The Obligations of the Carrier under a Bill of Lading Are to Properly - Case Study Example

Introduction Introduction of shipping containers had a revolutionary effect on shipping industry. Shipping containers contribute to economic and productive efficiency in handling, stowing, and discharge of a cargo. However, despite these benefits, questions on security and obligations of both parties during the shipment process arise. Bill of Lading is a general document issues by a carrier (shipping department) that proves that certain type of goods have been received on board and will be further delivered to the consignee within a certain time limit. Bill of Lading has a number of purposes among which is the evidence of the contract of carriage, statement of condition of goods received and whether the goods received match the contract description, document of transfer without transfer of ownership rights (N unes, T. 2004). Obligations of the carrier under the Bill of Lading include proper and careful loading, keeping and stowing of the goods received alongside with proper discharge of the goods on the board. While, undoubtedly, consideration should be given to human input, the present technological development and long industry experience significantly lower the possibility of human mistake during the transportation process. Crude Oil Transportation: General Issues Crude oil is widely used as a source of energy alongside with production of plastics and manufacturing. As an item of strategic importance, crude oil has for a long time been an object of various political confrontations. The issue is rooted in supply and prices on the commodity: transportation infrastructure emerged in an attempt to satisfy the rising demand for crude oil and products made out of it. Crude oil is transported from production sites to refineries by water and by land. About 62% of all crude oil is shipped by means of maritime transportation: barges and tankers, the remaining part is moved mainly by pipelines, trucks, or trains. Thus, consideration should be given to the two major means used in the industry: oil tankers and pipelines (Hopkins, T. D. 1992). Oil Tankers and Pipelines: Security Issues Safety of the commodity during transportation process largely depends on technological aspects of the cargoes used. Oil tankers are classified in accordance with their size: while coastal tankers can carry only about 50,000 tons of dead weight, ULCC are Ultra Large Crude Carriers and can transport over 300,000 of deadweight tons. Increase in size of tankers and, consequently, increase in the amount of chemicals transferred requires special security systems to be installed inside the tank to guarantee protection from oil spill. The majority of tankers are owned by independent tanker companies, thus technological characteristics responsibility is transferred on the owner. Invention of the “load on top” procedure significantly contributes to safety and efficient use of the commodity. Following this procedure, washings after the tank cleaning procedure are to be collected in special tank. On the way back to the terminal, the water and oil in the tank separate and water is pumped overboard, whereas oil can further be used (Hopkins, T. D. 1992). Other systems such as cargo gauging system, liquid overfill protection, vapor overpressure and vacuum protection, and, finally, personnel training. One of the requirements imposed on new tankers after 1978 Conference on Tanker Safety and Pollution Prevention is the installation of the washing system, as well as safe allocation of the tanks on the ship in order to minimize the possibility of oil spill. The construction of tankers is highly monitored by international agencies alongside with governments and includes such issues as dimension of protective spaces, double bottom tanks or spaces, cargo tank boundary lines for different weight tankers, cargo location relative to collision bulkhead, limitations on space and arrangement of cargo tanks, alternative designs and other tanker safety aspects (Rueda, A. 2001). Before crude oil can be transported by an oil tanker, it must reach the maritime terminal by a pipeline in order to be further loaded to the tanker. While pipeline transportation involves high initial capital investment, further exploitation of this transportation mean is considerably less expensive. A special security system is required to ensure safety during transportation. The major issues that have to be addressed are outside sources such as corrosion and mechanic failure. The two key legal documents regulate pipeline functioning: The Natural Gas Pipeline Safety Act of 1968 and The Hazardous Liquid Pipeline Act of 1979. These legal acts authorize pipeline inspections as well as enforce administrative and criminal penalties for those breaking the guidelines. Guidelines include safety requirements, minimum operator qualifications, oil spill response plan development, anti drug and alcohol programs for operators. The legal acts require operators to submit summary data alongside with reporting incidents that took place (Lenczowski, G. 1995). Thus, partially the obligations under the Bill of Loading are shared and enforced by governmental institutions. However, this is only the minor part when it comes to speaking about care for the goods carried. Oil Tankers and Pipelines: Industry Practice, Tanker Loading and Discharge While the liability to adequately care for the goods carried on board is virtually guaranteed and ensured by governmental agencies, the carrier still has to care for the goods while the loading and discharge processes. The process of loading and unloading of crude oil involves significant risks, as Volatile Organic Compounds (VOC) get into atmosphere. VOCs include a variety of chemicals that have short term and long term negative impact on health and environment. The chemicals include methane that contributes to greenhouse effect; going even further then this, there is a risk of ground near ozone generation that has adverse effects on vegetation. The emissions into the atmosphere vary significantly and depend on the temperature of oil, type of a tanker, loading rate, weather conditions, and ship motions. While there is vast number of alternatives proposed to reduce the gas emissions, the three commonly used are absorption of the gas into the crude oil during loading process, gas liquefaction with further storage and usage as a fuel, and transfer of tank atmospheres during the loading and discharge processes (Trench, Cheryl J. 2001). Aside from difficulties during the loading and discharge processes resulting from the nature of crude oil, there are risks associated with improper loading. Improper weight distribution as a result of tanker overload can lead to structural damage of the tanker and, consequently, result in an oil spill. Improper stability that results in a cargo shift not only poses difficulties for the personnel on board, but also can lead to structural damage of a tanker. It should be further noted that due to the nature of crude oil, the danger of it alongside with the strategic importance for world economy, all operations with the oil are highly monitored by governmental and international organizations. International organizations impose standards on loading and discharge processes, storage and transportation facilities used, even personnel employed. For instance, MARINTEK and SINTEF group concentrate their efforts on VOC emission measurements as well as attempt to predict risks associated with the change in the nature of crude oil in the future. All of these procedures are highly monitored especially in the light of recent events, oil spill, greenhouse effect, and the skyrocketing concern with environmental issues. Consequently, the responsibility of the carrier is partially diversified away; one simply has to follow a widely adopted scheme and established requirements in order to guarantee safety of crude oil (Trench, Cheryl J. 2002). Bulk Coal Transportation: General Issues Bulk coal is mainly used as a source of energy. Since it is characterized by a low per unit level of energy, especially if compared to crude oil, in order to be a competitive good on the market, transportation costs have to be minimized. Consequently, bulk coal is mostly transported by rail or truck on the local level. Approximately 60% of all coal is consumed within 50 mile zone from the mine site. In this case, transportation is done solely by truck or railroad. However, there are cases when bulk coal is transported by water. For transportation on the river, barges are used; when it comes to ocean transportation, bulk coal is mainly shipped by dry bulk vessels. In general, in order to reach the final destination several means of transportation are used (Mcdermott, D. 1997). Railroad, Truck, Water Transportation of Bulk Coal: Security Issues The major problem resulting from coal truck transportation is the potential damage to the road if the truck is overweight. While operating a loaded truck should be done in an appropriate gear for speed, load, and grade, the general requirements are similar to those for other drivers. The problem arises in the initial strike for cost efficiency: coal truck drivers are not paid well and the delivery of coal by transportation companies is done on the per ton charge basis. Consequently, trucks are often overweight. Truck overloading results not only in complicated operating, that is dangerous for other drivers on the road, but also damages roads. In such way, transportation costs are partially transferred to society rather than directly paid by manufacturing or transportation companies. The industry practice suggests a weight limit of 120,000 lbs. Public Service Commission of West Virginia not only imposes additional speed limits for coal trucks, but also requires reporting truck weight electronically into the database (Duke, J., Litz, D., & Usher, L. 1992). When transporting coal by dry bulk vessels a number of issues have to be considered. In the first place, there is a high possibility of flammable gas emissions into the atmosphere, oxidation that may result in depleting of oxygen, heating of the coal to the temperature that may lead to spontaneous combustion, chemical reaction with water that produces acids and stimulates erosion. Thus, not only the basic fire preventing procedures have to be followed, but also the vessel has to be properly equipped for timely reaction in case of emergency situation. The basic industry suggestions include Notice to Shipmasters Loading Coal, and MO Code of Safe Practice for Solid Bulk Cargoes (Litman, T. 1999). A typical coal train is able to group 100 or even more trucks of coal within a single shipment. The unit train is specifically constructed to move from one point to another within a certain destination. Special loading and unloading terminals are used in order to guarantee efficiency and safety. In order to guarantee safety of the cargo on the train, there are loading and discharge requirements posed by the industry that consider the hazardous nature of coal (Duke, J., Litz, D., & Usher, L. 1992). Bulk Coal Loading: Security Issues The transportation conditions depend on the type of coal loaded, the degree of danger it imposes. Thus, an initial investigation and testing of coal before it can be loaded is required in the majority of countries before it can be further loaded especially when it is transported by water. Such issues as space have to be considered. In case if coal is transported by a vessel, location of other goods on board has to be considered to flammable nature of coal. Before the coal is loaded, the cargo spaces have to be checked: they have to be dry, electrical cables and components have to be in proper condition and ventilated; the construction of electrical components has to be considered, a special classification is implied for security issues. The general recommendation regarding ventilation system involves forced air supply and natural exhaust. Various instruments to measure concentration of methane and oxygen in the atmosphere alongside with temperature monitoring have to be present and used during transportation process. Particular consideration should be given to stowing coal in hot areas, and monitoring of coal temperature during the transportation process. Coal terminals have built-in automated rail in-loading facilities or off-shore wharves that are serviced by conveyor systems, thus, there is little human labor and human mistake involved (Litman, T. 1999). Conclusion The security issues during the transportation process are very complex. However, when acting in accordance with industry practice that virtually covers every aspect of cargo security during loading, discharge, and storage, there is little possibility of either personal injury or cargo safety. It should be further noted, that in the light of recent events, oil and coal industry are the issue of particular interest. As stated by many scholars, oil and coal storage facilities may be a prime target for terrorist attacks (Litman, T. 1999). Consequently, aside from general security issues, the system of protection, detection, and emergency reaction have to be developed and integrated. References Duke, J., Litz, D., & Usher, L. (1992). Multifactor Productivity in Railroad Transportation. Monthly Labor Review, 115(8). Hopkins, T. D. (1992). Oil Spill Reduction and Costs of Ship Design Regulation. Contemporary Policy Issues, 10(3). Lenczowski, G. (1995). Major Pipelines in the Middle East: Problems and Prospects. Middle East Policy, 3(4). Litman, T. (1999). Win-Win Transportation Management Strategies: Cooperation for Economic, Social and Environmental Benefits. Mcdermott, D. (1997). Coal Mining in the U.S. West: Price and Employment Trends. Monthly Labor Review, 120(8). Nunes, T. (2004). Charterers Liabilities under the Ship Time Charter. Houston Journal of International Law, 26(3). Rueda, A. (2001). Price-Fixing at the Pump. Is the OPEC Oil Conspiracy beyond the Reach of the Sherman Act?. Houston Journal of International Law, 24(1). Trench, Cheryl J. (2001). HowPipelines Make the Oil Market Work — Their Networks, Operation and Regulation. Prepared for the Association of Oil Pipelines. Allegro Energy Group. New York, NY. Trench, Cheryl J. (2002). The U.S. Oil Pipeline Industry’s Safety Performance. Prepared for the Association of Oil Pipelines and the American Petroleum Institute. Allegro Energy Group. New York, NY. Read More