Ship Operation and Management

by
SK SINHA, Faculty(ME)

• Shipper: Person or Company who

transports or receives goods by sea, land or
air.
• Council: an advisory, deliberative, or
administrative body of people formally
constituted and meeting regularly.
• World Shipping Council: is the peak 
industry trade group representing the
international liner shipping industry, which
offers regularly scheduled service on fixed
schedules. Most liner carriers are container 
shipping lines.
 Ship operation and management
continued

• Organization: is the idea of putting

things together in a logical order. The verb
is "to organize". An organization is a
group of people who work together.
Organizations exist because people working
together can achieve more than a person
working alone.
• Theory of Freight rates:
• Freight may be payable: a. Bill of lading
freight or Charter party freight ---
• Types of Freight:
a. Advance freight
b. Lump Sum freight
 SO & M
Continued

c. Dead freight
d. Back freight
e. Pro-rata freight
f. Ad valorem freight
• Rate fixation and Government Control:
• Promotional freight rate: A rate instituted for promoting the
carriage of non-traditional exports of the country concerned.
• Special freight rate: A preferential freight rate, other than a
promotional freight rate, which may be negotiated between the
parties concerned.
• Shipowners fixes for tramping vessels
• Price fixing scheme – British SO & Tramp. Owners
• ICS along with 12 M nations ----IT Stabilization
• Govt. objective is to provide an objective assessment of the cost
and protect the interest of exporters.
• Surcharges:
• Currency changes:
 SOM
Continued

• Shipping Modes of Transportation: Land, Sea

and Air
• Truck- Speed(depends condition), cost(moderate
• Trains- Speed(faster), Cost(cheaper than train)
• Sea Freight – Speed(slow), Cost(cheaper)
• Air Freight – Speed(fastest), Cost(expensive)
• Loading & Delivery Option – port to port, Drop
& fill, D to D
• Other International Moving Costs: Insurance,
Packing cost, Taxes/Duty/Customs Charges,
Storage
• Free Quotes: Best container shipping deals
 SOM
Continued

• Example- A 20’ container (19’10.5”x8’x8.5)

transporting from Aus. to UK roughly cost 3027
$.When comparing prices for international
container shipping and moving, it’s important you
understand what you need and how that affects
the price you’ll end up paying.
• 20ft Shipping Container
• Suitable for: 1-2 bedroom moves or a car with
only a few boxes.
• Typical measurements:
Size (LxWxH): 19′ 10.5″ x 8′ 0″ x 8′ 6″ (6.1m x
2.4m x 2.6m)
Total internal volume: 1,169 ft³ (33.1 m³)
Net shipping load: 61,289 lb (28,200 kg)
 SO&M
Continued

• Advantages & Disadvantages of Conference

system: All shipping companies trading in a
particular area meet and discuss matters of
common interest. Adv- regular service, known
cost, reliability etc--- Disadv-  establish
protectionist organizations -monopoly, breach of
competition law- however, advantages outweigh
the disadvantages.
• Primage charge up to 10%(max)
• Liner shipowners- first conference established
in 1875: UK-Calcutta conference
• Presently 360 conferences and the largest being
the Far East Freight Conference
• Conferences- open or closed
 SO&M
Page-7

• Chartering and Charter Parties:

Chartering: Simply engaging for service under a contract. It is
a type of hiring. It's a shipping activity.
• The Charterer:
• Types of Charter: demise charter, voyage charter, and time charter.
• Tanker Chartering: TANKER Charter: Tanker chartering is mostly in the
crude oil, petroleum products (clean and dirty), and specialized product markets
by providing professional chartering and post-fixture services to its principals.
• Our services encompass chartering of all tanker vessel sizes in the spot market
as well as arranging period charters, COAs and bare-boat charters.
• Our team of young and experienced brokers has built up an extensive network
and reputation in all segments of activity, while cultivated a strong customer
portfolio of Charterers, Owners and Operators, which is constantly being
strengthened.
• Vetting of Tanker:  is a grading system of a ship, enabling a potential charterer to
compare between similar ships and choose the best for his needs, to maximize
efficiency. ... If two ships have the same price, the charterer will choose the one
with the less deficiency.
 Bill of lading
• Bill of Lading: is a legal document issued by a carrier to a
shipper that details the type, quantity, and destination of
the goods being carried. A bill of lading must be
transferable, and serves three main functions: it is a
conclusive receipt, i.e. an acknowledgement that the goods
have been loaded; and. it contains or evidences the terms of
the contract of carriage; and. it serves as a document of title
to the goods, subject to the nemo dat rule.
• LC: a letter issued by a bank to another bank (especially one
in a different country) to serve as a guarantee for payments
made to a specified person under specified conditions.
• Sale Contract: 1). FOB (Free on Board): Buyer arrange ship
and 2). CIF (Cost, Insurance, freight): Seller arrange ship
and take cargo insurance.
• Charterparty and bill of lading: To an unknown buyer and
cargo status -------------by international banks/financial
institutions through LC.
 SO & M
Continued from page 8

• Function of BOL: Three functions-----(a) Document of

Title; (b) Document of Receipt (c) Contract of Carriage
• Other Shipping documents: Sea waybills, Delivery
orders; Mate’s Receipt, etc.
• Salient points of BOL: (a). The name of the shipper, (b).
Ship’s name, (c) Full description of cargo including shipping
marks, individual package numbers in consignments etc.
(d) port of shipment, (e) Port of discharge, (f) Full details
of freight, (g) Name of consignee, (h) Number of BOLs, (i)
Actual date of Master’s or his agent.
• Types of BOL: 1. Shipped BOL, 2. Received BOL, 3.
Through BOL, 4. Stale BOL, 5. Groupage BOL, 6. Transhipm
ent BOL, 7. Clean BOL, 8. Claused BOL, 9. Negotiable BOL,
10. Non-negotiable BOL.
• Int. Convention on Carriage of Goods by sea Act:
The law of carriage of goods by sea is a body of law
that governs the rights and duties of shippers, carriers and
consignees of marine cargo.
 SO & M
Continued from page 9

• "Carrier" means any person by whom or in whose name a

contract of carriage of goods by sea has been concluded
with a shipper.
• "Actual carrier" means any person to whom the
performance of the carriage of the goods, or of part of the
carriage, has been entrusted by the carrier, and includes
any other person to whom such performance has been
entrusted.
• "Shipper" means any person by whom or in whose- name
or on whose behalf a contract of carriage of goods by sea
has been concluded with a carrier, or any person by whom
or in whose name or on whose behalf the goods are
actually delivered to the carrier in relation to the contract
of carriage by sea.
• "Consignee" means the person entitled to take delivery of
the goods.
• "Goods" includes live animals; where the goods are
consolidated in a container, pallet or similar article of
 SO & M
Continued from page 10

• transport or where they are packed, "goods" includes such

article of transport or packaging if supplied by the shipper.
• "Contract of carriage by sea" means any contract
whereby the carrier undertakes against payment of freight
to carry goods by sea from one port to another; however, a
contract which involves carriage by sea and also carriage
by some other means is deemed to be a contract of
carriage by sea for the purposes of this Convention only in
so far as it relates to the carriage by sea.
• Scope of application: The provisions of this Convention
are applicable to all contracts of carriage by sea between
two different States, if: (a) the port of loading as provided
for in the contract of carriage by sea is located in a
Contracting State, or (b), ----(c),-----(d)-------(e).
• In the interpretation and application of the provisions of
this Convention regard shall be given to its international
character and to the need to promote uniformity.
 SO & M
Continued from page 9

• Primarily concerned with Cargo Claims, this body of law is an

aspect of international commercial law and maritime law.
• The obligations of a carrier by sea to a shipper of cargo are:
to provide a seaworthy ship.
to issue a bill of lading.
to "properly and carefully load, handle, stow, carry, keep,
care for, and discharge the goods carried”
to proceed with "reasonable despatch"
to follow the agreed route (and not to deviate from it.
• Consignees (or indeed any lawful holder of the bill of
lading) who wishes to make a cargo claim because their
goods are substandard or have been lost or damaged at sea,
typically have four options.
• They may sue the seller, the shipper, or the carrier; or
they may claim from their own insurance policy.
• A suit will lie against the seller if the seller has insufficient
title, or the goods are not of satisfactory quality, or do not
comply with sample or description.
 SO & M
Continued from page 10

• A suit will lie against the shipper if the goods are damaged
through insufficient packing, or if any loss is suffered
through insufficient labeling.
• A suit will lie against the carrier if the damage occurred
aboard ship. The carrier's P&I club cover will normally bear
the cost.
• If the cargo is damaged where the shipper without fault
(e.g. if the goods have been properly packed and stowed)
or if the carrier is either blameless or exempted from
liability (e.g. because of ‘Act of God’ or ‘Justifiable
deviation'), a cargo-owner will have to claim on his own
cargo policy.
• Haque Rule
• Haque – Visby Rules
• Hamburg Rules
• Rotterdam Rules
 SO & M
Continued from page 13

• Cargo Surveys & Protests: Loading and Discharge Surveys

Vessels and Containers:
• Supervision Of Loading Goods Shipped By Container: Pre-
shipment inspection to confirm the quality; quantity and
marking of the product according to the contractual
specification.
• Checking shipping container cleanliness, dryness and
temperature settings.
• Checking the product quality, packing condition, sealing and
marking (including expiry date) against documentation /
contract specification.
• Supervising loading, ensuring safe, efficient and timely loading
of the product.
• Random sampling and check weighing.
• Rejecting any damaged goods.
• Tallying goods against order / shipping note during loading.
• Providing full photographic and written report.
• Witness sealing of the container.
 SO & M
Continued from page 14

• Supervision Of Loading Goods Shipped by Vessel: Pre-

shipment inspection to confirm the quality; quantity and
marking of the product according to the contractual
specification.
• Hatch hose or ultrasonic testing to ensure that they are
water-tight and suitable to carry the goods.
• Hold cleanliness to ensure that they are clean, dry,
odourless and free from previously carried cargo.
• Discussing the loading / stowage plan with the master.
• Draught Survey.
• Loading supervision, tally, quality control, rejecting any
damaged or out of specification product.
• Representative sampling.
• Hatch sealing.
• Protesting to the supplier or stevedores as necessary.
• Recording stoppages / working times.
• Obtaining copies of the shipping documentation.
• Providing full photographic and written report.
 SO & M
Continued from page 15

Discharge Supervision Surveys: Inspecting hatch seals

• Quality control, checking for water ingress, contamination,
infestation.
• Damaged cargo investigation, mitigation and loss control
• Witnessing weighing operations.
• Tally.
• Representative sampling.
• Supervision of stevedoring operations.
• Protesting against potential damage or shortage.
• Draught Survey.
Inspection in the port / Inspection in the stock: e.g.
Inspection of lot of fruits and / or vegetables in the port
includes and means:
• Check the ref. journal and control systems of the
microclimate conditions of transportation.
• Gathering information about the voyage.
• Check the operation of the cooling system before discharge.
 SO & M
Continued from page 16

• Measuring the temperature at the time of opening hatch covers

of holds and during the entire discharge.
• Collection and interpretation the thermographs installed by the
supplier during dispatch of cargo.
• Control of the general condition of the cargo during unloading.
• The selection of a representative sample and checking the
quality of delivered goods.
• Forming acts and protests in case of circumstances which are
capable to become cause of losses of the customer.
• Analysis of the results
• Forming acts, survey reports and reports on quality in
accordance with the results of the inspection.
• All stages in the port are produced with detailed photography.

An independent evaluation of the quality allows the

recipient to avoid conflicts with foreign and domestic
suppliers. As well as reasonably and timely have the
claims on quality of received goods, thus prevent
financial losses!!!!!
 SO & M
Continued from page 17

  Advantages of independent inspection

•  The conflicts with suppliers are excluded
• Quality evaluation is performed by a third party, which has a
trust.
• The decision on acceptance or return of the goods (issue the
complaint and its size) is taken on the basis of independent
opinions and can not be appealed.
• In that case, if the supplier still doesn’t agree with the
conclusion, the independent inspection company will prove it
and the questions concerning the quality of incoming goods
are removed in any case.

Note Of Protest:
A note of protest is a declaration under oath by the master of
the circumstances beyond his control leading to loss or
damage to the ship or cargo. This declaration has to be
made before a notary public, magistrate, a consular officer
or other appropriate authority. A note of protest is a legal
document.
 SO & M
Continued from page 18

The Master Should Issue A Note Of Protest In Any Of

The Following Circumstances:
• Whenever during the voyage, the ship has encountered
condition of weather and sea which may result in damage
to cargo.
• When any serious breach of Charter party terms is
committed by the charterers or his agents.
• When from any cause, the ship is damaged or there is a
reason to fear that damage may be sustained.
• In all cases of general average losses.
• When because of the weather, it has not been practicable
to carry out ventilation or other precautions in case of
perishable cargoes.
• If consignees fail to take delivery and pay freight in
accordance to the charter party or Bill of Lading terms.
• When cargo is shipped in such a condition that it is likely to
deteriorate during the voyage.
 SO & M
Continued from page 19

Important Things To Be Kept In Mind While Issuing A

Note Of Protest:
• The protest should be positively noted within 24 hours of
arrival in port.
• In case of cargo related protests, it should be noted prior
commencing cargo operations.
• The master should reserve the right to extend the
protest which means that initially at the time of noting the
protest, sometimes the master might not be aware of the
extent and details of the damage and hence he should
insert a clause “reserve the right to extend the protest
at the time and place convenient”. This clause then
allows the results of the investigation to be inserted at a
later stage.
• The Note of Protest must be issued by the Master in front
of one or more crew members who will act as witness in
relation to the Note of Protest.
 SO & M
Continued from page 20

Documents To Be Submitted While Noting Protest In

Case Of Suspected Cargo Damage During The
Voyage:

• Details of damage to cargo and ship.

• Records of weather actually encountered(DLB).
• Copies of weather forecast relied upon by the ship.
• Details of stowage and lashing of cargo.
• The stability data.
• VDR data.
• All navigation records such as charts, GPS, ECDIS
downloads etc which shows the course and speed of the
vessel and master’s response in the bad weather.
 SO & M
Continued from page 20

Marine Insurance
Background:
•Sea trade is carried in not only potentially dangerous and hazardous environment but
it’s risky and challenging too.

•The above adventure considering above adverse situations is made rewarding with
due care and diligence.

•Marine insurance has been an indispensable aid to overseas trade by shipping since
very early times. Its existence can be traced back to several centuries. The law
concerning it had taken a definite shape much prior to 1906 when the English Marine
Insurance Act was passed with a view to codify that law. Contrary to popular belief,
Lloyds’ London was not the first group of people to offer insurance for maritime
commerce. The first form of marine insurance dates back to the year 3000 BC when
Chinese merchants dispersed their shipments amongst several vessels so as to
abridge the possibility of damage to the product(s).
•The earliest form of insurance……………….
•General Average
•Danish reimbursement(11th to 18th century)
•Codification of Marine Insurance law.
 SO & M
Continued from page 22

• Edward Lloyds’ Coffee House in 18th century ……………………

• Sharing risks and rewards of the individual-------------------

• Underwriting -------------------------------------------
• Quality of the ship ------------------------------------
• Register Society -----------------Lloyd’s register--------------
• Ship’s hull & Equipment – A, E, I, O, U & G, M and B or 1,2 & 3

• Samuel Plimsoll pointed out the downside of the insurance----

and commented as “The ability of shipowners to insure
themselves against the risks they take not only with their
property, but with other peoples’ lives, is itself the greatest threat
to the safe operation of ships.

• First publication of Register of Ships in 1764

 SO & M
Continued from Page 22

• Marine Insurance: A contract of marine insurance is an

agreement whereby the insurer undertakes to indemnify
the assured, in the manner to the extent thereby agreed,
against marine losses, that is to say, the losses incidental
to marine adventure.
• Marine adventure is any adventure where:
1. any insurable property is exposed to maritime perils;
2. the earnings or acquisition of any freight, passage
money, commission, profit or other pecuniary benefits, or
the security for any advances, loans or disbursements is
endangered by the exposure of insurable property to
maritime perils;

• 3. any liability to third party may be incurred by the owner,

or other person interested in or responsible for, insurable
property by reason of maritime perils.
 SO & M
Continued from page 21

Indemnity: A contract of indemnity is a contract by which one

party promises to save the other from loss caused to him by
the conduct of any other person as contemplated in section 124
of the Indian Contract Act. But indemnity, as applicable to
marine insurance, must not be an indemnity as contemplated
by the Indian Contract Act, as the loss in such a contract is
covered by the contract itself and such loss need not
necessarily be caused to the assured by the conduct of the
insurer or by the conduct of any other person.
Bottomry: A contract by which a ship or its freight is pledged
as security for a loan, which is to be repaid only in the event
that the ship survives a specific risk, voyage, or period.
A bottomry bond is the instrument that embodies the contract
or agreement of bottomry.

Essential Ingredients of Marine Insurance:

• Insurable Interest: Every person standing gain or loss arising
out of a marine adventure can be said to have insurable
interest and only can be protected by marine insurance.
 IMO & C
Continued fm page 25

• Utmost Good Faith: A proposer for policy is required to

disclose to the insurer all facts regarding the risk oroposed
to be covered by insurance policy.
• Indemnity: Indemnity provided by the insurer on the
understanding that the shipowner will not overvalue the
insured item.
• Subrogation and Contribution: It means that while the
insurer will cover the losses suffered by the proposer, the
insurer is free to recover from the third party responsible
for the loss to the extent of actual.
• Proximate Cause: Under this clause the insurer will pay
for any loss proximately caused by a peril insured against.
A contract of marine insurance is documented in a policy,
extent of cover is indicated by clauses framed by Institute
of London Underwriters which are called Institutive clauses.
There are basically 4 main types of marine insurance:
 SO&M
Continued from page 25

• Hull Insurance: It covers the insurance of the vessel and its equipments
i.e. machineries, tools, fuel, furniture and fittings and etc. etc.
• Cargo Insurance: Includes the cargo or goods contained in the ship and
the personal belongings of the crew and passengers.

• Freight Insurance: Provides protection against the loss of freight. In

many cases the owners of goods is bound to pay freight, under the terms
of the contract, only when the goods are safely delivered at the port of
destination.

• Liability Insurance: is one in which the insurer undertakes to indemnify

against the loss which the insured may suffer on account of liability to a
third party by collision of the ship and other similar hazards. In a contract
of marine insurance, the insured must have insurable interest in the subject
matter insured at the time of loss. The following persons are deemed to
have insurable interest: 1. Owner 2. Owner of the cargo 3. A creditor who
has advanced money on the security of the ship or cargo to the extent of
the loan. 4. Master and Crew of the ship in respect of their wages. 5.
Mortgagor if mortgaged. 6. Trustee if holding any property in trust. 7. In
case of advance freight, the person advancing the freight. 8. Insured has
an insurable interest in the charges of any insurance policy which he may
take.
 SO&M
Continued from page 26

TYPES of MARINE INSURANCE POLICIES

• VOYAGE POLICY: Starts after voyage starts

• TIME POLICY: It can’t be for a period exceeding one year

but it may contain “continuous clause” means the policy
will cover till the voyage is completed.

• MIXED POLICY: covers the risk during particular voyage

for a specified period of time.

• VALUED POLICY: value of the subject matter is agreed

upon.

• OPEN or UN-VALUED POLICY: Subject to the limit of the

sum assured, it leaves the value to be ascertained
subsequently.
 SO & M
Continued from page 28

• FLOATING POLICY: It only mentions the amount for

which the insurance is taken and leaves the name of the
ship (s) and other particulars to be declared subsequently.
This policy is very useful for merchants who regularly
dispatch goods by ship.

• WAGERING or HONOUR POLICY: is a policy which is

also known as policy Proof of interest (PPI). In this policy
the insurers agree that they will not insist on the regular
requirement that the insured must prove an insurable
interest existed before a claim is paid. The possession of
the policy is all that is required. This policy is a matter of
trust between Insurer and Insured.

PERILS COVERED by INSURANCE