The Shipping Law Blog
A Useful Guide to the World of Maritime Law

Q: Docked / Berthed / Moored / Anchored?

July 10, 2010

All these terms refer to a vessel which is secured in a more or less fixed position.
When a vessel is in port to collect/disembark passengers or load/discharge cargo it will be, in a sense, connected to the dock (the functional area of pier) and is therefore ‘docked‘. A docked ship is typically a large one and will have several crew present on it, even when it is there overnight. Generally a ship is docked for a specific purpose, and when that task is complete the vessel will move on.
A berth, on the other hand, is a bit like the nautical equivalent of a parking space. Typically you buy one or lease one for a long period as somewhere to store your boat. To maximise space, ‘berthed‘ vessels are typically kept perpendicular to (pointed at) the main jetty or pier, rather than a docked ship which is typically parallel to (in line with) the dock.
Any ship which is secured by ropes to a permanent fixture is ‘moored’ to that fixture. So ‘moored’ can be quite a broad description, although it is most appropriately used to described a vessel which is being kept at ‘moorings‘. Moorings are areas of water where boats and yachts can be secured to a fixed object on the seabed, usually a large concrete block with a rope attached and a buoy on the end. They are cheaper than berths to rent and are more secure (people cannot simply walk up to your boat). They tend to be used for the storage of boats or yachts when not in use, so moored vessels tend to have no one on board.
The most independent way to secure a vessel is to drop anchor. So long as the anchor has a certain amount of purchase on the seabed the ship will not move too far from its current location and is therefore described as being ‘anchored‘. This is the most independent but also the least secure way to station your boat, and as such a ship which is anchored is usually only staying in place for a short time and will almost always have someone on board.

GUIDE: Terms for the Size, Weight and Carrying-Capacity of a Vessel?

July 5, 2010


There are a myriad of terms to describe essentially how big a vessel is, and often these can be confusing. A newcomer to the world of shipping might, for instance, reasonably but erroneously believe that the Tonnage of a vessel had something to with it’s weight in Tonnes. 

There are however only really five terms, currently in use (GRT, NRT etc. are now obsolete), that you need to remember, and they are as follows. 

Measurements of the Vessel’s Size

G.T. (Gross Tonnage) – This is a measurement of the size of the ship, which calculates the area of all its enclosed spaces. It is nothing to do with the weight of the ship and is used to assess how many staff are needed to run the ship, how much port fees should be charged etc.  

N.T. (Net Tonnage) – This is a measurement of the size of the cargo which can be stored on the ship, which calculates the area of all the space taken up by the cargo aboard the vessel, when the ship is fully loaded. Because the cargo will be smaller than the ship it is on or in this figure is the ‘net’ one. 

Measurements of the Vessel’s Carrying-Capacity

D.W.T. (Deadweight Tonnage) – This is the measurement of how much weight a vessel can carry. It does not include the weight of the vessel itself, but does have to take account of everything which adds weight to the vessel – cargo, passengers, crew, fuel etc.   

T.E.U. (Twenty-foot Equivalent Unit) – This is the most common measurement of how much cargo a container ship can hold. A ‘regular’ container is twenty foot long, although many are now ‘double-sized’ (being 40 foot long or similar). A container ship is therfore measured in how many containers it could fit on board if they were all twenty foot long.  

A Measurement of the Vessel’s Weight

L.W.T. (Lightweight Tonnage) – This is how heavy the actual ship itself is. This measurement is almost never seen in shipping, because the weight on dry land of a ship is not a figure which has any importance in terms of operating the vessel, deciding how many crew it should have or how much of a port fee it should pay. However, the term is important at the beginng and end of a ship’s life; when being launched and when being scrapped.

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Example Vessel Details:

THE “EMMA MAERSK”
GT : 170,974
NT : 55,396
DWT : 156,907
TEU : 14,770
LWT : Unknown

GUIDE: P&I Cover

July 4, 2010

P&I cover is a type of insurance shipowners can take out for claims made against them by third parties. It would cover, for instance, claims for damage to cargo, for injury to passengers or crew and for damage to other ships in collisions. The cover is provided through mutual insurance orgnaisations known as P&I Clubs. They are ‘mutuals’ in so far as they do not set out to make a profit, but merely to ‘pool’ or ‘spread’ the risks of all their clients.

Nomenclature
The world of P&I has its own unique terminology. Risks are not underwritten but ‘covered’. There is not an insurer but a ‘Club’. There are not clients or assured, but ‘Members’. Vessels are not insured by the Club but ‘entered’ with it. There is not an insurance policy, but a ‘certificate’. There is not a policy excess but a ‘deductible’. There are not premiums but ‘Calls’.

General Facts
Usually P&I cover pays the full third party liability claim less the deductible. However, in respect of collision claims the Club only typically pays 1/4 of the claim, providing an extra deterrent for the Member to avoid collisions. Although today many Clubs will cover full liability (known as ‘four fourths’) for an extra fee.

As P&I Clubs are only generally concerned with third party liabilities they are not concerned with covering damage to the Member’s own vessel. This damage will be covered under a separate ‘Hull’ or ‘Hull & Machinery’ policy.

The ‘Pay to be Paid’ Rule
As the Clubs are indemnity organisations, they generally compensate the Member for claims they have had to pay to third parties for liabilities incurred in the operations of the vessel. For that reason the Member will usually have to pay a claim and then ask the Club to compensate them for the amount of that payment; they cannot just ask the Club to pay the claim directly. One exception is in personal injury claims where the Club will often agree to pay the claim without the Member having first paid it.

FD&D  Cover
Many of the Clubs now provide FD&D Cover as an optional extra. This stands for Freight, Demurrage & Defence. Essentially it means the Club will represent the Member in respect of extra elements of legal claims not typically covered by general P&I insurance.

The International Group
There is an International Group of P&I Clubs who have agreed to pool their very high value losses (in excess of USD 8 Million) to provide yet further security to their Members. They also work together for the benefit of their Members as a whole. There are currently 13 Clubs who are members of the group; with The Shipowners’ Club being the largest in terms of number of vessels entered and GARD being the largest in terms of Gross Tonnage of vessels entered.


Sometimes it can be quite confusing to an outsider to understand all the Club’s referred to in the market, as all have a ‘management company’ which runs the day to day business on behalf of the Club; it will underwrite business and pay claims and the surplus is held for the Club to cover catastrophic losses or years when a very high level of claims are made. Technically, or at least theoretically, the Clubs (being the Members acting as a group) could withdraw or fail to renew their management contract and appoint a new management company, but the relatively small size of the market and shortness of relevant skills amongst the workforce as a whole mean that such an event would be extremely rare. 


Many of the management companies share similar names to their insurer accordingly, but some do not. As a brief guide the Members of the group with significantly different management company names and some nicknames are therefore as follows:

– The American Club
– Brittannia
– Japan Club
– Gard
– The London Club – Managed by Bilbrough
– The North of England (North, NEPIA)
– Skuld
– The Shipowners’ Club (Shipowners, SOP, SMP)
– The Standard Club – Managed by Charles Taylor
– Steamship Mutual
– The Swedish Club
– UK Club – Managed by Thomas Miller
– The West of England (the West)

Further Details
Each Club has its own set of Club Rules, which act like a copy of the insurance policy would if the risk were underwritten by a commercial insurer. Typically the certificate will merely state that the Member is entered with the Club subject to the Club Rules and confirm any variances, exclusions or additions, i.e. rather than recite those rules in full.


All of the Clubs publish a copy of their own rules on their website but the International Group clubs, due to their pooling arrangements must have essentially common insurance cover in their standard Rules (in other words, despite using their own wording, the same risks are overall covered, and the same items are excluded or limited within that cover). 

GUIDE: Marine Cargo Insurance

July 4, 2010
Marine Cargo Insurance basically insures the owners of cargo for loss of, or damage to, it during a voyage either wholly or partly over water.
 
Because these insurance policies are relatively complicated and need to offer different levels of cover to different assureds, but they often need to be generated and agreed quickly for urgent shipments, sets of ‘standard wordings’ are often used by underwriters writing this kind of business.
 

The most common wordings are those of the ‘Institute of London Underwriters’*, known as:
1) Institute Cargo Clauses A (provides the broadest cover, but also the most expensive)
2) Institute Cargo Clauses B (less cover, less expensive)
3) Institute Cargo Clauses C (least cover, least expensive)

There are also standard wordings for these additional risks:
1) War Clauses
2) Strike Clauses

Incoterms (International Commercial Terms)



Incoterms basically give legal clarity of the meaning of terms frequently used in iternational commercial conrtracts. The full descriptions are available here, but essentially they describe who is responsible for cargo and insuring it at varisou stages of transit. There used to be many categories, but now only three remain D, E and F.

 



Many exporters sell their cargo on a CIF (Cost, Insurance and Freight) basis, so the seller promises to arrange the cargo insurance. If a seller sells goods on an FOB, Ex Works or similar basis, then the buyer arranges his own cargo insurance. This can be risky, because usually the goods are not paid for until after delivery. If the goods arrive in a damaged condition, or an allegedly damaged condition, the buyer may simply refuse to pay for them. In this case, as the exporter has not taken out the cargo insurance, they have no one to appeal to for compensation. Special, relatively cheap, cargo cover has developed to cover only this situation, it is known as ‘Contingency (seller’s interest)’ insurance. 


Common Types of Cargo Cover


Open Cover – This is the most common type. It covers a type of movement for either a set number of movements or over a set period of time. Each individual movement need not be notified to the insurer (for example, if you owned a factory in China exporting rubber ducks to the USA, and sent 10 shipments of one container each a month you could take out open cover for moving rubber ducks from China to the US by container and all your shipments would be automatically  insured).


Specific (‘Voyage’) Policy – This is cover for an individual shipment, usually high value or an unusual one for the exporter (sending a set of generators to Iraq, where you usually only ship to Europe and the USA for example).


Contingency (Seller’s Interest) Policy – As described above, this is the cheapest insurance available. It specifically covers the situation where a seller is sending cargo overseas and the buyer arranges the cargo insurance. If the cargo arrives damaged the buyer may not pay for it and fail to make a cargo insurance claim, or make such a claim but fail to then compensate the seller or pay for the goods. 


Export Credit / Trade Credit – This type of insurance covers sellers exporting goods to customers in a new market. It repays the seller for the cost of the goods where they are shipped to a foreign country and then not paid for due to a fraud or because the buyer has gone bankrupt.


Premium
 
Cargo premium is generally calculated on the following basis:
1)  The value of goods insured (possibly with an increase to insured value to account for lost profit)
2) The type of goods (highly valuable, dangerous, toxic etc.)
3) The dangers faced by the goods (modes of transit, area, length of journey etc.)


Related Terms


General Average – All cargo must pay a portion of the damaged cargo on the basis that it was sacrificed to save the remaining cargo. Good examples include: cargo wet damaged when sprayed with water in a fire fighting action onboard. Generally the carrier will not release safe-landed cargo in a GA situation until a contribution to the damaged cargo is paid. If insured the insurer will pay this or post a bond for it to allow the cargo to be released.


Particular Average – A situation where the loss or damage to a cargo is borne only by the owner of that cargo, usually the shipper. 


Both-to-Blame Collision Clause – In the event of two ships colliding at sea where both are at fault, all vessels and cargo (by way of their hull or cargo policies) shall proportionately pay their share of the total losses based on the value of their cargo.


Sue and Labour Clause – A standard clause in a maritime insurance policy which allows the insured to recover from the insurer any reasonable expenses incurred by the insured in order to minimise or avert a loss to the insured property, for which loss the insurer would have been liable under the policy.


Facts to Note


Cargo which is insured against “All Risks” is not insured against “all losses”, only losses caused by a “fortuity” in transit.
 
* The Institute of London Underwriters (ILU) recently merged with a re-insurers organisation (LIRMA) to create the International Underwriting Association of London (IUA).

GUIDE: Contracts of Affreightment

July 4, 2010
There are two basic types of contract of affreightment:
1)      Bills of Lading; and
2       Charterparties.
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BILLS OF LADING
“A document issued by a carrier, to a shipper, acknowledging that goods have been shipped on board for conveyance to a specified party and place.”
A Bill of Lading has three main purposes:
a)     1. It acts as a receipt for the goods, showing the carrier took possession of them,
b)     2. It is evidence of a contract of carriage,
c)      3. It is a document of transfer, being freely transferable.
Common Types of Bill
Straight Bill – This is a non-negotiable Bill, stating clearly the consignee’s name. It can be endorsed over, but it is risky as if the carrier had for instance a maritime lien over the goods, the endorsee is bound by it in the same way the
Sea-Waybill – This is simply a receipt for cargo, and not a document of title. It is not transferable or negotiable. It is commonly used today when a company is shipping goods between branches in different countries, or where the cargo will arrive with the consignee before the original documents do.
Through / Multimodal / Combined Bill – Cargo carried under this type of Bill of Lading will go right through to destination, in other words by sea then by rail, or road or airfreight.
House Bill – The covering Bill to the real Ocean or Master Bill, issued by a freight forwarder.
Liner Bill – A Bill of Lading issued by a carrier that provides a regular service on a specified route. 
The Process
* Generally, once cargo has been shipped (or sometimes before) three original Bills of Lading are drawn up by the carrier, and one is given to the shipper. The information is usually just that supplied by the shipper.
* Sometimes the shipper draws it up and the carrier merely signs it, but this is unusual.
* They should not bear a date that is earlier than the date on which the cargo was fully loaded on board (The Wilomi Tanana [1993]).
Identifying the Carrier from the Bill of Lading
* The court will look at the logo printer on the Bill, the signature and wording of the signature box, and the terms on the back; specifically whether there is an IOC (Identity of Carrier) Clause.

 

CHARTERPARTIES
“This is a contract between a shipowner and someone who wishes to hire o let their ship, for a period of time or for a particular voyage.”
Types of Charterparty
Time Charterparty – This is where you hire the ship for a set period of time. The owner remains in charge of it but you can take it where you like, transporting what you like. You pay a fee plus the fuel you use and port charges you incur. 
Demise / Bareboat Charterparty – This is a sub-type of Time Chartering, where a ship is hired for a long period (years) and the charterer provides crew, insurance, maintenance themselves. Often the charterer obtains ownership after a set period of payments, and the Charterparty therefore acts as a form of finance (like HP on a car) for the sale of the ship.
Voyage Charterparty – This is where a cargo interest just charters a ship for one particular job (moving a bulk pig iron purchase from Rio to Beijing for instance). No crew costs, fuel costs or port charges are passed on by the owner, there is usually only one catch-all fee (but the charterer pays the stevedores). A miniature version is a Slot Charter Agreement, where a carrier agrees to give a charterer a certain number of container slots on a voyage from x to y.
COMMON CLAUSES IN C/P WORDINGS

Bunker Clause (Fuel Clause) – The charterer agrees to pay owners for all fuel on the vessel at the time of taking it over (delivery) – at the market rate at the port of delivery. The owner agrees to do the same to the charterer with any fuel left at the port where the vessel is returned to owners (port of redelivery).
Ship Clause – The owner of the ship warrants that the ship will be seaworthy in every respect at the point of delivery or beginning of the voyage.
Ice clause – Inserted when the ship is headed for a port which may be closed due to ice.
Lighterage Clause – Usually spells out that vessel can deliver goods near the port (for onwards transit by lighter) instead of exactly at it if necessary. Sometimes also declares that the delivery can be at any port in a certain range – Thamesport, Tilbury or Felixstowre for example.
Negligence Clause – Typically excludes shipowner’s liability for loss or damage to the goods during transit, save for a lack of due diligence by them.
Ready Berth Clause – Essntially says that shipowners have completed their job once they have arrived at the delivery port, and not once berthed , as in many ports they may have to wait for a berth and they will not pay the costs of this, and indeed the ship will charge for any laydays spent waiting for such a berth.
COMMON WORDINGS
Because of the complex nature of charterparty agreements and the number of clauses and safeguards that need to be built in to satisfy each party generally a charterparty agreement is entered into on a standard industry wording, such as a Gencon, Heavycon, Barecon etc., as appropriate. Sometimes the satandard wording is used, but more commonly an amended form of that wording is agreed, with some clauses removed, added and / or amended.

Q: Master, Captain or Skipper?

July 3, 2010

All three of these terms refer to the person in ultimate charge of a vessel. Every person in overall command of a vessel is the Captain of that vessel; although on some, usually large, commercial, sea-going vessels they will be referred to as the Master. They will typically be a licensed Master Mariner. 

A Master Mariner (MM) is someone who has an unrestricted Captain’s or Master’s license, usually from the flag state in which the vessel is registered; meaning they are allowed to be in overall charge of almost any size or power of vessel, anywhere in the world.

 
The often heard term Skipper is of course just a nickname for the Captain. It tends to be used to refer to the Captain of a smaller boat or yacht, or in say fishing vessels, where the Captain is often a friend or relative of the crewmembers, as well as their boss. In most of the world’s English-Speaking Naval Forces the person in overall charge of the vessel is the CO or Commanding Officer, but when aboard he too will generally be referred to as Captain.
 
In short, if you are unsure how to refer to the person in charge of a particular vessel it is safest to refer to them as the Captain.


(Image Credit: Sint Smeding)

Q: What is the Difference Between a Boat, a Ship and a Vessel?

July 3, 2010

 



Vessel is a catch-all term, like ‘watercraft’, which describes any floating object used for the carriage of people or goods. Generally smaller and less complex vessels are ‘boats’, whilst larger and more complex vessels are ‘ships’. As a general rule, you can put a boat on a ship, but you can’t put a ship on a boat. 

Specifically, boats are small to medium-sized vessels with hulls,* powered by sails, engines, or human force. Some types of vessel are always categorised as boats, regardless of their size or complexity.** Their ‘boat’ status was designated when these types of vessel were small and has stuck despite their future growth.

A ship is a larger vessel, built to transport either passengers or cargo. These types of vessel started off large and accordingly we talk of a cruiseships, containerships and a battleships.

* a raft, for instance, has no hull; it would therefore be incorrect to call it a boat – hence ‘life raft’.
**  submarines, fishing boats, tugs and barges for example.


(Image Credit: John Keogh)

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