The Shipping Industry: An Overview

AuthorEdgar Gold; Aldo Chircop; Hugh M. Kindred; William Moreira
The world of ships, seafarers, the shipping industry, and international
shipping organizations is ver y unique. Although this chapter is only in-
directly connected to the actua l practice of maritime law, it is designed
to assist those who may h ave little knowledge of the shipping industry
and its various sectors. Mar itime law is a very speci alized area of law
and some fundamental underst anding of the technical and commer-
cial aspects of the shipping industry is es sential. Furthermore, as c an
be seen from other chapters in th is book, maritime law c ases gener-
ally involve a number of technical aspect s that require at least a basic
appreciation of the area. For example, it would be diff‌icult to asse ss
a collision case without understanding the relevant ships’ courses as
plotted on the navigational char ts, or assess a cargo damage case with-
out knowing anything about stowage on board.
Ships have evolved from the primitive craft of pre-histor y to to-
day’s highly special ized vehicle of trade. At the same time, se afarers
have changed from primitive foragers or hapless i mpressed labourers
to skilled technicians and professional mariners. In other words, ships,
and the environment in which they oper ate, have become complex and
highly specialized in operational, managerial as well as legal terms. Ac-
cordingly, this chapter can only provide a very br ief overview of this
important industry.
The Shipping Industr y: An Overview 11
Shipping is the most important ar m of world trade. It is an internation-
al business and, according ly, much of it is regulated by widely accepted
international r ules that have been tran sposed into national law. Can-
ada, as a major trading nation, is very much part of this inter national
system. It is important to underst and that shipping is a global industr y
that is always in t ransition and continuously evolving. This has sign if‌i-
cant effects on the regulatory process.
1) Background
Until the 1970s shipping was part of the world’s organized trade and
commerce and was based on well-established procedures and legal
regulations. This system h ad evolved from nineteenth century Brit-
ish practice, when Great Britain controlled more tha n half the world’s
international seaborne trade.1 Britain and a number of other maritime
states continued to control international sh ipping well after World War
II. Shipping was predominantly privately ow ned and operated, under
national f‌lags, on dist inctive trade routes with established management
styles. The vessel’s f‌lag indicated not only the state where it was regi s-
tered, but also the state from where it was man aged and operated, and,
at that time, where almost all of the crew originated.2 New ships were
generally ordered when replacements were required or if there was
growth in a speci f‌ic trading area. Payment for new vessels was usually
made from retained prof‌its or by modest bank loans, based on measur-
able trading prospects and a good credit record.3 Even large oil com-
panies and other “down-stream” users of raw materials operated their
own vessels under their specif‌ic national f‌lags. Addit ionally, tonnage
1 For a thorough analys is of this period see Edg ar Gold, Maritime Transport: The
Evolution of Interna tional Marine Policy and Shipping Law (Lex ington, MA: Lex-
ington, 1981) ch 3–4.
2 This was in accord ance with article 5 of the Conve ntion on the High Seas, 1958,
29 April 1958, 450 UNTS 11, which require d that “there must be a genuine lin k
between the St ate and the ship; in particul ar, the State must effectively exerci se
its juris diction and control in admini strative, technical a nd social matters over
ships f‌lying it s f‌lag.” See also My res McDougal, William Burke , & Ivan Vlasic,
“The Maintenance of P ublic Order at Sea and the Nationa lity of Ships” (1960) 54
American Jour nal of International La w 25.
3 One of the leading st udies describing th is period is Carl McDowel l & Helen
Gibbs, Ocean Transportation (New York: McGraw-Hill, 1954).
was chartered as required from independent shipowners. Bulk cargo
charters were generally ar ranged in the London market. Liner shipping
conferences were dominated by the traditional maritime states and de-
termined their ow n freight rates and schedules. Ships were surveyed,
classif‌ied and in sured by a very small g roup of institutions, often also
based in London, but with worldwide agencies. The pre-1970s period
was considered to be a period of relative stability and prosperity in t he
shipping sector.
The profound changes that occurred in the shipping i ndustry in the
early 1970s were caused by political and economic events, including
the closure of the Suez Canal in 1973, the cutbacks in oil production in
the Middle East, the Iranian revolution, and subsequent global reces-
sions. In a few years shipping moved from relative stability to almost
chaotic development.4 This resulted in international s eaborne trade al-
most doubling during the period 1970–90.5 Shipbuilding orders soared
for larger vessels that had to u se the Cape of Good Hope route when the
Suez Canal pass age became unavailable. Japan and South Korea pro-
vided signif‌icant subsidies for such ship construction in their modern,
eff‌icient, low-cost shipyards.
Also withi n a brief period marine technology changed signif‌icant-
ly. This resulted in the standard 28,00 0 deadweight tonnage (DWT)
“supertanker,” developed in the late 1950s, growing to the 250,000 DWT
“very large crude carrier” (VLCC)6 as the principal means to carry
crude oil. Similar economies of sc ale were also developed in the dry
bulk trades where the traditional 10,000 DWT “tramp” vessel would
be replaced by a new generation of 40,000–200,000 DWT bulk ca rriers.
Changes in the general ca rgo sector were equally signif‌icant due to the
evolution of container ships from the 1950s onwards. Each of these new
vessels would replace about seven conventional general cargo ships.7
4 Gold, above note 1, ch 6–7. See also some of t he classics on this s ubject: Alastair
Couper, The Geography of Sea Transport (London: Hutch inson, 1972); Bernha rd
J Abrahams son, International Ocea n Shipping: Current Concepts and Princ iples
(Boulder: Westview, 1980) ch 1.
5 From 2.6 billion to 4.0 billion tons. Un ited Nations Conference on Trade and
Development (UNCTAD), Review of Mar itime Transport 2013 (Geneva: UNCTAD,
2013) at 7.
6 Vessels above this tonn age, ranging up to 500,000 DWT, and know n as “ultra
large crude ca rriers” (ULCC), would soon follow.
7 For a general disc ussion of these developments see Ab rahamsson, above note 4,
ch 1. The terms “Suezm ax,” “Panamax,” “New Panamax,” and “Seawa ymax,” for
example, are al so used to describe t he size limits for ships tr avelling through,
respectivel y, the Suez Canal, Pa nama Canal, and St La wrence Seaway, which are
determined b y the dimensions of the can al’s locks. The “Chinamax” st andard

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