Quality Shipping –
The Role of Class within Increased Self-Regulation

Address given at Mare Forum 99

Amsterdam, The Netherlands

Mr. Hans G. Payer, Germanischer Lloyd

Vice Chairman of IACS

Tuesday, June 22nd 1999

Abstract

Despite all our efforts we are still living with too many elderly and badly maintained ships competing for the world’s cargoes with the modern fleet at a commercial advantage. This is particularly disturbing at a time of depressed freight rates, where it is difficult even for the well intended owner to justify and finance the modernization of his fleet.

Considerable progress has been made in increasing the levels of ship safety in recent years and classification societies have played a significant role. A series of actions by IACS and IACS members has focused on fighting sub-standard ships and developing a strategy to keep an elderly fleet trading safely. This includes the strict transfer of class agreement, the automatic suspension of class for delayed response to class requirements, unified qualification and standards for the surveyor network and finally broadening the scope of classification and statutory work to include concern for the human element in shipping. This last aspect, finally initiated with the introduction of the ISM code, probably is the most significant overall step towards improved safety at sea. It may be viewed as the latest step in the evolution of rule development.

With the present prescriptive rules the compliance with specific requirements is monitored, supervised and certified by a third party. While this system represents a high degree of accountability, it is focused on compliance and does not offer motivation or incentive for improvements. Additionally there are indications that the industry is overloaded with rules and regulations in the present system. Self-regulation, on the other hand, offers several advantages. Solutions can be tailored to the specific needs and characteristics of a company based on defined safety and quality standards. The implementation and monitoring of the individual requirements are left to the company. Only the functioning of the overall system (quality and safety) is monitored by a third party either on a voluntary or on a mandatory basis.

The concept of self-regulation will thus change the existing working practices in the maritime industry. It will also change the role of classification societies as the leading provider of third party inspections. The existing requirements to perform inspections of the hull structure, the machinery and the safety equipment for example will not cease. However, it will be the company’s responsibility to set up the inspection planning and ensure that inspections are performed regularly. This will require changes to the classification rules and practices as well as changes to the system of trading certificates specified in international Conventions. Administrations will have to ensure that a sufficiently high safety level is maintained. A more flexible system of inspection and verification might be the result.

This development may well lead to an increased role of Port State Control on the one hand and classification societies on the other hand to provide independent spot checks on the safety and environmental protection status of vessels entering and leaving ports.

Introduction

The last decade has seen a substantial increase in maritime legislation. Through the use of tacit acceptance procedures at IMO, amendments to international Conventions are introduced on a yearly basis. Several severe shipping accidents have resulted in a number of additional mandatory requirements. The introduction of Port State Control initiatives as a first line of defense for coastal states have helped significantly to enforce compliance with international maritime regulations.

However the need to limit new legislation in favour of enforcing the existing requirements has been recognized by IMO. This is documented in IMO Resolution A.500(XII) stating the objectives of the Organization that the Council and the Committees entertain proposals for new conventions or amendments to existing conventions only on the basis of clear and well-documented demonstration of compelling needs .having regard to the costs to the maritime industry and the burden on the legislative and administrative resources of Member States... .

The subsequent inclusion of the Formal Safety Assessment method in the legislative considerations is a clear indication of this commitment.

However, despite new regulations and a tightening framework of inspections there are still too many sub-standard ships and sub-standard operators. Not only do these ships pose a substantial threat to the safety of life and the environment, but in addition they do so at a competitive advantage compared to safety-conscious operators. This is largely due to the fact that there are cost advantages in taking shortcuts: failing to maintain safety equipment, employing unskilled and underpaid crew onboard etc., in short – evading regulatory compliance.

While it is agreed that most of the maritime regulations help to ensure safer ships and cleaner oceans a system is needed that provides a competitive advantage for those owners who fully comply with regulatory requirements and strive to establish a safety culture within their operation.

The system of regular surveys as contained in the conventions and codes ensures that the specified minimum standards of maritime safety are met. Since these surveys are in general performed by a third party at the stated intervals, it results in a peaking of compliance at the time of verification. Regular maintenance by the ship’s crew in between the survey intervals, and possibly replacing the third-party surveys, could be used to ensure a uniform level of reliability and fitness for purpose.

The introduction of the ISM Code is a first step in recognizing the overall importance of operational and human aspects for maritime safety. Presently, the majority of accidents and incidents in shipping can be attributed to human and organizational failures.

The complexity of shipboard technology and operations has increased considerably in recent years. The intricate interrelations between ship design, construction, maintenance, ship management and ship operations makes it difficult to achieve improvements in safety by addressing any one of these areas separately.

Active safety management by ship operators has therefore been identified as the most significant factor in improving maritime safety.

With the introduction of functioning Safety Management Systems and the certification of these systems through flag States and Recognized Organizations the groundwork has been laid to move from a prescriptive regulatory framework towards industry self-regulation.

This will result in changing roles for shipowners, maritime administrations, classification societies and IMO.

Definition of Self-Regulation

Industry self-regulation has been heralded as a necessary and welcome addition or even replacement for the traditional compliance and survey based system to ensure maritime safety.

However, the term self-regulation has to be more clearly defined. In other industries self-regulation has been used as a means to avoid the implementation of governmental regulation. The classification of movies in the US entertainment industry serves as a good example.

Within the maritime industry self-regulation is often used by parts of the industry in the attempt to

improve safety records,

improve the image of that particular part of the industry, and

implement a standard that is above the mandatory minimum standard

Good examples of this type of self-regulation are the ISMA Code and CDI inspections.

ISMA

In order to improve their bad public image resulting from accidents, ship management companies founded the International Ship Managers Association (ISMA). ISMA members have to be certified according to the ISMA Code. This Code requires the implementation and maintenance of a safety and quality management system which combines the ISM Code and ISO 9000 requirements as well as additional stipulations.

Compliance is assessed and verified through regular audits performed by audit teams formed by auditors from 4 IACS societies (ABS, DNV, GL, LR).

The ISMA concept has been very successful to document the high performance, safety and quality standards of the ISMA members. Despite the introduction of the ISM Code there is no intention within ISMA to abolish or waive the ISMA certification requirements.

CDI Inspections

Within the chemical industry a better method was needed for ensuring that the condition of a chartered ship meets the charterers requirements for safety and environmental protection.

This was achieved through a common inspection agency, the Chemical Distribution Institute (CDI). A uniform inspection report was created, inspectors were trained and certified and a computer database of ship inspections was established.

The system had significant advantages for charterers as well as for owners of high quality ships. Ships could be selected that meet the charterers requirements. Sub-standard operators could be identified and would consequently no longer be used.

A second type of self-regulation is aimed at reducing the level of mandatory third party inspections and replacing this by a system of auditing and assessing the effective implementation and maintenance of safety and quality management systems.

Although this has not fully been implemented one example for this approach is the Streamlined Inspection Programme developed by the US Coast Guard.

Streamlined Inspection Program

In a partnership with the passenger vessel industry the Streamlined Inspection Program (SIP) is intended to improve year-round vessel safety. In this program vessel owners share responsibility for routine inspections with the USCG and maintain records of their inspections for review by USCG inspectors.

The program is limited to those owners that have demonstrated their commitment to safety of life and the environment and have good safety records.

Companies with existing quality and Safety Management Systems that include preventive maintenance can easily implement the SIP process.

Through SIP vessels will operate in continual compliance with the regulations, rather than the cyclical peaking of vessel condition associated with the traditional annual inspections. Benefits for shipowners include

Better management of vessel cost, and

increased involvement and ownership by vessel personnel for the safe operation of the vessel.

Self-regulation within the maritime industry can serve different purposes and can thus be implemented in the following two ways:

Self-regulation of an industry or sections of an industry to enforce uniform minimum standards.

Third party auditing and assessment of safety and quality management systems. Company specific compliance verification with technical and operational requirements.

Role Of Classification Societies

The influence of the Human Element and the failure of the ship structure and of equipment on board have always been the two main contributing factors for accidents and incidents. The work of the IACS members has contributed substantially to the significant advancements in ship and information technology, which has resulted in a generally high technical safety level for ships.

This high level of technical safety has to be accompanied by an increased attention to the impact of the Human Element. This has been recognized by the IMO, flag and port states, owners / operators and by classification societies. The implementation of the ISM Code requirement, the recent amendments to the STCW conventions and the increased focus on operational requirements within the IMO conventions and codes are clear indications of this change in attitude and have led to an increased involvement of the IACS members. Through the work as Recognized Organizations acting on behalf of flag States, Classification Societies have been tasked to address operational aspects in shipping.

IACS members are thus involved in all aspects of ship safety throughout the whole lifecycle of a vessel.

In addition this involvement brings the IACS societies in the position to provide information and guidance on all aspects of shipping to all parties involved.

Changes to the way survey and inspection programmes are implemented will thus significantly affect the work of Classification Societies. The changes that have come about through the introduction of the ISM Code have clearly documented this.

Experience with IACS Self-Regulation

Faced with criticism related to the quality and effectiveness of surveys and inspections performed by IACS members in the eighties a significant internal development within IACS has taken place to address the relevant issues. Most prominently this includes

IACS QSCS

Transfer of Class Agreement (TOCA)

IACS Unified Requirements

The IACS Code of Ethics is the basis of self-regulation efforts within IACS. It has been developed to ensure fair mutual treatment of members within IACS and continuous technical integrity and competence.

IACS QSCS

To ensure integrity and the highest standards in ship classification practice, IACS introduced its Quality System Certification Scheme (QSCS) in 1991. Representing the culmination of a three year development and audit programme, the scheme embraces management systems relating to both ship classification and statutory work carried out by IACS members.

Based on the requirements of ISO 9001, QSCS sets and monitors rigorous standards to create and maintain the necessary uniformity and consistency of members’ internal operations.

Ongoing compliance with the QSCS requirements is a prerequisite for IACS membership. IMO has recognized the IACS QSCS scheme as an important contribution to safety and is involved in the audit process through an observer.

Under progressive further development, the QSCS has delivered many benefits amongst others, in the enhanced clarity and consistency of information provided to survey staff. It ensures continuous delivery of the highest common service and reporting standards.

Transfer of Class Agreement

Class-hopping had been identified as one reason for the possibility of sub-standard ships to continue to trade even within IACS.

In 1988 IACS therefore put the transfer of class agreement, TOCA, into force. It provides for the reliable exchange of information between the losing and the gaining society about a ship changing class. TOCA was to eliminate this possibility of class-hopping. The information on ships leaving one society and accepted by the gaining society is collected and monitored by the IACS Secretary in London, resulting in a TOCA database.

Through a further strengthening of the TOCA agreement in 1996 it is ensured that the gaining society accepts the vessel only after all overdue surveys, recommendations or conditions of class previously issued against the vessel by the loosing society have been completed as specified.

The TOCA has made it virtually impossible for sub-standard ships to remain within the regime of IACS.

Unified Requirements

Non uniform standards within IACS and its members have made it possible in the past for ship owners to look for the class with the least requirements.

IACS has however introduced Unified Requirements (URs) which are regarded by the maritime community today as accepted technical standards. URs thus have to be implemented by each Member Society to the maximum extent possible. This means that each Society has in place documented provisions in the form of Rules, requirements, procedures, and/or instructions covering at least the UR standards.

Unified requirements have been developed in more than 14 areas ranging from Mooring and Anchoring to Survey and Certification.

The process of developing and implementing IACS Unified Requirements has led to a harmonization of the rules and procedures of all IACS Member Societies which are critical for safety. IACS URs can thus be seen as a further step to fight sub-standard shipping and to improve the safety record of the maritime industry.

Certification of Management Systems

The introduction of the ISM Code as Chapter IX of SOLAS marks a significant change in the approach to maritime safety. Through the requirement of a Safety Management System (SMS) for the company as well as for all ships, the importance of the shore-based operations for the overall safety of shipping operations has, in contrast to earlier practices, been clearly recognized. An ongoing functioning of the SMS is ensured through annual and renewal audits.

The ISM Code is very similar in structure and underlying principles to the requirements for the certification of quality systems as defined in the ISO 9000 series, except that it provides safety and environmental protection criteria, whereas ISO 9000 allows the company or operator to set its own standards.

Next to provisions that ensure the proper functioning of the SMS, all areas that are instrumental to safety and the environmental protection have to be addressed. These include

Role and responsibility of the master

Resources and personnel

Key shipboard operations

Emergency procedures

Maintenance

The ISM Code is intended to initiate a change in basic attitude and behavior. The most discussed impact of the ISM Code is the concept of the Safety Culture.

Through the combination of a systems approach to safety on the one side and continuous improvement efforts on the other, a lasting and ongoing increase in safety will be achieved.

The changes in the company and shipboard working attitude and environment will have a significant impact.

Initial results from a study involving all owners and operators of GL classed ships for instance show clearly that the Code has already brought about a number of changes for those companies that have ships falling into Phase 1 of the ISM-Implementation or have implemented Safety Management Systems as required by the ISM Code early. Response from about 400 shipowners has been evaluated, showing that 160 had already implemented the ISM Code while 240 had not yet done so. This made it possible to evaluate the impact of the ISM Code on the shipowners and shipping operations.

The analysis showed that within companies with SMS responsibilities are clearly defined and operating procedures have been developed and implemented. The overall documentation of safety critical processes has resulted in better preparedness for accidents and a greater transparency of the shipping operation.

Figure 1: Use of Checklists onboard

Figure 1 documents that the ISM Code has resulted in a more structured method for the onboard operations. On ISM certified ships checklists are for instance used more extensively.

Figure 2: Procedures for Accident and Incident Investigation

For accident and incident investigation procedures within shipping companies, the influence of the ISM Code is even more pronounced. Figure 2 documents that almost all ISM certified companies have implemented relevant procedures whereas only 55 % of the companies that have not yet implemented the ISM Code have accident investigation procedures in place.

The European Commission views the ISM Code as a valuable tool to increase industry self-regulation and to spread a safety and quality culture in the maritime industry.

With prescriptive rules, as have been used exclusively so far, the compliance with specific requirements is monitored, supervised and certified by a third party. While this system represents a high degree of accountability, it lacks in motivation or incentive for improvements.

In fact, it might hinder improvements due to the highly static process of implementing any changes to existing rules.

Self-regulation, on the other hand, does offer several advantages. The implementation and monitoring of the individual requirements is left to the company. The existing requirements to perform inspections of the hull structure, the machinery and the safety equipment for example will not cease. However, it will be the company’s responsibility to set up the inspection planning and ensure that inspections are performed regularly. Solutions can therefore be tailored to the specific needs of a company based on defined safety and quality standards.

Only the functioning of the overall system (quality and / or safety) is monitored through a third party either on a voluntary or a mandatory basis. This will require changes to the classification rules and practices as well as changes to the system of trading certificates specified in international conventions. Administrations will have to ensure that a sufficiently high safety level is maintained. A more flexible system of inspection and verification might be the result.

This concept of self-regulation may well change the existing working practices in the maritime industry in the long run. It could even effect the role of classification societies as the leading provider of third party inspections.

This development may well lead to an increased role of Port State Control on the one hand and classification societies on the other hand to provide independent spot checks on the safety and environmental protection status of vessels entering and leaving ports.

Although this concept of self-regulation relies on the implementation of the ISM Code and possibly the ISO 9000 standard, additional precautions have to be taken to ensure that the desired level of safety and environmental protection can be achieved.

Self-regulation requires that a well-developed safety culture has been achieved by the shipowner resulting in continous improvement of the safety and quality management system.

Compliance monitoring can only be performed through spot-checks. Therefore the reliance on a well-functioning safety and quality management system is a fundamental pre-requisite for the introduction of this type of compliance monitoring.

The simple fact that a Safety Management System (SMS) according to the ISM Code has been implemented is therefore not sufficient. Depending on the quality of the SMS as well as the way it is implemented in the company and on board the level of third-party inspections could be reduced. This could be one example for a competitive advantage for high-quality and safety-conscious shipoperators.

To achieve this functionality a rating system for the effectiveness of the Safety and Quality Management System might have to be introduced.

The concept of self-regulation will change the existing working practices in the maritime industry. It will also change the role of classification societies as the leading provider of third party inspections.

Conclusions

Industry self-regulation can be implemented in two distinct ways. It can be used voluntarily by parts of the industry to establish and enforce a higher standard and thus to raise the quality and safety level of that part of the industry.

Self-regulation on the other hand can also be seen as a change of emphasis in the co-operation between flag States, Classification Societies and shipowners. This change will make use of the introduction of the ISM Code and the ISO 9000 standard for all members of the industry. By auditing and assessing the effective functioning of a company’s safety and quality management system, the need for third party technical inspections will shift and can possibly be substantially reduced. This will be a benefit for quality operators and will thus contribute to end the existing competitive advantages for sub-standard operators.

Self-regulation relies strongly on the safety culture and responsibility of the operators. Methods will have to be developed which can be used as qualifying criteria. Experience with existing attempts at self-regulation document the effectiveness of this approach.

Acknowledgment

The author thanks Dr. Rolf Schulte-Strathaus, Germanischer Lloyd, Hamburg, for his valuable contributions.