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94 Cards in this Set
- Front
- Back
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What is shipping? |
focus= transportation of goods domestically, or internationally with a variety of different ships. - many skills required - moving cargo & or passengers (may own or operate tonnage) - role of owner takes many forms - Changed from a captain sailing his own vessel to international finance |
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Explain the Maritime Cluster |
- it is considered a maritime cluster when there is a geographic concentration of companies interconnecting and supporting and confirming each other. - the focus is on assembling relevant focus with an area to optimize business |
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What are the five main categories of ships? |
-General Cargo (17224) - Bulk Carriers ( 9687) - Container Ships (5831) - Tankers (14175) - Passenger Ships (6597) - Registered in over 150 nations and manned by over 1 million seafarers of virtually every nationality |
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Define Container Ships |
- carry most of the world's manufactured goods and products, usually through scheduled liner services. - revolutionized shipping industry |
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Explain Bulk Carriers |
- work horses of the fleet, these transport raw materials such as iron ore and coal. Identifiable by the hatches raised above deck level which cover the large cargo holds Dry Bulk Carriers: Capesize, Panamax, Handymax, Handysize |
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Explain Tankers |
- transport crude oil, chemicals, and petroleum products. - can appear similar to bulk carriers but the deck is flush and covered by oil pipelines and vents - Crude Oil Tankers: ULCC, VLCC, Suezmax, Aframax |
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Explain Gas Carriers |
- designed for transporting LNG. As the market grows rapidly, the fleet of LNG carriers continue to experience tremendous growth. |
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Explain Specialist Ships |
- Such as anchor handling tug vessels and supply vessels for the oil industry, salvage tugs, ice breakers, and research vessels. |
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Explain Anchor Handling Tug Vessels |
- mainly built to handle anchors for oil rigs, tow them to a location, anchor them up and in a few cases serve as an Emergency Rescue and Recovery Vessel |
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Seismic Vessels |
self explanatory |
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Pure Car Carriers |
- designed to allow all types of vehicles from completed passenger cars to construction equipment. - Multi-layered decks
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Roll on Roll off |
- Built in ramps which allow the cargo to be efficiently rolled on and off the vessel when in port |
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What are seafarers |
- the worldwide population of seafarers serving on the internationally trading merchant ships is estimated to be 466,000 officers and 721,000 ratings - lots from OECD countries but also Far East and SE Asia. - Phillipines and India = maritime labour supply nations, with many seafarers enjoying employment opportunities on foreign flag ships operated by international shipping companies. |
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What are the four shipping markets? |
- all trading a different commodity - the freight market - the sale and purchase market - newbuildings - demolition - each linked by the cash flow and push the market traders in the direction they want |
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Who are the main players in the industry? |
shipowners seafarers charterers brokers agents yards others |
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What is the most common structure of shipping companies and why? |
- today most are Ltd companies - this is due to diverse and demanding job requiring numerous skills. - companies can operate and manage the ships in house (fully integrated) or outsource responsibilities. |
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Where are shipping companies usually located? |
- often placed where they enjoy tax privileges. - Register under FOC/Open Registries - Most countries ship registries require a genuine link between the state and the ship |
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Who are Charterers? |
- cargo owners, may be other ship owners, operators and managers |
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Who are Brokers? |
- represent one party involved in most shipping transactions - ex: chartering, s&p, finance, insurance, demolition etc. |
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What do Yards do? |
- build and repair ships |
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Explain how liabilities and challenges have increased in recent years |
- development of national and international laws/associations have increased - number of service providers and need for such has increased - business of owning ships is risky and owning, managing and operating vessels is dominated by the balance sheets. |
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Explain Investing in Ships |
- based on the cyclicality of the market |
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What drives shipping? |
- the single most important factor generating shipping demand is the following: - shipowners control the supply of ships, but the demand for ships is driven by cargo owners. |
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What are the main cargoes to be traded? |
- Crude Oil, Iron Ore, Coal and Grain |
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Why must a ship be registered? |
- a vessel not sailing under a maritime flag of a country state enjoys no tax protection whatsoever- |
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What is ship registration? |
- formal process of attributing nationality (flag) to a vessel and the law of the flag. - details of build, ownership, mortgages entered into the flag states ship register - register issues "certificate of registration" effectively a ships passport, permitting entry/departure from the world's ports |
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What does registration provide? |
- private and public law functions |
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Explain the public law functions of registration |
- right to: fly nation flag, regulatory/jurisdiction over ships and crew - diplomatic and naval protection - fish in territorial waters, and engage in coastal trade - in event of war: governs possible vessel requisition by own flag state or provides evidence of ships neutrality to a hostile state |
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Explain the private law functions of registration |
- evidence of the registered owner's title to the vessel - identify party authorized to accept legal process - Record of mortgages: to establish "priority of liens" and facilitate enforcement by mortgage banks |
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When do you register your ship? |
- Part of an S&P transaction of when accepting a new build
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Where do you register a ship? |
- at the flag state authority or with a local representative
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What are the requirements to registry? |
- Look in the NMC and in NIS law |
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Must the owner, manager and crew all be residents of the flag state? |
- originally yes, to preserve flag state taxation, but now genuine link concept effectively discarded |
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What are the recognizable features of a Flag Of Convenience |
1) annual tonnage tax in lieu of corporate tax on a ships revenue/earnings 2) no restrictions on crew nationality 3) reduced regulatory control 4) no genuine link obligations 5) opaque beneficial ownership facilitated |
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Are FOCs a bad thing? |
- allows owners to be legally anonymous and difficult to prosecute in both civil and criminal actions - evidence of FOC ships engaging in crime and supporting terrorism |
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What are the FOC shipowner benefits |
1) Corporate Anonymity: beneficial ownership is concealed permitting liability control 2) Taxation: FOCs levy no tax on vessel operating profits 3) Utilization of cheaper crews (but margins are closing) 4) Freedom of Trade:avoidance of embargoes and discrimination |
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What are the FOC shipowner downsides? |
- PSC, EU, and ITF black listing. - Targeting and detention, delays/costs - bank concerns referencing flag states law on mortgage enforcement and priority of liens. |
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Explain the ITFs anti-FOC campaign |
- supports traditional flags and the genuine link concept: FOC as a weapon to attack seafarers wages and welfares - ITFs influenced now eroded as seafarers wages rise due to skilled crew shortage |
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What are the factors in choosing a flag? |
1) Entered on ITF, USCG, EU, or PSC blacklist 2) ship finance/mortgage enforcement issues 3) Poor int'l reputation/gov't instability 4) Cost of registration & annual fees 5) Tax Regime: tonnage tax or taxholdings/rebate 6) Dual registration flagging in/out entitlements |
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Explain the One ship/One Company Strategy |
- each ship in a fleet is owned by/registered to a separate company incorporated in the flag state or another tax free state if permissible. - intention is that registered owning company has no traceable asset other than one vessel - shares in each ship owning company will be held by a holding company (controlled by a beneficial owner) also established offshore - mgmt of each and every ship and company will be accomplished by yet another offshore company |
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What are the reasons for a One Ship One Company Strategy? |
1) avoid sistership arrest in the case of cargo damage, debt owed etc. 2) provide a corporate shield for ID of the beneficial owner against potential liability claims 3) Shield and channel revenue as part of a legitimate tax avoidance scheme |
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What are the main tasks of a shipowner in relation to ships? |
- commercial and technical mgmt |
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How is globalization affecting the shipping industry? |
- new business opportunities are being created - global competition has forced a new focus on quality service - new standards and regulations have come into force and will continue to come into force |
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What is a Joint Venture? |
- not a legal concept but a description of the purpose of the entity - a strategic alliance - creation of a new legal entity - a short term or long term partnership - the parties jointly undertake economic activities for mutual profits |
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What does each party do in a Joint Venture? |
- contributes assets, shares risk, has control of the enterprise - can be involved in any type of transaction - individuals, companies, corporations, or states |
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Reasons for creating a Joint Venture are: |
1) To gain entrance into new markets 2) spread cost and risks 3) big = efficient , econ of scale 4) access to desirable objects 5) being ahead of the industrial revolution |
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Downsides to a Joint Venture |
- high failure rate - high instability - prone to fail in volatile markets or when with gov't bodies |
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What is a shipping pool? |
- shipowners of a similar type with common administration. marketing and fixing vessels under a common name - a joint freight collection system and revenue distn - consists of vessels of a similar type. - companies retain legal identities. - less formal JV - usually contains one major participant - profits allocated through pool points - can be organized and controlled by its members, or by a legally independent admin |
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What is contained in a Pool Participation Agreement |
- which ships are to operate in the pool - obligation to bring a certain number of vessels into the pool - the possibility of substitute or remove ships from the pool - dissolution of the pool? |
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Advantages of being in a pool
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- reduced market risk - eligible for bidding on larger contracts - long-term industrial relationships - positive marketing - stable profit - highest stowage factor - benchmarking |
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Disadvantages of being in a pool |
- lose control over your tonnage - rely completely on a third party for the running of your ship - lose freight peak opportunities - limited disposal - still have the burden of manning and tech mgmt/liability |
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Who is the pool manager and what do they do? |
- The pool will have its own mgmt - commercial mgmt - freight calculation & collection - payment of all pool-related costs - operational function - calc disnt of revenues on pool points - marketing of pool to new potential members - market analysis - vessels performance evaluation |
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What are the two documents of relevance for a Pool? |
- Pool Participation Agreement - Time Charter Party |
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Name strategies for dealing with the future of shipping |
- consolidation - specializing - decomposition - owning or using steel - |
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Explain the two types of risk mgmt areas in shipping and ways to hedge risk |
Operational: Freight, revenue, costs and expenses Ownership: price fluctuations, accidents, losses Hedging: time charter, bareboat charter, FFAs |
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What are the general factors of competition law? |
- prohibited = price fixing, market sharing, capacity mgmt -exception = arrangement leads to an improved customer situation |
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What is the purpose of competition law? |
- to ensure that the transport sector operates as competitive as possible to the benefit of the consumer - failure to comply results in fines |
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What is the difference between a registered and disponent owner? |
- various rights and responsibilities/liabilities are associated with the shipowner - the term may be usedfor the entity responsible for the day to day running of the ship/company - the liable party in the contracts of affreightment, charter party - the person who initiates the operation, mgmt and carrier of financial risk |
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Define Part Owners |
- the capital requirements for acquisition and operation of ships is normally too big to be met by individuals = partnership - - joint and severally liable for debts resulting from the shipowning business |
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What are the duties of the shipowner? |
- the owner and operator are often but not necessarily the same party - the formal owner may delegate his authorities to others - if the transfer of duties is extensive, the other party may assume certain shipowning liabilities - statutory liabilities of registered owners cannot be delegated |
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What are the owners functions? |
- operations, technical, purchasing, crewing, marketing, chartering, claims, accounting compliance - bordering to a bare boat charter relationship is all these functions are being transferred to the manager |
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What are the duties transferred under a ship mgmt contract? |
- technical, commercial mgmt - crewing - liability = does it correspond to the outsourced function? can the manager be held liable? |
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How are duties delegated? |
Technical mgmt: BIMCO SHIPMAN Commercial mgmt: Pooling Agreements - ISM code: An international standard for safe mgmt and operation of a ship and pollution prevention - company under the code is any party assumed responsibility for the operation of the ship. |
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What are FFAs? |
- a financial contract which enables you to agree to a freight rate in the future - standardized - cash flow from contracts will compensate for future market rate vs contract rate |
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Why use FFAs? |
- important supplement to physical business -Hedging: reducing exposure against future rates - Speculation: take on exposure against the freight market - Price Discovery: valuation of contracts, budgeting, project valuation - liquidity and standardization makes it easy to enter into and exit contracts |
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What is the Baltic Exchange? |
- lond based institution publishing indices on several dry and wet freight rates. - the Baltic Index is the average based on the value assessment from a set of panel brokers |
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How are FFAs settled? |
- cash settlement during delivery period against an index - buyer receives money if average index is above contract price - seller receives money is average index is below contract price |
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Which parties are involved in the Sale and Purchase of vessels? |
- investors, buyers, sellers, managers, brokers, banks, ship registries, classification societies, guarantor/parent company, charterers, shipyards, lawyers, agents notaries, consulates |
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What are some strategic considerations for the purchase of a new vessel? |
1) Newbuilding: New and modern vessel, building process takes time, risk of construction failures 2) Secondhand: vessel is old and needs upgrades, ready immediately, has been in operation 3) Financing: bank financing, sale/lease back, equity |
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Name way to expand your fleet/capacity |
- purchase second hand vessels - entering into newbuilding contracts - purchase newbuilding contracts - reconstruction or extensions of ship - acquisition of ship owning companies - pool agreements - long term T/C or BB charters
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What are the main elements discussed in a ship building contract? |
- description of the ship - price, payment terms and financing - subcontracts - charge orders - the building period - tests and trials - delivery - default - options |
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Who are the parties to the T/C party/Period market |
- owner/disponent owner/chartered owner - charterer |
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Who can a charterer be? |
- a cargo owner, an operator, shipowner in need of additional tonnage - a disponent owner or commercial manager, pool manager, the seller of a vessel in a "sale and lease back" arrangement. |
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What are some common elements in a T/C form? |
- the partners, vessel, cargo capacity, equipment, speed and fuel consumption, period of hire, delivery and redelivery procedures - cost allocation btw charterer and owner - charter hire - payment/late payment/cancellation/guarantees, the adjustment clauses, offhire and bunkering - cargo restrictions, trading limits, sublets, Bill of Lading Extensions = options in favour of owner or charterer, purchase options |
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What are the 5 general characteristics of Pools? |
- similar tonnage - joint marketing - negotiation of freight rates - central administration - centralization of incomes and voyage costs |
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What is the spot market? |
- many ways to classify the freight market - liner market - tramp market - liquid tanker market - dry bulk market - neo-bulk market - spot chartering - period fixtures |
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What are the fundamental features of a Voyage Charter Party |
The Ship: named or unnamed, type, cargo capacity, leading/discharging equipment Time for and Performance of Voyage: time factor, when should loading commence? performance or voyage deviation Ports/Places The Cargo The Loading and Discharging Process: distn of expenses, laytime, demurrage, and dispatch Freight Allocation of Expenses |
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What is a Bill of Lading? |
- the "carrier"- contracting and performing carrier - underlying sale and BL - procedure of delivery of goods to the carrier - the liability of the carrier - description of the goods in the BL |
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Seaway Bills |
More simple and informal than BLs |
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Cargo Receipts |
- a BL and a seaway bill may be issued in relation to a voyage charter party and in situations where there is no voyage charter party involved. |
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What is a Bill of Lading? |
3 Legal Functions: 2) Document of Title: Who owns the cargo and is entitled to collect/sue 3) Evidence of Contract of Cargo: sets out rights and liabilities of the parties to the contract |
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What are the main types of B/L? |
1) Order BL 2) Straight BL 3) Seawat Bill |
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Explain an Order BL |
- a BL which specifies the name of the shipper and carrier but states that consignee is "to order" allowing sale of goods and endorsement during the voyage but BL must be presented to collect |
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Explain a Straight BL |
- specifies the name of the shipowner, carrier and consignee but is intended to require production of BL to allow collection |
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Define Seaway Bill |
- specifies the names of the shipowner, carrier and consignee but presentation not required to collect goods |
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What are things to look for in a BL? |
- who signs and on who's behalf - owner's and charterer's name or logo on the front - identity of carrier/demise clause on back of BL - is the owner/master obligated to sign "clean BLs as presented"? |
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Can a master refuse to sign BL? |
- refusal under a clean bill may result in a breach of contract |
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Under what circumstances can a master refuse to sign a BL? |
- BL contains extraordinary terms - load port incorrectly stated - disport is out CP voyage terms - BL quantity is clearly wrong - BL is incorrectly dated |
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What are the four principle consequences for choosing to register a ship in one state over another? |
1) tax, company, and financial law 2) compliance with maritime safety conventions 3) crewing and terms of employment 4) naval protection & political acceptability |
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What are key influences in shipping demand? |
- the world economy - seabourne commodity trade - average haul - random shocks - transport costs |
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What are key influences in shipping supply? |
- world fleet - fleet productivity - shipbuilding protection - scrapping and losses - freight revenue |
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What are the four types of demand in shipping? |
1) change in demand for a particular commodity 2) change in source from which source of supply of commodities are obtained 3) relocation of processing plant which changes trade pattern 4) change in shippers transport policy |
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Who are the 4 main groups of decision makers regarding ship supply? |
1) Ship owners: order new ships, scrap old ships 2) shippers/charterers: may become shipowners themselves or influence shipowners to issue time charters 3) The Bankers: influence investment and scrapping in weak market 4) Regulatory Authorities: legislation affects transport capacity of fleet |
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What are the main reasons to scrap a ship? |
- age - technical obsolescence - scrap prices - current earnings - market expectations |
