Banks should be insisting that letters of credit (L/Cs) pertaining to goods shipped on vessels above 500 tonnes are covered by the new and mandatory International Safety Management (ISM) code.

Compliance with the code became mandatory on 1 July 2002 but it appears that some ship operators have not obtained ISM certification. If non-compliant vessels are involved in an incident, or arrested or detained as a result of non-compliance, then cargo owners may not be eligible to recover their losses from insurers.

Non-compliant ships

According to Toby Sizeland, a regional marketing and marine manager at Norwich Union Insurance, non-compliant ships are still sailing and will be deemed unseaworthy.

"We had one such vessel on its way to Iraq, and we had to seek special permission from reinsurers to ensure full insurance protection. It is up to the exporter or the importer to check that a vessel is compliant before sending their goods," Sizeland told the Dubai-based newspaper, Gulf News.

Safety priority

"Banks should also be putting conditions on L/Cs that vessels used are ISM certified," he added.

The ISM code has been developed by International Maritime Organisation to ensure that shipowners make safety a priority.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.