ShipCrunch

International Criminal Court for Shipping?

Could a ferocious supranational arm of justice for shipping, solve all of shipping's problems?

By Ryan Skinner (email)

I've been there before. The rulebook that's pulled over the shipping industry like a straight-jacket doesn't work. It creates paper-compliers (following only the letter of the law) and stifles innovation.

Nobody (except Norwegians, god bless my host rulers!) likes a nanny state, which is the demeaning status the IMO has been brought to by its class of uber-technocrat mandarins. Their rules become an impenetrable barrier between people who do things and true excellence.

But, how can you prescribe a certain level of performance without rules? Let's abandon the territory of sticks for a second, and look at carrots. How many national R&D systems long ago understood that steering the direction of innovation (via technocrat diktat) was hopeless, and gave the steering back to industry itself?

That is, shipping companies themselves know what performance means. They know what failure looks like. Let them direct their own resources towards excellence.

But, but, but, but, I hear you whining, how about those who run operations of zero-quality to compete purely on price? How can a quality operator compete with them?

They can't.

You don't need to be a Nobel economist to understand that price is alpha and omega. That's always been the fundamental of shipping, hasn't it? Move things from here to there at the lowest possible price.

At the same time, you don't want to see oil slicks the size of Rhode Island pouring from countless tankers strewn about the world's beaches like bulimic bikini models.

Shipping has always seemed to have an enforcement problem. Because it crosses borders daily and operates in international space, efforts to police the industry have always seemed handicapped.

A few years ago, I delved deeply into the Milosevic case in the Hague, and particularly the unique status of the International Criminal Court, whose creation Wikipedia deems "the most significant reform of international law since 1945." Here was a body who managed to apply a set of global morals in the face of rigid and protectionist nations.

Even if I hate his despotic technocratic cousin, I do love Johnny Law. Nothing warms my heart like a tough sheriff (must be my American blood). Imagine if shipping companies were allowed, within some limitations, of operating as they saw fit. So far, so good. But if they screw up, they get hit hard. Very hard. We're talking very, very painful fines here.

After the Valdez incident, US authorities created OPA 90 to burn tanker companies that messed up. At the time, I was able to document how some shipping companies created straw management companies to minimize their liability. That was a fault with a national law. Let's empower a real supranational authority to bring some international order to the high seas.

It's either that or slowly suffocate from rules. These are the choices. Pick your poison.

Playing with shipping's business models

Monetizing what's most important for shipping's buyers. Your product? No! Compliance...

By Ryan Skinner (email)

You should only make money when you create value.

Um, yeah, alright.

Most shipping suppliers ship off their products to customers, then tick the box marked "Created Value". A bill follows.

But in how many cases was any value really created? That is, what is the value of a part beyond the pure cost of producing and delivering the part?

Arguably, many of shipping's suppliers are missing the golden opportunity to provide what shipowners really want: Compliance.

Two anecdotes illustrate this:

1) I'm engaged in a minor bureaucratic situation. My situation doesn't fit like a key into the bolt of the bureaucracy's rules. So I ask them, and ask again. However they answer, I won't get a real answer until my case is decided yes or no. What I would pay for up-front certainty? It's priceless.

2) On behalf of a client, I have asked the market for queries related to a particular area of shipping rules. Not surprisingly, every user's situation was unique; none fit precisely in the rulebook. Thus no one understood whether they might be stopped in port state control, or not.

Businesses hate uncertainty. And shipping companies are, by their very weather-prone and trans-jurisdictional natures, exposed to more uncertainty than most businesses. Eliminating uncertainty must have a very high dollar value for ship managers.

What I'm proposing is something as wild as a compliance guarantee. This kind of thing is being done in different guises. I believe Wilhelmsen offers something of this nature, even if the guarantee has no fiscal teeth. Wartsila seems to more or less argue for managers to outsource propulsion (like Rolls-Royce did in aviation).

It would require some inventive business modeling and an excruciatingly sharp focus on contractual clauses, but this model has merit. Any business needs to focus only on where the customer seeks value; if you do that, you'll only get better and better, in your customers' eyes.

Is there anyone in the business that gives customers a compliance guarantee? I'd love to hear about them, as an example....

For those willing to go down the business model re-development road, I can recommend two references that I have recently built off of:

• Business Model Generation: A manual for thinking afresh about how you do business
• Develop Ideas That Will Disrupt Your Industry

Yes, finally, a few words on piracy

What it takes to put an issue like piracy on the high seas,
higher on the public agenda

By Ryan Skinner (email)

Piracy's a subject I long ago decided not to touch with a barge-pole. Why? It doesn't need attention from the likes of me, and so many people know so much more than I. Let them fill the airwaves with ideas and opinions.

It's a tragedy that piracy has not gained more attention, though. An utterly solvable problem of heart-rending proportions taking place in full openness has generated less overall attention than, say, one memo from a Nokia CEO.

Don't blame the public. Until these pirates are stealing our women and raping our cattle, we're not going to give it two thoughts. It's not an issue that is touching people where they'll feel it.

The industry has seemingly crafted pretty strong economic arguments against piracy. I've heard cost of piracy figures ranging from $1 billion up to $12 billion (can you say piracy bubble?). I'm sure these facts and opinions get the creaking machinery of the bureaucracy moving, but there's no urgency.

I've seen little in the way of emotional appeals. The closest it came was during the Maersk Alabama incident, but that story turned into an action movie featuring a sniper.

Suspend your disbelief for a sec. I see Leslie Stahl of 60 Minutes in the humble home of a Ukranian second mate, who describes the harrowing ordeal of an extended period of incarceration on his own ship at the hands of pirates. Stahl asks the mate's young daughter "how did you feel when your daddy was kidnapped?" The young girl cannot explain her fear, but we can see it better than any words can convey.

Stahl interviews one of the warlord pirate leaders in Puntland, and a couple 16-year-old pirates who are about to board a mother ship. "Why do you do this?" Through the translator, we hear them say "It's a living."

Stahl talks to shipowners, negotiators on both sides, IMO leaders and Navy admirals. She paints the picture of an entirely avoidable state of affairs, beginning with a collapsed state harried by fish poachers and illegal dumping and ending with a menace to a salt-of-the-earth workforce.

Who's going to pitch this story to 60 Minutes? Take Producers David Gelber, Howard Rosenberg, Shachar Bar-On, or Associate Producer Sam Hornblower. All have friends of friends in shipping. Go ahead and look them up in LinkedIn. Maybe you know someone who knows them, or another producer.

It's all about the stories. Who knows a seafarer with a piracy story that hits heart-strings? Our piracy experts have countless colorful sources on both sides of the piracy equation. We know the navies, the IMO and the shipping industry will talk about it.

For a producer of gripping television documentaries, this story has a bow on it.

Here are some examples of other people trying to put some color to this story, if on a more modest scale than 60 Minutes:

Kirk Klocke's 3-part documentary on the shipping industry and piracy

A CBC documentary that has, unfortunately, been taken off the air

Sky's Ross Kemp in search of pirates

My cousin the pirate on Vimeo

Somaliland Piracy (but only if you understand Italian)

Mandatory ECDIS the worst thing that could have happened?

They say everyone chooses their own kind of hell. For shipping, it just might be the rules.

By Ryan Skinner (email)

It's total sacrilege, but I'm going to say it. Maybe DNV f*cked up.

Now, I have all the respect in the world for the guys over at Høvik. They're brilliant. Even if I kind of panned their Quantum thingy, they're still leagues ahead of most outfits in this business. They're what passes for bleeding edge in (let's be frank) an oftentimes dull industry.

But consider this ECDIS business. Over and over again, people pushing ECDIS cite the DNV studies, which demonstrated that mandatory ECDIS would reduce groundings by some dizzyingly high percentage. It was more or less on the back of these studies that the IMO went whole-hog and made these chart computers mandatory on all SOLAS ships PDQ.

The rules logic goes awry on the graph where x = some not-too-distant point in the future and y = a metric tonne of rulebooks. Suddenly, a rule requiring every master to have his mother on the bridge to hold his hand, doesn't work. The sheer weight of rules sinks the ship.

Now, I'm a big fan of ECDIS. It's ingenious like the GPS in a car, which I don't use but love on rentals. And perhaps that's the difference. No one mandates a GPS. No one argues that every GPS operates a little differently. No one moans about the need to update a GPS now and then. No one needs to take any special training to use one.

Would it not be better for regulators to get far out of the way, and let technology adoption take its own natural path? If ECDIS is just an example, is the profusion of rules making shipping safer, or more dangerous?

In order to apply a little science to this question, I've created/found a few graphs that help illustrate the problem. The first illustrates the expanding stack of rules that apply to shipping operations:

As we can see from this well-documented study, the amount and detail of rules-making has grown out of control. This chart is anecdotal, yes, but anecdotal evidence from shipping companies suggest it's approximately true. Is it having a beneficial effect on safety? Here are two charts taken at (relative) random regarding maritime casualties.

Granted, increasing volume of accidents and value lost may easily stem from a much larger world fleet. Nonetheless, it doesn't seem as if more rules = more safety. Is it then wise to create, yes, even more rules?

When considering mandatory ECDIS, perhaps it would be best to look at accident figures for high-speed craft (ferries and the like). ECDIS has been mandatory on these for many years; has it resulted in fewer incidents? Anyone have the data on that?

Both shipowners and officers are rightly grumpy about ECDIS mandation. Many people are simply PO'd that this thing's being pushed down their throats. Officers hear that they will get dual ECDIS and paper will be gone, and they worry. What about viruses? What about system crashes? Others rejoice.

I know the ECDIS fan-boy crowd is going to come down on me hard for this. They argue (in many cases, rightly) that without mandation the merchant fleet simply won't do ECDIS. Why? Because it's costly. And that may be true. But costs come down. Applications increase. And pretty soon ECDIS would be mandatory for entirely different reasons, not legal ones.

You can legislate yourself into a thicket, and I fear this may be happening more and more often in shipping and at the IMO.