Health, Fatigue and Quality of Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Shore-based Safety Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44. Diploma in Marine Surveying 2011 / 2012 (LP0058). 7. 16. 26. 42. 1-1.

(4) Contents. Module 1. 5. QUALITY AND AUDITS. 47. 5.1 5.2 5.3 5.4. Audits, Inspections and Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Quality Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Undertaking Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 International Ship Managers’ Association (ISMA) Code . . . . . . . . . . . . . . . .54. 6. INTERNATIONAL SAFETY MANAGEMENT (ISM) CODE. 6.1 6.2 6.3. The Origin and Objectives of the ISM Code . . . . . . . . . . . . . . . . . . . . . . . . .57 The Safety Management System (SMS) . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 The Implementation and Operation of the ISM Code . . . . . . . . . . . . . . . . . .60. 7. PORT STATE CONTROL (PSC). 7.1 7.2 7.3. The PSC Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 The PSC Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 PSC and the ISM Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73. 8. RISK MANAGEMENT AND FORMAL SAFETY ASSESSMENT (FSA). 8.1 8.2. Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Formal Safety Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81. 63. PART TWO MARINE SURVEYING PRACTICE 9. 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8. 1-2. 57. MARINE SURVEYORS, SURVEY ORGANISATIONS AND HOW TO DEFINE THEM. 75. 87. 88. Types of Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Surveyors as Policemen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 Surveyors as Fact Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 Marine Surveyors as Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 Marine Surveyors Acting in the Owner’s Interests . . . . . . . . . . . . . . . . . . . . .93 Surveyors as Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 The Marine Surveyor as an Expert Witness . . . . . . . . . . . . . . . . . . . . . . . . .94 The Traditional Source of Marine Surveyors . . . . . . . . . . . . . . . . . . . . . . . . .94. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(5) Module 1. 9.9. Contents. 9.10. Individuals and Companies Who are not Classification and Government Surveyors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96 Defining a Marine Surveyor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98. 10. KNOW YOUR CUSTOMERS. 10.1 10.2 10.3 10.4 10.5. Who Instructs Surveyors? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 How does Your Principal Know You? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101 Understand Your Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . .101 For Whom does the Surveyor Act? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102 Surveys “Without Prejudice” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103. 11. TYPES OF SURVEY – HULL AND MACHINERY. 11.1 11.2 11.3 11.4. Hull and Machinery in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105 Classification Society Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105 Statutory Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111 Condition Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112. 12. TYPES OF SURVEY – CARGO-RELATED SURVEYS. 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10. Cargo-related Surveys in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118 Is the Ship Cargoworthy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118 Preparation of Cargo Spaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120 Surveying the Cargoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121 General Cargoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121 Dry Bulk Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124 Supervisory/Overseeing Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130 Timber Deck Cargoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134 Bulk, Liquid Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135 Quantity Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139. 13. WARRANTY AND OTHER COMMERCIAL TYPES OF SURVEY. 13.1 13.2 13.3 13.4 13.5. Warranty Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142 Performance Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145 Commercial Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145 Quality Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146 Conformity with Letter of Credit (Before Shipment) . . . . . . . . . . . . . . . . . . .146. Diploma in Marine Surveying 2011 / 2012 (LP0058). 100. 105. 118. 142. 1-3.

(6) Contents. Module 1. 13.6 13.7. Conformity with Specification or Sample (After Shipment) . . . . . . . . . . . . .147 P&I Club Entry Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147. 14. TYPES OF SURVEY – WHEN THINGS GO WRONG. 14.1 14.2 14.3 14.4 14.5 14.6. General Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149 Insurance Cargo Loss Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149 Damage and Repair Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153 Accident Investigation Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .155 Third Party Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156 Investigation by Administrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .157. 15. GOING ABOUT A SURVEY. 15.1 15.2 15.3 15.4 15.5 15.6 15.7 15.8. Preparation and Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159 Planning and Organising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159 The Surveyor and the Health & Safety Legislation . . . . . . . . . . . . . . . . . . .160 Personal Safety Gear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161 The Marine Surveyor’s Tools of the Trade . . . . . . . . . . . . . . . . . . . . . . . . . .162 The Follow-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165 Giving Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .166 Consultancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167. 16. SETTING UP IN BUSINESS AS A MARINE SURVEYOR. 16.1 16.2 16.3. First We Define What Type of Marine Surveyor This Applies to . . . . . . . . .168 The Essential Elements of a Marine Survey Company . . . . . . . . . . . . . . . .168 Management and Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174. RECOMMENDED READING. 149. 158. 168. 178. Useful Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .179. 1-4. TUTOR-MARKED ASSIGNMENT. 180. APPENDICES. 182. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(7) Module 1. Contents. PLEASE NOTE. ©. ●. Self-Assessment Questions have been provided periodically throughout this module. These questions are designed to help you with your study. The questions are for your personal study only; do not send in your answers to these questions as they will not be assessed.. ●. For candidates taking the Diploma option, your TutorMarked Assignment is at the rear of this module. Your worked Assignment should be sent to the TMA Administrator (details are given at the end of the TutorMarked Assignment) for processing.. Copyright IIR Limited 2011. All rights reserved. These materials are protected by international copyright laws. This manual is only for the use of course participants undertaking this course. Unauthorised use, distribution, reproduction or copying of these materials either in whole or in part, in any shape or form or by any means electronically, mechanically, by photocopying, recording or otherwise, including, without limitation, using the manual for any commercial purpose whatsoever is strictly forbidden without prior written consent of IIR Limited. This manual shall not affect the legal relationship or liability of IIR Limited with, or to, any third party and neither shall such third party be entitled to rely upon it. All information and content in this manual is provided on an "as is" basis and you assume total responsibility and risk for your use of such information and content. IIR Limited shall have no liability for technical errors, editorial errors or omissions in this manual; nor any damage including but not limited to direct, punitive, incidental or consequential damages resulting from or arising out of its use.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-5.

(8) PART ONE THE MARINE SURVEYOR’S CUSTOMER BASE. GENERAL INTRODUCTION This introductory module covers two important facets involving the work of the marine surveyors. These are the maritime industry or the environment in which the survey will be working and how surveyors should go about their work. The module covers a lot of ground and is somewhat larger than the average module, so do not feel daunted by its size. It does contain some essential details, particularly for those intending to start off in this fascinating profession. The first part of Module 1 introduces the environment in which today’s marine surveyor operates with reference to the rules and codes by which the industry works. We explore the customer base of the marine surveyor and consider the problems of conflict between different potential customers. We also explore some marine incidents and show how these have helped to influence international and national institutions in shaping the industry codes both for today and the future.. 1-6. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(9) 1.. THE STRUCTURE OF THE MARITIME INDUSTRY. LEARNING OUTCOMES After successful completion of this chapter, you will: ●. name at least two different customers the survey or will serve;. ●. state the relationship between the various customers; and. ●. describe the main types of charterparty.. 1.1. THE MAIN COMPONENTS. 1-001. This introduction looks at the main components of the shipping industry from the perspective of those individuals, companies and organisations that may require the services of a marine surveyor. They can be divided broadly into the following four categories: ●. Firstly, there are those potential customers who have an interest in the services provided by a vessel. These services may range from towage or hydrographic services through the transportation of cargo to the carriage of passengers. The principal focus in this module is on the vessel as a means of transporting cargo.. ●. Secondly, there is the vessel and its owner and/or manager. The owner/ manager’s interest ranges from the quality of a vessel as a potential investment, through its preparedness and ability to carry a particular cargo or undertake a specific voyage, to its ability to comply with statutory regulations.. ●. Thirdly, there is the insurer, either of the vessel or the cargo, who wishes to match premium with risk and exposure.. ●. Fourthly, there are the organisations that impose and monitor safety standards, both governmental and non-governmental. These include classification societies, national governments and international organisations such as the International Maritime Organization (IMO) and the International Labour Organization (ILO).. 1.2. THE CARGO OWNERS. 1-002. The marine surveyor should never forget that the shipping industry exists to provide a service to its customers. This service is encapsulated in the well-known. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-7.

(10) The Structure of the Maritime Industry. Module 1. phrase “carefully to load, stow, carry and deliver” the cargo within the master’s control. Arguably, the cargo owner is the most important element in the structure of the maritime industry for without the cargo owner, the international trader, there is no demand for shipping services. 1-003. The cargo owner can, and frequently does, change during the course of the voyage. A marine surveyor will need to know whether he is providing a service for the buyer or the seller, the shipper or the receiver, the consignee or even one of a number of intermediaries who may have taken and resold title in the cargo during the course of a given voyage.. 1-004. Therefore, the marine surveyor needs an understanding of the way in which cargoes are bought and sold and how maritime transport is contracted. The interests of the cargo owner are discussed more fully in Chapter 2 of this module.. 1.3. THE VESSEL OWNERS. 1-005. The “vessel”, which is the vehicle used for the marine transportation of cargo or the delivery of a range of other maritime services, can be provided by many different organisations and for a number of different reasons. In the complex interplay of influences that surround the multi-million dollar transactions that characterise the maritime industry, it is important for the marine surveyor to be clear about the rights and responsibilities of the different organisations and individuals involved.. 1-006. Vessels are owned and operated in many different ways across a spectrum of three main types of organisation. At one end is the cargo owner who owns and/or manages his own vessels. Oil companies are a prime example, although the extent of their ownership of the means of transporting their cargoes is diminishing. The central core of vessel provision is by the shipowner, who both owns and manages his vessels. Management in this context means undertaking the commercial as well as the technical operation and container operators provide a good example of the modern shipowner. Thirdly, there are those owners whose interest in shipowning is primarily as a financial investment and who subcontract some or all of the operational functions.. 1-007. Shipowners make their vessels available to the market through one of two broad routes. One arises from what was traditionally known as the common carrier where the shipowner operates owned and chartered vessels on a fixed and published schedule; a system frequently referred to as the liner trade. This sector of the industry is now characterised by a complex network of scheduling and freight rate agreements between shipowners and service providers (such as the non-vessel owning container operator), pooling resources in freight conferences. Frequently, the shipping companies’ services are extended beyond the ports to provide a through transport service.. 1-008. Operating in a more open market are the tramp owners who move their vessels between commodities and trading areas with relative freedom. The freedom of entry into these markets ensures that there is an amplifying effect on the normal world trade cycles. Linked to this sector are the more specialised vessels. These are designed, built and operated against a long-term charter or contract of affreightment. Liquid natural gas carriers are a prime example of these vessels.. 1-8. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(11) Module 1. The Structure of the Maritime Industry. Here, the main method of engaging the services of a vessel is the charterparty, voyage, time or even bareboat. 1-009. The surveyor may also become involved with the vast array of specialist organisations that provide and operate service vessels, ranging from tugs, pilot vessels and bunker barges through survey and seismic vessel to offshore support and cable-laying vessels. All vessels have the same fundamental requirement of needing to “keep the water out” while protecting the crew and enabling their operational role to be carried out safely and economically. Nevertheless, the function of the vessel can greatly affect the detail of the operation and the structure of the vessel and the marine surveyor needs an understanding of the ways in which different vessels operate.. 1-010. A final sector which arguably provides more technological change than any other is driven by a resurgence of the carriage of passengers at sea. This sector covers cruiseships and ferries, and particularly high-speed ferries where formal safety assessment (see Chapter 8) is leading a more risk-based approach to regulation and thus to surveying.. 1-011. Behind the vessel owner there will inevitably be the institutions which have provided all or part of the funding for the purchase of the vessel. Banks and other financing institutions are also potential customers for the marine surveyor. Their interest in a vessel may be in the form of: ●. Equity, which tends to reflect ownership of the asset, is not a loan that is repaid by instalment but the return on investment depends upon the profitable trading – or sale – of the vessel. Shareholders providing the equity may be arm’s length investors, with little or no knowledge of the shipping industry, or owners reinvesting in their own fleet.. ●. Debt is a loan that must be paid back against a fixed schedule. A lender will generally secure its exposure through a mortgage on the vessel, as well as an assignment of earnings and insurance. The prime lender will secure its debt through a first preferred mortgage – a security that is only superseded by a maritime lien. Other lenders might provide finance, at a higher risk and rate of interest but against a lower level of security – this is sometimes referred to as mezzanine finance.. ●. A Mortgage is, for a lending bank, the most important evidence of its interest in a vessel and of the way in which the vessel provides security since: – – – –. 1-012. it gives the lender in rem rights against the mortgaged vessel (ie rights against the vessel itself and not just against the owner); it gives security (ie priority) against unsecured creditors; it enables the lender (the mortgagee) to take possession of the vessel in the event of a default by the owner (the mortgagor); and it allows the mortgagor to sell the vessel to raise funds to satisfy his debt.. Loan agreements may give the lender the right to appoint surveyors to inspect a vessel in order to ensure that it is being properly managed and maintained. In certain circumstances it will be important for the marine surveyor to know who. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-9.

(12) The Structure of the Maritime Industry. Module 1. has a beneficial interest in a vessel and to be aware of potentially conflicting interests. Mortgages, for example, may be ranked, with a first preferred mortgage taking preference over second mortgages or unsecured mortgages. Mortgages may, in turn, be superseded by maritime liens (especially when the lien secures the crew’s wages). Evidence of secured mortgages at least can be found by requesting a transcript of register from the flag state. 1.4. THE MANAGEMENT OF SHIPS. 1-013. There has been a trend over the past three decades for the beneficial owners of a vessel to sub-contract part or all of its management and operation. This divergence of responsibility has played a central role in the implementation of the International Safety Management (ISM) Code. This is discussed in Chapter 6 of this module.. 1-014. There are many reasons for the growth of management companies. The globalisation of trade and finance and economic pressure to reduce vessel operating costs frequently finds its expression in an unremitting search for lower manning costs. A direct effect of this has been that established corporate or company values have been replaced by contractual relationships having varying degrees of effectiveness. A major effect of this trend is to make the ship’s master the servant of many different masters. It is important for the surveyor to know where responsibility, and authority, for different aspects of a vessel’s operation lies.. 1-015. The Baltic and International Maritime Council (BIMCO) Standard Management Agreement (Shipman) is one of the most commonly used contracts for engaging ship managers. Under Shipman the vessel’s overall operation is divided into nine functions. These are: ●. Crewing Undertaken by either manager or owner and from their own resources or under the auspices of a crew manager. Indeed, more than one crew manager may be involved and it is common for the master and senior management team to be direct employees whilst the remainder of the crew are hired through sub-contractors. Amongst other things, a surveyor will want to know how familiar the crew is with the vessel and its operation, how well the crew can communicate with each other as well as their level of competence.. ●. Technical Management This includes: – – –. 1-10. supervision of the maintenance, repair and general efficiency of the vessel, the provision of stores and spares, ensuring that all the vessel’s international trading certificates are in order and that the vessel meets international and national safety standards.. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(13) Module 1. The Structure of the Maritime Industry. ●. Insurance Frequently surveys are for insurance damage and it is important to know who it is that is insured and also who is co-insured or named on the policy. This applies to both loss or damage risk insurance (hull and machinery) and liability insurance (protection & indemnity).. ●. Freight Management Important aspects of freight management, which may involve the marine surveyor, are: – – –. ●. on and off-hire surveys, hold and/or tank surveys connected to delivering notice of readiness (to commence cargo operations), and despatch and demurrage calculations.. Accounting An important consideration in so far as the surveyor needs to know who is engaging his or her services and where to send the resultant invoice.. ●. Chartering Charterparties, one of the principal methods of making a vessel available for employment, are discussed later in this module. Although closely allied to freight management, the chartering function may be undertaken by a separate organisation with the owner frequently keeping close control of this activity. Poor co-ordination or co-operation between fixture (chartering) and post-fixture (freight management and vessel operation) can give rise to disputes – and require the services of a surveyor.. ●. Vessel Sales and Purchase An activity where the classification surveyor has a pivotal role and where marine surveyors may be used to assess the condition of a vessel at the commencement of negotiations, both for buyer and for financing bank.. ●. Provisions and Bunkering Bunkering often becomes a difficult area of dispute particularly where bunkering barges are used. The transfer of liquid from one tank to another creates an opportunity for measurement variations and the sounding of tanks is an imperfect method of measurement. Quality can be hard to confirm in the time available for bunkering and surveyors may well become involved in resolving disputes of this nature.. ●. Operation This includes the issue of voyage instructions and the arrangements for surveying cargoes, undertaking draught surveys etc.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-11.

(14) The Structure of the Maritime Industry. Module 1. 1.5. THE CHARTERERS. 1-016. Apart from the obvious need for on and off-hire surveys, the relevance of the charter status of a vessel lies, to a large extent, in determining who has the right to instruct the vessel with regard to operational matters.. 1.5.1. Bareboat Charters. 1-017. Here the beneficial owner passes his operational rights and responsibilities on to the charterer although he may retain some or all of the responsibilities for insuring the vessel and the right to inspect the vessel from time to time in order to ensure that the charterer’s husbandry (ie care of the vessel) is in accordance with the terms of the charter.. 1.5.2. Time Charters. 1-018. A time charter has two important features:. 1-019. ●. It is a contract for the whole use of a vessel, not just the hire of hold or tank capacity within the vessel; and. ●. It passes to the charterer the right, and indeed duty, to give instructions to the master with regard to the employment of the vessel.. Both features give rise to a number of specific survey requirements which will be explored more fully later in this and other modules. The most important are: ●. On-hire survey which, as well as establishing that the vessel complies with its charter description, is a comparative survey. Part of its purpose is to establish a benchmark against which the condition of the vessel, and the time charterer’s care of the vessel, can be measured (fair wear and tear excepted) at some (possibly considerable) later date. The on-hire survey also raises the question of seaworthiness that will be discussed in more detail in Section 2.4;. ●. Off-hire survey where the surveyor must depend to a very great extent on the previous work of a fellow surveyor. It is an area where much may be learnt about the preparation of effective survey reports;. ●. Speed and consumption claims are a perennial source of dispute between owner and charterer and, if involving a surveyor, can involve him in some interesting detective work.. 1-020. The master of a time-chartered vessel will want to be very sure about who has appointed a surveyor. Since the time-chartered vessel may be fixed on a voyage charter, and then sub-chartered again, the master becomes the servant of many interests: owner, time charterer, voyage charterer, shipper and receiver (see Figure 1). He has both to serve and protect all their interests. He will undoubtedly want to know whose interests a surveyor is representing and a competent surveyor should also always be aware how his or her activities fit into the complex matrix of international trade, an exciting and challenging global business.. 1-12. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(15) Module 1. The Structure of the Maritime Industry. 1-021. This leads one to an important ethical consideration for the professional surveyor. On the one hand, a surveyor’s task is to make a factual report about the subject matter under consideration. On the other hand he has been retained by a principal who has a specific interest in, for example, a vessel or its cargo and may look to the surveyor’s report to enable him to achieve a particular (legal or commercial) outcome. Balancing these two potentially conflicting forces can be a challenge and is the hallmark of a truly professional surveyor.. 1.5.3. Voyage Charter. 1-022. Under a voyage charter, the charterer’s rights and responsibilities are very different and so is the master’s role. The charterer, or cargo owner, is in effect requiring the master to:. 1-023. ●. load a nominated cargo or several parcels of cargo in the nominated port(s) or berth(s) between specified dates;. ●. take responsibility for it by signing a set of bills of lading;. ●. transport the cargo or parcels of cargo safely;. ●. deliver the same quality and quantity of cargo to the named destination(s);. ●. take responsibility that it is delivered to the right consignee/receiver (even if the charterer has not arranged for receivers to be able to present an original bill of lading).. In contracting the vessel to undertake this assignment the charterer is not issuing the master with detailed instructions but relying on his professional competence to prosecute the voyage expeditiously and with due despatch. This scenario obviously throws up a number of areas in which the surveyor’s professional services may be required. Some of the main areas are: 1.. Arrival and Notice of Readiness (NOR) While voyage charters do not specify speeds or consumptions (this being the master’s area of responsibility), the vessel is expected to present itself, ready for loading, at the specified place between specified dates. Before the cancelling date (the cut-off date after which the charterer may decline to accept the vessel for the contracted voyage or series of voyages), is a specified period of time – the laydays – during which the charterer is bound to accept the vessel. The master’s ability to arrive at the specified position (be it within the port limits or alongside a particular berth), and tender a valid NOR, depends upon, amongst other things: ●. the availability of a berth or anchorage;. ●. presenting a seaworthy vessel; and. ●. presenting a cargoworthy vessel, especially with regard to the condition of the holds or tanks. Disputes often arise over the readiness. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-13.

(16) The Structure of the Maritime Industry. Module 1. of the cargo spaces for the intended cargo, especially if the shipper’s cargo is not yet in the port and ready for loading. 2.. Safe Port / Safe Berth The question of what is a safe port may also be raised, as the charterer has an obligation to ensure that the port towards which a vessel is directed is safe for that vessel, on that voyage, at that time of year or, as was stated in the case of the Eastern City [1958]: “A port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship.” It is interesting to note how often wise judges return to the benchmark of “good navigation and seamanship” and it is not a bad touchstone for marine surveyors either. In assessing whether a port is unsafe, three factors should be considered: ●. Is the port physically safe? For example, is there sufficient water depth, what are the anticipated weather conditions, has war broken out?. ●. Is the basic set-up of the port safe? For example, are the aids to navigation, tugs etc of a satisfactory nature for the vessel in question?. ●. Can the event or occurrence that appears to make the port (or berth) unsafe be described as abnormal or could it reasonably be foreseen?. The issue is complex and, if involved, the surveyor should ensure that he or she receives very clear instructions as to the issues in question. 3.. Loading/Discharging and Demurrage/Despatch Time is a most valuable commodity in shipping, both for the shipowner and the cargo owner. If it is wasted by, for example, delays to the vessel or unavailability of berth or cargo, then it is necessary to determine who should bear the financial penalty for the delay or reap the benefit arising out of the saving of time. Surveyors are frequently involved in determining the details to support claims of delay or detention. Laydays (or laytime) are the time allowed for loading and/or discharging the vessel and may be calculated in one of two basic ways: either by stating a specific time or by stating a loading (or discharging) rate against a given tonnage. They may be combined for load and discharge ports (reversible) or separate. Laytime has a start time and date for each port and a date after which, if the vessel has not arrived and presented valid. 1-14. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(17) Module 1. The Structure of the Maritime Industry. notice of readiness, the charterer may cancel the charter. This may well happen at times of falling charter rates. Conversely, a financial penalty can be imposed upon the charterer for exceeding the agreed laytime. This is called demurrage. Demurrage disputes are common occurrences, especially in difficult freight markets, and can be particularly difficult to resolve since they are frequently not addressed until after the voyage is complete, ie after the cargo is discharged. Despatch, a bonus to the charterer for completion within less than the allotted period, causes less of a problem since it is more easily deducted from the freight payment. The whole area of proper arrival and tendering of notice of readiness and the calculation of demurrage requires: ●. a good understanding of the relevant documentation, particularly the wording of the charterparty for that voyage;. ●. the ability to arrive at an accurate reconstruction of events from diverse information; and. ●. the ability to draw accurate information from people with conflicting interests.. These are all prime qualities of the good marine surveyor. 1-024. Pooling arrangements and contracts of affreightment are used either to increase market presence and negotiating power, or to enable owners or charterers to bid for major movements of freight. Many owners will commit their vessels to a pool of similar vessels run by one of the owners, or by a third party. One aspect of this arrangement is that it provides yet another organisation that will be relying upon the master to carry out its requirements and which he must balance against other demands on his time and resources.. 1-025. This potentially complex matrix of contracts and charterparties, with its conflicting interests, is a good illustration of the need for a surveyor to do his or her homework before commencing whatever survey work may be required.. SELF-ASSESSMENT QUESTION Assume that you have been asked by a bank to advise on a strategy for investing in shipping. Describe the various different ship investment and ship operating structures that you might recommend and explain how the bank might protect its investment.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-15.

(18) 2.. THE PURPOSE OF MARITIME TRANSPORT. LEARNING OUTCOMES After successful completion of this chapter, you will be able to: ●. state the different terms of trade;. ●. describe the more common elements of cargo documentation; and. ●. describe what is meant by seaworthiness and cargoworthiness.. 2.1. SHIPPING SOPHISTICATION AND DIVERSIFICATION. 1-026. The changes to the ownership and operational structure of the shipping industry discussed in Chapter 1 have been matched by a change in the diversity and complexity of the cargoes which these vessels are called on to transport. This, in turn, has affected the sophistication and diversification of vessel design.. 1-027. While the ubiquitous container may have disguised the wide variety of cargoes carried in the liner trades, its contents – and those of a large sector of the liquid bulk trades – require ever more precise containment and carriage. One reason for this is the unprecedented ability of an increasing range of cargoes to cause serious damage to the marine environment and/or to those who come into contact with them.. 1-028. The globalisation of the world’s economy has also had its effect on ship specialisation, whether it be the pure car carrier, multi-parcel, multi-coated chemical tanker, roll-on roll-off freight ferry, high-speed passenger ferry or, indeed, the recent generation of cruise vessels.. 1-029. This, too, has affected the training requirements of the officers who manage and operate these vessels. No longer is a general maritime knowledge, with dry cargo or tanker experience, sufficient and this is reflected in the 1995 Amendments to the 1978 Standards of Training, Certification and Watchkeeping Convention (STCW 95). Increasingly, specialised vessels carrying specialised cargoes are requiring officers with specialised skills.. 1-030. This is reflected in the certificate endorsements and training requirements set out in STCW 95.. 1-031. Just as this specialisation and requirement for specialised knowledge or training affects the crews on board, so too does it have implications for the marine surveyor.. 1-16. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(19) Module 1. The Purpose of Maritime Transport. 2.2. CARGO AND THE TRANSFER OF RISK AND TITLE. 1-032. As stated at the beginning of Chapter 1, the purpose of merchant shipping is to provide a service and by far the greatest user of the services of the industry is the cargo owner. Some of the aspects introduced in this section are developed further in Chapters 10 to 13 of Module 5.. 1-033. The “cargo owner” may change a number of times during the course of a voyage and, with containerisation leading the continual increase of through transport, the “voyage” may extend well beyond the vessel and the ports. A cargo owner’s interest in the cargo may also change during the voyage as the risk in the cargo (the responsibility for insuring the cargo or bearing the cost of its loss or damage) will frequently pass at a different time from the title, or ownership, of the cargo. As well as the cargo owner and the insurer, there is likely to be a financing bank with its own interests to protect.. 1-034. The first stage in the ultimate movement of a cargo by sea is the negotiation of a sales contract that will establish the terms of trade. This will involve a buyer and a seller, and the seller may be a trader planning to sell on the cargo.. 1-035. A range of influences, including the relative negotiating strengths of the buyer and seller, and, indeed, their negotiating skills, will affect the terms under which the sale is contracted. The most commonly used terms of trade have been codified by the International Chamber of Commerce and are known as Incoterms 1990.. 1-036. There are 13 different terms of trade, falling into four groups, and they address the following 10 considerations that must be undertaken by either buyer or seller in order to execute a successful transaction: 1a.. Provision of the goods in conformity with the contract (seller).. 1b.. Payment of the price (buyer).. 2.. Provision of necessary licences, authorisations and other formalities.. 3.. Contract of carriage (and insurance).. 4.. Giving (or taking) delivery (title).. 5.. Moment of transfer of risk.. 6.. Division of costs.. 7.. Notices.. 8.. Proof of delivery and presentation of transport documentation.. 9a.. Marking, checking and packing (seller).. 9b.. Inspection (buyer).. 10.. Other miscellaneous obligations.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-17.

(20) The Purpose of Maritime Transport. 1-037. Module 1. Item 3 above will decide whether it is the buyer or the seller who arranges the sea transport and this will be defined by the selection of the appropriate Incoterm. Item 9 has obvious import for the marine surveyor. The marine surveyor, especially if involved in cargo or hold/tank survey work, should be familiar with the 13 Incoterms summarised below: Group B: Departure EXW. Ex Works. (named place). Group F: Main Carriage Unpaid F signifies that the seller must hand over the goods to the nominated carrier free of risk and expense to the buyer: FCA FAS. Free Carrier Free Alongside Ship. FOB. Free On Board. (named place) (named port of shipment) (named port of shipment). Group C: Main Carriage Paid C signifies that the seller must bear certain costs even after the critical point for the division of risk for loss or damage has been reached. CFR. Cost & Freight (C & F). CIF. Cost, Insurance and Freight. CPT. Carriage Paid to. CIP. Carriage and Insurance Paid to. (named port of destination) (named port of destination) (named port of destination) (named port of destination). Group D: Arrival D signifies that it is the seller’s responsibility that the goods arrive at the stated destination.. 1-18. DAF DES. Deliver at Frontier Delivery ex Ship. DEQ. Delivery ex Quay (Duty Paid). DDU. Delivery Duty Unpaid. DDP. Delivery Duty Paid. (named place) (named port of destination) (named port of destination) (named port of destination) (named port of destination). Diploma in Marine Surveying 2011 / 2012 (LP0058).

(21) Module 1. 1-038. The Purpose of Maritime Transport. Closely linked to virtually all commodity transactions are insurance (this subject will be discussed in Module 5) and finance. By far the greatest majority of trade finance is provided by a process known as a documentary credit. The process of establishing a documentary credit is relatively straightforward and has the advantage to the seller of providing a confirmed method of payment. ●. The buyer and seller conclude a sales contract providing for payment by documentary credit.. ●. The buyer instructs his bank (the issuing bank) to issue a credit in favour of the seller (the beneficiary).. ●. The issuing bank asks another bank, usually in the country of the seller, to advise and perhaps also add its confirmation to the documentary credit.. ●. The advising or confirming bank informs the seller that the credit has been issued.. 1-039. For settlement, the seller sends the documents evidencing the shipment to the nominated bank where the credit is available. After checking the documents, the bank then pays the seller and passes the documents on to the issuing bank to ensure that its payment to the seller is reimbursed. Finally, the issuing bank uses the documents to secure its reimbursement from the buyer.. 1-040. From this brief description, it is clear why this method of finance is called a documentary credit and a central document is the bill of lading, possibly supported by a survey report on the cargo. This goes a long way to explain why banks will generally only accept clean bills of lading, that is, bills of lading that normally stipulate that the goods were “in apparent good order and condition when accepted”.. 1-041. Thus, dry cargo (Specialist Module A) and liquid cargo (Specialist Module B) surveys play a key role in trading and financing of cargoes.. 2.3. CARGO DOCUMENTATION. 1-042. A wide range of documents can be involved in the international trading and transportation of cargoes. Since the marine surveyor’s task is frequently to distil the facts from a complex, contractual dispute, an understanding of the principal documentation is essential.. 1-043. Figure 1 provides a simplified illustration of a cargo transaction and voyage charter. As stated, especially if time charters are involved or if vessels are subchartered, carrying parcels of cargo for different interests, or the cargo is traded during the voyage, the situation becomes much more complex. A diagrammatic approach to depicting the contractual relationships is often a useful first step in analysing a situation.. 2.3.1. Sales Contract. 1-044. The transaction which leads to the transportation of goods by sea is initiated by a sales contract. Although this is rarely, if ever, seen by the master or even the. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-19.

(22) The Purpose of Maritime Transport. Module 1. shipowner or his chartering department, it contains the basic data against which the (voyage) charterparty is constructed. 1-045. Sales contracts may be complex and detailed, documents relating to specific cargoes sold on specific terms (for example, the Grain and Feed Trade Association (GAFTA) provides a range of standard sales contracts) or much more abbreviated telex or electronic data transmissions which are common in the oil industry. The sales contract should provide the basic information about: ●. the origin and place of loading of the cargo together with the dates on which it will be ready for loading. This can be of critical importance as there may be a contractual requirement to ship a certain quantity within a specified period or the sales price may be decided by an (end of month) index relating to the month in which the cargo was loaded and bills of lading issued;. ●. the quality and quantity of cargo and possibly the agreed method of testing for quality;. ●. the terms of trade and documentation requirements;. ●. details of insurance requirements.. 2.3.2. Certificate of Origin. 1-046. With complex, international trade agreements and export/import quotas, not to mention trade sanctions, this is an important document. It should not affect the vessel directly but unfortunately it has been known for the contravention of export or import regulations to result in the detention of, or a fine on, the vessel rather than the errant charterer.. 2.3.3. Certificate of Inspection/Quantity/Quality. 1-047. The key point to understand here is that the buyer may have survey reports reflecting a quantity and/or quality which is different from that pertaining at the point of loading when the vessel’s responsibility commences.. 2.3.4. Commercial Invoice. 1-048. This will establish the value of the cargo which will be important in any dispute about, for example, short delivery. The invoice value may, however, be substantially different from the commodities’ open market value.. 2.3.5. Cargo/Customs Manifests. 1-049. This is the document that contains the complete specifications of the cargo with the intended destination that has been loaded by a vessel. This is a useful source of information, especially if many parcels of cargo (or containers) are being carried.. 1-20. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(23) Module 1. The Purpose of Maritime Transport. 2.3.6. Certificate of Insurance. 1-050. This has been introduced to substitute the original floating policies for individual shipments which are normally held by the bank or consignee. The certificate of insurance will show proof that the responsibility for insuring the cargo has been established under the terms of trade.. SELF-ASSESSMENT QUESTIONS A cargo of television sets being shipped in a container under CIF terms is damaged when being handled in the yard of the destination terminal. Is this a problem for the buyer or seller? Or perhaps both parties?. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-21.

(24) The Purpose of Maritime Transport. Module 1. Figure 1 Cargo Transaction and Voyage Charter. 1-22. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(25) Module 1. The Purpose of Maritime Transport. 2.3.7. Bill of Lading. 1-051. The traditional route of tally sheets being used to prepare a mate’s receipt with the mate’s receipts being exchanged for the bill(s) of lading is a logical and wellestablished practice, if not one which is always followed. Nevertheless, evidence from “original” sources such as a tally sheet can be compelling evidence in a court of law or arbitration and every effort should at all times be made to trace source documents.. 1-052. The three basic functions of a bill of lading are:. 1-053. 1-054. ●. as evidence of the terms of a contract of affreightment;. ●. as evidence of shipment of the goods;. ●. as a document of title.. There are a number of different bills of lading (and seaway bills where, basically, the function as a document of title does not exist) which meet the requirements of different trades, and a good reference document for definitions is UCP 500 (Uniform Customs and Practice). It is important to know whether the bill of lading which the master is to sign and against which he will later deliver the cargo is: ●. an open bill whereby the cargo is deliverable to the bearer of the bill of lading without formal need for identification;. ●. a straight bill where only the named consignee may take delivery of the cargo; or. ●. a negotiable bill where the goods are deliverable to a consignee whereby it can be endorsed to a third party if they buy the cargo.. The other main division is between: ●. a marine or ocean bill of lading, sometimes referred to as a port to port bill, and used extensively in the liner trades (in which case, it is the basic contract of carriage); and. ●. a charterparty bill of lading which specifies that it is subject to a charterparty (which, in this case, is the contract of carriage).. 1-055. The inter-relationship between bill of lading and charterparty is a complex issue which has given rise to much litigation. The starting point for determining this relationship is the incorporation clause in the bill of lading.. 1-056. It is the bill of lading, too, which brings into the contract of carriage the overall, international conventions which control the conditions of carriage. The effect and impact of the Hague, Hague-Visby and Hamburg Rules will be discussed in Module 5.. 2.4. SEAWORTHINESS. 1-057. The concept of seaworthiness is important in a legal context because it relates directly to the shipowner’s right to limit his liability. From a starting point, under. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-23.

(26) The Purpose of Maritime Transport. Module 1. English common law, whereby the common carrier has an absolute liability for the safety of the cargo entrusted to his care, the shipowner has consistently endeavoured to widen his right to limit his liability over and above the basic exemptions of:. 1-058. ●. act of God;. ●. Queen’s enemies;. ●. inherent vice of the goods.. The Hague Rules and their successors are an attempt to find an equitable balance between the shipowner’s and the cargo owner’s rights, responsibilities and risks. Rule 1 of Article III of the Hague-Visby Rules states: “The carrier shall be bounden, before and at the beginning of the voyage, to exercise due diligence to: (a). make the ship seaworthy;. (b). properly man, equip and supply the ship;. (c). make the holds, refrigeration and cold chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.”. 1-059. To invoke his right to limit liability, the shipowner must be able to demonstrate that both he and his servants exercised due diligence in the responsibilities set out above. The cargo owner, shipper or receiver who has suffered loss or damage to his cargo can be expected to challenge the shipowner’s right to limit liability by proving that he has failed to exercise due diligence in these matters.. 1-060. Cargo claims which are resolved in court or through arbitration generally take a number of years to resolve. The marine surveyor who is involved in gathering evidence in order to establish whether due diligence had, or had not, been exercised in ensuring that a vessel was seaworthy at a particular point in time will first need to clarify the precise, contractual context of the seaworthiness requirement.. 1-061. The court or arbitrator will want to know: ●. Was the vessel seaworthy (at the commencement of the voyage and at the time in question)?. ●. If not, did the owner exercise due diligence to make the vessel seaworthy?. ●. If not, did the unseaworthiness cause the loss or damage?. 1-062. The third point raises the issue of causa proxima or the direct, as opposed to the indirect (causa remota), cause of an incident or loss. In the words of Scrutton (Scrutton on Charterparties and Bills of Lading, first edition published in 1886): “The seaworthiness required is relative to the nature of the ship, to the particular voyage contracted for and the particular stage of that voyage being different. 1-24. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(27) Module 1. The Purpose of Maritime Transport. for summer or winter voyages, whilst loading in harbour and when sailing, and varies with the particular cargo contracted to be carried.” 1-063. The sometimes elusive concept of seaworthiness also affects hull insurance (covered in Module 5) and the (British) Marine Insurance Act 1906 (Section 39–40) stated: “A ship is deemed seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.”. 1-064. In other words, if a marine surveyor is commissioned to investigate the seaworthiness of a vessel in connection with a cargo dispute or insurance claim, it is essential that precise instructions are received setting out the contractual situation.. 2.5. CARGOWORTHINESS AND THE TERM “CAREFULLY TO CARRY”. 1-065. The Hague (and associated) Rules also introduce the concept of cargoworthiness and this is an important consideration which is discussed in Module 2 (Sections 4.4 to 4.7) which cover fitness for purpose and commercial surveys. It is sufficient here to state that the vessel’s function and the master’s duty is to carefully load, stow, carry, discharge and deliver the cargo entrusted to the vessel through a variety of inter-related contracts. It is important always to bear in mind that the eventual receiver of the cargo may well not be a party to many of the contracts involved, but have purchased the cargo on the basis of a bill of lading, possibly supplemented by an inspection report on the particular goods which was made some time before the goods were delivered for shipment.. 1-066. On the other hand, although modern communications and data transmission technology is making inroads into this, for the major part of the marine transportation in the transfer of goods from buyer to seller, the master and his crew have sole care and custody of those goods.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-25.

(28) 3.. THE PURPOSE OF MARITIME STRATEGY AND SAFETY. LEARNING OUTCOMES After successful completion of this chapter, you will be able to: ●. describe the role of the International Maritime Organization (IMO);. ●. consider the magnitude of marine accidents; and. ●. state how the IMO tends to react to these accidents.. 3.1. THE ROLE OF THE IMO. 1-067. The previous two sections have concentrated on the commercial aspects of shipping which are governed by what is generally termed private law. In other words, the law relates to the rights and responsibilities of those who choose to become contractually involved.. 1-068. Considerations of safety involve both those who are contractually involved but to whom the shipowner (as employee) owes a duty of care, such as the crew, as well as innocent third parties. This area is generally referred to as public law and one of the earliest examples of the modern era was the introduction of the requirement for load lines into the Merchant Shipping Acts in 1876 following the publication by Samuel Plimsoll of Our Seamen; An Appeal in 1873, and Coffin Ships in 1876.. 1-069. In the 1950s each shipping nation had its own maritime laws and there were comparatively few international treaties addressing maritime safety. Standards and requirements varied considerably and were sometimes even contradictory. In the following years, the world fleet grew at a considerable rate, from some 118 million tons in 1958, the year that conventions establishing IMO came into force, to 406 million tons by 1978. At the same time vessels became more specialised, more complex and larger. Safety was becoming a global issue and IMO was the forum in which international standards were established.. 1-070. IMO’s governing body is its Assembly, which meets once every two years and which consists of representatives from all member states (in excess of 150). Between sessions, a Council consisting of 32 member governments, elected by the Assembly, acts as its governing body.. 1-071. The legal vehicles through which IMO achieves its objective of internationally enforceable safety standards are conventions and protocols. Established by Convention in 1948, the Intergovernmental Maritime Consultative Organisation. 1-26. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(29) Module 1. The Purpose of Maritime Strategy and Safety. (its name until 1982) met formally for the first time in 1959. Since then, IMO has promoted the adoption of some 30 conventions and protocols, supplemented by over 700 codes and recommendations concerning maritime safety, the prevention of pollution and related matters. 1-072. IMO works through specialist committees and sub-committees composed of representatives of member states. They are advised and assisted by appropriate bodies of the United Nations as well as more than 30 inter-governmental organisations and nearly 50 non-governmental international organisations. These organisations have consultative status but cannot vote.. 1-073. The initial work on a convention is done by the appropriate committee or subcommittee; the resultant draft is submitted to a conference which all member states are invited to attend. The final text is then presented to governments for ratification. The convention comes into effect when it has been ratified by an agreed number of member states representing an agreed percentage of world tonnage.. 1-074. In addition to the conventions and protocols, through which major amendments and extensions are made to original conventions, are the many codes, guidelines and recommended practices. These are not usually legally binding, although they are frequently used in framing national laws and some, such as the International Safety Management (ISM) Code, are made mandatory by including the appropriate reference within a convention.. 1-075. Most of the conventions now include a “tacit acceptance” provision. Under “tacit acceptance” an amendment to the convention enters into force on a specified date (usually about two years after the amendment is adopted) unless it is rejected by one-third of contracting parties or contracting parties whose combined fleets represent 50% of world tonnage.. 1-076. Adopting conventions, codes and recommendations is important but they mean nothing if they are not enforced. This is the responsibility of governments rather than IMO and, not surprisingly perhaps, the way regulations are implemented varies from country to country.. 1-077. One step which IMO has taken to improve implementation and eliminate the differences in standards and interpretation is to establish a technical co-operation programme. An extension of this is the World Maritime University, established in Malmo, Sweden in 1982. More recently, a sub-committee on flag state implementation has been established and a regime of port state control introduced, allowing governments to inspect foreign vessels visiting their ports for compliance with conventions and recommendations.. 1-078. IMO is a technical organisation and most of its work is carried out in a number of committees and sub-committees.. 1-079. The Maritime Safety Committee (MSC) is the most senior of the committees that carry out the organisation’s technical work. It has a number of sub-committees whose titles indicate the subjects they deal with: ●. Safety of Navigation;. ●. Radio Communications;. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-27.

(30) The Purpose of Maritime Strategy and Safety. Module 1. ●. Life-Saving, Search and Rescue;. ●. Training and Watchkeeping;. ●. Carriage of Dangerous Goods;. ●. Ship Design and Equipment;. ●. Fire Protection;. ●. Stability and Load Lines and Fishing Vessel Safety;. ●. Containers and Cargoes;. ●. Flag State Implementation; and. ●. Bulk Chemicals.. 1-080. The Marine Environment Protection Committee (MEPC) was established by the Assembly in November 1973. It is responsible for co-ordinating the organisation’s activities in the prevention and control of pollution of the marine environment from ships. The sub-committees on Bulk Chemicals and Flag State Implementation are also sub-committees of the MEPC.. 1-081. The Legal Committee was originally established to deal with the legal problems arising from the Torrey Canyon accident of 1967, but it was subsequently made a permanent committee. It is responsible for considering any legal matters within the scope of the organisation.. 1-082. The Technical Co-operation Committee is responsible for co-ordinating the work of the organisation in the provision of technical assistance in the maritime field, in particular to developing countries. The importance of technical assistance in IMO’s work is shown by the fact that it is the first organisation in the United Nations system formally to recognise a Technical Co-operation Committee in its convention.. 1-083. The Facilitation Committee is responsible for IMO’s activities and functions relating to the facilitation of international maritime traffic. These are aimed at reducing the formalities and simplifying the documentation required of ships when entering or leaving ports or other terminals.. 1-084. All the committees of IMO are open to participation by all member governments on an equal basis.. 1-085. The committees are supported by a secretariat of some 300 international civil servants headed by the secretary-general.. 3.2. MARITIME LOSSES: THEIR IMPACT. 1-086. Maritime loss is used generically to cover both:. 1-28. ●. accidents for which a specific error or malfunction can be found in the causal chain of events; and. ●. casualties which can be equated to acts of God.. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(31) Module 1. 1-087. The Purpose of Maritime Strategy and Safety. Maritime losses can be grouped into four categories with the categories being defined largely by the particular stakeholders who are most affected by the loss. The concept of stakeholder interest is being used increasingly in assessing the impact of accidents and casualties and it will be discussed further in Chapter 8. The four categories are: (i). loss of vessel, primarily affecting the beneficial owner and his insurer;. (ii). loss of cargo, primarily affecting the shipper or receiver and their insurer(s);. (iii). loss of life or personal injury, primarily affecting the injured parties and their families and dependants;. (iv). damage to the marine environment where, beyond the immediate loss of livelihood and annuity, the loss is being seen as affecting the wider public interest.. 1-088. Public reaction must be considered an integral part of a marine safety regime since it is frequently public reaction which drives the political will to change the status quo. This is not the place to discuss whether it is the press (or media) which drives public opinion or the opposite. Nevertheless, the often overpowering impact of press and public opinion should be borne in mind by any marine surveyor involved in an accident or casualty which attracts public attention.. 1-089. Public pressure can undoubtedly be an important vehicle for change, especially against the resistance of vested interests and entrenched bureaucracy. Conversely one major, but often overlooked, advantage of having international safety standards is that safety has largely been removed from the control of the commercial arena. Although safety does vary from country to country, as is indicated by annual casualty statistics, most ships engaged in foreign trade are built, maintained and operated according to standards laid down by IMO.. 1-090. Two of the main criticisms levelled at the international/inter-governmental endeavours to raise global safety standards, now primarily the responsibility of IMO, are that: ●. major advances or changes are only generated in response to a major casualty; and. ●. the changes take too long to implement.. 1-091. Although the international conference convened by the United Kingdom in 1914, in response to the 1912 Titanic disaster, adopted the first Safety of Life at Sea (SOLAS) Convention, it did not enter into force because of the outbreak of the First World War. A second SOLAS Convention was then not adopted until 1929 and did not come into force until 1933, some 20 years after the incident which brought it about.. 1-092. In 1967 the Torrey Canyon went aground and spilled an unprecedented 120,000 tonnes of oil into the sea off the coast of England – the world’s first major pollution disaster. Faced with demands from politicians, press and public, the British government came to IMO with a series of proposals. These evolved into. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-29.

(32) The Purpose of Maritime Strategy and Safety. Module 1. a comprehensive action plan which saw major changes being made to regulations concerning pollution. 1-093. Almost exactly 20 years later, the Herald of Free Enterprise tragedy, with the loss of 188 lives, again saw the United Kingdom approach IMO and, just over a year later, a series of amendments to SOLAS 1974 were adopted. They came into force in October 1989 with a further set of amendments entering force in April 1990.. 1-094. IMO’s response to another major ro-ro ferry disaster, the Estonia, which sank with the loss of 912 lives in September 1994, was a major review of all aspects of ro-ro safety. This led to further significant amendments to SOLAS, many of which were already in force by the time the official report of the disaster was published in 1997.. 1-095. There are other examples of marine disasters which have triggered changes and amendments to IMO’s conventions and codes of practice, such as the Amoco Cadiz and Exxon Valdez oil spills. IMO’s reaction time and ability to incorporate corrective measures into international treaties has undoubtedly improved. However, the impetus for the re-examination of and improvement to safety standards has, all too often, been in response to a major accident or casualty. It can also be argued that the resultant recommendations driven by public pressure sometimes address the specifics of a particular incident rather than the fundamental causes of the problem.. 1-096. There is, within the international maritime community, a growing recognition of this problem. One initiative, again piloted by the United Kingdom, is to introduce a risk management approach to establishing safety standards. This approach, referred to as Formal Safety Assessment, is discussed in Chapter 8.. 1-097. Another problem of the current system is that it depends largely on the active technical and political input of interested and involved member states. It is noticeable that while the sinking of both the Herald of Free Enterprise and Estonia, with the loss of 188 and 912 lives respectively, generated relatively prompt amendments to IMO conventions, the loss of the Philippines ferry Dona Paz, with the loss of 4,375 lives, did not generate a similar level of international activity.. 3.3. MARITIME LOSSES: THEIR QUANTUM AND COST. 1-098. The meaningful analysis of the statistics of maritime losses is a complex exercise which must be undertaken against a background of major changes which can be summarised under the following headings: (i). Growth in Tonnage In 1958 the world fleet totalled 118 million tons and the world’s shipyards were delivering 9.2 million tons. In 1975 the world’s shipyards delivered a peak figure of 34 million tons and in 1978 the world fleet was 406 million tons. By 1996, after some years of negative growth, the size of the world fleet was 497 million gross tons (ships over 500 gt). In 2006, gross tonnage was 710 million. 1-30. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(33) Module 1. The Purpose of Maritime Strategy and Safety. tons, consisting of 49,213 vessels (with a further 45,723 vessels under 500 gross tons, with a total gross tonnage of 11 million tons). (ii). Specialisation of Tonnage Whereas once the major part of the merchant fleet could be divided into tankers, bulk carriers, dry cargo vessels and passenger liners, this is no longer so. Liquefied gas carriers and chemical tankers, container vessels and a wide range of roll-on roll-off ferries, both monohull and catamaran, as well as a major fleet of offshore support vessels, are but some of the changes. All these vessels demand, to a greater or lesser degree, specialised knowledge and skills from the seafarers who man them. At the same time, vessels have grown rapidly in size so that the world fleet now contains vessels capable of transporting up to half a million tonnes of crude oil and over 8,000 twenty foot equivalent (TEU) containers and vessels of 12,000 TEU capacity being designed.. (iii). Economic Conditions The shipping industry is a notoriously cyclical industry requiring a heavy capital investment which needs to be made against an uncertain and often erratic income forecast. Wildly optimistic forecasts of economic growth, and especially the demand for oil, in the late 1960s and early 1970s generated an explosion of shipbuilding capacity and excess tonnage which is only just working its way out of the system. Freight rates have, in general terms, failed to keep pace with the general inflation of costs and this has had a direct impact on the structure of the industry.. (iv). Industry Structure Financing costs and operating costs are two of the variables where shipowners and operators can counter the real term reduction in freight rates and achieve a competitive edge. Within the area of financing, the search for favourable tax regimes for large, capital investments played a significant part in the major move of shipowning from traditional flags to what are now commonly referred to as flags of convenience. The desire of many developing countries, encouraged by the policies of the United Nations Conference on Trade and Development (UNCTAD), also moved resources away from the traditional – and experienced – shipping nations.. 1-099. In the area of ship operating costs, one item which was seen as offering potential for reduction was crew costs. Over the last 20 years, there has been a major move from the employment of experienced seafarers, generally from traditional shipowning nations, with their high social costs and sometimes over-unionised work practices, to almost anywhere that can offer cheap manpower.. 1-100. Coupled with this has been the decline of the owner/operator and the rise of the international ship manager. With the fierce competition for ship management contracts in the global arena, crew costs have remained under pressure and, despite the use of fewer and fewer experienced crew on more and more specialised vessels, training costs have frequently been an early casualty of the search for economical operation.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-31.

(34) The Purpose of Maritime Strategy and Safety. 1-101. 1-102. Module 1. Against this background, the bare statistics for ships lost each year (based on figures issued by the London Underwriters Association) show the following percentages of world tonnage:. 1950 – 1959. Under 0.30%. 1960 – 1969. Rising to 0.40% by 1969. 1970 – 1979. Dropping to 0.31% in 1977 but rising to 0.56% in 1979. 1980 – 1989. Eventually decreasing to 0.20% by 1989. 1990 – 1996. Up to 0.40% in 1991 but down to 0.13% by 1996. Unfortunately, these statistics are no longer presented in the same way, but casualty statistics are available on IMO’s website (www.imo.org/circulars). Circular MSC 953 defines casualties as follows: “Very serious casualties” are casualties to ships which involve total loss of the ship, loss of life, or severe pollution, the definition of which, as agreed by the Marine Environment Protection Committee as its 37th session (MEPC 37/22, paragraph 5.8) is as follows: “Severe pollution” is a case of pollution which, as evaluated by the coastal state(s) affected or the flag state, as appropriate, produces a major deleterious effect upon the environment, or which would have produced such an effect without preventative action. “Serious casualties” are casualties to ships which do not qualify as “very serious casualties” and which involve a fire, explosion, collision, grounding, contact, heavy weather damage, ice damage, hull cracking, or suspected hull defect etc, resulting in: ●. immobilisation of main engines, extensive accommodation damage, severe structural damage, such as penetration of the hull under water etc, rendering the ship unfit to proceed; or. ●. pollution (regardless of quantity); and/or. ●. a breakdown necessitating towage or shore assistance.. “Less serious casualties” are casualties to ships which do not qualify as “very serious casualties” or “serious casualties” and, for the purpose of recording useful information, also include “marine incidents” which themselves include “hazardous incidents” and “near misses”.. 1-32. Diploma in Marine Surveying 2011 / 2012 (LP0058).

(35) Module 1. 1-103. The Purpose of Maritime Strategy and Safety. The following table is an extract that illustrates the recent trend for “very serious” casualties and the preponderance of serious casualties linked to hull or watertight door failure. Many of these are linked to bulk carrier losses and the reason for the current review of bulk carrier design by IMO.. Very Serious Casualties. Number of Lives Lost. ‘95. ‘96. ‘97. ‘98. ‘99. ‘95. ‘96. ‘97. ‘98. ‘99. Collision / contact. 20. 28. 31. 20. 25. 96. 48. 74. 19. 50. Stranding / grounding. 24. 23. 17. 24. 8. 5. 9. 8. 19. 15. Capsizing / listing. 6. 6. 13. 14. 6. 14. 543. 259. 61. 13. Fire / explosion. 23. 18. 19. 12. 21. 51. 30. 54. 18. 84. Hull and watertight door failure. 93. 80. 43. 70. 58. 194. 204. 78. 367. 232. Other. –. 1. 4. 8. 27. –. –. 1. 11. 60. Total. 166. 156. 127. 148. 145. 360. 834. 474. 495. 484. Severe Pollution. 1-104. Actual Total Losses. ‘95. ‘96. ‘97. ‘98. ‘99. ‘95. ‘96. ‘97. ‘98. ‘99. Collision / contact. 5. 9. 5. 5. 2. 19. 26. 23. 15. 21. Stranding / grounding. 9. 3. 6. 3. –. 24. 23. 17. 24. 8. Capsizing / listing. –. 1. –. 1. 1. 4. 4. 12. 13. 12. Fire / explosion. –. –. 2. –. –. 17. 9. 12. 11. 11. Hull and watertight door failure. 1. 3. 3. 2. 3. 93. 80. 43. 70. 56. Other. –. –. –. –. –. –. 1. 4. 6. 11. Total. 15. 16. 16. 11. 6. 157. 143. 111. 139. 119. Within these overall statistics, age, type of vessel and flag are perhaps the most relevant areas for analysis. Detailed figures are produced by IMO, as well as other sources such as the P&I clubs.. Diploma in Marine Surveying 2011 / 2012 (LP0058). 1-33.

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