Developments and key players in international shipping policies

1. Developments and key players in international shipping policies Tr815 International shipping Associate professor Harald M. Hjelle Partly based on lecture notes by Lars Almklov (NR) and Bjørn Pedersen (DNV) May 4, 2004 Harald M. Hjelle: Developments and key players in international shipping.ppt

2. Lecture outline • International shipping policies: • The key challenge: Regulating a globalised industry • International regulations and agreements • International co-operation • Key players • Ship-owners • Port states • Flag states • Classification societies Harald M. Hjelle: Developments and key players in international shipping.ppt

3. The development of a globalised shipping industry • Shipping has evolved from being an international industry to the first truly global industry • Before 1920s: National industries in an international market • After WW2: Mobile means of production, open registries and market liberalisation • Gradually globalization of technologies, capital and labour • 1970/80s: Shipping the first globalised industry Harald M. Hjelle: Developments and key players in international shipping.ppt

4. Open registries: A key necessary condition for a globalised industry • Characteristics of open registries: • No nationality requirements on crewing • No/low tax business environment • Liberal company legislation • Many without national shipowners • E.g. Panama, Liberia, Bahamas ... • Creating a global capital and labour market in shipping • Facilitating the development of a globalised industry Harald M. Hjelle: Developments and key players in international shipping.ppt

5. Illustration of a globalised industry • Ship designed in Norway • Built in South Korea • Owned by a Norwegian listed company, Norwegian and foreign shareholders • Flying a Panamanian flag • Managed by a Norwegian owned company situated in Malaysia • Trading in a liner service between the US and South America in co-operation with a Japanese shipping company • Manned by Norwegian officers and Filipino crew • Classed by DNV • Insured with a London based insurance company Harald M. Hjelle: Developments and key players in international shipping.ppt

6. National regulations not sufficient • National or regional regulations may be both ineffective and inefficient: • May be evaded • Different national regulations cause inefficiencies and competitive distortions • Global standards necessary to avoid a “race to the bottom” • A globalised industry requires global regulations Harald M. Hjelle: Developments and key players in international shipping.ppt

7. Regulatory framework and institutions • Market access: • WTO (1995) • National • UNCTAD/OECD • Safety and environment: • IMO (1948) • Working conditions and social standards: • ILO (1919) • Competition policy: • National / Regional (EU) • UNCTAD / OECD Harald M. Hjelle: Developments and key players in international shipping.ppt

8. Market access • International maritime transport is a liberalised sector compared to other service sectors: • Bulk trades: • Almost no restrictions to market access • A very competitive spot market • Liner trades: • Few bilateral cargo restrictions left • Still reservations regarding: • Government procurement • Strategic cargo • Cabotage (now fully liberalised in the EU) Harald M. Hjelle: Developments and key players in international shipping.ppt

9. The US case of shipping protectionism • The Jones Act: • Coastal trade by US owned, manned, built, managed, registered vessels • Government cargoes reserved for US flag • Alaskan oil reserved for US flag Harald M. Hjelle: Developments and key players in international shipping.ppt

10. Organization for Economic Co-operation and Development (OECD) • Established in 1961 • 30 member countries • Maritime Transport Committee • Promotion of liberal shipping policies • Promotion of quality shipping • Competition policy • Shipbuilding Harald M. Hjelle: Developments and key players in international shipping.ppt

11. United Nations Conference on Trade and Development (UNCTAD) • First meeting in 1964 • Shipping committee: • Commercial and shipping aspects • Confrontations between traditional shipping interests (Group B) and developing countries (Group of 77 / D) • UNCTAD Liner code 40/40/20-rule • Shipping committe dissolved in 1992 Harald M. Hjelle: Developments and key players in international shipping.ppt

12. World Trade Organization (WTO) • Predecessor: • GATT 1948-1994 • WTO established in 1995 • 147 member countries • Secretariat in Geneva • General Agreement on Trade in Services (GATS) is relevant to shipping Harald M. Hjelle: Developments and key players in international shipping.ppt

13. WTO principles: • Trade without discrimination: • Most Favoured Nation (MFN) principle: • Countries cannot normally discriminate between their trade partners • Freer trade: Gradually through rounds of negotiations • Predictability: Transparancy • Trade rules should be ”clear and public” Harald M. Hjelle: Developments and key players in international shipping.ppt

14. International Labour Organization (ILO) • Established in 1919, UN: 1946 • Secretariat in Geneva • General conference once a year • Conventions on work conditions and labour standards • Maritime Conference every 10 years • Adopted 32 maritime conventions and 25 recommendations (minimum wage) Harald M. Hjelle: Developments and key players in international shipping.ppt

15. International Maritime Organization (IMO) • Established in 1948 • Secretariat in London • 163 member states • Mission: ”Safer shipping and cleaner oceans” • Establishes minimum standards for ship • construction, and • operation Harald M. Hjelle: Developments and key players in international shipping.ppt

16. How the IMO works • Proposal is assigned to a committee or a sub-committe • Adopted by a special conference • Conventions typically enter into force on ratification by 15 countries representing at least 50% of world tonnage • Lengthy process to adopt, amend and ratify conventions. Some may be amended by simplified procedures • Conflict between states with strong environmental safety concerns and developing/open registry states Harald M. Hjelle: Developments and key players in international shipping.ppt

17. Major conventions on environmentMARPOL 1973/78 • Regulation to minimise risk of accidental pollution – phasing out of single hull tankers • Regulates operational discharge of oil, chemical substances, sewage and garbage • Regulates emissions to air (Annex VI 1997): • not yet in force • SOx, NOx, Ozon depleting substances Harald M. Hjelle: Developments and key players in international shipping.ppt

18. Major conventions on environmentLiability and compensation • Civil Liability Convention (CLC): • Strict liability for oil pollution • Shipowners obliged to maintain insurance • FUND- convention (IOPC) • Importers of oil contribute to a fund • Copensation if CLC insufficient • Total compensation limit: USD 260 mill. • Limit may be increased • Hazardous and Noxious Substances (HNS-convention) • Adopted 1996, not yet in force Harald M. Hjelle: Developments and key players in international shipping.ppt

19. Conventions on environmentSome remaining challenges • Discharge of ballast water • Ban TBT in anti fouling paint • Ratify MARPOL Annex VI: Air emissions • Regulate CO2-emissions • More ambitious SOx regulations (fuel quality) Harald M. Hjelle: Developments and key players in international shipping.ppt

20. Major safety conventionsSOLAS 1974 • Specific minimum standards on construction, equipment and operation of ships • Flag state certification prescribed • Requirements on surveying • Changing focus from technical requirement to the human factor. • 8 of 10 accidents caused by human error • Triggered: ISM-code and STCW-Convention 95 Harald M. Hjelle: Developments and key players in international shipping.ppt

21. Major safety conventionsISM • International Safety Management (ISM) code: • Originally only passenger ships and tankers, from 2002 also cargo ships and drilling units • Requires a safety management system to be established by the ship operator • ensuring compliance with all regulations and best practices • incident reporting and analysis • setting goals, principles and functions for a continous improvement process • Designated person responsible for the safety of the ship • Triggered by: Piracy in S.E. Asia, USS Cole, Sep 11 Harald M. Hjelle: Developments and key players in international shipping.ppt

22. Major safety conventionsSTCW • Standards on Training and Certification and Watchkeeping (STCW) convention: • Requirements for seafarers qualification and certification • Requirements for maritime education and training institutions • All seafarers must be trained in compliance with the new standards (Feb 2002) Harald M. Hjelle: Developments and key players in international shipping.ppt

23. Regional vs. Global regulationsThe case of doble hulling • Exxon Valdez grounding in Alaska, 1989 • Oil spill of 37 000 tons crude oil • Triggered the US Oil Pollution Act (OPA 90) • Double hull requirement for new oil tankers • Phasing out existing single hull tankers by 2015 • MARPOL Annex I amendments • Erika, France 1999 • EU pressure for accelerated phasing out of single hull tankers • MARPOL Annex I amended April 2001 • Prestige, November 2002 • Unilateral EU-regulation (Regulation (EC) No 417/2002) – (Cat 1: 2007, Cat 2 and 3: 2015) • MARPOL Annex I amended December 2003 (Cat 1: 2005, Cat 2 and 3: 2005-2010) Harald M. Hjelle: Developments and key players in international shipping.ppt

24. Conventions on marine securityThe aftermath of September 11 • Focus on ships as targets and means of terrorism • IMO instrument for ship and port security adopted in December 2002 • SOLAS Chapter XI-2: New international ship and port facility security code (ISPS) • In force: July 2004 • Process in ILO for seafarers identification • US Container security (World Customs Organisation Taskforce on Security) • Focus on transparancy of ownership Harald M. Hjelle: Developments and key players in international shipping.ppt

25. The challenge of enforcement • To be sustainable global standards must • Meet the legitimate requirements of • Shippers • Shipowners • Environmental interests • Consumer interests • The general public • Be credibly enforced by • Flag states • Port states • Classification societies Harald M. Hjelle: Developments and key players in international shipping.ppt

26. The role of the flag states (UNCLOS) • Specified in the United Nations Convention on the Law of the Sea (UNCLOS) • Right to set conditions for granting registration, including • Administrative • Technical, and • Social policy matters • Obligation to ensure that a vessel meets all relevant conditions • Responsible for enforcing agreed safety regulations through national maritime law Harald M. Hjelle: Developments and key players in international shipping.ppt

27. Flag states ability to enforce regulations • Some flag states seem to have problems enforcing regulations • Lack of capability or will? • This has triggered increased port state control Harald M. Hjelle: Developments and key players in international shipping.ppt

28. Port state controlThe regime • Ports (states) where ships are calling may board ships and • check status of certification • do physical inspections • verify that ships comply with international conventions • In case of serious deficiencies, ships may be detained until rectification has been carried out • Detentions may be extremely costly to the shipowner Harald M. Hjelle: Developments and key players in international shipping.ppt

29. Port state controlExamples of co-operation • Co-operation between port states in enforcing international standards • Paris MoU, 1982 • Tokyo MoU, 1993 • Latin America, 1992 • Co-operating on: • Exchanging ship information • Check lists • Targeting criteria • Increased transparancy in Europe through the Equasis database Harald M. Hjelle: Developments and key players in international shipping.ppt

30. More about Equasis • Part of EU Quality Shipping Campaign (1997) • Aim: Promoting quality and safety in marine transport • Main focus: • Transparancy with respect to the quality of ships and their operators • Reducing substandard shipping • Should cover the whole world fleet Harald M. Hjelle: Developments and key players in international shipping.ppt

31. Example of Equasis output ”Rocknes” Harald M. Hjelle: Developments and key players in international shipping.ppt

32. Classification societiesThe origin • Major societies established by marine insurers in the 18th and 19th century • Background: • Increase in international trade • Shipowners needed insurance to reduce their financial risk • Insurers needed someone to • establish safety standards, and • verify compliance with standards Harald M. Hjelle: Developments and key players in international shipping.ppt

33. Classification societiesFurther developments • Insurance companies require a valid classification • Now, the services of the classification societies are demanded also by flag states, port states, shipowners, financial institutions etc. • The classification is made according to minimum standards according to the relevant class (ship type, equipment, trading area) Harald M. Hjelle: Developments and key players in international shipping.ppt

34. Types of Marine Insurance • Hull and Machinery (H&M) • To cover damages to the ship • Protection and Indemnity (P&I) • To cover damages caused by the ship on • the environment • persons • cargo • Cargo insurance • For the cargo owner Harald M. Hjelle: Developments and key players in international shipping.ppt

35. Classification societiesRules and standards • Rules developed to define standards related to: • Seaworthiness for intended trading area • Focus on safety for crew, vessel and cargo • Strength and stability • Quality assurance of additional equipment • Development of rules: • A continous process • Feedback from surveys • R&D programs • New technologies require new rules Harald M. Hjelle: Developments and key players in international shipping.ppt

36. The classification processNewbuildings • Assessment/approval of design documentation • Inspection and certification of materials, machinery components etc. • Supervision during construction and testing • Class is specified in the contract between builder and owner. Class client to builder. • The classification certificate is issued upon delivery Harald M. Hjelle: Developments and key players in international shipping.ppt

37. The classification processShips in operation • Annual, intermediate and 5-year renewal survey to verify that standards are maintained • Scope of surveys increases with age of ship • Contractual relationship is now between shipowner and class • Repairs/conversions etc. are subject to survey and approval Harald M. Hjelle: Developments and key players in international shipping.ppt

38. Flag states and classification • Most flag states are authorising classification societies to carry out inspections and issue certificates on their behalf • Statutory Classification • IMO has issued a resolution with guidelines for such recognition • EU has issued an EU Directive with additional requirements Harald M. Hjelle: Developments and key players in international shipping.ppt

39. Other functions covered by Classification Societies • Assistance to Flag States in their participation in the work of IMO • Advisory services in selected fields (not to present any conflict of interest) • Certification according to ISO9000 and ISO14001 • Training of personnel Harald M. Hjelle: Developments and key players in international shipping.ppt

40. Classification societies Port State detention ratios by Class Harald M. Hjelle: Developments and key players in international shipping.ppt

41. Other international shipping organisations • INTERTANKO – Independent tanker owners • ITERCARGO – Bulk shipowners • OCIMF – Oil companies’ maritime forum • ICS – Shipowners’ national organisations • SIGTTO – Gas shipowners and gas technical operators • IACS – Ship classification societies • UMI – Marine hull and machinery insurers • P&I Int. – P&I clubs Harald M. Hjelle: Developments and key players in international shipping.ppt

42. International Association of Classification Societies (IACS) • 10 members fulfilling membership criteria • Classing 95% of world fleet tonnage • Quality system certification of members • Code of ethics • Promoting improvements of standards of safety • Participating in the work of IMO • Maintaining close connection with the world’s maritime industries • Secretariat in London (www.iacs.org.uk) Harald M. Hjelle: Developments and key players in international shipping.ppt

43. The 10 IACS members • LR – Lloyds Register (UK) • DNV – Det Norske Veritas (Norway) • ABS – American Bureau of Shipping (USA) • GL – Germanisher Lloyd (Germany) • PRS - Polski Rejerstr Statkow (Poland) • BV – Burau Veritas (France) • RINA - Registro Italiano Navale (Italy) • KR – Korean Register of Shipping (Korea) • CCS – China Classification Society (China) • NK – Nippon Kaiji Kyokai (Japan) Harald M. Hjelle: Developments and key players in international shipping.ppt

44. Class Societies’ market share DNV BV Harald M. Hjelle: Developments and key players in international shipping.ppt

45. Accidents and Causes • All accidents have multiple causes • The chain of events leading to accidents include the human element • Accidents are the symptoms • The basic cause • Lack of control (inadequate management) Harald M. Hjelle: Developments and key players in international shipping.ppt

46. DNV Loss/causation model • Management • Control • Inadequate • Policy • Systems • Compliance with the system • Basic • Causes • Organisational factors • Human • Process • Hardware • Immediate • Causes • Substandard • Acts • Conditions • Quality • Events • Undesired • Defects • Deviations • Non-Conform-ities • Loss of • Quality • Product • Reputation • Customer • Oppor-tunities Harald M. Hjelle: Developments and key players in international shipping.ppt

47. DNV Loss/causation modelActions Management Control Basic Causes Immediate Causes Quality Events Loss of Quality Present Situation Desired Situation Control Actions Harald M. Hjelle: Developments and key players in international shipping.ppt

48. World fleet casualty history Harald M. Hjelle: Developments and key players in international shipping.ppt

49. Annual total losses Harald M. Hjelle: Developments and key players in international shipping.ppt

50. The ultimate aim of quality/safety management: A quality/safety culture Harald M. Hjelle: Developments and key players in international shipping.ppt