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Carlos Salinas: The shipping industry: Its role and unique needs

The shipping industry: Its role and unique needs
Ambassador Carlos Salinas January 8, 2020

Most people just don’t realize how significant the role that shipping plays in our everyday lives. Chances are objects you have touched and used since this morning came to you through shipping. If you check your bags or pockets, you will probably find something there that came to you on a ship. As one conference speaker once famously declared: “No shipping, no shopping.”

The United Nations Conference on Trade and Development (UNCTAD) estimates that ships carry across the globe 80 percent of goods by volume and 70 percent by value through various jurisdictions. That’s how pervasive shipping has been in our lives.

Seafaring came about because people realized the importance of interconnectedness among nations for sheer survival. They had to engage in trade in order to buy what they could not produce and sell what they had in excess that can be useful to others. No two countries have exactly the same resources and this uneven distribution of the world’s resources has made trade unavoidable and seafaring imperative so the goods can reach the buyer for less.

Maritime historian Lincoln Paine asserts that “before the development of the locomotive in the nineteenth century, culture, commerce, contagion, and conflict generally moved faster by sea than by land… Travel by water was often faster, smoother, more efficient, and in many circumstances safer and more convenient than overland travel, which presents obstacles and threats from animals, people, terrain, and even the conventions and institutions of shoreside society.” These factors make it the most efficient and cost-effective method of international transportation for most goods, the backbone of international trade and the global economy.

Because the Philippines is an archipelago, its factual reality in the maritime sphere principally consists of its domestic ships. Unfortunately, we only hear about our domestic ferries when there are accidents at sea. The strides that some of our local operators are making in introducing new ferries to service our Eastern, Western and Central nautical highways have largely gone under our radar.

Similarly, as a key provider of seafarers to the world fleet, the only time we hear about the international shipping industry is when a ship is attacked by pirates and there are Filipino seafarers who are taken as hostages.

But there is something more to shipping than domestic ships and seafarers.

Shipping is a key industry to world trade. It is one of the most international industries because it comprises a whole chain of activities involving multiple players from different nationalities and jurisdictions–starting from ship design, ship construction, ship classification, ship registration, ship financing, ship operation, ship sale, carriage of cargo, carriage of passengers, chartering, crewing, ship management, ship insurance, all the way to ship recycling–all done under a single entity called the “ship.”

A ship could be designed in Japan, constructed in China, classified by Class NK of Japan, registered in Panama, financed in Hong Kong, carrying oil between the Middle East and East Asia, crewed by Filipinos, managed in Singapore, insured in the United Kingdom, and eventually recycled in Bangladesh at the end of its economic life.

This diversity requires a clear framework of international standards which can be adopted, accepted, implemented, and enforced by all.

The framework has two parts–the framework for operational standards and the framework for commercial standards.

The framework for operational standards is governed by international maritime conventions principally through the International Maritime Organization or IMO. The framework for commercial standards is governed by some conventions of the Unctad and mostly by standard contracts drawn up by international organizations involved in shipping like the Baltic and International Maritime Council or Bimco, the largest international shipping association involved in facilitating harmonization and standardization of commercial shipping practices and contracts. Violations of the framework for operational standards could mean detention of the vessel. Violations of the framework for commercial standards could lead to the arrest of the vessel.

These frameworks allow for a common approach to shipping and ensures that ships are able to ply their trade around the world with uniformity and predictability. Countries receiving these ships in their ports can be confident that they can welcome these ships without compromising their safety, security, and environmental integrity. Ship owners and shippers are also assured that contracts involving their ships will be respected and will be subject to uniform interpretation by the courts and arbitral tribunals which exercise jurisdiction over their commercial dealings.

How are the standards upheld under these frameworks? I shall go into more details in my next column.