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Issue 16 - December 2014

Welcome to the Xmas edition of SEA Watch with more updates and commentary on what’s happening in the world of shipping and marine insurance.

Dear reader ,

This month's SEA Watch will be the last in its current monthly e-zine format. It has been a privilege to have you all on board and your reader input, as received over the past 15 months, has all been very positive. Outline plans at this time are that SEA Watch and the newsletter produced by SEAsia's alliance partner, C Solutions, will be fused together to create a new joint publication. Further details will be advised to all of our readers very soon.

Our lead article, as written by your editor, provides an update on the new 'Polar Code'. What is it, what’s it for and how it might impact on you? Well it's not about traffic routing for Santa's sleigh. So read on to find out more as well as the reason that Singapore (where the only ice you'll find is in your G&T) has observer status at the Arctic Council.

Our next article reports on important SOLAS amendments relating to Confined Space Entry Emergency Drills. Capt. Kunal Pathak, SEAsia's GM/Director, reminds us that seafarers are still dying from bad air in confined spaces due to lack of knowledge and inadequate emergency preparedness. The new SOLAS regulations are intended to overcome these problems. Take note and ensure they become an integral part of your company's on board ISM Code safety procedures.

Our third article is from SEAsia's transport claims specialist, Oliver Rentzow. The Containerisation of cargo has changed the face of world cargo transport but it has created new and sometimes deadly risks. Read Oliver's update on improvements in container ship and cargo safety which have been facilitated by the new CTU Code as well as amendments to SOLAS soon requiring the obligatory verification of container weights.

Our final article has been prepared by SEAsia's Tony Wong, Master Mariner and Solicitor, stationed in Hong Kong. At first reading, your editor was confused as to why the Chinese courts had a problem with deciding on the proper meaning of the words "should have been delivered" as contained in both the Hague Visby Rules and Art 257 of the Chinese Maritime Code. Read on to discover why and the conclusion ultimately reached by the Supreme People's Court. Do you agree? Please let us know.

In closing, your editor and 'all hands' at SEA Watch and SEAsia in Singapore and throughout the SEAsia network wish you and your family a merry festive season. We look forward to catching up with you in the New Year in a new format and more news and objective commentary on shipping and marine insurance.

 

Ancient Mariner

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The Polar Code: the IMO's new regulatory regime

About a tenth of the world's undiscovered oil and close to a third of its undiscovered gas is thought to lie under Arctic waters. Additionally, the Northern Sea Route along Russia's northern can reduce the distance and fuel costs between Northern Europe and Asian ports by 40 percent. Numerous voyages have already been completed along this route during the summer months and more will follow as the earth continues to warm and the ice caps recede at both poles.

Realising the potential environmental and safety risks, the IMO's Marine Environment Protection Committee (MEPC) has been hard at work for several years in developing a new Polar Code designed to regulate ships and their operation in sensitive polar areas. These efforts have now culminated in the adoption of the International Code for Ships Operating in Polar Waters,commonly known as the Polar Code, with text finalisation to be completed early next year

The Polar Code specifically addresses potential hazards unique to Arctic and Antarctic environments including ice, remoteness and rapidly changing and severe weather conditions. It also provides goals and functional requirements related to ship design, ice class construction, equipment, operations, training, certification and search and rescue.

The Code will become mandatory by way of a new Chapter XV to the SOLAS Convention as well as amendments to MARPOL and its relevant Annexes. The expected date of entry into force of the amendments is 1 January 2017 for new ships constructed after that date. Ships constructed before 1 January 2017 will be required to meet the relevant requirements of the Polar Code by the first intermediate or renewal survey, whichever occurs first, after 1 January 2018.

Under the terms of the Code, ships will need to carry a Polar Waters Operational Manual, to provide the owner, operator, Master and crew with sufficient information regarding the ship's operational capabilities and limitations in order to support their decision-making processes. For ships with planned waypoints in high latitudes above 72 degree, the Code will also include the requirement to apply in advance for a Polar Ship Certificate that defines where and when the vessel may operate.

As to the current impact of the Northern Sea Route on Singapore's role as primary hub port located in the Singapore Straits, one of the world's major sea route 'choke points' (along with the Panama and Suez Canals), statistics show that only 71 vessels used the Northern Route last year with 18,000 vessels transiting the Suez Canal. However, it seems likely that as experience grows in accomplishing Arctic transits – including the rapid development of Chinese ice breaking vessels and skills – that more Northern Route transits will take place.

As for the future, could the number of Northern Route transits ever grow to a point that it could impact on Singapore's position as a hub port for container handling, bunkering, repairs and maritime expertise? It is clear that some concerns exist as evidenced by the fact that Singapore has obtained observer status at the inter-governmental Artic Council. However, based on the Northern Route and Suez Canal transit statistics for 2013 (noted above) as well as the recent and sudden drop in oil and bunker prices, it appears unlikely that there will be any significant decline in Singapore Straits transits and Singapore port visits during the next decade.

In summary, there seems little doubt that earth's atmosphere and oceans will continue to warm due to the relentless outpourings of CO2 and toxic waste from global coal and oil fired generators and industries (28% of which comes from China and 14% from the USA) which are not subject to the same international control as ships are under stringent MARPOL Annex VI regulations. It is therefore a certainty that the polar ice caps and glaciers will continue to melt and that shipping and energy exploration in the polar regions areas will increase proportionately. The Polar Code will help to regulate such activity and hopefully make it safer for ships, their crews and the environment.Regrettably, it will not stop us from destroying our planet.

Capt Robert Gordon

robert@seasia-group.com

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Enclosed Space Entry Drills: will they help to stop crew deaths?

This article is focused on an important and potentially life saving change to SOLAS Chapter III, regulation 19,"Emergency Training and Drills". The amendment will require the ship's crew to conduct Enclosed Space Entry Drills once every 2 months. The amendments to SOLAS, which will come into force on 1 January 2015, are detailed in IMO Resolution MSC.350(92).

In summary, the amendments to Chapter 3 will require crew-members who are a designated as part of the vessel's Enclosed Space Rescue Team to carry out regular drills once every two months and must simulate a rescue from an Enclosed Space. The amendments also lists what needs to be done during the drill from checking the atmosphere of the enclosed space to administration of first aid and resuscitation techniques. The emphasis is on the prompt, safe and efficient rescue of personnel who are in distress due to suffocation or inhalation of toxic vapours. Needless to say, the longer the response time, the more damage will be caused to the brain of the victim and the lower the chance of a full recovery.

Before going any further, it is important to understand the definition of an enclosed space. ISGOTT (International Safety Guide for Oil Tankers and Terminals) at Chapter 10 defines an enclosed space as a space where the air atmosphere does not support human respiration. This could be due to limited openings for entry and exit, restricted ventilation systems and/or spaces not designed for human occupancy.

If you are a mariner, it is not hard to imagine the many shipboard spaces that could be defined as a confined/enclosed space on board a vessel. As such, they must be properly marked to serve as a warning. However, the number and frequency of crew fatalities that continue to occur in enclosed spaces present a clear and urgent challenge that demands the full attention of the martime industry.

Statistics show that over 50% of the crew fatalities, which occur in enclosed spaces involve "would-be" rescuers who entered the enclosed space to rescue other crew members who had collapsed due to lack of oxygen or the presence of toxic gases. The evidence is therefore that ship's crew need to not only follow proper atmosphere testing procedures before entering an enclosed space, but also understand emergency rescue procedures so that a casualty in an enclosed space does not trigger further casualties to the rescue team. Thus, while prompt rescue is essential, it is of critical importance to get the rescue procedures right so as to negate the current rescuer '50% casualty ratio'.

In conclusion, the current Permit to Work/Enclosed Space Entry system (as set out in IMO Res A.1050(27) requires that the atmosphere in the space be tested for not only sufficient Oxygen, but also to ensure that all other toxic gases are below their permissible limits for workers to enter and work inside the space. Further, specified emergency equipment must be placed at the point of entry and a crewmember must standby to facilitate and monitor their entry and exit. The new and mandatory Enclosed Space Drill requirements now complement the existing Permit to Work/Enclosed Space Entry system by ensuring that the crew are able to take prompt, correct and safe action in the event that one of their shipboard colleagues needs to be rescued from an enclosed space.

Ship owners and ship managers need to ensure that their Masters and crews are properly instructed in respect of the above changes to SOLAS so as to ensure the safety of the crew. These new drill procedures should also be incorporated into every vessel's ISM Code SMS manual. Any failure to do so could of course be viewed as a deficiency by Port State Control.

Capt Kunal Pathak

kunal@seasia-group.com

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Container Ship and Cargo Safety: impact of the CTU Code and SOLAS weight verification amendments

The May 2014 edition of SEA Watch included our report on the increasing numbers of containers lost overboard at sea due to improper internal cargo packing and securing which resulted in the cargo breaking loose inside and then impacting on the external container lashings. As reported, this problem has been addressed by the new Cargo Transport Units (CTU) Code that provides detailed guidelines to cargo shippers and freight forwarders on proper loading and securing of cargo inside containers.

In this month’s SEA Watch we would like to highlight other measures that are being implemented to improve container ship and cargo safety. In particular, the IMO’s Maritime Safety Committee (MSC) has now approved long-awaited changes to the Safety of Life at Sea (SOLAS) convention that will require container weight verification as a pre-condition for loading packed export containers on board ships. The approved changes will enter into force in July 2016.

Under declared container weights have been a long-standing problem for the maritime industry as they present a very serious ship stability safety hazard for ships, their crews, other cargo on board. Overweight containers are also a serious hazard to port and terminal workers when handling containers and to the public while on the roads. Further, improper declaration of container weights can also give rise to Custom's concerns along with potential delays and fines.

The amendments to SOLAS stipulate that the shipper is responsible to declare the gross mass (weight) of the container and its contents in the shipping documents, as determined by the use of calibrated and certified equipment.This information needs to be communicated to the line and terminal, through the shipping document, "sufficiently in advance to be used in the preparation of the ship's stowage plan". If the verified gross mass is not available, the container cannot be loaded onto the ship.

It can be readily seen that reliable container weight information will greatly improve the accuracy and reliability of container ship stability calculations. In turn, this will assist in ensuring the safety of the vessel, her crew and cargo during both the loading process and the voyage. In addition to this, the provision of accurate weight information should also impact positively on the proper external securing of containers with respect to the type and strength of the lashing equipment to be utilised and the manner in which securing is accomplished.

In addition to the above mentioned SOLAS container weight information and CTU improvements, the IMO has also asked the International Organisation for Standardization (ISO) to assess other container issues relating to the strength of container corner castings and lashing equipment. Accordingly, the ISO's review of ISO3874, Series 1, Freight Containers, Lashing and Securing and ISO 1161, Series 1, Freight Containers, Corners and Intermediate Fittings – Specifications is now underway. 

On-going improvement is critical to an industry that plans to increase container stack heights on deck with the introduction of larger ships with capacities 22,000 - 24,000 TEU (twenty–foot equivalent units). The associated handling aspects will of course include a massive increase in the volume of containers turning round in a terminal that is already causing headaches and delays around the world.

To maintain and improve productivity, automation has long been in use in the container industry. Containers can now be moved automatically around a terminal almost entirely without the intervention of human hands and minds. As a part of this process, manual twistlocks on containers have been replaced with semi-automatic or even fully automatic twist locks.

Despite these twistlock/securing advances, the human factor may not at present be fully eradicated from the container handling equation. Therein remains a significant problem with respect to human error as well as exposure to danger during the container securing process. Other issues include problems associated with the fact that the use of fully automated twistlocks has sometimes proved incompatible with the dynamic motion and vibrations encountered on board container ships.

As for the future, it is clear that further improvements in container handling and securing are on the way and this is to be welcomed. The International Cargo Handling Coordination Association (ICHCA) has organised a major one-day seminar on this subject, which is being hosted by the world's first automated terminal, ECT Delta, in Rotterdam on 10 December 2014. More information on this key seminar can be found here. For those of you not able to attend, SEA Watch suggests that you familiarise yourself with the CTU Code.You might also wish to take a look at the Marin (Maritime Research Institute Netherlands) report on Lashing at Sea, which you may find here.

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Art 257 of the Chinese Maritime Code: the date on which the goods "should have been delivered" by the carrier and the start of the one year time bar clock.

The carriage of goods by sea, in relation to import and export cargo within Chinas jurisdiction, are governed by the Chinese Maritime Code that came into effect on 1 July 1993. China has not ratified any of the major carriage by sea conventions. However, the provisions of the Code that regulate the carriage of goods by sea are based on the texts of the Hague/Hague Visby Rules and the Hamburg Rules. As such, the law of carriage of goods contained in the Code could be considered as a hybrid regulatory regime subject to the interpretation of the Chinese courts.

In particular, Article 257 of the Chinese Maritime Code stipulates that the limitation period for claims against the carrier with regard to the carriage of goods by sea is one year, counting from the day on which the goods "were delivered" or "should have been delivered by the carrier". As such, Article 257 appears to replicate the wording and meaning of Art III rule 6 of the Hague Visby Rules which provides that "…the carrier and the ship shall in any event be discharged from all liability in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered".

The precise date on which the 'one year time bar' clock starts running is of critical importance. This is because if the parties (e.g. claimant cargo consignee and the carrier/shipowner) have not formally agreed by consensus and in writing to extend the time bar beyond one year or if the claimant has not issued a writ before it expires, then the claim will be extinguished forever and cannot be brought back to life. Good news for carriers/shipowners but a potential disaster for cargo claimants and their cargo insurers (who will usually be pursuing subrogated recovery) if the loss has been large.

The Code’s reference to the date on which the goods "were delivered" refers to the date of actual delivery to the consignee by the carrier. This is an objective fact that is relatively easy to identify. However, the date on which the goods "should have been delivered" must be considered as a hypothetical date of delivery to the consignee. This is deemed to occur when there has been no physical or legitimate delivery to the consignee due to the loss of the cargo or its misdelivery to the wrong party. It is in relation to the misdelivery scenario where a number of disputes have arisen in the Chinese courts as to the date on which the "should have been delivered" time bar clock should start and whether or not the cargo claimant's entitlements have been extinguished if the time limit has expired.

In a case which featured a shipper (unpaid for the goods by the consignee) claiming against a carrier for the delivery of goods without presentation of the original Bill of Lading (Shandong China Packaging Import and Export Corporation Ltd v Hong Kong Hecny Co. Ltd), the Qingdao Maritime Court was of the opinion that the date that the goods "should have been delivered" was the date on which the consignee could have requested the carrier to deliver the cargo by presenting the original Bill of Lading. However, the consignee could not do so because he did not have the Bill of Lading (due a discrepancy in the documents in relation to a letter of credit) such that the carrier could not deliver the cargo. The court therefore held that the date on which the shipper re-obtained the original Bill of Lading from the bank was the date on which the goods "should have been delivered" as it was the earliest date on which the consignee could have legitimately demanded delivery of the goods from the carrier. That date was 20 September 2000, and the Article 257 limitation period of one year should therefore count from that day.

On appeal, the Qingdao Court's decision was overruled by the Shandong Higher People's Court. The Shandong Court found, that as the ship had arrived safely at the nominated destination port, then the reasonable date for the delivery of the goods (once the conditions for delivery, including discharge and customs formalities were met after the ship's arrival) should prevail. As to 'reasonableness', the destination port allowed for 10 days of free storage time. The court therefore held that the reasonable date on which the goods "should have been delivered" and the 'one year time bar clock' started was when the 10 free days ended on 1 April 2000.

In another case, Shanxi Xinghuacun International Trade Company v Air Sea Worldwide Logistics Limited, a similar dispute arose in regard to the delivery of goods without presentation of the original bill of lading. At first instance, the Wuhan Maritime Court held that the date on which the goods "should have been delivered" by the carrier was the day when the shipper re-obtained the set of original bills of lading from the remitting bank. This being the case, the claim was not time barred.

Subsequently, on appeal, the Hubei Higher People's Court upheld the Court of first instance decision and dismissed the appeal of Air Sea Worldwide Logistics Limited. The case then went to retrial before the Supreme People's Court where it was held that the term "should have been delivered" in Article 257 of the Chinese Maritime Code must be applied in relation to what would have occurred in a normal voyage where the goods had been carried to the agreed port of destination, the conditions for delivery had been met in the normal manner and the consignee had collected the goods as normal. Accordingly, this should be the date on which the one year limitation period should start and not a later date on which the consignee was actually able to present the Bill of Lading to the carrier due to a problem with banking documents which were outside the carrier's control.

The Supreme People's Court went on to find that the goods in question had been delivered into the Customs Warehouse on 9 June 2007. From that date onwards the carrier had the physical ability to deliver the goods to the consignee despite the fact he could not legitimately do so without being in breach of the carriage contract. This being the case, it was held that the limitation period should count from that day.

In its judgment, the Supreme Court provided clarification that the day on which the goods "should have been delivered" must be determined in accordance with the terms of the relevant contract of carriage and the carrier's physical ability and not legal entitlement to deliver the cargo upon presentation of the Bill of Lading. Further, that if a Bill of Lading holder did not collect the goods within a reasonable period, this would not stop the limitation period from running. Otherwise, if a Bill of Lading holder deliberately delayed taking delivery of goods and the limitation period did not start counting despite such deliberate delay, this would defeat the purpose of the Art 257 limitation period to the detriment of carriers.

In conclusion, the decisive factor in both cases appears to have been the date on which the goods could have been physically but not legally delivered by the carrier due to the unavailability of a copy of the original Bill of Lading for presentation by the consignee. It is expected that the decision of the Supreme People's Court will provide persuasive guidance to the Chinese courts on the future interpretation and application of Article 257 of the Chinese Maritime Code in relation to the term "should have been delivered" and the date on which the one year time bar clock should start.

By way of commentary, it does seem somewhat unjust that a carrier who has been negligent in delivering cargo under a straight Bill of Lading without first demanding that the consignee present an original copy (so as to confirm his title to the goods and the fact that he has paid the shipper for them) should be allowed to escape his responsibilities on what could be construed as a time bar technicality. However, in fairness, it does seem that the Supreme People's Court was mindful of the necessity to be pragmatic by not creating a potential time bar loop hole for cargo interests who deliberately delayed collecting their goods by not presenting their Bill of Lading.

As for a comparison with English/common law decisions on the same point, our search of the legal texts indicates that the words "should have been" delivered in the Hague Visby Rules do not seem to have been considered by the English/common law courts with respect to the start of the one year time bar clock in circumstances where the goods have not been delivered or have been misdelivered. If any of our readers may be able to advise on this issue, we would be pleased to hear from you.

As a final point, the lesson to take away seems to be this: the one year time bar as incorporated or applied to a Bill of Lading contract whether under the Hague Visby Rules or Art 257 of the Chinese Maritime Code is a powerful defence weapon in the hands of the carrier. Shippers, consignees and their insurers should therefore be vigilant in ensuring that the time bar clock is carefully controlled and later reset by ensuring that the time bar is extended by mutual consent, in writing. Alternatively, that the clock is actually stopped by the issue of a writ. There will be no 'second chance' provided.

Capt Tony Wong Chai Yu

tonywong@seasia-group.com

Capt Robert Gordon

robert@seasia-group.com

 

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