Ship Agent Relationship with Principal
The Ship Agent should obtain the business and secure the payment from the Principal. Thereafter, excellent care must be taken to establish a strong Ship Agent and Principal relationship because the Ship Agent’s livelihood relies on this. Usually, a commercial companionship is the best relationship of all because neither side is probably to take the other for granted. The Principal might be established significantly far from the Ship Agent. Consequently, the Principal is highly dependent upon the Ship Agent for the outcomes.
Ship Agent Reports
The Ship Agent’s primary duty is to keep the Principal thoroughly informed of all events that occur while the ship is in the Ship Agent’s care. From the moment the Ship Agent receives the Agency Appointment, the Ship Agent should be updating the Principal frequently on the prospects for the ship’s port of call, including ETA (Estimated Time of Arrival), berthing, cargo operation, and sailing prospects. Before the ship’s arrival, the Ship Agent obtains ETA (Estimated Time of Arrival) on which the Ship Agent prepares arrangements for port entry, berthing, and cargo operations. Furthermore, the Ship Agent informs the harbor authority and cargo terminal. The Ship Agent is the prominent point of communication. By the principal’s instruction, the Ship Agent informs the Ship Agent in the next port of call. As circumstances alter, so do sailing prospects and these should be frequently dispatched to the Principal and miscellaneous parties.
When the ship arrives at the port, the Ship Agent should communicate here below pieces of information as events occur:
- Time of ship arrival
- Time at the anchorage, if the ship is anchored off the port to await
- Time weighed anchor if applicable
- Time of entering river or port
- Time and location of vessel berthing
- Time the ship master presented the Notice of Readiness (NOR)
- Time the Notice of Readiness (NOR) was accepted
- Bunkers and Fresh Water (FW) Remaining on Board (ROB)
- Time cargo operation commenced and the weather conditions
- Time cargo operation completed
- Time cargo documents on board and ship ready to sail
- Time ship departed the berth
- Time ship cleared river or port
- Details of cargo loaded or discharged
- ETA (Estimated Time of Arrival) at next port
At the end of a port call, the Ship Agent prepares the Statement of Facts (SOF) and dispatches it to the Principal. In some trades, the Statement of Facts (SOF) is completed immediately and is countersigned by the ship master before the ship sails. The Statement of Facts (SOF) is used by the shipowner or ship operator to calculate whether the port call has been completed in compliance with the charter party. The Statement of Facts (SOF) is used to calculate any despatch or demurrage that may have been incurred. The Statement of Facts (SOF) is submitted to other parties such as the charterer or the shipbroker but only on the explicit instructions and by clear permission of the Principal. Generally, domestic items such as the crew or supplies are not shown in the final Statement of Facts (SOF) as these items are not relevant to the charter party. Domestic items such as the crew or supplies are communicated with the Principals when they are materialized. It is crucial to keep the next port Ship Agent thoroughly informed of the ship’s progress, ETS (Estimated Time of Sailing) from the port, and ETA (Estimated Time of Arrival) at the next port. The next port Ship Agent arranges berthing and cargo-handling schedules. The next port Ship Agent relies upon the previous Ship Agent to update all information to progress these schedules. Likewise, if the ship was loaded at a port and is sailing to the next port of discharge, complete particulars of the cargo must be given to the next port Ship Agent. If the ship completes loading with either a shortage or an overload of cargo, not per the instructions received from the Principle, this situation must be reported instantly so that the right measures can be taken. Cargo Shortage or Cargo Overload could have a significant effect on the charter party agreement.
Ship Agent Nomination
The Ship Agent must be aware of the duties dependent upon the party from whom the Ship Agent received the appointment.
The Ship Agent might be nominated by:
B- Voyage Charterer
C- Time Charterer (Disponent Owner)
D- Protective Ship Agent (Supervisory Ship Agent)
A- The Ship Agent nominated by Shipowner: the Ship Agent receives the appointment from the shipowner who in turn is operating the ship, commonly on a voyage charter. The Ship Agent looks after the interests of the shipowner and the responsibilities comprise:
1- Port arrangements for the ship to berth
2- Port Disbursement Account (PDA) and Port Disbursement Costs
3- Crew members and domestic issues
Furthermore, dependent upon the terms of the charter party, the Ship Agent may also be liable for organizing cargo operations. The Ship Agent should frequently inform the cargo shippers or receivers about the ship’s progress and prospects for cargo operations.
Throughout the port call, the Ship Agent keeps the shipowner thoroughly informed of all events and factors. Furthermore, the Ship Agent carries out instructions received from the shipowner relevant to the ship’s call. The Ship Agent must protect the shipowner’s interests against charterers, shippers, and receivers in the event of any conflicts or claims. The Ship Agent is responsible fully to the shipowner from whom the Ship Agent is obtaining the Agency Fee. Information from the shipowner should not be disclosed to any third party other than those authorized by the shipowner.
B- The Ship Agent nominated by Voyage Charterer: usually voyage charterers insist upon their Nominated Ship Agent being Appointed by the Shipowner. Incorrectly, this is usually referred to as Charterer’s Agent, however, the Agency Appointment is made by the Shipowner who pays the Agency Fee, while the charter party stipulates which Ship Agent shall be Appointed. The Ship Agent is the servant of the Ship and Shipowner. The Shipowner Appoints the Ship Agent and pays the Ship Agent. The voyage charterer simply Nominates who shall be Appointed. The voyage charterer desires to Nominate the Ship Agent for a mixture of reasons. For instance, the voyage charterer may wish to be sure that the Ship Agent has specialized knowledge and familiarity with the business. The voyage charterer may wish to limit the source of communication about ships’ position to a single highly experienced Ship Agent. The voyage charterer may want confidentiality. The voyage charterer may want to ensure that details of the business do not fall into the hands of rivals. Nevertheless, the Ship Agency appointment has to be made by the Shipowner or Disponent Owner (Time Charterer) and the legally binding agreement is between the Ship Agent and the Shipowner or Disponent Owner (Time Charterer). There might be some kind of arrangement between the Ship Agent and the Nominating Voyage Charterer, however, the fiduciary duty is owed by the Ship Agent to the Shipowner and any dilution of this duty is in favor of the Nominating Voyage Charterer would be a violation. The Nominating Voyage Charterer might anticipate something in return for delivering the agency business. The Nominating Voyage Charterer expects to be kept closely informed of the ship’s progress. The communication costs will be absorbed by the Ship Agent as these costs cannot be charged to the Shipowner. Furthermore, all the fundamental reasons for the agency nomination will have to be provided, otherwise, the Nominating Voyage Charterer will consider nominating a different Ship Agent. In some cases, the Nominating Voyage Charterer may demand a financial consideration for nominating them as the Ship Agent. An experienced Ship Agent should have no difficulty in dealing with the minor conflicts of interest that may arise between the Nominating Voyage Charterer and the Appointing Shipowner during the ship’s port call. Nevertheless, there will be circumstances when a major area of conflict occurs, and hopefully, this can be envisioned before the situation gets out of control. In this case, the Ship Agent should clarify the facts to both parties the Nominating Voyage Charterer and the Appointing Shipowner. The Ship Agent is responsible for the party paying the Agency Fee. In some businesses, the Shipowner may agree with the charterer to pay port costs from freight. This might lead to some confusion for Ship Agents, however, this is merely an organizational convenience.
C- The Ship Agent nominated by Time Charterer (Disponent Owner): Time Charter Parties stipulate that the Time Charterer (Disponent Owner) shall appoint and pay for Ship Agents at all ports. When a Ship Agent is Appointed by a Time Charterer (Disponent Owner), this creates a fairly strange situation. The Ship Agent’s relationship with the ship and crew members is no different from acting for the Shipowner themselves. Nonetheless, the Agency Agreement is with the Time Charterer (Disponent Owner). Therefore, the Ship Agent should be aware that there are particular areas such as breakdown of ship’s equipment, crew members disputes, classification (certifications), and ship’s overall fitness where the Time Charterer (Disponent Owner) might be in dispute with the Actual Shipowner. In these situations, the Ship Agent has to remember that their Agency Agreement is with the Time Charterer (Disponent Owner) and the Ship Agent must fight on Time Charterer’s (Disponent Owner’s) side. The Actual Shipowner would then be well notified to appoint a Ship Agent of their own. Undoubtedly, it is customary for there to be two (2) Ship Agents at the time of delivery and redelivery of the ship on-hire and off-hire time charter. Under normal circumstances, the Ship Agent appointed by the Time Charterer (Disponent Owner) should look after the ship and the Actual Shipowner’s matters. When accepting a Ship Agency Appointment from the Time Charterer (Disponent Owner), the Ship Agent must clarify who will settle for what. Under the Time Charter Party, the Time Charterer (Disponent Owner) has to pay all the normal disbursements (such as port and dock dues, pilotage, towage, etc.), the Actual Shipowner has to pay for the expenses that are directly related to the ship itself (such as repairs, spare parts, crew repatriation, medical supplies, equipment services, crew matters, Cash to Master – CTM, etc.). In some cases, Time Charterer (Disponent Owner) may accept all expenses and account for those due by the Actual Shipowner within the hire payments. Usually, the Time Charterer (Disponent Owner) orders the Ship Agent to open a separate Port Disbursement Account (PDA) for the Actual Shipowner. The Time Charterer (Disponent Owner) may not notify the Ship Agent that the ship is trading under a Time Charter Party. Therefore, the Ship Agent must ask the Actual Shipowner.
D- The Ship Agent nominated as Protective Ship Agent (Supervisory Ship Agent): when the ship is on Time Charter and the Actual Shipowner requires a Ship Agent who has a clear contractual obligation to the Actual Shipowner. In some circumstances, the Actual Shipowner may not trust in the Charterer’s Nominated Ship Agent or their financial standing. In such cases, the Actual Shipowner pays the extra costs and appoints a Protective Ship Agent (Supervisory Ship Agent) to look after the Actual Shipowner’s interests exclusively. The purpose of appointing a Protective Ship Agent (Supervisory Ship Agent) is to protect the Shipowner’s interests on a port call where the normal Agency Appointment is not in their authority. Besides representing the Shipowner in any disputes relevant to the Charter Party, the Shipowner’s Protective Ship Agent (Supervisory Ship Agent) usually look after the Domestic Requirements of the ship that are for the Shipowner’s account. In some businesses, Time Charterers and Voyage Charterers are accountable for making good damage caused in loading and discharging. Generally, the Shipowner’s Protective Ship Agent (Supervisory Ship Agent) appoints surveyors to document any such damage and hold Time Charterers and Voyage Charterers liable for making good any repairs or defects incurred. When there are Cargo Claims, the Ship Agent represents the Shipowner to protect their interests and call in P&I (Protection and Indemnity) Club Representatives as and when required. Usually, it is Protective Ship Agent’s (Supervisory Ship Agent’s) duty to arrange for surveys for Classification and Ship’s Certification and to represent the Shipowner to on-hire and off-hire Time Charter fixtures. Protective Ship Agent (Supervisory Ship Agent) prepares and conducts on-hire and off-hire Time Charter Certificates.
Port Disbursement Account (PDA)
When the Ship Agent is dealing with a previously unknown Principal and cannot get sufficient credit references, the Ship Agent should consider very carefully whether or not to accept the Agency Appointment. The Ship Agent should never deem that one can always fall back on the right to arrest the ship if the Port Disbursement Account (PDA) is unpaid. In some maritime nations, it is quite expensive or almost impossible to arrest a ship. Furthermore, an arresting party not only detains the ship but may sometimes be accountable for supervision and crew maintenance before receiving any funds from ultimate disposal if the Shipowner decides to abandon the ship. Even if the ship is sold at the auction, there may be no funds available, as Port Disbursement Account (PDA) is ranked relatively low among debts recoverable after the sale of a ship. The earnings of a forced sale may be less than the amount owed to the mortgagee, leaving nothing for an out-of-pocket Ship Agent, even if the Ship Agent initiates the Ship Arrest. Furthermore, although the Ship Agent is acting as an agent to a named Principal when placing a purchase order with a Third Party Suppliers, there is a particular moral responsibility to safeguard the Third Party Suppliers because the Ship Agent is in a position of trust. If the outstanding balances are not settled, Third Party Suppliers may not be so willing to deliver the goods and services via that Ship Agent to another Principal. Port Disbursement Account (PDA) is the final document submitted by the Ship Agent to the Principal for the agency services that they have delivered and for the goods and services for which they have contracted on the Principal’s behalf.
Pro Forma Port Disbursement (PD) Invoice
Usually, the burden of paying Port Disbursement Account (PDA) falls to one of two parties:
A- Shipowner if the ship is operating under a Voyage Charter Party
B- Time Charterer (Disponent Owner) if the ship is operating under a Time Charter Party
Customarily, the party from whom the Agency Appointment is received is accountable for the Port Disbursement Account (PDA), however, this should be carefully inspected. In numerous cases, the Agency Appointment is made by the Ship Management Company that acts in every way as if the Ship Management Company is the Actual Shipowner. Then the Actual Shipowner may have fallen on challenging financial times and the Ship Management Company has denied responsibility for the Port Disbursement Account (PDA). Therefore, the Ship Agent musk ask the responsible party for settling the Port Disbursement Account (PDA). After receiving the Agency Appointment, and having established who is responsible for payment of Port Disbursements, it is of vital importance that a Pro Forma Disbursement Invoice is estimated. Pro Forma Disbursement Invoice incorporates costs that are likely to be incurred. Pro Forma Disbursement Invoice incorporates costs such as dock and river dues, light dues, towage, pilotage, government, or other levies, and agency fee. Pro Forma Disbursement Invoice should be dispatched immediately in written form by email or web portal. Customarily, the Ship Agent demands an advance of monies from the Principal to cover the Pro Forma Disbursement Invoice amount. This is not only to protect the Ship Agent from the likelihood of default on payment but also to reduce the burden on cash flow caused by late payment. Usually, in the absence of a contract to the contrary, a disbursement commission applies only to disbursements and cannot be applied to the Agency Fee itself. In some circumstances, especially where a Principal frequently positions ships into the Ship Agent’s port, the Ship Agent may have an agreement with the Principal for Extended Credit. Extraordinary supervision is required if considerable amounts of cash are involved such as Cash to the Master (CTM). Strict surveillance needs to be exerted when the Ship Master wishes to return unused cash. Demanding money in advance to cover Pro Forma Port Disbursement Account (PDA) is the only foolproof method that the Ship Agent can protect themselves from bad debt, the long delay in payment, or expensive legal costs to recover funds. The Ship Agent’s advance funding is approved by BIMCO (Baltic and International Maritime Council).
Ship Agency Costs
When the Ship Agent appointment is from a Time Charterer, the source of reimbursement must be clear. The separation of costs is subject to agreement between the two parties but the standard pattern is that costs are divided as:
Time Charterer’s Costs: Costs associated with the port call during the period of the time charter such as river dock or jetty dues, towage, pilotage, light dues, bunkers, agency fee, and any cargo-handling costs.
Shipowner’s Costs: Costs associated with the general costs of operating the ship and domestic expenses such as Cash to Master (CTM), crew costs such as mail, travel, hotel, medical, stores, provisions, repairs, maintenance.
Shipper’s Costs and Receiver’s Costs: In dry bulk shipping, the shipper pays for any charges on a CIF (Cost, Insurance, and Freight) Consignment to alongside for shipment before loading, or from on-quay following first discharge, and to pay any government levies for import or export, customs duties and suchlike on the cargo.
Final Port Disbursement (PD) Invoice
The Ship Agent records all purchases of both services and supplies throughout the ship’s port call. Furthermore, the Ship Agent ensures that the charges are in line with the custom of the trade and agreement with the Principal’s understanding and their acceptance. Some Principals request all invoices or orders for supplies and services to be signed by the Ship Master. If this is an illogical order, the Ship Agent must make sure that a reasonable Agency Agreement is contacted before undertaking the business. All goods and service suppliers should be ordered to submit the invoices fast and in line with settled prices. All invoices must be addressed to the Ship Master and Shipowner, care of the Ship Agent. Consequently, the goods and service suppliers are recognizing the Ship Agent’s legal position. This relieves the Ship Agent of the financial liability for the goods and services that the Ship Agent asked on behalf of the Principal. As these invoices are received, the Final Port Disbursement (PD) Invoice can be compiled. Usually, the Ship Agent would be able to expect to despatch the Port Disbursement Account (PDA) within 30 days. Shipowners are willing to have the disbursements as soon as possible and will agree to receive the main invoice within a fairly short period. However, Shipowners understand that a supplementary invoice may be generated to incorporate any items still not invoiced by the suppliers. The Ship Agent might have no funds left in hand to pay such late invoices. Furthermore, some suppliers seem unable to submit the invoices in a reasonable time. A practical method when encountering such delays is to make it clear that the suppliers will not be paid until the invoices have been settled by the Principal concerned. If we suppose that the Ship Agent received funds in advance as per the Pro Forma Port Disbursement (PD) Invoice, then the Port Disbursement Account (PDA) will show this credit and the invoice will require either a refund of any funds not spent or where there is a balance due to the Ship Agent, that amount shown in favor.
Unsettled Port Disbursement Account (PDA)
The Ship Agents should not give any credit to unknown Principals. If there is any suspicion, then funds in advance per the pro forma disbursements must be demanded. All Ship Agents should get insurance, which is part of the cover provided by such organizations as ITIC (Professional Indemnity Insurance for Transport Contractors and Professionals). ITIC (Professional Indemnity Insurance for Transport Contractors and Professionals) can take action more effectively and less expensively than can a Ship Agent on their own. The enforcement of action to recover funds due to the Ship Agent is the Arrest of a Ship being operated by the party from whom the Disbursement Money is due. Ship Arrest can be initiated exclusively when the court in the legal jurisdiction of the claim is satisfied that the claim is justified. Thereafter, the court issues a writ that empowers it to restrain the ship until the money due is settled and any costs are paid or an undertaking is given by a P&I (Protection and Indemnity) Club, First Class Bank, or Insurance Company to pay whatever is owing. If the Principal is in financial difficulty there might be several claimants, resulting in the liquidation of a business and a little chance of any payment of the debts incurred by the Ship Agent. Because the first line for a claim after the crew members will be a mortgagee.
Ship Agent’s Organization
A- Ship Agent’s Computerized Systems
B- Ship Agent’s Location
C- Ship Agent’s Communication
D- Ship Agent’s Manning
E- Ship Agent’s Marketing
F- Ship Agent’s Office Structure
A- Ship Agent’s Computerized Systems: No electronic system has yet been designed that can substitute the standard Ship Agent. The wisdom of shipping, regional expertise, and problem-solving capabilities are uniquely human characteristics. Nevertheless, computerized systems play a significant role in contemporary business. For the contemporary Ship Agent, the computer system will be at the hub of its communications. Ship Agent’s Computerized Systems are capable to send and receive electronic communications. Some liner ports mandate cargo data to be dispatched electronically and many liner operators dispatch manifests to the Ship Agent by Computerised Systems. The Ship Agent can buy or design their software to deliver Pro Forma Disbursements. Ship Documents can be scanned and kept electronically.
B- Ship Agent’s Location: The location of the Ship Agent’s office is crucial to the efficiency of their business. The closer the Ship Agent’s office is located to the ships, the more efficient the assistance. A considerable part of the Ship Agent’s responsibilities includes attendance onboard the ship and at the port. The Ship Agent’s location must be open 24/7 to be able to sustain operational performance. Furthermore, Ship Agent’s home should be close to the port.
C- Ship Agent’s Communication: The Ship Agent should keep a continuous flow of communication of data, and this requires access to tools via which they can send and receive instructions and data. The swiftness of reaction to events requires a meticulous assessment of communication tools available and vital to a contemporary port agency procedure. Email is the primary source of communication; some Shipowners operate via their web portals or international hub systems. The Ship Agent must comprehend the difficulties and intricacies of such systems. Furthermore, the Ship Agent’s employees require IT training. Most ships have the access to a telephone, telex, telefax, and email via satellites. Therefore, ships have 24/7 access to all means of communication then the Ship Agent has to be prepared to react 24/7.
D- Ship Agent’s Manning: The essence of the Ship Agency profession mandates a certain kind of individual for whom the job satisfaction of operating closely with ships and ships’ crew members reimburses for the unsocial hours that the job concerns. Furthermore, there have to be material payments. The individuals chosen for port agency jobs need more than patience for unsocial working conditions. Today, Ships Masters have a tremendous amount of responsibility. Therefore, the boarding Ship Agent should be able to relieve the Ship Master of at least some of that responsibility while the ship is in port.
E- Ship Agent’s Marketing: In the Ship Agency business, it is what the Ship Agent does for their Principals that matters. The Ship Agent must first understand what the customers want. The ship operator looks upon the Ship Agent as an association that looks after their interests, takes their instructions, and puts them to sound and advantageous effect. The Ship Agent should get to know the traffic in the port where they plan to deliver their services, and then ensure they can serve ship operators effectively. The Ship Agent requires both the technical proficiency to understand the traffic, ships, and cargo-handling requirements, and the capacity to influence third parties to ensure an efficient turnaround of a ship at the most economical cost to the Shipowner. The Ship Agent that can meet these standards then needs to launch this proficiency to the shipping market. The Ship Agent should serve the ship operator in a more cost-efficient way with assured service. When marketing the Ship Agency services to the ship operator, the ship operator is going to look for some justification to select that Ship Agent. The Ship Agent must look for advantages and requirements that the potential client may not receive from other Ship Agents. Business marketing is the commitment of all workers of the Port Agency firm. The qualities of the answer to a simple telephone inquiry project the efficiency and philosophy of the Port Agency firm. The Ship Agents should achieve support from Terminal Operators and Port Authorities. Word of mouth is a cheap marketing device and it is incredible how suggestions from other Shipowners can create a lot of opportunities. The Ship Agent can enhance the efficiency and the attraction of the services by examining the client’s requirements. Furthermore, the Ship Agent should closely monitor the changes in global trade. The Ship Agent must have the capacity to continually adjust their services to be able to handle unexplored business opportunities.
F- Ship Agent’s Office Structure: The volume of maritime traffic to be managed by the Ship Agent’s unit will specify the number of employees and how it can be organized. In some Big Ship Agent Companies, the volume of maritime traffic necessitates a shift system that authorizes the office to be continuously manned for both communications and boarding agents, however, this is not the standard. The most possible requirement is for the Small to Medium-Size Ship Agent Companies to operate on a rota system for boarding agents, with the office being manned during regular working hours. Usually, there is a duty roster that specifies each employee’s night shifts and weekend attendances. This assures that ships arriving, sailing, or requiring attendance outside normal office hours and at weekends obtain full attention. Furthermore, the Ship Agent’s office is utilized as headquarters for transmitting data and checking any incoming notifications.