Shipping Business

SHIPPING BUSINESS - Group One Syllabus

THE SHIPPING BUSINESS ENTITY

Thoroughly understand the concept of Limited Liability as applied to commercial companies.
Understand the differences between private and public companies; conglomerates and multi-nationals.
Understand how companies are organised internally.
Understand the manner in which limited companies are financed, the methods of raising capital and the rewards shareholders may expect.
Understand statutory requirements controlling limited companies aimed at protecting those who deal with them.
Be aware of the differences between vertical and horizontal integration.
Understand the advantages and disadvantages of being a sole trader or partnership rather than incorporation as a limited company.
Understand the principles of Quality Assurance (ISO 9000).
Be aware of the organisations that may test for and grant a QA certificates.

SHIPPING BUSINESS SECTORS

Understand how the original interpretation of the term "shipbroker" has, through the need to specialise, been expanded to encompass alI aspects of shipping business.
For each of the folIowing roles, students should be able to answer these questions:-
  a) For whom does the practitioner work?
  b) What form of contract is there between that entity and the practitioner?
  c) What does the work involve?
  d) What types of documentation does the practitioner normally use?
  e) How is the practitioner paid?

Dry Cargo Chartering

Thoroughly understand the relative positions of charterer and shipowner also the relationship between these principals and the broker(s) involved. 

Understand how each principal may have its own broker, how these may be "exclusive" appointments or "competitive". The position of intermediate brokers. 

Understand the way in which the international chartering market operates, the various prime centres including London, New York, Hong Kong ,Tokyo. Be aware of the continued dominance of the London market and the altered role of the Baltic Exchange in recent years.

Understand the way in which negotiation by the brokers — duly authorised by their respective principals — conduct negotiations leading to a "fixture".

Thoroughly understand the principal differences between a voyage charter and a time charter and understand the basic structure of each type of contract. Be aware of the special role of a bareboat charter.

Understand how brokers are remunerated by a brokerage (commission) based upon the owner's earnings under the charter concerned.

Tanker Chartering

Thoroughly understand the similarities and differences between dry cargo and tanker chartering especially:-

The restricted number of players in this specialised field. Be aware of the meaning of such expressions as "oil majors" and "traders".

Understand the manner in which the market is further compartmentalised depending on the commodities including crude, petroleum products, chemicals, gases, vegetable oils etc. and why each commodity needs a different type of ship.

Understand the way Worldscale operates in some sectors of the tanker trade and the reasons for its use.

Understand those elements in tanker charter parties that are different from dry cargo forms.

Ship Sale & Purchase

Thoroughly understand the respective roles of Buyers, SelIers, Brokers and Valuers.

Thoroughly understand that the market is divided into the trade in second hand tonnage (the most active sector for brokers), new buildings (the most specialised sector) and demolition (the scrap market).

Understand how negotiations proceed and the limited number of specialised forms covering the sale.

Ship Operations and Management

Thoroughly understand the principal role and function of ship management, whether as part of a shipowning company (in-house) or as an independent management company.

Understand the reason why shipowners may prefer to employ independent managers rather than manage their own ships.

Understand the basic structure of a ship management company and how its different functions would be incorporated in a management contract.

Understand how all or only some of these functions may be needed by the shipowner. 

Be aware of the increasing tendency of shipowners to externalise crew management and the reason for doing so.

Be aware of the availability of standard ship management contract forms (e.g. BIMCO's "Shipman").

Note that the ship management industry has its own Quality Management procedures. 

Port Agency

Thoroughly understand the relationship between port agents and their principals. Understand the method of appointment directly by the shipowner, of 
appointment by the shipowner but nomination by the charterer, appointment by the time charterer, the role of a supervisory agent.

Understand the scope of a port agent's work, its responsibilities, its limitations without specific authority and those occasions when implied authority may be assumed.

Be aware of the different entities with whom a port agent has to deal, including ship's command, statutory bodies, terminal/port operators, stevedores, suppliers of goods and services.

Thoroughly understand the importance of time counting and of the agent's responsibiIities in this respect, including ensuring Notice of Readiness is properly tendered and a statement of facts is compiled.

Understand the concept of obtaining funds from principals, settling invoices from suppliers of goods and services, accounting for this expenditure via the disbursement account.

Understand the agent's remuneration by way of an agreed fee, be aware of the existence of nationally agreed agency fee scales in some countries (no longer permitted in many jurisdictions).

Liner Agency

Understand that such duties may be undertaken by a department of the liner operator's company or by an independent agency.

Understand the additional duties over and above those of a port agent that fall to a Iiner agent, including particuIarly marketing and documentation which involves relationships with exporters, shippers, receivers, forwarders, NVOCs etc.

Be aware of the availability of the standard form of Liner Agency Agreement, published by FONASBA, study of which gives insight into the many duties a liner agent may be called upon to perform.

Understand the method of remunerating liner agents via a commission of the freight earned on cargo loaded or discharged at the agent's location.

Other Sectors. Understand the role and function of Freight Forwarders who can be agents or contractors, Non-vessel operating carriers (NVOCs).
Understand the extended role of various practitioners in shipping business including multi -modal transport, logistics and supply-chain management.

BUSINESS  ETHICS

Thoroughly understand that because so much shipping business is arranged by word-of -mouth, mutual trust is an imperative ingredient. "Our Word Our Bond" has always been the Institute's motto.

Understand how practitioners in shipping business may encounter and be in a position to detect or prevent fraud, including such things as identifying forged bills of lading, falsified certificates, false declarations of cargo.

Be aware of the potential for fraud in connection with letters of credit or false insurance claims.

Understand the danger of mis-direction of freight payments or mis-delivery of cargo. 

Understand that wrongly dating bills of lading is a fraud and that issuing a letter of indemnity in exchange for clean (rather than endorsed) bills of lading is technically fraud.

Be aware of the possibility of major fraud such as documentation for non-existent cargo, piracy, scuttling.

Understand the importance of knowing the bona fides of one's principals and trading partners

GEOGRAPHY OF TRADE

Students should have access to a maritime atlas for this and all other subjects in the Institute's curriculum.

Understand the major trade routes and the types of ships used for transportation of the five primary raw materials namely coal, ores, grains, fertilizers and oil, also general cargo (manufactured goods) with names and locations of the principal ports involved. 

Be aware of any particular characteristics and/or hazards involved in the transport of these commodities.

Understand the factors which infIuence the choice of the most favoured transport modes for these commodities e.g. palletisation, unitisation, containerisation, refrigeration, multi-modal transport and be aware of the shore-side facilities and infrastructure needed.

Understand the location and seasons of major natural phenomena affecting sea transportation, particularly storms and ice. Be aware of the rationale behind Loadline Zones and how knowledge of these can affect voyage planning and estimating.

INTERNATIONAL TRADE AND FINANCE

Thoroughly understand the role and function of INCOTERMS in international trade. 

Understand the manner in which the obligations and insurable risk and title pass from buyer to seller under each of the terms.

Thoroughly understand the importance of the bill of lading in international trade. 

Understand the difference between port/port, through and combined transport B/Ls also the role of Waybills

Understand the various methods of payment that may be used in international trade including cash and biIIs of exchange.

Thoroughly understand the special place of Documentary Letters of Credit and how they are established and operate. Be aware of ICC Uniform Customs and Practice. 

Understand the manner in which countries regulate imports and exports by means of customs tariffs, Iicensing etc.

Understand the basics of foreign currency transactions including the system of currency hedging.

Understand the importance of collecting, holding and remitting freight, hire and other funds to principals and clients. Be aware of the system of freight hedging.

BUSINESS COMMUNICATIONS

Thoroughly understand that in this and all other subjects in the Institute syllabus, candidates will be tested on their ability to communicate effectively in the English language.

Understand the different forms of communication including reports, letters, memos, faxes, e-mail etc and be able to draft answers in these forms when examination questions so demand.

Be aware of the media sources of information regularly used by practitioners in shipping business.

Understand the application and importance of computers, e-mail and the internet in all aspects of shipping business.

SHIPPING ORGANISATIONS—THEIR ROLE AND CONTRIBUTION

Students will be expected to use their own efforts to expand their knowledge of the many national and international organisations serving the shipping industry. AlI of them have websites to assist those who have access to the Internet.

Beware of confusion when names are similar e.g. "The Baltic Exchange" and the Baltic and International Maritime Council (BIMCO), Lloyds Register and the Corporation of Lloyds etc.

For each of the organisations, students should understand the folIowing features:-
  • Its origins, reason for its existence, its aims and objectives
  • Its nature and structure
  • Its membership and what they expect from the organisation
  • Any highlights in its achievements on behalf of its members.

Shipowners organisations: INTERCARGO (dry cargo shipowners), INTERTANKO (tanker owners), Baltic and International Maritime Council - BIMCO - (all owners and brokers), International Chamber of Shipping (association of national shipowning organisations), national Iiner shipowner organisations.

Broker and Port Agent Organisations: Institute of Chartered Shipbrokers (London-based unique international body conferring professional status on shipping business  practitioners worldwide), The Baltic Exchange (historic centre of ship chartering in London), Federation of National Shipbrokers and Agents Associations, FONASBA (international association of national broker/agent associations), International Federation of Forwarding Agent Associations, FIATA (International association of national forwarding associations).

United Nations agencies: International Maritime Organisation — IMO — (London based association of the world's maritime countries devoted to safety and pollution prevention), United Nations Council for Trade and Development — UNCTAD — (UN agency based in Geneva principally devoted to developing international trade and transport, especially to the benefit of less developed countries).

Chambers of Commerce: International Chamber of Commerce — ICC — (International association of national Chambers of Commerce), International Maritime Bureau — I M B — (Branch of ICC devoted to prevention of maritime fraud and piracy).

Insurance: Corporation of Lloyds (Historic London-based insurance market on which underwriters and brokers trade).

Classification Societies:  International Association of CIassification Societies — IACS — (International body of classification societies devoted to maintaining standards, accepting only those of good repute).

Labour Organisations: International Transport Workers Federation — ITF — (International federation of national trade unions involved in transport), International Shipping Federation — ISF — International association of national seafarer employers associations.

N.B.  No exemption is permitted from this subject.