The financial barriers to starting a cargo shipping business are significant and every level of operation requires a significant amount of capital investment. Even assuming you can afford to purchase a seaworthy vessel, entry into the industry is complex due in large part to the varying stakeholders whose functions are essential to operations. For those risk-taking entrepreneurs and business folks brave enough to entertain the thought of operating their own shipping operation business, the issue becomes how to start. This post is intended to be a step-by-step guide to starting a maritime cargo shipping operations business.
Purchasing a ship
Let’s start with purchasing a ship. The purchase largely depends on the type of operations you seek to implement. For example, if you want to transport liquid cargo, the ideal vessels for that venture are tanker vessels. If you want to transport dry, unpackaged cargo in large quantities, you want bulk carriers.
The legal requirements needed to begin operations
The next question typically involves the legal requirements needed to begin operations. You first need to obtain the necessary certifications from any one of the international classification societies. These certifications are necessary to move to the next step, which is to register the vessel with a flag state. These two processes should be carried out in parallel tracks due to the amount of time needed to obtain and compile the documents for registration.
Preliminary survey
The applicable classification society will first conduct a preliminary survey to confirm whether the vessel is in good condition and thus can be classed by that classification society. The classification society then surveys the vessel’s “drawings” and issues a plan appraisal letter, certifying that the drawings and documents are approved as per its rules and those of the International Maritime Organization (IMO) and specifies the inspection and surveys regime required to comply with the appointed certification. A pre-assessment survey is then carried out to confirm the class of the vessel. The classification society should also issue a variety of certificates after surveying the vessel, such as the international tonnage certificate, which reflects the vessel’s carrying capacity in both gross tonnage and net tonnage.
Comply with IMO regulations
As to vessel registrations with a flag state, this process typically entails working with the flag state’s maritime administrative authorities to provide them with all the necessary documents they require to comply with IMO regulations. Though the documents each flag state requires may vary slightly, there is standard documentation that must be provided to flag the vessel. Those requirements are prescribed by IMO rules and regulations, and they typically include an original notarized bill of sale, which confirms that the owner owns the vessel and that the vessel is free and clear of all mortgages, encumbrances, and liens; an international tonnage certificate; a Minimum Safe Manning Certificate. Long-Range Identification and Tracking Conformance Test, which allows the vessel’s location to be tracked while at sea; an IMO number for both the vessel itself and the ship-owning company; and radio frequency and call sign certificates to be issued by the flag state based on the radio equipment aboard the vessel. If the vessel was previously flagged in another flag state, a deletion certificate issued by that state to prove that the vessel has been deleted from the state’s ship register is also required.
Temporary provisional certificate or a full permanent certificate
Assuming all necessary certifications and documents are provided to the flagged state, it then issues either a temporary provisional certificate or a full permanent certificate, depending on the flag state’s regulations. At that point, the ship registration process is finally complete.
Despite completing ship registration, the vessel is still not ready for operations as there are other stakeholders that must be engaged to facilitate the vessel’s operations. The first and most important is a ship management company assists in hiring the crew and then manages the day-to-day operations of the vessel. The ship management company also assists and advises the shipowner on securing the required maritime insurance as well as engaging with the various ship agencies hired by the shipowner to assist the vessel and its crew at every port of call.
Registering and readying a ship to conduct shipping operations is complicated and is not a DIY operation.
