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“Singapore’s ‘Bunker Monkeys’ – will they never learn?”

April 2, 2014
 
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Issue 8 - April 2014

Welcome to the Easter 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 kicks off with your editor’s take on Singapore’s ‘Bunker Monkeys’. Essentially, bad people who do dumb things to make a fast buck and invariably get caught in a country that has a zero tolerance for crime. So why do it? Well, there’s big money involved and perhaps fines and loss of bunker licenses are not enough of a deterrent? So what next to preclude bad bunkering behavior in the Lion State? Read on to find out more about the MPA’s plan to solve a still significant problem which is impacting on Singapore’s reputation and shipowner’s and time charterer’s pockets.

Next on offer is an article from SEAsia’s GM and Director, Kunal Pathak, who has recently done some research on NPK fertilizers shipped in bulk. Kunal’s research turned up some interesting facts about NPK and its propensity to react to any heat source in a cargo hatch due to a phenomenon known as Self Sustained Decomposition (SSD). Never heard of it? Well it seems that a lot of other people haven’t either – including Masters and ships’ crews – and the risks are such that product knowledge and control must be utilised throughout the entire carriage exercise.

Our third article provides a quick recap on the BI/SeaProf Key Elements of Shipping course just completed in Singapore. Packed out again with 41 participants from leading Singapore based shipping companies and service providers. Feed back was excellent with the only complaint being “not enough time, more please”. SeaProf’s response is that there will be a Key Elements of Chartering course in Singapore from 14-16 July.  SeaProf are also looking hard at producing a Key Elements of Offshore and Energy course to meet demand. Oh, yes, and KES will run again in October 2014!

Our fourth article is from our Senior Claims Exec, Oliver Rentzow, who explains what to do if cargo is uncollected and storage and handling charges are mounting. There’s a solution but caution is required to ensure success and Oliver tells us how.

Finally, well sorry, no ‘meet the network’ article from SEAsia this month as the ‘chosen ones’ seem to be snowed under with work. Never mind, your editor was sent a funny story this morning that is purported to be an extract from that well known Johannesburg news journal, “The Star”. Is it true? Well, based on the sometime interesting behavior exhibited by our friends in the African continent, it could be especially when one considers that old ‘journo’ adage, “Never let the truth get in the way of a good story.” Read on and laugh or, if your ship is registered in this country, you can cry.

Ancient Mariner

Singapore’s ‘Bunker Monkeys’ – will they never learn?

 

Singapore is rightly proud of its squeaky clean image in a part of the world where dirty deals at high levels are unfortunately still endemic.  Not surprisingly, Singapore’s bunkering industry - which serves the many thousands of vessels transiting the Malacca Straits and with 2013 sales of 42.7 million tons of fuel to 37,000 vessels – has therefore been an object of close Government scrutiny for many years.

Why so? Well it’s easy to cheat when delivering bunkers from small bunker ships and barges to oceangoing vessels at Singapore and even easier when delivery is to what what is commonly known as the OPL (outer port limits) area. Bunkers are usually sold on weight but delivered by measuring volume which can be deliberately manipulated by increasing bunker temperature (so it expands and then lying about the temperature) as well as by introducing compressed air into the bunker line while loading (known as the Cappuccino effect) or simply by tank measurement falsification or even the addition of toxic waste to bulk up the bunker delivery quantity.

It’s all been done in Singapore and numerous people have been caught and have lost their bunkering licenses and have been heavily fined as well.

Crazy? Yes, but due to high bunker prices, so is the big money which can be made from cheating. Worse, the ship’s crew can often part of the fraud because it is not unusual for Chief Engineers to fiddle their daily main engine fuel burn figures and put the balance aside into a secret on board tank for later cash sale to a so called ‘oily bilge slop’ buyer.

So who’s being cheated? Well ship owners of course as well as time charterers who are required to pay for a ship’s fuel during the C/P term as well as owner’s claims for engine damage if the bunkers are contaminated.

It’s all a nasty business but Singapore’s MPA has fought back with the implementation of comprehensive controls which include the enactment into law of the “Singapore Standard Code of Practice for Bunkering – SS 600”. The Code includes the procedures for pre-delivery, delivery and post delivery activities. The formal licensing of Singapore bunkering companies and the training and assessment of bunker surveyors is also a key feature of the MPA’s quality and regulatory control plan.

Singapore’s latest ‘no cheating’ tool is to legislate the mandatory use of approved and sealed (tamper proof) “mass flow meters” on board all bunker ships and barges which operate out of Singapore. Full details of the mass flow meter approval and implementation date, widely expected to occur before the end of 2014, will be announced by the MPA during this month’s Maritime Week in Singapore.  

But here’s the big question: what is the proven efficiency and reliability of such equipment and will it provide the deterrent effect necessary to stop the cheating? Part of the answer lies in the name “mass flow meter” (also know as “Coriolis flow meters”) where the word “mass” refers to this type of meter’s ability to measure weight as well as volume (unlike “volumetric flow meters” which have been around for decades).

OK, so “mass flow meter” accuracy will be much better but will these units be able to deal with the detection of Cappuccino bunkers? Some manufacturers claim it will but there are views to the contrary which relate to the noise level created by Cappuccino bunkers being loaded on board and its interference with a mass flow meter’s signal processing system. Time will tell.

So will mass flow meters put a permanent lid on all bunker fraud in the Lion State? Sorry, but they probably won’t because bad behaviour and greed are still out there as evidenced by the recent spate of bunker license offences and  MPA cancellations. These ‘bad apples’ (as detailed on the MPA’s website) included Excel Petroleum Enterprises, Lian Hoe Leong & Bros. in January of this year followed Coteam Petroleum Trading in the past few days. Their offence? They allowed other unlicensed bunkering companies to use their Bunker Delivery Notes  (which included their letter head and bunker license details) for the purpose of delivering bunkers and facilitating illegal transactions.

In summary, ‘bunker monkeys’ are still afoot in Singapore and will no doubt continue their fraudulent activities even in a highly regulated market and despite the installation of mass flow meters. The answer? Utmost vigilance which includes the appointment of reliable and licensed bunker suppliers and even more reliable and certificated bunker surveyors to protect the interests of both ship owners, time charterers and their long suffering insurers.

Not sure how to avoid being ripped off? Give SEAsia a call and we will be pleased to provide practical advice and assistance.

NPK Fertiliser (UN 2071) and Carriage by Sea: hazardous cargo? 

NPK fertilisers, often considered as a safe cargo, are ammonium nitrate based and are composed of three main nutrients being Nitrogen (N), Phosphorus (P2O5) and Potassium (K2O). However, as illustrated by the smoke in the attached photo, serious problems may occur due to the presence of ammonium nitrate; a substance which is listed under the UN Recommendations on the Transport of dangerous Goods. This article has therefore been prepared as a SEAsia Loss Prevention Advisory for vessels involved in the bulk carriage of NPK fertilisers by sea.

NPK fertilisers are considered to be thermally stable, not combustible and are not prone to self-heat dangerously under normal conditions of storage and transport. Nevertheless, when exposed to an external source of heat (e.g. cargo hold lighting fixtures or portable lamps) a phenomenon known as Self Sustained Decomposition (SSD) can occur.

The SSD/decomposition process is exothermic (heat is released) and is accompanied by the production of copious quantities of fumes containing water vapour and deadly toxic gases such as oxides of nitrogen, hydrogen chloride, ammonia and chlorine. This can quickly lead to a series of catastrophic events including the destruction of the cargo and even the total loss of the vessel.

The exothermic reaction does not consume oxygen. Thus, starving the cargo spaces of oxygen – by use of a vessel’s fixed CO2 cargo hatch fire extinguishing system - cannot control the reaction and resultant heat. The IMSBC Code (2013 Ed) therefore advises that cooling with “copious” amounts of water may be necessary. However, mariners all know that once you pump in copious/large amounts of water in the cargo spaces of a bulk carrier, the next thing problem will be a dangerous loss of vessel stability due to free surface effect.

Once SSD is initiated, temperatures can reach up to 500oC and the associated decomposition may spread throughout the remaining cargo inside the cargo hold with the gases produced being toxic to humans. Further, as the cargo decomposes, the residue left may be only half the mass of the original cargo, which may have a significant impact on the vessel’s stability and trim.

Faced with all of these serious risks, the only certain method of controlling the dangers which can arise is to optimise and action both pre-chartering and shipboard loss prevention measures. In other words, to make sure it doesn’t happen.

Photo 1:  Cross section showing different phases of partially reacted NPK Fertiliser during SSD. Source (Edinburg Fire Research) 

SEAsia’s recommendations to P&I Clubs and their members – based on the IMSBC Code precautions, read together with UN and IMDG Code data – are as follows: 

  1. Shipowners (including time charterer disponent owners) must ensure that voyage charter terms for the carriage of NPK include specific provisions relating to the shipper’s obligation to provide a Materials Safety Data Sheet (MSDS) prior to loading.
  2. NPK cargo should only be accepted for loading if the shipper’s MSDS states that the “UN Trough Test” results for measurement of the SSD/decomposition rate “are not greater than 0.25 m/h (meters per hour)”.
  3. NPK cargo holds should be kept free of all sources of heating including cargo lights, heating systems, steam pipes, electric motors, live electrical cabling and naked flames. Any and all potential sources of heat/electrical power must be positively isolated e.g. remove or disconnect fuses.
  4. No welding, burning, gas cutting, or other operations involving the use of fire or naked flames should be allowed in the vicinity of the cargo spaces.
  5. No Smoking signs to be posted both on deck and in the cargo holds along with actioning vigorous enforcement when stevedores are on board.
  6. Any cargo contaminated with oil or fuel must not be allowed to remain in the cargo holds.
  7. All members of the ship’s crew must be fully advised of the potential dangers associated with NPK cargo so as to heighten awareness as well as to understand their role in the ship’s emergency damage control and containment plan.
  8. Precautions should be taken to ensure no penetration of NPK cargo into other cargo spaces, bilges, stool spaces etc. so as to ensure that SSD, if initiated, can be confined.
  9. NPK cargo temperatures must be carefully monitored and recorded during the voyage as this can give an early indication of SSD and facilitate immediate crew response along with alerts to owners, shore based authorities and SSD control experts.
  10. If SSD is initiated, the crew involved in controlling the emergency should wear breathing apparatus so that the toxic fumes are not inhaled. The accommodation space air conditioning system should also be switched to internal circulation mode only and vessel should steer a course to ensure the wind takes the toxic fumes away from the accommodation.
  11. If any of the NPK cargo has been subjected to SSD, the residue will usually cake and can set like concrete. It is also highly corrosive to the ship’s structure. Every effort should therefore be made to safely discharge the residue as a matter of priority just as soon as the vessel enters port. 

Looking at some of the past incidents related to the carriage of NPK Fertilisers, it is evident that ship owners, their Masters and crews are often not aware of the dangers associated with NPK fertiliser cargo. Careful reference to the IMSBC CODE, the IMDG Code and the UN CODE are therefore essential to ensuring a safe and loss free voyage. We would also draw attention of our readers to the publication “Guidance for Sea Transport of Ammonium Nitrate based Fertilisers”.

Key Elements of Shipping course sails home again

 

The twice yearly appetite for the BI/SeaProf Key Elements of shipping course seems to be insatiable with the 24-26 March course selling out for the 8th time in Singapore. The only complaint heard? “Not long enough, can we have more please?”

The well known companies attending included Wilhemsen, Odjfell, Nordea Bank, DNB Asia, Fearnleys, Jardine Shipping, Rickmers Shipping, Monsoon Martime, Bernard Schulte, United Ocean Ship Management, NYK Group, Sea Consortium, Dualog Singapore, PSA Corporation, Sentinel Marine, M3 Marine, Siglar Offshore and several others.

As intended, the majority of course attendees were relative newcomers into the marine industry along with a significant number of experienced managers and executives seeking to expand their knowledge of the different segments of the business of shipping. Oh yes, we also welcomed the Managing Director of a large shipping company who attended primarily to see if KES would be a good course for his staff. His verdict?  A definite “Yes” and the next KES course in October 2014 is already in planning with course dates to be set very soon.

The course leader was Assoc Prof Cathrine Bjune from the BI Norwegian Business School BI based in Oslo. BI’s modern and dynamic campus provides high end educational services to over 20,000 enrolled graduate and post graduate students. Norway is of course a world renowned centre of excellence for maritime business and technology, including both commercial and offshore shipping, and this specialty is reflected in BI’s focus on the maritime world.

Course participants were provided with topical presentations on the many facets of ship owning and management, followed by case study sessions to facilitate intensive learning by way of group work. Assessment was accomplished throughout the course which then culminated in a session where groups were required to summarise and present the course learning outcomes and their ‘take away’ knowledge. Results were positive with all participants being eligible for the presentation of a BI Certificate of Achievement.

Course speakers included Capt Robert Gordon, Chairman of SEAsia P&I Services Pte Ltd; Asst Prof Dr Jasmine Lam, Director of Maritime Studies at NTU; Raja Swaminathan and Espen Abrahamsen from Fearnleys;  Capt Michael Elwert, Group Director of the Thome Group; Tom  Zachariassen from Nordea Bank; Djeni Rolana, Shipping Consultant; Geir Fugelrud from DNV; Stein Kjølberg from Jotun; Gunnar Haug from Ulstein and Kunal Pathak from SEAsia Claims Services.

During Prof Bjune’s stay in Singapore, the many years of hard work by herself and her BI colleagues - in collaborating with the Nanyang Technological University (NTU) on the provision of maritime education - was honoured by the award of the Norwegian Business Association (NBAS) annual prize for excellence.

Regrettably, the 2 day Key Elements of Chartering course (which was intended to follow the 3 day KES course) had to be postponed due to insufficient participant uptake. However, a number of KES participants confirmed their interest in attending the KEC course which has now been re-scheduled for 14-16 July 2014 and has been expanded to a 3 day course. Other areas of interest were for more about the offshore industry and the plan for later this year is to offer a 3 day Key Elements of Offshore and Energy course as well.

SeaProf, as executive short course producers and managers for BI in Singapore and the Asian region, would like to thank all of our speakers and participants who helped to make the KES course last month such a great success. Photos will soon be available on the SeaProf Facebook page and will later be posted on the SeaProf website as well. 

What should you do if a Consignee fails to take delivery of cargo?

Shipping lines and freight forwarders often face the problem of a consignee’s failure to collect their containerised cargo. Containers and their cargo may be abandoned for a variety of reasons: the consignee may face financial difficulties (including bankruptcy), the cargo may be damaged or the consignee has simply has lost interest in the goods to be delivered (especially if he has not paid for them and the market price has dropped). If so, the goods and the containers will remain at the intermediary’s terminal incurring storage and handling charges.

A shipment is deemed to be “unclaimed” when, after a reasonable period of time (e.g. after the “container demurrage free period”), the intended consignee has shown no intention to take delivery.  If this should occur, it is essential to be pro-active in resolving the problem. SEAsia’s recommendation is that you should do the following without delay:

(1) Speak to your customers (both the shippers and the intended receivers if known) and request immediate instructions to either change the name of the consignee or destination and arrange for re-shipment. Or clarify if the cargo has been abandoned.

(2) Notify your liability insurers promptly and provide all necessary information including the details of the cargo as well as contacts for your destination agent and customers.

(3) Ensure your destination branch or agent keeps clear records of all costs in relation to the unclaimed shipment. Then inform your customers of those charges in writing.

(4) Assess storage costs and arrange more economical storage if possible so as to meet your legal obligation to minimize any costs and associated loss.

According to the terms of most Bills of Lading, if the consignee fails to take delivery of the goods within a stipulated period of time (e.g. 30 days from the date of expiry of agreed storage time) the shipping line or freight forwarder may sell, destroy or dispose of the goods and apply any proceeds of sale to reduce or settle the monies due to him from the cargo owner.

In particular, the Bill of Lading terms and conditions may grant the carrier a lien on the cargo by which they may seek to recover the costs for storage, demurrage, freight, handling charges, etc. To recap, a lien means the right to retain possession of someone else's property as security for a debt. This right must be exercised very carefully in order to avoid claims for unlawful detention of the goods. Further, this is a complex legal issue such that it would not be wise to proceed without first taking professional advice.

At common law, a sea carrier has a lien for unpaid freight. However, the common law right of lien is very restrictive. In the maritime context, it is only for unpaid freight, general average and the costs incurred in preserving the goods.  Moreover, it can only be exercised against the particular consignment over which the freight is outstanding.

With regards to freight forwarders, the lien entitlement is even more limited as the law recognises no general right of lien to a “mere bailee for reward”.

Because of the aforementioned vagaries in the common law, shipping lines and freight forwarders usually create a contractual right of lien in the Bill of Lading terms. However, there are some important points to remember so as to ensure the contractual lien does the job intended:

First, there can no lien if no quantifiable debt is due. You must therefore take all existing credit terms or payment conditions into consideration before taking a lien action. This is because a mere claim or dispute is not a quantifiable debt.

Second, you must retaining possession of the goods as this is the essence of lien. This can be achieved through your agent or subcontractor but exclusive control must be present.

Third, you must communicate your exercise of a lien to the person whose property is to be held. We suggest putting your demand in writing together with a specific reference to the Bill of Lading clause you wish to reply upon.

Since the common law lien is very restrictive, a good contractual lien clause will therefore cover as many types of sums due as possible. Basically, the words "any amount due" or "all sums payable", would be sufficient to cover all other charges in addition to unpaid freight.

A contractual lien is only effective against the customer with whom the contract was made and not against anyone else. Your customer however may not be the actual owner or consignee of the goods. The legal doctrine behind this problem is known as the “privity of contract” principle. It essentially confers rights and imposes liabilities only on the contracting parties. Please consult your liability insurers or their claims correspondents to seek advice against whom you should exercise your lien in your particular case.

Two additional notes: 1. Do not disregard the local law and regulations. Not all countries recognise a right of lien. 2. Do not forget that you have a continuing responsibility to care for the goods under lien and may therefore be liable for loss or damage to them whilst in your custody.

This brings us to the final issue, namely if and when you may to sell the goods. Please note that incorporating a contractual lien into your B/L terms does not also give you the automatic right of sale of the goods being held. Accordingly, it is also common for a lien clause to include an express right of sale.

Recommendations before disposal/sale action: 1. Use extreme caution before exercising a  contractual right of sale so as to avoid conflict with local law. 2. Do not sell any unclaimed cargo without the express approval of your customers or before consulting your insurers. 3. If your customers have agreed to abandon the unclaimed cargo for your disposal, ask them to put their agreement into writing inclusive of the provision of a full indemnity (SEAsia can help you with this) and provide you with the original Bill of Lading.

In conclusion, time is a key factor when dealing with uncollected cargoes. Your costs/losses can only be minimised if you start the disposal process for uncollected goods just as soon as contractually possible after the vessel’s arrival and cargo discharge. Another key factor is to seek early professional advice from your liability insurers and their claims correspondents/legal advisors just as soon as you believe you may be facing the problem of uncollected cargo. SEAsia Claims Services will be pleased to assist by providing recommendations and practical advice.

Extract from The Star ( Johannesburg ):

"The situation is absolutely under control," Transport Minister Ephraem Magagula told the Swaziland Parliament in Mbabane . "Our nation's merchant navy is perfectly safe. We just don't know where it is, that's all."

Replying to an opposition MP's question, Minister Magagula admitted that the landlocked country (Africa’s smallest nation) had completely lost track of its only ship, the “Swazimar”.

"We believe it is in a sea somewhere.  At one time, we sent a team of men to look for it, but there was a problem with drink and they failed to find it, and so, technically, yes, we've lost it a bit”.

“But I categorically reject all suggestions of incompetence on the part of this government.  The Swazimar is a big ship painted in the sort of nice bright colours you can see at night.  Mark my words, it will turn up.  The right honourable gentleman opposite is a very naughty man, and he will laugh on the other side of his face when my ship comes in."


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