Steve's 3rd maritime quiz answers

1) A bulkcarrier of 180,000 DWT would be called what type ?
Bulkcarriers of 180,000 DWT would be far too large to navigate through the Panama Canal, as the maximum width for a vessel to get through the Miaflores Lock system is 33.5 metres. Currently this means a bulkcarrier of more than about 79,000 DWT will be unable to go through the Canal. A wider lock system is currently under construction, due to be completed by 2014. When it is completed, the term "Pananax" will considerably increase. To see the latest progress with the expansion project, CLICK HERE. But currently, once larger than this size, bulkcarriers are termed "post-panamax" or "CAPESIZE" because to sail between the world's two largest commercial oceans (the Atlantic and the Pacific), will require sailing round the Cape of Good Hope in South Africa, so a 180,000 DWT bulkcarrier would currently be termed CAPESIZE. See our page on bulkcarriers to learn more.

2) On vessels subject to SOLAS, the SMC (Safety Management Certificate) is one of 2 required documents to show compliance with the ISM regulations, what is the other one ?
The SOLAS Convention concerns itself with the safety of ships at sea in order to protect those who work and or otherwise travel there, hence its full title of Safety of Life at Sea Convention (first brought in after the TITANIC disaster of 1912). It has considerably expanded and developed, with the introduction in 1998 of mandatory procedures being implemented for all activities on board. The certificate that is normally kept on the vessel to prove the vessel has complied with the requirements of the SAFETY MANAGEMENT procedures is the S.M.C. (Safety Management Certificate), but a second important document is the DOCUMENT OF COMPLIANCE (D.O.C.) normally kept in the offices of the shipowner. It is only when both certificates are validated that vessel is deemed to be in compliance with the Safety Management procedures within the SOLAS Convention.

3) The international system for regulating charter rates for crude oil tankers is known as ?
Worldscale is a unified system of establishing payment of freight rate for a given oil tanker's cargo. Worldscale was established in November 1952 by London Tanker Brokersí Panel on the request of British Petroleum and Shell as an average total cost of shipping oil from one port to another by ship. A large table was created. The same scale is used today, although it was merged with the American Tanker Rate Schedule (ATRS) in 1969. Worldscale is produced by Worldscale Association (NYC) Inc. for the Americas and by Worldscale Association (London) Ltd. for the rest of the world. The freight for a given ship and voyage is normally expressed in a percentage of the published rate and is supposed to reflect the freight market demand at the time of fixing.
In negotiating a price to pay, the table is referred to as WS100 or 100% of Worldscale. The actual price negotiated between shipowner and charterer can range from 1% to 1000% and is referred to respectively as WS1 to WS1000, depending on how much loss the first is willing to take on that voyage and how much the latter is willing to pay. If a given charter party settled on 85% of the Worldscale rate, it would be expressed as WS 85. Similarly, a charter party set at 125% of the Worldscale rate would be expressed as WS 125.

4) What is the maximum protection against pollution liabilty that the mutual P&I clubs now offer?
The liabilities that shipowners may incur arising from their ownership of the vessel could be enormous, especially with large, ocean going vessels. Historically, the owners of these vessels have sought to protect themselves on a mutual basis (whereby every "member" contributes to each other's losses). Clearly, with some liabilities, the potential loss could be too great for such direct contributions from all other members, so over a 100 years ago, the larger P&I clubs came to an agreement to "pool" large losses between the various clubs (commonly called the International Group Pooling Arrangements), but even that could prove inadequate, faced with an enrmous loss, so the group of P&I clubs have, over many years, purchased a single reinsurance programme to protect them all against the "big loss", should it ever occur. Although this reinsurance programme goes up into the billions of US dollars for most potential liabilities, it has been impossible to find enough market to cover pollution liability reinsurance much above $1,000,000,000, so the clubs themselves have had to impose a limit of that $1 billion on their membership for cover against pollution liability. In reality, given that shipowners can (in most circumstances) LIMIT their liability under international conventions, the probability of any one loss ever reaching this figure is extremely remote, but nevertheless, the limit of $1,000,000,000 has had to be imposed on all shipowning members of all the International Group clubs.

5)The deadweight of a vessel indicates the difference between the Load Displacement and and the Light Displacement. What does the Gross Tonnage of a vessel indicate ?
Gross Tonnage is the only measurement of vessels that is governed by an international convention (The Tonnage Convention 1969), and its pupose is provide information on the volume of enclosed space within the vessel. Therefore Gross Tonnage tells us nothing about the weight of the vessel or the maximum weight of cargo the vessel can carry, at all ! It simply measures how much SPACE there is within the vessel. As such, it is really explaining the comparitive sizes of vessels. As Gross Tonnage is the only measurement where there is international agreement on its calculation, it is the measurement used to govern all other international conventions and rules, where vessel size is important, such as the LLMC Convention, the CLC and Fund Conventions, as well as the Hague, Hague/Visby and Hamburg Rules. Although based on the cubic capacity of the enclosed spaces within the vessel, Gross Tonnage calculation is rather more complicated, and reference to the Tonnage Convention (1969) should be made to see the exact method of calculating the Gross Tonnage of any vessel.

6) The costs of membership to a mutual P&I "club" are called ?
Protection & Indemnity cover for the larger ocean-going vessels is unlike most insurance, in that it is a mutual protection among the "member" shipowners. This mutuality fundamentally alters the relationship between the protected shipowner and his "insurer", as each "member" is also acting as a proportionate insurer of the other members at the same time as being protected themselves. As a result, the members do pay "premiums" for their cover, as they would with normal insurance cover, but instead, pay "CALLS", because each member can be "called upon" to contribute to other member losses. Annually, each member has to be an advance call to remain a member of the club for the following 12 months, but may subsequently be called upon to pay more, should the club's funds require additional contributions from the membership. Such additional funds are termed "Supplementary Calls" and all members are obliged to pay such calls upon demand of the club. Should a shipowner ever want to leave a P&I club, then to protect the other membership, that shipowner may be required to pay a "release call", to adequately cover any likely future supplementary calls on those years that the shipowner was a member of the club.

7) What is the one liability that there can be limited cover offered under Institute Time clauses - Hulls marine hull insurance ?
Marine hull insurers are not (generally) liability insurers, as their expertise is more focused on physical loss or damage losses incurred by shipowners to their vessels. Most liability losses of shipowners are covered by their Protection & Indemnity cover. However, when the whole concept of modern liability first came about (in the mid-nineteenth century) P&I clubs did not exist, and shipowners, fearful of this new potential exposure, asked their marine hull insurers to offer protection from such liabilities. Hull insurers however realised the potential for huge losses, if they were to provide "liability" protection, so initially refused, and then could only eventually be persuaded to offer protection against one specific liability. Even that one was specific and only to limited extent, ie collision liability of the insured vessel to other vessels. Note that the liability overage offered is only following a collision with ANOTHER VESSEL. Liability arising from hitting other things (fixed and floating objects) is NOT covered. Even this one liability coverage was further restricted only up to the insured value of the insured vessel AND a requirement that the shipowner would have to be "self-insured" for 25% of all such liabilities (in an effort to ensure a degree of 'due diligence' by shipowners on how they steered their ships !!!.

That concept of only offering 75% (or 'Three Fourths') cover for collision liability to other vessels up to hull insured value has persisted to today, but now with the P&I clubs protecting the other 25% (or 'one fourth') and all liabilities excess of the hull insured value. Most other sets of internationally used hull clauses (such at the Norwegian Insurance Plan or the American Institute Time Clauses) are different in that they will offer collision liability up to full hull insured value (ie "four fourths" cover) rather than the 75% cover of ITC-Hulls and in the case of the Norwegian conditions, may extend the cover beyond liability to other vessels to include damage to fixed and floating objects as well, but such extra cover comes at a price ! Of course, it quite possible to delete cover for collision liability from the hull insurance altogether and seek cover from the P&I insurers in full, but such decisions are governed by the relative costs of doing so.

8) What is the U.S. and Canadian name for what the rest of the world call "Stevedores" ?
Originally derived from the term "along shore men", the United States and Canada use the term "LONGSHOREMEN" to mean stevedores or dock workers.

This begs the question about the word "stevedore" which again is a corruption of the old word "stowadore," is from the Spanish words "estivador," The medieval Latin word "stivator" is another derivation from the same root. Ironically, the first recorded use of the old word "stowadore" was in the year 1788 in a publication called the "Massachusetts Spy", so was itself first offically used when describing the work of American dock workers ! )

9) Oil Pollution Liability is (in most parts of the world) limited by 2 international conventions; the Civil Liability Convention (CLC) and the Fund Convention. Who contributes to the Fund convention ?
The purposes of the Fund Convention are:
To provide compensation for pollution damage to the extent that the protection afforded by the 1969 Civil Liability Convention is inadequate.
To give relief to shipowners in respect of the additional financial burden imposed on them by the 1969 Civil Liability Convention, such relief being subject to conditions designed to ensure compliance with safety at sea and other conventions.

Contributions to the Fund should be made by all persons who receive oil by sea in Contracting States, but in practice, this means that the the oil companies, owning the cargos in the top 30 or so oil-receiving States will pay the vast bulk of contrubutions to the fund.

10) In your own words and in one sentence, please state what "demurrage" is.
The term demurrage originated in vessel chartering (notably voyage chartering) and refers to the period when the charterer remains in possession of the vessel after the period contractually allowed to load and unload cargo ("laytime" or "lay days"). Demurrage refers to the charges that the charterer pays to the shipowner for its extra use of the vessel. Demurrage can be seen to be a form of liquidated damages for breaching the laytime set out in the governing contract (the charter party), to penalise charterers for delaying the vessel.

Anyone who has attended the marine insurance courses run by Steve should have been able to answer all 10 of the above questions correctly. If you wish to know more about such courses then contact us by clicking here.

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