Classification societies are non-governmental organizations that survey and classify ships, both during their construction and operation. They are the principal means by which standards of construction and maintenance are enforced. The societies issue certificates confirming that the construction of a vessel complies with those relevant standards as well as carry out regular surveys whilst the vessel is in service to ensure continued compliance. A classification certificate is required for an owner to register a ship as well as obtain marine insurance. Certification may also be required for entry into certain ports or to use certain waterways. Charterers and potential buyers will also be interested in seeing up to date certificates.
Societies make clear that their certificates only confirm compliance with standards and explicitly disclaim any responsibility for seaworthiness. For example, they exclude themselves from any liability should things go wrong at a later stage.
Classification societies are licensed by “Flag States” to undertake this work on their behalf.
The principal classification societies are as follows:
- American Bureau of Shipping (U.S.) (ABS) eagle.org
- Bureau Veritas (France) (BV) bureauveritas.com
- China Classification Society (CCS) ccs.org.cn
- DNV GL (Norway) (DNV GL) dnvgl.com
- Hellenic Register of Shipping (Greece) (HRS)
- Indian Register of Shipping (India) (IRS) irclass.org
- Korean Register of Shipping (Korea) (KRS) krs.co.kr
- Lloyd’s Register of Shipping (UK) (LR) lr.org
- Nippon Kaiji Kyokai (Japan) Class NK classnk.or.jp
- Polski Rejestr Statkow (Poland) (PRS) prs.pl
- Registro Italiano Navale (Italy) (RINA) rina.it
Vessels are grouped into general categories as follows:
- Oil Tankers Designed for transporting crude oil
- Bulk Carriers Designed to carry bulk solids such as grains, fertilizer and ores or bulk liquids such as refined petroleum products, chemicals and orange juice
- General Cargo Ships Designed to carry break bulk cargo
- Containerships Designed to transport standard-sized ocean freight containers
- Other Types of Ships Liquified gas carriers Chemical tankers Miscellaneous tankers Ferries and passenger ships Other miscellaneous ships
All ships must be registered to one nation in order that responsibility for violations of international law and convention may be assigned. These ships then fall under the jurisdiction of their nation of registry. Shipping companies adopted the practice of shopping around for nations that would give them the best deal on taxes, wages, and legal restrictions. Many “conveniently” register their ships with these countries, which include Panama – which had the world’s largest registered shipping fleet in 2018 – Liberia, Honduras, the Bahamas, Vanuatu, and the Marshall Islands.
The International Maritime Organization (IMO), a specialized agency of the United Nations whose primary focus is maritime affairs, is responsible for measures to improve the safety of international shipping and prevent marine pollution from ships. It is also involved in legal matters, including liability and compensation issues and the facilitation of international maritime traffic. Established under a 1948 United Nations Convention that entered into force on 17 March 1958, the IMO is open to membership by all states that are members of the United Nations and to other states in accordance with the admission procedures of the IMO Convention.
The IMO consists of an Assembly, a Council, and five Committees:
- Maritime Safety Committee (MSC) – the senior technical body responsible for all matters affecting maritime safety;
- the Marine Environment Protection Committee (MEPC) – responsible for the prevention and control of pollution from ships;
- the Legal Committee;
- the Facilitation Committee; and
- the Technical Cooperation Committee.
The organization, which is based in London, currently has 174 member states and three associate members. The Secretary-General, Kitack Lim, who is appointed by the Council and approved by the Assembly, heads the IMO Secretariat. He was elected for a four year term starting from 1 January 2016 and has been given a second four year term, starting January 2020.
Currently, the IMO has adopted more than 50 conventions and protocols that are mandatory instruments for those countries that are party to them. The majority of conventions adopted under the auspices of the IMO, or for which the organization is otherwise responsible, fall into three main categories:
- maritime safety;
- the prevention of marine pollution; and
- liability and compensation, especially in relation to damage caused by pollution.
Outside of these major groupings are a number of other conventions dealing with facilitation, tonnage measurement, unlawful acts against shipping and salvage, etc. Some of the more important conventions of interest and importance to vessel operators include:
- International Convention for Safety of Life at Sea (SOLAS), 1974, as amended – regarded as the most important of all international treaties concerning the safety of merchant ships and which specifies minimum standards for the construction, equipment and operation of vessels.
- International Convention for the Prevention of Marine Pollution from Ships (MARPOL) – which places restraints on the contamination of the sea, land and air by ships.
- International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW), 1978, as amended in 1995 and 2010 – establishing internationally acceptable minimum standards and requirements on training, certification and watchkeeping for seafarers.
The IMO has also developed a number of other separate codes of safe practice, some of which are mandated through a specific convention and others that are only recommendations, for example:
- International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM Code) – establishes safety management objectives and emphasizes the role of sound management in safety and pollution prevention. Compliance with the ISM Code is mandated by the SOLAS Convention, Chapter IX.
- International Ship and Port Facility Security Code (ISPS Code) – details security-related requirements for governments, port authorities and shipping companies in a mandatory section (Part A), together with a series of guidelines about how to meet these requirements in a second non-mandatory section (Part B). The ISPS Code came into force in July 2004.
AIS is an automatic, radio-based transmission system that reports the name (and a unique code, MMSI), the current position (coordinates) and navigational data (such as heading, speed and navigational status) of a ship on a regular basis (every few seconds or minutes depending on ship’s speed). Other information transmitted may include the draft of the ship, destination port, estimated time of arrival (ETA) and more data that need to be manually entered by the crew on board and therefore may be prone to error.
AIS signals can be received by specialised shore-based stations as well as satellites. Shore-based stations provide detailed coverage for areas where many ships may be crowded (i.e., ports) but cannot receive signals from ships which are far away from the antenna.
On the other hand, satellite AIS complement and enhance data accuracy by covering oceans but they can be quite unreliable when picking up AIS signals from places where a high number of ships transmit concurrently. AIS is a regulatory requirement and almost all ocean-going ships are required to be equipped with it.
Shipping is already the most carbon efficient mode of commercial transport and in recent years has dramatically cut its CO2 emissions per tonne of cargo moved one kilometre. As a result of IMO (International Maritime Organisation) regulations adopted in 2011, ships built in 2025 will be at least 30% more efficient than those constructed in the 2000s.
However, maritime transport was estimated in 2012 to emit around 800 million tonnes of CO2 annually and account for about 2.2% of global greenhouse gas emissions (3rd IMO GHG study 2014). Shipping emissions are predicted to increase between 50% and 250% by 2050 mainly due to the growth of the world maritime trade and dependent on various future economic and energy developments. For these reasons, governments expect shipping to intensify its efforts in reducing emissions.
Non-CO2 gases, especially NOx and SOx, play indirect roles in tropospheric ozone formation and indirect aerosol warming at regional scales. Annually, international shipping NOx and SOx represent approximately 13% and 12% of global NOx and SOx totals from anthropogenic sources respectively as reported in the IPCC Fifth Assessment Report (AR 5). Especially for SOx emissions, since January 2015, all vessels operating in Emission Control Areas (ECAs), also referred to as Sulphur Emission Control Areas (SECA), have had to ensure that their emissions are reduced. In order to meet these regulations, vessel operators are required to use a low sulphur fuel or install exhaust gas cleaning systems (scrubbers) to remove sulphur from exhaust emissions. Ships may also meet the SOx requirements by using natural gas as fuel. The ECAs are displayed on the map below:
Figure: Source: U.S. Energy Information Administration, based on International Marine Organization, European Union, and China’s Ministry of Transport
The most significant regulation for air emissions is the IMO Global Sulphur Cap. SOx emissions are based on the level of sulphur content in the fuel used. To achieve a reduction of SOx and particulate matter in the environment, the use of low sulphur fuel was globally mandatory from January 2020 unless alternative technology such as an Exhaust Gas Cleaning System (scrubber) is being used. After agreement at the IMO’s Marine Environment Protection Committee (MEPC) 70, the sulphur cap came into effect from January 1, 2020. For more information about IMO 2020, emissions and low sulphur fuel and the alternatives, see our article.
Shipping emissions can be controlled by means of:
- Operational measures (routing, speed, utilisation, Ship Energy Efficiency Management Plan (SEEMP), etc)
- Technical measures (ship design, propeller design, engines and fuel types. ship coating, scrubbers, Energy Efficiency Design Index (EEDI), etc)
- Market-Based Measures – MBM (carbon taxes, offset schemes, etc).
Regarding MBM, there is no consensus at International or European level. But the political pressure for a shipping MBM is increasing. While reference to a maritime fuel levy was deleted from the final text of the Paris Agreement, in January 2016 the International Monetary Fund (IMF) repeated its call for a carbon tax to be imposed on shipping at a level of about US$ 95 per tonne of fuel. A similar proposal was made in 2015 by the OECD International Transport Forum.
Recently, new ideas on technical and operational measures have been proposed, with a perspective of agreeing on a global data collection (or monitoring, reporting and verification) system as the next step.
The EU has legislated a monitoring, reporting and verification scheme for large ships (>5,000 tons deadweight). The MRV shipping Regulation adopted in April 2015 creates an EU-wide legal framework for the monitoring, reporting and verification of CO2 emissions and other relevant information from maritime transport. MRV came into effect on 1 January 2018.
Other types of environmental impact and pollution that may originate from ships include oil, chemicals, garbage, sewage, underwater noise, wake and cavitation side effects, marine pests in ballast water and the anti-fouling paint on a ship’s hull. Even old ships that are to be broken up or scrapped on beaches in India, Bangladesh and China can cause pollution unless great care is taken
The general principles of marine insurance are the same as with other types of insurance in that there are two parties: the assured and assurer (or carrier). The complex circumstances involved in sea and inland voyages require very specific arrangements for the provision of marine insurance. Generally, the marine policy may cover the risks of a single voyage or may insure for a certain period of time. Cargo is almost always insured by voyage. Vessels are usually insured for a certain duration of time, usually year by year. Cargo policies may be on a single lot or may be open to cover cargo as shipped by the insured. Hull insurance or vessel insurance may cover a ship or a whole fleet.
An H&M policy covers physical damage to the vessel, its machinery and equipment. In addition, the policy normally covers general average, salvage, sue and labour and collision liability. Coverage for a vessel under an H&M policy is written with a vessel value, which has been agreed upon between the owner and the underwriters of the policy. Most H&M policies include a deductible for partial losses. Often a shipowner may elect to cover a portion of the value of a vessel for total loss only. This is done using an increased value policy, which usually costs significantly less than a full form H&M policy.
There are several factors taken into account when determining the rate being charged for an H&M policy. They include the type of vessel, the value, the owner/operators experience, the loss record, the size of the deductible and the intended trade. H&M policies can be written to cover a single vessel or an entire fleet.
There are several different types of H&M policies a vessel owner can purchase to insure his vessel:
- Navigation Policy – provides coverage when vessels are used in maritime operations.
- Port Risk Policy – used when a vessel is expected to be laid up or non-operational for an extended period of time.
- Builder’s Risk Policy – used to cover a ship being built from the time its keel is laid until the ship is completed and accepted by the owner including sea trials.
- War Risk Policy – covers damage to the vessel for war and other risks excluded from the H&M policy by the War, Strikes, and Related Exclusions clause. This policy also covers damages caused by strikes, lockouts, labour disturbance riots and civil commotions, which may be important in a port environment.
A Protection and Indemnity (P&I) policy is purchased in conjunction with a hull insurance policy to provide liability protection not found in the hull policy. This type of coverage is usually placed either through a mutual P&I Club or with individual stock insurance companies.
The P&I policy provides coverage should an insured vessel cause damage to piers, wharves, bridges, cable or other fixed or removable objects. Also covered are the cost of raising, destroying or removing a wreck which is sunk and which constitutes a hazard to navigation; bodily injury, loss of life, and sickness of seamen, passengers, ship visitors, stevedores, etc; coverage for the repatriation expenses of seamen who become ill and/or injured during a voyage; and, collision risks not fully covered under a hull policy.
Further, the P&I policy provides coverage for damage to cargo caused by the insured vessel should the damage arise from the negligence of the vessel operator and for pollution risks. Operators often use this coverage to meet the requirements of the Coast Guard to obtain Certificates of Financial Responsibility. Domestically, many operators purchase pollution protection coverage through the Water Quality Insurance Syndicate (WQIS).
For those shipowners who are not members of a mutual P&I Club, the amount of insurance provided in a P&I policy is usually equivalent to the amount of insurance on the hull of the vessel. This amount of insurance is usually adequate where the shipowner may limit his personal liability to the value of the hull. However, where the owner of the ship has prior knowledge of the events or conditions that caused a loss, this limitation on the shipowner’s liability may no longer be applicable. In those circumstances, an owner may purchase an Excess P&I policy.
The most important elements that affect shipping navigation are:
- Ocean currents (due to the wind, due to the distributions of water masses of varying temperatures/salinity/density such as the Gulf Stream, tidal currents)
- Extreme weather (Cyclones, hurricanes, typhoons, etc)
- Seasonal weather patterns, such as monsoon in India and ice (certain ports freeze for varying period of time during winter)
Specialised companies provide weather-based routing services, which give information about the weather likely to prevail on the voyage with advice as to courses to steer to avoid the worst conditions. Sophisticated software may also combine weather data with the vessel’s voyage and particular technical characteristics as well as past recorded data to optimize routing and speed with regards to safety, reliability, fuel consumption and emissions. State-of-the-art fleet operation and routing systems rely on historical and real-time data that are transmitted by sensors on board the ship. However, only a small fraction of ships nowadays are equipped with sensors.
Figure: Altantic analysis from the Ocean Prediction Center, National Oceanic & Atmospheric Administration 15/11/19
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