Assignment No1

Marcos A. Gonzalez Unit Assignment 1

January 14th, 2014 Page 1

Marcos A. González R.


Assignment No.1

Task No. 1The marine surveying profession plays an important supporting role to the many parties,stakeholders and regulatory bodies in the global commercial and leisure sectors of themarine industry

a) Discuss the developments in trade and trading patterns in both sectors of themarine industry

b) Explain the role of the regulatory bodies involved in the marine industryc) Explain the roles of the parties and stakeholders involved in the marine industry

Minimum criteria to be met: 1.1, 1.2 and 1.3

Discuss the developments in trade and trading patterns in both sectors of the marine industry

Commercial SectorThe commercial sector is by far the largest of the sectors in themarine industry since about 90% of the world trade is doneseaborne. Due to its size and complexity it has to be explaineddividing it into several groups but before, an explanation of thetrading patterns has to be done in order to understand how big andcomplex really it is.

In the last years of the 20th century Asian countries leaded byChina became the manufacturers of the world. A combination ofcheap labor, immense natural resources and favorable laws forinternationals companies to establish their factories in countrieslike China, Vietnam, India, Thailand and Philippines made Asia thefactory of the world for a very wide range of products such asclothing, electronics, cars and even ships. Despite their naturalresources availability in the above mentioned countries, theindustrial growth requires now huge quantities of raw materialsthat have to be imported from different places around the world



depending of course on what material is needed, distances betweenports, cost associated and even political issues.

a) Crude, oil products and Gas

Energy is required in almost any human activity in these daysthat’s why is not a surprise that oil and its products, gas andcoal are among the major commodities traded worldwide. The oilprice has been around the 100US$ per barrel during the last yearsbut it doesn’t mean that the quantities traded have been reduced,on the contrary it continues rising. Traditional supplyingcountries as those in the Persian Gulf, Russia and Venezuela havenew competitors in the market especially those countries withoffshore industry such as Mexico, UK and Brazil. But oil notprocessed and refined has little use. Some countries such asEcuador export oil and import refined oil products due to it lacksof refineries. Heavy oils from Venezuela can processed by its ownrefineries or especially adapted refineries in USA or Curacao.

Crude oil is produced worldwide with some countries that heldbigger reservoirs than others and some countries with nothing atall, but no one, despite its reservoirs, production and exportingcapacity can reach the 15% of the market share. On the other hand,there are more crude oil importing countries than producers buttheir crude oil imports will depend on how industrialized they areand how much crude oil they can produce and refine. A clearexample of this is the USA who is one of the largest producers inthe world but due to its industrialization and life style it hasto import large amounts of crude to compensate the deficit, beingone of the largest importers as well. To make this pictureclearer, the USA imports more crude oil than the next 3 countries(together) in the top importing ranking.

Let’s see some of the largest importers and exporters of crude,oil products and gas

Crude Oil Oil Products GasRanking Exports Imports Exports Imports Exports Imports1 Saudi USA Russia European Russia European



Arabia Union Union

2 Russia China EuropeanUnion Netherlands Qatar Japan

3 Iraq Japan USA China Norway USA

4 Iran India Netherlands Singapore EuropeanUnion Germany

5 Nigeria Korea,South Singapore USA Canada Italy

6 UAE Germany SaudiArabia Japan Algeria United

Kingdom

7 Norway Italy Korea,South France Netherlands France

8 Angola France India Korea,South USA Korea,

South

9 Venezuela Spain Kuwait Germany Indonesia Turkey

10 Kuwait Netherlands Venezuela Spain Bolivia China

Table 1. The world largest importers and exporters of crude oil, oil products and gas. Source CIA World Fact Book (12)

It is easy to see that some countries are included in bothcategories for the same product, e.g. the USA is the 3rd oilproducts exporter and the 5th importer at the same time. This canbe somehow related to the location of trading hubs in locationssuch as Singapore, Rotterdam or the some of the Mediterraneancountries.

Large importer and exporter countries use to share the marketsthey attend or the supplies sources they have. For example, theUSA buys crude from a large list of supplying countries in orderto create competition in the price and avoid a cut in the supplydue to political issues or natural disasters. Exporting countriesdo the same in order to avoid dependence on one single customer ordue to political issues, e.g. is Venezuela who has changed itstraditional relation with the USA and start to export higherquantities to Asian markets, especially China.

According an article published by www.reuters.com by Ron Bousso onOctober 4th 2013 (1), there is a shift in the trading patterns ofoil related to fewer taxes and regulations, lower feedstock and


http://www.reuters.com/


energy cost in refineries located in the Middle East, Asia and theUSA. These favorable conditions allows them to compete in betterconditions to refineries located in Latin America or Europe thatserve local markets. In order to do so, they are using largerproduct carriers known as LR2’s around 75.000 tones.

Mr. Bousso quotes in his article Mr. Dario Scaffardi who isgeneral manager of Saras group (independent refinery in Italy) whosaid during the “Oil and money conference” held in October 2013 inLondon that “The whole dynamics (of trading) is changing… The basics of refineryhave always been to have refining centers close to the consumption centers andcrude oil on the long haul and the products were in the short haul. A lot of logisticalproblems related to bringing small parcels of products to a variety of small ports”

These changes are also related to the availability of determinedcrude oils to some refineries, e.g. are the refineries located inthe US Gulf Coast which have large amounts of light sweet crudesproduced in the areas around them. With capacities of 600.000 bpd,they are aiming to the international market (especially Europe)instead of remain with local customers only. In order tocompensate the shipping costs, the tankers in use now can be twicebigger than those only 20 years ago, allowing to reduce 3 to 4 US$per barrel according to what Mr. Tony Fountain, head of refiningand marketing at Reliance Industries said in the conference. It’sclear that competing with overseas refineries that can sell largequantities at lower cost is not easy to local refineries locatedacross Europe which caused many of them to close down.

Another change is the large storage terminals and hubs thatguarantee somehow the supply in cases where the shipping suffersinterruptions as was mentioned above.

It has to be kept in mind that the market is in a continue change,according www.oilindependents.org (2) Brazil has plans to reach the5 million bpd in 2020, Colombia has doubled its production in just5 years and in the present are close to 1 million bpd. Argentinahas found a 6 billion barrels reservoir in Vaca Muerta formation.Despite the short distance from South America to USA, China isworking hard creating links with several countries in the region


http://www.oilindependents.org/


in order to ensure energy sources, increasing the tradedquantities from 100.000 bpd in 2000 to around 1 million bpd in thepresent.

Latin American trading patterns are particularly important for theauthor of this assignment due to his geographical location assurveyor. Marianna Parraga prepared an analysis forwww.reuters.com (3) where is mentioned how Latin American countriesare rising their oil products’ imports from the USA despite theregion has some countries with huge reservoirs of oil (Mexico,Venezuela, Brazil, etc.). Since 2008 the top importers countriesdoubled the quantities imported and at the same time, oil exportsfrom the top exporters to USA has fallen around 20%. There areseveral reasons for the increased imports such as growingeconomies, new power plants (fueled by diesel, fuel or gas),increase in vehicles sales, etc. Since the refineries planned tobe built in the next years are in the early stages of design inmost of the cases, it’s expected that the imports of oil productswill rise even more since new refineries will take long time to bein service and there’s no sign of a economical recession in theregion as a whole despite bad signs in Argentina and Venezuelawhich is a particular case where politics has a strong influence.

Gas is considered to be a cheaper, cleaner and environmentallyfriendly fuel. The largest exporter in the world by far is Russiawith the European Union as its best customer which at the sametime is the first importer of the world 400% above the 2nd in rank,Japan. It is repeated the situation that some countries are amongthe largest exporters and importers at the same time such theabove mentioned European Union, 1st importer and 4th exporter at thesame time with a deficit of around 300%.

b) Dry bulk cargo

Dry bulk can be a very interesting sector to analyze. According toGenco Shipping & Trading Ltd. (www.gencoshipping.com) (4) in 2012


http://www.gencoshipping.com/

http://www.reuters.com/


approximately 4 billion tons of dry bulk was traded seaborne,which is one third of the whole dry bulk traded by sea. Themajority of bulk cargo is constituted by iron ore, coal andgrains. With minor quantities cement, agricultural products,mineral, forest products and others. In overall, between 1999 and2006 trade of bulk cargoes rose 35% which is in most of the casesrelated to economies such China. It has to be kept in mind thatcargoes such as grains and coal are much related to seasonalchanges which can lead to changes in trading patterns due toexpected or unexpected weather related issues.

The freight rates can vary tremendously in very short period oftimes due to many factors, especially the offer and demand ofcommodities and of course, the tonnage available at any moment.This volatility is also related to the size of the ships due tothe fact that Capesize vessels are basically used for the steeland thermal coal industries. Panamax vessels are more commonlyused for the transportation of grains and soybeans, steelproducts, cement, bauxite and alumina while handysize and handymaxvessels have more stable markets than larger vessels as they servea wider market with trading patterns much more dispersed (5).

When it comes to the main traffic areas, Asia appears again in thetop of the list. Data obtained from Fearn research’s (AstrupFearnley) tracking in 2003 60% of the dry cargo by volume wasdestined to Asia and 30% to Europe in the segment of vessels over50.000 dwt. All other continents are basically exporters (5)

Steel industry is by far the major commodity traded in the sectorwith around 50% of market share in volume of the seaborne trade;this includes materials associated with the steel production suchas iron ore, coking coal, scrap, manganese, etc. Other dry bulkcommodities include thermal coal, grain, forest products,fertilizers, bauxite and alumina and other cargoes.

Grain has some particularities to be considered, for example grainrequires more DWT tonnage than an equivalent weight of heavieriron ore or coal. Also, grain cargoes usually take longer times inport against much more shorter times for steel and coal highly



efficient terminals. Weather related problems can affect stronglythe grain market being rains and temperature changes the mostcritical issues. This can cause changes in the tonnage demand withvery short notice in determined areas which will depend on theavailability of the grain considered in other countries that cansupply the unexpected shortage.

Owners take deep look at all these and other factors when consideroptions of scrapping, upgrading or new building.

Iron ore

Iron ore with limestone and coking coal are the raw materials formanufacturing steel. It can be found in different quantities allaround the world. According www.blackiron.com (6) the worldproduction was 2.4 billion tones and in 2012 according GencoShipping (4) were exported 1.1 billion tons of steel worldwide beingChina (which is the world’s largest producer as well), theEuropean Union, Japan and South Korea the main importers andAustralia, Brazil, India and South Africa the main exporters. It’sinteresting that only 3 companies, Vale SA, BHP Billiton Limitedand Rio Tinto plc produced in 2010 around 63% of the totalseaborne market (information of AME Mineral Economics). From thetotal produced quantities only around 42% are traded by seaaccording to Macquarie Research and in 2010 reached for first timethe 1 billion tons shipped according the International SteelStatistics Bureau www.issb.co.uk (7), a 12% increase compared to2009 levels.


http://www.issb.co.uk/

http://www.blackiron.com/


Figure 3. Seaborne supply and demand of Iron Ore. Source: Black Iron (6)

Figure 4. Iron Ore production by country in the last years and near future expectations withthe data available at 2010. Black Iron (4)

When it comes to the vessels used for Iron Ore transportation,most of the time Capesize vessels are used in long haul tradingroutes. Since capesize vessels are the biggest bulk carriervessels, only few ports and terminals around the world can receivethese ships, it’s clear that these ports will be locatedespecially in the countries with large imported / exportedquantities.



Coal

Coal can be divided in coking (also called metallurgical) coal andsteam (also called thermal) coal being used to produce coke tofeed blast burners in steel production and as fuel for powergeneration respectively. It Coal is a very abundant commodity withexpected remaining reservoirs that could last between 150 and 200years with the current extraction rates when compared with around50 years for gas and oil (it varies on different sourcesconsulted). Since it is produced in a wide list of countriesworldwide, there’s no dependence of a particular region. Thequantities of coking coal traded will depend basically on thesteel manufacturing industry and as was stated above, the steelproduction and trading is rising and so is the coal consumptionwhich has increased faster than any other fuel since 2000. The 5biggest coal consuming countries are China, USA, India, Russia andJapan being Asia the biggest market by region according data fromthe World Coal Association www.worldcoal.org (8). In relation to thereservoirs, we find again China, USA, Russia and India as thecountries with the biggest reservoirs. Most of the countries havecoal reservoirs but in many cases they’re not economically ortechnically extractable.

The steam coal as stated previously is used in power generationwith a recent rise in the quantities traded due to its lower pricecompared with more expensive fuels as gas and fuel oil. Sincepower generation is dependent on the weather, the tradedquantities and patterns are driven by seasonal changes. Inrelation to the major exporters Australia again is in the list andChina again is the major importer worldwide.

Coal is usually traded in Capesize and Panamax vessels in Asia andin the case of Europe, there’s a preference for Panamax vesselsaccording Genco Shipping (4)

Grains

Grain trading has a much longer history when compared with oil andcoal. It can be traced back to the Phoenicians age the first grain


http://www.worldcoal.org/


trades from the actual Lebanon to the colonies established in theMediterranean Sea and other nations around the Black Sea. Eventhen, the trading was subject to seasonal fluctuations, mostlyweather related. As the centuries passed by, the grain trade wasnot only related to seasonal changes but also it was related tothe empires’ politics, as it’s mentioned in “The ancient mariners byCasson, L” (9) where the author states that one of the reasons of theRoman Empire used to conquer Egypt was to cut the grain suppliesto other rival nations rather than guarantee the own supply sinceRome was a minor customer for Egypt. This can give an idea of theimportance of the grain trade through the mankind history.

In the present the grain trade is not longer used as excuse forconquer a rival nation but has become more complicated in otheraspects. Today’s contracts between buyers and sellers includeinformation as grain grades, standards used and gluten contentwhen the grain is used for human consumption and the metabolizableenergy of the grain when used for livestock. At the end, the valueof the grain depends of its nutritional content rather than theavailability or abundance of certain grains but when within acertain grade or quality, price drives the competition betweenexporters. Grain has an interesting consideration, it’s costly totransport when compared to its relative value.

Today’s trading patterns actors at international markets are largescale millers and processors as the customers and on the otherside, the sellers can be international grain trading firms, and insome countries national exporting trading agencies. The contractsare usually based on standard contracts established by the Grainand Feed Trade Association (GAFTA) based in London which isconstituted by traders, brokers and processors coming from around76 countries (www.gafta.com). Contracts for international trade ofgrain include certificates of quality issued at the exportingcountry where the quality standards agreed are assured by anofficial agency. Other factors that may not be covered by theofficial grades given by the exporting grades but that can beincluded in the contract can be moisture or dockage. Grains aretested against physical attributes (easy to test and low cost) and


http://www.gafta.com/


intrinsic characteristics (expensive and longer time to get theresults). Surveyors are most likely to be hired on the first caserather than the second one.

In relation to trading, it will be sub divided in several groupsdepending on the grain. Using the November 2013 United StatesDepartment of Agriculture circular data tables, it will mentionedthe 5 major importers and exporters for the trade year 2012 / 13with the quantities traded in thousands metric tons

Wheat

Exports

Thousand metric tons

Country

Quantity

Exported

(2013)

Quantity

Exported

(2010)

Variation 2010- 2013

1European Union 22.621 22.279 342

2 Australia 21.269 13.764 7.5053 Canada 18.581 18.992 -4114 Russia 11.289 18.556 -7.2675 India 7.060 60 7.000

As it can be seeing, India was in 2010 far away from being a majorexporter but lately the government lowered the floor price inorder to make it more competitive in the international markets.

Imports

Thousand metric tonsCountry Quantit

yImporte

d

Quantity

Imported




(2013) (2010)1 Egypt 8.300 10.500 -2.2002 Brazil 7.548 6.690 8583 Indonesia 7.146 18.992 -11.8464 Algeria 5.364 18.556 -13.1925 Iran 5.550 3.650 1.900

Rice

Exports


Country

Quantity

Exported

(2013)

Quantity

Exported

(2010)


1 India 10.500 2.228 8.2722 Vietnam 7.200 6.734 4663 Thailand 7.000 9.047 -2.0474 Pakistan 3.000 4.000 -1.0005 Cambodia 975 750 225

India lifted the ban for exports of non basmati rice in 2011making Indian rice very competitive in the international markets,especially in Africa where Vietnam, Thailand and Pakistan lostterrain as traditional suppliers.


Country

Quantity

Imported

(2013)

QuantityImported(2010)

Variation2010 -2013

1 China 366 2.228 -1.8622 Nigeria 2.000 6.734 -4.7343 Iran 1.520 9.047 -7.5274 Iraq 1.188 4.000 -2.812



5Cote d'Ivoire 840 750 90

Coarse Grains

Exports


CountryQuantityExported(2013)

QuantityExported(2010)

Variation2010 - 2013

1 Argentina 29.405 19.030 10.3752 Brazil 26.074 8.627 17.4473 Ukraine 15.100 10.977 4.123

4European Union 7.855 4.293 3.562

5 Australia 5.450 4.414 1.036

Imports


CountryQuantityImported(2013)

QuantityImported(2010)

Variation2010 -2013

1 Japan 17.775 2.228 15.547

2European Union 11.805 6.734 5.071

3 Saudi Arabia 10.200 9.047 1.1534 South Korea 8.264 4.000 4.2645 Mexico 7.550 750 6.800

The major producers and consumers will not be mentioned since itis considered more important for this assignment the majorimporter and exporter countries. The reason the variations inquantities imported or exported was included just to show how acountry or even a region traded quantities can vary in just 3years by millions of tons. Whatever a country is trading today,



can be completely different 2 or 3 years and it will depend onmany factors that will not be covered in this assignment.

c) Containerized Cargo

Containers are used to carry basically any kind of cargo sincethere’re about 16 different types of containers accordingwww.iccl.org (verificar referencia). They can be handled easily bycranes, lifts and reach stackers allowing relatively short timesin port when compared with the volumes of cargo handled. Once inthe pier, usually they’re transported by trucks and then continueby truck or train to its final destination.

With data from the World Shipping council is shown the topexporters of containerized cargo of 2010. It’s very easy to seehow China is by far the major exporter of the world by almost 3times its closest competitor (USA). In relation to continents,again Asia has 7 countries in the top 10 list.

Top Exporters(millions TEU's)Country 2010

1 China 31.32 USA 11.23 Japan 5.74 South Korea 5.25 Taiwan 3.46 Thailand 3.47 Germany 3.08 Indonesia 3.09 Malaysia 2.510 Brazil 2.3

In the importers group, the names are basically the same with someslight difference in the rank order. Again, Asia has more


http://www.iccl.org/


countries in the list than any other continent (7 countries) andthe difference between the first 2 places and the rest of the listis considerable big.

Top Importers(millions TEU's)

Country2010

1 USA 17.62 China 12.03 Japan 6.14 South Korea 4.55 Germany 2.8

6 Other Arabian Gulf 2.7

7 United Kingdom 2.58 Indonesia 2.59 Taiwan 2.510 Hong Kong 2.5

General comments for commercial sector

As can be seeing, most of the seaborne trade in all segments takesplaces in Asia (China, South Korea, and Japan especially), USA andthe European Union with increasing participation of emergingeconomies such India and Brazil. Australia has a very strongpresence in dry bulk cargoes. This has to be taken in account forthe future surveyor at the moment of establishing his business onhis own account.

It is of particular interest for the author of this assignment theLatin American area since it’s the area where his business will beestablished. It’s clear that Brazil and Argentina are the biggestbulk cargo exporters in the region with iron ore and grainrespectively. The free trade agreement between USA and Colombiamade possible that 800 Colombian companies entered the NorthAmerican markets since the agreement entered into force accordingrecent statements from the USA secretary of state John Kerry inthe Organization of American States on November 18, 2013.Venezuela, Ecuador, Brazil and Mexico are the top exporters of oilJanuary 14th, 2014 Page 16


but Colombia, Trinidad and Tobago are getting into the businesstoo. Panama expects to open the new expansion of the channel in2015, which have a strong enough reason for ports in the easternseaboard of the USA to make the modifications needed to handlepost panama vessels, (Baltimore, Norfolk and Miami ports andothers considering the option). According the Panama CanalAuthority, by 2025 will be doubled the cargo volume transited in2005 but some of the critics against the expansion is that therecent years expansion in trade between the USA and China cannotbe sustained for the next years as some adjustments have to bemade. In any case, the expansion will make it easier for the eastcoast ports of the USA to trade with Asia. It has to be consideredthat the investments needed to handle post Panamax ships are hugeand won’t happen shortly. According an article of Steve Banker inForbes (www.forbes.com) “the best guess is that growth of oceancargo to the east coast (of the USA) from Asia will exceed that tothe west coast, but not be dramatically larger in any given year.Still, over the course of a few decades, cargo flows could lookdramatically”.

It’s clear that world trade has expanded several times since justfew decades ago as was shown in the table below. There’s no reasonto believe will be a contraction that reduce the volume of cargoesto those of 1970’s decade, what would happen and was shown also,is changes in the trading areas from one country or region toanother.

Goods Loaded (milliontons) Goods unloaded (million tons)

Oil DryCargo

Totalloaded

Oil DryCargo

TotalunloadedArea Year

Crude

Products

Crude

Products

Europe 1970 67 109 326 501 634 104 511 12492011 221 326 1075 1622 461 316 1213 1990

Africa 1970 282 8 119 409 28 15 47 902011 344 110 334 788 40 43 288 371

Asia 1970 624 90 148 861 231 55 335 6202011 900 377 2107 3384 866 462 3572 4900


http://www.forbes.com/


America 1970 137 25 468 630 189 119 220 5282011 278 218 1504 2000 513 193 674 1380

Oceania 1970 0 2 102 103 19 5 18 422011 20 5 934 959 27 24 76 127

Worldtotals

1970 1109 233 1162 2504 1101 298 1131 25292011 1763 1036 5954 8753 1907 1038 5823 8768

It just needs few minutes to see that all continents haveincreased somehow the traded volumes of cargo somehow. Oceania forexample, has very small quantities of oil traded but increasedseveral times the dry cargo loaded. Probably the most dramaticchange is Asia with an increase of almost 15 times in the drycargo segment, leaded without any doubt by China but followed bycountries as South Korea, Japan and Indonesia.

Leisure SectorThis sector is not well defined since the vessels that can beintended to be used as leisure, at the same time can have acommercial purpose such as yachts chartered by their owners but tothe effects of this assignment, leisure will be understand asthose vessels used for recreational and sports purposes includingmotor yachts, sail boats, small crafts, etc. used or not withcommercial purposes. It has to be kept in mind that not all smallcrafts belong to the leisure sector e.g. pilot boats.

The leisure sector when compared to the commercial sector can seemvery small but when looking in detail, huge quantities of moneyare discovered. This can be easily seen in the report of SuperYacht Intelligence 2012 (www.superyachtintelligence.com) where thesuper yacht industry is deeply studied(13) (super yacht is definedin the study as those yachts of 30 meters of length or more).

Quoting information of Super Yacht Intelligence, the super yachtindustry directly or indirectly contributed with 24 billions ofEuros, around 140.000 land based jobs, 33.000 crew and 100.000 dayworkers / contractors to the world economy. Direct contribution isunderstood as the total amount of services consumed by the yachts


http://www.superyachtintelligence.com/


(e.g. salaries, operation and maintenance, chartering, etc) andindirect contribution is understood as those expenses associatedwith the supply chain needed to the industry to work such asmanufacture of components used on board, brokerage services,administration services, etc.

If we consider that the super yacht fleet worldwide is around 4000units in 2010 and most of the sector is based in Europe and NorthAmerica, the importance of the sector is paramount in thosecountries with maritime leisure tradition especially when it’sclear that the number of yachts have been increasing continuouslyfor at least more than 25 years (quadrupled since 1985 until 2010)with a strong increase after 2000 and without indication that thegrowth will stop (together with its impact on the world economy).

Fig 5. Yachts delivered per year since 1985 Fig 6. Fleet size since 1985Source: Super Yacht Intelligence

The building industry is mainly based in Europe where are builtalmost 70% of the total deliveries worldwide. North Americafollows in a far second place with 21% and the rest of the worldwith just 10%. The 2012 order book reflects minor changes, whichmeans that no significant changes are expected in the buildingindustry. A deeper look at the yacht building yards locations isshown in the figures 7 and 8.



Fig 7. Origin of ships built by country Fig 8. Breakdown of the order book by countrySource: Super Yacht Intelligence

Italy, Netherlands, Turkey, Germany and the UK are the countrieswith highest presence in super yachts building industry. Europe isnot only the origin of most of the super yachts but also thepredominant base for them, being the Mediterranean sea ports thepreferred choice for homeports and cruising. Leisure sector hasthe particularity that since in most of the cases the yachts andcraft are not intended to make profit so they can spend weeks atport. 6 months per year in its home port is a normal period oftime for a yacht.

Other data about the yacht industry

Most of the super yachts are motor powered with 79% of the present fleet with tendency to increase based on the present order book.

Average fleet age 21 years Annual expenditure average (not including crew wages and

berthage): 1.650.000 Euros Average LOA: 40.3 meters Switzerland (without any coast) is one of the highest

contributors to the banking sector associated to the yacht industry.



The numbers related with smaller boats differ a lot from those ofthe mega yachts, where for instance in France are registered880.000 boats in 2005 (Maine International Trade Center,International Opportunities for Maine, Boat Building and MarineTrade). In this “sub sector” of the leisure, the USA have won agood reputation for building high quality boats which togetherwith the dollar weakness of the recent years have increased theexports to Europe. Countries such as Italy, Canada and Franceimport around 1 billion dollars in boats per year, Spain importedin 2007 1.6 billion dollars. If we consider that Italy and Franceare the 1st and 3rd worldwide manufacturers of boats, we can createa mental image of the size of this business.

New countries are mentioned in this sector such as China where’sestimated that the pleasure market reach 10 billion dollars worthnext decade. The United Arab Emirates have a fleet of 30.000leisure boats and have plans to expand the berthing capacity by30.000 before 2012.

The smaller the boat the less chances the owner require a surveyorbut for those surveyors working on the geographical areasmentioned above and with the proper experience, always will beopportunities since the money involved is huge and the fleet isquite big.

Explain the role of the regulatory bodies involved in the marine industry

The regulatory bodies are those with capacity in implementingrules for the marine industry. It will be included in this sectionthe insurances used in the industry because of their interest andthe pressure they can impose in the safety and protection of theenvironment.

The maritime industry mixes 2 very important things for the humanbeing, money and human life. In the last decades the environmenthas join the group due to the impact caused by some accidents andthe day to day activities in the marine environment and as a



natural consequence of the global awareness in the last yearsregarding the environment. There are many parties involved in themaritime safety, some of them as regulating bodies and others asregulated parties. Maritime administrations (including Port StateControl authorities) and Classification Societies are importantactors in the regulating bodies’ side. The International MaritimeOrganization formed by members of the maritime administrations,major classification societies and other organizations asobservers is the major regulating body worldwide and serves as ameeting place to discuss and update the maritime legislation.

International Maritime Organization IMOThe International Maritime Organization cannot be considered aregulatory body but is the source of the base legislation used bythe maritime administrations worldwide to operate and assessforeign and national ships (it adopts legislation while maritimeadministrations implement legislation). It is a meeting pointwhere delegates of 169 member countries discuss the technicalissues of the maritime industry (no commercial issues arediscussed) with the goal of improving the safety and security onboard and the protection of the environment. According theorganization web site (www.imo.org) “The International MaritimeOrganization is a specialized agency of the United Nations which is responsible formeasures to improve the safety and security of international shipping and toprevent marine pollution from ships. It is also involved in legal matters, includingliability and compensation issues and the facilitation of international maritimetraffic”

The maritime industry is probably the most ancient internationalindustry in history and during centuries it was managed separatelyby each maritime nation, especially those with strong maritimetradition, mostly located in Europe. Marianne Harvey in its paper“The Origins of IMO”(14) says “Each shipping nation had its own maritimelaws. There were comparatively few international treaties and those that existedwere not accepted or implemented by all maritime states. The result was thatstandards and requirements varied considerably and were sometimescontradictory”. It was not only 1948 when the recently born UnitedNations Organization convened a conference to be held in Geneva


http://www.imo.org/


between February 19th and March 6th in order to study the issue ofthe maritime industry regulations, especially those related tosafety. The result was the Convention for the Establishment of an Inter-Governmental Maritime Consultative Organization (IMCO).

Even though, it was not until 10 years later that the conventionwas accepted by signing countries, mostly because there weredoubts about the role of the organization regarding the commercialside of the industry, which some countries (Denmark, Norway andSweden) intended to include in the duties of the organization asthey try to do in 1955 in the 7th session of the Transport andCommunications Commission and in the 10th session of the GeneralAssembly in the same year. With the Japanese deposit of itsacceptance done on March 17, 1958 were met the conditions givenfor the coming into force of the convention.

During that 10 years period between 1948 and 1958 occurred the 3rd

SOLAS Convention and the International Convention for thePrevention of Pollution of the Sea by Oil (OILPOL Convention).Also, several regulations were revised and/or updated such asCollision Regulations, safety of navigation, meteorology and icepatrols.

During the 1st IMO assembly, held in London between January 6th andJanuary 19th the organization accepted the responsibility ofupdating a set of established treaties including the 1948 SOLAS(which entered into force in 1952), the International Regulationsfor Preventing Collisions at Sea, the International Code ofSignals and the International Convention for the Prevention ofPollution of the Sea by Oil and the unification of the tonnagemeasurement.

It was just 2 years later when the SOLAS convention became the 1st

convention held by the IMO. 55 countries participated in thatconvention resulting in 55 resolutions, some of them requiring theIMO to carry out several actions. SOLAS came into force in 1965.

According the IMO performance indicators (C 105/3(a)/1) from the30th September 2010, 159 out of 169 member states has ratified the



SOLAS 1974 and the Load Lines 1966 conventions making them themost ratified conventions of the IMO. As at August 2010 there were52 IMO conventions and 42 of them were in force. Even not allcountries ratify such conventions, those who did have around 98%of the worldwide fleet and have to be kept in mind that even acountry doesn’t sign a convention, its ships must follow it whengoing to a signing country ports.

IMO auspice the conventions where the instruments are discussedand agreed, once those instruments come into force (by acceptanceof a certain number of flag states) they become mandatory. Usuallythey’re called statutory requirements and can be divided in 4divisions

1. Ship’s design and stability2. Pollution 3. Accident prevention 4. Damage control

In the present there’s no doubt about the role of the IMO as itdemonstrate the paramount importance of having internationalstandards that were developed, agreed implemented, and enforced bybasically all the maritime nations of the world facilitating theacceptance of ships registered in a certain country by anothercountry. This is the only way to regulate the internationalmaritime industry.

National Maritime AdministrationsEach country government has the right to establish policies, lawsand regulations of their own in regard to the maritime industry.This legal framework is influenced and basically based on theUnited Nations Convention of the Law of the Sea (UNCLOS),international conventions, IMO resolutions and codes the countryhas signed in. The maritime administration of each country are thelegal entities assigned with the responsibility of ensure thesafety, security of the crews and ships and the protection of theenvironment while complying with the international laws that couldapply. Flag states assume responsibilities when become part of an



IMO instrument and the maritime administrations are in charge ofsuch responsibilities.

The national administrations have a long list of duties such as

Regulation of construction, equipment and repairs of ships Issuance, suspension or withdrawal of certificates to ships,

seafarers, service providers, educational centers, surveyors,yards and any other entity that the national laws establish.

Inspections and surveys (national and foreign) Registration of ships and seamen Investigation of casualties, wrecks, collisions, pollution,

fraudulent certificates, etc. (UNCLOS and some IMOconventions require that the results of such investigationsare made public)

Crew issues as working conditions, welfare, manning, medicalrequirements, etc.

Salvage Legal such as international conventions, national

legislation, litigation, etc. Act on behalf of the flag state government with other

maritime administrations and on conventions, IMO sessions andwherever the law establish

Any other given by the national legislation

The IMO through the resolution A.847(20) gives the guidelines tothe national maritime administrations on how to implement the IMOinstruments. It states the following in the point 1.2 “Under theprovisions of the United Nations Convention on the Law of the Sea (UNCLOS) and ofthe above IMO conventions (SOLAS 1974, MARPOL 73/78, Load Lines 1966and STCW 1978) Administrations are responsible for promulgating laws andregulations and for taking all other steps which may be necessary to give thisinstruments full and complete effect so as to ensure that, from the point of view ofthe safety of life at sea and protection of the marine environment, a ship is fit forthe service for which it is intended”.

It is clear that the responsibility lies on the administrationshoulders which must ensure that the international conventions are



followed, implemented and improved by means of nationallegislation.

When a government sign in a convention, it should start to prepareits national legislation (laws, codes, regulations),infrastructure, educational programs and whatever is needed inorder to be ready at the moment the convention comes into force.Deeper details about the resources a maritime administration needscan be found in the resolution A.847(20) of the IMO.

When considering the responsibilities of the administrations plusthe duties mentioned above it is easy to consider the maritimeadministrations the most important regulatory body of the maritimeindustry. It is important to mention that the IMO can support andgive technical assistance to the maritime administrations in orderto help them fulfilling their responsibilities.

In some cases, flag states authorize certain organizations to acton their behalf to perform surveys and inspections and issue thecertificates required by the IMO instruments. These organizationsare known commonly as Recognized Organizations (RO) and usuallyare well known classification societies (e.g. IACS members) but isthe administration who have to the right assess the capabilitiesof the organization and approve it or not as a recognizedorganization (in the IMO resolution A739(18) can be found theminimum requirements and standards a RO must have and the A789(19)includes the specifications for surveys and certification functionof the RO’s). This is the case of flag states such as Panama,Bahamas, Marshal Islands, etc who delegate the authority ofissuing certificates and perform surveys to such organizations andprobably the reason lies on the fact that ships flying those flagsare all around the world and it’s easier to the flag state rely onthe experience, knowledge and established network of theclassification societies. In any case, the administration have tomonitor the work done by the RO and always retain the authority tocarry out the surveys that are considered necessary in order to besure that the ships flying its flag comply with the dueregulations.



One of the most important responsibilities assumed by the flagstates is to ensure that the vessels flying its flag comply withwhat is established in the international conventions. In order tobe able to ensure compliance, administrations can and must:

1. Avoid ships to sail when the seaworthiness is in doubt2. Survey of ships including technical, operational and crew

related issues during the construction and service life.3. Proceed accordingly in those cases of ships flying its flag

that violated an international regulation. (In these cases,administration is informed either by a port state control ofa foreign country or by the RO in charge of the ship). Aninvestigation and follow up surveys may apply.

4. Create the laws that include penalties to the violation ofinternational (and national) regulations.

5. Ensure that the crews comply with the training andcertification required by ensuring they possess the knowledgeand skills needed for each rank.

Examples of deficiencies that surveyors performing statutorysurveys on behalf of an administration that can lead to detentionof the ship are (only as example and not limited to):

SOLAS

1. Failure of operation of the propulsion machinery or otheressential machinery on board such as emergency generator,emergency lighting, steering gear, radio equipments,navigational equipment, etc.

2. Bilges condition. Oily water mixture in the engine bilges,thermal insulation contaminated with oil, etc.

3. Insufficient capacity or deterioration of life savingequipment and fire fighting, fire detection, fire alarms andrelated equipments.

LOAD LINES CONVENTION

1. Corrosion or damage in structural parts of the ship onextended areas subject to loads and stress

2. Lack of approved stability information



3. Deterioration of closing devices that compromise the watertightness of the ship

MARPOL

1. Malfunction of the 15 ppm alarm, discharge monitoring andcontrol system, bilge water separation system, etc.

2. Unauthorized discharge piping (magic pipes)3. Not enough capacity in the sludge tanks or sewage holding

tanks for the intended voyage.

In not all cases the administrations comply with theirresponsibilities regarding surveying the ships to ensure the safeconditions of the vessels and other issues on board, that’s thecases of the so called sub standard ships, which means thatthey’re below the standards set for the industry for safety,security, pollution prevention, etc. Based on that, in the late70’s a group of European countries agreed to audit the working andsafety conditions in foreign flagged vessels.

The concept of the inspection of foreign vessel using common rulesfor a group of countries located in a determined geographical areaspread and even the IMO encourage this practice. In the present wehave the Tokyo MOU, Viña del Mar MOU, Caribbean MOU, MediterraneanMOU, etc. It’s interesting to remark that the United States ofAmerica don’t belong to any memorandum of understanding.

The port state control officer has the authority to detain a shipif it’s considered that safety, health and / or environment are inrisk. In the annual report of the Paris MOU (2007) the top listreasons for detentions are:

1. Certification of the crew and the ship2. Safety conditions of the ship (fire safety, navigation, etc)3. Working and living condition of the crew4. Maritime security5. Marine pollution prevention6. Operational issues



7. Management

Every MOU has established a common set of rules and regulationsthat port state control officers of each country belonging to theMOU will use to assess the conditions on board and determinewhether or not to detain the ship and should deficiencies arefound, the time frame to fix it (them) and will depend of theseverity of the deficiency how much time is considered necessaryto fix the issue. The idea of having common rules is due to thefact that vessels usually call on ports of the same geographicalarea during the same voyage. Having a common set of rules and acommon data base of inspections, avoid delays with several surveysdone in a short period of time and at the same time guaranteesomehow that surveys will be done, doesn’t matter the port or thecountry. It has to be kept in mind that even when a flag statebelongs to a MOU it doesn’t mean that another flag state belongingto the same MOU will not audit ships flying its flag but usuallythe main target are convenience flagged vessels, especially thoseincluded in the black list. Also, recognized organizations thatact on behalf of a flag state are categorized according theperformance of the ships they certified. An example of this can befound in the 2012 annual report where is stated that thecombination of the Sierra Leone flag and the Phoenix Register ofShipping resulted in 41% detention rate.

Each MOU will determine how often a ship must be inspected. In thecase of the Paris MOU they give longer inspection intervals toflags / RO included in the white list while ships with flags / ROincluded in the black list are inspected more frequently (nodiscriminitation should be made based on the flag, the standardsapply for all the flags in the same way). This change wasintroduced in 2011 and resulted in a lower number of inspectionsbut in a higher number of detentions. Paris MOU categorize theflag states in 3 divisions or “lists”, the white list whichrepresent those flags with low detention rates due to highstandards found on board ships flying their flags. Black list isjust the opposite and grey indicates an average performance withcaution of not falling in the black list. In the white list



France, Germany and Hong Kong are in the top 3 positions; Bolivia,Tanzania and Togo are located in the bottom of the black listbeing Bolivia the only one categorized as high risk. In therecognized organizations segment, the top 3 positions are AmericanBureau of Shipping, Det Norske Veritas and Lloyd’s Register whileon the other side are located Phoenix Register of Shipping,INCLAMAR and the Albanian Register of Shipping.

The fact that the PSC have the authority to detain the shipdoesn’t mean that it’s the main goal and usually detained ships’and their respective owners / operators are encouraged to fix thedeficiencies as soon as possible, even SOLAS in chapter I/19 andother conventions where the PSC is mentioned, establishes that allefforts should be made to avoid the detention of the vessel. But,in case that an evident sub standard ship is found, detention willbe used as a mean to find the real owner behind the vessel inorder to making responsible for the damages the ship can cause. Itcan be the case that a particular ship is banned to enter a MOUarea, e.g. several detentions.

Once on board, the PSCO officer will inspect based on the rules ofthe MOU he belongs to but as an example to show, the Paris MOUcode of deficiencies is listed

1. Certificates (ship, crew and documents)2. Structural condition of the ship3. Water / weather tightness of the ship4. Emergency systems5. Radio communication6. Cargo operations including equipment7. Fire safety8. Alarms9. Working and living conditions10. Safety of navigation11. Life saving appliances12. Dangerous goods13. Propulsion and auxiliary machinery14. Pollution prevention (MARPOL annex I to VI, anti fouling

system)January 14th, 2014 Page 30


15. ISM16. ISPS17. Maritime Labor Convention related issues

In order to inspect the above, Paris MOU uses 17 conventions (IMOand ILO) as reference.

SOLAS, MARPOL, UNCLOS, COLREG, STCW and LOAD LINES convention hasset the roles of both the port state and the flag state as well.

Classification SocietiesIn the 18th century the insurers based in England, specifically inLondon prepared a method to assess the technical condition of thevessels insured. The vessel itself was “classified” according thegeneral conditions of the hull on annual basis inspections on an“A – E – I – O – U” scale. The equipment on board was classifiedwith the letters A – B – C that later on were replaced with thenumbers 1 – 2 – 3 which resulted in the classification A1 as thehighest standard of condition; in the present is simpler, shipsare in compliance (in class) or not (out of class, suspended orclass withdrawn). This method of classification spread in themaritime countries, in Europe first and then as far as Russia andJapan forming the classification societies known today. In thepresent there are around 50 classification societies worldwide butthose included in the International Association of ClassificationSocieties cover around the 94% of the world tonnage. The IACSdefine a classification society to those entities that comply thefollowing (consider that the administrations are the entities whoauthorize the class societies so even an entity doesn’t fulfillthese requirements, a particular administration can consider it aclassification society)

1. It publishes its own classification Rules (including technical requirements) inrelation to the design, construction and survey of ships2, and has thecapacity to (a) apply, (b) maintain and (c) update those Rules and Regulationswith its own resources on a regular basis;

2. It verifies compliance with these Rules during construction and periodicallyduring a classed ship's service life;

3. It publishes a register of classed ships;



4. It is not controlled by, and does not have interests in, ship-owners,shipbuilders or others engaged commercially in the manufacture, equipping,repair or operation of ships;

5. It is authorized by a Flag Administration as defined in SOLAS Chapter XI-1,Regulation 1 and listed accordingly in the IMO database, Global IntegratedShipping Information System (GISIS).

The role of the classification societies is recognized in theSOLAS convention stating that “ships shall be designed, constructed andmaintained in compliance with the structural, mechanical and electricalrequirements of a classification society which is recognized by the Administration inaccordance with the provisions of regulation XI-1/1, or with applicable nationalstandards of the Administration which provide an equivalent level of safety” LoadLines convention recognize such role as well.

The main objective of the classification societies is to verifythat ships are built and maintained according the properstandards. Other roles the classification societies have assumedis to act on behalf of the maritime administrations to survey andissue statutory certificates to the ships flying the flag of thestate of such administration. Lately they have included in theirscope of service quality assurance and risk assessment.

The classification surveyor has to verify the structural integrityof the vessel by inspecting the hull condition, verify thereliability of the propulsion plant, electrical generators,steering gear and any other equipment installed on board in orderto provide essential services for the safe operation of the ship.The surveyor uses as reference in the surveys, the classificationsociety rules and regulations and the international instrumentsthat may apply to a particular ship especially when acting onbehalf of a flag state as recognized organization for issuingstatutory certificates. The classification process can include thefollowing by the appointed surveyors:

Review of the construction plans and assistance to thebuilding shipyard to verify construction is done incompliance with rules and the approved plans

Verify that the structural steel to be used as well ascomponents such as main engines, generators, boilers,



pressure vessels, etc are built and certified according therules of the class. Usually this is done in the supplier’syards so all materials and components will be in good orderwhen coming to the shipyard.

Attendance to the sea trials, witness the test of theequipments and systems required by the rules to be tested.

Once all the above is done satisfactorily, the class requestis sent to the classification society office where, ifconsidered appropriate, a class certificate is issued.

The ship must remain during her service life in a surveyprogram in order to keep the certificate of class valid.

All the above is done by means of visual inspections, tests,measurements, trials and checks according the surveyor experience,guidelines given by the society and the rules and regulations tobe followed.

During the service life of the ship, additional surveys will beannually, intermediate (between the second and third annualsurvey) and the class renewal / special survey which is held every5 years. As the ship becomes older is normal the surveys arestrengthened due to the fact that corrosion and structural damages(fractures, deformation, etc) can appear as the years pass by.Surveys out of the water are included in the program and will berequested more often as the ships age increases.

During the survey, is almost impossible that the surveyor canverify all the structure of the ship or the machinery included inthe classification certificate. For this purpose, the surveyorsuse a guideline that has been prepared based in the experience ofyears (centuries) in business with special attention to thoseitems more likely to suffer corrosion, stress and fatigue. It canhappen that the conditions on board lead to a suspension orwithdraw of the class, or sometimes, change the class notation(decision will be taken by the class society). Can be as well thatthe conditions don’t require a class suspension but instead,remedial actions have to be taken in a certain period of time inorder to keep the class. In those cases the surveyor can gives a“class condition” which means that there’s situation that must beJanuary 14th, 2014 Page 33


deal with in order to keep the class. The way to deal withconditions of class can be repairs, additional surveys,measurements, etc.

The International Association of Classification Societies (IACS)in its paper “CLASSIFICATION SOCIETIES – Their Key role” says somethinginteresting; A ship which hold all the statutory certificates andis classified against the highest standards is not guaranteed willnot suffer any accident due to the fact that there’s no way toverify the conditions of safety on board in the day to dayoperations. It is understood that ships are built according therules of a classification society and it’s the duty of the owneror operator to keep them in compliance with such rules. It meansthat the main responsibility of the safety on board and pollutionprevention lays on the owner / operator and it’s the duty of theregulating bodies to verify it’s properly done. In those caseswhere the ship suffers a damage that could compromise her classcertification, the society must be informed immediately in orderto schedule a survey and support in the repair process.

Considering that some flag states authorize classificationsocieties to act in their behalf for issuing statutorycertificates it’s very important to know that in those cases wherethe class is suspended or withdrawn the flag state should benotified by the classification society and then, in most of thecases the ship’s statutory certificates are invalidated untilproper corrective actions are taken.

The role of the classification society surveyor, besides all whatis stated in previous paragraphs is quoted by the IACS like “Theutmost care and discrimination have been exercised by the Committee in theselection of men of talent, integrity, and firmness as Surveyors, on whom thepractical efficacy of the system and the contemplated advantages must somaterially depend; the Committee have in their judgment appointed those personsonly…who appeared to them to be most competent to discharge the importantduties of their situations with fidelity and ability, and to ensure strict and impartialjustice to all parties whose property shall come under their supervision”

It’s interesting to remark that this concept was given back in1834. Words such as talent, integrity, firmness, competent,



fidelity, ability, strict and impartial justice to all parties areof paramount importance when the surveyor, not only those of theclassification societies, is described in the field and not justin the paper.

Ships are classified according a specific group of rules which mayvary depending on the ship type, navigation area and the serviceshe will do. The classification notation will be composed by thefollowing (it may be the case that several of them are usedtogether)

Main class symbol. Defines the compliance of the all of theship’s construction aspects with the specific rules of thesociety that apply.

Construction mark. The construction mark when assigned isused to identify the surveying procedure used for the firstclass assignment.

Service notation. When assigned, is used to identify theservice(s) the ship is intended to do by the owner. In thosecases where several different services are intended, the shiphas to comply with all the rules that may apply.

Navigation notations. When assigned, it defines the specificnavigation areas where the ship can operate.

Service and operational notations. When assigned, they definethe areas or special services the ship is intended to do(e.g. dredgers)

Additional class notations. When assigned, they define anyadditional requirement given by the owner at the moment ofthe ship building.

It’s interesting to notice that most of them says “when assigned”and that, mostly they define what the ship will do and where.

Classification societies’ surveyors can perform several types ofprogrammed surveys during the service life of the ship. Thegeneral goal of these programmed surveys is to assess whether theship is in compliance with the rules or not. Non programmedsurveys can be done in those cases where the ship suffers a damagewhich can compromise her class. The scope of the surveys can be as



follows (most of the information taken from the GermanishersLloyds and DNV regulations)

Annual survey. As the name says, it’s done every 12 monthswith a window period of 3 months (it means that can be donesince 3 months before the due date until 3 months later ofthe due date). Some of the items the attending surveyor hasto inspect are:

This is a general survey, includes inspection of themain structural elements of the hull.

Certificates as required by the rules (e.g. life boatsfalls)

The machinery, cargo holds and equipment on board willbe inspected randomly depending on the type of ship andher age.

The closing devices of hatches, ramps, doors, etc andtheir tightness.

Shell doors (bow, stern, sides) located in Ro-Ro shipsand passenger ships including function test of theopening / closing functions and indication devices.

Anchor and steering gear visual inspection Visual inspection of the machinery spaces including

safety aspects such as emergency escapes free passage,fire sources, cleanliness, etc.

Test of quick stop / closing of pumps, valves, motors,separators, boilers, fans, etc

Bilges: condition, alarms and level monitors, actuators,etc.

Communication devices between bridge and machinerylocations such as control room, steering gear room,thruster rooms. Etc

Power supply systems, including switchgears Fire: pumps and mains, detection systems, fixed

extinguishing systems, etc. Surveyor has to verify themaintenance done on such systems according the rules ofthe class, administration, manufacturer and relevant IMOinstruments. Especial attention to be taken to those



equipments that must be maintained by an authorizedservice provider (e.g. fixed fire systems)

Load lines marks to be verified Stability information to be verified Fire doors operation test General alarm functionality Life boat, rescue boat, launching and recovery systems ISM related items. The surveyor will list any finding

that may be associated to deficiencies of the safetymanagement system despite the issuing authority

Some additional tests can be required by the attendingsurveyor in order to ensure ship comply with the rules.This will depend on the class type, notation, age andthe criteria of the attending surveyor.

Intermediate survey. This survey is done between the secondand third annual survey in a 5 years survey cycle. The windowfor this survey goes from 3 months before the second yearsurvey to 3 months after the third year survey. Specificrules establish what should be inspected but it can includeultrasonic test of the hull.

The annual survey requirements are to be inspected. DNVdon’t give any special requirement in intermediatesurveys when the ship is less than 5 years.

The ballast tanks will be inspected depending on theship’s age. If the results are not satisfactory to thesurveyor, additional tanks of the same type may berequired for inspection. Depending on the case, sometanks may be required to be inspected annually. Signs ofcorrosion, structural damages and the condition of thecoating are of special interest for the surveyor.

Cargo holds are to be inspected depending the detail ofthe inspection on the type of cargo, age of the ship andthe criteria of the surveyor

Crack test on determined structural members accordingclass rules but with especial interest in areas of high



stress in locking devices, hinges, stoppers, etc. (dyepenetration and magnetic particles NDT can be usedaccording the class rules)

Elastic mounting of deck houses including springs,insulation, connections to the hull and securingdevices.

In the machinery some measurements are to be done orproof that have been done by approved crew members. Suchmeasurements can be: crankshaft deflections on mainengines and auxiliary generators, axial trust bearingclearances in the main shaft(s) and/or turbine rotors,insulation test done in auxiliary generators andselected electric motors

Operational test of the following: emergencygenerator(s) and emergency switchboard(s); machinery andelectrical installations operability

Automation equipment according class rules

Class renewal surveys. It is done every 5 years. Items mentioned in annual and intermediate surveys The class renewal survey has to be done in dry dock or

slip way unless a dry dock survey was carried out withina period of time approved by the class. In any case, thekeel, the rudder and the bottom plating have to beinspected by the surveyor. The rudder inspection as mostof the items will be more detailed as the ship getsolder and can be the case that the surveyor requests todismantle the rudder stock to inspect clearances,corrosion presence, etc.

Hull elements known to have suffered by stress andfatigue such as those located in areas as cargo holds,tanks (fore peak and aft peak tanks must be inspected inany class renewal, engine foundation, etc. The classrules include the list of items to be checked but thesurveyor’s criteria will apply. The frequency at whichstructural tanks of Fuel, Lube Oil and potable water



have to be inspected internally will depend on the ageof the ship. The detail of the inspection of structuralitems and how deep the surveyor has to inspect willdepend on the age of the ship. The rules of the classgive guides about the last.

Tightness test of tanks, pipe tunnels and void spaces. Thickness measurements according the criteria of the

attending surveyor Engine room structure, especially tank top, shell

plating and brackets. If considered necessary, thicknessmeasurement will required.

Depending on the age of the ship, the chain cables willbe inspected and after the 10 years survey, weight ofthe anchor(s) to be checked.

Continues class renewal items included for machinery andelectrical systems to be verified

Main engines, auxiliary systems and propulsion system(s)according to the rules. Surveyor can request todismantle a component in order to verify its condition(e.g. bearings, pistons, cylinders, etc.). Run test canbe requested by the surveyor for auxiliary systems (deckequipment as winches can be included) as considerednecessary.

Generators, essential motors, switchgears, protectiveand interlocking devices, etc to be inspectedexternally. Insulation test is to be done.

Any additional test as considered necessary by thesurveyor to ensure that the machinery and the electricalsystems are reliable and can be used without anyrestriction.

Fire protection and fire fighting systems according therules

Other requirements that will depend on the ship type

Example of the DNV rules regarding the thickness measurementaccording the age of the ship(16) (on the next page)



Example of DNV rules regarding the inspection of tanks accordingthe age of the ship(16)

Additional surveys that classification societies’ surveyorscan attend are bottom surveys, tail shaft surveys, thrusters’surveys, boilers and steam generators surveys, etc.

P&I Clubs and Marine InsuranceThe Insurances in the marine industry are of paramount importancedue to the risks associated with the ocean trading. Today,insurance can be split in P&I clubs and marine insurance ingeneral. The idea of having insurance is exactly the same than anyother industry, to protect against the losses caused by unexpected



events. The definition according the 1906 marine insurance act(17)

is “A contract of marine insurance is a contract whereby the insurer undertakes toindemnify the assured, in manner and to the extent thereby agreed, against marinelosses, that is to say, the losses incident to marine adventure.” The role of thesurveyor is to verify that the ship or offshore installationcomply with the requirements given to minimize the risks to thelowest reasonable and economically level. The requirements mayvary depending on the ship type, service, geographical area wherethe ship operates, etc. and can be that the ship just comply withflag state and international regulations or additionalrequirements or conditions may given depending on the risks andthe operations to be done. It can be the case that the surveyor isappointed when an unexpected event occurred to investigate thecauses and to assess the extent and severity of the damages.

It has to be kept in mind that insurance is a private operationbetween the owner and the insurer he chooses, it’s included in theregulatory bodies because of their interest in the marine venturesafety and because they may request additional measures to betaken in order to protect the crew, the ship and the environment.

Another point important to remark is the fact that only thoseentities with interests in the marine venture have the right to beassured.

P&I Clubs

The history of the Protection and Indemnity (P&I) clubs begins inthe 19th century when the ship owners faced liabilities not coveredby the hull underwriters. The solution found to this problem bythe owners was to associate themselves in “clubs” in order tocover the claims made against the members. Since a particular clubis a mutual association formed only by the owners of the shipsinsured by that club, there’s no interest in profits. The clubsask their members to pay “calls” annually. The calls made by theowners are just to cover the administrative expenses and costs,the claims, reinsurance costs, etc. If the calls are insufficient,the club members are asked for additional calls but on the other



hand, if there’s an excess of funds, next year calls will belowered.

The 13 main P&I clubs form the International Group of P&I Clubsand provide insurance to more than 90% of the worldwide tonnage.According Robert C. Seward in his paper “The Role of Protectionand indemnity Clubs”(19), the 13 P&I clubs work together in 2 ways.The first one is covering the claims in excess of 5 milliondollars up to 25 million dollars (individual clubs will cover thefirst 5 million dollars). Then, the group of 13 clubs is reinsured as one collective contract for claims higher than 30million dollars (5 per club plus 25 covered by the group ofclubs). The second area where the clubs cooperate is in theirareas of interest such as loss prevention, discussions in the IMO,shipping contracts, etc. This can be easily done since there’s nocompetition between the clubs (there are no profits) in the sameway than the classification societies (IACS).

The P&I cover against liabilities claims made by third parties dueto ships’ operation and use, nothing related to the shipconstruction itself (claims not covered by the hull and machineryinsurance). Example of the risk covered by the P&I clubs are:

1. Death or injury of people resulting by activities related tothe ship (e.g. crew, passengers and others if caused by theship)

2. Liabilities caused by stowaways or people rescued at sea3. Liabilities from collisions (e.g. damages caused to another

(other) ship(s), floating or fixed objects, deaths andinjuries.

4. Liabilities from groundings (e.g. pollution and consequentdamages)

5. Liabilities arising from cargo loss and / or damage(damagedcargo due to ship’s condition, e.g. water ingress to thecargo holds)

6. Liabilities arising from wreck removal (costs related toremoving the wreck) and towage operations

7. Legal and other costs related with these claims



The service provided by the clubs start at the moment that“something happen” and a claim against the ship may arise. Theclubs have the technical knowledge to help the owners to preventbigger damages by sending local representatives to assist themaster dealing with the situation. Legal advice when required canbe provided as well by the clubs and of course, when required, paythe claims. The club will assist the owners to proof the ship isnot liable of the damages caused. Local surveyors appointed by theclub’s representative will help in this. Clubs’ not only countwith surveyors, in any case they count with lawyers, localtechnical and commercial advisers.

Surveyors can be appointed also to go on board on regular basis tocheck the conditions of the ship. It can be done annually or whenthe ship enters the club. This is done probably due to the factthat clubs don’t trust in the classification society or the flagstate of the ship since in some cases the classification societieshave been criticized for its lack of initiative at the moment offacing sub standard ships since it may jeopardize the relationshipwith the owner (claim obviously denied by the classificationsocieties). The items inspected by surveyors are related tosafety, security, water tightness of cargo holds, operations onboard and all the flag state and international conventionsrequirements that may apply. The club will evaluate the surveyresults in order to assess the continuity of the ship (or theowner) in the club or like in some cases, amend the cover due tospecific circumstances. This situation occurred to the author ofthis assignment when a P&I surveyor inspected a general cargo shipwhere he use to work. The condition of the cargo hatch covers wasvery poor (they were not water tight). Since the ship was carryingcontainers only in coastal navigation (it was a feeder vessel),the club agreed to eliminate any coverage for cargo damages /losses. In this case, if the surveyor wouldn’t be appointed and aclaim would arise, probably the club would refuse to pay since theowner knew the conditions of the hatches before the claim arise.

In any case, since the clubs are formed by owners who take majorcare of their business, a particular member can be asked to leave



the club if it’s considered that it’s not keeping or operating hisships in the proper standards. The club may refuse to pay a claimif the owner didn’t take all the reasonable steps to limit theliability. That’s why the club must be contacted whenever isnecessary so a surveyor, lawyer or whoever is needed can assistthe master.

Marine Insurance

Marine insurance dates from ancient ages, back to the Roman Empiremaking of it one of the earliest insurances developed. In thosedays the risks were associated with pirates and weather conditions(depending on the trading zone and the season). The marineinsurers usually cover the hull and machinery for the ship ownersand the cargo for cargo owners. As stated above, cargo can becovered by the P&I clubs, so who pays when the cargo is lost ordamaged? The cargo owner should go first against the carrier; ifit’s found that carrier has no liability the cargo owner shouldclaim his own insurance. It’s clear to see how many partiesinvolved trying to protect their own interests and surveyors are avery important part of the process!

The offshore / energy industry being part of the maritime industryrequires insurance as well against the same risks any ship canface but somehow with higher level of severity and in some caseshigher level of probability, that’s why additional measures haveto be taken in order to reduce such risks. Being one of the mostdangerous industries of the world, insurance is a most. In marineinsurance and especially in offshore industry there is a term thatmust be clear for the surveyor. Warranty is a compromise that theassured takes to ensure that something in particular will be orwill not be done, a condition must be met or a statement of factsis affirmed or denied. In case the warranty is not strictlycomplied with, the insurer is discharged for liability.



The surveyor can be requested to attend a ship or installation inorder to verify that the terms of the warranty are followed by theassured. This would be called a warranty survey and is based onthe fact that offshore installations are usually huge in size andfiscal value, with high risks involved (weather, fire, pollution,personal accidents, etc). The surveyor should be familiar with thenature of the operations, risks associated, geographical areaweather patterns (hurricane areas), etc. The warranty surveyor hasa particularity, he oversees not only conditions are met but also,that operations are done according the standards of the industry.Examples of operations where a warranty surveyor may be appointedare:

1. Transit and positioning of jack ups, semi submersible units,wind turbines, etc.

2. Installation of structures (including seabed structures)3. Towage4. Heavy lift5. Laying of pipes and cables

Explain the roles of the parties and stakeholders involved in the marine industry

Many parties have interests involved in the shipping industry,interests that always worth a lot of money and as always happenswhen money is involved, conflicts and claims may arise when theoperation is not completed in the way it was intended to be.Marine surveyors may be required by many of the parties involvedin the marine industry in order to carry out surveys on theirbehalf and gather information that will be of paramount importancebefore taking a decision (purchase, start a repair), in lawcourts, issue an insurance policy, start an operation (heavy lift,positioning of offshore units), etc.

In the present, the stakeholders of a marine adventure can accessinformation like never before in the history. Almost any ship canbe checked on line and all her history verified not only by



classification societies, port and flag states but also byinsurers and cargo owners. This information is very important atthe moment of taking decisions by the interested parties such asconsidering to use or not a determined vessel if her safetyrecords don’t fulfill the requirements imposed by the cargo owner.Sites such Equasis (www.equasis.org) launched by the EuropeanUnion as part of its campaign Quality Shipping collectsinformation from different sources about the ships’ conditions.This information is available to the interested parties.

In the following pages, the role of the stakeholders of the marineindustry will be explained and a brief explanation of when theymay require a marine surveyor will be given.

Cargo owners The marine industry was born to fulfill the need of transportgoods to / from far regions for trading. Ancient civilizationssuch as the Phoenicians traded grains in the Mediterranean Seabefore the Greek and Roman empires. Through the centuries thetrading routes were expanded when the navigation techniquesallowed doing that and from short voyages in the Mediterranean Seaadventurers started to search new routes for trading. In thatspirit Italian, Spanish and Portuguese sailors as ChristopherColumbus and Ferdinand Magellan to name just a few, discovered newlands that changed the known world.

Today, the cargo owners just want that their cargo arrives in timeand in the conditions it’s supposed to be to its final destinationwithout so many adventures (new markets are found in differentways!). Cargoes can be almost anything, from a cell phone made inchina and sent to Europe to oil extracted in Venezuela and shippedto USA. In the same way cargo owners can be international branchedcompanies to individuals that are sending small packages through acourier. It’s easy to understand that the worth of the cargoes canbe millions of dollars in a single shipment.

Due to the complexity of international trading, the change of theownership of the commodities must be established before thepurchase / sale agreement is done. In order to clarify that, the


http://www.equasis.org/


INCONTERMS were defined to make clear where the seller pass theresponsibility of the cargo to the buyer (INCOTERMS will not beexplained further because it’s considered is out of the scope ofthis assignment). Since the ownership of the commodities canchange in different places during the voyage, the cargo owners canbe importers or exporters depending on the location.

Cargo also needs to be insured even though there’s no legalobligation to do so. With so many risks associated with the marineventure, there’s no cargo owner who takes such risks on his own.As stated in the Insurance section, cargo can be insured twice, bythe cargo owner and by the carrier being any damage paid bywhoever is liable.

Additional to all what is mentioned above, the cargo must passthrough customs, storage while the due inspections (custom,sanitary, agricultural, etc) and processes are done in the portsof departure, arrival or transit. Not all cargo owners deal withall these aspects; for the single individual that is shippingthere’re specialized companies with all the logistics necessary tofulfill the needs of their clients. Major industries that tradehuge quantities of cargo usually have internal departments dealingwith the documentation and requirements for the shipments and theprobable consequences that unexpected events occurred during thevoyage caused to the cargo.

Surveyors may be appointed by cargo owners for several reasonsincluding the inspection of the condition of the cargo whenloading or offloading (to verify that the specifications agreedare met), damages occurred to the cargo during the voyage, holdscondition before loading (to verify if they’re suitable for theintended cargo), ship’s draughts (used to verify the quantitiesloaded / offloaded) and any other situation that may affect thecargo or the purchase / sale agreement when related to cargoissues. The role of the surveyor verifying the condition of theship prior to begin the cargo operations is in one way related tothe responsibilities the cargo owner have from few decades ago toavoid the use of sub standard ships. European Union created theQuality Shipping Campaign in the 90’s to avoid sub standardJanuary 14th, 2014 Page 47


shipping in its waters. Cargo owners under this campaign areintended to use safely operated ships rather than sub standardships. Surveyors through their inspections on board are therepresentatives of the cargo owners when verifying suchconditions. It’s important to remark that under the 1992 CivilLiability and Fund Conventions requires that those with interestin the cargo must contribute with the compensations that may ariseafter an oil spill when the level of liability of the owner isexceeded. The idea of this is again, deterring cargo owners andshippers from using sub standard ships even if it means thathigher freight rates will apply.

Ship Owners, Charterers, OperatorsBeing the cargo transportation the reason the marine industry wasborn, were the ship owners who provide the means to fulfill thatneed. The definition of owner varies, several were found “The shipowner is the person who equips a ship (also fits out a ship), provides her with thenecessary provisions and crew and runs or operates her” Capt Pierre Desek,www.maritimeknowhow.com; IHS Fairplay(18) defines the registeredowner as the entity who appears in the ships certificates. TheMaritime Labor Convention defines the owner as “the owner of the ship oranother organization or person, such as the manager, agent, bareboat charterer,who has assumed the responsibility for the operation of the ship from the owner andwho, on assuming such responsibility, has agreed to take over the duties andresponsibilities imposed on ship owners in accordance with this convention”;Other similar definitions can confuse because a management company(term explained later) can be considered the owner and acquiressome liabilities according the convention (the proprietor of theship may not be the entity that has the responsibility of theoperations). SOLAS gives to the administrations the right todefine the owner.

The owner / operator are the main sole responsible for themaintenance of the ship according the rules of the flag state andclassification society that may apply. In some cases, owner flagtheir ships with low standard flags and classification societies(as mentioned in the Port State Control section above) whichJanuary 14th, 2014 Page 48

http://www.maritimeknowhow.com/


allows them to offer unfairly lower freight rates. In case ofpollution, the Civil Liability Convention (CLC) says that theowner and not any other party involved (manager, charterer,commercial operator, cargo owner, flag state and classificationsociety) is the responsible for oil pollution. Owners can beresponsible as well for other issues that may include crew relatedmatters such as wages, medical costs, liability in case of injuryor death, repatriation cost, etc. (ILO Convention covers most ofthese topics).

Since the introduction of the ISM code, the operator or chartererhave legal liability in case of accidents since there’rerequirements for maintenance of the ship, training of the crew,procedures for the operations on board considering the risksinvolved, etc. The DOC owner may have legal responsibility if acasualty results in a law court trial.

The manager (or management company) is commonly the entity thatoperates the vessel. It can be a technical management companywhich is in charge of the day to day operation of the shipincluding ship’s maintenance, dealing with the classificationsociety, supply of spares, riding teams, crew, etc. Usually theyare “the company” in the DOC and for this reason they’re in chargeof the safety management system. Examples of these companies areV.Ships (www.vships.com) and Bernard Schulte http://www.bs-shipmanagement.com. It can be the case that the managers don’tdeal with the commercial side of the business, which can be doneby a broker, a charterer, the owner or a commercial operator. Anycombination can be found in the industry; an example can be thecompany Mediterranean Shipping Company MSC which operatescommercially hundreds of ships but every ship belongs to a singlecompany which name is somehow related to the ship, then, MSC havemanagement companies based in different parts of the world (one ofthem in Hong Kong) which provide technical management. So, thecommercial side headquarter is in Geneva, the technical managementcan be in Hong Kong and the registered owner can be based in anycountry with favorable conditions. This is the base of what isknown as the one ship one company concept, spread widely around


http://www.bs-shipmanagement.com/

http://www.bs-shipmanagement.com/

http://www.vships.com/


the world as an effective mean to limit liabilities and companiessuch as MSC are known as Group Beneficial Owner (definition usedby HIS Fairplay18). Some flags require that the registered ownerbe a company registered in the same country. There are cases whena bank is the owner of a ship (cases where the ship is a guaranteefor the loan), the bank is the registered owner but the entitythat received the loan and operates the ship is defined as thedisponent owner.

The charterer is an entity that hires a ship for a voyage(s) orperiod of time. Organizations such as BIMCO (www.bimco.org) andthe International Chamber of Shipping (www.marisec.org) havestandardized the chartering contracts but, it’s common that amendsand changes are done according the requirements of the partiesinvolved. The operational costs have to be clearly defined in thecontract. Also must be defined who will be the ship manager, andwhat costs will be assigned to the charterer (usually fuel andport services) and which remain with the owner. There’s anotherpoint that must be clear if it’s possible to sub charter the ship.The freight cost will depend on the cargo (special requirements ofcleanliness, type of cargo, etc), ship’s condition (sub standardvessel’s freight is lower than those who comply fully with theregulations), ships availability (less availability, higherfreights), etc. In medium to long term charters, the charterer maybe known as the operator which is the entity who operatescommercially the ship and gets the profits obtained from theship’s operations. During the charter period, all the financialand legal responsibilities assumed by the owner on his role,remain with him.

Finance, Insurance and legalDue to the high quantities of money involved in the industry, it’scommon practice that banks and even governments provide financialassistance to the owner at the moment of purchasing or buildingships. Governments usually get involved in cases where companiesof the same country will be the owner or when local shipyards willbe in charge of the building. The last is the case of RoyalCaribbean International who got financial assistance from the


http://www.marisec.org/

http://www.bimco.org/


Finnish government in 2 ways, first with a loan by 40% of thetotal 1.05 billion dollars needed in loans issued by the Finnishgovernment agency Finnish Export Credit Ltd., the second one, whenthey (the government) guaranteed a big portion of the total of theloans. As mentioned above, the banks may become the registeredowners in these situations. Other conditions may be imposed by thebanks before giving a loan, e.g. to use a recognized technicalmanagement company while the duration of the loan or to voidpurchases of ships of certain age.

Not only for purchasing and building are needed financialresources by the ship owners, other reasons may be fleet re-vitalization (very common in passenger ships, cost per ship can beeasily 50 million dollars), repairs and upgrading of equipmentsincluding new legal requirements issued by the administrations.Some of the biggest shipping banks (those which lend money to theindustry) are Nordea Bank AB, DNB ASA, HSH Nordbank AG andCommerzbank. The last five years (from 2008) the industry hasfaced rough times due to low freight rates and over capacity ofthe ships (conditions usually connected); this resulted in severelosses to the banks. The situation arise during cargo booms whenowners ask loans that usually are easily approved by the banks,when the ships capacity over pass the demand or the cargo offerdrops by other factors, the crisis begins. It has to be mentionedthat the value of the ships is related to the freight cost of thecargo she is designed to load. For the small cargo or leisureowner, the situation can be somehow similar. Those banks that arefamiliar with the maritime business can issue loan more easilythan those banks that never have deal with the industry. Usuallythe banks will consider the same things than for any otherbusiness, such as credit records of the applicant, nature andopportunity of success of the proposed business, risks involved,securities offered to pay the loan, etc. A good business plan andall the documentation needed in order and updated (it may includebut not limited to surveys, taxes paid, financial balances, etc)can help a lot at the moment of asking for a loan in the maritimeindustry.



The insurance sector was explained in the regulation bodiessection of this assignment due to its capacity of imposingconditions in aspects related to the safety and operations of theships and offshore units. It covers the losses or damages, partialor total of ships, cargo, terminals and 3rd parties involved withthe ships. There’re several kinds of insurance, being hull &machinery and P&I the most common known. Shipyards have to insurethe ships while they are in the building process (common risks arefire, injuries to workers, delays, etc). War risks which are usedby those ships sailing in a determined period of time in adetermined area which are considered to be at war (hull andmachinery insurance don’t cover such risks). There’s anotherinsurance available is the Increased value, which cover thedifference between the compensation the owner gets from theinsurance after a casualty and the cost of a ship of similarcharacteristics in the market.

The legal departments of the different stakeholders, law firms andlaw courts are who deal when disputes arise from the complexsituations found in the maritime industry. Owners vs. charterersor managers, cargo owners vs. ship owners, crew vs. managers orowners, everything is possible to happen when any of the partiesinvolved consider the agreements have not been respected withperjure to their interest. Big companies have legal departmentswhich usually deal with the day to day operations and as advisorsto the other departments of the company. When cases come to thecourt, specialized law firms are required to defend the interestsinvolved. The specific body of laws that deal with these cases isknown as admiralty law, it covers activities and offenses thathave occurred in oceans and other navigable waters includingrivers and lakes, also some commercial activities that are doneashore but related to the maritime shipping industry are coveredby the admiralty law. Usual topics covered by admiralty law are(not limited to) charter parties disputes, claims arose from crewmembers, dock workers passengers or their families due to injuriesor death caused during the service or as consequence of theservice on board, cargo claims, liabilities that may arise fromcollisions, groundings, etc. Law firms are not only required when



disputes arises, purchase / sale agreements, crew contracts andcompensations, legal requirements issued by governments, agenciesor administrations and any other operation where they could berequired by its nature.

Freight forwarders, agents and brokersFreight forwarders are those companies who deal with the shippingneeds of customers who regularly are not involved in the business.Individuals who need to send a box overseas or a yacht owner whoneeds to reposition his boat from the Mediterranean Sea to SouthAmerica can be clients of the freight forwarders. In the scope ofservices usually provided are customs paperwork and tax payment,handling, packing, insurance, storage and the documentationrequired in each case and country and obviously the shipment ofthe goods. Freight forwarders can have their own means oftransportation (e.g. FedEx, DHL), also they can lease containersand stow all the goods inside and once the container is full, justsend it as any other container. At the destination, an agent willopen the container, do any custom required payment and deliver thecargo as agreed. In those cases where the cargo requires specialconditions (e.g. yachts repositioning) the freight forwarder willbe in charge of finding the best solution such as charter a shipfor such purpose.

The ship’s agents are the local representatives of the ship andowner (managers or operators). They work on behalf of theprincipal and act as an intermediary with local authorities, shipchandlers, bunker companies, customs, tug boats, etc. so they needto have a good contact list of the mentioned above. Theirknowledge and expertise of the local procedures ensure anefficient and fast response to the ship’s and principalrequirements. A good agent should inform the master about anysituation that he consider necessary should as special proceduresthat may differ from other ports (specially in those cases wherethe master is not familiar with the port) such as commercial,safety and security requirements, approximate costs of thesupplies the ship needs, custom requirements for signing off crew,etc. All the expenses the ship incurred during her visit will be



paid by the agent who will invoice the principal later, in thisway the principal just have to check the balance sent by the agentand make a single payment instead of several payments to differentsupplier in all the port the ship may call, obviously the agentwill charge for the services done with a fee based usually on therequirements attended or a flat fee that include everything whatthe ship may request but of course, the owner has to payadditionally for the expenses incurred by the agent on his name.This is what means “as agents only”, the owner agrees to assumeand pay all the obligations resulted from his vessel as long asthe agent didn’t exceeded the authority given by the principal.All correspondence related to his role as agent must include “Asagents only” in order to be entitled to the protections availablefor his role.

The agent usually works on behalf of the principal but thisdoesn’t mean that he cannot act for any of the other parties thatmay be involved in the voyage as instructed and agreed with theprincipal. There are several categories of agents such as portagent which is basically the one described above, the cargo agentwho can deal with the cargo issues in those cases where theprincipal is not dealing with the cargo issues, but can as wellthe case of the subsidiaries of a liner who will be in charge ofsecuring cargo for the line. In any case, the scope of theservices provided by the agent will depend on the needs of theprincipal and those parties involved in the voyage. The role andname of any other agent that attend the vessel will be determinedin a case to case basis.

The brokers are intermediaries who act between cargo owners andships’ operators and between buyers and sellers of ships. It’scommon that ship brokerage specialize in determined area, e.g. drybulk or tankers chartering but it can be found in the market bigbrokerage companies that can handle several types of cargoes andthe sale & purchasing of ships of different characteristics. Thesale and purchase brokers (S&P) deal with all the details of theselling process plus financial issues, probably will advise thebuyer about the possibilities of employment for the ship once



she’s acquired (condition of the market, present and in the nearfuture). In the leisure sector is common to find S&P brokers aswell. The cargo brokers can work for a ship owner who’s lookingcargo for his ship or for a cargo owner who’s looking a ship totransport his cargo. To be able to do his job properly, the brokermust have a database of ships including the real time position,the average freights, the cargoes available, etc so he can offerhis clients bigger earnings with lower expenses. As was mentionedabove in dry bulk cargo section (page 4), the dry bulk cargoes aretransported in ships whose size will depend on the cargo andthat’s a factor that brokers must keep in mind all the time andprobably cause some kind of specialization for the brokers. TheInstitute of Chartered Shipbrokers (http://www.ics.org.uk/) andthe Federation of National Associations of Ship Brokers and Agents(https://www.fonasba.com/ship-agents-and-brokers) are some of theinstitutions which provide training and standards for theindustry.

Port Authorities, dry docks and repair yardsThe port authorities are in charge of running the day to dayactivities in the port areas. It can include (but not limited to)the designation of berths for the arriving ships, safety andsecurity rules of the port areas, registry of supplying companiesallowed to work inside the port such as stevedoring companies,ship chandlers, etc. Every port according their nationallegislation may have different levels of authority and duties, oneof them can be forecast changes in the trading patterns and takethe proper actions such as expansions, new equipments for fasterand more efficient operations, (e.g. the expansions planned and inprogress in the USA east coast as consequence of the Panamachannel expansion, explained in the general comments for thecommercial sector above), also they have the duty to make moreattractive the port to the shippers when compared to ports locatedin the same area (e.g. Miami port and Fort Lauderdale port inFlorida, USA). There are several ways to achieve this goal such aslower rates and general costs for the shippers, faster operations,and better transportation in and out of the port facilities(train, roads, barges, etc) depending on the type of cargo. The


https://www.fonasba.com/ship-agents-and-brokers

http://www.ics.org.uk/


port authorities can be designated by the national or stategovernment or can be a private company with authority delegated bythe responsible authority (privatization definition can be foundin the Guidelines for Port Authorities and Governments on theprivatization of port facilities by the United Nations ConferenceOn Trade And Development(15)

As can be seeing, the port authority is much related to thecompetitiveness of the port (commercial duties) but for thisassignment, I will go in more detail with the activities relateddirectly with the ship and her crew. First, the International Shipand Port Facilities Security Code (ISPS) which was created as aone of the measures taken after the terrorist acts on September11th in the USA. The ISPS regulates the way security on board andin the port facilities is handled and it’s the port authority dutyto ensure the code is implemented accordingly by preparing theprocedures needed, controlling the access to the facilities andany other code requirement. Other important aspect is the safetyrules to be followed by all the parties involved in the portfacilities including the ships in berth or anchorage. Personalprotection equipment, procedures, work permits, bunkering permits,evacuation plans in case of emergencies, etc. are ruled by theport authority designated department (this information must beknown by the ship’s agent who’s in charge of sharing it with theships serviced), also usually there’s a fire department or teamthat depends directly on the port authority and must be preparedto fight fires on board and in the terminals and warehouses,considering all the different types of cargo than can be storedsuch as dangerous goods. Pollution accidents also are under theduties of the maritime administration which must be informed ofany accident occurred within the port which must have ready theprocedures to respond it. In some cases, when the spill isresponded by ship’s crew, the port authority must authorize theuse of dispersant (probably together with the national maritimeadministration).

The repair yards and dry docks are facilities where major repairsare carried out in ships. The dry dock must have the entire



infrastructure needed for such repairs such as heavy cranes, basin(which will determine the size of the ships allowed). There’re 3basic types of dry docks, the graving which is a basin where theship is entered and then the gates at the basin opening are closedand the water pumped out, allowing the ship to rest in blockslocated according the ship’s docking plan. The second type of dockis the floating dry dock which is sunk until the ship to berepaired can enter, and then is re floated. There’s a third typeof docking system which is the Syncrolift where several cranes orwinches lift the vessel working synchronized. This allowstransferring the vessel to a different place within the yardleaving open the possibility of lifting / lowering another ship,not like a regular dry dock where only one ship can be attended. 2other types of dry docking is the mobile travel lift which isusually used with yachts and the marine rail way or slipway. Ithas to be kept in mind that the dry dock also has regular dockingfacilities that usually are done to carry out repairs in water(wet dock).

The dry docking and repair yards must be familiar with the rulesthat may apply (national and international, class, etc), must havecertified providers in those cases where such condition isrequired (e.g. steel, machinery, etc). Their workers also have tobe certified when required such as the welders. Non destructivetesting (NDT) must be a usual practice in dry docks to verify thequality of the work done and to find faults in materials. Also thedry docks must provide the services ships may require such asshore connection for electrical power, sea water for the fire lineand cooling systems, etc.



Fig 10. Repair yard with dry dock in northern Europe

Task No. 2The four photographs (figures 1,2,3 and 4) are scenarios where marine surveyors will beinstructed to carry out a specific kind of survey

Using these photographs identify in each case which group(s) of marine surveyors would be involve and state why



Transportation of a semi submersible platform by a heavy transport carrier(Fig. 1)

For these particular operations, commercial surveyors will beappointed. By the nature of the operations shown in the pictureand the commercial aspects involved (insurance, claims, etc),commercial surveyors will be part of the operations mostly to helpto carry it out with the lowest reasonable risk accepted (As LowAs Reasonable Possible ALARP) by all parties. It is clear thatinsurance companies don’t want to take unnecessary risks. That’swhy a well experienced surveyor will check all the aspectsinvolved in the operation in order to reduce the risks to anacceptable level

Due to the complexity involved in the transportation operation, awarranty company will be required for issuing insurance. Suchcompanies will appoint a surveyor to ensure that the warrantyterms are followed and all the international and nationalregulations plus the procedures and standards of the industry areproperly followed as well.



The warranty surveyor may participate in the risk assessment thatmust be done prior the beginning of the operations but it has tobe kept in mind that the conditions present during the riskassessment can change suddenly (e.g. weather conditions).Mitigating actions to be carried out in case the conditions changemust be specified before the operations start. The level of riskacceptable must be agreed between all the parties involved in theoperations and be included in the risk matrix to be used in everyrisk assessment.

In short, surveyor must assure that:

1. Risks are identified and then, eradicated or reduced to a

permissible level

2. All conditions that can affect the operations were

considered and proper measures were taken.

3. The mitigating actions in case of accident are established,

are clear and understood by all parties and the resources

available.

4. Ensure that all resources (material or human) are available

at the moment they may be needed.

5. Participate in all the stages of the project from planning to

the execution.

6. In some operations with higher risks, the surveyor must issue

a certificate of approval prior to the beginning of the

operations. This certificate is issued on site.

Damage yacht following a stormFig 2

The surveyors specialized in small craft and leisure vessels have

the experience and knowledge needed to deal with the special

characteristics of this kind of vessels. Due to the diversity ofJanuary 14th, 2014 Page 60


materials, equipment, manufacturing techniques, sizes and other

factors, among this group of surveyors can be split in more

specialized areas. Yachts are assets that may cost a lot of money

for their owners and logically are protected with insurance;

surveyors in most of the cases are appointed by the insurance

company to assess the extension and severity of the damages,

report the facts of the incident, repair options and possible

costs. It has to be considered that in a first moment may be is

not possible to assess all the damages and additional opening up

can be required before a damage survey report can be issue. Also,

the surveyor may be appointed to oversee the repair process to

ensure that everything is done according the rules and regulations

that may apply while the costs are kept within the budget; in

these cases is very likely that payment is not done until the

surveyor approves the repair works. Usually the surveyors

appointed for these types of surveys are not involved in establish

who’s responsible for the damage in those cases where the damage

is result of an accident and not by natural causes (authorities

are more likely to be in charge of the investigation), he’ll be

more involved with the repair process.

It has to be kept in mind that insurance companies require that

surveyors send the reports of the accidents (or incidents) ASAP.

When the surveyor is appointed for a damage survey, he must ensure

that all proper measures are taken to avoid additional damages to

the boat and the equipment on board, especially sensitive

equipment such as electric and electronic equipment.

Cargo damagedFig 3



A cargo surveyor may be appointed in those cases where the cargo

suffered a change in its original condition(s) in such a way that

cannot be used as intended. Since it is an issue related to the

condition of the cargo transported, a cargo surveyor is the most

suitable person to be appointed in this case. The surveyor must

assess the extent and nature of the damage and in some cases find

out the cause of the damage but this will not be easy to find

especially when the master and the crew don’t cooperate as

instructed by their principal. In those cases, the surveyor must

exercise his skills to try to collect as much information as

possible given the circumstances (part of his duties is to collect

as much as possible objective evidence that can be used to prove

or refute claims). As stated above, cargo can be double insured.

The P&I clubs deal with claims arising from cargo damage

representing the owner and cargo insurers represent the cargo

owners. This may lead to a situation where surveyors representing

different interest find themselves on board. A professional

behavior must prevail at all times.

The surveyor must ensure that the cargo don’t receive further

damage by taking the proper measures to avoid such situation.

Actions such as removing or separating the cargo which didn’t

suffered damage, find the source(s) of the damage and fix it

before it affects the rest of the cargo, changing operation

procedures, repairing the cause of the damage (e.g. cargo hold

hatches rubbers) can be helpful when avoiding further damages.

This is very important since in case the claimant is compensated

for the damages, he will be compensated only for the damages

caused, not by the full cost of the cargo.



A surveyor can be appointed to inspect the cargo at the moment it

is being loading on board to establish in what condition it is.

Such condition and quantity must be included in the Bill of Lading

(B/L) and will be the reference to establish if at the end of the

voyage the damage suffered damage or a shortfall (also the P&I

coverage is invalid if such entrance in the B/L is missing). In

this cases, surveyor may remind the captain (as the responsible

for the cargo) to log any condition that may affect the cargo

during the voyage such as weather reports, ventilation provided,

inspections and any other relevant to the type of cargo on board.

Structural Damage after a collisionFig. 4

The nature of the damaged showed in the picture involve the

structure of the ship, area where especially class surveyors are

involved. The surveyor must assess the extent and nature of the

damages, estipulate the repairs to be done in order to keep the

ship in class. For this particular example, the ship cannot be in

class until the proper repairs are done according class standards.

It’s very likely that the cargo is unloaded and temporary repairs

done to allow the ship proceed to the repair yard (the ship is

allowed to sail for a single voyage).

The survey will determine the seaworthiness of the ship

considering the damage suffered in those structural elements that

would impair the ship’s structural integrity, water tightness and

weather tightness. The classification society based on the survey

report and the surveyor recommendations will decide what repairs

must be done immediately and which ones can be deferred to the

next periodical survey. Additional actions may be required such as



connecting weakened elements to stronger ones, cement boxes, etc.

It is very important that the surveyor includes the obvious

damages, plus fractures, buckling, corrosion and deformations

found that may be were there before the accident but in any case

would affect the structure of the ship. As general rule, any

defect that affects the classification of the ship must be

repaired, so it’s very important that the surveyor is well

familiarized with the rules and regulations of the classification

society. Once the repair process is done, a new survey will be

required by the classification society to “delete” the class

conditions. The extent of the survey will depend on the damage but

in a case like in the picture, probably will be similar to a

Special Survey (5 years) and all the repair process must be done

according the rules and regulations of the classification society

including the certification of the staff involved and the

materials and machinery used.

In most of the cases and depending on the conditions of the

damage(s), the flag state and the port state must be notified

(it’s the owners responsibility to inform) to carry out the

investigations of the accident, prevent further pollution (in such

cases where there’s oil spilled), evacuate the crew and

passengers, etc. If a third party is involved, the P&I club must

be notified as well. All these parties may require appointing a

surveyor on behalf of each one of them.

Task 3In setting up a new marine surveying business you have to consider the market place, legal and business issues



a) Discuss the areas you would research in setting up your business.

Most of the strategy is explained in the business plan preparedfor the business that is intended to be initiated. The areas to beexplored are the result of the knowledge of the author about thegeographical area where he’s intended to work (Colombia,Venezuela, Panama in an initial stage) and his professionalexperience working as engineer in several types of ships andoffshore installations. The following areas will be explored:

1. Local surveying companies. Some research has been donealready and the results indicate that they’re overload withwork. Information obtained indicates that they’re willing tohire individual surveyors when their capacity is exceedede.g. hire a surveyor per individual surveys withoutestablishing a permanent work relationship. This way of workcan be attractive considering that the surveyor can work withhis own clients plus those works given by local companies.Some of the companies that have been contacted arehttp://www.consemargroup.com/ and http://www.atlasmarine.net/

2. Local representatives of P&I clubs and insurances. Insurancesuch as P&I clubs is one of the main customers the author isintended to contact. In a first stage local representativeswill contacted and in a second stage, direct personalcontacts will be scheduled, very likely traveling to the UKso they claim handlers can meet personally the author. It’splanned to carry out ultra sonic test of water tightness ofcargo holds which can be of interest for the P&I clubs.Additionally, pre entry surveys, cargo damage surveys (insome particular cases), etc. The corporation of Lloyd’sagents will be contacted plus other insurance companies basedin the area.

3. Local classification societies (not belonging to IACS). InPanama there are some classification societies which arerecognized organizations by the Panamanian maritimeadministration. Usually they work with small feeder vesselsin the Caribbean basin and pacific coast of central and South


http://www.atlasmarine.net/

http://www.consemargroup.com/


America which doesn’t want to pay the cost of a recognizedclassification society and usually consider is not necessaryto do so, especially because these organizations are not sostrict in their inspections. This option has to be consideredcarefully since the reputation as a professional surveyor canbe jeopardized but it has to be kept in mind that as surveyormy work will be to report findings, what the classificationsociety does after is behind the control of the surveyor.

4. Local maritime administrations (Colombia, Venezuela, Panama).As certified ISM code internal auditor, maritimeadministrations can be interested in such qualification. Itis known that at least in Venezuela the surveyors working ontheir behalf need qualifications beyond those the authorposses (further investigation have to be done in Colombia; inboth countries there’re no recognized organizations, theadministration carry out all the surveys through theirsurveyors network).

5. Local training institutions which lack in some level of wellprepared lecturers or as usually happen, are not updated withthe latest rules and regulations in the industry. In the caseof Colombia, the merchant marine is ruled by navy officerswhich are not familiar with IMO conventions in the same waythat a merchant marine officer can be after years on board.The main institution in Colombia is SENAhttp://www.sena.edu.co/Paginas/Inicio.aspx and it was alreadycontacted (an appointment will be scheduled in the nearfuture). In Venezuela and Panama the situation is differentdue to the diversity of options in the market and therequirements asked by the administrations to provide trainingin the maritime area.

6. Local owners for those cases where they may need the adviceof a surveyor such as purchases, repairs, performance of themachinery (engines), ISM internal audits, etc. In this pointit has to be considered the experience of the surveyor sinceit’s not the same to survey a small leisure boat than surveya VLCC. Container ships, general cargo ships and bulkcarriers will be the segment to be focused on. In an initial


http://www.sena.edu.co/Paginas/Inicio.aspx


stage, bigger international companies will not be contactedunless the technical superintendent or manager is known. Thereason of this strategy is to avoid waste of time insomething that may have little or no results. Another way tocontact local owners is to offer technical advice in thosecases where their technical department lacks of experience.Local companies where the surveyor has work previously orwhere known colleagues are working will be the first to becontacted.

7. Agents. They will be contacted since they are the localrepresentative of the principals (ship and cargo owners,charterers) and work for the ships on all their local needs.This option is of particular interest where claims arisesagainst the ship due to damages to cargo, injuries caused tothe crew or passengers, damages to installations etc (eventhough all these can be appointed through a P&I club).Additional to the local agents, the agents of the Corporationof Lloyd’s and the survey and claims team will be contacted

8. Law firms offices located in the geographical area such asClyde and Co. (http://www.clydeco.com/offices/caracas/) andNorthon Rose (http://www.nortonrosefulbright.com/latin-america/offices/caracas/) can be contacted. Similar local lawfirms e.g. http://www.sabatinop.com/inicio.php andhttp://www.luiscovaa.com/ will be contacted

9. Other areas such as leisure (owners, marinas, insurance),tankers, cargoes, financial institutions etc will not beconsidered since they’re out of the scope of experience andknowledge of the author or they don’t have strong presence inthe area where the business is intended to be.

b) Explain the legal aspects of setting up different types of businesses.

The legal requirements to set up a business (legal entity as itcan be translated from Spanish) will differ from country tocountry. A brief description will be done of the most common typeof business or legal entities available and the pro’s and con’s ofJanuary 14th, 2014 Page 67

http://www.luiscovaa.com/

http://www.sabatinop.com/inicio.php

http://www.nortonrosefulbright.com/latin-america/offices/caracas/

http://www.nortonrosefulbright.com/latin-america/offices/caracas/

http://www.clydeco.com/offices/caracas/


each one. Since the author is planning to establish his businessin Colombia, further information will be provided about Colombianregulations.

There are some common requirements that any business must complywith such as a name, an address, financial capital and purpose ofthe business. As stated above, the specific requirements may varyfrom country to country.

1. Sole trader. The sole trader is the basic business form whereone person register a name (usually his own full name) andcan start almost immediately his / her business without anyadditional requirement (in Venezuela there’re a lot aadditional requirements). The advantages of the sole traderfigure is the independence since there’s nobody else takingdecisions, the sole trader can and have to take all thedecisions of the business, from day to day operations tillthe decisions that will affect the future of the businesse.g. business plan. The sole trader doesn’t have to report toanybody about his actions, financial results, decisions, etc.(it’s his own boss) but this doesn’t mean that he doesn’thave to declare earnings to the national taxation entity asthe law requires. This figure also allows to subcontractingman power when required which can be favorable when the workload cannot be attended by the sole trader alone and at thesame time don’t rise the financial obligations permanently;If the work load is steady on the time, the sole trader canconsider to change the business figure and expand thebusiness. On the other hand, the down side of the sole traderfigure is that he’s responsible with his whole capital forthe debts of the business, this is unlimited liability.Another point to consider is that as sole trader, someclients may be reluctant to work with, especially biggercompanies and corporations and public entities. Another issueto be considered when working with this figure is that thesole trader depends on his clients and must try as much aspossible to respond to their needs which usually are to beavailable 24/7 as most of the marine surveyors in the market



but for the sole trader is most important since it’s hisbusiness, not somebody else business.

2. Partnership. As the name implies, a group of “partners” pooltheir knowledge, financial resources and whatever else isrequired to start and run the business. Under the common lawlegal system the partners manage the business (day to day andfuture affecting decisions) and are liable personally for allthe debts but in some cases such as the limited partnershipsome partners limit their responsibilities in exchange forrunning the business and in the limited liability partnershipall the partners somehow limit their liability. When theknowledge and experience of the partners comes from differentbackgrounds it can help to provided a wider scope of servicesto the clients which definitely is a good advantage. Anexample can be surveyors with deck and engine backgroundscoming from tankers, bulk carriers, cruise ships etc. On theother hand, the main down of the partnership comes from thefact that at the moment of taking decisions that may affectthe business or even less important decisions, the partnersmust agree on the decision taken. In those cases wherethere’s no agreement, it can be the end of the partnership.This particular business form have different regulationsdepending on the country, in case this will be the choice thesurveyor have to do further research in the country wherehe’ll be established.

3. Limited Liability Company (Ltd or PLC in the UK). The maindifference between the LLC and the sole trader andpartnership is that the shareholders in the LLC areresponsible only for the debts up to the shareholding of eachone of them. According Rocket Lawyer(http://www.rocketlawyer.com/article/why-start-an-llc-limited-liability-company-advantages-and-disadvantages.rl)“Unlike sole proprietorships or partnerships, LLCs allow youto shield yourself from personal liability if your businessgoes bankrupt or injures someone or otherwise runs into legaltrouble. This means that, although your business might fold,courts and creditors will generally not be able to take your


http://www.rocketlawyer.com/article/why-start-an-llc-limited-liability-company-advantages-and-disadvantages.rl

http://www.rocketlawyer.com/article/why-start-an-llc-limited-liability-company-advantages-and-disadvantages.rl


personal assets. In other words, your business and personalresponsibility and assets are separate.” While in thepartnership the partners cannot sell their part of thebusiness, in the limited liability companies the shareholderscan sell at any moment their part in the stock markets(PLC’s) or privately (Ltd companies). In some countries asMexico and Argentina there are legal limits to the quantityof shareholders (50) and the management of the business mustbe delegated to a board of directors.

Which business form should be established will depend entirely onthe surveyor(s) but it has to be kept in mind that a big companyprobably will not wish to work with a sole trader (at least forbigger projects). A limited company would be the preferred choicefor big companies but the requirements for such business are moredifficult to comply with and find suitable partners may not beeasy.

c) Explain the elements that have to be considered in developing a business plan

A business plan is a statement of what a business is intended tobe in the future. The goals must be set and included together thestrategies to achieve such goals in the plan considering thesituations that may affect the performance of the business. Suchsituations are analyzed though methods such SWOT (StrengthWeakness Opportunities and Treats). In short, the business planwhen used by a sole trader who is starting his business stops theguessing and starts to take seriously the situations that willaffect the business during the day to day operations.

The business plan must include the following information(information required for a one person business)

Description of the business (overview) including mission andvision statements

Who will be the segment of the market intended to attend(clients) and how they will be reached



Objectives (goals) of the business Services or products to be offered Financial review including projections, growth plans and cash

flow Market and business environment analysis (SWOT analysis) Marketing and business strategy Action plan Resources needed (financial resources, human resources, legal

advisors, equipment, etc) Prices including the strategy to get such prices (costs,

competitors, value of the service provided) and how theclients will be charged (by hour, by job, etc)

Billing policies including procedures for quoting, billingand collecting amounts due

Performance indicators (also known as KPI’s, used todetermine if the goals have been reached)

Other information may be added to the business plan depending onthe size of the business such as a summary and companyorganization. Information such as the financial review, managementprocess and the company description will be more detailed andprobably more complicated in bigger companies. In some cases isnormal that financial institutions require a business plan beforegranting lends (in those cases, the financial projections are ofparamount importance).

A model business plan is attached to this assignment using theinformation and ideas that the author has to start his business.

Marine surveying requires working in difficult and changing environments

a) Discuss how the physical, work environment may affect the surveyor in the course of carrying out a survey in both sectors of the industry

The surveyor may find himself in work environments that may affecthis health or even his life if common sense and some basic rules



are not followed. Some of the most dangerous work environments arementioned then

1. Tanks. The different tanks located on board have to beinspected by different reasons.

a. Ballast tanks: structural elements contained inside thetanks make mandatory to carry out inspections on regularbasis. The frequency of such inspections will depend onthe age of the ship. The risks associated with ballasttanks are low oxygen levels, flooding during theinspection, hits, cuts (by sharp corroded metal), etc.Especial care must be taken in tanks that have suffereddamage e.g. after a collision or grounding.

b. Cargo tanks on tanker ships have to be inspectedespecially in product and chemical tankers when new(different) cargo will be loaded and such inspection isa requirement. Risks associated with such inspectionsare low level of oxygen and poisonous vapors, corrosivesubstances remaining in the tank surfaces, etc.

c. Other ship’s tanks such as fuel, lube oil, sewage tanks,etc have particular risks such as hydrocarbon or H2Svapors which need specific gas analyzers. In any case,the crew must follow the proper procedures (as explainedlater) and ensure that the conditions for safe entryinto confined spaces are followed

2. Engine and technical spaces require specific personalprotection equipment (PPE) for the risks associated with suchspaces such as ear protection and steel toe shoes, butadditional PPE may be required according to the ship’s safetymanagement system (SMS) and ship’s specific conditions.

3. Yards. When working in repair yards and shipyards thesurveyor may find himself in conditions that require specialattention such as those caused by cranes carrying heavyweights, welding process, sand blasting and most of theprocess in the yard. The use of helmet, steel toe shoes,gloves, goggles is usually mandatory but following the yardrules and use common sense is of paramount importance foravoiding accidents.



Another point that surveyor must consider specially when workingas sole trader are the working periods of time. Surveying of shipsmay require the surveyor to adapt his schedule to the clientschedule and since the ship will not wait, the surveyor may workfor long periods of time in order to finish the survey in time.This situation may lead to fatigue and cause an error in thesurvey or even worse, an accident. Other situation that must beconsidered when talking about the work environment is the longperiods away from home. This situation may affect the surveyorwhen situations arise at home that may disturb his judgment orsafety awareness.

b) Discuss the regulatory regimes that surveyors in the commercial and leisure sectors must consider to protect themselves and their surroundings

The marine surveyor does his job in different places on board andgeographical locations around the world. In most of the countriesnowadays there are laws that rule the safety in differentindustrial places such as port facilities and ships. The surveyorhas to comply with all the applicable laws that may apply on hisduties regardless the location where the survey’s been done. It isof paramount importance that the surveyor is familiar with thesafety regulations before to start the job to avoid any trouble.To do so, surveyor can contact the agent who should provide anyrelevant information.

The Safety Management System on board the ships, the locallegislation and any health and safety management system are themain regulations to be followed. All of them have the same basicobjectives; prevent health affecting issues, injuries and loss oflives. To reach those objectives, the laws and codes must includethe safety rules that may apply to the ship operations such asentries to confined spaces (tanks, cofferdams, etc), personalprotection equipment (EPP) to be used according the job, location,etc. Also, the conditions that must be met before initiate a jobmust be complied strictly to avoid accidents; such conditions must



be included in the relevant work permits such as permit to entryin confined spaces which must specify minimum oxygen levels forsafe entry, personnel involved (guard at the entry), lighting,etc. It is important that ship’s staff that’s familiar with theprocedures and the ship escort the surveyor at all times. Whensurveys are carried out on board ships where there’s no safetymanagement system (e.g. fishing vessels and leisure vessels),local and flag state rules and regulations must be followedstrictly.

When the surveys include tasks to be done in shipyards, repairyards and dry docks such installations must inform the safetyregulations to be followed in their yards. It may be the case thatthe yards posses some certification such as OHSAS 18001 which willprovide the guiding regarding safety procedures (OHSAS 18001 isthe equivalent ashore of the Safety Management System on board).

The surveyor has to take care not only about accidents but alsoabout long term issues that may affect his health. Risks suchasbestos, noise, chemicals exposure, etc. without being protectedwith proper PPE used correctly can cause damages to the healththat will not show any sign until health is compromised. That’swhy special care must be taken in cargo spaces, pump rooms, tanks,etc. that may be contaminated with substances that may compromisethe health.

Safety in the work place has some responsibilities from theemployer to his employees but this doesn’t mean that the employeehas no responsibility at all. An example of this is that everyemployee must use the PPE provided by the employer, follow theprocedures established and report any situation that may affecthis own or others health and safety. Not doing so may lead todismissal or even legal consequences. On the other hand, usuallythe employer by law (depending on the country) must:

1. Establish the safety and health policy where is stated theorganization objectives relating to the safety

2. Provide the proper PPE for every job



3. Ensure that the employees are well familiarized with the useof the PPE, emergency duties and the tasks to be done beforethey start (considering the risks involved)

4. Create and implement the proper operational procedures(considering the risks involved and the safety legislation)and accident reporting procedures; many times by law, theemployer must report the accidents to the local authoritieswhich can be the flag state or the port state. Employers mustreport deaths, some injuries such as those that impedes theemployee to come back to his duties in 24 hours (usual periodof time) e.g. fractures, amputations, burns, electric shock,etc. Other situations that may be required to be reported(incidents) to the authorities can include fires, collapse ofstructures (such as cranes), etc. Also, it can be required toreport deceases such as gastrointestinal deceases in thepassenger ships, illness caused by virus, etc.

5. Guards against the risks that may affect people not involvedin the work (e.g. guards around openings in the floor,protection against chemical or biological exposure, etc)

6. Provide the equipment to be used in case of emergency such asfirefighting equipment, first aid and medical equipment,rescue equipment, etc (this will depend on the legislation,installations and operations done). The employer must ensurethat the personnel familiar with such equipment and tasks areavailable at any time it can be required.

7. Any other that each country and / or organization mayrequest.

8. All of this applies in the same way to the self employedsurveyor.

FALTAN REFERENCIAS DE LA PAGINA 5



List of References(1) Reuters, by Ron Bousso, Oct 2013. Oil Trade Patterns Shift as

Refineries go Global [Online] Available athttp://www.reuters.com/article/2013/10/04/refineries-trade-idUSL6N0HU1CA20131004 accessed November 2013

(2) Independent Petroleum Association of America, March 14th2012 Shifting Petroleum Trade Patterns: Latin America Reorients [Online]Available at http://oilindependents.org/shifting-petroleum-trade-patterns-latin-america-reorients/ accessed November2013

(3) Reuters, by Marianna Parraga, Nov 17th 2013. Analysis: LatinAmerica Grows Increasingly Hooked on U.S. Fuel Imports [Online] Available athttp://www.reuters.com/article/2013/11/17/us-oil-latam-imports-idUSBRE9AG07120131117 accessed December 2013

(4) Genco Shipping & Trading Limited, no date of publishingavailable. Industry [Online] available athttp://www.gencoshipping.com/industry.html accessed December2013

(5) Astrup Fearnley, by Jarle Hammer, July 2004, [Online]available at http://www.fearnresearch.no/index.gan?id=140&subid=0 accessed December 2013

(6) Black Iron Inc., no date of publishing available. IronOre [Online] available athttp://www.blackiron.com/Investors/Iron-Ore/default.aspxaccessed December 2013

(7) International Steel Statistics Bureau, no date ofpublishing available, [Online] available athttp://www.issb.co.uk/global.html accessed December 2013

(8) World Coal Association, no date of publishing available,[Online] available at http://www.worldcoal.org/coal/uses-of-coal/ Accessed December 2013

(9) Casson Lionel, The ancient mariners, Seafarers andSeafighters of the Mediterranean in ancient times, 2nd

Edition, Princeton University Press. 1991.(10) United Nations Conference on Trade and Development, by the

UNCTD Secretariat, September 1998 [Online] Available at


http://www.worldcoal.org/coal/uses-of-coal/

http://www.worldcoal.org/coal/uses-of-coal/

http://www.issb.co.uk/global.html

http://www.blackiron.com/Investors/Iron-Ore/default.aspx

http://www.fearnresearch.no/index.gan?id=140&subid=0

http://www.fearnresearch.no/index.gan?id=140&subid=0

http://www.gencoshipping.com/industry.html

http://www.reuters.com/article/2013/11/17/us-oil-latam-imports-idUSBRE9AG07120131117

http://www.reuters.com/article/2013/11/17/us-oil-latam-imports-idUSBRE9AG07120131117

http://oilindependents.org/shifting-petroleum-trade-patterns-latin-america-reorients/

http://oilindependents.org/shifting-petroleum-trade-patterns-latin-america-reorients/

http://www.reuters.com/article/2013/10/04/refineries-trade-idUSL6N0HU1CA20131004

http://www.reuters.com/article/2013/10/04/refineries-trade-idUSL6N0HU1CA20131004


http://unctad.org/en/docs/posdtetibd1.pdf Accessed December2013

(11) Steven D. Peterson, Peter Jaret and Barbara Findlay Shenck.Business plans kit for dummies. 3rd edition. John Wiley andSons, 2010.

(12) Central Intelligence Agency, no date of publishing available,The World Factbook [Online] available athttps://www.cia.gov/library/publications/the-world-factbook/accessed November 2013.

(13) Super Yacht Group, February 2013, Economic Analysis of the SuperYacht Industry [Online] available on request fromwww.superyachtintelligence.com requested by email on November2013.

(14) International Maritime Organization, Marianne Harvey, 2012.The Origins of IMO [Online] available onhttp://www.imo.org/KnowledgeCentre/ReferencesAndArchives/Documents/Harvey,%20Marianne.%20The%20Origins%20of%20the%20International%20Maritime%20Organization-%20Information%20Resources.%20%20%20IMO,%202012.pdf Accessed on November2103

(15) United Nations Conference on Trade and Development, by theUNCTD Secretariat, September 1998. Guidelines forPort Authorities and Governments on the privatization of portfacilities [Online] available athttp://unctad.org/en/docs/posdtetibd1.pdf accessed onNovember 2013

(16) Det Norske Veritas, January 2011 Survey Requirements,[Online] available athttps://exchange.dnv.com/publishing/rulesship/2011-01/ts701.pdf accessed on November 2013

(17) United Kingdom Legislation, originally published in 1906,online copy available athttp://www.legislation.gov.uk/ukpga/Edw7/6/41/contentsaccessed in December 2013.

(18) IHS, no data of publishing available, [Online] available athttp://www.ihsfairplay.com/About/Definitions/definitions.html


http://www.ihsfairplay.com/About/Definitions/definitions.html

http://www.legislation.gov.uk/ukpga/Edw7/6/41/contents%20accessed%20in%20December%202013

http://www.legislation.gov.uk/ukpga/Edw7/6/41/contents%20accessed%20in%20December%202013

https://exchange.dnv.com/publishing/rulesship/2011-01/ts701.pdf

https://exchange.dnv.com/publishing/rulesship/2011-01/ts701.pdf

http://unctad.org/en/docs/posdtetibd1.pdf%20accessed%20on%20November%202013

http://unctad.org/en/docs/posdtetibd1.pdf%20accessed%20on%20November%202013

http://www.imo.org/KnowledgeCentre/ReferencesAndArchives/Documents/Harvey,%20Marianne.%20The%20Origins%20of%20the%20International%20Maritime%20Organization-%20Information%20Resources.%20%20%20IMO,%202012.pdf



http://www.superyachtintelligence.com/

https://www.cia.gov/library/publications/the-world-factbook/

http://unctad.org/en/docs/posdtetibd1.pdf


(19) Seward Robert, November 2002, The Role of the Protection andIndemnity (P&I Clubs) [Online] available athttp://www.itopf.com/_assets/documents/seward.pdf

Additional bibliography

1. International Maritime Organization web site www.imo.org 2. International Association of Classification Societies web

site www.iacs.org andhttp://www.iacs.org.uk/document/public/explained/CLASS_KEY_ROLE.pdf

3. Det Norske Veritas / Germanischer Lloyds web sitehttp://www.dnvgl.com/

4. Germanischer Lloyds rules for classification of shipsavailable athttp://www.gl-group.com/infoServices/rules/pdfs/gl_i-0-0_e.pdf

5. Paris Memorandum of Understanding web site and reportsavailable online

a. https://www.parismou.org/about-us/history b. https://www.parismou.org/system/files/Paris%20MoU%2C

%20incl%2036th%20amendment%20%28final%29.pdf c. https://www.parismou.org/sites/default/files/Annual

%20Report%202012%20%28final%29.pdf 6. International Chamber of Commerce web site

http://www.iccwbo.org/products-and-services/trade-facilitation/incoterms-2010/

7. International group of P&I Clubs web sitehttp://www.igpandi.org/

8. The UK P&I Club web site http://www.ukpandi.com/ 9. United States Foreign Agricultural Service web site

http://www.fas.usda.gov/data/search?f[0]=field_report_type%3AWorld%20Production%2C%20Markets%2C%20and%20Trade%20Reports


http://www.fas.usda.gov/data/search?f%5B0%5D=field_report_type%3AWorld%20Production%2C%20Markets%2C%20and%20Trade%20Reports



http://www.ukpandi.com/

http://www.igpandi.org/



https://www.parismou.org/sites/default/files/Annual%20Report%202012%20(final).pdf

https://www.parismou.org/sites/default/files/Annual%20Report%202012%20(final).pdf

https://www.parismou.org/system/files/Paris%20MoU%2C%20incl%2036th%20amendment%20(final).pdf

https://www.parismou.org/system/files/Paris%20MoU%2C%20incl%2036th%20amendment%20(final).pdf

https://www.parismou.org/about-us/history

http://www.gl-group.com/infoServices/rules/pdfs/gl_i-0-0_e.pdf

http://www.gl-group.com/infoServices/rules/pdfs/gl_i-0-0_e.pdf

http://www.dnvgl.com/

http://www.iacs.org.uk/document/public/explained/CLASS_KEY_ROLE.pdf

http://www.iacs.org.uk/document/public/explained/CLASS_KEY_ROLE.pdf

http://www.iacs.org/

http://www.imo.org/

http://www.itopf.com/_assets/documents/seward.pdf


ContentsTask No. 1.......................................................1

Discuss the developments in trade and trading patterns in both sectors of the marine industry..........................................................1

Commercial Sector..................................................1Leisure Sector....................................................12

Explain the role of the regulatory bodies involved in the marine industry..........15International Maritime Organization IMO........................15

National Maritime Administrations..............................17Classification Societies.......................................21

P&I Clubs and Marine Insurance.................................28Explain the roles of the parties and stakeholders involved in the marine industry....31

Cargo owners...................................................31Ship Owners, Charterers, Operators.............................33

Finance, Insurance and legal...................................34Freight forwarders, agents and brokers.........................36

Port Authorities, dry docks and repair yards...................37Task No. 2......................................................39

Transportation of a semi submersible platform by a heavy transport carrier.......40Damage yacht following a storm.......................................41

Cargo damaged...................................................41Structural Damage after a collision.....................................42

Task 3..........................................................43a) Discuss the areas you would research in setting up your business..............43

b) Explain the legal aspects of setting up different types of businesses............45c) Explain the elements that have to be considered in developing a business plan....47



a) Discuss how the physical, work environment may affect the surveyor in the course of carrying out a survey in both sectors of the industry.........................48b) Discuss the regulatory regimes that surveyors in the commercial and leisure sectors must consider to protect themselves and their surroundings...................49

Bibliography....................................................51
