Hull and machinery insurance.
This policy includes deck and engine room machinery, and inventory covering loading/discharging equipment, navigation instruments, anchors, chains etc.
Cargo insurance.
Cargo insurance may be taken out to cover goods of every kind which are being transported by ship under a B/L or C/P. Cargo may be insured by anyone who has a financial interest.
Freight insurance.
The term “freight” means the cost of transporting the goods. When the shipper of the goods pays the freight in advance (prepaid freight), the cost will be added to the value of the goods for insurance purposes.
During transportation the whole or part of consignment can be damaged. So there are particular average that means partial loss or damage caused to the ship or to a particular lot of goods. Particular average must be borne by the owners of the property suffering the loss, and is distinct from general average, which is distributed over the whole ship, freight and cargo
General average means any extraordinary loss, damage or expenditure incurred for purpose of preserving – the ship, the cargo and the freight. In case of general average losses are divided between all members of sea adventure.
Documents used in insurance.
The policy is the principal document. It is an evidence of the existence of the contract of Insurance.
There is floating policy, it covers a large quantity of goods for a fairly long period, usually a year, or it covers goods up to a large sum of money, and such a policy is represented by certificates for each separate consignment.
The scope of marine insurance
The scope of marine insurance may be looked at in two ways:
a. Perils covered
When insurance is effected, the intention is to provide financial compensation for any loss, damage or injury which may occur. Marine insurance applies particularly to losses arising from shipping and seaborne trade ventures.
Perils of the seas is a term found in marine insurance policies. This means that the peril must be something which can only occur in transportation by sea, not something which might just las well occur on land.
The term Perils of the Seas, does not cover such losses as Wear & Tear caused by the normal action of wind and waves. Perils of the Seas provides cover for such casualties as collisions, fire, theft (with violence - not pilferage which must be included specifically in the policy for cover to be provided) etc. War risks may also be insured for under the war clauses.
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b. Insurance of property
The scope of marine insurance applies to the perils covered. It also applies to the property covered.
When looking at the insurance of property, we must first take a look at one of the fundamental principles of insurance.
c. Insurable interest
If the marine insurance contract is to be properly valid, the assured must have an insurable interest in the item insured. This means that the assured must be interested in keeping the item insured safe, in good condition and undamaged land that he will benefit from Its safe arrival.
In marine insurance, however, in contrast to other types of insurance, ft Is not necessary for the assured to have an insurable interest at the time of effecting the insurance, but he must expect to acquire such an interest. What is important is that he must have an insurable interest at the time of loss If he is to receive compensation from the insurance companies.
Property insurance
We have different types of insurance policies covering the ship from when she is being built right up until the date she is sent to the scrap yard or is written off as a total loss at sea.
There are three main types of property insurance in marine insurance:
A. Hull Insurance
For the owners of the ship the hull policy will be the most important. The fact is that this policy also includes deck and engine room machinery, and inventory covering loading/discharging equipment, navigation instruments, anchors, chains, etc.
B. Cargo insurance
Cargo insurance may be taken out to cover goods of every kind; which are being transported by ship under a Bill of Lading or ' charter party. Cargo may be insured by anyone who i has a financial interest in the goods - i.e. an insurable interest
Normally the goods will be insured for their full value on arrival. This value will take into account their original cost, the cost of the insurance in transit and the cost of carriage or freight; customs duty may also be included in the cost.
C. Freight insurance
The term "freight" means the cost of transporting the goods. It may also be used when referring to the hire of a vessel.
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When the shipper of the goods pays the freight in advance (prepaid freight), the cost will be added to the value of the goods for insurance purposes. In certain cases, however, where the shipowner is not to receive payment until the task is carried out (payable at the port of destination), the shipowner will be the one with the insurable interest in the freight and can insure the full amount. He insures againk the freight being all or partially lost if the ship fails to reach her port of destination.
Insurance policies
The former Lloyd's S.G. Policy has been replaced by the new Marine Policy (MAR form). It is a simple document containing blank spaces for the following information: Policy number, name of assured, vessel, voyage 'or period of insurance, subject matter insured, agreed value (if any), amount insured, premium and clauses, endorsements, special conditions and warranties. The new form of policy came into force on 1st January 1982. and all business on the S.G. form was phased put by 1st April. 1983. For a marine insurance contract to be valid it must be expressed in a policy. No policy form has been prescribed by statute.
There are several different types of policies available
The type chosen depends upon the requirements of the assured
The voyage policy covers the risks of a particular voyjage and provides cover from the port of departure to the port of destination. Cargo insured under a voyage policy is normally covered from warehouse to warehouse and this terminates 60 days after unloading at destination.
The time policy, as the name implies, is for a specified period of time, but not more than 12 months, hull insurances jare normally effected on this basis.
The mixed policy is a combination of time and voyage insurance, and a longer period of time is allowed after jthe vessel has arrived at its port of destination.
The building risk policy is, as the name suggests, useld when a vessel is being constructed and until the vessel has been successfully launched and delivered to its owner. This pplicy is also used when the ship is under repair.
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The valued policy is a policy in which an agreed value is placed on the subject matter.
The unvalued policy is a policy in which there is no agreed value placed on the subject matter.
Floating policies do not apply to the ship or hull as we might expect, but are used in the insurance of cargo. Exporters estimate the number of shipments expected to be made in one year and the total value involved. Then for a relatively large sum they take out an insurance policy. The advantage of floating policies is that there is no need to issue a new policy every time a new shipment is made.
Open cover is an agreement between the merchant or shipper and the underwriters/insurers to insure the shipper's proposed shipments for the next 12 months. There is no total lump sum per year but there are fixed conditions and fixed rates for each type of goods. Shippers declare each shipment as it is made and the underwriters then issue a separate policy for each of these shipments.
- SHIPPING DOCUMENTS
If cargoes are carried by a ship, the shipper is obliged to charter the ship. The freighting or chartering of such a ship is done through a shipping agent, who signs an agreement with the shipowner in the name of the charterer. Such an agreement is called the Charter-party. The Charter-party must include all terms concerning the rate of freight, the time of loading, the port or ports of destination, the loading conditions, and so on. After signing such an agreement the ship is considered to be chartered and the loading of the goods may begin.
The stevedore looks after the stowage and the trimming in the holds, in order to fill the cargo space and to protect the goods from any damage during the voyage.
As soon as the cargo is agreed upon, the Charter-party is loaded, the Captain of the ship hands over to the shipper a signed receipt, which confirms that the whole cargo is received on board ship.
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Such a receipt is called the Bill of Lading. Depending on the requirements of the shippers, the Bill of Lading is issued in three, four, or more copies. There are 3 function of a B/L: 1)it’s a receipt for the cargo taken on board. 2)it’s a document of title to the cargo. 3)it’s a contract of Carriage repeating in detail the terms of the contract. B/L is negotiable document and can be bought and sold.
A manifest is a document containing complete specifications of the goods loaded by a ship. Cargo manifest are drawn up by the agents in the port of loading, based upon the Bills of Lading.
The Manifest contains the following data: the name of the ship, port of loading and date of departure, port of destination, number of Bills of Ladings, marks of packages and contents, names of shippers and consignees, weight of packages, rate of freight per unit, total freight.
Mate’s Receipt is a document signed by the Chief Officer, acknowledging the receipt of cargo on board ship. If the cargo is not “in apparent good order and condition” a corresponding remark will be inserted in the Mate’s Receipt. The Mate’s Receipt is exchanged for Bills of Lading when loading is finished.
Bill of Lading is issued after all mate’s receipts have been collected. Bill of Lading contains the same descriptions of goods and remarks.
Cargo-plan or Stowage plan shows the part of the hold and the holds in which the various cargo pieces have been stowed. It shows marks and destination of cargo.
Cargo-plan gives a clear picture of the disposition of each cargo piece.
Commercial invoice is the single document, which describes the entire transaction from start to finish.
Certificate of origin is used to determine in what country merchandise was manufactured.
Importers are now required to use an import passport to document payment of the import transaction. Shipping documentation may need to include a certificate of safety and health certificate. May be required additional documents for shipment of tobacco, alcohol, firearms, hazard materials etc.
Shipping Documents
The most important document is the Bill of Lading. To begin with it contains a very important information. On its face there is a description of the ship, there are names of the shipowners, shippers and consignees, of the ports of loading and discharging. There is a description of the goods: kind, quantity and measure, condition, packing, marks and numbers. The rate of freight and total freight are also shown on its face. There are also the number of original Bs/L issued, necessary signatures and the date of issue and Master’s signature. On its back there conditions of transportation.
The three main functions of the Bill of Lading are:
1. It is Master’s receipt fir the cargo taken on board his ship.
2. It is a document of title: the person(s) who holds the Original B/L has right to the cargo described in it.
3. It is a proof of arrangements between the shipowners and the Cargo Owners.
The B/L is a negotiable document, which means that it can change hands, i.e. be bought or sold.
The B/L is issued on completion of loading and signed by the Master. The cargo is delivered to the Consignees against the B/L. If the Consignee is satisfied with condition of the cargo, he does not make any remarks as to the defective condition of the cargo or its packing or quantity, the B/L is foul and dirty. There are different kinds of the B/L, e.g. (for example) liner B/L, container B/L, dry cargo B/L, tanker B/L, combined transport B/L, etc.
The cargo is taken on board in accordance with the Cargo Plan which shows the disposition of the cargo to be taken on board. It is drawn up well in advance by the Agent and the Cargo Officer or by the Chief Controller’s Office. In any case it should be approved by the Master.
The main factors which must be taken in consideration when drawing up the cargo plan are:
1. safety of the ship at any time at sea after loading;
2. safety of the cargo;
3. rotation of ports (i.e. each consignment is to be easily accessible in the port of discharging)
On completion of loading copy of the Stowage Plan (final Cargo Plan) is faxed to the port(s) of discharging together with the Cargo Manifest to facilitate discharging (to make all preliminary arrangements for discharging).
The Cargo Manifest is drawn up on completion of loading. It contains complete information about the cargo loaded on board: the name of the ship, the port of loading, the port of destination and the date of ship’s departure, the number of all the Bs/L, description of the cargo (its kind, weight and measure, marks and numbers), shippers and consignees’ names, rate of freight, total freight.
The B/L and the Cargo Manifest are also among the documents required by the Customs.
CONTRACTS OF CARRIAGE.
1) B/L is the main document in sea carriage. From the juridical point of view B/L has 3 functions: 1) a formal receipt by the Owner acknowledging that goods of the stated quantity and condition are shipped to a stated destination in a certain ship: 2) a memorandum of the contract of carriage repeating in detail the terms of contract which was in fact concluded prior to the signing of the B/L; 3) a document of title to the goods (It means – who owns the B/L owns the goods).
The B/L shall specify:
- the name of the ship;
- the name of the carrier;
- the port of loading;
- the name of the shipper;
- the port of destination;
- the name of the Consignee;
- the designation ( description ) of the goods; their marking; the number of pieces; their weight or volume;
- the amount of freight and other payments due to the Carrier;
- the time and place of issue of the B/L;
- the number of original Bs/L drawn up;
- the signature of the Master and Agent;
There are many kinds of Bs/L, such as order B/L, straight B/L, B/L to bearer and Recta B/L.
If there is the clause in B/L “shipped in apparent good order and condition”, so it is called shipped on board B/L
Now days intermodal transportations widely spread and that’s why the Operators were to issue the Combined transport B/L. As a form of a Contract of Sea Carriage the liner B/L is used in the liner shipping. The Carrier can issue some original Bs/L according to Shipper’s will.
Clean B/L is a B/L, which doesn’t contain any clauses regarding violation of marking or damage to cargo.
1. Charter-party is a document, which contains the terms of Sea Carriage and freighting of the vessel. Ch/p is signed between the owner or his Agent and the Charterer.
There are 3 types of Charter: voyage charter, time-charter and demise-charter or bareboat-charter.
The main part of charterers has a printed standard uniform where the space is remained for placing the following data: the freight; laytime; demurrage; ship’s gear; speed. There may be Addendums and Riders to the Charters.
The standard uniform is used for the carriage of the specific types of cargo, such as: grain, ore, timber, coal, oil, etc.
The standard uniforms can be agreed, adopted, recommended by BIMCO.
Chartering of vessel can be performed: “in full and complete cargo” and “in space charter”.
2. Contract of affreightment. The Owner can make an agreement with the Charterer for carriage of big lots of cargo within the range in definite period. In accordance with the circumstances it is called sometimes “quantity contract” or “transport contract”.
Some voyages can be effected under this Contract. The Owner can use some vessels to perform his duties. The owner can take on board the supplementary cargo (deck cargo) or to load the cargo in the inverted voyage.
Dispatch/demurrage is counted on the term of reversible. Parties agree on a time of ceassation of the contract.
Import/export.
Each country has to import articles and commodities it doesn’t itself produce, and it has to earn foreign exchange to pay for them. It does this by exporting manufactured articles and surplus raw materials. Thus the import and export trades are two sides of the same coin, and both can have beneficial effects on the home market. Import creates competition for his produced goods; export gives a manufacture a larger market for his products, so helping to reduce the unit cost. In each case effect is to keep prices in the home market down.
But there may be some factors that compel governments to place some restrictions on foreign trade. Import may be controlled or subject to a customs duty to protect a home industry. And export may be restricted to conserve a particular raw material required by developing home industry. These factors mean that importing and exporting are subject to a lot of formalities, such as customs entry.
Large companies, like the manufactures of motor vehicles, computers and heavy equipment, will usually have their own import-export departments. Smaller companies, on the other hand, may find it cheaper to buy and sell through merchanting houses. Such merchants often trade in a wide variety of raw materials and manufactured goods, though each company will probably have its own specialties. It will also have is own offices, associates or agents in the countries with which it trades, and a long experience of dealing with the many categories of people involved in import-export.
Clearing and forwarding agents handle all the details of transportation of a cargo: packing, weighting and marking, making customs entries, and the many dock services entailed in loading and discharging. Advertising agents helped by a reports of market researchers, promote the products of their clients; commercial attaches and other government officials promote the products of their countries. Seamen, dockers, bank officials and customs officers, not to mention all the workers who actually grow, mine and manufacture the commodities that are exported, are all involved in the complex operations of the world trade.
Raw materials like virgin non-ferrous metals, and some items of produce, such as raw cotton, vegetable oils and wheat, can be accurately graded, and the grades remain the same, year in, year out. These commodities can thus be brought and sold under a standard description and according to standard contract terms developed by the commodity exchanges. There are many such standard descriptions in the produce trade, such as Middling Cotton and First Pressing Castor Oil; in other commodities there are terms like G.O.B. or Good Ordinary Brand, F.A.Q. or Fair Average Quality, and G.M.Q. Good Merchantable Quality. To the produce importer or exporter these terms have exact meanings, established by associations of dealers, perhaps over several hundred years of trading.
Some commodities, however, like tea and wool and certain spices, cannot be accurately graded because the quality varies from year to year, and from consignment to consignment. These have to be sold on a tale quale basis. In this case the buyer has to inspect a consignment for himself, or perhaps only a sample, and then make an offer according to his own judgment of the quality.
The prices of raw materials and produce change every day, so offers are usually only firm for about 24 hours. The prices of manufactured goods, on the other hand, remain unchanged, as a rule, for weeks or months, so buyers can place orders on the basis of a manufacturer’s printed price list.
There are many ways of selling manufactured goods to foreign buyers. A manufacturer may sell direct to wholesalers and maintain his own traveling representatives, or set up his own offices abroad. Alternatively he may sell to an export merchanting house; in this case there is a little financial risk for the producer, since the merchant acts as a principal and pays for the goods himself. A third possibility is for manufacturer to appoint foreign agents, who will work on commission and may be stockists. In this case goods may be sent on consignment, unsold, and the agent is expected to obtain the best price available; but this practice is more common with produce exports.
A firm order is often called an indent, and there is a special type of commission agent called an indent house. A buyer either places a closed indent, which names the supplier, or an open indent, which leaves the choice of supplier to the agent. The indent agent takes a commission on the value of his purchase, and this will of course be higher if he acts as a confirming house and takes the del credere risk.
Dealers in the commodity exchanges can either buy for immediate delivery (or spot/cash), or forward delivery in, say, 3 months time. Forward delivery is known as a futures contract. In the simplest case, when prices are rising, you can buy for immediate delivery and sell forward; then, provided the cost of warehousing and financing is less than the difference between the two prices, you will make a profit. Of course this is not when prices are falling.
Manufacturers have to quote firm prices for many months ahead, but they run the risk of having to buy their raw materials in 6 months time at a price higher than that on which they based today’s selling price. Buts they cannot afford to take immediate delivery of all the raw materials they will require over the next 6 months. It would lock up too much finance, and they would be at disadvantages if the raw material price fell, and their competitors bought at the lower price. So they go in for hedging operations on the Commodity Exchanges.
A hedge contract involves buying or selling forward. It cannot guarantee a manufacturer against loss, but it can restrict his loss within very narrow limits by averaging out the cost of his raw materials for many months ahead. In other words it insures him against violent fluctuations in the price of his raw materials.
One of the documents presented by an exporter to his buyer is the commercial invoice, which summarizes contract terms and declares that shipments have been made in accordance with them. It contains, first of all, the names and addresses of the seller and the buyer; next, a full description of the goods dispatched, including the weights and numbers and marks pf all packages; thirdly, the price per unit and the total cost of consignment. The invoice will also state the port of shipmen and the date, the terms of sale, such as CIF, and the terms of payment, such as sight draft, perhaps under a letter of credit. Finally it must be signed by an authorized employee of the seller, and it may even quote import or export license numbers. Sometimes there are extra charges not quoted in the contract, such as freight and insurance; these will be shown in a separate debit note. Correspondingly, commission and other credits, perhaps for short weight, will be shown in a credit note.
Ship management
Ship management is an umbrella term which comprises various types of management services covering all aspects of daily vessel operations. A shortened version of the definition the Ship management is "The professional supply of a single or range of services by a management company separate from the vessel's ownership" where: "professional supply" means that the supplier (shipmanager) provides service(s) to the user (shipowner) according to contracted terms and in return for a management fee. In doing so the shipmanager is required to ensure that the vessel always complies with international rules and regulations, is run in a safe and cost efficient manner without threat to the environment and is maintained so as to preserve as far as possible its asset value. The shipmanager must also take responsibility for its actions. "A single or range of services" means that the shipowner selects to use a comprehensive range or just one service from a number offered by the shipmanager. These services break down into three main groups: technical management, crew management and commercial management. "Management company separate from the vessel's ownership" means that the supplier of the services is independent from the user working with its own staff and from a separate office. The term separate, in the strictest sense, means that there is no common shareholding interest between the shipowner and the manager.
Hybrid shipowner-shipmanager relationships:
1). The shipowner elects to retain control over a number of critical functions in the management of its ships, including the selection of senior officers, safety auditing and the negotiation and management of dry-docking, while outsourcing the remaining day-to-day ship management activities.
2). The shipowner retains a technical department to run a "core" fleet of, say, bulk carriers, but in acquiring a fleet of specialist vessels, such as parcel tankers or reefers, uses a shipmanager that is able to provide the requisite skills in technical management including the maintenance of tank coatings or of refrigeration equipment, as well as the sourcing of seastaff with the specialist skills and experience relevant to the ship type(s) in question.
3). The shipowner does not have the inhouse technical and personnel staff to handle an unforeseen increase in its fleet, perhaps via an opportunistic purchase. In this particular situation a shipmanager will be used only until the shipowner recruits additional staff to cope with the additional workload.
4). A shipmanager has a shareholding position in a vessel under management or has some kind of equity association with the shipowner i.e. both companies are part of the same group.
Technical Management
The primary objective of technical management is safe, pollution-free and cost-efficient vessel operation in accordance with international rules and regulations and where due consideration is given to the protection of asset value. The various tasks are also interrelated and interdependent. For example, regular vessel inspections by a superintendent provides an input and serves as an output for other service elements including purchasing, reporting, certification, maintenance and budgeting. In similar vein, purchasing has a bearing on vessel inspection, safety and quality management and maintenance
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