Maritime Regulation & Shipping:
How is the ISPS Code affecting your Business?
By: Karsten von Hoesslin*
On July 1st, 2004, the International Ship and Port Security (ISPS) Code was implemented around the world by order of the United Nations’ maritime body, the International Maritime Organization (IMO). The ISPS code provides a regulative framework to enhance security both at sea and in ports which all of the 164 members of the IMO adhere to. The ISPS is typically seen through an international lens, however, it does have domestic implications specifically in the realm of economics. So the question is; how is the ISPS code affecting your business?
Along from a pile of paperwork, the implementation of the ISPS code may affect your business (should you be involved in maritime commerce), in two ways; with relative bureaucracy or absolute bureaucracy. By “involved,” it is implied that you are either a large facility with coastal access that decided to create its own deep water port for the sake of eliminating a third party (such as a major Canadian port) or an exporter leasing hulls (the ships themselves) or containers to ship your goods. Chances are that after the ISPS implementation date, you will have somewhere in the fine print of the receipt, found an increase in price. It is also very likely that if you questioned the increase, the answer will be security related. Should you complain, you will be told that according to international regulation, you should suck it up and pay the fee.
This, however, requires further examination because the quality of risk assessment is often inaccurate and many business owners or small port facilities are paying far more than they should. But first, it is necessary to go back to the basics and examine what is at the heart of the matter; the rationale behind the ISPS code.
The ISPS agenda got moving in the wake of the
September 11th terrorist attacks.
Though the attacks were on land, the world began looking for the next potential environment susceptible to
terrorist activities. Since it is no
mystery that sea commerce has its grey areas, the
ISPS requires ships over 500 tons on international voyages to designate a crewmember as a Ship Security Officer (SSO); typically an unpaid position where the unlucky sailor is doing two jobs for the salary of one. To remain competitive in the age of severe overhead reduction, many ships have skeleton crews (staffed with the bare minimum) so the last thing an overworked seafarer wants, is the extra assignment of regulating security, especially if there is no economic incentive. Any port handling ISPS-affected ships must also have a Port Security Officer (PSO), and in conjunction with a long list of other acronyms, the port must have perimeter fencing, security cameras, and security guards.
The world’s megaports
such as Hong Kong and
Coming back to businesses using either megaports or developing ports of their own, the ISPS will
either prove to be a complete headache with increased overhead or it will give
you an excuse to upgrade your miniport facilities for other reasons, yet the
bottom line is that no incentive exists to do either of the two. A pulp and paper mill located on
Insurance underwriters are cashing in on poor risk assessment. They may claim that the current boom in freight is giving ports and shippers record profits, but that is still no excuse to calculate risk improperly. After all, if underwriters are really falling behind in premium levels proportionately to profit levels earned by shippers and ports, then they would not have a problem exposing their risk assessment formulas. Surely you can guess the answer (no).
The ISPS code was implemented too quickly
without accounting for how insurance underwriters could profit maximize. Canadian businesses are paying a price and it
is far greater than the actual level
of risk. If you are not already losing
out due to increased overhead by implementing ISPS, then you will lose out by
not getting the incentive you deserve from your insurance underwriter by trying
to upgrade existing security facilities.
As far as the author can recall, coastal
* Karsten von Hoesslin is a Research Associate with the Centre for Military & Strategic Studies, University of Calgary and was posted at the International Maritime Organization during the summer of 2004.