LM1928 Module3

DIPLOMA IN
SHIP SUPERINTENDENCY
2007 / 2008
MODULE 3
The World of Shipping
AUTHOR
Robert Tallack BSc FNI

Director
IDG Maritime
UK
Lloyd’s and the Lloyd’s crest are the registered trademarks of the society incorporated by the Lloyd’s Act 1871 by the name of Lloyd’s.
CONTENTS
Page No
1. THE BUSINESS OF SHIPPING 5
1.1 The Main Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

1.2 Cargo Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.3 The Vessel Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.4 The Management of Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.4.1 Crewing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.4.2 Technical Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.4.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1.4.4 Freight Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1.4.5 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1.4.6 Chartering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1.4.7 Vessel Sales and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
1.4.8 Provisions and Bunkering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
1.4.9 Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
1.4.10 Budgets and the Management of Funds . . . . . . . . . . . . . . . . . . . . .11
1.5 The Operation of Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
1.6 The Registration and Taxation of Ships . . . . . . . . . . . . . . . . . . . . . . . . . . .13
1.7 The Legislators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.7.1 International Maritime Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.7.2 The Early Work of the Comité Maritime Internationale . . . . . . . . . .15
1.7.3 The Growing Role of the United Nations: the IMO and the ILO . . . .16
1.8 The Regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
1.8.1 National Governmental Agencies . . . . . . . . . . . . . . . . . . . . . . . . . .17
1.8.2 Classification Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
1.8.3 Surveyors, Auditors and Inspectors . . . . . . . . . . . . . . . . . . . . . . . .20
1.8.4 Types of Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
2. INTERNATIONAL TRADE AND THE EMPLOYMENT OF SHIPS 23
2.1 A Transaction Fundamental to the Demand for Shipping . . . . . . . . . . . . . .23

2.2 Trading Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
2.3 Employment: Liner Trades and Tramp Trades . . . . . . . . . . . . . . . . . . . . . . .26
2.3.1 Liner Trades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
2.3.2 Tramp Trades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Diploma in Ship Superintendency 2007 / 2008 (LM1928) 3-1

Contents Module 3
2.3.3 Bareboat Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

2.3.4 Time Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.3.5 Voyage Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.4 Cargo and the Transfer of Risk and Title . . . . . . . . . . . . . . . . . . . . . . . . . .30
2.4.1 Incoterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
2.4.2 Documentary Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
2.4.3 Cargo Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
2.4.4 Sales Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.4.5 Certificate of Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.4.6 Certificate of Inspection, Quantity and Quality . . . . . . . . . . . . . . . .36
2.4.7 Commercial Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
2.4.8 Cargo / Customs’ Manifests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
2.4.9 Certificate of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
2.4.10 Bill of Lading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
2.5 Seaworthiness and Cargoworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
2.5.1 Seaworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
2.5.2 Causa Proxima / Causa Remota . . . . . . . . . . . . . . . . . . . . . . . . . .39
2.5.3 Cargoworthiness and the Term “Carefully to Carry” . . . . . . . . . . . .39
2.5.4 Tank, Hold and Cargo Inspections . . . . . . . . . . . . . . . . . . . . . . . . .40
2.6 Carriage of Goods by Sea Act and the Hague Rules . . . . . . . . . . . . . . . . .41
2.6.1 Article III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
2.6.2 Article IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
3. RISK AND MARINE INSURANCE 44
3.1 Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

3.2 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
3.2.1 Hazards and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
3.2.2 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
3.2.3 Formal Safety Assessment (FSA) . . . . . . . . . . . . . . . . . . . . . . . . .48
3.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
3.3.1 Cargo-related Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
3.3.2 Limitation Against Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . .54
3.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
3.4.1 Hull Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
3.4.2 Particular and General Average . . . . . . . . . . . . . . . . . . . . . . . . . . .60
3.4.3 Total and Constructive Loss, Deductibles . . . . . . . . . . . . . . . . . . . .60
3.4.4 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
3.4.5 Disbursement Warranty – Total Loss Only (TLO) . . . . . . . . . . . . . .61
3.4.6 Collision Liability – Running Down Clause (RDC) . . . . . . . . . . . . . .61
3.4.7 Mitigation – Sue and Labour . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
3.4.8 Pollution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
3.4.9 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
3.5 Claims and Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
3.5.1 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
3-2 Diploma in Ship Superintendency 2007 / 2008 (LM1928)

Module 3 Contents
3.5.2 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63

3.6 Cargo Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
3.6.1 War Risk Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
3.7 Protection and Indemnity Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
3.8 Freight, Demurrage and Defence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
3.9 Additional Insurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
3.10 The York-Antwerp Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
3.10.1 Rule of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
3.10.2 Rule Paramount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
3.11 Incidents, Emergencies and the MAIB . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
3.11.1 An Accident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
3.11.2 Major and Serious Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
3.11.3 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
3.11.4 Hazardous Incidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
3.11.5 Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
3.11.6 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
4. THE EMPLOYEES: MANNING THE SHIPS 71
4.1 Seafarer Employment: Training and Competence . . . . . . . . . . . . . . . . . . . .71

4.1.1 The Change from Vertical to Horizontal . . . . . . . . . . . . . . . . . . . . .71
4.1.2 Functional Capabilities Required by Seafarers . . . . . . . . . . . . . . . .74
4.1.3 Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
4.1.4 Levels of Responsibilities and Standards of Competency . . . . . . . .75
4.1.5 Hierarchical Management versus Team Management . . . . . . . . . . .76
4.1.6 Team Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
4.2 A Strategy for Crew Provision? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
4.2.1 Adding Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
4.2.2 Cultural Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
4.3 Qualifications and Safe Manning Certificates . . . . . . . . . . . . . . . . . . . . . . .81
4.3.1 Safe Manning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81
4.3.2 Ensuring the Correct Qualification . . . . . . . . . . . . . . . . . . . . . . . . .81
4.3.3 Ships’ Crews and Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
4.4 Proposed ILO Convention 188 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
4.4.1 Title 1: Minimum Requirements for Seafarers to Work on a Ship . . .87
4.4.2 Title 2: Conditions of Employment . . . . . . . . . . . . . . . . . . . . . . . . .89
4.4.3 Title 3: Accommodation, Recreational Facilities, Food
and Catering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
4.4.4 Title 5: Compliance and Enforcement . . . . . . . . . . . . . . . . . . . . . . .92
5. TECHNOLOGICAL CHANGE AND ITS MANAGEMENT 94
5.1 Change and Its Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94

5.1.1 Change and its Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94

Contents Module 3
5.1.2 Managing Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96

5.2 Areas of Technological Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98
5.2.1 Managing Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
5.2.2 Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
5.2.3 Computerisation and Simulation . . . . . . . . . . . . . . . . . . . . . . . . . .102
5.2.4 Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103
5.2.5 Integration and the Navigational Challenge . . . . . . . . . . . . . . . . .104
5.2.6 AIS – Automatic Identification Systems . . . . . . . . . . . . . . . . . . . .106
RECOMMENDED READING 109
USEFUL WEBSITES 110
TUTOR MARKED ASSIGNMENT 111
Appendix 1 : The Hague-Visby Rules

Appendix 2 : The York-Antwerp Rules 1994
Appendix 3 : Trade Cycles: Freight Rates
Appendix 4 : Safe Manning Certification (British Model) Merchant Shipping
Notice MSN 1767 (M)
Appendix 5 : ILO Convention 188 – Draft Certificates
PLEASE NOTE
● Self-Assessment Questions have been provided periodically throughout

this module. These questions are designed to help you with your
study. The questions are for your personal study only; do not send in
your answers to these questions as they will not be assessed.
● For candidates taking the Diploma option, your Tutor Marked

Assignment is at the rear of this module. Your worked Assignment
should be sent to the TMA Administrator (details are given at the end
of the Tutor Marked Assignment) for processing.
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1. THE BUSINESS OF SHIPPING
LEARNING OUTCOMES
After successful completion of this chapter, you will be able to:
● state the different customers that shipowners serve;
● describe the relationship between the various segments

of the industry; and
● describe the role of charterparties and bills of lading.
1.1 THE MAIN COMPONENTS
3-001 This introduction looks at the main components of the shipping industry, which
can be divided broadly into the following four categories:
● First, there are those potential customers who have an interest in the
services provided by a vessel. This may range from towage or
hydrographic services through the transportation of cargo to the carriage
of passengers. The principal focus in this module is on the ship as a means
of transporting cargo.
● Second, there is the ship and its owner and/or manager. The
owner/manager’s interest ranges from the quality of a vessel as a potential
investment, through its preparedness and ability to carry a particular cargo
or undertake a specific voyage to its ability to comply with statutory
regulations.
● Third, there is the insurer, either of the vessel or the cargo, who wishes to
match premium with risk and exposure.
● Fourth, there are the organisations that impose and monitor safety
standards, both governmental and non-governmental. These include:
– classification societies;
– national governments; and
– international organisations, such as the International Maritime

Organisation (IMO) and the International Labour Organisation
(ILO).

The Business of Shipping Module 3
3-002 This chapter will provide a brief overview of the two central components:
● the cargo owners (or customers); and
● the shipowner (and ship manager).
1.2 CARGO OWNERS
3-003 The ship manager should never forget that the shipping industry exists to
provide a service to its customers. This service is encapsulated in the well-
known phrase “carefully to load, stow, carry and deliver” the cargo within the
master’s control. Arguably, the cargo owner is the most important element in the
structure of the maritime industry for without the cargo owner, the international
trader, there is no demand for shipping services.
3-004 The cargo owner can, and frequently does, change during the course of the
voyage. The superintendent should know whether he is providing a service for
the buyer or the seller, the shipper or the receiver, the consignee or even one of
a number of intermediaries who may have taken and resold title in the cargo
during the course of a given voyage.
3-005 Therefore, the superintendent needs an understanding of the way in which

cargoes are bought and sold and how maritime transport is contracted. The
interests of the cargo owner are discussed more fully in Chapter 2 of this module.
1.3 THE VESSEL OWNERS
3-006 The “vessel”, which is the vehicle used for the marine transportation of cargo or
the delivery of a range of other maritime services, can be provided by many
different organisations and for a number of different reasons. There is a complex
interplay of influences that surround the multi-million dollar transactions that
characterise the maritime industry. It is important for the superintendent to be
clear about the rights and responsibilities of the different organisations and
individuals involved.
3-007 Broadly speaking, vessels are owned and operated by three main types of
organisation:
● First, is the cargo owner who owns and/or manages his own vessels. Oil
companies are a prime example although the extent of their ownership of
the means of transporting their cargoes is diminishing. Oil companies tend
to see maritime transportation as a potentially high risk, capital intensive
but non-core activity and as a service that can be purchased more cost
effectively on the open market. It will be interesting to see the implications
of the Erika and the Prestige on oil companies’ chartering policy.
● Second, the central core of vessel provision is by the shipowner who both
owns and manages his vessels. This owner also organises the
employment of these vessels, either by soliciting cargo on fixed routes
(liner trades) or chartering space in the vessel (tramp trades).
Management in this context means undertaking the commercial as well as
the technical operation and container operators are one good example of
the modern, vertically integrated shipowner.

Module 3 The Business of Shipping
● Third, there are those owners whose interest in shipowning is either as a

financial investment or who want to control the maritime link in a logistic
chain without involvement in the operation of ships. These owners sub-
contract some or all of the operational functions to specialist ship
management organisations. This sector also includes a significant
proportion of the world’s fleet where ownership and operation is separated
for tax and liability reasons or, sadly, to find regimes where quality and
safety requirements are less stringent. Compared to the vertically
integrated owner/operator, these structures are frequently referred to as
horizontally integrated organisations.
3-008 Shipowners make their vessels available to the market through one of two broad
routes. One arises from what was traditionally known as the common carrier
where the shipowner operates owned and chartered vessels on a fixed and
published schedule; a system frequently referred to as the liner trades. This
sector of the industry is now characterised by a complex network of scheduling
and freight rate agreements between shipowners and service providers (such as
the non-vessel owning NVOs) container operator pooling resources in freight
conferences. Frequently, the shipping companies’ services are extended beyond
the ports to provide a through transport service. In this sector of the industry, the
contract for the carriage of cargo (the contract of affreightment) is most
commonly found within the bill of lading.
3-009 Operating in a more open market are the tramp owners who move their vessels
between commodities and trading areas with relative freedom. The relative ease
of entry into these markets can have an amplifying effect on the normal world
trade cycles. Linked to this sector are the more specialised vessels. These are
designed, built and operated against a long-term charter or contract of
affreightment. Liquid natural gas carriers are a prime example of this. In the
tramp trades, the main method of engaging the services of a vessel is the
charterparty, voyage, time or even bareboat.
3-010 The superintendent may become involved with the vast array of specialist
organisations that provide and operate service vessels, ranging from tugs, pilot
vessels and bunker barges through survey and seismic vessel to offshore
support and cable laying vessels. While all vessels have the same fundamental
requirement of needing to “keep the water out” while protecting the crew and
enabling their operational role to be carried out safely and economically, the
function of the vessel can greatly effect the detail of the operation and indeed,
the required structure of the vessel. Both the superintendent and the crews need
a thorough understanding of the ways in which different vessels operate and this
is an important consideration as ship managers bid for work and crews change
from one type of ship to another.
3-011 Technology and economics, or perhaps more accurately, technology driven by

economics, can at times move faster than operational capability, and the sea is
an unforgiving environment. Economics and technology enabled the economic
transportation of crude oil in VLCCs and ULCCs (very large and ultra large crude
carriers). Nevertheless, the lessons of static build-up in large tanks and the need
for inerting tanks was only learnt as the result of large explosions and lost ships.
The stresses imposed on large bulk carriers, both during loading operations and
in heavy seas, exacerbated by the use of high tensile steel in an effort to reduce

scantlings (the weight of the steel structure) is only now being learnt. Roll-on,
roll-off ferries have a potential stability problem inherent in their very design that
must be countered by operational procedures. Modern cruise vessels, growing
to even greater size with large, multi-national crews, few of them capable of
being described as seamen, pose challenges of emergency management and
evacuation, while high speed ferries are adding a new dynamic (and possibly a
few future surprises) to coastal navigation. The superintendent must learn to
balance the economic benefits of technology against its potential risks. Risk
management is a core discipline that the superintendent must develop.
3-012 Behind the vessel owner there will inevitably be the institutions which have
provided all or part of the funding for the purchase of the vessel: banks and other
financing institutions; and the ship manager needs an understanding of how they
function. An investor’s interest in a vessel may be in the form of:
● Equity, which tends to reflect ownership of the asset, is not a loan that is
repaid by instalment but the return on investment, and depends upon the
profitable trading – or sale – of the vessel. Shareholders providing the
equity may be arm’s length investors with little or no knowledge of the
shipping industry or owners reinvesting in their own fleet.
● Debt is a loan that must be paid back against a fixed schedule. A lender
will generally secure its exposure through a mortgage on the vessel, as
well as an assignment of its earnings and insurance. The prime lender will
secure its debt through a first preferred mortgage – a security that is only
superseded by a maritime lien. Other lenders might provide finance, at a
higher risk and rate of interest but against a lower level of security – this is
sometimes referred to as mezzanine finance.
● A mortgage is, for a lending bank, the most important evidence of its interest
in a vessel and of the way in which the vessel provides security since:
– it gives the lender in rem rights against the mortgaged vessel (i.e.
rights against the vessel itself and not just against the owner);
– it gives security (i.e. priority) against unsecured creditors;
– it enables the lender (the mortgagee) to take possession of the

vessel in the event of a default by the owner (the mortgagor); and
– it allows the mortgagor to sell the vessel to raise funds to satisfy

his debt.
3-013 Loan agreements may give the lender the right to inspect a vessel in order to
ensure that it is being properly managed and maintained. It will always be
important for the superintendent to know who has a beneficial interest in a
vessel and to be aware of potentially conflicting interests. Mortgages, for
example, may be ranked, with a first preferred mortgage taking preference over
second mortgages or unsecured mortgages. Mortgages may, in turn, be
superseded by maritime liens (especially when the lien is securing the crew’s
wages). Evidence of secured mortgages at least can be found by requesting a
transcript of register from the flag state.

1.4 THE MANAGEMENT OF SHIPS
3-014 There has been a trend over the past two decades for the beneficial owners of
a vessel to sub-contract part or all of her management and operation. This
divergence of responsibility has played a central role in the implementation of
the International Safety Management (ISM) Code. This is discussed in more
detail later in this module.
3-015 There are many reasons for the growth of ship management companies. The
globalisation of trade and finance and economic pressure to reduce vessel
operating costs frequently finds its expression in an unremitting search for lower
manning costs. A direct effect of this has been that established corporate or
company values have been replaced by contractual relationships having varying
degrees of effectiveness. A major effect of this trend is to make the ship’s master
the servant of many different masters. It is important for the master to know
where responsibility, and authority, for different aspects of a vessel’s operation
lie. The ship’s superintendent is a crucial link in this chain and needs to
understand its commercial pressures as well as the technical challenges.
3-016 The Baltic and International Maritime Council (BIMCO) Standard Management
Agreement (Shipman) is one of the most commonly used contracts for engaging
ship managers. Under Shipman the vessel’s overall operation is divided into ten
functions. These are:
1.4.1 Crewing
3-017 Undertaken by either manager or owner and from their own resources or under
the auspices of a crew manager. Indeed more than one crew manager may be
involved and it is not uncommon for the master and senior management team to
be direct employees whilst the remainder of the crew is hired through sub-
contractors. Amongst other things, a ship manager is required to ensure that the
crew is familiar with the vessel and its operation and to know how well the crew
can communicate between themselves as well as being fully aware of their level
of competence. A ship manager is also required to ensure that the crew is
familiar with and qualified for the particular type of vessel and its trade; in other
words, that the crew they are relying on is fit for purpose and much of this
responsibility lies with the superintendent. Attention is drawn to Chapter 4 on
Manning the Ships and particularly to the proposed consolidating ILO
Convention 188 at Section 4.4.
1.4.2 Technical Management
3-018 This, the central core of the superintendent’s responsibility, includes:
● supervision of the maintenance, repair and general efficiency of the

vessel;
● the provision of stores and spares; and
● ensuring that all the vessel’s international trading certificates are in order
and that the vessel meets international and national safety standards.

1.4.3 Insurance
3-019 It is important for the superintendent to know who it is that is insured and also who is
co-insured or named on the policy (e.g. owner, manager, bareboat charterer) and
whether the insurances are assigned to a bank under the terms of a loan agreement.
This applies to both loss or damage risk insurance (hull and machinery) and liability
insurance (protection and indemnity). To this should be added a knowledge of the
extent to which a vessel is not covered by insurance and this covers the level of its
deductible, sometimes called uncovered average (see Chapter 3).
1.4.4 Freight Management
3-020 Important aspects of freight management are:
● the provision of voyage orders and other information to enable the master
to plan and undertake the voyage;
● the provision of voyage estimates and accounts;
● the calculation of hire and freights, despatch and demurrage; and
● the arrangement of the correct collection and payment of all charter hire
and freight monies.
1.4.5 Accounting
3-021 The ship manager is required to establish a proper accounting system and maintain
accountancy records and the superintendent needs to understand this system.
1.4.6 Chartering
3-022 The management of chartering is in accordance with owner’s instructions to

“ . . . provide chartering services which includes but is not limited to seeking and
negotiating employment for the vessel . . . ”
3-023 Although closely allied to freight management, the chartering function may be
undertaken by a separate organisation with the owner frequently keeping close
control of this activity. Poor co-ordination or co-operation between fixture
(chartering) and post-fixture (freight management and vessel operation) can and
does give rise to mistakes and disputes.
1.4.7 Vessel Sales and Purchase
3-024 Whether working for a shipowner or as a ship manager, the sale and/or
purchase of a ship is a major project activity where many strands need co-
ordinating in order that the purchase (or sale) price can be safely exchanged for
the bill of sale giving title in the ship. At the same time, the physical asset, the
ship, has to either be handed over in the contractually described condition or
taken over and rapidly made into an efficient working unit.
3-025 The demolition of ships at the end of their useful life is becoming an ever more
contentious issue, both with regard to health and safety practices in countries

where demolition is carried out and also because the vessel may contain toxic
waste that is proscribed under the Basel Convention. Superintendents responsible
for ships being sold for demolition must undertake a thorough audit of all
compartments and be aware of any potentially toxic or hazardous substances.
1.4.8 Provisions and Bunkering
3-026 Bunkering requires careful planning by the ship manager both in order to achieve
competitive prices without cutting out cargo deadweight (since bunker prices vary
both regionally and with the market) and at the same time ensuring satisfactory
quality while paying due care and attention to the bunkering operation.
1.4.9 Operation
3-027 Closely allied to freight management, this activity includes:
● voyage estimates;
● voyage instructions;
● appointment of agents;
● appointment of stevedores; and
● arrangements for surveying cargoes.
A superintendent cannot give proper support to the master and crew without a
thorough understanding of these functions.
1.4.10 Budgets and the Management of Funds
3-028 This is a crucial aspect of ship management:
● On the one hand, the ship manager needs to submit a competitive annual
budget that will secure the management contract or achieve the owner’s
endorsement.
● On the other hand, the manager needs to build in a sufficient margin to

fund expenditure on those essential items that do not give an immediate
operational return. These can be summarised as safety, preventative
maintenance and training. When freight rates fall, these essential
operational areas are frequently the first to suffer cutbacks and this
encapsulates one of the main problem areas highlighted by the trend away
from vertically to horizontally integrated operational units.
A large part of this budget is the direct responsibility of the superintendent and
he will, or should, also have an input into other areas such as crewing.
1.5 THE OPERATION OF SHIPS
3-029 This section on the operation of ships is separated from the preceding section,
the management of ships, because it is essential that the wider aspects of ship
management within its international legal and commercial framework is

translated into a clear and precise dialogue between the ship manager and the
ship and its crew. The superintendent is a key element in this dialogue.
3-030 Shipping companies, in responding to the complexities of an increasingly

competitive and globalised economy, have themselves become more complex.
3-031 The two diagrams above are used by the Greenwich Maritime Forum to illustrate
the change in the structure of many modern businesses, including shipowning
and ship management. In the vertically integrated company, what is sometimes
called the traditional shipowning model, the core functions (of owning,
managing, crewing, employing and operating) are all undertaken by the same
company and from within the same management team.
3-032 This approach gave rise to clear lines of communication but tended to be
resistant to change. In the networked shipowning and operating organisation,
companies developed that specialised in financing and owning ships, some
specialised in ship employment (the commercial operation), others focused on
management and operations and yet others on crewing. This type of
organisation allowed high levels of expertise to develop in specialist areas and
in this way the elements of the overall structure could (appear to be) extremely
cost effective. This model has also proved to be flexible in the face of change and
has the ability to add or remove, expand or decrease separate elements as
demand dictated without altering the overall structure.
3-033 However, lines of communication are necessarily more complex and different
elements are as likely to compete as to co-operate if a strong central controlling
element was not in place. All too frequently, in the early days of the transition of
much of the shipping industry from vertically integrated to networked companies,
this controlling element was missing or too weak. The result of this need to

strengthen this element of ship management and operation was the establishment
of the International Safety Management (ISM) Code (see Chapter 3).
3-034 Furthermore, the organisation of a shipping company also needs to be seen from
the perspective of the ship and the master. Especially as communicating with the
vessel becomes easier and more instantaneous, so the master will receive
instructions and information from an increasing number of sources within the
networked organisation; if these instructions appear to conflict, then the risk
profile of the overall operation starts to increase. It is essential that the master
and the crew see the superintendent as a unifying element within this matrix and
not as just one more piece of a possibly conflicting jigsaw puzzle of management.
3-035 It is the commercial element of ship management, the employment of the ship, that
generally generates the time pressure that raises the risk profile of the ship’s
operation. Similarly, it is the legal liabilities associated with the commercial operation
that are often (but by no means always) a contributory element in influencing or
modifying the optimum technical solution to a problem or an emergency. It is,
therefore, important that the superintendent (and the master) understands the inter-
relationship between different elements of the ship management organisation.
1.6 THE REGISTRATION AND TAXATION OF SHIPS
3-036 Registration and taxation are juxtaposed here because it is often the element of
taxation that determines where a ship is registered. There are two elements to this,
the taxation of ship operating profits and the way in which capital allowances
(against the purchase of the ship) are available to be offset against the profit
generated by either the ship itself or against other profit generating operations. One
of the challenges of shipowning is the ability to raise the large amounts of capital
necessary to purchase ships in what is a highly competitive and highly cyclical
industry. If the effective cost of the vessel can be reduced by using its capital
allowances to offset profits that may be generated through other activities that do not
have direct access to capital depreciation, both businesses benefit. Tax regimes that
facilitate such transactions are, therefore, inherently attractive to shipowners.
3-037 However, it can quickly be seen that the core expertise required in such transactions
is financial rather than ship operational and this is part of the reason for the transition
from vertically integrated to networked organisations described above.
3-038 There are two other inter-related elements that determine the registration of
many ships. The first is the cost of registration, that is the fees paid to the
national government of the flag state. In many cases, these are low since the
states see shipowning as but one element in a wider, financial portfolio on
which the state’s economy depends. In too many cases, this low registration fee
regime in linked to a poorly developed infrastructure for the regulation of ships
registered under the flag of that state. As is explained in the following section,
the implementation of international laws relating to the safety of the shipping
industry depends upon the ratification into national law of the conventions
generated in such international organisations as the International Maritime
Organisation. If flag states do on ratify these conventions, translate them into
national law and then rigorously apply that national law, then the convention
has no effect.

3-039 In Chapter 3, the international response to flag states that do not comply with
international regulation is discussed in connection with the ISM Code and
STCW 95. Obviously, flag states that do not insist on the rigorous
implementation of international safety conventions are seen by some
shipowners and operators as a low cost way of providing shipping services.
There is a tension between the commercial profit motive and quality and safety
with the result that a heavier burden is placed upon the ship manager who
complies with international regulation. Largely outside this loop are the
charterers and traders who are prepared to accept, or even actively seek,
cheaper tonnage available under the flags of some states.
3-040 In many cases, flag states that do not have a strong maritime infrastructure sub-
contract some or all of their statutory duties to other organisations. This is
particularly so in the case of statutory ship inspections where classification
societies are retained and authorised to carry out these functions. It is important
for superintendents to understand the maritime infrastructure of the flag states
of the ships that are part of his or her responsibility and always to be sure for
whom a classification society is undertaking an inspection or audit, i.e. the owner
(for classification surveys) or the flag state (for statutory surveys).
Philosophically, a superintendent needs to be clear in his mind how well these
possibly conflicting roles co-exist.
1.7 THE LEGISLATORS
1.7.1 International Maritime Law
3-041 There is a subtle but important difference between the legislators and the
regulators in international shipping in that the principal legislator, the
International Maritime Organisation (IMO) does not have the authority to
legislate. Being, like the International Labour Organisation (ILO), an agency of
the United Nations, IMO has the power and indeed, the duty, to develop
legislation in support of, in Lord Donaldson’s now famous phrase:
“Safer Ships, Safer Seas”
However, the implementation of that legislation is dependent upon IMO

Conventions being converted into national law and then being enforced by
national governments, i.e. the flag states.
3-042 Underpinning the work of IMO is the international law of the sea and this is
enshrined in the United Nations Convention on the Law of the Sea (UNCLOS).
The law of the sea starts with the age-old principle of the freedom of the seas.
The first change to this was the extension of the laws of a nation to its Territorial
Sea; traditionally the range of a cannon shot from the shore and now generally
accepted as three nautical miles. As vessels and trade grew (as well as the
range of gunfire) nations pushed out the range of their influence to 12 miles,
although maintaining the right of vessels to have unhindered “innocent passage”
through these waters. The discovery of mineral resources on and under the
seabed and the importance of dwindling fish stocks then drove the extension of
national interest further offshore and the concept of the Exclusive Economic
Zone, generally to 200 nautical miles, arose.

3-043 Driven primarily by the fear of pollution and now increasingly by the fear of
terrorism, nations (such as the United States with its Oil Pollution Act) and
regional blocks (such as the European Union) are taking or considering
unilateral action to protect the waters around their coasts. Within the overall legal
framework of UNCLOS, therefore, there is a tension between, at one end of the
scale, nations that want to impose stricter laws than IMO conventions and at the
other, nations, particularly some flag states, that do not ratify (into their national
law) or do not effectively apply IMO’s conventions and regulations.
3-044 Out of the historical perspective outlined above has grown the body of law that
regulates both the technical and the commercial operation of ships. It is useful,
if not essential, for superintendents to understand how the process works as it
gives a valuable perspective to the framework within which operational decisions
are made. More crucial, however, is the need for shipowners and operators to be
able to participate in the process of framing and developing sensible and
workable laws and regulations.
3-045 The basic premise is that for rules and regulations to apply to a ship, they must
be derived from the body of law of the nation in which the ship is registered,
commonly referred to as the flag state. The concept of sovereignty, linked to the
national flag and generally operating against the freedom of the seas, is outlined
above, and two strands of law have developed over the years.
3-046 What is frequently described as public law deals with matters primarily
associated with the freedom of the seas and the right of free passage.
3-047 As international trade increased in volume a body of law grew up regulating such
matters as insurance and contracts of carriage. This is frequently referred to as
private (maritime) law.
3-048 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, international regulation.
3-049 The move towards establishing international maritime law came mainly from
continental Europe with its tradition of codified civil law. Although this approach
sometimes conflicted with English common law, based as it is on precedent, both
regimes now work closely together. One of the earliest forums for co-operation was
the Comité Maritime Internationale (CMI), formally established in 1873 with a mission
to work for the international unification of maritime law. 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.
1.7.2 The Early Work of the Comité Maritime Internationale
3-050 In the 100 years and more of its existence, the CMI has been involved in drafting
the following conventions:
● Collision (1910)
● Salvage (1910 and 1989)

● Limitation of Liability for Maritime Claims (1924, 1957 and 1976)
● Bills of Lading (1924, 1968 and 1979)
● Arrest (1952)
● Carriage of Passengers (1961)
● Carriage of Luggage (1967)
● Carriage of Passengers and their Luggage (1974)
● Civil Liability Convention on Oil Pollution (1969)
● Fund Convention (1971)
● Maritime Liens and Mortgages (1926 and 1967)
as well as in contributing to many others.
3-051 The drafting process generally follows the same pattern. 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. Generally, 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 working
group will then produce a first draft of a convention or set of rules and a
representative sub-committee will be established. Several years of negotiation
and redrafting may then take place before the sub-committee is in a position to
lay a document before the CMI executive. 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 moved through in a plenary session.
3-052 If the end product is approved as a potentially beneficial convention it will then go to
a full government-sponsored diplomatic conference at the end of which it will, if
approved, become a fully-fledged international convention available for ratification
and incorporation into the law of ratifying states. Generally, the international
convention will set down how many countries need to ratify the convention before it
comes into force. Ratifying nations then have a specified period of time to make the
convention part of their own national law. In the United Kingdom this is achieved
initially through an Act of Parliament supported by enabling legislation in the form of
statutory instruments.Those nations that have not ratified the convention by the time
it achieves international status must accede to the convention, which effectively
introduces the regulations directly into their national law.
1.7.3 The Growing Role of the United Nations: the IMO and the ILO
3-053 In recent years the role of the CMI has changed due to the creation of three United
Nations agencies (IMO, UNCTAD and UNCITRAL – the latter being the United
Nations Commission on International Trade Law). These agencies have, to some
extent, 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. An example of CMI’s continuing work is
its proposed review of the Hague, Hague-Visby and Hamburg Rules.

3-054 With the generation of maritime conventions and recommendations increasingly

in the hands of UN organisations such as International Maritime Organisation
(IMO), it is important for shipowners and ship managers to understand how
these organisations work and how they can feed their ideas, opinions and
practical experience into the legislative process. The International Maritime
Organisation, its main conventions and regulations and the way in which these
are formulated is described in detail in Module 4.
3-055 While the IMO is a forum for both governments and interested non-governmental
organisations (NGOs), only governments may vote and the organisations
responsibilities are mainly technical. Social responsibility is the realm of the
International Labour Organisation (ILO) which has a different voting constitution
that includes governments, employers (the shipowners’ representatives in
respect of maritime conventions) and trade unions. Currently some 65 maritime
related ILO instruments are to be updated and consolidated under a proposed
new convention. This is discussed in Chapter 4.
1.8 THE REGULATORS
3-056 As explained above, the implementation of legislation depends primarily upon

national governments incorporating international conventions into their national
body of law and then on them implementing that legislation. However, due to the
diverse and international nature of the shipping industry there are a number of
other organisations that play an important (if not statutory) role in the maintenance
of good shipping practice. The most important are introduced below.
1.8.1 National Governmental Agencies
3-057 The structures used by national governments to monitor and regulate their
shipping interests can vary widely. At one end of the scale, as has been seen,
some governments sub-contract great swathes of their statutory obligations to a
classification society. At the other end of this scale, tradition and the
juxtaposition of shipping and trading interests has given rise to a complex
tapestry of ministerial and quasi governmental organisations.
3-058 Superintendents will need to identify for themselves how the flag states, under
which their fleets are registered, operate. Some of the questions that the
superintendent may need to ask are:
Which organisation is responsible for:
● the registration of vessels and mortgages;
● the framing of shipping policy and statutory regulations;
● the application and monitoring of statutory and other safety legislation (in
England, for example, the Maritime and Coastguard Agency is responsible
for applying legislation formulated by the Ministry of Transport (Shipping
Policy). For other industries, such as offshore oil production, safety policy
is effected through the Health and Safety Executive);
● conducting accident investigations (such as MAIB, the Marine Accident

Investigation Branch of the MCA);

● employment and social security legislation;
● the national presence at IMO and similar international bodies;
● taxation as it is applied to shipping;
● customs and excise?
3-059 This is not an exhaustive list, but hopefully gives a feel for the areas of
importance. It is also important to be aware of unilateral action that may impose
additional obligations. There is currently a debate underway between nations
that feel that IMO is not as fast and effective as it needs to be in framing and
implementing legislation and those that see problems arising from an increase
in uncoordinated national legislation. Perhaps the prime example of unilateral
action is the Oil Pollution Act enforced by the United States Coast Guard.
3-060 Another increasingly important aspect of the role of national agencies is in

undertaking port state control inspections to check compliance with the ISM
Code and STCW 95. Again, this is not legislation that emanates directly from
IMO but depends upon collaborative action by governments within a
geographical area. In Europe, governments signed a memorandum of
understanding in Paris (the Paris MOU) through which they regionally (and
internationally) coordinated their right under individual national legislation to
inspect ships on arrival in their ports for compliance with the ISM Code and, in
the event of serious non-compliance, their right to detain a ship.
3-061 Port state control inspections are a central element within the current regime of
enforcement. It will be interesting to see what regime is put in place to monitor
ship security under SOLAS Chapter XI and the ISPS Code. The role of flag
states and port state control inspections are discussed in Module 4.
1.8.2 Classification Societies
3-062 Classification societies perform a wide variety of services for the shipping industry,
ranging from the purely commercial to the statutory. In recent years, competitive
pressure to gain more business through a more commercial approach has caused
the societies, and the industry, some soul searching. The classification societies,
mainly through the International Association of Classification Societies (IACS), are
one of the more important and influential NGOs influencing the IMO’s debates.
3-063 There always has been a tension in the role of the classification societies in that
they are retained by the shipowner to provide information required by third parties.
This started with the growing insurance market centred on Lloyd’s in London.
Increasingly, the widening circle of “names” underwriting the ship needed to know
if a ship was well constructed and in a suitable condition to undertake the
proposed voyage. Thus, Lloyd’s Register of Shipping came into being with its
familiar notation of 100A1, later to be extended to cover machinery (LMC). This
notation is usually coupled with the Maltese Cross to denote that not only has the
ship been surveyed to Lloyd’s Register standards, but that her construction and
the manufacture of her equipment have both been carried out under survey.
3-064 Classification society notations, like the rules that regulate the design of ships,
have become increasingly complex and more comprehensive over the years. This

area of the generation of rules for ship design and the subsequent survey of a
ship against those rules remains a central part of the service provided by the
various classification societies. It is important to understand that the rules are
generated by and belong to the individual societies. It was in this area, with a
perhaps over enthusiastic (or competitively driven) response to the shipowner’s
desire for greater deadweight (cargo carrying capacity) and lighter scantlings
(lighter frames and plates) that, for a period, societies were accused of having
erred towards profit driven motives as opposed to professional judgement.
3-065 It is worth diverging here to recap. Over the past 40 years, the structure of the
industry has changed from predominantly vertically integrated organisations with
well understood, if sometimes competitively inflexible procedures. Frequently, they
have been replaced by horizontally integrated organisations contractually linked to
form operating units. While procedures and processes abound, they live more and
more in a paper world of “operating policies” than in the hearts and minds of the
sea and shore staff. Less overall responsibility is “owned” by any one organisation
or individual, to use a modern management expression. The requirement under the
International Safety Management Code (ISM Code) to identify a designated person
with identifiable, legal responsibility for safety is a direct response to this trend.
3-066 The classification society’s role of producing construction rules and regulations
and surveying against them gave the societies an expertise (and integrity) that is
frequently used by national governments. In the more established shipping
nations, “class” is frequently charged with the right to undertake certain statutory
surveys, the load line survey being a prime example and one which leads directly
to the appearance of a classification society’s initials on the Plimsoll mark.
3-067 In a number of countries, especially those offering what are frequently referred
to as flags of convenience, whole areas of marine administration may be sub-
contracted to one or more classification society. Statutory rules, derived from
international (IMO) convention and made into individual national law, and the
individual classification society’s construction rules lie closely together. It is
important for the ship manager to understand which is which.
3-068 In addition to their regulatory role, classification societies have expanded their
business in a number of other directions. One direction is in the provision of
commercial ship design services extended, in some cases, to offering computer
models to aid ship investment decisions. In another, they have extended their
functions by offering quality audits (based around ISO 9000) and, in a reflection of
their statutory role, by auditing ISM Code compliance on behalf of certain flag states.
3-069 The International Association of Classification Societies (IACS), can take credit for
two recent initiatives. One is providing a forum through which the processes and
procedures of the former communist eastern bloc classification societies can
become compatible with the “western” approach. The other is encouraging member
societies to re-address the balance between commercialism and competition.
3-070 The current members of IACS are:

American Bureau of Shipping ABS
Bureau Veritas BV
China Classification Society CCS

Det Norske Veritas DNV

Germanischer Lloyd GL
Korean Register of Shipping KR
Lloyd’s Register of Shipping LR
Nippon Kaiji Kyokai NKK
Registro Italiano Navale RINA
Russian Maritime Register of Shipping RS
3-071 Classification societies do enjoy a privileged legal position. This was reinforced
(under English law) in the House of Lords decision in Mark Rich & Co v Bishop
Rock Marine Co (The Nicholas H) [1996] 1 AC 211. In mid voyage, the Nicholas
H was forced to put into port because of a crack in her hull. A surveyor, acting
on behalf of the classification society, carried out inspections and recommended
that, after repairs specified by him, the vessel could continue upon her voyage.
Unfortunately a few days after leaving port the vessel sank with the loss of all
her cargo. The cargo owners brought an action against the repairers and the
classification society alleging a breach of the duty of care.
3-072 Without delving into the arguments surrounding “foreseeability” and the duty of
care, the House of Lords held that even on the assumption that the surveyor had
acted negligently, it would not be fair or reasonable to impose a duty of care. Their
Lordships argued that classification societies are independent and non-profit
making utilities, created and operating for the sole purpose of promoting the safety
of lives and ships at sea, fulfilling a role that would otherwise have to be fulfilled
by flag states. To impose an absolute duty of care would impose a burden on
shipowners who ultimately have to bear the cost and would be at variance with the
international contractual structure between shipowners and cargo owners set out
in the Hague Rules (and their successors, the Hague-Visby Rules).
3-073 Equally, in Reeman v Department of Transport [1997] 2 Lloyd’s Rep 648, the
Court of Appeal held it not fair, just and reasonable to impose a duty of care on
a DoT surveyor charged with the duty of certifying ships under statutory
provisions aimed at promoting safety at sea.
3-074 Classification societies have been discussed at some length for two reasons.
Not only do they play a key, and very useful, role that every ship manager should
understand; they also reflect many of the tensions, mistakes and re-adjustments
that have affected the whole of the shipping industry over the last 40 years.
1.8.3 Surveyors, Auditors and Inspectors
3-075 Every ship in port, as masters and superintendents know only too well, is visited
by a wide range of surveyors, auditors and inspectors, each of whom imposes a
need for time and attention upon the hard pressed crew resource. It might be
difficult in the pressure of ship arrival and clearance and the commencement of
cargo operations (and probably repairs, crew change, bunkering and storing) but
each visiting surveyor or auditor must be individually identified and his reason
for access and inspection clearly defined.

3-076 One of the first questions that needs to be answered is the authority requiring or
requesting the audit or survey?
Once this is known, it is possible to start to prioritise; as a general rule, no

surveyor or auditor should be on board unaccompanied – if possible this should
be an absolute rule, even to the extent of placing additional staff onboard.
3-077 As well as being carried out for different principals, from port state control to
prospective charterer, audits, surveys and inspections have a different function
and process.
1.8.4 Types of Survey
3-078 Surveys can range from the predominantly factual to those that are based
largely on the surveyor’s professional interpretation of a range of what may be
far from complete facts and evidence. It is important that the ship understands
what sort of survey is to be undertaken.
3-079 At one end of the scale is the factual survey. A documentary survey is a prime
example of this – either the documents are in place, valid and in date, or they are
not; there is little room for negotiation, the printed and duly authenticated word is all.
3-080 Surveys against precise specifications, such as hull and machinery surveys against
statutory or classification rules, are another area where precise and factual surveys
can be achieved with evidence frequently being available from precise
measurements such as ultrasonic measuring equipment. Here, the variable element
arises from the extent or accuracy of measurement that the surveyor is able to
undertake within the constraints of the time and resources available to him. Even if
the minimum percentage of measurements required is specified, problems of
access and the surveyor’s experience and professional ability to concentrate
resources on the critical areas or aspects will directly affect the quality of the survey.
3-081 Cargo surveys are another example of surveys where, although precise survey
requirements may be stated, the dimension of the task and often the very
quantity of material to be surveyed, means that the quality of the survey
depends upon the surveyor’s ability to base the resultant report on a truly
representative selection of discrete samples.
3-082 As the surveyor moves closer towards an audit of performance, such as in the
case of an ISM Code audit, so value judgment, backed by experience, plays an
increasing role together with an understanding of management systems. To take
an obvious example, even if a vessel is able to lower and launch a lifeboat in
port, or don and deploy fire-fighting equipment, to what extent does this mean
that the crew could fight a fire effectively or rescue a man lost overboard?
3-083 The other important element that the surveyor should always bear in mind is the
quality of the evidence on which he is basing his findings. Is, for example, the document
which is being checked an original, a true photocopy or to a greater or lesser extent
modified or fabricated? In the case of electronic or mechanical measurements the
surveyor needs to know how well the equipment is calibrated and how accurately it
is functioning in the (often adverse) conditions of the survey. Finally, there is
the evidence and information provided by the people involved – ship’s crew,

stevedores etc. The surveyor or auditor uses his or her skills to evaluate the human
input and to penetrate beyond the evidence that may be first presented.
3-084 Inspections, surveys and audits have, to a degree, a parallel with the
management cultures of blame, compliance and of self-regulation. Inspections
are used, particularly in manufacturing, to ensure that the end product meets a
defined specification. Failure to pass inspection results in rejection. It is, in
general terms, a static and reactive approach to ensuring quality.
3-085 A survey, on the other hand, tends to incorporate a view of an object’s ability to
meet certain standards, not just at the time of survey but on into the future (for
the defined survey period at the very least). As such, it is a more pro-active
approach to ensuring continued compliance with regulations.
3-086 Auditing tends to take into account the human factor and the dynamics of
management to a much greater extent.The International Standards Organisation (in
ISO 10011 – Guidelines for Auditing Quality Systems) defines a (quality) audit as:
● “a systematic and independent examination to determine whether quality

activities and related results comply with planned arrangements”; and
● “whether these activities are implemented effectively and are suitable to

achieve the stated objectives.”
3-087 The International Register of Certificated Auditors (IRCA), part of the London-
based Institute of Quality Assurance, defines the following types of audit:
● first, party (internal) audits performed within an organisation by that

organisation’s auditing function;
● second, party audits where, for example, an organisation audits a supplier

or contractor;
● third, party audits undertaken by an independent certification body (such

as the flag state administration in the case of the ISM Code).
3-088 Superintendents need to understand the purposes of, as well as the differences
between, inspections, audits and surveys as well as the authority behind them.
SELF-ASSESSMENT QUESTIONS
1. How does the commercial and the technical management

of ships differ?
2. Which organisations are responsible for generating

international maritime law?
3. What two roles do classification societies undertake?

2. INTERNATIONAL TRADE AND THE
EMPLOYMENT OF SHIPS
LEARNING OUTCOMES
● describe how trade drives demand for shipping;
● state the different ways in which ships are employed; and
● define the inter-relationship between shipper, receiver and

the cargo.
2.1 A TRANSACTION FUNDAMENTAL TO THE DEMAND FOR SHIPPING
3-089 The shipping industry, like other industries involved in transportation, is not
immune to technological change. Initially in the ability to build larger and more
complex vessels and latterly in the area of communication and information
technology, the industry has seen significant changes over the last three
decades. Nevertheless, certain aspects of the operation of ships are deeply
conservative, especially on the commercial side where shipping and
international trade meet.
3-090 There is a shipping industry because, somewhere in the world, a producer

wishes to sell a product or a commodity, and somewhere else in the world, a
consumer or a manufacturer wishes to buy that product or commodity. Assuming
that the buyer and the seller can agree a price, they have two challenges to
overcome before their transaction can be successfully completed.
3-091 They need to agree:
● who will be responsible for transporting the goods from seller to buyer; and
● how the transaction will be financed.
3-092 Once this is agreed, they can produce the sales contract, the primary document
behind the movement of virtually all cargo at sea.
3-093 The linkage between these two transactions; a flow of (physical) goods in one
direction and a flow of money (probably electronically) in the other, is a
document called a bill of lading. This is the principal document against which the
buyer’s bank may be requested to release some millions of dollars against the
future delivery of goods that the buyer may not have seen, that are not in his
possession and are, or are about to be, exposed to “the perils of the sea” on
some unknown or little known vessel.

International Trade and the Employment of Ships Module 3
3-094 This piece of paper, the bill of lading, is also the document that the ship’s master
(or agent) signs on behalf of the shipowner establishing:
● the safe receipt of the goods on board;
● their quantity and quality;
● their eventual safe and timely delivery; and
● it also provides evidence of the contract of carriage.
3-095 Within this general concept there are a number of factors which may add
complexity and risk. These include:
● Where does the journey commence and end?
● Who arranges the transportation?
● Who insures the cargo and where does the risk lie?
● How many times does ownership change during the course of transportation,
i.e. is the cargo sold and resold and who holds valid title to the goods?
● How complex is the financing and what security is required?
3-096 An increasing consideration, especially since the loss of the tanker Erika in
December 1999 (and Prestige in 2002), is what is the quality of ship used and
who will bear the liability for selecting that ship?
To put it another way, to what extent should flag state registration guarantee the
suitability and seaworthiness of a vessel?
Similarly, what does classification society endorsement signify and should the
shipping industry need to rely on surveys by, for example, individual oil
companies and the P&I Clubs?
Should, indeed, the industry have to rely on port state inspections, carried out at
the receiving ports, in other words, after the voyage (and major risk)?
3-097 Below these concerns are the areas of more direct interest to the shipowner or
manager in so far as he has more influence over them:
● Is the packaging or containment for the cargo correct?
● Is the delivered quantity and quality correct?
● Can the ship meet the necessary schedule?
● Who is responsible for instructing the master, e.g. the owner or the ship-
per or receiver?
● Does the contract of carriage impose any unacceptable burdens on the

ship or its owner?

Module 3 International Trade and the Employment of Ships
and, by no means least;
● Does the proffered freight rate make a satisfactory contribution to the

trading, operating and financing costs of the ship?
2.2 TRADING PATTERNS
3-098 While trading patterns are perhaps more associated with the role of the
commercial management and employment of a ship, they will also influence the
technical operation and an understanding of their influence will assist the
superintendent in the efficient planning of repairs, storing, crew changes, dry-
docking and general maintenance.
3-099 In certain cases, and particularly the liner trades, ship schedules are set months
in advance and the superintendent’s focus may be more on weather patterns as
maintenance is planned or on air fares as crew changes are planned.
3-100 For ships employed on the tramp trades, both liquid and dry bulk, economic and
seasonal factors will influence the vessel’s trading patterns. The general level of
economic activity will, quite obviously, affect the demand for tonnage. For
example, lower economic activity, less demand for steel resulting in a lower
demand for iron ore and coking coal and, therefore, freight rates fall and ships
are released back onto the market.
3-101 This is an obvious time to catch up with maintenance and, if possible, undertake
major repairs and dry-docking. Conversely, this is also a time of reduced
earnings, restricted cash flows and owners are understandably not enthusiastic
about bringing forward expenditure that can be delayed. Equally, a period of rising
freight rates is not the time an owner wants to hear that a ship must be taken out
of service for dry-docking. Especially if the trading operation of a ship is carried
out by a different organisation, the technical managers should make every effort
to discuss trading patterns, predictions of employment and the proposed
programme for repairs with those responsible for commercial operations.
3-102 Seasonality can affect ship usage and trade in two ways. Winter, especially
in the northern hemisphere, can be expected to generate an autumn demand
for shipments of crude oil and fuel oil. A warm winter may result in a
significant fall-off of tanker demand although sudden peaks may appear
following cold spells. Shipowners tend to take a jaundiced view of ship
managers who have taken or need to take a vessel out of service at these
(relatively) predictable moments. An understanding of the general level of
fuel stocks in the major consumer countries can be useful information for the
ship manager.
3-103 Seasonality also affects agricultural production, in respect of both the timing and
the quantity of cargo moved. Grain and rice are the most important agricultural
commodities and have a major influence on the overall level of freight rates in
the dry bulk trades.
3-104 Voyage length is another very direct influence on freight rates. Grain, for
example, is traded from South America into the Mediterranean and from
Australia into the Far East. If, however, the harvest is bad in one of these growing

regions, grain may be imported from Australia into the Mediterranean. The
significantly longer voyage time has a much greater effect on demand than the
pure tonnage moved might indicate.
3-105 Thus, the movement of goods in tonne-miles can be a better indicator of

potential demand than tonnage alone. The table below gives an indication of the
main movements of two staple bulk commodities, crude oil and grain, at the turn
of the millennium on two or three trade routes.
Commodity From To Tonnes Tonne-Miles

(million) (billion)
Crude Oil Venezuela USA 181 325
Middle East USA 119 1,358
West Africa USA 79 400
Grain US Gulf Far East 34 347
US West Far East 18 103
River Plate Mediterranean 11 66
River Plate Far East 8 81
2.3 EMPLOYMENT: LINER TRADES AND TRAMP TRADES
3-106 The profitable employment of the shipowner’s asset is, at all times, a central
consideration for the ship manager, whether or not he is tasked with this role.
Employment can, in broad terms, be divided into two approaches:
● scheduled liner trades; and
● open market tramping operations.
3-107 While the earning potential of all shipping is sensitive to the world’s
economic health, bulk carriers and tankers operating on the spot (voyage)
market are exposed to the most volatile fluctuations in their earning and
superintendents need to be aware how dramatic this can be and how it can
affect the shipowner in two related ways. The first is, on a falling market, the
obvious tightening of the owner’s cash flow that may have a rapid and direct
effect on the superintendent’s budgeted spending. The shipowner’s position
is further adversely affected by the accompanying drop in vessel values; this
will attract the rapid attention of the owner’s bank and other lenders and may
well cause them to limit overdraft availability. The table below shows the
volatility of the tramp market (both dry cargo and oil) over the period
September 2004 to September 2005, as well as the relative stability of the
liner (container) sector.

* based on 350 trading days.
While the higher charter rates may be seen as a bonus, Panamax bulk carriers
rates dipped as low as $5,590 per day in June 2002 (equivalent $2.1 million per
annum) and VLCCs to $10,000 per day in September 2002. Budgeting and
maintaining maintenance and training programmes under such downturns
becomes a real challenge for owners and managers. This volatility and the
inevitability of trading cycles is well illustrated by the table contained in Appendix 3.
2.3.1 Liner Trades
3-108 Ships, predominantly general cargo vessels (sometimes called “break-bulk”),

container vessels and roll-on/roll-off vessels, provide a service by offering space
in their holds (or on deck) for the carriage of parcels of cargo. They sail on
predetermined routes and on published sailing schedules and must accept
cargo proffered for shipment at their published freight rates. This obligation to
accept all (suitable) cargoes is based in the concept of the common carrier.
Within these constraints, the liner operator maintains total control over the ship
and its operation.
3-109 The common carrier has (under English law) an absolute liability for the safety
of the goods entrusted to him. Common law admitted few exceptions to this strict
liability and these exceptions can be encapsulated as:
● “act of God”;
● “Queen’s enemies”; and
● “inherent vice (of the goods)”.

3-110 Not surprisingly, the common carrier endeavoured to mitigate this strict liability
through a variety of limitation clauses in charterparties and bills of lading.
Perhaps surprisingly, the courts have tended to uphold these bargains limiting
liability, and the liner trades of today operate much more closely to the criteria of
proven negligence. Nevertheless, the concept of the common carrier and
absolute liability is important as it is the starting point from which grew an
ongoing legal negotiation between cargo owner and shipowner regarding the
division of liability and the shipowner’s right to limit that liability.
3-111 This negotiation continues and the Hamburg Rules, as a more cargo friendly
alternative to the Hague and Hague-Visby Rules, is but another phase of the
ongoing negotiation between carrier and cargo (see Section 2.6 for an
explanation of these Rules).
2.3.2 Tramp Trades
3-112 The alternative to the common carrier is the private carrier. Here the shipowner
offers his vessel under contractual terms negotiated between himself as
shipowner and the owner of the goods to be shipped. However, reality is not that
simple and, as will be described later in this module, there are two contracts
which affect the carriage of the goods: the charterparty and the bill of lading,
both inter-related but performing slightly different functions.
3-113 Furthermore, the owner of the goods may change during the course of the
contract of carriage. The new holder of the bill of lading (giving him title to the
goods) will not have been a party to the original (bill of lading) contract between
shipper and shipowner and is likely to be even further removed from any
charterparty contract.
3-114 Since it is a basic concept of English law (and thus of most maritime law) that
only those parties to a contract have rights under it, legislation has grown up to
protect the interests of, effectively, the receiver of the goods. At this stage, it is
sufficient to understand that a private carrier’s liability is not absolute but is
based on negligence. Put briefly, this means that negligence by the owner’s
servants, basically the master and crew, is excepted. There are, not surprisingly,
many exceptions and qualifications.
3-115 The essential elements of the main three types of charterparty are set out below,
together with the two versions of a bill of lading. This is merely an overview and
each will be discussed in more detail, either later in this module or in other
modules.
2.3.3 Bareboat Charters
3-116 Here the beneficial owner passes his operational rights and responsibilities on
to the charterer, although he may retain some or all of the responsibilities for
insuring the vessel. A bareboat has little direct influence on contracts for the
carriage of goods and is sometimes referred to as a demise charter. In this
period of heightened security and the demand for transparency of ownership, it
can be expected that the bareboat owner will be drawn further into the

responsibilities of ownership and management. An important element for the

superintendent is who provides the insurance for hull and machinery.
2.3.4 Time Charters
3-117 A time charter has two important features:
● it is a contract for the whole use of a vessel, not just the hire of hold or tank
capacity within the vessel; and
● it passes to the charterer the right, and indeed duty, to give instructions to
the master with regard to the employment of the vessel.
3-118 Since a time chartered vessel may be fixed on a voyage charter, and then sub-
chartered again, the master becomes the servant of many interests:
● owner;
● time charterer;
● voyage charterer;
● shipper; and
● receiver.
He has both to serve and protect all their interests. The shipowner or ship
manager must be able to advise the master on his responsibilities under such
circumstances which is why the superintendent needs a good understanding of
the interrelationships between the various parties involved in the transportation
of goods by sea.
2.3.5 Voyage Charters
3-119 Under a voyage charter, the charterer’s rights and responsibilities are very
different and so is the master’s role. The charterer, or cargo owner, is in effect
requiring the master to:
● load a nominated cargo or several parcels of cargo in the nominated

port(s) or berth(s) between specified dates;
● take responsibility for the goods by signing (a set of) bills of lading;
● transport the cargo or parcels of cargo safely;
● deliver the same quality and quantity of cargo to the named destination(s); and
● take responsibility that it is delivered to the right consignee/receiver.
3-120 The shipper takes responsibility for loading and discharging the cargo within an
agreed timeframe (the laytime) and is financially penalised (by demurrage) or

rewarded (by dispatch) if the process of loading or discharging takes more or

less time than negotiated in the charterparty.
3-121 The precise identification of who is the shipper, the cargo owner, the charterer,
the consignee and the receiver at any given stage of a voyage and their
responsibilities at that time can be complex. It requires an understanding of the
fundamental legal principles combined with the facts of that particular voyage as
contained in the various contracts of affreightment (charterparties, bills of
lading). One way to clarify the situation is to draw a diagram, similar to Diagram 3
on page 3-35, comforted by the knowledge that senior maritime lawyers also
need such aids from time to time.
3-122 In contracting the vessel to undertake this assignment the charterer is not
issuing the master (and, by implication, the ship manager) with detailed
instructions but is relying on his professional competence to prosecute the
voyage expeditiously and with due despatch.
2.4 CARGO AND THE TRANSFER OF RISK AND TITLE
3-123 The whole reason for merchant ships is to carry cargo as quickly and as
economically as (is safely) possible from place to place. Whether the proviso in
the preceding sentence is in a parenthesis or not in many ways encapsulates
the challenge faced by the shipping industry. The pressures imposed by “as
economically as possible” are generally well known, if not always well managed.
Managing the choice between quality and safety, repairs or economies, training
or no training budget creates a constant tension and is a fundamental part of the
superintendent’s job.
3-124 Perhaps less well recognised is the pressure generated by the need to deliver
“as quickly as possible”. That time is money is a well-known mantra but the link
between time and risk profile is sometimes less well understood. Time, in a busy
schedule for crew to rest or to familiarise themselves with a new ship, time to
slow down in inclement weather are all pressures that the modern ship master
has to face and he or she will, from time to time, need the support of an
understanding superintendent. In order to understand how this time pressure is
generated and how it might be effectively ameliorated – hopefully without loss of
earnings – the superintendent needs an understanding of the commercial
business of trade.
3-125 Reference has already been made to security and the increased security
requirements that will be generated by SOLAS and the ISPS Code. Alongside
this, there will be increased cargo security and an increased need to understand
cargo movement and cargo documentation.
3-126 The “cargo owner” may change a number of times during the course of a voyage
and, with containerisation leading the continual increase of through transport,
the “voyage” for some cargoes may now extend far beyond the “ship’s rail” and
the port. A cargo owner’s interest in the cargo may also change during the
voyage as the risk in the cargo (the responsibility for insuring the cargo or
bearing the cost of its loss or damage) will frequently pass at a different time
from the title, or ownership, of the cargo. As well as the cargo owner and the
insurer, there is also likely to be a financing bank with its own interests to protect.

3-127 As stated earlier, the first stage in the ultimate movement of a cargo by sea is
the negotiation of a sales contract that will establish the terms of trade. This will
involve a buyer and a seller, and the buyer may well be a trader planning to sell
on the cargo during the voyage.
3-128 A range of influences, including the relative negotiating strengths of the

buyer and seller, and indeed, their negotiating skills, will affect the terms
under which the sale is contracted. The most commonly used terms of trade
have been codified by the International Chamber of Commerce and are
known as Incoterms 2000 and these frequently form the basis of the initial
sale contract.
3-129 There are 13 different terms of trade, falling into four groups, and they address
the following ten considerations which must be undertaken by either buyer or
seller in order to execute a successful transaction:
1a. Provision of the goods in conformity with the contract (seller).
1b. Payment of the price (buyer).
2. Provision of necessary licences, authorisations and other formalities.
3. Contract of carriage (and insurance).
4. Giving (or taking) delivery (title).
5. Moment of transfer of risk.
6. Division of costs.
7. Notices.
8. Proof of delivery, transport documentation or equivalent electronic

message.
9a. Marking, checking and packing (seller).
9b. Inspection (buyer).
10. Other miscellaneous obligations.
3-130 It should be apparent how the decisions made by buyer and seller when
negotiating the sale contract flow directly into the contract of carriage. The
superintendent is, therefore, well advised to be aware of the 13 Incoterms,
summarised below, that define delivery terms and the passing of risk and
title:

2.4.1 Incoterms
Group E: Departure
EXW Ex Works (named place)
Group F: Main Carriage Unpaid
F signifies that the seller must hand over the goods to the nom-
inated carrier free of risk and expense to the buyer.
FCA Free Carrier (named place)
FAS Free Alongside Ship (named port of shipment)
FOB Free On Board (named port of shipment)
Group C: Main Carriage Paid
C signifies that the seller must bear certain costs even after the
critical point for the division of risk for loss or damage has been
reached.
CFG Cost and Freight (C&F) (named port of destination)
CIF Cost, Insurance and Freight (named port of destination)
CPT Carriage Paid to (named port of destination)
CIP Carriage and Insurance Paid to (named port of destination)
Group D: Arrival
D signifies that it is the seller’s responsibility that the goods

arrive at the stated destination.
DAF Deliver at Frontier (named place)
DES Delivery ex Ship (named port of destination)
DEQ Delivery ex Quay (Duty Paid) (named port of destination)
DDU Delivery Duty Unpaid (named port of destination)
DDP Delivery Duty Paid (named port of destination)
3-131 It is worth noting that the frequently used term “shipper” can have two meanings
within the context of contracts of sale and also contracts of carriage. Thus, for
example, the term “shipper” signifies both the person handing over the goods
and the person who makes the contract with the carrier: however, these two
“shippers” may or may not be different persons. For example, under a FOB
contract, the seller would hand over goods for shipment and the buyer would
make the contract of carriage, thus becoming the shipper.

2.4.2 Documentary Credits
3-132 Closely linked to virtually all commodity transactions is insurance (the subject of
Chapter 3) and finance. A process known as a documentary credit provides by
far the greatest majority of trade finance. The process of establishing a
documentary credit is relatively straightforward and has the advantage to the
seller of providing a confirmed method of payment.
● The buyer and seller conclude a sales contract providing for payment by
documentary credit.
● The buyer instructs his bank (the issuing bank) to issue a credit in favour
of the seller (the beneficiary).
● The issuing bank asks another bank, usually in the country of the seller, to
advise the seller and perhaps also add its confirmation to the documen-
tary credit.
● The advising or confirming bank informs the seller that the credit has been
issued.
3-133 For settlement, the seller sends the documents evidencing the shipment to
the nominated bank where the credit is available. After checking the
documents, the bank then pays the seller and passes the documents on to
the issuing bank to ensure that its payment to the seller is reimbursed. Finally,
the issuing bank uses the documents to secure its reimbursement from the
buyer.
3-134 From this brief description, it is clear why this method of finance is called a
documentary credit and a central document is the bill of lading, possibly
supported by a survey report on the cargo. This goes a long way to explain
why banks will generally only accept clean bills of lading, that is, bills of
lading that normally stipulate that the goods were “in apparent good order
and condition when accepted”. Masters frequently come under extreme
pressure from charterers and shippers to sign “clean” bills of lading. While
this is a matter that must be resolved commercially, understanding and
support from the technical managers is important; an underlying principle is
that if the bill of lading as signed does not match the quantity or apparent
quality of the cargo loaded, the responsibility at the first instance lies with the
shipowner.
3-135 Module 6 and Specialist Module A, respectively, focus on the maritime law as it
affects contracts of carriage and charterparties and the issue of bills of lading.
2.4.3 Cargo Documentation
3-136 A wide range of documents can be involved in the international trading and
transportation of cargoes. As a ship manager’s task is often to distil clear voyage
orders from a complex, contractual arrangement, an understanding of the
principal documentation is essential.

3-137 Diagram 3 on the following page provides a simplified illustration of a cargo

transaction and voyage charter. As stated, especially if time charters are
involved or if vessels are sub-chartered, carrying parcels of cargo for different
interests or the cargo is traded during the voyage, the situation becomes much
more complex. A diagrammatic approach to depicting the contractual
relationships is often a useful first step in analysing a situation.
2.4.4 Sales Contract
3-138 The transaction which leads to the transportation of goods by sea is initiated by
a sales contract. Although this is rarely, if ever, seen by the master or even the
shipowner or his chartering department, it contains the basic data against which
the (voyage) charterparty is constructed.
3-139 Sales contracts may be complex and detailed documents relating to specific
cargoes sold on specific terms (for example, the Grain and Feed Trade
Association (GAFTA) provides a range of standard sales contracts) or much
more abbreviated telex or electronic data transmissions and these are common
in the oil industry. The sales contract should provide the basic information about:
● the origin and place of loading of the cargo together with the dates on
which it will be ready for loading. This can be of critical importance as there
may be a contractual requirement to ship a certain quantity within a spec-
ified period or the sales price may be decided by an (end of month) index
relating to the month in which the cargo was loaded and bills of lading
issued;
● the quality and quantity of cargo and possibly the agreed method of test-
ing for quality;
● the terms of trade and documentation requirements; and
● details of insurance requirements.
3-140 As already mentioned, much of this information is codified by the 13 Incoterms.
2.4.5 Certificate of Origin
3-141 With complex international trade agreements and export/import quotas, not to
mention trade sanctions, this is an important document. It should not affect the
vessel directly but unfortunately it has been known for the contravention of
export or import regulations to result in the detention of, or a fine on, the vessel
rather than the errant charterer.
3-142 Again, with the imposition of stricter anti-terrorist legislation, both internationally
through IMO and the World Customs Organisation (WCO) and unilaterally (the
United States’ Container Security Inspections) Certificates of Origin and their
verification are becoming increasingly important. If cargo owners fraudulently or
accidentally make mistakes in their cargo documentation, there is little doubt
that the ship will be held at least partially accountable and probably detained or
delayed.

Diagram 3
The Cargo Transaction and Voyage Charter

2.4.6 Certificate of Inspection, Quantity and Quality
3-143 The key point to understand here is that the buyer may have survey reports
reflecting a quantity and/or quality which is different from that pertaining at the
point of loading when the vessel’s responsibility commences. In general terms,
the master is not expected to be a expert in the condition of the cargo but is
expected to give an opinion as to where the cargo “appears” to be in good order
and condition as described in the bill of lading. It is important that the vessel can
demonstrate that it took its responsibility to “carefully load and stow” seriously.
Officers should be about the deck, noting cargo and weather and keeping a good
log of events. In the event of a dispute, this first hand evidence will be invaluable.
2.4.7 Commercial Invoice
3-144 This establishes the value of the cargo and will be important in any dispute for,
for example, short delivery. The invoice value may, however, be substantially
different from the commodity’s open market value. For some commodities,
values are established by international price indices at a certain date, for
example the last trading day of the month in which the goods were loaded on
board. This explains why it is so important that a master is not pressured into
signing for cargo before it is physically all on board (pre-dated bills).
2.4.8 Cargo / Customs’ Manifests
3-145 This is the document that contains the complete specifications of the cargo with
the intended destination that has been loaded by a vessel. This is an essential
source of information, especially if many parcels of cargo (or containers) are
being carried.
3-146 The same security implications attach to the manifest as attach to the certificate
of origin. Especially for container shipments, the USA is requiring a ship’s
manifest to be lodged (with US Customs) at least 24 hours before the vessel
commences loading and a similar declaration is expected to become an
international requirement.
2.4.9 Certificate of Insurance
3-147 This has been introduced to substitute the original floating policies for individual
shipments which are normally held by the bank or consignee. The certificate of
insurance will show proof that the responsibility for insuring the cargo has been
established under the terms of trade.
2.4.10 Bill of Lading
3-148 The traditional route of tally sheets being used to prepare a mate’s receipt, with
the mate’s receipts being exchanged for the bill(s) of lading is a logical and well
established practice, if not one which is always followed. Nevertheless, evidence
from “original” sources such as a tally sheet, whether paper or electronic based,
can be compelling evidence in a court of law or arbitration and every effort should
at all times be made to trace source documents. Once again, officers should
understand their responsibility to the cargo that is entrusted to their care.

3-149 The three basic functions of a bill of lading, as stated earlier, are:
● as evidence of the terms of a contract of affreightment;
● as evidence of shipment of the goods; and
● as a document of title.
3-150 There are a number of different bills of lading (and seaway bills where, basically,
the function as a document of title does not exist) which meet the requirements
of different trades, and a good reference document for definitions is UCP 500
(Uniform Customs and Practice) usually obtainable from a chamber of
commerce. It is important to know whether the bill of lading that the master is to
sign and against which he will later deliver the cargo is:
● an open bill whereby the cargo is deliverable to the bearer of the bill of lad-
ing without formal need for identification;
● a straight bill where only the named consignee may take delivery of the
cargo; or
● a negotiable bill where the goods are deliverable to a consignee whereby

it can be endorsed to a third party if they buy the cargo.
3-151 The other main division is between:
● a marine or ocean bill of lading, sometimes referred to as a port-to-port bill,

and used extensively in the liner trades; and
● a charterparty bill of lading which specifies that it is subject to a charter-

party.
3-152 The inter-relationship between bill of lading and charterparty is a complex issue
that has given rise to much litigation. The starting point for determining this
relationship is the incorporation clause in the bill of lading.
3-153 It is the bill of lading, not the charterparty, which brings into the contract of
carriage the international conventions (such as the Hague Rules) that control
the conditions of carriage. Although a detailed study of these Rules is not a part
of this Diploma, they do relate directly to the cargo owner’s relationship with the
shipowner, the cargo owner’s rights, the shipowner’s endeavours to limit liability
and the seaworthiness of the ship, which is discussed below.
3-154 Two final issues regarding the bill of lading, particularly relevant to the tanker
trade and, it always seems, to the late hours of Friday afternoons. The master,
or the managers will, from time to time, undoubtedly be asked to deliver a cargo
without an original bill of lading being presented or at a different port from the
one stated on the bill of lading. To do this puts the ship at risk and it is not a risk
that is covered under the cargo risks element of a ship’s Protection and
Indemnity Club cover. Although most P&I Clubs are pragmatic and will offer
advice on suitable guarantees, it is crucial that this advice is followed to the
letter.

2.5 SEAWORTHINESS AND CARGOWORTHINESS
2.5.1 Seaworthiness
3-155 The concept of seaworthiness is important in a legal context because it relates

directly to the shipowner’s right to limit his liability (Section 3.3). From a starting
point, under English common law, whereby the common carrier has an absolute
liability for the safety of the cargo entrusted to his care, the shipowner has
consistently endeavoured to widen his right to limit his liability over and above
the basic exemptions of:
● act of God;
● Queen’s enemies; and
● inherent vice of the goods.
3-156 The Hague Rules and their successors are an attempt to find an equitable
balance between the shipowner’s and the cargo owner’s rights, responsibilities
and risks. Rule 1 of Article III of the Hague-Visby Rules states:
“The carrier shall be bounden, before and at the beginning of the voyage, to
exercise due diligence to:
● make the ship seaworthy;
● properly man, equip and supply the ship; and
● make the holds, refrigeration and cold chambers, and all other parts of the
ship in which goods are carried, fit and safe for their reception, carriage
and preservation.”
3-157 To invoke his right to limit liability, the shipowner must be able to demonstrate
that both he and his servants (including the superintendent) exercised due
diligence in the responsibilities set out above. The cargo owner, shipper or
receiver who has suffered loss or damage to his cargo can be expected to
challenge the shipowner’s right to limit liability by proving that he has failed to
exercise due diligence in these matters.
3-158 Cargo claims which are resolved in court or through arbitration generally take a
number of years to resolve. The superintendent may well find himself involved in
gathering evidence in order to establish whether due diligence had, or had not,
been exercised in ensuring that a vessel was seaworthy at a particular point in
time (probably some long time after the crew has disbanded). He will first need to
clarify the precise, contractual context of the seaworthiness requirement.
3-159 The court or arbitrator will want to know:
● was the vessel seaworthy (at the commencement of the voyage and at the
time in question)?
● if not, did the owner exercise due diligence to make the vessel seaworthy?
● if not, did the unseaworthiness cause the loss or damage?

2.5.2 Causa Proxima / Causa Remota
3-160 The third point raises the issue of causa proxima or the direct, as opposed to the
indirect cause (causa remota) of an incident or loss. In the words of Scrutton:
“The seaworthiness required is relative to the nature of the ship, to the particular
voyage contracted for and the particular stage of that voyage being different for
summer or winter voyages, whilst loading in harbour, and when sailing and
varies with the particular cargo contracted to be carried.”
3-161 The sometimes elusive concept of seaworthiness also affects hull insurance and
the (British) Marine Insurance Act 1906 (sections 39 to 40) stated:
“A ship is deemed seaworthy when she is reasonably fit in all respects to

encounter the ordinary perils of the seas of the adventure insured.”
3-162 In other words, it is essential that a superintendent takes all reasonable steps to
ensure that a vessel is seaworthy at and before the commencement of every
individual stage of the voyage. Moreover, the superintendent must be able to
prove that he has done so and much of that proof should reside in the safety
ethos of the organisation.
2.5.3 Cargoworthiness and the Term “Carefully to Carry”
3-163 The Hague (and associated) Rules also introduce the concept of
cargoworthiness. This is an important consideration associated with fitness for
purpose and condition.
Is, for example, the vessel of the right type and construction, especially cargo
containment (e.g. does a tanker have the right tank coating for the product to be
carried) and condition, usually decided by survey (if of the right type, is the tank
coating in sufficiently good condition to protect the product)?
It is sensible for the superintendent to ask for a copy of the charter description
of the vessels for which he is responsible.
If the vessel is being “over-sold” the cost is likely to fall on the shipowner.
A prime example is the speed and consumption description, especially as the

vessel moves through her dry-docking cycle, but incorrect cargo deadweight
capacities are not unknown.
3-164 Even if the vessel is fit for purpose and the cargo containment is in good condition,
the owner and particularly the master have an overriding duty to carefully load,
stow, carry, discharge and deliver the cargo entrusted to the vessel. Even if the
shipper’s stevedores are loading and stowing the cargo, the master is not absolved
of a duty to ensure that, in his view and experience, the cargo is being “carefully
loaded and stowed”. In this context, the master carries a much more direct
responsibility to the eventual receiver of the goods than any shipper’s stevedore.
(This responsibility goes hand in hand with the master’s “seaworthiness”
responsibility to make sure that the cargo is so stowed that the vessel has sufficient
stability for “the envisaged voyage in the envisaged conditions”.)

3-165 It is important to bear in mind that the eventual receiver of the cargo may well not
be a party to many of the contracts involved and may have purchased the cargo
on the basis of a bill of lading, possibly supplemented by an inspection report on
the particular goods. This inspection may well have been made before the goods
were delivered for shipment and eventually loaded on board. In other words, there
may be a difference in the apparent quality and/or the quantity of the goods
between this inspection and the evidence of the mate’s receipts on loading.
3-166 The shipper will certainly not want the master’s description on the bill of lading
acting as a receipt for the goods to differ from the other documentation which he
will present to the bank in order to release the documentary credit in his favour.
Hence, pressure on the master to sign clean (unqualified) bills of lading is
frequently intense. This is an area where the master may require, and should be
able to rely on, staunch support and good advice from his owner or the ship
managers. Bearing in mind that these situations inevitably arise in the “wrong
time zone” (i.e. in the middle of the superintendent’s night) while the master is
under intense pressure to sail, the superintendent needs to have procedures in
place to support their masters. One source of support is, if available, the local
P&I Club correspondence; the owner’s agent may be another, but the ship’s
agent may frequently be appointed by or more beholden to the shipper.
3-167 Finally, although modern communications and data transmission technology are
making inroads into the relative isolation of the master and his ship, for the major
part of the marine transportation link in the transfer of goods from buyer to seller,
the master and his crew have sole care and custody of those goods.
2.5.4 Tank, Hold and Cargo Inspections
3-168 Tank or hold inspections are an integral element in ensuring that the ship is
cargoworthy and will most probably be stipulated in the charterparty if the vessel
is employed in this way. Tank and hold inspections are not always an exact
science and, in some trades, may be as much influenced by the availability of
cargo to load as to the absolute cleanliness of the tank or hold. Presentation with
clean tanks or holds, suitable for the contracted cargo, within the prescribed lay
days and before the (charter) cancellation date is likely to be an inherent term of
the ship’s voyage charterparty.
3-169 From the ship’s point of view, it can be a daunting prospect. The ship sails,
inevitably in a rush from her last discharge port, possible with a largely new crew.
The challenge is to clean the holds en route to the next loadport and the same
questions should exercise the mind of the ship’s management team and the
superintendent:
● How well were the holds or tanks cleaned at the port of discharge?
● What level of slops or residue cargo is there on board and where can it be
discharged? Will it slow down the cleaning process?
● How long is the ballast passage and what are the anticipated weather con-
ditions? How safe will it be to work in the holds/tanks?
● Is the task exacerbated by the need to change ballast water?

● Are the necessary resources available, both in manpower and equipment?
● What is the standard of cleanliness required at the loadport, bearing in

mind the comments about the availability or otherwise of cargo?
● Who has cleaned a vessel for this cargo (in this port) before? Is there suf-
ficient experience onboard?
● Will the master need assistance? Will he or she be facing a hostile com-
mercial environment?
3-170 The company must have a clear policy and procedures for hold or tank cleaning;
it is a potentially dangerous operation and one in which the ship
manager/master can easily perceive themselves under pressure to take risks
with safety. The superintendent must ensure that this does not happen.
3-171 At the loadport, the survey, whenever possible, should be joint; if it is not, it may be
a sensible expense to appoint an independent ship’s tank or hold surveyor. Good
photographs of hold and tank condition can be invaluable, together with a record of
the cleaning procedure; especially if a dispute arises and is taken to arbitration.
3-172 Even more challenging may be the need to inspect cargo. This, in most cases,
is a highly technical operation undertaken by specialists. While the master or
chief officer may be able to spot obvious cargo damage or poor quality, it is
unrealistic to expect anyone but a trained cargo surveyor to be able to give an
opinion that will stand against an expert witness.
3-173 With ship’s husbanding agents becoming less and less common and the ship
having to rely on the charterer’s agent, it may well be that the master will need
the support of the local Protection and Indemnity Club representative.
3-174 Finally, it must always be remembered that for the ship, the load survey is but
one end of the transaction. The receiver may also require a cargo survey on
discharge and the ship will need to be able establish beyond reasonable doubt
the quality of the holds or tanks and the cargo at the load port, as well as
accounting for its carriage during the passage.
2.6 CARRIAGE OF GOODS BY SEA ACT AND THE HAGUE RULES
3-175 It is necessary to establish the legal relationship between shipper and receiver
(of the cargo) and the carrier (the ship) and the role and effect of the two most
relevant contracts, the bill of lading and the charterparty. The national inclination
of the carrier is to exclude, so far as possible, responsibility for loss, deterioration
or damage affecting the cargo.
3-176 It was not until 1895 that exporters in the United States first established the legal
obligation of the carrier to provide a seaworthy vessel and exercise due diligence
in the prosecution of the voyage (the Harter Act). In 1924, European shipowners
agreed the Hague Rules that imposed two similar obligations:
● to exercise due diligence to make the ship seaworthy before the voyage; and
● to care for the cargo during the voyage.

3-177 While the first obligation is essential and overriding – and well worthy of the
attention of superintendents – it applies before the voyage, not throughout the
voyage (although the voyage may be construed as a port-to-port passage within
the overall voyage). The carriers have continued to link as many exceptions as
they can to the second obligation of which the three fundamental ones are:
1. Acts of God.
2. Fire, unless caused by the fault or privity of the carrier.
3. Negligence in the navigation or management of the vessel.
3-178 Even if liable for loss or damage, the carrier (the owner or time charterer) will still
endeavour to exercise the right to limit liability.
3-179 Two problems surround the application of the Hague Rules:
● One is consistency:
Being a convention, their legality depends upon the interpretation of the

Rules into national law (first done in the United Kingdom by the Carriage
of Goods by Sea Act 1924 updated to 1972 which, confusingly is different
from the Carriage of Goods by Sea Act 1992 – that is the modern
equivalent of the 1885 Bill of Lading Act). Thus it is quite possible for a
carrier to have outboard parcels of cargo to which slightly different
versions of the Hague Rules apply – or do not apply at all.
● The second problem is that:
(a) the Rules only applied to the cargo once it had crossed the ship’s
rail; and
(b) only applied to contracts of carriage covered by a bill of lading.
The growth of the container and through transport requirements together

with an increasing use of seaway bills gave rise to pressure for a change.
3-180 In 1997 the Visby Protocol was introduced (the Hague-Visby Rules) but it was
not widely adopted and needed the SDR Protocol of 1977 to address the value
to which carriers could limit their liability. These values were set at 10,000 gold
francs per package or 30 gold francs per kilo and were subsequently changed
to 666.67 SDRs (Special Drawing Rights – a basket of currencies) and 2 SDRs
per kilo.
3-181 In 1978, an UNCTAD Convention introduced the Hamburg Rules, which

endeavoured to re-address the balance of liability in favour of the shipper and
receiver (including bringing deck cargo within the Rules) but they also have not
been widely adopted.
3-182 It can be seen that the interpretation of contracts relating to the carriage of cargo
is complex and, arguably, not the province of the superintendent. It is, of course,
a matter that will interest the carrier’s P&I Club, as the different application of the
Rules will affect their exposure.

3-183 The Hague-Visby Rules consist of ten Articles of which the most relevant to the
master and superintendent are:
2.6.1 Article III
1. The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to:
(a) make the ship seaworthy;
(b) properly man, equip and supply the ship;
(c) make the holds, refrigerating and cool chambers and all other parts
of the ship in which goods are carried, fit and safe for their reception,
carriage and preservation.
2. Subject to the provision of Article IV the carrier shall properly and carefully
load, handle, stow, carry, keep, care for, and discharge the goods carried.
3. After receiving the goods into his charge, the carrier or the master or agent
of the carrier shall, on demand of the shipper, issue to the shipper a bill of
lading.
2.6.2 Article IV
3-184 This article excludes the carrier and the ship from liability under Article III.1 and
III.2 unless caused by want of due diligence on the part of the carrier.
3-185 Clause 2 of this Article lists a range of exceptions, Clause 3 excuses the shipper
from loss or damage sustained by the carrier from any cause without the act,
fault or neglect of the shipper.
3-186 Clause 4 is important in that it gives leave to deviate in order to save or attempt
to save life. However, deviating to bunker or store may well prejudice the carrier’s
protection and permission should generally be sought from charterers if this
becomes necessary.
3-187 The Hague-Visby Rules are set out in Appendix 1.
1. What is the effect of a ship not being seaworthy:

(a) at the beginning of a voyage; and
(b) during a voyage?
2. Who pays for the carriage (freight) if goods are contracted
under Group F of the Incoterms?
3. What is the role of the Hague Rules?

3. RISK AND MARINE INSURANCE
LEARNING OUTCOMES
● explain the need to apply risk assessment;
● describe the use of insurance and the role of the broker; and
● describe at least three of the elements of the commercial

management of emergencies.
3.1 RISK
3-188 Risk and the management of safety and security are discussed in Module 7. At
this stage it is only necessary to emphasise that the formal assessment of risk
is an integral part of ship management and must permeate the superintendent’s
thinking at all times. However, a balance is needed; in many cases risk appraisal
is a part of every task that is carried out and a balance is needed between the
need to stop, formally appraise, assess and select the optimum course of action
and the need to apply training and common sense and get on with the job.
3-189 A risk-based approach has been used for a number of years by the nuclear,
chemical and offshore industries and is increasingly being used in the shipping
industry, partly because it is a useful and practical tool at the operational level
and partly because it was required by legislation. European Union regulations on
health and safety require the application of risk assessment and risk
management is implicit in the application of the ISM Code. Furthermore, IMO
has introduced a risk-based approach for managing international legislation and
this approach is outlined below. However, the risk assessment used in, for
example, the nuclear industry, is based on what is termed a “safety case”; that
is the specific power station or processing plant (or, in the case of the offshore
oil industry, a specific production platform). Risk management used in the
shipping industry takes a more generic approach.
3-190 The application of risk management techniques ranges from relatively complex
mathematical modelling to applied common sense and therein lies part of its
problem. At one end of the scale it is too complex for the untrained practitioner
and at the other, because it is so straightforward, it is not applied rigorously
because . . . “it is so like common sense”. It is perhaps best thought of as a
management discipline that will improve decision-making, providing an
invaluable tool box of techniques which can support the proficient manager. Risk
management is closely aligned with planning – if the manager takes time to plan
he can use risk management effectively.

Module 3 Risk and Marine Insurance
3.2 RISK MANAGEMENT
3.2.1 Hazards and Risks
3-191 To understand risk assessment and risk management it is essential to

understand the difference between hazard and risk. This is best done by a
simple illustration. Assume, for example, a vacuum cleaner safely stowed in a
locker. It is in the public area of a ferry, or passenger ship, and there is little risk
of any harm or injury.
3-192 If the vacuum cleaner is left unattended, outside its locker and with a trailing
lead, the likelihood of an accident increases in terms of frequency, although the
consequences are not likely to be serious.
3-193 If the vacuum cleaner is being used with its flex stretched across the floor of a
public area, the risk of an accident is even higher and the possible injury more
severe – a broken arm or badly twisted ankle. Assume that the flex leads across
the steps down to the dining saloon – now the potential seriousness of an
accident is heightened, even to the possibility of a fatality.
Diagram 4

Risk and Marine Insurance Module 3
3-194 If the steward is late in his work and the vacuum cleaner is in this position as lunch
is announced, both the probability as well as the severity of an accident will be high.
3-195 There is little doubt that in the last scenario the vacuum cleaner is the hazard. It is
however the same vacuum cleaner and the same hazard, as when it was stowed
in its locker. It is the level of risk that changes. This understanding is critical when
concerned with hazard identification, the first step in the risk management process.
3.2.2 Risk Management
3-196 The five commonly defined steps in the risk management process are:
Step One Hazard Identification (HAZID)
This is frequently initiated by using brainstorming techniques,

as it is important to identify all possible hazards. For the same
reason, it is important to consult widely and involve people at all
levels, including those who physically carry out the operation(s)
under consideration. Take, for example, a risk assessment of
the mooring of a large tanker: the hazards and associated risks
are quite easily identified from the viewpoint of the officer
forward or after; the perception can be quite different from a
small mooring boat fifty feet below and close to a propeller that
might start turning at any moment.
Step Two Risk Evaluation and Assessment
This step requires careful and logical analysis and should not
be rushed. In normal, operational situations it is often a matter
of (carefully and systematically) applied common sense and
experience; a structured “what if?” session. In more complex
situations there is a range of risk management tools that can be
used such as fault and event tree analysis.
Step Three Development of Risk Management Plan
While a properly applied safety management culture will strive

to achieve a “nil accident” status, risk cannot be eradicated. The
aim is to keep risk “as low as reasonably possible”, generally
referred to as ALARP. As illustrated in Diagram 5 on the
following page, risk is measured in two ways:
● by consequence; and
● by frequency.
3-197 If risk assessment put an operation within the High Risk area, the correct
approach may be to cease that operation altogether or at least to cease it until
ways of significantly reducing the frequency and/or consequence of the risk can
be found. The main area of endeavour should be within the central area and the
general thrust should be to force down the frequency and consequence of risk
situations. Within this central area, risks should be prioritised and to help them

achieve this in a global and industry-wide environment, IMO have adopted the
Formal Safety Assessment (FSA) process described on page 3-49.
Diagram 5
Step Four Identification and Implementation of Risk Control Measures

Once risks have been identified, appropriate risk control
measures need to be put in place. The first decision is whether
to accept or reject the risk and if the decision is to reject it, as it
normally should be, then ways of reducing the risk need to be
identified. Three of the most effective ways of reducing risk are:
● reviewing policies and procedures and, where necessary,
modifying them;
● reviewing design and/or equipment; and
● training, including the introduction of total safety and total
quality management systems.
Another important risk control measure is the use of insurance,
whether it is in place to catch the (hopefully) remote but
(potentially) catastrophic incident such as collision or whether it
is there to cover the less significant but possibly more frequent
occurrence such as the loss of crew personal effects.
Step Five Risk Monitoring
Continuous monitoring, in the form of safety audits is, as always,
an essential element of the whole process and the company
should be striving continuously for a steady reduction in risk.

3.2.3 Formal Safety Assessment (FSA)
3-198 Formal Safety Assessment is a term that the superintendent will hear
increasingly and it is a method of applying risk assessment that has been
developed by IMO to assist it in identifying priority areas for safety (and
environmental) legislation and in delivering risk control measures that are both
effective and equitable, i.e. that endeavours to share the cost of safety legislation
between the various stakeholders in the maritime industry. The concept of
stakeholders is explored below.
3-199 The IMO Formal Safety Assessment approach differs from the safety case
approach in that its intention is to provide a generic approach across the whole
field of safety legislation rather than address a specific operation.
3-200 Thus, the approach proposed by IMO also takes a generic approach to vessel
operation and to those (stakeholders) involved in and affected by its operation,
either directly or potentially.
3-201 In developing the methodology, several studies were carried out to define a
comprehensive generic approach to the methodology as follows:
● those features, characteristics and attributes of ships and shipping com-

mon to the operation of vessels engaged in international trade;
● those people, organisations, countries or other entities affected by the

risks associated with international shipping and having a stake (financial,
personal safety, environmental or a combination of those factors) in ship-
ping which may be affected by such risks or by changes in regulations
affecting these risks (see stakeholders discussed on the following page);
● the range of accident types which could impair generic ship or shipping
functions (FSA Step One – Identification of Hazards); and
● various underlying risk exposure sources from which life threatening haz-
ards may develop (FSA Step Two – Risk Assessment).
3-202 This resulted in the identification of 14 generic ship functions that consider the
full life cycle of the generic ship. This starts with conceptual design, including all
operational stages in port, on passage and in dry dock as well as
decommissioning and disposal. The generic ship functions are:
● Mooring/towing
● Payload
● Bunkering/storing
● Navigation
● Emergency response/control
● Communications

● Habitable environment
● Manoeuvrability
● Power/propulsion
● Stability
● Pollution prevention
● Anchoring
● Structure
● Others
3-203 Equipment and system categories have been defined (e.g. control, human,
management, machinery, safety etc) and hazardous substances, ignition
sources and hazards to personnel have been identified. The generic ship
encompasses all aspects of international shipping affecting safety of life.
Generic ship definitions are also used to assist in the identification of hazards,
underlying causes, risks and risk control measures as well as identifying the
parties benefiting from and being put at risk by the shipping venture (the
stakeholders).
3-204 The concept of stakeholders is particularly important at the stage of cost benefit
analysis where the (conceptual) objective is that:
3-205 Examples of the stakeholder costs, benefits and risks that FSA endeavours to
balance are illustrated on the following page.

The principal stakeholders in the shipping industry are taken to be:
Diagram 6
Principal Stakeholders used in FSA

3-206 The generic accident categories have been identified which could impair the
function of the generic ship. These generic accident categories are used as an
aid to the hazard identification process (FSA Step One) and they are:
Diagram 7
Generic Accident Categories used in FSA
3-207 In FSA Step Two – Risk Assessment – preliminary and unquantified fault and event
tree analysis resulting from Step One’s hazard identification and screening are
developed into a risk contribution tree from which risk control options are identified
within FSA Step Three. These options are then subjected, within FSA Step Four, to
a process of cost/benefit analysis, mainly based around standard net present value
calculations, which generates a Cost per Unit Reduction in Risk (CURR). Benefits
from risk control options which can be valued, include reductions in losses or
damage to vessels, cargo and infrastructure, reduced environmental clean-up and
reduced loss of environmental amenity. Other benefits, such as reduced ecological
damage (say, from improved flue gas emissions) are more difficult to value. They
may be taken into account in FSA Step Five – the decision-making process.
3-208 Another area which causes some difficulty is finding a universally acceptable
benchmark for the value of injury or loss of life and this has yet to be satisfactorily
resolved. The philosophy underlying Step Five – Risk Monitoring – is designed to
be a forward looking approach to maritime legislation that will pre-empt media
driven reactions to major marine casualties and achieves an equitable cost/benefit
balance for all stakeholders. The main objectives of the FSA methodology are in:
● prioritising IMO’s work programme to identify areas where regulations should

be reviewed and developed, using input from FSA Steps One and Two;
● focusing data collection on the basis of needs identified from other FSA
steps;
● deciding between alternative risk control options;

● examining the effects of proposed regulatory changes on stakeholders’

costs and benefits; and
● reviewing the basis and framework of rules for the future (e.g. balance
between goal setting and prescription).
3-209 The increasing use of risk-based as opposed to prescriptive legislation is

already affecting the ways in which ship management companies work and new
skills are having to be learnt. An example of this is the decision by the
International Association of Classification Societies (IACS) to apply FSA
techniques, where possible, in IACS’s working party tasks. Thus IACS will give
training to the chairmen of working groups and this appears to be a valuable
step in implementing FSA at a level nearer to the operational level and also in
contributing to a common standard of application across the member
classification societies.
3-210 The natural outcome of any risk assessment and risk management process
leads to the decision on how risks are to be mitigated. This can include
acceptance, changes in policies and procedures, avoidance (by stopping a
particular operation or activity) or by accepting and offsetting the risk. One of the
most widely used forms of risk offset is insurance and the various forms of
marine insurance are introduced below. However, a peculiarity of the shipping
industry is the jealously guarded right of the shipowner to, under certain
circumstances, limit his liability.
3.3 LIMITATION OF LIABILITY
3-211 Like much of maritime legislation, limitation, or the ability of the shipowner to cap
his financial liability, has commercial roots that are succinctly put in the preamble
to the British Responsibility of Shipowners’ Act of 1933. It is:
“ . . . of the greatest consequence and importance to this kingdom to promote and

increase the number of ships and vessels, to prevent any discouragement to
merchants . . . which will necessarily tend to prejudice the trade and navigation of
this kingdom”.
3-212 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; if it cannot be
repealed outright, [it] deserves only a narrow grudging and constrictive
construction.”
3-213 Limitation of liability within the maritime world is a concept that sets shipping
apart from other areas of industry and commerce. It is found in both public and
private maritime law and, in general terms, this divides into:
● claims brought against the shipowners as the result of a contract for the
carriage of cargo which, not surprisingly, are mainly contractual disputes
and are governed by such private law conventions as the Hague-Visby
Rules; and

● 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.
These tend to be suits brought under the law of tort and could be governed
by either the common law, e.g. a collision case, or public statutory law, e.g.
pollution. (Tort in English law is any wrong, not arising out of contract, for
which there is a remedy by compensation or damages.)
3.3.1 Cargo-related Limitation
3-214 For cargo-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.
The carrier was exempt for loss or damage only if caused by act of God, the
Queen’s enemies or as the result of an inherent vice of the goods. Increasingly,
shipowners sought to limit their liability further by adding protective clauses to
charterparties and bills of lading and contractual terms began to displace the
common law. This was possible under English law (as opposed to more codified
law) due to the English law concept of “freedom of contract”. Shipowners and cargo
owners were free to contract on any terms that they deemed fit. This ultimately led
to inequity in favour of the shipowner which was finally resolved by international
convention, namely the Hague, Hague-Visby and Hamburg Rules.
3-215 As the era of the merchant selling goods to a buyer with the goods being
transported by an independent carrier took over from the seagoing merchant
trader, so the problem arose of the buyer or receiver of the goods not being a
party to the original contract of carriage between the seller and the carrier and
therefore prevented (under English law) from bringing a legal action under that
contract. This was eventually resolved by the introduction of the Bill of Lading Act
1855 (now replaced in England by the Carriage of Goods by Sea Act 1992),
which determines the buyer’s legal rights under the contract of carriage.
3-216 It is the Hague and the Hague-Visby Rules (and more recently the Hamburg
Rules) that establish, amongst other things, the extent to which the carrier can limit
his liability. This made trade and trading risks much more quantifiable for owner,
shipper, receiver and, importantly, insurer. It is also argued that it produced a
downward pressure on freight rates, to the general benefit of international trade.
3-217 Before being able to limit his liability, the carrier must meet certain obligations
that, in the Hague-Visby Rules, are set out in Article III, Rule 1:
“The carrier shall be bound before and at the beginning of the voyage to exercise
due diligence to:
(c) make the holds, refrigerating and cold chambers, and all other parts of the
and preservation.”
3-218 This relates directly to the concept of seaworthiness and cargoworthiness

introduced in Chapter 2.

3-219 To invoke his right to limit his liability the shipowner, must be able to demonstrate
that both he and his servants (including and, perhaps, particularly the ship’s
superintendent) exercised due diligence in the responsibilities as set out above.
A cargo owner, shipper or receiver, who has suffered loss or damage to his
cargo can be expected to challenge the shipowner’s right to limit his liability by
proving that he failed to exercise due diligence in these matters.
3-220 The level of limitation is set out in the Rules and Article IV, Rule 5(a) establishes
the extent of the shipowner’s liability (see Appendix 1).
3-221 Thus, 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,
but that he also can demonstrate this in the event of a dispute. This is best done
through the production of contemporaneous records, many of which will be
formal documents.
3.3.2 Limitation Against Third Parties
3-222 This is an area that sets shipping law apart as it introduces a concept that
prevents innocent third parties from gaining full compensation from the results
of negligence by the servants of a shipowner. The basic principle is that if a ship
has caused loss or injury, then a total sum for which the shipowner is liable can
be calculated. This sum, and no more, whether adequate or not in way of
recompense, is divided amongst all who have suffered loss or injury.
3-223 There have been three conventions dealing with tonnage limitation, in 1924,
1958 and 1976, and it is the 1976 Limitation Convention that forms the basis of
British law through the Merchant Shipping Act 1995.
3-224 Article II sets out the claims that are subject to limitation:
“Subject to Articles 3 and 4 the following claims, whatever the basis of liability
may be, shall be subject to limitation of liability:
(a) claims in respect of loss of life or personal injury or loss of or damage to

property (including damage to harbour works, basins and waterways and
aids to navigation), occurring on board or in direct connection with the
operation of the ship or with salvage operations, and consequential loss
resulting therefrom;
(b) claims in respect of loss resulting from delay in the carriage by sea of
cargo, passengers or their luggage;
(c) claims in respect of other loss resulting from infringement of rights other
than contractual rights, occurring in direct connection with the operation of
the ship or salvage operations;
(d) claims in respect of the raising, removal, destruction or the rendering

harmless of a ship which is sunk, wrecked, stranded or abandoned, includ-
ing anything that is or has been on board such ship;
(e) claims in respect of the removal, destruction or the rendering harmless of

the cargo of the ship;

(f) claims of a 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, and further loss caused by
such measures.”
3-225 Article III contains exceptions and specifically excepts claims for salvage and
contribution in general average and claims for oil pollution damage.
3-226 Article VI sets out the general level of limitation:
“The limits of liability for claims other than those mentioned in Article 7, arising
on any distinct occasion, shall be calculated as follows:
(a) in respect of claims for loss of life or personal injury:
(i) 333,000 Units of Account for a ship with a tonnage not exceeding
500 tons;
(ii) for a ship with a tonnage in excess thereof, the following amount in
addition to that mentioned in (i):
for each ton from 501 to 3,000 tons, 500 Units of Account;
for each ton from 3,001 to 30,000 tons, 333 Units of Account;
for each ton from 30,001 to 70,000 tons, 250 Units of Account; and
for each ton in excess of 70,000 tons, 167 Units of Account,
(b) in respect of any other claim:
(i) 167,000 Units of Account for a ship with a tonnage not exceeding
500 tons;
(ii) for a ship with a tonnage in excess thereof, the following amount in
addition to that mentioned in (i):
for each ton from 501 to 30,000 tons, 167 Units of Account;
for each ton from 30,001 to 70,000 tons, 125 Units of Account; and
for each ton in excess of 70,000 tons, 83 Units of Account.”
3-227 Article VII sets out the limit in respect of claims arising for loss of life or
personal injury to passengers of a ship where the limit of liability shall be an
amount of 46,666 Units of Account multiplied by the number of passengers
which the ship is authorised to carry but not exceeding 25 million Units of
Account.
3-228 A shipowner is entitled to limit liability unless it is proved that the loss resulted
from his personal act or omission, committed with the intent to cause such loss,
or recklessly and with knowledge that such loss would probably result. The onus,
therefore, is on the claimant to challenge the shipowner’s right.

3.4 INSURANCE
3-229 Marine insurance can be divided into three general areas:
● Hull and cargo insurance: the insurance of physical assets against defined
perils.
● Protection and indemnity insurance: insurance against liabilities and claims.
● War risk insurance: the extension of other insurances to cover incidents of

war or other hostilities.
3-230 The shipping world’s main, but by no means only, insurance market is based in
London and revolves around English law. The reason for this is that England
traditionally used insurance to support and encourage trade and exploration as
illustrated by the preamble to the Marine insurance Act of 1601:
“ . . . by means of which policy of assurance it cometh to pass that upon the loss
or perishing of any ship there followeth not the undoing of any man, but the loss
alighteth rather easily upon many men . . . and rather on them that adventure not,
than those that do adventure, whereby all merchants, especially the younger
sort, are allowed to venture more willingly and freely . . . ”
3-231 178 years later, in 1779, the insurance activity around Edward Lloyd’s coffee
house had grown to such a level that a standard Lloyd’s Insurance policy – the
SG Form of Policy – was adopted. Linked to the SG Form of Policy were
standard clauses that became known as the Institute Time Clauses (Hulls) and
the Institute Cargo Clauses; these clauses were drawn up, and modified from
time to time, by the Institute of London Underwriters.
3-232 In 1983, a major revision of insurance procedure replaced the SG Policy with the
New Marine Policies (MAR Form, updated in 1991) and the Institute Time and
Cargo Clauses were also updated. The law underpinning marine insurance is
based upon the Marine Insurance Act of 1906 and subsequent amendments.
This Act establishes five underlying principles, these are:
● Insurable Interest
The insured must have a genuine financial interest in the subject-matter of

the insurance.
● Utmost Good Faith
The basis on which the insurance contract is founded which means that all
relevant facts must be disclosed – important when placing or renewing
insurance.
● Indemnity
Indemnity means that the insured is covered for his loss and not to make
a profit through insurance – a testing decision when choosing market
values in a volatile freight market. This also means that the assured is

recompensed for the costs incurred in, for example, repairing damage – this
can have important cash flow implications for the shipowner.
● Proximate Cause
Proximate cause which restricts the claim to those perils on which the
premium is based.
● Subrogation
Subrogation allows the insurer to take over the rights of the assured
against any third party who was responsible for the loss in respect of which
a claim was paid.
3-233 Although the structure of the London marine insurance market has changed, it is
still based around the practices of Lloyd’s of London. Lloyd’s of London represented
the gathered “names”, the underwriters who were prepared to finance the “maritime
adventures” encouraged in the 1601 Act. Access to these underwriters was through
marine insurance brokers and the broker’s task was twofold:
● The broker presented the risk to Lloyd’s and used his market experience
to identify an underwriter who had the interest and underwriting capacity
to take the first percentage tranche of the insurance at a keen and
competitive rate. It is this transaction that set the terms and conditions
(within the Policy and Institute Clauses) of the insurance cover.
● The broker is then responsible for persuading other underwriters to “complete

the Slip”, in other words, to take a percentage of the risk until all 100% is
covered on the terms, rate and conditions of the lead underwriter.
3-234 As the London market has modified and other markets have grown, so there
have been changes and it is possible to insure part of a risk in the London
market and part in the Norwegian or German or American market. More
corporate organisations are now members of Lloyd’s and running in parallel with
Lloyd’s are the major corporate insurers who may take a larger percentage of
the risk and offset it through reinsurance.
3-235 Reinsurance is as important in the London market as insurance and it is the

mechanism through which insurers further dilute their own risk portfolios.
Indeed, it is the ability of the market to accept reinsurance risk that effectively
establishes the capacity that the market has for providing marine insurance
cover. Another crucial element affecting the market’s capacity and premium
levels is the ability of insurers to invest and earn interest on the insurance
premiums that are always payable in advance.
3-236 A further task of the insurance broker is to handle claims and this will be
addressed later. The shipowner or manager requiring insurance cannot
approach the market directly but must work through a broker. The relationship
between the broker and the shipowner is crucial and must be based on mutual
respect and a full understanding by the broker of the shipowner’s/manager’s
business. Time spent with one’s insurance broker is rarely wasted and, even if

the company’s insurance is handled by a dedicated insurance department, there

is a strong argument for the superintendent to be a party to the annual renewal
discussions.
3.4.1 Hull Insurance
3-237 The current Marine Policy is, in essence, little more than a vehicle for identifying
the assured and the insurers and for attaching the agreed range of clauses. It
states:
“We, The Companies*, hereby agree, in consideration of payment to us by or on

behalf of the Assured of the premium specified in the Schedule, to insure against
loss damage liability or expense in the proportions and manner hereinafter
provided. Each Company shall be liable only for its respective proportion.
This insurance shall be subject to the exclusive jurisdiction of the English Courts
except as may be expressly provided herein to the contrary.”
* Institute of London Underwriters version.
3-238 As has already been stated, insurance is provided against defined perils and
these perils, as defined in Clause 6 of the Institute Time Clauses fall into two
groups:
Clause 6.1 No requirement to prove due diligence by owners,

managers or superintendents
6.1.1 Perils of the sea, rivers, lakes or other navigable

waters: These perils include heavy weather, sinking,
grounding, stranding, ice damage and damages
incurred in collision. The cover does not include normal
action of wind and waves (wear and tear) and the
cause must always be fortuitous (see Clause 6.1.7).
6.1.2 Fire, explosion: Damage by explosion, internal or

external, is covered so long as the damage is not
caused by one of the perils excluded under Clause 24
(war damage) or arson on the part of the assured.
6.1.3 Violent theft by persons outside the vessel: The act

must be violent, clandestine theft is not covered.
6.1.4 Jettison: If parts of the vessel’s apparel are

jettisoned to prevent further loss and there is cargo
onboard, it will be necessary to declare General
Average so that cargo contributes.
6.1.5 Piracy: Piracy includes passengers who damage the

vessel through a mutinous act as well as riotous acts
from ashore.
6.1.6 Contact with land conveyance, dock or harbour

equipment or installation: Hull insurance covers

damage to the hull; damage to, for example, a lock

gate, would be covered by the ship’s P&I insurance,
i.e. there can be two entirely separate claims arising
from the one incident.
6.1.7 Earthquake, volcanic eruption or lightning: Excellent

examples of what can be described as a fortuitous
event.
6.1.8 Accidents in loading or discharging or shifting cargo

or fuel: The policy covers damage to the vessel but
not the ship’s liability to the cargo owner for damage
to the cargo. This peril was previously covered under
Clause 6.2 but has been transferred in recognition of
the difficulty for the owner to ensure “due diligence”
in port working cargo where his influence is often
much diminished.
Clause 6.2 Recovery is subject to proof of due diligence exercised by

the assured, owners, managers or superintendents
6.2.1 Bursting of boilers, breakage of shafts or any latent

defect in the machinery or hull: This provides
insurance for damage caused by a bursting boiler or
breaking shaft but not for the damage (to the boiler
or shaft) unless that damage was directly caused by
an insured peril (such as grounding).
6.2.2 Negligence of master, officers, crew or pilots: This

clause has been under negotiation and there is
some pressure to remove it.
6.2.3 Negligence of repairers or charterers provided such

repairers or charterers are not insured hereunder:
Again, the insurance covers making good the
damage resulting from the negligent repair not
putting right the negligent repair.
6.2.4 Barratry of master, officers or crew: This goes

beyond negligence to acts “wilfully committed”.
6.2.5 Contact with aircraft, helicopters or similar objects,

objects falling therefrom: Transferred from Clause
6.1.6 with helicopters added in recognition of the
increased use of helicopters for transferring pilots,
personnel or stores.
Clause 24 : War exclusion

Clause 25 : Strikes exclusion, including terrorists
Clause 26 : Malicious acts
Clause 27 : Radioactive contamination

3-239 It will be clear from the wording of some of the clauses above that damage must
be proximately caused by an insured peril and this can effectively be translated
as “directly”, not through a chain of causal events.
3-240 Certain perils are excluded and these include wilful misconduct of the assured,
wear and tear, damage caused by rats or vermin, the breakdown of machinery
(unless caused by an insured peril which would include crew negligence) and
exclusions under the Paramount Clause. These are:
3.4.2 Particular and General Average
3-241 Accidental damage to the vessel is referred to as particular average and, subject
to the provisos above, is covered under the hull policy. Generally insurers will
accept replacement of new for old if it is reasonable and, under certain
circumstances (of reasonableness), will cover the cleaning and repainting of a
ship’s bottom.
3-242 General average covers a sacrifice of property or an expenditure properly incurred

(by the ship) in preserving the common adventure (of cargo and ship). The sacrifice
of property would include jettison of equipment, water damage to cargo incurred in
extinguishing a fire, cutting bulkheads to attack a fire, cargo burnt as fuel due to
insufficient bunkers, damage to engines attempting to float a stranded vessel.
3-243 For such an act to be considered as a general average act, there must be
danger. General average acts are determined under the York-Antwerp Rules
which are summarised in Section 3.10.
3.4.3 Total and Constructive Loss, Deductibles
3-244 An actual total loss occurs when a ship is either destroyed or the assured has
been irretrievably deprived of the use of the ship or it has been posted “missing”,
provided that the proximate cause is accepted as one of the insured perils. If the
assured is deprived of the use of the vessel (by the proximate cause of an
insured peril) and the cost of reinstating the vessel to the owner is greater than
the salved value of the vessel, the owner may declare a total constructive loss
and tender notice of abandonment to the insurer. Insurers are generally reluctant
to accept notice of abandonment as it transfers to them any liabilities attaching
to the abandoned vessel.
3-245 The policy deductible is a negotiable amount that is deducted from every claim,
including general average, except claims for actual or constructive total loss.
Superintendents need to ensure that within their vessel budgets they have an
allowance for deductibles or uncovered average as, in the event of an accident, this
can cause serious cash flow problems. Generally, each incident incurs a deductible
except that (under Clause 12.2) heavy weather damage occurring at different times
under a single passage from port to port attracts only one deductible.
3.4.4 Warranties
3-246 Warranties may be implied or express and the two implied warranties arise not
from the Institute Clauses but the Marine Insurance Act. The first concerns the

seaworthiness of the vessel and states that:
“ . . . there is no implied warranty that the ship shall be seaworthy at any stage of
the adventure, but where with the privity of the assured, the ship is sent to sea
in an unseaworthy state, the insurer is not liable for any loss attributable to
unseaworthiness.”
3-247 The other implied warranty relates to the legality of the adventure.
3-248 Express warranties cover such matters as “warranted the vessel shall not be
towed”, involvement in salvage services and trading location; normally
restricted to trade between 50oS and 70oN. Generally the ship will be held
covered (against an additional premium) if the insurer is advised immediately
with good reason for the breach of warranty. It is important that the
superintendent is aware of all express warranties and that he/she ensures that
the master is also aware of them and the action necessary in the event of a
breach.
3.4.5 Disbursement Warranty – Total Loss Only (TLO)
3-249 This enables the assured to insure his ship for less than the market value but
for an amount that would cover the cost of most anticipated repairs. An
ancillary policy of up to 25% of the insured value can then be added which is
effective only in the event of actual or constructive total loss. The premium for
this cover is charged at a lower rate and represents a saving for the assured;
since the insurance is against what are usually defined as “disbursements” (as
opposed to the ship itself) this is defined as a policy proof of interest (PPI)
cover.
3.4.6 Collision Liability – Running Down Clause (RDC)
3-250 Whereas the insurance against the perils defined in Clause 6 is strictly covering
the insurers, Clause 8 extends this cover to third parties in the event of collision.
This extended cover, known from its introduction as the running down clause,
widens the scope of the cover in this specific circumstance to:
● Loss or damage to the other vessel or to property on board the other

vessel including cargo;
● Expenses or losses incurred by the other vessel including loss of freight;
● Liability of the other vessel for general average claims or salvage.
3-251 This is a very real extension of the assured’s cover and is generally restricted to
three-quarters of the value of the assured’s ship, with the remaining one quarter
being covered by the assured’s P&I Club. The assured will, of course, be
claiming the right to limit his liability under the 1976 Convention on Limitation of
Liability for Maritime Claims (the London Convention). The Sistership Clause
ensures that when ships under the same ownership collide, they are treated as
separately owned.

3.4.7 Mitigation – Sue and Labour
3-252 There is an inherent obligation on the assured always to act as an uninsured

person and take such reasonable action as would be expected to minimise loss.
This obligation, the obligation to “sue, labour, travel for in and about the
defence, safeguard and recovery of the goods” is maintained by Clause 11 of
the current Act.
3-253 A careful record must be kept of all expenditure under this heading and is
covered in addition to the policy cover.
3.4.8 Pollution
3-254 Although additional cover can always be negotiated, at a premium, hull insurers
are generally determined to avoid liability for pollution and environmental
damage. The only exception to this is an extension to cover pollution under
general average.
3.4.9 Subrogation
3-255 When the insurer settles a claim, the insurer automatically acquires the right of
action against any third party that may have been responsible for the claim, up
to the level of the claim. In the same way, in the event of a CTO, the insurers
acquire the right to the wreck and may sell her.
3.5 CLAIMS AND RENEWALS
3.5.1 Claims
3-256 As stated, claims are submitted through and handled by the marine insurance
brokers claims department. Usually the approach is to agree the quantum with
the lead underwriters and the other underwriters will follow.
3-257 Superintendents should remember that hull cover is indemnity insurance. This
means that the assured should effect the repairs, pay the invoice and then
submit the invoice to the insurer. This obviously leaves the assured with a
potentially serious cash flow problem, especially if the ship is carrying a high
deductible. In practice, in all serious cases, the insurer should be informed as
soon as possible and will be interested in the decisions being made to effect the
repairs. It may well be that the insurer asks the assured to go to competitive
tender if the repairs are expensive.
3-258 While it is important that the assured is advised of a potential claim as soon as
possible, it is also important that the claim is properly presented. Careful attention
needs to be paid to whether the damage is or is not proximately caused by an
insured peril and whether there might have been a breach of warranty. Since the
insurers will doubtless wish to interview the ship’s staff and see the ship’s log
books in a serious case, it is important that the master and officers are at least
reasonably conversant with the terms of the ship’s insurance. If the insurer is not

given prompt notice of a claim, either via the broker or the local Lloyd’s agent, the
insurer may deduct up to 15% from the claim.
3-259 It is a point well worth remembering that the insurers (and the courts if it comes
to it) will look first to the master’s actions in mitigating loss, acting as a prudent
seaman – not as a manager under strict orders from his owners or managers to
take a specific course of action.
3.5.2 Renewals
3-260 Renewals need careful preparation and should not be rushed. A good insurance
broker will want to understand the owner or manager and his operating
philosophy. Just as the courts show particular interest in the actions of the
master, the good insurance broker will want to see beyond the figures and get a
feel for the superintendents and other operational managers that “make the
company work”.
3-261 The prospective assured must remember that marine insurance is based upon
the principle of “utmost good faith”; changes in operating policy, changes in
crewing practice and other significant changes should be discussed with the
broker so that he can present the company to the most appropriate lead
underwriter in the most appropriate way. The company’s claims record should be
examined critically and, if there is room for improvement, the underwriter will
want to know that steps are being taken to achieve this.
3-262 It is a mistake to instruct the broker to “shop around” for the best quote. Once a
fleet is presented to the market and a view on premium level formed, it is unlikely
that other underwriters will undercut it. This does not prevent the broker from
carefully assessing the strength of the market and the portfolios of different
underwriters before formally introducing the enquiry to the market. This,
however, means that preparations for renewal need to be started in good time.
This caveat against “shopping around” does not prevent the broker exploring
different markets for all or part of the cover, although if splitting cover the
assured should take into account any potential problems that may arise from
having different terms and conditions.
3-263 Although insurance cover is traditionally placed for a 12-month period, there is
no formal restriction in insuring for a longer period.
3.6 CARGO INSURANCE
3-264 Little need to be said about cargo insurance as it does not generally affect the
superintendent. Institute Cargo Clauses are attached to the Marine Policy in
much the same way as Hull clauses attach. There are three standard sets of
clauses: A, B and C, with A providing the all-risks cover. As with the Hull
clauses:
“In no case shall this insurance cover loss or damage arising from:
Unseaworthiness of vessel or craft, unfitness of vessel craft conveyance

container or liftvan for the safe carriage of the subject-matter insured where the

assured or their servants are privy to such unseaworthiness or unfitness, at the

time the subject-matter is loaded therein.”
3-265 Also, the assured is to take such action as may be reasonable for the purpose
of averting or minimising such loss.
3.6.1 War Risk Cover
3-266 The Hull Policy exclusions under Clauses 23, 24, 25 and 26 of the Institute Time
Clauses have already been mentioned. The Institute War and Strikes Clauses Hulls –
Time 1983, provides cover for the risks excluded under the standard hull cover.
3-267 The perils insured against under this cover are:
● war, civil war, revolution, insurrection, or civil strife arising therefrom, or

any hostile act by or against a belligerent power;
● capture, seizure arrest, restraint or detainment, and the consequences

thereof or any attempted threat;
● derelict mines, torpedoes, bombs or other derelict weapons of war;
● strikes, locked-out workmen, or persons taking part in labour disturbances,

riots or civil commotions;
● any terrorist or person acting maliciously or from a political motive; and
● confiscation or expropriation.
3-268 It is important to note that this cover is designed to protect the assured from an
unexpected occurrence under the perils. As soon as the insurer is of the opinion
that there is a real danger from one of the perils, the insurance market will
declare a war exclusion zone and the cover will cease to attach for any vessel
entering the zone. It will be necessary for the assured to approach their war risk
insurers for special cover to trade within the excluded zone and this cover, if
available, will attract an additional premium.
3.7 PROTECTION AND INDEMNITY INSURANCE
3-269 Protection and Indemnity insurance is provided primarily, but not exclusively, by
mutual insurance associations, owned by the member shipowners but managed
by a separate legal entity, the managers. Although P&I Clubs have a long and
complex history, one of the important reasons for their existence was (and is) to
provide the additional quarter of the cover under the running down clause (RDC)
in the event of collision.
3-270 Instead of covering this exposure individually, shipowners banded together to

form a “mutual insurance association” and from there the range of cover offered
expanded. Acceptance into a mutual club is at the discretion of the existing
members who all set their own rules, premiums and extent of cover. In effect, the
extent of cover has become similar and the leading 15 P&I Clubs, the
International Group, combine to place their reinsurance and work to similar limits.

3-271 The main insurance cover, frequently called Class 1 cover, encompasses:
● Injury, illness and death of a seaman.
● Injury, illness and death – persons other than seamen: this includes pas-
sengers and stevedores and poses a significant problem where there is an
endeavour to sue under the “generous” liability laws of the USA.
● Repatriation of crew and substitutes expenses: includes cases of serious

family illness.
● Diversion and other expenses incurred in landing stowaways, refugees

and sick persons, including life salvage.
● Loss and damage to the effects of seamen and others.
● Loss or damage to property.
● Contractual liabilities, including those relating to customary towage.
● Collision liability: this includes the outstanding quarter RDC but extends
the cover to include:
– raising, removal, destruction, lighting or marking of wrecks;
– property;
– pollution or contamination of property;
– the cargo or property on the insured vessel including any general

average contribution;
– loss of life, personal injury or illness; and
– the proportion of the member’s liability which exceeds the sum

recoverable under the hull policy.
● Pollution: cover for losses, liabilities, damages, costs and expenses arising
from the consequence of the escape or discharge from the insured vessel
of oil or any hazardous substances.
● Cargo: This is, perhaps, the most important aspect of P&I cover and
relates to the liability of the owner under his contract of carriage. Unless
prior agreement has been reached with the Club, cover will be given on the
basis that the shipowner’s contract with the cargo owner is on terms at
least as favourable as the provisions of the Hague or Hague-Visby Rules.
Cover can extend beyond the sea-leg of the voyage, and extension of
increasing importance to container operators.
The Clubs impose strict rules with regard to the signing of bills of lading and
the proper delivery of cargo, although at the discretion of the manager, the
Club will assist the owner when faced with the problem of delivery of cargo
without presentation of bills of lading or for changes of discharge port.

P&I Clubs undertake considerable research into cargo loss prevention and
provide considerable advice to shipowners; which advice the shipowner is
expected to heed if cover is required.
● General average: both the ship’s proportion and unrecoverable average.
● Salvor’s expenses under Lloyd’s Open Form.
● Fines, inquiries and criminal proceedings.
3-272 In return for the provision of this cover, the Club and its managers will expect the
shipowner to comply with the Club’s Rules. These include ensuring that all ships
are seaworthy and properly classed with an approved classification society (the
Club may require a ship to undergo a condition survey), that liability is never
admitted and that the Club is notified promptly of any claim.
3-273 Premiums of Club calls are handled differently from hull premiums and a first call
is made on the renewal date of 20 February, probably of between 60% and 80%
of the anticipated annual premium. A second call may be made later in the year.
It may well be two or three years before the total liability from all claims can be
calculated and until that can be achieved the owner is exposed to a
supplementary call and so needs to make a provision in the company’s accounts
in line with the Club’s estimates.
3-274 As with hull insurance, deductibles are set for the various types of liability.
3-275 In a similar way to hull insurance, the owner will need to take out additional war
risk cover.
3.8 FREIGHT, DEMURRAGE AND DEFENCE
3-276 FD&D cover is provided either by P&I Clubs (where it is sometimes referred to
as Class 2 cover) or by specialist independent Clubs. FD&D cover is primarily
for the provision of legal cover for the defence or prosecution of charterparty
disputes. As well as cover for legal disputes, the FD&D Clubs also provide legal
advice when negotiating contract and support extends beyond pure charterparty
disputes to cover such areas as sale and purchase or stevedore disputes.
3-277 P&I Clubs, or their managers, build up an extensive knowledge over the wide
range of cover that they provide. The term Club is not a misnomer and the
sensible shipowner makes full use of their expertise. P&I Clubs also maintain
Club correspondents in many ports around the world and these correspondents,
who are familiar with both the Club and the local “customs of the trade”, can
provide invaluable support to the ship and her master.
3.9 ADDITIONAL INSURANCES
3-278 Through the P&I Club network, specialised insurance is available for strike
cover, by both crew and shore strikes, loss of hire as the result of a marine
casualty, and charterer’s cover for time charterers who may well face many of
the liabilities covered under Class 1 and Class 2 cover.

3.10 THE YORK-ANTWERP RULES
3-279 The York-Antwerp Rules are the set of Rules that determine how that peculiarity
of the maritime world, general average, is settled. We have already stated that any
party to a marine adventure, and this will generally (but not only) be the shipowner
and/or one or more cargo owners, that suffers loss for the common good will be
recompensed by those parties that have benefited from that sacrifice.
3-280 If general average is declared, the general average act will almost inevitably be
triggered by some other event such as heavy weather or fire. Thus, there will be two
events involving insurance claims, the incident (generating particular average) and
the sacrifice (leading to general average). The point of this possibly obvious
statement is to make the point that an event involving general average is inevitably
complex and will involve a number of different parties (and their insurers) all having
their own demands for information and statements from the master and the ship.
3-281 The incident therefore needs careful management from the very start. The
master will inevitably need support as various surveyors and lawyers take an
interest in the incident and the master must be careful to identify who each of
the interested parties are and ensure that each receives only the information to
which they are entitled. A very careful record of costs will need to be kept from
the very start and the chronological record of events based around the log-book
will almost inevitably need transposing into separate records addressing
different aspects of the incident and the actions taken.
3-282 It hardly needs saying that the ship’s P&I Club must be advised as soon as
possible and if the master needs to make a declaration of general average, then
this is most sensibly done with the advice of the local P&I Club correspondent.
3-283 The current version of the Rules is the 1994 version (although the 1974 versions
may still prevail in some jurisdictions) and these incorporate the concept of the
protection of the environment within the ambit of marine salvage. The Rules
consist of seven lettered rules and 22 numbered rules that are governed by the
Rule of Interpretation.
3.10.1 Rule of Interpretation
“In the adjustment of general average the following Rules shall apply to the
exclusion of any Law and Practice inconsistent therewith. Except as provided by
the Rule Paramount and the numbered Rules, general average shall be adjusted
according to the lettered Rules.”
3-284 The Rule Paramount provides good guidance to the master (and
superintendent) in the event of an incident that could or should involve a general
average sacrifice. As is so often the case, the courts will look to the master to
act reasonably as “a prudent seafarer”. In other words, do what is sensible and
reasonable and worry about the insurance and average issues later.
3.10.2 Rule Paramount
“In no case shall there be any allowance for sacrifice or expenditure unless
reasonably made or incurred.”

3-285 The Rules are set out in full in Appendix 2 and the lettered rules are summarised
very briefly below. The numbered rules are detailed and deal with fact.
3.11 INCIDENTS, EMERGENCIES AND THE MAIB
3-286 All flag states should have an organisation that investigates maritime accidents;
in the United Kingdom it is the Marine Accident Investigation Branch (MAIB). The
MAIB is an independent branch of the Ministry of Transport that reports directly
to the Minister. It operates under the Merchant Shipping Act 1995 and the
Merchant Shipping (Accident Reporting and Investigation) Regulations 1999.
3-287 The MAIB’s fundamental purpose is to investigate an accident to determine its

circumstances and causes with the aim of improving the safety of life at sea and
the avoidance of accidents in the future. It is not the purpose to apportion liability
or, except as so far as is necessary to achieve the fundamental purpose of
investigation, to apportion blame. Consequently, a MAIB investigation is entirely

independent of any investigation being made by the police or other authority that
is collecting evidence for a possible prosecution.
3-288 This possibility of a dual investigation needs to be watched carefully by a

superintendent of a ship involved in an accident in whatever jurisdiction that the
incident occurs and, if necessary, legal advice should be obtained to ensure that
seafarers do not make statements that either incriminate themselves, their
colleagues or their employers.
3.11.1 An Accident
3-289 An accident is defined as an undesired event that results in personal injury,

damage or loss. Accidents include loss of life or major injury to any person on
board or when a person is lost from a ship; the actual or presumed loss of a ship,
her abandonment or material damage to her, collision or grounding, disablement
or material damage caused by the ship.
3-290 An accident can also be an occurrence such as the collapse of lifting gear, an
unintentional shift of cargo or ballast sufficient to cause a list, a loss of cargo
overboard or a snagging of fishing gear which results in the vessel heeling to a
dangerous angle, if the occurrence could have caused serious injury or damage
to the health of any person.
3.11.2 Major and Serious Injury
3-291 Major injury involves such incidents as a fracture or a loss of consciousness (or
more serious), while a serious injury is a accident which occurs “on board or
during access” which results in incapacity for more than three consecutive days.
3.11.3 Reporting
3-292 Accidents, including serious injuries, requires a report by telephone, facsimile,

telex or e-mail to MAIB within 24 hours of the occurrence. Serious injuries must
be reported within 14 days.
3-293 The Regulations require masters to ensure that the circumstances of every
accident are examined and where the ship carries a safety officer, his or her
investigation (carried out on a British ship under the Merchant Shipping and
Fishing Vessel (Health and Safety at Work) Regulations 1997) will meet this
requirement. If requested, a report on the findings must be sent to the MAIB
(using the MAIB Incident Report Form).
3-294 In making reports, MAIB draws attention to the content of the descriptive text.
Lessons can be learned from positive as well as negative aspects and details of
actions taken to minimise the effects of the accident or, in the case of a
hazardous incident (see below) to prevent it turning into an accident, are
particularly helpful. Referring back to MAIB’s fundamental purpose of improving
safety, much can be gained from the experience of those most intimately
involved in the event when it occurred.

3.11.4 Hazardous Incidents
3-295 A hazardous incident is when an accident nearly occurs in connection with the
operation of a ship; in other words it is what is often known as a “near miss”.
Although there is no requirement to report hazardous incidents, superintendents
should encourage this practice. Useful lessons can be always learnt and such
reporting is part of the “no blame” culture associated with total safety
management. Examples are navigational or engineering incidents causing
hazard, failure in procedures in shipboard operation, material defects, fatigue
and human failures. The critical question in deciding whether or not to report an
incident is whether it had the potential to lead to an accident.
3.11.5 Investigations
3-296 Should the MAIB decide to start an investigation, the master or owner will be
advised within 28 days. An investigation will generally involve inspectors visiting
the ship and the master should ensure that all relevant information: charts, log
books and other records, are available for the inspectors. The inspectors may
also wish to visit the owners or ship managers and they may require any person
able to assist to appear before them. Any person so summoned may be
accompanied by a friend, union representative or solicitor and it is recommended
that professional advice is made available and, in doing this, it is sensible and
advisable to keep the ship’s P&I Club closely advised of what is happening.
3.11.6 Reports
3-297 The results of MAIB investigations are made public in the way that the Chief
Inspector feels is most appropriate and this includes placing it on the internet
(see Recommended Reading for useful websites) or summarising key features
and lessons learned in MAIB’s periodic Safety Digest.
1. What is the difference between hazard and risk?
2. What are the three principal risks covered by marine

insurance?
3. When will the Marine Accident Investigation Branch initiate

an investigation?

4. THE EMPLOYEES: MANNING THE SHIPS
LEARNING OUTCOMES
● compare how the changes in the global economy effected

shipownership and ship management; and
● state the role of strategic planning in crew provision.
4.1 SEAFARER EMPLOYMENT: TRAINING AND COMPETENCE
4.1.1 The Change from Vertical to Horizontal
3-298 Diagrams 1 and 2 in Chapter 1 illustrate the way in which shipping companies
have changed in order to respond to the changes in the demand for maritime
transportation and to changes in the structure of the global economy. During the
1970s a process started that split the ownership and operation of ships into four
main functional areas:
● ownership;
● employment;
● management; and
● manning.
3-299 On the basis that the world continually fails to learn from history, it is worth briefly
exploring a little further some of the major factors that resulted in the changes to
employment in the shipping industry discussed in this chapter.
3-300 Technology, both within and outside the industry, is central. One obvious exter-
nal factor is the 747 jumbo jet, heralding the age of long-haul, mass transport.
This, over a period of a few years removed the demand for major passenger
liners. At the same time, the first class, international mail (postal) service trans-
ferred from sea to air and dealt a further blow to fixed schedule liner traffic on
the main liner routes. Since then capacity has increased to in excess of 8,000
teu in ships with an average speed of over 20 knots (as opposed to the 16 to 18
knots of the liner vessels of 1960–1970). This expansion continues to be driven
by the ongoing globalisation of industry and the means of production; the
change of the role of much of the shipping industry from the element that carries
a cargo from port to port to an integral link in a much more complex and
time-constrained logistic chain.

The Employees: Manning the Ships Module 3
3-301 The economics of scale also affected the tramp or bulk traders. This was driven
by a healthy world economy on a plentiful supply of cheap crude oil. Economists
drew graphs of the predicted growth in world trade that disappeared optimisti-
cally off the top right-hand corner of the graph. Shipbuilders and shipowners
responded during the late 1960s with the VLCC (very large crude carrier of
250,000 tonnes deadweight carrying capacity and more) and an increasing
number of dry bulk Panamax (circa 70,000 tdw) and Capesize ships (circa
150,000 tdw).
3-302 The closure of the Suez Canal in 1967 gave a further fillip to the VLCC (and
ULCC) order book. Unfortunately, however, its reopening, coupled with the real-
isation of the oil producing nations that they could influence (upwards) the price
of oil resulted in a seismic shudder throughout the shipping industry. Fuelled by
shipyard overcapacity, the excess supply of ships is only now working itself out
of the system and the industry will remain highly cyclical. The two graphs in
Appendix 3 illustrate this cyclical nature of the industry.
3-303 On the positive side, the industry responded strongly to the demand for ships
that could carry ever more specialised cargoes. Petroleum products in coated
tanks and chemicals in stainless steel tanks with closed loop venting systems
are obvious examples. The less than aesthetic pure car carrier is another. More
recently, the high speed (catamaran) ferry and the dedicated cruise liner are
other examples. A challenge that is still to be faced is encapsulated in the
prediction that by 2020 there may be more LNG carriers at sea than VLCCs.
3-304 While changes in trading patterns (or demand) were driving changes in ship
design (the hardware), other changes that had profound influences on the
shipping industry were also taking place.
3-305 Capital was escaping from national boundaries and becoming internationally
available. This in turn led to internationally based financing organisations pre-
pared to invest in shipping more for reasons of capital appreciation than for trad-
ing. These organisations were not constrained by any allegiance to a national
flag and looked increasingly for tax havens in which to locate their investment,
increasing the tonnage registered under flags of convenience.
3-306 These organisations also needed to find companies with the skills necessary
to undertake the technical, and sometimes the commercial, operation of this
tonnage. This in turn led to an increase in the demand for professional ship
managers.
3-307 Ship managers, some new and some the remains of the traditional liner and
tramp companies, competed for business by endeavouring to reduce the daily
cost of operating the ships under their management. As part of this process, ship
managers and shipowners, with a few exceptions, looked for cheaper supplies
of manpower, initially ratings and later, for cheaper officers, giving rise to the
independent crew manager. Accountants, and many ship managers too, found
the immediate argument of cheaper wages and no social costs much more per-
suasive than unproven arguments by “traditionalists” about maintenance and
safety levels.

Module 3 The Employees: Manning the Ships
3-308 These management companies, therefore, entered the market in search of the
most “cost effective” source of crew supply, both for ratings and, increasingly,
officers. Crew supply organisations appeared in response to this demand in both
traditional and some non-traditional areas of the world. During the 1980s a large
proportion of the shipping industry appeared to be focused on the lowest cost
crew with an alarmingly low commitment to quality. The horizontally integrated
organisation, if integrated is the right word, had appeared as a major element in
the provision of maritime transportation.
3-309 This horizontal structure gave rise to a number of management challenges that
were not well understood nor properly addressed. At the same time, crews got
smaller and the master and senior officers faced new challenges in manage-
ment. No longer could the traditional hierarchical management model survive
when crew numbers were of a size that demanded a team-based approach to
operations on board. However, there was little effort or interest in large parts of
the industry to address the new management requirements onboard.
3-310 Diagram 8 below, The Master’s Dilemma, is an attempt to illustrate the problems
being faced by those in command at sea and working for the growing number of
horizontally integrated ship operations.
Diagram 8
The Master’s Dilemma

3-311 An increasingly poor accident record during the 1980s and early 1990s did lead
the maritime world to address the situation, mainly through legislation and two
major initiatives through the International Maritime Organisation (IMO). Chapter IX
of SOLAS, Management for the Safe Operation of Ships and the associated
International Safety Management (ISM) Code was, effectively, an endeavour to
remove the question mark from Diagram 8 on the previous page. It establishes
company responsibility and authority, sets out clearly which of the shore-based
organisations is responsible for the safety and management of the ship through
the introduction of the Designated Person (ISM Code Sections 3 and 4) and at
the same time (Section 5) endeavours to ensure that the master’s responsibili-
ties are matched by his authority.
3-312 The other major initiative was the Amendment in 1995 of the Standards of
Training, Certification and Watchkeeping Convention (1974). Like many initiatives,
the STCW amendments had two drivers. One was to establish a common, world-
wide standard of competencies, relevant to the modern shipping industry and its
growing and increasingly specialised fleet. The other, it is sometimes argued, was
to reduce the cost of training in an industry facing the challenges outlined above.
3-313 Unfortunately, one of the weaknesses of trying to set international standards in

this way is that although such organisations as the International Maritime
Organisation, with its status as an agency of the United Nations, may propose
such legislation, its implementation depends upon individual governments trans-
lating the conventions into their national law. If this is not done, or if this is done
but the requirements of the convention are not applied rigorously, then standards
will not improve within the fleet of that flag state.
3-314 There is also an argument that, in some cases, these international standards are
viewed as a level that needs to be obtained and no more, rather than a basis for
further development. The reluctance of some flag states to ensure that these
international standards are fully implemented on all of the vessels registered
under their flag has led to port state control, that is an endeavour to implement
these standards by nations receiving sub-standard vessels into their ports. Port
state control and PSC inspections are discussed in Module 4.
4.1.2 Functional Capabilities Required by Seafarers
3-315 The International Convention on Standards of Training, Certification and

Watchkeeping for Seafarers, 1978 as amended in 1995, together with its asso-
ciated Code, generally referred to as STCW 95, brought about a sea change in
the way in which seafarers are trained and certificated. The basic change is from
testing knowledge (as in written examinations) to testing competency (by
assessing performance in the workplace). In order to achieve this, it is first nec-
essary to define the functions required to operate a ship at sea and in port. Once
this has been done, details of knowledge, understanding and proficiency can be
established in the form of competencies and methods for demonstrating
competence and the criteria for evaluating competence can be developed.
3-316 It is important for the ship manager and the superintendent to monitor the
competencies that are required on board and compare these with the
competencies being provided through STCW 95; if they do not match, then
the company needs to take steps to provide the necessary training.

3-317 The final dimension to be decided are the levels of responsibility at which the
various competencies are required in order to ensure that the operational
demands of a ship at sea can be met. The three levels defined in STCW 95 are
support, operational and management.
4.1.3 Functions
3-318 The functions identified as necessary for the operation of ships are:
● Navigation.
● Cargo handling and stowage.
● Controlling the operation of the ship and the persons on board.
● Marine engineering.
● Electrical, electronic and control engineering.
● Maintenance and repair.
● Radio communications.
4.1.4 Levels of Responsibilities and Standards of Competency
3-319 Management means the level of responsibility associated with:
● serving as master, chief mate, chief engineer or second engineer officer

on board a seagoing ship; and
● ensuring that all functions within the designated area of responsibility are
properly performed.
3-320 Operational means the level of responsibility associated with:
● serving as an officer in charge of a navigational or engineering watch or

as designated duty engineer for periodically unmanned engine machinery
spaces or as radio operator on board a seagoing ship; and
● maintaining direct control over the performance of functions within the

designated area of responsibility in accordance with proper procedures
and under the direction of an individual serving in the management level
for that area of responsibility.
3-321 Support means the level of responsibility associated with performing assigned
tasks, duties or responsibilities on board a seagoing ship under the direction of
an individual serving in the operational or management level.

4.1.5 Hierarchical Management versus Team Management
3-322 One criticism that might be levelled at STCW 95 is that although the word
management appears frequently, it does not appear (except in one of the
21 competencies for chief officer/master) within the required competencies.
Senior ship’s officers:
● get very little formal management training; and
● have to manage in a singular and quite difficult environment.
3-323 In the days of vertically integrated shipping companies, the officers tended to all
come from the same employer, usually the shipowning company, and could con-
template a progressive career within that company. They understood how the
company worked and what was required of them on each stage of the promo-
tional ladder. It was a strongly hierarchical organisation with very clearly defined
responsibilities, and officers learnt on board what was expected of them in their
next appointment.
3-324 The structure of the crew organisation was, and still is, also hierarchical. Crews
were, by and large, also bigger and it was possible to allocate specific respon-
sibilities to specific people. In many cases, this has changed. Crews increasingly
come from different backgrounds and bring with them different views on both
their specific job and also on the way in which a ship should be run. By and
large, ships are more complex, more specialised and more sophisticated and
this goes for many of the cargoes too. At the same time, as every superintend-
ent is aware, crews have become smaller.
3-325 The result of this is that a purely hierarchical approach is becoming less and
less effective for normal routine operations. Not only does the superintendent
have to understand and support a team-based approach to management
on board; but also has to appreciate that many senior officers have trained
and grown up in the traditional hierarchical tradition and find the transformation
difficult.
4.1.6 Team Leadership
3-326 Much can and has been written about team management and this is not
the place in which to delve into the detail of management techniques. What is
important is to understand the difficulties faced by masters who are grappling
with the need to make the change from hierarchical to team management.
Officers when promoted to master or chief engineer also face a similar
challenge.
3-327 The most critical and challenging aspect for the hierarchical manager contem-
plating a change to the team-based approach is the need to share information.
It is frequently stated that information is power and much of the information
about the operation and management of a ship flows through the master. Making
decisions and issuing instructions based on information that is not in general cir-
culation, while not necessarily easy, does provide a level of “built in comfort
zone” – the decisions are difficult to challenge.

3-328 It can be much more daunting, however, to share information, request feedback
and then reach a decision in open forum where that decision can be challenged.
Especially for masters trained in the hierarchical approach as, in the words of the
old Lloyd’s Insurance Policy, “Master under God”, it can feel like an abrogation
of responsibility.
3-329 On promotion too, the combination of team management and leadership may
feel different and strange. The officer will be changing:
3-330 The purpose of this section on competencies and management is to underline

the need for superintendents to formulate their own views on the competencies
and training that are required by the personnel manning the ships for which they
are responsible. STCW 95 and the ISM Code are not, in themselves, the
answer; they are the foundations upon which the superintendent must play his
part in developing and delivering a safe and efficient crewing policy. There are a
range of other aspects that need to be taken into account; managing change and
innovation is discussed in Chapter 5 and aspects of multi-cultural crews are
touched on in the next section.

4.2 A STRATEGY FOR CREW PROVISION?
“Koreans No Longer Going to Sea
The number of Korean seafarers serving on national flagships has dwindled

sharply over the last ten years, according to data compiled by the Korea
Maritime Institute and released today. The number has fallen by as much as
70 per cent with only 49,000 Koreans working on domestic carriers by the end
of 2001 compared to almost 106,000 in 1990. At the same time the number of
foreign crew employed on Korean vessels shot up to 7,000 at the end of 2001
from just 58 in 1991. Fewer Koreans – 5,700 – are now manning foreign ships
compared with 36,400 in 1990, the data, compiled under the auspices of Korea’s
ministry of maritime affairs and fisheries, revealed.”
3-331 This article, which appeared in Fairplay during the summer of 2002 effectively
demonstrates the challenges facing ship managers responsible for providing
crews for the world’s fleet – the supply-side of the market changes. There are two
important elements in this process of change: development and demography.
Development
3-332 In this context, development means economic development in different countries

of the world that makes seafaring a more or less attractive career. As Korea’s
commercial and industrial development expands, so its supply of seafarers
reduces to that core of people who go to sea as a chosen profession as opposed
to as a means of earning a living. Not only does this reduce the supply of Korean
seafarers on the international market (admittedly never a large number) but it
also increases demand upon that (now slightly reduced) market.
3-333 The ship management organisation must, therefore, develop a strategy to

ensure that it has access to a number of sources of manpower supply that can
provide personnel with the right qualifications and competencies at the right
level of cost. To put this in a practical context: Poland is one country that provides
seafarers to the international market, although admittedly not one of the larger
suppliers. Poland has now joined the European Union and this is likely to change
the internal economy of Poland. If Poland is supplying good quality seafarers to
your company, is now the time to invest further in a potentially growing economy
or the time to look for a different source of supply?
3-334 This must be a continuing question for personnel departments in ship manage-
ment companies across the world. Fortunately, this decision process is being
made more difficult by the increase in quality now being demanded on board
ships. Legislation from two directions is forcing up quality. The ISM Code and
STCW 95 have already been mentioned and are beginning to take effect,
although there is still some way to go before the industry can claim that there
are no more flag states that can honestly state that forged qualifications are a
thing of the past. Interestingly, an increasing awareness of the environment and
environmental legislation is also adding its weight to the demand for quality in
the world’s seafarers, although it is sad to see that coastal oil pollution has a so
much higher public visibility than the loss of a bulk carrier with all of its crew.

Demography
3-335 Which, here, means that the generation of senior officers that trained in the days
of the vertically integrated shipping companies and who took that knowledge
and experience into the world of ship management and crew management
companies, is now retiring fast. The industry in general and each ship manage-
ment company that has employed largely North European masters and chief
engineers will have to plan their succession. There is an important aspect to this
that warrants careful consideration. These “senior seafarers” also provided a
significant element of the ship management company’s senior management, not
least in the role of superintendent. Their common heritage and common
language provided a significant contribution to the effectiveness of manage-
ment, a contribution that is in danger of disappearing in the horizontally,
networked organisations that are the modern shipping company and where
clear and well understood communication is crucial.
3-336 The lack of management training has already been discussed and with it goes
the development of the next generation of leaders for the industry; these leaders
will come from different backgrounds, (many) different cultures and have arrived
at the level of command through a different educational and training system. The
central question is “Is that system producing the leaders and managers that the
industry requires”. Some ship managers and crew suppliers are actively
addressing this challenge (see below), the question is, are enough companies
doing this?
4.2.1 Adding Value
3-337 Improving the training and supply of Filipino senior officers.
“The ability to lead cannot be acquired by ordinary means such as reading and
classroom examinations; neither can it be instilled by other methods such as
simulations and drills. Rather, it is learned only through actual experiences
and continuous practise, in an environment that allows for interaction with others
and provides opportunities for exploring the individual’s potentials in a real-world
setting.”
Carla S Limcaoco, Senior V-P Philippine Transmarine Carriers Inc

Seaways December 2002
4.2.2 Cultural Diversity
3-338 Conventional wisdom and anecdote suggests that certain crew mixes do not
work because of insurmountable cultural differences. More enlightened man-
agement suggests that in many cases this is a matter of management – or
rather the absence of management. Recent research into the diversity of crews
on board different ship types leads to some interesting if possibly tentative
conclusions.

Diagram 9
3-339 The figures in Diagram 9 above from the Seafarers International Research Centre
at Cardiff University summarise research into the crew mix of three different types
of ship. Conventional wisdom might indicate that a single crew source, or at least
a two-crew source (one for officers and one for ratings) indicated the higher level
of crew competence and quality. The figures appear to refute this when the com-
plexity and sophistication of vessel type is taken into consideration.
3-340 On the relatively unsophisticated bulk carrier, 50% of the vessels surveyed
had a single source crew and over 75% had only two nationalities on board.
This seems to indicate that the overriding consideration was the cost of the crew
while the more sophisticated tankers and container vessels showed a greater
diversity of crew. Assuming, which seems reasonable, that the ratings were all
from one source, this indicates a high diversity in the officer ranks. This, it can
be argued, indicates that the ship management or shipowning companies were
paying more for securing the right quality of seafarer.
3-341 Multi-cultural crews are obviously an established feature of the current and
ongoing supply of ships’ crews and it would be a mistake to assume that prob-
lems do not arise from this mixture of languages and backgrounds. Language is
an obvious starting point and arguably more attention and a wider interpretation
should be given to the import of paragraph 6.7 of the ISM Code, which states
that:
“The Company should ensure that the ship’s personnel are able to communicate
effectively in the execution of their duties related to the SMS.”
3-342 “Duties related to the SMS” (or Safety Management System established by the
ISM Code) must include emergency situations and it is highly arguable whether
the general standard of “common language understanding” is robust enough to
operate under the stress of emergency situations.
3-343 Approaching the problem from a different perspective, the complaint is often
heard that masters and senior officers do not feel confident in delegating to

junior officers from different cultures (and, it is fair to say, from different generations
in many cases). Part of this problem stems from an inability to communicate
effectively and part of it from the general lack of management training, including
and especially team management, that can be identified in many, but fortunately
by no means all, shipping companies.
4.3 QUALIFICATIONS AND SAFE MANNING CERTIFICATES
4.3.1 Safe Manning
3-344 Safe manning is a three-way negotiation, conducted within the framework set
out by IMO and the ILO (with particular reference to fatigue and hours of work),
between:
● At stage one, the owner and the crew, with particular reference to the
master;
● At stage two, the owner and the flag state administration.
In other words, the owner needs to take into account a range of factors from the
design of the vessel to the anticipated trading pattern and propose a suitable
manning scale. The flag state will want assurance that the manning scale has
been accepted by the seafarers (or their union) and, if agreement cannot be
reached, may arbitrate.
3-345 Appendix 4 contains an abridged version of the British Maritime and Coastguard
Agencies Merchant Shipping Notice 1767 – Hours of Work, Safe Manning
and Watchkeeping, and this gives good guidance to the approach that a super-
intendent will need to take when considering the manning level for a new
vessel, or a vessel that is either modified or significantly changing her trading
pattern.
4.3.2 Ensuring the Correct Qualification
3-346 In Chapter 5 below, the case, The Eurasian Dream, highlights the challenge
of ensuring that a vessel is manned with personnel possessing the right
qualifications and the right experience. In this incident a fire aboard a pure
car carrier exposed the dangers that can arise from moving personnel
between vessels that are becoming increasingly specialised. In the case of The
Eurasian Dream, the master was correctly qualified but lacked experience in
pure car carriers. Placed on board a ship with little time to familiarise himself
properly before sailing, both judge and superintendent agreed that a shelf full of
manuals and instruction books is no alternative to proper experience or
instruction.
3-347 Ensuring the correct qualification needs to be looked at on three levels. The first
and most obvious is “Does the officer hold the necessary qualification under
STCW for the position, the vessel and the trade?” By now (2003) all Certificates
should either be issued under the 1995 Amendments to STCW 74 or have been
revalidated under STCW 95. The correct qualification is initially a matter of
responsibility: management level for senior officers and masters, operational

level for officers of the watch and support level for ratings. For the deck department
this is further divided by trading area (near-coastal or unlimited) and gross
tonnage (with lesser requirements for vessels less than 500 tonnes). For the
engine department the controlling factor is the power of the main propulsion
machinery, with divisions at 750kW and 3,000kW.
3-348 In translating the Convention requirements into national law, some flag states
add further requirements and the basic British requirements are illustrated in
Diagram 10 on the following page.

Merchant Shipping Notice 1692 (M) plus Amendment 1 (March 1998)

Diagram 10

3-349 Once the basic qualification requirement is satisfied, the superintendent needs
to satisfy him or herself that the necessary additional qualifications are in place.
After the requirement for the necessary GMDSS radio certificates (STCW 95
Reg A-IV-2) there are the additional qualifications for emergency, occupational
safety, medical care and survival training (STCW 95 Chapter VI). Next come the
requirements for service on specialised ships (STCW 95 Chapter V) including:
● tanker familiarisation and training;
● chemical tanker training; and
● liquefied gas tanker training.
3-350 Crews serving on passenger ro-ro ferries and passenger ships also require up-
to-date training in dealing with the specific needs of those ships, including crown
control and hull integrity.
3-351 It is obvious from the above that the crew department needs to maintain a com-
prehensive matrix of qualifications and training requirements that also takes into
account the need to provide properly qualified relief personnel at short notice.
3-352 While it is the IMO that drafted the STCW Convention and its 1995 Amendment, it
is the flag states that provide the training, examine seafarers and issue certificates
of qualification. Thus the quality of the training and of the competence of the officers
in particular depends upon the commitment and capability of flag states to raising
standards. It is in order to monitor this that the IMO established a “white list” of flag
states that have met the requirements of STCW 95 and this is available on the IMO
website. Crew managers and superintendents will, no doubt, also develop their own
ideas about the competency of officers holding certificates from different flag states.
3-353 It is sad but necessary to observe that some national certificates of competency
seem easier to acquire than others without the need for compliance to the full
training and examination process and so ensuring that capability and compe-
tence do match the proffered paperwork is important.
3-354 As well as ensuring that the documentary aspects of crew selection are in place,
the superintendent also needs to ensure that the seafarers, and the senior offi-
cers in particular, have the necessary experience to operate the ships to which
they are assigned safely and efficiently. The problem illustrated by The Eurasian
Dream can be only too real. It is not easy for a master or senior officer to turn
down an appointment to, for example, a bulk carrier because, although qualified
for the appointment, they have never actually sailed on one nor experienced the
operation of, say, changing ballast.
3-355 It is not only Far Eastern personnel that might be hesitant to “lose face” by hav-
ing to ask junior officers for advice on operational matters but to prevent such
embarrassment the first requirement is to ensure that there is that level of oper-
ational experience within the ship’s senior management team. One advantage of
the team-based approach to management (over the hierarchical) is that it is eas-
ier to share experience and it is sensible for the superintendent to facilitate and
encourage this sharing of knowledge and experience through the working pro-
cedures on board. However, it must also be remembered that in the event of an
emergency situation, the master will need to revert to a hierarchical or command

approach and will have little time to consult and a great need to rely on
experience and knowledge.
4.3.3 Ships’ Crews and Travel
3-356 Except for ships plying their trade on limited, local voyages, it is unusual for sea-
farers to join or leave a ship in their homeport; international travel is the order of
the day. One aspect of this is that it is necessary to have made all the necessary
checks on qualifications and experience before going to the expense of flying
crew members around the world. Since this means that many members of the
crew will be engaged on the basis of paper qualifications, it is important for
superintendents to meet as many crew members as possible when visiting ships
in order to form an opinion both of the person and of the reliability of the
organisation engaged to interview and supply the crew.
3-357 In addition to qualification checks, medical checks are also important and at
least one P&I Club is working with its members to take early action to vet
seafarers and ensure that they are truly fit and healthy before joining.
3-358 There are many competent travel agents who specialise in organising travel
arrangements for crew members joining or leaving ships. A key element in this
process is the interface with the local ship’s agent. Increasingly in the tramp
trades the charterer appoints the agent and no ship’s husbanding agent is
appointed. This interface warrants careful monitoring.
3-359 It has always been important that seafarers carry the correct documentation and
this requirement is increasing as security precautions are tightened in ports around
the world. By July 2004, ports should have implemented the International Ship and
Port Security Code and alongside this IMO-generated requirement, the
International Labour Organisation and the seafarers’ unions are discussing the revi-
sion of the Seafarers Identity Documents Convention 1958 and the extent to which
biometrics (e.g. eye retina recognition) will be introduced. There is little doubt that
ships’ crews are seen as one way in which terrorists can travel and, as stated, the
security requirements associated with crew travel can only get more stringent.
4.4 PROPOSED ILO CONVENTION 188
3-360 Between 7 and 23 February 2006, employers, governments and trades unions
met at the 94th (Maritime) Session of the International Labour Conference to
discuss the proposed Consolidated Maritime Labour Convention (ILO 188). The
proposed Convention shall require every ship (of more than 500 gt engaged on
international voyages) to carry a maritime labour certificate and a declaration of
maritime labour compliance (Article V).
3-361 The aim of the new Convention (the proposed Consolidated Maritime Labour
Convention) is to become a global instrument known as the “fourth pillar” of the
international regulatory regime for quality shipping, complementing the key
conventions of the IMO:
● the International Convention for the Safety of Life at Sea (SOLAS) 1974,
as amended;

● the International Convention on Standards of Training, Certification and

Watchkeeping (STCW) 1978, as amended; and
● the International Convention for the Prevention of Pollution from Ships

(MARPOL) 73/78.
The proposed Convention will contain a comprehensive set of global standards,

based on those provided for in existing maritime labour instruments.
3-362 Article III proposes fundamental rights and principles to:
(a) freedom of association and effective recognition of the rights of collective

bargaining;
(b) the elimination of all forms of forced or compulsory labour;
(c) the effective abolition of child labour; and
(d) the elimination of discrimination in respect of employment and occupation.
3-363 The Regulations will be issued as a two-part Code, with Part A being mandatory
and Part B providing guidance. The extent and effect of the new consolidating
Convention can be gauged by the fact that it revises some 38 existing ILO con-
ventions (plus a further 27 other instruments).
3-364 The Regulations and the Code are organised into general areas under five titles:
3-365 Each title contains groups of provisions relating to a particular right or principle
(or enforcement measure in Title 5), with connected numbering. The first group
in Title 1, for example, consists of Regulation 1.1, Standard A1.1 and Guideline
B1.1 (relating to minimum age). The Convention has three underlying purposes:
(a) to lay down (in its Articles and Regulations) a firm set of rights and principles;
(b) to allow (through the Code) a considerable degree of flexibility in the way
members implement those rights and principles; and
(c) to ensure (through Title 5) that the rights and principles are properly
complied with and enforced.

3-366 The Convention and Code are vertically integrated so that a single reading covers
all aspects of a specific item, as exemplified by the following extract from Title 1.
4.4.1 Title 1: Minimum Requirements for Seafarers to Work on a Ship
3-367 The requirements for seafarers to work on a ship are set out in Regulation 1.1
and Standard A1.1, Title 1.
“Regulation 1.1: Minimum Age
Purpose
To ensure that no under-age persons work on a ship:
1. No person below the minimum age shall be employed or engaged or work

on a ship (based on C7 and C58).
2. The minimum age at the time of the initial entry into force of this
Convention is 16 years (modified C180A12).
3. A higher minimum age shall be required in the circumstances set out in the
Code.
Standard A1.1: Minimum Age
1. The employment, engagement or work on board a ship of any person

under the age of 16 shall be prohibited.
2. Night work of seafarers under the age of 18 shall be prohibited. For the
purposes of this standard, ‘night’ shall be defined in accordance with national
law and practice. It shall cover a period of at least nine hours starting no later
than midnight and ending no earlier than 5 am (modified C180A6).
3. An exception to strict compliance with the night work restriction may be

made by the competent authority when:
(a) the effective training of the seafarers concerned, in accordance with

established programmes and schedules, would be impaired; or
(b) the specific nature of the duty or a recognised training programme

requires that the seafarers covered by the exception perform duties
at night and the authority determines, after consultation with the
shipowners’ and seafarers’ organisations concerned, that the work
will not be detrimental to their health or well-being.
4. The employment, engagement or work of seafarers under the age of 18

shall be prohibited where the work is likely to jeopardise their health or
safety (modified C138A3/1). The types of such work shall be determined
by national laws or regulations or by the competent authority, after
consultation with the shipowners’ and seafarers’ organisations concerned,
in accordance with relevant international standards.

Guideline B1.1: Minimum Age
(No provisions).”
3-368 The rest of the titles and regulation headings are summarised below:

4.4.2 Title 2: Conditions of Employment
3-369 While it is not the intention here to analyse the Convention and associated Code,
it will obviously have a major impact of the employment of seafarers and a few
salient points are set out below (bearing in mind that the Convention is only a
proposal at the time of writing). In the superintendent’s role as point of contact
between crew and office, it is important that the superintendent is able to
respond knowledgeably to queries, anxieties or over hopeful expectations
generated by what is a major event in seafarers’ social legislation.
Wages
3-370 While the Code establishes the seafarers’ right to be paid at intervals of no
longer than one month, it allows member states to negotiate minimum wage lev-
els, provided, however, that:
“The basic pay or wages for a calendar month of service for an able seafarer
should be no less than the amount periodically set by the Joint Maritime
Commission or another body authorised by the Governing Body of the
International Labour Office. Upon a decision of the Governing Body, the
Director-General of the ILO shall notify any revised amount to the Members of
the Organisation” (Guideline B2.2.4).

Hours of Work
3-371 The limits on hours of work or rest shall be as follows:
“(a) maximum hours of work shall not exceed:
(i) 14 hours in any 24-hour period; and
(ii) 72 hours in any seven-day period;
or the equivalent hours of rest, taken in no more than two parts. Working
hours for young seafarers (under 18) should be no more than 40 hours
per week and 8 hours per day” (Guideline B2.3.1).
Leave
3-372 Paid leave entitlement is based upon a minimum of 2.5 days per month of
employment and:
“Any agreement to forgo the minimum annual leave with pay prescribed in this
Standard, except in cases provided for by the competent authority, shall be
prohibited” (Standard A2.4).
Repatriation
3-373 Repatriation at no cost to the seafarer is enshrined as a right under designated

circumstances.
Loss of Ship
3-374 Detailed provision is made in the event of foundering or the loss of the ship but
no particular provision seems to have been made for seafarers aboard a ship
abandoned by its owner.
Manning Levels
3-375 Based upon national agreements that should ensure:
“a sufficient number of seafarers employed on board to ensure that ships are

operated safely, efficiently and with due regard to security under all conditions
taking into account concerns about seafarer fatigue and the particular nature
and conditions of the voyage” (Regulation 2.7 Purpose)
4.4.3 Title 3: Accommodation, Recreational Facilities, Food and Catering
Accommodation
3-376 Standard A3.1 requires competent authorities to pay special attention to:
(a) the size of rooms and other accommodation spaces;

(b) heating and ventilation;
(c) noise and vibration and other ambient factors;
(d) sanitary facilities;
(e) lighting; and
(f) hospital accommodation.
The minimum permitted headroom shall be at least 203 cm, bunks 198 cm x
80 cm minimum and accommodation single-berth except on passenger or
“special purpose” ships. Accommodation should be sited and constructed so as
to minimise vibration and noise and, as a general rule, should be:
(a) at least 4.5 m2 on ships of less than 3,000 gt;
(b) at least 5.5 m2 on ships of more than 3,000 gt and less than 10,000 gt;
(c) at least 7.0 m2 on ships of more than 10,000 gt;
The need for recreation facilities is emphasised but not specified.
Catering
3-377 No specific standards are set although food should be prepared that meets the
cultural, religious and gastronomic requirements of crew members!
Medical
3-378 A comprehensive section on the provision of health-care and medical support –

doctors are required on ships carrying 100 or more on international voyages of
three days or more – and shipowners and members are exhorted to collaborate
in search and rescue and participate in medical research programmes.
Liability
3-379 Regulation 4.2 addresses shipowners’ liability and this is encapsulated in the
Purpose for this regulation:
“Each Member shall ensure that measures, in accordance with the Code, are in
place on ships that fly its flag to provide seafarers employed on the ships with a
right to material assistance and support from the shipowner with respect to the
financial consequences of sickness, injury or death occurring while they are serv-
ing under a seafarers’ employment agreement or arising from their employment
under such agreement.”

Health and Safety
3-380 Little here that will differ from a good company’s health and safety policy; it is
clear that the shipowner has the responsibility to be proactive in preserving
health and safety, including the detrimental effects of noise and vibration.
Education and training (especially for young seafarers), accident investigation
and reporting are all, as expected, included under shipowners’ responsibilities.
Shore-based Welfare Facilities
3-381 Member states are required to:
“ensure that shore-based welfare facilities, where they exist, are easily accessi-
ble. The Member shall also promote the development of welfare facilities, such
as those listed in the Code, in designated ports to provide seafarers on ships
that are in its ports with access to adequate welfare facilities and services.”
This, many seafarers’ may feel, may be long overdue in some countries.
Social Security
There is continuing pressure on members to ensure that seafarers and their

dependants are included within the countries social security provisions.
4.4.4 Title 5: Compliance and Enforcement
3-382 It is not intended to address this Regulation except to say the both flag states
and port states have responsibilities and that there will be resulting inspections
and certification. One can only hope that the requirements are coordinated as
the new Convention takes the place of some 65 existing instruments. Appendix 5
contains drafts of the two principal certificates:
● the Maritime Labour Certificate (valid for five years); and
● the Declaration of Maritime Labour Compliance.
3-383 The Convention will, as stated, be discussed during the period 7 to 23 February
2006 and is expected to be adopted by ILO Members with the support of IMO.
Article VIII addresses entry into force:
“3. This Convention shall come into force 12 months after the date on which
there have been registered ratifications by at least . . . members with a
total share in the gross tonnage of ships of . . . per cent.
4. Thereafter, this Convention shall come into force for any Member 12
months after the date on which its ratification has been registered.”

1. To what extent is the organisation of your company based

on a vertical or horizontal structure?
2. To what extent is team management practised on board

ships in your company?
3. What three elements does a superintendent need to consider

regarding the competence of seafarers?

5. TECHNOLOGICAL CHANGE AND ITS
MANAGEMENT
LEARNING OUTCOMES
● define the need to manage change and innovation; and
● describe the impact of technological development.
5.1 CHANGE AND ITS MANAGEMENT
5.1.1 Change and its Challenges
3-384 Few people will be unaware of the ongoing and arguably increasing rate of
change in the shipping industry. For the seafarer and the superintendent, this
change can be seen in four principal areas:
• changing employment structure;
• changing ship design and types, with increasing size and specialisation;
• changing technology in the provision of ship’s equipment; and
• changing legislation and increasing focus on risk management.
3-385 This chapter is mainly concerned with the last three items but a ship’s
superintendent is frequently the crew’s main link with their employers, at least in
a physical sense. Therefore, the need to be aware of and sympathetic to change
as it affects the crew’s conditions of employment is important and should not be
overlooked.
3-386 While the steady increase in specialised ship types, and their growth in size
and capacity is generally an exciting challenge and an opportunity, “progress”
does come with some caveats. There is, as mentioned in the previous chapter, a
constant need to ensure that the crew, and officers in particular, are appropriately
trained and qualified for the different ship types to which they may be appointed.
However, trained and qualified is, in many ways, just the starting point for
developing a real understanding of how a particular ship type works. Underlying
the paper qualification is the underlying need to develop the level of understanding
and experience that is crucial when problems or emergencies arise. Too many
changes for a seafarer (and, it is true also, for a superintendent) will mean that this
experience does not have the opportunity to grow and develop.

Module 3 Technological Change and its Management
3-387 The International Ship and Port Facility Security (ISPS) Code and related SOLAS
regulations are a prime example of this trend. No superintendent (or seafarer) can
be unaware of the impact of this legislation or of the extra burden that it brings.
Superintendents are inevitably the messengers that bring the news of legislative
change and they, therefore, have a particular need to understand the best way in
which to introduce and manage change. The relentless increase in legislation can
inhibit the way in which people work; the feeling that one “needs to think about the
legislation” can overshadow the need “to act as a prudent seafarer” as a number
of Admiralty Court judges have suggested as a reliable approach in emergency
situations. If technology fails, the seafarer and the master in particular, must have
the experience and confidence to act as a prudent seafarer, and there is often not
the time available to consult manuals and procedures (see para 3-414). It is one
of the duties of the superintendent to ensure that sea staff are confident of their
own professional abilities – this in turn means that training needs to be properly
underpinned by education and knowledge.
3-388 In this complex environment, risk assessment (Chapter 3) is a tool that is both
helpful and that is being increasingly written into legislation; not only does the
superintendent need to be familiar with the process, he or she needs to make
sure that it is understood by those on board. It is helpful if the superintendent can
be clearly seen to be using a risk assessment approach when dealing with issues
that effect a ship, especially during ship visits; a matter of leading by example.
3-389 This leaves the challenge of managing the technological development of

equipment and systems on board the ship. It can be argued that equipment
innovation and design is driven by one or more of the following:
• A well identified need.
• A poorly identified need.
• Changes in legislation.
• A technological development looking for a market.
• An endeavour to achieve savings.
• An endeavour to increase efficiency.
• Changes in associated technology.
3-390 It is not intended to explore these areas individually but in assessing the need
for new technology, superintendents may find it useful to decide, with a critical
eye and a critical mind, which of the preceding factors is dominant. It is also
important to think critically about the potential problems, as well as the potential
benefits, that the new technology may bring to the crew who have to use it. The
problems experienced by officers adjusting to the different manufacturers’
designs of GDMSS equipment are still with the industry; this represents an
avoidable risk and avoidable stress – and avoidable mistakes. Human error is so
often identified as the cause of accidents at sea and usually this human error is
attributed to the operator. Perhaps too little attention is paid to the role of the
managers, the legislators – and, in this context, the designers – who establish
the environment in which the operator must work.

Technological Change and its Management Module 3
3-391 The superintendent represents an important link between the ship and the crew
and the impact of technological change on board and the commercial and
legislative pressures that lead to change. The superintendent has a professional
responsibility to ensure that this feed-back loop is effective and this can be a
difficult and challenging task. In short, technological change needs active
management and the superintendent is in the front line.
5.1.2 Managing Change
“We trained hard but it seemed that every time we were beginning to form
up in teams, we would be reorganised. 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 whilst producing confusion,
inefficiency and demoralisation.”
Petronius Arbiter, later a Roman governor, as a young soldier
3-392 Petronius Arbiter’s words have a familiar ring as they represent change without
a clear objective but the shipping industry operates in a rapidly changing world
and change is inevitable. The first concept is to accept that change is both
necessary and inevitable. The second is to recognise that people react
differently to change and the third concept to accept is that change can be seen
as external (imposed) and potentially threatening or internal (self-generated)
and beneficial. In the isolated environment of a ship, the reaction to the process
of change will depend very much upon the skill and commitment of the manager
who has to introduce that change and this will frequently be the superintendent.
3-393 Change is, or should be, a response to demand and an understanding of the
changes in demand that have generated the change is a good, if not essential,
starting point if change is to be implemented successfully. Management must
clearly identify the objectives that they aim to achieve through the process of
change and they should be able to articulate them in a way that is understandable
and relevant to all who are affected by the proposed changes. Commitment and
an understanding of the effect of change must be seen to be coming from the top,
it should not be handed from management level to management level, losing a
degree of clarity at each level like a game of Chinese whispers.
3-394 Change can be perceived by the recipients either as a threat and a danger or as
a challenge and an opportunity, depending partly upon the recipient’s nature and
partly upon the way in which change is introduced. Generally, the response will
be a combination of both reactions and almost inevitably the individual, and the
group, will pass through the four stages illustrated below.
3-395 Denial is frequently the first response to change, especially significant change, to
a person’s familiar routines, whether it is in their personal or working life. It can at
the worst be typified by shock and numbness; a tendency to withdraw (if we ignore
it, it may go away) or an attitude of “business as usual” may mask the denial.
3-396 It is important to recognise this reaction and not be fooled into believing that
business as usual means that the organisation can move straight into the new
structure with full commitment (sometimes called the Tarzan swing). Confront
individuals with information, let them know that change will happen and explain

what to expect and suggest actions that they can take to adjust to change. Give
time if possible and this can be particularly difficult in the marine environment,
and arrange planning sessions to talk things over.
Diagram 11
3-397 During the resistance phase, anger, blame, anxiety, depression – even in
some cases, a downing of tools – can be expected. The onset of this phase
is signalled by a much more overt reaction and this is the time to listen
sympathetically and to encourage exploration of the possibilities of the new
situation. It is not the time to try and talk people out of their feeling or to “impose”
change, it is the time to listen carefully and to get behind the overreaction to the
real concerns so that they can be addressed constructively.
3-398 Although the management of change should not be delegated, it is obvious that
in the context of a ship at sea, much of the management of change must be
handled by the master and senior management team on board. This adds to the
difficulty and means that particular care is needed in involving the master and
the senior managers on board in the reasons for change.
3-399 If the previous stages have been handled successfully, individuals should
now be moving into the phase of exploration. This may be expressed by
over-preparation, confusion, even chaos together with an upsurge of energy:
“Let’s try this, or that and what about this . . . ?”
Lots of energy and new ideas but there is a lack of confidence and direction. One
of the problems is that different individuals may reach this stage at different times.
3-400 This is the phase for training. Concentration should be on priorities and, short-
term, achievable goals should be set. Project implementation teams can be
formed and brainstorming and planning encouraged but it remains important
that a firm and clear objective is clearly visible to all.

3-401 Commitment occurs when individuals begin working cohesively together as

a team; there is co-operation and better co-ordination. Those who are most
committed may already be looking for the next challenge. This is the time to set
longer-term goals and build the management of change into the organisational
structure.
3-402 The change management process described above is obviously designed

primarily for structural change in large organisations. The challenges for
superintendents involved in the implementation and management of change
across a fleet of owned or managed ships are obvious. Nevertheless, people will
still go through the four reactions outlined above and somehow this needs
managing. Technological change and legislative changes, just as changes in
management structure, can produce concern and anxiety and also raise the
need to manage in a different way. The increasing requirement to become risk
managers, to change from common sense and experience some might argue, is
but one example of this.
5.2 AREAS OF TECHNOLOGICAL CHANGE
3-403 This section looks at some of the areas in which technology is presenting
new solutions and new challenges. It is not written as a technical guide to
these technologies but to provoke thought and exploration. It will, it is hoped,
provide a useful, if not necessarily complete summary and starting point from
which the aspiring superintendent can develop a philosophy for managing
technological change and innovation.
3-404 Technological change and innovation are, arguably, led by integration and
automation. Both bring substantial benefits but both can present problems if not
implemented with a clear aim in mind. This, perhaps, is the Golden Rule that
superintendents should resolve to adopt “Use technical innovation to achieve a
clearly defined objective; do not be led by technology”. This, of course, is more
easily said than done, especially as much change is now imposed by legislation
and regulation. Nevertheless, the superintendent and the company should have
a properly thought through strategy for managing the introduction of new
technology and it should involve a very strong feed-back loop from the ships.
3-405 Chapter 4 looked at the changing world of manning and the challenges facing
the modern seafarer as he or she moves from ship to ship. The challenges come
at four levels. The first is the challenge of finding one way though the STCW
Certification process so as to end up with an adequate grasp of professional
competencies and a Certificate that is acceptable around the world.
3-406 In parallel with the need to gain the basic, professional qualifications is the need
to gain proficiency in the operation in an increasing number of ship types. For
tankers, chemical tankers and gas carriers this is set down in STCW 95 but the
need extends over a wider spectrum of vessels. The horizontally integrated
company may make it easier to gain experience in a wider range of vessels but
it does, arguably, make it more difficult to build up expertise of a particular vessel
type. If the experience of the generation above the seafarer is similar, then it
becomes increasingly difficult to build that in-depth knowledge of a ship type that
leads to cost-efficient operation and a sure response in an emergency.

3-407 Rapid technological change means that there is another challenge beyond the
challenge of different ship types and this occurs when the seafarer enters the
navigation bridge or the cargo or engine room control room. While the range of
equipment may be familiar, the details, the way in which systems do or do not
integrate and the layout of the controls may vary significantly. The experience of
GMDSS mentioned in para 3-390 and the problems caused by different control
configurations designed by different manufacturers should still be an important
lesson – the superintendent has a key role in ensuring that the manufacturers
learn from that lesson.
3-408 The fourth challenge is a human one, the ability for the seafarer to become a
confident member of the ship’s management team in an industry that, in many
cases, is still unsure whether it practises a hierarchical or a team-based
management style. It is not easy, in this environment, to say “I may have a
Master’s (or Chief Engineer’s) Certificate, but the technology in this cargo control
room scares me to death”. This can be even more of a problem if a multi-national
crew raises the cultural problem of “loss of face” – and it can be as tough for a
North European officer as for any other.
3-409 The case of The Eurasian Dream [2002] EWHC 118 (QB) (Comm) illustrates
some of the problems faced by changing crews and specialist vessels.
3-410 The Eurasian Dream was a pure car carrier with 12 car decks and five fire zones.
On 23 July 1998, the vessel was both discharging cars and bunkering. According
to the third officer, a fire broke out “in number 2 hold, on 4 deck” where a service
truck was being used to jump-start vehicles prior to discharge. At 18:45, the fire
alarm was sounded. When local efforts to contain the fire failed, CO2 was
released into the holds by the chief engineer. However, it appears that the whole
process of releasing the CO2 was late and incorrectly carried out, without proper
attention being paid to ventilation and the gas tight condition of the five fire zones.
3-411 As a result, a fire in one vehicle resulted in the constructive total loss of the
vessel.
3-412 By way of background, the master had joined the Eurasian Dream in Jeddah on
21 April 1998. He had previously served as a master on bulk carriers and had no
experience of car carrying vessels. When asked if he had received any training in
the use of the vessel’s fire-fighting appliances after joining the vessel, the master
said that any training was restricted to the chief engineer taking him round the CO2
room and showing him where everything was. The master said that “he had not
had proper instructions from the owners in relation to fires on car carriers”.
3-413 The master also stated that:
“he now realised that there are special risks when a car carrier is in port but
he had not appreciated this at the time and no one had warned him”.
3-414 The ship manager’s superintendent agreed that the master was a novice in three
senses, he was new to the ship, new to this type of ship (a pure car carrier) and
new to the ship managers. Nevertheless, he received a briefing letter that was
in substantially the same terms as the briefing letter to the previous master (who
had considerable experience of car carriers). The CO2 manual was not referred
to in the handing-over form and it was only one of about 150 equipment

manuals, each of which would be about 75–150 pages or more. The letter to the
master did not tell him which of the manuals were relevant to him as master.
3-415 In the words of one of the expert witnesses:
• “ . . . the briefing and instructions given to the master were not safe and
prudent to enable him to carry out his job properly.”
• “ . . . he did not consider that the master was properly instructed and trained
to deal with a fire on the ship.”
• “ . . . the master should have been allowed to read important manuals

before taking command. There was a need for an overlap period between
old and new masters.”
3-416 The short sections below highlight some of the areas where change is at its
greatest and represent areas where the company and the superintendent will
need to put in place processes that will ensure that the ship’s management team
can benefit from the technology without the inherent dangers of improperly
understood equipment.
5.2.1 Managing Technology
3-417 The technology triangle in Diagram 12 below shows the three main centres that
influence technology and, once again, the superintendent’s area of responsibility
means that he or she is a crucial link between the three centres.
Diagram 12
The Technology Triangle
The Regulator
3-418 There is no doubt that the International Maritime Organisation (IMO) and, to a
lesser extent, the International Labour Organisation (ILO) are the prime
legislative movers for the shipping industry. Nevertheless, they are by no means
autonomous and, for example, in establishing standards for electronic and

communications equipment, IMO has to work within the framework of such

international bodies as the International Electrotechnical Commission (IEC) and
the International Telecommunications Union (ITU), both UN organisations. IMO
may generate the legislation, but it is the national governments of the various
flag states that implement it at a national level and this, of course, may mean
differences in detail between ships if they fly different flags.
3-419 In addition, political blocks such as the United States and, increasingly, the
European Union are generating their own regulations such as the EC Bulk
Carrier Directive. In addition to these two blocks of bodies, the classification
societies are a main area of responsibility for the superintendent, sometimes
acting on behalf of flag states in a statutory role as well as acting as “quality
control” for the insurance industry.
3-420 All of these organisations will ensure that the superintendent receives a steady,
downward stream of detailed regulation that has to be converted into operational
procedures and, frequently, structural or equipment upgrades. The real challenge
for the superintendent, and an important area of responsibility, is the ability to
ensure that information passes in the other direction so that the legislators
receive at least some feedback from the sharp end. It is worth asking whether
bulk carriers would have been built with reduced scantlings and high tensile
steel shear strakes, with no forecastle and large for’d hatches if the naval
architects who designed them (to meet the competitive pressures of the
commercial market place) had more direct communication with the people who
sail in them – and too frequently find their vessels foundering under them. It is
the superintendent who forms, or should form, a vital link in this dialogue.
The Designer
3-421 Whether ship builder or equipment manufacturer, the designer has to wrestle
with the same legislative challenges that affect the superintendent. While type-
approval ensures that there is a quality standard, the process of change is slow,
expensive and complex. Driven from one side by regulation, the
designer/manufacturer also has to meet the cost pressures of his customers, the
shipowners and managers. While this price pressure is only to be expected,
there does appear to be an increasing trend for some of the larger ship
operators to use professional purchasers to source equipment. This can mean
an increasing pressure to meet the regulatory requirement at the lowest cost
with, some manufacturers argue, a reduced ability:
(a) to sell quality and added value; and
(b) reduced feedback from the ships and superintendents on equipment per-
formance under operational conditions.
3-422 Once again, it is the superintendent who is the person who can make this link.
The User
3-423 This is a dual role where both owner/manager and seafarer are both users and
it is obviously important (if not essential) that the owner/manager has an idea
whether he is spending his money wisely. As the technology triangle
demonstrates, the owner/manager may also appear in the role of designer and

companies that have a strong involvement in this area often tend to be the
successful companies with communications flowing in both directions through
the medium of the superintendent. If this is not happening effectively or
efficiently, the superintendent has a professional responsibility to challenge this.
5.2.2 Automation
3-424 While a definition of automation is “the use of automatic equipment to save

mental and physical labour”, automatic is defined as “done spontaneously,
without conscious thought or intervention”.
3-425 While automation is an undoubted and unquestionable benefit, it does carry with
it the seeds of danger unless managed properly. A modern chemical tanker’s
cargo control room is probably one of the best examples of the efficiencies that
can result from the automation of pumping, ullaging and valve systems. There is
only one caveat and that is the danger of a pump meaning an icon on a
computer screen, out of sight and obeying the lightest touch of the operator.
When systems break down or emergencies occur, that small icon then becomes
irrelevant and the pump reverts to being a large and intransigent lump of metal;
it is important that as the seafarer becomes more proficient with the icon, the
reality of the ironwork is not totally ignored.
3-426 Where will automation develop next? The increasing efficiency and reliability
of micro-processors will ensure that data monitoring and control continues to
increase. Perhaps this will lead to automatic or semi-automatic survey systems,
with sensors monitoring spaces where access is difficult. With the increasing
introduction of double hull vessels, this may be inevitable. Will the future class
surveyor conduct his inspection from in front of a computer screen and not find
it necessary to enter enclosed spaces?
3-427 Where one of the dangers of automation lies is, perhaps, in its potential to
enable a ship to be operated (at least when everything is working properly) without
“conscious thought” (see definition above) needed from the ship’s management
team. If this is allowed to creep in (and it already is to a certain extent) then the
quality of the management team will deteriorate and the ability to manage under
“non-standard” conditions will be degraded. Automation should not proliferate, it
should be planned with the sea staff central to the feed-back loop.
3-428 The other area of danger is that automation can reduce the need for crew
numbers. The fully automated and unmanned ship may be a technological vision
that will one day be achieved. Constant attrition of the manpower available on
board is another matter entirely.
5.2.3 Computerisation and Simulation
3-429 These both lie very close to automation and, indeed, to every subject covered in
this short review. One of the key elements of computerisation is the level of
integration. Again, decision-making in establishing levels of computerisation
need to take into account advantages and disadvantages. Manufacturers will
love to sell fully integrated systems but, does this mean that the best individual
systems are part of that package?

3-430 In the introduction to this section, the challenge of increasing and sometimes
bewildering technology was raised. Simulation has a major role to play here. As
automation and computerisation increase, so the need to learn how the system
works in a safe, simulated environment increases. One of the challenges here is
for the simulations to be written for benefit of the seafarer and not in a language
mainly comprehensible to the computer programmer.
3-431 In Chapter 4 the need to develop experience of different ship types was
emphasised and this extends to the need for officers to be able to familiarise
themselves with new or different technology. On-board systems increasingly
need to have a safe facility that will allow officers the ability to run realistic
simulations of actual operations and manufacturers need to be encouraged to
engage professionals skilled in teaching when developing these programs.
5.2.4 Communication
3-432 One thing is sure about communications and that is that the level will increase
and every increase in capacity will bring with it a further increase in demand. The
future will almost inevitably move towards permanent broadband communication
between ship and shore although whether that will bring an increase in the quality
of communication as well as the quantity is a different question.
3-433 Communication between ship and shore falls into four broad sectors:
• Data
Virtually every part of the ship is now prone to data streaming: the main
engine bearing temperatures, stress levels in the hull, cargo condition or
temperature, can all be monitored from an office ashore. This appears to
be an irreversible process and there is, perhaps, little to be gained in
challenging it and it does have the benefit of enabling vessel operation to
be compared across a fleet of vessels on a daily basis instead of the need
to analyse voyage data at irregular intervals.
Some of the data that is currently being collected is now being recorded
in a Black Box or Voyage Data Recorder (VDR) in much the same way as
has been standard practice for many years in the aviation industry.
• Management
This encompasses the dialogue between the ship and the shore and is
an area where a fine balance needs to be achieved between instruction
and support and advice. It is also an area where thought needs to be
given to the method of communication, e.g. spoken word by telephone,
written word by e-mail or more formally by letter or policy statement sent
by e-mail. It is important to construct and transmit a message in a way
that will get the intended results and to do this it must be understood by
the receiver, not just the sender.
It is suggested by some researchers (Mehrabian) that up to 55% of

the meaning contained in a communication can be non-verbal, with nearly
40% of the meaning conveyed, for example, by tone. In written
communications, all of this meaning needs to be conveyed by words

alone. In formally written communications, even if transmitted by

electronic means, the thought process involved in the preparation should
ensure that meaning and context are adequately covered. The ease with
which e-mail communication can be undertaken does, sometimes –
possibly often – mean that the required thought process is not adequately
undertaken. In short, be cautious of the ease with which words can be
transmitted when the objective is to transmit coherent thoughts.
The ISM Code went to some lengths to reinforce the master’s responsibilities
and authority (ISM Code Section 5). Ease of communication should not
undermine this. It remains good practice to always decide:
– Why . . . is the communication necessary, what is its objective?
– What . . . is the information that needs to be conveyed, including

the information necessary for the receiver to understand the
sender’s objective?
– Who . . . should it be addressed to?
– How . . . should the communication be transmitted and what checks

need to be incorporated in order to ensure correct understanding?
• Training
Developments in distance learning and inter-active learning mean that modern

communications can enable seafarers to study much more effectively at sea.
Access to well designed company intranet sites can provide an effective way
of keeping personnel up-to-date, involved and aware of changes and
developments (see Section 5.1: Change and Its Management).
• Social
The modern seafarer has been brought up in the age of the Internet and
expects to be able to access the outside world wherever he or she is and
perhaps especially if at sea and cut off from normal social contact.
Seafarers today need to be computer literate; with this comes a natural
desire to be connected to the world; provision must be made on board to
enable this if the industry is to attract the staff it needs.
5.2.5 Integration and the Navigational Challenge
3-434 Navigation and the navigating bridge is one of the areas where new technology and
integration are moving at a bewildering pace. The first step in this integration is now
very well established and was always quite clear and straightforward; it was the
integration of the gyrocompass into the automatic pilot and the radar (together with
other inputs such as speed). It is the virtual replacement of astronomical position
fixing by electronic means (primarily GPS – Global (Satellite) Positioning System –
and the upgraded Differential GPS that gives greater accuracy by correlating the
ship’s received position information with corrections from a land-based GPS
receiver) and electronic charts. Two systems of GPS are NAVSTAR GPS Standard
Positioning Service (SPS) and the Russian-based GLONASS.

3-435 Electronic charts, while offering a range of benefits, not least being the ease with
which they can be updated, are a complex technological development at the
centre of the integrated bridge system and it is a technology that needs
understanding. Initially, maps covering land areas and charts covering sea areas
were developed using different datum; an initial challenge is the conversion to
the accepted global datum WGS 84 to which GPS positions are referenced.
When using DGPS, it is possible that the positioning of charted data may not be
as accurate as the DGPS position. Mariners should, therefore, always allow a
sensible safety margin to account for such discrepancies.
3-436 Electronic charts are becoming an essential part of the navigation system of the
modern bridge and contribute greatly to navigational safety. However, such
systems must be used prudently bearing in mind the proliferation of approved
and unapproved equipment and the current scarcity of official vector data (q.v.).
Approved in this context means meeting the SOLAS Chapter V requirements
and the only type of electronic chart system that meets the performance
standards adopted by IMO is Electronic Chart Display and Information System
(ECDIS). It is a requirement that ECDIS only uses official vector data produced
by a national hydrographic office through Electronic Navigational Charts (ENC).
The strength of this system is that, apart from being based on WGS 84 datum,
it is built as a true digital chart with the amount of detail displayed automatically
reduced when the scale of a particular ENC is reduced, in order to lessen clutter.
3-437 If an IMO approved electronic chart system is not in use, the continuous use of
paper charts is essential. Electronic Chart Systems (ECS) are commercially
produced vectors charts and the other, commonly used system is the Raster
Chart Display System (RCDS), which are electronic facsimiles of hydrographer’s
office paper charts. Despite this, Raster charts are used extensively in ECDIS
display systems but in its Marine Guidance Note 63 (October 2001) the British
MCA warns of the need to apply risk assessment to the use of ECDIS in Raster
chart (as opposed to vector chart) mode. Annex 1 of MGN 63 contains a
comprehensive risk appraisal of which the table below is but a small element.
ANNEX 1
EXAMPLE ANALYSIS OF RCDS MODE LIMITATIONS AND POTENTIAL

HAZARDS
Limitations Potential Hazards
1. Chart based system Next RCDS chart unavailable. Lack

of anticipation of approaching and
developing navigational hazards.
2. Alarms not triggered Vessel may enter designated

by chart data danger areas. Planned passage
may cross danger areas.
3. Datum shifts Vessel position on the chart may

shift, especially between charts.

3-438 Radar is the other major input into the integrated navigation system and it still
needs to be underlined that radar should still be considered as an aid to
navigation and not a reason not to apply prudent seamanship, especially with
regard to speed in conditions of reduced visibility. In addition to the Automatic
Plotting Information provided by ARPA radars, a new development will shortly be
providing even more data.
5.2.6 AIS – Automatic Identification Systems
3-439 These systems are required to have transponders fitted that will transmit data
about the ship’s identity, type, position, course, speed, navigational status and
other safety-related information. It will be transmitted automatically and will enable
other ships and shore establishments to locate the transmitting object accurately.
3-440 The system is designed as a navigational aid and not as a replacement for
established navigational equipment such as ARPA. Trials of such systems have
been taking place around the world and during one such trial on a stretch of the
Danube River, a European Community project has proved that the concept
works and is a worthwhile investment. The investment cost is also falling,
systems are currently around US$5,500 and US$10,000 but the difficulty now
will be in system supply.
3-441 The use of AIS transponders is set out in Regulation 19 of SOLAS Chapter V,
which is the carriage requirement for shipborne navigational systems and
equipment. The original concept for the carriage of AIS was adopted in the year
2000. The regulation required AIS to be fitted aboard all ships of 300 gross
tonnage and upwards engaged on international voyages, cargo ships of 500
gross tonnage and upwards not engaged on international voyages and
passenger ships irrespective of size built on or after 1 July 2002.
3-442 The time scale for international shipping built before 1 July 2002 is now for AIS
to be fitted to:
• passenger ships on international voyages constructed before 1 July 2003;
• tankers, not later than the first survey for safety equipment on or after
1 July 2003; and
• all ships, other than passenger ships and tankers, of 50,000 gross tonnage
and upwards, not later than 1 July 2004.
3-443 However an amendment to SOLAS adopted by the Diplomatic Conference on

Maritime Security in December 2002 states that ships, other than passenger
ships and tankers, of 300 gross tonnage and upwards but less than 50,000
gross tonnage, will be required to fit AIS not later than the first safety equipment
survey after 1 July 2004 or by 31 December 2004, whichever occurs earlier.
3-444 The adoption of this new amendment will cover a great many more ships in the
shorter time span than the original plan of 2008.
3-445 Ships fitted with AIS shall maintain AIS in operation at all times except where
international agreements, rules or standards provide for the protection of
navigational information.

3-446 The regulation requires that AIS shall:
• provide information – including the ship’s identity, type, position, course,

speed, navigational status and other safety-related information – automat-
ically to appropriately equipped shore stations, other ships and aircraft;
• receive automatically such information from similarly fitted ships;
• monitor and track ships; and
• exchange data with shore-based facilities.
3-447 It will be important for ships’ staff to attend training courses on the use of AIS
and the way that it is integrated with the other navigational systems. For
example, a ship that is picking up and displaying AIS data has the potential to
be safer than a ship without such a system. This is because the navigator knows
what the identified objects are doing because the system has told him. This
leaves more time to concentrate on the objects that are not identified by the
system.
3-448 The one major health warning with this is, what happens if the wrong information
is transmitted? We hope that the Voyage Data Recorder (VDR) will pick this up
and exonerate the ship in the eyes of the insurance company.
3-449 AIS also has the potential to transmit an almost overwhelming amount of data.
The International Association of Lighthouse Authorities (IALA), lists radar target
broadcasting, VTS waypoints and route plans, meteorological and hydrological
data and information about Aids to Navigation (AtN). Without going into detail on
specific areas, it can be seen that AIS has, together with other electronic
navigational aids, the potential to contribute to information overload.
3-450 Information overload, the quality of equipment integration and the danger of
over-reliance by watchkeepers on electronic aids that are just aids to navigation,
albeit invaluable ones, are all areas that the superintendent must be aware of
when purchasing equipment for the navigation bridge (or any other part of the
ship’s management systems). There are four interfaces for the professional
superintendent:
• the officers (and ratings) onboard and the invaluable feedback that they
can provide;
• the owning or management company, where both budgets and policy are
set;
• the equipment manufacturers and, one hopes;
• some of the specialist working groups at the IMO and other organisa-
tions where sensible, well thought through legislation needs to be
developed that has the requirements of the equipment or system
operator at its heart.

1. What are the standard sequences of response to change?

2. What are the three areas that need consideration when
manning a ship?
3. What are the benefits and potential problems of automation?

RECOMMENDED READING
Supplementary reading is necessary to gain the depth of learning required in

this module. The following list of publications has been referred to in the prepa-
ration of this module and is recommended for supporting your study. However
the list is not exhaustive.
● Guidelines on the Application of the ISM (Code), International Shipping

Federation
● STCW ‘95 Company Checklist, International Shipping Federation
● Commercial Management for Shipmasters, Robert L Tallack, The Nautical

Institute (ISBN 1 870077 33 4)
● UCP 500 Uniform Customs and Practice for Documentary Credits,

International Chamber of Commerce, January 1994
● Analysis of Major Claims, UK P&I Club
● Marine Guidance Notices and Marine Shipping Notices: Maritime and

Coastguard Agency (see website)
● Managing Safety and Quality in Shipping, A M Chauvel, The Nautical

Institute (ISBN 1 870077 40 7)
● Managing Risk in Shipping: A Practical Guide, The Nautical Institute (ISBN

1 870077 48 2).

USEFUL WEBSITES
International Maritime Organisation : www.imo.org
Maritime and Coastguard Agency : www.mca.org
International Association of Classification : www.iacs.org.uk

Societies
The Nautical Institute : www.nautinst.org
International Shipping Federation : www.marisec.org

International Chamber of Shipping
International Association of Dry Cargo : www.intercargo.org

Shipowners
International Cargo Handling : www.ichca.org.uk

Co-ordinating Association
International Transport Federation : www.itf.org.uk
International Labour Organisation : www.ilo.org
International Ship Managers Association : www.isma-london.org
International Federation of Ship Master’s : www.ifsma.org

Associations
Baltic and International Maritime Council : www.bimco.dk

TUTOR MARKED ASSIGNMENT
In order to assess your understanding of this module, write approximately 250 words on
each of the following subjects:
● The various functions involved in managing ships.
● Seaworthiness and cargoworthiness and their importance.
● The process involved in amending (in 1995) the STCW Convention and ensuring that
it operates consistently and effectively.
● The elements of a strategy for ensuring the provision of competent and cost effective
crews.
● Brainstorm the hazards that you might expect to encounter when dry-docking for
repairs.
● Under what circumstances may a shipowner be able to limit his liability?
● Discuss the approach you would take when planning the navigation bridge for a new
class of vessel.
For candidates taking the Diploma option, a Tutor Marked Assignment must be
completed for each core module. There is a minimum pass mark for each assignment
and candidates will be expected to reach this minimum standard. Collectively, the
assignments represent a possible 40% of the candidate’s final mark.
On the cover page of your assignment, could you please

include the following information:
● Your Name
● Course Name – Ship Superintendency
● Course Code – LM1928
● Order Number (the six digit number quoted on your

enrolment confirmation letter)

Tutor Marked Assignment Module 3
To speed the processing of assignments, please return your typed assignment by post, fax
or email directly to the TMA Administrator:
Post: Mrs Parmjit Gill

TMA Administrator
National Sea Training Centre
Dering Way
Gravesend
Kent
DA12 2JJ
United Kingdom
Tel: +44 (0)1322 629684
Fax: +44 (0)1322 629684
Email: mol@nwkcollege.ac.uk
Emailed assignments are the preferred method of receipt. Please ensure that in the sub-
ject of your email you include the following information:
● Your Name
● Your course name
● The module name
Emailed assignments will only be accepted if they are sent as attachments to the email
message. Remember to keep a copy of your completed assignment in case of loss. Please
also state if you would like confirmation of receipt of your assignment. If so, you must
include your email address, as confirmation by post or fax is not possible.
There are no penalty points for late submission of assignments. You should attempt to
complete each assignment within four weeks of receipt of the module. However, you can
submit assignments at any time during the course, but they must be received before
the exam.

APPENDIX 1
HAGUE-VISBY RULES
Appendix 1 Module 3
THE HAGUE RULES AS AMENDED BY THE

BRUSSELS PROTOCOL 1968
ARTICLE I
In these Rules, the following words are employed, with the meanings set out below:
(a) “Carrier” includes the owner or the charterer who enters into a contract of carriage
with a shipper.
(b) “Contract of carriage” applies only to contracts of carriage covered by a bill of lading
or any similar document of title, insofar as such document relates to the carriage of
goods by sea, including any bill of lading or any similar document as aforesaid issued
under or pursuant to a charterparty from the moment at which such bill of lading
or similar document of title regulates the relations between a carrier and a holder of
the same.
(c) “Goods” includes goods, wares, merchandise, and articles of every kind whatsoever
except live animals and cargo which by the contract of carriage is stated as being
carried on deck and is so carried.
(d) “Ship” means any vessel used for the carriage of goods by sea.
(e) “Carriage of goods” covers the period from the time when the goods are loaded on
to the time they are discharged from the ship.
ARTICLE II
Subject to the provisions of Article VI, under every contract of carriage of goods by sea the
carrier, in relation to the loading, handling, stowage, carriage, custody, care and discharge
of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights
and immunities hereinafter set forth.
ARTICLE III
1. The carrier shall be bound before and at the beginning of the voyage to exercise
due diligence to:
(c) make the holds, refrigerating and cool chambers, and all other parts of the
and preservation.
2. Subject to the provisions of Article IV, the carrier shall properly and carefully
load, handle, stow, carry, keep, care for, and discharge the goods carried.

Module 3 Appendix 1
3. After receiving the goods into his charge the carrier or the master or agent of
the carrier shall, on demand of the shipper, issue to the shipper a bill of lading
showing among other things:
(a) The leading marks necessary for identification of the goods as the same
are furnished in writing by the shipper before the loading of such goods
starts, provided such marks are stamped or otherwise shown clearly upon
the goods if uncovered, or on the cases or coverings in which such goods
are contained, in such a manner as should ordinarily remain legible until
the end of the voyage.
(b) Either the number of packages or pieces, or the quantity, or weight, as the
case may be, as furnished in writing by the shipper.
(c) The apparent order and condition of the goods.
Provided that no carrier, master or agent of the carrier shall be bound to state or
show in the bill of lading any marks, number, quantity or weight which he has
reasonable ground for suspecting not accurately to represent the goods actually
received, or which he has had no reasonable means of checking.
4. Such a bill of lading shall be prima facie evidence of the receipt by the carrier of
the goods as therein described in accordance with paragraph 3 (a), (b) and (c).
However, proof to the contrary shall not be admissible when the bill of lading has
been transferred to a third party acting in good faith.
5. The shipper shall be deemed to have guaranteed to the carrier the accuracy at
the time of shipment of the marks, number, quantity and weight, as furnished by
him, and the shipper shall indemnify the carrier against all loss, damages and
expenses arising or resulting from inaccuracies in such particulars. The right of
the carrier to such indemnity shall in no way limit his responsibility and liability
under the contract of carriage to any person other than the shipper.
6. 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, or, if the loss or damage be not
apparent, within three days, such removal shall be prima facie evidence of the
delivery by the carrier of the goods as described in the bill of lading.
The notice in writing need not be given if the state of the goods has, at the time of
their receipt, been the subject of joint survey or inspection.
Subject to paragraph 6 bis the carrier and the ship shall in any event be
discharged from all liability whatsoever in respect of the goods, unless suit is
brought within one year of their delivery or of the date when they should have been
delivered. This period may, however, be extended if the parties so agree after the
cause of action has arisen.
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.

Appendix 1 Module 3
7. An action for indemnity against a third person may be brought even after the
expiration of the year provided for in the preceding paragraph if brought within
the time allowed by the law of the Court seized of the case. However, the time
allowed shall be not less than three months, commencing from the day when the
person bringing such action for indemnity has settled the claim or has been
served with process in the action against himself.
8. After the goods are loaded the bill of lading to be issued by the carrier, master,
or agent of the carrier, to the shipper shall, if the shipper so demands be a
“shipped” bill of lading, provided that if the shipper shall have previously taken
up any document of title to such goods, he shall surrender the same as against
the issue of the “shipped” bill of lading, but at the option of the carrier such
document of title may be noted at the port of shipment by the carrier, master, or
agent with the name or names of the ship or ships upon which the goods have
been shipped and the date or dates of shipment, and when so noted, if it shows
the particulars mentioned in paragraph 3 of Article III, shall for the purpose of
this article be deemed to constitute a “shipped” bill of lading.
9. Any clause, covenant, or agreement in a contract of carriage relieving the carrier

or the ship from liability for loss or damage to, or in connection with, goods
arising from negligence, fault, or failure in the duties and obligations provided in
this article or lessening such liability otherwise than as provided in these Rules,
shall be null and void and of no effect. A benefit of insurance in favour of the
carrier or similar clause shall be deemed to be a clause relieving the carrier from
liability.
ARTICLE IV
1. 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 to make the ship seaworthy, and to secure that the ship is
properly manned, equipped and supplied, and to make the holds, refrigerating
and cool chambers and all other parts of the ship in which goods are carried fit
and safe for their reception, carriage and preservation in accordance with the
provisions of paragraph 1 of Article III. 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.
2. Neither the carrier nor the ship shall be responsible for loss or damage arising
or resulting from:
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the
carrier in the navigation or in the management of the ship.
(b) Fire, unless caused by the actual fault or privity of the carrier.
(c) Perils, dangers and accidents of the sea or other navigable waters.
(d) Act of God.
(e) Act of war.

Module 3 Appendix 1
(f) Act of public enemies.
(g) Arrest or restraint of princes, rulers or people, or seizure under legal

process.
(h) Quarantine restrictions.
(i) Act or omission of the shipper or owner of the goods, his agent or
representative.
(j) Strikes or lockouts or stoppage or restraint of labour from whatever cause,

whether partial or general.
(k) Riots and civil commotions.
(l) Saving or attempting to save life or property at sea.
(m) Wastage in bulk of weight or any other loss or damage arising from
inherent defect, quality or vice of the goods.
(n) Insufficiency of packing.
(o) Insufficiency or inadequacy of marks.
(p) Latent defects not discoverable by due diligence.
(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, 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.
3. The shipper shall not be responsible for loss or damage sustained by the carrier
or the ship arising or resulting from any cause without the act, fault or neglect of
the shipper, his agents or his servants.
4. Any deviation in saving or attempting to save life or property at sea or any

reasonable deviation shall not be deemed to be an infringement or breach of
these Rules or of the contract of carriage, and the carrier shall not be liable for
any loss or damage resulting therefrom.
5. (a) Unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading, neither the carrier
nor the ship shall in any event be or become liable for any loss or damage
to or in connection with the goods in an amount exceeding the equivalent
of 666.67 units of account per package or unit or units of account per kilo
of gross weight of the goods lost or damaged, 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.

Appendix 1 Module 3
The value of the goods shall be fixed according to the commodity exchange
price, or, if there be no such price, according to the current market price, or,
if there be no commodity exchange price or current market price, by reference
to the normal value of goods of the same kind and quality.
(c) Where a container, pallet or similar article of transport is used to consolidate

goods, 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 as far as these packages or units
are concerned. Except as aforesaid such article of transport shall be
considered the package or unit.
(d) The unit of account mentioned in this Article is the special drawing right as
defined by the International Monetary Fund. The amounts mentioned in
sub-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.
(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, or
recklessly and with knowledge that damage would probably result.
(f) The declaration mentioned in sub-paragraph (a) of this paragraph, if

embodied in the bill of lading, shall be prima facie evidence, but shall not
be binding or conclusive on the carrier.
(g) By agreement between the carrier, master or agent of the carrier and the
shipper other maximum amounts than those mentioned in sub-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-paragraph.
(h) Neither the carrier nor the ship shall be responsible in any event for loss
or damage to, or in connection with, goods if the nature or value thereof
has been knowingly mis-stated by the shipper in the bill of lading.
6. Goods of an inflammable, explosive or dangerous nature to the shipment

whereof the carrier, master or agent of the carrier has not consented with
knowledge of their nature and character, may at any time before discharge be
landed at any place, or destroyed or rendered innocuous by the carrier without
compensation and the shipper of such goods shall be liable for all damages and
expenses directly or indirectly arising out of or resulting from such shipment. If
any such goods shipped with such knowledge and consent shall become a
danger to the ship or cargo, they may in like manner be landed at any place, or
destroyed or rendered innocuous by the carrier without liability on the part of the
carrier except to general average, if any.
ARTICLE IV
1. The defences and limits of liability provided for in these Rules shall apply in any
action against the carrier in respect of loss or damage to goods covered by a
contract of carriage whether the action be founded in contract or in tort.

Module 3 Appendix 1
2. If such an action is brought against a servant or agent of the carrier (such

servant or agent not being an independent contractor), such servant or agent
shall be entitled to avail himself of the defences and limits of liability which the
carrier is entitled to invoke under these Rules.
3. The aggregate of the amounts recoverable from the carrier, and such servants
and agents, shall in no case exceed the limit provided for in these Rules.
4. Nevertheless, a servant or agent of the carrier shall not be entitled to avail

himself of the provisions of this article, if it is proved that the damage resulted
from an act or omission of the servant or agent done with intent to
cause damage or recklessly and with knowledge that damage would probably
result.
ARTICLE V
A carrier shall be at liberty to surrender in whole or in part all or any of his rights and
immunities or to increase any of his responsibilities and obligations under these Rules,
provided such surrender or increase shall be embodied in the bill of lading issued to the
shipper. The provisions of these Rules shall not be applicable to charterparties, but if bills
of lading are issued in the case of a ship under a charterparty they shall comply with the
terms of these Rules. Nothing in these Rules shall be held to prevent the insertion in a bill
of lading of any lawful provision regarding general average.
ARTICLE VI
Notwithstanding the provisions of the preceding articles, a carrier, master or agent of the
carrier and a shipper shall in regard to any particular goods be at liberty to enter into any
agreement in any terms as to the responsibility and liability of the carrier for such goods,
and as to the rights and immunities of the carrier in respect of such goods, or his obligation
as to seaworthiness, so far as this stipulation is not contrary to public policy, or the care or
diligence of his servants or agents in regard to the loading, handling, stowage, carriage,
custody, care and discharge of the goods carried by sea, provided that in this case no bill
of lading has been or shall be issued and that the terms agreed shall be embodied in a
receipt which shall be a non-negotiable document and shall be marked as such.
An agreement so entered into shall have full legal effect.
Provided that this article shall not apply to ordinary commercial shipments made in the
ordinary course of trade, but only to other shipments where the character or condition of
the property to be carried or the circumstances, terms and conditions under which the
carriage is to be performed are such as reasonably to justify a special agreement.
ARTICLE VII
Nothing herein contained shall prevent a carrier or a shipper from entering into any agreement,
stipulation, condition, reservation or exemption as to the responsibility and liability of the
carrier or the ship for the loss or damage to, or in connection with, the custody and care
and handling of goods prior to the loading on, and subsequent to the discharge from, the
ship on which the goods are carried by sea.

Appendix 1 Module 3
ARTICLE VIII
The provisions of these Rules shall not affect the rights and obligations of the carrier under
any statute for the time being in force relating to the limitation of the liability of owners of
seagoing vessels.
ARTICLE IX
These Rules shall not affect the provisions of any international Convention or national law
governing liability for nuclear damage.
ARTICLE X
The provisions of these Rules shall apply to every bill of lading relating to the carriage of
goods between ports in two different States if:
(a) the bill of lading is issued in a contracting State; or
(b) the carriage is from a port in a contracting State; or
(c) the contract contained in or evidenced by the bill of lading provides that these Rules
or legislation of any State giving effect to them are to govern the contract;
whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any
other interested person.
[The last two paragraphs of this Article are not reproduced. They require contracting States
to apply the Rules to bills of lading mentioned in the Article and authorise them to apply
the Rules to other bills of lading.]
[Articles 11 to 16 of the International Convention for the Unification of Certain Rules of Law
Relating to Bills of Lading signed at Brussels on 25 August 1974 are not reproduced. They
deal with the coming into force of the Convention, procedure for ratification, accession and
denunciation and the right to call for a fresh conference to consider amendments to the
Rules contained in the Convention.]

APPENDIX 2
YORK-ANTWERP RULES 1994

Appendix 2 Module 3
Rule of Interpretation
In the adjustment of general average the following Rules shall apply to the exclusion of any
Law and Practice inconsistent therewith.
Except as provided by the Rule Paramount and the numbered Rules, general average shall
be adjusted according to the lettered Rules.
Rule Paramount
In no case shall there be any allowance for sacrifice or expenditure unless reasonably
made or incurred.
Rule A
There is a general average act when, and only when, 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.
General average sacrifices and expenditures shall be borne by the different contributing
interests on the basis hereinafter provided.
Rule B
There is a common maritime adventure when one or more vessels are towing or pushing
another vessel or vessels, provided that they are all involved in commercial activities and
not in a salvage operation.
When measures are taken to preserve the vessels and their cargoes, if any, from a com-
mon peril, these Rules shall apply.
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; but if the disconnection is itself a general
average act the common maritime adventure continues.
Rule C
Only such losses, damages or expenses which are the direct consequence of the general
average act shall be allowed as general average.
In no case shall there be any allowance in general average for 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.
Demurrage, loss of market, and any loss or damage sustained or expense incurred by rea-
son of delay, whether on the voyage or subsequently, and any indirect loss whatsoever,
shall not be admitted as general average.
Rule D
Rights to contribution in general average shall not be affected, though the event which gave
rise to the sacrifice or expenditure may have been due to the fault of one of the parties to

Module 3 Appendix 2
the adventure; but this shall not prejudice any remedies or defences which may be open
against or to that party in respect of such fault.
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.
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.
Failing such notification, 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, or particulars of value in respect
of a contributory interest, the average adjuster shall be at liberty to estimate the extent of
the allowance or the contributory value on the basis of the information available to him,
which estimate may be challenged only on the ground that it is manifestly incorrect.
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 with-
out regard to the saving, if any, to other interests, but only up to the amount of the general
average expense avoided.
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.
This rule shall not affect the determination of the place at which the average statement is
to be made up.
When a ship is at any port or place in circumstances which would give rise to an allowance
in general average under the provisions of Rules X and XI, and the cargo or part thereof
is forwarded to destination by other means, rights and liabilities in general average shall,
subject to cargo interests being notified if practicable, remain as nearly as possible the
same as they would have been in the absence of such forwarding, 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 of 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.
Rule I – Jettison of Cargo
No jettison of cargo shall be made good as general average, unless such cargo is carried
in accordance with the recognised custom of the trade.

Appendix 2 Module 3
Rule II – Loss or Damage by Sacrifices for the Common Safety
Loss of or damage to the property involved in the common maritime adventure by or in

consequence of a sacrifice made for the common safety, 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 safety, shall be made good as general average.
Rule III – Extinguishing Fire on Shipboard
Damage done to a ship and cargo, or either of them, by water or otherwise, including
damage by beaching or scuttling a burning ship, in extinguishing a fire on board the ship,
shall be made good as general average, except that no compensation shall be made for
damage by smoke however caused or by heat of the fire.
Rule IV – Cutting away Wreck
Loss or damage sustained by cutting away wreck or parts of the ship which have previously
been carried away or are effectively lost by accident shall not be made good as general
average.
Rule V – Voluntary Stranding
When a ship is intentionally run on shore for the common safety, whether or not she might
have been driven on shore, the consequent loss or damage to the property involved in the
common maritime adventure shall be allowed in general average.
Rule VI – Salvage Remuneration
(a) Expenditure incurred by the parties to the adventure in the nature of salvage,
whether under contract or otherwise, shall be allowed in general average provided
that the salvage operations were carried out for the purpose of preserving from peril
the property involved in the common maritime adventure.
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 is referred to in Article 13 paragraph 1(b) of the International
Convention on Salvage, 1989 have been taken into account.
(b) Special compensation payable to a salvor by the shipowner under Article 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.
Rule VII – 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, 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; but where a ship is afloat no loss or damage caused by working propelling
machinery and boilers shall in any circumstances be made good as general average.

Module 3 Appendix 2
Rule VIII – 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, the extra cost of lightening, lighter hire and reshipping (if
incurred), and any loss or damage to the property involved in the common maritime
adventure in consequence thereof, shall be admitted as general average.
Rule IX – Cargo, Ship’s Materials and Stores used for Fuel
Cargo, ship’s materials and stores, or any of them, necessarily used for fuel for the com-
mon safety at a time of peril shall be admitted as general average, but when such an
allowance is made for the cost of ship’s materials and stores the general average shall be
credited with the estimated cost of the fuel which would otherwise have been consumed in
prosecuting the intended voyage.
Rule X – Expenses of Port of Refuge etc
(a) When a ship shall have entered a port or place of refuge or shall have returned to
her port or place of loading in consequence of accident, sacrifice or other extraordinary
circumstances which render that necessary for the common safety, the expenses of
entering such port or place shall be admitted as general average; and when she shall
have sailed thence with her original cargo, or a part of it, the corresponding expenses
of leaving such port or place of refuge consequent upon such entry or return shall
likewise be admitted as general average.
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, the
provisions of this Rule shall be applied to the second port or place as if it were a port
or place of refuge and the cost of such removal including temporary repairs and
towage shall be admitted as general average. The provisions of Rule XI shall be
applied to the prolongation of the voyage occasioned by such removal.
(b) The cost of handling on board or discharging cargo, fuel or stores whether at a port
or place of loading, call or refuge, shall be admitted as general average, when the
handling or discharge was necessary for the common safety or to enable damage to
the ship caused by sacrifice or accident to be repaired, if the repairs were necessary
for the safe prosecution of the voyage, 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.
The cost of handling on board or discharging cargo, fuel or stores shall not be
admissible as general average when incurred solely for the purpose of restowage
due to shifting during the voyage, unless such restowage is necessary for the
common safety.
(c) Whenever the cost of handling or discharging cargo, fuel or stores is admissible as
general average, the costs of storage, including insurance if reasonably incurred,
reloading and stowing of such cargo, fuel or stores shall likewise be admitted as
general average. The provisions of Rule XI shall be applied to the extra period of
detention occasioned by such reloading or restowing.

Appendix 2 Module 3
But when the ship is condemned or does not proceed on her original voyage, 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.
Rule XI – Wages and Maintenance of Crew and other expenses

bearing up for and in a port of refuge etc
(a) Wages and maintenance of master, officers and crew reasonably incurred and fuel
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 or place are
allowable in general average in accordance with Rule X(a).
(b) When a ship shall have entered or been detained in any port or place in conse-
quence of accident, sacrifice or other extraordinary circumstances which render that
necessary for the common safety, or to enable damage to the ship caused by sacri-
fice or accident to be repaired, if the repairs were necessary for the safe prosecution
of the voyage, the wages and maintenance of the master, officers and crew reason-
ably incurred during the extra period of detention in such port or place until the ship
shall or should have been ready to proceed upon her voyage, shall be admitted in
general average.
Fuel and stores consumed during the extra period of detention shall be admitted as
general average, except such fuel and stores as are consumed in effecting repairs
not allowable in general average.
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.
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, then the wages and maintenance of
master, officers and crew and fuel and stores consumed and port charges incurred
during the extra detention for repairs to damages so discovered shall not be admis-
sible as general average, even if the repairs are necessary for the safe prosecution
of the voyage.
When the ship is condemned or does not proceed on her original voyage, the wages
and maintenance of the master, 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 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.
(c) For the purpose of this and the other Rules wages shall include all payments made
to or for the benefit of the master, officers and crew whether such payments be
imposed by law upon the shipowners or be made under the terms of articles of
employment.

Module 3 Appendix 2
(d) The cost of measures undertaken to prevent or minimise damage to the environment
shall be allowed in general average when incurred in any or all of the following
circumstances:
(i) as part of an operation performed for the common safety which, had it been
undertaken by a party outside the common maritime adventure, would have
entitled such party to a salvage reward;
(ii) as a condition of entry into or departure from any port or place in the
circumstances prescribed in Rule X(a);
(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 environmental damage shall not be
allowed as general average;
(iv) necessarily in connection with the discharging, storing or reloading of cargo

whenever the cost of those operations is admissible as general average.
Rule XII – Damage to Cargo in Discharging etc
Damage to or loss of cargo, fuel or stores sustained in consequence of their handling,

discharging, storing, reloading and stowing shall be made good as general average,
when and only when the cost of those measures respectively is admitted as general
average.
Rule XIII – Deduction from Cost of Repairs
Repairs to be allowed in general average shall not be subject to deductions in respect of

“new or old” where old material or parts are replaced by new unless the ship is over fifteen
years old in which case there shall be a deduction of one third. The deductions shall be
regulated by the age of the ship from the 31 December of the year of completion of the
construction to the date of the general average act, except for insulation, life and similar
boats, communications and navigational apparatus and equipment, machinery and boilers
for which the deductions shall be regulated by the age of the particular parts to which they
apply.
The deductions shall be made only from the cost of the new material or parts when finished
and ready to be installed in the ship.
No deductions shall be made in respect of provisions, stores, anchors and chain cables.
Drydock and slipway dues and costs of shifting the ship shall be allowed in full.
The costs of cleaning, painting or coating of bottom shall not be allowed in general average
unless the bottom has been painted or coated within the 12 months preceding the date of
the general average act in which case one half of such costs shall be allowed.

Appendix 2 Module 3
Rule XIV – Temporary Repairs
Where temporary repairs are effected to a ship at a port of loading, call or refuge, for the
common safety, or of damage caused by general average sacrifice, the cost of such repairs
shall be admitted as general average.
Where temporary repairs of accidental damage are effected in order to enable the adven-
ture to be completed, the cost of such repairs shall be admitted as general average with-
out regard to the saving, if any, to other interests, 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.
No deductions “new for old” shall be made from the cost of temporary repairs allowable as
general average.
Rule XV – Loss of Freight
Loss of freight arising from damage to or loss of cargo shall be made good as general aver-
age, either when caused by a general average act, or when the damage to or loss of cargo
is so made good.
Deduction shall be made from the amount of gross freight lost, of the charges which the
owner thereof would have incurred to earn such freight, but has, in consequence of the
sacrifice, not incurred.
Rule XVI – Amount to be made good for Cargo Lost or Damaged by Sacrifice
The amount to be made good as general average for damage to or loss of cargo sacrificed
shall be the loss which has been sustained thereby based on the value at the time of dis-
charge, ascertained from the commercial invoice rendered to the receiver or if there is no
such invoice from the shipped value. The value at the time of discharge shall include the
cost of insurance and freight except insofar as such freight is at the risk of interests other
than the cargo.
When cargo so damaged is sold and the amount of the damage has not been otherwise
agreed, 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 the first paragraph of
this Rule.
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, ascertained from the commercial invoice rendered to the receiver
or if there is no such invoice from the shipped value. The value of the cargo shall include
the cost of insurance and freight unless and insofar as such freight is at the risk of inter-
ests other than the cargo, deducting therefrom any loss or damage suffered by the cargo
prior to or at the time of discharge. 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.

Module 3 Appendix 2
To these values shall be added the amount made good as general average for property
sacrificed, if not already included, 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 earn-
ing 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; deduction being also made from the
value of the property of all extra charges incurred in respect thereof subsequently to the
general average act, except such charges as are allowed in general average or fall upon
the ship by virtue of an award for special compensation under Article 14 of the International
Convention on Salvage, 1989 or under any other provision similar in substance.
In the circumstances envisaged in the third paragraph of Rule G, the cargo and other prop-
erty shall contribute on the basis of its value upon delivery at original destination unless
sold or otherwise disposed of short of that destination, and the ship shall contribute upon
its actual net value at the time of completion of discharge of cargo.
Where cargo is sold short of destination, however, it shall contribute upon the actual net
proceeds of sale, with the addition of any amount made good as general average. Mails,
passenger’s luggage, personal effects and accompanied private motor vehicles shall not
contribute in general average.
Rule XVIII – Damage to Ship
The amount to be allowed as general average for damage or loss to the ship, her machinery
and/or gear caused by a general average act shall be as follows:
(a) When repaired or replaced, the actual reasonable cost of repairing or replacing such
damage or loss, subject to deductions in accordance with Rule XIII;
(b) When not repaired or replaced, the reasonable depreciation arising from such damage
or loss, but not exceeding the estimated cost of repairs. 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 amount to be allowed as general average shall be the difference
between the estimated sound value of the ship after deducting therefrom the estimated
cost of repairing damage which is not general average and the value of the ship in her
damaged state which may be measured by the net proceeds of sale, if any.
Rule XIX – 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 misdescribed at time of shipment shall not be allowed as general
average, but such goods shall remain liable to contribute, if saved.
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, but
such goods shall contribute upon their actual value.
Rule XX – Provision of Funds
A commission of 2% on general average disbursements, other than the wages and

maintenance of masters, officers and crew and fuel and stores not replaced during the
voyage, shall be allowed in general average.

Appendix 2 Module 3
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.
The cost of insuring general average disbursements shall also be admitted in general
average.
Rule XXI – Interest on Losses made good in General Average
Interest shall be allowed on expenditure, sacrifices and allowances in general average at

the rate of 7% per annum, until three months after the date of issue of the general average
adjustment, due allowance being made for any payment on account by the contributory
interests or from the general average deposit fund.
Rule XXII – Treatment of Cash Deposits
Where cash deposits have been collected in respect of cargo’s liability for general average,
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.
The sum so deposited, together with accrued interest, if any, shall be held as security for
payment to the parties entitled thereto of the general average, salvage or special charges
payable by cargo in respect to which the deposits have been collected. Payments on
account or refunds of deposits may be made if certified to in writing by the average
adjuster. Such deposits and payments or refunds shall be without prejudice to the ultimate
liability of the parties.

APPENDIX 3
TRADE CYCLES: FREIGHT RATES

Appendix 3 Module 3

Module 3 Appendix 3

APPENDIX 4
SAFE MANNING CERTIFICATION

(BRITISH MODEL)
MERCHANT SHIPPING NOTICE
MSN 1767 (M)
Module 3 Appendix 4
THIS SHIPPING NOTICE IS ABRIDGED AND IS INCLUDED

FOR GUIDANCE ONLY
Hours of Work, Safe Manning and Watchkeeping

Revised Provisions from 7 September 2002
Application of the Merchant Shipping (Hours of Work) Regulations 2002 and
STCW 95
Notice to Shipowners, Companies, Managers, Masters, Deck and Engineering Officers

and all seafarers on Merchant Ships
With effect from 7 September 2002, this Notice supersedes Merchant Shipping Notice
MSN 1682 (M) and should be read in conjunction with Merchant Shipping Notice MSN
1758 (M), and Marine Guidance Notes MGN 50 (M), MGN 137 (MF), and MGN 179 (M)
(or subsequent amendments)
Summary
This Merchant Shipping Notice contains the detailed mandatory requirements specified by
the Secretary of State under the Merchant Shipping (Hours of Work) Regulations 2002
which come into force on 7 September 2002, and Regulations 1–5 and 11–18 of the
existing Merchant Shipping (Safe Manning, Hours of Work and Watchkeeping) Regulations
1997. It gives guidance on the application of the Regulations.
The guidance is in 3 Sections with Annexes:
● Section 1 – Hours of Work
● Section 2 – Safe Manning
● Section 3 – Watchkeeping
Key Points
Section 1 – The requirements of the new 2002 Regulations: apply to all seafarers
(including masters) employed or engaged in any capacity on board a seagoing ship other
than fishing vessels, pleasure vessels, offshore installations whilst on their working
stations and tugs which do not ordinarily go beyond the limits of categorised waters provide
for a minimum of 10 hours rest in any 24-hour period and 77 hours in any seven-day period
and four weeks annual paid leave require records of hours of rest to be maintained
(suggested pro-formas at Annexes A and B) provide for inspection and enforcement by
the MCA
Sections 2 and 3 of this Notice, which supersedes MSN 1682(M), have been reissued to
incorporate editorial amendments, to clarify the manning guidance tables (at Annexes C
and D) and to incorporate International Maritime Organisation Resolution A21/Res 890 on
the Principles of Safe Manning.

Appendix 4 Module 3
SECTION 1 – HOURS OF WORK
1. Introduction
1.1 The Merchant Shipping (Hours of Work) Regulations 2002, (referred

to in Section 1 of this Notice as “the Regulations”) which come into
force on 1 September 2002 apply.
2. Application
2.1 The requirements . . . Apply to . . . seafarers employed or engaged in

any capacity on board every seagoing ship, whether publicly or privately
owned, which is registered in the territory of any Member State and is
ordinarily engaged in commercial maritime operations.
2.2 Seafarer
2.2.1 A seafarer is a person employed or engaged in any capacity

on board a seagoing ship on the business of the ship.
2.3 Seagoing Ship
2.3.1 For the purpose of these Regulations a seagoing ship is

one which is certificated under Merchant Shipping legislation
for navigation at sea.
2.4 Commercial Maritime Operations
2.4.1 All vessels engaged in trade, carrying cargo or fare-paying

passengers are covered, as are sail training vessels
2.5 Definition of Hours of Work
2.5.1 For the purposes of the Regulations, hours of work are when
seafarers are required to do work on the business of the ship.
2.5.2 On-Call Time – The Regulations provide that a seafarer

whose normal period of rest on board ship is disturbed by
a call-out, should have adequate compensatory rest.
3. General Duties (Regulation 4)
3.1 The Regulations require that any company (defined as the owner or
any other person or organisation, such as the manager or bareboat
charterer who has assumed responsibility for the ship from the
owner), and the master must ensure that seafarers are provided with
at least the minimum hours of rest.
4. Minimum Hours of Rest (Regulation 5)
4.1 The hours of rest shall be not less than:
(a) 10 hours in any 24-hour period; and

Module 3 Appendix 4
(b) 77 hours in any seven-day period.
Note: Hours of rest may be divided into no more than two periods, one
of which should be at least six hours long, and the interval in between
should not exceed 14 hours.
4.2 It is expected that employers and employees will reach agreement on

the arrangements for conducting emergency drills such as musters,
fire-fighting and lifeboat drills, in a way which minimises the disturbance
to rest periods and provides compensatory rest for seafarers whose
normal rest is disturbed by call-outs for drills.
Exceptions to the Limits on Hours of Rest (Regulation 6)
4.3 Exceptions to the limits on the hours of rest may be allowed

(Regulation 6) provided that they are the result of an agreement
between employers and seafarers and have due regard to the general
principles of health and safety of workers.
5. Posting-up of Table of Duties (Regulation 7)
5.1 Companies should ensure that a table or schedule of duties is

produced setting out the hours of work and rest periods. The table
should be in the same format as Annex A(i) to this Notice or in a
format substantially like it. The table must be in English and in the
working language of the ship, if that is not English, and should specify
for every position at least:
● the daily schedule of duties at sea and duties in port; and
● the daily minimum hours of rest as required by the

Regulations (see para 4.1 above) or any collective or
workforce agreements in force.
In devising the schedule, operators should take account of factors

such as:
(a) trade and type of operation;
(b) type and size of ship;
(c) construction and technical equipment of the ship;
(d) manning levels and changes in crew numbers due to crew

changes and sickness;
(e) the maximum period of continuous watchkeeping;
(f) minimum rest periods;
(g) total workload;

Appendix 4 Module 3
(h) the seriousness of irregular working hours and their

contribution to causing fatigue and the importance of
scheduling reasonably stable working hours over a voyage.
5.2 Changes should not be made to the schedule of duties unless they
can be justified by substantially altered work patterns made neces-
sary, for example, by a change in trading pattern or other significant
factor. Where it is known that a ship engages in an irregular trading
pattern or that working hours are unlikely to be uniform, this can be
taken into account and recorded in the schedule.
5.3 It is not necessary to draw up a new schedule of duties for each voyage,
so long as it is applicable to the voyage in question and the composition
of the crew for whom it was originally intended has not changed.
5.4 It is the responsibility of the master or authorised person to post up

the table in a prominent and easily accessible place in the ship. Where
there is more than one table, the master is responsible for ensuring
that all tables are posted in a suitable place.
5.5 When first drawing up a schedule of duties for a ship, companies

should seek the views of the master, who should in turn seek the
views of the officers, the ship’s safety committee, or the seafarers or
their representatives or a trade union as appropriate. The final deci-
sion on the schedule lies with the operator who will be responsible for
ensuring that it is appropriate in relation to the safety of the ship and
the performance of duties.
6. Exceptions for Emergencies (Regulation 8)
6.1 The Regulations recognise that situations may arise in which a sea-
farer may be required to work during scheduled hours of rest. These
include emergencies which threaten the safety of the ship or the cargo
or put life at risk. In these circumstances, the limits may be exceeded
provided compensatory arrangements are made to avoid fatigue.
7. Records (Regulation 9)
7.1 The master or authorised person is responsible for ensuring that records
of hours of rest are maintained for each seafarer serving on the ship.
8. Night Workers (Regulation 10)
8.1 The definition of “night” relates to a period of nine consecutive hours

including the period between midnight and 5 am.
9. Young Persons (Regulation 5(5) and Schedule 2, paragraphs 1 and 4)
9.1 The Regulations prohibit the employment on a ship of any young

person under the age of 16 by amending section 55 of the Merchant
Shipping Act 1995.

Module 3 Appendix 4
10. Annual Leave (Regulation 12)
10.1 For the purposes of these Regulations, a seafarer is entitled in each

leave year to a period of leave of at least four weeks, for which he is
entitled to be paid at the rate of a week’s pay in respect of each week
of leave.
11. Enforcement Provisions (Regulations 14–20)
11.1 Council Directive 1999/95/EC concerning enforcement provisions is

also implemented in these Regulations.
SECTION 2 – SAFE MANNING
12. Introduction
12.1 The Merchant Shipping (Safe Manning, Hours of Work and

Watchkeeping) Regulations 1997, place responsibilities on companies
owning or operating UK registered seagoing ships and other ships
whilst in UK national waters, to ensure that their vessels are manned
with personnel of appropriate grades who have been properly trained
and certificated. The numbers of certificated officers, and certificated
and non-certificated ratings must be sufficient to ensure safe and
efficient operation of the ship at all times.
13. Responsibilities of Owners and Operators
General Principles
13.1 In fulfilling their responsibility to ensure that ships are safely and
sufficiently manned, owners and operators should:
.1 make an assessment of the tasks, duties and responsibili-

ties of the ship’s complement required for its safe operation,
for the protection of the marine environment and dealing
with emergency situations;
.2 assess the numbers and grades/capacities in the ship’s

complement required for the safe operation and for the
protection of the environment, and for dealing with
emergency situations, including the evacuation of passengers
where applicable;
.4 ensure that the manning level is adequate at all times and

in all respects, including meeting peak workloads and is in
accordance with the principles contained in this MSN;
.5 in case of changes in trading area(s), operations, construction,

machinery, equipment or operation and maintenance of
the ship, which may affect the manning level, review the
manning level.

Appendix 4 Module 3
13.2 In conjunction with these factors the owner or operator should:
.1 identify all the functions to be undertaken on board during

a representative voyage or operational period, including
determination of the number of personnel required to
undertake the relevant tasks and duties under both peak
and routine work load conditions;
.2 identify those functions that constitute a normal operation

and determine the numbers of personnel required to
undertake the concurrent tasks and duties safely;
.3 identify the skills and experience required to perform those

functions;
.4 establish working arrangements to ensure that the master

and crew are capable of undertaking concurrent and
continuing operations at the appropriate level(s) of
responsibility, as specified, with respect to their skills and
training; and
.5 ensure that the working arrangements allow for sufficient

rest periods to avoid fatigue and to comply with the Hours
of Work Regulations 2002.
13.3 In applying these principles, proper account should be taken of the

International Maritime Organisation (IMO), International Labour
Organisation (ILO), International Trade Union (ITU), World Health
Organisation (WHO) and European Union (EU) instruments with
respect to:
.1 watchkeeping;
.2 hours of work or rest;
.3 safety management;
.4 certification of seafarers;
.5 training of seafarers;
.6 occupational health and hygiene; and
.7 crew accommodation.
14. Establishing Safe Manning Requirements
14.1 Specific factors to be taken into account in determining the safe

manning level include:
.1 frequency of port calls, length and nature of the voyage;

Module 3 Appendix 4
.2 trading area(s), waters and type of operations in which the

ship or vessel is involved and any special requirements of
the trade or operation;
.3 number, size (kW) and type of main propulsion units and

auxiliaries;
.4 size, type of ship, and layout;
.5 construction and equipment of ship;
.6 cargo to be carried or operational requirements;
.7 method of maintenance;
.8 extent to which training activities are conducted on board;
.9 how the proposed complement will deal with various

emergency situations that may arise;
.10 navigational duties and responsibilities as required by

STCW 95 including the following:
.1 plan and conduct safe navigation;
.2 maintain a safe navigational watch;
.3 manoeuvre and handle the ship in all conditions and

during all operations;
.4 safely moor and unmoor the ship; and
.5 maintain safety whilst in port.
.11 Cargo handling and stowage:
.1 plan and monitor the safe loading, stowage, securing,

carriage and unloading of cargo.
.12 Ship specific operations:
.1 the nature and duration of the operation(s) the ship

undertakes and local environmental conditions.
.13 Ship operations and care for persons on board, and

maintaining lifesaving, fire-fighting and other safety
systems in operational condition:
.1 maintain the safety and security of all persons on

board and keep life saving, fire-fighting and other
safety systems in operational condition, including
the ability to muster and disembark passengers and
non-essential personnel;

Appendix 4 Module 3
.2 operate and maintain watertight closing arrangements;
.3 perform operations necessary to protect the marine

environment;
.4 provide medical care on board;
.5 undertake administrative tasks required for the safe

operation of the ship; and
.6 participate in mandatory safety drills and exercises.
.14 Marine engineering tasks and duties:
.1 operate and monitor the ship’s main propulsion and

auxiliary machinery;
.2 maintain a safe engineering watch;
.3 manage and perform fuel and ballast operations; and
.4 maintain ship’s engine equipment, system and services.
.15 Electrical, electronic and control engineering duties:
.1 operate ship’s electrical and electronic equipment; and
.2 maintain ship’s electric and electronic systems.
.16 Radio communications:
.1 transmit and receive information using ship

communication equipment;
.2 maintain safe radio watch;
.3 provide communications in emergencies.
.17 Maintenance and repair:
.1 carry out maintenance and repair work to the ship and its
machinery, equipment and systems, as appropriate to
the method of maintenance and the repair system used.
14.2 In addition, the level of safe manning should also take into consideration:
.1 the management of safety functions of a ship underway, not

underway or operating in near stationary mode;
.2 except in ships of limited size, the provision of qualified deck

officers to ensure that is not necessary for the master to keep
regular watches by adopting a three watch system;

Module 3 Appendix 4
.3 except in ships of limited propulsion power or operating under

provisions for unattended machinery spaces, the provision of
qualified engineering officers to ensure that it is not necessary
for the chief engineer to keep regular watches by adopting a
three watch system;
.4 the maintenance of applicable occupational health and hygiene

standards on board; and
.5 the provision of proper food and drinking water for all persons
on board.
15. Guidance on Appropriate Manning Levels
15.1 In determining what constitutes a minimum safe manning level, useful

guidance may also be obtained by use of risk and hazard management
tools such as formal safety assessment.
15.2 The minimum safe manning levels referred to in this Notice are those
required for all reasonably foreseeable circumstances and working
conditions to permit the safe operation of the ship under normal
operational conditions.
15.3 The tables at Annexes C and D provide guidance on the numbers of

certificated deck and engineer officers appropriate to different sizes of
ships, tonnages and trading areas.
As the watchkeeping arrangements for the engineering department

and the demands placed on personnel vary significantly according to
the level of automation, these tables only provide guidance; owners
and operators must take all relevant factors into account before
finalising their manning proposals.
15.4 The number of ratings required will be determined by the factors

summarised in paragraphs 13 and 14 above.
16. Nationality Restrictions
16.1 The Merchant Shipping (Officer Nationality) Regulations 1995 do not

permit foreign nationals (other than Commonwealth citizens, EEA
nationals, or a national of a State other than an EEA State which is a
member of the North Atlantic Treaty Organisation) to serve as master
of a strategic ship. This is defined as a UK ship of 500 gt or more
which is a cruise ship, a product tanker or a ro-ro ship. There are no
other nationality restrictions applying to the manning of UK registered
ships.
17. Consultation on Safe Manning Levels
17.1 Owners and operators should consult with the master, seafarers’
representatives and the MCA (where appropriate) on their proposed
manning levels. Once agreed, a record of the consultation process

Appendix 4 Module 3
should be retained by the owner or operator, together with a record of

the agreed manning level.
17.2 If agreement cannot be reached between the owners or operator and

master, and seafarers or seafarers’ representatives regarding
manning levels, the MCA will consider the views put forward and, if
appropriate, require the manning levels to be revised. When
disagreement occurs, it may be necessary to arrange a practical
demonstration of the crew’s ability to carry out the essential tasks in
the context of the principles of safe manning.
18. Safe Manning Document
18.1 The Merchant Shipping (Safe Manning, Hours of Work and

Watchkeeping) Regulations 1997 require owners or operators of all
UK seagoing vessels of 500 gt or more to obtain and carry a Safe
Manning Document specifying the minimum manning levels. Owners
and operators of ships below 500gt may also choose to hold a Safe
Manning Document.
19. Application for a Safe Manning Document
19.1 Any application for a Safe Manning Document should be made

by the owner, or a person authorised to act on their behalf, on form MSF.
19.2 When applying to the MCA for a Safe Manning Document, owners or
operators should submit a clear and concise explanation of:
.1 how the proposed manning level has been determined;
.2 how it takes account of the guidance of this Notice; and
.3 how it takes account of the hours of work provisions in the

Regulations.
20. Approval of a Safe Manning Document by the MCA
20.1 A proposal will only be approved and a Safe Manning Document

issued provided the manning level fully satisfies the principles,
recommendations and guidelines outlined in this Notice. The MCA
may require an owner or operator to amend a proposal if, after
evaluation, the proposal is considered inadequate.
20.2 When the MCA has agreed a proposal regarding manning of a

particular ship, a Safe Manning Document will be issued for that ship
in a format which complies with the requirements of SOLAS, as
amended. It should be retained on board and be available for inspection
by an authorised person, whenever required.
20.3 In the event of any change in equipment, construction or use of the ship,
which may affect the safe manning level, the owner or operator should
make an application for the issue of a new Safe Manning Document.

Module 3 Appendix 4
SECTION 3 – WATCHKEEPING
21. General
21.1 The principles applying to the keeping of a safe watch are given in
Chapter A-VIII of the STCW Code and must be followed in order to
comply with the Regulations.
21.2 The Regulations require the master of any ship to be responsible

for the overall safety of the ship. He must also ensure that the watch-
keeping arrangements are adequate for maintaining safe navigation
at all times, including the provision of a look-out as required by
the International Regulations for the Prevention of Collisions at Sea
1972, as amended. Masters, owners and operators are reminded
that the UK does not consider it safe for the officer of the navigation
watch to act as sole look-out during periods of darkness or restricted
visibility.
21.3 The chief engineer officer of any ship is responsible to the master for
ensuring that arrangements are adequate at all times for maintaining
a safe engineering watch.
22. Further Information
22.1 Any queries relating to this Notice should be addressed to the MCA . . .
SELECTED TEXTS FROM ILO CONVENTION No 180

AND THE STCW CONVENTION
ILO Convention No 180
ARTICLE 5
1. The limits on hours of work or rest shall be as follows:
(a) maximum hours of work shall not exceed:
(i) 14 hours in any 24-hour period; and
(ii) 72 hours in any seven-day period, or
(b) minimum hours of rest shall not be less than:
(i) 10 hours in any 24-hour period, and
(ii) 77 hours in any seven-day period.
2. Hours of rest may be divided into no more than two periods, one of which shall
be at least six hours in length, and the interval between consecutive periods of
rest shall not exceed 14 hours.

Appendix 4 Module 3
6. Nothing in paragraphs 1 and 2 shall prevent the Member from having national
laws or regulations or a procedure for the competent authority to authorise or
register collective agreements permitting exceptions to the limits set out. Such
exceptions shall, as far as possible, follow the standards set out but may take
account of more frequent or longer leave periods or the granting of compensatory
leave for watchkeeping seafarers or seafarers working on board ships on short
voyages.
ARTICLE 7
1. Nothing in this Convention shall be deemed to impair the right of a master of the
ship to require a seafarer to perform any hours of work necessary for the imme-
diate safety of the ship, persons on board or cargo, or for the purpose of giving
assistance to other ships or persons in distress at sea.
3. As soon as practicable after the normal situation has been restored, the master
shall ensure that any seafarers who have performed work in a scheduled rest
period are provided with an adequate period of rest.
STCW Convention (STCW 95)
Section A-VIII/1 of the STCW Code (Mandatory)
1. All persons who are assigned duty as officer in charge of a watch or seafarer on
watch shall be provided with a minimum of 10 hours’ rest in any 24 hour-period.
2. The hours of rest may be divided into no more than two periods, one of which
shall be at least six hours in length.
3. The requirements for rest periods laid down in paragraphs 1 and 2 need not be
maintained in the case of an emergency or drill or in other overriding operational
conditions.
4. Notwithstanding the provisions of paragraphs 1 and 2, the minimum period of 10

hours may be reduced to not less than six consecutive hours provided that any
such reduction shall not extend beyond two days and not less than 70 hours of
rest are provided each seven-day period.
5. Administrations shall require that watch schedules be posted where they are
easily accessible.

Module 3 Appendix 4
Section B-VIII/1 of the STCW Code (Guidance)
3. In applying Regulation VIII/1, the following should be taken into account:
1. provisions made to prevent fatigue should ensure that excessive or

unreasonable overall working hours are not undertaken. In particular, the
minimum rest periods specified in Section A-VIII/1 should not be interpreted
as implying that all other hours may be devoted to watchkeeping or other
duties;
2. that the frequency and length of leave periods, and the granting of
compensatory leave, are material factors in preventing fatigue from building
up over a period of time; and
3. the provision may be varied for ships on short sea voyages, provided
special safety arrangements are put in place.

APPENDIX 5
ILO CONVENTION 188 –

DRAFT CERTIFICATES
Declaration of Maritime Labour Compliance – Part II

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DIPLOMA IN

Robert Tallack BSc FNI

1. THE BUSINESS OF SHIPPING 5

1.1 The Main Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

2. INTERNATIONAL TRADE AND THE EMPLOYMENT OF SHIPS 23

2.1 A Transaction Fundamental to the Demand for Shipping . . . . . . . . . . . . . .23

Diploma in Ship Superintendency 2007 / 2008 (LM1928) 3-1

2.3.3 Bareboat Charters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

3. RISK AND MARINE INSURANCE 44

3.1 Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

3-2 Diploma in Ship Superintendency 2007 / 2008 (LM1928)

3.5.2 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63

4. THE EMPLOYEES: MANNING THE SHIPS 71

4.1 Seafarer Employment: Training and Competence . . . . . . . . . . . . . . . . . . . .71

5. TECHNOLOGICAL CHANGE AND ITS MANAGEMENT 94

5.1 Change and Its Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94

Diploma in Ship Superintendency 2007 / 2008 (LM1928) 3-3

5.1.2 Managing Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96

RECOMMENDED READING 109

USEFUL WEBSITES 110

TUTOR MARKED ASSIGNMENT 111

Appendix 1 : The Hague-Visby Rules

● Self-Assessment Questions have been provided periodically throughout

● For candidates taking the Diploma option, your Tutor Marked

© Copyright Informa UK Limited, 2007. All rights reserved.

3-4 Diploma in Ship Superintendency 2007 / 2008 (LM1928)

After successful completion of this chapter, you will be able to:

● state the different customers that shipowners serve;

● describe the relationship between the various segments

● describe the role of charterparties and bills of lading.

1.1 THE MAIN COMPONENTS

– national governments; and

– international organisations, such as the International Maritime

Diploma in Ship Superintendency 2007 / 2008 (LM1928) 3-5

● the cargo owners (or customers); and

● the shipowner (and ship manager).

1.2 CARGO OWNERS

3-005 Therefore, the superintendent needs an understanding of the way in which

1.3 THE VESSEL OWNERS

3-6 Diploma in Ship Superintendency 2007 / 2008 (LM1928)

● Third, there are those owners whose interest in shipowning is either as a

3-011 Technology and economics, or perhaps more accurately, technology driven by

Diploma in Ship Superintendency 2007 / 2008 (LM1928) 3-7

– it gives security (i.e. priority) against unsecured creditors;

– it enables the lender (the mortgagee) to take possession of the

– it allows the mortgagor to sell the vessel to raise funds to satisfy

3-8 Diploma in Ship Superintendency 2007 / 2008 (LM1928)

1.4 THE MANAGEMENT OF SHIPS

1.4.2 Technical Management

3-018 This, the central core of the superintendent’s responsibility, includes:

● supervision of the maintenance, repair and general efficiency of the

● the provision of stores and spares; and

Diploma in Ship Superintendency 2007 / 2008 (LM1928) 3-9

1.4.4 Freight Management

3-020 Important aspects of freight management are:

● the provision of voyage estimates and accounts;

● the calculation of hire and freights, despatch and demurrage; and

3-022 The management of chartering is in accordance with owner’s instructions to

1.4.7 Vessel Sales and Purchase

3-10 Diploma in Ship Superintendency 2007 / 2008 (LM1928)

1.4.8 Provisions and Bunkering

3-027 Closely allied to freight management, this activity includes:

● appointment of stevedores; and