CHAPTER 2

“What would you like to have – coffee or tea?” Meghnad asked.

“Coffee for me,” I said. Like many people from South India, I prefer coffee to tea. I had just arrived in his office and was eager to learn a lot from him.

“Do you mind if I record this conversation. It will help me make a better report,” I suggested since I did not want to miss anything.

“Sure, why not,” he replied shrugging his shoulders.

“Let us continue from where we left yesterday. You were explaining about the design drawing of the Oil tanker.”

“Ah! Yes. These are the drawings based on which our ship would be constructed. The drawings follow the guidelines agreed upon in the contract specification, which also includes maritime regulations and shipyard standards. Two copies are sent to our office for approval. One copy we return to them with our comments and suggestions. These drawings are also sent to the classification society, ABS in our case.”

“Who are these classification society?” I faintly remembered this name ABS, not sure where.

“Classification society is an independent, not-for-profit, non-governmental organization that establish and apply technical standards in relation to the design, construction and survey of marine related facilities including ships and offshore structures. These standards are referred to as rules.

It is interesting story how the first such society, Lloyds register of Shipping was born. It was originated by a group of underwriters in a London coffee house named Lloyd’s, in the year 1760. At that time the Lloyds register of Shipping’s role was to provide a subjective assessment of the strength of the vessel for the intended voyage and the capability of the master, to aid the ship owners in obtaining insurance coverage.

Our ship is classed to ABS, American Bureau of Shipping. It means that design of the ship will be approved by ABS to ensure that it meets all regulations. The ship will also be inspected by a representative of ABS, called a surveyor, at various stages of construction.

“If ABS makes sure that it meets all the criteria, then why do we need to approve the drawings and have a site team in the shipyard?” I asked.

“Good question. It is true that a classification society ensures that the ship meets the requirement of regulatory rules, both during design approval and during construction. Safety of the ship, safety of the people, and safety of the environment are their prime concern. But, there are many aspects that are beyond their scope. Some of them include life of coating (or painting), the appearance of the ship (aesthetics), the comfort of the crew, the convenience of operation and maintenance, the cost and efficiency of operation of the ship, the speed of cargo loading or discharge, etc. These are matters of vital importance to the ship owner and hence our role in both design approval and during construction is so significant.”

“So are all ships either Lloyds register or ABS classed?” I wanted to know.

“No,” he said emphatically.

“More than fifty organizations worldwide define their activities as providing marine classification.

Ten of those organizations as members and two as associate members formed the International Association of Classification Societies (IACS), to promote improvement in standards of ships. Members include American Bureau of Shipping (ABS), Bureau Veritas (BV), China Classification Society (CCS), Det Norske Veritas (DNV), Germanisher Lloyd (GL), Korean Register of Shipping (KR), Lloyd’s Register of Shipping (LR), Russian Maritime Register of Shipping (RS), Nippon Kaiji Kyokai (NK), and Registro Italiano Navale (RINa).

Croatian Register of Shipping (CRS) and Indian Register of Shipping (IRS) are the associate members.”

“Is classification society a regulatory body, then?” I asked.

“No. Class is not a regulatory body. It is a third party organization working independent of the ship owner or shipyard during ship construction. The main function is to ensure that the ship meets with basic standards, as established in the class rules. In situations when the flag state authorizes the class, it can also certify that the ship meet the flag state and international regulations.

“What is a flag state? Are they a regulatory authority?” I asked wondering what this new term meant.

“Flag state is the basic regulatory authority. All ships have to be registered in a particular port (port of registry) and country (flag state). Every flag state has their own regulations, which have to be followed by the ships that are registered. The flag state generally follows the International Maritime Organization (IMO) rules. However they have the power to include additional requirements or exemptions in the IMO rules.

“I have heard about this IMO. It is like UNESCO or UNICEF, right?…based in London?” I asked hesitantly trusting my general knowledge skills.

“You are right. IMO is a body of the United Nations (UN) formed in 1948 to encourage and facilitate the general adoption of the highest practicable standards in matters concerning maritime safety, efficiency of navigation and prevention and control of marine pollution from ships. IMO came out with various conventions, codes, and guides. The two most important are SOLAS (Safety of Life at Sea) and MARPOL (International Convention for the Prevention of Pollution from ships). I will talk about it in detail later.”

“Are there any other regulatory authorities?”

There is a very important authority called the Port State Control. They represent the government of the ports and have the power to inspect a ship and detain it if it does not meet their standards. They have become more strict and relevant because they feel that the ship owners, flag state, or classification society have not adequately ensured that the ships comply with international maritime regulations. In addition there are special requirements of the underwriters (insurers), oil companies (or charterers) who rent our oil tanker.”

“So, our oil tanker is Indian flagged right?” I guessed.

“No, our ship is registered in port of Majuro in The Republic of Marshall Islands,” Meghnad replied smilingly.

“But, why? What is the connection?” I was agitated and expressed my displeasure.

“We have most of our ships flagged with Marshall Islands because of less taxes. Earlier such flags were called flags of convenience. It was mainly because of less stringent regulations and partly because of the less taxes. This is no longer the case now. Other flags of convenience included Panama (the largest in the world), Liberia, Cyprus, Malta, etc.”

“Ehm,” I sighed, “So, every ship has to be flagged with a flag state. Does that mean every ship has to be classed with some society?”

“Actually no. Technically a ship can sail without classification, but practically no ship will do so. The enforcers include the insurers, who most likely will not insure a non-classed ship; Port state control, which may not permit a non-classed vessel in to the port; and oil companies which will not rent a non-classed oil tanker.”

“Having a ship classed with a reputed classification society, like one of the IACS members, ensure that the ship meet certain standards. It is also an independent evaluation of the ship, which you recall was the reason why class society came in to in the first place.”

“Smriti!” he said after glancing at his watch, “I have a meeting with my team today. Can we continue tomorrow? Maybe you can meet Pradeep before you go. He can also tell you about the process of contract signing better,” Meghnad suggested.

“Sure…I hope I have not asked too many stupid questions and irritated you,” I hesitated.

“No, not at all. I do not believe that there are stupid questions. There are only stupid answers,” he comforted me. “Anyway see you tomorrow.”

It was a great session with Meghnad. He had great patience in explaining the process of ship acquisition. “My report is going to be informative,” I figured.

I walked to the reception and checked if Pradeep was in his cabin and available for a short meeting. Before entering his cabin, I mentally organized the questions to be asked to him.

As I entered he greeted me with a charming smile and led me to my seat. He then asked, “Did Megnath help you out today?”

“Yes, he did. It was a nice learning class. But, there are some queries that you can answer best, which is why I came to you.” I said.

“Shoot.”

“Yesterday, you told me how the process evolved after you chose the JHI shipyard. Tell me why you choose a shipyard in Korea, and why not in China or Europe?” I asked remembering an article I read on shipbuilding in some newspaper.

“It is true that Europe had great shipbuilding history, but these days they mostly build specialized vessels and passenger ships. Ships like oil tankers are mostly built by far eastern countries. Korea and Japan are the leading shipbuilding nations with their share of forty and thirty percent respectively. China is a relatively newcomer with just over ten percent of shipbuilding orders.

Our ship being an oil/chemical tanker is complicated and our company policy dictates that we build at shipyards with good track record and experience. JHI was the right choice based on these.”

“Meghnad told me that our ship is ABS classed. Do we decide the class and if yes why we chose ABS?”

“The classification society is mutually decided by the ship owner and the shipyard. The ship owner and the shipyard may have a preferred class because of commercial reasons, or cordial relationships. It is shipyard that pays class society during ship construction and ship owner pays during ship operation (after ship is delivered by shipyard). In our case ABS class was offered in the specifications, and since most of our ships in the fleet are ABS classed, we accepted the offer.”

“Ehm, I see,” I said, grasping the explanation. I looked up my watch and noticed that it was time for me to leave

“Pradeep, I will leave now. By the way, this weekend I am going home for a short vacation, maybe a week, to the god’s own country. If I don’t go my mom is going to crib.”

“Alright see you after you trip,” he got up to see me off.