THE NAUTICAL INSTITUTE COMMERCIAL MANAGEMENT FOR SHIPMASTERS

A PRACTICAL GUIDE Robert L. Tallack, BSc, FNI

First published 1996 by The Nautical Institute, 202 Lwnbeth Road, London SEI 7LQ, UYL @The Nautical Institute 1996. Sponsored by the UK P&I Club All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or ransmitted in any form or by any means, electronic, inechanical, photocopying, recording or otherwise, without the prior written permission of the publishers, except for the quotation of brief passages in reviews. ISBN 1 870077 33 4 Although great care has been taken with the writing and production of this volume, neither The Nautical Institute nor the author can accept any responsibility for errors, omissions or their consequences. This book has been prepared to address the subject of commercial management for shipmasters. This should not, however, be taken to mean that this document deals comprehensively with all of the concerns which will need to be addressed or even, where a particular matter is addressed, that this document sets out tile on1v definitive view for all situations. The opinions expressed are those of the author only and are not necessarily to be taken as the policies or views of any organisation with which he has any connection. Readers and students should make themselves aware of any local, national or international changes to bylaws, legislation, statutory and administrative requirements that have been introduced which might affect any decisions taken on board.

PREFACE
THE SHIPMASTER has assumed awesome responsibilities. Whereas in the past their ships were relatively small and therefore carried a limited amount of cargo, today the master in command of a VLCC, a passenger vessel, a large container ship or a Panamax bulk carrier controls a huge capital asset and a cargo worth millions of dollars. This responsibility assumes greater importance as society demands higher standards and the P&I Clubs have to make ever-larger provision for liability insurance. The shipmaster has a crucial role to play in managing risk. When the ship is at sea he manages the physical risk implicit in navigation and collision avoidance, but when the ships are working or carrying cargo there is a commercial risk which needs equally careful management to ensure the viability of the company and the satisfaction of the cargo owners. As director of a shipping company and chairman of a P&I Club, I see the necessity to train masters in commercial awareness, because so much depends upon the way they manage the whole venture. As owners we entrust the master to sign the contracts of carriage on our behalf. As such, the shipmaster is the owner's last line of defence when deciding if a bill of lading gives a true description of the goods or cargo being loaded. If there is a charterparty, it is the shipmaster who has to ensure that the standards of performance are complied with. To be an effective commercial manager, the master 4iust have a good knowledge of trading terms, a detailed appreciation of the provisions expressed and implied in shipping contracts, and the confidence and worldliness to communicate with all contracting parties in such a way that the best results can be achieved for the company which employs his services. In many ways the shipmaster's job is more complicated today than it was a decade or so ago. Whilst modern c6mintinications enable the quicker exchange of information, the same process has enabled companies to control subcontractors in new ways and cargo owners to trade their cargoes whilst in transit with greater ease and frequency. Often the result is that the master has to handle a very complex set of relationships and must decide how best to resolve conflicts of interest in support of his owners. An equally important part of the master's job is to ensure that the ship is well run, properly maintained and the crew utilised to best advantage. Here the emphasis is on planning, budgeting, delegation and encouraging team work. The detailed examination of voyage accounts in any

company operating a fleet of ships will indicate that there are some masters who achieve consistently better performance than others. It is important to encompass the knowledge, skills and attributes which make for success, and where appropriate link these to the standards demanded by the new ISM Code. In this respect, the ISM Code breaks new ground by establishing an approved system of safety management. The quality principles implicit in the code can also help to reduce accidents and prevent losses. We see in Commercial Management for Shipmasters the first comprehensive publication which sets out how the shipmaster can understand and then manage the intricacies of the marine venture from ship purchase, through voyages on charter or in liner trades, to the time of drydock. It does of course demonstrate that our masters have to be true professionals of high quality. This book I believe will be used as a foundation and support for the master and I am pleased that the UK Club has promoted this worthwhile project. N.-G. Pahngren, Chairman, UK P&I Club FOREWORD THIS BOOK on Commercial Management for Shipmasters is long overdue and one might wonder why this subject has not been covered in such detail before. As a commodity man, using the Baltic Exchange to fix the ships I wish to use, I am conscious that I do not know the exact condition of the vessel which will carry my cargo nor do I know the master. In such circumstances, I have to rely on the integrity of the industry to ensure that its ships are structurally suitable for the voyage in question, on the owner or operator to ensure that our contract can be fulfilled, and upon the master to ensure that the ship is directed in accordance with my instructions. It is of course in this area that a good shipbroker working in an environment such as the Baltic Exchange is of inestimable importance. The framework in which I conduct negotiations is prescribed by rules which can be considered legally binding and for which I prefer to use tried and tested methods rather than risk a dispute concerning a misunderstanding which neither the shipowner nor trader wants. The shipmaster's role in trade is a crucial one. He is the first signatory to the bill of lading which gives the trader the cash entitlement to the commodity. The bill of lading becomes the negotiable document upon which all further trading depends. Any trader submitting cargo to a ship will want a clean bill of lading; however, the trader or receiver to whom that cargo might be sold usually wants to know its proper condition. Certainly the shipowner can become liable if a cargo is found to be badly damaged when clean bills of lading were signed. When it comes to the charterparty, the master should be consulted to ensure that the vessel can in fact meet all the prior conditions of loading and that the vessel can deliver the cargo as specified. This husbandry demands good management skills, an understanding of costs and budgets, an appreciation of the law of carriage and a rich experience in chartering and seafaring. We know that the main emphasis of the industry is safety. We can understand this from the casualties which have led to loss of life or damage to the environment, and, of course, we endorse all measures that improve safety at sea. However, I must emphasise that the main, indeed only, purpose of a ship is to carry cargo to facilitate trade and we must give equal weight to this important subject. That is why I am particularly pleased to write this foreword and urge that the book is used widely for the excellent advice it contains. A. Harper, Chairman, The Baltic Exchange

THE AIM OF THIS BOOK...
THE AIM OF THIS BOOK is to help to improve the commercial performance of merchant shipping through increasing the shipmaster's understanding of that important aspect of his professional role as well as offering an introduction to some aspects of modern management practice. The book

examines the Operation of a merchant vessel from the user's viewpoint-that is, from the viewpoint of those who generate the demand for services and who, in the long run, pay the wages, in other words, the customer. The objective is to assist the master in providing an efficient and economical service to his customer whilst at the same time protecting the equally valid interests of his owner. The book puts management in the context of commercial operations. It is designed to enable those who use it to optimise the use of resources, minimise down-time and contribute positively to a company's planning strategy, financial management and cost control. It will enhance voyage performance and enable Shipmasters to make better decisions or to be more focused when seeking specific information in order to achieve the best outcome in the many varied circumstances of shipping operations. It covers a number of areas which some may argue are the province of the superintendent or of shore-based managers. The Nautical Institute contends that there is little, if anything, which affects the efficient, economic and safe running of a vessel which is not the concern of the master. This argument is endorsed by the importance ,which the International Maritime Organization gives to the ship-shore interface in the ISM Code. Although not centred around checklists, this book is designed as a practical guide but one to be read during the planning stage rather than as a ready reference. Its commercial content necessarily involves reference to maritime law, but this is not a lawyer's book. Rather it is designed to give the background and guidance to help masters avoid the tricky waters of legal argument where decisions are reached, and reversed, after hours of learned argument and certainly not in the same circumstances and time available between completing cargo and sailing when decisions have to be made with regard, for example, to signing or clausing bills of lading. After reading this book, it is hoped that the shipmaster will feel the urge to explore some of the subjects further and no longer feel that commercial matters are 'not his part of ship' nor feel challenged by changing demands on his traditional approach to shipboard management. If he feels better able to organise and involve his crew, balance the many, often conflicting, commercial pressures he faces as a master or be more confident in arguing his corner in defence of his owner's interests, then the aim of The Nautical Institute and the book's sponsor, the UK P&I Club, will have succeeded. Much thought has been given to chapter layout, and the approach adopted is to provide a well structured insight into the master's responsibilities for the safe and efficient running of the vessel-an insight which might be as relevant to those ashore as much as those at sea. The book is defined by its contents rather than a detailed index.

ACKNOWLEDGEMENTS AND REFERENCES
MOST OF THE REFERENCES and acknowledgements are given at the end of the chapter to which they refer. It is almost unnecessary to say that this book could not have been written without the help and encouragement of very many people. First amongst these must be The Nautical Institute and all who travail in her, particularly the Secretary, Julian Parker, with whose assistance the concept of the book took concrete form. A glance at the references will quickly show that London is a centre of maritime excellence. Its ability to support the maritime industry is perhaps unsurpassed-all it needs are more shipowners. If one thing became apparent in writing Commercial Management for Shipmasters it was the importance of training young seafarers to understand shipping as a whole and to accept them as part of a total management team. Research started at the library at the British Museum, a recommended visit for those that do not know it. The use of the libraries at the Institute of Chartered Shipbrokers and solicitors Holman, Fenwick and Willian and Herbert Smith is much appreciated, as is the patience of Maddy Wright, the librarian at Ince & Co. but to all those who have given help and advice, my sincere thanks. A number of people have struggled to transform my midnight manuscript into legible typescript, none more so than Susan Walton; it then became the editor's, David Sanders, turn to set about the singular syntax. Finally, a debt of thanks is also due to the UK P&I Club and particularly its editorial team of Nigel Carden, Karl Lumbers, Roger Nixon and Sonja Fink, who kept faith, even when they were faced with the challenge of finding the fine balance between practical advice and legal exactitude.

CONTENTS

Preface.

CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER CHAPTER

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Foreword. The aim of this book Acknowledgements and references. Index of chapter and section headings. Owner, master and the vessel. Management. Budgets and management information systems. Terms of trade and bills of lading. Legal framework for contracts of carriage. Charterparties: The master's role as manager. Marine insurance. Contracts for purchasing supplies and services. Managing a technical cost centre. A changing approach to safety. Commercial perspective on emergencies. Renewal-sale, purchase and financing. End word.

ANNEXES and DOCUMENTS The Nautical Briefing referred to in this book is The Development of Maritime Commercial Practice, extracts from which are given at the end of the annexes, on page 282. The full briefing can be found in the companion volume, Watchkeeping Safety and Cargo Management in Port, or can be obtained as a separate publication from The Nautical Institute.

INDEX OF CHAPTER AND SECTION HEADINGS
CHAPTER 1 OWNER, MASTER AND THE VESSEL
The shipping company Who are the owners? To whom is the master responsible? What is management? Safety About the book Role of The Nautical Institute

CHAPTER 2 MANAGEMENT
Managing teams Knowing yourself Knowing your team Managing the team Delegating Making decisions Appraising your team Planning Mind mapping Setting objectives Time management Risk assessment Managing change Communicating Managing meetings Paper and telecommunications Body language Negotiating Multi-cultural environments Causes and consequences of cultural differences

Management and STCW

CHAPTER 3 BUDGETS AND MANAGEMENT INFORMATION SYSTEMS
Language of budgeting Terminology Format for a vessel budget Building an operating budget Receiving the budget package Briefing and the budget team Presenting the budget Management information systems Accounting system Financial accounts and cash flow The future Trading budgets and the voyage calculation Voyage calculation-dry cargo Voyage calculation-liquid bulk

CHAPTER 4 TERMS OF TRADE AND BILLS OF LADING
The sale contract generating demand for transport Initial considerations for buyer and seller Shipper's checklist Consignee's checklist Division of risk and cost Methods of payment Process of documentary credit Bills of lading and sea waybills Straight bills Marine/ocean bill of lading Non-negotiable sea waybill Charterparty bill of lading Multimodel transport document Terms on the reverse side National and international laws

CHAPTER 5 LEGAL FRAMEWORK FOR CONTRACTS OF CARRIAGE
The sales contract Sellers, buyers and traders Sales contracts-dry bulk Sales contracts-liquid bulk Contracts of carriage Charterparties and bills of lading Right of consignees Hague to Hamburg-controlling the conditions of carriage The Hague-Visby rules The Hamburg rules The future General average and the York-Antwerp Rules Incorporation clauses Limitation of liability Cargo-related limitation Limitation against third parties

CHAPTER 6 CHARTERPARTIES; THE MASTER'S ROLE AS MANAGER

off-hire and withdrawal Clause paramount and other protective clauses Arbitration Summary CHAPTER 7 MARINE INSURANCE Hull and cargo insurance The markets Precedent and the law The Institute time clauses-hulls The assured Utmost good faith Attachment of risk The clauses Assignment Scope of cover and navigation Total loss Perils covered Pollution hazard General average and salvage . cargo work. sailing orders.records Cargo Personal contact Dangerous cargo Live animals and deck cargo Signing bills of lading The passage and deviation Delivery Voyage charter-liquid bulk Condition and cleanliness Signing bills of lading and delivering cargo Freight and liens Charterer's orders Loaded passage. bunkers Charter hire. speed and deviation ETA. re-delivery. cargo claims and liens Speed and consumption. and liberty clause Cargo. hire payment and cancellation On and off-hire surveys. seaworthiness Owners/charterers to provide Safe berths. safe berths and NOR Condition and seaworthiness Agents Time charterparties-NYPE93 The charterer Description of the vessel Delivery. holds. shipper and freight Club Correspondent Warning signs Arrival NOR and cancelling date Unsafe loading and discharge ports Laytime and demurrage When does laytime start? Calculation of laytime and demurrage Demurrage and damages for detention Seaworthiness Looking for evidence Contemporaneous.Dry bulk voyage charter-Gencon Charterer. trading limits.

reserves and reinsurance The Club's cover Personal injury-crew . Personal injury-stevedores Personal injury-passengers and others Diversion expenses Collision liabilities Loss or damage to property other than cargo Pollution Towage contract liabilities Liabilities under contracts and indemnities Cargo's proportion of general average or salvage Legal costs Omnibus cover Inter-Club New York Produce Exchange Agreement Class II and other cover CHAPTER 8 CONTRACTS FOR PURCHASING SUPPLIES AND SERVICES Purchasing stores and supplies Purchasing contracts Requisition Inviting quotations and selecting suppliers Orders and contracts Receipt of goods Terms and conditions in supply contracts Repair and other service contracts Selecting a repair yard Terms and conditions Placing and managing the contract Management contracts Bimco management contract Crew supply contracts CHAPTER 9 MANAGING A TECHNICAL COST CENTRE The team and the hardware Team responsibilities True partnership required Management meeting Managing maintenance Bunkers-the energy source Constituents and quality Purchasing bunkers Taking delivery CHAPTER 10 A CHANGING APPROACH TO SAFETY Safety and management International Safety Management Code Background .Damage and its repair Collision liability Sistership clause Additional and substitute clauses ITC Hulls-restricted perils The Institute cargo clauses Protection and Indemnity Associations The P&I Club structure Club income.

like a seamark.Safety management system (SMS) Advantages of establishing an SMS Revised STCW Convention Risk assessment Definitions Five steps in risk assessment Decisions between the options available Risk assessment at operating level Incidents. inquiries and investigations The media CHAPTER 11 COMMERCIAL PERSPECTIVE ON EMERGENCIES Cargo claims and general average The incident The adjustment York-Antwerp Rules Owner's negligence and limitation of liability The facts The incident The analysis Judgement Collision and salvage The incident The salvage The collision CHAPTER 12 RENEWAL-SALE. the actual job has changed with the development of the industry and perhaps changed more than traditional training has allowed.safety THE NAME SHIPMASTER is a well established and honourable title. Brief reflection reveals that. although the position of shipmaster is well understood. It implies a long tradition of seafaring and has a bell-like quality which is authoritative and.shipmaster today ? And how can we provide guidance to ensure that the next generation of chief officers will be well prepared for the challenges which lie ahead? It is to address this issue that The Nautical Institute commissioned this book. What are the qualities which make an effective . should provide a strong sense of direction. and . PURCHASE AND FINANCING Purchasing a vessel Negotiation and inspection Delivery Registration Finance and the vessel as collateral Raising the purchase price Securing the loan Mortgagee Possession Liens and other encumbrances Arrest END WORD ANNEXES Chapter 1 OWNER.to whom is the master responsible? -what is management?. MASTER AND THE VESSEL The shipping company -who are the owners? .

The master's role is much less clearly defined and learning to accept commercial leadership is another way of explaining the need for this book. the management challenge is not the same. catering and manning is widely applied in a global industry which is affected by the varying cost of finance or the fluctuation of the currency market. many of these functions are separated.in the following chapters we will explore the knowledge. is to toll the bell for the demise of the profession of shipmaster To manage well in the competitive shipping industry is not easy. and carried them out to the best of their ability within the confines of the ship. and . .Sustain efficient working practices. for the shipmaster to know for whom he is working or the priorities which constitute 'a successful voyage'. For the individual to contribute to company profitability he or she must understand the business of the company and be able to relate their skills and expertise to the company objectives.Contribute to the company. not just divisionally but corporately. The need to be forward looking rather than just relying on traditional values is essential to increase your worth and also to secure a viable future in a very complex and fast changing industry. This book is about building that relationship and giving the shipmaster the knowledge and skills necessary to: . At this point we should reflect on the certainty that sustained the junior officer up to the rank of chief officer. essential. They received orders. owner/operator company. then we have to recognise that to be self-centred and inflexible. where ships are getting older and new more efficient ships are being introduced. Nevertheless. more cost-effective. the structure of shipping companies and shipping ventures has changed over the centuries. . The shipping company A shipping company is becoming increasingly difficult for many of us to define.Adapt to changing circumstances. In any team effort the role of the individual and the company are linked. relying upon the position and not the tasks to be undertaken. The master/ owner/ manager relationship is critical to success and to achieve success it needs to be a two-way flow. adaptation is. techniques and skills which shipmasters as managers can apply to improve the economic performance of their ships and in so doing increase the commercial viability of their company. where companies are developing. It must be evident even in this abbreviated introduction that it is not always easy. usually from colleagues of a similar ethos and cultural background. No commercial situation is static. For many the traditional understanding of a shipping company is a company that owns its own vessels and employs its own seafarers. somewhere. Thus during the course of his career the shipmaster may work in a very wide range of company structures ranging from a close one-to-one relationship in a small. running down. where people progress through the ranks and employment patterns change. to act as the fulcrum around which the commercial.Manage all aspects of the vessels of which he must surely be more than just the driver. Even in the airline industry. When communications and technology alter -working practices and when subcontracting Management. technical managers and one or more crew managers. Who are the owners? . technical and human aspects of the voyage turn. and perhaps more than ever. In a competitive industry where trades. Today. to the web of contracts which links some vessels to their beneficial owners. maintenance. Those who succeed deserve special recognition. Although as can be seen from The Development of Maritime Commercial Practice. through the structured divisional systems of a large corporation. is always seeking a better. In no other enterprise are the money-earning units dispersed and moving around the globe in the way that ships operate. Competition means that someone. where similar large capital units are deployed globally and safety considerations are paramount. the shipmaster's job remains the same. markets and commodity prices are constantly changing. solution to the transport problem. with different parts of the operation being undertaken by companies whose only formal relationship is contractual. involving commercial managers. merging or surviving.

awareness of' company profitability and corporate objectives will help to identify the future potential. be regulated by the General Agreement on Tariffs and Trade (GATT). but pricing cannot be fixed. disclosure of accounts.g. the number of ships available. The demand side is established by global economic activity and the resulting levels of international trade. well known that no single owner controls a market. this owner-the beneficial owner-may be substantially financed by private or public share capital and the shareholders.g. will expect to see a proper return on their investment. stated that after 15 years of cost cutting there was little further to go and that in future companies would have to compete on efficiency. Thus. affecting. Fleet sizes increased until the depression in the 1930s when tonnage was surplus to requirements and many seafarers lost their jobs. In his 1994 address to The Nautical Institute AGM. cutting costs has been the only solution. Holder. but before assuming that these individuals have the power of Roman emperors it must be remembered that the name 'appearing on the ship's register' may have very little to do with the operation of the vessel or the employment of the master and crew. is primarily determined by an entrepreneurial view of future demand. the owners have to pay off the loan and interest as well as salaries and overheads before they can make a profit to reinvest in the future. . It is. but regulatory authorities are now improving their ability to penetrate the corporate veil. Monthly cash flow can be very meagre and. The supply side. This was sustained until the 1970s. Philip Anderson observes: Between 1986 and 1993 P&I insurance claims have risen by 300%. the shipowner only controls part of the equation. although in many cases astute trading of the vessel as a capital asset may prove more profitable than trading the vessel in her role as cargo carrier. accept employment in a shipping company and do not have any idea of its financial viability nor corporate objectives. The technique of managing a large fleet by dividing it into single-ship owning companies in 'friendly' legal regimes is still widely practised with the aim of limiting liability in the event of a catastrophic claim. generally. the technique of mergers. the VLCC. to make money out of shipping. A master who does not understand the constraints placed upon his principals is going to feel frustrated and aggrieved when the demands for costly requisitions are turned down.. In a Nautical Institute paper on accident and loss prevention. the owners are not free to act as they please. notification of directors and rules concerning nationality (tax in some jurisdictions). many sailing vessels had to be scrapped and many masters were out of work. A shipping company is a company which complies with the provisions of the Companies Act in the country of registration and whose main purpose is.A. Similarly. Over all these factors are national ambitions to develop industries through protectionist policies (the British Navigation Acts which lasted from 1646 to 1840 are a good example) all of which should. Mr. World War II reduced tonnage and after the war there was a massive increase in trade. the international availability of finance and. for example. the OPEC or independent oil producers desire to generate revenue-or the climate. The effect of the market is to induce peaks and troughs. They are managers of the company's money-making process. and that imperfectly.. of course. At the turn of the century when larger steamships were displacing sailing vessels. if the company is being financed by a bank loan on a mortgage.e.The standard answer is 'those whose names appear on the ship's register'. Insurance P&I plus Hull and Machinery used to be about 10 %. the Institute's President. Cost cutting has not been an entirely satisfactory strategy. when overtonnaging again (and still when this book is being written) became a serious problem. national but not necessarily economic desires to develop shipowning capacity. Even if he does. in theory at least. This is modified by new technology (e. to a certain extent. They may capture a niche or use. who may include major investors from pension funds. to survive. All these companies must comply with the provisions of the Companies Act concerning registration. It is surprising how many . Captain L. In the global economy the opportunities are too wide and varied. This in turn is modified by national or regional ambitions. So. the containership). masters. acquisitions or pools to enhance market share. but can now represent as much as 45 % o operating costs in 1994. the grain trade or general stock levels and demand for fuel oil.

but common to all these is the shipmaster. They practise management by exception. The relationship of the master to the owner and or shipmanager is an essential part of commercial management and will be discussed in more detail in the following chapters. He even congratulated the authorities on establishing his identity! There are many owners like this who use management companies to protect their anonymity.The cargo owner. the master does not even know who the owner is. who may change during the course of a voyage. However. a master needs to know how the owner wants to run his vessel.The manager. That. The master also has to minimise loss and damage and maintain safety standards in order to satisfy a wide range of parties. In these situations both subcontractors are likely to want to minimise costs within the confines of their contractual agreement with the 'owner'.Other subcontractors.To establish the right balance between. who is the customer. is their profit margin. The surveyor stated that the equipment had to be rectified before the ship could sail. . it is also evident that there are many kinds of shipping company. or she. a Nautical Institute briefing paper) left its mark on the northern European and Scandinavia shipping scene where is clearly understood that a successful shipping venture is one which has close and genuine co-operation between those who play their part ashore and those at sea.The charterer.The classification societies. the master was responsible to the shipowner for the commercial success of the voyage. after all. . the close relationship between owner and master and crew-has contributed to much of Greece I s maritime success. variations in ownership and widespread subcontracting to the shipmanagement companies. Just as the master may be linked to the beneficial owner by a chain of contracts. maintenance and cost savings. To balance what can Often become a conflict of interest the master needs to have the knowledge and competence to optimise the use of resources in pursuit of the maritime venture .The regulatory authorities. so the shipmaster is linked to the cargo owner. leaving statutory and operational management to a shipmanagement company.The owner. the freight rate. . . only interfering when necessary.Maritime Commercial Practice. Everybody is familiar with the financial viability of the company. the opportunity for business and recognises the times when bonuses can be paid and the times when ships have to be sold. Sometimes owners retain direct links with the master for business purposes. Master and crew must never forget that the reason they are employed is because somebody wants to move cargo and it is he. by contractual obligation. Under these circumstances how is the master to know in what condition to maintain his vessel's hatches or when to employ shore labour for a particular task which would save money in the long term? The effect of the Hanseatic League (see The Development of . To whom is the master responsible? Traditionally. . Such companies have high company loyalty and the owners can confidently leave ship business to the shipmaster and manage their fleet economically. Frequently. In good times profits are shared and in bad times crew are laid off but are retained with a subsistence wage. which will include: . With different contractual arrangements a master may deal directly with a management company for both commercial and operational matters and a manning agent for personnel. . In a somewhat similar way. The agent said he had the authority to ensure the work would be done in the next port but could not disclose the owner's name. say. The surveyor refused to allow the ship to sail until the owner personally presented himself and rectified the deficiencies in Vancouver Within six hours the American owner arrived. A vessel was given a port State inspection in Vancouver where the lifesaving and firefighting appliances were found to be in an appalling state. This also applies to vessels which might have been repossessed by banks who employ management companies to trade their assets.

the trend is likely to be towards a more central role for the master in all aspects of the operation of his vessel.The effective management of human resources in an era where manning policies and social standards are changing. makes the powerful observation: Many of the changes which have occurred in recent times enabled cost savings to be made and the economic efficiency of shipping as part of the overall transport system to improve. Other companies make the ship a full cost centre. . less return on investment.Control. Once that is known. This book on commercial management for shipmasters should be unnecessary. These basic principles apply to all managers and to sea staff at all levels.Ship finance. the master must be able to provide: . fuel. . The relationship of the master to 'the company' also varies according to the management style of the organisation and the level of information supplied on board. if the economic performance of companies depends upon good management it is reasonable to assume that everybody would manage well to satisfy their own best interests. but a leader can only expect support if those following know what they are trying to achieve (involvement in planning). cleaning. and the ISM Code will undoubtedly influence this if implemented and monitored effectively. . the translation of a contract on paper into a successful voyage. taking into account the need for accident and loss prevention. .Clarity of purpose. To be successful. the master needs to understand how those control functions work which are (or should be) common to all shipping operations. supply all the necessary financial information and provide the resources to enable the ship management team do everything reasonable from planning the dry dock to storing and negotiating contracts. These will include: . destinations. . Captain Warren Leback. the US Maritime Administrator. There has to be a clear understanding of the destination. including voyage estimating and the budgetary control of running costs. but surprisingly it is not normal. much more complicated contractual arrangements..these are not the technical computational skills practised by the chief officer but management skills demanding a much wider appreciation of shipping. However it must be appreciated that there is also more competition. For example. Very little financial or budgetary information is given and the master is expected to respond as told. Some managers prefer to provide the ship with direct instructions concerning cargoes. In his preface for The Nautical Institute's authoritative book The Management of Safety in Shipping.Effective working practices. stores and crew. it is well known that team work brings better results than individuals working a natural state. It is unfortunate how contractual arrangements often inhibit the development of good working practices and. increased pressure on time and burgeoning Safety . an effective safe passage plan can be prepared.The management of the commercial operation. Charterparties will be negotiated ashore but in consultation with those on board. While there are many ways of organising a shipping company. At regular intervals the vessel's position is plotted. as so often happens with human relationships. it is a higher order of development which has to be worked at and sustained. if they are encouraged and rewarded for good performance and their errors or omissions are corrected if they make mistakes.Leadership and motivation. measures to increase levels of control can destroy motivation. Those who can achieve this excellence can obtain greater rewards. The ability to optimise relationships and results is the quality of a good manager and this theme is developed in later chapters. What is management? The Nautical Institute defines management as 'The process of involving people and utilising other resources to achieve a given objective'. Management is like navigation. After all. corrective measures must be taken through the exercise of control. If the ship is deviating from the track. Motivation is more difficult. Thus. In other words.

by demonstrating a knowledge and a competence in management.legislation. less well trained crews but instead is achieved through more professional management. is also increasingly important to the shipmaster. It is also human to act carelessly. An understanding of the economic environment. to add a little to the latter. good management. technical and economic environment in which the vessel is operating. if the ship is not viable economically then either the managers will look for a 'more economical' management on board or the vessel is likely to be sold. In opening this chapter we suggested that the title shipmaster has a bell-like quality because a bell rings with a clear and authoritative sound. which often appears on balance sheets only as a cost item. However. when considering voyage calculations. It has to be observed that the consequences of oil pollution in sensitive areas caused by one ship can now threaten the viability of whole companies. but in order to do this. The International Safety Management Code has taken a valuable step forward in viewing the shipside and shoreside operation as a single entity with a common purpose. Many shipmasters believe that their job is to ensure safety and no more. Like all disciplines. like economic performance. About the book Management is considered against a firm conviction that although leadership is an essential quality for the shipmaster. Having established safe working practices. of budgets and cashflow. before desire and capability comes interest and knowledge . With all these pressures. usually if not always. If the ship has an accident the viability of the whole operation is put in jeopardy. Once a company loses its commitment to safety standards. of course. bearings and measurements. to forget other people. He must ensure good habits are encouraged. It is a position which is often undervalued by those living and working ashore. safe practices have to be learnt and impressed. especially as more companies trim their shore organisations. both technical and commercial. Safety. How much better to improve the bottom line by achieving improved charter earnings than by cutting the stores budget. However.the objective of this book is to stimulate the former and. cultural. the master cannot carry out his function unless the owner clearly defines their objectives and his responsibilities. the way in which it is achieved and used must reflect the social. This gives masters the opportunity to prove that they have a role in the commercial operation of the vessel. has to be managed. Another aspect of better economic management is found in achieving the best use of those resources available and necessary to operate the vessel and this is also addressed. The approach taken is twofold: to explain the (mainly legal) framework within which international trade and maritime transportation is undertaken and to explore how commercial contracts can be managed most efficiently by those on board. Our challenge is to prove that 'more economical' does not mean cheaper and. and mistakes identified and corrected. it is hoped. However. it is too late. It is human to make errors of judgement. they must also have both the desire and the capability to do so. fail to secure moving objects and mistake dial readings. but by that time. It means that the master has to exercise command over many disciplines. correct Procedures followed. to manage his contractual obligations under the charterparty. A shipmaster must attend to safety first. the master can communicate at a higher level and so demonstrate his worth. suffer slips and lapses and make errors in calculations. It is here that shipowners have a crucial part to play in ensuring that the master is fully briefed about what is happening and how the owner requires his vessel to be managed. it loses its ability to contain risk.clarity of purpose can only be achieved if the way forward is understood. the demands of ship operational safety. Penalties following avoidable accidents are becoming more severe and claims for compensation can be crippling. This important lesson is re-learnt every time there is a marine disaster. Both these objectives are most efftctively achieved through. can be overlooked. Such knowledge can also help the master to manage his resources more effectively and. This does not mean that safety is unimportant. However. Managing the commercial activities of the vessel is a central theme of this book-and of the shipmaster's role. . This book is directed primarily at management and specifically at commercial management because safety is adequately covered in a complementary publication. it is then necessary to concentrate on the earning capacity of the voyage.

Managing people means getting your relationships right in all directions. frequently.Commercial efficiency and technical safety must be co-ordinated and here the shipmaster's role is pivotal although the difficulty of this balancing act is not always fully appreciated by those ashore. once analysed. The role of The Nautical Institute Commercial Management for Shipmasters is part of The Nautical Institute's programme for improving operational effectiveness at sea. ISBN 1-870077-08-3. Nevertheless. However. In this book on watchkeeping all the basic commercial terms are defined and the role of the ship's officer responsible for cargo operations are explained. infinitely variable and increasingly scarce resource. plannings and communicating.planning. The Nautical Institute. sideways with your peer group.management and STCW Management. accidents do happen and it is in this area that the balance between commercial and safety considerations is finely balanced and where the shipmaster will have to assess and resolve many conflicting pressures. in the context of this chapter. Watchkeeping Safety and Cargo Management in Port. upwards with your superiors. Underlying both books is the understanding that all shipping operations are conducted for commercial reasons. The final chapter looks at the master's role when a vessel is bought and at the financing behind the contract. the introduction of competency-based training and assessment and a focus on less prescriptive legislation. international maritime transport will remain a fumdamental part of the global economy and ships will continue to be bought. ISBN 1-870077-29-6. As EVERYONE who has entered a business bookshop knows. is concerned with practical ways of achieving the best possible results from our most valuable. it is important to remember that we are all people.communicating. ACKNOWLEDGEMENTS REFERENCES The Management of Safety in Shipping. . demolished and new ones built. downwards with your suboTdinates-as well as with yourself. sold.people. The aim of this chapter is to distil some of the management techniques which can help a ship's master manage more effectively. appear to present commonsense in new clothes. The programme was introduced by a Nautical Briefing The Development of Maritime Commercial Practice and follows on as an instructional programme from the officers' handbook. by Captain P. who primed the literary pump with his help in getting chapter one started. managing people effectively is one of the most challenging aspects of our professional career.cultural background. The techniques will concentrate on three critical aspects of effective management: team building. Whatever the changes in operational practices. Many of the books. if not of our life. The master's challenge is to achieve this. in an isolated environment within a limited period of time and. For this reason Commercial Management for Shipmasters assumes the level of knowledge outlined in Watchkeeping Safety and Cargo Management in Port and both books may need to be studied. And a greater role for operational risk management will also affect the way in which vessels are managed and operated. against a multi. Although we often talk of subordinates. Watchkeeping Safety and Cargo Management in Port. Chapter 2 MANAGEMENT Managing teams. The Development of Maritime Commercial Practice (Nautical Briefing). Roberts. in this way we all belong to the same peer group. New initiatives are taking place within the international scene such as the implementation of the ISM Code. The Nautical Institute. The Nautical Institute. or at least in new jargon. JULIAN PARKER. more trees have been sacrificed on the altar of modern management theory than almost any other subject.

and . In other words. The three sections which follow-managing teams. At the same time. The concept of managing is being replaced by that of true leadership. communicating or planning would take precedence. Much simpler forms of analysis. work and react are looked at next. about enough things .You guarded your knowledge and information. to whet the reader's appetite for further study. and . and communicating-are designed to provide some practical steps towards people-centred leadership and. management and leadership is really quite simple: . where support and advice may be required. you needed to know enough . a harsh economic climate has focused attention on these layers of management. although even then. They can be used to help identify strengths.Leadership is a trait few had and few could develop. The secret of success is to choose a technique and make a habit of using it every time you meet someone new. some will be beneficial to the efficient operation of the vessel whilst others may be counter-productive. Whether we like it or not.... they can help a ship's master get the best out of his team members as individuals and also help him use the most effective approach when dealing with the general business community. Psychometric testing is increasingly used as part of an interviewing and selection process and requires a degree of specialist knowledge and training before the results can be relied on as reasonably accurate.You operated a strict chain of command and control. analysing and understanding individuals. the good manager can decide how to develop the members of his team for the common good. compulsory control is being replaced by voluntary co-operation based on trust and respect leading to a commitment to common goals. Managing teams The crew on board every vessel is arranged into a more or less traditional organisation within which formal and informal groupings will occur. some active. No master can be expected to achieve this magical transformation in isolation and there will be times when autocratic leadership is required. society is changing.. planning. the traditional way of ordering from above without releasing enough real power to enable the management team to achieve objectives has brought the downfall of some pretty impressive captains of industry..One can argue whether team building. enough of the time . with or without an effective team.. you may argue. hopefully. just as the role of parenting is changing from autocracy to trusteeship. and 'weaknesses. Prone to grow many levels of management. but. Management is changing in a changing society. The end results are frequently quite straight-forward and consist of identifying which are the most dominant of a range of traits. the objectives will be achieved much more effectively. Just as navigation was possible using the old. so is the role of managers as leaders in organisations. with practice. .. Some of these groupings will be passive. to be right enough .You watched your back for knives... to reassess your original classifications. fast enough . . so . why is it necessary to change. from time to time. if you did not naturally have it. Using this knowledge. With practice. just to keep going. ethnic or social lines and there will certainly be divisions along hierarchical lines.You told people what to do and how to do it.Seniority in a hierarchical structure (and especially in a uniform) protected you. view of the universe.. so management is possible using the hierarchical pyramid structure for managing companies and organisations. if the crew is a team. Neither your planning nor your team members will meet expectations unless you can communicate with them in a way in which they (not you) understand. consequently . certainly the need to plan exists. based on Observation can. But. In order to achieve this it is first necessary to know and understand the members of your team. which can be developed... The master's challenge is to build this assortment of groupings and individuals into an effective and cohesive team which will assist and support him in managing the vessel in the most efficient and economical way. earth-centred. These may be on a departmental basis or be along cultural. to control enough things correctly . which meant that .You needed to be the hero with all the answers. also give a good indication of an individual's strengths and weaknesses. these organisations tend to be over-managed and underled. And. Some of the techniques which can be used to give a deeper understanding of how people think. There are many techniques for assessing.

In a world where hierarchical authority. To the need for self-knowledge can be added another ten and these are shown in Figure 2. especially when dealing with people. It is not always an easy exercise. as well as 'hard' information. 'the master next to God. self-control with a little. industry. such as facts and figures. A manager needs to be sensitive to events both in his internal working environment (the ship and his team) as well as the external environment . Communicating. It is equally important to have an idea of the skills and attributes that a successful manager needs. the demand for shipping services). a manager needs to be able to identify in his decision making role between the need for logical. The first group forms the foundation level of basic knowledge and information required for decision making and taking action. less wearing solution. The importance of analysing ourselves as others see us cannot be over-stressed. It is essential that you get to know them thoroughly.Knowing yourself There is one person you will meet in every team you are ever in. honestly and objectively. Here. but it can pay dividends. This was well known to the philosophical ancient Greeks who were known to inscribe above the entrance to a temple the simple admonition 'KNOW THYSELF'. resolving conflict. while the third brings together the qualities which enable managers to acquire and use the basic knowledge and information required in one and two. Effective resilience does not mean an unbending I you've got to be thick skinned' approach. At times. Most masters will recognise the need for emotional resilience when the stress levels rise. delegating. measured flexibility provides a longer-term. company. In a similar way. persuading and selling and using and responding to authority and power are all skills that need to be developed. this area also has a direct bearing on a manager's ability to manage change. The 11 attributes have been divided into three groups. the manager needs to be sensitive to 'soft' information.' is no longer the only pattern of management. negotiating. a high level of judgement or even intuition may be needed. The central group directly affect behaviour and performance. . social skills and abilities are required to get things done through other people. Especially in his internal environment. such as the feelings of other people. too. interpersonal skills are of increasing importance. optimising techniques and situations which call for the ability to weigh pros and cons to resolve uncertain or ambiguous situations. 1.

Finally. The ideal colleague is one who is also interested in undertaking a programme of self-development. mental agility. The 'underlying qualities' of the third group relate to the manager's ability to develop the situation specific skills needed to address the many challenges facing the master and all managers in the conduct of their professional life.2 lists the 11 basic qualities. and the ability to think on one's feet. arc skills that can be exercised and improved by a manager who takes responsibility for his own development and learning. Having completed the analysis. the next step is to carry out a similar analysis using a colleague to give objective feedback and to challenge your assumptions. the ability to look critically at one's managerial skills. self-knowledge. these I I qualities are expanded into what could be described as a managerial health check. each with a range of questions which should help you in your analysis the most difficult part is perfect honesty. regulations and procedures generates a feeling of being reactive line managers rather than proactive managing directors. The choice of a colleague to undertake this role can be difficult. and the expansion of rules. especially in the confines of the vessel. the next step is to set goals for self-development. Annex 2. Some may find that the increased ease of communication. In other words. especially shipshore. learn to learn again.3 gives a range of learning goals.In annexes to this chapter. balanced learning habits. There are many techniques for this. these can be prioritised on the basis of your view of what is most urgent or you can start with the four learning areas. All learning processes require evaluation which will enable you to review. but for a master on board simple introspection is a good place to start. Knowing your team . always more effective if linked to a timetable. Our training should develop in us a tendency to set and achieve purposeful goals and the desire and confidence to want to take command in all situations rather than merely responding to demand. and creativity. we return to self-knowledge. For the brave. adjust your goals-the whole process should become a rolling progression of constant improvement. Creativity and mental agility. and if necessary. Annex 2.

with limited requirement for project or task teams. this skill in classifying your colleagues can also.As resources become increasingly scarce. The jobs which your team have to do are often fixed around the vessel's watchkeeping requirements. if he is mainly an Intuitor. . the team must be developed. talk to him in facts and figures when he visits the vessel. for example may have two distinct teams on board.Conversely. With practice it can be used not only to help you manage your on-board team but also to deal more effectively with the intensive person-to-person interactions which you have to handle when in port. together with an indication of how such people are likely to function on board. the knowledge and understanding gained can be used to help you develop your officers and petty officers. talk overview to him. WE ARE ALL PART OF SOMEBODY'S TEAM. Sensor. come back and think how you would distribute tasks amongst the four dominant functions in your budget team. one or two that are semi-developed and one that is underdeveloped. Carl Jung pioneered the modern approach to the study of personality types nearly a century ago. on the average vessel there is only room for one team. 'How do I handle the agent in order to get the best out of him?'. many of the subsequent attempts at classifying our dominant characteristics rely on a four-way division. Whilst certain vessels-passenger ferries and cruise vessels. The first step is knowing and understanding the individual members of your team. Like Carl Jung's four functions. . focused and led by the master.After reading chapter three on building a budget. in which case the third mate can take him round and I can release the chief officer. Despite departmental demands and different functions. the need to work as a team increases. As you learn to spot the strong and weak functions in your subordinates. 'What sort of man is the cargo surveyor-is he a big picture man. Each method has its adherents. but give him a detailed brief with the facts and figures.2.Assuming your superintendent or fleet manager is predominantly a Thinker. or is he a detail man ? . . and Feeler and their main characteristics. However. The key is to choose an approach that works for you and apply it so that it becomes second nature. it will help you decide who will be most appropriate for different tasks and enable you to build an effective team. He started with a basic two-way split and developed his theory from there on the basis that most people have one predominant function. In the shipboard context.Assuming your second officer shows the dominant characteristic of an Intuitor. be used in a different way. some simple theories can help you see the wood from the trees. Intuitor. Although human beings are far too complex to be completely categorised. but give him a brief overview to take back to the office so he can give his boss the big picture. as you develop it. You can use this skill (the knowledge of people's dominant characteristics) upwards. ALWAYS REMEMBER. to react to your superiors in a way which they will best understand and appreciate and also which will complement their strengths and support their weaknesses. The four functions are Thinker. too. does this leave you feeling happy about his chart-correcting reliability as opposed to his functioning as a watchkeeper in traffic? . are set out in figure 2.

One of the characteristics of our fellow human beings is their constant capacity to surprise. much can be achieved by the use of the mark one eyeball and a little practice. As illustrated in Figure 2.3. looks at motivation and the level of risk at which different personalities feel comfortable. the surprise can often be how well your team works together if you motivate and manage them effectively.These techniques are an aid to Personal relationships. applied with sensitivity and common sense. Another approach to people classification is shown in Figure 2. As with aids to navigation. This method has a strong input from the development of sales teams. It enables assessments to be drawn from relatively brief meetings.3. . they can be invaluable but need to be calibrated with visual bearings at regular intervals.

.

is the effort worth while? The argument for adopting a team-building style of management is strong. the crew will look on the vessel as a transient appointment and it is quite likely that there will be no long-term commitment nor loyalty to company. One important aspect of how well your prospective team will respond to your management will depend upon their evaluation of you. . Conversely. the watch structure and the reduced number of crew on board today's vessels can result in a number of isolated individuals who interact little more than is necessary to hand over the watch. and especially on board. Your task now is to weld them into an effective and efficient team. As Lindsey observed. the stability of the inverted pyramid does at least ensure that senior management is alert and responsive. interdependent team. Also. especially in an unsupportive management environment. In many cases. shipmanager or crew suppliers are not employing similar management cultures. The new view sees senior management as facilitators. It must be recognised that there may be many difficulties to team building on board. responsive to the needs of their subordinates and responsible for providing them with the training.<EYEBALL> . It starts with the premise that the master intends to take positive command and impose his personality on the vessel. the strict requirements of the vessel's routine can. vessel or prospective team. let alone three to four months. resources and environment necessary to enable them to carry out their functions most effectively. How. very clear direction is required from the master in his role as team leader. then. The traditional view of management is a pyramid with employees reporting upwards and instructions flowing downwards. The recognition that much of the productive work of the company. there is an ideal environment for team building. was carried out mainly at the lower levels of the pyramid.TO BE USED CONSTANTTLY TO UPDATE ASSESSMENTS. Although the objective is to develop a strong. has led to a reversal of this traditional view. if handled properly. An increasing number of companies are finding upward evaluation at least as valuable as the more traditional appraisal system. be used to give form and purpose to the way in which the team operate. the work that actually earns income. The master may also have a number of different cultures to understand and assimilate. does the master set about building his team and. Managing the team You have now got to know yourself a little better in your role as manager and can identify some of the strengths and weaknesses of the varied bunch of officers and ratings who make up your crew. On the positive side. especially if the shipowner. rather than operate in a management vacuum hopefully held together by four bands of gold braid and directed by the Satcom link with the ship's managers or owners. by the very nature of the isolated on-board environment. compared to the potentially solid stability of the old model. in Western culture at least. Many is the manager who has wished that he could get his team together for as little as a weekend.

. Every interaction you have with your crew may have an influence on their motivation. Despite the isolation of maritime life. or to err in . frequently changing crews. They will want to be part of the team. may mean that social cohesion does not take place naturally. the realisation that this is not perhaps the best way to manage high value capital assets with an inherent capability to cause loss of life and pollution of the environment is showing signs of bringing a sea change in the approach of the industry towards those at the sharp end. It is easy to argue that competence is not under the master's control. and fitting well with the concept of team work. It may be a totally new experience for many seafarers in today's Merchant Marine. shown in Figure 2. it is the commitment. using the techniques discussed earlier in this section. First may come the social need of being part of a supportive group. By getting to know and understand your team. stay on after the end of the watch to lend a hand. Commitment is achieved by having a clear overall purpose and by setting identifiable and achievable goals. This is explored under planning in the next section. the majority will want to be valued and respected by their colleagues. not the person. Indifferent shipmanagers. you have what you are sent. so attention turns to the area of people needs. It will make them more or less likely to pull out all the stops when it matters. in its preamble. Except in extremis. Fortunately. Books are written about motivation and theories abound but in the end. educational and ethnic mix of many of today's smaller crews (which limits choice). keep the relationship constructive and focus on the desired end result-a committed member of the team. Your crew's attitude will also reflect your attitude towards them. states that: The cornerstone of good safety [and any other] management is commitment from the top. On the other hand. the shortest distance between two points is not always a straight line. behaviour and problems. above all. It is not always easy. or at the other end of the scale. a consistent pressure to reduce costs and the magic of modern communications which. this is illustrated by the introduction of the IMO's Safety Management System (ISM Code) which. To change attitudes it is necessary to build trust and demonstrate commitment and consistency. it can be assumed that the existence needs are catered for (although mere may be real concerns about the safety and security of the family and home). combined '. . To be truly motivated. can be released from the pigeon hole labelled' third mate' or' second engineer'. classification of motivational needs. Turning people starts with you. To an extent. competence. is Maslow's hierarchy of needs. most individuals need to feel that they are satisfying a need. you will have already skipped this chapter. They reflect a combination of past experience and future expectation. attitudes and motivation of individuals at all levels that determines the end result.5 in its traditional pyramid format. but the prize is worth the effort. individual strengths can be directed to the common good and weaknesses identified and supported in a constructive way. both at group and at individual level. Somewhere in the middle. is engendering selfmotivation. The inserts in square brackets are the author's and the words in bold are all areas directly within the master's influence. Cleaner Seas). working through his management which is the natural starting point. As yon get to know your team better. hardly encourages good management practice' are the real culprits (Donaldson Report Safer Ships. you have a wealth of experience on board which. the proportion of punishment and reward depending upon the resources under your control. there are only three ways to motivate. You might be a charismatic leader. Focus on issues. In the field of handling human resources. In matters of safety and pollution prevention [and commercial performance]. you resort to the stick and the carrot. One of the earliest. -Attitudes are very often a reflection. in which case. Bolster selfe-confidence and self-esteem and. and still one the best known. through team work. part of the family.This observation is not intended as a cynical indictment of the modern ship's master. One way in which it may be achieved is through acceptance into an efficient and effective ship's operating team. other motivational needs can be identified. the diverse social. This will need the active involvement of the master. These needs can be many and varied. Once members of the crew perceive the existence of a socially and professionally supportive environment.

but you should also teach your managers how to praise and reprimand. Being judged on the quality and output of your team. Following routine Controlling the result Having knowledge Planning and initiating. You will be changing: FROM TO Doing the job An uncertain supervisory role. who may have more specialist knowledge. People who feel good about themselves generally produce good results and three powerful aids to motivation are: 1. If you are not used to this approach to management and leadership. . Then make sure that all the members of your team know that you will be letting them know how they are doing. Praising . Goal setting Be sure that everybody is clear about what you expect from them: .Identify key areas of responsibility. . .Include the goal and performance outcomes required. 2. From this point of view you will see how important it is to get the best out of your team and to achieve this they need motivating at an individual level.your favour in the numerous conscious and unconscious motivational calculations they make every day. Using well understood technical skills Learning new managerial skills Doing it yourself receiving delegated tasks Delegating tasks to others. it all may feel strange and different.80% of results come from 20% of your tasks. This may be done directly by you. Managing others. or if you are newly promoted.Express them in few sentences. relying on the skills of others.

no telephone calls and other interruptions. message. . but never in front of others. . as well as listening to their words. Be aware how much of the message comes across in tone and through body language.If you want ten years of prosperity. . .People need to know that they are valued: Tell people you are going to let them know how they are doing. _______________________________________________________________________________ _ *In these contexts. then they will be interested in your objectives and be a willing member of your team. indeed. This includes listening to them. listen to their meaning and underlying. Tell people how good you feel about what they did right and what it does for colleagues and the vessel. When they truly believe that you are interested in them. . make good eye contact and.* 3. no shuffling papers. they will even enjoy it and ask for more. fully and with commitment. -Make physical contact. but people have one undoubted advantage over grain and trees.Be specific. grow trees. don't hold it against them. Second Half of Reprimand: . As explained in 'Body language' later in this chapter.Reprimand people immediately. . Delegating is done in many ways and for a number of different reasons. physical contact might be a hand on the shoulder.If you want one year of prosperity. .When you end a reprimand with a praise. Praise people immediately. but must obviously be used with great care. Tell people what they did right-be specific. people remember their behaviour not yours. grow grain. . not destructive. they must understand that underperformance is not acceptable. grow people.It makes the team's work more satisfying. but this must be constructive. -Make eye contact. Reprimanding If people are not meeting the goals which they are capable of achieving. His ability to run the economy might raise questions. If you do it correctly. .Stop for a moment of silence to let them feel how good you feel. One underlying principle of motivation and.Finish and forget. often unspoken. . The reasons for delegating are fairly straightforward.Reaffirm that you think well of them but not of their performance in that situation. and is a very powerful way of developing relationships. of all aspects of personnel management is that people like to be treated as individuals.Shake hands or make contact reassuringly-* .Stop for silence to let them 'feel' how you feel-do not rush on almost as if you are embarrassed about making the reprimand. you are invading a person's intimate space and different nationalities respond in different ways. ---------------------------------------------------------------------------------------------------------------- Delegating A philosopher once said: .If you want 100 years of prosperity. -Use their name. First Half of Reprimand: .Tell people before that you are going to let them know how they are doing. .Remind them how much you value them. you can delegate tasks to them.It increases the output of the team. . . .Make contact-Smile.Tell people how you feel about what they did wrong. They need to know how they are doing.

if your team is working well there is no need and much of society today would consider you have no right. Most of the reasons for delegating are valid but to whom do you delegate? Some of the questions you might ask are: . .How will you reward the individual on successful completion? How do you delegate? . . this is the main way of delegating.Do you consult?-Can be good team work: 'Right. we have got to achieve "this" by "then".- It allocates tasks to those most technically competent. it is only being honest to recognise that delegating authority is a little bit like giving away something of yourself-make sure you get it back and. It develops team members' competence.How did they get on last time? . It frees you from tedious and mundane tasks.Who might benefit most from the task? . why and to whom you have delegated the task to other team members? . It enables you to concentrate on more productive tasks. .Do you request?-This is perfectly valid but can leave the subordinate feeling that you owe him something in return. . Intuitor)? . written memo.. It develops your subordinates and gives you back-up.) How do you manage the delegated task? . Mind mapping (as described later) can be a useful tool on these occasions. 0 It motivates (if done properly). with luck and good management. (Requesting should not be mistaken for politeness-you can say please and thank you with an instruction. Delegating responsibility without authority rarely achieves its aim and can frustrate and de-motivate the recipient. and particularly planning ahead. as discussed later in this chapter. As with all delegation. . A blank sheet of paper can be a significant challenge. .Have I avoided unplanned delegating. who has any ideas how we might go about it?' . that of using your time productively. through snap decisions in a meeting or a conversation? .Which of my people is least overloaded? .How or why the task arose and how it fits into the vessel's operation (the benefits). One of these tasks is planning.Should the task be delegated in parts or as a whole? .How do you check that the individual understands the nature and extent of the delegated task? (This can be particularly difficult in a multi-cultural environment.The resources and authority he or she may use.Do you suggest?-Only if you are avoiding the issue or are very skilfully finding ways to develop the individual's potential.Do you command?-Not unless it is an emergency. It frees you to (metaphorically) 'go fishing'.g. that you need to learn another new skill.e.How are you going to instruct the individual: verbally. Sensor. full job plan? -in some cases it may even require a formal contract. you will see your subordinates grow and develop their own natural authority.How long the task should take. . .How can I prevent my staff delegating tasks to me? What am I delegating and what do I need to tell the individual to whom I am delegating? . often quite difficult to stir the grey cells into conceptual thinking and forward planning. .) .Any particular procedures they must follow.What are the natural check points so you can monitor progress without appearing to interfere. Delegating authority is delegating power and this can be explosive if not handled properly. The serious side of freeing you from tedious and mundane tasks to 'go fishing' lies in your ability to undertake more productive tasks.Who is the best capable to undertake this task (Thinker.How you intend to measure performance. You may well find. It is all too easy to feel busy doing the everyday tasks others can do. or what the deadline is. Feeler.Do you instruct?-Either formally or informally.Can you accept that the individual may perform the tasks quite adequately without doing it as you would have done? . the necessary authority must be defined and delegated if the individual's position does not already hold the required authority. . But. once you have mastered the skill of motivating.Do you need to explain how. It demonstrates your ability as a manager.

. Making decisions Rule of the Road apart. even if it survives first scrutiny. most decisions are a choice between alternative courses of action. is a great de-motivator and de-motivation has a long shelf-life. concentrate on those which only you can decide. neither of which is completely right or wrong. It is generally accepted that there are seven steps required to make an effective decision. delegate those which you can.Prioritise your decisions.. 'Always delegate as you would wish to be delegated to 'Find out what they know and explain to them what else they need to know. Finally. . motivate but be honest. do not assume that they know the same as you.Do you plead?-Never.Do not ignore your (subjective) instincts but use (objective) information to test your conclusions.Endeavour to make your decisions only when you have the best available information-a series of (contradictory) short-term decisions impresses no one. One of the greatest inhibitors to decision making is the fear of being wrong whilst all successful professionals will admit to making many wrong decisions-they just made more right ones. false motivation. . .

it is necessary to close the feed-back loop. so that you can be relaxed and confident. the specifications. Do they know the performance criteria against which you are judging them? A good job description is an essential starting point and examples of one approach to job descriptions are given in the annex to this chapter. Step 7-Check the course made good: build feedback and monitoring into the implementation process. but achieve this by making the best decision possible first and then adapting it to the circumstances. Prepare for the appraisal carefully. if appropriate-make sure that you have all the relevant facts. or most of. they fall into distinct groupings which can best be solved by applying the appropriate generic rule. Appraising your team Before turning to the twin pillars of team management. take into account the individual's cultural background and dominant personality characteristics and think how best to structure your approach. Make sure that those who need to know about the decision and its consequences are informed. a decision is extraordinary and can only be dealt with on its individual merits. Then look at what is acceptable. The appraisal process should be ongoing.Step 1-Identify the problem: a great many decisions are generic-that is. Step 2-Define the problem: what precisely is the nature of the problem? Check your definition against observable facts-and the opinion of your colleagues. planning and communicating. Too many appraisals are periodic events (annual or end of voyage) which are approached with a degree of dread and embarrassment on both sides. there is inevitably a compromise. And so they should be if treated in this way. Step 4-Decide the right course: select the right course of action that meets all. Give each individual good notice of the date and time of the appraisal meeting-a week is reasonable-and encourage him to think about what he wants to discuss. Step 3-Specify the parameters: what exactly must the decision accomplish? These are the so-called boundary conditions that must be satisfied by the selected solution. Different industries generate different sets of generic decisions and once this is recognised. It is sometimes . policy or principle. In your planning. the plausible does not necessarily represent the complete facts. Less frequently. Step 6-Implement the decision: assign the responsibility for carrying out the decision to those capable of doing so and delegate the necessary authority. the correct set of rules or policies can be identified and decision making speeded up. Make sure you are clear in your mind of the standards against which you are appraising your staff. This gives the individual something positive to think about and leads to a more productive interview and reduces unnecessary worry. Step 5-Adapt the decision: in reality. so that the formal appraisal interview and reporting is no more than a confirmation of what is known and understood by both parties.

7. Try not to be judgemental or authoritarian. Reflective questions pick up on the other person's statement and repeat it in the form of a question.Arrange for privacy with no interruption. you learn more by listening than by talking. . . perhaps because of this very reason.List major differences. Planning means having a plan if things do not go according to plan. . this should not cause a problem. Professional competence can lead us into thinking that areas in which we should plan. The tone of the questioning is also important as indicated in Table 2. but. An employee will see no reason to change performance if it appears to be accepted by the organisation. the 36 questions do make both an effective checklist of management style and a useful prompt of questions to be used in an appraisal. your objective is to encourage your team members to try harder and do better. It is generally believed that at least 50 per cent of performance problems occur because of lack of feedback. who should you appraise? There is a growing body of opinion that every employee should be appraised by his or her immediate superior. reflective and directive questions are all useful techniques to draw the individual into a thorough discussion of job performance and personal development. such as a port call. it results in everyone pulling in . On the average vessel.Consider possible solutions/ actions. Nevertheless. and plan with our teams.Agree firm time and date for interview.Develop a framework and anticipated sequence for the interview. Make sure that the meeting takes place in a private and relaxed atmosphere. Planning In some ways planning is second nature to us all but. are all part of the routine of the voyage. .Ensure sufficient time is available for the interview. . we frequently do not do it well.Analyse differences for possible causes. it means being prepared for the unexpected. A checklist for preparation: . don't forget.Prepare notes for use in the interview.' Prepare the end of the interview so you can conclude on a positive note.helpful to think of the appraisal as a business meeting rather than an interview. it means ensuring that your team knows what you intend to do and what you want them to do. Finally. . A cheerful 'Good morning Third. . One major company has introduced a questionnaire which is completed anonymously by all employees every six months as part of an upward appraisal of management. or at least the departmental head should do the job. . START AND END ON A HIGH BUT NEVER IGNORE UNSATISFACTORY PERFORMANCE Think carefully about how you will open the interview. Whilst the use of upward appraisal is not being advocated as it requires a high degree of expert counselling to ensure that it works effectively. this would leave the master with two appraisals. Planning means collecting and collating information. the chief officer and the chief engineer. is everything still all right with you for our meeting?' is infinitely better than 'Sorry to drag you away from your work but we've got to get these appraisals done. and make contingency plans. what are the steps you would take and when would you take them?' Open.' Master: 'You are convinced that the level can be reduced?' Directive questions are useful in soliciting information about a particular point or issue and are usually reserved until the other person has finished talking on the subject: Example: Master: 'If you are convinced that we can reduce cargo claims. . Example: Officer: 'Cargo claims would be reduced if we modified the procedures for taking samples.Compare actual performance with previously agreed or established standards. unsatisfactory performance must be addressed. draw the individual out by using open questions: How? Why? What? When? Who? Example: 'How can we reduce cargo claims?' will draw out an opinion or expression of feeling.Advise job holder to review own performance against previously agreed standards. even if this acceptance is by default. Since the chief engineer's performance criteria are increasingly managerial and decreasingly technical.

Crew or flight deck resource management (C/FDRM) is an increasing part of flight crew training and is compulsory in aviation. resources at your disposal. are very conscious of the need to develop their flight crews into an-effective. all having a common training background and corporate culture. all based around a common plan. they plan.) In other words: I The need to plan is not reduced by 101 operations and procedures manuals. to get the bridge team and the engineers to co-operate as a team and share human resources. the crew meet. The major airlines. interpersonal skills. the skeleton. linked to effective communication. Planning is effective and efficient. they take-off and. before technology. these are the raw materials. cohesive and responsive unit. arrive at their destination and. which probably have some of the best operational and procedures manuals. they check.the same direction and it enables you to get the very best results from the. on which you build your plan. sometimes limited. In some ways. The SAS (Special Air Service) has a planning principle called 'the Seven P's': PROPER PLANNING AND PREPARATION PREVENTS POOR PERFORMANCE (The seventh 'P' is an emphatic adjective. . the airline industry's problem is easier. debrief-discuss what went right and what went wrong.' To achieve this requires all the elements contained in this chapter. The lessons of FDRM are moving into the shipping industry and the objective is 'to put people first. possibly with one or two intermediate airport calls. if they are well trained.

especially if we have been educated in a traditional way and work in a hierarchical environment. so there will be many activities when he should prepare a plan with his team. setting objectives. it draws on those parts of the brain which govern language. . Mind mapping There is a tendency. what we may call a structured approach. to approach planning in a linear fashion. communicate it to all concerned and check its effectiveness after the event. time management. and consequently lists are drawn up of events and activities which then need prioritising and interrelating. This is very left brain dominated. during this period.The maximum time-span for this is probably 12 hours. he may be looking at a four-month period with a changing team from different cultural backgrounds. all very relevant aspects of planning. Nevertheless. we shall explore: mind mapping. sequential thinking and analysis. risk management. managing change. Under the broad heading of planning. just as there will be many passage plans. The master's challenge is very different.

g. Mind mapping is a simple method of using these attributes to initiate the planning processe. They are. under certain. this can help. By using the visual attributes of the brain.circumstances. Despite a tendency for the left brain to take over. easy to leave and return to. This leaves more time to concentrate attention on the meeting. Upper case print (capitals) is usually used as it is easier and quicker to read. built on as events develop and then presented to the analytical left brain for the formal report writing later. Some thought will produce early and obvious linkages at the second level of activity and juxtaposing these items may simplify the mindmap. for a start. Similarly. it has a very definite potential. for report taking.. critical aspects can be noted very briefly (with a time of occurrence). There are no strict rules for making a mind map beyond starting in the centre of the page with the central theme. Some people like to enhance their mind map with diagrams and illustrations and. the assets located -in the right side of the brain are not being used. but it is certainly an underutilised technique which challenges the traditional approach. For people who tend to visualise problems. Meanwhile. Mind maps such as these have a number of other advantages. They are also quick to scan and thus can be a useful aid when discussing (the impending port-call) with colleagues. especially in brainstorming sessions. the generation of ideas and their presentation in a form which enables the left side of the brain to use its analytical skills. lecture or whatever is the subject under consideration. The objective is to give the natural aptitude of the right brain free rein. . Mind mapping may not be the best solution for everybody-or anybody-all of the time. in the first example the initial planning for chapter three on budgets. only a little prioritisation or regimentation of ideas should take place at this stage. conceptualising and visualising in a holistic (three dimensional) fashion. the number of words used can be kept to the minimum (thus TO DO BEFORE ARRIVAL need only be BEFORE ARRIVAL) and the need to 'locate' the thought or piece of information more necessary in linear note taking is obviated. the main aspects of a port call are placed around the central theme and generally the brain thought process will produce most of the important items first but this is not critical. They also have a valuable role in note taking and report writing.Mind mapping enables a quick assessment to be made of an accident which can be used for a more formal report when time permits. These include the ability for simultaneous thinking.

There is one for the shareholders. The mission is an important statement. affecting both internal characteristics and external circumstances. External circumstance is regarded as an opportunity or a threat.10 lists the factors. As well as its mission. depending upon the organisation's ability to exploit it. and should define the business the organisation wants to be in. priorities need to be set. the very raison d'etre. Captain Kirk . Not all are under your control as master. Captain Kirk has been appointed to command m. and Threats-which are to be avoided (or removed). differentiate the organisation from competition. Impossible. which might be regarded as a threat by some but an opportunity by others. Once the key factors have been subjectively identified. The chief engineer is Scottish. SWOT is one well tried method of analysing and prioritising in planning: Strengths-which are to be built on. Opportunities -which are to be grasped. one has to be smart. most self-respecting companies have several about which they like to make formal mission statements. detailed objective analysis is required. Strengths and weaknesses are internal characteristics of all organisations.Setting objectives 'This is mission control. As resources are finite. Problems come from trying to do the detailed analysis first. a recently purchased. quality control needs one and the International Safety Management Code is bound to want one. The statement should be easily understood. your objectives and attendant goals require resources to carry them out. which requires analysis. It is generated as part of your (company's/vessel's/ personal) strategic plan and enshrines the long-term aim. an organisation may have a number of aims which are general statements about its ambitions. Change is an excellent example. one for health and safety. Weaknesses-which are to be cured (or avoided). Although generally set by your mission and higher level aims. Since all the senior officers are due to be working together for at least four months. be relevant to everyone and be stimulating and exciting. the navigator Filipino and nobody is quite sure where the chief officer comes from (but he is definitely a Thinker).v. Aims are focused by the objectives which must be achieved and include the element of time. It is a key means of communicating the strategy and the tone of an organisation both to its customers and its employees. slightly modified. Table 2. be measurable. It is often the most difficult part of a strategic plan to agree as it should be succinct and also because it is more visible than the rest of the plan. and to score goals. secondhand vessel of indeterminate age and quality. The most common method of identifying them is brainstorming by a small group of managers.' Everybody should have a mission. but this should not prevent you from establishing a mission and defining objectives and setting goals for your vessel. The introduction of specific numbers produces targets or goals.

hopefully. budget which is discussed in chapter 3. weaknesses (such as the lack of stores and spares). Some recommend .decides to make a plan. was to check and repair all hatch seals. measurable and relevant. A variety of strengths (such as the chief engineer's previous experience on a sister vessel). (4) The crew. long ballast passages) and threats (a rumour that managers were considering introducing a more 'cost effective' crew) were identified. One of the objectives. it also needed to be achievable and time. People: and. There is no avoiding the fact that time planning requires a painstaking and methodical approach. he called his senior officers together for a brainstorming session prior to undertaking a SWOT analysis.bound. Next. (2) The customer. given high priority and requiring resources from both deck and engine departments. your operating. After sitting quietly in his cabin with a wet towel round his head for the first week of the Pacific crossing. then delegated the task of setting out specific targets to the chief engineer and the chief officer. although not fully under your control it can be. your people are already forming an efficient and effective team. 3. 4. who was beginning to get good at this.' 2. First you have to find 'Where you are at?' by analysing how you spend your day. Finance: in this context. Before they left he reminded them that although their goal was already specific. improved through careful management. Time management Planning and management are directly involved with the use and allocation of resources and your main resources are listed below: 1. Time: which is non-returnable and needs to be planned and used to maximum effect. Within this general aim a number of objectives were set. he has decided on his main Aims and produces: Mission impossible. (3) The owner. both your own and that of your team. One of the first aims agreed by the group (who were already beginning to see themselves as a team) was to upgrade the cargo facilities. The master. is an exercise in realism and discipline. opportunities (such as two good. 'To operate an environmentally sound vessel"' which delivers charterer's cargo on time and on quality"' in the most economical fashion") & The Mission contains a statement for: (1) The community at large and the insurer specifically. Materials: your vessel and its outfit and stores. since an efficient and economical vessel is generally less liable to trade crews downwards. Managing time.

Nevertheless. If they do not match up. this is much more difficult than for managers in a more routine environment. how should you be spending the majority of your time? For all seafarers. sometimes referred to as risk management. and you must switch priorities. The decisions may be large or small and the risk analysis conscious or unconscious.Analyse and review the way in which you influence the way in which members of your management team use their time-are your priorities always reasonable? .Whilst you are always 'on call'.Always question tasks-are they important. and risk assessment is one such tool. . Good management uses all the managerial tools at the manager's disposal. . but you can achieve much the same by dividing your day into 30-minute segments. guard your core time. . Tips for good time management include: .Be aware of the natural rhythm of work-plan to instil enthusiasm when surges of effort are necessary. Compare this 'expenditure' with your personal and departmental objectives. Be aware of your body's natural rhythm. you are spending too much time on irrelevant details.Analyse and review how you use your own timebe honest and be critical and do it frequently as a matter of course.Slice the elephant' big jobs are generally accomplished by tackling a bit at a time.Take time to understand how the industry and your company works can save time and result in more efficient decisions. . although the maritime life is little respecter of this.What can you delegate-what should you delegate? . . urgent. working in the morning if you are a lark or in the evening if you are an owl. .Recognise time wasting in yourself as well as in others and be critical of it.Beware of clearing decks for the big job and then never getting round to it-attack it as soon as possible. essential. and the master in particular. . is a discipline which has developed in parallel with the insurance industry and impinges upon all our managerial and operational decisions. Nevertheless. . but it inevitably occurs and does so with varying degrees of effectiveness.Is what you are doing now the best use of your time? Risk assessment Risk assessment.Establish priorities-what is essential. show that you appreciate brevity. .Set conscious time targets-especially for meetings or when you are using other people's time. it is important.keeping a minute by minute diary. better performance can be achieved by matching your work activity to your personal rhythms. relevant-are they helping you achieve your alms? . .

or should be. that is you. The maritime industry. range from hurricanes to zero visibility. the condition in which we work is the result of somebody else's change. and the group. it should not be handed down from management level to management level. as a young man. cargoes and vessels are exposed to conditions which may.Effective risk management comes from applying. The first concept to grasp-and impart-is that real change is essential. and applying consistently. Management must have clearly identified objectives which they aim to achieve through the process of change and they should be able to articulate them in a way which is understandable and relevant to all who are affected by the proposed changes. a few relatively simply disciplines to the decision-making process. we would be reorganised. The maritime industry's approach to risk assessment is discussed in chapter nine.12 and they will require their manager's help to emerge as a committed and effective team. the response will be a combination of both and almost inevitably the individual. the reaction to the process of change will depend very much upon the skill and commitment of the manager and. This is not a time for delegation and. perhaps. but they reflect reorganisation without a clear objective and not well considered change designed to meet the challenges of a rapidly changing world. on board. inefficiency and demoralisation. depending partly upon the recipient's nature and partly on the way in which the concept of change is introduced. will pass through the four stages illustrated in figure 2. though we might be quite happy with the final result. Change can be perceived by the recipients either as a threat and a danger or as a challenge and an opportunity. if the reason for change is not clear. where there is a requirement to transport millions of tonnes of hydrocarbons and toxic chemicals across many thousands of miles of oceans or thousands of passengers across crowded sea lanes. then the manager responsible for implementing it is entitled to ask for clarification. is increasingly turning to these techniques. Risks associated with operating with defined and identified hazards are defined and analysed and risk management measures built into the operating systems. Change is. In a work environment. Commitment must come from the top. been slow in applying these techniques which have developed in high risk industries such as nuclear power and recently transferred to the offshore industry as the basis of safety cases for offshore modules. Generally. for without it we would still be in the Dark Ages. losing a degree of clarity at every level like a party game of Chinese whispers. I was to learn later in life that we tend to meet every new situation by reorganising and a wonderful method it is for creating an illusion of progress while producing confusion. Managing change We trained hard but it seemed that every time we were beginning to form up in teams. The maritime industry has. starting point if change is to be achieved successfully and effectively. Petronius Arbiter. later a Roman governor. Petronius Arbiter's words may have a familiar ring. . where lives. The second is that very few of us like the challenge of change. a response to demand and a recognition and full understanding of changes in demand is a good. if not essential.

Do not try and talk people out of their feelings. it is generally advisable to have at least one other manager committed to the process of change at this stage (but not all management as this can produce a them-and-us reaction) as this will prevent the group focusing their resistance to change on you and therefore rejecting your counselling while at the same time it enables you to listen in stereo for the group's true concerns. confusion. anxiety. Create your mission statement and acknowledge and reward those responding to the change. if this is markedly apparent. depression. do not let enthusiasm head you in the wrong direction or towards the wrong objectives. try to build in the realisation that change is a natural part of progress. . Commitment occurs when individuals begin working cohesively together as a team. Form project teams as mentioned and encourage brainstorming and planning sessions-but remember. It is also quite acceptable and frequently beneficial for the team to recognise that you too have had doubts and fears about the changes. This is the time to set long-term goals and to concentrate on team building. Look ahead and. This may be expressed by over preparation. Concentrate on priorities and set short-term achievable goals. as always.Denial is the first response to a major change in a person's familiar routines. time is a great healer) and then arrange planning sessions to talk things over. whether it is in their personal or working life and it can be typified by shock and numbness. and an upsurge of energy. This is the phase of training. individuals should be moving into the phase of exploration. The onset of this phase will be signalled by a much more overt reaction and it is the time to listen. One of the problems of this stage is that different individuals may reach it at different times.. During the resistance phase you will see anger. there is cooperation and better co-ordination. Although the management of change should not be delegated. a downing of tools. It is important to recognise this reaction and not be fooled into believing that business as usual and a low level of overt resistance means that the organisation can move straight into the new structure with full commitment (the so-called Tarzan swing). to respond sympathetically and to encourage people to explore the possibilities of the new situation. ?' Lots of energy and new ideas but a lack of confidence.. 'Let's try this. take control of the situation by using the more advanced individuals to establish a pilot team or your more potentially committed individuals may revert to resistance. even chaos. let them know that change will happen and explain what to expect and suggest actions they can take to adjust to the change. you are setting the course. or that. blame. Give them time (if possible. A tendency to withdraw (if we ignore it. it is the time to listen carefully to get behind the overt response to the real concerns so that they can be addressed constructively. it may go away) and an attitude of 'business as usual' may be evident. If this stage has been handled successfully. to acknowledge feelings. Confront individuals with information. Those who are most committed may already be looking for the next challenge. in looking ahead. even in some cases. and what about this .

Brainstorming sessions. when and where is convenient? . The first golden rule of communication always has been 'God gave us two ears but only one mouth so that we can Rx twice as much as we Tx'. and these require the same forethought and consideration as their larger counterparts. . called to disseminate information rapidly. important matters are never solved. therefore. the most important. .A planned informal meeting-you decide the objective and select the participants.Communicating Nothing can be achieved without communication in one form or another. . nor necessarily. through informal gatherings and briefings to a meeting of only two people. Communication is about perspective. as stated. meetings and briefings as well as at negotiating and at the 'second level' communications. The second and perhaps most important is communication as a means of understanding other people's needs and desires. . As we become more senior and people are constrained to listen to us because of our rank. highly structured. or In committees trivial matters are handled promptly. telephoning. it is 'To ensure that the receiver understands. Who needs to attend. . including: body language and communicating in a multi-cultural environment. The second golden rule of communicating is not to get your message across. no other method of collectively exchanging information has been discovered and well managed meetings can be effective. require similar careful preparation as do large meetings. which tends to have a rigid. The style of these meetings makes them an ideal vehicle for a wide range of purposes. the contents of my communication to them which may be very different in construction from the way in which the information reached me. Scientist Sir Barnett Cocks. 2. They can range from the formal. 'What does he need to know in order to carry out my requirements?' Ergo. A ship's safety meeting is one example. Context is also important: 'What does the intended recipient know prior to my communication?'. Such meetings should be brief and usually followed by a further meeting to gather feedback. which require sensitive handling as many people have difficulty in lifting their sights from everyday work and real innovators may fear scorn from their peers. They tend to deal with specific issues and the outcome should be a plan or recommendation. Below this lies a third level of often subconscious communication by which our tone and actions can send messages which either raise or lower barriers to real interpersonal co-operation. and yours is not the only. it is not a bad idea to have a formal meeting with yourself from time to time. structured agenda and specific attendees.An informal meeting.A formal meeting. written. The first and perhaps most obvious form is communication as the method of making our needs and desires known. this rule becomes ever more important. the communication should be transmitted in the receiver's (cultural) language rather than in the transmitter's'.Appraisals and other one-to-one situations which. What is the meeting's objective and what style should it be? Some of the alternatives are: . Managing meetings Meetings have a bad press? A committee is a cul de sac down which ideas are lured and then quietly strangled. events. Within this section we shall look at the more formal methods of communicating: verbal. Indeed. Nevertheless. and communication does take many different forms.Briefing meetings. often ad hoc-'It's time we talked'-or a sub-group. A useful checklist when preparing for a meeting contains the following: 1. Lord Gresham.

let them speak first. Are there any areas which will generate conflict of interest? . If you are attending a meeting: . consider whether to hand over the chairmanship for that item. a round table is better for informal meetings aimed at a participative or team result. The talkers-excluding the sub-species windbag. plenty of room will be required for papers and backup material. do not bluff-promise an early reply. do the items need timing as well as ranking? .If you do not know the answer to a question. . The passionates-who will usually only utter when they feel or fear that an issue will impinge on them. Are there any new members? . be clear about your objective. plan your contribution but stay flexible.If you know that someone else shares your views.Ensure that disagreements are made public and discussed rather than taken away to fester-step in decisively if people begin quarrelling. 2. Passionates are more persuasive and less persuadable than anyone else and there is generally little to be gained in trying to canvass them. drinks. paper. How will minutes be handled? . and easy chairs can be used for a briefing.Be more concerned with the process than the content. their input can be just as valid. it is useful to circulate a draft agenda first and request input from the participants.H. 5.Consider how you will handle a confrontation.Pens. for example. 5. do not become so absorbed in the detail that you lose touch with the feel of the meeting. Agree the action to be taken. 3. 9. For budget meetings. A formal meeting is satisfactory round a normal rectangular meeting table. pace the meeting. unless a vote is being taken. The mums-who will stay silent almost throughout. . there is little to be gained by trying to activate them. food-much can be achieved over the relaxed atmosphere of a meal. more often it is against than for. by whom. It sounds very fine but seers are not often malleable and do not contribute to those subjects on which they do not have a point of view. who will prepare them? . then summarise and reinforce their arguments. There are five types of participant you will meet at a meeting: 1. this needs careful thought and organisation. . watch the audience for reaction.Do your research. Lawrence observed.Develop your skills of improvisation: have contingency plans. even if it is not a formal written one. 10.Control the strong. . . Summarise frequently and definitelv at the end of each agenda item. 6.Don't be in a hurry to speak: let others make their case. If you are chairing the meeting: . . by when. . 4. 4. The seers-those who only speak when they have something to say. In some cases. 'Clever men are unpleasant animals'. they are valuable contributors and can and should be canvassed. and deliver. Are any other facilities required? . encourage the weak.Make sure that the previous minutes are circulated if they are to be formally agreed. Generally you will know what they are passionate about. together with the person delegated as responsible and a time frame. A meeting full of seers would achieve little and.They may require special briefing.With a watchkeeping system. In a formal external meeting at which you have a particular point to make. The location needs to provide seating compatible with the style of the meeting. as D. but circulating coffee pots can disrupt the flow of a discussion. keep the meeting moving and stay out of the discussion. The main point is to think it through and pay attention to detail. concluding in favour of your own. What should be in the agenda and is it necessary to circulate any information first? . The unknowns-observe and classify as soon as possible. so. 7. find out who supports and who opposes your views.Think carefully about the order of the agenda items and your objectives. . then construct yours by logically summarising their views.Don't watch the speaker. 3. .How promptly are minutes required.It is inevitably better to list action items. .Keep one careful eye on the time.Every meeting should have an agenda. A formal rectangular table with pads and pencils set out can send a strong signal about your approach to the meeting and its seriousness. 8.

and instrumental aggression.an awareness of body language can be a useful adjunct to the manager's skills. Interrogation-as well as being used for such basic reasons as getting more information or confirming a statement. sulks. against which it is usually deployed.Camouflage statements: 'Aren't you interested in whether we finish cleaning the holds on time . Bill. interrogation. ?' . Bi is seated in the competitive-defensive position of normal business negotiation. patience. Enthusiasm-usually a popular approach as long as it is not overdone. In the situation depicted. One final thought.. B2 has moved to an independent position and may be signalling detachment or disinterest. meetings are considered only to be the formal endorsement of decisions made informally elsewhere. conciliation.. and withdrawal.Take time to consider the cultural background to the meeting. stimulates guilt. enthusiasm. In formal situations. the side position. seating arrangements can affect the conduct of meetings and indicate approach and attitude. done totally obliquely: 'Personally. which should never be used. which tends to be pretty final.. is what every salesman tries to achieve as he partially reduces the physical barrier of the desk without aggressively invading A's territory. from William H. few successful people are impatient although they may well employ impatience successfully. effective meeting behaviour has been classified into aggression. ?' or.. If you are a forceful character by nature. but how can you ignore Sven's basic argument . Withdrawal-can be effective withdrawal-a combination of stubborness and sulks-or physical withdrawal. Team-work can also be positively affected by formal and non-formal seating plans and this is discussed in the next section.. I don't feel strongly about this. Research has indicated that people give more help to those whom they believe to be dependent upon them. ?' . the co-operative position.. in some parts of the world. which must be used sparingly. stimulates generosity. Sometimes called the seven deadly skills. parry and thrust rather than monologue and filibuster. Aggression is divided between angry aggression...Incite arguments: 'Are you actually trying to claim that . a pre-emptive apology (It's my fault) can be especially effective-this works on the supposition that a humble apology stimulates sympathy. Conciliation is an underrated weapon which like aggression. should be used sparingly. is achieved through close friendship or by invitation.Delay decisions: 'Surely we had better wait until we get all the facts before .: . Wyte Jr. questions can be used to: . Desmond Morris raised interest in body language in his book Manwatching. B4. Sulks-must be used with extreme caution and must not be self-piteous-its sole aim is to elicit sympathy. Learn how to use them and how to handle them. ?' Patience-contrary to popular belief. B3. which could well represent the master in his office receiving port agents and other visitors.

Reports and letters Written communications: . 1. Consequently.Energy: it requires extra effort to make a conversation between two voices succeed. Let us not shrink from using the short. In the section on body language we quote research that indicates that up to 55% of the impact of a message is non-verbal expressions and actions and only 7% is words.Cost: cumulatively. Nevertheless. I didn't have time to write a short one. there are times when the sequence of information should be driven by events rather than times and it is not . they adjudicate. iii) . even if it is conversational. it is still expensive and the aim must be to be brief. Paper and telecommunications I am sorry I wrote such a long letter. . Your written output will have to compete for attention when it arrives at its destination.Register and emphasise your views.Allow many people access to the same information. with the increasing development of satellite communications. so be brief whenever you can: short memos and reports get read. logbook entries driven by the precise time of a series of events.. crisp paragraphs. clear and concise. the cost is high-prepare and help reduce the number of calls. but it does reflect through your tone.Distraction: doodling. .Provide proof of action. . they make compromises.Voice power: the voice is a great reflector. An essential requirement is: . and typing are all possible whilst talking. they exchange information. which can be expressed orally [or through attached appendices]. Telephone techniques The telephone has become as much a part of business life as the written word and. . prepare. But they do not think.. regardless of distance. any closer and you would risk a charge of assault. Combine the two and you are winning. . Most seafarers are brought up to make chronological reports. This can only be achieved by planning what you wish to communicate prior to commencing the call-how many times do you remember a critical question just after the telephone call ends? It is easy to think you have planned a call. .Enable the recipient to retain and study information for as long as required. Winston Churchill Before communicating by written report or by telephone-think.. In many circumstances this approach is both correct and suitable and it enables others to draw out the information which they require..Body language: there is none directly. it quickly communicates when you are not attentive.Speed: the rapid nature of the phone can wrongly suggest that issues have been fully resolved.Language: needs to be simple and uncomplicated. it is sensible to know you have by writing down the items which you wish to discuss.. ruffling papers. Winston Churchill again: i) The aim should be reports which set out the main points in a series of short.Excessive intimacy: you invade someone's ear. . expressive phrase. .Intrusion: Some people resent even the brief loss of control over their lives when answering the phone. our tone and inflection need emphasising to enhance our message.Record information for future reference. However. however. Points to note are: . 2. woolly phrases are mere padding .People very rarely think in groups: they talk together. They do not: . has become so at sea. .Give the opportunity for immediate feedback. . short sentences are understood.. It can help to stand up to conclude a telephone call. .internal feelings quickly communicate. plan. ii) Often the occasion can be met by submitting not a full dress report but an aide memoir . .Know and state the purpose of the conversationthis may seem obvious but you cannot see the puzzled frown on the other party's face over the phone.

55% non-verbal (expressions.A contents list. In the same way. whose jobs involve lying. by chance. at social functions and friendly gatherings. in the words of one author: 'Some people. As early as 1872. such as politicians. Then design your report to meet these needs-the mind mapping techniques mentioned earlier can be very useful under these circumstances. The social zone represents the distance which we stand from strangers.Clear subject headings.unusual to find expensive advisers recasting ship's reports when this could. It can cause problems if a superior. 1992. not both at the same time. .38% vocal (including tone and inflection). and should. often unspoken. the size of which varies with both culture and temperament.economical with the truth is easier from behind a desk-where much of your body language is shielded-or over the telephone. Thus.A concise summary or conclusion-a busy manager will read this first.7% verbal (words only). When preparing a report. The first rule of style is to have something to say. you have two things to say. Only those who are emotionally close to that person are invited to enter it-inadvertent entry by others can quickly lead to feelings of hostility or defensiveness. think who is going to use it and what they will want to know. The personal zone is the distance we stand from work colleagues. It is the working zone-its inner edge is roughly the distance of a handshake and its outer edge is roughly the width of a desk. actions). layout is important. have been done on board. George Polya. . Willing co-operation is not achieved through authority exercised in a person's intimate zone. Nautical Briefing. actors and television announcers. Charles Darwin was studying scientifically The Expression of the Emotions in Man and Animals. thoughts and feelings. . they too have defined territories which we should enter with a level of awareness. Remember this when you are drafting it. have refined their body gestures to a point where it is difficult to "see" the lie'. inadvertently enters the 40cm intimate zone of a junior. This personal space divides into a number of zones. being. and the public zone is the comfortable distance which we would choose to stand if we are addressing a group of people. say one first then the other. Body language Especially in a multi-cultural environment. . Hungary. Conversely. The intimate zone is by far the most important as it is the zone that a person guards as if it were his own property. For further reading consult Written Communications for Business. . It is well known that animals claim a territory and although human beings do not usually mark theirs in the same way. . with an intimate zone of 15-20cm. . .Wide margins and generous space at top and bottom makes the report easier on the eye and allows readers to make notes. preferably numbered. The second rule of style is to control yourself when. a basic knowledge of body language can act as a useful guide to other people's. lawyers.A clear statement of subject or objectives. Subsequent research (Mehrabian) indicated that the total impact of a message is about: .

formal. for example. involving agents. North Europeans and North Americans have a larger spatial requirement than Southern Europeans or Asians. (As in selling. charterers. Of these. unless the crew mutiny or strike. you are showing the other party measurable benefits). surveyors and. again more difficult in a multi-cultural environment. quite frequently. to some extent.Generally speaking. Country dwellers also tend to have larger spatial zones than city dwellers (note how closely people stand when they shake hands) and people from sparsely populated areas may greet without physical contact. especially with other departments. Introducing a new style of (team) management may well involve you in negotiations. confidence or dominance. as giving and taking orders becomes a less acceptable aspect of business behaviour.14. Many of the non-verbal signals which we use are well known and include the crossed arms and legs of defensive disinterest or displeasure. open attitude illustrated in Figure 2. Most body signals centre around the closed body. All parties to a negotiation must perceive that they have needs which require satisfying-you may find it necessary to demonstrate to the other side that a need exists which your objective will satisfy. a good manager can adjust his approach to improve his communication. a Filipino or Chinese crew member may well naturally stand 'uncomfortably' close to a Northern European. Leaning forward denoting hostility and leaning back. with its systems of favours done and owing. your managers. Timing is an important but frequently overlooked ingredient and has two main points: . the internal negotiations have a particular potential for being divisive and there is a greater need for a win/win outcome. subordinates and your senior managers in order to achieve wholehearted commitment to your preferred plan of action. closed attitude-open body. Reality is even more complex. negotiation but. In other words. By becoming sensitive to such signals. conflicts are resolved by reference to who is 'right'-assuming that right can be defined. Thus. both parties should come away from the negotiation feeling satisfied with the outcome. In theory. will become a fully fledged. Virtually all the communications in our working environment. are. This does not happen by accident and is one of the objectives a skilled manager takes into the negotiation. chandlers. both verbal and written. Negotiations will be both internal (within the ship team) and external. Very few negotiations on board. especially with the hands behind the head. indicating superiority. a negotiation. you will regularly find yourself having to negotiate with peers.

What is my weakest point and how do I defend it? . 'You can have any colour so long as it is black' said Henry Ford.What is the ideal situation I would like to achieve? .Summarise and spell out the implications.If you need time to think. Try for a win/win solution. Take a deep breath and suggest confirming the main points there and then or ask for a recap (standard practice in charterparty negotiations). which has included the identification of factors which support your objectives. researching the problem and selecting your objective. try and have support on your side of the table and discuss and agree your roles. Consolidation Once the negotiation stage of a contract has been concluded. Negotiation Based on your preparation. At its most simplistic. refer to managers/owners)? . but this may not be so. as well as your objectives beforehand.. 2. If a point is not understood or clear. .Leave your opponents the 'price of the bus fare home'. However.Ask plenty of questions-probe. Preparation A large part of this is intelligence gathering.Let your opponents do plenty of talking-listen actively and observe their body language. Try to avoid thinking on your feet.What is the worst situation I can accept (this may call for a quick risk assessment)? . specialists can effectively be let loose on a diversionary technical discussion if it becomes necessary to rethink your strategy on the hoof. depressed or in a bad-temper (no letter from home-be sensitive to small issues)? External negotiations will set their own agenda. busy..What concessions can I make and in what order? . What management-speak calls situational negotiation may also take place at this early stage. Almost as important is trying to identify the other parties' main objectives. . or moving a surplus of fresh food. This may be verbal and a handshake at one end of the spectrum or several volumes of contractual documentation at the other.Recognise your opponent's need to save face.Is the timing right (for the organisation to accept the idea which you are trying to implement)? . . especially if you can be flexible with your requirement.Do I need to work with a colleague as a negotiating team? . take notes and offer discreet advice. The good guy/bad guy technique can ' be used although this is less negotiation than interrogation. . Negotiating a dry-dock or repair contract.g. clarify it now. . . is he or she under pressure.Speak as firmly and assertively as may be necessary but never (actually) lose your temper. you should have the following general principles in mind: . call for time out. The supporting cast's role will mainly be to observe. If possible. unless you are really in for the kill and not expecting to return: .Give reasons for your position. although time out to discuss a revised proposal is a perfectly sensible and acceptable tactic. This is indirect negotiation using third parties or the grapevine (or the media in political or employer-union situations). or the price of stores. Theoretically (although it is less clear in practice) there are four stages to a formal negotiation: Negotiating 1.What reserves do I have (P&I representative. Nothing weakens your position more than a negotiation within the negotiating team. although some can be predicted. 3. but never forget the old adage that he who writes the minutes (or contract) is king. is predictable and tends to follow standard patterns. the chandler wants the highest price for his produce. Perhaps he lost a contract to supply a cruise ship the day before and his main priority is cash flow.Be non-committal about their proposals or expectations. it must be translated into a formal contract. . These may seem obvious. 'We'll draw up the contract' may sound a very generous offer after a protracted negotiation during a busy port stay.e. Maybe this is your best solution on the basis of a cost-benefit analysis. . Intelligence gathering may help identify such opportunities. .Is it the right time to tackle the individual.Review your performance afterwards and finally. 'we are intending to tank clean in X unless we can find a better solution' will generally elicit a better price than 'we must tank clean now'.

Other negotiations will arrive out of the blue-or more probably out of a cold. I'll get some coffee and we can sit down and find a solution'.reaching a fixed position too quickly and. The point to remember is that this is an extension of the same negotiation which you initiated when you started your first intelligence gathering. this may be the off-hire survey and in a repair contract it includes the agreement on final price. Thus. In bi-national conversation. Chief officer: 'Half this steel is wet and most of it is already showing signs of rust. That is the basis of a large. their problem is greater than ours. this is not so if a language barrier is being crossed. Misunderstanding can start with language. Shipper: Your charterparty states clearly that you have to sign clean bills of lading'. . need to develop them into an effective team. and compare them with your contractor's record of the same event.4. Execution Not of the contractors but of the contract. And remember. keep accurate records. a cardinal principle of negotiating is to avoid. Master. the thesis of this book-we are offering a service. Not only are the words different in different cultures but the structure. and since the natural English speakers tend to be poor linguists. you will generally be under time pressure and needing to sail-not the standpoint from which to initiate a renegotiation or resolve fundamental disputes regarding the interpretation of the contract. whilst in a single language interaction. taking into account the inevitable additional (and cancelled) items. If you have managed to ensure that the contract fairly reflected the agreement and if disputes during execution have been resolved promptly. Address disputes as they arise. it needs to be. a lack of understanding of the problems of translation. this phase of the negotiation can be quick and relatively painless. if possible. who are our customers? 5. grammar and concept can be too. This is a stand-off situation in three short sentences. we tend to transmit a lot more than we receive. Negotiations continue until the scheme of work of the supply item is complete and the final price agreed. It is also worth remembering that as senior managers. Virtually every seafarer works in a multi-cultural environment and many work with multi-cultural crews and you.. content and meaning pass backwards and forwards through two sets of cultural filters which may or may not give words and actions the same meaning to the receiver as they have to the originator. buy time (may not be possible but a standoff takes time too) and share the problem. As is discussed in chapter six. if not possible. In a charterparty.cultural environments All subjects need at least one impressive word and ethnocentrism is the understanding of how cultural perceptions and assumptions affect us. contracts need to be project managed whether they be charterparties or repair contracts.'Then we have a problem (let me call my P&I representative). Conclusion Multi. wet night shortly before you are due to sail. formal negotiation which can be predicted and for which you can prepare. This starts with the need to divert part of one's mental capacity to the task of translating into or out of the language in which thinking is undertaken. 100% attention can be devoted to understanding the problem. as master. or. Remember too.' Master: Then I am going to have to clause the bills of lading'.

Netherlands. expounded an interesting and useful theory on the characteristics of different cultures in corporate situations. Sweden. Canada. And the report became policy. And the seniors went to their heads of department and said: 'It is a pile of dung and nobody may abide the odour thereof' And the heads went to their faculty chairmen and said unto them: 'It is a vessel of fertilizer and none may abide its strength' And the faculty chairmen went to their deputy director and said: 'It contains that which aids plant growth and is very strong' And the deputy director went to the director and said unto him: 'It promoteth growth and is very strong' ' And the director went to the minister and said unto him: 'This powerful new initiative will promote the development and efficiency of lecturers and is strongly recommended'. Four national patterns of corporate culture are identified based on a comparison of the level of central or decentral control linked to the degree of formality in personal relationships.Definitions of culture are not too helpful. Spain. Incubator. with each dimension giving clues to the next less obviously visible inner dimension. Germany Central and Informal. Like Chinese whispers. Family. some aspects of multicultural crew behaviour and response can be easily recognised. as illustrated in figure 2. The assumptions were without form and the report was without substance. Eiffel Tower. different forms are used to address people at different levels of the hierarchy. . but can be thought of as consisting of three dimensions. Fons Trompengars. Guided missile. UK Formal and Central. USA. France. Returning to language-even' when only 'one language is being used. in his book Riding the Waves of Culture. And darkness was upon the face of the workers and they spoke unto their seniors saying: 'It is a crock of excrement and it stinketh'.16 and. whilst such extracts can be counterproductive if used for a quick fix. And the minister looked upon the report and saw that it was good. This produces a matrix: Decentral and Formal. Belgium. Japan Informal and Decentral. In the beginning was the report and then were created the assumptions. this can distort meaning as illustrated by this light-hearted latter-day parable on educational development.15. Denmark. India. These are summarised in Table 2.

sisters. D. Hofstede (1979) developed a power differential index (PDT) which measures the hierarchical distance managers maintain from their subordinates and the distance that the workers see their managers are removed. These are just a few pointers to suggest that a little careful thought can result in a much more effective relationship and help build for you an effective team. During childhood and early life he learns and adopts values on what behaviour is good' and what is 'bad' ' . it is important to understand that they interacted with different people and with different environmental factors so that they will have developed different values on what is 'right 'or 'wrong.' When dealing with other people. Less need for technology 3.what is 'fight 'and what is 'wrong. A high PDT score indicates that the managers have a great deal of power over their workers and remain distant from them. By investigating managers and workers in 40 different countries.Less questioning of authority in general Low PD1 Moderate to cold More need for technology Less traditional agriculture and more modern industry Higher education of lower strata Strong development of educated middle class Greater national wealth Wealth more widely distributed Political power by representation Smaller population Historical events -independence More questioning of authority in general Later. "good’’ or 'bad'. A low ROI score shows that the workers use company rules as nothing more than general guidelines. Less education of lower strata 5. the pattern is as follows: . A low PDT score indicates the opposite.Historical events -colonialism 11.16 on page 41. friends and with the environment. he or she interacts with parents.The corresponding corporate characteristics are shown in table 2. By combining the results of all these investigations and using only the major shipping countries involved. Moreby (1989) applied the work environment preference schedule (WEPS) developed by Gordon (1970) to senior ships' officers and middle level shipping managers from 17 countries. Less national wealth 7. Hofstede (1979) investigated the attitudes people held towards company rules. Political power concentrated 9. A high score on the rule orientation index (ROI) is when people abide by the letter of the rules even when. made the following observations with respect to communication problems inherent in a cross-cultural manning environment: As a person grows up. FNI. Large size population 10. H Moreby. Different factors cause high and low PDT scores as follows: High PD1 1. Tropical and subtropical 2. in the circumstances. A high WEPS score shows the willingness of a person to subordinate himself to the wishes of his superior (similar to a high PDI score) and to follow exactly the rules and regulations (similar to a high ROI score). More traditional agriculture and less modern industry 4. brothers. this is against the company's best interests. Wealth concentrated in a small elite 8. This is a most important issue when considering the manning of merchant ships. Weak development of educated middle class 6. A significant difference between people from different countries is their attitude towards authority and rules. Causes and consequences of cultural differences Dr.

1.Radio communication. in some countries. the seafarers supplied by the agent may be less competent but willing to pay. In some Third World countries from which crews are recruited. In addition to the effects of cultural differences on organizational structures and managerial styles. It also affects safety and efficiency because if the good competent seaman from an area cannot afford to pay or refuse to pay the bribes. shipmanagers. his competence to demonstrate skills in those functional areas relevant to his job description are assessed in relation to his ability to support the more senior officers on board. Such individuals feel more 'comfortable' and prefer to manage people from the high PDI clusters. it is more open than in others. Through Western eyes. corruption exists in every country in the world. There are. etc. Corruption-In one form or another. . in turn. there are two further cultural issues that must be taken into account. electronic and control engineering. 2. Under these circumstances seamen may try to stay on one ship for as long as possible because they simply cannot afford to take a vacation and find another seagoing job. The only difference is that. As an officer commences his training... . However. low ROI Scandinavian) will have to change his managerial style and become more authoritarian and more 'remote' from his crew if they consist of people from another cluster (e. . low ROI cluster who believe very strongly in authoritarian styles of shipboard management and complete obedience to orders. assessed against their ability to demonstrate operational competence with an increasing need to be able to demonstrate managerial skills as well. there are seven functional areas in which standards of competence are measured: . seafarers may have to pay for their jobs.. . . By the time the officer is promoted to master. high PDI.e. managerial competence will form an important part of his capability. These more senior officers are.Maintenance and repair. superintendents and senior officers from countries in the low PDI. Management and STCW The 1995 Annex to the IMO Convention on Standards.Electric. a shipmanager or shipmaster from one cluster (e. religion plays an important role in the community and in every-day life.Controlling the operation of the ship and care for persons on board.This pattern has very important implications for manning and shipmanagement. up to half of his take home pay may have to be paid by a seaman to a clerk if he is to remain on the roster for another ship at the end of vacation. Training and Watchkeeping (STCW) emphasises the acquisition of skills (as opposed to just knowledge) and provides for a functional approach to certification. high ROI Indian). This is an important issue to be addressed and resolved by the major employers of Third World seafarers.g.g. .Cargo handling and stowage. . shipmanager or shipmaster employing crews from the same cluster finds it relatively easy for he does not need to change his management style. This is normally well respected and absorbed into shipboard working practices. As reported in Seaways (September 1995). This can present problems related to the discipline and discharge of seamen. A shipowner. Religion-In the Islamic and Catholic countries.Navigation.g. the first is good and the second is bad. a low PDI. however. feeding arrangements.Marine engineering.

When in place.Actual income and expenditure is checked against agreed budgets at regular and appropriate . finance. Relevant elements might be: . individuals and self. people. In order to be able to measure whether an individual's skills demonstrate a high enough level of competence. a number of detailed performance criteria are specified for each element. For example. Each unit of competence is then subdivided into elements of competence. allocating and evaluating work carried out by teams.In the United Kingdom. individuals and self against objectives. Four key roles or functional areas were identified as encompassing all the areas in which managers operate. the top Level 5 NVQ in maritime operations will equate to a Foreign Going Master's Certificate of Competency (subject to an additional requirement for a formal oral examination). These are operations.or in the functional area of managing finance under the unit of competence for monitoring and controlling the use of resources . and they equate to the seven functional areas identified within STCW. individuals and self to enhance performance. Thus. . The section is included to give a brief overview of how vocational qualifications work with particular reference to management standards. this functional approach to acquiring skills by which to demonstrate competence is embodied in the National (and Scottish) Vocational Qualifications ~NVQs). the basic building blocks for NVQs. .Monitoring and controlling activities against budgets. and information. two of the eight performance criteria which set the standard for monitoring and controlling activities against budgets are: .Setting and updating work objectives for teams and individuals. Each of these key roles is divided into what are called units of competence.Developing teams.Planning. The Level 5 NVQ in maritime operations will contain units of competence (qv) which are drawn from the middle management standards.Allocating work and evaluating teams. . within the key role of being competent to manage people two of the four units of competence cover: .

in a suitable simulation. Whilst these qualities generally ensure that ships reach port safely. time. In the UK.Prompt corrective action is taken where necessary in response to actual or potentially significant deviations from budget. This range of responsibility is defined by range indicators.Setting objectives and planning. but it can also be a shipping company). most universities have a management faculty and may offer accredited courses by correspondence.e. Conclusion The knowledge and skills discussed in this chapter enable one person.Delegating. ACKNOWLEDGEMENTS IT IS ALMOST IMPOSSIBLE to write on management and management change without drawing on the skill of other authors. the Open University offers a full MBA for those with the determination to succeed. through questioning. materials.i. And monitoring covers direct costs of. Since we all work within a set of organisational rules. For example: monitoring of budgets relates only to the accounting centre for which the manager has responsibility. Competence can be assessed by observation of the candidate performing a task at his or her work place or. the tradition of the company and strength of character. relying on the example set by other masters who influenced thinking. Similarly.. a candidate can present a portfolio of evidence (more comprehensive than a simple record book) to prove that he has achieved the required level of competence. if this is impractical. Routes also exist by which prior learning. and . accreditation of prior learning) but good supporting evidence is essential. at sea the shipmaster is exposed to many more uncertainties than shorebased managers and so the need for good management practices is even more important than might be realised. Particular thanks are also due to jenny Hill of Hill Tallack who proof-read the manuscript and suggested a number of improvements. and this is reflected by the length of the reference list.Coaching others.. expenses.Running effective meetings. However.Managing. Generally management techniques are transferable and can be applied equally well ashore as at sea. operating policies. . . Perhaps this only reinforces the truth that management skills are central and essential to all that we do. which is only credited in unit size chunks. In the past without this higher level of awareness the individual had to cope as best he could. . is checked by the centre's internal verifier before being advised to the awarding body for that vocational qualification (MCI or management charter initiative in the case of these qualifications). The modules cover: .Solving problems and making decisions. . it is necessary to challenge past assumptions and consider if there are better ways of obtaining results. . The award. and cash flow. relevant overhead costs.intervals. Competency-based learning and competency-based assessment of skills is going to increase-this section is designed as a brief introduction.Leading and motivating staff. For those wishing to take a deeper interest in management skills. The assessor may still require him to demonstrate some aspects of his competence and in both cases he will. staffing. the master-to manage more effectively. Candidates can only be assessed competent by a qualified vocational assessor who must be operating within the quality controls of an accredited assessment centre (frequently a college. the operational requirements of the voyage. . Range statements help define the areas in which vocation assessors can assess a candidate's levels of competence against the various performance criteria for each element. revenue earned by the accounting centre. there will be limits to one's authority and areas of responsibility. . job descriptions etc. Thanks are due to Miles Martin at Ugland Ship Management for permission to reproduce their job descriptions. The Nautical Institute runs a scheme on personal management effectiveness leading to a management diploma. experience and qualifications may be accredited (APL. Additionally. test the candidates' underpinning knowledge.

Sample job description for the master. managers must know operational costs. no quality assurance and. H. the budgeting process is becoming an essential part of the shipmaster's job. the budget should no more be forgotten than the course line on a chart. indeed. or causes. Derek Rowntree: Corgi. Just as the difference between a DR position and a fix shows the navigator how wind and tide are affecting his progress. project budgets. Meetings. therefore. activities/learning area matrix. just as a navigator may change course to benefit from. This difference is called the variance and is a crucial aid for the effective manager. so will the effective manager make the necessary adjustments to regain or improve upon his financial course through the year However. . the budget remains the benchmark against which he can measure and calculate the .trading budgets and the voyage calculation. . Meetings. of which budgeting and budgetary control form an important part. The One Minute Manager. Good planning skills are fundamental to the success of any venture. The Stages of Change.or long-term forecasts. Moreby.Cultural Manning Environment.Self-assessment and goal setting. Once calculated. Blanchard and Johnson: Fontana. A budget is not a dictum that must be followed slavishly. G. or are involved in drawing up your own vessel's budget. Riding the Waves of Culture. Robert B. the variances will enable the manager to pinpoint the cause. so the prudent businessman plans his expected financial progress through the coming year with an annual budget. ISBN 0-552-99291-7. FNI. In the same way that a prudent master plans his voyage before setting sail for the next port. essential that sea staff understand the importance of good commercial management. they must understand the influences which affect these costs and they must be able to organise the company to ensure that it is profitable. Whether you are presented with a budget by your owners or managers. Forts Tromenars: Nicholas Brealey. ISBN 0-340-36376-2. REFERENCES Chapter 3 BUDGETS AND MANAGEMENT INFORMATION SYSTEMS Language of budge ting. He will probably cast the budget forward three to five years as part of a strategic plan and may also produce short. Burgoyne & Boydell: McGraw-Hill. so the difference between a venture's budgeted and its actual or estimated (financial) position will tell a businessman how his venture is performing. Effective Performance Appraisals. Pedler. favourable currents or avoid bad weather. If the budget is well constructed. variances help the astute manager to take early and effective action to reduce the impact of negative influences or enhance the benefit of positive factors. Hofstede. Maddox: Kogan-Page.Self-assessment and goal setting. Flora/Elkind Associates: San Francisco. seastaff are being drawn into the budgeting process.Getting the Best from People. Professor D. Winston Fletcher: Coronet Books.Manager's Guide to Self. Communications Problems Inherent in a Cross. some questions around the 11 management qualifies. ANNEXES FOR CHAPTER 2 . ISBN 1-85788-033-1. The Managers Book of Checklists. Increasingly. ISBN 0-07-084924-2. Once analysed.building an operating budget. ALL COMMERCIAL ENTERPRISE is managed through some form of financial control. Hill Tallack: Human Resource Consultants.Development. Hierarchical Power Differences in Forty Countries.management information systems. It is. for specific activities or new ventures. Like any form of good housekeeping. Social Styles & GffT. no employment. All seafarers must understand this fundamental principle. for without financial viability there is no safety. of any variance from his planned course.

Terminology Budget period (sometimes planning period): The basis is usually 12 months. This comparison produces a variance (qv). they are fundamental tools for comparing vessel performance within a fleet. As such. but if you cannot remember where you started from you will not be able to calculate set and drift and make the right adjustments to achieve your objective. and frequently referred to as the budget): Financial projections are made in detail and the final budget is usually approved at board of directors level. except as a result of fundamental changes to the budget assumptions.Understand the relationship between budgets and management accounts and the use of codes of accounts. . sometimes. or the company. The short glossary given below gives the most common usages but there may well be variations and it is important to clarify these before making any budget predictions. it cannot. . the annual operating plan. and only if.Understand how to monitor actual performance against budget. If. there is some terminology to learn. Data: These are facts used in the calculation of your budget which you know to be true-your vessel's cargo-carrying capacity is (or should be) one. budgets are prepared to a standard format. statements about the future which you. you may know where you are. different ships may have different longsplices and beware of assumptions built upon assumptions.Understand how budgets are constructed and calculated. be changed during the budget period and then only with board approval. This means that the annual budget does not change when you leave one charter and enter another at a different charter rate. and should not except in exceptional circumstances. that is part of normal trading. As such. It will. If the budget is revised or changed for some fundamental reason. be changed within the budget period. . if the charter rate is higher. In a well ordered company. Projections or predictions: These are the result of applying Assumptions to Data. I Freight Rates x Cargo Capacity = Trading Income Actuals and Accruals: As the year progresses. healthy. but normally corresponds to the company's financial year and is usually broken up into weekly. By the end of this chapter. Many things may change. both during the budget negotiations and during the financial year. We will look at assumptions in greater detail. Freight rates during the budget period will be an assumption unless the vessel is fixed on a time-charter. number of crew. This is particularly relevant if changing companies or managers. of course. a kind of financial set and drift. but that is quite normal-and. it is good practice to clearly define it as a revised budget and logically. throw up variances (qv) in the actual to budget reconciliation. believe will be true. Assumptions: These are beliefs.effectiveness of his actions and should not. in which case the income becomes data. classification cycle and bunker consumption could be others. The actual year to date (YTD) figure for cost and profit centres is calculated from the transactions which have already entered the accounting system together with a best estimate of . Annual budget (or. it should have its revised assumptions and data. Assumption x Data = Predictions e.Understand how to make a budget presentation and how to survive budget reviews. Absolute clarity of assumptions and data used in budget calculations is the single most important factor in building and negotiating budgets since this is your chart datum.g. four weekly or monthly periods. This may be a calendar year. the budget format matches the management accounting system and is linked through the code of accounts as discussed later in this chapter. Be aware of the budget basis. do they enable the manager to monitor the performance of a number of similar operating units. Language of budgeting As with every task. you should be able to: . the management information system (sometimes management accounts) builds up a picture of actual financial progress which can be compared with the budget.

The GMIS should be able to do much more than just perform high-speed bookkeeping. what happens to the bottom line profit (in.. That is. Usually measured for the latest budget period (a month or a quarter). In this case the explanation might be that the voyage was completed in 24. income is 110% of budget. a bank statement being one. it should be able to provide a wide range of historical and analytical data as well. a product carrier was budgeted on a specific time-charter carrying dirty products but the charter fell through and she ended up in the spot market trading clean. whose cash flow implications are not highlighted by simply dividing the budget into 12 equal monthly periods.038 78.e. It is often done on a percentage basis and especially useful in project budgeting.5 days.) Estimates: The term can have two meanings.g. Periodising may be achieved by simple division (e. The conventions are not always the same. It may happen. The overall effect at company level may not be significant enough for the formally approved budget to be changed. which would need to be sanctioned at board level but comparisons of actual against original budget would give variances (qv) not best suited to achieving good budgetary control. mistakes need to be corrected (a contra entry made).592 82. these days computer software ensures that a single (Journal) entry generates the double (debit/credit) entry which forms the basis of the bookkeeping function. Reconciliation: The essential but unexciting task of comparing the computer output with what you thought you input. changes by 5% or 10%.500 Actual 9. They are also sometimes expressed in percentage terms-e.g.) Sensitivities: A method of checking the robustness of the budget result or of the effect of changing assumptions or data. say. Periodising: This is dividing the budget into usable segments.. Taking the above example of drydocking. Item Time-charter equivalent of freight rate ($/day) Bunker consumption Victualling Budget 9. of course. the year to date (YTD) and for the balance of the budget period (rest of year-ROY). (Like cleaning one's teeth. or rot sets in.) Management accounts: These are addressed later in this chapter. for example. Journals: The generic term for all methods of making an entry into the accounting system. Variances: The difference between budget and actual or estimate and the manager's major tool for analysing and correcting performance. in which you receive all your income. The explanation for variance two could be either: . Estimate.any costs (or income) incurred but not yet in the system-these are accruals. it needs to be done regularly.550 The variances also must have an explanation. they are the financial end of a general management information system (GMIS). so beware that you understand them before entering into a discussion or making an analysis. Journals provide evidence of transactions and are the method by which instructions are entered into the system. for the rest of the (budget) year (ROY). In best practice. It is the area where the budget and the financial accounting system meet in order to throw up comparisons between the two (variances).950 Variance + 554 -4. sometimes Forecast. by 12) or by taking into account significant factors.120 +3. if a vessel changes trade-say. Sometimes circumstances can dictate that a vessel is to operate on a revised estimate and this may be for part or all of the budget period. (T/C equivalents will be discussed later in this chapter). if the exchange rate in US dollars. In shipping this is usually quarters or months. In the examples above: The first variance might represent the budgeted T/C equivalent rate for a voyage charter predicted to take 26 days and earn US$235.120 32. such as seasonal changes or drydocking or repair periods. In such cases. especially where figures have been consolidated and a small resultant variance might conceal significant variances from budget in a number of the subaccounts which require attention. (Accruals must. (There are also other types of evidence of transactions. be reversed out of the system when the actual transaction is formally recorded.g. a period of no income and high expenditure.000 in freight. is also the term used when predicting performance against budget during the balance of the budget period. pounds sterling and in which currency you pay half your operating costs). Variances are either positive or negative and depend upon whether the budget item is income or expenditure. The approach to periodising is important when considering the cashflow. and is a central tool in the planning process. revised budget may be recommended.000 36.

it may be represented by the payment of bareboat hire for a vessel on demise charter. Is it because stores were purchased at below budget cost or is it because two crew members were removed five days into the budget year? In the latter case the maintenance budget needs examining to see if the use of shore gangs has increased as a result and thus whether the overall saving is positive or negative. be very suspicious of small variances covering a number of budget items. Because budget preparation and consolidation is a time-consuming process. This field may also incorporate an allocation of the company's establishment costs (overheads and administration) which are out with the vessel's control. Item three represents an annual victualling budget of $5. Because of this. indeed. in real as well as in financial terms. Field 2-operating costs: This represents the cost of manning. give daily running costs (DRC).and depreciation (on a profit and loss accounting basis) or loan interest and loan instalments (on a cash-flow basis). similar types of vessel or vessels operating in the same trade or geographical areas. Strategic budget: Part of the strategic plan and often calculated by projecting the annual budget forward using given rates of inflation.. At its simplest. which is a universal measure of vessel operating costs and will appear again in the calculation of voyage charters. it is essential to understand the basic budget assumptions. The costs which are directly related to the vessel.e. Format for a vessel budget The format set out in figure 3.g.We budgeted a consumption of 30 tonnes per day for a 26-day passage at $100 per tonne and (1) adverse weather resulted in an increased consumption of 41. which must cover the whole of the budget period. These are trading. any one of %%7hicb can suddenly run out of control. maintaining. often referred to as the running costs.or two-week detailed budget for a repair period. It cannot be emphasised too strongly that the careful analysis of variances is one of the most powerful tools for understanding what is happening. Field 3-financial: This relates to the cost involved in owning the vessel and is primarily the province of the commercial or finance department. The overall budget is divided into three distinct fields (defined as 'all the entries collectively' relating to that specific activity).28 per tonne. not just in your budget area (i. Because variances are used to correct the course. For a vessel financed by a bank loan it will include loan interest. it is essential that management information should be prepared and delivered in a timely fashion. when divided by the number of days within the period. Project budget: A budget made for a specific purpose. It is sometimes argued that depreciation should be shown as part of the operating costs since it reflects the historical cost of the vessel spread over its economic life. are very much the province of the master and his staff. storing and insuring the vessel and having it in all respects ready to commence trading. Again. Such variances inevitably cover large and opposite variances in underlying areas of activity. This could range from a long-term (10 years or more) calculation to assess the viability of purchasing a new vessel to a one. The running costs. there is no benefit from over time-consuming detail.. there is frequently severe time pressure on managers responsible for unit level budgets. Specific adjustments may be made for major items such as dry-docking and special surveys or for anticipated changes in freight rates or levels of economic activity affecting local or international trading conditions. This helps the company not only to understand its overall future trading opportunities but also its future cash position. but this is not general practice. your vessel). it is essential that all of the individual operating unit budgets use the same data and assumptions. or. operating and financial.00 per man for a 24-man crew.or (2) the actual cost of bunkers was $105. One of the most common project budgets is the voyage charter calculation explored later in this chapter. A final word. of which the operating budget is of most relevance to the shipmaster. Budget consolidation: Company or group budgets are constructed by consolidating individual Operating unit budgets.20 mt for the passage. the reason for the positive (beneficial) cost variance requires explanation.1 is one example of how a vessel's income and costs can be organised into logical groupings and be used for creating budgets and monitoring performance. And to monitor variances properly.e. . a combination of both factors.. but also across the fleet. An effective and efficient system is needed that gives a reasonably accurate picture of what is happening now.

In order to achieve manageable calculations. For a modern. It is recommended that these are studied before proceeding further. port and agency costs and. .1 sets out a typical vessel budget format and contains definitions for the individual budget components. Figure 3.Field 1-trading: This field covers the income generated by the commercial activity of the vessel. during dry-docking years. he must always aim for zero off service. It should also make provision for ballasting and positioning voyage costs. Trading costs are calculated for each separate voyage in a voyage calculation-in effect. Field 2 represents the vessel's operating costs. a mini-project budget. It is one of the master's main functions to ensure that this period is as low as possible. this should be at maximum three days except. and the costs directly related to earning that income. These costs include brokerage commission. Note 2-off-hire: A combination of. VESSEL BUDGET FORMAT Field 1 Trading days note 1 (offhire) note 2 Gross trading income note 3 (Owner's expenses) note 4 Net trading income note 5 Field 2 (Crew costs) note 6 (Repair & maintenance) note 7 (Stores and spares) note 8 (Victualling & pantry stores) note 9 (Insurance) note 10 (Franchise/uncovered average) note 11 (Sub total) (Drydocking)* (Classification) * note 12 (Modifications) * note 13 (Sub-total-running costs) note 14 Gross vessel income (Overheads) note 15 (Administration) note 16 Net vessel income Field 3 Profit and loss (Loan interest) (Depreciation) Profit or (Loss) Cash flow note 17 (Loan interest) note 18 (Loan instalments) note 19 Cash flow (Positive or negative) Field I represents the trading activities of the vessel. Field 3 represents the cost of owning the vessel. *represents costs which may be spread over more than one year (see notes). and many companies might argue for less. well maintained vessel. 1 Sample vessel budget format Field 1: trading days Note 1-trading days: The number of days within the budget of accounting period. usually 365. Otherwise the number of days within the budget period from acquisition/reactivation (or until disposal). when trading on a voyage basis. (a) Off-service-The number of days within the budget period which it is estimated that the vessel will be unavailable for trading due to technical defects. Figure 3. budgets for vessels spot trading are usually calculated using a time-charter equivalent rate multiplied by the number of trading days less estimated off hire. bunker costs and the costs of preparing and surveying the holds or tanks for cargo. such as freight income. of course. charter hire or passenger revenue.

All costs of repairing an insured accident should be charged to a special (holding) account under this section.e. study leave. as lube oils are not generally paid directly by the charterer). much of this information should be historical and analytical data thrown up by the management information systems. Sometimes put out to specialist subcontractors to supply food and monitor the victualling rate.: (Trading days-offhire) x estimated time-charter rate = net trading income Field 2. main engine plant. When the insurance recovery is made.g. Note 4-owner's expenses: The costs incurred by trading the vessel. sickness and overlap. Since the budget will normally be stated in one currency and earnings (and costs) may be in several.. It is usually calculated on a time-charter basis-i..g. A sub-section frequently included here addresses the cost of undertaking crew changes e. The charter hire may be a known or anticipated time-charter rate (budget data or budget assumption) or. . Other owners have a fixed rate by supplying $x per man per day (as cash) to the steward-no variations permitted. but see also note 12. cargo equipment. Note 5-net trading income: The end of the trading budget. it is not included if a vessel is contracted under pure technical management. auxiliary machinery systems. for a vessel trading on the spot market. designated to that incident. it includes any idle time between fixtures.e.(b) Idle days-The number of days that it is estimated that the vessel will be unfixed. Note 11 -franchise /uncovered average: A prudent owner will make a budget provision for a certain level of deductibles and some costs resulting from accidents not covered by insurance.. Note 8 stores and spares: All consumable stores and spares for operating the vessel including lubricating oils (included here rather than under trading costs. both hull and machinery related and protection and indemnity. these costs are considerable and include all bunkers and port expenses. For a time-chartered vessel this will comprise the broker's commission and any bunkers for owner's account-e. including social costs of the crew' usually including an allowance for leave pay. it is credited to this account leaving only the deductible as a debit. deck. Either they can be charged directly to the x-ear in which they occur (alternative A) or a provision can be made and the effect of the expenditure spread over a longer period (alternative B). However. Any specific insurances related to a specific charter should generally be considered as an owner's expense within the trading field-and. Note 3-gross trading income: This may be made up from passenger receipts. this may be further subdivided into the vessel's functional areas. Regular review and reconciliation should take place in order to avoid nasty shocks at end of year when all subaccounts must be fully reconciled. but also often the start point for the presentation of the vessel's operating budget within the management accounting system. For a vessel on a 12-month time-charter this will be the same as the off-service estimate. Again. and bridge and navigational equipment. Note 7-repair and maintenance: The costs allocated for repair and maintenance of the vessel are usually subdivided into such vessel areas as: outside hull. but these are accounted for by the use of a time-charter equivalent rate and not usually estimated in the annual budget (see voyage calculations). recharged to the charterer. clearly stated predictions have to be made on foreign exchange rates. holds and hatches. the time-charter equivalent rate is frequently used for ease of calculation. if possible. Note 12-drydocking and classification: This area covers costs that are periodic and can be handled "in two ways. operating budget Note 6-crew costs: The wage costs. For a vessel operating on voyage charters. for positioning voyages and any initial cleaning of tanks/holds to meet charter description and any costs incurred whilst offhire (some companies may well include these costs within the operating cost section of the budget). A sub-section here sometimes shows dry-dock costs. Very close monitoring of these accounts is necessary as. For budgeting purposes. if the vessel is predicted to work the spot market on voyage charter.. it will depend upon the current perception of the market for that vessel. although the management accounting system-perhaps better referred to as the management information system will throw up all costs and income. being a holding account awaiting insurance recovery. travel.i. The full cost must be shown as it occurs for cash flow planning. it is not immediately taken into the operating costs. Note 9-victualling and pantry stores: All food and other costs associated with supporting the crew. Note 10-insurance: Premiums for all the usual insurances. accommodation. container freight or charter hire. etc. hotels and subsistence.

1-drydocking: The cost of dry-docking should be shown in the year in which it occurs.g. recharged. frequently termed that vessel's gross operating income. superintendent's travel and overseas costs are allocated to overheads. Entertainment and communication costs relating to charterers fall under owner's expenses in the trading budget and must be.3 million) must . classification costs and other surveys (i. In other words.3 million and depreciated at $2.e.0 million per year over 15 years. or a life enhancement refit.e. perhaps involving other activities of the group. Note 18. a vessel purchased for US$33. but. The simplest approach is straight line depreciation to a residual value. divided by total trading days give daily running costs (DRQ. If of modest amount. If of a substantial amount (and especially if financed by a bank loan). Field 3: financing budget Management will also be interested to know whether the vessel is covering her financing costs. medical and communications may be contained within overheads or under a separate budget item.: Assume 30-month drydock interval: Cost of drydock Dry-dock equalisation 1995 Net effect on P&L (see 19) *= no provision made A 1995* 1995 (120)* (120) 80 (120) * (40) B 1996 1997 (40) (40) (40) (40) Note 12. over that charter period. Although vessel financing will usually be consolidated across the fleet and organised to achieve the optimum tax plan. depreciation and loan interest. Thus.. company policy may dictate that the impact of the cost be spread over the rest of the vessel's life or. As mentioned previously. A typical example is sea staff study leave. the book value of $7. in profit and loss terms. This marks the end of the area in which the vessel has some degree of control over profitability. usually on a percentage basis. if of a more specific nature linked to a specific trade.. Note 16-administration: The allocation. Shareholders particularly will be interested to know whether there is a surplus which will generate a dividend. Subtracting the running costs from the net trading income gives a contribution to profits. these may be taken as a cost in the year in which they occur. e.g. then the balance of the depreciation (i. the net operating income-meets. In some companies. in particular safety surveys. a figure central to all freight calculations. Running costs for the budget period. improvements or modifications may be made to the vessel which benefit her for the remainder of her life-modifications in connection with a major change in statutory or international regulations are an example.e. of the establishment costs of operating the company (e. rents. the management fee may appear here. Note 17-loan interest: The interest falling due in that period on any loan (debt) financing related to that vessel.2-classification: Although smaller than dry-docking costs.1-depreciation: An accountancy method of spreading the capital cost of the vessel over the vessel's reasonable lifetime.vears. the impact of the cost can be spread across the drydocking interval by making a credit in the drydocking year and a debit in the non drydocking . etc. whether the contribution resulting from the vessel's trading (field 1) after allowing for the vessel's running costs (field 2)-i.Note 12. Note 13-modifications: From time to time. can be handled in the same way. If a vessel is under technical management. Note 14-running costs: Sometimes called operating costs and care must be taken to ascertain whether running (or operating) costs have included either overheads and/or administration costs. if the vessel is sold in mid-life. Note 15-overheads: Non-vessel specific costs allocated to a group or class of vessels.. as the benefit of the expenditure is not for that year alone. The contribution at this level may be termed the net operating income. it is good management discipline to be aware of the whole range of a vessel's financial performance. often 10% of cost but it may also be an estimate of scrap value. alterations.).5 million) plus the residual value ($3. Incidental costs such as entertainment. As illustrated in chapter 12 (sale and purchase). non-class). where contractually agreed. rates. This will require adjustments to the vessel's depreciation within the P&L accounts.3 million would be given a residual value of $3. some companies may include annual depreciation within running costs. managerial salaries..

The date of this meeting will generally be a couple of months before the budget period commences. be added to the existing book value and depreciated over the balance of the vessel's (extended) operating life. your first task is to go through a checklist of what you have and what you need. I from a departing superintendent. consolidation and review. Much can change during this period and this is one of the reasons why budget assumptions are so important. on the basis that the master is required to prepare a full operating cost budget for his vessel. Note 18. Building an operating budget Building a budget needs careful planning and coordinated input from a number of different sources. you could be working on data that is four months old (and it will be 16 months old by the time you get round to reconciling your actual performance to your budget).. There will inevitably be some immutable date at which a whole fleet. before tax.. taxable. The calculation of voyage estimates is discussed later in this chapter. To achieve this it is necessary to add back all non-cash items. in a badly organised company. such as the allowance for depreciation and the provision for dry-docking. The net sale profit is. Note 19. in its place. company or group budget package must be presented to a senior board of directors for approval. After looking at the stages which it is necessary to go through in preparing a budget we will explore the exciting challenge of presenting.2. and. your budget. and defending. depending upon the tax regime of the nationality of the owning company. Here we will concentrate on field 2. must be recorded and are. This means that you may well have to start preparing your budget four or five months before the budget period in question (on the other hand. effectively. and represents the amount available on which the company will be taxed and which is available to pay shareholders a dividend on the equity which they have invested in the company. the operating budget. even before the budget period starts. A protracted budget period presents its own problems. deduct any loan instalments or lease payments falling due within the period under consideration. an intrinsic part of the budget. Note 19. but auditors will look for consistency of reporting. you may well find yourself being asked to prepare a budget in what seems like only five minutes). Prior to this date there will be a long period of calculation. It is important to realise that this is a protracted exercise of which your input may well be only one small link.be deducted from the net sale profit. The impact of depreciation can be adjusted by the choice of depreciation period and residual value.1-profit & loss: The result is a net profit (or loss). and we need your budget by . Either way. Receiving the budget package This may arrive in many ways. brown envelope full of forms and instructions which lands on the master's desk with a dull. It means that. if they can be said to enhance the vessel's value or effective operating life. heart depressing thud to a brief 'Oh yes. resulting in a process something like the one depicted in figure 3. The cost of any major conversions or modifications may.2-cashflow: P&L does not address fully the actual movement of cash. .2-loan instalments: Any repayment of loan principal falling due in the period in question. from a large.

Preliminary questions 1.The checklist should cover the points set out in the flow diagram and you should be aware of the overall timing. or will. 2. is it realistic? . Consolidating corporate budgets can be a lengthy process as illustrated by the flow diagram. he support or attack it and who is the best source of the information which I shall inevitably need? Your immediate point of contact might be your superintendent (who. discuss his problems and make an ally. Remember to make personal contact with the finance manager when you are next in the office. What is your timescale. to whom will I be delivering my budget. how strongly can. so make sure that you get all the information you can when he is there) or the ship group manager. will never be there when you need him. Who are my points of contact. The person who will present your budget up the line will probably be the fleet director and the source of much of the information which you will need may well lurk somewhere in the finance department. according to Murphy's Law.

g.200 for pantry stores. When preparing to present your budget. The chairman has a high level of control. And a golden rule.. confront a problem with a direct rebuttal. crew costs. repair/dry-dock schedule.200-is usually about right except on coastal and smaller craft). A vessel's budget can be represented by one line. It is also good practice to discuss the budget assumptions with the members of your management team responsible for that section of the operation. how much difference does 30% more time trading in tropical waters make? Note: There are two bits of terminology which you may come across-line and level of control: Line refers to the presentational line in the budget. 3. As well as ensuring that the assumptions are realistic.e. especially in the personnel manager's eyes but how much flexibility is there in the crew cost subbudget? The information frontier: The operating cost budget can be presented as one figure. budget data and resulting predictions. your company or managers will need to advise you of those budget assumptions which are common to all budget units.e. As well as the budget period and required date of presentation.Probably not. Only in exceptional circumstances.. Remember. Additional lines give additional and increasing levels of detail. chemicals. but in how much more detail? Level 1-victualling and pantry stores . build up your own data base using information which is readily available on board. An example could be the average running hours and resultant fuel consumption of the generators. What does the Budget Package contain? Do you understand the format of the budget.. If it does not. know the expected level of control and prepare at least one level beyond the information frontier 4. does management care how the result is achieved? Do you have freedom to go over on one account (say.g. At the highest level of detail will be the inventory for pantry stores.300. record all budget assumptions. We know that management will require it to be presented in greater detail than this: R&M. $17. insurance costs. wage and leave rates. Do not be reticent about requesting the information which you need to build your budget. like a wish to die young and gloriously. the chief engineer requires considerably more detail and has a lower level of control.000-e. crew change and intervening drydock programme time available will only allow rough estimates in some budget areas-please advise if any flexibility' could be a better approach. Level 2-victualling . View of trading pattern.. the net result (or profit/ loss) -this might be adequate for the chairman of an international transportation group but not for the fleet manager.500. too. that a good management information system will be able to produce a range of useful historical and analytical data which will help you prepare your budget. it also improves the 'ownership' of the budget by those on-board managers who will be responsible for operating within the constraints of the budget. supplemented by information relating to the trading pattern-e. etc.. any contract supply items. The astute manager always has one level of detail in reserve with which to counter attack on his budget. $625.i. is the level of detail clear-you get no prizes for calculating the expected cost of crew travel to the last cent when it should be rounded up to the nearest hundred or even thousand pounds. What are the budget assumptions? This is of fundamental importance and in this context.g. These must include: exchange rates to be used. and keep the message-it has become part of your budget assumptions. victualling rate. dollars or kroner (the nearest hundred as a decimal of $1.e. kindly reconsider' may well secure the group finance director's attention but 'Your budget package received and presentation date noted. much time and effort can be lost working on false assumptions. 'Your budget deadline is totally unrealistic. lube oil-and may include number of crew. repair and maintenance)? Probably not. refers to both assumptions and data. this indicates that you will then have no problem at all in delivering the most accurate and detailed budget. indicative costs of various stores.(20 crew x $5 x 365 days) + 5%. Do not ask for an extra week/month or voyage.. The key question is. Briefing and budget team .$42.g. riding gangs to be provided. crew costs) and under on another (say. expected trading pattern. paints. plus $4. and this leads to the first lesson in the tactics of budget presentation (sometimes known as jungle warfare).2 for $17.

Ownership of the budget is important. like so much on board. assumptions and data Level 4:Chief engineer. they.Stimulate their interest so that they give thought to the whole shipboard management and detailed thought to their own areas of responsibility (maybe the third mate can think of a more economical way of maintaining the lifesaving equipment-at least the challenge makes him think and feel part of the management team). when presenting to master: From the table. so involve the whole management team. but in a controlled and logical manner.Set out clearly the information which you require from each member of the team. will need to know the level of precision you require and (referring back to the explanation of line and level of control) should go at least one level beyond the information frontier which you require. A good example of this could be: Management level and line and level of that manager's required control I Level 1:Senior management when presenting to main board: Annual operating cost budget assumptions and data Vessel name and type. Budgeting is an ideal stimulus to reviewing how effectively you are managing your operation. too. crewing and dock/survey plan Overall figures for each section-e. trading pattern.000 DRC equal to $5. do not deploy the information in the defence of your . crew costs. lube oil with the associated price assumption and assumed running hours The C/E should explain his maintenance schedule. aux machy spares. . it should be clear how important it is to be armed with at least one additional level of detail but this is your tactical reserve. to them. wrap a wet towel round your head and periodically phone bemused subordinates with demands for answers to a string of. and . you can send your team away to calculate their own individual section of budget input.Give them a clear and concise brief on the task. say. Your objective is to: . Once this has been done. Associated assumptions $1. This means that he will have additional detailed information at hand with which to answer your (hopefully) penetrating questions. R&M with an appropriate degree of supporting detail Stores and spares would be specified as.g. existing stock. the timescale and the underlying assumptions. etc. is a team activity. seemingly unrelated questions.A cardinal mistake is to retire into your cabin.971. Budgeting. NEVER PLAN ALONE BUT ALWAYS KEEP CONTROL. Good ideas and good insights come from everywhere. and by when. Remember. main engine spares.400 per day Level 2:Fleet manager when presenting to senior management: As above but in greater detail as set out in the operating budget Level 3:Master when presenting to fleet manager: Each section will be broken down into its subsections.

remember. But remember another golden rule: Beware of assumptions built upon assumptions. share with them the secret of good planning. fleet director or owner or chairman if required. You should open proceedings by setting the context and restating the overall assumptions.You establish quickly if you are in the right ball park. When presenting the budget. into the world and outside your care and protection for the first time) in writing. Rerun the exercise until you and your team sound confident and you feel that you can make a clear. The budget is calculated in US dollars and is based on the assumption that we will . Many of the cost centres can be divided by the number of periods (four or 12). go one level beyond the level at which you are presenting the budget-and then one level beyond that. as described in Note 12 (earlier in this chapter) a credit or a debit may have to be allowed for special non-annual expenditure. If you are required to make a verbal budget presentation. Once the annual budget has been calculated. Just as it is not good policy to have half a dozen surveyors wandering unaccompanied round your vessel. will benefit from allocating the costs to the expected period. take your time to examine it. if the figures are available explain if. There is no dry-dock scheduled during the budget period.Time spent refining assumptions is rarely spent steaming in the wrong direction. it will require periodising. Remember. you may be required to cast forward a three. Once the team have calculated their individual budget inputs. undirected. Gentlemen.budget before it is required. using either the format specified by the company or a standard format such as the one contained in figure 3. for a well-presented budget enhances every manager's reputation. One of the most effective ways of reviewing your budget is to use your team to make a budget presentation to you.You keep focused and do not lose the big picture. the indices used form part of your budget assumptions. too. how and why this varies from the current year's estimate or previous year's actual. .1. Before dismissing your team to start their calculations. clarify the uncertainties and reduce them in order of importance. around your budget. but an allocation is made toward the cost of the next dry-dock in 30 months' time. again. you may have the opportunity to present it in person at a later date. . repair and maintenance. it is time (a) to review each part of the budget to ensure that assumptions have been applied correctly and (b) to construct the budget as a whole. so it is unwise and unprofessional to let your management wander. Each member of the team should state the assumptions and data upon which they have calculated their input and. you will be required to submit your budget (your budget. either by month or quarter. although to maintain operating efficiency. The advantages are (to borrow some soccer euphemisms): . take charge of the situation. force an answer in five minutes. Presenting the budget On almost all occasions. If you are lucky. but some. concise and convincing presentation to your fleet manager.trade grain and coal trans-Atlantic before ballasting to the Pacific mid-year in accordance with commercial department's predictions.month period commencing next January. especially if there is a drydock due. especially in connection with hold cleaning. Use the opportunity to assess the effect of changes in the assumptions by making a number of sensitivity allowances. Then. Main assumptions are those received from the finance department in September and revised towards the end of October We have budgeted on the proposed reduction in crew level. beware of non-recurrent costs and.or five-year budget. the five-minute budget. Use the exercise to challenge the information frontier. the sums will be arithmetically correct. I would like to present the budget for mv Well Run for the 12. If they are correct. No matter how complex the problem. such as dry-docking. . we have increased marginally our use of riding gangs. emphasise the underlying assumptions. for example. This is usually calculated using inflation indices or percentages but. Finally.

You may divert the cuts into other areas. and should be the result of co-operative effort. who is strong and expanding. may well wish they had committed early. a profitable year-end result. Life on the edge: Those of an adventurous frame of mind can. Margins or pad the hierarchy: If budgets are rolled up from the lowest level of the company. we have a deck scaling machine and pneumatic paint spraying equipment. whether written or in person. At $73. departmental managers are endeavouring to defend their areas of responsibility. 3. who are your friends and who are your enemies. . The astute manager learns the rules of jungle warfare. Conversely. note any deviation (variance) and take early and effective . At the same time. Attention to detail matters.If you can accept an extension to hold or tank cleaning time of two days (have a realistic figure which you can justify or you lose). Good budgets are a valuable tool in improving performance and should be owned by all involved. we have another radar fitted. you should have left the impression of a competent. This is not always the wisest use of funds but those who have seen training allocations trimmed to enable budget expectation to be met. positive expense variance for a majority of the year. Remember. there is little more satisfying than having survived a tough budget session by preparing well and presenting well. etc. You never know. managers will endeavour to retain margin at their level of control and shave the budget they pass down. 5. the tension winches are overhauled. ask which assumptions are to be changed to achieve the revised figure. A WELL PRESENTED BUDGET CAN BE A VERY EFFECTIVE INTERNAL CV Take the trouble to set out your budget and its assumptions neatly and in a well indexed and easy to understand format. If the budget rolls down from senior management. Flat refusals rarely survive. Finally. and usually false. Management information systems Accounting system Having produced a budget. However well you present your budget. Hopefully your dry runs on board will mean that even if your budget is not accepted and is sent back for review. 4. you could take a cut and win. The most effective way to counter this is by driving the discussion down through the information frontier until you arrive at one level beyond that of your inquisitor. 0 If we get a new set of lightweight mooring ropes. bear in mind that budgets are an intensively competitive actvity. whose department is under pressure. articulate and efficient manager. expense managers pad costs to make the budget easier to achieve. Know the territory. it pays to reconnoitre. When to spend: Very often the expectation of savings to be imposed later in the year will induce managers to commit early in the year when funds are available. offer the most important thing in their control. 2. on board and ashore. etc. The cunning co-operator: Many thrusts of the budget parer's knife can be diverted by a discussion on alternatives. even at the expense of others. the prudent financial navigator wants to plot his progress towards his destination. Knowledge and ignorance: Specialist knowledge.If we increase the number of riding gangs. 1. when you receive the result. this shows a 2~12% increase on this year's estimate due mainly to the need to renew all hatch seals. or a keen and newly-promoted manager. especially if you arc not going to be there to defend it. Conversely. the budget is your representative with senior management and budgets can be fun. Your defence is similar. delaying cost items can produce a positive.If you would look at the left-hand column headed annual budget on the line for repairs and maintenance..600. Of course we can reduce the crew by a further two: . Senior management is permanently trying to persuade income generating departments to revise their estimates upwards and cost centres to either reduce expenditure or improve productivity. although this does not constitute good budgeting. often leads to an imbalanced concentration on the budget area known best by the recipient. whatever the outcome of the budget presentation. when pressed for savings. Before making your budget presentation. ignorance leads to arbitrary and autocratic cuts. get your team together and debrief them.

cash and management. Great care must be taken in generating and using a code of accounts.) Each transaction is entered into the accounting system through a journal entry which. as well as stating the amount and date of the transaction. (Purists may argue that the payroll account is not truly a ledger-see journals. in the context of management accounting. drydock costs)..g.corrective action if necessary. effectively.3 shows the flow of transactions which is common to all accounting systems which are. databases which organise a large number of large and small transactions in a variety of predetermined ways. The numerical indicator is found in the code or chart of accounts. Figure 3. the actuals are compared against budget to calculate variances.4 represents the typical functions of a number of subsidiary ledgers. The output from the general ledger is in the form of the three types of accounts mentioned earlier-financial or statutory. fixed asset register) and some of which handle the data in order. The code of accounts directs the transaction to its relevant subsidiary ledger (ledger originally referring to a book-or register-that lies permanently in one place). Figure 3. to produce a stock control system or accumulate historical data from which project estimates can be generated (e. . some of which store raw or primary data (accounts payable and receivable. The importance of ensuring that the journal entry for each transaction directs the data to the correct ledger is self-evident. The tool for achieving this is the management accounting system which is described earlier under terminology. The subsidiary ledgers feed into the general ledger where. includes a brief narrative description and a (usually) numerical indicator which instructs the computer where to store the transaction within the database. for example.

349 Identifier for mv Anon. The journal entry for a single transaction would look like this: [47/349/712732 / / $20. profit centre or the whole fleet. .000 / VOY 120 SEAWAYS /3/95] would represent: 47 Vessel group (say.725. Very specific information can be pulled from the accounts.A typical code of accounts may be constructed in the following way: . all product tankers forming a profit centre). 27 Main engine-support systems. 71 Operating costs-repair and maintenance. .Eng R&M Turbocharger budget. or: 712030 Total M. how many cylinder liners were purchased across the total number of vessels in that profit centre. 32 Turbochargers-impeller. for an individual vessel.g. The code of accounts can be used to call up information in varying degrees of detail. . for a year or between given dates. or a freight payment (X denoting a credit) for a vessel in profit centre 43.93 / MAN Hamburg /5/95] or [43/337/612010/ x / $245. Taking the example given above: 710000 Total repair and maintenance budget or: 712000 Total main engine R&M budget. supplied by MAN in Hamburg in May 1995.A two-figure number representing the profit centre or vessel group..A three-figure number representing each individual vessel.A six-figure number directing the transaction to the correct subsidiary ledger and providing linkages which enable specific reports to be generated-e.

debtors and cash and bank balances. accrued expenses. furniture and fittings.733 What cannot be seen from the above is: The profit for the year.Financial accounts and cash flow Although financial accounts do not normally form part of the ship's responsibility.Cash borrowed or raised from shareholders cannot contribute part of profits. These include creditors (accounts payable). Below or to the right. liabilities are listed starting with current liabilities. starting with the net income generated from the income statement which is then adjusted' to show the cash flow from profit-making operations.203. etc £389. A simple summary of cash receipt and disbursements could look something like this: Cash receipts: From customers for products sold to them From borrowing on interest bearing notes From issuing new capital stock shares £5. the input of data into the management accounting system also provides the raw data for the statutory accounts.000 £6.218 For building improvements. The future . balance sheet and cash movements is also shown.231 For income tax (part prior year) £132.400 For cash distribution to shareholders (dividends) £93.205 For various operating expenses £1.g.636 Cash disbursements: For purchase of products sold or being held for sale £4. Fixed or long-term assets are stated first.5 where the interrelationship between profit and loss.Product purchased and held in stock has a value as well as a cost. loan repayments (due within the following financial year). income tax due and bank overdrafts. traditionally on the left or at the top. e. Assets are shown. To take just a few points: . vehicles etc. If liabilities exceed assets.922. In many ways.000 £100.e. Current assets include stocks and inventory. cash flow is the simplest concept and it is certainly the lubricant which keeps the organisation operating. The income statement and balance sheet form the statutory accounts and are often accompanied by a modified form of cash flow sometimes called the application of funds. the company has negative equity and very worried shareholders. new equipment.247. buildings or equipment is shown by only charging a portion of the cost (depreciation) to that particular year. The long-term benefit of the purchase of land. It was originally intended to include a section on double-entry book keeping. The balance sheet provides a snapshot of the company's assets and liabilities at any point in time (although normally at the end of each financial year).Have we yet received cash for all the product which we sell on credit? . To this is added long-term loans and leases. but one undoubted benefit of the computer is that to a great extent it has made this exercise unnecessary. Both statutory and management accounts can be derived from single entry operations and calculations and comparisons made electronically. accruals are applied to the trading and operating level costs and stock in hand is taken into account (or the balance between opening and closing stock). To produce an income or profit & loss statement. income and costs are set out in a specific order as shown in figure 3.636 £1225. The difference between assets and liabilities is balanced or financed by shareholders equity (i. .750 £6. and the financial condition of the company at the end of the year.030. all net of depreciation charged to date.. land and buildings.484.903 Net increase/ (decrease) in cash £43. depending upon the format used. retained earnings and share capital).. plant and equipment. Finally.099 For interest on notes payable £74. Increased financial involvement also tends to result in increased curiosity and a knowledge of cash management is useful if not necessary.

. S240. Chapter five looks at the commercial negotiations which lead up to the contract of carriage which is set out in the voyage charter and chapter six explores how the voyage charter can be project managed. They would calculate the potential net profit from a charter. or at least the contribution which is left after trading costs have been deducted. if downward may cause the owner to fix long. is an invaluable tool for achieving cost effective and efficient ship operations. The finance department and the personnel department-and to an extent. a need for financing collateral may also drive him towards a long-term (and bankable) time charter. many companies are now looking for savings within the shore-based staff. Even if the freight market is rising and the broker recommends waiting for a better rate. there is no reason why the master should not be primarily responsible for his own budget. even if the immediate return is less. Trading budgets and the voyage calculation The management of a voyage charter is one of the prime areas where the commercial acumen and managerial effectiveness of the master can impact directly on to the financial viabil1tN. just as his counterpart in industry ashore would be. load. discharge and become open for the next cargo in as short a time as possible. As chief executive of a major subsidiary. either the owner's own house brokers or competitive brokers in the market. the owner must. When it comes to selecting future employment. the owner and his broker.000. will be feeding to an owner with a vessel about to become open (i. its implications will not be fully hoisted on board.e. short. organisation. say. Conversely. such as cheaper dry docking in the Far East or a perception that freight rates are better in the Atlantic than. as is evidenced by the owner's willingness to pay despatch for an earlier than anticipated release of his vessel. A fundamental objective is always to present. This part of chapter three focuses on how the 'project budget' for a voyage is constructed (the voyage calculation). on a rising market. but unless the time factor is forever in mind.Medium term: Positioning the vessel globally for other economic reasons.Thus. This may sound obvious. 30 days.. Thus the master can truly become the master of his own vessel in the same way that the master of old took total responsibility for the operation and running of his vessel. and calculate a time-charter equivalent rate. containing as it does-or should-a user-friendly method of keeping track of your cost and your income. must be clear about whether their objectives are: . If these are applied. Brokers. the system will serve you rather than you becoming a slave of the system. or at least a larger part of his fleet. This would then stand as the rate achieved despite the fact that the voyage had. To get the best from the system. It is essential for the owner and broker to keep in mind that 'operating costs arc for ever' as are overhead and administrative costs and financing costs. as it frequently . The longer the ballast or repositioning voyages and the waiting time between charters (and the technical offservice) the fewer the 'earning days' in any given period. the customer upon whom the whole organisation depends for its livelihood. he will want to fix his vessel.Short term: The best paying cargo and/or the shortest delay or ballast voyage (q. $8. say. become available for charter) a range of different employment options. In this scenario he becomes even more central in responding to the shipper.of the vessel for which he is responsible. Nowhere is the old adage 'time is money' more true than in voyage-charter operations. One of the finer judgements is the frequency at which budget actual comparisons are made: too infrequently and the output becomes too old to guide effective corrective action.v. For many years.). its projected length. sail. too frequently and the system begins to take over. the management information system. understanding and a level of discipline are required. All of these must be covered by the earnings of the voyage charter. The future holds great potential. . shipping companies operating in communist-based command economies failed to understand the implications of time. Modern computer and communications technology is making this a cost-effective reality as data-can be compressed and transmitted in a fraction of the time and at a fraction of the cost that was possible only a few years ago.Long term: A long-term view of freight rates trends which.000. remember that the potential increase in rate is not all 'profit' but will also have to contribute to the vessel's costs during the extended waiting period. Crews on board have been reduced to around their safe and practical minimum. how it is used to select the most profitable voyage and how it can be used to assist in reviewing the level of efficiency with which a voyage has been prosecuted. however. the technical operations department-become his support systems and he truly owns not just his budget but the command of his vessel as well. the Pacific or in the clean rather than the dirty products market. Similarly.

in other words.Freight rate: either in US dollars (or other currency) per tonne or lump sum. always important. The owner is not led to believe that the vessel can change from a coal from Hampton Roads to a grain cargo from Galveston with the same facility as a computer can calculate the time-charter equivalents. bunker price and additional costs such as might be necessary for hold/tank cleaning and produces the net revenue earned. voyage distances can be generated automatically by entering the load and discharge ports. The great remaining variable is time and the combination of net revenue and voyage time gives a figure (generally expressed in US dollars per day) which is universally referred to as the time-charter equivalent (TCE).Amount of cargo: in tonnes or volume plus margin. When using one of the more sophisticated computer-based systems. a proficient operations department should be able to make a good estimate using relatively little market information. . taken 50% longer to perform. It removes variable costs. and the example used here is a typical pro-forma for a computer-based system. tonnes per hour. many excellent publications cover this and one of the best is listed within the reference section to this book.g. Nevertheless. with much of it being undertaken using customised computer programs. .. say. the owner's broker or operations manager will collect as much information as possible about the various options available.g. are: . Assuming that the broker is conscious of the need to keep the vessel earning. bunkers costs. There is a wide variety of formats for voyage calculating. they were only achieving seven or eight. reducing the achieved or actual rate to $5. One aspect which many calculating formats do not include is a simple way of comparing the voyage estimate against the actual result achieved.did. The cardinal rule.333 per day. and.Load and discharge ports: either a specified port or ports or designated range. the financial implications do not change-eventual bankruptcy.Loading and discharge rates: either in volume or in time. owner's option) . all follow the same basic principle. . It is not the intention to become too involved in the technical detail of voyage calculations.. This is the universal unit of comparison and it is truly representative as it takes into account the ballast voyage to the load port from the position of the vessel at time of fixture (or at least the time at which the calculation is made). The voyage calculation does this. . instead of performing 11 or 12 voyages within a budget year.Explore how variations in one or more factors affect the end result (sensitivity analysis).Learn from the comparison of actual result against budgeted result (variances). a ballast bonus. The potential variation of cargo-handling rates is one of the main differences between dry bulk (complicated) and liquid bulk (standard) calculations. such as port costs. However.e.Type of cargo: giving stowage factor and hold/ tank cleaning requirements. total Voyage calculation-dry cargo . and this includes thinking about the operating end of the business-the vessel. it should not take the place of thinking. so the differences in. the ballast voyage from start point to load port is included in the costs and time. one safe port Hamburg-Rotterdam range. voyage time and bunker consumption can be calculated from automatic input of vessel data and the broker has the ability to calculate a range of sensitivities at the touch of a keyboard. Just as the variance assists the technical manager to understand how his vessel is performing. he then needs a simple and reliable way in which to reduce the many (or few) options open to him into simple. Rather the intent is to: . Looked at in a different way. This adds an additional variable to the costing. including. In order to make a voyage calculation.g. One reason for this was a tendency to undertake long ballast and positioning voyages between charters and although this was often driven by 'national strategic' requirements. comparable figures which he can present quickly and easily to the owner.e. .. Frequently. over and above the specification of own vessel. 5% MOLOO (more or less. discussed above. .e. The basic ingredients.See how knowledge of the voyage calculations can assist in project managing the charter. if payable. is that generally all voyages are calculated on a round voyage basis.Laycan (lay days and cancelling date): giving the range of time within which the vessel has to present ready for loading.Deepen the understanding of how voyage calculations reflect what happens on board. One important aspect of manual calculation is that the thinking tends to come first and the end result is better understood. . Impressive though this is.

Charterparties. is he reliable.000 tonnes? What is the cargo's stowage factor. what is the market doing. which vessels are where. if done properly. There is a very strong argument for sending the master a copy of the voyage estimate together with his voyage orders and again when the actual voyage outturn is known. apart from his. a valuable two-way flow of information would ensue. etc. indicate both how well the initial estimate reflects reality and also where time or money was lost or gained. port costs.000TS SHINC -AMWELSH CP 2. are there any special precautions.5TTL HERE -GENCON CP ACCOUNT NUTTYSLACK -50/70. In the example given.e. The owner wants to remain trading in the Far East despite improving freight rates in the Atlantic as he is shortly due to dry-dock.000 tonne limit at Newcastle significantly increase the number of vessels which might be tendering. There is no doubt that. accurate knowledge of the lifting and steaming capability of his owner's vessel? The input from the market into the chartering department will generally be in the brief formats set out here.000 TS COAL -LOADING NEWCASTLE NSW -DISCHARGE HONG KONG -LAYCAN 3RD/15TH FEB -30.000 tonnes or 40. assuming the technical managers/ department have divulged this piece of information)? Another telex to master and mental note re deviation clause.5 ADDRESS PAST The broker then needs to consider all or some of the following points: Do we recognise the charterer. can we find out more about him? Can his vessel enter all ports under consideration and lift a full cargo (possible telex to master)? Can he meet the laycan: Richards Bay looks a bit tight but..000 + 18 HRS -RATE $9. does the lower 40. both different.000 + 12 HRS/15. just achievable (urgent telex to master which arrives in the middle of the night)? What is the competition. if not where can I get it and are there any impending problems at any of the ports. congestion or strikes? What is the bunker situation.000 TS COAL -RICHARDS BAY/INCHON -LAYCAN 15TH/25TH FEB -LOAD/DISCHARGE 34. do I have to do any hold cleaning (can the master achieve this and at what cost-6r do we worry about this after the event!)? Do I have good port cost information. He also wants to avoid the need to clean for grain which he is contemplating doing during the upcoming dry-dock. can he get a feeling from the charterer's broker whether he is more interested in lifting 70. In commencing the calculation. hopefully. He therefore instructs his broker to concentrate on charters which will bring him back to his chosen dry-dock area. The broker culls two possible charters which fit his time scale from the mass (or depth) of information crossing his desk: ACCOUNT HPS -40/70. Only one indicative charter rate: can the broker get any idea from charterer's broker. a Panamax bulk carrier is due to come open after discharging a cargo of coal in Yokohama. can he calculate on basis of 'last done' and see what it looks like? - . when does the vessel need to bunker (bearing in mind that she is going to dry-dock. This would not be on the basis of 'possible' interest. but to involve the master and his management team in the very core of the commercial success of their vessel. on current performance.voyage time.10/MT 2. what will the broker have to work with.. does this have any implications? Mental note to reconsider after the voyage calculation.000/10.g.

.

.

even with only two options and. If voyage (a) can be repeated. when required. Initially movements above or below the flat rate. With the release of government control.500 long tons Average service speed 14. the rates within the freight schedules were calculated so that.5 knots 55 tonnes/day 100 tonnes/day 5 tonnes/day 380 cst . But if she steamed at a more economical speed from Richards Bay and saved on bunkers. Old Worldscale (15/9/69-31/12/88) STANDARD VESSEL Total capacity 19. what if the cargo intake is 500 tonnes less (because the chief engineer has 500 tonnes of bunkers up his sleeve)? Time-charter equivalent is reduced by $125 in voyage (a). On I January 1989.000 metric tonnes 14. Voyage (b) would put the vessel off Singapore.552 miles from Inchon to Singapore and present on 14 April.Everybody has a different voyage calculating format but they should all produce basically the same answer.350 per day. the net daily revenue (timecharter equivalent) was the same for all voyages. after allowing for port costs. is it better to stem more expensive bunkers in Yokohama and save time at Singapore? As can be seen.62Y2p or about $3. Consequently. admittedly a dry-dock stem. The Old and New Worldscales are compared here. such as trans-Atlantic round voyages with grain or coal. This puts a new complexion on the calculation. a new Worldscale was introduced which brought the base criteria into a closer alignment with the realities of modern tanker practice. the calculations were made on the basis of a round voyage and the various scales issued in London were all built up from old MOT (Ministry of Transport) rate of 32/6d (thirty-two shillings and sixpence. The word nominal is important. slow steaming from Hong Kong on 5 April with seven idle days. the technical managers in Cyprus have advised the commercial managers in London (or at least. they hold a good price on a dry-dock stem in Singapore for 12/15 April. were expressed in points of scale. they will do at some stage-it rather depends how much the owner is in control) that the spare part they need is not available until 1st April.) Voyage calculation-liquid bulk It was the British and American Governments' chartering out of requisitioned tankers during the period immediately after the 1939-45 war which gave rise to the concept of freight rate schedules which have become today's Worldscale. Sensitivity analysis. does a sensitivity analysis show a benefit-assuming the master is confident that he can make the Richards Bay laycan in the first place? In which case. In order that the government could be seen to be even-handed.0 knots Bunker consumption: . Worldscale was continuously monitored and. or “what if’s “ can now be applied. updated by the combined efforts of a panel of independent banker brokers in both London and New York.90 at the 1969 exchange rate) for a cargo from Curacao to London. which was set at Worldscale 100 (the equivalent of the 32/6d flat rate). market forces moved the contract rate up or down from the flat rate according to supply and demand pressures. For example. What if the vessel loses two and a half days through bad weather and then loses another day because she cannot tender NOR until Monday morning? (TCE is reduced by $1. the permutations begin to grow. Worldscale 70 and Worldscale 135 being 30% below and 35% above the flat rate of Worldscale 100. the vessel could steam the 2. now Y-1. the separate British and American freight rate schedules were combined into the Worldwide Tanker Nominal Freight Scale or Worldscale (now generally referred to as Old Worldscale). but common practice today is to express the rate in terms of a percentage.At sea 28 tons/day -Purposes other than steaming -In port 5 tons/day Grade of fuel oil 180 cst New Worldscale (1/1/89) 75. During the days of government control. In September 1969. In many cases. the differences may be marginal and sensitivities may need to be run on the effect of 5 % MOL cargo or plus or minus 10 cents in freight rate. From an initial comparison it would seem that voyage (a) to Newcastle NSW is the obvious choice. As with dry bulk. bunker costs and (if any) canal expenses. if there is no loss of time-the next available dry-dock at Singapore is not for another two weeks. however. In this case. the rate paid was the flat rate of the relevant scale.

661 Result per day 10.49 Bunkering: 0 Loading: 1. Much of this information is provided indirectly by owners reporting to Intertanko. 30 hours for Suez (d) Freight rates .387 342.Based on information available up to September converted into US$ at the September rate of exchange.US$/tonne of 1. Typical Voyage Calculations on a 30.24 hours for Panama.445 FO Load/disch 550 mt $85 46.563 250.417 B.650 Total 131. these are: (a) Bunker prices .438 24.800/day $12.5 knot 1.500 150.Worldwide average price for 380 cst during the month of September prior to the effective date. (b) Port costs .28 WS 202.80 Bunkering: 0.000/day 31.000 mt Rate $3.249 Result 466.346 FOP Load/disch 15 mt $110 1.Port time FIXED HIRE *final amendment 72 hours laytime plus 12 hours per port $1.472.000 mt Rate $10.445 46.000 Days: Ballast: 484 nm 14.750 Total 808.75 Discharging: 1.5 146.5 Commission 1.000 mt Rate $3. officially the 'quantity shipped'.75 WS 47.000 mt Rate $10. for New Worldscale.910 Daily running costs $8.75 Bunker: FO 20 mt/day 58 mt $110 6.923 31.000 15.000/day 342.792 22.249 1.948.957 Port exp loadsport Ras Tanura 32. usually based on bill of lading quantity (plus deadfreight if any).000 20.908 01-Nov-95 $ 1.5 Load: 2 Discharging: 2 Bunker: FO 68 mt/day 2617 mt $85 22.000 kg. (c) Canal transits .000 Port exp dischport Immingbam 20.650 1.500 Port exp dischport Chiba 150.5 knot 1.827 Port exp loadport Mongstad 15.39 Laden: 484 mn 13.48 Laden: 6653 run 14 knot 19.000/day Old and New Worldscales In addition.210 1. Typical Voyage Calculations on a VLCC 01-Jun-95 $ Freight 250.5 1.124 Commission 1.28 WS 245 178.25% 2.138 26.586 101.355 32.923 . A.Annually on 1 January or as judged necessary. Worldscale is based on a number of variable costs and.276.000 222.75 WS 72.750 1.301 Daily running cost $5. (e) Revisions .000 MT product carrier 01-Jun-95 01-Nov-95 $ $ Freight 22.000 Days: Ballast: 6653 mn 15 kno 18.25% 15.346 6.130.

Certainly.610 69.6 Voyage calculations-tanker market (a) VLCC-Ras Tanura to Chiba. However. knowing the trade and the area. Two things become immediately apparent: the nominal rate stays the same ($10. And should the owner be actively involving and using his masters in this way? Without a good understanding of the factors involved.bills of lading and seaway bills.Correlation of income statement. Tracy: John Wiley & Son. 000. bearing in mind the cancelling date) and go for Richards Bay.up or tied agents at every port.5 percentage points in another. .378 10. balance sheet and cash flow. P.6 are set out in a much foreshortened format and are not produced to show a comparison of competing voyages but rather the effect of market movements. Bookkeeping.866 Figure 3.28 per tonne respectively).Result Result per day 99.5 knots both in ballast and laden? Should an experienced master. it should. a colleague from Maersk days. The master's role is dominated by the need to minimise offservice and maintain a schedule with head office back. Japan (b) 30. THANKs are due to Graham Murray. The introduction suggested that information such as the voyage calculation would help the master manage the voyage more efficiently. the master's responsibility remains the same and the obligation to safety carry and deliver is not removed.tdw product carrier. ISBN 0-471-59391-5. It is against a market such as this that the shipowner must endeavour to make investment plans with anything from five-to-15 year pay-back periods. have a better idea than most whether currents and weather will improve or reduce the overall voyage speed? Is it reasonable to expect him to have views on the likelihood of being able to save a few hours on Newcastle? In short. The need to transport goods from producer to user is so fundamental to international trade transactions that both buyer and seller need to consider it at the outset of their negotiations.Reconciling the cash and accrual basis. the purpose of this book is to provide the master with a good working knowledge of chartering and its should be able to contribute to improving the quality of the commercial decisions upon which the viability of the company depends. Geoffrey Whitehead: Butterworth-Heinemann Ltd. Moller for data for the voyage calculations and to the Worldscale Association (London) Ltd. The other is that during the same fivemonth period the rate has risen 25 percentage points in one trade and fallen 42. The through transport nature of modem container operations ideally demonstrates the differing times at which risk and title can change. would he like to be asked his opinion on whether to go for two round voyages to Newcastle or play it safe (or relatively safe. The movement of containers is probably the most highly structured of all modes of maritime transportation. Reverting to bulk carrier voyage (a).Mongstad to Immingham The voyage calculations in Figure 3. ACKNOWLEDGEMENTS How to Read Financial Reports. the vessel is nearing dry-dock time and who should know better than the master whether she can maintain 13. there is little point in asking the master for his advice.663 15. to friends at A. Some of the considerations which they need to have in mind are set out in the following . ANNEXES FOR CHAPTER 3 Chapter 4 TERMS OF TRADE AND BILLS OF LADING The sale contract generating demand for transport. Much depends upon whether the master wishes to be involved or purely reactive. John A. REFERENCES .75 per tonne and $3. and it is the Worldscale rate that changes. Nevertheless. if knowledge improves performance. for his proof-reading of this chapter.

) What Incoterm do I use as the basis for my sale contract? Are there any statutory regulations in the exporting or importing country which affect this transaction and if so what must be done to comply with them ? (Advice/ assistance from bankers/ chambers of commerce. who can be described as a carrier issuing a bill of lading for the carriage of goods on a vessel which he neither owns nor operates. not call for a shipped-on-board endorsement-I get paid quicker that way. 2. A. .. 3. is found most frequently today in the mainline container operation. effectively.g. This is based on the recommendations of a major container operator to its customers. and nowadays: . collection at the seller's factory premises (EXW) or at a container freight station (CFS) and delivery to the buyer's premises. together with the ship's (Customs) manifest.The utility and integrity of the container has also resulted in it. These define the transfer of risk and title as well as the division of costs and. responsible for the performance of a range of subcontractors under the single contract of carriage. 4. How trustworthy is my buyer? What is his payment record? What steps do I need to take to ensure I get paid and paid on time? (Advice/ assistance from bankers/credit agencies. and certainly the vessel..) What vital points in the sale contract do I need to control to ensure that my buyer is not free to insert problem-causing provisions in the letter of credit when he opens it? (e. These berth-to-berth operations have now expanded. Mates' receipts would be produced from which. dates.The concept of through transport has led to the extension of the contract of carriage far beyond berth to berth to include. hazardous. (Advice/ assistance from bankers/ carriers/chambers of commerce. This chapter looks at how the terms of trade between buyer and seller are translated into shipping requirements. the liner operator would accept goods for shipment on his advertised berth where they would be checked for quality and quantity by an army of tally clerks. together with the requirements for funding the transaction. theoretically at least. both the buyer and the seller need to consider a range of factors. do I nominate a carrier. incorporates other modes of transport (road/ rail/ river) and makes the main transport operator. Does it contain any requirements with which I cannot comply (e. Traditionally. reefer-the contents and their quality and quantity will be unknown. both documentary and physical. Documentary Contract of sale 1.The liner operator. This inevitably. The goods would be carried against an advertised schedule (both time and freight rate). except in general terms--e. will receive a sealed container and. to a stated destination where they would be discharged into the care of the consignee against presentation (usually to the liner operator's port agent) of an original bill of lading. . for example. often using the 13 Incoterms described within the chapter. and covers the whole of the transport operation.) Receipt of documentary credit Check immediately. This has given rise to the Non Vessel Owning (Common) Carrier (NVOCC). etc). etc. becoming the unit of transport rather than the vessel. . The checklist set out below is based around the recommendations of one of the world's major container operators. the carrier.g. form the background against which bills of lading are generated and presented to the master for signature. weight. stipulate places of receipt/ delivery/ports of loading/ discharge that are viable. stipulate transhipment allowed.. The sale contract generating demand for transport Initial considerations for buyers and sellers THE AGE-OLD CONCEPT of the common carrier. introduced in The Development of Maritime Commercial Practice. bills of lading would be generated for each consignment. call for a combined transport document and not a marine/ocean bill of lading. the utility of the container has resulted in three developments which radically affect and extend the original liner terms contract of carriage. Shipper's checklist When entering into an international trade contract involving an element of maritime transportation.checklist. Here.g.

Physical Delivery 1. Remember-if you pack the container you are liable for any injury or damage caused by your failure to do a good job and need insurance against this potential liability. Packing and securing must be such so as to prevent movement within the container during transit (regular shipments of cartonned goods should be designed with dimensions to create a tight fit module within the container). 'doing no harm'). 4.g. Do I need to take steps to control the quality/ quantity of goods ordered to ensure that what I order is what I get (e. nor liquids over solids. has the driver presented a carrier's seal (and not just some nondescript model so he can swap to the right one down the road after helping himself!)? Have you affixed seal and checked it is in position. preshipment survey/tally into container etc)? (Advice/ assistance from bankers/chamber of commerce. If you want combined transport then you should be requiring a combined (or multi-modal) transport document. 8. Any that are not must be rejected. refrigeration. 7. Consignee's checklist A. Are any special stipulations put into the letter of credit clear and unambiguous? (Any abbreviations or references to 'standard' clauses or requirements must be internationally recognised or confusion will ensue and the transaction may be delayed or incur additional expense. Am I unhappy with any stipulations/restrictions which the shipper is insisting upon in the sale contract? Opening letter of credit 1. B. Which Incoterm do I use? 3.~ Have N-ou recorded the seal number on your documents.) Have I considered the advantages of waybills? (c) If the carriage is combined transport. ventilation.) B. 'usual practice'. 3. . 2. Are any of the goods classified as hazardous by IMO? Have all necessary declaration and packing requirements been observed? All FCL containers must be inspected upon receipt and prior to packing to ensure that they are clean and watertight (by internal visual inspection). etc)? If so the carrier must be informed and the correct type of container requested. Ensure even weight distribution within container. especially of any large and/or irregularly shaped loads. the buyer has you over a barrel and will probably want a discount to agree to any amendment. Documentary Contract of sale 1 . Include nothing on the basis of 'might as well'. however minor. If you leave it until after shipment. 6.. If consignment is FCL.) 2. Particularly think carefully about the following:(a) No transhipment clause-bank will ignore anyway if goods containerised and through bill of lading issued. Circulation channels must be so constructed so as not to collapse during transit. so why put it in? (b) Have I asked for the correct document as a contract of carriage? (If you have asked for a marine/ocean bill of lading then you must be thinking of port-to-port shipment only. Is the letter of credit in conformity with the contract of sale? 2.. special clauses)? If so now is the time to revert to the buyer for amendment. Do secure stow at door end to prevent fallout at discharge. Physical Shipment 1.routes. Do not stow heavy items over light. Respond promptly to arrival notification form when received. If goods are refrigerated they must be at the correct temperature at the time of shipment and FCL packing must be such as to permit free circulation of cool air to avoid 'hot spots'. no transhipment. is a shipped-on-board endorsement really necessary? 3. Is shipment FCL or LCL? This will affect the level and type of packing and marketing required. Do goods require any special attention during carriage (e. Are all of the stipulations/restrictions which I am inserting in the letter of credit really necessary? (Look carefully at each one and justify its inclusion or leave it out. Don't overload. 5. Use dunnage where necessary to spread the weight of heavy loads.g.

If all the above points have been dealt with correctly. whilst table 4. providing all necessary data and documentation.2 demonstrates who bears the cost of the different segments of the total contract of carriage. They were revised in 1953 and 1967. C&F. impounded. 5. If bill of lading issued lodge original with carrier and pay any outstanding freight and charges due at destination promptly to preclude delay in delivery. The Incoterms are designed to arrange for the orderly transfer of risk from seller to buyer at a place where the goods can be inspected. Incoterms stem from a study initiated by the International Chamber of Commerce in the 1920s which resulted in the International Rules for the Interpretation of Trade Terms and the publication of the first international commercial terms in 1936. now appears as CFR). expanded to include goods carried by . the buyer or seller should now be on the way to their bank confident of having their documents accepted and payment effected. If delivery is FCL ensure that the advice relating to seals is observed. Give prompt instructions relating to Customs clearance to the container operator or your freight forwarder. If goods are damaged advise cargo insurers as well as the carrier so that a joint survey can be arranged where appropriate and steps to mitigate loss agreed. Table 4. They can also be confident that their risk management approach has reduced or removed the chance of their goods being damaged in transit. the 13 Incoterms 1990 were introduced and described briefly. delayed or of them incurring uninsured liabilities as a result of this transaction.1 sets out the 13 terms (note that cost and freight. 3. If delivery is LCL ensure that apparent order and condition is noted on delivery note at time of delivery and any discrepancy is additionally notified promptly to the container operator. The buyer's and seller's decision-making processes should result in one of the 13 standard International Chamber of Commerce Terms (Incoterms 1990) being selected as the basis of the -sale contract and this in turn will affect the way in which the transportation is contracted. 6. Division of risk and cost In the Nautical Briefing.2. 4.

the FCA term should be used. but he would be prudent to do so since the seller's obligation ceases at the ship's rail. This term should not be used when the buyer cannot carry out directly or indirectly the export formalities. When. according to commercial practice. including multimodal transport. The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination. The 1990 revision incorporated the increasing trend towards paperless trading-this is the use of electronic data interchange (EDI) instead of paper documents. air. In particular. warehouse. sea. The 1990 revision presented all the Incoterms in a systematic manner. By grouping the matters dealt with under each term under the same heading having the same numbering throughout. The 13 Incoterm terms of trade to which the ten considerations are applied are briefly described on the following pages. nor do the terms refer to obligations towards third parties or to whether it is common sense or prudent for one of the parties to take a certain measure.) to the buyer. In such circumstances. the seller is deemed to have fulfilled his obligation to deliver the goods when they are in the custody of that person. If the buyer instructs the seller to deliver the cargo to a person. undertakes to perform or to procure the performance of carriage by rail. . works. the obligations of the parties are mirrored. the seller may choose within the place or range stipulated where the carrier shall take the goods into his charge. Not every obligation is applicable under every Incoterm. a free-on-board (FOB) contract places no obligation on the buyer to insure the goods for the sea passage. This term thus represents the minimum obligation for the seller. the seller's assistance is required in making the contract with the carrier (such as in rail or air transport) the seller may act at the buyer's risk and expense. e. This term may be used for any mode of transport. in a contract of carriage. cleared for export. unless otherwise agreed.g. factory. into the charge of the carrier named by the buyer at the named place or point. etc. The objective was to make it easier for buyer and seller to select the best alternative for their particular trade. EXW 'Ex works' means that the seller fulfils his obligation to deliver when he has made the goods available at his premises (i. If no precise point is indicated by the buyer. For example. a freight forwarder who is not a I carrier'.air in 1976 and expanded again in 1980 to reflect the increasing impact of through transport. FCA'Free Carrier' means that the seller fulfils his obligation to deliver when he has handed over the goods. road. inland waterway or by a combination of such modes.e. he is not responsible for loading the goods on the vehicle provided by the buyer or for clearing the goods for export. 'Carrier' means any person who. fuller explanations being available from the International Chamber of Commerce (ICC) through local (national or city based) chambers of commerce.

. The FOB term requires the seller to clear the goods for export. is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier. FOB 'Free on Board' means that the seller fulfils his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. as well as any additional costs due to events occurring after the time the goods have been delivered to the carrier. DAF 'Delivered at Frontier' means that the seller fulfils his obligation to deliver when the goods have been made available. igloos. The FAS term requires the buyer to clear the goods for export. The CIP term requires the seller to clear the goods for export. cleared for export. This term can only be used for sea or inland waterway transport. swap bodies. It should not be used when the buyer cannot carry out directly or indirectly the export formalities. 'Carrier' means any person who. trailers. When the ship's rail serves no practical purpose such as in the case of roll-on/roll-off or container traffic. If subsequent carriers are used for the carriage to the agreed destination.'means that the seller has the same obligations as tinder CPT but with the addition that the seller has to procure cargo insurance against the buyer's risk of loss of or damage to the goods during the carriage. When the ship's rail serves no practical purpose. in a contract of carriage. . undertakes to perform or to procure the performance of carriage. . CFR'Cost and Freight'means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods. ro-ro equipment. The seller contracts for insurance and pays the insurance premium. the CPT term is more appropriate to use. This term may be used for any mode of transport including multimodal transport.'Transport terminal' means a railway terminal. all types of containers and/or flats. air. such as in the case of roll-on/roll-off or container traffic. The CFR term requires the seller to clear the goods for export. a multipurpose cargo terminal or any similar receiving point. 'Container' includes any equipment used to unitise cargo. The buyer should note that under the CIF term the seller is only required to obtain insurance on minimum coverage. the risk passes when the goods have been delivered to the first carrier. on the quay or in lighters at the named port of shipment. FAS'Free Alongside Ship' means that the seller fulfils his obligation to deliver when the goods have been placed alongside the vessel. the FCA term is more appropriate to use. This term may be used for any mode of transport including multimodal transport. This term can only be used for sea and inland waterway transport. such as in the case of roll-on/roll-off or container traffic. The buyer should note that under the CIP term the seller is only required to obtain insurance on minimum coverage. at the named point and place at the frontier. CIP 'Carriage and Insurance paid to. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The risk of loss of or damage to the goods. by rail. CPT 'Carriage paid to . The seller contracts for insurance and pays the insurance premium. sea. road. This term can only be used for sea and inland waterway transport. The CPT term requires the seller to clear the goods for export. the CIP term is more appropriate to rise.g. inland waterway or by a combination of such modes. a container terminal or yard. When the ship's rail serves no practical purpose. This term can only be used for sea or inland waterway transport. is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. . whether ISO accepted or not. The CIF term requires the seller to clear the goods for export. as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel. CIF 'Cost. and applies to all modes of transport. but before the . This means that the buyer has to bear all costs and risks of or damage to the goods from that moment. Insurance and Freight' means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage.' means that the seller pays the freight for the carriage of the goods to the named destination. e. a freight station.

VAT unpaid named place of destination)'. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination. and obviously a particularly high degree of trust is required by the seller. This term may be used irrespective of the mode of transport. provided that the terms of the documentary credit are complied with. DDP 'Delivered duty paid' means that the seller fulfils his obligation to deliver when the goods have been made available at the named place in the country of importation. DEQ 'Delivered Ex Quay (duty paid)' means that the seller fulfils his obligation to deliver when he has made the goods available to the buyer on the quay (wharf) at the named port of destination. The documentary credit can satisfy the seller's desire for cash and the buyer's desire for credit. This term should not be used if the seller is unable directly or indirectly to obtain the import licence. If the parties wish the buyer to clear the goods for importation and pay the duty the words 'duty unpaid' should be used instead of 'duty paid'. The term is primarily intended to be used when goods are to be carried by rail or road. This is issued by a bank for the account of a buyer (the applicant) -or for its own account-and is an undertaking to pay the beneficiary the value of the draft. If the parties wish to include in the seller's obligations some of the costs payable upon importation of the goods (such as value added tax (VAT)). requires a high degree of trust. this has to be made clear by adding words to this effect. Cash in advance is straightforward. The buyer has to pay any additional costs and to bear any risks caused by his failure to clear the goods for import in time. This term can only be used for sea or inland waterway transport. DES 'Delivered Ex Ship' means that the seller fulfils his obligation to deliver when the goods have been made available to the buyer on board the ship uncleared for import at the named port of destination.. The logical extension of this is the documentary credit or letter of undertaking. The term 'frontier' may be used for any frontier including that of the country of export. This term may be used irrespective of the mode of transport. Therefore. named place of destination)'. this should be made clear by adding words to this effect: 'Delivered duty paid. Whilst the EXW term represents the minimum obligation for the seller. this should be made clear by adding words to this effect: 'Delivered duty unpaid. VAT paid. Open account describes an arrangement whereby the goods are manufactured and delivered before payment is required. taxes and other charges of delivering the goods thereto. cleared for importation. including duties. cheap and. cleared for importation. Methods of payment Once the terms of trade have been decided. the exact means of payment must be selected. the term DDU should be used. it serves . The seller has to bear the costs and risks involved in bringing the goods thereto (excluding duties. taxes and other official charges payable upon importation as well as the costs and risks of carrying out customs formalities). Collection describes an arrangement whereby the goods are shipped and a bill of exchange (draft) is drawn by the seller on the buyer and documentary evidence (of which the bill of lading is a key ingredient) is sent to the seller's bank in order to effect collection through the buyer's confirming bank. This term should not be used if the seller is unable directly or indirectly to obtain the import licence. but it may be used for any mode of transport.Customs border of the adjoining country. If the parties wish to exclude from the seller's obligations some of the costs payable upon importation of the goods (such as value added tax (VAT)). (. DDP represents the maximum obligation. taxes and other charges of delivering the goods thereto. this should be made clear by adding words to this effect: 'Delivered ex quay. DDU 'Delivered duty unpaid' means that the seller fulfils his obligation to deliver when the goods have been made available at the named place in the' country of importation. VAT unpaid (named port of destination)'. If the parties wish to exclude from the seller's obligations some of the costs payable upon importation of the goods (such as value added tax (VAT)). This term can only be used for sea or inland waterway transport. it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term. as has been stated. The seller has to bear all risks and costs including duties.. If the parties wish the seller to carry out Customs formalities and bear the costs and risks resulting there from. The seller has to bear the risks and costs. If the parties wish the buyer to clear the goods for importation and to pay the duty.

. or the 'reimbursing agreement' between the buyer (the applicant) and the issuer (the issuing bank). trianglular contractual arrangement: . and banks are in no way concerned with or bound by such contract(s).Second-the 'application and security agreement. ie title and risk) by way of a documentary credit.the interests of both parties independently and offers a unique and universally used method of achieving a commercially acceptable undertaking by providing for payment to be made against complying documents that represent the goods.Third-the documentary credit between the issuing bank and the beneficiary. introduces the financial institutions and converts the originally simple.First-the sale contract between buyer and seller-. the undertaking of a bank to pay. Consequently. ' UCP 500 sub-Articles 3a & b. It will immediately be obvious that payment (and consequent transfer of ownership. The documentary credit may also be confirmed by another (confirming) bank and it is important to understand that each contract is independent of the other: 'Credits. even if any reference whatsoever to such contract(s) is included in the credit. accept and pay draft(s) or negotiate and / or fulfil any other obligation under the credit is not subject to claims or defences by the applicant resulting from his relationship with the issuing bank or beneficiary' and A beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the applicant and the issuing bank. and making possible the transfer of title to those goods without contemporaneous physical transfer of the goods being necessary. one contract transaction into a distinct. . by their nature are separate transactions from the sales or other contract(s) on which they may be based. and .

Although a documentary credit represents the payment end of a single sale contract. interest in the physical movement of that cargo. thereby leaving the trader with a positive cashflow. Each set of transactions requires original documentation in order to effect payment. and will have no knowledge of or. the issuing bank's recourse is to the advising bank. Europe or the Far East.3. and as the frequent non-availability of bills of lading in the port of delivery proves. if incorrect documentation is presented to the issuing bank by the advising bank. not to the seller. at its simplest. a banking structure similar to the one depicted in Figure 4. documentary or otherwise. to commodity traders and others who buy and sell goods is that they can enable an onsale to take place before the buyer's bank has to effect payment under the credit.Process of documentary credit There are many advantages which flow from the use of documentary credits of which the foremost can be seen to be the provision of a confirmed method of payment. However the process involves many more institutions (and their costs) than in the originally simple contract between buyer and seller. for that matter. If the trader structures his transaction correctly. Behind each of these complementary but totally separate transactions is. documentary credits generate a paper chase of their own. they will rely totally on the validity of the documents presented to them. Since the documentary credits department of a large. is the bill of lading in the dual roles of document of title and proof of quantity and quality. international bank will be handling thousands of transactions daily. . his buyer will pay him before the trader's bank settles under the credit. A cargo of crude oil from the Gulf may be traded several times in this way en route to North America. and central to this documentation. issuing bank to advising (or confirming) bank and advising bank to seller (or beneficiary)-is a separate and distinct contract. A particular advantage of credits. each link in the chain-buyer (or applicant) to issuing bank. Thus.

the bill (s) of lading. keeping one. always signed the bill of lading (three originals) in front of him. Thirdly. He was a shipper. The ones that follow are based on the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits UCP500) which replaced UCP400 on 1 January 1994. Secondly it describes the goods to be shipped and this description. quantity or even packaging. .3 reproduces a standard application for an irrevocable documentary credit and there are a number of points to note from the 'shipping' end of the transaction. from irrevocable to transferable and revolving which all follow the same basic principles. An example might be where a grain exporter is purchasing parcels of grain to form an economical Panamax cargo. the application stipulates the documents that must be presented. The story mentioned below is told by a deck officer who served as a cadet on a liner vessel in the mid-1950s and it well illustrates the use and importance of the bill of lading. the principle is not. a documentary credit is time-related and stipulates an expiry date.This goes a long way to explain why banks will generally only accept a clean bill of lading. These he collected and. Figure 4. documentary credits are executed by the presentation of the specified documents. The 'Red Clause' documentary credit. collected the mate's receipts and checked them carefully to ensure that there was no endorsement regarding quality. but despite EDI and changes in transport practice brought about by the container. will certainly contain no reference to defects in quality. charterpartv bill of lading. at his insistence. the vessel called at a small Indian outport and every trip.4. which should tally with the description on the bill of lading. Every trip. to his consignee in England. These three functions will be explored in greater detail in chapters 5 & 6. so-called because it was originally written in red ink. For a start. in separate envelopes. Since. It is recognised that in the container trades the bill of lading and other cargo related documentation is handled almost exclusively by the company's shore organisation. The three well known functions of a bill of lading remain: (a) as evidence of the terms of a contract of affreightment. they still remain the central document for facilitating international trade and transportation. the bailee of his goods. the shipowner's essential customer. and each trip he entrusted his work and his livelihood to the care and custody of the master. Here funds can be made available before shipment and this can be useful where traders or dealers require a form of pre-financing. recorded delivery. There is a wide range of documentary credits. (b) as evidence of shipment of the goods. as is inherent in their very name. Whatever method of credit is used. is an interesting variation. with the agent. His eventual buyer may allow him partial advance payment to settle with his supplier and reserve silo space in the port of loading. the same basic principles apply and settlement follows the procedure illustrated in Figure 4. it is hardly surprising that these same bills of lading are frequently unavailable at the port of discharge. a bill of lading that normally stipulates that the goods were 'in apparent good order and condition' when accepted. The relevant documents are: marine/ocean bills of lading. a local farmer arrived at the quay on a bullock cart containing six bales of hides. The extension of the carrier's responsibility to meet the needs of through transport as discussed in the last section has meant that the basic liner terms bill of lading has been modified and a few definitions -ire required. non-negotiable sea waybill. The scale may be different today. He watched the cargo being loaded. Then. Bills of lading and sea waybills This section of the chapter looks at bills of lading and sea waybills predominantly in their through transport role. he went straight to the post office and posted the other two. he went to the master who. and (c) as a document of title. multimodal transport document. and it is against these documents alone that the credit is transacted. including inevitably. that is.

the master must only deliver the cargo to a bona-fide holder of an original bill of lading. . provided he has not been informed of any theft or fraud. the bill of lading states that the goods are deliverable to a named consignee or order. then the cargo can be claimed by a person who presents an original document. At the discharge port. If the original consignee signs the back. the document becomes a straight bill of lading. In most cases. If the bill of lading is negotiable.Straight bills. If the bill of lading states that the goods are deliverable solely to a named consignee. If the bill of lading is straight. open bills and delivery If the bill of lading states that the goods are deliverable to bearer. then only he can take delivery of the goods. the document becomes an open bill of lading. This makes the document negotiable. which means it can be endorsed to someone else if they buy the cargo. and that the person claiming delivery is entitled to the goods. it is very important that he checks whether the document has been properly endorsed. Endorsing means adding a clause to the document and signing it. with no other remarks (this is known as endorsed in blank). If the bill of lading is open. This is known as an open bill of lading. he should check that the person claiming delivery is the same as named in the document. If the endorsement states deliver to XYZ or order then XYZ can further endorse it to someone else if they resell the cargo. This is known as a straight bill of lading. then he can deliver the cargo to whoever presents the document. If the endorsement states deliver to XTZ.

It should also be noted that waybills are not mandatorily subject to the relevant Carriage of Goods by Sea Act (Hague or Hague-Visby Rules).Appears on its face to have been signed or otherwise authenticated by the master or by the owner. does not indicate the name of the carrier. . or if issued in more than one original. This is increasingly made against a delivery order on the consignee's headed paper. the other original bills become null and void.Comply with the stated transhipment requirements. Banks will not examine the contents of such terms and conditions. However.Unless otherwise stipulated in the documentary credit. such a bill of lading is a much simpler document-see. .Indicates that the goods have been dispatched. multimodal transport operator or the master. the full set as so issued. or a named agent for or on behalf of the carrier. the full set as so issued. and.Specifies that it is subject to a charterparty.Appears to contain the terms and conditions of carriage or merely contains some or all of such conditions by reference to a source or document other than the multimodal transport document (short Multimodal transport document . .Contains no indication that the carrying vessel is propelled by sail only. Charterparty bill of lading The inter-relationship between bills of lading and charter parties is discussed in detail in chapter five. . In general. . and date and sign this remark. Their advantage is that in a world of increasing EDT. there is no need for physical documents to be used as delivery can be made to the nominated consignee (order' waybills are not possible) against proof of identity.Comply with the requirements of the Credit.Once he has done this.Indicates the port of loading and the port of discharge stipulated in the documentary credit. UCP500 defines a multimodal transport document as one which: . there is a problem if security of payment/delivery or subsequent sale is involved. Marine / ocean bill of lading The marine or ocean bill of lading is also referred to as a port-to-port bill of lading. so far as the UCP500 is concerned. . . At this time.Indicates that the goods have been loaded on board or shipped on a named vessel. A specimen bill of lading is shown in the annexes. taken in charge or loaded on board.Appears on its face to indicate the name of the carrier or multimodal transport operator and to have been signed or otherwise authenticated by the carrier or multimodal transport operator.Indicate the port of loading and the port of discharge stipulated in the documentary credit. or if issued in more than one original. the full set so issued. . and . or by a named agent for or on behalf of the master or the owner. .Indicates a place of taking in charge stipulated in the documentary credit which may be different from the port. if issued in more than one original.Consist of a sole original or. the Gencon Bill in the annex to chapter 6. and .Contain no indication that it is subject to a charter party and/or no indication that the carrying vessel is propelled by sail only. .Appear on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by the carrier or the master or by a named agent for or on behalf of the carrier or the master. . airport or place of loading. their requirements are that it: . the master will endorse the bill of lading as Accomplished. .Consists of a sole original multimodal transport document. Non-negotiable sea waybill The fundamental difference between a bill of lading and a waybill is that a waybill is not a document of title.Appear to contain all of the terms and conditions of carriage or some of such terms and conditions by reference to a source or document other than the bill of lading (short form/blank back bill of lading). The UCP500 requirements are that it should: . .Indicate that the goods have been loaded on board or shipped on a named vessel. . the master. which describes its role perfectly. and a place of final destination stipulated in the documentary credit which may be different from the port of discharge. for example.Consists of a sole original bill of lading. .

Certainly a shipmaster is wise to keep a careful log of bills of lading in his possession. On a liner bill they are generally more extensive than on a charterparty bill (see the annex to chapter six for an example). deliver to J. even in summary form. freight details only appear on copy bills which are then used as the freight invoice. and a (b) Combined transport bill of lading: here the person on whose behalf the bill of lading is issued accepts responsibility for the cargo for the entire period of the carriage. whatever his trade. Other points to note are: (a) Consignment to the order of: this space may be completed either with the name of the consignee or to his order or the words 'to order' in which case the shipper becomes the consignee and delivery is made in accordance with his instructions. reproduced in the annex. (e) Incorporation clause: this is the clause which incorporates both the carrier's tariff rate and the small print on the back of the bill of lading and/or any charter-party terms. so far as the carrier is concerned.form/blank back multimodal transport document)-banks will not examine the contents of such terms and conditions..coding bills of lading. (iii) by means of a blank endorsement and passing the bill of lading to the consignee-i. These instructions may be given: (i) By specific endorsement. perhaps. (b) Above particulars as declared by shipper. . strange that in view of their potential for fraud.In all other respects meets the stipulations of the credit. a delivery order from shipper to consignee.. watermarking and bar. The synopsis of the 27 clauses contained on the reverse of one ma or container operator's universal bill of lading is set out below for completeness rather than for detailed study. Many of the major container operators have produced a hybrid Combined transport bill of lading which covers the requirements of both port to port (or Ocean/Marine) and combined transport.g. There appears now to be a move towards numbering. He will subcontract all or part of the carriage and will be responsible for the acts and omissions of the subcontractor that he uses.e. . The sections marked place of receipt/place of delivery are only used in the combined transport role. It is the tally entered under 'total number of containers/packages received by the carrier' for which the carrier accepts responsibility. (stamp and signature of shipper). is a good example.g. whether blank or completed and should control access to them. the date of any 'shipped on board' endorsement must reflect the precise date of shipment. but not acknowledged by the carrier: The main details shown in the body of the bill of lading are commercial details and are required by the shipper for commercial reasons and. a blank endorsed 'order' bill is a dangerous document as whoever holds the bill of lading is entitled to demand delivery of the cargo. Smith & Co.. The P&O Container universal bill of lading.Contains no indication that it is subject to a charterparty and/or no indication that the carrying vessel is propelled by sail only. bills of lading are relatively easy to secure. (c) Freight and charges: generally freight is earned on receipt of the goods and is non-returnable. .e. (ii) By attaching authorised delivery instructions on the shipper's stationery e. MTDs acquire a number of names but the most critical difference is between a: (a) Through bill of lading: here the carrier only accepts responsibility for the sea carriage whilst the cargo is carried on his own vessel and acts as agent in respect of sea or land carriage not actually performed by himself (in the strictest definition. like a bearer cheque. The ultimate extension of the subcontract of the actual performance of the carriage is a NVO (C) C bill of lading (the non vessel owning (common) carrier) also referred to as a combined transport document (CTD). (d) Place and date of issue: note that this may be any date after the goods have been received for carriage. Terms on the reverse side The terms and conditions on the reverse of a bill of lading do not make the most exciting reading. It is. shipper's stamp and signature with no qualification. they should be kept to a minimum. 'Order' bills of lading are the usual requirement in a documentary credit transaction but it can be seen that. In some cases. a through bill is not a multimodal transport document). by contrast.

CMR for European international road movements. of containers/ packages received . war risks premium). (22) General average and salvage-the New Jason clause is incorporated to cover the event of GA being adjusted in America according to US law which prevents carriers recovering GA contributions in certain circumstances unless they have made specific contractual provision which this clause also covers. (18) Matters affecting performance-cove ring circumstances which make for frustration of the carriage.provides for the basis of the carrier's liability to be Hague-Visby if this is mandatory (e..' the carrier makes no representation relating to any details of the goods. CIM for European international rail movements. etc. 9) Inspection of goods-giving the carrier the authority to check on the carriage of hazardous goods. agents. 10) Carriage affected by condition of goods-if a problem arises with the goods. the right to stow on deck and the effect on liability. . Holland. (4) Subcontracting and indemnity-giving the carrier the right to subcontract and at the same time establishing a 'Himalaya and circular indemnity' which provides that: (i) The cargo interests undertake not to bring claim against the carrier's employees. .. (3) Warranty-by the merchant that he has authority to give instructions to the carrier in relation to the goods concerned. provides the approach to liability where extra freight is paid for on ad valorem B/L (i. Belgium. (ii) That if cargo interests do bring such a claim. cannot be offset against unpaid claims and the carrier's right to levy a surcharge against unexpected cost (e.g. (12) Shippers'/ merchants' responsibility-covers warranty that details on the face of the B/L are correct. 'Merchant' is widely defined as the shipper. (5) Carrier's responsibility: port to port shipment.50 in USA per kilo and incorporates other relevant conventions-e. shipments from the UK.g. (19) Dangerous goods-carrier's prior agreement required together with proper packing and marking. when the value of the goods is included in the B/L) and generally addresses the basis upon which the value of goods is calculated for claims purposes. (23) Variation of the contract-only by the carrier's agreement. etc. stowage generally and correct freighting. (15) Optional stowage and deck cargo-the right to consolidate cargoes. etc) and Hague Rules if not. (21) FCL multiple bills of lading-all B/Ls to be presented or the container will be unpacked and the goods delivered piecemeal.g. 8) Shipper packed containers-addresses the basis of liability for FCL packed by the merchant. (13) Freight-non-returnable.. (17) Methods and route of carriage-allows transhipment and the carrier's right to pack goods in a general purpose container unless specific request and payment has been made for a 'special'. (20) Notification and delivery-the merchant's responsibility to ensure that delivery is taken within (usually) 30 days or the goods may be sold. the carrier has the right to take such steps as are necessary on behalf of the merchant in that merchant's best interest and to recover his expenses (sue and labour). (14) Lien-on both goods and documents and covering general average contribution.Clause (1) Definitions-such terms as 'subcontractor'. .. (11) Description of goods-links up with incorporation clause and provides that. (2) Carriers' tariff-in so far as they are not inconsistent with the terms of the B/L. . (16) Live animals-primarily the acceptance of no liability. compliance with regulations (Customs. amongst other things.e. consignee. subcontractors have the benefit of the B/L terms excluding and limiting the contractual carrier's liability. holder. Germany. 6) Carrier's responsibility: combined transport -provides. any person owning or entitled to the possession of the goods or of the bill of lading and anyone acting on behalf of any such person (bearing in mind that none of these persons is a signatory of the B/L!). receiver of the goods. etc. and (iii) If cargo interests do bring such a claim and succeed. The Sistership salvage clause is also incorporated and the master is appointed as agent to engage services if needed. France. the carrier will be indemnified by the merchant-hence the importance of dealing with bona fide shippers.) and the return of the container. 7) Sundry liability provisions includes the supply of the container in the B/L contract. subcontractors. Scandinavia.carriage'. establishes a limitation of liability of 2 SDRs (Special Drawing Rights) or US$2. for the circumstance where damage has occurred to goods in the container (hidden damage) and it is not possible to ascertain where this occurred. except for the 'total No.

Several years of negotiation and redrafting may then take place before the subcommittee is in a position to lay a document before the CMI Executive. in the United Kingdom this is done initially through an Act of Parliament supported by enabling legislation in the form of Statutory Instruments. this section gives an insight into how international conventions are negotiated. If the end product has been a convention it will then go to a full government-sponsored Diplomatic Conference at the end of which it will. In the almost 100 years of its existence. One of the earliest forums for co-operation was the Comite Maritime International (CMI). (25) Validity-covering conflict with national laws or international conventions. The small print on the back of a bill of lading is never an easy read and is frequently highly technical. Although this approach sometimes conflicted with English common law based as it is on precedent.Carriage of Passengers (1961) 0 Carriage of Luggage (1967) . either by the Courts of the country where the carrier.Carriage of Passengers and their Luggage (1974) 0 Civil Liability Convention on Oil Pollution (1969) Fund Convention (1971) .Bills of Lading (1924. One of its stated aims was to encourage the formation of national maritime law associations in countries with a maritime tradition and the British Maritime Law Association was formed in 1908. liability' insurance and the conduct of contracts of carriage. Before moving on to the next three chapters which deal with the legal framework within which contracts of carriage are carried out. international regulation. (26) Both to blame collision clause. The preceding summary is intended to give general guidance only to the types of clauses and the gist of the terms and conditions found on the back of a bill of lading. What was frequently described as public law dealt with matters generally associated with the freedom of the seas and the right of free passage. the first step for a working group is to circulate a questionnaire to all member national associations seeking advice on the law applicable to the subject in each member country. a body of private maritime law grew up regulating such matters as collision. become a fully-fledged international convention available for ratification and incorporation into the law of ratifying states. Generally. As international trade increased. It is interesting to note that the depletion of fish stocks has generated a once unthinkable move towards the restriction of a fishing vessel's traditional rights to fish in international waters. The rapid rise in the extent and complexity of international trade during the 19th and 20th century and increasing interest in the sea and seabed as a source of mineral wealth blurred this distinction and increased the need for a greater degree of international co-operation-or at least. The CMI identifies an area of law in which unification would be an advantage and appoints a small working group to start work on the project. their management and then insurance. The move towards establishing international maritime law came mainly from continental Europe with its tradition of codified civil law. 1968 and 1979) 0 Arrest (1952) . has his principal place of business.Collision (1910) . the international convention will set down how many countries need to ratify the Convention before it comes into force. A working group will then produce a first draft of a convention or set of rules and a representative sub-committee will be established. Those nations which have not ratified the Convention by National and international laws . the CMI has been involved in drafting the following Conventions: . both regimes now work closely together. according to the laws of that country. The concept of sovereignty linked to the national flag and operating against a background of the freedom of the seas is generally well known and two general strands of law developed over the years. if approved. at the option of the plaintiff. Generally. formally established in 1897 with a mission to work for the international unification of maritime law. 1957 and 1976) .(24) Law and jurisdiction-provides any claim or dispute under this B/L shall be determined. Ratifying nations then have a specified period of time to make the convention part of their own national law. or the defendant if not the carrier. The draft convention or set of rules will then be subject to a clause-by-clause analysis at a periodic CMI conference and on the final day the text will be voted through in a plenary session.Limitation of Liability for Maritime Claims (1924.Maritime Liens and Mortgages (1926 and 1967) as well as in contributing to many others. The drafting process generally follows the same pattern.Salvage (1910 & 1989) . (27) USA Clause Paramount-this makes provision for the application of the appropriate US legislation to shipments to and from the USA.

legal standing. 1974. An example of this is the proposed review of the Hague. This was recognised as only a stopgap measure and a process of consultation was put in hand prior to a general revision which was undertaken at the next conference in Sydney in 1994. Hague-Visby and Hamburg Rules which the CMI plans for its centennial year (see chapter 5). with the conference of 1804 in York producing the York Rules (York was a major centre of the wool trade to the Continent) with a revision in Antwerp in 1877. to some extent. whereas the major safety-based conventions such as SOLAS and MARPOL are brought into legal effect through the enactment of national law by the ratifying governments. as amended 1990. which has no formal. UNCTAD and the International Union of Marine Insurers (IUMI). following further debate and a vote by each national delegation. There was also a strong lobby from underwriting interests. The Salvage Convention. the texts were remitted to the full ISC for approval and formal submissions to the plenary session of the ISC. founded in 1961). There is no doubt that maritime law is drafted by many learned people who have a vast experience in resolving the problems which arise from disputes relating to contracts of carriage. introduced the concept of protection of the environment into the maritime legal framework. On the fifth day. as well as including the provision relating to the protection of the environment. 2. As salvage awards are allowable in General Average (Rule VI). In recent years the role of the CMI has changed due to the creation of three United Nations agencies (IMO. If the theme of the 1974 revision was a desire for simplification. replaced the CMI as initiators of international conventions although the CMI and its national agencies still retain an important advisory role both to the UN agencies and to their respective national governments. Some 25 delegates. The history behind the Rules was traced in the Nautical Briefing. which effectively introduces the regulations directly into their national law.the time it achieves international status must accede to the convention. 3. Just as we have found a benefit when there is a closer understanding between the designers of ships and those who take them to sea. The first two days were given to debate. An interesting example of how the international consultative process works is the 1994 Revision of the York-Antwerp Rules which are also discussed in chapter 5. The British Maritime Law Association (BMLA) for example. and on the third. This tradition of revising the Rules to bring them up to date with modern maritime technology and to take into account changes in legislation has continued every 20 to 25 years. international. that emphasised a desire that the scope of general average should not be expanded. 'The delegates representing the National Association of Maritime Law of the States listed hereunder: 1. would require revising. as well as a revision of the York-Antwerp Rules. the York-Antwerp Rules 1994 became the (generally) accepted guiding rules for general average through a proposal and a recommendation by a body. UNCTAD and UNCITRAL-the latter being the United Nations Commission on International Trade Law). . together with a variety of observers. discussed claims for pollution damage and offshore mobile craft. attended the five days of discussion of the ISC dealing with the Rules revision. in Articles 13 and 14. consulted particularly closely with the Association of Average Adjusters. was clarity. 1989. These agencies have. propose that the new text be referred to as the York-Antwerp Rules. having noted with approval the amendments which have been made to the York-Antwerp Rules. It was the International Convention on Salvage. 1994 should be applied in the adjustment of claims in General Average as soon as practicable after 31 December 1994. it was apparent that the York-Antwerp Rules. so might there be a benefit from involving the professional mariner in the drafting of maritime conventions. the CMI. The CMI established an International Sub-Committee (ISC) which sent a questionnaire to all 52 member-maritime law associations. a drafting committee produced texts based on the previous two day's discussions. who debated the proposed changes at a conference in Toronto in September 1994. which triggered the latest revision. each of the Rules was debated and adopted at the full plenary session of the Comite Maritime International which then adopted the 1994 Rules as a whole and passed the following Resolution. Forty-two national delegations of varying size attended the CMI Conference in Sydney in October 1994 which. Other organisations consulted by the ISC included the Association Internationale de Dispacheurs European (AIDE. On the fourth day. 1994. Lloyd's Underwriter's Association (LUA) and the Institute of London Underwriters (ILU) also showed a healthy interest in the revision. 1974. discussed in chapter ten.' It is interesting to note that. The International Group of P&I Clubs. the objective for the 1994 revision. recommend that the York-Antwerp Rules. as well as UNCTAD. The CMI was therefore asked to amend Rule VI accordingly and this was done at the Paris conference in June 1990. These in turn consulted interested parties within their own countries.

P&O Containers Ltd. The relationship between and rights and responsibilities of the shipper and consignee (the seller and buyer).Bill of lading/waybill . as seen in chapter four. be delivered by the master at the agreed destination (Hull) to the consignee on presentation of one of the original bills of . stamp. Incoterms 1990. Guide to Documentary Credit Operation. each in a separate envelope. as it does on a liner trade. The stow was noted on the tally sheet and a mate's receipt prepared. against the appropriate freight. ACKNOWLEDGEMENTS REFERENCES . it is too easy to forget the special relationship between shipper and shipmaster. Just as the sale contract is the key document at this initial stage of activity. During the early part of the sixties. The master.Bill of lading terms and conditions ANNEXES FOR CHAPTER 4 Chapter 5 LEGAL FRAMEWORK FOR CONTRACTS OF CARRIAGE The sales contract. the waybill). Accompanied by the agent. The bill of lading can stand alone. the company was acting as a common carrier. The Merchant's Guide.limitation of liability. the chief officer would give him his mate's receipt after agreeing to the condition and quantity of the skins. It is the aim of this chapter to discuss the master's role against the background of these conventions as an introduction to chapter six. and frequent changes of trade. a large and well established liner company made a (fairly) regular call to a small port not far from Cochin on the south-western coast of India.MY THANKs are due to the International Chamber of Commerce and to John Richardson. International Chamber of Commerce. whilst still ensuring customer satisfaction. Every two months or so. and the shipmaster and shipowner are governed by a number of international conventions. When he arrived. Freight rates were available on demand. an hour before dawn. if any. International Chamber of Commerce. One of the objectives of the Nautical Briefing on maritime commercial practice is to heighten awareness of the activities and needs of the shipping industry's customers (the buyers and the sellers of internationally traded commodities) who are the generators of demand for maritime transportation. John W. Richardson. would carefully make out. THE CENTRAL DOCUMENT in virtually all contracts of carriage is the bill of lading (or perhaps. Since the headman was well known in the port. author of P&O's Merchant’s Guide. After a few minutes polite conversation. This chapter is about how the demand for maritime transportation is generated and the legal and commercial structure within which this demand is translated into the employment of a vessel and how it thereby generates the income with which to pay for everything from loan interest to crew wages. multinational corporations (although these are not new-think of the East India Companies described in the Nautical Briefing). The ways in which contracts of carriage can be carried out with the maximum degree of efficiency and with the best return both for the vessel and the shipowner. There he would post two of the bills of lading. the charterer. the headman would set off for the post office. so it is that contracts of carriage are the documents which translate this general requirement into a specific demand for the services which the shipmaster is responsible for managing. FCII. knowing that the village's produce was in safe hands and would. who was expecting them. In a world of satellite communications. The sailing date and itinerary were well published by the local agent and his cargo canvassers. or be linked with one or more charterparties. will be examined. the headman would climb the three decks from the cargo office to the master's cabin. the headman from a village some 20 miles inland from the port loaded the village's output of six bales of hides on to his ox cart and set off for the port. to his buyer in Leicester. he reported to the agent and then moved his oxen into the shade of a godown and waited patiently.contracts of carriage. Eventually he was called forward and the village's six bales of skins were swung into the appropriate 'tween deck tinder the watchful eye of the deck officer on cargo watch. date and sign three original bills of lading which he exchanged for the mate's receipt.

Documentation. With material costs ranging from £60/£70 per tonne (for rice bran) to the equivalent of £15. be it a LNG carrier. The UK market for animal feedingstuffs is some I I million tonnes per annum.marketing and close contact with the consumer. margins are low and competition fierce.000 per tonne (for vitamins). In order to achieve this he knows that his most valuable core skill is nutrient knowedge. Of these it is transportation which can most easily be contracted out with the potential of cost savings. of which over half is imported.buying.An agreed product or service. . The headman would then start the slow journey home. An animal feedingstuffs manufacturer analyses his business. Behind this simple summary is an intensively competitive world which generate. The six essentials of every international trade transaction are identified as: . the decision on where and when to buy and how to ship passes to a third party.000-tonne single decker which generates income. . stocks (which represent idle money) must be kept as low as possible consistent with continuous production runs. tinder the heading 'international trade today'.120 million tonnes of crude oil amongst a wide range of primary bulk commodities which are predominantly transported by private carriers outside the liner trades. A typical example is the manufacture of animal feedingstuffs. With the delivered cost of raw materials constituting 80% of final price. commercial practice. This story is repeated from chapter four because in an age of computerisation. . In an increasingly complex technological world. Whilst the manufacturer's buyers and nutrition experts. feeding stuffs and pulses trades provide a valuable insight into how these markets work and the way in which the shipping industry's customers-growers. quality is a key consideration. Marine transport is one crucial link in the chain of events which takes the rice from the paddy field to the supermarket shelf at a consistent quality or enables manufacturers to combine half a dozen different raw ingredients from around the world into a consistent end product. including shipment. satellite communications and burgeoning safety regulations and inspections.Insurance cover. The trader's prime objective is to meet the requirements of the buyer . manufacturers and retailers-operate and perceive the industry's role in their business.Shipping and delivery details. Thus. and . although a mainstream of 25 products plus 15 alternatives will fill the 35 or so silos at his main dockside processing plants most of the time. the manufacturer decides to end his direct involvement in shipping and to buy the majority of his raw materials requirements ex-store in the countries in which he manufactures. continue to travel the world maintaining contact with growers of soya and sunflowers in Peru and India. It is also the only activity undertaken on board a commercial cargo vessel. traders. the movement of over 200 million tonnes of cereals annually and some 1.lading.A sale contract.000TEU container vessel or a 3.transportation. vegetable oil in Malaysia and cereals in Argentina and the USA. Fifteen buyers process the feeding stuffs through 27 feed plants. With low margins over incoming raw materials and a demand for a high level of quality control. . .Terms of payment. clearly defining the delivery of nutrient product packages (animal feeds) as his prime business objective. it is all too easy to forget that this is still the essence of the professional mariner's role. content that the village's livelihood had been entrusted to the care of the master. with the UK Food Safety Act (or the many overseas equivalents) requiring an exacting level of due diligence throughout the production process. buyers and traders The basics of international trade are described in the Nautical Briefing on the development of maritime . The cereals. rice bran in Thailand. The sale contract Sellers. supporting core skills are identified as: . A major manufacturer may monitor 500 different commodity classes and subclasses grown in different regions around the world. a 5. . the trader. with its associated demands for the ability to hedge financially against commodity price movements. giving an average ingredient cost of about £128 per tonne.

Sale contracts-dry bulk The Grain and Feed Trade Association is one of a number of organisations which provide a range of services central to which are a number of internationally recognised procedures and standard contract forms (similar. or (c) Sell directly on a CIF (cost insurance and freight) to the end user (the manufacturer) for delivery to his warehouse. . It is very likely that the trader will be aiming to consolidate two or three parcels to achieve economies of scale and thus a handy-size bulk carrier. charterer and receiver. some hundreds of miles from the nearest port. the trader knows that he must provide: security of delivery. consistent quality. the contract contains 30 clauses. meanwhile. organise the seaborne transportation leg being two of the most important. . the seaport. to the range of BIMCO charterparties). stows.A small grower may well sell ex-field to a contractor (who may provide harvesting services) or to a cooperative.The co-operative. whilst at the other end of the chain. must decide whether to: (a) Sell 'ex-railhead silo' to a trader who will transport to. and competitive pricing. FOB. (b) Transport it to the seaport and organise an FOB (free on board) sale. access to the buying market and the ability to. 64. it will most probably be GAFTA (Grain and Feed Trade Association) Contract 109.Of fair average quality of the season's shipments at time and place of shipment to be assessed upon the basis of. carries and eventually delivers the cargo. General Contract FOB Terms for Grain in Bulk. the co-operative will be endeavouring to match the export contract with the local contracts on which they have secured the commodity from the grower. A general understanding of the terms and conditions of the sale contract (based on the GAFTA standard) gives a useful understanding of the imperatives driving the shipper. The trader. the margin shall be 10%. . say. official or customary inspector's certificates issued at time and place of delivery will be final as to quality. In this case. Contract No. lifting. Thus. For full and complete cargoes. This will require the co-operative to organise both the overseas sale and the marine transportation. . 119. quality and consistency (which he may well undertake in conjunction with the manufacturer's nutrition experts). Bulk Feeding Stuffs Ex Store/Silo. three or four sale contracts by the trader. As the manufacturer (the buyer) will want to keep his stock as low as possible. . with the excess or deficiency over 5% being settled at 'FOB price on the date of last bill of lading . GAFTA's official FAQ standard of the month during which the bill of lading is dated. in many ways. 30. is one of the most frequently used and is summmarised below as well as being included in the annex for this chapter although readers are not advised to get too involved in the detail of this section. Signed by sellers and buyers but specifying the intervening brokers (unlike the average charterparty). cost-effectively. in this case Contract No. Raw materials are frequently sold on an FOB (free on board) basis and the trader will be endeavouring to match his purchase contract with his sale contract to the manufacturer.000 tonnes could well be chartered against a background of several purchase contracts and two. . His first task is to identify a supplier who can meet his requirements in terms of price. the trader will want to back-to-back this contract with his GAFTA Contract 109 covering the onsale to the manufacturer. General Feeding Stuffs.(the feeding stuffs manufacturer) which will be translated into a sale contract.' Clause 6-Quality: There are a number of standard options and an understanding of the way in which the contract approaches this problem may aid the master in the event of a query as to the correct wording on the bill of lading. and comparison with. A number of factors will affect the decision on how the goods are exported.Government. delivery. will instruct his shipping department to charter the necessary tonnage to meet the loading and delivery dates. All these aspects of international trade depend centrally on one or more of the roles of a bill of lading and on the way in which the master presents his vessel. Bulk/Bags. and consolidate at. as described in chapter four. loads. having fixed his buy and sell contracts and hedged any exchange rate exposure between purchase and sale currency. The relative strengths and weaknesses of the supplier and trader will determine the terms and conditions under which the goods are shipped: . Some 80% of all cereal contracts and a major proportion of all feeding stuffs and pulses contracts move on one of GAFTA's 80 contracts. of which: Clause 3-Quantity: allows 5% more or less at buyer's option (which translates recognisably enough into the equivalent charterparty (C/P) clause). Behind this may well be organised documentary credits facilitating deferred payments.

Sundays and Holidays excluded. (seller's responsibility) and export licence. .. so it is important for the vessel to give as reliable as possible notices of arrival since the charterer must base his logistics on this information.' Thus. . it would appear that the quality and quantity which they.To average at time of shipment about equal to the official standard of the (relevant) chamber of commerce. Goods pass to buyer's risk upon 'delivery over the ship's rail' (Clause 13). 14. Clause 11-Loading: This is much more fully addressed and is to be undertaken by sellers (load. free of expense to the vessel (except that opening and closing of hatches shall be done by owners at their own time and cost). . insurance and other such normal carrying expenses shall be for buyer's account. rely upon is determined prior to the cargo being loaded. such as 'Thai Rice in Bags or Bulk' (GAFTA Contract No.200 metric tonnes per WVATD (weather working day of 24 hours). dunnage and ventilation for buyer's account. Clause 22 & 23-Notices: all notices received after 1600 hours are deemed to have been received on the following business day. the information may well help to defend the owner's position.. interest. even if used) basis five working hatches. pro-active master. Clause 17-Sampling: Provides the option for an average sample to be taken and sealed jointly by buyer and seller and assessed in line with GAFTA's sampling rules (see annex). if the vessel is lost prior to completion of loading. Clause 7-Delivery: This refers to delivery of the grain to the load port and requires buyers to give a certain stipulated notice of the vessel's 'probable readiness and the tonnage required'. The vessel is to load in accordance with the custom of the port (unless otherwise stipulated) and B/L .. etc. Clause 24-Non-business days: Hopefully correlated with the charterparty. Clause 19-Insurance: Marine and war risk insurance to be effected by buyers.. Note that many of the notices to be given by the buyer will depend upon timely and accurate information from the master. laytime. P&I Clubs receive many shortage claims which could be refuted or mitigated with the assistance of a. Clause 10-Shipment and classification: per first-class .shall be considered proof of delivery in absence of evidence to the contrary'.. weight. weight. As with quantity. be economical with the truth when advising ETAs. Matting. 15 address certificates of origin. All charges for storage. Good customer relations do not aim to put one's customer in this sort of situation. the vessel can easily become caught up in a dispute about quality between buyer and seller and if the master is aware of the sampling procedures being used. condition. and any financing bank. SSHEX (Saturday afternoons. in the minds of sellers and buyers. 120) have more specific wording for: Clause 9-Inspection and fumigation: This specifies independent inspection and supervision in respect of the quality. (excluding tankers and vessels which are either classified in Lloyd's Register or described in Lloyd's Shipping Index as 'ore/oil vessels') steamer(s) and/or power engined ship(s) classed not lower than 100 Al in Lloyd's Register or British Corporation BS or top classification of other equal register. etc. facsimile is not considered a satisfactory method of transmitting notices. stow and trim)..At the time and place of shipment about as per sealed sample marked . provided that buyers give written notice not later than 1600 hours on the next business day following the day of the delivery period. shall be 'final at port of loading according to the certificate issued by. Presentation of NOR (notice of readiness). but note that if buyers do not confirm that insurance is placed at least five consecutive days prior to the expected readiness of the vessel(s). The fumigation requirements are also specified. Clauses 13. or ships not inferior to these classifications. This should be correlated with the requirements for establishing weight under the B/L and it is very important for the master or his cargo officer to take an interest in this procedure if at all possible. Clause 16-Weighing: leaves the description of the weighing procedure open to negotiation but establishes the right for both sellers and buyers to attend. at best. despatch/ demurrage (as per C/P) are all addressed (see chapter six) and. sellers have the right to effect insurance at buyer's risk and expense. buyers pay for loaded rice as per B/L or mate's receipts (M/R). . Some FOB contracts. levies. at 1. export duties. taxes. condition and packaging of the rice prior to loading (at the expense of sellers) and that this quality. Clause 8-Extension of delivery: Buyers have the option to extend the contract period of delivery by up to 21 consecutive days. It is sad but true that many traders expect that vessels on charter to them will. Clause 18-Latent defect: The grain is not warranted free from latent defect.

Contracts based on CIF (cost. in the possession of . The contracts are generally TQ (tale quale) although a dozen are RT (rye terms-see clause 13).At time and place of shipment to be about as per sealed sample marked . Such wording presupposes that the seller knows the cost of freight prior to concluding the sale contract or is prepared to live with this exposure. Clause 3-Price: This now naturally covers 'gross weight. the bill(s) of lading to be dated when the goods are actually on board. intervening between the first seller/shipper and the last buyer/receiver. Clause 11-Payment: made: '(a) in exchange for and on presentation of shipping documents'. whatever the pressure from the shipper. In general terms. at 10 per cent of full value. Clause 7-Sales by named vessels: For all sales by named vessels. As has been previously mentioned. or . collectively known in this context as a 'string'. the owner then has a direct responsibility to deliver the cargo to that buyer in strict accordance with the description on the bill of lading and to which the buyer receiver was never a party. Penalties are established for below specification quality with buyer's right to reject if the sand/silica content exceeds 5%. Very often there will be a number of intermediate buyers and sellers. with the price calculated at the discharge port. It is not... cost. quantity and timely loading are three important areas of consideration and..afloat' basis. 100 (Contract for Shipment of Feeding Stuffs in Bulk) naturally extend the seller's involvement beyond the ship's rail at the port of loading. the following shall apply: (a) Position of the vessel is mutually agreed between the buyers and sellers. (b) The word 'now' to be inserted before the word 'classed' in the shipment and classification clause. At some stage the music stops and the last buyer then unwraps his contract and starts to read the small print.At the time of loading to be fair average of the season's shipments. identify and ship the goods described in the contract within the quantity and time constraints of that contract. insurance and freight-or C&F. the appropriation clause is cancelled as the goods have already been effectively identified and loaded (see clause 10). Clause 10-Appropriation: The purpose of the notice of appropriation is to confirm to the buyer that the shipper has fulfilled his obligation to provide. The 'strings' can be of indeterminate length and where long strings are involved in the more volatile markets they can be a constant source of problems since. a Performance Bond may be established on which the buyer can draw in the event of a default by the seller. '(b) in exchange for shipping documents on or before arrival' but sellers have the option to call on buyer to take . as opposed to their quality. Clause 6-Period of shipment: 'As per bill(s) of lading dated Or to be dated . Under the terms of sale. in the event that a CIF sale is made on a named vessel on a 'shipped' or . even in prime condition ex-factory. Very often disputes are left to be resolved until the last shipment of a series and the seller will endeavour to detain the vessel in an attempt to offload claims for poor quality or short delivery on to the shipowner. these two terms relate to the condition of the goods on arrival at destination. there is a tendency to buy and resell on the basis of market price movement. are: Clause 2-Quantity: The margin to ship more or less moves to the sellers but is reduced to 2% with an option of shipping a further 3% more or less. Quality is the inherent nature of a product. Date of the bill(s) of lading shall be accepted as proof of date of shipment in the absence of evidence to the contrary. The main difference in the GAFTA sale contract arising out of the use of CIF terms. however.. The purpose is to provide the last CIF buyer/receiver with enough information to take delivery of the goods on arrival of the appropriate vessel. Quality.shipped'-i. are quality products). In any month with an odd number of days.. an alternative method of passing title and cannot replace a bill of lading. Certain other cars. (c) Appropriation clause (qv) cancelled if sold . the Bonds can be of considerable value in the case of a large contract of affreightment. The price of the goods may well be fixed against the bill of lading date so it is crucial that B/Ls are not signed until the cargo is on board. it might be argued. never. insurance and freight'. (Confusion sometimes arises when attempting to differentiate between quality and condition... Clause 5-Quality: This is established through a warranty given to the buyer by the seller based on: . based on contract 100. Thus the notice of appropriation is particularly useful to receivers when shipping documents are delayed in the banking system or in the coastal trades where it is frequently the case that the vessel can arrive before the shipping documents. whatever its condition-a rusty Rolls-Royce remains a quality product. cost and freight) such as No. the middle day shall be accepted as being in both halves of the month'. rather like a game of pass the parcel.e.

The sampling rules are set out as an annex to this chapter as a useful industry guide and the master's responsibility for sampling discussed in more detail in chapter six.Policy(ies) of insurance. is such a contract and the main point of interest is the obligations which it lays on the seller to have his goods available: Clause 7-Period of delivery: if sold 'prompt' the delivery period shall be deemed to be 14 days from the date of the contract.. the contracts of carriage with the contract of sale. Clause 18-Sampling and analysis: Although in this contract. buyers and sellers will be endeavouring to minimise their exposure by ensuring that their contracts are. .Baltic.Mexican Pacific. and . can be crucially important. sellers 'must provide other documents or an indemnity'. Clause 15-Loading strike: The period of delivery (clause seven) shall be preceded by a theoretical number of voyage days and a deemed period of shipment of 31 days at origin shall precede those days. buyers and traders at the beginning of this chapter. consecutive days from the date of the bill(s) of lading'.. 130. 109. Clause 14-Shipping documents: .Mediterranean. Morocco to Liberia . At all stages. we looked at the provider of animal feedingstuffs who had moved out of the shipping activity by buying on an ex-store/silo basis and the trader's requirement to match his 'buy' contract and shipping 'arrangements with the requirements of his 'sell' contract. If the shipping documents are not available. This has been a brief introduction to the type of contract on which international trade is carried out and which generate the demand for maritime transportation.Other documents as called for under the contract.. naturally.up the documents 'on or after . Whoever is responsible under the terms of the sales contract for providing the shipping services will. The voyage days range from: . the details for sampling and analysis are set out in some detail the requirements for sampling are established by GAFTA in sampling rules No. leg of the journey. the end buyers were buying ex-store/warehouse. to .. . as far as is possible. as fast as the vessel can deliver in accordance with the terms of the B/L). also be endeavouring to reduce his exposure by matching. Contract No.) Clause 17-Weighing: Buyer makes final settlement on the basis of the gross delivered weights at the port of discharge at buyer's expense. their agents or a recognised bank.Invoices.. 7 days. .. The cost of discharge from hold to rail for seller's account. Clause 13-Rye terms: Addresses contamination which may occur as a result of shipment in 'tankers or in oil compartments of oil /ore carries and provides for sellers and buyers to 'give each other all reasonable assistance in the prosecution of claims for recovery from shipowners. Indonesia. if liner bills of lading are used. 3 days. in this example. The relevance to the master is both in an understanding of the potential need to give timely notices of delay supported by properly collated evidence as well as an understanding of the time pressures against which the seller/shipper (his customer) is conducting his business. It is important to remember that the marine sector is just one leg of a journey from. West Coast North America. China. 124 and methods of analysis No. and arguably the most difficult..-again it is imperative for the master to be aware of quality. corn field to breakfast table or cattle trough. . Such other delivery order(s) if required by buyers to be certified by the shipowners.Full set (s) of bill (s) of lading an ' d/or ship's delivery order(s) and/or other delivery order(s) in negotiable transferable form. and the timely arrival of the vessel.Other European Ports . (Note that in the scenario described earlier. so far as is possible. Clause 16-Discharge: As fast as the vessel can deliver in accordance with the custom of the port (or. .. Iberian Atlantic Ports . Time. and in such a case the trader would have to cover the cost from ship's rail to his store. 15 days. are the contracts of carriage (bills of lading and charterparties) which control the seaborne. Outside this chain. through . back-to-back. If civil and/or military commotion or strikes or lockouts prevent loading during the 28 days of the deemed period of shipment the seller must give notice and will require documentary evidence of the cause of the delay to support any claim for an extension under this clause. Contract for Ex Store/Silo in Bulk Feedingstuffs. thereafter for buyer's account. In the section on sellers. Japan and other Far Eastern Ports . . Sale contracts-liquid bulk . but running parallel with it. Sellers shall have the goods available for delivery in good condition. . 45 days.

Contracts of carriage Charterparties and bills of lading With the sale contract either well advanced or completed.FOB title At buyer's vessel's intake pipe.The example of a range of sales contracts set out earlier in this chapter is fairly typical of the way in which a wide range of commodities are traded with a trade association establishing the contractual ground rules and probably providing a level of quality control through a sampling and analysis service. The rapid expansion of trade during the 19th century and the continuing tendency for merchant adventurers to separate their activities so as to specialise either as shipowners or traders led to an increase in national and international law governing the carriage of goods by sea. these are substantially longer. Secondly charterparties can only perform one of three functions of which the bill of lading is capable-namely. Under CIF and C&F contracts. an abbreviated form of contract became popular. to statements he makes about quantity and the (apparent) condition of the goods on shipment. and cannot. Considerable attention is given (in an FOB contract) to the procedure for nominating a vessel and ensuring its timely arrival at load port. one of function and the other of breadth of coverage. it is the duty of the seller to conclude the contract of carriage. basically FOB .1). Charterparties are typically used when a shipper wishes to make use of an entire vessel whilst bills lading are used where the shipper only wishes book space on a vessel. . Buyer. on a falling market the shipper will be pushing for early signing and vice versa. Charterparty. A few of the relevant points to note are: . or affreightment. As independent traders entered the market and began trading against each other. reflected a fairly heavy legal input and still provide much of the framework for current trading practice. Significant attention is also given in the sales contract to details of laytime and demurrage. . perform the crucial role of the bill of lading as a document binding the carrier. One major strand of international maritime law was generated because of the principle of English law under which only those who are party to a contract can sue under that contract.CIF price Linked to the bill of lading date so. involving as it does the hire of an entire vessel. Bunkering. The ordinary application of the English doctrine of privity of contract meant that the buyer (or consignee/ endorsee) would be left without a remedy against the carrier (shipowner) even though he has sustained a loss. delivery and employment of the crew are typical examples.FOB delivery . Both contract notes refer to major oil company standard terms and conditions and. There are two broad types of carriage document in common use which he can turn to. bill of lading and charterparty.. This severely undermined the Rights of consignees . as indicated. Much of the trading in hydrocarbons was initially undertaken by the oil majors using their own contractual formats. Examples of two of these. the shipper (who will be defined by the Terms of trade in the sale contract. It is the nature of this relationship which will be explored in this chapter and it is one which has kept the legal profession gainfully employed for many years. Charterparties do not. the charterparty or the bill of lading. of the goods. These. charterparty).Demurrage .Note the seller's right to reduce the laycan to three days one month before actual delivery. it is common for bills of lading to exist together with charterparties within the same transaction and why it is also common to find clauses in one or both documents relating to the other. are contained as an annex. that of being a record of a record of a contract of carriage. Nor can charterparties share the magic of a bill of lading as a document of title. under the signature (usually) of the master.Linked with NOR at port of discharge or physical discharge and an example of the interaction between the three contracts involved: sale. will contain some clauses which relate directly to the carriage of the goods as well as many clauses which go far beyond the mere carriage of the goods and relate to the management of the vessel. CIF-the seller) will need to put in place a contract for the carriage. For this reason.g. . seller and the bank providing the credit line are all very dependent upon clear and precise information from the master. . one FOB and one CIE. and understand the buyer's natural anxiety about the vessel's timely arrival.Delivery .An example of the direct linkage between the sale contract and the contract of carriage (e.he buyer. This leads to two crucial differences between the two documents. as he was not a party to the contract of carriage (see figure 5. not surprisingly.

although the bill of lading is evidence of this contract. just to make the point completely clear with respect to bulk cargoes.received for shipment' bill of lading now falls within the Act.g. the Carriage of Goods by Sea Act 1992 (the 1992 Act) expands the scope of the contractual link between carrier and receiver and brings English law more in line with European law-e. (d) Electronic data interchange (EDI) -the Act makes provision for the future application of EDI.straight' or 'nominated' bill of lading).commercial value of a bill of lading and restricted its negotiable value at a time when international trade was becoming more complex and banks were increasingly involved in financing transactions on the face value of documents alone. A . (c) Ship's delivery orders but not merchant's delivery orders. and every endorsee of a Bill of Lading. is not a party to the contract of carriage although he may be affected by it. particularly the bill of lading. French Decree 99-1078 of December 1966 Article 49. grain in a silo. Dutch Commercial Code Article 510. . Section 606 of the German Commercial Code and the US Pomerene Act (Federal Bills of Lading Act 1916). and be subject to the same liabilities in respect of such goods as if the contract contained in the Bill of Lading had been made with himself Whilst the tenor of the 1855 Act might seem to have solved the problem.g.g. In summary. irrespective of the passing of property (the goods or cargo) and regardless of whether the lawful holder of the bill of lading has suffered loss himself. it was establishing a right which extended beyond the long established law of privity of contract.. the contract of carriage is the responsibility of the seller and. (This is not to be confused with the Carriage of Goods by Sea Act 1924 which is a different branch of . (b) Sea waybills (this is an important new extension). The increasing complexity and sophistication of modern trade. oil in a tank). (2) Rights under the shipping documents (section 2): The essential objective of the Act is to enable the lawful holder of a bill of lading to assert contractual rights against the carrier. This in turn led directly to the Bills of Lading Act 1855 (the 1855 Act) which was central to maritime commercial practice for nearly 140 years until the effects of containerisation and through transport and an increasing need for the endorsee to be brought more fully into the scope of the Act resulted in the Carriage of Goods by Sea Act 1992 (the 1992 Act). the bi1yer. presiding judges were keen to ensure that not too wide an interpretation was made of the freedom to litigate bestowed by the Act.the legal tree which implemented The Hague Rules in England and which is discussed later in this chapter. The 1855 Act established the legal link between carrier and receiver by providing that: Every consignee of goods named in a Bill of Lading. a . unless it is a document which is incapable of transfer by endorsement (e. After all. this problem no longer applies. to whom the property and the goods therein mentioned shall pass upon or by reason of such consignment or endorsement. .) In a CIF or C&F sale contract. attributable to improved international communications.. revealed severe limitations with the 1855 Act. the 1992 Act provides for the following: (1) Documents to which the Act applies (section 1) (a) Bills of lading. Section 5 (4) (b) states expressly that it does not matter that goods cannot be identified because they are mixed with other goods (e. as consignee. Although under the 1855 Act there was a problem with title to sue where the endorsee came to hold the bill of lading after the goods had already been delivered (by the carrier). Without exploring the legal complexities relating to the 1855 Act. shall have transferred to and vested in him all right of suit. 'Property' in the goods is no longer a requirement for title to sue and.

. there are still many countries whose law is governed by the old Act and it is for this reason as has been demonstrated time and again. the Delfini (1990) Lloyd's Rep 252. entered into a voyage charter with the owners of the Delfini (the defendants). especially. CIF terms. Without an intention to enter into a discussion of case law.000 tonnes of Algerian condensate from Sontrach.000 tonnes to Enichem. as shippers. good original records and contemporaneous evidence from the vessel is frequently crucial to the Courts or arbitrators who are attempting to unravel and adjudicate on complex transactions which have taken place some years previously. tankers. somebody else's problem' as soon as the discharge port is reached and the hoses are connected or the hatches opened. The voyage charter provided that Vanol were allowed to instruct the vessel to . It does not become. delivery Gela.First sale contract: Vanol International BV. illustrates a situation which is only too well known to masters of bulk vessels and.However. .Contract of carriage: Vanol.Second sale contract: Vanol onsold 20-25. a pre-1992 Act claim. purchased 100. by contract dated 2 July 1985. The sale contract provided that payment and delivery could be made against either the shipping documents or a letter of indemnity backed by a bank guarantee to be in place no later than the date of nomination of the vessel. . The master's commercial responsibilities mean that he plays an active and involved role in that happens on board and in connection with the cargo which has been entrusted to his care.

the shipowner and the master.) Settlement: On 12 August. irrespective of the passing of property and regardless whether he has suffered loss himself. it is perhaps unfortunate that the revision of the 1855 Bill of Lading Act carries the name Carriage of Goods by Sea Act 1992. being able to recover substantial damages for the benefit of the person who has suffered the loss. which had never been presented to the defendants and which.The 1992 Act: It was the realisation that the precedents. gave notice of readiness but did not berth until 7 August. if necessary. to Enichem who were to pay for the goods. In summary. The principal recommendations which effectively summarise the exposure of the carrier-i. stated the quantity of condensate loaded and. the contract of carriage was discharged despite the incomplete delivery. declined (as did the 1855 Act) to attempt a precise.) . However.The shipper and any intermediate holder of a bill of lading should not be entitled to rights of suit after someone else has become the lawful holder of the bill of lading. the 1992 Act does bring English law relating to the rights of suit against a carrier even closer to the practice of other major maritime nations. should properly come directly from the shipowner and not the receiver and should. P&I Clubs do recognise the realities of the commercial world and do have recommended wording for such indemnities. if it is to be given. which established the strict interpretation of the 1855 Act rather than the natural justice of the case. The 1855 Act: (a) The initial judgement was that once the vessel had unloaded and sailed away. preferably be undertaken against a letter of indemnity in accordance with the Club's recommended wording. (This illustrates how critical and how complex the precise identification of a specific act or event may be within the course of a normal commercial operation.I. However.I. with an invoice. therefore. thereby risking confusion with the 1924 and 1972 Carriage of Goods by Sea Acts. (b) The plaintiffs (Enichem) appealed but the Court of Appeal held that they had no right of suit because endorsement of the bill of lading to Enichem on 20 August did not play an essential part in the transfer of title to the cargo which occurred at the latest when Enichein paid Vanol on 12 August and probably earlier on discharge or even when Vanol telexed Enichein on 5 August. one to the ship instructing it to deliver to Enichem without presentation of the bills of lading and the other. naturally. It is interesting to note that the Law Commissioners. Enichein paid Vanol. It also emphasises the need for accurate and concise records to be kept on board. in their recommendations to Parliament.The lawful holder of a bill of lading is entitled to assert contractual rights against the carrier. .) Bills of lading issued: The vessel was loaded on 2 August and bills of lading issued naming Sontrach as shippers. It might be added that this has still to be confirmed by the establishment of precedents confirming that interpretation of the 1992 Act. Delivery: The vessel arrived at Gela on 4 August. There followed a dispute in which Enichein sued the shipowners for short delivery.. whereupon the bill of lading ceased to be effective as a transferable document.O. which implemented The Hague and Hague-Visby Rules respectively. (A P&I Club would not be happy with this condition being written into a charterparty which if complied with prejudices Club cover. be backed by a bank. (The instruction to the master to discharge without presentation of bills of lading. to be delivered. are: . By providing that the bill of lading should be capable of endorsement so as to pass contractual rights and title even after delivery of the goods has been made (provided that the endorsement is effected in pursuance of contractual arrangements made before the delivery of the goods) the problem of the Deyini and sever4 other similar cases is avoided. . will then replace the Club cover in the event of a claim for mis-delivery and this is why Clubs recommend that the L. legal definition of a bill of lading and left it to be identified by reference to its three well known functions. The L.e. no contractual rights were acquired by the transferee (Enichem). The vessel discharged between 7 and 9 August.O. were having a detrimental effect on the future of London as an international centre for the resolution of disputes which was the impetus for change. accordingly.- - - discharge against Vanol's letter of indemnity if bills of lading were not available at time of discharge. Bills of lading were still in the hands of Sontrach and on 5 August Vanol issued two telexed letters of indemnity. It was only on 20 August that Enichem's bank received a complete set of shipping documents from Sontrach including the bills of lading.

In 1893. carry. and the apparent order and condition of the goods. the carrier is able to limit his liability to a fixed amount per package or unit (then £100 and today linked to Special Drawing Rights –SDRs). not throughout. Since the amendments dealt with specific problems a piecemeal approach was again adopted. the consignee. It is also essential that the carrier has clear and concise procedures for delegating authority to agents to sign bills of lading on their behalf and that the master knows how these operate. to a lesser extent. shipowners were adding exception clauses to their contracts of carriage which limited their liabilities at the expense of the shipper and. This was a recognition of the near impossibility of achieving seaworthiness under all circumstances. The second obligation is subject to a catalogue of exceptions of which the most important are Acts of God. fire. was a combination of pragmatism and compromise.Visby rules The container industry was one of the major influences behind the Visby amendments to The Hague Rules which were negotiated between 1962 and 1968. handling. The advent of The Hague Rules imposed two distinct obligations on carriers: (i) to exercise due diligence to make the vessel seaworthy before the voyage. These were implemented into the (then very extensive) English sphere of influence by The Carriage of Goods by Sea Act (1924). Since The Hague Rules are applied in accordance with the corresponding national law of the country of loading. handle. it was necessary to generate a second protocol as the monetary limits to liability under the Visby amendments (Poincare . The result inevitably. The application of the Rules also produced its own problems. Although by 1968 73 States had ratified the Rules. Hague to Hamburg. constitutes conclusive evidence against the carrier of such shipment or receipt (this reverses the rule kn6wuas Grant v. the quantity and number of packages or weight of the cargo shipped as furnished in writing by the shipper. at least in detail. (ii) to care for the cargo during the voyage. keep. and negligence in the navigation or management of the vessel. more especially.The consignee named in a sea waybill (or other such person to whom the carrier is instructed to deliver) and the person entitled to delivery in accordance with an undertaking contained in a ship's delivery order are able to sue on the contract of carriage. A more serious limiting factor was the fact that The Hague Rules only apply to contracts of carriage covered by a bill of lading or similiar document of title and only applied from the moment the goods were loaded until discharged. . although the obligation arises before.. from country to country. The situation was not helped by different laws being applied in different countries at a time when international trade was expanding. each State gave the Rules legal status by incorporating them into their own legal system and. Even then. This created problems for the growing container market who were offering through transport and increasingly making use of sea waysbills. However. care for and discharge the cargo'. The first obligation is essential and overriding. Indeed. The carrier. This is an interesting requirement since it is generally the shipper and the consignee who appoint stevedores and thus have a direct influence on the loading. stow. stowage. the voyage. two identical parcels of cargo could be loaded in two 'Hague' countries for discharge in a third and find differences in the interpretation of the law in the event of a claim. master or agent is required to issue bills of lading showing: the leading marks necessary for identifying the goods. these vary. exporters in the United States first established the legal obligation of the shipowner to provide a seaworthy vessel and to exercise due diligence in the prosecution of the voyage. It can easily be seen how dangerous it is for a master to sign bills of lading on trust without having ascertained to the best of his ability that the goods have been loaded and are in compliance with the description on the face of the bill of lading. The practicalities and problems arising from this from the master's point of view are discussed in chapter six together with the corresponding duty to 'properly and carefully load. unless caused by the actual fault or privity of the carrier. The Hague.A bill of lading. discharging and. representing goods to have been shipped or received for shipment and in the hands of the lawful holder. The master's signature does bind the carrier and the bill of lading is conclusive evidence of shipment against the carrier. as we have already seen. the Harter Act did not gain universal acceptance and it was another 30 years before the main European maritime nations managed to reach a pragmatic but piecemeal agreement by the adoption of The Hague Rules in 1924. when the Visby protocol was introduced in 1977. Norway whereby it was held that the master has no authority to sign a bill of lading for goods not put on board).controlling the conditions of carriage Increasingly during the 19th century.

a comprehensive and common basis for conducting the international carriage of goods by sea (which. The main point which the Visby Amendment addressed was limitation of liability-the Visby Rules failed to address the problem of linking values to Jhe outmoded gold standard but did introduce a weight alternative-i. The number of States applying only the original Hague Rules has (at this date) been reduced to 63. The Hamburg Rules As with the Harter Act. and/or (d) Where the port of discharge is in a contracting State or the optional port of discharge in fact used is in a contracting State. This pressure appeared as a report to UNCTAD (UN Conference on Trade and Development) in late 1970 and led to a series of negotiations. possibly. as a consequence. as set out in table 5. and/or (c) Where the contract of carriage provides for the application of the Rules or any national law giving effect to them. SDRs (special drawing rights). They include: 1. Under the Hamburg Rules (Article 21). a more pragmatic if less romantic solution. (d) Any place named in the contract of carriage.67 SDR (special drawing rights) per package or unit or 2 SDR per kilogramme weight of the goods lost or damaged.000 gold francs per package. Not surprisingly. the voyage charter and. waybill or other document evidencing the contract is issued in a contracting State. Although the name and principal place of business of the carrier must be identified on the face of the bill of lading. a loaded voyage can be subject to two inconsistent legal regimes. the overall effect of the Hamburg Rules is to reduce the risks borne by cargo and their insurers whilst increasing the risks borne by the carrier and his insurers. Bearing in mind that Hague. A wider application of the Rules. calculated against a basket of major currencies were introduced. Other provisions in the Rules are designed to widen the application of the Rules even further and. Hague-Visby and Hamburg Rules are summarised in the annexes. the UK) and discharged in a Hamburg Rule port (in. The owner's responsibilities and the conditions under which he can limit his liability are discussed in more detail later in this chapter. provided that the defendant had a place of business there. These limits were subsequently revised to 666. That the Visby Rules are a compromise is demonstrated by the fact that only 21 States have adopted The Hague-Visby Rules. The regime applicable would in practice depend on where the Court or arbitration in which the proceedings were brought was situated. Egypt). shippers in countries which felt themselves disadvantaged by the international legal regime which affected their exports pressed for change. it works.2. they apply to all contracts of carriage by sea whatever type of document is issued (or even if no document is issued) but excluding charterparties. Hague-Visby and Hague-Visby with SDR Protocol are then applied to export cargo through the nuances of national law. whichever is the higher. remember.transport interests'. the head time charter all stipulate different countries. in the main. It is.francs. The last point is significant because. Under Article 2 the Hamburg Rules apply: (a) When the port of loading is in a contracting State. or 30 gold francs per kilo of the goods lost or damaged. (b) The place where the contract of carriage was made. the cargo being loaded in a Hague-Visby port (in. The major areas of differences between The Hague. denominated in terms of gold) were already inappropriate. does not apply to charterparties) has hardly been achieved although. this could be: (a) The principal place of business of the carrier (and that is not easily defined in all cases). any contracting State in which the vessel (or vessels in the same ownership) can be arrested. and (under Article 22). for example.. and/or (b) When the bill of lading. essential to be aware of where proceedings might be initiated although this can be difficult if the various bills of lading. the Rules (Article 1) widen the definition in that the 'Actual carrier' covers any person to . for example. since this convention was generated more by 'trade interests' than by . Furthermore seven of these States have not adopted the 1977 SDR Protocol. The issue of what constitutes a package for the purpose of limitation has been the subject of a great deal of litigation. whichever is the higher. When the cargo is containerised the number of packages enumerated on the bill of lading will be deemed to be the number of packages for the purpose of limitation. (c) The port of loading or discharge.e. therefore. 10. not at the CMI or IMO but at UNCITRAL (UN Conference on International Trade and Law) which culminated in a convention made in Hamburg in March 1978 and generally known as the Hamburg Rules.

who has acquired the bill of lading or other contract in good faith. ports of discharge. As can be seen. can prove that he. consequently. namely Forms A and B. the carrier's liability and. be partly photographic. the liability of the carrier under the Hamburg Rules is based upon the principle of presumed fault. especially when taking into account that the limits to liability are some 25% higher (Table 5. The carrier is liable for cargo claims resulting from loss or damage to the goods or for delay in delivery (if the occurrence took place whilst the cargo was in his care. having due regard to the circumstances of the case. In the absence of such clause. an authority (e. Form A applies to members who wish to adopt The Hague or Hague-Visby Rules. protecting the owner of a bareboated vessel. even if optional. the International Group of P&I Clubs have drafted two clauses. including the consignee. Consequently. Wording to the effect that 'The shipper has agreed that the cargo carried under the bill of lading may be carried on deck or under deck at the carrier's option' is recommended. The carrier must. Unlike the criminal law which assumes one is innocent until proved guilty. It has not yet been conclusively established whether demise clauses. The future . port authority. be able to demonstrate that he followed the shipper's instructions and once again we see the importance of keeping a good and careful record which could. This test is particularly applied in the case of delay in delivery if not effected 'within the time expressly agreed upon'. however.. Form B applies when the carriage is between two States that are contracting parties to the Hamburg Rules. represent a significant widening of the potential application of the Hamburg Rules. It might well be prudent to ascertain carefully the requirements at the discharge port before loading (especially if discharging in a Hamburg Rules port) as the carrier may remain responsible for the cargo until delivery as specified above. the carrier will not be liable for loss.g. the carrier. the Hamburg Rules widen this (Article 4) to: (a) From the time that he has taken over the goods from a shipper or his agent or (effectively) a port authority. the standard application of the Hamburg Rules takes effect: the burden of proving that there was such an agreement falls on the carrier and the carrier is not entitled to invoke that agreement against a third party. 3. There is a change in the burden of proof with regard to fire in that in this case the claimant has to prove fault or neglect on behalf of the carrier and a survey may be required to help determine this. is substantially higher if the Hamburg Rules apply either by accident or design. The carrier's defence of act. in the navigation or in the management of the ship' does not exist.whom the whole or part of the carriage of goods has been entrusted. and the Courts will turn to what can (reasonably) be expected of a diligent carrier. and we have already seen that the scope of this definition has been widened) unless he. his P&I Club's exposure. neglect or default . A wider range of cargoes: The carrier is only entitled-to-carry cargo on deck if such carriage 'is in accordance with an agreement with the shipper or with the usage of the trade or is required by statutory rules or regulations' (Article 9).. his servants and agents 'took all measures that could reasonably be required to avoid the occurrence and its consequences' (Article 5). little precedent to act as a guide to a clause which could be interpreted very widely. consequently. Customs) pursuant to the regulations at the port of discharge or such other third party in accordance with the contract or the usage of the trade. until (b) The time he has delivered the goods to the consignee.2 E). So far as animals are concerned. and where the Hamburg Rules cannot be avoided. If it has been agreed that the goods be carried on deck or if carried on deck by 'usage of the trade' it is essential for the master to insert a record on the face of contract of carriage to that effect (a standard liberty to carry on deck clause is not enough). although this may not prevent claimants bringing cargo claims in regimes where the Hamburg Rules apply. will remain effective. It should be remembered that at present there is little case law related to the Hamburg Rules and. As noted. Responsibility and liability: Whilst the standard period of the carrier's responsibility under The Hague/Hague-Visby Rules was 'tackle to tackle' or 'hook to hook'. 2. usefully. Failure to deliver within 60 consecutive days following expiry of the agreed time can result in a claim for total loss of the goods.. damage or delay in delivery resulting from any special risk inherent in carrying live animals (Article 5).

The alternatives seem to be straightforward acceptance of the Hamburg Rules or a new convention which would amend the Hamburg Rules and/or modernise The Hague-Visby Rules and/or combine the two regimes. there are areas where a degree of difference of interpretation exists between the formal application of the Rules. even if the York-Antwerp Rules are not specifically incorporated in a bill of lading or charterparty. As salvage awards are allowable in general average. (South America features quite strongly in this group). What is critical is that he keeps a very careful record of his action and the reasons for them. All of the above..000 years. There is a general feeling that Hague-Visby does need a thorough overhaul or modernisation. the voyage charter. Australia). precise and seaman-like advice in needed). the principle is universally applied. it would be reasonable to expect that the rules of general average. Looking to the latter. In chapter six. However. It could be argued that it is perhaps time that the practical mariner had a voice in these deliberations. for the general duty of deciding whether a sacrifice is necessary rests with the master and not his owners or managers. sometimes. by the inclusion (or failure to include) of correctly worded clauses (see incorporation clauses section in this chapter). some of the practical aspects of the application of these Rules will be considered. would be clear cut and universal. the marine adventure on which we embark today is very different from the marine adventure which our grandfathers and great-grandfathers faced. the CMI will consider this at their Centenary Conference in Antwerp in 1997. (6) National law in countries which are signatories to none of the conventions. Rule VI (Salvage Remuneration) was amended by the CMI-the 1990 Amendment. To give the legal world its due. are subject to national interpretation and only linked to the other major contract of carriage. whatever the eventual outcome. the balance of power seems to be moving towards the shippers who are the customers. when exploring the operational management of the various contracts of carriage. which replace the 1974 Rules as amended in 1990. this does not affect the master's actions when in a position where general average might be declared (except. sacrifice for the common good and the subsequent recovery from 'all parties to the adventure who benefited from the sacrifice'. How the 1994 Rules came into being is explained in chapter four as an example of the way in which international governmental and non-governmental organisations collaborate to change or update international maritime practices. even though modern communications can make them seem very close. we have achieved six alternative legal regimes: (1) Hague (2) Hague-Visby (3) Hague-Visby with SDR Protocol (4) Hamburg (5) Hague-Visby signatories who have introduced some elements of Hamburg (or ratified the Hamburg Rules and delayed their introduction-e. it was accepted at the time that the amendment might not be adequate and a general revision was undertaken in preparation for the next CMI Conference held in Sydney in 1994 (see chapter 11). However. after all.g. the ~general application of the principle of general average (in common law in England) and the approach to general average in marine insurance. The spur to changing the 1974 Rules was the International Convention on Salvage 1989 which introduced the concept of protection of the environment within the ambit of marine salvage. If the theme of the 1974 revision was a desire for simplification. as we have mentioned. Chapter eleven reviews a general average incident from the master's perspective and looks at how the various costs incurred are apportioned by the average adjuster. To a great extent. the motivation for the 1994 . One aspect which a new or modernised convention may wish to address is the relationship between bills of lading and charterparties and the way in which terms and conditions of the charterparty can relate to the receiver of a bill of lading. but can make no progress unless UNCTAD and UNCITRAL are prepared to compromise. 1994. when clear.Antwerp rules Based on a principle which has been around over 2. An industry-based compromise is being drafted in the United States by a Marine Law Association study group but.In an endeavour to achieve uniformity in the application of law to the central document in most contracts for the carriage of goods by sea. General average and the York. The current version of the Rules are the York-Antwerp Rules.

The 1994 lettered Rules are set out below with brief commentary aimed to aid the master navigate most effectively through the shoals which surround the declaration of general average and its subsequent adjustment. any damage or expenditure falls to the vessel as particular average. Rules of interpretation In the adjustment of general average the following< lettered and numbered> Rules shall apply to the exclusion of any Law and Practice inconsistent therewith. The general format of the Rules has lettered Rules establishing how the general average is adjusted with numbered Rules (and a new clause paramount) setting out the detail. shore authorities and other advisors. The amended Rule has removed surplus words and includes the new clause paramount. As already noted. the Courts will look at the actions of the master to determine whether they were reasonable in the light of the information available to him at the time. Changes and additions from the pre 1994 wording are shown in bold italics and enclosed in <parenthesis> on the few occasions where words have been deleted. the areas which a master should be particularly careful to record-or avoid. including. any consequential damage to cargo. . but if the disconnection is itse6(a general az~erage act the common maritime adventure continues. Thus. This totally new wording addresses the increasing practice of deepsea commercial tug/barge operations and is based on the Rhine Rules. consequently. provided that they are all involved in commercial activities and not in a salvage operation. these Rules shall apply. Rule A There is a general average act when. this will include consulting with owners/ managers. General average sacrifices and expenditures shall be borne by the different contributing interests on the basis hereinafter provided. if any. An example of a general average adjustment is contained in chapter eleven with the objective of highlighting the expenditure which can-and cannot-be included and. It does not address the situation where a tug engaged . in general terms. general average shall be adjusted according to the lettered Rules. any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure. Except as provided by the Rule Paramount and the numbered Rules. When measures are taken to preserve the vessels and their cargoes. if there is no danger to the cargo but only to the vessel. from a common peril. Rule paramount In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred. This clause makes it very clear that. Included in this will be an assessment of the lengths to which the master went to ensure that he had to hand all available relevant information. A vessel is not in common peril with another vessel or vessels if by simply disconnecting from the other vessel or vessels she is in safety. The first paragraph of Rule E establishes the onus of proof when claiming general average. in the event of a dispute.revision was clarification with a strong lobby emphasising their wish that the scope of general average should not be expanded. and only when. 'intentionally and reasonably' (again) and 'common safety'. The 1974 Rule B has been moved to Rule A (second paragraph) as a precursor to the expanded Rule B tug and tow provision. There are five words to concentrate upon in the first paragraph: 'extraordinary'. Rule B There is a common maritime adventure when one or more vessels are towing or pushing another vessel or vessels.

a determination resisted by the representatives of the P&I Clubs. the average adjuster shall be at liberty to estimate die extent of the allowance or the contributory value on the basis of the information available to him. may well lead to litigation in the future and masters will be well advised to keep a good record of events relating to potential or actual pollution and/or damage to the environment and efforts to prevent it. even if the voluntary action was the 'reasonable act of a prudent mariner'. For the York-Antwerp Rules 1984 and this Rule in particular to have effect. not judge the causes. loss of market. etc. or particulars of value in respect of a contributory interest. and any loss or damage sustained or expense incurred by reason of delay.. shall not be admitted as general average. while pollution liabilities resulting from a general average act should. any ensuing arbitration or litigation could well . but this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault. be excluded. Rule D Rights to contribution in general average shall not be affected.on a salvage operation breaks down (i. What has been described as the 'pollution compromise' was extensively debated. There has been no change here. not just formally in the vessel's logbook and official reports. whether on the voyage or subsequently. damages or expenses which are the direct consequence of the general average act shall be allowed as general average. The first change to Rule C. This is an area which. All parties claiming in general average shall give notice in writing to the average adjuster of the loss or expense in respect of which they claim contribution within 12 months of the date of the termination of the common maritime adventure. A voluntary stranding on a coral reef off a popular tourist resort could well ensure that the vessel's name is quoted in case law for many years. and this rule emphasises that the purpose of general average is to deal with the consequences. The exclusion of 'losses. damages or expenses incurred in respect of damage to the environment or in consequence of the escape or release of pollutant substances from the property involved in the common maritime adventure.e. it is essential that the Rules are incorporated in the towage contract and the relevant contracts of carriage. the costs incurred by the parties to the adventure to prevent or minimise such liability should be included. With notice of a claim not being required for 12 months from the incident. which estimate may be challenged only on the ground that it is manifestly incorrect. a general average within a general average) even if the salvor's tug is engaged on contractual as opposed to Lloyd's Open Form terms. In no case shall there be any allowance in general average for losses. or if within 12 months of a request for the same any of the parties shall fail to supply evidence in support of a notified claim. themselves. The compromise is that.' generated considerable debate and must be considered against Rule XI (d) which refers to the special skill or endeavours of salvors in preventing or minimising damage to the environment. Rule E The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average. considering the potential size of pollution liability claims. paragraph three (old two) tidies up a commercial point by making it perfectly clear that loss of market is not compensated. The point relevant to the master is the importance of keeping a good record of events. but personally. with the insurers of ships and cargoes determined that they should not become liable for pollution through the back door. Demurrage. Failing such notification. Rule C Only such losses. and any indirect loss whatsoever . damages or expenses incurred in respect of damage to the environment. though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure.

there is obviously room for conflict. if any. in two new paragraphs. The Incorporation Clause is designed to incorporate charterparty clauses into the bill of lading in order to resolve this potential for conflict. subject to cargo interests being notified if practicable. Rule G General average shall be adjusted as regards both loss and contribution upon the basis of values at the time and place when and where the adventure ends. those aspects most relevant to the master when deciding upon the most appropriate course of action are discussed in that chapter. the following factors need to be borne in mind: Which contract of carriage prevails? Which charterparty is being incorporated? To what extent can charterparty clauses be incorporated? Is the incorporation clause wide enough and do the incorporated clauses fit? What happens if there is a conflict of law? What remedies and courses of action are open to the master if the bill of lading presented for signing is incompatible with his charterparty? Assuming initially that there is only one charterparty. The issues are complex and have given rise to much litigation and considerable expense. clarifies the situation with regard to cargo forwarded to its destination. and the cargo or part thereof is forwarded to destination by other means. a good place to remember the importance of how to handle personal notes and records of an event and of the doctrine of privilege. an occurrence increasingly common in the days of containerisation. Incorporation clauses When a vessel sails on a normal tramping voyage. This is. rights and liabilities in general average shall. This is explained earlier in this chapter and in more detail in The Nautical Institute's publication The Masters Role in Collecting Evidence. Rule F Any additional expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving.test the best of memories of a master who may well be serving. The numbered Rules are set out in chapter eleven and. if the bill of lading is in the possession of a buyer who is not a party to that charterparty then the bill of lading contract of carriage prevails. to other interests. remain as nearly as possible the same as they would have been in the absence of such forwarding. she will be the subject of at least two contracts which govern the conditions of carriage. When a ship is at any port or place in circumstances which would give rise to an allowance in general average under the provision of Rules X and XI. as signatory to the bills of lading. This rule shall not affect the determination of the place at which the average statement is to be made up. is very much involved. Since the cargo owner may change one or more times during the voyage and is frequently not the charterer. perhaps. in this day and age. These terms may be modified by the incorporation of charterparty clauses to the extent discussed . It is also a matter in which the master. the charterparty between charterer and owner and the bill of lading between cargo owner and shipowner. as if the adventure had continued in the original ship for so long as justifiable under the contract of affreightment and the applicable law The proportion attaching to cargo of the allowances made in general average by reason of applying the third paragraph in this Rule shall not exceed the cost which would have been borne by the owners of cargo if the cargo had been forwarded at their expense. When considering an incorporation clause. Rule G addresses the basis of the values on which general average losses and contributions shall be calculated and. but only up to the amount of the general average expense avoided. with different owners or managers on a totally different trade.

A bill of lading in the hands of a charterer acts merely as a receipt (unless the charterer is an endorsee of a bill of lading). a freight clause which reads: Freight to be paid in accordance with charterparty dated 10February 1996. The words: All the terms. if so. apply to this bill of lading and are deemed to be incorporated herein. a reference to an unidentified charter would be insufficient to incorporate any charterparty into the bill of lading. does it fit? A distinction must be made between clauses (in the charterparty) which are germane to the bill of lading's function as a contract of carriage. is perhaps the most well known and effective incorporation clause. carriage and delivery of goods) can and should be incorporated into . Under English law. Thus. carriage and delivery of the goods as Lord Denning described them in the Annefield [1971] 1 LLR 1. clauses and exceptions contained in the charterparty. its identity can be inferred from. to the shipment. When there is a chain. with. and other clauses such as the arbitration clause.below. or a contingent or a tentative incorporation of the whole Or specific parts of the charterparty? The second question. date 10 February. set out the ground rules: I would say that a clause which is directly germane to the subject matter of the bill of lading (that is. again in the Annefield. a high degree of compatibility can be achieved between the charterparty and the bill of lading.. The law will then turn its attention to the extent to which the charterparty terms can be incorporated and will apply a two stage test defined by Sir John Donaldson MR in the Mirimar [1984] 3 LLR 1. and it only arises if the answer to that is Yes is. provided that it is a voyage charter. 1996. conditions. do the tentatively incorporated parts have to be rejected as being unserviceable or inapplicable either because of their subject matter or because o their wording? Or. Lord Denning. for example. clauses relating to the shipment. a bill of lading which states on its face 'Freight and all other conditions as per charterparty' failed to incorporate an exception of perils which appeared in the charterparty but not the bill of lading. The owner may be subject to two different contracts at the same time. the bill of lading constitutes the contract of carriage between owner and bill of lading holder (who may or may not be the voyage charterer) (it is amazing how many lawyers have to draw diagrams somewhat similar to the one in Figure 5. the Courts assume the relevant charterparty will be the head charterparty to which the shipowners are a party. does the charterparty clause make sense in the context of the bill of lading? In 1971. is the wording wide enough and if so. should a cargo claim arise. assuming a clause paramount incorporates The Hague or Hague-Visby Rules into both contracts and an effective incorporation clause is also inserted in the bill of lading. One of the resultant problems is that. The first question is. for example. In this case the charterparty conditions of carriage prevail over those of the bill of lading. in words perhaps more useful as bills of lading are thrust under the master's nose as the vessel prepares for night sailing:. Under American law. The second part of the test now comes into play. is the wording of the bill of lading contract wide enough to produce a prima facie.e. the vessel on time charter and in turn subchartered to a voyage charterer. the controlling contract depending upon the identity of the holder of the bill of lading. However. a voyage subcharterer who is a bill of lading holder may be in a position to choose under which contractual terms he proceeds -i. This raises two questions: which charterparty is incorporated and how can an incorporation clause be made most effective? All too frequently the incorporation clause in the bill of lading fails to identify the relevant charterparty Sometimes. if arbitration is in New York. either against the owner under the bills of lading or against the disponent owner under the charterparty.1 in order to get the relationships right) effectively by passing the time charterer.

in the much quoted case. Receivers are driven by additional concerns over and above the need to ship the goods. unless otherwise stipulated in the credit. named. If a Credit calls for a bill of lading covering a port. Charter Party Bills of Lading. however. accept a document. However arbitration does not fall naturally within the general description of 'germane to the shipment. it should not be incorporated into the bill.to-port shipment. . an attempt. which: i. clauses and exceptions including the arbitration clause as well as the negligence clause and cesser clause as per charterparty dated 10 February 1996 are deemed to be incorporated therein. however named. Article 25. if the clause is one which is not thus directly germane. contains no indication that it is subject to a charterparty and/or no indication it is propelled by sail only. All other terms. The goods must be financed and probably resold on the basis of the bill of lading. the said owner shall have an absolute lien and charge on the said cargo'. but the cargo on which the owner may wish to exercise the lien may not belong to the charterer but to the holder of the bill of lading. dead freight and demurrage. The shipowner's right to exercise a lien on the cargo in respect of outstanding freight is another contentious area.the bill of lading contract. This is generally allowable under the charterparty. Shipowners who have negotiated a charterparty providing for arbitration under an acceptable legal regime. this may give rise to other problems. appears to contain all the of the terms and conditions of carriage. One area of incorporation which causes endless problems relates to arbitration clauses. v. which. But. even though it may involve a degree of manipulation of the words in order to fit exactly the bill of lading. The Courts are prepared to go some way in manipulating charterparty wording to make it fit into the context of the bill of lading but they are not prepared to go all the way. and Part b states that even if the Credit requires the presentation of a charterparty contract in connection with a charterparty bill of lading. states: a. in the context of the wording charterers shall pay demurrage' to substitute 'consignee' for 'charterer' was considered a manipulation too far. A word here about the Cesser Clause which is intended to enable charterers to extricate themselves from the transaction once they have provided and loaded the vessel and ensured their profit.g. or some of such terms and conditions by reference to a source document other than the bill of lading (short form/blank back bill of lading). the Mirimar. If a Credit calls for or permits a charterparty bill of lading. Thus. conditions. all liabilities of the parties to cease after shipment of cargo in consideration of which it is agreed that the payment of all freight. therefore. accept a document. As seen. specific wording will be needed to incorporate this right (of a lien) and if the cargo is financed through a documentary credit. if it is intended to incorporate the charterparty arbitration clause (or other clauses which do not deal with the shipment. but will pass it on without responsibility on their part. banks will. e. unless otherwise stipulated in the credit. carriage and delivery of goods'. The 'or the charterparty' might be considered a little surprising since what is being discussed is that which the holder of the bill of lading will see. contains any indication that it is subject to a charterparty. It may contain such wording as 'This charter being entered into on behalf of others. banks will not examine the contents Of such terms and conditions and vi. The Uniform Customs and Practice 500 states in Article 23 with respect to a marine/ocean bills of lading: a. carriage or delivery of the goods) they should be specified quite clearly. in the event of a dispute will be anxious not to have this changed by the bill of lading.of lading contract unless it is done explicitly in clear words either in the bill of lading or the charterparty. banks will not examine such charterparty contract. Therefore. banks will. They are.

If on time charter. An example of an inconsistent term which the master has the right to refuse is a port of discharge outside the trading limits stipulated in the charterparty. if you are inserting an incorporation clause: . which incorrectly describe the condition or quantity of the cargo. There are a number of checks which a master can and should make. or NYPE 93: . what are his obligations to sign bills of lading as presented and is there a strongly worded indemnity? . Time charters particularly. give the charterers express right to require the master to sign bills of lading 'as presented'! This obligation will not be removed by the additional wording 'without prejudice to this charterparty'.. such bills of lading impose or result in the imposition of more onerous liabilities upon the Owners than those assumed by the Owners under this Charter Party". Indeed. bills of lading. owned by the charterer (charterparty to prevail) or a third party or is the bill of lading to be endorsed to a third party (bill of lading to prevail)? .Are there exceptions in (any of) the charterparty (ies) which might not be included in the bill of lading and which might leave the shipowner exposed? . . . it has been held that this wording works in reverse and protects the charterparty from any inconsistent terms in the bill of lading. .) Should you be requesting instructions from owners and/or your local P&I correspondent? and finally. shall be without prejudice to this Charter Party and the Charterers shall indemnify the Owners against all consequences or liabilities which may arise from any inconsistency between this Charter Party and any Bills of Lading . HagueVisby (or Hamburg) Rules? By law. This raises the question of the extent to which charterers can oblige the master to sign bills of lading which are incompatible with the terms of the charterparty under which the vessel is operating.g. so that he is in a better position to know whether an incorporation clause is either essential or desirable. This does not protect the master nor the owner from a failure to take proper care not to issue inaccurate bills of lading. and where the contract stipulates that the act is to be without prejudice to the charter the charterer's right to issue bills to suit his own convenience must be constrained by the need not to make the terms of the new contract which he thus imposes on the shipowner more burdensome than those which the owner originally contracted to assume in exchange for the freight. for example.Make it as wide as possible and ensure that.Is there an obvious need for an incorporation clause. prior to the presentation of bills of lading.. In many time charters the charterer's right to demand that bills of lading are signed as presented are alleviated by a counter indemnity as per Clause 10 of the Gencon form: "Charterers shall indemnify the Owners against all consequences or liabilities that may arise from the signing of bills of lading as presented to the extent that the terms or contents 0J. it incorporates the matter which you are endeavouring to address and do not forget to specify the relevant charterparty.Does the charterparty contain a clause paramount incorporating The Hague.Is the cargo being loaded.Is there compatibility between the arbitration or applicable law clauses? ..e.quite understandably interested in the bill of lading being as unencumbered as reasonably possible with additional clauses and references to other contracts.. This was partly redressed by Mustill L J in the Nogar Marin [ 1988] LLR 413: Where the master is expressly required to sign bills of lading as presented. these Rules only apply to bills of lading. what do the voyage orders and/or company policy state with regard to incorporation clauses? If the charterer resists the inclusion will you comply? (It is unlikely that you will be able to insist. if possible.

It is . or public statutory law e. Like much of maritime legislation. These tend to be suits brought under the law of tort and could be governed by either the common law e. (b) properly man... (Tort in English law being any wrong. are set out in Article III: Rule 1.. This was possible under English law (as opposed to more codified law) due to the English law concept of 'freedom of contract'. This ultimately led to inequity in favour of the shipowner which was finally resolved by international convention. receiver and. so the problems arose of the buyer not being a party to the original contract of carriage between the seller and the carrier.) Limitation of liability Cargo. conditions. before and at the beginning of the voyage. . not surprisingly. not arising out of contract. which establish.Claims brought in the main by third parties who have suffered loss or damage as a result of the negligent navigation or operation of the vessel. As the era of the merchant selling goods to a buyer. the carrier must meet certain obligations which. importantly. is found in both public and private maritime law (see Nautical Briefing). The carrier was exempt for loss or damage only if caused by Act of God. a collision case. for which there is a remedy by compensation or damages. Limitation of liability within the maritime world. pollution. equip and supply the ship. amongst other things. of the greatest consequence and important to this Kingdom to promote and increase the number of ships and vessels. This was eventually resolved by the introduction of the Bill of Lading Act 1855 (now replaced in England by COGSA 1992).g. This made trade and trading risks much more quantifiable for owner. the extent to which the carrier can limit his liability. Increasingly. . in The HagueVisby Rules. to the general benefit of international trade. to exercise due diligence to (a) make the ship seaworthy. which will necessarily tend to prejudice the trade and navigation of this kingdom. shipowners sought to limit their liability by adding protective clauses to charterparties and bills of lading and contractual terms began to displace the common law. The carrier shall be bound.related limitation The starting point is the absolute liability of the common carrier for the safety of the cargo entrusted to his care under English common law. with the goods being transported by an independent carrier took over from the seagoing merchant trader. a concept which sets shipping apart from other areas of industry and commerce. the Queen's enemies or as the result of an inherent vice of the goods. Before being able to limit his liability. if it cannot be repealed outright.g. to prevent any discouragement to merchants . It is also argued that it produced a downward pressure on freight rates. It is The Hague and The Hague-Visby Rules (and more recently the Hamburg Rules) discussed earlier in this chapter. and . In general terms this divides into: .Claims brought against the shipowner as the result of a contract for the carriage of cargo which. Shipowners and cargo owners were free to contract on any terms which they deemed fit. namely The Hague Rules. The concept has not always been popular and the US Limitation of Liability Act of 1851 was described as: An act which is vicious in its impact unconscionable in its results and outmoded in an age of institutionalised Protective insurance. insurer. (it) deserves only a narrow grudging and constrictive construction. are mainly contractual dispute's and are governed by such private law conventions as The Hague-Visby Rules. clauses and exceptions (including the arbitration clause) as per charterparty dated . ..All terms. shipper. limitation has commercial roots which are succinctly put in the preamble to The Responsibility of (British) Shipowners' Act of 1733.

Pilot. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: (a) Act. refrigerating and cold chambers. A bulk carrier was fixed to load kaolin with very strict requirements for cleanliness. the shipowner must be able to demonstrate that both he and bis servants exercised due diligence in the responsibilities set out above. to make the ship seaworthy and to ensure that the ship is properly manned. (j )Strikes or lockouts or stoppage or restraint of labour from whatever cause. precooling for refrigerated cargo or checks on heating coils. fit and safe for their reception. mariner. Records of hose tests on hatches or maintenance on tank valves are all the sort of evidence which. Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier. dangers and accidents of the sea or other navigable waters. rulers or people. The crew were able to prove that the paint had been correctly applied in accordance with the manufacturers' instructions. whether partial or general. Rule 2.(c) make the holds. or seizure under legal process. neglect. his agent or representative. can help prove that the vessel was both seaworthy and cargoworthy before and at the beginning of the voyage. The deck log recorded the weather conditions. . To invoke his right to limit his liability. and the use of hold ventilation was also recorded. unless caused by the actual fault or privity of the carrier (c) Perils. deck and engineroom-rough (scrap logs) are also considered important by Courts and arbitrators. (e) Act of war (f) Act of public enemies. many of which will be formal documents. shipper or receiver. On discharge it became apparent that the paint had contaminated some of the kaolin. including the humidity. This is best done through the production of contemporaneous records. (g) Arrest or restraint of princes. Holds were scaled and painted. who has suffered loss or damage to his cargo can be expected to challenge the shipowner's right to limit his liability by proving that he failed to exercise due diligence in these matters. Thus. The master's actions resulted in the Court discounting his testimony as the judge considered that the master had acted dishonestly and hence his evidence could not be believed. carriage and preservation. A cargo owner. It was held that due diligence had been exercised and that the owner was entitled to limit his liability. and all other parts of the ship in which goods are carried. or default of the master. Article IV is the 'exceptions clause': Rule 1. refrigerating chambers and all other parts of the ship in which goods are carried fit and safe for their reception. it is important that the master ensures not only that he and his crew do exercise due diligence to make the vessel seaworthy and the holds cargoworthy. Recently a case was lost (in the United States) because the master erased portions of the scrap log (with the best of intentions to improve legibility) instead of correctly drawing a line through the text. carriage and preservation in accordance with paragraph I of Article III. or the servants of the carrier in the navigation or in the management of the ship. As well as logbooks official. Whenever loss or damage has resulted from' unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this article. tests of bilge suctions. (i) Act or omission of the shipper or owner of the goods. equipped and supplied and to make the holds. Evidence is all important in these circumstances which may require the master to recall events which occurred several years before. (h) Quarantine restrictions. even down to a record of the size of the paint spray tips. together with records of routine maintenance. (d) Act of God. but that he also can demonstrate this in the event of a dispute. (b) Fire.

(c) Where a container. if embodied in the bill of lading. shall be prima facie evidence. neither the carrier nor the ship shall in any event be or become liable for any loss of damage to or in connection with the goods in an amount exceeding 666. master or agent of the carrier and the shipper other maximum amounts than those mentioned in sub. (l) Saving or attempting to save life or property at sea. quality or vice of the goods. (q) Any other cause arising without the actual fault or privity of the carrier or without the fault or neglect of the agents or servants of the carrier. or in connection with. goods if the nature or value thereof has been knowingly mis. but shall not be binding or conclusive on the carrier (g) By agreement between the carrier. (m) Wastage in bulk or weight or any other loss or damage arising from inherent defect.paragraph. .stated by the shipper in the bill of lading. or recklessly and with knowledge that damage would probably result. (n) Insufficiency of packing. The declaration mentioned in sub.weight of the goods lost or damaged. by reference to the normal value of goods of the same kind and quality. (P) Latent defects not discoverable by due diligence. (h) Neither the carrier nor the ship shall be responsible in any event for loss or damage to. pallet or similar article of transport is used to consolidate goods. It should be remembered that these Rules apply only to bills of lading by force of law and it requires a correctly worded clause paramount to incorporate them into a charterparty or other non-negotiable document of carriage eg a waybill.paragraph (a) of this Paragraph shall be converted into national currency on the basis of the value of that currency on a date to be determined by the law of the Court seized of the case. This considerably widens the common law list of causes which enable the shipowner to limit his liability. (o) Insufficiency or inadequacy of marks. but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage. Rule 5 (a) Unless the nature of value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. Article IV establishes the extent of the shipowner's reduced liabilities.Paragraph (a) of this paragraph. (e) Neither the carrier nor the ship shall be entitled to the benefit of the limitation of liability provided for in this paragraph if it is proved that the damage resulted from an act or omission of the carrier done with intent to cause damage. (d) The unit of account mentioned in this Article is the special drawing right as defined by the International Monetary Fund. evidence is essential. Except as aforesaid such article of transport shall be considered the package or unit. The amounts mentioned in sub.(k) Riots and civil commotions. Again. the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of this paragraph asfar as these packages or units are concerned. whichever is the higher (b)The total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged.paragraph (a) of this paragraph may be fixed provided that no maximum amount so fixed shall be less than the appropriate maximum mentioned in that sub.67 units Of account per package or unit or 2 units of account per kilogramme . The value of the goods shall be fixed according to the commodity exchange price or current market price.

be extended if the parties so agree after the cause of action has arisen. Rule 6 also obliges the cargo receiver to give immediate notice in writing of any damage to the goods unless the damage to the goods is not apparent in which case such notice must be given within three days of delivery. Subject to paragraph 6bis the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods. The first is based on the residual value of the vessel. The monetary value of the liability of the carrier is calculated by reference to a package or unit or per gross weight. The ability to limit liability found within the cargo related conventions is confined to parties to a given contract. it 'is not a matter of justice . The basic principle is that if a vessel has caused loss or injury. been the subject of joint survey or inspection. This period may. or. The legislative origins of the right to limit are mentioned in the introduction. In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. there is a great degree of importance attached to the accurate description of the goods in the bill of lading. 6. owners (and the P&I Club) should be advised as it affects the level of liability and the owners cargo related. within three days. Limitation against third parties This is very much the area which sets shipping law apart and is sometimes referred to as open limitation.. The notice in writing need not be given if the state of the goods has at the time of their receipt. such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. a contract of carriage. Failure to do so will give rise to an assumption that the goods were damaged after delivery. thus demonstrating Lord Denning's 'justification in convenience'. There are two ways in which the total sum available for compensation can be calculated. It can be seen why cargo owners so often call for joint surveys. injured parties may not be so pleased with this 'justification' and can naturally be expected to focus on the shipowner's detailed compliance with the legislation which enables him to limit and once again contemporaneous records and evidence are essential to the shipowner's case. Despite all of this it is imperative that the master notifies his owners (or his local P&I Club correspondent) of any possible loss or damage to the cargo. However.. when Master of the Rolls. In the words of Lord Denning. if the cargo receiver gives notice within time or the cargo has been the subject of a joint survey. then a total sum for which the shipowner is liable can be calculated. furthermore if the vessel sinks . If the value of the goods is stated on the bill of lading (ad valorem bills of lading). Unless notice of loss or damage and the general nature Of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract Of carriage. unless suit is brought within one year of their delivery or of the date when they should have been delivered. This enables the owner to secure his insurance at a manageable rate since the underwriter can calculate the upper limit of his risk. liability insurance. for which even the receiver voluntarily enters into the transaction. is divided amongst all who have suffered the loss or injury.As can be seen. Significantly different is the concept of legislation which prevents innocent persons from gaining full compensation from the results of negligence by the servants of a shipowner. Not surprisingly.. Unlike English Common Law of Contract which provides for a six-year time limit.e. whichever is higher. and no more. This will enable the owners to arrange for the attendance of an independent surveyor whose evidence may prove crucial in refuting or mitigating the claim. whether adequate or not in way of recompense. however. but has its justification in convenience'. but this has a major flaw since it favours the owners and operators of old and poorly maintained (low value) tonnage and. if the loss or damage be not apparent. Article III sets out how the cargo owne'r can claim against the shipowner for damage or loss. This sum. then the Courts generally assume that any damage arose on board.i. under The HagueVisby Rules a cargo claim becomes time-barred after one year of delivery.

equitable or by demise. this convention focuses directly on the owner . has not totally displaced the earlier convention.000 which reduced. stranded or abandoned. Insurers of liability claims which fall within the scope of the convention can benefit from its protection if claims are subrogated to them and licensed pilots are brought within the concept. Floating oil exploration or production platforms are not included. It is immediately noticeable that unlike most ship-related legislation. passengers or their luggage. Referring back to registration in chapter twelve. whether legal. dealing with tonnage limitation. whose pre-accident value was E1. by the Pilotage Act 1983. including anything that is or has been on board such a ship. in 1924. not the owner's domicile. manager or operator of a sea-going ship'. charterer. 'Seagoing ship' applies to vessels from the moment they are launched (even though not yet complete and capable of navigating). there is no value left. (b)claims in respect of loss resulting from delay in the carriage by sea of cargo. destruction or the rendering harmless of a ship which is sunk.eg after collision. This becomes important as shipowning and operating companies become more diffuse and more widely located. A technical management company operating under a contract can expect to benefit from the cover and so may commercial managers but it might be interesting to speculate as to a crew manager who negligently fails to ensure that his sea staff actually have the qualifications and ability which they purport to have. but the lines are less clearly drawn when it1comes to managers or operators. (d) claims in respect of the raising. Article II sets out the claims which are subject to limitation and these are: (a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour walls. it is the vessel's flag. which entered into force on I December 1986. but hovercraft have. wrecked. The 1976 convention. occurring on board or in direct connection with the operation of the ship or with salvage operations. in the United Kingdom. (e)claims in respect of the removal. and further loss caused by such measures. A mortgagee who has repossessed the vessel (chapter twelve) is included. . within United Kingdom legislation at least. basins and waterways and aids to navigation). 1957 and 1976. post-accident to $91.500. and consequential loss resulting there from. which governs the ability to limit liability. occurring in direct connection with the operation of the ship or salvage operations. The Convention relating to Limitation of Liability of Owners of Sea-Going Ships 1957 has some 50 signatories.805-made up of lifeboats and advance passage money). (c) claims in respect of either loss resulting from infringement of rights other than contractual rights. removal. been included by the Hovercraft Act 1968. The second system is based on tonnage and there have been three international conventions. and the convention recognises also the charterer's ability to direct the master as to the navigation of the vessel. (An example is the Titanic. but has done so in the United Kingdom since it was incorporated into Schedule 4 of the Merchant Shipping Act 1979. Article I of The Limitation of Liability Convention provides that 'shipowners and salvors' may limit their liability and the owner is defined as the 'owner. The expression 'owner' can be taken to include any owner. (l) claims of the person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his liability in accordance with this Convention. destruction or the rendering harmless of the cargo of the ship.

if there is doubt (on a balance of probability) about the personal misconduct of the owner. 1969 (or any Protocol thereto). (This was a case of-the owner's marine superintendent failing to take positive steps to ensure that the master did not proceed at excessive speed during reduced visibility. committed with the intent to cause loss. a claimant can still be expected to scrutinise all available evidence in order to break' the shipowner's right to limit and masters and all on board need to be very careful when making statements or making records available. claims subject to any international Convention or national legislation governing or prohibiting limitation of liability for nuclear damage. For many years. In addition. The burden of proof moves to the claimant and that means that. claims under (d) can only benefit from limitation if a formal fund has been established to compensate the harbour authority for the additional expense and this is not common). (c) claims against the shipowner of a nuclear ship for nuclear damage. a quite significant change and one which might have changed earlier legal decisions such as the Lady Gwendolyn [1965] LLR 294 had they been decided under the new convention. The 1976 convention introduced a new concept. unlike before. or recklessly and with knowledge that such loss .(d) claims by servants of the shipowner or salvor whose duties are connected with the ship or salvage operations. In chapter six reference is made to the privileged information and a claimant's right of discovery and the way in which it is possible to convey confidential information to a solicitor. and in the 1957 conventions.) Nevertheless. a master is well advised to: . . the Merchant Shipping Act 1979 (Clause 18) removes the liability from the owner of a British ship for any loss or damage by reason of fire onboard except if it can be proved (in line with Article IV) that the loss or damage resulted from his personal act or omission. or recklessly and with knowledge that such loss would probably result.(As a point of detail. would probably result (Article IV). (b) claims for oil pollution damage within the meaning of the International Convention on Civil Liability for Oil Pollution Damage. he will be entitled to limit. not surprisingly. committed with the intent to cause such loss. In the event of any major incident. the personal act or omission of the person seeking to limit. Exceptions are contained in Article III and these are: (a) claims for salvage or contribution in general average. In other words.. it must be proved that the loss resulted from: . This application of the term to a specific incident was. . the term 'actual fault or privity' was used to establish whether or not the owner could benefit from the limitation of liability allowed by the convention. It was held that owners could not limit their liability since their 'actual fault or privity' had contributed to the accident-a collision. in order to break the shipowner's right to limit his liability. the subject of much legal argument and no strong consensus emerged as to its interpretation.. the privilege has become a right.

- Contact the local P&I Club correspondent and arrange for legal support; - Call a meeting of the ship's management team as soon as possible and clearly brief them on both to whom and who not to make statements, and how as well as how to handle surveyors and inspectors, lawyers and port and State authorities and what records, log books etc. may or may not be inspected or copied; - Ensure that the heads of department clearly brief their staff in terms which they will understand; - Set up a meeting room where the master will, unless a senior representative from the owner takes over, firmly chair all meetings, preferably with a Club representative at his side. It may well be found bencficial to have these meetings in a public room and preserve the sanctity and privacy of the master's or ship's own office. It may also be found beneficial to detail one officer-the second officer-to act as permanent secretary and keeper of the records. - Ensure that all visitors are met, their identity positively checked and that they are not allowed to roam unaccompanied around the vessel; - Decide who will deal with the media and how, if the incident is likely to attract this sort of attention (see chapter eleven). It might be wondered how the shipowner managed to convert his privilege into a right to limit his liability and the answer lies in his agreement to raise the level of compensation. Article VI addresses the limits of liability and these are calculated on the basis of the vessel's gross tonnage as established by the 1969 Tonnage Convention. The gross tonnage is multiplied by a monetary value which is defined by special drawing rights (SDRs) a unit of account whose value is determined daily by the International Monetary Fund based on a basket of currencies. If personal claims are involved, the SDR value is double that of the fund related to other claims not involving injury or death. Once the fund is established, it is then divided amongst the claimants, with the personal injury and death claims taking precedence. The claim fund is calculated according to the table on the previous page. Hovercraft have separate limits and there is also a separate limit of liability for claims by passengers against the vessel in which they are carried. (The expression 'open liability' was mentioned with respect to third party claims, with contractually based, cargo claims being considered closed. Passengers' claims are sometimes defined as partly closed.) The fund is calculated by multiplying 46,666 SDR by the total number of passengers which the vessel is certified to carry with an upper limit of 25,000,000 SDR. Although not addressed here, this might be modified by the Athens Convention 1974, which is calculated on the basis of passengers actually being carried. At the end of 1995, the US dollar stood at 1.48441 to the SDR, so typical limitation funds were:

Conclusion

Any oceangoing cargo vessel carrying cargo is involved with large sums of money and potentially large liabilities. Even if there is no damage to the cargo, the master, in signing bills of lading, has provided a document of title to the full value of the cargo to a consignee and the vessel and her owner are thereby linked not only to the contract of carriage but to the commodity value itself. These relationships are governed by the framework of international, and sometimes conflicting, conventions and national laws described in this chapter. It is virtually impossible to set out in precise, practical detail every circumstance which the master may face. The objective of this chapter is to explain the underlying principles in a way which may help the master manage those contracts of carriage for which he becomes responsible and which are discussed in more detail in chapter six.

ACKNOWLEDGEMENTS
MANY PEOPLE from London's maritime legal profession contributed to this chapter, and particular thanks are due to Charles Baker of solicitors Herbert Smith. A great number of papers and booklets are produced within the London maritime world and it is a pity that more is not seen of them by those who serve the industry at sea. This chapter has endeavoured to get at the trade which drives the demand for shipping and in this connection the assistance of Pamela Kirby-Johnson, Director General of the Grain and Feed Trade Association, Dalgety Agriculture, and traders Arcady and E. D. & F. Man must be acknowledged, together with rice trader Alan Harper, chairman of the Baltic Exchange.

REFERENCES

Subsequent Holders; The COGSA 1992. Paper December 1994: Graham Harris, Partner Richards Butler. From Hague to Hamburg. Paper December 1994: judge Anthony Diamond, QC. Incorporation of Charterparty Terms. Conference Paper December 1994: Charles Williams, Thomas Cooper & Stibbart. Rights of Suit in Respect of Carriage of Goods by Sea. Law Commission No. 196, HMSO HC250. Comparison; Hague, Hague-Visby and Hamburg Rules. Paper May 1995: John Culley, Thomas Miller & Co Ltd. The Hamburg Rules. Notice to Members September 1992: The International Group. Bills of Lading. Conference Paper December 1994: Charles Williams, Thomas Cooper & Stibbart. Limitation of Liability. Paper: Sonja Fink, Thomas Miller & Co Ltd. York-Antwerp Rules, 1994, An Analysis. Charles Hebditch and John MacDonald: Richards Hogg.

ANNEXES FOR CHAPTER 5
- The Grain and Feed Trade Association: general contracts. GAFTA sales contract No. 64; FOB terms for grain in bulk. Extracts from the GAFTA sampling rules No. 124. - Summary of sample oil contracts. Gas oil sale contract. Sale of Bonny light. - Extracts from the Hamburg Rules-articles 15 to 19. - Comparisons of Hague/ Hague-Visby and Hamburg Rules.

Chapter 6

CHARTERPARTIES: THE MASTER'S ROLE AS MANAGER
Voyage charter- dry bulk- liquid bulk trades- time charter- NYPE93. The project management period for a charterparty starts well before voyage orders are received and probably before the previous charter has finished. Chapter five described how brokers and the owners' operations department worked when actively searching for the optimum employment for your vessel's next voyage. As they make and refine a series of voyage calculations (see chapter three), a number of questions about, for example, steaming time or hold/tank cleaning will be fired in the master's direction. It is then that the master needs to start his planning in order to ensure that the requirements of the charter, reflecting a negotiated agreement between his customer and his owner, which he has to manage and execute, is co- ordinated with his longer- term requirements of managing and maintaining the vessel effectively. In this chapter, the intention is to analyse three commonly used charterparties and build up a logical format for a set of voyage orders. In doing so, the reader is invited to identify those areas where there are opportunities, through careful planning, to minimise risk and loss with the clear objective of providing the customer with a high level of service whilst at the same time maximising the bottom line for that vessel's operation in particular and the shipowner in general.

WHEN RECEIVING QUERIES related to the next employment for the vessel, and if circumstances permit, time and energy may be saved by being proactive rather than reactive-e.g. by the master sending a message along the following lines: If planning another transatlantic round voyage and basis predicted weather and condition of hull, ETA (anticipated) load port at economical consumption of 23 tonnes/per day is (time and date). In view of weather, if required to clean holds (e.g., from coal for grain) will be unable to complete within ballast voyage and will require 18 hours in port/at anchor to complete prior to survey. Concurrent 12 hours required for repairs to ensure hatches 3, 5 and 7 watertight. Also plan to pull one cylinder liner and overhaul main engine fuel pumps. This important but not essential and will require approx. 24 hours alongside. Will require to stem minimum 750 mt HFO and 30 mt MDO in order to complete another round voyage.

There are several benefits to such an approach - it looks efficient and is efficient. It is also good negotiating technique as the operations department is now responding to the vessel's agenda, rather than the vessel seeking to influence theirs, and this helps the vessel achieve its internal operational priorities (maintenance, etc.) whilst still meeting its overriding commercial commitments. It also helps them in pitching their opening bid for employment accurately and avoids nasty surprises. There are compelling arguments for providing the master and the vessel with the whole picture and delivering the charterparty to the vessel as early as possible. Unfortunately, this happens far too infrequently, sometimes because a certain laxness in the system means that the production of the formal written charterparty is not undertaken immediately on completion of the fixture. With current developments in the electronic production of charterparties, this is becoming less defensible. Masters should request a copy of the charterparty to supplement their voyage orders and should also build up a stock of charterparty forms on board, bearing in mind that an additional rider clause may change the import of some of the printed clauses. Voyage orders should, hopefully, address the voyage in a logical order, collating the clauses which refer to individual subjects (e.g., hold, tank preparation, arrival and NOR, etc.) and, most efficiently of all, in the order which they are likely to arise as the project-i.e., the voyage-progresses. Whether or not the charter-party is delivered, it is good practice to produce a project (charter) checklist which can be built up as information about the charter becomes available. This has the added advantage of indicating very quickly what (critical) information is not available. It is an ideal and educational task for more junior members of the team who can be invited to present their analysis at the management meeting. The first two sections of this chapter work through two standard voyage charterparties, drawing together clauses into a logical sequence and exploring their implication much as if constructing a set of voyage orders. The two charter parties are the Bimco Gencon and the Shellvoy 5-copies of both can be found in the annexes. The third part of this chapter undertakes the same exercise for a time charter, in this case rising the New York Produce Exchange NYPE93. It might be asked what is so magical about this since it sounds much like normal practice? The answer lies in using the management tools set out in chapter two to approach the charterparty as a project affecting-and requiring the support of-the whole of the on board management team. Planning, prioritising and assessing risks and preparing contingency plans using the best input from the master's management team comes first. This is followed by decisions and the delegation of tasks, all to be communicated in a way which will motivate an enthusiastic and willing response. And the objective: the highest degree of customer satisfaction for the charterer achieved with the maximum degree of profit for the owner, linked, perhaps, to the master's own professional satisfaction. Certainly, if the management team and the management organisation are working well, the inevitable problems which occur will be handled more efficiently. In a similar way, forward planning and a common understanding of customer priorities and concerns, together with the confidence and willingness to discuss them, will make for a more effective operation.

Dry bulk voyage charter- Gencon

Gencon, the Baltic and International Maritime Council uniform general charter (as revised 1922, 1976 and 1994) was designed for trades for which no specially approved charterparty form is in force. As such, it is in fairly common use and is in Bimco's standard base format, in other words, the main variable details of the specific charter are inserted in numbered boxes in Part I while Part 11 carries the standard terms and conditions. A copy is contained in an annex to this chapter. Most other trade-related charterparties are set out in a format more akin to the Shellvoy 5 or N"YPIN3 and the order in which information is presented may vary quite considerably. Again, additional rider clauses will not necessarily be added in a logical order and, being, in theory at least, a direct reflection of the agreement between owner and charterer, should, in the case of discrepancy with the printed word, take precedence. However, as has been mentioned before, charterparties, both rate and terms, tend to be negotiated on a last done basis. It is noticeable that the recently introduced NYPE 93 is hardly being used. This is despite the fact that it was revised by people in the trade to take into account

the thrust of many of the additional rider clauses which, added to the 1981 edition, were becoming standard. Nevertheless, brokers tend to go back to the last charterparty that they concluded for that trade, and negotiate as closely as possible to that format. This does mean that there can be conflict between the main body and the rider clauses-or even between some of the rider clauses-which may prompt a request for clarification at best and at worst result in litigation. Changes in the main body of the charter often reflect changes in the balance of negotiating power which, in turn, may reflect changes in supply and demand within the charter market. Thus, they can be important indicators of how the charterers will 'run' the charter and will usually relate pretty directly to either who pays for what or how much time is allowed for certain operations. Changes may be small-e.g., is the word 'not' deleted or inserted-and will need careful scrutiny. Charterparties, unlike a good novel, do not usually make good reading from beginning to end. An initial scan, is recommended to get an overview and to identify where, in the charterparty form, different subjects are covered. Hopefully, either a good fixture recap or a set of voyage orders will already have arrived and the main points of the contract should be set out in a logical sequence and cross-referenced to the charterparty form and its additional clauses. The first scan, however, should ensure that no factual inaccuracies have crept into the description of the vessel, especially with regard to lifting capacity (boxes 5, 6 & 7 and clause I refer). It is also important to know who is referred to as the owner (box 3 and clause 1), especially if the vessel is on voyage charter, as this will be the person or company to which the consignee looks if he has a claim. Clause I also contains a very succinct summary of the voyage to be undertaken and clause 2 sets out the owner's responsibilities and includes any manager under this heading.

Charterer, shipper and freight

Charterer (box 4), shipper (box 17 & clause 6) and freight (box 13 & clause 4): here is stated the vessel's customer. It is essential that the charterer is correctly identified as this will be the person to whom the owner looks for the payment of freight and demurrage. However, unlike a time charterer, he is not placed in a position of being able to issue instructions to the master with regard to the navigation and the management of the vessel. He may or may not be the shipper (or receiver) and, although the shipper is not necessarily identified in the charterparty, he may well be in the resulting voyage orders. This knowledge can be important, for fraud does exist. Furthermore charterers can vanish more easily than vessels. Although it took place in 1980, many will still remember the case of the tanker Salem which sailed from Kuwait with a crude oil cargo worth US$ 56 million, bound for Italy. She diverted to South Africa where she discharged (in contravention of the sanctions which were then in force), proceeded round the Cape, was scuttled and sank. The crew, 'after heroically fighting an engincroom fire' were rescued clean and well dressed with suitcases and passports to hand but no logbooks. This is a classic example of maritime fraud involving deviation. The amount of this fraud has reduced since the high point of the early 1980s, partly due to changing economic and political conditions and partly due to the efforts of the International Maritime Bureau, (IMB, part of the International Chamber of Commerce). However, the incidence of documentary fraud is on the increase and it is, therefore, essential that masters are always vigilant in order to ensure that they are not unwittingly involved. Documentary fraud, in the maritime world, usually involves bills of lading and commercial invoices, or sometimes nothing more elaborate than a telex message. To quote from standard instructions contained in the voyage orders of one major international oil company: All messages sent to masters via brokers or owners (from the charterer) will end with (an agreed format) and request for acknowledgement of receipt. Such an acknowledgement when requested, must refer to (this format). Any message supposedly coming from (the charterer) but not ending with (the format) should immediately be brought to the attention of the charterer Several instances have occurred in cases related to cargo fraud where ship's masters have been requested to transmit messages on behalf of another ship or other persons ashore (usually on the excuse that the other ship's radio was broken down). Masters should refuse to send such messages and report the fact to owners/charterers.

The best way to counter documentary fraud is knowledge, closely followed by awareness and caution. In an operation where a blank bill of lading can be transformed into a document of title worth many hundreds of thousands, if not millions, of dollars by the application of a locally purchased rubber stamp and a forged signature, it is amazing that more care is not taken with these documents. Especially if blank company bills of lading are entrusted to the master's safekeeping and they are not consecutively numbered, it is sensible to institute a discrete and unobtrusive numbering system and log. Knowledge of the charterer should start back at the owner's office, where the first line of defence is for the broker to ensure that he is proposing a fixture with a known and reputable charterer. In an industry where overseas representative offices and brass nameplates abound and where the vertical integration of trading companies has, like shipping companies, fragmented, many imposing but not necessarily substantial nor necessarily honest letterheads abound. However, the ultimate responsibility for ensuring that the proposed charter is of good financial standing, remains with the shipowner. A second step in the acquisition of knowledge can be undertaken by the master and this is particularly recommended if calling at a strange port.

Club Correspondent

Although specific surveys and other work will, reasonably, be charged to the owner, support and advice from the local P&I Club Correspondent will generally come as part of the service. Since prevention is always better than cure, if the master has any real concerns about the cargo which he is about to load - or discharge (and he should be aware of and alert for potential problems) he must consult his owners. It is recognised that there can be real dilemmas here (see chapter 10, figure 10.2) - who is the 'owner' to whom the master should address his concerns? There may at this stage just be that worrying feeling that 'things are not quite right', a difficult message to pass through technical managers to an anonymous 'owner' but information which it is the master's professional duty to communicate. In case of real difficulty or an emergency, the master can always contact the local P&I Club Correspondent along the following lines (but bearing in mind that there may be a fee attached to the service): To UK Club Correspondent From master mv 'Carden' Due to berth at port of Bellosonja 0 700 Monday to load bagged rice plus one parcel lumber beha4f shippers XYZ. Our charterers are ABC and EFG have been appointed as agents. Please advise if above known to you and whether there are any special, local requirements with respect to anticipated cargo or loading operation. If you are in port area during our stay, would be delighted to welcome you onboard. Regards Don Ellen, master Hopefully this will not elicit a response to the effect that: Charterers unknown, shippers recently involved in attempted fraud, rice infested and poorly bagged. Lumber 's particularly troublesome. Last vessel with similar dimensions to yours at proposed berth touched bottom during springs. Appreciate your kind invitation, my colleague Mac will not fail visit you on arrival. However, it is better to know when you still have time to sort the matter out, consult your owners and appoint a cargo surveyor. Generally, it is the consignee who suffers at the hands of documentary fraud. If the shipper or charterer proves to be illusory, then, as previously mentioned (chapter five), the consignee will naturally look towards the vessel and the owner for a solution to his problems and compensation for his missing or under-delivered or off-spec cargo. It is not difficult to understand a consignee's concern as he pays for a cargo which he has never seen, against a description of quality and quantity on a bill of lading which may refer to a contract (the charterparty) to which he is not party and which he may well never see. However, the owner can also suffer, especially under a time charter. He may well be paid his first two weeks' charter hire in advance as is required, arrive, load and, perfectly legally, sign and issue bills of lading. The charterer collects these and passes them and thus evidence of title to the goods

and the payment of freight, to the cargo owner in exchange for the entire freight. The charterer then 'disappears' leaving the owner with two weeks' charter hire and a loaded cargo to deliver under the bills of lading which have been signed by him or which have been approved by him for signature.

The IMB identify six clear warning signs which should put traders on their guard: The goods may be in strong demand or not readily available; Low prices may be quoted or the source of supply may be unusual; The method of payment may be unusual or it may be required to a third party or intermediary; The names used by companies involved may have an uncanny resemblance to those of well known business houses; - There may be pressure for fast acceptance or processing of documentary credits; - It may be proposed that the bill of lading is acceptable even though the goods are inconsistent with it. For the master, the rules of careful vigilance, maximum relevant information and good housekeeping in connection with bills of lading (and mate's receipts) apply. He should: - Ensure that the cargo signed for on the bills of lading is actually on board; - Where practicable, sign bills of lading himself; - If possible, only release cargo against a duly endorsed bill of lading (see below regarding letter of indemnity); - And, furthermore, against a bill of lading signed by him or which has been approved by him for signature.

Warning signs

Arrival

Arrival, boxes 8, 9, 10 & 21 and clauses 1 & 9: Clause I requires the vessel 'as soon as her prior commitments have been completed: to proceed to the loading port (s) or place (s) ... or so near thereto as she may safely get and lie safely always afloat. . .'. This sentence summarises a number of concerns for both charterer and master. Estimated time of arrival, box 9 and clause 1: In chapter 5 the importance to both buyer and seller of knowing when the cargo is to be loaded became apparent, not least because at times the purchase price of the commodity is based on an international price index obtaining on the date on which the master signs the bills of lading. Whoever is responsible for loading the goods will also have to make a number of arrangements to bring the cargo to the loading berth in time for the vessel's arrival, but not so early that he becomes liable for unnecessary demurrage on rail waggons, trucks, silos or tanks. Nor does he want an opportunity for cargo to deteriorate or be pilfered. It is a sad, but perhaps not surprising, fact that many traders are convinced that owners and masters are unable to be less than economical with the truth when advising ETAs. Brokers, anxious to secure a good fixture, will also tend to err on the side of optimism, hence the proactive approach suggested in the introduction to this chapter. Although a vessel's operational details are no concern of the charterer, the master's advice of ETA to the agent is frequently the first direct contact between the charterer and the vessel which he has contracted. As such, it is the time to build confidence, not sow seeds of doubt. Neither the Gencon nor the Shellvoy 5 charterparty have a specific clause detailing the times when ETAs should be advised, although there will usually be an additional rider clause dealing with this. Tankervoy 87, in clause 20 requires the master to radio the charterers and the agents (at both load and discharge port respectively) advising the vessel's ETA: on sailing from last prior port; seven days, 72, 48 and 24 hours prior to the expected arrival time; any other time the charterers may so request; and promptly if there is an alteration of more than six hours to an ETA. This is a fairly standard requirement and, especially if performance is not quite what it should be, due for example, for a need for engine repair or maintenance, it is an area where the master may find himself under commercial pressure. Good voyage planning helps here bearing in mind that an ETA must always be given in good faith. The master's failure to do so could expose the shipowner to large claims. It is also an area where the master might find that the principles of (commercial) risk management, discussed in chapter ten, aid his decision making process.

NOR and cancelling date

In all cases. box 21 and clauses 6 & 9: The cancelling date is critical since it is in the charterer's option. depending upon your geographical position. It is also important that the vessel has arrived i. before NOR can be formally tendered (berth charter). the charterer can reject the notice of readiness. The third mate. may well keep a movements log when entering port-a third mate who understands the relevance of the NOR. the charterer is not ready to commence loading. For this reason it is important that a very careful record of events is kept. If. the charterer will probably accept the vessel late. If not. It is not sufficient to assume that an acceptance of the holds by the cargo surveyor and a quick telephone call to the agent will be sufficient and that laytime will commence to count. Little is gained by burning extra fuel only to find that NOR cannot be formally tendered until after the weekend. since . as previously mentioned. Unsafe loading and discharging ports Loading and discharging ports or places. his contract may be time bound for a number of reasons ranging from constraints on the buyer/seller's ability to raise finance to support the transaction to. Mention has been made of the whole team being involved in the execution of the charter and this aspect is a prime example. the purchase price for the cargo being linked to a timerelated index depending upon the date on the bills of lading. the charterer may have negotiated for the vessel to be alongside a designated berth. if the charter market is falling. come to a stop at the correct position for tendering NOR. In reality. However. boxes 10 & 11 and clause 1-unsafe ports: One matter which may concern the master as he approaches port is whether the port is a safe port and. charterers may well decide to cancel her upon arrival which means that your vessel is released onto that falling market and. Careful reading of the requirements for tendering notice of readiness (NOR) is essential. It may be necessary to check with the agent prior to tendering NOR if there are any special. the charterer will be looking at the market to see if they can find a more cost effective solution to their transportation needs. your owner may find himself in a very weak negotiating position. with the vessel at the owner s expense. invaluable repair and maintenance time will have been gained. It is recommended that vessels arriving during the night or during other non-working hours tender on arrival and if in doubt retender 'without prejudice to the earlier notice' at the commencement of working hours. he will be very happy to sit waiting'for a formal notice to be submitted. the vessel when tendered. Conversely. In other cases. Berth availability and the additional cost of demurrage on goods awaiting shipment in the harbour will also be on the shipper's mind as he constantly monitors his trading margin. local 'customs of the trade'. If the vessel is not accepted. in which case the mooring operation should be complete. if by burning extra fuel it is possible to berth before the weekend (or a holiday) and secure time alongside with no cargo work being undertaken. or whoever is. This is especially so when on a berth charter as delays due to berth unavailability are generally attributable to the charterer. This means that the holds (or tanks) should be clean and prepared for the designated cargo and.designated. for some reason. if this is not so.e.Notice of readiness and cancelling date. It is important that NOR is tendered in writing to the right persons (clause 6c) and it is essential to get a written confirmation that it has been received. it is vitally important that the master formally retenders notice of readiness in the method and to the parties stipulated in the charterparty. should be in all respects ready for loading. when it is to be tendered and what constitutes an allowable delay which may be claimed against the charterer. will be able to keep a much more useful movement log than a third mate who is just filling in numbers 'because third mates always do this job'. The charterers can effectively leave the choice as to whether they accept the vessel until it arrives and tenders notice of readiness. The movement of the charter market may not be the only factor concentrating the charterer's mind.

If the port is named. in the relevant period of time. Political risk is a particularly difficult problem to address. pilotage. a competent ship operator should be able to assess whether a given port is suitable and safe for its own vessels.this is a subject about which the legal profession can debate at some length. That means safe so far as the port's topographical. port control-of a satisfactory nature with respect to his vessel and. bringing as it does the risk of injury and of the vessel becoming delayed. use it and return from it without.. is there sufficient water depth. the charterer should give new orders (and the master will need to calculate any additional time and bunkers consumed). In the case of unsafe ports. it is unlikely that the charterer will be held to have assumed responsibility for it being safe. If the port is un-named. if so. The basic test of whether a port is safe or not was set out in the Eastern City [1958]: A port will not be safe unless. If the master has any doubts about safety he should consult his owners or the local Club Correspondent. Although terrorists were known to be operating. the terrorists quickly transferred their activities to the region of Masawa and the vessel was fired on. aids to navigation. and not readily recognisable from a given range of ports.g. Then he must collect as much evidence as possible to support the decision this can range from local navigational warnings and meteorological forecasts to photographs and chart tracings. change rapidly. will generally be settled through negotiation ashore.Is the basic set-up of the port safe? In other words. Situations can. Whilst the decision as to whether it is clearly too dangerous to proceed must lie with the master. the charterer has a responsibility to nominate a port which is 'prospectively' safe for the vessel in question at the particular time at which the vessel reaches it. In assessing whether a port is unsafe. Although the owner has accepted the named port as safe for his vessel it does not follow that he has accepted a named berth. meteorological. As in the case of the Saga Cob [1992] 2 LLR 545 entering Masawa. available tugs. the facts and how they develop are all important. the level of risk which might be accepted by the prudent mariner. are the systems -e. has war broken out etc. Above all. supported by his equally prudent owner.Is the port physically safe? . . being exposed to danger which cannot be avoided by good navigation and seamanship.g. it is reasonable for him not to proceed. he must make his decision as early as possible and communicate it to his owners/managers supported by a well argued case for not proceeding. what are the anticipated weather conditions. Prospectively safe refers to the time at which the charterer orders the vessel to the port and this is an important matter for the master to record. and do.e.. only general seamanlike guidance can be given here. the master needs to consider three factors: . sensing political benefit.Can the event or occurrence which makes him consider the port unsafe be described as abnormal or could it reasonably be foreseen? If the master considers the port unsafe for his vessel. An accurate and relevant log of events can best be taken by an officer who understands what is important under a given set of circumstances. . This in turn means that the master must understand the situation and the issues at stake and fully brief his officers. Meticulous and contemporaneous record keeping by the vessel is crucial and will form the foundation upon which any dispute is subsequently resolved. . If the port subsequently becomes unsafe. political and other inherent features are concerned. The first point to look for in the voyage charter is whether the port(s) are named or just stated as a range. blocked or entrapped. uses it and departs from it. leading the charterers to conclude that the port was safe. their activities were concentrated in another part of the country. After all. but he must consider very carefully what the law might interpret as the 'reasonable actions of a prudent (but experienced) mariner'. the particular ship can reach it. The master's role then becomes that of the provider of evidence and he may find that some of the risk analysis techniques discussed in chapter ten help. in the absence of some abnormal occurrence.

both of the relevant printed clauses and any additional clause (s) which may change or amplify this. berth or no berth. the vessel must be an arrived ship and. a useful checklist.. 6 Upon arrival at . .158.. Thus careful reading is required. In 1981.. the Master .. this depends upon whether she is fixed on a port or berth charterparty. hours after receipt of such notice .The annex to this chapter contains..The calculation of laytime..The calculation of demurrage. time or. boxes 16 & 20 and clauses 5. sometimes called reversible laytime. to a certain extent. This is set out in lines 109-116 of the Gencon form and has been reinforced by a number of recent cases. either as a separate and specific time for each operation of loading and discharging (option a) or as a combined time for the whole operation (option b). The owners claimed a larger amount and this dispute was taken to arbitration where the charterers contended that they were protected by the last sentence of clause 6 for all but 15 minutes of demurrage... Port of loading... that the vessel is ready to load .78. which was no fault of and not under the control of the charterer. Firstly. It therefore relates directly to that elusive commodity mentioned in the section on voyage calculations in chapter three-namely.. it is technically damages paid to the shipowner in respect of a breach of the charterer's obligation to load and/or discharge the vessel within the laytime stipulated in the charterparty. However.. -. . 9 . reachable on her arrival . . and laytime ... The House of Lords upheld the initial finding that charterers were liable for demurrage since the berth which the vessel was prevented from reaching by reason over which they (the charterers) had no control was one which the charterers had a duty to have already designated and procured. where delay is caused to Vessel getting into berth after giving notice of readiness for any . and a valid NOR must have been tendered. linking these with some of the ways in which he might conduct his vessel so that it results in maximum benefit to the bottom line of the voyage calculation. Three criteria must be fulfilled for laytime to commence. The vessel was delayed by congestion for 9 days 8 hours and 50 minutes. Firstly. 6. more precisely. designated and procured by the Charterer . shall commence upon the expiration of six .. and thus claimed back all in excess of $341.. 7 & 16: The detailed calculation of laytime is the subject of a number of excellent books and it is not intended to look in detail at calculations here.. shall give the Charterer. and .22 on account of demurrage but entirely without prejudice.The distinction between demurrage and damages for detention. cargo.reason over which Charterer has no control. The vessel must be: an 'arrived ship' at the load port. Prima [2 Lloyd's Rep 159] in which the charter provided that: Cl.. .... Laytime and demurrage Laytime and demurrage. The charterparty also stipulated that the berth shall be safe and: Cl. A glance at box 6 in the Gencon charterparty will show that there are two ways in which laytime can be calculated. Charterers paid a sum of $162. Rather the intent is to highlight some of the factors which the commercially astute master should be looking for in the charterparty. the vessel must be physically ready to load. House of Lords ruled on the case of the Laura. A careful record of events needs to be kept if the berth is not immediately available. time when the vessel should be free of her current contract and already engaged upon her next business. The areas to be addressed are: . though.Recovering the money -liens and cessor clauses.When laytime starts. notice . such delay shall not count as used laytime. . When does laytime start? . what is laytime and what is demurrage? Laytime is the contractually agreed time allowed to the charterer to load and discharge the vessel and whilst demurrage is sometimes considered as welcome additional income (especially on a falling market)..

Although the charterer is generally responsible for payment of demurrage. time and who is going to pay for it. I am unable to see any such conflict. It is. therefore. If. split laytime at least means that the owner has the opportunity to secure any demurrage earned in the load port before the voyage ends. there are options for either arrangement. Although there are arguments for both options. when the vessel does berth. receiver). With respect. the case seems to have proceeded in the Courts below upon the footing that there was a conflict of interest between C1. It is a common misunderstanding for masters to believe that the NOR has to be accepted to be valid.. in the manner which I have suggested. This is only true if the charterparty specifically requires acceptance of the NOR. a wise precaution for the master to keep his owners closely advised of the laytime situation at the last discharge port and the extent to which demurrage is building up. When tendering NOR. a commercial negotiation.. Laytime may be calculated In one of two basic ways. NOR will be invalid if the vessel is not fully ready to load and laytime will not commence. Time lost in waiting for berth to count as discharging laytime.One of the strong lessons emerging from this case was that related clauses should be read as a whole in order to understand their meaning. I would regard them upon this construction as complementary one to the other It is interesting to reflect upon what the individual brokers felt that they were agreeing as they negotiated. and it is wise to copy it always to their agents. Even if anchored off the port awaiting a berth. SHEX (Sundays and holidays excepted) are-two of the most common but may be followed by EIIJ (even if used) or UU Calculation of laytime and demurrage . in dry cargo trades. Within this general rule there are a wide range of variations. Time to count from arrival Pilot station Bandar Abbas. well illustrates another point. these clauses are in no way in conflict. In the words of Roskill L. formally retender and keep retendering until it is finally accepted.6 and 9 which required reconciliation. The additional wording to Gencon clause 6 in the Lethero [1992] 2 Lloyd's Rep 109. . 6 . . and for a start the master needs to know whether the laytime allowance is a separate item for the load port (or ports) and discharge port or combined in one overall allowance. for example. the calculation reduces to that most valuable of all commodities in shipping. And. if NOR is rejected. the vessel should be in a fit state to load. It is vitally important that NOR is tendered in the correct format to the correct person (shipper. there is a delay while she pumps ballast or has to re-clean her holds to meet surveyors' requirements. . That is the nature of shipping. Perhaps the real answer lies in which way the freight market was moving at the time. Either way.. then there is a danger that NOR will be rejected and all the waiting time will be at owner's expense. which..J. is generally a minimum of six hours after tendering (and possibly acceptance) and may be much longer. This case illustrates a legal solution to what was. It may be profitable to give some consideration to the timing of NOR and the time from which laytime shall commence. for example. Laytime can start and stop depending upon the wording in the charterparty and the course of events: Cl. shipper or consignee after the cargo has been safely discharged may be a lengthy process. at the discharge port.. whether in berth or not . In Gencon clause 6. Properly construed. perhaps against a deadline. The second consideration is NOR and this has already been discussed. As is stated in every textbook. to reach a compromise. charterer or. Although 'ready to load' means that all holds must be passed before NOR is accepted. either by stating a specific time or by stating a loading rate against a given tonnage to load-or discharge. certain times are excluded from laytime and brokers enjoy developing acronyms for these: SHINC (Sunday and holidays included). it is obviously sensible to concentrate first on those holds where loading will commence. recovery from the charterer. the master is warranting that his vessel is ready to load-in other words.. except for actual steaming time to and from Bandar Khomeini which to be excluded from counting . and always will be.

Just as a master may be loath to report a temporary breakdown and risk off-hire (under a time charter). it must be accurate. The master needs to think about how laytime is calculated in conjunction with his arrival time. under the terms of the charterparty.ha4( of the amount .. demurrage shall be incurred at ports of loading and/or discharge by reason of fire. Steel and rusting must immediately spring to mind in this context. A stoppage or unexplained slowdown in loading should always be investigated. lockout. Whatever the cause. It is a commercial calculation. of course. For example. the vessel must be ready to load-the charterers may reject NOR if the vessel spends the weekend cleaning. Whilst a shipper may be quite happy to pressure the master to continue loading in the rain. who is paying for opening and closing the hatches. If. Exceptions to laytime do not constitute exceptions to demurrage unless expressly stated as in clause 8 of Asbatankvoy. the master should never sign a Statement of Facts unless he is certain of its accuracy in fact it is a golden rule that the master should never sign anything. should be calculated over 24 hours from midnight. Alternatively. but which do not fall within laytime. no matter how busy he is. for it is likely to be a young third mate who has to -understand their requirements and make the decision during the early hours of the morning. the receiver may be less enthusiastic about receiving rain wetted cargo. However time pressed. The Charterer shall not be liable for any demurrage caused by strike.it is useful to have a glossary of chartering terms on board. and this cannot be done from behind a desk on board the vessel. A master who finds himself in such a situation should immediately contact his Club Correspondent. The term 'once on demurrage. And it is not only rain which can cause a problem.g. type of cargo and.e. the rate of demurrage shall be reduced by one. unless it has been checked and is correct. delegation and the efficient use of his team can help the master achieve this. If the vessel is unable to load or discharge in accordance with her description in the charterparty. holds). there is no need to increase speed and fuel consumption in order to arrive and tender NOR within working hours on a Friday (and note. selfexplanatory. This situation may change if the vessel needs a quiet period alongside for repairs or maintenance (but note that for NOR to be accepted. it is not possible for the vessel to become an arrived Demurrage and damages for detention . that 'Sundays' can vary in line with the national religion) if the waiting period before laytime commenced leads him into an excluded weekend or holiday period. Since the Statement of Facts is the cornerstone of any laytime calculation. in the last resort. Only those days when weather permits (weather working days) may count towards laytime and this is obviously a matter of judgement. Good forward planning.. to a great extent. supplier. Both the master and the chief officer need to have a very clear policy regarding stoppages for weather. a vessel can gain useful alongside time which will justify additional bunker consumption arriving before the working week finishes. officers or crew of the Vessel or tugboat or pilots. the charterer may have failed to procure a berth so that. The best result may prove to be a negotiated pro-rata solution which may be undertaken by the P&I Club under the owner's Defence Cover. The master must weigh up a number of considerations here. Within the days that are included in laytime. storm or by strike. unless otherwise stated. and he may well be supported by the port authority which wants to free the berth. negotiation. high winds may well prevent containers being loaded. there may be certain exceptions. If the problem is partial. lockout.. for example (see Gencon Clause 5(b)). so a charterer can be expected to pursue any. custom of the port. Obviously a careful record needs to be kept and the charterers encouraged to keep working where they can. one hatch cover isjammed or one of the vessel's cranes is not working-the situation becomes more complex. stoppage or restraint of labour or by breakdown of machinery or equipment in or about the plant of the Charterer. explosion. however. shipper or consignee of the cargo.(unless used) . always on demurrage' is well known and. a careful record must be kept and the annex to this chapter contains an example of a statement of facts covering a vessel's port stay and cargo work. The days that are not excluded are working days and. legitimate reason for not paying full demurrage. demurrage may also cease to accrue. stoppage or restraint of labour of Master. These discussions would be based upon the vessel's records. The vessel may be subject to other delays which are the responsibility for the charterer. if weekends are included (SHINQ but not usually worked.

.The vessel must be fit to carry the contracted cargo. and keep owners advised. The concept of seaworthiness affects many aspects of maritime commerce and law. addresses this matter and aims to absolve the shipowner from all responsibility for loss. From this it is obvious that the concept is relative but.. .g. The level of recompense will reflect the freight market at the time (and thus may or may not be at the same level as demurrage) and may also include the cost of bunkers consumed. caused by personal want of due diligence on the part of the Owners or their Managers to make the vessel in all respects seaworthy . the master should be confident that his vessel is seaworthy for the intended voyage. the owner's recourse is through a claim for damages for detention. This is generally when the cargo is loaded (and properly stowed) or the hoses are disconnected.e. exactly when was the discharge port declared and were extra bunkers consumed. then charterers should use all reasonable despatch to load (and discharge) the vessel and the master would be wise to make enquiries as to what is generally considered to be a reasonable rate of working in that port. for example. Or the charterer may fail to exercise his option to declare a discharge port and the vessel may consume time and bunkers during the waiting period. In fact. the rule is keep a careful record of facts.The cargo must be both safe and safely loaded and stowed. it is not unknown for a cargo owner to do this if prices for his cargo are fluctuating within a range of ports. But seaworthiness can be an elusive concept. whilst loading in harbour. If. the charterparty is silent on the matter of laytime. . damage or delay unless . in addition to being structurally sound and in good condition: . The (effects of such an action are discussed below. .. Seaworthiness. owner's responsibility clause in the Gencon charterparty. not just properly certificated but able to communicate amongst themselves and to the outside world and there should be sufficient personnel to work the vessel. Once again. clause 2 Having arrived and presented his vessel for loading. If the charterer then delays the vessel's sailing while.The vessel must take a pilot where required (and where voluntary. This definition understandably recognises that the vessel should be seaworthy when she sets out on the voyage.. Clause 2.The vessel must have a competent master and crew.The vessel must have adequate stores and bunkers for the voyage or at least. the next stage of the voyage. Finally. but that it may be impossible to maintain this absolutely throughout the voyage.. the vessel may have to deviate from the contracted voyage. In the words of Scrutton: The seaworthiness required is relative to the nature of the ship. a word about when laytime ends. . In such cases. If not.. from hull insurance to cargo claims. the owner has a claim for detention. the onus will be on the master and owner to produce convincing arguments as to why no pilot was used) and charts should be corrected and up to date. cargo papers are prepared. then laytime ceases. the Marine Insurance Act 1906 (section 394) states: 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. to the particular voyage contracted for and the particular stage of that voyage being different for summer or for winter voyages. Whether the reader considers that this test is always achieved may be a matter for discussion. and when sailing and varies with the particular cargo contracted to be carried. Certainly the thrust of the International Safety Management Code is towards improving this area of operation. for some reason.vessel and tender NOR. If this occurs within the laytime allowed.

Seafarers are. much argument will revolve around the answer to questions two and three. If the dispute reaches Court or arbitration.e. Under English law.If not. generally The Hague or Hague-Visby Rules and potentially. perhaps. Photographs or a video. his vessel must be seaworthy and this is clearly before and at the beginning of the voyage-it is not a continuing warranty. ease the absolute obligation of the owner to provide a seaworthy vessel to the obligation to exercise due diligence. In the event of a cargo claim. almost inevitably. As with all surveyors. properly manned and seaworthy. about the repair work undertaken at the load port and whether it was all complete on sailing can bring the gleam of the hunter who has just raised the scent of his quarry to a good lawyer's eye. An unguarded comment by. wetting-or of loss. especially officers. It is important. at the commencement of the voyage-the answers to all the above questions will depend to a large extent on the evidence from the vessel. there is an implied and absolute undertaking in every contract of carriage to provide a seaworthy vessel-the common law position. did the owners exercise due diligence to make the vessel seaworthy? . If navigation is an issue. should know their purpose on board and the danger of unguarded and illconsidered statements. be some evidence of damage-say. and how it affects the contract between owner and charterer as well as those who stand behind the charterer and become contractually related to the owner through the bill of lading. require the carrier to prove that he. Looking for evidence The most important evidence is. however. the Hamburg Rules.Was the vessel seaworthy? . A photograph of rain wetted cargo on the quay prior to loading or the 'seventh' wave breaking over Contemporaneous records . generally.' To pursue the definition of what is reasonable and to define due diligence is. on the other hand. contemporary records from the vessel's logbooks and. especially with a camera which imposes the date on the negative.If not. did the unseaworthiness cause the loss or damage to the cargo? Hopefully the answer to these questions is yes. It also applies in stages so that the vessel need only be seaworthy relative to a port operation when initially presenting for cargo. cargo interests and their legal advisers will almost inevitably look for evidence that the vessel was not seaworthy at the commencement of the relevant voyage. the tribunal will want to know: . The burden of proving that a vessel was unseaworthy lies with the cargo interests. polite and prepared to~ talk about their vessel. say. an engineer to a cargo surveyor who has just POP ed down the engineroom. the engineroom log may be as important as the deck log and official logbook.as indicated above. she could be repairing a fault to her main engines or auxiliary machinery so long as the repair is complete at the time of sailing and she is seaworthy for the next stage of the voyage. the tribunal or Court might reasonably reach the conclusion that since the damage must have some cause. as may be expected. if heavy weather is claimed as a defence. as can contemporary meteorological records. The Hamburg Rules. If the answer to the first question is no. to pursue legal niceties and not the practicalities faced by the master. Since the loss or damage will inevitably occur after the time at which the vessel is warranted seaworthy i. legally. In the absence of evidence to prove that the vessel was well found. or the lack of it.The central concern is with seaworthiness. not unnaturally. In other words. however. for the master to understand when. will incorporate one of the international conventions relating to the carriage of goods by sea. There will. yes and no. The Hague rules.. the most logical cause is unseaworthiness. the relevant working charts can be important. Surveyors may well visit the vessel with this objective in mind. in which case cargo owners or charterers are unlikely to be able to recover damages from the owner. Most charterparties. are especially valuable. they should be accompanied throughout their visit and the crew. and his servants and agents I took all measures that could reasonably be required to avoid the occurrence [purportedly arising out of unseaworthiness] and its consequences.

Finally. care for and discharge the goods . then it should be addressed in a letter to the owner's solicitors. which are. means that each side must disclose to the other all documents in their possession. Again. will be the chief officer. the burden of proving the exercise of due diligence shall be on the carrier and other person claiming exemption under this article. entrusted to the master's safe keeping by his customers. . as stated in Article IV of the HagueVisby Rules: Wherever loss or damage has resulted from unseaworthiness. preferably contemporaneous. If the master's opinion is requested. However. Contemporaneous records. since in this day and age. not in a separate report which can be 'discovered' by cargo.number one hatch. records. Even if apparently in good order during loading. the most important officer in cases of cargo loss or damage. Discovery of documents. not opinion or conjecture. stow [and lash]. If the incident is serious enough.. 'for keeping the water out'. crews tend to disperse at the end of a voyage much more frequently. as the second mate explained to the examiner for master and mates. It may. just proper Watchkeeping Safety and Cargo Management In Port (see The Nautical Institute publication by Captain Peter Roberts). then the owner loses his right to limitation under The Hague and Hague-Visby Rules. be notified immediately to the shipper's representative and dealt with at the mate's receipt stage and before the bill of lading is presented.. properly and carefully load.Evidence relevant to causation: a fundamental part of the duty of the cargo officer on watch is to monitor the condition of the cargo. surveyors' reports and notes of protest are all important and. have benefited from the advice of -the owner's legal representatives. a wise master ensures that he has a relevant statement of fact from those of his officers involved and. keep. In general. the records disclosed should be matters of fact. This is not asking for anything unusual. the master might consider asking the local P&I Correspondent to arrange for a lawyer to be present when statements are taken from the crew. Article III of The Hague-Visby Rules requires the carrier to: . Defects observed during loading should. be sweating too much. . especially if accompanied by a logbook entry (both deck and engine) recording a prior reduction in revolutions to case the vessel's passage. can answer yes to the second of the questions posed earlier. will be compelling evidence to the tribunal. for example. Under certain circumstances. the availability of essential back-up services in the engineroom may be relevant. Subsequent reports. Also. the tribunal or Court will be interested in: . are important-. tribunals or Courts might consider. On reflection. it is hard to think of a better definition: 'watertight' and 'fit for sea' are all important contributions to seaworthiness. An argument by the shipowner that due diligence was exercised will almost certainly fail if it is not supported by well documented evidence from the vessel and. photographs and samples will all help to strengthen the shipowner's case. through his and his master's actions. evidence. in most cases. custody or power which are relevant to the resolution of the dispute.Quantum: if cargo interest can prove unseaworthiness.Evidence relevant to seaworthiness: this can range from the adequacy of the hatch covers or cargo lashings to the date of the latest chart correction or the performance of the radar. handle. naturally. Even cargo stowed on deck 'at shipper's risk' is entitled to the due diligence of the owner and his master and crew. found in many but not all jurisdictions. under the process of discovery of documents. contemporary reports are generally valued more highly than subsequent recollections which.. or the appearance of insects or other bugs might give warning of infestation. The ship's hull together with its hatch covers is. the cargo should be monitored during the voyage. The absence of what may be termed 'normal documentation' tends to make a tribunal or Court suspicious.Evidence related to due diligence: if the owner. on this point. will be scrutinised carefully by the opposition. . as has been stated before. photographs. even a difficult situation can be retrieved. ..

a much more economical proposition. experienced in these matters. would have accepted his cargo being loaded on arrival against a firm commitment to fumigate properly the first parcel in situ on passage. the master. London and their operational staff. Unfortunately. It is essential that the master does not lose sight of the importance of delivering an efficient and cost effective service to his customer. the master solved the problem by discharging the first parcel ashore and having it and the holds fumigated. be he village headman or a multi-national corporation.e. then it is suggested that he has a professional duty to try and establish them.Cargo (boxes 7 & 12. not the quantity-the master has a thick file of messages and subsequent invoices to prove this-but the quality. . the bags were of poor quality and extensive rebagging was required causing more delays and expense to what was already becoming a very expensive operation. Evidence of infestation in the first parcel caused the second shipper to reject the vessel. It may not be possible to effect such changes single-handed but. say. in many cases. much of the problem frequently lies with the owner who has failed to establish a properly structured channel of communication with the master through which to address commercial matters. Although shipper's local agent resistant. If. It is all too easy to say 'to carry cargo' and to begin to believe that the seafarer's prime function is to manage the ever increasing volumes of safety systems and regulations which characterise ship operations today. a master finds himself working for an organisation where such a rapport and such lines of communication are clearly lacking. a proactive course of action is required: From: Master mv Basmati To: Operations Manager Proposed solution here is to discharge infested parcel. in Greece. facing the challenge of carrying a wider range of cargoes. the international trader who wishes to transport goods by sea and thus commits them to our professional care. typically. The moral of this story lies in communication. 3 hold. either physically or philosophically. In effect. Whilst it is easy to apportion a large part of the blame for such an expensive operation to the master. clause 1) A central theme of this book is to focus on the basic and fundamental reason why merchant vessels are built and bought and seafarers trained and employed. arriving in Singapore to complete loading with a transhipment cargo of another grade of rice. in a case such as this. However. however. A rice trader tells of a vessel. This split can and does work well for a number of owners who locate their commercial operations in. please formally ask shipper/charterer whether he will accept this alternative. fumigate Nos 4 & 5 and commence loading within 36 hours with etc etc. no link was made between the person who knew most about the carriage of rice and what he would accept -i. his reaction to his agent's report of the infestation was an initial (and understandable) refusal to load until the matter was resolved. with a commercial operation which is somewhat removed. This is obviously time consuming and bagging of first parcel of poor quality so suggest minimum handling. Changes in the structure of many shipping operations in recent years has resulted in masters and officers changing trades much more frequently and. Proposed plan has been discussed and agreed with local cargo surveyor organised by Club Correspondent. Partly because it was the first time that he had loaded rice and partly because he was receiving a great deal of conflicting advice with no clear lead. We can transfer Part parcel in No. This can often be the case when the master's formal reporting channel is through technical managers. The rice trader.. having loaded a part cargo of bagged rice in one Far Eastern port. for in these cases there is inevitably a very clear centre of authority and a close rapport between master and owner. fumigate ashore and reload. the trader-and the person responsible for carrying out job. the highly competitive market in which vessels compete for employment can make it difficult to establish a dialogue between the master and the shipper of the cargo. 1 hold to No. Whilst improvements in communications have simplified the process of accessing up to date information.

which means planning ahead is essential. knew little of the master who tended to remain on board. on deck-and. whether there are other hazards. but a charterparty may contain a list of specific excluded cargoes or a general prohibition of 'dangerous' or 'unlawful' goods. This situation did happen and the master in this case did not act decisively in his owner's best interests. professional interest in the operation of the terminal. Once again. but generally they were settled there and then with the minimum of paperwork and without escalating into a dispute between owner and charterer. The operation was initially beset by a multitude of minor problems and frequent shortage claims. for example. is silent on hazardous and dangerous cargoes. even after several voyages. Once out from behind his desk. Who are the cargo surveyorscousins of the shippers? -and what does the cargo look like in storage or in the warehouse? Are there signs of wetting or vermin. Dangerous cargo The mention of dangerous cargo immediately brings to mind the lMDG Code and its over 3. is not to ask for instructions but to put forward a proposal and ask for approval or an alternative. The art of negotiating. whether the goods fall within the IMDG Code and require specified. A master should know: what his charterparty says about dangerous goods and his contractual and common law position. A good photograph will doubtless interest the arbitrator in the event of a dispute. or a weighbridge that does not look as though it has been tested for years. Make sure that the chief officer has a good watch on deck and that the officer knows what he is watching for (again. who showed a lively. which require special carriage and/or may affect his crew or the fabric of his vessel. does it all look to be the same grade and who is testing for quality and taking samples? Make an effort to meet the shipper and discover his problems-there may be mutual solutions. as they can be an early warning of impending problems. The Nautical Institute's Watchkeeping Safety and Cargo Management in Port can give guidance to junior-and senior-officers). That is not the time to start investigating or resolving a problem with cargo interests which could and should have been identified and addressed earlier. being a charterparty designed for bulk cargoes. courteously if formally receiving visitors but not venturing on to the terminal. The vast expansion of dangerous goods is quite staggering since the first legal mention of only three in the Merchant Shipping Acts 1854: aquafortis (nitric acid. It would not be true to say that there were no more problems. On completion of loading cargo. a charterer recalls the master of a parcel tanker trading regularly to a private oil terminal in Scandinavia. The moral is that masters should venture ashore as much as time and conditions allow and make contact with the next link in the transportation chain of which the vessel is but one part.000 substances listed as hazardous to human life and/or the environment. time is the potential problem. Personal contact Some thousands of miles north. the terminal manager asked the master if he would mind meeting in the terminal manager's office. Either the master or the chief officer should endeavour to find out. One trip.g. a genuine rapport developed between the terminal manager and the master. special conditions of carriage -e. having damaged his ankle skiing on a Friday afternoon. active or dormant. The most important point is to act as early as possible and gather as much intelligence as possible. . Check mate's receipts regularly. if not. oil of vitriol (sulphuric acid) and gunpowder. what procedure is being used for weighing the cargo-modern conveyor..This may sound terribly obvious: except that the annals of P&I Club cargo claims prove that it does not happen as often-and as early in a developing situation-as it should. and this is a negotiation. The legal concept of dangerous in a contractual context can be both wider and narrower than the scientific definitions used by IMO. the shippers and the port authority will want bills of lading signed and the vessel off the berth as soon as possible. The Gencon. The terminal manager. operationally there always are. used extensively for etching).

. in the absence of established company procedure. properly packaged and sufficiently lashed and that his vessel can be considered seaworthy. the Hamburg Rules ease the burden on the shipper. cargo was described under a voyage charterparty as 'antioxidant treated bagged fishmeal'. careful. A mere difference in degree of hazard will not make the shipper liable unless it is so great as to approximate to a difference in kind. Even if the shipper's agreement is given to load on deck. the master has a responsibility (to the receiver under the bill of lading-see chapter five) to ensure that the cargo is suitable for passage on deck. . since the notice can be verbal. A set of photographs showing the stow and the method of dunnaging and lashing are highly recommended together with a reference to the vessel's stability and whether she was stiff or tender. if any such goods have been shipped without proper consent.There is an implied common law undertaking imposed on shippers and charterers to give notice to the owner of any dangerous goods tendered for loading. 'He' may be taken to refer to the 'carrier' (by whom or in whose name a contract of carriage has been concluded) or the 'actual carrier'. On voyages which involve the USA. of the precautions to be taken. rule 6) refer to the carriage of dangerous goods.The burden of proving absence of proper notice is on the owners and. Perhaps not surprisingly. The cargo had not been properly treated and overheated.Moller [ 1951 J IKB250). . A properly worded Clause Paramount should incorporate all Hague.It has been held that the master's consent to take cargo does not affect the owner's position since master '. if necessary. The Hague Rules (article IV.. and “carried on deck at shippers'risk without liability for loss or damage howsoever caused” is recommended. It was held that the cargo did not correspond with the contractual description and the charterers must bear the additional costs. it is unwise and. so beware of being offered: . However. . . . contemporaneous records may be important in the event of a dispute. The Hamburg Rules (article IX) entitle the carrier to carry goods on deck only if such carriage is in accordance with an agreement with the shipper or with the usage of the particular trade or is . load a full and complete cargo (if shipment of deck cargo agreed same to be at charterer's risk and responsibility) . but it must be adequate. Whatever the Courts eventually decide. destroy or render innocuous '. It is critically important that there is (written) agreement for the cargo to be carried on deck as deck cargo falls outside the provision of The Hague Rules. . . without payment of compensation' is there (but there is no reference to responsibility for associated costs) but it'. . it must be expected that a professional master would consult with his owners (and the local Club Correspondent). has no authority to vary the owner's contract' (Chandris v. the clause needs further expansion and the vessel's P&I Club should. Under Rule 13.. they may 'be landed . giving the master the right that. . . the shipper remains responsible for marketing and labelling dangerous goods and for informing the carrier '.. to a degree. unprofessional to rely on the exclusion of the master's responsibility in these days of improved communications and litigation.. causing increased discharging costs. and they will doubtless have the opportunity of doing so if the wider scope of the Hamburg Rules become more commonly used. . a wet w4in dry sheep's clothing [where] there was nothing to put [the master] on notice that the cargo was something radically and fundamentally different from what it appeared to be. . . of the dangerous character of the goods and. may not be invoked by any person if during the carriage he has taken the goods in his charge with knowledge of their dangerous character'.' The right to unload. In the Amphion [19911 2 LLR 101. destroyed or rendered innocuous by the carrier without compensation' and at the shipper's expense. Live animals and deck cargo The Gencon charterparty (clause 1) stipulates that the vessel shall '. assumes the absolute common law liability for the cargo. be asked to advise. The notice need not be in writing. Bills of lading must also be addressed. 'All on deck at shipper's risk' is often not adequate. which may well widen the scope to include the master as any other person to whom such performance has been entrusted'. in the absence of an agreement. Isbrandtsen. Hague-Visby (or Hamburg) Rules provisions from the bill of lading into the charterparty. This means that the shipowner is unable to rely on the ability which the rules give him to limit his liability and.'.

documents . Animals are excluded from The Hague Rules but are dealt with under article 5. with businesses far divorced from the loading operation making decisions worth many millions of dollars based on evidence provided by others. unless there is Proof that all or Part of the loss.required by statutory rules or regulations. Long before the case of the Salem. masters will be wise to enquire how 'usual' the usage is-such defences as usual custom and practice have a habit of dissolving under concentrated legal attack. In their continued absence. Such authoritative publications as Thomas on Stowage provide guidance which will generally be accepted by Courts and arbitrators and it is an interesting project for a junior officer to research the next cargo and report his findings and recommendations for carriage to the management team. since it enables the holder to demand delivery of the cargo-of. The moral is. often through the Club Correspondent. the service for which the vessel. demand them. evidence of contract of carriage. Early action. the Hamburg Rules. or potentially valuable. through the charterparty. it is important to request. conned a buyer in Syracuse to lend money based on a non-existent cargo. the loss. increasingly. is likely to acquire the bill of lading and ownership of the commodity within the vessel's holds. Signing bills of lading (clauses 1 and 10) An example of the Congen bill of lading form appears in the annex and compared with the liner bill it is a much simpler form. may prevent many problems later. which. Hence the potential for documentary fraud. However. One of the most common frauds is to use dummy or false bills of lading. Whilst 'the usage of the particular trade' slips easily off the tongue. In the absence of such instructions. at some stage during the voyage. has been engaged to perform. This will help to prove that the carrier took all reasonable steps to properly care for the cargo. the deck officers. at least.5 of the Hamburg Rules: With respect to live animals' the carrier is not liable for loss. This is nothing new. in finding out more about the shippers. They also stipulate that the agreement to carry on deck must be inserted in the bill of lading. Central to this is the bill of lading. As mentioned earlier in this chapter. in 350BC records show that a shipper Zenothemis. damage or delay in delivery resulted from fault or neglect on the part of the carrier. a shipowner. a third party. the receiver. his servants or agents. it is presumed that the loss. damage or delay in delivery could be attributed to such risks. and. This is very much the owner's and broker's responsibility when first entering into the charterparty. First. keep valuable. Fraud: Much of modern international trade is conducted through documents (and. record this fact and advise the shipper how the vessel proposes to care for the animals. the master must consider what implications his entries. however. even if it is just initiating a cautious enquiry as to identity and reputation. electronically). Furthermore. This may vary under the law of the relevant country (but here English common law is discussed). His need to be able to rely on what is written on that bill of lading is understandable as has been discussed in chapters four and five. although they may have little or no knowledge of the individual shippers. damage or delay in delivery resulting from any special risks inherent in that kind of carriage. a cargo of $20 million worth of crude oil-gives the person who controls the bill of lading the control of the flow of very substantial sums. The first rule is to know as much as possible about the people with whom you are trading. increasingly. damage or delay in delivery was so caused. unfortunately in cahoots with Hegestratos. if necessary. (with or without their amendments): and. in exchange for a large quantity of money. there are some practicalities which should become part of the operational procedure of the vessel and understood by. endorsements and signature have under the three familiar functions of receipt for cargo loaded. In preparing the bill of lading for signature. and document of title. in the circumstances of the case. say. it does represent the contract between the vessel as carrier and the owner of the goods to be transported. The Hague-Visby Rules. the master can play an early and valuable role. If the carrier proves that he has complied with any special instructions given to him by the shipper in respect of the animals and that.

. especially in an oil terminal. it is good practice to endeavour to secure a draft copy early enough to read through it beforehand and bear in mind the advice of the Through Transport Mutual Club to its (liner) members which. in consultation with the owner. (b) Never send blank bills or photocopies without having first defaced them. if inadvertent. It may be necessary to check which conventions apply (e. check that they are OK'. they live and work subject to the pressures and influences of that port and may have much more contact with the shipper than the owner. . is: (a) Treat all blank bills like blank cheques. This is not to say that the majority of agents are not thoroughly professional. especially new customers. The representative.g. York-Antwerp) and agree. If the relevant conventions are not incorporated then the owner may have to buy additional insurance cover so he needs his master to tell him. Hague. 'the Master or Agent of the said Vessel . Thus the clause 'Demurrage and deadfreight are claimed by carriers who may exercise their right to lien the cargo under Clause 8 of the Charterparty' in the Anara al Sabor [1980] 2 LLR 261 was considered unacceptable even though the cargo was substantially undershipped.' may sign. for example by having them preprinted with consecutive numbers. who demand copies of bills to.. It is not always possible in the tramp trades to control the bills of lading which may well be produced by the shippers. (d) Train your staff in the proper procedures. without prejudice to this charter' as in clause 10 of the Gencon. The unguarded. Some companies have an established procedure for signature by the agent. paraphrased. It also gives the master an opportunity to check the Paramount Clause so as to ensure that either The Hague or Hague-Visby Rules have been incorporated. it is good practice to ensure that the agent promptly confirms that the bills of lading have been signed as agreed. The bill of lading as a contract: Charterparties frequently require that bills of lading are to be signed I as presented' or 'to sign clean bills of lading . . who is sent to get 'clean bills of lading signed. but the master must establish a close liaison with the agent and should not be put off by an agent who appears less than willing to co-operate. concise and very definitely in writing. Copies of the bills can sometimes be sighted earlier during the loading process and additional incorporation clauses or clauses relating to deck cargo or live animals agreed in consultation with his owners. sir? Why this weighbridge is checked every week'. Agents: It is always worth remembering that. the basic information as to weight or quantity and condition must be as required by the master (if necessary in consultation with his owners).or 'Hasn't been looked at for 20 years') a much more confident stance can be taken if the shipper's -figures are disputed or the quantity of the cargo warrants clausing the bills of lading. and make sure that they are clean'. However. As was stated in the case of the Nanfii [1977] 1 LLR 201: . Hamburg. just before the vessel sails is unlikely to have much authority to negotiate. which amendment should be included (see chapter 11.safe. A record of the exchange should be kept on board with the cargo papers. the general average settlement). Instructions to the agents should be clear. the master should sign bills of lading himself. with the mate's receipts being kept up to date with the progress of the loading. but whoever signs.) Masters must take great care in clausing bills of lading as this may make them ineffective as a document of trade (e. juxtaposition of even a blank bill of lading and a ship stamp is an open invitation to fraud. Whenever possible. although as can be seen from the Congenbill. Preparation: Anticipate problems and act as early as possible. With the chief officer and the deck officers constantly watchful of the condition of the cargo.. and with the knowledge gleaned from an earlier walk ashore by the master to view the weighbridge ('Tested. unacceptable to a financing bank). (c) Be suspicious of people. (e) Above all-don't trust anyone. Standard Club cover is conditional upon the application of one of these conventions unless The Hamburg Rules apply by force of law (see reference to Forms A and B in chapter five).g. although the agent may be appointed and paid for by the owner. Keep them locked away and try to keep track of them. Furthermore. The latter part of the clause means that the charterparty contract between owners and charterers is not affected by the inclusion in the bill of lading of different terms (see chapter five: incorporation clauses..

claused mate's receipts and photographs of the rusty coils of iron rods would almost certainly be sufficient to support the owners' right to clause the bills of lading. he not only protects the shipowner from possible claims but also puts his owners in a strong position to claim damages for detention if the vessel is delayed while the matter is resolved. There is. In the case of the Nogar Marin. Bill of lading as a document of tide: This aspect has partially been covered under fraud above and will be revisited in the section on delivery. Nonetheless. in the NogarMarin [1988] ILR412 the master had duly inspected the cargo of iron rods in coils and found some rusty. should b'e able to rely on a signed bill of lading (see also chapter five-the rights of consignees).. in other words. Article 111 (4) of The Hague Rules reads: Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described . The statement 'weight and quantity unknown' shifts the burden of proof on to the shipper to prove that the stated quantity was in fact shipped. At this stage it is sufficient to recommend that a proper record is kept of how many signed originals and non-negotiable copies are made for each parcel as well as noting who has received them. Hague-Visby or Hamburg or indeed. claim by a receiver who. However. possibly even the common law position at the load and discharge ports. or the quantity or weight . the legal position depends to some extent on the convention under which the cargo is being carried. This was held effectively to remove the protection offered by that clause. Masters should. Article 111 (4) of The Hague-Visby Rules goes on to add: However.. Under The Hague Rules the carrier may produce evidence to dispute the number of packages or weight of . Conversely. And although it is going too far to say that the charterer is always right. the owner will need powerful arguments to refute a. he negligently failed to instruct the mate to clause the mate's receipts and so clean bills of lading were presented and signed. date of bill of lading. If he does.430 bags of potatoes) and above the wording 'quantity and weight unknown'. Weight and quantity of cargo: Under common law. Owners were unable either to refute the subsequent claim from receivers or claim an indemnity from the charterers. condition of cargo. Unfortunately. however. the bill of lading is prima facie evidence that the quantity of goods alleged to have been shipped has in fact been shipped.. Positive identification should not be overlooked. Bill of lading as a receipt: This is the aspect which will most exercise the master's mind at the time of signing..packages or pieces. In the Boukadoura [1989] the master declined to sign unclaused bills as the ship's figures showed a much lower quantity of oil loaded.The issue of bills of lading in a particular form may be vital to the charterers trade. proof to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith. the Courts reasonably consider. As the vessel's figures were correct. even in the rush to sail. The obvious lesson is that the master must have strong and valid supporting evidence if he is to refuse to sign unqualified bills of lading. Furthermore. whether it be Hague. an important distinction between The Hague and Hague-Visby Rules. the judge held that the master was entitled to refuse to sign an unqualified bill. the burden of proof is on the owner to prove that the said quantity of cargo is not loaded. the Courts have supported the master's right to decline to sign and delay sailing until the matter is resolved. Under The Hague and Hague-Visby Rules the shipper has the right to demand that a bill of lading be issued showing 'either the number of . leading marks. additional clauses. it must always be remembered that the charterer is the customer. as furnished in writing by the shipper'. the master signed in a second place and affixed the ship's stamp alongside the quantity (of 43. In the Herroe and Askoe [19861 2 LR 382. therefore. quality of cargo. be careful about how and where they sign. If there is a genuine problem with the bills of lading as presented. and possibly letters of indemnity. He will need to consider: weight and quantity of cargo.

unknown.stained or damaged packaging should encourage the master to enquire more thoroughly into condition than he otherwise might. Date of bill of lading: This also impinges on the bill of lading's role as a document of title and the importance of. in the Saudi Crown [1986] 1 LLR 261. Shippers and receivers in their guise as sellers and buyers may rely on the shipped date on the bill of lading to establish the date on which the value or quality of the goods is established. insist on the bill of lading showing the leading marks necessary for the identification of the goods'. a parcel of 4. Generally. absolute proof with respect to receivers and enclorsees. therefore. If perishable goods are shipped. On falling market. The burden of proof will then be upon the carrier. do not add one unless it is necessary to record an unsatisfactory condition. as in most cases. the master must ask himself two simple questions: 'Are the goods marked in such a manner as should ordinarily remain legible until the end of the voyage?' and 'Are there reasonable grounds for suspecting that the information is not accurate?' If the answer is no and yes. . there may be requirement to ship so many tonnes per month. are reproduced. The Hamburg Rules were introduced in chapter five and in the annex to this chapter. Conversely.500 tonnes of rice bran was sold under a contract which provided for that period of shipment to be 'as per bills of lading or to be dated 20june . articles 15-19. unless involved in through transport. It can immediately be seen from article 15 that the Hague-Visby 'either/or' has been removed and that there is a list of 15 items of information which must appear on the bill of lading. and is not responsible for the shipper's description of that cargo's quality if. issuing a 'shipped bill' (see also extracts from the Hamburg Rules in the annexes). The master should.the cargo recorded on the bill of lading. the other can be qualified as weight. Whether the drafters of the Rules intended this or not. the temptation or urgings of a shipper to sign pre. It is not unreasonable for the receiver to expect the cargo to be delivered in accordance with the contract which he has signed and as described by the bill of lading which bestows on him ownership of the goods. he should advise his owners and Club Correspondents but if this is not possible he is entitled to insert the wording as the bill of lading will still be 'clean'. Under The Hague-Visby Rules the quantities recorded on the bill of lading will be conclusive as against the carrier when confronted with a shortage claim by a cargo receiver or endorsee. The master is not expected to be able to see into a case or crate but the word 'apparent' is relevant as a Court or arbitrator may well consider that. a visit to see the cargo in the warehouse or prior to loading is advisable. bills will contain the wording 'shipped in good order and condition' or preferably 'shipped in apparent good order and condition' (Congenbill). the quality of a cargo is distinguishable from its condition-a Rolls-Royce motor-car is still a high quality car. the bills of lading shall be dated when the goods are actually on board. the late date of shipment may give receiver the excuse to terminate a valuable contract. the word 'or' between 'quantity' and 'weight' has the effect that only one need be conclusive evidence. However. respectively the master should take early action to resolve the matter with the shipper which may include remarking-and this should be done at shipper's time and expense. the bill of lading contains the words: 'quality and condition unknown'. Referring back to chapter five. For example.15july 1982 without extension. Date of bills of lading shall be accepted as proof of date of shipment'. especially under Hague-Visby. Again this is prima facie evidence as to condition under The Hague Rules. always check that this wording is contained on the face of the bill of lading (it is usually in the printed text) If it is not. even if not in mint condition. or quantity. Conversely. the need to take early action if figures are in dispute is even more evident. Again. this is exactly the type of sale contract which neither the master nor owner usually sees but which is behind virtually every international shipment of goods. under a contract of affreightment for a series of shipments. Leading marks: The shipper can. under Hague-Visby. the master's need to ascertain the condition is increased and he must act diligently and explore beyond the mere external appearance. Without endeavouring to prejudge the Court's interpretation of the rules. As mentioned in chapter five. Condition of cargo: If there is no statement as to the condition. whereas some cargo may be of low quality and yet still be in excellence condition. Quality of the cargo: The master is not generally competent to assess the quality of a particular cargo.or ante-dated bills of lading must be resisted. and.

a clean bill of lading by shippers and charterers is well known. there will be strong pressure not to qualify the quantity or the quality of the cargo. and urgently advise his owners and his P&I Club. Furthermore. One definition by the International Chamber of Commerce in their Uniform Customs and Practice for Documentary Credits states that: A clean shipping document is one which bears no superimposed clause or notation that expressly declares a defective condition of the goods and/or the packaging. but (iii) Always ensure that your stance can be backed up by firm and comprehensive evidence recorded at the time. mate's receipts checked-for more comprehensive information see Watchkeeping Safety and Cargo Management in Port). In this case 'comprehensive' means demonstrating that early action has been taken to avoid problems (e. a word with the local Club Correspondent during the course of the operation may well be the best way to ensure an efficient operation and timely and trouble free sailing. he is not only misrepresenting the condition of the cargo towards any endorsee of the bill but also laying himself and his owner open to the risk of allegations of fraud. or indeed insistence on.. if the master is forced to sign a clean bill of lading when he considered that it should have been claused. Letter of indemnity: All too often. the master is offered a letter of indemnity to sign clean bills of lading. Deviation from what may be described as the most direct route can prejudice the owner's right to rely on the limitations of liability and exceptions available to him under conventions such as The Hague-Visby Rules-not a course of action to be undertaken lightly. The receivers successfully sued the shipowners for damages. Do not accept it. If the cargo does not fit with the shipper's description on the bill of lading. If clean bills are issued for goods which the master knows to be defective. in most jurisdictions the letter of indemnity will be worthless and the owner's P&I cover will be prejudiced. A further relevant clause is the incorporation clause and this was discussed in chapter five in conjunction with the limitation of liability. advising the charterer of your reasons. Clause 3 of the Gencon charter allows the master a certain degree of flexibility in the prosecution of the voyage with respect to the rotation of ports. Finally. If problems are suspected. not the end. Additional clauses: The desire for. . while the master is entitled to. and indeed should. receiver.g. Banks will refuse shipping documents bearing such clauses or notations unless the credit expressly states clauses or notations which may be accepted. he should immediately issue a protest. Thus. It was not until after this event that the buyers realised that the delayed loading and departure meant that the cargo would not arrive in time for them to meet their commitments and they had to purchase a substitute quantity of rice bran elsewhere. and (ii) If he refutes your right to clause the bill. cargo officers on deck. Indemnities for delivering without the presentation of bills of lading are covered under the heading of 'delivery' later in this chapter. loading was not completed until 26 July. bring it to the attention of shipper and. The time at which the master should show interest in the bill (s) of lading which he will be requested to sign (or authorise) is at the beginning of loading. although the ship's agents signed and dated all the bills of lading showing 15 July. The passage and deviation There is an implied undertaking that the voyage will be undertaken with due despatch and this undertaking becomes particularly important when perishable products are being carried. but the right to deviate is restricted to the purpose of saving life and/or property. then the overall guiding principle is: (i) Clause the bill of lading with respect to condition or quality. The bills were sent by the sellers to the buyers who duly authorised payment. advise him that you will delay sailing until the matter is resolved. annotate the bill of lading with clauses relating to carriage on deck or with regard to the carriage of live animals (sometimes also referred to as liberty clauses-the liberty to carry deck cargo may also appear on the reverse side of the bill of lading).In this particular case. if possible.

with respect to the payment of freight and demurrage. he may remove his owner's right to limit liability and rely on the exceptions contained within The Hague or Hague-Visby Rules. as did Consternation as described in chapter eleven. The system is not foolproof. or being instructed to sound. currents is naturally acceptable. . ballast and bunker soundings and pumping records. and these records should include: . the bill should be suitably claused and a recommended wording is: One original bill of lading retained on board against which bill delivery of cargo may properly be made on written instructions from shippers/ charterers. The voyage charter and. The master always understands that cargo must never be discharged without the presentation of a bill of lading. All weather routeing advice is issued with a strong disclaimer. the port authority. announcing that the bill of lading will not be available for the vessel due to discharge on Sunday. When presented with a bill of lading and a demand for the delivery of the cargo. for that matter. This is the golden rule and like all rules. it is frequently broken in response to commercial pressures-most operations managers are aware of the call from charterers at 1630 hours on Friday. A . caution should be exercised if weather routeing proposes a course which takes the vessel into the proximity of other navigational dangers such as crowded shipping lanes in poor visibility or close to ice floes.Cargo ventilation. stow and discharge. However. his Club correspondent or ask his owners to contact the shippers. or use. If this is not so. . but if in doubt the master should seek guidance from his agent. the hold bilges.Bilge. . the master's first duty is to confirm the identity of the presenter of the bill of lading. If he does not.Temperatures in (heated) fuel oil under or adjacent to sensitive cargoes. This enables the consignee to endorse the back of the document in favour of a subsequent buyer of the cargo. humidity and temperature.Routine checks on hatches and lashings.Weather conditions and precautions to avoid or alleviate bad weather. should have a liberty to bunker clause incorporated within them. the master is recommended to raise the matter through his owner so that either explicit permission or additional P&I insurance (not a foregone conclusion or automatic right) can be arranged. If the bill of lading states that the goods are only to by delivered to a named consignee. At the other end of the spectrum is the open bill which is made out in favour of the bearer. This is particularly important if the master is instructed to retain one original bill of lading on board against which the cargo is to be delivered. . More usual is a negotiable bill of lading made out to a named consignee or order. Cargo claimants often allege that damage occurs during the loaded passage and the master's responsibility is carefully to carry as well as load. if necessary. the bills of lading.Deviation from the most direct course for good navigational reasons such as weather routeing or to avoid. Many vessels deviate to bunker. If this is the case. When preparing to release cargo. . the master will need to know what kind of bill of lading he is dealing with. Proper records must be kept of the passage as it impinges on the cargo. and to protect the owner's position. enabling the cargo to be claimed by whoever first presents a valid bill of lading. that other contract of carriage. Delivery (box 12 clause 4) The master has two overriding objectives at the discharge port(s): to ensure that the goods are delivered to the correct consignee. the bill is known as a straight bill.The compliance with special requirements of carriage such as heating or refrigeration. One vessel arriving in port with several feet of water covering a steel cargo in one hold which had entered through a small stress fracture in the hull was unable to rely on a defence of perils of the sea for the simple reason that there was no record of the crew sounding.

Condition and cleanliness (clauses 1 and 2) . endorsed in blank. The notes which follow should be read as an adjunct to the first part of this chapter and are intended only to highlight some of the major areas of difference between dry and liquid bulk cargoes. although a basically sound and well balanced charter. which will replace the owner's P&I cover for misdelivery claims. The owner should advise the master of the precise requirements. has been developed from the former Asba II with 30 printed clauses. ship's stamp and master's signature is sufficient and prevents the bill from being further traded. .e. need of updating. The first difference which springs to mind on a quick examination of Gencon and Shellvoy 5 is that in the tanker trade the charterparties are more uniform. the problem cannot be resolved on board and must be dealt with by direct negotiation between owner. the charterer and a first class bank.Mobilvoy 80 (revised 1990). It is sensible practice to insist on written discharge instructions from the charterer or the receiver and on completion a receipt for the cargo. but also explains the differences of detail between the major voyage charters. It should generally be retained with the ship's papers until further instructions are received from owners. the consignee (or subsequent endorsee) may endorse the bill as delivery to Company B or order thereby allowing the cargo to pass from trader to trader (i. in.liquid bulk The principles of voyage management remain essentially the same. Intertanko (the International Association of Independent Tanker Owners) produces an excellent publication which analyses the six main tanker voyage charters: . in many cases requiring it to be backed by a bank guarantee. Shellvoy 5 is used here to illustrate tanker voyage charterparties and is reproduced in the annex for the simple reason that it is more frequently used than Tankervoy 87 and has a more comprehensive (or complex) bill of lading clause. The word Accomplished together with the date. perhaps.Asbatankvoy was developed from the old warshipoilvoy and. receiver and Club. Since commercial operations and the delays of the international banking system demand a solution. . The most foolproof method of proceeding is for the owner then to transmit to the master the full text of the negotiated letter of indemnity together with specific instructions to discharge without the proof of the bill of lading. If no bill of lading is available.Tankervoy 87-Tankervoy 87 (produced by Intertanko) has not been used as much as it might deserve due to the attachment that the oil majors have for their own formats and the tendency for brokers to stay with what they know.simple signature on the back of the bill. It is also true to say as well that oil cargoes tend to be traded on passage with even more regularity than dry bulk cargoes.Exxonvoy 90. Once again. The Intertanko publication Tanker Voyage Charters is recommended as guidance for all masters involved in the tanker trade as it clarifies. makes the document an open bill of lading whilst the addition of the words deliver to Company A makes it a straight bill. he in turn endorses the document. Consequently it carries an increasing number of rider clauses and in the past has tended to feature unduly in litigation. charterer. not only the specific clauses. This largely reflects the fact that the loading and discharge processes are much more standardised and so the charter negotiation tends to focus more around rates than laytime and demurrage. it is. a 'string' is established as discussed in chapter five). most P&I Clubs have a standard form of indemnity which the owner will negotiate with the charterer / receiver. ideally the letter of indemnity should be signed by the receiver. Voyage charter. the identity of the receiver is important. Alternatively. is sometimes viewed as a charterer's charter. . When a bill of lading is presented and the master has satisfied himself that it is a valid original (no strange signs of alterations) and that the person presenting it is indeed the endorsee and rightful owner of the cargo. At the same time any other originals become null and void. Beepeevoy 3 & Shellvoy 5 are all reasonably recent revisions of long established voyage charters which are considered to have a reasonably fair balance between owner and charterer. although the nature of the bulk oil trade of necessity generates a number of operational changes.

000 ton tanker on time charter to the authors of one of the charterparties mentioned in the introduction to this section! Charterer As you know. complement and fitness beyond the requirements of the Hague-Visby Rules.000 bbl cargo is bought against an anticipated 5% rise in oil prices. pipes and pumps of the Vessel to the satisfaction of the Charterer's Inspector' (Asbatankvoy). . the charterer does not indemnify the receiver.e. requests from charterers for delivery without presentation of bills of lading or for a change of destination are a feature of the tanker trade. rule 5 states that: .. possibly.. and the cargo officers.000. numbers. This generally takes the form of extending the requirement regarding fitness beyond the 'commencement of the voyage'. Instead the receiver will claim against the shipowner who in turn will bring an indemnity claim against the charterer. lines and pumps are suitably clean' As it becomes increasingly common for charterers to stipulate condition surveys. carrying and discharging cargo the master shall at all times use due diligence to keep the tanks. and with all the undertakings given by the charterers one might be forgiven for wondering how disputes can arise between the owner and the charterer. the price of winter fuel oil. his main concern is that the outturn matches what he has agreed to pay for. then the owner will not succeed in his indemnity claim against the charterer. But one caveat: when dealing with powerful charterers such as oil companies. is contained in sub-paragraph 5) and the reference to the section of The Hague-Visby Rules which deals with the description. Whereas many charterparties require the owner to 'clean tanks. The master needs to retain all his caution in order to protect his owner's position. Changes to the nominated discharge port are quite common and must be treated with the same gravity as non-production of bills of lading-the procedure for establishing an indemnity is similar. The right of the carrier to such [charterer’s] indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper In other words.000 can be reduced by 20% by a I% shortfall in outturn. time. for example. as mentioned above. Clause 33 addresses the handling of bills of lading in much more detail than. An indication. it is important that the master. Assuming a 1. the following point must be kept in mind: .'and 'It shall be for the master alone to decide whether the vessel's tanks. so that the end receiver may be two. will be extremely sensitive. the Gencon charterparty.A number of charterparties such as Shellvoy 5 use wording which is designed to increase the owner's (and therefore the master's) obligation in respect of the state of the vessel and her equipment. having been made on the anticipation of a marginal movement in. i. as so many do at 16. There are also differing approaches with regard to the requirements imposed by the charterer in connection with the cleanliness of tanks and pipelines. The tail end of article III.The third party's (i.. Although the receiver will be aware of a charterparty operation somewhere in the background. to price. it is all too easy to be pressured into complying with their wishes. Although the charterer guarantees the accuracy of 'the marks. The charterer and receiver may well be long standing trading partners. lines and pumps of the vessel clean for the cargo specified. perhaps. Shellvoy 5 imposes a heavier obligation 'Whilst loading. His transaction. a potential profit of $900. and .30 hours of a Friday afternoon with a 100. oil cargoes are frequently purchased for the purpose of trading them en route. quantity and condition of the cargo. The following true story commenced.e. the receiver's) redress is against the carrier who then has the problem of triggering the charterer's indemnity clause.. three or even more transactions away from the shipper or charterer.If the master issued a clean bill of lading knowing the figures to be inaccurate. destination. quantity and weight of the goods furnished' and indemnifies the owner against inaccuracies. Signing B/Ls and delivering cargo (clauses 33 & 42) As with dry cargoes the problems associated with delivering cargo. Furthermore. . quantity and. we have fixed the vessel on voyage charter to (another of the oil majors appearing above). say. . know exactly where the final responsibility lies for passing tanks fit for loading.

speed and deviation (clause 3.Will laytime start. Laytime and demurrage are specified at some length. check with the owner or time charterer that they are happy for discharge to commence on arrival.In transhipment at sea. safe berth and notice of readiness (clauses 4.What is the effect of non-compliance with any of the owner's obligations under the charterpartye. Owner Good. If in any doubt. Insert the relevant details of this subcharter and send it to us and we will pass it on to the master with instructions to discharge. 12. there is no problem.How is delay after disconnection of hoses handled? . the importance of tendering NOR in strict conformity with the requirements of the wording of the charterparty must be stressed. 31 and part 1) The charterer has a duty to nominate ports in sufficient time to prevent delay or deviation and once this has been done he has the right to expect that. the vessel shall perform her service with utmost despatch'. and once again the factors which the master should consider (and record) include: .Owner Unfortunately.How is congestion at the port treated? .Does 'all time used for charterer's purposes' count for laytime and demurrage? .How is time lost due to adverse weather. the bill of lading will not be available for discharge on Sunday. The concept of a safe berth has already been discussed in some detail. is consequential loss of time for owner's account (if the vessel is ordered off the berth for example) . although tanker voyage charters also include the right for charterers to specify transhipment at sea. as is the charterer's need to change orders as a result of changes in a volatile market. are any delays other than those due to owner's or vessel's fault. will it be suspended if the berth is inaccessible? . storms or swell to be treated on and off the berth? .At what point will time start to count? . 13 & 28 and part 1) Once again. it's the subcharterer's. If a speed clause is incorporated in part I L-special provisions. Note that the liberty to tender NOR by radio requires written confirmation to follow as quickly as possible. you know them. with particular attention to the time at which orders were received. or if started. despite the wording of clause 42 it is exceedingly difficult to exercise a possessory lien against a quantity of oil disappearing down a pipeline into a tank farm a mile away. 1700 hours on Friday afternoon: Owner I've received the indemnity but it is not the one which we have agreed..g. Owner So what was the problem? Charterer Our legal department don't like us accepting the other (oil major's) indemnity. Charterer No. distances and bunkers consumed.Until when does time run? . exclude& . Careful records need to be kept in the form of a statement of facts covering times. we have agreed the indemnity with our P&I Club. Loaded passage. No problem. then you accept their indemnity and we will accept yours. several conversations later: Charterer All right. 1815 hours. utmost despatch' will be judged according to that clause. ETA. Freight and liens (clauses 5 & 42) Charterer's orders (clauses 10 & 26) The subject of damages for detention is addressed. The liberty clause (clause 31) gives the vessel the liberty 'to call at any port or ports for bunkers'. Freight is earned concurrently with delivery and. we will send you our indemnity as agreed.

Ask for a copy of the report when available. Time charterparties . such as '. the owner becomes vicariously responsible for the acts of the agent.How is shifting in port treated? . There is a fine line to be drawn between being alarmist and being efficient and effective and commercially aware. 2. .' degrade the principle of once on demurrage.Brief (and debrief) that member of staff. . . The prudent master should ensure that all transactions with the agent are on a formal basis. . as should happen. consult your owners. Some owners. .Establish who he is and what his authority is. If. means just that. either in an endeavour to secure business or through lack of awareness. . or 'eligibility' as it is termed in some charterparties. This is an area where clarity of expression is especially important but not always achieved. give rise to half-rate demurrage? Masters may find that this checklist. the increasing level of inspection might derogate the owner's obligation to present a seaworthy vessel at the commencement of the voyage.Who pays for delays arising from the port authority's orders? . give warranties of alarming width.What events. A very good superintendent was once requested to undertake a marketing role. When asked why he had not known of a major chartering opportunity he replied that he had heard about it but as it was only a rumour he had not reported it.. since employed and paid for by the owner. there is unlikely to be a clause in the master's job description which precludes him from taking the initiative. for example. An undertaking that a vessel is equipped for trading to all ports and terminals to which the charterer may lawfully send her. . 17 and part I) In the tanker trades. .Try to arrange for a senior member of the ship's management team to see him before he disembarks. if in doubt. if any.Establish what he wants or needs to see and what you are prepared to allow him to see. Since the agent may well receive the majority of his business from his appointment by charterers. Again. shall not count for laytime or as time on demurrage . Condition and seaworthiness (clauses 1. many potential problems will never progress past the stage of being potential. 16. extracted from a consideration of laytime and demurrage in Intertanko's Tanker Voyage Charterers acts as a useful teaching exercise for the officers in the deck department.To what extent does the wording of the charterparty. Agents (clause 24) Although appointed by the charterer. owners and the master should bear this in mind. It should not. The master should ask himself. and if in doubt should appoint his own husbanding agent-and contact the Club Correspondent.Make sure that he is accompanied by a member of the ship's staff. Whoever is inspecting your vessel: . always on demurrage~ . . In the words of Intertanko: 'The interplay of seaworthiness (and other) undertakings and exceptions is a matter which is inadequately addressed in some charters'. even if the requirements are unusual or the regulations new. especially if the agent is to sign bills of lading on the master's behalf. Although it is properly the owner's responsibility to establish such a dialogue. the owner and the master develop an ongoing dialogue. for this requirement remains fundamental as discussed at the beginning of this chapter. It is sometimes said that tanker masters make good surveyors because they have been inspected and surveyed so much themselves.How are ballasting and deballasting handled-are they excluded from laytime only to the extent that they delay cargo operations? . as surely the charterer will: 'Is the vessel and her crew in every way fit for the intended voyage? This is particularly relevant 'before and at the commencement of the laden voyage'. An important aspect of this is 'fitness for purpose' to borrow a phrase from the quality manuals.

is relatively recently revised. the master becomes the servant of many interests: owner. . as with the voyage charter. The charterer It is hoped that the owner has been diligent in investigating the prospective time charterer since he is giving him the contractual right to give direct orders to the master. of course. is usually fairly straightforward and may well happen at sea. to give instructions to the master with regard to the method of employment of the vessel. which is used as an illustration for this discussion of the management of time charters. bearing with it the many amendments and. hold or tank capacity.There are two distinguishing features of a time charter. As such.delivety. gathering related information together under headings which are useful and relevant to the on board operationagain a possible task for a junior officer. it is recommended that the time charter is treated like a project to be addressed and understood by the whole of the shipboard team. it is generally better to advise the time charterer early so he has some manoeuvrability to renegotiate his commitments. 13 & 16) The requirement to deliver. has a vessel to run. The charterer will probably be expecting the vessel to meet his prebooked cargo contracts or fit into a schedule so that advice regarding arrival at the delivery port is important. It is important to incorporate any rider clausesalthough none is shown in the NYPE 93 contained in the annex-in the analysis and revert immediately to the owner if signs of a conflict of terms are found. re. Delivery. which has already been mentioned. contact the owner and request it. If it is not. rider clauses which were the very reason for introducing the revised version. The relationship of trust or suspicion established at this early stage is likely to set the tone for the rest of the charter. If the time charter has not been sent. In this event a good set of bunker soundings will be required and the master. shipper. such is the innate conservatism of the shipping industry. He also. within the vessel. as well as the chief engineer. contact the owner immediately. who will be dealing with his vessel at a daily operational level and with whom he should make contact in the event of a serious problem arising. receiver. The second is that time charters also address the charterer's right. The first. Since the employment may well engage fixing the vessel on voyage charters. For his part the master should take such steps as are available to him to understand how the time charterer is organised. If delivery is likely to be delayed for any reason. and indeed duty. However. which is when the vessel comes on-hire. sometimes contradictory. it addresses subjects such as speed and consumption and bunkering which do not concern a voyage charterer (beyond his right to expect the owner to prosecute the voyage with due despatch). voyage charterer. Perhaps we should say. all of whose interests he has both to serve and protect. As with the voyage charter. not jealously guarded by the master amongst the ship's papers. hire payment and cancellation (clauses 2. 10. The starting point. if necessary. as well they might be. Commercially sensitive information can. will need to know exactly how much fuel oil is on board since the charterers will be working on the deadweight given in the description of the vessel which stipulates the ship's constant. The New York Produce Exchange charterparty (NYPE 93). 11. Clause 13 re-emphasises the importance of this. be erased but it does no harm for the management team to be aware of the earning potential of their vessel and of the cost of lost time-especially if they are also made aware of the daily running costs (Chapter Three). the older version continues in use. Description of the vessel One of the first items to check is whether the description of the vessel is correct. is that it is a contract for the use of a vessel rather than just for the hire or space. a multi-million pound investment to manage and take it as a compliment to maritime professionalism that in (too) many cases. the owner (as the person ultimately responsible for the vessel and the enormous liabilities which it is capable of incurring) does not feel it necessary to establish a personal relationship with the master. is to work logically through the charterparty. time charterer.

. the market is in his favour. Therefore.A point to consider is how communications are to flow between master and owner and master and charterer (and subcharterer if fixed on voyage charter). the charter may be for a year or more and this raises the extent of the continuing obligation of seaworthiness. Bear in mind. it will be helpful for the master to know whether the fixture which he is performing is above or below prevailing market conditions as this will. emerge during the charter. There is little point in the owner incurring . For a start. too. the charterer will want direct communication with 'his' master and will reasonably expect prompt responses and reports. . strong and in every way fitted for ordinary cargo service . The on-hire and off-hire survey may be conducted by one surveyor actingjointly on behalf of both owners and charterers.hire surveys. 6 & 7) So far as time allows. In fact. This could result in a dispute between owner and charterer. of course. However. It is generally held that the obligation to maintain a seaworthy vessel 'for and during the service' is one of due diligence rather than being absolute. in many circumstances. It is an essential part of the service provided under the charter that he is able to do this as otherwise it will prejudice both his and the owner's ability to limit their liability. he will undoubtedly endeavour to fit in an extra voyage. ready to receive cargo with clean-swept holds and tight. the vessel should be prepared for the on-hire survey and the charterer's surveyor will reasonably expect to find a vessel which is '. he will probably try and redeliver an 'expensive' vessel as early as possible. if applicable. this concept can be extended to include the proper working of the ship's cargo gear. The surveyor should be accompanied by the master or a senior officer who should keep notes and ensure that the on-hire survey and supporting notes are clear and comprehensible in such a way that the off-hire master can effectively argue the owner's case. Thus the charterer can reasonably expect the vessel to be kept in class and properly maintained (by a competent crew) and. The owner has an obligation to keep the vessel in a seaworthy condition and this obligation extends beyond the fabric of the vessel to include the competence of the crew. it is worth bearing in mind the off-hire survey even at this early stage. the owner will. staunch. Alternatively. determine the charterer's approach. If problems. Redelivery can become a very contentious matter since the period of the charter will not necessarily correspond with a natural break in the charterer's employment of the vessel. . The owner may instruct the master to refuse to comply with the charterer's orders if they suspect that the charterer is planning an illegitimate last voyage. of performance for example. 7 & 14) These clauses bear careful reading so that accounting and disbursements can be organised from the outset in accordance with the terms of the charter. On and off. Whilst the obligation to ensure a seaworthy vessel throughout the hire period may not be absolute. check the wording of the particular charterparty. he may actively look for reasons to cancel the charter. however. If time charter rates have moved against him. the time charterer presenting his (chartered) vessel for a voyage charter will be expected to present a seaworthy vessel as discussed at the beginning of this chapter. the owner will require that hire be paid at the prevailing (higher) market rate. it needs to be fast and efficient. OwnersIcharterers to provide (clauses 6. Understandably. Lines 33-34 and 81-82 of NYPE 93 amount to an express obligation to make the vessel seaworthy on delivery and this includes cargoworthy. Indeed. It is important to check and understand the cancellation clause. Such problems have been known to lead to a system of double accounting which should be avoided. that whilst the charterer may well send the same surveyor to conduct both surveys. This raises the subject of seaworthiness but before moving to this subject. a different master may be in command of the vessel at that time. seaworthiness (clauses 3. the charterer and the owner may each appoint their own surveyor-again. it may well be counter-productive to maintain a diplomatic silence over problems impinging on the seaworthiness of the vessel. since the off-hire survey is conducted in owner's time. If. especially the circumstances under which the cancelling date can be extended and especially so in a volatile market. want to know about the problem first. Furthermore. The master should be aware of possible problems as the time charter draws towards its conclusion and keep his owner closely advised of any relevant information about forward commitments. . again not unreasonably.'. the vessel should always be cargoworthy and.

holds. stores and fuel'. This means that. The liberty clause. As indicated earlier. 15. However.. The deck officers also need a clear understanding of who is controlling the loading. the final responsibility remains the master's. it may be noted. The NYPE 93 extends the charterer's obligations with regard to loading which. This is especially so when a claim is brought at the instigation of a receiver who is likely to pursue the largest and most visible asset-the vessel. in the final analysis it is. hopefully.. if the time charterer subcharters the vessel to a voyage charterer it is prudent to ascertain the status of the liberty clause in the voyage charterparty. have expert knowledge of the cargo being shipped. possibly Shrough cargo being loaded. are to bring the cargo alongside and lift it to the ship's rail where the master assumes responsibility. 12. Needless to say. clause 14 introduces the concept of a supercargo. 22 & 26) The question of trading limits should be fairly straightforward unless the master becomes aware. Cargo. It is a little late to complain about a parcel of excluded cargo with pen poised above the bill of lading. trading limits. not possibly as common as yesteryear but not extinct either. the time taken to build a working relationship with the supercargo and to understand his requirements should pay dividends. Certainly such clauses as 'charterers shall remove their dunnage and fitting at their cost and in their time' provides an opening for a mutually beneficial negotiation-or in some cases a firm insistence that the terms of the contract are stringently complied with. However. the master's supervisory role may need some fine judgement and the wording of the clause.. 13. cutting out the charterer's cargo. . Despite the charter's indemnity for deck cargo. inadvertently or otherwise. Whilst the supercargo should be able to take a lot of weight off the master's shoulders with regard to dealing with stevedores.costs which can reasonably be for the charterer's account. the liberty to carry clauses should be added to the bill of lading in accordance with Clause 30 (c). and remains the master's responsibility to sign bills of lading or to authorise the agent to do so on his behalf. sailing orders and liberty clause (clauses 5. reserving only proper and sufficient space for . and should. Safe berths. but make it very plain that the master remains responsible for the safe navigation and safe operation of the vessel. To deviate may result in loss of the ability to limit liability which has a nasty habit of passing through the time charterer and lodging with the owner. The charterer's obligation to direct the vessel only to safe ports and safe berths is much the same as it is under a voyage charter. (A time charterer involved in a liner trade where the time charterer/liner operator has house agents in the port is naturally a different scenario as he may elect to be the carrier under the bills of lading. 8. The owner has a right to rely on the charterer complying with Clause 4 with regard to the carriage of lawful merchandise and the exclusion of certain goods. The relationship between the master and the supercargo is one which perhaps finds a parallel with that of the master and pilot.. the master and his officers need to remain vigilant to ensure that these undertakings are not breached. as mentioned previously. should be studied carefully. Clauses 15 and 16 reinforce the charterer's right and duty to direct the vessel.) Finally. shore officials and stevedores meals should be dealt with. that the vessel maybe directed to a war zone or a port which he does not feel is suitable for the vessel. despite the charterer's right and obligation to perform all cargo operations (lines 103-105). 23. claims and Hens (clauses 4. does not refer to deviation for bunkers as this is the time charterer's concern. As well as setting out the way in which the (sometimes not inconsiderable) cost of agents. 27. under common law (and subject to the custom of the port). cargo work. 28) The charterer clearly has the right to use the 'whole reach of the vessel's holds . especially if amended. the chief engineer cannot have too much fuel up his sleeve. it is worth bearing in mind the caveats about the value of indemnities with respect to signing clean bills of lading. Owners should be advised immediately.

it may be a wise course to hire shore labour to assist the crew and relieve them of routine duties. Although Clause 19 states when the vessel was last drydocked. stowed or lashed than charterer's local representatives consider necessary. With generally smaller crews. The current situation appears to be that the warranty will apply at the date of delivery. the charterparty does not provide a formula for addressing the inevitable fall-off in speed-or increase in bunker consumption-as time passes since the last time the underwater hull was cleaned.or three-shift cargo operations involve the use of ship's gear. if possible. cargo claims are settled under the Inter-Club Agreement of 1970 and its subsequent amendments. Speed and consumption. means in accordance with the speed and consumption figures contained in the description of vessel-which is one good reason why this information should be carefully checked as soon as possible. In view of the potential off-hire penalties and liability for stevedores' standby costs. have caused the relevant loss or damage. it will be necessary for the chief officer to organise work schedules carefully if two.. may be added to the end of line 105 in an endeavour to shift more of the responsibility for cargo operations to the owner and master. trimmed. in any case. if speed does fall off. the latest of which came into force on I January 1996. . 8 & 9) Line 100 requires the master to perform the voyages with due despatch which. If the words '. However. In such cases. the stevedore's admission of liability and holding the charterers responsible for (prompt) repair. The words and responsibility'. charterers may be able to deny liability which makes it even more imperative that the vessel takes prompt steps to hold the stevedores liable. Under NYPE 93. logging the event. However. The engineering department also need to be alerted to the need to keep the cargo gear operating at capacity. who effectively insure cargo claims on behalf of both owner and charterer. Neill L. it is essential that the master can provide contemporaneous records to support the owner in the event of arbitration. The objective is to replace expensive litigation by apportionment based on cause and relevant extracts from the Agreement appear in chapter seven. . in this context. Moral-keep records and take photographs.J stated: . giving some instructions in the course of the stowage. In the Shinjitsu Maru [1985] 1 LLR 568. but if it can be shown in any particular case that the charterers by. getting. for example. the master has a professional duty to ensure that the cargo is stowed in a safe manner. at the time of delivery. it is up to the master and his officers to react immediately. but this will not be the case with all time charter cargo clauses and. and responsibility' have been added to clause 8(a).The charterparty seeks to shift responsibility of cargo handling on to the charterer. I have come to the conclusion that the correct approach is to construe the words 'and responsibility 'as effecting a prima facie transfer of liability for bad stowage to the owners. Clause 35 makes it abundantly clear that stevedore damage is the responsibility of the charterer. .. The problem areas are likely to centre around a master's request for cargo to be better . the owners will be able to escape liability to that extent. bunkers (clauses 7. or throughout the charterparty. starting with an endeavour to decide whether the speed warranty applies at the date of the charterparty. charterers may well endeavour to prove that the fall-off is due to a breach in another charterparty clause such as the requirement to maintain the vessel properly (lines 81 & 82). The Inter-Club Agreement is designed to operate on the basis of printed clauses in the NYPE93 (and Asbatime Form 1981) and material amendments such as the addition of 'and cargo claims' to clause 26 can affect the impact of the Inter-Club Agreement and increase the likelihood of disputes between owner and charterer. and the warranty will not normally be construed as a continuing warranty throughout the charter period unless the charterparty specifies a continuing obligation (as in most tanker charters). Speed and consumption clauses have provided a fertile area of dispute over the years. The agreement is drawn up by the International Group of P&I Clubs.

Average speed and consumption-there is legal precedent that the averaging should take place over the whole of the charter period. a speed of . . There is generally a grace period [clause II (b) commonly referred to as the 'anti technicality clause'] to allow for late payment but. ar least the charterer will gain from an increase in the vessel's 'whole reach and burden'. as opposed to Force 4 moderate breeze. a careful record of bunkers used will be required and. The other side of the coin is bunkers and bunkering. Charter hire. . such words as 'about 14. . especially on a changing market./day. the arbitrators expressed the view that'. For example. if required.hire and withdrawal (clauses 10. ..t. be interpreted from archive data for much of the world's oceans. It is of little benefit to them if the vessel had the ability to overperform at some other period if she is jeopardising a current subcharterer by under-performing. 0 Max-with respect to consumption does set an effective upper limit and if the vessel burns more in order to maintain 'about' the charterparty speed. in the Al Bida. Of course. in an endeavour to loosen or tighten the interpretation of the clause: . Off-hire is covered in clause 17. the owner is in a difficult position if there is a cargo on board belonging to a third party since he still has an obligation to deliver the cargo under the terms of the bills of lading. hire is payable either monthly or fortnightly in advance. One might feel inclined to speculate at the meaning of the word 'in' in the speed warranty. The owner (in such a case) is simply stating that if conditions were ideal (no wind.'. no swell.Sea and weather-again. too. Most mariners have battled against seasonally unusual adverse currents and contrary winds and seas whilst hoping that the charterer did not have another vessel in the vicinity.About-although the general understanding is that this imports a margin of half a knot or 5% the Court of Appeal endorsed the arbitrator's conclusion in the Al Bida [1986] 1 LLR 142 that the word 'about' cannot be fixed by law. If the vessel does come off-hire. no waves. trim. It is not unknown for the vessel to exaggerate the condition of the weather. . but charterers can be expected to challenge this vigorously. Be warned that meteorological satellites now transmit so much data that wind and sea conditions can. but because those ideal conditions will not be met in practice he has to be given some margin-the speed will fall away (when the vessel is driven at the warranted consumption) because of the effect of the moderate weather'./day' (for example) have a straightforward commercial meaning. size. charter payments can take some time on their route from charterer to owner-and charterers have their cashflow problems.t. They do so at their peril as modern technology is now coming to the not necessarily welcome rescue.5 knots at 35 m. Somewhere down the line. etc. it can be argued that a stoppage on passage to effect a repair has little relevance to the charterer if the passage can be completed within the constraints of the speed and consumption clause. There is little point in being off-hire if one does not have to be. or Force 5-moderate waves. 'about' must be tailored to the vessel's configuration.5 knots in moderate weather on a consumption of 35 m.. Despite the wonders of the modern banking system. no current) then the vessel would achieve 14. Frequently Beaufort Force 3 or less is taken as moderate weather.Charterers may well insert a rider to the speed warranty to the effect that 'the vessel is capable of steaming and shall maintain throughout the charter . As the arbitrators concluded. 11. off.' which all goes to show how easy it is to make the relatively simple moderately complicated. . Many words and phrases decorate speed and consumption clauses. The more astute might even persuade charterers to pick up half the cost if he can convincingly present the speed and consumption equation from the owner's viewpoint. . if the chief engineer does manage to keep this amazingly low. the excess consumption is for owner's account. either on a per day or per deadweight basis. draught. the owner will be carefully considering whether to exercise his right to withdraw the vessel. and this is covered in chapter nine. 17) Since charter hire is the lifeblood of the shipowner's business regular payments of charter hire are important. however. In most but not all time charters. the master needs to start making a commercial calculation about the cost of underwater cleaning versus the potential for performance claims.

. . To manage them effectively. In fact. Shellvoy 5.Clause paramount and other protective clauses (clause 31) Clause 31 sets out clearly a range of clauses which are designed to protect the carrier and which also need to appear in all bills of lading which the master (or agent under his instruction) may issue. Holman Fenwick & Willan.Unsafe ports and berths claims-practical steps for masters. In order to achieve this. Harvey Williams & Stan Bormick: Intertanko 1992. Conference Paper October 1994: Charles Debattista. the master will need to: . The most common and probably the most widely known is the clause paramount which brings the time charter within the ambit of The Hague. the master needs to be fully briefed himself. Lux. chartered shipbroker and maritime arbitrator. and . the maritime legal fraternity gave generously of their advice. . Arbitration (clause 45) Summary This charterparty provides for arbitration to be either in New York or London. Charles Baker. Once again. and to them I must add Graham Clarke. Tanker Voyage Charters. although based on standards documents. Conference Paper September 1994: Steven Baker. Practical Measures to Prevent Fraud. charterparties are essentially negotiated contracts. Partner: Herbert Smith. especially when vessel management has been contracted out.understand basic chartering concepts and appreciate the meaning and impact of various clauses. Commercial Contracts. the Baltic and International Maritime Council. This means that the shipowner. . Time Charterparties. many of those who contributed to the previous chapter contributed to this one. It will be seen that. of such other national legislation as may mandatorily apply by virtue of origin or destination of the bills of lading may well produce a situation which brings The Hague Rules and the Hamburg Rules into conflict. ACKNOWLEDGEMENTS AGAIN. ANNEXES FOR CHAPTER 6 . New York Exchange Charterparty 1993.be aware of prevailing market conditions (chapter 2-know the business in which you operate) and be aware how this can result in apparently small adjustments to charterparty wording which may have major implications. the wording in line 323 '. Thanks are also due to Paul Veldhuizen of Shell for permission to reproduce their Shellvoy 5 and together with a sample of voyage orders as well as BIMCO. REFERENCES Unsafe Ports. must himself take positive and decisive actions if loss prevention is to become part of his philosophy and not remain an initiative of his P&I Club. .Sample charterparties. Bimco/Fonasba standard statement of facts (short form). Nautical Institute publication: The Mariner and the Maritime Law. Signing Bills of Lading. . Ince & Co. or Hague-Visby Rules. Southampton University. NYPE 93.Unsafe Berths. Chapter 7 MARINE INSURANCE Hull and cargo insurance. Paper: Richard Williams.be able and willing to brief the vessel's management team. Ince & Co. despite the endeavours of the P&I Clubs to introduce wording to prevent this.plan ahead and prepare early. Paper: Johnathen S.Protection and Indemnity Associations.. Bimco Gencon voyage charter plus Gencon bill of lading.

called 'an absurd and incoherent instrument. . This is linked to chapter II where three examples of a maritime accident are analysed. not insurance as such. An increasingly litigious world.imposed higher deductibles which means that shipowners are carrying much more of their own risk. it's an insurance item I was the common response to mistakes and mishaps giving rise to damage. The focus will concentrate upon how knowledge of the terms of the vessel's insurance policies can affect the master's actions and decision making and how his actions affect the settlement of claims. and focus on areas where the master's actions and the evidence provided by him and his crew can make a material difference. USA and Germany. when referring to a (then current) policy of marine insurance in 1791. the master is the first on the scene and his handling of the incident and the way in which he gathers evidence will directly affect either the prompt settlement of a claim or the successful outcome of an arbitration or Court case which may not occur until some years later. which is by far the largest marine insurance centre with an annual marine premium income in excess of US $3 billion. the USA. although the funds that finance the London market in particular are themselves international. General average is. The London market itself is a participation market with a number of underwriters taking a share of the London order. This will 'Include examining: . by means of which policy of assurance it comet to pass that upon the loss or perishing of any ship there followeth no/ the undoing of any man. for example. whereby all merchants. the Institute Cargo Clauses. These paragraphs concentrate on the way in which the London market operates. although it is quite possible for an insurance policy to have insurers from more than one market underwriting the policy with. It is hoped that this chapter will help to clarify what MrJustice Buller. as recorded in the preamble to the Elizabethan Marine Insurance Act of 1601: . with the ever. cargo and liability (P&I) as well as touching very briefly upon additional areas such as war risks and loss of hire. terms and conditions are changing. France. to a lesser extent. and rather upon them that adventure not. 60% in London and 40% placed in the American or Scandinavian market.For many years 'don It worry. say. In all cases. but care must be taken to ensure that the subsidiary market follows the lead market with regard to claims settlement. are allowed to venture more willingly and freely. but the loss alighleth rather easily upon many men than heavily upon few. Scandinavia and France.' Hull and cargo insurance The markets The major international insurance markets are London.Liability insurance and the P&I Clubs: the ways in which P&I Clubs can support the shipmaster over a wide range of problems from personal injury through cargo claims and charterparty disputes to pollution incidents. Phoenician maritime practice and Rhodian law both contain references to the spread of different levels of risk and general average is a feature of maritime commerce which addresses how the common risk can be fairly shared. than those that do adventure. This chapter is designed to provide a working knowledge of marine insurance without undue reference to case law. If this does not happen the master has to be particularly careful when gathering evidence relating to an .present threat of pollution liability. means that liability insurance is adjusting to changing circumstances.. are significant players in the London market. This chapter explores the three main areas of marine insurance: hull. but a risk that is normally covered by marine policies. especially the younger sort. Maritime insurance is seen at its most proactive in supporting and facilitating the growth of trade. . The world has changed: Insurers have re..The way in which claims are settled and the importance of the early actions taken on board by master and crew in ensuring a satisfactory settlement. The main objective is to achieve a keener premium rate. At the same time. THE COLOURFUL HISTORY of marine insurance has been irretrievably intertwined with the development of international trade and the maritime adventure from its earliest days. however.The fundamental principles behind hull insurance and the scope and operation of the Institute Hull Clauses and.

perhaps more importantly. The use of the term 'market' is deliberate. which come with its dominant position. The market is. . This. driven by supply and demand and this is one of the main reasons why the marine insurance industry has a problem with the suggestion that it should play a more central role in regulating the safety of vessels and their operation. The broker should know whether the underwriter i. The objective is to find an underwriter who will offer a competitive rate and who has enough authority or reputation in the market for other underwriters to follow his terms and conditions so that 100% of the London order will be covered. the market does take its safety responsibilities. all this should make little difference. one practical. but. paid far enough ahead of any claims settlement so that it can be invested and generate both reserves and a profit. where independent underwriting syndicates compete for business and the Institute of London Underwriters. and Commons. The product of both Lloyd's and the ILU is the same in both policy terms and claims handling. or by unwritten law (common law) interpreted in accordance with precedent as is the case with much (but by no means all) of English law. where the marine underwriting activities of the major insurance companies have their market. all judges are human and will. with other companies and syndicates. Precedent and the law is initially established by custom and practice. in this present Parliament assembled . by the King's most Excellent Majesty. Both sections of the market are likely to participate on any one risk. should more properly lie elsewhere and not least with the self-regulatory role of the prudent shipowner. to a large extent. Underwriting representatives from both organisations sit on common advisory bodies such as the joint Hull Committee which meets regularly to discuss matters of common interest to the market. The broker must then complete his slip. Figure 7. a 10% to 20% share of the risk. hungry for a certain type of business or whether he is not seeking that class of risk and is therefore likely to be expensive. it must always be borne in mind that underwriters compete for business.insurance claim as he may well have to deal with two surveyors and the shipowner/ manager with two adjustments based on two different policies. seriously even if it is not prepared to take over a regulatory role towards safety. prefer to justify their decisions by what has been done in the past. The psychological reason is that.0% of the risk so that the number of companies and/or Lloyd's underwriters appearing on the placing slip (the working contract document used by the brokers when physically placing the insurance with all the participating underwriters) can often exceed 50.. or as renewal approaches. the SG policy survived because it had the strength of precedent behind it.1 illustrates the development of the marine insurance policy and the central role played by the Lloyd's SG policy form for almost 200 years. in turn. hopefully adequate for the risks accepted in the contract of insurance. . and this still holds good for the new clauses such as the 1995 Institute Time Clauses-Hull.. enacted on 21 December 1906 '. To the user. The lead underwriter may take. are treated with respect-one psychological. the broker will be aware of the preferences and expertise of the various underwriters. some of them taking as little as 1. In selecting a lead underwriter for a specific risk. for instance. the market would argue. The broker must then decide how to approach the market and who is likely to be the best lead underwriter for that particular business. naturally. Using language more suited to the Elizabethan definition of marine insurance than to today's world. I did much to codify the law relating to marine insurance. is interpreted either by written or codified law after the fashion set by the Code Napoleon. taking into account the past claims record and the risks inherent in the operation. the broker should discuss thoroughly with the owner how best his vessel or fleet can be covered. Cover is nearly always placed in the London market through a marine insurance broker who provides a wide range of services for his client including claims collecting services. by and with the advice and consent of the Lords Spiritual and Temporal. Having said that. the assured. The market consists of both Lloyd's of London. some may prefer to lead on dry bulk tonnage and spread their risk by following on tanker tonnage. The practical reason is that it is desirable that decisions should have as great a degree of uniformity as possible. There are two reasons why the previous decisions of Courts. On first placing a risk. They require premium income. This. but much still depended upon precedent and the interpretation of the various terms and conditions by the Courts. Precedent and the law . such as ship safety and standard market terms and conditions. Some may have a particular knowledge of the offshore industry or have a close relationship with a particular shipping community or be prepared to cover older tonnage. The United Kingdom Marine Insurance Act (MIA).

. Above the High Court sit (usually three) judges forming the Court of Appeal. pronouncements by the way. The decisions of a Court which becomes the precedent for future cases appears as ratio decidendi which is the judge's pronouncement of law in relation to the particular facts before him. whose decisions are binding on the High Courts and upon its own judgements. A judge in the High Court is bound by the decisions of superior Courts but he does have a degree of flexibility with regard to previous decisions of other High Court judges. The judge may also make obiter dicta. To a great extent. The precedents of decided cases are. A degree of flexibility in a rapidly changing world was introduced in 1966 when it was agreed that the House of Lords may' depart from a previous decision when it appears right to do so'. whilst not binding. which.Precedent is initially set by judges sitting in the High Courts-in the case of maritime law. Above the Court of Appeal sits the House of Lords (or the Privy Council for overseas legal systems which relate back to the English system) as the highest Court in the land whose decisions bind all lower Courts. commercial matters and the distribution of prize money) or the Queen's Bench for commercial disputes. the 'anchors of the law'. as the Elizabethan lawyer and writer Sir Francis Bacon so eloquently said. either the Admiralty Court for technical shipping disputes (the Court of Admiralty originally dealt with criminal matters on board vessels on the high seas. the Court of Appeal is an interpreter of legal precedent rather than a judge of right and wrong. may guide future judgements.

.

The new clauses recognise many of the changes that have taken place in the shipping world over the previous 12 years and. on the other hand. Institute Voyage Clauses-Hulls Cl 285. damage. Here will be listed the percentage of the risk insured by each individual company or syndicate. in some areas of cover. is always on h voyage by voyage basis. The previous version only specified English law to apply. Inside is a schedule page containing the following information: (a) Policy number. whether it be Hull or Cargo. such as the already mentioned Institute Time Clauses Hull and Institute Cargo Clauses. (f) Agreed value (if any). many of which are standard Institute clauses. it becomes necessary to establish the value of the vessel or item insured at the time of the loss (subject to the sum insured being the maximum recoverable amount). were seriously out of balance. (c) Vessel. leaving its interpretation to the Courts in whichever country suit was brought. The policy is. such as these have the advantage of facilitating the rapid placement of the insurance risks. if not. As described below.'. (e) Subject matter insured (Hull or Cargo). and the extent of this liability is established by the attachment of applicable clauses. These were replaced by a new set dated 1 November 1995. Usually policies are valued. The whole agreed value need not be insured (indeed. The demise of the SG form meant that the associated clauses had to be able to stand alone when used in conjunction with the new Policy form. although. which contained the practical requirements of the assured.. they are more restrictive. as they cut down the amount of proof reading that the underwriters have to do. the insurance may be split between two different markets in which case settlements are made proportionately). The following are examples of the standard sets of clauses which can be attached to the policy. Following representations from. Institute Cargo Clauses (B) Cl 253. the London market introduced a new policy form in January 1982 and agreed to cease using the SG policy from 1983. (d) Voyage or period of insurance. The first set of stand alone ITC Hulls Clauses were introduced on I October 1983.sets'. CARGO Institute Cargo Clauses (A) Cl 282. (iii) The March 1991 policy form corrected the earlier version by stating that 'This insurance shall be subject to the exclusive jurisdiction of the English Courts . Insurance for hulls is generally effected for a period of 12 months.By the late 1970s it was becoming apparent that the balance between the SG Policy. HULL Institute Time Clauses-Hulls Cl 280. is responsible only for their own proportion of the risk as established by the 'placing slip'. endorsements. Institute Strikes Clauses (Cargo) C1 256. which originally contained the fundamental principles of marine insurance. in essence. amongst others. . An example of the format of the new policy is contained in the chapter annex. Institute War Clauses (Cargo) C1 255. in the event of a total loss. little more than a vehicle for identifying the Assured and the Insurers and for attaching the agreed range of clauses (some 'official' or Institute clauses and some 'unofficial' or bespoke clauses). (i) Clauses. (ii) Each (insurance) company and/or Lloyd's underwriter who participates in the insurance. on some occasions. The current Marine Policy used by both the Institute of London Underwriters and Lloyd's is based on a very different structural approach. (g) Amount insured hereunder. Standard clauses. (h) Premium. (b) Name of assured. the policy may cover only a specific voyage. This list is far from exhaustive. and the following points are worthy of note: (i) The insurance cover is very simply stated as against loss. special conditions and warranties. UNCTAD. . and the Institute Clauses (both Hull and Cargo). Cargo insurance. liability or expense. many of the clauses are organised in standard groups or . and of less relevance C1 257-260 covering sendings by post and air cargo. On the facing page of the policy document are set out the participating companies and Lloyd's syndicates. Institute Cargo Clauses (C) C1 254.

the evidence which they produce may well be examined in the cold light of a Court room. by people who know a lot about the law but possibly rather less about the practicalities of ship operations. The clauses are discussed in groups under logical subject headings and are reproduced in full in the annexes. many companies or Lloyd's syndicates negotiate amended or restricted conditions. A contingent interest is more common. Several parties may. rendered defeasible (i.g. Masters should bear in mind. it is necessary to establish who and what can be insured. The master is strongly urged to enquire about the terms of his insurance if the details are not already available on board. premiums) but areas where on-board action can have a direct affect are explored in more detail. annulled).The ITC Hulls clauses are discussed in the following section. Some of the Institute clauses. may either place the insurance on behalf of the shipowner or be coinsured under the owner's policy. will only be touched on lightly here if their content mainly affects the shore management (e. the salved vessel sinks). in theory at least. Although the ITC Hulls 1995 are the official face of London-based marine insurance. Three other terms are relevant in connection with the definition of an insurable interest: a defeasible interest. A picture may or may not be worth a thousand words. however. Frequently it will be the latter as it is the charterer's operation which determines the level of risk and consequently the premium. Co-insurance is an important matter and it is prudent for the master to know who else is named as co-insured on the policy for. if not (e.. If-the owner has used debt to finance the purchase of the vessel (that is. the terms of that contract will determine whether the owner or the charterer is to effect insurance. with the relevant changes between Hulls 1/10/83 and 11/11/95 highlighted. the structure has been somewhat simplified and it is possible to understand the policy by a systematic review of the 27 separate clauses which make up the full set of Institute Time Clauses (although only areas relevant to a master's actions. if he has a bank loan) the lender will inevitably attach a mortgage to the vessel and as mortgagee. which may be different from those of the owner. however. the correct handling of the situation and recording of the evidence can materially affect both the quantum of the claim and the speed of settlement. if used. a contingent interest and a partial interest. whoever has an insurable interest in the marine adventure can be named as an assured. that in the event of a Court case. The aim in reviewing the policy and the clauses is to establish the background against which the shipmaster can make his decisions when involved in a situation which may give rise to an insurance claim. It is less common these days for a vessel to be owned by a number of parties each holding directly a number of 64th shares in the vessel-a partial interest-but more common for a person to The assured . In all cases.. may not seem so at that future date under that type of interrogation. a photograph can certainly reinforce the argument of the man who was on the spot and remind him more clearly than a printed page might of the circumstances at the time. too. Details of the vessel's insurance cover should not be a taboo subject. Generally a time charterer will effect his own insurance to protect his interests. three to five years in the future. although important. Shipmanagers. Starting logically at the beginning this is the shipowner. the bank will also' have an insurable interest (see Assignment). What may seem crystal clear and obvious now. for example. renewals. as a collision. known only to the owner or manager. and banks may also place their own mortgagee interest cover. the vessel is on bareboat or demise charter. and hopefully as rare. they will have a common interest. In short.g.e. If. the owner of that towing vessel has a defeasible interest which will either be confirmed if the salvage act is validated (is successful) or. The Institute Time Clauses-Hulls (ITC Hulls) The fundamental principles of marine insurance have not changed with the introduction of the new marine policy with attached clauses and their interpretation is still established by the precedents set by the Courts over many years. but which still constitute an insurable interest. will be reviewed here).. However. Firstly. This may be as straightforward as heavy weather damage or as complex. A defeasible interest is rare but should a vessel be towing an abandoned vessel into port in the hope of salvage. have a contingent interest in the successful operation of laying or repairing an oil pipeline or submarine cable.

Attachment of the risk Probably the only time a master will be involved in the attachment of insurance cover is in taking over a vessel. in some ways. The Clauses Continuation (ITC cl 2): Subject to the assured invoking this clause by advising insurers prior to the expiry of the insurance. take place at night or close to a weekend or holiday. Knowing who is. a relevant point at which to revert to one of the underlying principles of marine insurance. or (ii) If in port and in distress. In such cases. This narrows the 1983 wording to restrict continuation only to cover vessels which are in distress. be likened to tax forms where there is a fine but very definite line between tax avoidance and tax evasion. would be a partial interest. the underlying fabric condition of the vessel is still established by a classification society. requirements or . if the utmost good faith is not observed by either party. insurance cover is placed 'lost or not lost'. Classification (ITC cl 4): Despite the introduction of condition surveys by the London Salvage Association. not surprisingly." freight disbursements. the classification of the vessel has to be maintained and all class recommendations. knowledge of a loss precludes the placing of insurance cover although not its assignment. The interest insured Utmost good faith This is. and. Although less significant in these days of rapid communications. Finally in this section. passage money. the insurance on the vessel is held covered by the underwriters. Since physical delivery may well. commissions and profit are all considered insurable interests. As well as the vessel and. The period covered is usually restricted to 12 months or less. . This includes both misrepresentation and nondisclosure and the duty of disclosure includes advising of material changes during the voyage as well as when placing or renewing the insurance. . it may be two to three days before the time of attachment can be formally advised to the underwriter. when must interest attach for it to be valid? The assured must have an interest in the subject matter at the time of the loss. the period of cover can be extended on a monthly pro rata basis: (i) If the vessel is at sea and in distress. cover will be organised to attach at the earliest time at which the vessel is likely to be delivered but the actual time of attachment will be the time of delivery established on the protocol of delivery (see chapter twelve). and usually seems to. not amounting to the full value of the vessel. the contract may be voided by the other party. Not surprisingly. the interest insured is not defined within the clauses and it is the definition within-the Marine Insurance Act (1906) and its subsequent interpretation in the Courts which establishes this. until 'arrival at the next port in good safety'.have a lien on the vessel which. It is important for the master to present the evidence relating to a claim in such a way that the average adjuster or owner's claims manager can recoup the maximum possible under the policy. Tackle. perhaps. although he need not necessarily have an interest when the insurance cover is placed. In such cases. . in the words of the old SG policy. as are the master's and crew's wages and the potential liabilities to a third party that arise directly from an insured peril. The dividing line between third-party liability covered under the hull policy as opposed to protection and indemnity cover will be explored later in this chapter. 'Ordnance. established in four sections (from 17-20) of the MIA (1906): A contract of marine insurance is a contract based upon utmost good faith. or who might be. 'until the vessel is made safe'. This is common in cargo insurance when the cover is frequently assigned to the benefit of the consignee (see chapter four regarding the transfer of risk and title). Insurance claims can. Unlike the old SG policy. covered is important for the master if he is to gather and record evidence relating to a claim in such a way that the company's claims manager or an average adjuster can present the maximum justifiable claim. Apparel & etc .

but allows minor accident damage to be claimed and repaired as part of normal ship operations. Termination has important implications. Much could rely on well kept and convincing ship's records.1 (termination) also includes the circumstances where 'a periodic (classification) survey has become overdue' as an event taking the assured outside the terms of his cover. Subclause 5. There are many cases when the official ship's time of an event is required and such a signal can be used for a little judicious nudging of unresponsive owners or managers. Scope of cover and navigation (ITC cl 1) This clause covers three main points which relate directly to the master and the shipboard operation: i) Pilots: The master has the right to sail with or without pilots. this is also considered as similar to a change of owner/manager although the standard Bimco bareboat charter allows for insurance to be effected by either owner or charterer. have to be reported to class. It may well be that the Courts will come to consider this a material change of similar import to a change of the technical manager as the ISM Code bites. class is automatically withdrawn as and when one of the periodic surveys become overdue (in certain circumstances class can be extended for up to a further 3 months if agreed by the society). insurers agree that. This could have serious implications should a vessel. The mortgagee will. especially in this age of changing managers.restrictions have to be followed to the letter. as part of his loan agreement.. 'if an event occurs at sea which affects class.. Termination (ITC cl 5) (previously clause 4). The practical effect of this is that total loss claims and any claims over a specified amount are collected by the broker in the normal way but paid to order of the mortgagee rather than the owner. Nevertheless. unless the classification society has specifically agreed to an extension. The ITC 1995 clause 5. the old . Furthermore it is a condition of both class and the insurance cover that any incidents. 27March 1995'is a sensible precaution. unless specifically agreed to the contrary by underwriters in the event of a change of flag. Assignment (ITC cl 21: previous clause 5) Although the MIA (1906) provides for a marine policy to be assignable. be found to be behind schedule with the periodic surveys or the planned maintenance and survey schedules required under a continuous machinery survey (CMS) in order to maintain class. Consequently. Although it is not the master's direct responsibility to correspond with insurers. but this right is naturally subservient to local bye-laws and regulations and the Courts will tend to look at what a prudent mariner would have done in the circumstance (although the policy provides cover for the assured in the event of crew negligence. or enables repayment of the mortgage in the event of total loss. at 0700hrs. with this automatic withdrawal of class the insurance of the vessel lapses at the same time. One of the most common forms of assignment is in favour of a mortgagee. 5 In the new regime. This protects the mortgagee's interests in the event of major damage. including that of the master). the provisions of clause 21 prevents this unless the agreement of the underwriter is secured. or the insurance cover cancels automatically. a well turned message to the effect 'Please advise insurers that flag was changed to . In the case of the Caribbean Sea (1980) the Court heard and accepted evidence from Bureau Veritas that the society's rules differentiated between 'the loss Of validity of the classification certificate which is an automatic consequence of the omission by the owner to fulfil his obligations towards the society and the withdrawal of class which requires a positive act from the society. require that the insurance cover is assigned in his favour and a dated notice of assignment will be attached to the policy. having suffered damage from an insured peril. introduced by the IACS classification societies. In general. ownership or management (or requisition which has a similar effect on the governance of the vessel). conditions or damages for which the classification society might make recommendations for.2 provides for an automatic termination of cover. the vessel is held covered until the next port. with class approval the vessel can continue her voyage to a suitable repair port. Clause 5 does not specifically mention a change of crew managers or change of crew composition (including nationality) under the same technical management. If a vessel is put on bareboat charter. If the damage is caused by an insured peril.

to save property and. A negotiation may be required to agree to which port a vessel is to be towed. ii) Tow and assist: Basically the master is free to tow and assist (or be towed) in any situation where a vessel is in distress. responsible for the safety of the vessel and her navigation. Perils covered (ITC cl 6) The ITC clauses cover damage or loss caused by named perils as set out in clause 6 and before loss or damage is accepted by underwriters it must pass the test of causa proxima non remota spectator (the proximate and not the remote cause must be looked for). both through training and through being the person on the spot. the man on the spot-will carry considerable weight if owners wish to follow a difference course from the insurer. This decision is the master's and reflects the very sensible view that he is. then no cover is in place for damage to the insured vessel or to the lightering vessel. unless towage is customary in the circumstances prevailing. (but see the 'due diligence' provision under section 5 (Perils covered). In turn the underwriters will refuse to accept the abandonment. Towing under such circumstances can be subject to an additional premium (AP). increasingly today. to prevent pollution. but to act in order to save life. iv) An actual loss appears inevitable. but will agree to put the assured in the position of having accepted the abandonment on that day if the vessel is subsequently assessed as being a CTL. Again. unless underwriters have specifically agreed to the operation beforehand. This is a risk covered under the P&I Club rules and not the hull policy. Masters can assist in this process by giving a short and succinct description of the situation and their intentions. and . therefore. is 'Master. supplies and equipment.The towed vessel: generally in the direction of her intended voyage. (when the vessel is in need of assistance) which.The towed vessel's insurers: the nearest port where repairs can be carried out. The policy does not call for the master to refer to class or to his owners.principle remains. how could a pilot assume responsibility of someone who. . Total loss (ITC cl 19) This is unchanged from the old SG policy. he should immediately advise insurers through his owners. in practice leaves little latitude for serious diagreement although there may easily be four different opinions here: . the master is always in command and. managers or insurers. . However the policy wording refers to the first safe port or place.'. the second amendment allows for the use of helicopters for the transportation of personnel. The vessel is an Actual Total Loss where.. in the words of the old SG Policy. If the master is being pressured into a loading or unloading operation which heightens risk. ii) The assured is irretrievably deprived of the possession of the vessel. . or iii) The ship has been posted as missing or a Constructive Total Loss (CTL).The towing vessel's insurers: the nearest safe port. v) The vessel cannot be preserved from an Actual Total Loss without incurring an expenditure in excess of the insured value.The towing vessel's owners/managers: the best direction for the prosecution of the towing vessel's intended voyage. . a sensible recognition of the commercial facts of ship operations to the effect that cover shall not be prejudiced by liability exemptions in pilotage or harbour tug contracts if their agents accept or are compelled to accept such contracts . After all. iii) Cargo loading/discharging at sea: If a vessel is employed in a trade which entails loading or discharging at sea into or out of another vessel. In such circumstances the assured may abandon the vessel to the underwriters. a logical and well argued proposal by the master -i. by far the best person to make this decision. Underwriters' reluctance to accept abandonment is due to them not wanting to become involved in any legal requirement to remove the wreck. insurers' prior permission to tow or be towed is required. it may be that ajustified additional premium can be passed on to the charterers.e. . i) The vessel has been destroyed. In situations where assistance (to or by the insured vessel) is required but immediate danger is not present. under God'? The 1995 ITC clauses introduce two new clarifying sub-clauses: the first.

4 Jettison: If parts of the vessel's apparel are jettisoned to prevent a loss and there is cargo on board. vessel's liability towards the cargo owner for any damage to the cargo. is covered under P&I cover.1. the onus of proof rests with the assured. with the result that Tommy falls to the ground and receives damage of a particular average character Tommy. Tommy has. by contact with a lock gate. The insured perils fall into two groups. grounding.1) is not subject to the requirement that the loss has not resulted from want of due diligence by the assured.1. Therefore. to answer his mother to the following effect. ice damage and damages received in collision.6 relating to nuclear propulsion machinery has been removed since it has not become an accepted means of propulsion. 6. No. but being inexperienced and thoughtless. Should his mother remark on the awful results of disobedience. liability for damage to a third party caused.6 Contact with land conveyance. Initially. the difference being that the first group (cl 6. Since the question of whether the loss is proximately caused by insured perils will be one of fact. my accident was not the result of disobedience.1. During this walk he passes an orchard and. volcanic eruption or lightning: All these are excellent examples of what can be described as a fortuitous event. The cover does not include the normal action of wind and waves (wear and tear) and the cause must always be fortuitous (see 6. youthful propensities.7).1 are set out below with brief comments.This concept of the proximate cause is important if sometimes arbitrary and perhaps less than logical. is an intelligent youth and of a legal turn of mind. The eight perils comprising clause 6. It is well illustrated by a famous example given many years ago by Mr P. 6.1.1.1. Carey. explosion: Damage by explosion. he does not wait to see whether the branch will bear his weight. 6. mother. internal or external. is covered so long as the explosion is not caused by one of the perils excluded under cl. lakes or other navigable waters: These perils include heavy weather. it is for them to show that the loss arises from causes other than those insured against. The previous ITC 1983 cl. and no sooner has his mother left the building by the front door than he goes out by the back door for a walk. in such cases.5 Piracy: Unfortunately piracy is still with us. then it will be necessary to declare general average so that cargo contributes.1. My disobedience was the causa remota. stranding. adjuster of claims to the London Assurance Corporation: We will suppose that Tommy is told by his mother to remain at home and mind the house while she goes out. like all boys. and was infact so remote that it had nothing whatever to do with the accident. This peril was previously covered under section 6. Fire damage is not extended to include damage caused by heating where no fire is involved.8 Accidents in loading or discharging or shifting cargo or fuel: The hull policy covers resultant damage to the vessel but not the.6.1 Perils of the seas.2 Fire. rivers. 6. 6. so he explains. but once a prima facie case has been established against the insurers. owners.3 Violent theft by persons from outside the vessel: The act must be violent. seeing some -ripe and refreshing fruit on the boughs of a tree. with a view to minimising his own delinquencies.24 (war exclusion) or arson on the part of the assured. 6. 6. the assured may well have to resort to the Courts to discharge his burden of proof. for example. he would be able. 6. he climbs the tree to make a survey of the fruit. The causa proxima of my damage was the breaking of the branch.H. Seeing at the end of a branch some fruit which appears to be superfine ripe and refreshing. managers or superintendents. sinking.2 and was therefore subject . clandestine theft is not covered. dock or harbour equipment or installation: It must always be remembered that the cover provided under the hull policy is for damage to the insured vessel. Piracy includes passengers who damage the vessel through a mutinous act as well as riotous act from ashore. two distinctly separate insurance incidents are involved with two distinct and separate insurers. he clambers along the branch to sample this superfine -ripe and refreshing fruit. and could well while away the time during his convalescence by reading Arnould's Marine Insurance with special reference to the subject of causa proxima.1.1. particularly designed to highlight areas where the master's actions are particularly relevant.7 Earthquake.1.

breakage of shafts or any latent defect in the machinery or hull: This provides cover for damage caused by the bursting or the breakage. managers or superintendents or any of their onshore management'. Honest but careful wording of reports and logbook entries.2.g. 6. owners. In the 1995 amendments this was imported from subclause 6. owners. collision or grounding or crew negligence-in which case there would be a second. One deductible or two? Clearly. the surveyor was advised that the vessel had touched twice.2. and separate. managers or superintendents or any of their onshore management.4 Barratry of masters.1 Bursting of boilers. especially as the ISM Code comes into force. can help the owner or manager to present his claim most effectively. The main change to clause 6 is the inclusion of . however. 1. The reasoning behind this action is a realisation that many vessels now use the services of helicopters to transfer crew and supplies. (1) Grounding causes breakage of shaft-a claim can be put forward under insured peril 6. and codes of practice.1 so that the 'due diligence' provision now applies and. the first caused by an error in navigation by the master in coming to pick up the pilot and the second through a manoeuvre to avoid another vessel. but has survived the 1995 amendments. Contact with aircraft. but not the repair to the boiler or the broken shaft unless this in turn was caused by an insured peril -e. 6.2. helicopters have been added.2. The negligence of the charterer relates to a situation where the charterer has authority to direct the master as in the case 6f a demise or bareboat charter. The five perils covered under cl 6. such as the ICS Guide to Helicopter/Ship Operations. 6. It is now considered unreasonable to demand 'due diligence' from the shipowner. It has now been switched to section 6.. As such it goes beyond negligence.2. 1. inspecting the vessel's hull with the hull underwriter's surveyor. underwriters will exercise their right to two deductibles. It is an interesting speculation whether an accident caused by the negligence of a master or crew who are not sufficiently qualified and experienced (although meeting the documentary requirements of whatever convenient flag an owner may have selected to safely operate the vessel). where his influence is often minimal. Cl 6. (2) Broken shaft causes damage within the shaft tunnel-a claim can be put forward under this insured peril (6.to the exercising of 'due diligence' by the shipowner. Note. the cover applies to loss or damage caused to the vessel due to the negligence of the repairers but not the cost of making good the negligent repair (unless the damage itself was caused by an insurable peril). that if two claims are put forward. Underwriters are anxious to ensure that such operations are carried out with the utmost of care. officers. Inquiring as to this. the charterer. as the case may be. backed by a knowledge of the terms of the policy. after touching bottom during a passage up a river.5. 1.2.2 'has not resulted by want of due diligence by the assured. some minutes apart. if there are two causes there are two deductibles. crew or pilots are also owners or part owners. Two indentations were found.superintendents or any of their onshore management' in the provision that the loss or damage specified under sub-clause 6. 6. It can be seen that to ensure prompt and efficient claims adjustments to be made a very careful record needs to be made by the master -e. one to port and one to starboard. Negligence of master. their actions in their professional capacity are not included in the test for 'due diligence'. even if the master. officers or crew. The continuance of this insured peril was under review. Masters are therefore advised to observe this code. furthermore. 6.g.2 are all subject to due diligence being exercised by assured.) for the damage caused by the shaft but not the damage to the shaft. otherwise underwriters may have reason to question the payment of a claim ensuing from an accident caused by a poorly controlled helicopter supply drop. This picks up wrongful acts 'wilfully committed' by the master or crew to the prejudice of the owner or.1 in recognition of the fact that this is an area much influenced by the activities of third party shore-side operations. claim under the policy. officer.. could be construed as a failure to exercise due diligence by the owner or his managers.3 Negligence of repairers or charterers provided such repairers or charterers are not an assured hereunder: Again. crew or pilots.2.3 makes it clear that. This wording has considerably widened the scope of the proviso and no doubt in due course the Courts will be called upon to decide how far down the corporate tree 'any . helicopters or similar objects or objects falling therefrom. are followed. There is a story of a master.

It is also an area in which the contract of carriage and marine insurance interact. . Minimising loss (ITC cl 11 . or further damage.onshore management' extends. . The master should. Pollution hazard (ITC cl 7) This clause was first introduced in 1973 following the bombing of the stranded tanker Torrey Canyon as a means to mitigate the effect or spread of pollution and the 1995 amendment has included the wording '. although it is difficult to see just how such set of circumstances could prevail to produce such result! General average and salvage (ITC cl 10.. . Sue and labour expenses are paid in addition to and separate from the loss or damage to the vessel and are limited to the value of the vessel. The obligation to minimise loss is very clearand. war risks. . The wording of the old SG policy is quite clear and the obligation to sue and labour is maintained in the new policy (cl 11.old clauses 11 & 13) With general average we come to that unique strand of maritime practice and law which has its roots deep in maritime history. or shipowner in this case. Safeguard and Recovery of the Goods . these risks (with the exception of the radioactive contamination exclusion) are covered elsewhere by specific insurances -e. or damage to the environment . his measures should at all times be construed as 'reasonable'. Nor is the breakdown of machinery unless proximately caused by an insured peril. This change closely follows the new regime brought into effect by the ISM Code. it shall be the lawful to the Assured..CI 24 War exclusion.2 (negligence of master and crew). . and travel for in. In theory the insurers could pay double the insured value.v. the underwriter may well have grounds to refute a claim.Cl 26 Malicious acts exclusion. their Factors. nice judgement is required in deciding what measures to take and expenditure to incur. How these are handled in the process of settling a claim is illustrated in chapter eleven.' but this extends only to damage to the vessel and not to any damage or liability caused by the vessel. and about the Defence. will contribute . 0 Cl 27 Radioactive contamination exclusion.1). The insured. whereof .2. to the Charges whereof we. Excluded perils (ITC cl 24. is always expected to act as if uninsured and to take all actions expected of an uninsured person in order to protect the insured vessel from loss. subject to such protection as is given by cl 6. the Assurers. Nor are the underwriters liable for increases in costs relating to repairs to the vessel caused by delay or for any expense related to that delay except that the expenses can be included if a GA claim is allowed.g.. and in the case of any Loss or Misfortune. indeed. which covers the work of the average adjuster. . once for the vessel and once for the sue and labour expenses. 25.CI 25 Strikes exclusion' including (for reasons best known to the drafters) terrorists... The 1995 amendments 'excluding all special compensation and expenses referred to in clause 10. Servants. he should be reasonably certain that the loss or misfortune is proximately caused by an insured peril and. The exclusions which comprise the paramount exclusion clauses are: . keep a careful record of all endeavours and expenses in connection with his duty to sue and labour. Whilst it is recognised that the time immediately following a 'loss or misfortune' may well not be the time at which the master will want to be engaged in philosophical contemplation of the nuances of marine insurance law. labour.5 (q. Generally.old clause 13) . . If a total loss seems inevitable. and Assigns. Similarly. It has already been mentioned that the cause of the accident must be proximately caused by an insured peril and not be caused by the wilful misconduct of assured. 26. if such steps were clearly not taken. Clause 27 has been extended in scope beyond weapons of war to include other man-made sources of harmful radiation. 27) It must be borne in mind that the ITCs are interpreted against the MIA (1906) and the related body of precedent as well as the four paramount exclusion clauses. to sue. . This obligation is particularly relevant to the shipmaster as the person generally able to take the first and most effective steps to minimise loss. through the application of the York-Antwerp Rules (1994) or other general . .)' reflect the hull underwriter's continuing determination not to become liable for pollution related liabilities. damage caused by wear and tear or rats and vermin is not covered. therefore. .

as it turned out. This gap in cover has been left for the P&I Clubs to pick up unless the assured can persuade underwriters to provide him with the partial buy back as provided by the Institute General Average Pollution clause described later in this chapter. MIA (1906) defines thus in sections 56 & 64: A loss may be either total or partial. He turned on steam drenching. mistakenly believed that there was a fire in the hold.. a major deviation from previous practice. It will be apparent that for there to be a general average act. Secondly. (iv) Damage to engines in attempting to force a vessel off a strand. (iii) Damage done by cutting bulkheads or scuttling to extinguish a fire. In Watson v Firemen's Fund Insurance Co. if undertaken by a salvor'Would have been allowable in the GA adjustment. more than one party must have an interest in the marine adventure. (1922). or (b) Expenditure properly incurred in preserving the common adventure. This includes in a GA adjustment. is a partial loss [i. as does the wording of clause 10. (vi) Loss of freight caused by general average sacrifice of cargo. This places a burden on the master to make a decision in circumstances which may be far from clear and highly stressful. there is. This tracks previous market practice. firstly. which include measures undertaken to prevent or minimise damage to the environment. (ii) Damage done to cargo by water or other agent in extinguishing a fire.3) with certain exceptions. however. in their determination not to become involved in any form of pollution liabilities. .g. There is. caused by a peril insured against. (excluding damage to the packaging of the cargo on fire. . the expenses incurred by the assured to minimise or prevent damage to the environment. In addition. the benefit of the master keeping a clear and comprehensive record of events (and expenditure) is clear. and only when. causing damage to the cargo. particular average] and a particular average loss is a partial loss of the subject matter insured. as laid down in the contract of carriage. A general average loss is the result of a general average act which may be either: (a) A sacrifice of property which would include such acts as: (i) jettison of ship's gear or cargo. and. (v) Cargo burnt as fuel due to insufficient bunkers (although the reason for being short of bunkers in the first place will be closely examined). The YA Rules were examined in chapter five. here we are concerned with the hull insurer's obligations. Again. in addition. pollution prevention and control costs and expenses (such as the provision of pollution containing booms) necessary to bring a vessel into (and remain in) a safe port are included in the above mentioned Rule XI (d) but are not covered under the ITC 1995. this being a particular average claim). Hull underwriters. however. deck cargo being included only if normally carried on deck. The expenses of services rendered by the assured (including master and crew). the damage to the cargo could not be recovered under general average. there is a general average act when. Salvage is covered in more detail in chapter 11. in chapter 11 the sequence of events involved in adjusting a claim is illustrated. which. The 1995 amendments also make it very clear that special compensation payable to a salvor under article 14 of the 1989 Salvage Convention or other expenses or liabilities incurred with respect to damage to the environment are not part of ITC Hulls cover (and properly fall under P&I insurance). As well as a general average sacrifice.e. technically. and which is not a general average loss. It is necessary. Any loss other than a total loss . . As there was no actual fire. Salvage charges are also recoverable under GA. Thus. a tug under a towage contract as opposed to Lloyd's Open Form) are properly recovered under the sue and labour clause. likely to be either a particular average claim or a total loss claim. the master of a vessel on ballast voyage and not on charter cannot declare general average. his agents or any person employed for hire by them (e.. danger exists. to be clear exactly what losses may be involved. and they are defined as the charges recoverable under maritime law by a salvor independently of contract.6 which extends the ITC to cover sums which the assured has to pay to salvors for their efforts to prevent or minimise damage to the environment as referred to in Article 13 paragraph I (b) of the same Convention. underwriters are prepared to make good a loss suffered by the assured in preserving the ship (cl 10.average rule. In practice. when hull underwriters always previously agreed to accept the provisions of the current York-Antwerp Rules. By doing this they have declined to cover the minimal exposures contained in the YA 1995 Rule XI section (d). have excluded from the cover they provide for YA General Average adjustments. the master quite reasonably but. all pollution expenses or liabilities.

Under clause 13 underwriters also reserve the right to decide on the place of repair and any additional costs of removal to the selected port of repair will be covered. 14. A competent marine insurance broker with a good claims handling deparment. it will be expeditious to take the opportunity to scrape and paint the underwater hull. In any of these circumstances. underwriters are prepared to pay the costs of sighting the bottom. but underwriters may well argue that they should have been advised of the potential claim at the time of the initial loss of oil. 17. owners or managers under 13. it would be prudent to advise underwriters since the loss or damage then found . can go a long way towards bridging this gap. or when they should have become aware of. Based on the actual wording of the clause. If the bottom damage is caused by stranding. Frequently. the owner being compensated for any delays caused solely by this process. it is prudent for the master to ascertain from his owners or managers who will be paying for what work at an early stage. and the tailshaft is drawn at which time the stern tube bushes are found to be wiped. 13. As an example of how this clause may operate in practice: . it would appear that since the assured did not and should not have become aware of the loss or damage until the drydocking. Underwriters will normally cover the cost of temporary repairs but. the MIA (1906) and ITC c 118 allow the assured to claim a depreciation allowance for unrepaired damage. There are bound to be difficulties in establishing what date the assured 'should have become aware'. This is an extremely burdensome duty that falls upon the master and/or chief engineer.1 to give notice within 12 months of becoming aware of. 1). in effect they waive this right under cl 14. although the amount of the depreciation appears to be a matter of negotiation. which was introduced in its present form in 1969 and is a negotiable amount -and one which has increased considerably in recent years-applies to all losses covered by .A ship may touch bottom. 12. Furthermore. a loss or damage recoverable under the policy. Two years later in drydock extensive damage is found. Many months later the vessel drydocks.15. 16.Damage and its repair (ITC cl. underwriters may require the owner to obtain a number of competitive quotations or tenders for the repair of the vessel. average adjusters will not waive the new for old reduction for GA sacrifice to a ship older than 15 years. Time is important since the owner will want his vessel repaired and sailing as quickly as possible. This will be the first moment when the assured might know that loss or damage has been sustained. whilst the underwriter will want to ensure that the work is undertaken under the most competitive tender and will want to see the repairs completed and paid for by the owner before he settles the claim. This then settles down and no other abnormalities are noted. time would not begin until the drydocking. In formal terms. There is an obvious cash-flow problem here for the owner (and perhaps more critically for a ship manager). it would seem that the only sensible course is to notify underwriters of any incident in which loss or damage is found or suspected to exist and which may result in a claim on hull insurers.A momentary loss of oil occurs from the stern seal or a brief rise in stern tube oil temperature is noted.may' result in a claim on the policy of insurance. The 1995 amendments increase the onus on the assured. supported by clear and concise evidence from the master. The question arises as to whether the claim falls foul of the time limit. To ensure that the assured does not fall foul of this clause. Divers are sent down and report no evidence of damage. . In that case. One of the skills of the insurance broker is negotiating the best claims settlement possible with the lead underwriter and then ensuring prompt payment. However. 18) Whilst the MIA (1906) allows the underwriters to make a deduction under 'new for old'. whether or not damage is found (cl 12. he indemnifies the owner for his expenditure resulting from an insured peril. Grit blasting and other surface preparations and priming of replacement plating is allowed in agreed circumstances for repaired bottom plating damaged by an insured peril. if a vessel is drydocked to repair bottom damage. Deductible (ITC cl 12) The policy deductible. It might be otherwise if the diver found minor indentations which it was thought would probably fall below the deductible.

if necessary. the ship is sent to sea in an unseaworthy state. preferably. and then some days later. it's an insurance claim' is very much a thing of the past.1 states that it is …….. Underwriters must be advised as soon as practicable of any breaches of these trading warranties. The first concerns the seaworthiness of the vessel. by contact with floating ice-is treated as one claim with one deductible.. and before it happens if possible. Thus it includes: particular average.’ The notice should be immediate and. salvage services …… & etc'. The sometimes heard 'never mind. Most masters will be well aware that deductibles have risen considerably in the last few renewals and $100. negotiating with him through their marine insurance broker.the policy other than total or constructive total loss.. assuming always that the proximate cause of the loss related directly to that particular unseaworthiness. . with due deference to the Institute's membership. general average sacrifice. the master elects to breach a warranty. the insurer is not liable for any loss attributable to unseaworthiness. the assured is held covered…………. before the occurrence. Provided notice be given to the underwriters immediately……. Inevitably work will be undertaken that is routine maintenance in addition to damage repair.000 deductibles for panamax bulk carriers are not at all unusual. Express warranties: ITC cl 1.warranted that the vessel shall not be towed . Of the express warranties. Express warranties are a bit like that. this negotiation can often be effectively assisted by a well presented statement of intent from the master. salvage awards and contributions to salvage award. the other most relevant to the master is the locality warranty or trading warranty. but where with the privity of the assured. I towage. etc' and ITC cl 3 states 'Held covered in the case of any breach of warranty as to . there is no implied warranty that the ship shall be seaworthy at any stage of the adventure. in the shipowner's general interest to keep the number of incidents to the minimum. Implied warranties There are two major warranties that are implied in any hull time insurance but are not actually set out in words in the ITC but rely on the Marine Insurance Act for their legal effect. Sensible thinking and good planning is necessary when at the repair yard. e.. sue and labour charges. This is recognised in the case of a time policy. This is essential if. Underwriters can then charge an additional premium or amend the terms of cover. The other implied warranty is that of the legality of the adventure and. . however the policy would normally contain terms such as the Institute Trading Warranties clause or a bespoke clause setting out exactly where the vessel can trade.. the intent should always be 'subject to underwriters' approval' and should contain a brief sitrep (situation report) and include the master's reasons for selecting that particular course of action. An important exception to the each occurrence rule is heavy weather damage (cl 12. The ITC itself does not restrict the trading area of the vessel. therefore. it could be held that by their privity they have negated the policy. It seems slightly less logical that the warranty of seaworthiness does not become absolute at some suitable stage during the period cover. However. in regard to towage under contract. expenses related to salvage and claims under the collision liability clause. for instance. a storm. Separate and precise accounts will need to be kept and it is much easier to organise this with the repair yard at the start rather than towards the end (see chapter eight). Unless the urgency of the situation dictates otherwise. A deductible is applied to 'each occurrence' and it is.. This means that the owner is self-insured for the majority of minor accidents. or should be. is hopefully not a matter of great relevance. if the owners or managers are advised of the unseaworthiness [by the master] and fail to correct it..2) where all damage incurred during a voyage between two successive ports-even if caused by separate incidents.. the important point for the shipmaster comes later in clause 3. Logic dictates that an owner cannot warrant absolutely that at all times his vessel is seaworthy. Although the owners or managers will be advising the underwriter and.g. say. especially when she is at sea.

. This additional cover for total loss only (TLO). If the information is not on board he should request it. and is strictly a policy proof of interest (PPI) cover which means that the shipowner does not have to prove the quantum of the amount claimed and. 1 (b) of the International Convention on Salvage 1989). When introduced. Although the RDC is a very real extension of the hull underwriter's exposure-not only does he have his existing indemnity towards the assured. the difference between the two liabilities is settled on a single liability basis.Pollution (unless directly caused by the insured vessel to the other vessel or property/cargo on board that vessel). the 1995 amendments have extended this clause (8. unlike the rest of the ITC (Hulls).. the work of the Comit6 Maritime International).Again. property. Some aspects of an insurance claim involving a collision are explored in chapter eleven. time charter hire and increased values. etc. where an incident is followed through from actual occurrence to final settlement. This is one reason why underwriters restrict its usage to an amount equal to 25% of the hull value.5) to cover awards for the skill and efforts of the salvors in preventing or minimising damage to the environment. the principle of crossliabilities does mean that. you cannot claim on his RDQ and extends to: . and .4. . which basically indemnify the assured for damage to his own vessel or property.Expenses or losses incurred by the other vessel including loss of freight and financial loss suffered by the owners of property on board the other vessel. underwriters restricted their cover under the RDC to 3/4th of the legal liability of the assured as it was felt that it might make the assured and his servants more careful than they might otherwise have been. This does not apply when either or both ships limit their liability.) Known from the time of its introduction at the end of the 19th century as the running down clause (RDC). the master should be aware exactly what the permissible trading area of the vessel is so that he can advise his owners/managers as soon as possible when he takes his vessel outside the trading area. the last quarter is frequently picked up under the owner's liability cover with his P&I Club. Collision liability (ITC cl 8) The interesting aspect of the cover provided for collision damage under Cl 8 is that. or .Liability of the other vessel for GA claims and/or salvage. showing particularly the importance of the master's evidence and reports.Losses except directly related to the other vessel or property on the other vessel. the clause extends the scope of the policy to cover the assured's legal liability to a third party. on the insured vessel. in the case of a collision between a handy-size bulker and a large container vessel-and the owner must look in other directions to find his cover. Limitation of liability: In the Nautical Briefing it was seen how much time has been devoted to the matters of collision and of the right to limit liability (Figure 1. This can be much smaller than the claim made by the other vessel-for instance.Cargo. The right of a shipowner to limit his liability was established through international . However. when both vessels are to blame.Loss or damage to the other vessel or property on board the other vessel (this includes cargo and the personal effects of passengers and crew)..Wreck removal. .Loss of life or injury. attracts a lower premium rate. if you alter course to avoid another vessel and run aground. for as many collisions as the assured's vessel may have-it is limited to an amount equivalent to 3/4th of the value of the insured vessel. strictly speaking the assured does not even have to prove that they have a legal insurable interest. . (Salvage is also a third-party liability in respect of the salvor. Physical contact must have occurred (i. Disbursements warranty (TLO): This clause allows the shipowner to insure an amount in addition to the agreed value of the hull and machinery for a variety of interests which are grouped under the definition of Disbursements. but he is exposed. this supplementary insurance cover applies solely to circumstances where the insured vessel is in collision with another vessel. The maximum amount insured is limited to a sum equal to 25% of the sum insured on the hull and machinery and includes such interest as anticipated freight. para. separately.e. (Article 13. Although the cover can be extended to 4/4th. This only covers the vessel against total or constructive total loss and does not respond to partial losses. It need only be noted here that the RDC excludes liability for: .

excludes expenses or liabilities incurred in respect of damage to the environment. Clause 10. if in doubt. currently. Whilst obviously significant. underwriters are flexible. even though covered by the same international convention. and which has had force of law in the United Kingdom since I January 1987 (see chapter five).restricted perils These clauses are a restricted form of the full ITC clauses as already described herein. has been excluded from 6. This is a clause that has been made available by underwriters (at an additional cost if they so wish) to fill the shortfall in cover for GA pollution as described earlier in this chapter. limitation will depend on the jurisdiction in which the claim is settled.pollution expenditure clause hulls . reduced in respect of any under-insurance. for example. this is not seen as fatal to all claims involving negligence of the master and crew. loading or discharging cargo is. governed by the Convention on Limition of Liability for Maritime Claims (London 1976) sometimes called the London Convention. the master will need to bear in mind that by moving to the bunker berth on day 30. The answer is. which is allowed under Rule XI(d) of the York-Antwerp Rules 1994 and which would be recoverable under clause 10 of the Institute Time Clauses-Hulls 1/11195 but for clause 10. 'Negligence of master officers crew. he may have negated the benefit of the lay-up premium however operationally efficient this may be. From an operational point of view. perhaps. This additional clause is for use only with the Institute Time Clauses 1/11/95: In consideration of an additional premium to be agreed. Even so. This makes them subject to the 'want of due diligence' proviso. However. . for example. lay-up returns. The clauses are identical except that. and will vary whether the vessel is under repair or not.2 where they were in the 1983 clauses. (1) '. For instance damage done to the vessel in a collision.5. discharging or shifting cargo or fuel' return to clause 6. or the threat of such damage. only those claims where their negligence is the only proximate cause of the loss or damage.2. accidents in loading.Antwerp Rules 1994 this is extended to cover vessel's portion of general average expenditure. so a log of repair days is always required. This reflects underwriters determination not to provide machinery breakdown cover to certain fleets where they are uneasy about the owner's dedication to good maintenance.2.2 therein. .convention to encourage shipping interests which might otherwise be daunted by the onerous liabilities for loss of life or damage to property which can arise from the prosecution of a marine adventure. Additional or substitute clauses ITC Hulls. . (2) Also. The right to limit liability is. leaving only 'latent defect in the machinery or hull'. or as the consequence of the escape or release of pollutant Institute general average. Premiums and return premiums (ITC cl 23) Little here directly affects the vessel or master except. is still covered. This clause is subject to English law and practice. (3) 'bursting of boilers breakage of shafts' is dropped from the cover provided by this clause. allowed although acting as a storage vessel is not. The joint Hull Committee UHQ have established a special returns office whose job is to accept or reject applications for lay-up returns. different in the detail of its impact from that under English law. where the bridge officer was to blame. The ITC Hulls and ITC Hulls Restricted Perils differ only in the wording of clause 6.2. Sistership clause (ITC cl 9) This clause simply allows for cases of collision or salvage involving vessels owned by the same body corporate to be treated as separate legal entities when settling claims. Limitation in the United States is. state intentions and ask. if a vessel is due to move to a load berth early on the 31st day and requires bunkers. A lay-up return is allowed (assuming the vessel is in an approved lay-up area) for a period of not less than 30 consecutive days. where the contract of affreightment provides for adjustment according to the York.

The Institute cargo clauses It is not intended to dwell long on cargo insurance. Exclusions. grounding. After the major reorganisation of 1982 and the introduction of the new Marine Policy and Institute Cargo Clauses. International agreements also require the consignee to claim. voyage and time charterparties incorporate YorkAntwerp Rules 1994. covered if it is undertaken for good reason and with the intention of returning to the direct route. Obviously. (not rainwater) (C). jettison or working overboard.. It is not surprising. deliberate damage to cargo. unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject. The B and C clauses (cl 253 & cl 254). Those risks marked (C) are not included in the C clauses. however. arise from: wilful misconduct of assured. at the time the subject-matter insured is loaded therein. for apparent damage to the goods at the time he removes them (or before) or. collision-is not covered. that the shipper expects the master to prosecute the voyage 'with reasonable dispatch in all circumstances'. If owners take up this 'buy-back' clause. inherent vice. insufficiency of packing. are different from the old FPA (free of particular average) and WA (with average) clauses in that they do not restrict particular average loss. In this case. when compiling any report. loss in weight/volume. general average sacrifice. Unseaworthiness/unfitness is addressed in (exclusion) clause 5. delay. collision. earthquake.g.1 illustrates the development of the three variations of cargo insurance. The B clause set out the risks covered as: fire or explosion. if the damage is not . sinking. therefore. this transfers at a specific-but possibly different-time to the consignee depending on the terms of trade used. the master should bear in mind that it may well have a very wide readership. strikes and lockouts.matter insured where the assured or their servants are privy to such unseaworthiness or unfitness. etc. or the threat of such release. overturning or derailment of land conveyance. but just to give a general overview and highlight those areas where the master might become more closely involved with cargo underwriters. there remain three alternative suites of clauses. A. volcanic eruption or lightning (C). The insurance is also extended to indemnify the assured against any claim under the contract of carriage both to blame collision clause. wear and tear. discharge at port of distress. and total loss of cargo lost or dropped whilst loading or discharging (C). however. capsizing. The A clauses cover all risks of loss or damage as well as general average and salvage subject to the policy exclusions. see chapter five) prevent the carrier from incorporating any clause in his bill of lading that gives him benefit of the cargo owner's insurance policy: Cl 15-This insurance shall not inure [come into use] to the benefit of the carrier or other bailee. Like the cargo policy. The A clauses (cl 252) relate closely to the all risks form of cover introduced in 1963..substances from the vessel. Deviation is. the 'assured or their servants' does not extend to include the shipowner as he is not considered to be the assured's (the cargo owner's) servant (unless directly controlled by him). A glance at chapter eleven shows how difficult this is and this aspect of Hull. use of atomic weapons. apart from the usual selection of war. Figure 7. stranding. Insurance must be co-ordinated most carefully with P&I cover. Another point to note is that this exclusion applies 'at the time of loading' and not specifically at the commencement of the voyage. as illustrated in chapter four. entry of water. Yet Clause XI(d) of York-Antwerp 1994 (qv) relates to pollution prevention and control costs and expenses (such as the provision of pollution containing booms) necessary to bring a vessel into (and remain in) a safe port. insolvency of carrier. The international agreements regulating the Carriage of Goods at Sea (The Hague or Hague-Visby Rules. It bears note that the deterioration of cargo due to delay. even if that delay is caused by an incurred peril -e. capture. ordinary leakage. Clauses 15 and 16 relate directly to the contract of carriage between shipper and carrier. B & C. it is essential that they ensure that all bills of lading. in writing from the carrier. seizure.: In no case shall this insurance cover loss or damage arising from: unseaworthiness of vessel or craft.

apparent. is so important in containerised through transport. it must be emphasised. many of the Clubs moved their corporate residences out of London to register offices offshore. although generally limited companies are limited by their guarantee rather than by shareholding.. Protection and Indemnity Associations The P&I Club structure The overall service which a shipowner receives from what is generally referred to as a P&I Club is made up of: the mutual association.) In the event of damage or loss to the cargo. the business of such meetings includes the election of committeemen and amendments to the Club's rules. for example. will constitute prime evidence as to whether his actions were considered correct or justifiable. The mutual association: The mutual association is at the heart of the services. with all rough logs and deck logs. to proceed against the carrier. perhaps. Clubs rely heavily on their ability to build up strong financial reserves. However. the shipmaster must chart a careful course through the reefs and shoals of marine insurance claims. The chapter annex illustrates a typical certificate of cargo insurance which would be part of the packet of documentation (including such papers as the certificate of origin. necessary to conduct the Club's international business. The relaxed tax regime was undoubtedly an important consideration. the managers: and a network of independent Club Correspondents. The big rock to avoid is. During the second half of the sixties. In order to preserve the underwriter's rights. three to five years after the event.1 . All members are entitled to attend general meetings (analogous to shareholders annual general meeting). while the principle of mutuality remains. Bermuda being a popular location. subscribe no capital and receive no dividend. ensure that all fights against carriers. clause 16 requires the assured and their servants and agents to: 16. The power of a well chosen photograph in helping recall is well known. The best pilot through these troubled waters is the one marked 'reasonable actions of a prudent seafarer'-and the best support may well be the local P&I Club Correspondent. especially US dollars. a single VLCC cannot outvote the owner of a large and active fleet of 'tweendeckers. In addition to the usual adoption of the annual report and accounts and other such corporate housekeeping. and 16.. together... It should always be borne in mind that associations.within three days. The constitutional affairs of the association are governed by articles or by byelaws while the scope of cover and other practical obligations of the Club and its members are set out in the rules. bailees or other third parties are properly preserved and exercised. indeed. As the man on the spot his reports and logbook entries. exercising his right of subrogation. He has obligations towards more than one party and. members are not shareholders. Summary As can be seen. Their overriding obligation is a mutual responsibility to . the normal practice is for the cargo owner (shipper or consignee) to claim under the policy and for the underwriter.2 . Frequently voting rights are allocated on a graduated system so that the owner of. described in chapter four. the one marked 'wilful fault or privity' which enables the shipowner's underwriter to whisper gently in his ear 'you are on your own now'. Modern P&I Clubs are generally incorporated (as opposed to being partnerships) and. the impetus at the time was the inability to hold in the UK the range of currencies. (It can be seen immediately why the use of the correct Incoterm. or at least his owners. members (the owners with entered tonnage) contract with the corporation rather than with one another as is the case in partnerships. take such action as may be reasonable for the purpose of averting or minimising such loss the equivalent of 'sue and labour' under the hull polity. may act on behalf of more than one party and yet find that party's insurers proceeding against him. commercial invoice and original bills of lading) which would pass from seller (shipper) to buyer (consignee) via the documentary credits department of the confirming bank. does not cast the best light on the master's actions. . Poorly documented evidence presented in Court. especially if it is timed and dated and accompanied by notes made at the time settling out the circumstances and the reason why specific courses of action were taken.

some managers in recent years would argue that they and their Clubs are also playing a much more proactive role in improving safety and performance within the shipping industry.. Thus the managers will look closely at the Club's existing and prospective membership with particular reference to: . . They provide all the services offered by the Club to its members. container ship.advice on documentation such as bills of lading and charterparties. Below the general meeting are the committeemen. tanker. including claims handling and legal advice as well as underwriting and fund investment. and .Trading areas and geographical spread (a concentration of vessels trading in the litigious environment of the USA might not be considered the best way of spreading risk). . . although their legal residence may well be offshore and co-located with that of the Club which they serve. The condition surveyor is not surveying against a statutory specification (although he will check for compliance) and there is. .Monitors changes in the shipping industry and considering the need for amendments to the rules. and . an adverse report from a condition surveyor can result in cover being temporarily suspended. Loss prevention forms a large part of this activity and may include: .0 million and $30 million (see Table 7. more flexibility to work with the Club to achieve a mutually satisfactory solution which fits in with the vessel's trading requirements. two to three day inspections by independent surveyors). cruise ship. which may be a subsidiary housing the full management team. etc.Supervises the managers.claims analysis to identify cause and possible methods of prevention . and . However. .Exercises discretion over accepting or rejecting claims which do not fall fully within the Club's rules (liability arising out of delivery of cargo without presentation of bills of lading could be such a case). The managers: The managers of many Clubs are a separate legal entity from the Club.2). For the master. the committee or board: . the introduction by many Clubs of condition surveys is one way in which they have addressed this problem. especially if specified repairs are not completed within the time allowed. However. Often however.raising the awareness of both seafarers and shore staff as to risks and potential risks (including information on the causes of claims). this aspect of the manager's duties requires skilled forecasting. but one which can be handled slightly differently from statutory inspections. most of whom participate in an agreement to pool individual risks between $5.controlling the quality of entered tonnage. As well as their reactive role of providing insurance cover. generally speaking. they operate through agents in London. contentious process. the old name for those members elected to what is nowadays known as a board of directors and who are today referred to as the directors of the club. . the Club's board will probably meet on a quarterly basis. rather like blackballing a member of the local golf club. As well as submitting and recommending matters for approval or consideration by the members of the general meeting. The relationship between manager and association is close and usually of long standing. The managers are responsible for the day-to-day business of the Club and for advising the board in all of the areas mentioned above.Fixes the amount of premiums and deciding on the closing of policy years. .g. Since a claim may not be settled for two or three years or even longer after the incident. a condition survey is an important event. The 15 leading P&I Clubs make up the International Group.proactive claims handling. In order to fulfil these duties. A cardinal rule of all insurance is to ensure a spread of risks. Policing oneself and one's own membership can be a politically delicate and. bulk carrier.Type of vessel -e.The age profile of the fleet.Decides on reinsurance policy and reserve fund investment policy.contribute to the damages which may be suffered by their association through its obligations to insure any one of its members. . There is also a further pooling of risks to the extent that individual claims exceed the limits of the Group General Excess-Loss Reinsurance Contract. .Operating and management philosophy and capability of existing and prospective members together with their claims record.ship inspections (generally brief inspections by Club staff) and condition surveys (thorough.

A thorough investigation of relevant facts and collection of contemporaneous documentation where the liability of an entered vessel may be involved. early involvement of expert assistance is frequently the master's wisest course of action. their role too is loss prevention. cargo or otherwise. the Club will have a network of recommended lawyers and surveyors. One Club's guidelines to Correspondents for appointing a surveyor or expert state that they will generally be appointed for the following reasons: . people with maritime-related legal or commercial skills located in ports throughout the world. many Correspondents arc used by more than one Club. the Club will despatch one of its own experts to assist the master.The Club Correspondents: Club Correspondents are probably the master's main point of contact with his P&I Club.Preliminary investigation of any incident involving damage or loss caused by an entered vessel. Perhaps their greatest asset is knowledge of the local maritime trade coupled with a good understanding of how Club cover works. A Club will establish an extensive network of Correspondents. A large Club may have over 400 Correspondents at over 350 ports worldwide. . Even in relation to non -P&l matters.Expert advice or opinion. . rather than agents. . he should bear in mind that they may be independent representatives. In such cases. or caused to cargo under a contract of carriage involving an entered vessel. Indeed.Preloading or discharge surveys when agreed beforehand by the Club (some Clubs insist on precautionary preloading surveys for such goods as steel). Although the Club Correspondent should formally be appointed and briefed by the Club. the Correspondent can be a useful source of information. The correspondents are not agents (either of the Club or its managers) but independent individuals or companies. However. In a similar way to its network of Correspondents. who will be available to act on behalf of the master and owner and. . if necessary.

reflecting how the premium is charged by the reinsuring underwriters to the Clubs in the pool. which is normally calculated by combining: . . many Clubs take out additional catastrophe cover to meet their obligations in respect of overspill claims (i. A compromise between the views of those Clubs who oppose a limit and those who support it.Specify appropriate reporting requirements such as: advice on the nature. the impact of liability claims in recent years renewed the debate about whether the Clubs should continue to offer unlimited cover or whether they should set a limit.First the cost of a member's vessels under the pool's excess loss reinsurance. .e. a monetary estimate of the value of the loss or damage. The Group general excess loss policy is the largest single maritime reinsurance cover placed through London. reserves and reinsurance Club income comes from two sources: premium income-the calls made upon members-and the investment return on that income. Clubs set up contingency reserves to protect policy years which have been closed but which still have claims outstanding. . Although many claims may not have been settled. One of the arguments against setting a limit has been that it could become a target for claimants. the element known as retained premium. and a recommendation for future handling. The limit on the amount of the overspill call liability for each entered vessel is equivalent to 20% of that vessel's property damage limitation fund under the 1976 Limitation Convention.Identify any precise points on which assistance. Club income. shipping is a volatile business and Clubs employ a number of investment and reinsurance strategies in order to achieve stability and ensure adequate reserves.Identify the party -i. extent and cause of the incident. loss or damage. Conversely. a typical calculation might be: . As a mutual organisation. the directors are empowered to seek further calls from the members.Club surveyors will not normally be expected to investigate damage caused to the entered vessel nor conduct supervisory work associated with the normal operational practice of a prudent shipowner. if there are surplus funds. Annual calls (the insurance premium) are calculated to reflect as accurately as possible each member's anticipated exposure to the risks covered. was agreed to take effect from 20 February 1996. The manager's aim is to achieve a balance at the end of the policy years between a member's retained premium and unreinsured claims. It is obvious. However.Finally. an important aspect) clear and precise instructions must be given which: . Each entered vessel is allocated a premium rating. and the combined Clubs' buying power ensures that they achieve competitive rates.Give an accurate outline of the facts as are already known.Next is added the estimated contribution that the Club will make to the unreinsured part of the pool together with an allowance for general administrative costs. calls may be reduced or refunded. To help monitor levels of premiums. . This is based on tonnage and varies for specific types of vessels. The form of the compromise is to place a limit on each owner's liability to contribute to an overspill call and to limit the cover for such an overspill claim to the amount that can be collected by (limited) overspill calls levied in relation to all vessels entered by the Clubs participating in the International Group pooling arrangements. owner or charterer-on behalf of whom the surveyor is retained. less the amount recoverable from the pool or its reinsurers. a claim which exceeds the limit of the reinsurance cover). The sheer size of both marine and non-marine catastrophic claims in recent years has fuelled the debate about whether the Clubs will continue to offer unlimited cover. the Club will aim to close a policy year about two and a quarter years after the end of that yaar. However.. how important it is that the master both provides clear and concise information which enables the Club Correspondent to instruct the surveyor and then that the surveyor and the master work together as a team. but cannot be stressed too strongly. Having chosen a surveyor with the appropriate skills (and independence. This is the amount which it is calculated will be needed to meet the member's anticipated claims in the coming year. Club finances obey the mutual equation: Calls + investment income = claims + expenses If more funds are needed to balance this equation. .. with any necessary contingency reserve in place.e. Over and above the excess loss cover. advice or action is required.

. . shortage and damage. whilst not exactly in line with the master's needs. The Club rule book is exactly what its title states. sick persons and stowaways. express or implied as in hull insurance. When joining a vessel. a fairly high proportion of the total annual call.Legal and other costs incurred in dealing with these risks. but it may well be adjusted up or down depending upon the Club's overall claims record for that year. is levied at the beginning of the policy year. a supplementary call percentage for that policy year is decided by the directors. As usual. . passengers and stevedores.Payment of calls-Clubs will not reimburse claims if calls are outstanding.Wreck removal. together with a list of entered vessels and an address list for Club Correspondents.Collision liabilities. About eight months after the end of the policy year. . is set out in the Club's rule book which is reissued annually and should be found on board every entered vessel. . although it will probably be invoiced in instalments spread over the 'P&I year' which commences on 20 February. a copy of this will be found on board.Diversion and other expenses incurred in landing refugees.Fines. Other Clubs issue guidelines for Correspondents which. the Club can compare the actual loss ratio with the acceptable loss ratio and use this as a guide to adjusting a member's premium rating. . This information will be found in the vessel's certificate of entry and.Special Compensation' paid to salvors under Lloyd's Open Form. . .Contractual liabilities. A member may pay both an advance call and a supplementary call to his Club. but a number of acts or omissions will prejudice Club membership. together with a range of circulars and briefings on specific topics especially when changes occur.Classification and statutory requirements-obligations in relation to class are strict and the effect of .Acceptable loss ratio = Retained premium Total calls The ratio can vary quite considerably from member to member.Cargo loss. including excess collision liability. based on their estimate of the claims record for the year. Some Clubs issue similar user-friendly interpretations of their rules. before relying on the benefits of membership. . If the initial estimates were right the supplementary call will equate to the balance of the member's total premium. The Club's cover Class I cover: The main body of cover provided by P&I Clubs. The type and extent of cover offered under each heading is described below in general working language. illness or death of crew.Injury. typically between 60% and 80%. it is well worth approaching your Club and requesting it. including those of customary towage. Masters who are involved in their vessel's budgets will note that the advance call.Property damage. There are not standard warranties. although some Clubs have the power to set off unpaid calls against claims reimbursement.Unrecoverable general average contributions. . . in well managed companies. provide useful reference.Repatriation of crew and substitute expenses. If none of these is on board. Most P&I Clubs are prepared to put together a range of cover which precisely matches a member's probable liabilities-and this can vary within different parts of a large fleet. The range of risks covered may include: . The relationship between actual claims and total calls is called the actual loss ratio: Actual loss ratio = Actual claims Total calls As each renewal comes round. and members can adjust the quantum of their retained premium by varying the extent of cover and the level of deductibles. and . .Pollution by oil or other substances. it contains the detailed rules governing the application of the insurance cover to the various risks included under Class 1. a wise master will check whether his vessel is entered for all or only some of the risk set out in the rule book. it is important to be aware of the obligations. sometimes called Class I cover. .

However. especially in specialised trades such as refrigerated cargoes. or at least responsible manager. The master should be aware of his duties under the relevant rule and should note that costs and expenses typically are only recovered if they are: extraordinary. . . but if they are imposed within the certificate of entry. . event or claim liable to give rise to a claim.Notification-the owner is under a strict obligation to notify the Club's managers of every casualty. that members of the crew do not make statements which could be construed as admitting liability. incurred solely for the purpose of avoiding or minimising liability.Obligation to sue and labour-this obligation may be specifically defined but the owner is always required to act as a prudent.a breach of any of these obligations is that the member loses his entitlement to recovery from the Club for claims arising during the period of the breach (irrespective of whether the claims were caused by the breach). the cover provided is 'indemnity insurance' and as such.. . this would probably override the fourth condition.Trading limits-these are rare. The member is therefore obliged to advise the Club managers of any change of classification society and any outstanding obligations at the date of the change. written permission is required if they are going to be breached. Many Clubs make it a condition of cover that the vessel complies with certain statutory requirements of the flag State.e. periodic surveys are required by all class societies and often these will give rise to recommendations for repairs to be completed within a certain time. especially if there has recently been an incident giving rise or likely to give rise to a claim. . For example. Leaking hatch covers are a prime example of a condition which may prompt the Club to suspend cover until the defect is rectified.Prompt reports are sent to the classification society of any incident or condition affecting the ship in respect of which the society might make recommendations. around the vessel.as with hull insurance. However.The member complies in a timely manner with all rules.admission of liability-this is naturally an important condition for the master to understand and remember. . It is important. fitment. recommendations and requirements of the classification society.Condition surveys-Clubs may well suspend part or all of a vessel's cover if a Club condition survey finds serious defects.Seaworthiness. equipment and manning of the insured vessel. modification. This. but has actually paid -i. . Such matters need the master's immediate attention.Members are not permitted to avoid or delay compliance with obligations imposed by their class society by changing to another society. can be unaware of such seaworthiness.Every ship in the Club must be classed with an approved classification society throughout its period of entry. the Club indemnifies the owner for the amount of any claim for which the owner has not only become liable. as can be seen. . Linked closely with seaworthiness is the vessel's fitness for purpose. If the owner fails to notify the managers or to submit a claim. the Club reimburses the owner rather than settles the claim. The advent of the ISM Code should make it less likely that an owner. except to the extent that the directors otherwise decide. unattended. Typically a Club may require that: . incurred on or after the occurrence. It is very much the master's responsibility to ensure that the crew understand this and that they do not let strangers walk.Non. typically those relating to the construction. The obligation is not limited to matters within the member's personal knowledge. condition. incurred with the agreement of the Club. . too.Indemnity-although often termed liability insurance. so a failure by a marine superintendent to report damage could result in a breach of this Rule. .The member agrees to authorise the classification society to disclose to the managers records relating to the maintenance of class of the entered ship. It . As liability insurers the Clubs frequently pay cargo claims to which unseaworthiness is a contributory factor. can give rise to important cashflow considerations. the claim may become time barred. It is not unknown for the representative of a claimant in respect of cargo or injury to wander into the engineroom in an endeavour to elicit some extraneous evidence which he could use to support a claim that the vessel was unseaworthy at the commencement of the voyage. . the inability to impose an absolute warranty of seaworthiness throughout the voyage is recognised. except those few vessels (used only in-ports and harbours. not at sea) which are entered on terms that they are not classed at all. if the master considers that he needs to act promptly. and authorises the managers to inspect such information. uninsured owner would. a claim caused by unseaworthiness existing when the voyage begins and within the knowledge of the shipowner would be excluded from cover under most Club rules. if the survey or compliance with the repair recommendations becomes overdue the member may be in breach of his cover.

but. Life salvage Claims for life salvage are rarely made. He may also be liable in tort to persons other than crew. These claims may in certain jurisdictions be defeated or limited in amount by the terms of the passenger ticket. as opposed to the employer of the stevedores. Collision liabilities One-fourth collision liability: The English form of hull policy requires the ship's hull underwriter to pay three-fourths only of the liability of the insured ship in respect of loss or damage to another ship or her cargo as a result of the collision (subject always to the maximum mentioned below). Customs officials. Several Clubs extend the cover given to stowaways to include the like expenses in respect of refugees who have been picked up by the ship. his reasons for taking those actions and all of the costs involved. Although there is no liability here in the usual sense. although it is more usual for the claims to be made under the crew members' collective agreement or particular contract of employment. the position was improved somewhat by the introduction of the 1972 Amendments to the Longshoremen's and Harbour Workers' Compensation Act which narrowed the circumstances in which the shipowner. However. Cover in respect of liability to these persons can also be included. as are the funeral expenses of dead seamen and also the cost of sending abroad a substitute for a seaman who is sick or injured or for a seaman who dies. the Clubs give cover to the shipowner in respect of the basic running expenses of his ship during the diversion. In order for a life salvage award to be made it is necessary not only for life to have been salved. passengers and others. injury or illness. pilots and so on.hardly needs to be added that the master needs to keep a careful record of his actions. Loss of personal effects Liability of the shipowner to crew. is liable for stevedore deaths and injuries. Diversion expenses The shipowner may suffer losses through having to divert his ship in order to obtain treatment for an injured or sick person on board or for the purpose of landing stowaways. The cost of medical treatment and of repatriation is covered. the owners may recover from the Club. the claim for life salvage will form part of the arbitrator's award for the property salvage. Personal injury to or illness or loss of life of crew members The shipowner may be exposed to such claims in tort or under statute law. Similarly. In the event that the life salvage proportion of the award is not recoverable from the owner's hull policy. including surveyors. illness or death. but also property. is also covered. in respect of loss of or damage to the personal effects of these persons. Where there is a particular employment contract and this provides for unusually generous compensation in the event of death. the shipowner will normally be expected to have cleared it in advance with the Club so that his additional exposure under the contract can be taken into account in the assessment of his premium. Personal injury to or loss of life of stevedores This is a frequent source of heavy claims against shipowners particularly in US ports. whether this is so or not in the particular case. Personal injury to or illness or loss of life of passengers and others The shipowner may be exposed to claims in respect of passengers carried on board his ship in respect of injury. This one-fourth usually makes the Club the largest single insurance interest. the shipowner is covered for this risk. including port charges incurred solely for this purpose. In normal circumstances. and in practice the managers of the Club will usually be asked by the hull underwriters to handle the issue of collision . The remaining one-fourth of such liability is insured by the shipowner's Club. the cost of providing food and other necessities for stowaways may be reimbursed to the shipowner by his Club. stevedores and passengers who come on board his ship for one purpose or another.

However. to recover in respect of this payment from his hull underwriters. English hull underwriters and those writing hull risks on similar terms are not obliged to make payments in respect of collision liabilities beyond a sum representing three-fourths of the ship's insured value under the hull policies. in the US there is a well established principle. including docks. In certain countries. but cannot recover either from the carrying ship or from the non-carrying ship in respect of that part of the blame attributable to the carrying ship. The shipowner may in such circumstances recover his payment from his Club (although in the case of towage other than ordinary harbour towage. if any. The shipowner will not need to insure with his Club for this risk where his hull policy accepts it. wharves. is that at some point the hull underwriter may limit his payments to the insured shipowner in respect of collision liabilities. locks and so on. as is consequent damage to shore side structures or to the cargo in the insured ship herself and pollution from and loss of life or personal injury on board any ship involved. and the hull underwriter's cover excludes. the Club taking appropriate counter-security from the insured shipowner and also from the hull underwriters (or brokers) to the extent of their respective interests. As the Club's cover under this head could be increased unfairly by a decision of the shipowner to insure his ship with his hull underwriters for an artificially low value. as the words in the running down clause 'pay by way of damages' have been interpreted as being restricted to payments in respect of tortious liability. as the local policies do not follow the scheme of the RDC in establishing for collision liability a fund separate from the ship's basic fund. the Clubs provide in their rules that a claim in respect of excess collision liability can be reduced proportionately if. The non-carrying ship is then entitled to recover over against the carrying ship in respect of the carrying ship's degree of blame for the collision. the 'innocent cargo rule'. for example. provided only that there is some degree of blame. this part of the Club cover is more important than it may at first sight appear. The common theme. All those liabilities are insured by the shipowner's Club. wreck removal liabilities are excluded. It is also usual for the Club concerned to give. any necessary guarantees to the other ship and her cargo. The Club cover includes. Excess collision liability: Under the terms of the running down clause. with . when the Club's cargo cover is conditional upon the The Hague or Hague-Visby Rules being included in the contract of carriage and these Rules exclude claims by cargo in respect of the negligent navigation of the carrying ship. The same is true of liabilities incurred by the shipowner not in tort but because of the existence of a contractual obligation. because of the terms of the last sentence of the running down clause. In view of the possibility of a ship of low insured value colliding with one or more ships of very high value.liability with the other ship and her cargo on behalf of all the underwriting interests. upon the non-carrying ship. Duder payments made by a shipowner for collision damage to a tug were held to be unrecoverable from hull underwriters where the collision was caused solely by the negligence of the tug and liability arose under the special terms of the towage contract. Other risks excluded from the running down clause: There are a number of important exclusions from the liability of the hull underwriters in the running down clause (RDC). The cargo owner may make a claim against the non-carrying vessel in accordance with her degree of blame. as is the case. but instead provide that the hull underwriter may stop paying altogether when he reaches the insured value of the ship. the Club cover fills that gap. In this indirect manner the owner of the carrying ship may become obliged to pay part of the claim of the cargo carried on board his own ship. not only the wreck removal of the insured ship herself. however. Thus in Furness Withy v. but also the removal of the wreck of any other ship involved. The overspill beyond this limit is picked up by the shipowner's Club. Loss or damage to property other than cargo The Clubs provide cover for damage caused by contact between the entered ship and property belonging to other persons. in any event. It may be asked why the Club cover should include the insured shipowner's liability to cargo carried in his own ship. slight. In most jurisdictions it is indeed unlikely that the owner of cargo in the insured vessel could succeed in a claim against the owner of that ship in a collision situation. by special arrangement only). For instance. As the shipowner would be unable. in the opinion of the directors of the Club. to the effect that cargo may recover from the non-carrying ship the whole of its loss. on behalf of the insured shipowner. the extent of the hull underwriters' interest maybe even smaller where the insured vessel herself is also heavily damaged or lost. the ship has not been insured with her hull underwriters for her proper value.

The cover extends beyond the sea leg of the carriage and thus will protect the shipowner throughout a combined transport contract from an inland point to another inland point. such as the delivery of cargo without production to the master of the relevant bills of lading. or the issue of a clean bill of lading for cargo which is patently damaged (see chapter six). Most such liabilities are imposed by international convention. Club rules impose restrictions on the cover in respect of deviation from the contracted voyage (for example an unreasonable departure from the agreed itinerary or the shipment on deck of cargo with underdeck bills) and in respect of other departures from the proper carrying practice. Pollution It is well known that there has in recent years been a massive increase in the exposure of shipowners to liability claims in respect of pollution caused by cargoes from their vessels. the Clubs will pay to the shipowner contributions to general average. All these liabilities are insured by the Clubs. special charges or salvage which the shipowner would have been able to recover from cargo interests had he not disentitled himself from so recovering by committing some breach of his contract of carriage. removal. although he may still wish to have Club cover for the excess above any limit imposed by the hull policy. The shipowner may recover from his Club any additional cost incurred by him in discharging or disposing of damaged cargo. Unless prior arrangements are made with the Club managers. as the use of a floating crane. as. The Club cover also extends to damage caused by the entered ship to other ships and their cargoes without any actual contact. destruction. for example. Wreck liabilities A very important part of the cover provided by the Club is that which relates to the liability of the shipowner under his contract of carriage to pay for any loss of or damage to cargo. as. although with a limit in respect of oil pollution claims which presently stands at US$500m each entered ship each accident or occurrence. Towage contract liabilities Clubs provide cover in respect of liabilities which may be incurred during ordinary harbour towage and may by special arrangement offer cover on appropriate terms for situations beyond harbour towage. The Clubs give cover for the liability which a shipowner may incur in respect of the raising. this cover will be given on the basis that the shipowner's contract with the owner of the cargo is on terms at least as favourable to the shipowner as the provisions of The Hague or Hague-Visby Rules. Liabilities under contracts and indemnities Shipowners are often required to give contractual indemnities in order to secure services required by their vessel such. From the cost of the operation will be deducted the value of the wreck or any part thereof that is recovered as a result of the removal operation. domestic statute or common law. but also embraces those which come indirectly. . They also give cover for liabilities under the terms of the usual contracts for towage by the entered ship of another ship or object. for example. Cover in respect of any resulting liability can be obtained from the Clubs in most such situations provided that the Club has had the opportunity to review the contract it can extend the necessary cover or arrange additional cover for any resulting liabilities. Cargo liabilities Cargo's proportion of general average or salvage As an extension of their cover for loss of or damage to cargo. those which form part of the collision claim of another vessel (see chapter eleven). but some have been voluntarily assumed by shipowners in accordance with the Tovalop scheme. This oil pollution limit does not apply only to claims that are made directly against the entered ship by those who suffer the oil pollution. provided only that the sea leg is performed by an entered ship. for example. by causing damage to a moored vessel by passing her closely at excessive speed. lighting or marking of the wreck of his ship.the German and Scandinavian types of hull policy. . in particular cargoes of oil.

This was revised and reissued in September 1996 and the following new features should be noted: The definition of cargo claim(s)-as 'claims for loss. . Legal costs The Clubs also pay for legal costs and similar expenses which a shipowner may incur in dealing with a liability insured by his Club. make the liability. the analysis of the NYPE contained reference to the Inter-Club NYPE Agreement for the apportionment of cargo claims. The 'omnibus' rule gives the opportunity to the directors to move rapidly in response to the needs of the members.Certain expenses of salvors Clause 1 (a) (ii) of the Lloyd's Standard Form of Salvage Agreement (1995) provides that in certain circumstances the owner of an oil tanker may be required to reimburse a contractor who attempts to salve that tanker for his '. ullage or pilferage). to prevent or minimise damage to the environment. Cargo claims shall be apportioned as follows: (a) Claims in fact arising out of unseaworthiness and/or error or fault in navigation or management of the vessel: 100 % Owners .. This is a most unusual provision and is a reminder that the Clubs exist. but as organisations for the benefit of the shipowners who are their members.' These expenses. Thus. It should be noted that the cargo responsibility clause in the charterparty should not be materially amended so as to '. particularly where a new risk suddenly arises or when an exceptional case appears to fall outside the express provisions of the rules. In practice. surveyors and other experts who may be required and who are paid directly by the Club. Omnibus cover In recognition of the fact that the list of liabilities to which shipowners are subject is constantly increasing in unforeseen ways. best endeavours .'has been broadened and now includes related Customs dues or fines. the rules of the Clubs give their directors discretion to pass for payment certain claims that are not expressly covered by any of the heads of cover in their rules. . in contrast with ordinary salvage awards made under the Lloyd's Form or under general maritime law. damage. provided only that they are within the general scope of what it is the Club's purpose to cover and are not expressly excluded elsewhere within the rules. making the master responsible for cargo handling is not a material amendment although the addition of 'cargo claims' to clause 26 of NYPE (or clause 25 of Asbatime) will prevent the Inter-Club Agreement apportionment coming into affect even if the charterparty is made subject to the terms of the Agreement. Inter-Club New York Produce Exchange Agreement In chapter six. . are not recoverable under hull insurance policies. . who engage any lawyers. The new time-bar provision also caters for the possibility that the Hamburg Rules will apply. the words 'and responsibility' in clause 8 of NYPE (or Asbatime). shortage (including slackage. Most of these come within the cover of the Clubs. such as waybills and voyage charterparties are also included. over-carriage of or delay to cargo . the defence to the claim against the shipowner is usually conducted by his Club's managers or correspondents. as between Owners and Charterers.. . either directly or because of an obligation to reimburse his seagoing employees in respect of fines levied on them within the scope of their duties. Written notification of a claim must be given within 24 months of the date of delivery (or 36 months if the Hamburg Rules apply) or recovery under the Agreement will be deemed to be waived and absolutely barred. Claims arising under Through Transport or Combined Transport bills of lading are included but only when it is established that the cause of the loss or damage occurs between and including loading and discharge of the chartered vessel. and the Clubs have agreed to insure shipowners for them having in mind the interests of the Clubs in the avoidance of oil pollution incidents. Claims arising under other types of contracts of carriage. for Cargo Claims clear'. not as profitmaking insurance companies. Fines A variety of fines may have to be paid by a shipowner. . interest and certain costs.

freight or hire claims and. stow.save where the Owner proves that the unseaworthiness was caused by the loading. (d) All other cargo claims whatsoever (including claims for delay to cargo): 50 % Charterers 50 % Owners unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including their servants or sub-contractors) in which case that party shall then bear 100 % of the claim. Class H and other cover Class 11: Class II cover or freight. demurrage). Strikes cover: May cover shore strikes or crew strikes or both and provides against loss of hire or. Through-Transport Club (TTClub): This Club provides specialist cover for the NVOCCs (non-vessel owning common carriers). Loss of hire: Provides a similar cover for a vessel delayed or out of service as the result of a marine casualty. ACKNOWLEDGMENTS . lash. Alternatively. demurrage and defence (F. lashing. discharge. they may enter the vessel into a war risk club or with a P&I Club which offers a separate class of cover specifically for war risks. port authorities etc in respect of their third-party liabilities.g. claims for shortage or overcarriage: 50 % Charterers 50 % Owners unless there is clear and irrefutable evidence that the claim arose out of pilferage or act or neglect by one or the other (including their servants or subcontractors) in which case that party shall bear 100 % of the claim. War Risk Clubs: Class I P&I cover usually excludes war risks and consequently it is common for owners to attach to their war risk (hull) insurance policies a clause giving cover for P&I war risks. (b) Claims in fact arising out of the loading. storage or other handling of cargo: 100 % Charterers unless the words 'and responsibility' are added in clause 8 or there is a similar amendment making the Master responsible for cargo handling in which case: 50 % Charterers 50 % Owners save where the Charterer proves that the failure to load. Firstly. stowage. stowage. Charterer's cover: A time charterer can obtain cover under any of the categories listed above but may also take a special cover in respect of potential liability for damage to the vessel itself (e. such as disputes with: hull and war risk underwriters. legal advice is provided and secondly cover is provided in respect of disputes in which no other insurer should properly bear the shipowner's legal costs. damage caused by charterer's stevedores). The benefits of entry into a Defence Club are twofold. lockouts. over repairs. stoppages or restraints of labour. of course. under charter parties (such as speed and consumption. freight forwarders. D & D) cover is generally available from within the P&I Club against the payment of a separate premium or from an independent but related Defence Club. with agents. discharge or handle the cargo was caused by the unseaworthiness of the vessel in which case: 100% Owners (c) Subject to (a) and (b) above. and in connection with new buildings. in which case the claim shall be apportioned under sub-clause (b). lashing. discharge or other handling of the cargo. at a lower level. cover for daily running costs when vessels are delayed by strikes.

Witherby & Co.board management is increasing the shipmaster's involvement in purchasing beyond the traditional requisitioning of stores. saving money. followed by placing the purchase order (identifying the point at which an enquiry becomes a firm contract). H.GREAT HELP was received in preparing this chapter from Derek Prince and his colleagues at Bain Hogg. Roger Nixon and Nigel Carden of the UK Club contributed significantly to the editing of this chapter. The chapter will follow the natural progression of a purchase. therefore. Witherby & Co. Purchasing stores and supplies Purchasing contracts Whilst the essence of all purchasing is similar. Chalmer's Marine Insurance Act. Brown. together with a brief overview of the law of contract as it relates to purchasing. Using a repair contract as an example of one of the major contracts likely to be managed from on board. H. These are typified by the very large number of individual items which make up the total stores stock. R. The second part of the chapter addresses some of the considerations involved in negotiating and managing a supply contract. ANNEXES FOR CHAPTER 7 . especially if the item has a high durability. R. Butterworth & Co (Publishers) Ltd. .J. LLP. It is. On the other hand. A majority of shipboard purchases will be MRO purchases. Excess items in stock represent dead money.selecting a repair yard. Also important factors are the value of the item and its durability.board purchasing system can improve both efficiency and job satisfaction while.Institute Time Clauses-Hulls 1/ 11/95. whether the purchasing system is effective and user-friendly is a different matter. Brown. The intention in this chapter is to give a general description of how purchasing systems work. unquestionably a long lead item but infrequently required and a lot of money to tie up. selection of the repair yard.Law and Practice. repair and operating supplies.Hulls. some of the more important terms and conditions and the management of the contract are all explored. it could cause a vessel to miss its cancelling date and lose a charter.management contracts. that is maintenance. 1906. . essential to know which stock parts are potential 'ship-stoppers' and which have long lead times or are difficult to source in certain parts of the world. it is economically inefficient to hold more than the basic minimum requirement. The introduction of on. Analysis of Marine Insurance Clauses-ITC. ITC Hulls 1/1 1195-Comparison with ITC Hulls 1983. A ship's spare propeller is an excellent example of this area of decision making. the detail differs according to the purpose of the transaction. Hazelwood. in the extreme. There is little doubt that an effectively run on. Essential though an item may be. P&I Clubs. as well as Christopher Barstow at Richards Hogg. REFERENCES Analysis of Marine Insurance Clauses-ITC. funds that cannot be used for more pressing purposes-such as purchasing bunkers for the next positioning voyage without incurring an overdraft and the resultant interest payments. IT IS UNLIKELY that any vessel will be operating without having a purchasing system in place. and receiving the goods. Hence the decision to be made: one spare propeller per .ILU Marine Policy-March 1991. Barstow. Definitely a ship-stopper if it fails.Certificate of cargo insurance. Richards Hogg Ltd. starting with requisition and the request for quotations. at the same time. C.Cargo. having to wait for essential spares to be delivered can result in off-hire and the consequent loss of income. Chapter 8 CONTRACTS FOR PURCHASING SUPPLIES AND SERVICES Purchasing stores and supplies.

rate of consumption. Requisition For many years it has been traditional for the control of the purchasing operation to be held within the head office. consciously or otherwise. one between sister ships. Lube oil is relatively cheap in Singapore but what stock should be stemmed when the future trading pattern might change? A further few months trading across the Pacific would indicate a low stock purchase. a large purchase of deck paint. In other words. a ferry or container operation-the risk assessment (applied common sense plus a hard look at the finances) may well result in the decision to order a spare propeller. mainly operating at a steady speed and on one generator and with a low lube oil consumption. chapter 3). Food can be considered in a similar way. spread across the wide range of a vessel's stock of stores and spares. whilst a change of trading area leading to a similar period trading from port to port during the winter in the Mediterranean could indicate a benefit from a higher stock intake. stock due and net requirements are the terms which concern the stock controller. A slightly different approach can be taken for general consumable stores which are more closely related to MRP or material requirements planning for production line manufacturing-and the purchasing. or at least the consumption of. Fortunately. If the vessel is fitting into an highly scheduled service-for example. even at extremely attractive prices.vessel. In a similar way. two in a three ship series. conserving cash. the critical items tend. if a tramping bulk carrier. free stock. gross requirement (for the period under consideration). As mentioned in chapter 2. may not be the wisest use of funds just before a winter season in the North Atlantic. The vessel's role was reduced to submitting a requisition with little or no knowlecrge of the cost of the items involved. consider a handy-size product carrier which has just traded trans-Pacific. just because it is storing time. planning has an important role to play in achieving the most cost effective purchasing pattern and a lot of the requisite information can be generated from raw data input by an efficient management information system (see. the items which the master. but what to do if you purchase a vessel second-hand without a spare propeller? The answer generally lies. catering supplies may sometimes make this comparison appear quite real! For the control of consumable stores. For a simple example. chief engineer and chief officer have to follow most closely are relatively few and can be depicted in Venn diagram form as shown here. possibly not. a substantial purchase of light foods popular in tropical climates. These requisitions were frequently checked against budget by a superintendent or purchasing manager and adjusted after careful thought and . may not prove cost effective in the long run if the vessel is due to trade in a northern winter for the next few months. to follow a standard Perato distribution. mathematically. in the risk appraisal assessment for that vessel or operation.

the golden rule is to set out your request clearly so that. but a basic purchase requisition form can be a very simple document (figure 8. generally fall into this category. for example. In planning a request for quotations. Japan. In some cases. instructing him to secure. As already mentioned. used properly. It did not only happen at sea: a famous penny store was once reputed to have a 103-year stock of lime green zips. and 4. Knows where to make the purchase most cost effectively. can result in useful ideas for economies. This means that. and this is most prevalent on ferries operating within a limited area. a system is needed to ensure that the best decision is made every time and all involved should know its basic principles and understand how it works. will I get the amount I need?' resulted. subject only to normal secondary authorisation requirements for high value items. . into the responsibility of the shipmaster and his heads of department. independent quotations.consideration so that the stores on board often failed to match needs and an elaborate game of '. The person who requisitions stores may well not be the person who: 1. it will be necessary to ensure that heads of department (HODs) keep a careful watching brief on the various stock holders within their department. mainly locally sourced. The request for quotations can be sent directly to the potential suppliers (probably the best course of action) or through the agent. contract and payment terms will be of less significance. 3. and the tragic 1995 earthquake in Kobe. The first stage of the requisition process is to decide who is responsible for maintaining the optimum stock level of each particular item. the vessel has an allowance for direct purchase of a range of consumable items. The most effective person to initiate a purchase requirement is often the user. Finally. together with the operating budget. All requisitions should be consolidated into departmental requirements at this level. Therefore. total purchasing responsibility. has transferred. although it will be necessary to invite quotations. 2. . Victualling supplies and pantry stores. Is most unlikely to be the person who will effect payment for the transaction. all suppliers quote on a like-for-like basis. usually three. there will be those. The person concerned should also know the cost of the item(s) under his or her control together with an indication of the budget allocation or target consumption for the forthcoming voyage or budget period. Inviting quotations and selecting suppliers In many cases. Due to the problems inherent in ordering stores for a moving vessel. In other cases. This can also be an effective way of involving both junior officers and petty officers in the management of the vessel and. coupled with the much greater ease of communication. it is important to indicate the level of priority of the requisition in a simple way.2). It is no longer somebody else's fault if you have 100 paint brushes and no thinners. . the vessel's owners or managers will have supply contracts in place for major or common stock items as these can ensure quality and availability as well as securing volume discounts. is pushing more and more of the purchasing responsibility towards the sharp end. It may also be useful to add an additional column giving the budget price for the item. The tighter margins under which shipping operates today. if I double my order for this. One way of achieving this is to build a stores status item into the agenda for the regular management meetings. Most companies will have their own stores requisitioning and purchasing forms. illustrated one of the dangers of a one source just-intime policy for car parts or computer chips. The next stage down from this is for the company to have two or more recommended suppliers. although a wise master will ensure that he has a back-up system and will keep a close eye on his ship-stoppers. quality. so far as possible. including galley stores and supplies. quantity and quality). Will undertake the purchase operation (although he should be involved in checking receipt. Has the authority to authorise purchase. items for which full competitive tenders are required.

If this freedom of action is allowed. Great care must be taken when placing a purchase order to ensure that all requirements are stated clearly. all delivery costs. if the stores are to be air freighted. Whilst price is generally the main determinant. If the order is the resuft of a hard negotiation on price. 3. it must be authorised.Full compliance is rarely achieved but a request for any special terms or variations to be quoted separately helps. Orders and contracts Once the decision to purchase has been made. quality. Obviously delivery details are particularly important in the case of ship's stores: if the vessel's schedule is uncertain. make sure you are ordering what you have negotiated. availability and terms and conditions all affect the final decision. Once the quotations have been received they will have to be analysed and a supplier selected. It is a good discipline to involve both your HODs and the crew member who originated the requisition and get them to state briefly the basis of their purchase decision. Date of order. The words 'Purchase order' clearly stated. . The instructions 'Please supply' or 'Please supply the undermentioned. It may also produce an interesting and cost effective alternative to your original request. It is also important to ensure that the following are known: general and any special terms. it may be advisable to ascertain the latest date for a firm order so as to avoid the danger of cancelling charges. For large value items it is not unusual for both the master's and the HOD's signature to be required and in some cases it may be necessary to refer back to managers or owners for confirmation. Levels of authority for purchasing stores should be clearly stated and well understood. a purchase order should contain: 1. this can be significant and is generally an item best handled by the purchasing team ashore. and in many cases it is better to set out the requirements in full. terms and currency of payment. Name and address of purchasing organisation. 5. 4. many suppliers have recovered their margins as a result of a carelessly worded purchase order. 2. The ability to authorise expenditure to a certain level within his own area of responsibility can give a junior officer a great sense of job satisfaction. Name of supplier with full address. and any special taxes or export dues. At its simplest. budgets and management accounts). the shipboard control system must be effective and capable of ensuring that all purchases are recorded so that the vessel's performance against budget can be monitored (see chapter three. The term 'as per quotation' must be used with great caution.

New stores should not be dumped at the most convenient point just inside the storeroom doors. Agents and/or owners/managers must be advised of the expenditure. a journal entry coding and covering the expenditure must be made in the management accounting system (or. which. The follow-up after stores are received is easily overlooked. 2. 11. Delivery address (which could be 'as per agent's instructions') together with the name and address of the port agent. Terms and conditions in supply contracts For many items. 7. Quantity to be supplied. suppliers have a worldwide network and volume discounts can be achievedlubricating oil and paint are examples-and a company contract will be in place. 6. although to be effective. delivered during busy periods. can be found in the annex to this chapter. it is not sufficient for the suppliers to present them with his delivery note. consideration should be given to stowage. Particularly good or bad service by a supplier should also be advised to owners/managers (and the local agent) and a record kept on board for future reference. If on-board budgets are being kept. together with explanatory notes. Finally. In such cases it may only be necessary to call off the required stock. it may be worth requesting a professional tally clerk from the agent to act on behalf of the vessel. Terms of payment and address for invoicing. The terms 'said to contain' and 'content and quality/quantity unknown' are often used. 9. and 12. Delivery date. with reference to earlier quotations if applicable.Full description of what is required. Quantity and quality should be checked so far as packaging and the availability of time and staff allow. a purchase will be contracted on the basis of suppliers' terms and conditions. that the contract becomes legally binding. One question remains: once the supplier has received the purchase order (as opposed to when the buyer has dispatched it). an accrual-see chapter 3). A level of guidance can be gained from the International Ship Suppliers Association conditions. Receipt of the goods The golden rule when receiving and checking stores is: Always check incoming stores against the purchase order. these must be made known prior to contract. This in turn raises the question of when the purchase contract actually comes into being. It is frequently difficult in these circumstances to ascertain exactly what the exact terms and conditions of a contract are and how they will be interpreted in the event of a dispute. Storing problems are not all one sided. although it is wise to state each time that this is done on the basis of the company's negotiated terms and conditions. For large orders. never against the delivery note. The order number and a request for confirmation of order. as can be gathered from the ISSA's journal. 8. in the absence of an invoice. 4. together with any items that might be in dispute. but is an important part of the purchasing process. A standard sequence of events would be: Vessel raises enquiry An invitation to quote Supplier quotes An invitation to treat Vessel places order An offer to buy Supplier acknowledges and confirms A firm contract is only effected at this stage. It is at stage 4. Crew members should be made aware of the basic principles of stock control and it is interesting to note that the level 2 vocational qualification relating to the British EDH (efficient deck hand) contains elements of stocktaking. and the amount of space devoted to the problems of arresting ships and the potential amendments to the International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing . 1. 10. Price and discount. is a firm contract in place? This question. not stage 3. 3. Generally. together with the general terms and conditions for purchase contracts are discussed later in this chapter.

project-manage the drydocking or repair. managed at arms length with a crew supplied by even if the agent places the stores orders.Ships 1952 (see also chapter 12 regarding liens. extensive steel work and fabrication or is the main concern a high level of engineering capability? Repair yards can vary considerably at what they are good at and the availability of different trades at any one time. This includes both preparing the specification. . Whatever help the supplier may receive from these conventions in the event of no payment. Technical ability Does the repair yard have sufficient technical ability to undertake the work specified in the repair specification? Is the vessel requiring. It is not a time to hand your vessel over to others. a good measure is whether the terms are 'fair and reasonable' but. he is certainly contemplating a long and expensive process. importantly. the apprehensions regarding storing in a strange port are not all with the vessel. there is much scope for variation within national interpretation. the conditions in the event of cancellation. Criteria involved The selection of a repair yard will normally be made against the following criteria: 1. the supplier has no problem. and it is reasonable that he should. The master in turn needs clear statement of price against the stores specified. . 2. but in the case of a vessel in bareboat. Thus. the master) is ordering the stores. supported by the chief engineer. as the signature of the first engineer or third mate is of doubtful value except as proof of delivery. in conjunction with the assigned superintendent.What should the supplier do when the stores are physically delivered? The simple answer is get a legally binding signature. consequently. statement of any delivery cost or taxes and. timechartered and sublet on a voyage charter. maritime and possessory). for example. Work period . It is also worth ascertaining whether the supplier is a member of the ISSA. the master should.Which rights. The supplier needs as much time as possible to organise the delivery-many are the stories they can tell of unnecessary last-minute panic deliveries-and he needs a clear specification. Repair and other service contracts Selecting a repair yard Although drydock and repair contracts are generally negotiated by superintendents or management staff. who is the principal on whose behalf the vessel (formally. as will be apparent. the master must be sure of his authority before placing an order. This is more difficult than it sounds. . some companies have delegated this responsibility to the master. it is probably because the supplier is well aware that it is only the signature of the master that is legally binding on his principal. If the ship supplier comes knocking on the master's door at an inconvenient time for a relatively insignificant stores delivery which should have easily been dealt with by the duty officer. analysing quotations and negotiating the contract as well as the overall cost and final settlement.How should disputes be settled? There are a number of courses of action from full-blown Court cases to ADR or 'alternative dispute resolution' (a variation on arbitration which endeavours to reach a mutually agreed solution). are granted by applicable law and/or international convention? Again this brings the supplier back to the chequered history of the convention relating to arrest and also to the 1967 Brussels International Convention for the Unification of Certain Rules Relating to Maritime Liens and Mortgages. The supplier needs to know. issuing invitations to tender. some of the more important issues are: . it is essential that he knows on whose behalf he is acting and. Looking at the problems from the ship suppliers' point of view. in addition to those in the contract. What the supplier will want is a declaration stating on whose behalf the stores have been ordered (and received). .With whom should the ship supplier conclude the contract? For well-established liner companies. As mentioned. Even if not involved to this extent.How should contracts be formulated? Reference is again made to the ISSA conditions.

. etc. be prudent to seek advice through head office to check if there are any peculiarities in the law of the country in question. always ask for clarification: 'I understand this clause to mean . If the valves are known to be in a poor state of repair. it is not possible. not only must they be properly incorporated but they must be consistent with the standard terms or it must be made clear which provision takes precedence. Terms and conditions As in all commercial negotiations. Your local classification society surveyor or agent may be able to give you some insight-but. a clause will be construed against the party seeking to rely upon it. and repair yards generally have their own contracts. for example. will be interested in all these decisions. the cost quoted cover reinstatement to an acceptable standard? The cost calculations must also include auxiliary costs such as port dues. these factors do not have full impact where the only connection with English is the choice of law. much more needs to be known about the cost of stripping down. Does. by reference to any contract term. the best approach to negotiating a repair contractand to most contracts-is that of good commercial common sense tempered with reasonableness. therefore. ahead of the negotiation. Additional insurance costs are another potential extra cost. It may. Liability for consequential loss . services and. Furthermore. Incorporation of clauses If 'standard terms and conditions' are referred t6. a quote for 'opening up. . and do remember to keep notes of any meeting. taxes. 2. they want your work too. Unit charge Is the estimate competitive-are you comparing like with like? For example. if they do not. each side will endeavour to secure the contract on their own terms and conditions. However. Some of the points to bear in mind are set out below. liability for any other type of loss or damage resulting from negligence may not be excluded or restricted unless the provision is 'reasonable'. 3. delay the drydock stem or the progress of work (if the contractor saw a more lucrative emergency repair coming over the horizon)? Labour may be drawn off. for example. If they are not included by the repair yard. Whilst English law is frequently written into contracts. overhauling and closing' deck valves may be satisfactory and reflect a competitive price. if payable.. A clause which seeks to restrict liability to an unreasonable extent will therefore leave an exposure to unlimited liability. inspecting. 4. who may be paying for part or all of the repair. If the meaning is not clear. Unfair terms Under English law. Using common contractual terminology. but this becomes more critical if your repair is dependent upon an item of specialist yard equipment. If in doubt. on a well found vessel. The same applies both to any liability as a result of breach of any provision in a set of standard terms and conditions and to a provision restricting the time during which a claim may be made. Whether a term is 'reasonable' will depend on the circumstances. ensure that the agent provides these costs and they are incorporated. the repair yard is referred to as the contractor and the owner/vessel as the company. 4. remember. If particular additional clauses are negotiated. and it is important to know what law regulates the contract. as may a mortgagor. replacing parts. Location Can the vessel be brought to the repair yard without undue deviation? What are the associated bunker costs? Hull underwriters. Availability Are there any subjects or escape clauses which could. to exclude or even restrict liability for death or personal injury resulting from negligence. This is particularly important in relation to a clause which seeks to restrict liability. 3.Is the work period quoted reasonable? Is it likely to be weather affected? What other vessels are under repair or due for repair? The arrival of a cruise liner or large tanker may well pull away resources allocated to your vessel if you are not careful. 5. It is vital that clauses satisfy the 'reasonableness' test. the entire clause will be ineffective. it that your understanding too?' orjust 'What does this mean in practical terms?' can save a lot of grief later. it is vital that they are seen and understood before they are accepted and that they are properly incorporated in the contract. 1. It is vital to understand (or specify clearly) what lumpsum price covers. Clarity of wording The wording of contractual clauses must be entirely clear.

Check whether -certain sub-contractors will expect payment in a different currency. If the company is covered by loss of hire insurance. Time and liability for loss of hire Is the time quoted in running days. or from the compatly's point of view should not. The contract must state clearly how additional work is to be authorised and charged and how the work will. However. some arbitration procedures are painfully slow and it might be wise to seek advice. The contractor will require them to comply with the contractor's health and safety policy and the master/chief engineer have a responsibility to ensure that their subcontractors are aware of this.It is common to see clauses limiting liability for ‘consequential' or 'indirect' loss. but there should be enough flexibility in the system for the night duty officer to agree minor amendment on the spot if necessary to maintain the flow of the work. Ensure that you understand how any dispute is to be handled. it might be sensible to opt for arbitration rather than recourse to the Courts. 9.g. Subcontractors The terms and conditions under which the company's own subcontractors can undertake work need to be clarified. will not receive (note. Such clauses may be particularly important in the context of pollution or loss of profits incurred due to delays or negligent work. to a great extent. The regular daily meeting is a good time and place to clarify and agree extra work requirements. that may well be the company's first recourse and it is the insurer that will then seek redress from the contractor. chapter seven). reflect the perceived status or known payment record of the company. Nevertheless. The availability of credit will. This has the dual benefit of providing an element of guarantee for the work done. 8. weeks-days or working days? What are the working shifts and the overtime rates? Claims for loss of hire can be substantial and the contractor will endeavour to protect itself. The vast majority of such clauses as currently worded do not have their intended effect. In any case the starting point is very much that he who does not ask. 40% on completion. Credit of up to 90 days can often be negotiated for part of the payment -e. Since disputes are likely to be of a technical nature.. the usual clause excluding liability for 'consequential loss'. . Very precise wording is required if liability for consequential or indirect losses are successfully to be excluded or restricted. It is important to ascertain the exchange rate which the yard is using if quoting in a non-national currency and the relationship of that currency to your operating or budget currency. affect the overall contractual repair time. will not generally be enough to protect a contractor from such a claim. 7. 30% after 45 days. The contractor's subcontractors are the responsibility of the contractor and they must operate within the terms and conditions of the main contract. Change orders and additional work These will inevitably occur and it is vital that they are carefully controlled and properly authorised. 6. the comments in chapter 12 regarding the repairers' right to a lien). However. the master and the notes which he kept relating to the contractual negotiations and the facts at the time will form a prime part of the insurer's evidence (see subrogation. 30% after 90 days.Costs and conditions of payment. Similar considerations are relevant if the crew are to be allowed to carry out maintenance or repair work. If the contractor owns or subcontracts tugs. the tugowner may be able to limit liability to a much greater extent than envisaged under the repair contract-which is where the company should be able to turn for redress in the event of damage. however.

.

.

It is also the responsibility of the company to ensure that all their staff (and subcontractors) are aware of it and comply with it.. should identify areas requiring clarification which will almost always be of the '. of cancellation procedures is important. Reinstatement and regulations/responsibilities After any work. costs and requirements for seatrials must be clearly agreed. the organisation. a comparison table can be drawn up (the one shown in Figure 8. the best guarantee is frequently the deferred portion of the payment. find out how the emergency services operate and ensure that the crew and all visitors are aware of the particular dangers of a vessel under repair and are wearing appropriate clothing. Some of the tests which the master may wish to apply are: . Guarantees Usually difficult to secure. or otherwise. and clear authority has been given by owners/managers if required. The first review of received quotations. ranging from shore electric supply to garbage removal.Which has priority: time. Domestic facilities The cost and availability of all domestic facilities. 16. as well as discarding obviously non-competitive repair yards. with the basic information. your hull underwriters. Start by grouping the repair items into natural areas of work. Time and care in preparing the specification is always well spent. more importantly. Keep copies of contracts for future reference and endeavour to secure the contractor's contractual terms as early as possible before commencing the negotiation. These points are by no means exhaustive but are intended to put the master in the right frame of mind for a successful contractual negotiation with a supplier. Cancellation Stems for drydocking are. through your company.What currencies are involved. 15. not forgetting the importance of ancillary costs and support services. Health and safety It is the responsibility of the contractor to have an effective safety organisation.Who on board (or on a sister vessel) has recent knowledge of any of the repair yards? Once the decision is made. by the nature of a vessel's operation. or as satisfied as he ever will be. with a brief description of the work to be done and any gaps in contractor's insurance which you consider significant. Once the master is satisfied. does this price include . the aim is to ensure that all contractors respond on a like-for-like basis although this is almost impossible to achieve fully.10. initially made on a provisional basis. Placing and managing the contract Chapter two contains some guidance on negotiating techniques and suggestions on organising the shipboard team for a project such as this which must be Properly planned and managed if maximum value for money is to be achieved. A good understanding of the terms and conditions relating to the firming of the contract and. Make contact with the contractor's safety manager. cost or quality and how do you rank the repair yards against these criteria? .lnsurance Ensure that the contractor has adequate insurance in place and ascertain what it covers and. Remember the unsuccessful tenderers. what is the potential danger from exchange rate fluctuations? . ?' variety.Is a particularly low quote in one area likely to be maintained. Advise. bearing in mind the sequence of events leading up to the placing of a firm contract defined at the beginning of this chapter. it should be the contractor's responsibility to ensure reinstatement to previous conditions within the requirements of class and relevant statutory regulations. .. the availability of essential equipment and services. the contract can be placed. is it genuinely based on low labour costs or efficient work practises? . Trials Especially if major engine repairs are scheduled. 13. should be clarified at an early stage and included as part of the contract. .What knowledge do you have and what is your assessment of the yard's terms and conditions? .How precise have you been able to make your quotation.4 is based on a major refit for a Panamax bulk carrier) apply a risk assessment (see chapter two). but may well also confirm. what it does not cover. if necessary. 12. 14. 11. they . which repair yard is likely to be most flexible with respect to changed orders-and extended time in drydock? .

Look for problem areas and bottlenecks. but a basic understanding of their contents is important. He will understandably have a close relationship with the repair yard. If a superintendent is not in attendance throughout the repair period. Establish regular meetings. never forget the importance of the validity date and time on an offer Well before arrival. It is a sensible precaution to discuss this with the personnel on board and the personnel department ashore so that reliefs can be arranged at a convenient. including part or all of the operational and commercial function. The heart of the contract is established in boxes 5 to 14. It is not intended to dwell long on these as they are many and varied. It is impossible to over-emphasise the importance of keeping a constant control of costs (and savings-items can be cancelled after opening up and inspecting) and to compare the ship's running total with the repair yard's estimate at regular intervals. the safety officer and the account manager who will run the cost control. In many circumstances it may well be possible to arrive at an overall cost prior to the contractorwhich should put the vessel in a strong negotiating position for agreeing the final contract price. engineering. The annexes contain a sample ship management agreement and although many management companies have their own. Ensure that extra works are formally authorised in writing and added to the original contract price. Establish how cost control is to be effected. he will generally understand how the repair yard operates and how to get the best out of it. On arrival.. If a ready-made package is not available. as illustrated in figure 8. the master (and chief engineer) should make an early effort to meet the general manager. The master's objective. In all contractual negotiations. Like the Gencon (chapter 6). Consider how best to deploy staff. at which the day's (or night's) work can be discussed and agreed. both in scope and wording. the master should study the repair specification in conjunction with his HODs. is sufficient. bearing in mind their individual attributes and strong and weak points-also bearing in mind that inevitably some will be relieved right in the middle of the most critical period. and crew supply contracts. not critical.4. Finally. who are effectively his 'owners'. An expression of thanks for their tender and. part I is a box layout. Take the time and effort to ensure (or remind him) that he is an important part of the owner's team. through which the owner engages a company to operate his vessels. The objective is a system that serves rather than one which diverts time and attention in an effort to keep it up to date. supplemented by clause 2. it is essential to take responsibility for this item from the start as. The scope of management contracts can vary from supplying superintendency services to full management. aided by an efficient cost control system.will have put in a lot of work responding to the enquiry and your company may need to use their facilities at some time in the future.3. relevant departmental managers-e. A simple spread sheet.g. ship manager for the vessel. so that resources can be allocated to the critical areas. It may be useful to draw up a simple flow diagram as illustrated in figure 8. once repairs are underway. supplemented by more detailed information contained in part 11. use the classification society representative as much as practically (and economically) possible. it is very difficult to catch up and many repair yards will be 'More than happy to take the full responsibility for controlling costs. it is sensible to keep overall control through separate spread sheets covering the different sections of the repair specification. if possible. steel work. as well as the local classification society surveyor. priorities adjusted. point in the repair period. Management contracts Two other contracts which the master may have to deal with are technical management contracts. the Bimco Shipman covers all the main points. is to be able to arrive at the end of the repair period with a precise figure for expenditure. brief but structured. These can then be easily overseen and a manual total achieved when necessary. a brief explanation of why they were not successful will never go amiss. Appointment of BIMCO management contract . One aspect which the master will need to consider is any wording which gives him guidance as to who has the ultimate responsibility for his vessel-in other words.

even if it is 'playing by the book'. Crew supply contracts Crew supply contracts are perhaps even more varied and can be potentially more tortuous than management contracts. This analysis should also take into account the articles of agreement and thus two or more different legal regimes can.Provisions. it should be possible to brief the officers on board clearly and succinctly regarding the important points and thereby avoid unnecessary misunderstandings. . Clause 2 (appointment of managers) requires the managers to use their 'best endeavours' to provide the agreed management services. Discipline linked to the grievance procedure is another potential area of contention.Accounting. clause 18. ACKNOWLEDGEMENTS THANKs are due to Eric Welsh and his colleagues at Tees Drydock for their input into the section on drydock contracts. gross negligence or wilful default of the managers or their employees or agents . A clear understanding between crew and master that there is both a requirement for discipline and. despite being engaged for long periods. .Crewing: including the optional requirement to undertake training. if necessary. Although box 2 states the owner's name.Chartering. . overtime and watchkeeping is one obvious area.Placing insurance. The alternative.Freight management. . sub-charterer and shipper/receiver are included in the equation.Managers. . a fairly strict requirement.Sale or purchase. It will be interesting to see whether the wording of the contract changes in order to incorporate the ISM Code concept of a designated person (see chapter ten). . which sadly quite often comes to the attention of the International Shipping Federation.' Should the occasion arise when there is a dispute between owners and managers.Technical management. Here the master may have more opportunity to be proactive. especially in countries where health facilities are not necessarily well developed. place of registered office and law of registry. is the health and wellbeing of family and relatives. . Linked to this can be payments in event of short manning as well as the many and varied holidays to which they may be entitled. most of the crew have families who they miss and about whom they worry just as much as everybody else. Another area of concern. As with charterparties and other contracts. the contract is perhaps less specific than it might usefully be on the relationship between the master and who has ultimate authority. resulted solely from the negligence. Certainly the master could be receiving instructions and fielding enquiries from two or three legally different organisations. and clauses 3 to 12 which detail the specific duties of the managers under the following headings: . be relevant to crew matters: the flag State law (articles of agreement). However. it is sensible to analysis them under the more important operational headings.Operation: this is perhaps the most critical area with regard to good communications. which may well be different in a number of the management areas set out above.2 (responsibilities) then endeavours to loosen the commitment by placing the managers under '. . . . . .' towards the owners unless it can be proved to have '. working through the manning agent to arrange hospitalisation and/or hospital visits and milising the vessel's communications to ensure that the crew member has timely news from home. . . One of the prime concerns is that allotments are getting through to the families and. the nationality law of the seamen and the jurisdiction specified in the crew agreement. .Bunkering: it is critical to ensure that the correct bunker specification is agreed-see chapter nine. . Hours of work. and that is just the home team before the charterer. Once this has been done. and to the International Ship Suppliers Association. . conceivably. it is a difficult matter to check and generally a matter that has to be resolved through the manager's personnel department. since payment is frequently the responsibility of the manning agent. may well result in disputes and disgruntled crew members. no liability whatsoever . Perhaps the most important point to remember is that. . a fair and effective grievance procedure should establish the ground rules for an effective working relationship. the master may well find himself in the very difficult position of having to respond to two masters.

On the average Aframax tanker they generate enough power to supply a small town. the efficient operation of the engineroom being their prime concern. This means that there is even less place for the hierarchical two department approach which was. can be frustrating.constituents and quality. The team and the hardware Team responsibilities IN CHAPTER TWO.up which most power plants enjoy and using a fuel supply that may be far from consistent They are responsible for what is the highest cost element in most vessels. . Chapter 9 MANAGING A TECHNICAL COST CENTRE The team and the hardware.Standard ship management agreement: Bimco. it is up to the master to establish a satisfactory working relationship. either because he does not feel it is his concern or because he does not feel welcome in that part of the ship. all too prevalent. Shipman. Occasional Paper. Routine repair and maintenance requirements need to be scheduled so that they fit round the changing needs of cargo operations. It is important for the master to realise that demands for efficient co-operation. understandably.taking delivery. or if they are not working effectively.effective way. the vessel's userl maintainers.ISSA conditions and explanatory notes. At the same time. It is important to realise that there will probably be differences of culture and perception between deck officer and engineer officer. when the recipient is frequently having to revise his planning to meet changing external requirements. As such.REFERENCES Shipyards: Contractual Terms. negates part of his responsibility.purchasing bunkers. and in some cases still is. in terms of both capital and running costs and they hold specialist knowledge which is critical to the economic success of the venture.team responsibilities. it must be recognised that there may be the occasional master who is not fully sympathetic to the pressures under which the chief engineer and his department have to operate. Therefore it is imperative that the master ensures that the chief engineer and his team feed into and respond to the prime objective of the venture. If not. therefore. The master's relationship with the chief engineer is a critical one and one which the master may need to work at quite consciously if it is to be successful. ANNEXES FOR CHAPTER 8 . which. That responsibility includes the overall safety and efficiency of the vessel as an operational unit and the ultimate responsibility of overall command in the event of an emergency. It is. they are essential participants in the master's management team. important that the master thinks constructively about how he can establish a managerial and operational environment which both enables and encourages the technical department to deliver the vessel's propulsive and electrical power in the most efficient and cost. November 1992: Chris Perrin et al. tend towards being inward looking and task oriented. team management was proposed as the most effective method of achieving optimum efficiency with today's reduced crews. The master who is not familiar with the engineroom of his vessel. in most cases.managing maintenance. whether or not their approach fully supports the overall commercial objective of the voyage. They achieve this on a frequently unstable platform divorced from all the technical back. arising from the inherited and developed characteristics which lead the individual to choose a particular career path. The division of responsibilities between master and chief engineer may or may not be established by a company's operating procedures. will be to transport the customer's cargo safely and expeditiously. to use naval terminology. Clifford Chance. Engineers in the Merchant Navy are. There should be no doubt that the master .bunkers and bunkering. Engineers may.

and probably not one which can best be resolved by a frontal assault. the driving imperative is the efficient trading of the vessel. Management meeting The master's most effective course of action lies in establishing effective team management. As is. Especially where increasing financial responsibility is devolved to the vessel. if necessary. plant and other areas for which the engineers are responsible as well as the requirements of the vessel's trading pattern. An on-going requirement is the vessel's maintenance programme and. Even though this may lighten the deck department's physical workload. he needs to be familiar with every part of his vessel and he also needs to be able to understand any particular problems which the engineering department may face. Speed and consumption is an area where the knowledge of both parties can and should be pooled in a proactive way if the maximum benefit is to be achieved from every tonne of fuel consumed. This becomes even more important in circumstances where the responsibility for all maintenance. depending upon the type. therefore. This is rightly a matter of concern for the master. metaphorically. both in the short and the medium term. the master needs to work out a repair and maintenance strategy with the chief engineer. the master may know that there are problem speeds for the main engine and will avoid those revolution bands and. Therefore. possibly. The master may draw the chief engineer actively into the team through his position . as proposed in chapter two. This section has tended to imply that engineers are. on the staff for corrective maintenance (a term we return to shortly). this is planned as a separate exercise which only connects with the vessel's trading demands at times when priorities conflict. inwardly focused rather than outwardly viewing the operation of the vessel in all its aspects. For example. True partnership required At the other end of the scale. all too often. One of the master's primary functional roles is at the interface between the demands of the customer and the operation of the vessel. increasingly brief.has overall command and has. This will necessarily vary from vessel to vessel. He also needs to understand that achieving optimum propulsive efficiency is more than adjusting the revolutions but requires a more complex balancing of main and ancillary equipment in order to achieve optimum thermal efficiency. at times. guarded by Cerberus. This is by no means meant as a criticism and many engineers could justifiably point to a total lack of understanding of their problems and priorities by the master and deck department. there should be a joint medium-term plan which is developed against a background of the vessel's known or at least a best guesstimate of the vessel's trading pattern. masters may from time to time find that the management of the propulsion plant on their vessel is being undertaken with less than optimum efficiency whilst the entrance to the engineroom is. linked to a careful understanding of the chief engineer with regard to his dominant 'drivers' (see chapter two). Port stays. This is not to invite a liturgy of problems. A good starting point may be to draw the chief engineer out on the concerns that are uppermost in his priority list. his support and managerial skills may also be required to deal with such matters as surveyors or port State control inspections. are another area where the effectiveness of the vessel's management team will be tested. In many cases. may want to focus his technical skills inwardly on his main engine maintenance schedule or essential repairs. what the master needs to know and understand is what conditions help and what conditions hinder the efficient operation of the propulsion plant. clear from the theme of this book. has been transferred to the engineering department. Again. age and condition of the machinery. including that of the cargo equipment. if total responsibility has been delegated to the on-board team-and this needs a true and effective partnership between master and chief engineer-the interrelationship must work on board and problems should not be passed to shorebased superintendents for resolution. hopefully. ultimate responsibility for every part of the vessel. Nevertheless. At a time when the chief engineer. quite naturally. especially on tankers or general cargo vessels which impose a high ongoing load on the electrical plant and. it can give rise to inter-departmental tensions where maintenance schedules and (possibly frequently changing) trading requirements clash. The place to resolve such conflicts is within the vessel's management team meetings. bunkering will impose another high priority demand which must be incorporated into the overall plan and this aspect is discussed in the second part of this chapter. plan to avoid draughts and trims that reduce optimum performance.

being absent so that he has to chair the meeting from time to time (a co-operative chief officer may be useful here). except for exceptional circumstances. Finally.e. Spares purchasing and the need for a wellbalanced inventory has been discussed in chapter eight. if not already provided adequately by owner or manager. Off-service. even the most non-computer-literate master may find a wealth of talent and enthusiasm within the junior ranks of his management team. This requires understanding and reasoned argument. The master should actively involve the chief engineer and his team. Remember. the master may find that he has to appraise the chief engineer. This approach may not be greeted with universal acclaim but.as vice-chairman of the vessel's management team. An inventory of the vessel's overall condition can also usefully be made and used to prioritise repair and maintenance requirements. the chief engineer should be. This should be done on a whole-ship rather than a departmental basis and the whole of the resources on board. which it should be doing. the anticipated trading pattern. Units from MCI are used to provide the managerial input into the marine VQS. concentration is focused on managerial capability. for Vocational Qualifications within the Management Charter Initiative -i. One of the easiest and least effective ways of using up a maintenance budget is by flying spare parts around the world. If the chief engineer finds that the management team is making the decisions that make his life easier. as lacking for engineering officers as it is for deck officers. Playing second fiddle to the master during a management meeting may not strike a chief engineer as the best way of spending a forenoon when his priority is to be down in the engineroom trying to work out why the fuel slides are not working properly. in analysing the current stock inventory and establishing the optimum stock of stores and spares. The use of computers and IT has an increasing role to play in this area and. unless there are obvious shortcomings. or downtime. not confrontation and the imposition of authority. in terms of manpower and equipment. the level of management training is in many cases. leading to a loss of charter hire (either directly as in the case of time charters or by extending the time . more tellingly. so far as is ever possible. but it may well influence the maintenance programme and ensure that it fits. The management meeting is where. However. is being devolved to the vessel. it is becoming increasingly necessary that the vessel operates as one co-ordinated team rather than two competing departments. and more control and authority. Managing maintenance This is not a technical book and the intention of the following comments on maintenance is only to provide a few concepts which may aid the planning process. maintenance can amount to up to 60% of controllable operating costs. targeted where they will be most effective. the managerial equivalent to marine operations. it can be seen that the appraisal is moving away from the technical (managing operations and [technical] information) towards the wider area of managing the business and its most important (human) resource. The difference can be illustrated by looking at the senior and middle management's standards defined in the United Kingdom. together with the chief officer. a prospect which can be quite daunting. he is much more likely to become a willing convert. it should not be the master's responsibility to make an in-depth appraisal of the person's technical skills. with smaller crews and a future where more responsibility. Standards: Middle Management Senior Management NVQ Level 4 5 Managing operations Improving business process Managing finance Organisational development Managing people Individual & team development Managing information Human resources processes Despite the slightly less than user-friendly language.. Even if a vessel has a lot of stores and spares on board. it is not necessarily efficiently stocked. Maintenance costs can amount to up to 25% of operating costs but. Not only will this provide a storing strategy. Drawing the chief engineer and his department into the planning process could be as simple as. by careful stage management. At this level.

element in voyage charters) is a direct consequence of the vessel's (or the owner/manager's) operating policy. This is a matter which should be very much to the forefront of the master's thinking at all times. Whilst the experience of the last two decades is likely to have made seafarers all too aware of the detrimental effects on efficiency and safety of a purely accountancy approach to such figures, maintenance is obviously an area where careful planning can produce substantial benefits. It is the longer-term or strategic planning which is going to produce the lasting benefit without compromising safety or efficiency.

The maintenance requirements of a vessel will depend upon its type, age, condition and, to a certain extent, its trade. Poorly maintained vessels will require considerable amounts of corrective maintenance, which tends to be short term in its benefit and, in the longer term at least, expensive in its application. As the material condition of the vessel improves, preventative maintenance will take over and at some stage for every vessel, there will be an optimum as indicated by figure 9. 1. All work on the vessel's hull or machinery, except the most immediate of emergency repairs, will contain an element of preventative maintenance. To attempt to identify precisely the optimum point on the cost curve would probably add a significant on cost in administration and overheads. However, it is suggested that this is a valuable area of strategic planning in which the master can profitably engage the chief engineer on a whole-ship basis. Even if little control has been devolved to the vessel, it will produce a coherent and logical argument which can be jointly submitted to managers or owners by the onboard management team. It is interesting to speculate how many times a visiting superintendent, marine or engineer, meets the vessel's two senior managers at totally separate times and how infrequently he is greeted by a joint, comprehensive and well argued plan focusing on the vessel's future requirements and immediate priorities.

Bunkers- the energy source

Hardly any seafarer has managed to complete a career without encountering some kind of problem associated with bunkers. Although primarily the responsibility of the chief engineer, as the source of energy for virtually all that happens on board, bunkers are far too important to be ignored by the master. If 'the Chief' has problems with his bunkers, then the vessel has problems as well. The master needs to know what quality problems might be associated with the bunkers which his vessel stems and how they might affect the vessel's performance and machinery. He increasingly needs to know how to order and ensure timely delivery of bunkers at the right price and the right specification. Then he needs to know how to ensure that the bunkers are stemmed in a safe and trouble free manner that disrupts a busy port routine as little as possible.

Constituents and quality

Before the effect of the various impurities which affect the quality of fuel oil can be understood, it is helpful to have a degree of understanding of what happens during the combustion process. Although this happens during a very short period of time as the piston is approaching TDC (top dead centre) and the fuel is injected into the cylinder, there are three distinct phases.

- The first, referred to as the delay period, occurs as part of the fuel is injected into the cylinder. It begins to vaporise but not to combust. - Ignition initiates a period of uncontrolled combustion, during which time the fuel injected during the delay period is burned. - This is followed by a period of controlled combustion. Fuel is burned as it is injected into the cylinder and this phase ends with the burn-out of the combustion residues. On ignition, the pressure in the cylinder rises rapidly and considerable stresses are imposed on the piston as it approaches top dead centre. Although the period of uncontrolled combustion is necessary to initiate the overall combustion phase, it is desirable to keep the rate of sudden pressure rise as low as possible. This can be achieved by ensuring that the minimum quantity of fuel is present in the cylinder at the commencement of combustion. This requires that: - The ignition delay period should be as short as possible; requiring - Rapid mixing achieved by vigorous air movement in the cylinder and good (fuel) spray distribution; and - High air temperature and pressure. This aids evaporation of the fuel droplets and their chemical oxidation; needing - The use of a fuel with the correct ignition characteristics. Both the physical and chemical properties of fuels have an influence on ignition and the most important characteristics are discussed below. Viscosity: This is a measure of the ability of a fuel to resist flow. It is stated in terms of time requirea for a given quantity to move through a standard capillary tube at a given temperature. CentiStokes (cSt) are now the common units of measurement. High viscosity affects atomisation and can hinder the fuel/air mixing processes. It can also give rise to the danger of fuel impinging on the piston crown and cylinder wall. Viscosities have risen as cracking technology and the economics of the petro-chemical industry have combined to wring more and more higher grade product from each barrel of crude. The trend seems set to continue, although there is a level (around 700 mm'/s) where the cost of adding the necessary dilutants starts to offset the benefits of cheaper higher viscosity base stock. Associated with viscosity is pour point. This defines the temperature below which the wax within the fuel will crystallise, thus preventing the oil from flowing or being pumped. Density: This represents a unit of mass per unit of volume (e.g., kilograms per cubic metre). However, it is increasingly expressed in terms of specific gravity (SG) and is the ratio of the weight of a volume of oil at 60'F to the international unit standard (SG 1.00) of fresh water. There are three important aspects to density. For a start, it enables calculations to be made regarding the storage space required for a given quantity of oil. Together with viscosity, it is important for the operation of centrifuges and it also relates to the energy content of the fuel. The energy content of oil is stated in either calories per gram or BTUs (British Thermal Units) per pound weight and is frequently referred to as the calorific value. Instability: The behaviour of an intermediate fuel if it disintegrates and decomposes during storage and/or the heating and purifying process. This is more common in blended diesel oils (as opposed to distillates) and may be caused by: incompatible fuels used for blending; insufficient blending methods; inhomogencous products; too high asphaltene contents without sufficient aromaticity. Aromatics is a name commonly given to a group of hydrocarbon derivatives of benzene which chemically belong to a closed loop class of organic compounds and thus have specific chemical characteristics. One of these is their typical odour. Asphaltenes are insoluble, solid particles which are combustible and contain a high carbon to hydrogen ratio. They entrap water, fuel ashes and other impurities. Sulphur: This occurs naturally in all crude oils but, because it is associated with higher boiling point compounds, the sulphur content of residual fuel oils will tend to be higher than that of distillates which boil off at a lower temperature leaving the sulphur to accumulate. The sulphur content can range from 1% to 5% by weight. Within the combustion chamber, sulphur oxides and sulphuric and sulphurous acids are formed. The acids especially can give rise to low temperature corrosion of cylinder liners, exhaust systems and exhaust gas boilers. To a certain extent this can be countered by the use of alkaline lubricants, and it is also important to ensure that the dewpoint of sulphuric acid is avoided by not over-cooling the fuel injectors, cylinder liners and exhaust system. However, the chief engineer has a fine judgement to make, as the overall thermal efficiency of the engine system depends upon the correct operating temperature. In general terms, high sulphur content fuels are bad news, not least because buying up to 5% non-energy-producing sulphur is a waste of money.

Ash-forming deposits and contaminants: As with sulphur, ash-forming constituents of crude oil tend to concentrate in the residual fuel oils. The nature and amount of these constituents varies widely, dependent mainly on the source of the crude. The main elements are cadmium, iron, nickel, silicon, sodium and vanadium. Of these, vanadium is probably the most troublesome and, together with nickel, is usually present in oil-soluble form, and thus there is no easy method of removing it. Dilution with vanadium-free distillates is one approach-in effect, a reversal of the distillation process which caused the problem in the first place. Normal vanadium concentration is 50-150 ppm, but in certain Venezuelan crudes the content can reach 500 ppm. Oxidisation of sodium and vanadium can, through a series of complex chemical reactions, form semiliquid, sticky, low melfing-point salts that adhere to exhaust valves and turbochargers in particular. The mixture will corrode steel and, if it forms a plastic layer on valve and valve seats, is particularly troublesome. Strict temperature control of the valves and valve seats is important in controlling the effects of vanadium-sodium deposits but, again, this has to be balanced against the overall thermal efficiency not just of the engine, but of the whole system. This can be taken to extend from the temperature at which the bunkers are introduced to the daily service tanks through to the exhaust gas turbocharger.

The natural sodium content of fuel oil can be increased by the presence of salt water, and similarly the iron content can be increased by deposits from rusty storage tanks or pipes. Other elements which may be present include silicon and calcium, as well as dusts and dirt from the atmosphere. All of these can form damaging ash residues in the heat of the combustion chamber. Burning low quality bunker fuel gives rise to unburnt carbon and other ash deposits, which not only affect the cylinder liner, valves and piston but may also form deposits on the blades of the exhaust turboblower. The effect of this is to reduce blower speed which in turn reduces the quality of combustion, giving rise to even more carbon residues and excessive exhaust gas temperatures. Unburnt ash and carbon nuclei can act as local centres of combustion, resulting in fierce localised heating giving rise to metal damage. Further damage becomes apparent through excessive liner wear, and this is especially so if lubricating oils are contaminated and piston rings begin to stick.

The best method of minimising the downside damage of poor quality fuel and ensuring the maximum thermal energy per dollar is to order against the correct specification, and then to ensure that the fuel delivered meets that specification. Since. the constituent parts of residual fuels are dependent upon the origin of the crude and upon the refining process used, it is difficult to produce an exact universal specification. However, there are a number of recognised specifications and ISO 8217 (1987) CD 1994 sets out max/min limits covering the parameters shown in figure 9.2 for a range of fuel densities for the two main marine fuels. Additional information may also be provided by fuel advisory services such as FOBAS (Lloyd's Register's Fuel Oil Bunker & Advisory Service) or DNV Petroleum Services. These may include figures for sodium, iron, nickel, cadmium, magnesium, lead and zinc. The figures given above cover a range of four marine distillate fuels and 14 marine residual fuels (discussed below). This is because it is an ISO requirement that categories of any particular petroleum product are classified in a separate standard from the one containing their specification (a ruling arising from needs for lubricants). ISO 8216-1 is the international standard for the classification of marine fuels. The four classifications of marine distillate fuels (which are defined in ISO 8216, 1986) are: DMX Distillate. Used in emergency equipment, external to the machinery spaces. DNU Distillate. General purpose, shall contain no residuum (marine gas oil). DMB Distillate. General purpose, may contain a trace of residuum (marine diesel oil). DMC Distillate. General purpose, may contain some residuum (marine diesel oil). The much larger range of classifications for marine residual fuels (some 15 with esoteric designators such as RMAIO at the lighter top end and RML55 at the 1,010 kg/m, bottom end of the range) is there to accommodate the even larger range of marine diesel engines. Some of these were designed for fuels available 30 years or more ago, whereas modern diesels are capable, due to advances in centrifuging technology, of operating at the higher densities indicated. The two primary parameters which affect classification are density and viscosity. Viscosity brings its own problems since it is at times quoted at 100'C and 50'C, whereas density will be seen quoted at 15'C. The reason for using 100'C for assessing viscosity (an increase on the old 80'C) is because it gives a more accurate result. However, 50'C is the temperature at which both blend quality calculations and blending itself is carried out, and it is the temperature at which the bunker supply industry has continued to market and price marine residual fuels. This should give an indication of some of the problems faced by the chief engineer and technical manager in establishing a bunker supply policy for the technical classifications and specifications are still subject to grade availability. On top of this, bunker price will also have an effect on buying policy and, of course, bunker purchasing may well be undertaken at second, or even third, hand by a timecharterer's operations department with very different priorities. It is, therefore, essential that each vessel should select the appropriate classification of distillate and residual fuel for the machinery on board (with a tolerance range to take into account availability problems) and set the relevant specification when ordering bunkers or specifying bunker requirements in a time charter. Another dimension of the potential danger from below-specification fuel oil can be found in Lord Donaldson's report on the lossof the motor-tanker Braer in 1993 (Safer Ships, Cleaner Seas, HMSO) where, within the some 100 recommendations is included: The UK government should: (a) Ensure that bunker oil suppliers review their quality control systems with a view to identifying the sub- standard fuel before it is sold. (b) Encourage IMO to develop a system to eliminate the problems of contaminated fuel based on: (i) A certificate of quality which all suppliers would be required to issue on delivery. (ii) On board testing of the fuel supplied-most merchant ships should be required to carry a simple test kit. (iii) On-shore laboratory test of a sample of the fuel oil. and the Report states (section 7.7.3): As an operational unit a ship depends not only upon the reliability of a structure and machinery, but also upon a number of other vital elements.

Most importantly, the safety of a ship depends upon her crew and we discuss the 'human factor' in chapter 8. But it is easy to forget that other seemingly minor components such as fuel oil and lubricating oil play a vital role. A ship's engine may be well maintained and in perfect working order, but it can still fail if there is a problem with the fuel or lubricants. In a similar vein, IMO requested the International Organization for Standardization (ISO) to add to the existing clause 4.1 in IS08217: The fuel shall be blends of hydrocarbons derived from petroleum refining. This shall not preclude the incorporation of small amounts of additives intended to improve some aspect of Performance. The fuels shall be free from inorganic acid. and the recommendation that: The fuel should not include any added substance of chemical waste which can either: jeopardise the safety of the ship; adversely affect the performance of the machinery; be harmful to personnel; contribute to additional air pollution. All these are very laudable aims, but it is noticeable that they tend to be couched in general as opposed to specific (contractually enforceable) wording. Before leaving this general description of factors affecting quality, it is worth noting that there is a whole technology relating to lubricating oils and their role in analysing and improving engine performance. It is also essential to consider the vessel' ' s propulsive equipment as a whole from bunker tank through settling tanks and purifiers, through the fuel injection and combustion systems and out through the exhaust turbo-blowers, exhaust gas boiler and funnel outlets. A problem anywhere within this system can adversely affect the vessel's performance, either in terms of maintenance costs or that most critical measure of dollars per knot.

Purchasing bunkers

Generally, bunkers will be purchased either by the operations department ashore or the time charterers. However, it is sensible for the master and chief engineer to be aware of what is being contracted, what quality (if any) has been specified, and the general contractual terms of delivery. A good starting point is for the chief engineer and the master to have, and use, the optimum bunker specification for their vessel and the tolerance limits over which alarm bells should start to ring. Many owners and charterers will have a worldwide bunkering strategy which may depend upon discounts based on volumes lifted. They may also have quite complex hedges or swops or other financial instruments in place to even the variations in oil price, especially at times of high volatility, or international uncertainty. Despite this, the single most effective method of maximising dollars per knot is to organise a bunker strategy which enables the vessel to stem bunkers only, so far as possible, at ports where both the price and the specification is right. This requires a knowledge, or a guesstimate, of the vessel's future trading pattern and careful planning if freight paying cargo is not to be shut out by ostensibly cheaper bunkers. It is important that the chartering brokers include a good bunker specification in the time charterparty and that the chief engineer is aware of what has been specified. In the NYPE 93 (see chapter 6) clause 9 (b) sets out the requirements and gives the owners a degree of protection against the delivery by time charterers of unsuitable bunkers. The Bimco clause on bunker quality control takes this a stage further: The full test of the clause is: 1. The charterers shall supply bunkers of a quality suitable for burning in the vessel's engines and auxiliaries and which conform to the specification(s) mutually agreed under this charter 2. At the same time of delivery of the vessel the owners shall place at the disposal of the charterers, the bunker delivery note(s) and any samples relating to the fuels existing on board. 3. During the currency of the charter the charterers shall ensure that bunker delivery notes are presented to the vessel on the delivery of fuel(s) and that during bunkering, representative

samples of the fuel supplied shall be taken at the vessel's bunkering manifold and sealed in the presence of competent representatives of the charterers and the vessel. 4. The fuel samples be retained by the vessel for 90 days after the date of delivery or for what ever period is necessary, in the case of a prior dispute, and any dispute as to whether the bunker fuels conform to the agreed specification (s) shall be settled 'by analysis of the sample(s) by ( . ) or by another mutually agreed fuels analyst whose findings shall be conclusive evidence as to conformity or otherwise with the bunker fuels specification(s). 5. The owners reserve their -right to make a claim against the charterers for any damage to the main engines or the auxiliaries caused by the use of unsuitable fuels or fuels not complying with the agreed specification (s). Additionally, if bunker fuels supplied do not conform with the mutually agreed specification (s) or otherwise prove unsuitable for burning in the ship's engines or auxiliaries, the owners shall not be held responsible for any reduction in the vessel's speed performance and/or increased bunker consumption nor for any time lost and any other consequences. Nevertheless, it has proved difficult for owners to succeed in cases against either bunker suppliers or time charterers for damage caused by off specification bunkers, especially since the additional wear and tear to the main engine may not become apparent for some months. In all cases it is essential to ensure that the chief engineer puts in hand plans to: - Load the fuel into separate empty tanks and to keep the fuel segregated so far as possible until its quality and compatibility are checked; - Take proper samples; and - Effectively check the quantity of bunkers actually delivered. These points are considered in more detail in the next section. Although BIMCO has produced a standard marine fuels purchasing contract, Fuelcon 1995, the strength of the bunker suppliers, many of whom are major oil companies, means that they are frequently in a position to impose their own contracts. The main points to be considered on board are summarised below. A point to remember is that the contracting parties (buyer and seller) may be many miles (and time zones) away from the physical delivery which in many cases is undertaken by a sub-contractor to the main supplier. Nominations: Probably ten days to contract a stem; the master should give two clear working days to the delivering company (Shell contract). 'The giving of notice to the delivering company under this subclause, and its acceptance, shall constitute a bunkering commitment' and 'If the vessel shall not have arrived at the delivery port within 14 days after the expected date of arrival . . If the buyer (the vessel) has already given notice ... then the buyer shall be liable ... for any expenses that the delivery company has incurred. . .' The Elf contract states: 'Upon arrival in port, the master or chief engineer (who should be acquainted with the terms of the contract relating to delivery acceptance and quality verification)*, should check with the local agents that all preparations for bunkers have been made'. This raises the important point that agents should be kept fully aware of the bunkering arrangements and the vessel should do this even if the owners/ charterers do not. -Owners please note, this is a contractual term. Risk and property: In general, this shall pass to the buyer when the fuel passes the flange connecting the supplier's hose to the vessel. Fuelcon 95 splits the passing of risk and title, giving the supplier a maritime lien until the invoice is settled. Quality: Not surprisingly, suppliers' contracts offer little more than they need to and, in the case of oil majors, may well just refer to their standard grades. Frequently wording such as 'commercial grades offered generally by seller' may be used and even '... nor does the seller warrant either expressly or by application, that the marine fuel will be suitable for any particular purpose . . .' Certainly, and reasonably, if the owner wants to ensure that the proper specification is delivered, he must ensure that a proper specification is given to the supplier. Quantity: If possible, the supplier will specify that their 'weights and measurements will be accepted as conclusive evidence of the quantities delivered . . .' Typically, 'the amount of fuels delivered shall be determined by measurements of shore tanks, lighters, or by meters, at seller's option, and buyer will be charged on the basis of these measurements. Buyer has the right to have its representative present during measurement. . .' It is important, therefore, that the chief engineer or his representative gets ashore or down on to the bunker barge at an early stage of the operation. It may well be advisable to appoint a surveyor

These include: Inadequate pre-planning-do not leave things to chance. Taking delivery In chapter two the importance of teamwork and planning was emphasised. Under these circumstances. Section . Loss of speed and machinery troubles may be encountered. but something as simple as a whistle makes ideal backup. If so that fuel should. Despite sometimes being recommended. Bunkering frequently takes place during a busy port call and. bunker station. Residual oils from cracking processes are frequently inherently liable to incompatibility. Make sure that language problems are overcome prior to commencement and ensure that back-up communications are available.Well after bunkering the 'unsuitable' fuel is detected at sea without the possibility of avoiding burning that fuel. use checklists. If a shore gauge is being used it may be wise to request to sight its test certificate. machinery defects may be found which appear attributable to unsuitable fuels encountered during several voyages. addition of MDO and mixing procedures by pumping as often increases the problem rather than curing it. sounding pipes (or control room) and supplier's bunker barge or shore installation must all be in the circuit. especially for general cargo and dry bulk vessels.1. Inadequate communications-engine room.Upon or shortly after delivery the 'unsuitable' fuel is monitored or analysed.to monitor the bunkering process. if not adequate. Lack-of save-alls under connections and vent pipes-review the facilities well prior to the bunker operation and. VHF or UHF handsets are virtually standard practice. This can cause difficulties with transfer. Quality claims are more difficult and there are three basic situations in which they may arise. This includes taking steps to prevent comingling until it is known that the previous and newly bunkered fuel is compatible. An answer to the remaining quantities of 'unsuitable' fuel has to be found. this must be made '. be discharged and exchanged without causing serious problems but loss of time may arise. high loading on pressure systems and a number of other ills. but frequently by juryrigged adaptors. Time bar: Shell's contract stipulates that in the event of a complaint. Some companies endeavour to reduce this to as little as 30 days. Not only must the chief engineer be aware of this. it is probably advisable to use the engine manufacturer's technical staff to analyse the problem. Advise the bunker supplier of the on board bunker connection as early as possible. If this is not possible. Inadequate scupper closing arrangements-so well known and still happening.During engine repairs. . . make or order replacements. affects the whole routine of the vessel.but so must the junior engineer officer who decides to top up the settling tanks in the small hours of the night. as soon as possible and in any event within three months of the date of delivery'. It needs to be carefully and jointly planned and the correct resources allocated. settling or day tanks may give rise to reactions due to incompatibility. The European Harbour Masters' Association (EHMA) has produced an instructive examination of common causes of spills.. In all cases the master has an obligation to take steps so far as possible to mitigate the potential damage. Mixing fuels from different-bunkering sources together in storage. high sludge deposits in tanks. and whoever is checking quantities must be aware of the tricks of the trade such as shortened sounding rods or 'adjusted' sounding pipes. indirectly. Claims: Short delivery claims should be dealt with at the time and if possible noted on the delivery receipt. . Incompatibility or instability (fuel disintegrating and decomposing) may also result from poor blending methods prior to bunkering intermediate fuels. . Bunker connections-not just caused by poor seals or improperly tightened bolts. it may be necessary to note protest. inadequate purifying. preferably adjacent to the . .Prevention through Club recommendations and guidelines to substantial volumes such as the Singapore Bunkering Procedure and also The Nautical Institute's bunkering checklists (pages 172-73) in Watchkeeping Safety and Cargo Management in Port. A range of advice regarding bunkering procedures is available. These range from the IMO publication Manual on Oil Pollution. if possible. agree procedures and brief all concerned. Frequently a result of poor inter-departmental liaison. Inadequate emergency stop arrangements-supply vessels should have centralised emergency stop facilities located in an accessible area of the tank deck.

accident investigation. it should extend into a turbulent oil flow at approximately one third diameter. especially by claims that 'the supplier's samples are always used'. If a normal sampling tube is used. Ongoing Development of the International Marine Fuel Standard. Examination of Common Causes of Spills and Proposed Port Regulations Regarding Bunker Operations.revised STCW convention. CEng. Port of Singapore Authority.A. founder chairman of the International Association of Bunker Suppliers. .risk management. Marine Fuel Quality. and to Paul Russell. C. Singapore Bunkering Procedure. International Standard ISO 8217. especially on small container/feeder vessels or during ballasting operations. Barrow. Petroleum Products . European Harbour Masters Association.S. Sampling is an essential part of the bunkering process. Chapter 10 A CHANGING APPROACH TO SAFETY Safety and management.Representative of the full quantity of fuel taken (bunkers may stratify in a bunker barge or storage tank). Surveying Fuel Oil Claims. . or one of his staff if he is busy elsewhere. The wish to lift as much bunkers as possible-make sure that the officer responsible for bunkering knows what tank space is available and checks the ullages frequently.Eng.Specification of Marine Fuels. Supply vessel's tank capacity-the maximum and minimum transfer rates must be agreed by both parties prior to transfer commencing.the media. Bunker Operations. Sampling systems are improving. Do not let the chief engineer. Paper: B.Be filled into galvanised or glass (not plastic) containers. Elf. Senior Engineer Surveyor. It is really dangerous to give him an idea because he will . of Shell. Movement of small sea-going vessel-as well as sea-induced. to FOBAS at Lloyd's Register for their help and for providing background material. 'The soldier is the most conservative creature on earth.Fuels (class F) . the point at which fuel samples are to be taken according to the contract may be different. A.transfer manifold. these movements can be produced by loading and discharging operations. What is most important is that the supplying barge/vehicle/pipeline has a means to stop the transfer quickly and the receiving vessel knows how this can be activated. Another is retained by the supplier while the third can be sent to FOBAS or another analytical chemist. Wright.Taken from the shipboard supply line on the vessel (not the bunker barge): NB.international Safety Management Code.F. If necessary. and this includes ensuring that the containers are totally clean at commencement. at the National Sea Training College. Later designs of sampling equipment comprise sampler tubes fitted permanently into flange pieces which can be inserted between loading pipe and ships' connections and which can be set to draw off a pre-determined quantity from the given quantity of bunkers to be loaded. The FOBAS Approach. Mills. ACKNOWLEDGEMENTS THANKs are due to Douglas G. .J. nevertheless it is always good practice if possible to take a sample at the point at which the bunkers leave the supplier's control and enter the ship's system. Hans-Otto Ebner. Lloyd's Register Fuel Oil Bunker and Advisory Service. P. get a surveyor or other independent party to witness the integrity of the samples taken at the flange.Be divided and scaled into three one-litre containers. Heron and J. Newbury. REFERENCES Development trends in marine bunker fuel properties and their impact on marine diesel engine performance. Fuel samples should always be: . FIMarE. one of which should be retained on board for a minimum of 30 days. be hasselled out of taking samples.

This increases the proportion of the output which meets specification and quality is assured for the customer. End testing rejects below-quality service or products. from corporate strategy to daily operational routines. It is typified by a 'Take it or leave it' attitude to quality.F. and an 'It's only a drop in the ocean' attitude to environmental pollution. Even as technology changes the way things are done indicating a need for training or retraining. such carelessness reflects in few checks on employees or their health and little attention to the safety aspects of the work process. not necessarily deliberate but nevertheless careless. whether this is the result of a production or a service process. Safety should reflect the way in which a company works and thinks. 'It is only a drop in the ocean' and the problem is 'solved'. FSA has its roots in the nuclear industry where it was easily recognisable that there were a n umber of potential hazards which had to be identified and assessed before ways of reducing the risk associated with these hazards could be defined. However well FSA enables legislation to be drafted. Safety should not be an addon. Consequently. amongst other things. and it is a senior managerial responsibility to get this right and. But never mind. page 22). The Titanic. Torrey Canyon. If the reject pile starts to grow. but the maritime industry is notoriously conservative and General Fuller's words hold more than a grain of truth for the way in which the industry regulates itself. there are no subsequent checks on customer satisfaction-and probably just as well. Input specifications are defined and the overall operational or manufacturing process is broken down into manageable quality control loops. under Lord Carver. and the IMO is considering its viability as a tool for developing future maritime legislation.The vessel arrives at the load port with a quantity of dirty slops on board and finds no reception facilities. it is part of the master mariner's professional calling. its effect will only be as good as the people who put it into practice. As far back as 1874 it required a reaction to Samuel Plimsoll's book Coffin Ships before the (British) Board of Trade started to prescribe load lines in 1876 (Nautical l3fie/ing. Then the finance department finds that it cannot finance the full bunker stem and unfortunately the broker has omitted to insist on a liberty to deviate clause ' .not adopt it until it is obsolete and then will not abandon it until it has nearly destroyed him. an atmosphere of 'They should be able to look after themselves' pervades the organisation. reactive (crisis) management takes over (although by now the bottom lineprofitability-is already suffering). a template into which shipping companies squeeze their operational procedures so that a coveted certificate can be achieved. The company learns to cope with large quantities of procedural paperwork and how to . short of totally ignoring it. Consultants are brought in and quality assurance arrives. The approach is used by a number of industries where hazardous plant exists.C. It starts with a few input checks into an unspecified process which has equally few checks on its output. which are closely linked with the quality of the end product. Fuller HARSH WORDS. A similar approach is taken to safety control. Lifeboats should contain. Is this really relevant to a coastal ferry or an offshore oil rig ?-is it cost-effective safety? For many years. Checks are placed on the output to ensure that it meets specification. TO a great extent is was the review of the Piper Alpha fire which generated a sea change in thinking which was taken up in the UK by the House of Lords Select Committee Safety Aspects of Ship Design and Technology in 1992. Herald of free Enterprise and many other marine disasters all prompted revisions to safety legislation which prescribed a regulation to address the perceived cause of the accident. with accidents records and statistics meticulously analysing avoidable accidents. New management takes over and introduces quality control. maritime safety legislation has been both prescriptive and reactive. This advocated a Safety Case approach based on the use of risk assessment techniques within an overall methodology of formal safety assessment (FSA). such as delivering a cargo 'on spec and on time'. an 'I hope we've got enough cash' approach to financial planning. At the bottom of the scale is management by carelessness. In a commercial sense it can be found in the broker who fixes the seemingly highest paying cargo with little reference to the vessel's current operational programme and then hands its execution over to an operations department and loses interest feeling that his job is done. on board. Amoco Cadiz. Safety and management There are various ways in which companies can approach safety. On the safety side. a fishing line and a heliograph and a quantity of food designed to maintain life in the middle of an ocean. General J.

Safety assurance is also introduced so that employees receive the training necessary to enable them to meet the qualification and knowledge required for their specified tasks. the problem is that safety imposes itself on the way in which the individual works while the objective is to achieve a state in which the individual naturally works in a safe manner. The employees' safety is assured. his colleagues and the environment-a true safety culture. both for himself. The internal customer (we all need support from our colleagues and need to support our colleagues) and job ownership ('I can work effectively this way') are both important aspects.respond to non-conformity reports and proudly hangs an ISO 9002 certificate in its reception area. in too many cases. Figure 10. To a great extent. At the same time. the individual's objective is to achieve quality (or true professionalism) in the task or operation which is his or her personal responsibility within the wider context of the company. They work within the rules and regulations and comply with a safety policy designed to meet the demands of the operational or manufacturing process undertaken by their company. The critical area of achievement is in breaking down the overall process (or operation) into its constituent parts and ensuring that these all work to a common end in a way in whit the individual undertaking the work feels both comfortable and fulfilled. 'We find that the quality control procedures are the most cost-effective way of keeping track of (for example) our ship's plans' and 'I work this way (safely) because it is the most effective way to work' are all signs that a company has got it right. the rules and regulations and often copious procedures it introduces cause strain and frustration in the workplace. 1 demonstrates the parallel paths of total quality and total safety management. . This state can work very well except that. The chief executive tells his customers and competitors how marvellous their new quality system is and tries to sell their newfound expertise without really changing the way in which he works. Systems are in place and levels of competence are defined and employees are monitored for health and fitness.

either on a voluntary basis because they can see the benefits or to meet earlier deadlines for specific vessel types. One aim should be to ensure that staff are property informed and equipped to fulfil their operational responsibilities safely. while the master is clearly responsible for the safety of the ship and her crew. The task facing all shipping companies is to minimise the scope for poor human decisions which contribute. the underlying truth is that the act or omission of a human being plays some part in virtually every accident. by the year 2002. including those where structural or equipment failure may be the immediate cause. organised. It is important to recognise that the responsibilities and authority of the different persons involved in the system. Advantages of establishing an SMS . It is difficult to find better words to introduce the code than those used by the International Shipping Federation in its Guidelines on the Application of the IMO International Safety Management Code. The ISM Code establishes an international standard for the safe management and operation of ships by setting rules for the organisation of company management in relation to safety and pollution prevention and for the implementation of safety management systems (SMS).The work on the introduction of formal safety assessment by the (British) Marine Safety Agency and presented to IMO in May 1996. It does take time to be safe-until it becomes second nature. are the backbone of an SMS. governed by comprehensive rules and conventions developed by national and international authorities. the tasks and activities related to safety and environmental protection. form its basis. is based on a sound understanding of its consequences. a genuine commitment from the top-not just of money or time. regulations of the technical aspects of shipping can only achieve part of the objective of safe and pollution free ship operations. are planned. International Safety Management Code The ISM Code will be a fact of life for all professional seafarers sailing in vessels of 500 gross tonnes or over. inevitably. allowing areas for improvement to be identified and implemented. both ashore and on board. directly or indirectly. Decisions taken ashore can be as important as those taken at sea.A competency-based approach to training incorporated in the recent revision of the Standards of Training. Background The operation of merchant shipping is specialised and complex. or any other organisation or person who has assumed the responsibility for the operation of the ship from the owner While statistical analyses suggest that around 80 % of all shipping accidents are caused by human error. The growing awareness of total quality and total safety management is finding an expression in three distinct strands of development in the maritime industry: . taken at any level within the company. Nevertheless.It also means that there is. Certification and Watchkeeping Convention (STCW). . In the final analysis. the overall responsibility for the administration and safe operation of each ship rests with the owner. Many companies have already introduced the code. the very way in which a person approaches and undertakes every task. Once defined and documented. to a casualty or a pollution incident. An SMS is developed and maintained by people. and .The ISM (International Safety Management) Code. both ashore and on board. Safety management system (SMS) The introduction of a safety management system (SMS) requires a company to document its management procedures to ensure that conditions. and there is a need to ensure that every action affecting safety or the prevention of pollution. executed and checked in accordance with legislative and company requirements. activities and tasks. An SMS enables the company to measure its performance against a documented system. and the lines of communication between persons affected by it. affecting safety and environmental protection. but of philosophy and belief. The development by IMO of the International Management Code for the Safe Operation of Ships and for Pollution Prevention (the International Safety Management (ISM) Code) is the reflection of this objective on the part of governments.

Favourable insurance premiums relative to the market. A company that succeeds in developing and implementing an appropriate SMS should therefore expect to experience a reduction in incidents which may cause harm to people. Indeed.2 and the problems which it can produce for the master.An improvement in the safety consciousness and safety management skills of personnel. There is some evidence to suggest that.. including: . the company: 'Company' means the owner of the ship or any other organisation or person such as the manager. its equipment and cargo). or the bareboat charterer. and .The minimisation of exposure to claims in the event of a major marine disaster One of the great strengths of the code is that it recognises the importance of the relationship between head office and the master.3 which requires that: The company should establish procedures to ensure that new personnel and personnel transferred to new assignments related to safety and protection of the environment are given Proper familiarisation with their duties . Designated Persons: . It is possible to develop an argument that it should be the International Management Code and that safety is the inevitable result since it is the way seafarers are trained. . This is illustrated by section 6. if there wasp criticism of the ISM Code. as well as defining. This is intended to remove the situation depicted in figure 10. albeit in a rather general manner..' It tightens this by specifying in Section 4. should designate a person or persons ashore having direct access to the highest level of management. as appropriate. Indeed. damage to the environment. commercial benefits may also flow from the general benefits. over time. or damage to property (such as the ship. . and . as required. Purpose To ensure the safe operation of each ship and to provide a link between the company and those on board ' every company. not least in carrying out his commercial role.The establishment Of a safety culture that encourages continuous improvement in safety and environmental protection. think and act that is fundamental. it is that it stops one pace before the ultimate goal is achieved.A structured safety management system enables a company to focus on the enhancement of safe practices in ship operations and in emergency preparedness. .Cost savings resulting from improved efficiency and productivity (such as through the minimisation of disruptions to the operation of the ship that may cause delay). Experience from within the shipping industry and from other industries has shown that a company may benefit further in terms of.Improved company morale. who has assumed the responsibility for operation of the ship from the shipowner and who on assuming such responsibility has agreed to take over all the duties and responsibility imposed by the code. The responsibility and authority of the designated person or persons should include monitoring the safety and pollution prevention aspects of the operation of each ship and to ensure that adequate resources and shore based support are applied.Greater confidence on the Part of clients..

in the view of The Nautical Institute. The starting point for compliance with the ISM Code is.The master at the very least should also be given proper familiarisation with their commercial responsibilities. especially if new to the position or the company. The master's responsibilities and authority are sensibly addressed in section 5. . . This is partially done by ensuring that: 6.. 2 fully conversant with the Company's SMS.1 The Company should ensure that the master is: .3 given the necessary support so that the master's duties can be safely performed.2 going a long way to redress the erosion of the master's authority in which modern communications have played a large part: The Company should establish in the SMS that the master has the overriding authority and the responsibility to make decisions with respect to safety and pollution Prevention and to request the Company's assistance as may be necessary. and . [every] ship should be operated by a company which is issued a document of compliance relevant to that ship.1 . reflects the team approach advocated in chapter two. The Code then addresses resources and personnel. the company and it is required that: 13. very sensibly.. Once the company's operating philosophy and procedures are established. it also requires from the master a management approach which.2. an understanding of the company's ethos and its objectives. with the ultimate sentence of 5. then the audit process moves on to the fleet so that . the workload on the crew and the skills required for the tasks which they are expected to perform under both normal operating and emergency conditions. requiring that: 6. However' the code is a great step forward and the master should make it one of his priorities. certificated and medically fit seafarers in accordance with national and international requirements. notjust to meet the designated person but to develop a rapport and. Although the code goes some way towards confirming the traditional authority of the master. This requires the company to consider the trade in which the vessel is engaged.1 propfflyqualifiedfor command. each ship is manned with qualified. .

13.4 A certificate, called a safety management certificate, should be issued to a ship by the administration or organisation recognised by the administration. The administration should, when issuing the certificate, verify that the company and its shipboard management operate in accordance with the approved SMS. The first part of the annex for this chapter, borrowing again from the JSF Guidelines, sets down a sensible approach to the development of an SMS system against which a master may well consider analysing his current company's operating procedures. The documents of compliance and the safety management certificates are issued under the authority of the relevant flag State against the audit reports of organisations recognised by the vessel's flag State. The persons undertaking the inspections should be properly registered auditors who have undertaken a rccogniscd quality audit course, supplemented by a maritime specialisation course which focuses the quality audit capability on the specific requirements of the ISM Code. The code also addresses the development of plans for shipboard operations, dividing these into special operations and critical operations as well as requiring the company to establish procedures '. . . to identify, describe and respond to potential emergency shipboard situations'. Although this is not the place to commence implementation of the code, the ISF guidelines offer an excellent summary of the operational areas which should be covered by the code and on which a master can start working independently of the code. These are set out in the annex for this chapter, together with some suggested subject matter for operations documentation and a useful summary of relevant international shipping conventions and recommendations. An approach to emergency planning can fie made using some of the disciplines described under formal safety assessment. A similar approach to commercial operations might also be an interesting exercise for the shipboard management team, drawing guidance from The Nautical Institute's Watchkeeping Safety and Cargo Management in Port.

Revised STCW Convention

In the words of the International Shipping Federation in the introduction to its guide to the 1995 amendments to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW) 1978: is arguably the most important development concerning the improvement of maritime safety for over a decade. If effectively implemented, the new Convention should do much to increase safety of life at sea and the protection of oceans from pollution. The competence of seafarers is a critical factor in the safe and efficient operation of ships. A central aspect of the amendments has been to iocus on uniform standards for the attainment of competence in essential maritime skills. Competences can be described as all the individual tasks and skills required to operate a ship identified and grouped together to represent manageable, practical units of ability that can be readily assessed. For example, the competence of being able 'to plan and conduct a voyage and determine position', comprises tasks and skills using: - Celestial navigation. - Terrestrial and coastal navigation. - Electronic position fixing systems. - Echo-sounders. - Compasses. - Steering control systems. - Meteorological information. Functions identify more distinct groups of skills, abilities and responsibilities than those established by conventional departmental divisions which form the basis of the present convention. The convention defines standards of competence for seven functions: - Navigation. - Cargo handling and stowage. - Controlling the operation of the ship and care for persons on board. - Marine engineering. - Electrical, electronic and control engineering. - Maintenance and repair. - Radio communications.

The convention in section A:I:1 defines three levels of responsibility at which the competence to carry out these functions must be achieved: - Management level for masters and senior officers which requires them to be able to ensure 'that all the functions within the designated area of responsibility are properly performed'; - Operation level, corresponding to the watchkeeping or duty deck or engineer officer level; and - Support level. It can be readily seen that, with the breaking down of depaytinental functions in favour of overall operational functions, officers will require greater or lesser degrees of competence in all or most of the functional areas depending upon their responsibilities on board. This is reinforced under regulation I:14 by a requirement for the flag State to require every company to ensure (inter alia) that: .4 Seafarers on being assigned to any of its ships are familiarised with their specific duties and with all ship arrangements, installations, equipment procedures and ship characteristics that are relevant to their routine or emergency duties; and .5 The ship's complement can effectively coordinate their activities in an emergency situation and in performing functions vital to safety or to the prevention or mitigation of pollution. Indeed, professional seafaring and effective management require effective co-ordination of [their] activities under all circumstances, including those relating to the commercial performance of the vessel. From this brief description of the amendments to the STCW Convention, set in the context of the ISM Code, it is hoped that masters will reach a logical conclusion which leads them towards the team based management practices advocated in chapter two. There is no doubt whatever that an aspiring officer can best prepare himself for 'ensuring that all the functions within the designated area of responsibility are properly performed' than by an active participation in the management of the vessel as a whole rather than a concentration of the (arbitrarily) allocated functions of, for example, a second mate or third engineer.

Risk assessment

A risk-based approach has been used for a number of years by the nuclear, chemical and offshore industries, but formal safety assessment (FSA) differs significantly from the safety case regime in which a risk-based approach to safety management is developed on a case-by-case or plant-by-plant basis. Instead of applying these techniques to individual ships, the IMO are considering using FSA in an international context and at the development stage of the regulatory procedures that affect all ships. Thus, risk assessment can be applied at a number of different levels in the marine environment: potentially as an aid to the regulatory process (as in FSA), to the design process of individual vessels (especially complicated vessels such as cruise liners where safety case approach has a particular relevance in designing in optimum fire and safety precautions) and by the master and officers as a logical way of aiding the decision making process. Turning first to FSA, its potential benefits are seen as: (1) Enabling a consistent and comprehensive regulatory regime to be developed, which addressed all aspects of maritime safety in an integrated way; (2) Facilitating cost effective regulation, whereby safety investment is targeted into areas where it will achieve the greatest benefit; (3) Being proactive (rather than reactive) in its approach, enabling hazards that have not yet given rise to accidents to be properly considered; (4) Giving confidence that the system of regulation and control is risk based-i.e., that regulatory requirements are in proportion to the severity of the risks being controlled; (5) Providing a rational basis for assessing and controlling new risks posed by ever-changing marine technology. In the words of Captain D. Bell, of the MSA, whilst not being a panacea for all the problems of the world's shipping industry, when fully formed FSA has the potential to be: A tool which will help to develop a comprehensive risk management system for the (international) shipping industry. It will allow a systematic and proactive view to be taken of ship safety enabling informed decisions to be made based on the objective analysis ofrisk. It will deliver the maximum level of safety for a given level of investment; so it will not be a licence to spend more and more money on safety but a guide to ensure that money is spent in the most

effective way. It will offer the opportunity to change, in the longer term: ... from the present reactive and largely empirically based system Of conventions and regulations to one based on scientific analysis and assessment which anticipates problems before they develop into catastrophies and it should help to lead to the change of safety culture advocated so powerfully by the Secretary General [of the IMO] For the purpose of the MSA assessment, FSA is divided into five systematic steps: Step One Identification of hazards. Step Two Assessment of risks associated with these hazards. Step Three Development of alternative ways of managing those risks. Step Four Cost benefit assessment of the risk management options. Step Five Decision between the options available. Whilst these five steps establish the base case, they do not formally incorporate the point at which a judgement of the acceptability of a level of risk is made. Nor do these steps include the monitoring and review loop that is essential for effective management. To an extent this is because the topdown FSA approach will be subject to a decision making procedure (as to acceptable risk) which will be negotiated at an international level. The commonly defined key steps in the safety management processes are: - Hazard identification. - Risk evaluation. - Development of risk management plan. - Implementation. - Risk monitoring.

Definitions

Before hazards can be identified, it is necessary to be quite clear about the difference between a hazard and risk. This is illustrated in figure 10.3, using a basic piece of electrical equipment as the hazard. In situation 1, with the vacuum cleaner safely stowed, there is little risk of any injury. In situation 2, with the vacuum cleaner left unattended, with a trailing lead, the likelihood of an accident increases-risk is heightened, although the consequences are not likely to be serious. In situation 3, with the flex stretched across the floor of a public area, the risk of an accident is higher and the possible injury more severe-a broken arm or badly twisted ankle. In situation 4, the flex leads across the steps down to the dining saloon and the potential seriousness of an accident is heightened, even to the possibility of death. If the cleaner is in this position as lunch is announced, the probability as well as the severity of an accident will be high-a high risk scenario. An approach to quantifying risk will be introduced later in this chapter; here the focus is on the hazard. There is little doubt that in scenario four; the vacuum cleaner is a hazard. It is the same vacuum cleaner, and the same hazard as in scenario one-it is the level of risk which changes. This understanding is critical when concerned with hazard identificatioil; it is all too easy to overlook a hazard because at the time of evaluation it is not posing a risk.

As well as producing benefits for its owners and operators by transporting cargo or passengers, vessels have the potential to cause harm or loss, such as: - Injury or death to passengers and crew and, potential, shore-based personnel; - Damage or loss to the vessel and its cargo; - Pollution of the environment; and - Interruption of business for its operators, shippers, port authorities, etc. Physical situations which have the potential to cause such harm are known as hazards. Thus, a bow door is a hazard, because, if left open, it has the potential to allow water to enter the vessel. The floding would be known as a hazardous event. There is at this stage no assessment made of the likelihood or frequency of a hazardous event although the possible severity of the consequence might be taken into account, hence major or minor hazard. Accidents (events or incidents) are the realisation of a hazardous event-sudden, unintended departures from normal conditions causing harm or loss. Again, this may be quantified as to severity up to major catastrophies such as the Estonia or Herald of Free Enterprise. Risk is the combination of the likelihood and the consequence of a hazard causing an accident. The likelihood may be expressed as: the frequency-the number of events occurring per unit time; or the probability-the chance of the event occurring in specified circumstances. The consequence is the degree of harm caused by the event. Safety is the inverse of risk and, logically, the higher the risk of any level of harm from any activity, the lower is its safety. Conversely, the concept of 'safe' equating to zero risk is not tenable in an intrinsically hazardous activity such-as shipping. A more valid definition of safety may be the management of risk or the control of accidents. Assessments can be made of-

- Safety-and if it is established in a structured and scientific manner it is sometimes referred to as formal safety assessment to differentiate it from a more subjective safety assessment which, at varying levels of consciousness and sophistication, is an inherent part of ship operations; - Risk-similar in many ways to safety but QRA (quantitative risk assessment) is a numerical approach incorporating analysis, methods of risk reduction and, possibly, cost benefit analysis. QRA is probably the most sophisticated method available to engineers to predict the risk of accidents and give guidance on appropriate means of minimising them. - Hazard-usually used to describe a range of many qualitative techniques which can help identify what - could go wrong, to gain an appreciation of the significance of such hazards, document safeguards and suggest whether these are adequate, without explicitly considering the likelihood of events occurring. Risk analysis is the process of quantifying risks based on identified hazards and incorporating an analysis of frequencies and consequences.

Five steps in risk assessment

Returning to the IMO con~sideration of the five steps involved in formal safety assessment, the aim is to achieve a systematic judgement and effective management of risk. Identification of hazards: A hazard has been identified as a physical situation with the potential for causing harm, to people, the environment or property. Hazards may or may not have already been realised as accidents and it is important to constantly monitor how changing technology and the influence of human factors may give rise to new hazards. Various techniques exist to assist with hazard identification (HAZID). (i) Hazard and operability studies (HAZOP): this methodology involves a structured, systematic and comprehensive examination of installation/facility layouts and procedures, activity descriptions and/or process flowsheets. The study is usually undertaken by a multidisciplinary team who are familiar with the process under an independent chairman. HAZOPs have the benefit of being particularly appropriate for identifying hazards in 'soft' systems involving activities and operations. (ii) Failure mode and effects analysis (FAIEA): again a systematic approach, usually undertaken by small tcams, undertaking a bottom up process, beginning with a system component and looking at the effect on the overall system. This may well result in a range of possible effects from a single failure. Thus an FMEA may examine component failure in the cooling water pump and at a different stage, the effect of pump failure on the machinery plant. Above that there is the effect of machinery failure on the vessel as a whole. FMEA is mainly applicable to 'hard' (or hardware) systems and, as can be seen, can have a beneficial influence on the selection of spares as discussed in chapter eight. (iii) Structured what- if techniques (SWIFT): 'what if' is probably the most important question in the whole field of safety management. SWIFT is a group brainstorming based around a prepared hazard checklist, considering unplanned deviations from normal operations. Assessment of risk: There are both qualitative and quantitative methods of evaluating the risks posed by the identified hazards and the process involves considering the likelihood of occurrence in combination with their consequences. (i) Risk matrices: This is ajudgemental'and possibly subjective approach using qualitative scales (see table 10.4).

Having defined the scales, a group of operators with relevant experience can be brought together to place judgemental rankings on the hazards and a typical matrix would appear as depicted above. (ii) Event tree analysis (ETA): These use inductive, forward looking reasoning commencing with an initiating event. Event trees tend to use a true/false logic and give a good pictorial display of event sequences. A range of outcomes can be accommodated on one event tree and a given outcome can be the result of more than one event tree sequence. (iii) Fault tree analysis (FTA): The basic process in the techniques of fault tree analysis is to identify a particular effect or outcome from the system and trace this back into the system along the logical routes to the prime cause. FTA works back-down after an accident or unwanted failure has been identified -i.e., EFFECT - CAUSE mainly using AND/OR logic gates. Thus it can be seen that ETA feeds forward from a given event whilst FTA works backwards from that event giving a detailed analysis of cause. Development of alternative ways of managing risk:

could be added mitigation. The formal approach to RMP is: . 'hard' engineering solutions-as opposed to better training or operational procedures-i. procedures and human error. for example. This leads the shipowner into the presentation of a Safety Case much as is done in other industries and. a refocusing of competences.e.The risk management plan (RMP) requires a systematic evaluation of the identified risks in their order of severity-obviously events registering as frequent and catastrophic on the matrix are tackled first. lower level of risk and then assigning a monetary value to the change or risk. . The interesting and somewhat unique step which the IMO is contemplating is to go beyond the Safety Case approach and use FSA as the guidance and control mechanism for a supra-national regulatory environment.by taking out insurance to cover the potential losses. For example. but should have indicated the relative importance of various contributory factors. Although it may be emotive to put a price on human life or the protection of the environment. additional training or. If safety costs become too high (or become out of line with the perceived probability/ severity of loss or damage) then either the process becomes no longer economically viable or regulations are evaded. 'Soft' operational failures may point to a need for improved procedures..e. Other tools available to combat risk include both regulation (i. Prescriptive rules may be more easily complied with and enforced. The prescriptive route is to require all new tankers to have double hulls. The alternative is to set minimum acceptable levels for the leakage of oil into the environment as the consequence of a give fi seve-rity of accident. recalling the STCW amendments. 'Hard' engineering failures may point to solutions incorporating redundancy. this approach could have been considered when prescribing double hulls and if this has been done. A complicating dimension is that the costs will not necessarily be borne by those benefiting most directly. is it better to increase the oil pollution clean-up facilities than to invest in double hull tankers? or invest much more heavily in training and standards? The formality of risk analysis will not only have revealed the hierarchy of risks. measures may be either active or passive. 'soft' solutions designed either to prevent the incident or to mitigate its effects? Rigorous analysis using tested and consistent techniques can contribute significantly to finding the best. This is then compared with the costs which must include not only initial and ongoing costs but also the costs associated with change and eyff-orcement. . it is suggested. then the prescriptive regulation might have become guidance by the addition of '. suggested arrangements or procedures. effective against only one hazard or many and effective alone or only in combination. The evaluation of benefit involves repeating step 2 of FSA to determine the new. or alternative measures of equal effectiveness'. if not yet fully developed in the maritime context. ..e.Treat-by identifying reduction measures with the ideal being to lower the frequency of the accident first and to reduce the consequence second. and/or . as is required in the provision of safety stand-by facilities for offshore oil installations. Equally. A guiding rule is consistency of application. A set of measures to reduce pollution from collision and grounding incidents involving large tankers is a prime example of the established process. cost effective solution. mandatory requirements to be complied with in every case-but remember the fishing lines and heliograph) and guidance (i. .e. all effective risk management (and prescriptive regulatory regimes) must take into account that the funds available for allocation to safety are finite. Cost-benefit assessment of the risk management options: It will not have been possible to identify the optimum risk controlling mechanism without involving a cost-benefit dimension.Tolerate-by considering the risk acceptable if it cannot be reduced further in a cost-effective manner. This may start to sound complicated. . Cost benefit techniques are at work in a number of industries... but can preclude technological progress or site based (safety case) approaches which may lead to more effective or more economical solutions.Terminate-either by eliminating the potential for the event to occur or removing the exposed personnel. probably not a viable or tenable solution on its own. This also demonstrates the potential use of the tree analysis techniques.Transfer. On the other hand. To this. Multiple barriers to prevent escalation may also be a necessary solution along an escalatory route identified by either fault or event tree analysis. To What extent should investment be put into double hulls (or the equivalent) -i. requiring a number of qualitative decisions. Common factors are equipment reliability. where the extent of compliance is at the discretion of the owner). diversity or separation.

requires a degree of subjective judgement and it is here that consistency is particularly important. it is used every time someone crosses a road (do we . . In simple terms. amongst others. there would come a time when it was uneconomical to transport hydrocarbons or at least the heavier fractions. risk is considered broadly acceptable. Or it might vastly increase the use of nuclear energy. the decisions could become as much political and philosophical as they are technical. For an organisation such as the IMO. as mentioned earlier. Another result might be to promote the development of environmentally friendly energy sources which do not add to the high atmospheric levelOf C02 or contribute to ozone depletion. This can lead to the concept known as ALARP or as low as reasonably practicable. relatively cohesive social group.Individual Risk: Frequency with which a given individual may be expected to sustain a given level of harm from the realisation of specified hazards.The assessment of benefit. by masters and their officers on a daily basis as an integral part of their job. Decisions between the options available One of the problems involved in selecting the best option is the importance of ensuring that all options to all relevant risks are being considered on a similar basis. This is not too difficult on a specific Safety Case basis but becomes more problematic in a supranational. continued operation is not considered acceptable whilst below a lower target level. Risk assessment at operating level Does this brief review of the higher stratosphere " risk assessment and management have any relevance at an operational level on board? The answer must be yes. it can be much more complex in a supra-national context where the value attributed to life and liberty may vary dramatically. which is an essential element in the management of any process. and involves an upper level risk target. This tiered system is employed by the UK Health and Safety Executive. with its requirement for practicability and consistency. Indeed. risk can be expressed with respect to: . Having followed the five steps of FSA then! are. To stretch the imagination: if the void space required between double hulls were increased or triple hulls were specified.Societal Risk: The relationship between frequency and the number of people suffering a specified level of harm in a given population from the realisation of specified hazards. 'reasonable practicability' needs to be demonstrated. Between the two levels. It is difficult enough to agree on the value of the environment in a single. There is also the problem of drawing a boundary around the areas of consideration. The result of this could be to move refinery and manufacturing processes globally with unknown societal consequences. consciously or otherwise. illustrated in Figure 10. two which still need to be addressed: implementation. . in the ALARP region. industrywide environment. with its links through the United Nations to such bodies as the World Health Organisation and the organisation of the Rio Environmental Summit.6. since risk analysis and decision taking is practised. or at least its translation into a comparative monetary value. Above this.Environmental Risk: Frequency with which a specified undesired environmental incident may be expected to occur from the realisation of specified hazards. and monitoring.

70 % Quantified risk $33. 000 pd over 25 days $12. Below the IMO level. without a tug. in the best case you anchor but probably block thefairway until main engines are repaired.000 Cost of U/W inspection $3. $12. in considering whether risk appraisal can be of value in a commercial environment: Engine trouble has delayed your arrival and you have 12 hours to enter port and tender notice of readiness. If this happens.500 Bunkers used. logical thinking and anticipation. will probably be 5 % lower Five days DRC $27.500 $47.000 Miscellaneous costs $2. the port is not closed but you are worried and not 100-% sure about the reliability of the main engine.000 $61. Even then. FSA related techniques are being used by an increasing number of shipping companies. you run aground possibly when transiting the narrow channel leading to the breakwater Taking the assumption of running aground. as discussed. The sea bed is shingle so it is unlikely that there will be any damage requiring dry-docking but an underwater inspection will be required. a valuable role in the early design processes of complex vessels such as cruise liners where such aspects as fire hazard analysis are of critical importance. Pilots.. As such.jay-walk across here or cross officially at the lights?) or decides whether to open the hatch and continue discharging in port on a wet Sunday afternoon. for example. Incidents is the neutral name for accidents and.500 Five days steaming bunkers $7. The -risk is the main enginefailing on the way into port.000 Estimate for remedial work. It is always difficult to produce really realistic examples in a textual context but.20% Quantified risk $12.500 Risk factor.300 Risk factor.800 Cost of tugs.day voyage.tidal and weatherfactors indicate that it could befour days before you could be refloated at which time the -tug would be available.a delay of. it is a technique which a master can most effectively use in a team management environment and depends very much on his commitment to preplanning. etc.500 5 % reduction on $10. The freight markets have fallen and. you might have to wait for wind and tide before you could safely weigh anchor. say. in a high hazard industry such as shipping. One of its great strengths is that it brings designers and operators together in a common process at an early stage of the design when their conclusions can have a real and effective impact on the end product.250 There may be a need to re-evaluate but at least the risk has been quantified and can be logically compared and costed using the best information available against comparative course of action. next drydock $15. You make an assumption of the likelihood of engine failure at one in five (20 %). In the worst case.risk of proceeding inbound is: Four + days daily running costs $27. The port's only tug has broken down and the wind is increasing. It finds. Incidents. Two consequences of accidents will be touched on briefly here: enquiries and investigations and the media. domestic and refloating $1.260 Failure to make Laycan will lead to a 70 % chance that the charter is cancelled resulting in a five-day passage to an alternative load port. inquiries and investigations . they cannot be totally eliminated. six hours. The . One aspect of risk assessment techniques which should be apparent is that it is a team activity in which combined knowledge and experience is used-and which can benefit from lateral thinking-which may not come most easily to those cast in a traditional mould. for a similar 25.

Modelled very much on the Air Accident Investigation Branch.Inspector's investigation and report. that marine accidents are thoroughly investigated. Merchant Shipping Notice No. although.The procedures discussed here relate closely to the approach taken in the United Kingdom. the master may need to keep in mind his relationship. Most commonly. near misses play a valuable role in improving safety and are encouraged by both the MAIB and The Nautical Institute through its confidential Marine Accidents Reporting System (MARS) which appears monthly in the Institute's journal Seaways. to a number of conflicting interests-owner. the inception of MAIB was greatly prompted by the lessons learnt from the Herald of Free Enterprise accident and the rialisation that there can be conflicts of interest when accident investigation and policy and regulation are undertaken by the same body. represented in the UK by the Department of Transport. Although based in a long tradition of accident investigation. MAIB's independence is reinforced by the direct reporting line from the chief inspector to the Secretary of State for Transport. requiring all accidents to be reported as soon as practicable and in any case within 24 hours of next arrival in port with an onboard investigation (by the ship's safety officer if carried) if personal injury is involved. to apportion blame. This is used in all cases where the accident requires full and detailed examination (except where an inspector's inquiry is called for). The purpose of any investigation (whether at local level on board or at national level) can be to reveal one of three types of information: who is to blame. This aspect is covered more fully in The Nautical Institute's publication The Masters Role in CollectingEvidence. The fifth dimension is the response of the local regulatory authority. .Administrative inquiry. the current investigatory regime dates from 1989 when the Marine Accident Investigation Branch (MAIB) of the Department of Transport (Shipping) came into existence. It will be interesting to see how and if the aims and methods of MAIB adjust as and when FSA is introduced. Regulation 4 of the Accident Reporting and Investigation Regulations states: The fundamental purpose of investigating an accident under these regulations is to determine its circumstances and the causes with the aim of improving the safety of life at sea and the avoidance of accidents in thefuture. a report is requested from the owner or master or other relevant individual or agency. M. A summary report may be released and made available to interested parties and the general public. Serious injury or dangerous occurrences should be reported within 14 days and there is no formal requirement to report (non-specified) hazardous incidents.To contribute to safety at sea by carrying out investigations to determine the cause of accidents. shipper. and the maritime community in particular. Submission of a report to the Secretary of State is not required and publication of the report is solely at the discretion of the chief inspector. and what is the cause. However. Appropriate in less serious cases and conducted by correspondence. He also needs to bear in mind the earlier comments made about the privity of information and the importance of gathering and presenting evidence. which will be published unless a formal investigation is ordered. .1584 addresses accident reporting and investigations.To satisfy the public in general. the chief inspector must submit a report to the Secretary of State for Transport. . . and increasing awareness of how accidents happen so as to encourage better and safer ship operation. which make . When considering inquiries or investigation. aspects of blame and liability apportionment may be inevitable. both commercial and contractual. At present these aims are: . This is reserved for major accidents. The MAIB also publishes regular summaries of investigations. in pursuing the true cause of an accident.To fulfil the requirements of the Safety of Life at Sea Convention to conduct investigations into marine accidents and to supply the ' International Maritime Organization with pertinen information about such investigations. On completion of an inspector's inquiry. It is not the Purpose to apportion liability. making recommendations which will result in improved safety. charterer to mention the four most obvious. how the liability should be apportioned. consignee. There are three levels of investigation: -Inspector's inquiry. nor except so far as is necessary to achieve thefundamental purpose. It is the third of these that is central to MAIB's function.

especially in territorial or inland waters. . it appears to the Secretary of State [for Transport] that a formal investigation should be held and conducted in accordance with these [Merchant Shipping (Formal Investigations) Rules 1985 as amended in 19901 Rules by a wreck commissioner . . On occasions. The inspector has the authority to: require any Person . . One potential benefit is that it is relatively difficult for the media to access a vessel and.worthwhile reading. as opposed to formally recommends. to attend before him. The objective is for the person giving the declaration not to feel encumbered and to talk freely to the inspector in pursuit of greater safety. One thing is certain. but below major injury level which equates to loss or dislocation of limbs etc. (b) Vessel lost or presumed lost. answer questions. especially as they contain a section in each investigation which comments. This can well delay and may easily hamper a MAIB investigation since the statements required by the different investigations serve different purposes. The apportionment of blame has been known to impinge on accident investigations from other directions too. The media The second aim of MAIB to satisfy the public in general . abandoned or materially damaged. the MAIB is not a prosecuting body and the declarations made to the inspector are not admissible in evidence at any inquiry or for the purpose of prosecution which may be instigated by the Marine Safety Agency or Treasury solicitor. (c) Collision or grounding. it may be a situation where . As has been stated. there may be the death or other circumstance which prompts a police investigation or a Coroner's Court to examine the evidence.' indicates how important the handling of the public aspect of any accident has become..Serious injury basically means incapacity for three or more consecutive days. assisted by one or more assessors appointed by the Lord Chancellor The instigation of a formal investigation and the appointment of a Wreck Commissioner (usually a judge and not to be confused with a Trinity House Receiver of Wrecks) obviously widens and.Accident (a) Loss of life or major injury.. However. a good security guard on the gangway will help win time to enable a co-ordinated response to be made or for a company representative to take over. (d) Causing loss of life. one to identify the cause and the other to allocate blame or at least to determine whether there has been a criminal act..Dangerous occurrences includes a range of occurrences from any person overboard through fire on board to unintended movement of cargo sufficient to cause a list. One advantage of a media-trained company representative taking responsibility for dealing with the media is that they are more likely to be . roll-off ferries is still an open question in many people's minds. major injury or material damage or serious harm to the environment. lengthens the whole scope of the investigation especially as the formal investigation may well make recommendations as to policy. inevitably. on how the incident or accident might have been avoided. and the second is to endeavour to ignore their existence. Notice 1584 defines: . if the accident is likely to sell newspapers the media will be there with some of the most effective communications and photographic equipment available. the first is not to feel that he can confidently face them without preparation and proper management of the situation. There are two things that the master must not do if the media appear. and sign a declaration of the truth of his answers. the course of MAIB investigation into cause may not all be smooth sailing. . . if in port. . The evidence which an MAIB investigation may make public can also have ail effect on the progress of a commercial arbitration or Court case which is also looking at the same incident andat its commercial consequencesFinally. All seafarers must be aware of a public perception of the industry as polluters of the environment and the safety of roll-on. M..

'No comment' or off the cuff responses arising from frustration. Recalling chapter two. Bridge Team Management an d The Management of Safety in Shipping.Have factual information to hand. .Be honest. it is people who operate ships. and lends time to the considered response. so far as time and the imperatives of dealing with the incident are concerned. If possible. and The Nautical Institute starts from the point of view that it is human to make mistakes. sincere and to display your real personality.Use jargon. Dr David Lawrence also contributed to the section on safety. However. Dealing effectively with the media needs training and practice (see references) but the best way to be believed by the public is to be honest. This adds formality to the interview. Specialists in oil spill containment and spill management are en route. we are now working to ensure the safety of the crew. And. plan and manage the situation so far as possible. . in such a situation.Emphasise corrective actions. prepared statement is a good first line of defence. Although formal safety systems make for better design. . They will be glad to assist you. It is also important to remember that members of the crew are potentially even more vulnerable and should be shielded as much as possible and warned quietly not to make statements. . anger or tiredness are the stuff of journalists' sound bites. Giving them controlled access will go some way to getting them to work with rather than against the ship team. DON'T .Stress negligence or individual errors. DON'T . . For information about [the company] you may direct your questions to [the designated company official].Dwell on negative .Improvise or speculate. This theme is developed more fully in The Nautical Institute's three publications Bridge Watchkeeping. To ensure safety the master must make sure that every critical operation can be checked and monitored and that all the sea staff are encouraged to check their own work and have it double-checked by somebody else. Thanks are due to the International Shipping Federation for permission to reproduce extracts from their excellent guides.Stress heroic actions.Speculate on repercussions.and to limit damage to the environment. The authorities have been notified and we are cooperating with them to handle the situation. You may direct your questions to the authorities. it is advisable to record who has been spoken to and what has been said. The quiet friendly word after the interview is over is one danger area as is the aggressive intrusion into an operational scenario or a subsequent call at home or in the office.Correct mistakesstate that you would like to clear up confusion. . . The problem facing the master is then how to manage the errors and ensure that the error or omission by one person will not compromise the safety of the ship or its commercial viability. especially if a number of journalists are present. know the answer and . A short.Admit you do not allegations. . This plan includes environmental protection procedures. Assuming it is necessary to deal with the media. The emotional stress resulting from being involved in and responsible for the management of a crisis situation is not the best preparation for facing a trained journalist. the possible benefit of being behind a desk or table. . bearing in mind that the media have well tried 'ambush' techniques.Assume you are ever off the record. DO . the ship and its cargo. .Use plain language.Say'no comment'. The company's emergency response plan has been activated. . establish a Press centre where the master can give an interview. This could be along the lines ofWe recognise the need to respond to the media.Stick to the main message. DO . remember the importance of body language and. offer what information is available. Try and withdraw. ACKNOWLEDGEMENTS THANKs are due to Jim Peachy of the Marine Safety Agency for access to their work on FSA and to advice and information from the Marine Accident Investigation Branch.detached.Lie.

With an LOA of 185m and a beam and depth of 27m and l5m respectively.Antwerp Rules commenced in chapter five and introduces Lloyd's Open Form and the International Convention on Salvage (1989).REFERENCES Guidelines on the Application of the IM0 International Safety Management Code. surveyors. Both are based on an amalgam of actual incidents which occurred within the last few years. ANNEXES FOR CHAPTER 10 . superintendents. The Management of Safety in Shipping. This chapter explores two incidents and follows them through to their resolution some years later. the master and his vessel are inundated with managers. the better able he is to act effectively in a given situation. Very often. Chapter 11 COMMERCIAL PERSPECTIVE ON EMERGENCIES Cargo claims and general averages. she has a summer deadweight of 34. it continues the exploration of the York. Handling the Media. Report March 1995. International Chamber of Shipping. International Chamber of Shipping. The Revised STCW Convention. Five 8-tonne cranes served her five holds and she is propelled at an economical 14 knots by a 12.Extracts from ISF guidelines on ISM Code Special shipboard operations and examples of emergency situations. The Nautical Institute. Major international shipping conventions and recommendations.000-bhp slow-speed diesel. inadequate training. the environment and his vessel and her cargo. Development of a safety management system. once the emergency is over. but still retains her original class and is registered in Cyprus-although it could be any one of a number . Videotel Productions. Swift. The Nautical Institute. Formal Safety Assessment and the IM0. All too frequently. it is not surprising that emergencies and other troublesome incidents continue to occur. Bridge Team Management. Suggested subject matter for operations documentation. All incidents have a commercial implication and whilst a master's actions must be driven at the time of an incident by the imperative of safety. Captain A. but one of the principles on which it is based is that the wider the master's knowledge of a subject. It is very easy to let them take over when this is the very time that the master should be in command. though. The Nautical Institute. inspectors. our search for the responsible human stops too soon. Management of Safety in Ship Design.of life. J. Vince Jenkins: AEA Technology. lawyers and media. Poor design. Perhaps. the cause of these incidents is traced to human error and perhaps it is an accurate conclusion. but that a true and accurate record of events is made and that any commercially sensitive information is only available to those who have a legal right to it. Paper. Cargo claims and general average THE MOTOR VESSEL Consternation is typical of many handy-sized five-hatch/five-hold bulk carriers built during the early part of the 1970s. This book is not able to change this. In doing this.000 tonnes. Like many of her type. Not only does he need to ensure that the incident is dealt with in a true seamanlike manner. she has been sold a couple of times during her 20 years tip to the incident. With the vessel being one of the central characters in the chain of international trade and with the weather and the oceans still untamed by technological advance.owner's negligence and limitation of liabilitycollision and salvage.this is done within the overall commercial context of the marine adventure. whether successfully contained or not. Aidan Holland DNV Technica: RINA Newbuild 2000. lack of motivation and mediocre management are all human errors which are not within the control of those who operate vessels at sea. Bridge Watchkeeping.

throughout her life. at such port or place in the United States as may be selected by the Owners. and the one relating to the major parcel of copper concentrate stipulated in clause 3 that: General Average shall be adjusted. Each contains a reference to York-Antwerp Rules. arid managed by Fibula Ship Management Inc. general average is adjusted in London in accordance with York-Antwerp Rules 1974-no amendments. Certainly there will be banks in the background who. for many shipmasters.of different registers. it is perhaps logical that the wording in the cargo documents related most closely to the cargo interests which suffered loss. for each voyage in question. especially the Scandinavian underwriters who led the insurance on the parcel of copper concentrate on behalf of the trader. expecting a simple one-month transaction. 51 it was further specified that: It is agreed to amend Clause 19 to the extent either YA. The vessel was contracted to carry the various parcels under individual voyage charters. The incident On completion of loading and lifting some 31. The main parcel of 20. as amended 1990-or latest amendment.R. the reader might like to speculate whether the subsequent amendments (albeit mainly relating to pollution) might materially affect the settlement. the detailed numbered sections of the York-Antwerp Rules are set out with the latest 1994 version of the Rules with the amendments highlighted. Bunkered. This represents fairly typical example of the range (and potential conflict) of the commercial documentation relating to the carriage of. ostensibly on an arm's length basis.500 tonnes of cargo. purchased by a major international trader in metals arid minerals arid onsold to receivers in the Far East for their manufacturing processes. In the voyage charter for the main parcel of 15. Cargo insurers are also more than a little interested.Antwerp Rules 1990 and any subsequent amendments. clause 13 read: Any averages occurring under this Charter to be adjusted in London. she set course forJapan. 1950 or 1974 or as most recently amended are al5plicable dependent upon the wording in the [voyage] Charter Party and/or Contract of affreightment ruling. Other voyage charters referred to 'York-Antwerp Rules 1974 at and as supplemented by custom and practice at the Port of London'with or without the '1990 amendment'. signed by the respective shippers. further parcels. a fairly average cargo. As the vessel proceeded. will prevail. Reading these in conjunction with the lettered section contained in chapter six. She is owned by a single-ship company.000 tonnes of copper concentrate was from Saldanha Bay. In this example. stated and settled according to York. to the account of charterers. Clause 19 of the time charter specified that: General Average shall be adjusted according to York-Antwerp Rules 1974. the Consternation shifted berth in Durban for bunkers.Antwerp Rules 1974 in London. together with any financing arrangements made under a deferred credit scheme as described in chapter four. At the end of this part of the chapter. During the voyage in question the vessel was tramping under a Pool Agreement in accordance with the pre-1993 version of the New York Produce Exchange Form time charter (see also Chapter 6). in smaller lots. In Rider clause No. were loaded of lead concentrate (three parcels) and silver/gold concentrate (one parcel). With cargo often being the main contributor to a general average claim. according to York. . She had been fixed for a typical voyage from South Africa to the Far East with parcels of mineral concentrates. had remained with ABS. They reflect the various underlying contracts negotiated by the traders (and discussed in chapter five) initially to buy and subsequently to sell on the goods. The cargo was carried under a number of separate bills of lading.000 tonnes of copper concentrate shipped by the trader. Consternation Shipping Corporation. are anxious for the cargo to be delivered and their obligation lifted. Classification. and according to English Law and practice.

such (subjective) statements as 'the vessel was in perfectly good/seaworthy condition on departure. This is a situation which can easily get out of control unless the master takes positive steps to manage the situation. The weather continued to deteriorate. The master altered course to make for a port of refuge.keeping a rhumb line route in an endeavour to avoid higher latitude storms. Manoeuvring to create a lee. 2 cargo holds and there was some heavy weather damage on deck. it is important. to keep this option open when making the initial protest. Immediately on clearing the port the vessel met a heavy swell and rough seas with winds of Beaufort Force 5-6. As a wise precaution the master discussed the contents of his report with the local Club Correspondent before making the formal report available.. These days (following the case of the Miss Jay Jay) the Courts define heavy weather much more precisely and it is possible to correlate a vessel's logbook against historical satellite weather data which will give wave and swell height and direction over much of the ocean's surface. this is best done within the body of a letter to the company's solicitors. I and No. loss due to (an insured) peril of the sea. the master. He wisely elected to keep to the 'standard' version (to which he just needed to add the relevant details) and to which he attached either a typed or photocopied extract of the relevant log-book pages. unfortunately. A protest can be noted before either a notary public (or his equivalent) or before the Consul representing the country in which the vessel is registered. damages etc. over and above the port authorities. MVConsternation Port of Refuge: Port Louis.033) tons register which sailed from (Durban) on or about the (29th) day of (lanuary 1995) with a cargo of (mineral concentrates) bound JbT (Yokohama) and arrived at (Vort Louis) on the (7th) day of (February 1995) andjearing loss or damage owing to (heavy weather) during the voyage. reserving the right to extend the same at time and place convenient. Weather forecasts were studied but weather routeing was not used. Arbitrators and average adjusters are. The report must remain factual because it can be inspected by all parties under the legal concept of 'discovery'.. On arrival. to inspect the vessel and her cargo and to gather information. main deck and hatch covers. Although tempted to write extoded explanations of the events leading tip to his decision to alter course. he hereby notes his protest against all losses. Sea water was found to have entered the forecastle spaces and both No. however. the crew were able to inspect the fore part of the vessel. (Horatio Horblower) master of the (Cypriot) flag ship (Consternation) of (Limassol) official number (3456) and (12. The report will be ongoing and it is good practice to keep it up to date on a daily basis. The report is accompanied by as many photographs as possible supporting the claim of weather conditions above and beyond the normalin other words.' Protests may need to be extended in certain cases but this will usually be done under legal advice. (The Nautical Institute publication The Masters Role in Collecting Evidence expands upon this aspect.) . noted protest before the consul (or a notary). having already notified his owners and charterers. however tempting. in this case he had time to start drafting his report on passage to the port of refuge. Signed by (Consul/Notary) It is much better at this stage to be as brief and factual as possible and avoid. Heavy pitching and rolling resulted in seas breaking over forecastle. If the master needs to convey an opinion to his legal representative. Obviously the next two days were going to be extremely busy. and accompanied by his local P&I Club correspondent. Signed by (Master) Subscribed and sworn before me (Consul or Notayy) on the (7th) day of (February 1995). Port of Registry: Mauritius Limassol On this (7th) day of (February) one thousand nine hundred and ninety (five) personally appeared before me (the Consull Notary) at Port Louis.. the master remembered that the purpose of a protest is to note an event formally and reserve a position. all too used to a'boisterous breeze'becoming a 'raging gale'. reaching Storm Force 10 with the vessel proceeding at reduced speed. Any supplementary information or opinions which the master may have should be kept totally divorced from the formal paperwork. with very many interested parties sending surveyors or other representatives. Fortunately.

1 hold.General average surveyor (required if there is a forced discharge of cargo). This can also be a good time for the master to gather together information relevant to his report and to ensure that all work being undertaken has been duly authorised and that invoices and/or running timesheets are being provided. During the Consternation's stay at the port of refuge it was agreed with the owners of the copper concentrate that the salt water wetted cargo in No. In this circumstance there is no immediate need for any general average security to be posted by cargo interests (which is either in the form of an average bond by receivers or an average guaranteesee annex 11.Time charterers.Classification society surveyor. All information provided by the master and presented to the adjuster must be factual and correct. . of No. As mentioned previously. both to the shipowner and to the cargo owners. Prior to discharge. (representing Hull and Machinery insurers). and. Representatives on behalf of the traders (shippers) request that wetted and dry cargo be kept separate. . . The average adjuster is responsible for calculating the contribution of other parties towards the extraordinary loss or expense suffered by the owner (or another party to the adventure). agreed by all parties concerned. I hold. so far as possible.Salvage Association surveyor. indeed. together with the Club Correspondent. Discharge revealed that the combination of copper and seawater was giving rise to galvanic attack on the steelwork of No.Cargo analysts on behalf of owners and various cargo interests. port officials and stevedoring and agency representatives are: . although the risk was still held covered by the trader's cargo insurance. As such. possibly in consultation with his hull insurers through his insurance brokers. Many of them may be expected both at the port of refuge and at the port of final discharge. This was only partially possibleald attempts at separation eventually result in the cargo becoming partially contaminated with dunnage and plastic sheeting when reloaded into No. it was the consensus of the interested parties that the best remedial action was pressure washing and coating the lower 5m. based on this information.The importance of keeping to factual information must be impressed on all officers on board. it should be bourne in mind that the average adjuster must hold to a professionally neutral position. any vessel) declaring general average on arrival at a discharge port. Brief review meetings of the ship's management team (home team) are recommended morning and evening. in the case of a container vessel or parcel tanker (or. over and above his home team. various samples of cargo were taken by analytical chemists on behalf of both owner and cargo. prompt and firm action may be needed by the master to ensure that no cargo is discharged before he has confirmation from his owners based on advice from the average adjuster. It is contended that.Cargo surveyors on behalf of owner's. are part of the home team in the same way as the Club Correspondent. and agree overall policy and allocate duties and priorities. . neither he. However. the master remains in charge of this operation although there will be many interests keen to influence his judgment in their favour. If possible-and this is important enough to make it possible-the master should call a meeting of his management team. The average adjuster is also generally appointed by the owner. An analysis was undertaken on behalf of owners and. althoi*h appointed by the owner and entitled to full co-operation and support together with access to all relevant facts. General average is usually declared by the owner and does not require any specific act by the master (such as appearing before a notary) although there are circumstances under certain legal schemes where other interested parties can initiate a general average claim. There is little chance of the master lacking either company or paperwork. liens on cargo are possessory not maritime. for surveyors on behalf of cargo interests can be expected to show a lively interest in the condition of the hatch covers and the general seaworthiness of the vessel (see chapter six). A particular complication was that title had by this stage passed from trader to the receiver. . nor the local surveyor appointed by him. for that matter. Although normally appointed by the owner. This calls for a plan which is. time charterers and various cargo interests. All such queries should be referred to the master or a designated officer.2-by the cargo insurers) to cover subsequent contributions. I hold should be discharged into barges and regularly turned to aid water evaporation and drying. all the crew. the master must remember that the average adjuster is bound to work in accordance with well defined principles under the York-Antwerp Rules. Of the people he can expect to see passing through his office. . The stage now comes when efforts must be made to reclaim as much of the cargo as possible and to mitigate loss.1 hold with zinc rich paint. in so far as he is the shipowner's senior representative.

The attached extracts from the general average adjustment are included to give an indication of the detail which needs to be recorded in the event of general average being declared. samples of the cargo were again taken for analysis. less any The adjustment . which involves approval by Class and the local marine inspectorate. These G. Such an incident can easily leave an impression of a poorly maintained and inefficient vessel which should not be chartered again. Analysis confirmed that the average moisture level was above the transportable moisture levels (TML) of [he other concentrates. As can be seen. the ship's agents already had confirmation that an average bond and average guarantee had been posted.Since the vessel was called off the berth from time to time by the port authorities. the costs fall into one of three pots: . 2 hold. findings and summary invoices with over 250 pages of accounts. It ran to some 200 pages of reports. The general average adjustment neared conclusion almost two years after completion of the voyage. an alternative solution was sought. together with its condition as this would affect its market value. which the owner will expect to recover from his hull insurances. time charterers and cargo interests. If not accepted. went a long way towards leaving the impression of an efficient operation which encountered and successfully dealt with. The voyage eventually completed just over four months from arrival at first load port.A. some of the crusted and contaminated cargo was piled in a warehouse for later disposal. Having skilfully managed regular meetings at which all interested parties were invited to attend. the master won the confidence of most involved and consensus was generally achieved. the analysis concentrated on determining the effect on the commercial value of the lead concentrate of saltwater. In this case. which is then apportioned between the various parties (vessel.Particular average. Firm and decisive management of the incident by the master. If accepted. Prior to discharge of No. for which the master issued formal notices of damage. all parties will have suffered loss and the most damaging loss may be a loss of confidence in the vessel and her trading pool. 2 hold was found not to be feasible since there was perceived to be a real danger of environmental contamination. Forty days after entering the port of refuge. Competitive quotes were invited for the removal of the bulkheads. It was also found that agreement could be reached on using one analytical chemist thus saving both time and money. effectively supported by his advisers and crew. On arrival at the first discharge port. comprehensive and obviously contemporaneous reports backed up with well kept logbooks will undoubtedly ensure that the master's evidence is given the credence due to the person who was on the spot. cargo and time charterer's bunkers). Owner's cargo surveyors and the local P&I Club Correspondent were instructed to keep a record of what eventual tonnage was recovered. A similar solution for the wetted concentrate in No. Although a majority of the cargo passed over a weighbridge. one of the inevitable perils of the sea. mv Cotisternation bunkered and sailed into gale force winds and heavy seas which promptly washed some 30 drums of sweepings off the weather deck.General average. 2 hold. Despite the settlement. was to construct a dividing bulkhead by hammer driving interlocking steel plates into the cargo as the wooden separation was collapsing. arbitration or a Court action may result with the possible requirement for the master to give evidence. Discharge was slow due to the temporary bulkheads and crusting of the cargo. Non-standard and consequently more expensive methods of discharge had to be employed. . Under such circumstances. the whole operation took 29 days. There were particularly strict environmental controls in the port of refuge and as no party was prepared to underwrite the possible fine and clean-up cost. breaking the ship's railings at the same time. contributions are normally covered by their respective insurers. settlement will be made between the shipowners. The mixing of wet and dry and the partial contamination by dunnage caused the receivers considerable consternation. The master had to address similar considerations at the second discharge port where the copper concentrate was to be discharged. The solution to the problem of No. This would be serious as the trader is an important charterer of bulk tonnage and the receivers are all major industrial concerns and both importers and charterers in their own right. The receivers of four bill of lading lots were involved in ihis decision. During this time the vessel suffered a certain amount of stevedore damage.

The extent of the accounts (250 pages) demonstrates the critical importance of establishing a regime of good housekeeping and proper and contemporaneous records. NOTE: The following are extracts only from a fictitious adjustment in which the ship and the cargo interests will be major participants. In yet other cases. Although some running costs may be recovered such as wages. attention is drawn to the adjuster's notes and particularly those areas where costs are apportioned or allocated to the remainder column and where it might have been possible to argue for them to be included under the general or particular average columns. expenses or overtime are disallowed as sufficient evidence is not available to argue for their inclusion. Consequently. the owner's cashflow will still be adversely effected by the lack of income. The intention is to reflect the range of relevant information involved and indicate how it is analysed and classified thereby demonstrating the essential need for detailed records and for the master to actively manage the operation in close co-ordination with the hull underwriters' surveyor. the master. in conjunction with the chief engineer and his management team. it is likely to have a seven to fourteen day deductible before it starts paying.Remainder. co-operating fully with the surveyors appointed by owner's insurers.deductible. It is important that the master sets up a system which carefully monitors and identifies expenditure. . This will assist the average adjuster to determine whether costs should be regarded as either general or particular average-or whether they are not recoverable and must be borne directly by the owner. Even if the owner does have 'loss of hire' cover. Readers are not recommended to try and follow the calculations in detail as they are incomplete. which the owner must bear out of his own resources. In the following examples of the average adjuster's accounts. fuel and stores. may need to review their future maintenance schedule and revise some of the priorities. Other cases show where overtime is an allowed general average claim because it contributed to a reduction of the overall time/cost equation. and .

.

.

.

.

Jettison of cargo No jettison of cargo shall be made good as general average. shall be made good as general average. shall be allowed in general average provided that the salvage operations were carried outfor the purpose ofpreservingfrom Peril the property involved in the common maritime adventure. It will doubtless be thejoy of the average adjuster to apportion between the two. with changes made during the 1994 CMI Convention highlighted in the same way). by water or otherwise. 'property' has replaced 'ship and cargo' to forestall any possible allowances for pollution liability and loss has been included as well as damage.The numbered rules (which deal with fact) should be read in conjunction with the lettered rules (which appear in Chapter five. whether under contract or otherwise. could be allowable as general average in terms of the lettered rules A and C. including deimageby beaching or scuttling a burning ship. In chapter seven (General average and salvage) the case of Watson v Fireman's Fund Insurance was noted. Rule VI Salvage remuneration (a) Expenditure incurred by the parties to the adventure in the nature of salvage. Rule IV Cutting away wreck Loss or damage sustained by cutting away wreck or parts of the ship which have been previously carried away or are effectively lost by accident shall not be made good as general average. damage caused in alleviating heating of cargo. If and when environmentally friendly sail power returns. Rule III. In this case. As previously mentioned. Loss or damage by sacrifices for the common safety Loss or damage to the property involved in the common maritime adventure by or in consequence of a sacrifice made for the common safety. Rule V Voluntary stranding When a ship is intentionally run on shorefor the common safety. in extinguishing a fire on board the ship. However. 'recognised custom of the trade' is open to a number of attacks legally and masters should be certain to ensure that the bill of lading of any cargo carried on deck is properly claused (chapter 6). or either of them. Extinguishingfire on shipboard Damage done to a ship and cargo. Expenditure allowed in general average shall include any salvage remuneration in which the skill and efforts of the salvors in Preventing or minimising damage to the environment such as York. 'Heat however caused' has been changed into 'heat caused by fire' specifically to allow for occasions when it may be necessary to turn refrigerating machinery off in order to extinguish a fire. the consequent loss or damage to the property involved in the common maritime adventure shall be allowed in general average.Antwerp Rules 1994 (numbered rules) . whether or not she might have been driven on shore. Therefore. Only a small technical point to note. The reference to property is again to forestall any possible allowances for pollution liability. before there is an actual fire. this clause will regain much of its former relevance. and by water which goes down a ship's hatches opened or other opening made for the purpose of making a jettison for the common salety shall be made good as general average. Damage to the reefer cargo from ambient heat is now allowable as opposed to heat damage caused by the fire. the extinguishing damage to the cargo was not allowable as general average because the endorsee failed to establish that there had been an actual fire in the hold. Rule 1. except that no compensation shall be made for damage by smoke however caused or by heat of the fire. unless such cargo is carried in accordance with the recqgnised custom of the trade. there had been no peril. Rule 11.

or any of them necessarily used for fuel for the common safety at a time of Peril shall be admitted as general average. Any use of the vessel's machinery in such a case must be reasonable as specified by the Rule Paramount. the corresponding expenses of leaving such port or Place consequent upon such entry or return shall likewise be admitted as general average. but when such an allowance is made for the cost of ship's materials and stores. if any. Expenses lightening a ship when ashore and consequent damage When a ship is ashore and cargo and ship's fuel and stores or any of them are discharged as a general average act. Cargo. but where a ship is afloat no loss or damage caused by working the propelling machinery and boilers shall in any circumstances be made good as general average. etc.. Again the working has been adjusted to avoid any possible environment liability. sacrifice or other extraordinary circumstances which render that necessary for the common safety. (a) When a ship shall have entered a port offace of refuge or shall have returned to her port or Place of loading in consequence of accident.is referred to in art. Rule VII. ship's materials and stores used forfuel Cargo. and any loss or damage to the property involved in the common maritime adventure in consequence thereof. Rule IX. 13 paragraph 1(b) of the International Convention on Salvage. the expenses of entering such port Or place shall be admitted at general average. or are in danger of becoming. the extra cost of lightening. This rule reflects the 1990 amendment to the 1974 Rules which introduced the concept of including 'the skill and efforts of the salvors in preventing or minimising damage to the environment'. blocked so that the engines are unlikely to be able to operate long enough to make any effective contribution... Damage to machinery and boilers Damage caused to any machinery and boilers of a ship which is ashore and in a position of peril in endeavouring to refloat. that the shipowner did not stem enough fuel. it is vitally essential that the master keeps a careful record of all expenditure whenever there is the possibility of a recovery under general average. and when she shall have sailed thence with her original cargo. for example. As has been seen in the prior example. lighter hire and reshipping (if incurred). This is not strictly relevant to the numbered rules which deal only with fact-the fact being that there was'not enough fuel and stores or cargo had to be used. the Provisions of this rule shall . Rule X. their use might well be considered unreasonable and therefore not allowable under general average This will ultimately depend upon what alternative courses of action were available to the master. and this may well be the fault of a time charterer rather than the owner. the general average shall be credited with the estimated cost of thefuel which would otherwise have been consumed in prosecuting the intended voyage. or a part of it.' The previous clause was drafted in the days of coal-burning ships and contained within it an element of fault-i. The previous wording required that these costs would be included '. Rule VIII. shall be admitted as general average. (b) Special compensation payable to a salvor by the shipowner under art. Expenses at port of refuge. If.. This rule relates to the second paragraph of Rule C. The need to keep a careful and constant account of bunkers consumed is obvious.when and only when an ample supply of fuel had been provided. 1989 have been taken into account. ship's materials and stores. When a ship is at any port or place of refuge and is necessarily removed to another port or place because repairs cannot be carried out in the first port or place.e. If there is fault in the under provision of fuel. it is known that the cooling water intakes are. shall be allowed in general average when shown to have arisen from an actual intention to float the ship for the common safety at the risk of such damage. 14 of the said convention to the extent specified in paragraph 4 of that article or under any other provision similar in substance shall not be allowed in general average. then this may become a matter for dispute under other contracts.

be applied to the second port or place as if it were a Port orplace of refuge and the cost of such removal including temporary repairs and towage shall be admitted as general average. Fuel and stores consumed during the extra period of detention shall be admitted as general average. then the wages and maintenance Of master. Port charges incurred during the extra period of detention shall likewise be admitted as general average except such charges as are incurred solely by reason of repairs not allowable in general average. except in cases where the damage to the ship is discovered at a port or place of loading or call without any accident or other extraordinary circumstances connected with such damage having taken place during the voyage. Wages and maintenance of crew and other expenses bearing up for and in a port of refuge. Rule XI. Only a marginal change was made in the 1994 redrafting. even if the repairs are necessaryfor the safe Prosecution of the voyage. NB: Paragraphs of Rule IX(b) 1974 reordered . (b) When a ship shall have entered or been detained in any port or Place in consequence of accident. (a) Wages and maintenance of master. if the repairs were necessary for the safe prosecution of the voyage. when the handling or discharge was necessary for the common safety or to enable damage to the ship caused by sacri/ice or accident to be repaired. shall be admitted in general average. or to enable damage to the ship caused by sacrifice or accident to be repaired. except such fuel and stores as are consumed in effecting repairs not allowable in general average. storage expenses shall be admitted as general average only up to the date of the ship's condemnation or of the abandonment of the voyage or up to the date of completion of discharge of cargo if the condemnation or abandonment takes place before that date. the wages and maintenance of the master. The cost of handling on board or discharging cargo. officers and crew and fuel and stores consumed and port charges shall be admitted as general average only up to the date of the ship's condemnation or abandonment takes place before that date. including insurance if reasonably incurred. if the repairs were necessary for the safe prosecution of the voyage. (b) The cost of handling on board or discharging cargo. unless such restowage is necessary for the common safety. call or refuge shall be admitted as general average. officers and crew reasonably incurred andfuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or Place of refuge or returning to her port or place of loading shall be admitted as general average when the expenses of entering such port orplace are allowable in general average in accordance with Rule X(a). fuel or stores whether at a port or Place of loading. fuel or stores is admissible as general average. The provisions of Rule IX shall be applied to the extra period of detention occasioned by such reloading or restowing. This rule is directly applicable to the case of the Consternation. The Provisions of Rule IX shall be applied to the prolongation of the voyage occasioned by such removal. But when the ship is condemned or does not proceed on her original voyage. (c) Whenever the cost of handling or discharging cargo. etc. fuel or stores shall not be admissible as general average when incurred solely for the Purpose of restowage due to shifting during the voyage. officers and crew andfuel and stores consumed and port charges incurred during the extra detention for repairs to damages so discovered shall not be admissible as general average. fuel or stores shall likewise be admitted as general average. officers and crew reasonably incurred during the extra Pe7iod of detention in such port or place until the ship shall or should have been made ready to proceed upon her voyage. the wages and maintenance Of the master. reloading and stowing of such cargo. the costs of storage. Provided that when damage to the ship is discovered at a port or place of loading or call without any accident or other extraordinary circumstance connected with such damage having taken place during the voyage. When the ship is condemned or does not proceed on her original voyage. sacrifice or other extraordinary circumstances which render that necessary for the common safety.

the cost of each of these measures will be allowable in general average (so long as they would have been taken into account in the reward to a salvor operating on the basis of a LOF type agreement). Rule XIII. when and only when the cost of those measures respectively is admitted as general average. Drydock and slipway dues and costs of shifting the ship shall be allowed in full. Painting or coating of bottom shall not be allowed in general average unless the bottom has been painted or coated within the twelve months preceding the date of the general average act in which case one half of such costs shall be allowed. Rule XII. etc. discharging. life and similar boats. storing. in which case there shall be a deduction of one third. The change from 'caused in the act of seen above has been introduced to narrow the scope of the wording of this rule. stores. whether such payments be imposed by law upon the shipowners or be made under the terms of articles of employment. No deductions shall be made in respect of Provisions. as a part of that operation. a load tanker is stranded and the shipowner hires equipment on a contractual basis both to refloat the vessel and. call or refuge. The greater extent of what may be termed the vessel's domestic costs are covered under this rule. would have entitled such party to a salvage reward. The additional paragraphs under (d) relate to the 'pollution compromise' which was agreed between liability and property underwriters in 1994. The deductions shall be made only from the cost of the new material orparts whenfinished and ready to be installed in the ship. machinery and boilers for which the deductions shall be regulated by the age of the Particular parts to which they apply. In general terms under (i) if. then. . or of damage caused by general average sacri/ice. for the common safety. (iv) necessarily in connection with the discharging. the cost of such repairs shall be admitted as general average. subject to the 'reasonableness' required by the Clause Paramount. Temporary repairs Where temporary repairs are effected to a ship at a Port of loading. The costs of cleaning.construction to the date of the general average act. (iii) as a condition of remaining at any port or place in the circumstances prescribed in Rule X(a) provided that when there is an actual escape or release of pollutant substances the cost of any additional measures required on that account to prevent or minimise pollution or environment damage shall not be allowed as general average. storing or reloading of cargo whenever the cost of those operations is admissible as general average. In a similar way. Damage to or loss of cargo. anchors and chain cables. Again the comments about keeping good records obtain. officers and crew. reloading and stowing shall be made good as general average. which had it been undertaken by a party outside the common maritime adventure. The deductions shall be regulated by the age qf the ship from 31 December of the year of completion of . (ii) as a condition of entry into or departurefrom any Port or place in the circumstances prescribed in Rule X(a). communications and navigational apparatus and equipment. Deductions from cost of repairs Repairs to be allowed in general average shall not be subject to deductions in respect of new for old where old material or parts are replaced by new unless the ship is over 15 years old. except for insulation. to prevent or minimise damage to the environment. fuel or stores sustained in consequence of their handling. Rule XIV. (d) The cost ofineasures undertaken to prevent or minimise damage to the environment shalrbe allowed in general average when incurred in any or all of thefollowing circumstances: (i) as part of an operation performed for the common safety. Damage to cargo in discharging.(c) For the purpose of this and the other rules wages shall include all payments made to orfor the benefit of the master. for example. booms or similar equipment hired to prevent or minimise damage to the environment when lightening or transferring cargo will be allowed.

1989 or under any other provision similar in substance. A recent House of Lords decision. In the circumstances envisaged in the third paragraph of Rule G. deducting therefrom any loss or damage suffered by the cargo prior to or at the time of discharge. ascertainedfrom the commercial invoice rendered to the receiver or if there is no such invoice from the shipped value. therefore. deduction being made from the freight and passage money at risk of such charges and crew's wages as would not have been incurred in earning the freight had the ship and cargo been totally lost at the date of the general average act and have not been allowed as general average. and the ship shall contribute upon its actual net value at the time of completion of discharge of cargo- . or when the damage to or loss of cargo is so made good. deduction being also made from the value of the property of all extra charges incurred in respect thereof subsequently to the general average act. There have been no recent changes to this Rule. The value of the ship shall be assessed without taking into account the beneficial or detrimental effect of any demise or time charterparty to which the ship may be committed. the Bijela [1994] A. either when caused by a general average act.value. To these values shall be added the amount made good as general average for property sacrificed. This proposal was. however. the cargo and other property shall contribute on the basis of its value upon delivery at original destination unless sold or otherwise disposed of short of that destination. It can. Deduction shall be madefrom the amount of gross freight lost. No deductions new for old shall be made from the cost of temporary repairs allowable as general average. A number of delegates at the Sydney conference in October 1994 wanted to solve this by introducing the concept of value at time of final delivery. but only up to the saving in expense which would have been incurred and allowed in general average if such repairs had not been effected there. if any. except such charges as are allowed in general average or fall upon the ship by virtue of an award for special compensation under art. the cost of such repairs shall be admitted as general average without regard to the saving. if not already included. The value at the time of discharge shall include the cost of insurance and freight except in sofar as such freight is at therisk of interests other than the cargo.Where temporary repairs of accident damage are effected in order to enable the adventure to be completed. but has. endorsed the average adjusters' practice of allowing such temporary repairs. overturned and the controlling value remains the value at the time of discharge from the vessel. time charter hire is not allowable. Rule XV Loss of freight Loss of freight arising from damage to or loss of cargo shall be made good as general average.. Rule XVI Amount to be made good for cargo lost or damaged by sacrifice The amount to be made good as general averagefor damage to or loss of cargo sacrificed shall be the loss which has been sustained thereby based on the value at the time of discharge. in consequence of the sacrifice. Men cargo so damaged is sold and the amount Of the damage has not been otherwise agreed. ascertainedfrom the commercial invoice rendered to the receiver or if there is no such invoicefrom the shipped. Rule XVII Contributory values The contribution to a general average shall be made upon the actual net values of the property at the termination of the adventure except that the value of cargo shall be the value at the time of discharge.C. of the charges which the owner thereof would have incurred to earn suchfreight. 14 of the International Convention on Salvage. The second paragraph has been the subject of considerable litigation as to the extent of the repairs allowable. not incurred. The value of the cargo shall include the cost of insurance and freight unless and in so far as such freight is at the risk of interest other than the cargo. There is a problem inherent in this rule in so far as multi-modal (through) transport is frequently effected under one invoice from shipper to (inland) destination. be difficult to ascertain the value 'at the time of discharge' from the commercial invoice. to other interests. the loss to be made good in general average shall be the difference between the net proceeds of sale and the net sound value as computed in thefirstparagraph of this rule.

passengers' luggage. subject to deductions in accordance with Rule XIII. other than the wages and maintenance of 'master officers and crew and fuel and stores not replaced during the voyage. but not exceeding the estimated cost of repairs. such general average contributions are covered by special clauses in the vessel's hull and machinery policy or the shipowners may choose to bear these costs themselves for commercial reasons. but such goods shall remain liable to contribute. however. Damage or loss caused to goods which have been wrongfully declared on shipment at a value which is lower than their real value shall be contributed for at the declared value. led to the logical conclusion that a passenger ferry full of private cars would be virtually unable to declare (effectively) general average. The reasonable depreciation arising from such damage or loss. The newly introduced las'twearagraph. Either a great deal or very little can be written about this rule. with the addition of any amount made good as general average. The actual reasonable cost ofrepairing or replacing such damage or loss. Normally. sacrifices and allowances in general average at the rate of 7% per annum. although reasonable since a passenger does not generally insure against general average contributions. Rule XX. The sum so deposited together with accrued interest. personal effects and accompanied private motor vehicles shall not contribute in general average. Treatment of cash deposits Where cash deposits have been collected in respect of cargo's liability for general average. Damage to ship The amount to be allowed as general averagefor damage or loss to the ship.Where cargo is sold short of destination. her machinery and/or gear caused by a general average act shall be as follows: (a) Men repaired or replaced. salvage or special charges such deposits shall be paid without any delay into a special account in the joint names of a representative nominated on behalf of the shipowner and a representative nominated on behalf of the depositors in a bank to be approved by both. Mails. But where the ship is an actual total loss or when the cost of repairs of the damage would exceed the value of the ship when repaired. The cost of insuring general average disbursements shall also be admitted in general average. however. (b) When not repaired or replaced. Rule XXII. if any. until three months after the date of issue of the general average adjustment. if saved. shall be allowed in general average. salvage or special charges payable by cargo in respect of which the deposits have been collected. shall be held as secutity for payment to the parties entitled thereto of thegeneral aver age. if any. Payments on account or refunds of deposits may be made if certified so in writing by the average . Undeclared or wrongfully declared cargo Damage or loss caused to goods loaded without the knowledge of the shipowner or his agent or to goods wilfully misdescbed at time of shipment shall not be allowed as general average. the amount to be allowed as general average shall be the difference between the estimated sound value of the ship after deducting there from the estimated cost of repairing damage which is not general average and the value of the ship in her damaged state when may be measured by the net proceeds of sale. Rule XXI. due allowance being madefor any payment on account by the contributory interests or from the general average deposit fund. The capital loss sustained by the owners of goods sold for the purpose of raising funds to defray general average disbursements shall be allowed in general average. but such goods shall contribute upon their actual value. it shall contribute upon the actual net proceeds of sale. Interest on losses made good in general average Interest shall be allowed on expenditure. Rule XVIII. Provision funds A commission of 2 % on general average disbursements. Rule XIX. it is the time that average adjusters wrap a damp t I around their brows.

The incident which follows is based on an actual incident and is synthesised from a lengthyjudgment. setting out in frequently tedious and sterile detail.) The third mate had been on board for about six months on his first trip to sea after military service in the navy and graduation from a maritime university. Reports on him by other masters included the comments that he was inclined to be rash and needed to learn some serious judgement' and that with more experience he would make a good master but recommended that he be given a 'small ship' to command first.' The chief officer had served with the crew managers for a number of years but this was his first trip with these ship managers. He had neither met them nor been briefed. Here that consideration is made against the shipowner's ability to limit his liability in the event of negligence by the master or crew. He was neither interviewed by the managers nor had he read their various instructions. The facts - The vessel is a handy-sized bulker less than six years old. nor had he read their various instructions. This in turn will reflect on how various flag States implement the requirements of both the STCW Convention and the ISM Code and whether that (major) part of the shipping communitywho want improved standards are prepared to take decisive action to prevent substandard operations and substandard registrations. The course recorder worked and would have recorded the courses if it had not run out of paper some days previously. the officers with internationally 'valid' certificates of competency. with its requirement for a 'designated person' and much clearer lines of communication between vessel and owner.2. as opposed purely documentary. What the shipowner cannot do is limit the liabilities which arise directly from his own negligence. Owner's negligence and limitation of liability In chapter ten the challenge-and the opportunity-offered to the shipping industry and to the professional mariner was opened for consideration. one of the two radars was in use at the time of the incident. . following four years as chief officer. terms. If there are any shorebased readers who appear in the list in the preceding paragraph. He had joined the vessel two weeks previously for his first trip as master.adjuster Such deposits and payments or refunds shall be without prejudice to the ultimate liability of the parties. GHI's approval of his promotion and appointment was given 'on a chit signed by half a dozen members of senior management to whom the man was a stranger. He had been interviewed twice by a clerk from managers GHI and met briefly by a marine superintendent. (Many seafarers will be aware of the volumes of operational. indeed there were more bodies on board than stipulated. The vessel was seaworthy in practical terms and there were no mechanical failures. Perhaps this is why the flag State never instituted a flag State inquiry. It does not matter too much who it happened to or where it happened-suffice that it happened on a modern well found vessel. As the ISM Code comes into force. it will be interesting to see what interpretation the Courts put upon the owner's responsibility to provide a crew that is trained and competent to operate a particular vessel in real. She is: Owned by ABC Bareboat chartered to DEF Managed by CHI With crew provided by JKL Time chartered to NINO On voyage charter to PQR Flagged with STU And cargo owners are VWX The piece of paper which carried the title 'Minimum Safe Ma ning Certificate' was 'valid' and. The master had been employed by JKL throughout his seven years at sea. safety and quality standards which appear on board many vessels. The vessel had just completed a long ocean passage (plenty of time for chart corrections and voyage planning) and was to make landfall in an area known for its many reefs and small islands. they might like to glance at Figure 10. before reading on. the master's dilemma. much of what could be more effectively imported through better-and ongoing-training. a consistant crewing regime with a career structure and a strong and clear company ethos. The second mate was the same age as the master and had recently been working ashore for three years.

and he could produce no record of regular vessel visits or sea staff briefings and interviews. initially to $2.US inspections had twice found the vessel to be deficient of charts but no action appeared to have been taken by owners or managers. . The analysis Judgement . 'The passage . He had visited this vessel about 30 months previously (to discuss de-ratting exemption!) and his ship visit ' schedule was traced from his expense account in the absence of visit reports. He held a master's certificate and had sailed as second mate. The incident The third mate was on watch when the vessel made landfall at 23:30.Charterer's agents' request that the master try and bring arrival time back from 07:00 to 06:00 to enable an 08:00 start to cargo work was considered as so general a request as not to constitute 'undue commercial pressure.25 million as per the 1957 convention. The master was told by nobody (did he need to be~) that he was expected to monitor the duties carried out by the deck officers as he was responsible for their duties being properly carried out. the 1976 convention was promulgated into law in the local jurisdiction. . so that for a period of eight days the vessel navigated on plotting sheets. The master was not on the bridge for the landfall. A number of fairly forceful comments were made during the course of the case. . a maze of reefs and islands through which [the assessors] consider no competent mariner would surely seek to navigate and especially not at night. He handed over to the second mate at 24:00 on a DR position when a fix could have been obtained by radar. . which from the outset appeared intent on saving a few miles (about 40) by cutting in between the shoals and islands after making initial landfall. The owners were also criticised for failing to provide Ocean Passagaes and Routeing Charts.6 million plus interest and costs. He did not attempt to check on chart corrections or the officers in their duties. The officers did not understand 'warningareas unsurveyed should not be traversed' and assumed areas with no depth soundings indicated deep water. .' .Quality of chart correcting was poor and checks on other vessels showed that the managers did little to ensure that charts were kept up to date. The vessel stranded on a reef at 03:30. is through an area without navigation lights..The standard of watchkeeping that allowed the vessel to navigate in such an area was criticised as was the failure of all on board to ignore the many warnings on the chart of 'dangerous to navigation'. Some of them are set out below and they illustrate the somewhat grey area where crew negligence (and incompetence) and the owner's and manager's responsibilities meet: . . Both pleas were opposed by the cargo owners who sought to recover damages of $7. 'areas unsounded should be avoided' etc..The failure of the owners to have full chart coverage of the whole voyage area. Owners tried to have the cas~_ heard under this convention risking the higher limitation level but seeking the protection of the more onerous requirements. was criticised.The master issued no standing or night orders and in fact imposed none of his own personality on those subordinate to him regarding the way in which he wanted the vessel to be run. He regarded chart correction and navigational planning as being quite simply 'the 2nd mate's job'. However. Any reasonable master would surely make a point of being on the bridge himself in such waters as a back-up to the crew at least'. College training appeared to give little attention to the importance and practice of chart corrections and a cultural difference was noted where the senior or older officers were disinclined to teach junior officers their duties (return to chapter two).The master was criticised for his choice of route. between the incident and the Court case.The manager's marine superintendent had special responsibilities for all navigational publications for about 60 ships and was claimed to be a bulk carrier specialist with responsibility for about 25 Krulkers.There was judicial amazement expressed at the fact that a new master could be appointed without an interview with an experienced master and a briefing for the performance of his duties by the vessel's managers. The owners and managers applied to limit their liability on the grounds of crew negligence. He reported to a marine manager. also a second mate but with a first mate's certificate.

the incoming officer should duly make his objections known-unless he wants to assume responsibility for the failures of others. recklessly and with knowledge that such loss . During some 5. In the case of the Bowbelle and the pleasure craft Marchioness (involved in a night-time collision on the River Thames. .8 million. Charges dismissed To break limitation under the new convention (1976) requires the establishment of the appropriate degree of recklessness on the part of the owners. the burning question was did the fault go beyond those on board to the extent that the owners would not be able to seek protection under the appropriate Limitation of Liability Convention. the pleasure boats would be out and one day there was going to be a serious accident'. It seems that in the case of the Herald of Free Enterprise manslaughter charges against the owners were dismissed because apparently nobody had perceived the risk of the vessel sailing with her bow door open. . now the summer was starting. An element of 'recklessness' must be present such as identifying the risk but continuing to take it. . there was no satellite alert beacon and the liferaft was useless. that the radio did not work. It was established that both the master and the 2nd mate were incompetent and that the owners had not exercised due diligence in manning the vessel by leaving it entirely to the manning agents and taking little or no direct interest themselves. The Court considered that '. can catch up with a former officer of a ship who thought that his connection with that vessel was long ended. Their defence under the 1957 Convention. The vessel sank and although she was raised two years later as part of the resulting investigation. Burden of proof Although this was a criminal and not a civil case and so the burden of proof was raised to 'beyond all reasonable doubt'. . the personal act or omission of the person seeking to limit.There was no question but that the master and crew were negligent. .6 million plus interests and costs.' would probably result. Whether the owners would have succeeded in limiting liability had the case been tried under the principles of the 1976 Convention is not known but opinion indicated that it would have been a very fine judgement. the managing agent of the fishing vessel Pescado was held guilty of manslaughter of 'persons unknown' (one of the crew of six who all died when the vessel sank) on the grounds of a breach of the duty of care. Thus the risk was identified but continued to be taken and could be construed as reckless conduct. a more difficult concept to prove. . and the long arm of the legral system. might be difficult but if successful it would limit their exposure to US$2. similar collisions and the owners of Bowbelle had expressed their concern in writing to the port authority saying that '. It also illustrates the critical importance of accurate and relevant evidence.000 voyages. There had been some earlier. It was known that the crew were inexperienced novices. The burden of proof on the cargo owners (the plaintiffs) under the 1976 Convention to prove that the loss resulted from '. . As stated in chapter five. As stated. the owners and managers applied to limit their liability on the grounds of crew negligence as defence against cargo owner's suit for US$7. the exact cause of her sinking was never established beyond reasonable doubt. A salutary lesson for all was that the vessel's previous 2nd mate was called as a witness and spent many hours under cross-examination as the Court endeavoured to establish the status of the chart folios on the arrival on board of the sailing 2nd mate. one of the philosophies of proper handovers between officers is that a status report should be prepared for the incoming officer. the circumstances were different. If the hdndover information is wrong. The past. . The managing agent is appealing and it is noteworthy that he was acquitted on six other charges of manslaughter which specified the crew members who died and alleged that the vessel was unseaworthy and unstable. no accident had occurred (as a result of open bow doors) and so no risk was 'recklessly' taken. The Pescado was converted by the managing agent to a scallop fisher and the prosecution contended that the result was unstable and that the vessel was sent to sea without a statutory safety certificate. the level of limitation is commensurately higher (in this case US$6 million). . The owners could not limit their liability and were exposed to the full claims from the cargo owners. it does illustrate how difficult it is to bring a case against a manager or owner. based on the concept of 'fault or privity'.'. . More recently. It was observed that one of the manager's circulars stated that 'failure to correct navigational charts was the equivalent of abandoning the safety of the voyage' and yet they made no attempt to ensure that charts were corrected and up to date for the intended voyage. is much heavier. committed with the intent to cause such loss. with the Marchioness sinking with considerable loss of life). .

. the Mars Disaster put her rudder 15' to port and thereafter hard a-port on sighting the London Branch. This would have taken her past the London Branch at a distance of not less than two cables nor more than four cables. or contract tow or whether they might be able to make port under the vessel's own power. The London Branch put her wheel hard a-starboard and her engines full astern immediately on sighting the Mars Disaster visually. on some new areas where. The master's immediate actions included: sending an SOS. and to cope with the oil spill and four Oust) floating containers.. corresponding to the range set on their radars at the time. Each ship became aware of each other at a distance of six miles. the Mars Disaster. a degree of fault or privity. She was still turning to port at the time of the collision. The effect was that although the head may have fallen off a few degrees there was no reduction in her speed.000 tonnes deadweight. . had an uneventful voyage from north Europe to the port of Worstdreams. . The London Branch. 4 cargo tanks at an angle of approximately 65-70' heading aft. Collision and salvage The incident The incident described below has been amalgamated from two cases. and perhaps penalties.Using much the same information. The flag State did not even hold its own inquiry into the incident and a strong case can be made for the flag State being the prime defendant.advising owners of the incident through a brief message with details to follow. making sure that only facts were recorded. a well-found multi-purpose 'tween decker of some 20.If it is difficult to control owners. 11:15. He sent a supplementary message to his SOS summarising that information which might be useful to the shore authorities and potential salvors. with the result that the tanker was severed into two parts and a substantial quantity of her cargo of fuel oil was lost. how much more so the authorities? One of the parties listed at the beginning of this section was notably missing from the Court room. . assessing whether it was possible to render any assistance to the Mars Disaster. he prepared a written brief which was sent to his owners advising that he was assessing whether he needed salvage assistance. and his crew. does lie. f-6. the master considered what assistance was required for his vessel. a motor tankship of some 16. The master made a mental note to call his management team together and brief them on their tasks and on what to say~ and what not to say~to the constant stream of surveyors who could be expected as soon as port was reached and possibly even sooner. who was on watch at the time of the collision. employed by her owners on a regular liner service. were at least temporarily safe.Having received a report from the chief engineer and the chief officer that his own vessel was in no immediate danger. Whilst picking up survivors from the Mars Disaster. plan his best course of action and decide upon priorities: . Two containers were lost overboard and a number of others damaged. of the Mars Disaster. The London Branch struck the starboard side of the Mars Disaster in way of her No.The second mate took a number of photographs of the damage. ascertaining if his vessel. As a result of this action the Mars Disaster turned not less than 50' to port and this brought her right across the track of the London Branch.The second mate was allocated to keep a careful and continuous record of all events. At the same time. Perhaps the expanding implementation of the ISM Code will help to focus attention. When the vessels were not less than by 4miles apart and not less than three minutes before the collision. according to the deck log. the master had a moment to think through the vessel's predicament. The third mate.500 tonnes deadweight laden with a cargo of fuel oil. at the very least. was proceeding at 13 knots on a course of 295'. two more containers were cut adrift and jettisoned and a small amount of bunker fuel escaped from a double bottom tank. Proceeding towards her next port of call on a course of 124'. and the master made supplementary notes of what occurred and ensured that a copy was made of the radar plot. Because of the damage. the oil spill and the jettisoned containers and commenced his detailed narrative. visibility began to reduce considerably and speed was reduced to 14 knots at.r the Mars Disaster. The London Branch was also holed and took a list to starboard. and indeed recklessness.

concentrate on sending the information which the recipient needs to know. sea state (2. However. don't just send what you know. to the quality of the evidence provided by the vessel). the back-up response will only be as good as the briefing about the incident which comes from the master. When making the follow-up report. If there is a little time to give more detail than the position and type of emergency. in some countries it is necessary and there are certain formal requirements. Next . In all circumstances. (e) Payments on account and average bond. inadequate or insufficient information is communicated by the master. Although appointed by the owner. (c) Collision (where one of the priorities is to protect one's position in respect of the colliding vessel and this relates very much to the initial statements of master and crew and. (f) Constructive total loss (see chapter seven and the underwriters' probable internal action in rejecting the owner's claim of CTL). If poor. (d) Salvage (where advice as to the appropriate actions in engaging a salvor can be provided assuming that there is time for such discussions). the happier the shipowner will be: to some extent. he was confident that the necessary back-up would be forthcoming. The first was the collision and the second was a potential salvage situation. sensibly the appointment should be made in consultation with the Club and the hull underwriters. the owner traditionally has the right to appoint the adjuster of his choice. Since the master's initial attention will be concentrated on operational matters and dealing with the incident. Since the master was fortunate enough to work for a company that was organised in such a way that the ISM Code requirements were little more than a reflection of the way in which it already operated. again.An average adjuster.O. Those effecting such policies may be expected to have skilled advisers. the master was mindful of the fact that general average would have to be declared and that the vessel's-and the cargo's-insurers would become involved. his reporting may well have to be graduated. then he and his owners should not be surprised if they receive inappropriate advice in return. The most important action is to ensure security is obtained for the cargo's contribution before the cargo disappears ashore-see the annex for an example of an average bond). in the long run. This would come primarily from: . unable to take soundings -round the vessel until daylight in approximately two hours and even then. the smaller the amount allocated to the remainder column. . Nevertheless. and . advise the owners and other receivers of the S. Vessel appears slightly trimmed by the head and has 3' list to port. this depends upon the records and the quality of the evidence provided by the crew). There are advantages in having adjusters involved right from the start of any incident as they have a valuable contribution to make over and above producing the final adjustment. be dealt with separately. Thus. It was a potentially complicated situation.The master was aware that he was facing two serious circumstances which would. message that A may be an hour or more before it will be possible to send further details and make an assessment of the type of assistance needed.S. the master was quite correct for as Donaldson J (now Lord justice) said in the case of the Playa de las Nieves [1974] (in relation to a protest that the Institute Time Clauses-Freight were a trap for the unwary): Marine insurance is a technical matter and marine insurance policies on large commercial vessels are not intended for do-it-yourself enthusiasts.5 m waves) will preclude accurate readings or ability to launch lifeboat. In London and many other insurance markets. set out the priorities and intended course of action based on the knowledge and evidence to hand-recall one of the principles of communication set out in chapter two. from a vessel aground '. advice on which should be sought from the average adjuster). . it will be part of his role to give practical advice on such matters as: (a) General average (it is not necessary under English law for the owner to make a formal declaration.The owner's P&I Club (see chapter seven) who would be lead underwriters with regard to the collision (since covering 25% of the risk under the 3/4 RDC clause) and who would mobilise legal advice and a surveyor to be on hand as soon as he arrived in port. the adjuster has a professional duty to remain independent and his assessment of the claim should always be impartial. To an extent. (b) Particular average claims against the hull insurers (reverting to the calculations earlier in this chapter.

It is important to bear in mind that the shore based support team is trying to make an assessment of the situation based on very limited information. This was limited to services to a 'tanker laden or partly laden with oil' and entitled salvors to an award against the owners in connection with their endeavours to prevent or minimise pollution. therefore. there are a number of aspects which will engage the salvors' attention: the need to salve the hull of the tanker. or engage a tug under a normal contract of towage. the potential for salving the London Branch. this approach is often not the best way of passing important information successfully. 3. Calling his senior management team together. Consequently. he considers this is the correct and prudent course of action. although the task would not be different. The simple answer is the most capable. although his vessel is not in any immediate danger. condition of injured persons (if any). The concept of environmental protection was first introduced into LOF 1980 by the inclusion [in clause 1 (a)] of what became known as the safety net provision. it is also apparent from conversations with many who are involved in providing shorebased back-up. If the master were to engage a tug on contract at between $5. Logically. the need to minimise pollution damage. the management team need to consider the requirement to minimise pollution damage from the leaking double-bottom tank. assuming that more than one offer their services. and the possibility of recovering the jettisoned containers. even if the salvage services were not successful. but frequently more information is needed about this aspect from the shore back-tip team. The next decision is likely to be which salvor to accept. Having dealt with the immediate priorities. Shipping has changed out of all recognition since the Brussels Convention on Salvage 1910 came into force and one of the main changes is the industry's ability to cause major environmental pollution. The message can then be built up as information becomes available and supplementary information sent in subsequent messages can easily and clearly pick up the same numbering system. Arbitrators are generally fairly generous to salvors. the vessel needs the assistance of a tug. 2. To engage a salvor under LOF would probably result in a settlement of four or five times this amount as. adding that.000 maximum. but at the present moment the vessel is in no immediate danger. even despite the increasing wind.000 and $7. since they consider that it is important to encourage the salvor's voluntary provision of service. In addition to the need to reach a port or place of safety. weather conditions-prevailing and forecast. the master advises his owners that he considers it necessary to engage a salvor under LOF. weather reports indicate that winds will increase to force five or more over the next 24 hours. the master may identify three possible solutions to his current predicament. the danger to navigation from the jettisoned containers and the worsening weather forecast. Whilst this may sound tedious obvious. Priority headings-status of own vessel. 4. a master can do little wrong if he acts as if uninsured and follows the dictates of good seamanship which the incident and operational aspects demand. He can: endeavour to make port under his own power. However complicated the legal-and commercial-situation may appear. Several of the containers on deck are only secured by badly strained lashings and the chief engineer is concerned that salt water has got into the fuel system within the engineroom and cannot guarantee the main engine's reliability. 5.and springs in two days' conveys both competence and a lot of information whilst reducing the need for frequently timeconsuming requests for clarification or more information. The salvage . he can apply a simple version of risk assessment to assist his decision making process: 1. These may or may not be the same as the master's priorities. including the average adjusters. engage salvors under Lloyd's Open Form (LOF or similar). In these circumstances. that the quality of information coming from the casualty is often less than professional. the master must next turn his attention to the need to get his vessel to a place of safety and the need (or otherwise) for salvage. options for port of refuge and recommendations if any. the vessel should make port within four days-a cost of $30. The wind is rising and the fog is clearing. If salvage assistance is on its way. the value of the salved property would be taken into account.500 per day. summary of assistance needed-should be set down in numbered paragraphs. Whilst the recording of evidence does need to be set down in chronological order as in a logbook. The vessel has a hole below the waterline and is leaking oil.HW here at 1230Z.

. the owner the right to terminate the salvage operation.Article 8 Duties of the salvor and of the owner and master. and this is frequently the reason why their version of events appears to take precedence over that of the vessel when the case comes to arbitration. although the convention. Unlike a charterparty.' and that this includes binding the owners of property aboard the salved vessel. be in attendance if solicitors acting on behalf of the Mars Disaster come on board. If possible.. The long awaited International Convention on Salvage (1989) changed the ground rules much more significantly.Article 14 Special compensation. In an interesting departure from previous practice. published in September 1990. master shall have authority to conclude contracts for salvage operations . it had little impact and there were only three safety net cases in the ten years after it was introduced. Article 6 of the Act clearly states that the '. If he does remain in command he must quickly establish an effective working relationship with the salvage master and he should be sure in his own mind that the actions of the salvors are in the best interests of property (the vessel and cargo). will want to board the vessel to make inspections or to take statements. The major changes were incorporated in LOF 90. However. LOF 95 also allows the contractor to make reasonable use of the vessel's 'machinery. clause (2a) and clause 3 of LOF(95). Article 8 of the Act. Whilst this will inevitably be handled by his owners in conjunction with the average adjusters..This was a fundamental breach of the 'no cure-no pay' principle. A first priority for the master is to establish a firm guard on the gangway and ensure that the first people on board (subject to port officials) are the home team led by the local P&I Club Correspondent. the lives of crew and any passengers onboard. . It is worthy of note that both LOF 90 and LOF 95 require that the salvor (the contractor) shall use his best endeavours' both to salve property and prevent or minimise damage to the environment (clause 1). is reproduced as an annex to this chapter and is a fairly straightforward contract. the master must remember that no cargo should be discharged until he has received specific clearance from his owner. the relationship between master and salvor is a delicate one. 'Best endeavours' is considered to be more onerous than the obligation contained in article 8 of the Act to owe a duty . although the master would need to be very sure of his ground before recommending this course of action. The salvors will. the Club's appointed solicitor should take the first statements from the master and all members of the crew. the master needs actively to plan and discuss with the shore-based team how he will handle the first few critical hours alongside and he will need the full support of his ship's management team. the master remains in command. A large number of people. relevant extracts from the Act are reproduced at the end of LOF95. including port authorities. surveyors and solicitors. . Although a general condition survey will be undertaken (probably by a Salvage Association surveyor).Article 6 Salvage contracts. most importantly. gear. LOF95. still required ratification by 15 States (and then a period of one vear) before entering into force. . agreement on what may be sighted or inspected must be . Concerning the salvage. The grounding of the motor-tanker Braer on 5 January 1993 prompted a more rapid response from the British government and the convention was enacted under British law by the Merchant Shipping (Salvage and Pollution) Act 1994 which came into force on 1 January 1995. both in connection with the collision and the salvage.Article 13 Criteria for fixing the rewards. He should also advise the crew how to respond to other questioning and. . it will be essential to ensure that security is received from the 2. These are: . An overriding requirement throughout the whole salvage operation is to keep a careful log of all that is happening. it is not a matter of negotiation or amendment and requires the minimum of factual detail. In some ways analogous to that of a pilot. The media may also be in attendance. . anchors. However. chains. . to carry out the salvage operations with due care'. . cargo interests and other vessel's surveyors will also require access to the vessel and cannot reasonably by refused. A new Lloyd's Open Form (LOF 95) was introduced on the same date which reflected in detail the provisions of the 1994 Act. including the attached articles.000-odd bill of lading holders whose cargo is on board the London Branch. since it was based on an increment (of up to 15%) on reasonably incurred expenses. stores and other appurtenances' (clause 3) and (clause 4) gives. the environment and. equipment. minute by minute.Article I Definitions. So long as he remains aboard his vessel. Whilst on passage to port. formally require the master to co-operate fully with the salvor but clause 1 (d) of the same article gives the master the right to reasonably request the salvor to accept the intervention of other salvors. if possible.

In this case. This was regarded as totally inexcusable and the most serious of all faults committed. and . REFERENCES York-Antwerp Rules: An Analysis. The judgement allocated to the Mars Disaster two-thirds of the blame and to the London Branch onethird. again. the Court had to consider the questions: (a) whether the documents produced from the Mars Disaster had been fabricated to establish a false case. therefore. Nevertheless. The collision The collision will be resolved in the Admiralty Court and. The accompanying officer must be briefed to make no statements which could be construed as admitting liability.Average guarantee .The master's statements of the bearing of the London Branch were concluded to be a 'fabrication showing a complete disregard for the truth': . .Both vessels were at fault for proceeding at a speed substantially in excess of a safe speed and both vessels were at fault for allowing a close-quarters situation to develop. ANNEXES FOR CHAPTER 11 .The initial statement of speed was changed from 8 knots to 5V2 knots. the assessors concluded that a safe speed under these conditions for the London Branch and Mars Disaster was 8 knots and 6 knots. It is. in part must be set the failure of the London Branch to react to it.Lloyd's Open Form 1995.Both vessels were at fault for leaving their radars on the six-mile range without scanning ahead. When asked by the judge. In short. two of the considerations which were taken into account were that: . During all this time. important that the surveyors should be accompanied by an owner's surveyor or a ship's officer. ACKNOWLEDGEMENTS LLOYD's LAw REPoRTs were read for the background from which some of the incidents were developed. the detailed ongoing record of events must be maintained.reached first. the quality of evidence provided by the vessel will be relevant in influencing the judge with the advice of his two assessors in reaching a decision. Of particular interest is the way in which the judge compared the evidence provided by each vessel in order to reach a conclusion with regard to the inevitable conflicts in their evidence. . Richards Hogg Average Adjusters. and (b) whether the radar observations made on board the London Branch were so reliable that they could be accepted in preference to the evidence of the master of the Mars Disaster The evidence from the Mars Disaster presented a number of problems: . The master must also be careful not to sign any papers or make any agreement which could prejudice the right to adjust or otherwise deal with claims in the owner's preferred jurisdiction.The scrap log aroused suspicion because undoubtedly certain entries in it had been erased and the condition of the working chart gave cause for suspicion that alterations had been made in order to conceal the truth. The apportionment might have been much closer if the London Branch had not been able to provide convincing evidence which materially helped the judge and his assessors to view the evidence of the Mars Disaster for what it was. The eventual settlement and apportionment of the general average claim will not differ from the approach illustrated in the earlier part of this chapter. But against it. although it was apparent that the true speed was 121/2knots. respectively. both vessels were found to be guilty of serious faults in navigation. which were similar in character until the Mars Disaster turned to port.

Any history of a recurring fault such as excessive wear oti stern tube bearings.000 or more vessels on his files as actively for sale at any one time. There are also many brokers who have woken in the middle of the night hoping that they remembered to include a (short-term) validity to an offer. So: NEVER FORGET VA LIDITY ON A FIRM OFFER One of the major subjects which will involve the master and the vessel. Buyers should note that the information contained in the classification society's main records is only as tip to date as the latest survey returiis-there may be some information still being prepared at the local survey office. especially to those on board. With some 70. The inspector will be concentrating on three aspects: . Since the buyer's surveyor will inevitably concentrate on any areas highlighted by the inspection of records. The first thing a buyer will want to do is inspect the vessel's classification records. is reproduced in the annex. in response to actual or perceived movements in the sale and purchase market which. This inforniation will enable the physical inspection of the vessel to be focused on the most critical areas. supervision and delivery from a shipyard of a newbuilding is a long. the specific decision to act can be triggered with little or no apparent warning. chief officer and chief engineer on the vessel being sold should also have these areas in their mind. a firm offer may be made. which may be done by his superintendent or an agent if the classification society's head office is abroad. negotiating for two second-hand container ships. and . offer valid until . a sale and purchase broker may have 2. to give it its full title. can move with remarkable volatility. . it follows that the master.Outstanding conditions of class and/or memoranda. the Norwegian Shipbrokers' Association's Memorandum of Agreement for sale and purchase of ships. buy old ones and dispose of even older ones. .' Time is always critical in any transaction and a broker (or anyone else involved in a contractual negotiation) must never forget to add a validity time and date to his offer or counter-offer (the simple words 'Firm offer valid until 120OZ. Following initial contact between the two principals' brokers. All shipping companies need to buy new ships and sell off old ones-or in some cases. by the buyer responding to one or more of the vessels proposed by his broker (the usual negotiating terminology is buyer and seller as in 'Buyer offers firm .term strategy.Any evidence of serious damage such as collision or (and especially) grounding. honest. indicating the possibility of shaft misalignment. trials and delivery phase. The decision in principle to buy or sell will usually have been made as part of a medium. at times. . PURCHASE AND FINANCING Purchasing a vessel. The contracting. but offers no more information than is requested and certainly does not enter the realms of conjecture. but not always. Tuesday 2 May 1995' are sufficient). is 'subject inspection' which is covered in clause 4 of the MOA.000 owning companies. However. through one of the largest brokers in the world. as the market rate starts moving away from the position which they recommended their principal to take.1 and subject to following terms . This was adopted by Bimco in 1956 and the current edition of Saleform 1993.Chapter 12 RENEWAL-SALE. the master will be operating under clear instructions from the owner or manager and it is not intended to explore this aspect further. . In this case.and this seems a logical place to round off an examination of the commercial contribution which the master can make to his company. .000 commercial vessels of over 100 grt and something like 10.the legal framework. It is sensible to run through the likely items together and have an agreed explanation which is obvious. .term project which usually only involves the master and senior officers in the completion. frequently just referred to as 'the MOA'. Purchasing a vessel Negotiation and inspection THE SALE AND PURCHASING TRANSACTION is invariably negotiated on the basis of. usually.finance and the vessel as collateral. There is a true story of one of the world's largest shipping companies. the vessels were sold to a competitor. They were less than three minutes late in responding to a counter offer and during that time.

If possible. in which case the master's responsibilities are much reduced.659.The market-i.. If the owner has not decided whether or not he is a seller (butjust wants to test the market without disturbing the crew) or if the vessel is under offer for. In the case of a vessel being sold for demolition . whether it is rising or falling.974. in the seller's case. ensure that the work involved fits in with the vessel's planned maintenance. The cost of either completing outstanding repair and survey work. The timing of the inspection is essentially a function of.After the inspection it is good policy to summarise any areas on which the buyer's surveyor seemed less than satisfied and report back to the vessel's owners. the buyer's surveyor should have full access to all the vessel but should be accompanied by a (suitably briefed) officer at all times.g.000 deductible. or open up one or more ballast tanks (frequently including fore and after peak).v. Finally on this subject. Part one of the calculation sets out the various costs associated with meeting the contractual obligations of the MOA. Here there is rarely an inspection.The vessel's status-e. current and previous.000 has probably prompted the sale) and the written down book value after allowing for annual depreciation (see chapter 3). if any. make sure that all the vessel's certificates are available for inspection and that a list of any equipment that is leased or rented rather than owned is available (again. and .. in the buyer's case. or repairing and bringing the vessel up to their operating standard as well as what nasty surprises they may find when they have taken over and the vessel is all theirs. must be available for inspection. for example.1 shows a typical sale calculation.There should be no undue delay to the vessel.075. . JULIANS PRIDE . As already mentioned.000. It is a sensible precaution to find from the owner (seller) what speed and consumption has been given in the sale offer and to what extent this has been related to state of hull and weather and sea states. The vessel is sold for so much per tonne lightweight with particular attention being paid to the more valuable of the non-ferrous metals such as the propeller and spare. Part two compares the expected result with predictions of market value (the uplift of $1. make the logbooks available for photocopying (get your own agent to arrange thisit ensures the timely return of the logbooks). prepayment penalties and the loss of subsidised interest. One aspect which will be of particular interest to the buyer's surveyor is an assessment of the vessel's actual speed and consumption and all on board should be prepared for some close questioning on this subject. .The vessel's location-con tracts can be concluded while the vessel is on passage. as representatives of the sellers you have a (legal) duty to the buyers to answer their queries honestly as well as a duty to your owners (the sellers) not to offer unsolicited information nor make conjectures which might adversely affect the sale (in spite of the fact that the sale may well inificate the end of your and your crew's current employment).The vessel's deck and engine logbooks. Within these constraints. Again. including a repair covered by insurance but carrying a $50. Some thought and planning needs to go into this. be on an as is. and . he will pay corporation tax on this profit. the buyer's surveyors may well arrive in the guise of prospective charterer's representatives. The completion of the current voyage and the ballast voyage to a suitable drydock and delivery port are also important considerations and figure 12. the procedure is different.e. in some cases. open up one main engine and/or auxiliary diesel cylinder head. as opposed to the negotiated. The physical inspection may occur before or after the price has been agreed or the purchase may. will be uppermost in their minds. The Saleform inspection clause will frequently be expanded by additional clauses requiring the vessel. price of the vessel.226 after paying off the outstanding shipbuilding loan. whether tanks/holds are full or are available for inspection. Sellers may well arrange for a superintendent or other head office representative to accompany the buyer's surveyor(s). it may be sensible to have a set of trading certificates already copied so that no originals need go out of your possession). where is' basis. a time charter. and cash profit of £3. The buyer is also particularly interested in equipment and machinery that can be onsold in a working condition. and if he is in the wrong tax regime for a shipping company. both buyer and seller will be calculating the actual. The main conditions of the inspection are contained in clause 4: . for example: to open crank case doors for inspection. SALE ONE m.The vessel will be inspected without opening up and without cost to the sellers. During the course of the negotiations. should be taken into account to achieve the net cash surplus. In this case the owner has made a book profit of £3.

@ $145 $2.net proceeds SALE ONE (cont. Notice & Repat) $32.000 Delivery Spare Parts $1.O. Key Figures Built 2/1982 Class/S.500.900 Extra Spare Parts $9.) m.226 Figure 12. 1 b Sale calculation-cash and book profit Delivefy .000 Vessel Expenses 3 Days 9 $5.900 Repair expenses in connection with delivery: Drydocking $72.640 20 Mts G.000 Net Sale Price (See Calculation) £ 7.555.820 20 Mts G.150.075.000 Price Less Commission $11.340 $16.000 The Sale is Netting $10.155.000 Estimated Sale Price $ 11.000 Various Repairs $18. JULIANS PRME DATE OF SALE 01-Mar-94 Assumed Sale in Gibraltar after ballast voyage from S.O.020 32 Mts Fuel @ $94 $2.000 Total Expenses $339.000 3% Commission $345.225. 1a Sale calculation.5 Book Profit or Loss on Sale £ 3.893 Figure 12.50 The Sale is Netting £7.400 Damage Works $73.S.556 Exchange Rate for Calculation £ 1.225.000 Mobilisation Expenses 2 Days @ $5.800 Sundry $27.366.889 Newbuilding Price Written Down 6% pa 10 Years $ 5.893 Depreciated Value Per 01-Mar-94 $ 4.v.667 Newbuilding Price $ 13.840 Exchange Rate PDS/$ $1.DATE OF SALE 01-Mar-96 Net Price Calculation Estimate Price: $11.340 $10.794 Cash Profit or Loss £ 3.099 Outstanding Loan Per 01-Mar-94 £ 3.838. Atlantic.888. Due 2/1996 Owners Institutos Nautical Estimated Market Value Per 01-Mar-94 $ 10.680 60 Mts Fuel & $94 $5.500.000 Less Following Expenses: Stamp Duty: $0 Crew Costs (inc.859.000 Port-/Canal Expenses $15.160 Insurance Reftind for Average Damage $23.500. 9 $145 $2.000 Survey Works $50.

attention will focus on bunkers remaining on board (ROB).A power of attorney authorising him to act on behalf of the seller. An alternative is for a buyer's representative. To a great extent. this is an area which requires the master's attention in good time. This may be particularly true if the buyer has a substantial fleet entered with his society. The chief engineer and chief officer are professionally bound to make a very careful bandover to their reliefs. safely afloat and at a safe berth. Almost inevitably. of all matters relating to bunker and ballast disposition and stability. often remote from his office and support staff. seller's representatives may be equally adept at being more than economical with the truth with regard to the condition of the vessel.Delivery will usually take place immediately following the sale dryclocking. on direct. It is not usual. As the date and time of delivery approach. The seller's commercial manager probably left London at the end of a busy day finalising documentation. six months. A considerable amount of brinkmanship is exercised at delivery dryclockings and the buyer's representatives may be adept at securing every advantage which they can. This is usually agreed at the time.3 depicts a standard protocol of delivery which he only signs. usually a senior engineer.2 sets out typical instructions to a master and figure 12. this could be four or more days). This is so. Both buyer's and seller's representatives will require. Care must be taken to ensure that no liability can be attached to the officer and he must be covered by either the buyer's or the seller's P&I Club. can be put under tremendous pressure from both sides. even if one of the seller's officers has been retained for a voyage or a fixed period in an advisory capacity. and have the right to. who will be new to the vessel. as documentary delivery must take place during banking hours (and preferably banking hours in New York for reasons that will become apparent) physical delivery frequently takes place at totally inconvenient times when the dock offices are closed and few telephones are available. Until delivery. to his own professionalism and the integrity of his classification society in his role as arbiter of what work is required and. Be aware that the surveyor. a minimum of. . but must be done formally by an addendum to the MOA signed by both parties. for buyers to take delivery in drydock. clear and authenticated instruction from his head office or the company's commercial representative conducting the documentary delivery. with at the very minimum: . His duties are outlined below and there should be a great rapport and understanding between him and the master. although this may be modified by additional clauses. Satellite communications have eased these problems greatly~except in cases where the equipment is leased and is removed from the vessel at the end of the working day three hours before delivery is due to take place. . but his prime responsibility is.Non-essential crew and crew personal effects should have been landed. with logbooks to follow. usually. . Even from a cursory reading it will be apparent that a comprehensive breakdown of costs and times will be required and this should be organised with the agent and the drydock company at an early stage. .Owners and leased equipment should have been landed. Clause 6 of the MOA sets out the drydocking procedure. safely moored at the agreed place of delivery (or in drydock with all the necessary stability information handed over). the addendum should make clear that undocking becomes the full responsibility of the buyer's crew. or should be. However.The vessel should be safely afloat. if buyers want to undertake further work. involved with a vessel has has never seen before. Figure 12.Stores and spares inventories should have been completed and signed by both parties. which must be paid for by the buyer. . in duplicate. Somewhere in the middle is the classification surveyor. his client is the seller. Obviously. the physical and the documentary delivery will take place in different time zones and. Conversely.Estimated bunker ROB should already have been agreed between buyer and seller in sufficient time for the buyer to arrange for payment on delivery (if a weekend intervenes. of where the major cost of dryclocking will fall. to sail with the vessel for a period prior to the sale. good communications and the prudent master will ensure that he has a back-up system too.Authenticated copies of the vessel's trading certificates valid for. . consequently. the master's end of the business should be almost concluded by the time of physical delivery-. The actual transaction of delivery normally takes place in at least two places (physical and documentary delivery) and sometimes more. and .

Finally.An invoice for bunkers ROB.A similar letter of release for the deposit monies (this 10% has been held in an interest-bearing escrow account since the time of signing the MOA and can only be moved with the agreement of both parties). preferably only one original but frequently three or more. wondering why the whole transaction took so long and blaming each other for having forgotten to order a taxi.An irrevocable undertaking to delete the vessel from the current national ship register within. In return he will. much of the input will . say. Powers of attorney are exchanged and buyers examine photocopies of the bill of sale and the copious amount of additional documentation which they have requested. based on the preagreed quantity and price and including the quantity and cost of unbroached oils and greases. require: . again at the minimum. of course. On a demolition sale delivery. Understandably. an equally tense situation may develop on board. Nevertheless. . . Eventually all is resolved. the buyer's on-board representatives decide to announce that they dispute the bunker figures or some other feature relating to the contractually-agreed condition of the vessel. and such unfounded rumours should be ignored as totally scurrilous. In many cases. come from the vessel end. And why did the transaction involve New York? All large dollar amounts arc physically cleared through corresponding New York banks. the delivery site is a remote beach where the master is expected to do the unthinkable. (Full and effective payment is quite convincing if a PoA is not available. . the new master wonders where to find the bridge kettle. The fact that these sums can circulate in the banking system for 24 hours or more is. the seller's negotiating position is understandably weakened and it is only good practice to have ensured the documentary delivery is proceeding smoothly before succumbing to inevitable pressure from buyer's representatives to beach the vessel. in potentially adversarial confrontation. both of whom are probably strangers. this can be quite a tense period for the commercial manager. across a table from the buyer and his advisors. As the seller hands the buyer the BOS. . of delivery. drive his ship ashore. The master and his team leave their home for the last six months. where they are shown into a small conferenje room where they sit. .. transactions are completed on trust on the basis of the fac& value of the banker's draft. nothing to do with the fact that the banks can earn overnight interest on them. Procotols of delivery are signed and hands are shaken. On board. They will be representatives of his solicitor's and bank's corresponding firm in New York.A copy of the buyer's representative's power of attorney or similar authority. the lawyers and the bankers pronounce that the buyer's drafts appear to represent good value. It is good practice to fill in the actual figures after the transaction and check where the variances occurred. Once this has been done. but short of cash.1. . most probably notarially attested. . Although it will be constructed at head office.An original bill of sale. liens and encumbrances.) On the morning of the day. But it does explain some of the reasons for the tensions which can be felt on delivery and which may transmit to those on board. The seller's commercial manager heads for the airport with that slight feeling of anxiety which will last (all through the weekend) until he hears that the buyer's bank draft has proved good for value. Together they will proceed to the agreed place of delivery.A letter to the deposit holding bank authorising them to transfer the deposit monies to the seller's bank account and release interest earned to the buyers. 30 days. a project budget is essential for this transaction.Preferably a banker's draft in respect of payment for bunkers and lubricating oils. A mini-renegotation ensues whilst the BOS lies on some invisible demarcation line along the centre of the negotiating table and contact is lost with the vessel. the seller tries to establish contact with the master on board. This is eventually achieved just as the buyer asks to examine the original bill of sale (the document of title). In the meantime. the master faces different problems. for those who have already read: Chapter 3-as indicated in figure 12. usually a bank. . and . the seller's commercial manager will meet a lawyer and possibly a banker. full payment is quite difficult to confirm until the 'value' has been confirmed by seller's bank which may take some hours or even a day-often.A banker's draft for the remaining 90% of the purchase money.A clean transcript of the register as proof that the vessel is free of all mortgages.Two protocols of delivery.

5. NOTE THAT THE DIVER'S INSPECTION IS TO BE IN ACCORDANCE WITH CLASSIFICATION SOCIETY RULES AND. 4. CYPRUS. 2. UNTIL DELIVERY IS EFFECTED. NICOSIA. MOST OF THE PREPARATORY WORK FOR THE SALE HAS ALREADY BEEN UNDERTAKEN BUT WE MAKE THE FOLLOWING SPECIFIC POINTS BASED ON THE MEMORANDUM OF AGREEMENT. YOU ARE TO CONTACT US IMMEDIATELY WITHOUT MAKING ANY COMMITMENT TO BUYERS. even if only to make sure the taxi is on the check-list! For a takeover crew.8 & 11 CLASS RECORDS HAVE BEEN INSPECTED AND ACCEPTED. WITHOUT THE RIGHT TO INTERFERE WITH THE RUNNING OR THE NAVIGATION OF THE VESSEL AND ALWAYS UNDER THE MASTER'S DISCRETION. YOU ARE TO GIVE THEM EVERYASSISTANCE WITH THIS. YOU ARE REQUESTED TO RENDER EVERYASSISTANCE TO THESE REPRESENTATIVES WHO WE EXPECT TO BOARD AT COLOMBO. NATIONAL AND INTERNATIONAL TRADING CERTIFICATES ARE TO BE VALID FOR A MINIMUM OF SIX MONTHS ON DELIVERY. THE CLASS CONDITION OF THE VESSEL IS SELLER'S RESPONSIBILITY. A COPY OF WHICH WILL BE BROUGHT ON BOARD AT DELIVERY 1. ALTHOUGH IT IS AT THEIR EXPENSE AND MUST NOT DELAY YOUR PREPARATION OF THE VESSEL FOR DELIVERY. SHIPS EQUIPMENT. THEY WILL BE ON BOARD AT THEIR OWN RISK AND EXPENSE AND THEY TO SIGN USUAL LETTER OF INDEMNITY PRIOR TO BOARDING THE VESSEL.T. SPARES AND STORES CLAUSE 7 . the same applies and planning should start well before arrival on board-at the very latest at the hotel or agent's office on the day before delivery. CLASSIFICATION AND TRADING CERTIFICATES CLAUSES 4. INSPECTION CLAUSES 4 & 6 CLAUSE 6B APPLIES AND BUYERS ARE ARRANGING FOR AN UNDERWATER INSPECTION UPON ARRIVAL. SHOULD THE DIVER'S INSPECTION INDICATE A NEED FOR DRY-DOCKING. TIME AND PLACE OF DELIVERY CLAUSE 5 IT HAS BEEN AGREED THAT THE VESSEL WILL BE DELIVERED AT HER PRESENT ANCHORAGE AT SINGAPORE AT 1000 HRS NEWYORK TIME ON THURSDAY 27 OCTOBER 1994 (2300 SINGAPORE TIME). PLEASE MAKE NECESSARY ARRANGEMENTS TO RENEW YOUR DE-RAT CERTIFICATE ON ARRIVAL. PLEASE KEEP US ADVISED OF YOUR EXPECTED SCHEDULE SO THAT NOTICE OF READINESS CAN BE TENDERED AND NOTE THAT BUYERS CAN CANCEL IF THE VESSEL IS NOT IN ALL RESPECTS READY FOR DELIVERY BY 0800 SINGAPORE TIME 3 NOVEMBER 1994. IT WOULD BE PRUDENT IF YOU ENQUIRED DISCREETLY THROUGH THE AGENTS/CLASS SURVEYOR OF CURRENT DRY-DOCK AVAILABILITY. BUYER'S REPRESENTATIVES CLAUSE 15 BUYERS ARE ENTITLED TO HAVE TWO REPRESENTATIVES ON BOARD ONCE THE DEPOSIT IS LODGED WHICH WE ANTICIPATE WILL OCCUR TODAY. ATTENTION OF CAPTAIN CHISHOLM. PLUM RIDGF AS YOU ARE AWARE. THE SALE OF YOUR VESSEL HAS BEEN AGREED TO NAUTICUS SHIPPING COMPANY. THESE TWO REPRESENTATIVES WILL BE ON BOARD THE VESSEL FOR THE PURPOSE OF FAMILIARISATION AND AS OBSERVERS ONLY.Chapter 2-a ship delivery is an obvious example of where planning and team-work prove invaluable. 3. LONDON. SALE OF M. A COMPANY CONTROLLED BY LAMBETH SHIPPING.

ENGINE AND PANTRY STORES AND ARRIVAL FLUSHING/ANTWERP TO BE HANDED TO COMPANY REPRESENTATIVE AND VICTUALLING AND BOND ACCOUNTS COMPLETED IN THE NORMAL MANNER. SHIP'S CASH. ANY ACCOMMODATION PAINTINGS OR PHOTOGRAPHS OF GOOD QUALITY ARE TO BE RETURNED TO COMPANY STOCK VIA ANTWERP AGENTS. -LIST OF SUPPLIERS AND GUIDELINES FROM NAVIGATORS. SAFE KEYS . -ALL OTHER INSTRUCTIONS ORIGINATING FROM THE COMPANY. LIBRARY. BUNKERS CLAUSE 7 AS YOU HAVE ALREADY BEEN ADVISED. INVENTORY FORMS FOR DECK. UNITOR BOTTLES AND NORTH SEA RADIO EQUIPMENT IS TO BE LANDED TO THE AGENTS TOGETHER WITH THE S. CYPRUS. ENGINE AND OFFICIAL LOG BOOKS FOR LAST THREE YEARS (BUYERS MAY PHOTOCOPY DECK AND ENGINE LOGS). THE SHIP'S BELL HAS BEEN EXCLUDED FROM THE SALE BUT IT IS NOT INTENDED TO REMOVE THIS. UNUSED FORMS AND CORRESPONDENCE FILES ETC. ALL BROACHED AND UNBROACHED STORES ARE INCLUDED IN THE SALE AND IT IS INTENDED TO LEAVE LINEN AND CROCKERY ON BOARD. -CERTIFICATE OF FINANCIAL RESPONSIBILITY (US WATER POLLUTION). 6. VIZ DECCA NAVIGATOR. -UNUSED NATIONAL AND COMPANY FLAGS. THIS CERTIFICATE IS TO BE DATED AND ENDORSED BY YOU TO THE EFFECT THAT THE VESSEL HAS BEEN SOLD TO NAUTICUS SHIPPING CO. ALL OUTSTANDING WORK LISTS TO BE CANCELLED AND DESTROYED TOGETHER WITH VESSEL STAMPS. THESE FIGURES WILL CONSTITUTE THE DELIVERY TONNAGE AND YOU SHOULD KEEP YOUR DOMESTIC CONSUMPTION TO A MINIMUM. NICOSIA. LUBRICATING OIL AND GREASES ARE INCLUDED IN THE OVERALL PRICE. -ALL INSURANCE AND P&I DOCUMENTATION. COMANY LIVERY CLAUSE 12 BUYERS HAVE UNDERTAKEN TO DELETE FUNNEL MARKING AND VESSEL NAME PRIOR TO DEPARTURE FROM PORT OF DELIVERY. MASTER'S ACCOUNT. BUNKERS ARE TO BE CHECKED AT 1000 MONDAY 23 OCTOBER 1994 BY A CALEB BRETT SURVEYOR. ENGINEERS AND CATERING CIRCULARS AND CIRCULAR LETTERS. -RADIO LICENCE. SHIP'S PAPERS CLAUSE 7 THE FOLLOWING DOCUMENTS ARE TO BE PACKED AND RETURNED TO COMPANY: -ALL CAPTAINS. THE VESSEL'S NAME SHOULD BE REMOVED.. IF POSSIBLE YOU ARE REQUESTED TO REMOVE FUNNEL MARKINGS PRIOR TO DELIVERY.S. -CERTIFICATE OF SAFE MANNING. USED FLAGS BEING DESTROYED. THE FOLLOWING DOCUMENTS TO BE HANDED TO THE COMPANY REPRESENTATIVE OR RETURNED TO THE OFFICE BYYOU AFTER DELIVERY: -CERTIFICATE OF REGISTRY. 7. 8.E. -DECK. 9.ALL EQUIPMENT NOT INCLUDED IN THE SALE.

ENSURE YOU GET A RECEIPT. including the required nationality of master and certain senior officers. RYAN SHIPPING LIMITED. Figure 12. Registration following purchase is an important aspect as a lender will require prompt registration so that a mortgage can be attached. the buyer will require a clean transcript of register which should confirm that no current mortgages attach to the vessel and. PLUM RIDGE PROTOCOL OF DELIVERY WE THE UNDERSIGNED NAUTICUS SHIPPING COMPANY. the stipulation for both qualifications for ownership and command are tending to become less nationally based. rules and regulations under which a vessel will operate. that the vessel is free from encumbrances. CYPRUS. of course. Figure 12. GENERAL WE WILL TELEX YOU ADVICE REGARDING ANY CHANGES IN THE TIME OF DELIVERYWHICH MUST BE UNDERTAKEN DURING LONDON BANKING HOURS. In a similar way. THE VESSEL AT BUYER'S EXPENSE AND RISK.3 Protocol of delivery Registration Registration determines the laws. NAUTICUS SHIPPING COMPANY NICOSIA. it is the flag State which converts these into applicable legislation for its own vessels (through the Carriage of Goods by Sea Act in the case of a British vessel). ONCE THE PROTOCOL OF DELIVERY AND ACCEPTANCE SET OUT IN THIS LETTER (TWO ORIGINALS) HAS BEEN SIGNED.2 Master's delivery instructions M. Prior to any sale. AT THE SAME TIME YOU ARE TO ENDORSE THE VESSEL'S CERTIFICATE OF REGISTRY TO THE EFFECT THAT THE VESSEL HAS BEEN SOLD TO NAUTICUS SHIPPING COMPANY. LONDON. the buyer must rely on the declaration in the sale form and the terms of the . It also establishes the statutory legislation covering such matters as loadline certificates as well as manning requirements. However.T. Even in the event of international conventions such as The Hague-Visby Rules. YOU ARE TO ENSURE THAT GOOD COMMUNICATIONS ARE ESTABLISHED VIA THE AGENTS AND YOU AND BUYER'S REPRESENTATIVE ARE TO ADVISE WHEN YOU ARE READY TO DELIVERY THE VESSEL. it is not always possible to complete these formalities on a back-to-back basis and provisional registration may be used for the first few months or weeks. registration requirements stipulate the qualifications for ownership within the flag State and for better or for worse. NICOSIA. AT HOURS ON THE DAY OF AT SINGAPORE. prove that no maritime liens attach (see below). CYPRUS. particularly.WHEN HANDING OVER SAFE KEYS. CYPRUS NOTE: BUNKER AND LUBRICATING OIL STATEMENT AS ATTACHED. 10. as required by the wording of the bill of sale. RYAN FOR AND ON BEHALF OF BAILEY SHIPPING LIMITED. NICOSIA. THE VESSEL HAS BEEN DELIVERED IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE MEMORANDUM OF AGREEMENT DATED 6 SEPTEMBER 1994 AND THE RISK AND RESPONSIBILITY HAS THEREFORE PASSED TO US AT THE ABOVE TIME AND DATE. DO HEREBY ACKNOWLEDGE RECEIPT OF THE MOTOR TANKER PLUM RIDGE. MASTER'S ACCOUNT AND SHIP'S CASH TO BE RETURNED VIA COMPANY REPRESENTATIVE. YOURS SINCERELY B. FOR SELLERS: BAILEY SHIPPING LIMITED LONDON FOR BUYERS: MESSRS. lenders will be interested in the flag State and the applicable mortgage laws as discussed in the following sections. The register will not. WHICH HAS BEEN DELIVERED TO US BY THE SELLERS AT B. Insurers and.

If the vessel is owned by more than one qualified person (and no representative person has been appointed) one of the qualified owners who lives in the UK must be appointed as the managing owner. ships are divided into 64 shares-harking back to the days when it was common for a group of individual merchants.000 and $14. the Admiralty Courts through the Admiralty Marshal-to sell the vessel and divide the proceeds between the mortgagee (s) and any holders of a lien on the vessel. Raising the purchase price When an owner considers purchasing one or more vessels.000. but. This introduces the concept of the vessel as collateral for a loan and the use of mortgages to establish and secure the collateral.000 spread over the cycle of the last six . he may be: replacing ageing or technically outdated vessels to maintain or expand his fleet presence (very much. so must the vessel be registered within a national framework of laws which will operate. especially based on the belief that ageing VLCCs 'must' appreciate in value at some stage. possessory or maritime. a five year-old Panamax could be bought for anything between US$5. for example.000.sale contract for that assurance.4 shows the reality with respect to VLCCs and Panamax bulk carriers over the past 20 years. the approach of liner-type companies). including probably the master. Panamax bulk carriers if the next cycle is predicted correctly. traded profitably and sold for US$20 million on a market peak. etc) Act 1993 and the Merchant Shipping (Registration of Ships) Regulations 1993.000. British citizens and persons who are nationals of a European Economic Area (EEA) country and who are established in the UK may register a commercial vessel. to a greater or lesser extent. Any share may be owned by up to five people but they can only speak with one voice. making an entry into a new sector of the market where he considers he has an operational advantage or where he perceives trading demand will expand ahead of vessel supply. if borrowing is involved. This can be done in a number of ways which are touched on below but. Success has been mixed and perhaps the most successful proponents of trading operations have been the Greek shipowning community. if necessary for the Courts-in the United Kingdom. Figure 12. for example. although New York has been an active centre for fund raising against future vessel appreciation. Being established means making an economic contribution to the UK by being the proprietor of a business in the UK. then metaphorically. if a VLCC can be bought for US$5 million on an upward cycle. he will miss the boat. three weeks. Finance and the vessel as collateral An integral part of purchasing any vessel is raising the necessary finance. If none of the qualified persons are resident within the UK a representative person must be appointed who is an individual resident in the UK or a company incorporated in one of the EEA countries with a place of business in the UK. Since the mortgage must be formally registered. Even the $4. Registration is valid for five years and although it establishes nationality and tonnage. Finally. within a given period of time. he will produce a closed transcript of registry proving that the vessel has been removed from that ship's previous register. but not exclusively. there needs to be a way in which a lender can realise the value within the security he has been given if loan repayments are not being made. It is very much an attitude of mind. This introduces the need to be able to arrest a vessel and. The buyer will also require from the seller an undertaking that. Such people are termed qualified persons and at least 33 of the 64 shares must be owned by qualified persons. making a capital investment with the objective of securing capital appreciation against a (hopefully not too distant) future increase in the value of that class of vessel. The annex for this chapter contains a British bill of sale and form of mortgage. say. Within the United Kingdom the law covering registration is contained in the Merchant Shipping (Registration. to combine to finance a maritime adventure. International shipping is one of the most competitive of all businesses and is apparently driven by perennial optimism that the next upturn in the freight rate cycle (which drags vessel prices along with it) is the beginning of a golden age of high freight rates and if an owner does not buy now. This third alternative is not the exclusive preserve of financial institutions. Over the period since 1985. the carefully invested capital will fully finance an investment in. Details of national registration procedures and requirements vary and must be ascertained in detail prior to any transaction. within the overall framework of international maritime conventions. For the purpose of registration. it does not prove ownership or show mortgages (which are registered at the Registry of Shipping and Seamen).000. the lender will require security.

that is his business plan.Owner's equity: the proportion of the overall purchase price covered by the owner's own funds.Owner's reputation: this is an important factor and in today's world may also include the . In reality.000 per day in loan repayments (on an 80% by eight year loan) for the owner who has bought at the top of the market. with debt representing the amount of the purchase price borrowed. The bank will also have a policy as to whether to carry all the lending or to syndicate it. perhaps. Since the capital cost. why some owners are attracted by the thought of saving $500 per day on manning costs! If the owner is a cash buyer. once the vessel is bought. Theoretically financial institutions manage a balanced portfolio of carefully considered investments in a range of industrial and commercial ventures. is difficult to change. . to a bank or other financial institution.Bank's lending policy: the debt-to-equity ratio. the availability of investment funds to the shipowner is also cyclical. In general. This means that once the loan agreement is in place they have the right to reduce their exposure by inviting other banks and institutions to take a portion of the lending. there is little need for security but. Within the bank. it explains. Since the perception is common and the economic assessment of future trade growth and thus ship demand is far from an exact science. Certainly when negotiating a loan the owner will want to insist that all such negotiations are only with the lead lender. the manager responsible for shipping will present his client's proposal to the bank's credit committee who will take many of the following factors into consideration when deciding whether or not to advance a loan: . there is generally a market perception against which banks expand or contract industry sector investment portfolios. owners and borrowers tend to resist this as it makes life more complicated if a change or rescheduling is required during the life of the loan. in many cases the owner will have to present his case. will vary with the bank and the banking community's perception of shipping as an investment. often a merchant bank with a specialist shipping department. . This may be cash from accumulated reserves or the sale of another vessel or it may be a direct input of shareholders' funds through a rights issue.years can add $500 or more per day in additional interest charges and a further $1. It could also be financed by an overdraft from the owner's trading bank as opposed to the specialised lending bank which he has approached or by floating a speculative investment bond.

The business plan may be calculated on the most powerful of computers and cast and recast in a multitude of different ways. Using tax in a different way. want to build up a track record with one or two prime lending banks. Put simply. repayment installments may be reduced and the balance will form a balloon at the end of the loan period. such arrangements are notoriously difficult and frequently expensive to unscramble should the owner wish to sell the asset within the period of the loan. which commands higher interest rates and frequently the right to profit share or equity . trading of ships etc. Owners will. this tends to delay the repayment of the loan principal. rolloff ferry to expand its business. the Scandinavian K/S schemes enable individuals to offset their personal tax against depreciation in a ship. Nevertheless. which may either set out the overall terms of the loan in considerable detail or just establish the main points.. Residual values of vessels at the end of the loan period are an important consideration in this context and range from a conservative scrap value to wildly optimistic assessments of appreciated assets. using complementary tax breaks in two different countries. the legal entity which is responsible for repayment of the loan. At the end of the day. as well as stipulating how many directors are required to make a board resolution. so mezzanine finance became more popular. This may then be refinanced or paid off against the sale of the asset. The lenders will want to ensure that the borrower is properly constituted to enter into the proposed venture and will at the outset require to see the following documents: (a) Memorandum of association: this defines the objectives of the company and in one important clause sets out its aims. At the same time it may be necessary to increase the company's authorised share capital. lending should be made against the belief that the asset is being purchased at a realistic price and the skill of the owner and his operation will enable him to repay the loan and related interest.e. amount and period of the loan will be specified. However. These may be quite wide and cover the purchase. supported by expert survey and inspection reports and the loan agreement will cover a wide range of eventualities in great legal detail. The main points which will be covered in the facility letter will include: The borrower: this is the formal. however. guarantee and charge as a multiple of capital reserves. in general. As banks reduced the proportion of their overall debt lending against owner's equity portion. However. ownership. Technical specifications of the vessel may be presented in great detail. the lending bank can be expected to request as much collateral security as it can whilst the owner will argue to keep his assets as free as possible. Most common are term loans which specify a fixed amount repayable over a set period. the chartcr-ratc which the vessel can command and the number of days of the year on which she is actively earning. Sometimes an initial grace period will be allowed when only interest is paid as this eases the operation over what may be a high cost start-up period. In other words. corporate body -i. management. Alternatively. using the best tax and accountancy advice available. chartering. this is higher risk lending from specialist institutions. Whilst offering a potential for reducing the overall cost of finance.Security: it is sometimes said that 'the best lending is unsecured' and 'never lend against security'. Closely akin to mortgage type loans is lease financing. The MOA will also define the company's powers to borrow and to pledge its assets. leaving the detail for subsequent negotiation of the loan document. (b)Articles of association: these set out the rules under which the company operates and the powers of the directors to borrow and the extent to which they can borrow. Normally there will be one drawdown and equal repayments of principal will be made every three or six months. . If the loan is agreed by the credit committee the bank will draw up a facility letter.reputation of the beneficial owner's shipmanager and even his crewing policy. The AOA must comply with the strict regulation of the Companies Act in whatever jurisdiction the company is domiciled. while the asset ages and thus is not so common. if the company was established to act as a road haulier and decided to buy a roll-on. The loan: the type. it may first have to go back to its shareholders and acquire their formal agreement to an expansion of the aims of the company. the success of the venture will depend upon two variables. which may be linked to complicated tax leverage constructions-double dip leases were popular at one stage for financing semisubmersible drilling rigs. Sometimes a mortgage-type repayment may be agreed in which case the regular repayments of principal and interest will be constant. The downside for the shipping industry can be that the vessel exists as vehicle for tax gains rather than being generated by real demand for tonnage.

more commonly. loan agreements are complex documents which will generally follow the following format: Clause 1 Definitions and interpretation. authorising the proposed borrowing and stipulating the reason for the borrowing. although there are always notable exceptions and lease financing is generally over a longer period. Interest rates: these may be fixed or. unused bills of lading). banks will want to charge as many additional fees as they can. Clause 6 Interest: this may include a mechanism for increasing the margin (over LIBOR) if a default occurs. although these loans are in the process of being phased out. the so-called OECD Loans of 80% of the building price repayable over eight years from delivery at 7. For mezzanine finance. under certain circumstances.5% rate of interest. Clause 5 Repayment and prepayment: the owner will usually want the right to prepay the loan without any penalty should he wish to sell or refinance the vessel (the latter not. Clause 2 The loan and its purpose. Much of the borrower's skill and credibility will be devoted to reducing the margin of interest he pays over and above the LIBOR rate. may be government subsidised in line with guidelines from the Organisation for Economic Co-operation and Development.5% are not unusual. but not exclusively for new buildings. covering a wide range of requirements including the documentation-bills of sale. but the bank will want to ensure that its loan is used for the purpose intended and not to support the company's general operation in the f6rm of working capital. approved by a quorum of the board. The period of the loan will depend upon negotiating power and the business climate at the time of the loan negotiation but will generally fall somewhere within a five. The mezzanine lenders' security is subordinate to the principal bank borrowing or senior debt. Security is an important aspect. floating and the general benchmark is the London Interbank Offer Rate or LIBOR. certificate of class. Although there are always exceptions to the rule. commitment. indeed. The general rule is to borrow in a currency which matches one's main income. the master may be empowered to act for the company under a power of attorney. being popular with the lender). board resolutions. naturally. usually couched in standard banking terms. Powers of attorney must be formally notarised by a commissioner of oaths or notary public and are usually registered with the consul of whichever jurisdiction in which the PoA will be used -e. Under the AOA. The holder of a PoA will need to provide positive proof of identity and either return the PoA when the transaction is complete or record who holds it. etc. although complex multi-currency facilities are available. They should be kept in the safe along with other commercially valuable documents such as bills of sale (and. management and termination being three of the most common. Clause 3 Conditions precedent and subsequent. Clause 9 Security documents: including assign ments and mortgages.participation. especially. the spread can be ten times as much. These are very powerful documents as they authorise the named person to act with the full authority of the board of directors and. It is good practice to make photocopies of documents such as these so that interested parties to a transaction can be given a set of proforma documents to check prior to the actual transaction without the provider having to worry about the custody of the original. Finally. loans. The lender will also want to see a formal board resolution. under the AOA would normally require the signature of two directors.to eight-year period. the board may issue a power of attorney and indeed. as is suggested in chapter 6. Clause 8 Fees: in addition to the spread over LIBOR. They should be drafted so that when a transaction is complete or a certain date is passed. etc. For prime borrowers this can be as low as an additional one-quarter per cent whilst spreads of 1.-which the owner must provide Clause 4 Representations and warranties: usually general warranties relating to the corporate status and absence of any insolvency proceeding.g. they no longer have any validity. and is discussed in the next section. Clause 7 Flag: the lender's interest in the flag is mainly related to knowledge of the legal regime under which his mortgage will be secured.5% to 2. Typically this . basically the rate at which banks lend between themselves in whatever currency in which the loan is made. the holder of a power of attorney may be able to sign documents and make contractual agreements which. the country of registration of the vessel. Clause 10 Covenants: as well as defining the financial covenants (effectively undertakings) of the borrower this clause may cover major covenants with regard to the vessel.

Securing the loan As mentioned earlier. It is not the objective to have to realise the various securities in order to repay the loan for. the time at which LIBOR is fixed for each payment of interest on a floating interest loan. even if this is achieved. This will include all or some of the following: . for the agreement to be a valid contract. classed and properly repaired. Clauses These may cover the way in which formal notices are given. At the same time.g. representing title in the vessel will be exchanged for documents representing the full purchase price (plus the agreed cost of bunkers and lubricating oils). However. most term agreements contain a comprehensive list of events which constitute a default. Nevertheless ' the lender will require security and will negotiate for as much as possible. However.will include an undertaking that the outstanding loan is never more than a certain proportion of the value of the vessel as formally established by a sale and purchase broker's valuation. at least. Appendix C. the lender will require his loan to be secured by. Clause 13 Assignment. and Appendix E: Form of guarantee: which is covered in the next section. syndication and subparticipation: by the lender as already mentioned. since by the nature of the transaction there is adequate consideration moving both ways e. amongst other things. earnings. assuming in the terms of the S&P brokers' profession I willing buyer. Appendix B: Form of mortgage: this is covered in the next section. in certain circumstances such as in the event of a default. The covenant also covers such matters as the undertaking to keep the vessel insured. a vessel in exchange for cash.. based on the principle that if it does not cost more to have beit and braces (since the borrower pays the. can also constitute a default such as failing to maintain class or trading outside insurance warranty limits. the objective for a bank should be to lend against projects which have the strength of the business plan and a positive cashflow able to service the loan and interest payments on their due dates. Clause 14 Payments: a variety of housekeeping arrangements with regard to repayments and setting interest rates-e. costs of establishing the loan) the lender may execute the loan agreement in the form of a deed. Clause 12 Set-off and lien: mainly relating to the bank's right. if unavoidable. Probably the largest part of the purchase price will be the loan and the buyers will need to make it available to the sellers on delivery. Usually the percentage is between 120% and 150% (or conversely it may be stated that the outstanding loan should not be greater than 60% to 70% of the open market value of the vessel. headings and contents page and a copy of the offer or facility letter. many events have to occur often in different parts of the world (and consequently in different time zones). the form of drawdown notice plays an important part in the mechanics of ship purchase and finance. additional security may have to be provided. which gives the lender some extra degree of security and also gives rise for the legal need for a covenant. Under English law. it should be sufficient. Appendix D: Forms of assignment: of insurance and. 15-19 the law andjurisdiction of the agreement and how disputes are resolved. to place a lien on other property or assets of the borrower. the bill of sale. there will be a number of appendices: Appendix A: Form of drawdown notice: as mentioned earlier in this chapter. Thus. These range from failure to make due payment of interest or loan instalments to the vessel becoming a total loss. the lender's profit lies in the steady repayment of interest at the agreed spread over LIBOR. when a vessel is purchased. the main one being to repay the loan in accordance with the agreed schedule. Primarily. other events. Miscellaneous points. If the loanto-value ratio is too high. a reference. more in the domain of the master. a mortgage registered with the (new) flag State of the vessel. In addition. not insignificant. willing seller').Form of deed of covenant: this deals with the undertaking of the borrower to do certain things. Clause 11 Event of default: unless the loan is repayable on demand.g.

it must be formally registered (in the United Kingdom. and other obligations'. Under English.It gives the lender in rem rights against the mortgaged vessel (i. Very often the lender will require any insurance amount over. . If the mortgagee finds that the owner. say.e. in many countries. in accordance with the Companies Act 1985). . The effectfrom the master's point of view is that the lender may require his own set of accounts and reports with regard to repairs covered under insurance. to have full effect. 'principal sum' and 'interest and current account. and consequently most Commonwealth. US$100. Many loan agreements stipulate that the first priorily for a vessel's earnings are towards essential trading and operating costs. ensure that freight or charter earnings are directed to the benefit of the mortgaged vessel and not other company expeAses. He and his team on board need to set a careful course to help the owner navigate out of the impending shoals of bankruptcy. he can. priority over) against unsecured creditors. every mortgage. If operating under such constraints. It may be that the owner is falling behind in interest or principal repayments as freight rates fall (or. for the lending bank. A standard form of mortgage also tends to be used in Scandinavian and a few other countries. is entering areas of default under the loan agreement. However. . and . . If the covenant includes an actual charge over the vessel. allowing the owner's normal operating procedure to deal with the small repairs. law. must be registered with the flag State's relevant ship registry. there is a much wider scope for parties to dictate their own form of mortgage within the general framework of the regulating legal system. Mortgagee A mortgagee acquires certain rights under the mortgage. fail to rise in line with an over-optimistic business plan). a statutory mortgage is used (see annex to this chapter).Assignment of insurances: as mentioned. he must consider his best course of action. .. a master must consider what is essential as against merely important.It gives security (i. If the vessel's earnings have been assigned to a bank account over which the mortgagee can exert control. although they are longer and more detailed. There are two forms. In any case. The latter is the most commonly used as it widens the scope of the security to include other sums such as ancillary costs. .) Act 1993. etc.It allows the mortgagee to sell the vessel to raise funds to satisfy his debt. rights against the vessel itself and notjust against the owner).A personal or company (bank) guarantee or indemnity. the practice has grown of expanding the effect and scope of the mortgage as an instrument of security by including a deed of covenant (as mentioned above) in the loan agreement. the insured sum stipulated will be well in excess of the loan amount. .It enables the lender (the mortgagee) to take possession of the vessel in the event of a default by the owner (the mortgagor).Assignment of earnings: owners will try to avoid earnings being paid into a designated account in the lender's bank in which he may be required to hold a certain balance which can adversely affect his cashflow. etc.A first-priority mortgage (FPM): discussed later. frequently.Assignment of any requisition compensation. as a first step.. . statutory or preferred.A charge or pledge over borrower's shares: this becomes more common if the borrower has to resort to the use of mezzanine finance. the mortgagor or borrower. usually the central and most important part of its security~ the essential features of a ship mortgage are that: .000 (although it may be less). Although the English system has the benefit of simplicity. but. to a great extent. A mortgage is. The form and function of the registered ship mortgage is prescribed in the regulations made under the Merchant Shipping (Registration..e. they represent fairly drastic courses of action which will result in the termination of the very maritime adventure for which the loan was advanced. The default may be because the owner is failing to keep the vessel insured or classed in accordance with the agreement either because of a rise in costs or because of a need for repairs which he cannot meet. insurance premiums paid or due to be paid by the mortgagor which the mortgagee will want secured. to be paid to their account. and notably Liberia and Panama.

offer the master a unique opportunity. there is generally little benefit of selling a perfectly good asset on a falling market. the master will require clear and concise instructions from his owners. retain one copy [of a preferred mortgage] on board the mortgaged vessel and cause such copy and the document of the vessel to be exhibited by the master to any person having business which may give rise to a maritime lien or to the sale. It will undoubtedly be apparent to him by the time a Mortgagee's inspector arrives on board. there will be circumstances when the mortgagee decides to realise his security. who should know this better than those on board. It also illustrates the importance of a master ensuring that he knows who is visiting his vessel and why and then making appropriate Plans. the mortgagee may enter negotiation with the owner about rescheduling the debt repayments. or mortgage of the vessel. It is done though-to the benefit of alert and cash-rich shipowners. Furthermore. for the mortgagee. on the starboard side impresses on the mortgagee's representative the importance of releasing funds for a new set of hatch or tank seals. if possible. before responding to mortgagee's instructions. He may issue orders directing the vessel to the nearest place for the vessel to be arrested and subsequently sold either by a Court or at auction (with or without judicial supervision) or by private treaty. After all. debts. it can. section 110 of the relevant Liberian regulations require the mortgagor to '. It also avoids. Such unilateral action has a significant downside for the mortgagee as he becomes mortgagee in possession and consequently and instantly liable for all debts of the vessel subsequent to taking possession and any maritime liens may follow the vessel into its new ownership. It is. unlikely that an owner will advise the master that he is in default under his loan agreement. that cash flow is tight. Obviously an unsuspecting master can get caught up in this game of cat and mouse and should be very clear as to the origin of his sailing orders and other instructions (note the requirements for the authentication of trading messages in the voyage orders in the annex to chapter six). usually an auction. on board has a much better chance of protecting not only the position of the owner but also the rights of himself and his crew. assuming he is clear as to who his owners are under these circumstances. achieve the co-operation of the Courts. The old adage that possession is nine tenths of the law does tend to apply and a master remaining. in fact. any danger of a claim by the owner for damages for failure to obtain the best price Possession . The licence of a master who wilfully fails to exhibit such documents and a copy of the mortgage may be susspended or revoked'. In association with an inspection of the vessel. Undoubtedly. A mortgagee also has the right to take possession of the vessel and either dismiss or instruct the master. perhaps. It is not an inconceivable scenario for the chief officer to be walking up the port side of the foredeck with a charterer's surveyor showing him the newly chipped and painted hatch covers or tank lids. much better that he should depart with a well conceived plan and set of priorities as to which areas the reduced funds available should be directed in order to ensure maximum operational efficiency. the purchaser will have the knowledge that all debts and liens will be lifted from the vessel. If the vessel is sold through a properly constituted judicial sale. the mortgagee will prefer to co-operate with the judicial system and. Under most circumstances. however. since both parties accepted the business plan. conveyance. If the freight market has fallen both borrower and lender have a responsibility for finding a solution. Whilst the concept of yet another inspection is unlikely to be greeted with tremendous enthusiasm on board. The regulations relating to the arrest and sale of a vessel vary and circumstances arise where the mortgagor endeavours to trade his vessel only in countries with restrictive rules on arrest. whilst the master. Rather than letting the inspector depart with a depressing Picture of a vessel deteriorating under a lacklustre crew. whilst the morWragee tracks that vessel or a sister vessel to a port with a more benign legal regime for his purpose. a mortgagee will hesitate to take possession of the vessel as he then assumes responsibility for all trading and operational costs. Generally. Nevertheless.A general but little used right of the mortgagee is to inspect the vessel. for example. . is to put the vessel under the control of a competent shipmanager who has the resources to bring a run-down vessel back up to operational efficiency. however. but a commercially aware master should know that his vessel is mortgaged and. One course open to him. liens and other obligations. physically. .

the shiprepairer mentioned earlier should have commenced the action in a port within a legal regime more akin to the American legal system. A shiprepairer in respect of work undertaken and 2. 1967 and 1993) have not been notably successful. the shiprepairer had long lost possession and his right to a possessory lien. endeavour to resist the creation of liens without their consent. the balance.possible. If they do have to arrest the vessel. there are circumstances where the master may find it necessary to discharge cargo before freight is paid so that he can proceed with his voyage. The possessory lienor loses his lien once he has lost possession of the vessel or the subject of the lien (although he retains his basic legal right if he can find an effective jurisdiction under which he can serve his claim). Here it was held. although their power is limited. Salvage.Maritime liens: technically. Wages of the vessel's master and crew. The ranking of liens. it passed to the Privy Council in London on appeal.Possessory liens: these depend upon the lienor retaining possession of the vessel until the indebtedness is settled and which are referred to as working in personam. it is difficult to claim a possessory lien if the cargo is disappearing up a pipeline into the receiver's tank farm. if any.How quickly can the sale or auction be undertaken? . possessory or maritime. A mortgagee's rights to the net funds from the sale of a vessel only extend to the extent of the owner's indebtedness.Are the procedures for arrest expensive and can they be recovered? . but an appreciation of legal framework will help him steer a prudent course which will. This matter of physical possession is important in another context. that the shiprepairer was not entitled to assert a maritime lien and by then. as the case was brought in Singapore. A port in respect of unpaid port dues. These will be one of two kinds: . but only by a majority of three to two. following the guidance of international convention. The American repairer relied on the fact that a repairer's lien in America is held to be maritime rather than possessory. unless lifted by due legal pi. the list is restricted to: 1. It is obviously not possible for a master is make a 'legal' judgement under such circumstances.ocess. Master's disbursements and 5. they attach to the vessel itself and follow it. As mentioned in the Nautical Briefing. 3. Liens and other encumbrances As well as second mortgages (a lender may have a first preferred mortgage on the subject vessel and a second mortgage on other vessels within a fleet if those other vessels are also carrying first mortgages). Under English law. 2. However. protect his owner and his vessel. An example of this is the case of the Halcyon Isle. the debts which may be secured by a maritime lien are limited (although the United States of America has a slightly more liberal approach). . The two principal possessory liens are those which may be raised by: 1. and mortgages. in most regimes. Damage done by the vessel. Arrest Obviously. 4. is not handled consistently from country to country and attempts at achieving an international consensus through convention (principally in 1926. The master will doubtless need the assistance of his P&I Club's local Correspondent in such circumstances. even through changes of ownership. However. so far as possible. In certain circumstances it may give the possessory lienor the right to apply for the vessel to be arrested and judicially sold. in theory at least.Can the arrest be accomplished quickly and easily? . is the property of the owner.Will the funds be held safely and distributed quickly? . The owner has the right of a possessory lien over cargo against unpaid freight. where the priority between a registered mortgage and a lien was disputed by an action in rem in Singapore Courts by American shiprepairers. Consequeritly. of course. Mortgagees will. Bottomry and respondentia-slightly archaic devices by which the master could pledge the vessel in order to raise funds to progress the maritime adventure. these liens work in rem-that is. This divergence of the local interpretation of laws which are. they will wish to know: . makes arresting a vessel in default as much of an art as a science. In such cases he needs to discharge the cargo into the care of an individual or organisation which can retain a possessory lien on behalf of the owner. liens may also attach to the vessel.

(h) Bottomry. Philip Wake. employment or earnings of that ship. Bill of sale: Department of Transport form ROS 20 1/94. he should not be too quick to surrender 'possession'. Houlder & Partners. REFERENCES Shipping Finance. charterers or agents on behalf of a ship or her owners. By this stage of the proceedings. supplies and services rendered in good faith. (d) Agreement relating to the use of hire of any ship whether by charterparty or otherwise. he remains 'in possession' of the vessel on behalf of his owner until relieved and. the scope of maritime liens is wider than that commonly held under English law and includes certain items which would there be held to be possessory liens. Shipping Review & Outlook. In closing. officers. Arrest of Ships. MNI: Clarkson Research Studies. Under the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships. Particulars of vessel. (o). He may also be the only person who is available to initiate an action in rem in order to establish a maritime lien on behalf of his and the crew's wages and. including disbursements made by shippers. (p) or (q) above. perhaps disbursements owed for stores. (q) The mortgage or hypothecation of any ship. with the exception of liens arising under (1). 1952. (j) Pilotage. as initial Court judgements may be overruled on appeal. repair or equipment of any ship or dock charges and dues. (o) Disputes as to the title or ownership of any ship. possession. Other vessels under the same ownership may be arrested instead. Mortgage of a ship: Department of Transport form ROS 25 1/94. (c) Salvage. debts. loans and liens. (k) Goods or materials wherever supplied to a ship for her operation or maintenance.. (m) Wages of master. Francesco Berlingieri: Lloyd's of London Press. it can only be hoped that this section is of academic interest only. (n) Master's disbursements.What is the likely ranking that the Court will give to their mortgage with respect to other mortgages. (g) General average. Fenwick & Willan available for the section on finance. checked my slightly rusty knowledge of sale and purchase. lien or encumbrances? It is worth noting that there will probably be no sign of a maritime lien attaching until the lienor commences an action in rem (technically the term is 'inchoate'). ANNEXES FOR CHAPTER 12 Memorandum of agreement: Norwegian Saleform 1993. Gerry Donker of Howard. (e) Agreement relating to the carriage of goods in any ship whether by charterparty or otherwise. (i) Towage. . Stephenson Harwood: Euromoney Books. (l) Construction. (b) Loss of life or personal injury caused by any ship or occuring in connection with the operation of any ship. or crew. All matters of procedure shall be governed by the law of the contracting State in which the arrest was made. (p) Disputes between co-owners of any ship as to the ownership. matters will have passed out of any direct control of the master. The list includes: (a) Damage caused by any ship either in collision or otherwise. However. ACKNOWLEDGEMENTS RODERICK O'SULLIVAN recommended references and made the library of Holman. The Convention (which is due to be revised) gives contracting States the right to arrest vessels flying the flag of one of the contracting States in any contracting jurisdiction in respect of the above maritime liens only. (f) Loss or damage to goods including baggage carried in any ship.

The old. 4 Not only has manning changed but so has the technical complexity and pace of marine transportation. Chapter 12 together with the chapter on budgets may give some understanding of the financial pressures which face shipowners and technical managers and to which. directing masters who are encumbered with untrained and sometimes incompetent crews. To achieve this is the fourth challenge facing the master. 2. for if the service is good.END WORD The meaning of commercial management THIS BOOK has ranged widely over many subjects which a reader may not have expected to find. 3. with an often ill-conceived mixture of 'cheaper' crew and 'labour saving' devices. the charterer will come back. very little is variable. they are always searching for value for money and the focus of that search ranges between the lowest cost of transportation available and reliability and quality. hierarchical methods of management. the book is written with the premise that the shipmaster is a professional and. Like all customers. although the ISM Code should help to improve the ship-shore interface. the cost of crewing has been seen as one of the few areas where costs can be cut. A wide understanding of all aspects of the business of shipping is essential under these circumstances. Although in a strange way this is a compliment to our profession. the more effective and successful the operation. The third challenge for the shipmaster is to convince the shipowner that the master's role should incorporate the management as well as the driving of his vessel and this is an area where The Nautical Institute is playing an increasing role. This then is the first challenge for the master and his vessel. are similar for all owners. The ISM Code addresses the ship-shore interface quite directly. must change. have made it easier for managers ashore to believe that they can economically manage ships from the office. Shipping exists because there are customers who require our services. but change will be slow and difficult if the master remains reliant on office instructions and convinced that he is only there to take the vessel from port to port. It is often asked how an owner can entrust an investment of many tens of millions of dollars to the hands of a master he has never met and does not know. just as there is a safety aspect and a technical aspect. The charter market for ships is truly international and highly competitive. Innovation in shipping also means that organisations and working practices have got to adapt to the new technologies. The resources available to the shipmaster today are now quite different. . The vast increase in safety legislation is a measure of the failure of this approach. There is no apology for this. It is very difficult for a charterer to pay an extra 10 cents for a vessel (even if he was paying $10 more last voyage) unless he can see that the service he received from the vessel compensates for the extra charter rate. a major -shortage of qualified seafarers is approaching and shipowliers must look seriously at their training commitment. changes of crewing policy can deliver immediate and substantial savings and it can be some time before a drop in maintenance standards shows through. It is a sad fact that over the past ten years or more. with an aggressive commercial department frustrated by a cash-constrained technical operation-the master may well have to resolve conflicting demands emanating from elsewhere in the company. as such. subject to a small negotiating market. Communications. suitable for a different age and a different set of circumstances. the response has too often been cheaper crews. Nevertheless. Better and different ways of improving management and working practices are most likely to come from interaction and discussion between all people working in an organisation. hopefully the ISM Code will help to change this and there will be more stability in the area of manning. The more these three aspects can be brought into harmony. This is not always easy as there may be tension or lack of understanding between technical and commercial departments ashore. Especially on a well maintained vessel. an area seldom introduced to seafarers. This book is designed to illustrate four key principles: 1. But effective management can deliver quality at a competitive cost and this is the second challenge for the master. Of all the many items which go to make up the cost at which the owner can present his vessel. There is a commercial aspect to virtually every action taken or decision made by a shipmaster. he should have an understanding of all aspects of his trade-even including an awareness of how his vessel is financed. together with other advances in technology. sadly if understandably. The capital cost is set when the vessel is bought and financed and many of the other costs.

1 5.1 11. The Development of Maritime Commercial Practice 11. balance sheet and cash flow Reconciling the cash and accrual basis Bill of lading/waybill Bill of lading terms and conditions GAFTA sales contract no.1/2 4.4 6.2 12.5 6.1 Sample job description for the master Self-assessment and goal setting.3 3.6 7. FOB terms for grain in bulk Extracts from the GAYTA sampling rules no.2 6. 124 Summary of sample oil contracts-gas oil sale contract-sale of Bonny light Extracts from the Hamburg Rules-articles 15 to 19 Comparisons of Hague/Hague-Visby and Hamburg Rules Sample charterparties Binco Gencon voyage charter plus Gencon bill of lading Bimco/Fonasba standard statement of facts (short form) Shellvoy 5 Particulars of vessel NYPE 93 Unsafe ports and berth claims-practical steps for masters ILU marine policy-March 199 1: Institute Time Clauses-Hulls 1/ 11/95 Certificate of cargo insurance ISSA conditions and explanatory notes Standard ship management agreement: Bimco Shipman Extracts from ISF guidelines on ISM Code Special shipboard operations and examples of emergency situations Suggested subject matter for operations documentation Development of a safety management system Major international shipping conventions and recommendations Lloyd's Open Form 1995 Average guarantee Memorandum of agreement: Norwegian saleform 1993 Bill of sale: Department of Transport form ROS 20 1/94 Mortgage of a ship: Department of Transport form ROS 25 1/94 Extracts from Nautical Briefing.1 8.ANNEXES Annex No.2 2.1 12.2 5.3 6.1 2.3 8. activities /learning area matrix Correlation of income statement. 2.2 4.1 6. 64.3 .1 7.2 7. some questions Self-assessment and goal setting.3 5.1 3.5 6.3 5.4 5.2 10.2 12.

SAMMPLE JOB DESCRIPTION FOR THE MASTER Job Descriptions of sea staff Before producing detailedjob descriptions. To undertake all formalities in connection with the ship's articles of agreement. To familiarise himself with all aspects of the vessel and her equipment. To ensure the successful prosecution of the voyage. To plan shipboard training. To participate as a member of the ship's management team. Leadership I To command the confidence of the ship's bompany by firm guidance. 4. ensure that the vessel is maintained to a satisfactory operational standard. To monitor and control expenditure according to agreed procedures. The ISM Code reinforces the need for all seastaff to be competent and properly qualified for the vessel on which they will be sailing. delegate. To keep abreast of maritime developments. To act as personnel executive to the ship's company and to promote their welfare. To monitor own performance. to assume overall responsibility for medical services and to ensure that all documentation associated with medical treatment is completed. To ensure compliance with law. 3. To involve and familiarise the ship's complement in the formulation and execution of those plans. To take charge personally in emergencies. The attached extracts from a company's standing instructions sets out the roles which the company expects its masters to undertake. To ensure security and control of bonded stores and shop items and to assume overall responsibility for stock. To ensure the security of confidential material. company policies. supervise and develop the talents of their staff. This is especially important if the crew is engaged through a crew supplier rather than being directly employed. To monitor and control the use and disposition of provisions. Special responsibilities To provide at all times for the safety of the ship. To maintain and foster an awareness of the budgetary control system and costs. 3. To regulate cash issues and maintain records and accounts in accordance with agreed procedures. To attend to the welfare of the ship's company.1 Annex Duties and responsibilities 1. personnel and cargo. . To appraise the performance and potential of ship's staff according to agreed procedures. exemplary personal conduct and by fostering a congenial working and social environment. To promote safe working practices and procedures among crew-members with the objective of preventing personal injuries and financial loss. a company should be clear as to the role which the various seastaff are expected to fulfil. the master's role. Together with the chief engineer officer. To avoid pollution by strict compliance with Marpol regulations. is to plan. As described in chapter two. To ensure a high standard of communication within the ship and between ship and shore. Only when absolutely necessary should the master be involved in doing the task. and is in all respects seaworthy and remains so. Master Title Purpose Reporting to Liaison with Captain Management of all shipboard affairs Fleet manager Shipboard management team Chapter 2 2. 4. To ensure compliance with the law. To ensure that the vessel is fully equipped in all respects to proceed to sea bearing in mind the projected voyage. To allocate accommodation. regulations and instructions. 2. this latter task being normally delegated. To initiate and co-ordinate plans to meet operational objectives. and to a great extent that of the chief engineer. To maintain discipline on board. To co-ordinate training practices and procedures on board the ship. stores and cash. 2. Control 1. To establish and maintain vessel security by ensuring that only bona fide visitors are permitted on board the vessel.

will assume command and make an entry into the official log book. This is to be recorded in the official log book and the company informed as soon as possible. and to notify the company when surveys are required. -Can you think of some recent examples of occasions when you needed to know more basic facts? -How much do you know about your organization's policies? -How much do you know about your organization's medium. by the virtue of the master's incapacity he is unable to relinquish command then the chief officer.2 2. Notes Responsibility The ultimate responsibility for the safety of the ship and crew rests with the master and nothing herein is to be construed in any way to relieve him of his full responsibility for the safe navigation of his ship and the efficient organisation on board. -What do you do to keep up to date with new techniques and with the latest thinking in your area? -How much time do you spend reading specialist journals? -How do you get guidance on technical or specialist aspects of your job? -How well-informed are you about possible legislative. and workforce. consumers.and long-term plans? -What do you do to keep informed about all these things? Relevant professional knowledge. Command of basic facts Annex 2. Chapter 2 SELF-ASSESSMENT & GOAL SETTING QUESTIONS: THE I I QUALITIES OF A SUCCESSFUL MANAGER Quality 1. and keep the company informed of the situation. discipline and training of the ship's company. customers. In matters of safety the master has discretion to take whatever action he considers to be in the best interest of his ship. the chief officer will assume command. If the master is incapacitated. the master must hand all papers and documents concerning the ship's business to his successor. If. Changing of command When a change of command takes place.To ensure the vessel's certificates are in force. more junior to yourself. The master is to exercise overall control and guidance to ensure the efficient maintenance and operation of the ship and the overall welfare. after consultation with the chief engineer. The requirements as regards stability. management. . The master is responsible for the implementation of the company maritime safety policy on board his ship and he will be accountable for any failure to comply with correct operating procedures. the master must take such immediate action as he considers necessary. however. Indicative questions -How much do you know about what's going on in your organization? -What are your sources of information? -How extensive are your contacts? -How many people do you know in your organization? -What do you know about the way other people feel about your organization? 'Other people' should include those superior to you. those on board and the cargo. The master is responsible for ensuring that before proceeding to sea the ship is fully equipped and safe for the intended voyage. the master is to issue his own standing orders and instructions to supplement company regulations. and clients. Standing orders On taking over command. at your own level. The company is to be informed as soon as possible. owners. ballasting and stowage of cargo are to receive his careful attention. Should an emergency situation develop.

how confident are you in your decision making abilities? Social skills and abilities -How much difficulty do you have with other people? What types of such difficulty do you have? -What do you do in situations involving inter-personal conflict? -Can you think of some recent examples of situations in which you needed to use social skills? What happened? -How much do you know about what other people think and feel about you? -How do you respond to anger. self-starting.e. fatigue? -With whom do you discuss your worries and anxieties? -Think of the most tense. analytical. when you don't know what's going to happen next. How did you behave? -What do you do when you become emotional? -How do you behave in situations of great ambiguity? (i. and international changes and the effect these might have on your organization? Continuing sensitivity to events -What do you do to make sure that you are tuned in to what's happening in a given situation? -How sensitive are you to the way other people are feeling. or to the way in which they are likely to react? What steps do you take to develop this sensitivity? -How perceptive are you? -How do you make sure that your assumptions about what's going on are correct? -What types of situation do you find hardest to weigh up? Problem-solving. and . 5. rather than sleeping. 8. following9 Creativity -How easy do you find it to come up with new ideas? -How do you feel when all the well-tried solutions to a problem have failed? -What do you do to try to see new ways of doing things? -How often do you try out new methods. Can you give some examples? -What do you do to make sure that you neither become thick-skinned nor over-affected by emotions? Proactivity-inclination to respond -What steps do you take to ensure that you're in control purposefully to events of your own behaviour. stressful situations that you have been in recently. tension. hostility. when everything seems very uncertain). governmental. approaches. 6. anxiety. and -What do you find most difficult about making decisions? decision/judgement-making skills -How. passive. suspicion? -How do you try to ensure that other people understand you when you communicate with them? How do you ensure that you understand others? Emotional resilience -How do you cope with feelings of stress. rather than allowing yourself to be controlled or manipulated by others or by situational pressures? -In which situations do you tend to be independent and proactive as compared with situations in which you tend to be dependent and reactive? -How good are you at taking the initiative? -To what extent are you thrusting.. 4. 7.3.do you feel about having to make judgements in situations in which ideally you would have more information? -What range of decision-making techniques do you have available to help you when appropriate? -Can you think of some recent examples of good and bad decisions you made? -In general. active.

feelings. in which all the pieces seem to come together' to solve a problem? Can you think of some examples of this? -How do you feel when faced with the need for rapid thinkine. its causes and its effects? These indicative questions help you to give yourself a self-rating on the 11 qualities of an effective manager. on further development. beliefs. -What do you do when faced with seemingly contradictory information. or generate mini theories.9. Balanced learning habits and skills 11. . Mental agility 10. turn out to be good and useful? -How good are you at coping with several problems or tasks at the same time? -Can you think of a few examples of situations in which you really needed to think quickly? What happened in each case? -How often do you get sudden flashes of insight. values. from your own practical experiences? -Can you think of examples of occasions on which you (a) preferred to rely on the guidance of an expert rather than trust your own judgement? and (b) preferred to trust your own judgement rather than rely on the guidance of an expert? -What do you do to ensure that you use a balanced range of learning habits? -What do you do to increase your level of self-knowledge? -Can you give examples of instances when knowledge or understanding of how you were feeling or behaving affected what you were doing? -To what extent are you consciously aware of your own goals. behaviour? -How often do you stop to consider your own behaviour. Self-knowledge solutions to problems? -What are the most creative things you have done in the past 12 months? -How often do you get seemingly crazy ideas which. data or ideas? -How good are you at relating theory and practice in management? -Can yo~L think of examples of occasions when you were able to draw general conclusions.

.

.

.

.

.

.

.

.

.

............................. Set No ......................... the words "Buyers" and "Sellers" shall be deemed to be the parties to the contract and their respective superintendents at the port where the cargo is loaded and/or discharged........2 Annex Extracts from the Grain and Feed Trade Association GAFTA sampling rules (No: 124) (Effective for contracts dated from 1 July 1994) 1...................................................................... Seals..... To............................................................................................................................ and for parties who have contracted in metric tons................... 1................................................................ the other party shall under advice to the defaulting party call in a competent organisation at the port for the appointment of an independent superintendent to act on behalf of the defaulting party to draw and/or seal samples according to these Rules.....................................................................................................................5 ............................................ samples should be drawn for every 500 long tons.... Purpose of Sample ....................................................................................................................................... 1....................... samples should be drawn every 500 tonnes............ Weight/Analysis ......................... Marks ....................................................................... the quantity represented by the sample and the date the sample was sealed...................................................................................................................................... Shipper/ Seller/Buyer ...... Labels may be purchased from Gafta..................................................................................... 1.. Quantity represented by this sample ...................................... ………………………………………………………… Date Sealed .......................... .................... Commodity....................................... The seal's mark should be clearly identifiable and clearly visible................................ ............................... .......................................................................................................................................……………………………………………………………………………................................................. 1... From...Chapter 5 5............ Extra expenses incurred in this connection shall be borne by the defaulting party....... ....................................V.................. and/or transhipped................ ............................ .......................................................................................................... .................................................................................... .............................................................................. For parties who have contracted in long tons................................. .. Part Total Quantity of...............................................................3 .................... N.................................... ............ ....................2 General For the purpose of these Rules.............................. ............................. M. *Arbitration (Quality/Rye Terms)................... .............................. Bags/Bulk........... The word "sealed" shall mean jointly sealed by the Buyers and Sellers or their superintendents...............................1 1............... ........... and any other pertinent information which may be required on the label as follows:Sender..................4 If one of the parties is not represented for sampling or refuses to draw and/or seal samples as called for under the contract.......... Samples shall be sealed in such a manner as to prevent any access to the sample without breaking or removing the seal................................... * delete as appropriate D/O Receiver Quantity B/L No.............................................Sample No.......................................................................................................................................... Sample labels Every sample shall be sealed and shall bear the name of the ship...........................................

in artificial light if considered adequate and mutually agreed by the superintendents. excluding the run. then the original bags may be opened to sample by hand scoop.3 Slab Cakes in bags. For contractual tonnage over 500 tonnes a minimum 20 kilogram bulk sample of increments shall be taken for each 500 tonnes. 2. or ex-vehicle. concurrently with loading at the nearest practicable point to the vessel. increment samples shall be drawn uniformly and systematically.1 for goods in bags.2. not less than 50 of the bags shall be sampled.3.1 For goods in bags samples shall be drawn from original bags which are clearly identifiable with the appropriate markings. If samples are drawn from conveyor. the superintendents may stop the operation in order to draw samples as required by these Rules. Increment samples According to the rate of discharge /loading. the increment samples drawn shall be taken from not less than 3 sampling points from each wagon or vehicle. samples shall be drawn from the bags as provided in Rule 2. So far as is possible samples shall be drawn from the ends and middle of. samples shall be drawn from a moving stream. either in accordance with Rule 2. increment samples shall be taken uniformly and systematically in order to achieve a representative sample of the consignment. samples shall be taken at the nearest point to the hold. b) for up to 1000 bags. middle and bottom of each bag. If loading is by grab. and where possible. but if the contractual tonnage is less than 550 tonnes. each increment sample should not exceed 1 kilogram. 2. and c) over 1000 bags.1 For goods in bulk at loading. increment samples shall be drawn uniformly and systematically. at the . Where samples are required to be taken from rail wagons or vehicles. Increment samples shall be taken by ordinary hand-scoop or by other mutually agreed equipment throughout loading. at a point where the samples drawn are representative of the goods loaded/discharged. or ex-silo overside to vessel. and placed in mutually agreed suitable container(s). during the discharge. and/or loading and/or transhipment operations.2 For goods in bulk at discharge. not less than 20 of the bags shall be sampled. from various parts of the hold in a fair proportion. not less than' 3% with a minimum of 50 of the bags shall be sampled. If for any reason samples cannot be drawn from the hold. by a piercing spear from the top. one cake to be taken from each of a number of bags selected at random but not less than five (5) bags per 100 tonnes. Samples shall be drawn uniformly.2 Bags 2. Each cake to be broken into eight pieces of about equal size. Irrespective of the time or place of sampling. and agreed by the superintendents.2. 2. the bulker sample of increments drawn shall be not less than 40 kilograms. 2. As many increment samples as practically and physically possible shall be taken in relation to the discharge/ loading. 2. 2. or if not possible. The parties are deemed to have agreed to this procedure. increment samples shall be drawn uniformly and systematically. If it is not possible to efficiently draw a sample by spear. excluding the run. concurrently with discharge.2 Bags-for cutting and starting-where goods are loaded from bags into the vessel.2. samples shall be drawn from the quay or barge from the bulk. classification and sealing of contractual samples shall always be carried out in daylight or. concurrent with discharge. If samples are to be drawn outside of natural daylight they must be drawn under full and properly adequate ship's lighting and/or installation lighting.3 Bulk 2.3. Sampling points Sampling points have to be carefully selected. In the event that the operations preclude access to the hold or a mutually agreed acceptable point.3.2. Each sample shall contain equal portions from each part of the cake. 1 for goods in bulk. a) for up to 100 bags.1 Method of drawing samples General Samples shall be taken as required by the contract in accordance with the following provisions of the Rules. the quartering.2. the bags in rotation.

Seeds &. 3. (Containing bags) " CB " means the containing bags shall be new. (polypropylene/polyethylene) When the Council of GAFTA has given prior approval in writing to an operator to use an electrical/mechanical system for quartering down. These samples to be sent to the offices of GAFTA without delay.nearest practicable point to the hold. and each set shall consist of the following:- . sets of -samples are required as follows:4.3.2. 2. quartered and reduced to the required quantity needed for the contractual samples. preferably from a moving stream when discharging overside. man-made or natural fibre or a mixture thereof. 3.3 4. unglazed. Each sample contain equal portions from each part of the cake. to craft or other means of transport. Form No: 65. by the most practical means possible agreed by the superintendents. fertiliser.3. 2. in bulk or bags. 3. All official samples (except for natural weight tests. jars or tins with close fitting lids.2. Fertiliser.1 Sample bags and sample containers CB. PP/PE. The increment samples representing the total contractual quantity shall be thoroughly mixed into a bulk sample. or strong polythene of a minimum 250 gauge bags securely tied. in an area free from any possible contamination. enclosed in sealed cotton bags. in which event a further sample is not required and this shall be recorded on one of the sample labels. Increment samples shall be taken by ordinary hand scoop or by other mutually agreed equipment throughout discharge. The bulk sample shall then be divided. and if required by either superintendent.4 Where goods are loaded. seeds andyice Unless the contract stipulates otherwise. 4. unless otherwise stated in the contract.1. or bags of non-ventilating foil of PP/PE polypropylene/polyethylene material may be used in place of containers MPC referred to in 3. MPC. whatever is appropriate in accordance with the contract. except where such balance does not exceed 50 tonnes. (Moisture proof containers) "MPC" means the containers shall be bottles. odourless. and shall be mixed and quartered as required by the Association's analysts or arbitrators.2 Grain. to be marked "Set I" and "Set 2" respectively. Each cake to be broken into eight peices of about equal size.Rice. samples shall be drawn at the stuffing and unstuffing of the container. five cakes to be selected at random for each 100 tonnes.1 Official samples required for analysis tests and arbitration purposes Official sets of samples are required for every 500 tonnes. and for safe custody. See Rules No: 65) for any purpose shall be not less than 1 kilogram. and when full. bags of sufficiently ventilating foil of PP/PE polypropylene/polyethylene material may be used in place of CB referred to in 3:1 above. made of non-toxic.3). sufficiently tightly woven to retain all dust and/or foreign matter and prevent the moving apart of the warp and the weft of the material. or to silo. 2. and that such containers are labelled and shall be sealed. pulses.3 Slab Cakes in bulk. packing and sealing samples. or for any balance or contract for a lesser quantity.2 For malting barley 2 sets of samples are required. Pulses. For Grain. 4. 2.2 above.4 Security At any cessation of work.5 Dividing/quartering Upon completion of sampling the increment samples in the mutually agreed suitable containers shall be emptied on to a well cleaned and flat surface (or for PP/PE bags into the approved mechanical division system-see Rules 3. insewn. the containers containing the increment samples must be sealed by the superintendents. shipped or delivered in containers. placed in a mutually approved secure place.2 3. 4. except Malting Barley I set of samples consisting of the following:CB-arbitration CB-analysis MPC-moisture when required by the contract CB-FAQ standard CB-Natural Weight Tests-See Rules. They shall be tightly filled and securely tied before sealing.

The sealed samples shall be a fair and true indication of the degree of damage and the sample labels shall show the proportion of the tonnage so affected. Each type of damage shall be sampled separately. These samples shall be sent to the offices of GAFTA. under a tale quale contract. All contracts-goods damaged or out of condition other than rye terms Seller's Superintendent at Buyers' request shall jointly seal samples of goods damaged or out of condition. but without prejudice to Sellers' rights and responsibilities under the contract. Both sets of samples and the FAQ standard sample to be sent to the offices of GAFTA without delay. The expenses incurred in sealing and forwarding of classified samples of damaged goods shall be paid half by Buyers and half by Sellers. damaged or destroyed prior to the expiration of the period for forwarding permitted under this clause. Lumpy goods if in bags shall be sampled by cutting from top to bottom and withdrawing samples by hand. whichever happens later. then goods damaged or out of condition shall be landed on the quay or discharged to lighter for the purpose of such classification and any sampling shall take place within the port area as soon as possible after the damaged goods are landed or discharged into lighter. shall be sampled on board the vessel at time of discharge. and where no payment is to be made for increase in weight by water. In the event of such agreement not being reached. 1 sample to be taken for each classification as follows: CB-Sound Goods-For Buyers CB-Sound Goods-For Sellers CB-Damaged/Out of Condition-For Buyers CB-Damaged/Out of Condition-For Sellers MPC-Liquid and/or Chemical Damaged Goods-For Buyers MPC-Liquid and/or Chemical Damaged Goods-For Sellers The samples (held by the Sellers and held by the Buyers) shall be forwarded to GAFTA within 7 consecutive days of discharge from the vessel or on completion of classification and sealing. oil and/or liquids. are damaged by water. if necessary. 1 sample to be taken for each classification as follows: CB-Sound Goods-For Buyers CB-Sound Goods-For Sellers CB-Lumpy/Damaged Goods-For Buyers CB-Lumpy/Damaged Goods-For Sellers MPC-Liquid and/or Chemical Damaged Goods-For Buyers MPC-Liquid and/or Chemical Damaged Goods-For Sellers All contracts--goods damaged or out of condition traded on rye terms Goods arriving damaged or out of condition. in part or whole.5 . unless otherwise stated in the contract. oil and/or other liquids. has been lost. at the request of either party one sample shall be taken for each of the following: MPC-Sound Goods MPC-Water/Liquid/Oil damaged goods. Sellers shall refund to Buyers the whole of such proportion as may be recovered from the ship or underwriters. after giving notice to the other party.4.3 4. or that the said set 4. In the event of it being proved to the 'satisfaction of the arbitrators that one set of sealed samples. always provided that all the damaged or out of condition and sound goods be classified. for the determination of excess water. oil and/or other liquids. or local public or independent analyst to be mutually agreed.4 CB-arbitration CB-germination/admixture MPC-moisture/protein/ calibration or screening CB-varietal purity In addition 1 set only is required for the FAQ Standard-CB. Should Buyers incur additional lighterage or other expenses in the application of this Clause. or part thereof. but in cases where both parties agree that it is not practicable for the classification and sampling to be carried out on board. the cost to be shared equally by Buyers and Sellers and the result to be final and binding. apply to a competent organisation at the port for the appointment of an independent superintendent to act on behalf of the other party and samples shall be drawn jointly under all reserves. All contracts-goods sold tale quale Where goods. and shall be mixed and quartered by the Association's analysts or arbitrators. either party or both parties shall.

Bologna or to Arbitrage-en Verzoeningskamer voor Granen en Zaden van Antwerpen/ Chambre Arbitrale et de Conciliation de Grains et Graines d'Anvers. 98. the choice of analyst shall be that of the instructing party. 101. 97. 22. If required by Buyers. 96. Within 14 consecutive days of receipt of the certificate of analysis of this sample. Unless the contract stipulates otherwise. 99. to the analyst concerned.4 Arbitration sample Any one of the sealed samples shall be retained for arbitration purposes if required. In the event that this option is not decided at the time of the contract. instructions specifying what analyses are to be carried out. made within 14 consecutive days of receipt (by them) of the true copy of the certificate of the second analysis. 8. The mean of the two analyses shall be accepted as final if the variation does not exceed 0. sealed in not less than a set of 6 samples as follows: A set consists of the following: MPC-Ist analysis and where moisture is guaranteed CB-for castorseed and/or castorseed husk. or fail to forward the certificate in the said 14 days. Should the Buyers or any representatives acting on their behalf fail to both despatch samples and to instruct the analyst within 14 consecutive days of their sealing as above provided. or to Institute Europeen de FEnvironnement de Bordeaux (I. Belgian or French Standing-in-Clause applies.6.6. 102 and 103. 4.2 above does exceed 0. Rotterdam. Aug.6.2. 4. then either party shall be entitled to proceed to arbitration on the other complete set of sealed samples. 4. Buyers shall send a true copy thereof to Sellers stating whether they accept this analysis or whether they require a second analysis. 15. to give notice to Buyers that they require a second analysis.E. sand and/or silica analysis *CB-2nd analysis CB-3rd analysis CB-2nd castorseed and/or castorseed husk. and on notice being given to the other party a third sealed sample shall be despatched without delay to Dr. Bernard Dyer for analysis. 6. the 2nd analysis sample shall be in a MPC.6. samples of each parcel shall be drawn in accordance with these Rules. or Salamon & Seaber. or through an agent or representative acting on their behalf. 100A.6. *In the event the General. both to be done within the time limit stated hereinbefore. and the mean of the two analyses nearest to each other shall be accepted as final and binding on both parties. and shall send to the other party a true copy of the relative certificate of analysis within 14 consecutive days of receiving it from the analyst. sand and/or silica analysis CB-Arbitration purposes For marine and animal products.having been forwarded in accordance with this clause has been lost. 4. damaged or destroyed during transit. Bordeaux). 5% then at the request of either party. then any claim for rejection or for an . 4. If a second analysis is required another of the sealed samples shall be despatched without delay to Dr.3 Third analysis test If the variation stated in Rule 4.E. 5%. all the above samples shall be contained in Moisture Proof Containers. or to LabCo. within 14 consecutive days of receipt by them of the true copy of the certificate of analysis. within 14 consecutive days of sealing be despatched to: AGER. for analysis. 4.6 Feedingstuffs sold on GAFTA contracts nos. the sealed samples in a MPC shall. Second analysis test Sellers have the right. London.6. 95. 100.1 First Analysis Test The sample(s) for the first analysis shall be drawn in moisture proof containers and the analysis result for moisture from this sample will be reported on the certificate of analysis and used as the calculating factor for a second and third analysis test.5 Despatch of samples and instructions The party requiring any of the respective analyses shall be responsible for the despatch of the relative sample(s) and shall give directly. Voelcker for analysis.

The provisions of Rule no. shall be drawn. on a sample sent to . 113 and 119. Aug. In which case they shall be responsible for forwarding samples and giving the instructions to the analysts within 14 consecutive days of sealing of samples). Norway. 4. the date the sample was sealed. the samples shall be in moisture proof containers (MPC).11 Analysis for castor seed and/or castor seed husk. 110 and any other pertinent information which may be required. that they have called on the analysts for all three tests at the outset. the choice of analyst shall be that of the instructing party. except that samples shall be sealed in a set of 5 samples. Bernard Dyer and the third analysis test by Dr. Agro Division. 112 and 118. 109 or No. 104. 110. Buyers shall send a notice to Sellers. accompanied by the certificate of analysis or a true copy. Such samples will be drawn during the discharge of the importing vessel at the port in the country of the delivery place named in the contract. In the event that this option is not decided at the time of arrival. in which event costs including analyses costs shall be for the account of the Buyers. at French Ports-Institut Europeen de L'Environnement de Bordeaux. the following shall apply: The party landing the goods shall appoint and instruct an independent superintendent to draw and seal fully representative samples. 4. Swedish or Danish Ports-Steins Laboratorium As. If a second analysis for castor seed and/or castor seed husk is required such analysis shall be made by Salamon & Seaber on the sample already in their possession for test of oil and protein. Buyers have the option of requiring all 3 tests (2 tests for castor seed and/or castor seed husk) for all or any of the contractual warranties at the same time. the first analysis for Castor seed and/or Castor seed husk shall be made by: For goods discharged at Belgian Ports-Arbitrage-en Verzoeningskamer Voor Granen en Zaden. For marine and animal products or where moisture is guaranteed. Should either party require further analysis but fail to make application therefor and to send samples within the time limit as above. for analysis by Salamon & Seaber.9 For ex-store contracts no. the second analysis test by Dr. quantity represented by the sample. at Norwegian. any one of the sealed samples shall within 14 consecutive days of sealing. then the analysis or the mean of the two analyses then existing shall be deemed to be final. 4.allowance in respect of any matters dealt with under the contract shall be deemed to be waived and absolutely barred. The laboratory shall record this information on the analysis certificate. 109. to whom samples and instructions should be sent. 4. and the first analysis test shall be carried out by Salamon & Seaber. Buyers may accept Sellers' analysig but if required by Buyers. Italy. (or to analysts to be agreed by the Parties). Within 10 consecutive days of sealing. For goods sold to/discharged at ports in Belgium.10 For feedstaffs sold on GAFTA contracts nos. at the same time as sending instructions to the analysts. 4:6 applies.8 For feedingstuffs sold on GAFTA contracts nos. a statement that the samples were sealed and taken in accordance with these Rules for analysis under contract No. together with the total quantity of which each sample forms part. Netherlands. 109 and no. 10. be despatched to Salamon & Seaber. 4. In addition. Sweden and Denmark. at Dutch Ports-LabCo. France. but if a sample is not in their possession. one of the sealed samples shall be despatched to the appropriate analyst. at German Ports-Institut fur Angewandte Botanik. One set of samples in containing bags (CB). at Italian Ports-AGER. This analysis shall be final and any claim arising from it shall be made within 24 consecutive days of the date thereof. Germany. Voelcker. 9 and 43 Unless the contract stipulates otherwise. Every sample shall be sealed and shall bear the name of the ship. samples of each parcel shall be drawn in accordance with these rules in moisture proof containers MPC. 1.7 For feedstuffs sold on GAFTA contract nos. in accordance with Rule 1:3.

If a sealed sample is not in the possession of Dr. If a sealed sample is not in the possession of Dr. Sellers' superintendent shall seal sample(s) of bags/sacks considered by Buyers' superintendent to be unsuitable and/or torn. Bernard Dyer. after receipt of the analysis certificate in respect of the second analysis for sand and/or silica. Netherlands. Bernard Dyer's laboratory when a second analysis is required one of the other sealed samples. Aug. Aug. Bernard Dyer. shall be sent to Dr. Sampling and analysis of feedingstuffs and cereal by products in bulk discharged at Rotterdam and Amsterdam For analysis of feedingstuffs and cereal by-products. Samples for other purposes may also be submitted to LabCo to be divided. If a second analysis for sand and/or silica is required such analysis shall be made by Salamon & Seaber on the sample in their possession for the test for oil and protein but. which shall also be used for other analysis if required. Voelcker. Bernard Dyer's laboratory when a third analysis is required one of the other sealed samples. Sweden. quartered and reduced.13 4. be despatched to the analyst and which shall also be used for other analyses if required. discharged at Rotterdam and Amsterdam. in bulk.4. which shall also be used for other analysis if required.12 4. which shall. If a second analysis for sand and/or silica is required one of the other sealed sainples. who will divide. If a sealed sample is not in the possession of Dr.3 . samples for standing-in purposes shall be forwarded to LabCo. Chapter 5 Summary of Sample Oil Contracts Annex 5. lightly damaged. the first analysis for sand and/or silica shall be by the same laboratories as provided for the determination of castor seed and/or castor seed husk. Denmark. within 10 consecutive days of sealing. medium damaged. quarter and reduce them. Germany. shall be sent to Dr. on a sample sent to them without delay after receipt of the analysis certificate in respect of the first analysis for sand and/or silica. after receipt of the analysis certificate in respect of the first analysis for castor seed and/or castor seed husk. France. which shall also be used for other analyses if required. If a third analysis for sand and/or silica is required such analysis shall be made by Dr. if a sample is not already in their possession. Bernard Dyer's laboratory within 3 business days. For goods discharged at other ports the first analysis for sand and/or silica shall be made by Salaman & Seaber on one of the above samples. within 10 consecutive days of sealing. such analysis shall be made by Dr. within 10 consecutive days of sealing. be despatched to the analyst and which shall also be used for other analyses if required. after receipt of the analysis certificate in respect of the second analysis for sand and/or silica. Voelcker's laboratory when a third analysis if required one of . Analysis for sand and/or silica For goods discharged at ports in Belgium. Voelcker within 3 business days. Bags/Sacks If Buyers so request. Bernard Dyer's laboratory within 3 business days. shall be sent to Dr. be despatched to the appropriate analyst.14 them without delay after receipt of the analysis certificate in respect of the first analysis for castor seed and/or castor seed husk. which shall. Norway. For goods discharged at other ports the first analysis for castor seed and/or castor seed husk shall be made by Salamon & Seaber on one of the above samples. The resulting sample(s) will be forwarded to the analyst in accordance with the provisions in these Rules. such analysis shall be made by Dr. and heavily damaged. Bernard Dyer's laboratory without delay after receipt of the analysis certificate in respect of the first analysis for sand and/or silica. If a third analysis for sand and/or silica is required.sound. shall be sent to Dr. If a second analysis for castor seed and/or castor seed husk is required. Italy. the other sealed samples. Aug. One sample bag to be selected to represent each category and the percentage of each category to be agreed by the superintendents and stated on the label(s). One of the sealed samples shall. Samples of empty bags/sacks shall be sealed in 4 categories:. but without prejudice to Sellers' rights and responsibilities under the contract. which shall also be used for other analyses if required.

6 hours NOR plus 36 hours Shinc. Period: 1-10 November 1995 FOB Bonny Terminal Nigeria Both dates inclusive.A: Sale of Gasoil.-Buyer 2200 Eastlines Avenue Black Hills New York 10850 2.1 per cent wt max Period: Arrival Copenhagen 23-25 October 1995. Buyer: XYZ Oil Product: Gasoil Volume: 25. All other local taxes for buyer a/c. Ltd. C max Cloud Point -2 deg.000mt plus or minus 10 percent seller's option Type of Sale: CIF Copenhagen. C max Flash Point 66 deg. Cody With reference to our recent discussions. Denmark Quality: Specific Gravity 0. 900. received and paid for or caused to be purchased. min Sulphur 0. 3. Price: The CIF Copenhagen price will be Platts high quotation for gasoil 0. and paid for 50/50 by seller and buyer. C.00/mt if no quotation published for b/l date the first preceding date to apply. We are pleased to confirm herewith the terms and conditions of the crude oil purchase/sale between us. To: XYZ Oil--Corporation From: Fearless Oil Co. Quantities and qualities: To be sold and delivered or caused to be sold and delivered by Fearless to ABC and to be purchased. C 6 max Water & Sediment 0. major 1 October 1995 Good afternoon this is Fearless oil Our Tlx Nr 700. Part I-Specific provisions 1. Laytime: Demurrage: Payment: Inspection: Duties: Other T&G: B: Nigerian Bonny light sale to A33C oil. Mobile latest GT and 0 CIF sales. Price is based on b/l quantity and is on an EEC duty-paid basis. Price: . Date: 9th October 1995 This is to confirm the following transaction Seller: Fearless Oil Co.000 bbls +/. To: ABC-New York Attn: 0. Parties: Fearless Petroleum Inc 1820 44nd Street New York.2% sulphur cargoes CIF NWE basis ARA valid on the b/l date plus US$5.850 max Diesel Index 53 min Distillation FBP 370 deg. max CFPP -11 deg. 4. NY 10020 ABC International Trade Inc. pro rata for part cargo.2 percent WT max Colour 1 max Kin visc at 20 deg. At charterparty rates By irrevocable 1/c issued by 1st class bank acceptable to seller confirmed and payable in London within 2 days of completion of discharge or 4 days after tendering notice of readiness of discharge which ever is the sooner. Ltd. Findings to be binding on both parties Product is on an EEC duty-paid basis. Inspectors to be appointed b buyer. received and paid for by ABC: Bonny Light Crude Oil.5% operational tolerance. C.

The price to be paid for 37.0 +/- 37.1 degrees API Gravity Bonny Light shall be the average of the mean of Platts quotations for dated Brent published from 18-25 October 1995 inclusive, plus 50 cents/bbl. The foregoing price does not include the Nigerian harbour dues which are for ABC account. Such price shall increase or decrease by US dollars 0.003 for each tenth degree by which the gravity of the crude oil actually loaded is respectively, above the lower end or below the upper end of the base specified. 5. Payment terms: In the event that any payment falls due on a day when the designated bank is closed, such payment shall be made on the last banking day before the non-banking day. Payment by ABC to Fearless for Bonny Light crude oil sold and purchased hereunder shall be made in US Dollars by telegraphic transfer of immediately available funds not later than 30 days after the Bill of Lading date to the bank and account number as designated by Fearless. Payment shall be made against the presentation of a commercial invoice, Bills of Lading, and other normal shipping documents. In the event that Bills of Lading have not been presented at the time of payment, ABC will accept from Fearless a letter of indemnity in a form satisfactory to ABC. Fearless, pursuant to the provisions hereunder, represents and warrants that at the time of loading it will be the owner of the crude oil sold hereunder and for which the Bills of Lading will be issued. Delivery: Delivery by Fearless to ABC will be FOB Bonny Terminal. The cargo shall be supplied in one lot in the date range 1-10 November 1995 inclusive. This date range shall be narrowed to a 3 day lifting range by Seller notifying Buyer of such lifting range not later than 13 October 1995. This delivery period is a material provision of this agreement. Title: Crude Oil shall be pumped aboard the Buyer's vessel at the Seller's expense. Delivery shall be deemed completed and title shall pass as the crude oil reaches the flange connecting the Seller's or the Seller's supplier's pipeline or hose with the Buyer's vessel intake pipe at which point the Seller's and the Seller's supplier's responsibility shall cease and the Buyer shall assume all risk of loss, damage, depreciation, or shrinkage of the crude oil so delivered.

6.

7.

Part II-General provisions 1 With respect to Bonny Light crude oil sold and purchased hereunder, the Nigerian Petroleum Company's general conditions of sale (of Nigerian crude oils), PART II shall govern. 2. Wherever PART II is at variance with the provisions of PART I hereof, the provisions of PART I shall govern. We are pleased to have completed this arrangement with you and would appreciate your confirmation of the foregoing at your earliest convenience. Best Regards, John Thomas

Chapter 5

Annex 5.4

Extract from the Hamburg Rules: Articles 15 to 19
Article 15-Contents of bill of lading I The bill of lading must include, inter alia, the following particulars: (a) the general nature of the goods, the leading marks necessary for identification of the goods, and express statement, if applicable, as to the dangerous character of the goods, the number of packages or