INSTITUTE oF CHARTERED SHIPBROKERS 2015 EditionSHIP OPERATIONS AND MANAGEMENT YS CHARTERED * SHIPBROKERSished by the Institute of Chartered Shipbrokers 85 Gracechurch Street London ECV OAA, U Teleshone: +44 20 7623 111 ‘ed Kingdom, Frail books@esorguk wawrwiicsorguk First published 2015 ISBN 978.1-908823-64.8 Ginstitute of Ci artered Shipbroxers 2015 Al rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying. recording or otherwise without prior penrrission of the publisher and copyright owner Terms of use While the advice given in this book Ship. Operations and Management has been developed using | the best information currertly available, itis intended purely as guidance to be used at the uses own risk No resporsibility is accepted by the Institute of Chartered Shipbrokers (ICS), the membership of ICS or by any person, firm, corporation or organisation (whe or which has been in any way concerned with furnishing of information or data, the compilation or any translation, publishing, supply or sale of the document) for the accuracy of any information or advice given in | the document or any omission from the dacument or for any consequence whatsoever resulting | cirectly or indirectly from compliance with or adoption of guidance contained in the document even if caused dy a fare to exercise reasonable care. Printed by Cambrian Printers ‘Artwork production by Jacamar (wwwjacamarco.uk) Front cover image: Portpictures ii Instiute of Chartered ShipbrokersAndrew Lansdale Contributing Editor and Reviewer The Institute's technical editor comes from a ily, His father served in capital ships in the Royal Navy, Ancrew Larsdale served aboard the three-masted training ship HMS Worcester before going to as a cadet and deck officer in the British Merchant Navy. He came ashore and started in the g sector of the shipping indust’y. He pessed the Institute examinations in October 1972. sea, servin; shipbreking He has worked in dry cargo chartering and tanker chartering 2s well as in ship management anc shipping research. He has plied hs trade ni London, Tokyo and Hong Kong. In 2003, he tured to journalism and has worked as markets editor for Foirplay and as a freelance journalist for Loyel’s List and TredeWinds, He was presented with the News journalist of the Year Award in 2006. In July 2015, he completed 53 years of service in the shipping industry. Apart from writing his hobbies include navigating his smal saling yacht, Saving Grace, around the south coast of England, Ted Zaimis Contriouting Editor Ted is the owner of Alpha & Omega Marine Ltd, dealing with hull and liabilities placements at Lioy¢’ London Markets, anc also consulting and advising on claims and risk management. He is ex Army and, after completing his studies in maritime business and management at Liverpool John Moores University and an LLM Maritime Law at Southampton University, he has been in the Lloyds Market since 2006 He is 2 member of the Institute of Chartered Shipbrokers, the Nautical Institute and the Chartered Institute of Insurers, He has also contributed articles on maritime law and shipping business to Uoya!'s Lis ing Network and Inte lanthly Review. Ship Operations and ManagementForeword Foreword Tony Dizon Former chairman, The Institute of Chartered Shipbrokers Managing a ship and its operation is arguably more important than ‘operating a company And its becoming increasingly important as the years pass. If we look back to the days of sail, 2 ship would typically have been ‘conned by a syndicate of businessmen, They would have waved goodbye to the ship and its Master and crew from the docks of Bristol, Boston or Bombay They knew not when they would see their ship again ‘The Master would take the ships initial cargo 10 its port of destination, unload it on production of an original bill of lading and then look for a cargo for the nexct-leg af the voyage. He would tak to local shipbrokers and would agree a freight or a charter hire to the naxt port There the process would be repeated and the ship's safe would gradually fill up onith the vessefs earnings. The ship's operation was controled by the Master by the winds and a certain element of good fortune. Since a ship and its crew cannot trade forever there came a time when the ship will return to its home port. The crew would be signed off and paid off The Master and the owners would share the profits of the long voyage, which might have lasted Iterally years. Following the advent of what might be called the wireless age, everything changed. The owners were able to become more hancs-on.And this was a power they were never going to relinquish. And since shipowners have neither the tine, nor the inclination to do everything themselves, they must build up 2 staTT of competent managers to successfully operate the vessel. Ships’ Masters, althaugh still hghy cualified, have these days been removed fram much of the commercial decision-making processes, All-enveloping Intemational rules and regulations have concentrated on the safe management of shipping, And the industry has had to sharpen uo its act accordingly Added to this is 2 glodal spread of ownership. Thus educational books such as the Institute of Chartered Shipbrokers' Ship Operatons and Management should be welomed by shipowners. shipbrokers, charterers, agents and cargo factors around the world. Tony Dixon Former chairman of the Institute of Chartered Shipbrokers, iv Institute of Chartered ShipbrokersAcknowledgements Acknowledgements First and foremost. we would lke to thank Tory Dixon for his support and encouragenent in the revision of this book We must also acknowledge the contribution of several industry professionals, among them Nick de Spon, Christos Tsangaris, Natale Hewett, Willam Smper Michael Roberts, Captain Ranganathan Narasimhan and Captain Suresh Bhardwaj who have shared their wealth of knowledge and experience with the hsttute. Special thanke are also cue to Caroline Fossey and Dinah Bromwich in proofreading what is a fairly complicated and industry-focused book The front cover and many other images have been sourced from Danny Comeissen of Port Pictures Ship Operations and Management vContents Contents vi Contributing editors Foreword Acknowledgaments Shipowners, operators and managers |THE SHIP MANAGER 12 STRUCTURE OF SHIPCWNING AND MANAGEMENT ORGANISATIONS 13. SHIPS PERSONNEL 14 ACCOUNTING Is THE MANAGER IS STILL AN AGENT. 16 EMPLOYMENT OF PORT AGENTS The ship 21 INTRODUCTION 22 THE SHIP aa) BASIC SHIP LAYOUT 24 PROPULSION zy EMPLOYMENT OF SHIPS. 26 TYPES OF SHIPS. 27 DECISIONS REGARDINGTHE SIZE OF VESSEL 28 SHIP MANAGEMENT ao SHIPBOARD HANDLING EQUIPMENT 210 RO-RO ACCESS EQUIPMENT Registration and classification 31 REGISTRATION, 32 TYPES OF SHIP REGISTRIES 33 CHOOSING A FLAG CLASSIFICATION PORT STATE CONTROL, NATIONAL INSPECTIONS. CONDITION SURVEYS AND INSPECTIONS, OTHER SURVEYS CONCLUSION \sM CODE Institute of Chartered Shipbrokers311 3.12 THE ISPS CODE THE IEEC Marine insurance 4l 42 43 44 45 46 47 418 THE MANAGEMENT OF RISK HULL AND MACHINERY INSURANCE GENERAL AVERAGE SALVAGE SUEAND LABOUR NAVIGATING LIMITS, WAR RISKS AND SANCTIONS CLAIMS HANDLING PROTECTION AND INDEMNITY Costs and accounting al INTRODUCTION oe DEFINITIONS: ma: SHIP MANAGEMENT COST FUNCTIONS 5.4 BUDGET PREPARATION, 5.5. REPORTING 5.6 THE LAYUP DECISION 7 CONCLUSION Operations 61 INTRODUCTION 62 VOYAGE PLANNING 63 HIRES AND FREIGHT 64 COMMISSIONS: 65 COMMERGAL OPERATIONS: Crews and bunkers Tl 72 INTRODUCTION THE CREW. THE MASTER AND MATES: STANDARDS FOR TRAINING, CERTIFICATION AND WATCHIEEPING (STCW) BUNKERING ECDs Contents 86 89 90 90 oT 102 102 04 los, 117 18 127 128 Be 151 157 159 160 60 6! Ship Operations and Management viiContents 8 Cargoes and geographic factors 177 al INTRODUCTION, 178 82 DRY CARGOES: 178 83 NON-8ULK ORY CARGOES: 180. 84 STOWAGE FACTOR: 181 85 DANGEROUS CARGO 182 86 THE IMO INTERNATIONAL MARITIME DANGEROUS, GOODS CODE (IMDG CODE) 182 87 BILLS OF LADING 185 88 CARGO CLAIMS. 187, 89 LIQUID CARGOES: 187 810 TANK CLEANING 191 Bll PETROLEUM PRODUCTS. 192 B12 CHEMICALS 194 813 LIQUID GAS CARRIERS 194 814 ULLAGE, DEADFREIGHT AND SLACK TANKS ol. 815 GEOGRAPHY AND METEOROLOGY 196 B16 ROUTEING SERVICES 200 B17 LOADLINES: 200 9 Voyage estimating 203 ol INTRODUCTION 204 2 THE LENGTH OF THE VOYAGE 204 a COMMENCING THE VOYAGE ESTIMATE 206 94 TANKERS. 208 95 TIME CHARTER, 208 96 PRACTICAL CALCULATIONS 209 oy VOYAGE ESTIMATE 209 10 The ship manager’s legal relationship 221 10.1 INTRODUCTION 222 10.2 THE MANAGEMENT CONTRACT 222 10.3 LEGAL PROBLEMS 223 10.4 ARREST IN REM 224 10.5 FREEZING ORDERS, ALSO KNOWN AS MAREVA, INJUNCTIONS 224 10.6 FREIGHT AND HIRE PAYMENTS. 225 10.7 DBEAUNG WITH PORT AGENTS. 226 10.8 DEAUNG WITH CHARTERING BROKERS 228 Institute of Chartered Shipbrokers