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Understanding the Need for SOLAS

New SOLAS requirement will ensure safety of shipments of export cargo and import cargo in international trade.

Understanding the Need for SOLAS

I started my career at the age of 17 in the Royal Navy and in my time in the service crossed the Atlantic, the Pacific, the Indian Ocean, and the South China Sea. I saw first-hand the strength of the sea, and when you‘re standing on the bridge of a ship with waves taller than you all around, the ocean can seem a scary place.

On average, two ships a week are lost at sea. The ocean is the most dangerous workplace on the planet, where deep-sea fishing is the most life-threatening occupation, and commercial seafaring is the second. Shipping and containerization have brought us T-shirts and televisions at cheaper prices, but with cost in another sense. Each year, 2,000 seafarers lose their lives.

Even the biggest ships now operate with crews as small as 13. The shortfall is supposed to be taken up by automation, which is one worry. “So many experienced professionals have expressed their concern about over-reliance on these clever machines,” wrote former Lloyd’s List editor Michael Grey recently, “and a generation of computer-savvy officers who fail to look out of the window at the crucial moment.”

All ships are designed for a purpose. So how does the world ensure that the ships that are built for a purpose can actually carry out that purpose? And how can the crews of those ships be confident that they are safe to voyage on?

The answer lies in the International Convention for the Safety of Life at Sea (SOLAS) which is an international maritime safety treaty. It ensures that ships flagged by signatory States comply with minimum safety standards in construction, equipment, and operation. The SOLAS Convention in its successive forms is generally regarded as the most important of all international treaties concerning the safety of merchant ships.

The first version of the treaty was passed in 1914 in response to the sinking of the RMS Titanic. It prescribed numbers of lifeboats and other emergency equipment along with safety procedures, including continuous radio watches. The 1914 treaty never entered into force due to the outbreak of the First World War.

The 1960 Convention was the first major achievement for the International Maritime Organization (IMO) and represented a major advance in updating commercial shipping regulations and in staying up-to-date with new technology and procedures in the industry.

And in a further advance of safety measures, the IMO amended SOLAS further to require, as a condition for loading a packed container onto a ship for export, that the container has a verified weight. And why not? Many of us have read about the dreadful consequences of ferries being overloaded with passengers. Is that any different from a container ship being loaded with overweight containers? No one is suggesting that this happens deliberately, but to be proactive and ensure that this is not a future cause of sinking, from now on a container ship sailing should at least be fully aware of the weight of cargo it is carrying.

SOLAS requires that the shipper is responsible for the verification of the packed container’s weight, and this requirement will become legally effective globally on July 1, 2016. After that date, it would be a violation of SOLAS to load a packed container onto a vessel if the vessel operator and marine terminal operator do not have a verified container weight.

Under SOLAS, not only are we moving into a world of prescribed standards, we are also moving into a world of legal accountability and strict liability. It’s common practice for freight forwarders to have their names on the Ocean Bill of Lading. In this instance, the full accountability for SOLAS non-compliance will rest with them, regardless of anything that appears on the House Bill. So shippers, freight forwarders, vessel operators, and terminal operators will all need to establish policies and procedures to ensure the implementation of this regulatory change.

Come July 1st, being able to record the method in which the container was weighed, the verified date of weighing, and the company that verified the weight will become vital for anyone expecting to do business on the high seas. Producing the verified gross container weight document at a moment’s notice will likely become common practice as well.

On the wardroom noticeboard of the USS Buck (which suffered considerable damage in a collision), there was a plaque with a comment attributed to Thucydides, the Greek Historian. It read, “A collision at sea can ruin your entire day.” Let’s paraphrase that by replacing “collision” with “sinking,” and let’s all ensure that a sinking at sea is not caused by overloading of a vessel. We need to take container weight regulations and SOLAS seriously, and we should do all we can–as efficiently as we can–to ensure safety of life at sea.

Mike Coney is vice president of business development Asia for WiseTech Global, a developer of cloud-based software solutions for logistics based in Sydney, Australia.

Netting systems will allow freight forwarders to handle more shipments of export cargo and import cargo in international trade.

Freight Forwarder Benefit From Banking-Grade Clearing System

When profit margins are pressured, many call for reduced overheads, which results in a growing momentum for a logical and rationalized accounting process. Freight forwarders can now reap the benefits of increased administrative productivity and lower costs by simplifying how they transact with their trading partners around the world.

How can they achieve this? The answer is the advantages of netting clearing systems.

Every freight forwarder recognizes that their accounts receivable and accounts payable problems are compounded by operating under the weight of paper and across multiple time zones and currencies.

Netting is an automated inter-company clearing system designed to settle international payments and receipts between trading partners. These systems were originally, designed for use by banks to settle transactions but now forwarders have access to the same highly effective financial relationships via integrated netting.

Netting concentrates all payments and all receipts across the freight forwarder’s network into one cost-efficient transaction per month.

The administrative efforts in managing accounts receivable and accounts payable can be reduced by as much as 70 percent. Netting minimizes manual data entry and delivers total, real-time transparency from invoicing through to remittance. It then automates the posting of settled transactions and eliminates the time taken to record accounting and bank entries.

Collecting debts from overseas agents and offices in a timely manner has long been an issue for forwarders. The uncertainty of whether debts will be paid quickly becomes the uncertainty of whether cash flow will be available to pay trading partners.

Netting puts an end to the uncertainty. With netting, there is not only discipline, structure, and a timetable within AR and AP flows, there is also a lowering of financing costs.

Netting almost completely eliminates the high administrative costs and bank charges associated with processing numbers of low-value transactions in multiple currencies.

The certainty of cash flow means a reduction in the amount of working capital needed, which leads to a lower float. In turn, banks are more likely to provide competitive working capital financing.

Every international transaction carries foreign exchange risk with the potential devaluation of currency or revaluation of a currency for invoices that are owed. Few freight forwarders have the capacity to bring currency hedging specialists in-house. With foreign exchange dealings centralized and netted off, far fewer deals are required, and the larger, aggregated volumes attract much better rates.

For the first time, forwarders have visibility into the approval status of every invoice. Triggers even advise if invoices have not been approved within a defined timescale. Invoices are viewable online at any time with the real-time net due to be paid or received by netting partners.

Frustrated customers can use queries and alleged missing documentation as excuses for non- or late payment. The time taken to resolve these problems causes enormous disruption to operational staff with the correspondence and phone calls, the copying and re-sending of documents, and more; and it eats into the job’s profit margin as well.

Within a new system, transparency and automated dispute resolution mechanisms speed up the processing of non-approved invoices. A chat function is the first line of defense to quickly solve minor disputes. While significant issues and exceptions can be escalated within the system for expert and personalized service.

It’s common for large mismatches to occur in inter-company bookings and for billings to be wrong, mis-entered, or disputed. This leads to problems in reconciling the accounts, which in turn can lead to errors in the P&L statement and ultimately an incorrect balance sheet.

With inter-company billings eliminated from final group accounts once they balance out, the significant overhead of this administrative function is also eliminated in the process.

Mike Coney is vice president of business development Asia at WiseTech Global, a developer of cloud-based software solutions for the logistics industries.