BC Shipping News - February 2018

Legal Affairs: New measures to address abandoned vessels

Op-Ed: Cabotage: Fight gathering global strength

LNG Bunkering: Future trends in LNG bunkering

BC SHIPPING Commercial Marine News for Canada’s West Coast.

Volume 8 Issue 1

www.bcshippingnews.com

NEWS February 2018

Industry Insight Jean-Jacques Ruest CN Railway

State of the Industry Chamber President’s Annual Report

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Supply Chain Finance

Shipper Supply Chain Finance Solutions

“Teekay has thrived here. Canada is admired around the world, and Vancouver is a great place to live.”

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BC SHIPPING

CONTENTS February 2018 Volume 8 Issue 1

NEWS

Cover Story

35 SURVEYING

New genetic testing lab adds to IMS’ capabilities

20 7

EDITOR’S NOTE

8

IN BRIEF

12

INDUSTRY INSIGHT

By Jane McIvor

Industry traffic and news briefs Creating a superior supply chain Jean-Jacques Ruest, CN Railway JJ’s 30-plus years of global business expertise puts him in good stead as one of the leading voices on the topic of supply chains and the one to turn to when looking for insights into efficient cargo logistics.

18 20

25

12

PORTS & TERMINALS

39

LNG BUNKERING

42

OP-ED: CABOTAGE

HISTORY LESSON Art in the Arctic

By Lea Edgar

STATE OF THE INDUSTRY Chamber President’s Annual Report on the shipping industry

By Robert Lewis-Manning

Shipper supply chain finance solutions

By Darryl Anderson

SHIP FINANCE

31

MARITIME LAW

33

SUPPLY CHAIN

Vancouver shipping A missed opportunity?

By Haijun Yu and Bernie Jones Norton Rose Fulbright merger proving successful for all

Grain history part II Vancouver’s golden age of grain

By David Hill-Turner

Future trends in LNG bunkering

By Captain Stephen Brown Fight for cabotage gathering global strength

By Terry Engler

45 CABOTAGE

Cabotage in Canada: A short assessment

By John Roberts

47 WATERJETS

Operational realities of jet drive boats

By Michael Gardiner

SUPPLY CHAIN FINANCE

29

37

51

LEGAL AFFAIRS

Feds introduce new measures to address abandoned vessels

By Catherine A. Hofmann

41

The many moving parts and partners for W.A. Grain

On the cover: Fairview Terminal, Prince Rupert (photo: Lonnie Wishart); above: Vancouver Harbour (photo: BC Shipping News); right: the Coralius (courtesy Sirius Shipping); left: Jean-Jacques Ruest (photo: CN)

February 2018 — BC Shipping News — 5

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International Sailor’s Society Canada

EDITOR’S NOTE

Photo: Dave Roels

Key take-away this month: Partnerships are integral to success

I

f there’s one take-away from this month’s issue, it’s the notion of partnerships.

Whether it’s within our own industry, across other trade sectors, with all levels of government or all organizations who have a stake in seeing a strong and vibrant Canada, we only succeed when, as Robert LewisManning puts it, we’re all “rowing together in the same direction.”

Start with the obvious — JJ Ruest, Executive Vice-President and Chief Marketing Officer for CN, speaks of need for collaboration throughout each step of the supply chain, as does David Smythe in the article on W.A. Grain and its partners. David is adamant that communication amongst partners is a key component to their success.

Robert Lewis-Manning’s State of the Industry report outlines the pressures

and challenges the shipping industry faces from upcoming government legislation. Only through consistent messaging from the industry to government will our voice be heard (and more importantly, understood).

Darryl Anderson’s article on shipper supply chain finance highlights options for businesses to solve financing issues through partnerships with financial institutions and insurance underwriters; and Haijun Yu and Bernie Jones outline the need for partnerships in similar sectors to address one of the obstacles to Vancouver as an international maritime hub — that of ship finance and investment.

Stephen Brown ends his article about trends in LNG bunkering by noting that it will only be through partnerships (between

ports, shipping lines, energy suppliers and government) that the best solution for supplying LNG on the West Coast will be found.

Even Norton Rose Fulbright partner David Bain, while summing up their first year of the merger with Bull Housser Tupper, speaks to the importance of partnerships in growing the industry, speficially pointing out that the Vancouver International Maritime Centre — an initiative based on industy/government partnerships — has been instrumental in creating an environment conducive to growth.

So, a bit of an obvious message but one definitely worth repeating and highlighting.

As they say — and especially appropriate for the supply chain, you’re only as strong as your weakest link.

— Jane McIvor

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INDUSTRY TRAFFIC BASS appoints VP of sales for North America

B

ASS is pleased to announce that it has appointed Mr. Fernando Lehrer as their VP of Sales for the North American market as part of its continuous commitment to growth and close customer support.

With a Naval Architect & Marine Engineer background, Fernando brings over 20 years of experience in the maritime industry serving in critical roles such as VP of Product Development for ABS Nautical Systems (ABS), Director of Marine Consulting Services for ABS and President of London Offshore Consultants (LOC).

His wealth of experience allows him to develop a holistic understanding of the challenges that ship operators face and the importance of selecting the right fleet management tools to address them.

Fernando is also a thought leader and visionary who has spoken at various industry events on the latest issues gripping the industry, with a keen interest in Marine Digitization and the way technology will impact the maritime industry.

With its foray into the North American market, BASS is now represented in over 35 countries and counting with its global employee headcount growing to 140 personnel, its largest ever with further additions in the pipeline.

To learn more, visit www.BASSnet.no.

Clear Seas continues to clarify facts about shipping

T

he Clear Seas Centre for Responsible Marine Shipping continues to outline and provide clarity on such issues as oil tankers, underwater noise, the value of shipping and now, a new section outlining the facts on who pays for an oil spill.

In accordance with their mandate to provide impartial and factbased information on marine shipping in Canada, Clear Seas has created a section on their website that highlights: • The law in Canada that regulates liability and compensation for oil spills, and gives force to international conventions on oil pollution damage.

• How the amount and source of compensation available compares for spills of oil tanker cargo versus bunker oil.

• The national and international funds available for oil tanker cargo spills.

• How Canada’s Ship-source Oil Pollution Fund works and what kinds of oil pollution claims it will pay.

The purpose of this site is to outline who pays for the costs related to an oil spill in Canadian waters and to encourage informed conversations about marine shipping in Canada.

Learn more at clearseas.org/who-pays-oil-spill and join the conversation on social media by using the hashtags #clearfacts #whopays and #oilspill.

Clear Seas also has a number of additional research projects underway, including commercial shipping issues in Canada’s north; real-time vessel monitoring and marine transportation corridors.

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NEWS BRIEFS

Canadian Coast Guard selects Furuno to outfit new Bay Class Search and Rescue vessels

F

uruno has been selected by the Canadian Coast Guard to outfit their new Bay Class search and rescue vessels. The 55-foot CCGS Pennant Bay and CCGS Baie De Plaisance are the first of 12 hulls ordered by the CCG, with an option for six more. CCGS Pennant Bay was built by Hike Metal Products in Wheatley, Ontario, while Baie De Plaisance was built by Chantier-Naval Forillon, Inc. in Gaspe, Quebec. These new Bay Class vessels, all named for Canadian bays, have been commissioned under Canada’s Federal Infrastructure Initiative and the 2016-17 Fleet Renewal Plan. Their new Furuno electronics, including a multi-station NavNet TZtouch network with Radar and Depth Sounder, will assist the CCG in their mission to keep Canadians and Canadian waterways safe.

To help maintain their high standards of success, an integrated and comprehensive package of Furuno electronics was selected for the new Bay Class vessels which are capable of operating up to 100 nautical miles offshore. At the heart of the network are dual NavNet TZtouch Black Box Processors (TZTBB’s) and 19-inch touch screen displays, supported by a dedicated 14-inch NavNet TZtouch (TZT14), at the upper helm. NavNet TZtouch offers the capable, proven navigation system the CCG needed, while also delivering the ability to integrate the best peripheral devices available to help accomplish their mission objectives. Dual X-Band Radars are accessible from all TZtouch workstations, and include the Solid State DRS4DNXT, Furuno’s new 24-inch Doppler Radome with Target Analyzer and Fast Target Tracking, along with the DRS6AX, a 6kW Open Array Radar from Furuno’s recently expanded X-Class line. Together, these Radars deliver exceptional target detection and clarity, along with impressive short-range detection and a range of up to 96 nautical miles.

These new SAR ships are controlled by the integrated NavPilot series adaptive Autopilot, the NavPilot 700 at the lower helm, and the color NavPilot 711C at the upper helm. Furuno’s NavPilot is

referred to as a ‘self-learning’ Autopilot due to its ability to improve the vessel’s handling by recording information about its characteristics throughout each voyage. Supporting the Furuno navigation network are several devices and sensors including the DFF1 1kW Depth Sounder and DT800 Depth Sensor, providing redundancy in depth sensing and a detailed picture of the water column beneath the hull.

The RD33 Digital Data Display provides a selection of important navigation data with multiple preset data sets to choose from, as well as custom display modes to show important information required for the mission at hand.

Additionally, FLIR M-Series Thermal Camera integration is achieved on these systems with the simple interface built in to every display and processor in the NavNet TZtouch network. The camera’s advanced thermal imaging will assist in the vessel’s search and rescue mission, allowing the operator to see more, and farther than ever before. The camera can be controlled from any display, and can lock on to a specific target or target location with a simple touch of the display.

The NMEA2000 network allows for easy future expansion, as expansion ports are built in to the network at pre-determined, logical locations for additional NMEA2000 peripheral devices to be added.

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February 2018 — BC Shipping News — 9

NEWS BRIEFS

AAL boosts its Canadian operations

I

n a move that underscores AAL’s long standing presence and commitment to the Canadian market and further boosts its support of a growing project customer-base in the region, the global operator has appointed Marc Schutzbier as Commercial Manager of its Canada operations. Marc is a highly respected shipping professional with over 11 years of international and local market experience working for one of the world’s leading project forwarders, Deugro. Marc will be based in AAL’s Calgary office.

Felix Schoeller, General Manager with AAL and responsible for the carrier’s Canadian operations for the last four years commented, “Marc has a great deal of commercial expertise and a deep understanding of the Canadian and wider North American heavy-lift project markets and what it takes to meet the needs of our local customers. He brings with him great passion and will help to drive forward our ambitious business development strategy for the region.”

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PROUD TO BE SERVING THE NORTH COAST

Marc himself concluded, “AAL has impressive and well-established resources already serving the North American market — a significant fleet of highly flexible MPP vessels, a multiple award-winning operations and commercial team with heavy-lift project credentials second to none. And, most importantly, a proven track record and the respect of the local shipping community, which is not an easy thing to build in such challenging market conditions.

“As the project market once again develops momentum, we have a highly competitive portfolio of multipurpose and heavy lift services for our customers. This comprises tailor-made chartering solutions and flexible fixed route semi-liner services of regular sailings between Canada and the rest of the Americas, Asia, Europe, Middle East and Africa — a one-stop-shop for not just project shippers, but also those who wish to ship dry bulk, breakbulk and general cargo.”

PRINCE RUPERT, B.C. 250-624-9858 info@wainwrightmarine.com www.wainwrightmarine.com

BC SHIPPING NEWS

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INDUSTRY INSIGHT

Creating a superior supply chain Jean-Jacques Ruest

Executive Vice President and Chief Marketing Officer, CN Railway

W

ith the vision of creating a superior supply chain, JeanJaques Ruest, Executive VicePresident and Chief Marketing Officer for CN, knows that leveraging the strength of each partner in the chain is integral to success. Ruest’s 30-plus years of global business expertise puts him in good stead as one of the leading voices on the topic of supply chains and the one to turn to when looking for insights into efficient cargo logistics.

BCSN: Tell me a bit about your background and your views on what makes for a successful supply chain.

JR: Before joining CN in 1996 as Vice President, Petroleum and Chemicals, I worked for a major international chemical company for 16 years. At CN, I was promoted to Vice President, Industrial Products in 2003; then to Vice President, Marketing in 2004; and Senior Vice President, Marketing in 2006 before attaining the position of Executive Vice President and Chief Marketing Officer in January, 2010.

Broadly speaking, I’ve always approached my career at CN as a student of the market, looking at all of the different economic sectors and their transportation requirements.

I’m looking at the business from our customer’s point of view — that is, from the outside 12 — BC Shipping News — February 2018

...in the international container supply chain, to be successful, we must be able to leverage the strength of the three partners — the ocean shipping line, port and terminal operations, and rail service. looking in. In the rail industry, it’s easy to take an inside view and try to make the world adapt to our needs but that doesn’t go very far.

Taking an outside view allows us to see the services as defined by the customer.

As an example, in the international container supply chain, to be successful, we must be able to leverage the strength of the three partners — the ocean shipping line, port and terminal operations, and rail service. Ultimately and when done right, the collaboration can be extremely powerful.

The first step in creating a superior supply chain is to convince the shipping lines to make a Canadian port their first port of call and to do that, we must market and promote the efficiencies and services of our terminal operator partners as well as the rail side of operations.

On average, we aim to maintain dwell time of two to 2.5-days. By that, I mean that once the containers are off the ship, it will take that long for it to leave the dock on

the rail car. While we strive for an average benchmark of two to 2.5 days for dwell time, we’re also focused on service to outliers — those containers which take longer — to minimize the number of individual excessive dwell times.

Rail time, like time on the ocean side of the chain, remains fairly consistent so key to a superior service for an importer is their experience at the ocean terminal, the experience at the inland terminals and how efficiently the carter trucking services can be accommodated. Factors like quick carter turnarounds (aiming for 45 minutes from ingate to outgate), reservation times being kept, and overall total sustainable costs, all play a part in achieving the ultimate goal of a superior supply chain.

When importers consider their transportation needs, they’ll look at all aspects of the chain and they’ll want to see a seamless process along with the commitments of each partner. To that end, we have Memorandums

INDUSTRY INSIGHT of Understanding with each of the port authorities which basically outline the concept of creating a superior service. We have also operational Level of Service agreements with terminal operators which allow us to share daily key performance indicators and work together to achieve the goal of two to 2.5 days of dwell time.

BCSN: What about the supply chain for the exporter?

JR: We need partners to be able to balance their journey for the ship on the return voyage. The more imports we have, the more exports we need and we have undertaken a number of initiatives to create more export opportunities.

There needs to be a balance — ideally 80 to 85 per cent of containers need to go back to the same coast they came from, and then as many of those as possible need to be used for revenue generating export. When a port grows its import market, it means they need to find ways to generate more exports. Take Prince Rupert, for example, the Fairview Terminal expansion is being balanced by companies like Ray-Mont Logistics for exporting specialty crops, and Tidal Transportation for exporting forest products.

Photo courtesy of Prince Rupert Port Authority

Recently recognized by the Journal of Commerce for port productivity, Maksim Mihic (DP World), Shaun Stevenson (Prince Rupert Port Authority) and JJ Ruest accept the award JOC’s Chris Brooks.

There are two ways to create exports.

The first is by ‘source loading’ — i.e., the container is loaded close to where the product was manufactured or harvested.

For example, sawmills within 100 miles of Prince George would load their containers there; or a farm with specialty crops would do the same in Saskatoon.

One of the larger initiatives we undertook this year was in partnership with AGT Foods in Regina to increase source loading by building a new intermodal ramp. The ramp

is being built and operated by AGT but CN will be the exclusive train service for it. That should be ready by this coming summer.

The other way is to generate more exports at the port itself — ‘port side export.’

Continuing with the Prince Rupert example, we partnered with the Prince Rupert Port Authority and the Government of Canada to build a $90-million multi-user rail corridor which is being used by companies like RayMont for their new facility. Using the rail corridor or loop track, they are able to bring

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INDUSTRY INSIGHT

Photo courtesy of Prince Rupert Port Authority

When companies look at getting into the business of loading containers, they’re looking to see what sort of rail service they’ll be receiving; what the pricing is like; and how we’re going to market the service...

JJ Ruest, Brian Friesen (Prince Rupert Port Authority) and Charles Raymond (Ray-Mont Logistics) were at the Asian Logistics & Maritime Conference in late November, 2017, to highlight the collaboration amongst partners on Canada’s West Coast.

14 — BC Shipping News — February 2018

in 100-hopper-car unit trains of grain and transload it into ocean containers in roughly three days. Ray-Mont’s operation in Vancouver can only accommodate 50 cars at a maximum. That makes a huge difference to the rail pricing to the West Coast — as much as $4 per metric tonne.

Tidal Transportation also uses the loop track. For the first two or three years of their operation, lumber loaded into containers was only coming in by truck, so the Port of Prince Rupert natural catchment area for lumber was very limited. Now, the facility is rail served by the loop track and the catchment area of the Port of Prince Rupert now goes all the way to Prince George and all of Northern B.C. BCSN: What are some of the other initiatives you’re working on, especially for the West Coast?

JR: There are two new terminals that have been built for the export of propane (to be sourced from Alberta and Northern B.C.) in Prince Rupert and we’ve be working with AltaGas and Pembina on ways to get this energy to market. One will start in 2019 and the other in 2020 and most of the energy will go to Japan as well as to South Korea and Taiwan.

We’re really pleased to see both of these projects moving forward.

It will be another significant export for the West Coast and it’s a great strategy to support local companies growing their energy business in Alberta and Northern British Columbia. Without access to new markets that fetch a good price for propane, growth in this energy sector would have to slow down. And by having two terminals, we’ll be able to export for a better price. It’s also good news for smaller, more remote communities that benefit economically from energy production.

The same situation applies to the export of lumber. If U.S. imports diminish, other markets need to be found. Small towns that depend on sawmills can have access to rail loading capacity of containers in Prince Rupert or Vancouver which can be exported to Asia.

There is also a plastic pellets manufacturing plant in Alberta which we’re hoping will one day have a container loading facility in Prince Rupert.

BCSN: In what way does CN facilitate or assist with that kind of decision?

JR: We’ll support new terminals and their growth through a comarketing partnership as well as potentially some financial backing in the first couple of years as they get established. When companies look at getting into the business of loading containers, they’re looking to see what sort of rail service they’ll be receiving; what the pricing is like; and how we’re going to market the service for these products to get to them to be bagged or put in containers.

BCSN: I’d like to spend some time looking at trends and if you can provide a forecast for the coming year and beyond.

JR: Starting with the North American economy, it looks very good.

The majority of the GDP for both Canada and the U.S. is consumer driven — as much as 70 per cent of the U.S. GDP is related to consumer spending and Canada is very similar. If consumers are doing well — that is, they have an income and are spending it, the ports

INDUSTRY INSIGHT will do well. And the markets for Central Canada, the U.S. Midwest and the resulting workload for West Coast ports of Canada are forecasting growth in the high single digits.

The West Coast looks especially good with growth forecasted to be between five and 10 per cent — that’s on the back of consumers in North America supporting the port industry.

BCSN: What about the North American Free Trade Agreement negotiations?

JR: That’s a wild card. At this point, it can’t be quantified. The industry most vulnerable to the negotiations is the North American automotive manufacturing sector which generates quite a bit of business for Canadian ports. It’s a cloud on the horizon which is not factored into the above forecast at this point.

Another cloud for the West Coast is port capacity and how much room, or how much capacity, there is left for growth. On the East Coast, there’s still quite a bit of port capacity for those supply chains to grow but on the West Coast, as much as we just expanded, we might be consuming the capacity those expansions afforded fairly quickly, especially in Prince Rupert.

For Vancouver, Deltaport is still to be completed. We might be within a year or two of that capacity topping out, depending on how fast existing capacity is being consumed. The more successful we are, the more capacity we consume and the more expansion we require.

I’m a big believer in the benefits of trade.

“NAFTA-like trade” will survive; the Trans-Pacific Partnership I hope will move forward; and the new Canada-European Union Comprehensive Economic and Trade Agreement is a positive step as well. It would be good to have more trade agreements with China and Southeast Asian countries. These trade agreements are good for the country.

BCSN: How do you see CN’s role within those agreements?

JR: I see us as a way to enable trade and enable export. If we help our customers sell their product, then their business improves and everyone wins. The more relevant we can be to trade and to our customers’ business, the easier it is for all of us to be successful. But CN alone will never have the full solution to that happening — that’s where we go back to the partnership and supply chain. We need to work with the shipping line on the ocean side, the terminal on the waterfront and the rail. It’s only when these three things come together that you really create a supply chain that’s relevant.

Working in silos doesn’t work. BCSN 16 — BC Shipping News — February 2018

About JJ Ruest

J

ean-Jacques Ruest was appointed Executive Vice-President and Chief Marketing Officer in January 2010, with responsibility for providing the strategic direction and leadership for CN’s Sales and Marketing.

Mr. Ruest joined CN in 1996 as Vice-President, Petroleum and Chemicals. He was appointed Vice-President, Industrial Products in 2003, Vice-President, Marketing in 2004, and Senior VicePresident, Marketing in June 2006.

Prior to this, Mr. Ruest worked for 16 years at a major international chemical company.

Mr. Ruest holds a Masters in Business Administration in Marketing from Université de Montréal and a Bachelor of Science degree in applied chemistry from Université de Sherbrooke. He also completed the executive program of the University of Michigan Business School, and CN’s Railroad MBA program.

Recognized as a leading voice on the topic of supply chain, JJ leverages over 30 years of global business expertise. He has played a pivotal role in converting CN from a railroad mindset, to an end-to-end supply chain mindset. This is how CN helps its customers succeed. JJ continues to travel the world to immerse himself in the landscape of global trade, while remaining engaged with supply chain and logistics associations across North America.

About CN

C

N is a Class I freight railway headquartered in Montreal, Quebec that serves Canada and the Midwestern and Southern United States. As a publicly traded company with over 22,000 employees, CN is Canada’s largest railway, in terms of both revenue and the physical size of its rail network. It is North America’s only transcontinental railway, spanning from the Atlantic coast in Nova Scotia to the Pacific coast in British Columbia.

Following CN’s purchase of Illinois Central Railroad in 1998, and a number of smaller U.S. railways, it also has extensive trackage in the central United States through the Mississippi River valley from the Great Lakes to the Gulf of Mexico. Today, CN owns about 31,500 route kilometres of track in eight provinces (the only two not served by CN are Newfoundland & Labrador and Prince Edward Island), as well as a 113-kilometre stretch of track into the Northwest Territories to Hay River on the southern shore of Great Slave Lake; it is the northernmost rail line anywhere within the North American rail network outside of Alaska.

The company reaches close to 75 per cent of the U.S. population and all major Canadian markets, transporting approximately C$250 billion worth of goods annually for a wide array of business sectors, ranging from resource products to manufactured products to consumer goods. CN, along with its operating railway subsidiaries, serves the cities and ports of Vancouver, Prince Rupert, Montreal, Halifax, New Orleans, and Mobile, Alabama, and the metropolitan areas of Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth, Minn./Superior, Wis., and Jackson, Miss., with connections to all points in North America.

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HISTORY LESSON

Art in the Arctic Photo: Dave Roels

By Lea Edgar Librarian & Archivist, Vancouver Maritime Museum

T

hroughout history, the Arctic has been the muse of artists and explorers from around the world. This isolated terrain was well known and travelled by the Inuit people; however, the European adventurers often had no concept of what the frozen foreign landscape contained. Visual art was the best way to express what explorers were experiencing so far from home.

It was not only an outlet of expression, but also a method of documentation of what was often a once-in-a-lifetime journey.

Three 19th century Arctic artists’ works are well represented in the collections of the Vancouver Maritime Museum (VMM).

Cresswell, Browne, and Young left us with three unique impressions of the North.

In contrast, a modern Arctic artist, Cory Trépanier, launched an exciting new exhibit at the VMM this January of his extraordinary Arctic paintings. The exhibit is called Into the Arctic and will continue until March 25. A visit to this exhibit will allow patrons to analyze how the impressions of those witnessing the Arctic landscape have evolved since early exploration.

William Henry James Browne

Many early Arctic artists got their start accompanying the search parties for Franklin’s lost expedition of 1845. For example, William Browne was the second lieutenant on board HMS Enterprise with Captain Ross in 1848. He produced many sketches while the two ships of Ross’ expedition, Enterprise and Investigator, were locked in the winter ice. Browne led a sledge party across the sea-ice to Prince Regent’s Island.

During this time, he sketched what the crew encountered. Ten of his drawings were published in 1850, many of which depict Prince Leopold Island. Since there is no published documentation for this journey, Browne’s drawings act as a captivating record.

The image shown here is called “Noon in Mid-Winter (Pt. Leopold).” It is a dramatic representation of the ships HMS Enterprise and HMS Investigator stuck in the sea ice and tented for winter. Like many Arctic artists, Browne employed an emphasis on the 18 — BC Shipping News — February 2018

Visual art was the best way to express what explorers were experiencing so far from home. It was not only an outlet of expression, but also a method of documentation...

“Noon in Mid-Winter (Pt.Leopold)” from Ten Coloured Views taken during the Arctic Expedition of Her Majesty’s Ships Enterprise and Investigator, under the command of Captain Sir James Ross. London: Ackerman and Co., 1850. Henry A. Larsen rare book collection. horizontal and vertical expanses. He also depicted the human figures as very small to emphasize the scale of the foreboding landscape. Although these are stylistic choices, his images are nonetheless quite truthful.

For example, “Noon in Mid-Winter” not only documented the long darkness of the winter months, but also allowed the artist to play with the balance of light and dark.

Captain Samuel Gurney Cresswell

Samuel Cresswell joined Robert McClure on board HMS Investigator as second lieutenant and ship’s artist for his 1850 expedition. On this voyage, Cresswell painted and sketched the experiences of the men in the Arctic ice. The Investigator became trapped in the ice from the fall of 1851 to the spring of 1853. Cresswell was then put in charge of

evacuating the sick and injured crew members to Captain Kellett’s ship 260 kilometres away.

The watercolours Cresswell produced on this trip serve as an excellent record of the activities of the crew surviving in the Arctic landscape. The image shown here depicts the challenging sledge trip Cresswell made with the sick crew. When they started out, only one crew member rode on the sledge.

But two more quickly joined the first as they were quite weak with scurvy and other hardships of the journey. He described the immense difficulty of pulling the heavy loads over the massive ice ridges, and how they almost lost a crew member, in the publication, A series of eight sketches in colour … of the voyage of H.M.S. Investigator.

All in all, they managed the trip in 16 days with no lives lost. He eventually returned to

VANCOUVER MARITIME MUSEUM

“Sledging over Hummocky Ice” by Captain Samuel Gurney Cresswell.

VMM Object ID: 2008.5000.0488.

“The Erebus and Terror wintering in the ice” by Allen Young. VMM Object ID: M973.230.2.

England in the fall of 1853. When he arrived, he announced that the Northwest Passage had finally been located.

shown above. Notice how the scene echoes Browne’s “Noon in MidWinter” with the two ships covered in their tents and small figures demonstrating the immensity of the landscape.

The three artists featured here are but a small example of the impact the Arctic landscape has had on the imagination of both sailors and artists. Imagine the challenge of documenting the magnitude of what the eye was seeing onto mere paper. Nevertheless, Arctic artists continue to dazzle and inspire those of us who may never experience the frozen north.

Lea Edgar started her position as Librarian and Archivist for the Vancouver Maritime Museum in 2013. She can be contacted at archives@vanmaritime.com.

Sir Allen William Young

Allen Young offered his services as sailing master for Sir Francis McClintock’s expedition on board the Fox in 1857. McClintock had been searching for Franklin with other parties since 1848. Young donated £500 to the expedition. In the end, they famously discovered the only written record to date of the lost expedition’s fate. Young also participated in long sledge journeys across the ice in search of Franklin.

The search for Franklin was clearly at the forefront of Young’s mind as he painted the imaginary scene of the Erebus and Terror

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Photo credit: Dave Roels

Commissioned by the City of Richmond, BC to celebrate Canada’s 150th, this painting now hangs outside their council chambers — but also is on view as a large mural on a wall facing the Gulf of Georgia Cannery National Historic Site in Steveston. It depicts the “Titania” arriving to take the first canned salmon direct from Steveston to London. Limited edition canvas reproductions are available.

February 2018 — BC Shipping News — 19

STATE OF THE INDUSTRY

Unprecedented pressure on the horizon

By Robert Lewis-Manning, President, Chamber of Shipping

W

elcome to another year — one that will not resemble the previous year and one that is surely destined to provide new opportunities but also unparalleled challenges and change for marine transportation in British Columbia.

While tradition dictates that this editorial piece should provide a forecast of commercial markets and the like, this will be a much more focused effort deliberately intended to grasp your attention. Suffice it to say that the commercial doldrums of 2016, which moderated somewhat in 2017, are now being replaced with a more optimistic commercial marketplace.

Commercial marine transportation is facing unprecedented pressure to adapt to a changing environment and this will only accelerate in complexity and scope over the coming year. The primary causes of these pressures include the continued growth of trade in Western Canada and the increasing demand for Canadian exports; a heightened awareness, and in certain cases anxiety, towards shipping by coastal communities; and the Government of Canada’s aggressive approach to marine protection. Of course, all of this is inherently connected and, at times,

20 — BC Shipping News — February 2018

Commercial marine transportation is facing unprecedented pressure to adapt to a changing environment and this will only accelerate in complexity and scope over the coming year. the lack of synergy in approach to expanding trade and increased environmental protection results in the very concerns expressed by coastal communities.

The demand for change will manifest itself in various ways, including new legislation and regulations, regional practices and procedures, but also innovative approaches to governance of waterways. Certain features of this change will be very progressive and supportive of trade, while other aspects could be perceived as extremely misdirected.

The government’s Oceans Protection Plan will include a significant portion of the funded programing but even more programing is expected to emerge once the federal government tables its 2018 Budget.

Undoubtedly, Canada intends to hasten its protection of coastal waters and this will be achieved primarily through the establishment of Marine Protected Areas. While Canada’s formal international commitment

includes protecting 10 per cent of Canadian coastal waters by 2020, the government is already signalling its intent to go well beyond this target. In order to facilitate this significant undertaking, the federal government will amend the Oceans Act to allow the relevant Minister to designate areas for immediate protection on an interim basis and restrict activities that have not occurred in an area within the previous year. Will this include constraints to commercial shipping? It is difficult to know with any certainty at this stage although the lack of engagement in developing the legislative amendments is not a positive signal. This effort will be magnified as Canada assumes the Presidency of the G7 in 2018, which includes a mandate for Canada to be an “activist” in promoting and implementing oceans protection and management. At last count, there were nine processes underway to establish protected areas in BC waters alone, and additional initiatives to address specific species at risk — the lion’s share of which have some degree of actual or eventual management of ship traffic.

Supporting the protection of the marine environment is and will remain a top priority for our sector and one can easily identify numerous industry successes. The recent Haro Strait Slow-Down Trial in support of science to protect the endangered Southern Resident Killer Whale was a globally recognized initiative that required an unprecedented industry-wide commitment. This involved ocean carriers for all commodities and cruise ships, the Vancouver Fraser Port Authority, terminals, the Pacific Pilotage Authority, and the BC Coast Pilots. This significant achievement was confirmation that industry is both engaged and accountable to scientific process that collects and evaluates

STATE OF THE INDUSTRY data, and properly informs policy development. While this did come at a cost to carriers, it was imperative to demonstrate the sector’s professional approach and ability to adapt, and to support an evidence-based approach to solving a challenge.

Not all policy development is subject to such a deliberate and informed process.

Despite the efforts of many to demonstrate why a “tanker moratorium” makes little practical sense (because crude is not being shipped on the North Coast), this year will in all likelihood include the legislated implementation of a ban on the movement of crude oil and other persistent oils from ports on the North Coast. This precedent-setting legislation was never the product of good public policy and will add little in the way of practical protections for the North Coast.

An unfortunate consequence of a political decision that did not even consider the actual concerns expressed by coastal communities.

Although the Oceans Protection Plan aims to improve responsible shipping and build the confidence of coastal communities, this effort appears misplaced, misguided, and completely ineffective.

Despite the efforts of many to demonstrate why a “tanker moratorium” makes little practical sense ... this year will in all likelihood include the legislated implementation of a ban on the movement of crude oil and other persistent oils from ports on the North Coast.

It is expected that many coastal First Nations will aspire to take a more active role in evaluating and managing risk posed from commercial shipping. While coastal Nations have a long-standing and inherent connection to the marine environment, there is little doubt that several more recent and high-profile incidents have reinvigorated the interest of Nations to be more involved with commercial shipping. A recent proposal by the Heiltsuk Nation for an Indigenous Marine Response Centre demonstrates the concerns, expectations, and the sophisticated approach of an increasing number of First Nations.

The Government has also identified reconciliation with Indigenous Peoples as a high priority although it remains challenging to determine the elements of this evolving

relationship. Despite the uncertainty, there are already some components of co-management emerging from ongoing marine spatial planning initiatives on the North Coast and this is likely to expand in the future.

Further on the horizon is a likely alignment of national objectives to reduce Canada’s overall greenhouse gas emissions with Canada’s international objectives at the International Maritime Organization (IMO). While the timeline for any change will stretch beyond 2018, expect to see noteworthy signals from Canada as it strives to exert leadership at both the United Nations and within the G7 framework.

So what does all of this mean to commercial shipping moving forward? It unquestionably means that we will be operating

STATE OF THE INDUSTRY

Commercial shipping desperately needs to reverse the current trend of popular opinion influencing transportation policy. in a significantly more complex coastal environment, which will necessitate new and important relationships with multiple federal and provincial departments, First Nations, the scientific community, and coastal communities where we operate.

High-profile incidents and new trade projects have resulted in increased attention and visibility for marine transportation. The pressure to reduce the impact of shipping on the environment will also continue to challenge the sector to innovate.

Commercial shipping desperately needs to reverse the current trend of popular opinion influencing transportation policy. As a sector, it will be crucial to align our messages to governments as much as possible.

Likewise, it will also be essential to support the collection of data in order to inform decision makers. We must be prepared to engage and provide information in order to be credible and respected partners in developing solutions. Finally, we must ramp-up our capacity and capability to engage in

this increasingly complex and dynamic environment and this will necessitate the entire sector “rowing together in the same direction.”

Robert Lewis-Manning joined the Chamber of Shipping in February 2016 following his tenure as President of the Canadian Shipowners Association and a 24-year career with the Royal Canadian Navy. He can be reached at robert@cosbc.ca.

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SUPPLY CHAIN FINANCE

Shipper supply chain finance solutions

By Darryl Anderson Managing Director, Wave Point Consulting

W

ith NAFTA storm clouds on the immediate horizon, many shippers are considering how best to expand their sales. Logistics fluidity and financial liquidity are both required to provide the oxygen necessary to keep goods pulsating through international supply chains. Global trends, challenges and market opportunities are shaping and impacting a shipper’s need for working capital, trade credit or marine insurance. This article is intended to help shed some light on the vital topic of supply chain finance solutions that will no doubt increase in importance over the coming years.

International and Canadian trends shaping trade finance

The Asian Development Bank (ADB) and the International Chamber of Commerce (ICC) reported a US$1.6 trillion shortage in trade finance in May 2017. According to the ICC, the “chronic” shortfall has come about largely on the back of the unintended effects

...the “chronic” shortfall has come about largely on the back of the unintended effects of global financial crime regulation. ...many global banks have begun to exit correspondent relationships in perceived high-risk regions. of global financial crime regulation. The ICC points to various studies which show that many global banks have begun to exit correspondent relationships in perceived high-risk regions. Mr. John Danilovich, the ICC’s Secretary General, said: “This is a complex global problem requiring a concerted global response.”

In November 2017, the United Nations Inter-Agency Task Force on Financing for Development acknowledged the scope of the international shortfall of trade finance and explicitly recognized that it was an essential tool to enable the flow of commerce through global supply chains.

In their report, Supply Chain Finance: A New Means to Support the Competitiveness

and Resilience of Global Value Chains, Export Development Canada researchers Jean-Francois Lamoureux and Todd Evans found cause for sober reflection. They determined that within Canada progress has been slower to occur in connections with improvements to the financial supply chain (that is the flow of financial information and money that takes place) compared to the progress made in supporting the physical movement of goods.

Canadians are not alone in needing to adapt to changing structural conditions of international trade and the requirements of global supply chains. Financial markets in different countries around the globe have various degrees of sophistication, credit

Photo: David Price

Global trends, challenges and market opportunities are impacting a shipper’s need for working capital, trade credit or marine insurance.

February 2018 — BC Shipping News — 25

SUPPLY CHAIN FINANCE availability and capacity to support this type of activity.

Chris Duggan, Vice-President, Trade Strategic Initiatives – National Specialized Solutions, Royal Bank of Canada, suggests that the simple fact that suppliers and buyers are operating overseas lengthens the physical supply chain significantly which, in turn, creates a longer financial cycle for all parties involved. Consequently, both the working capital requirements to finance trade transactions are impacted and the need to mitigate market risks for both importers and exporters in those markets rises in importance.

Companies that deal internationally have to be able to differentiate between the regulatory requirements for each of the countries

26 — BC Shipping News — February 2018

in which they operate as well as the differing financial strength of those countries and the commercial companies with whom they deal. The attendant risk and working capital requirements of their partners often lead them to seek risk mitigation, in various forms, as well as differentiated transaction structuring to minimize their working capital usage.

Supply chain financing tools available in Canada

The range of instruments available to support companies internationally is continuing to evolve to meet changing market conditions and the potential for increased disruption due to the cancellation of trade

treaties, logistics, liquidity events, regulatory requirements and challenging foreign exchange markets, to name just a few.

Companies looking to improve their performance often start with a desire to create enhanced supply chain liquidity according to Liquid Capital’s Stephen Ison. As such, the process begins with measuring their cash conversion cycle (CCC). For example, an importer purchases inventory, stores it and/or uses some of the stock to create additional value (i.e., manufacturing), then markets and sells the goods required to pay their suppliers and cover the cost of having the products shipped. While retailers are responding to the demands for ever faster physical shipping cycles (due to electronic

SUPPLY CHAIN FINANCE If improvements in supply chain financing don’t keep pace with developments in the physical speed of logistics, problems soon arise. commerce and other factors), it is still common practice for importers to wait and wait to collect on their invoices. The importer has used its cash at the beginning, is still waiting for money at the end and the time between is called the Cash Conversion Cycle.

If improvements in supply chain financing don’t keep pace with developments in the physical speed of logistics, problems soon arise. The CCC, in the example above, can be many months long. Shortening the CCC means a company has more cash at any given time for expansion, unforeseen challenges, purchasing opportunities and more.

Ison, stresses the fact that “cash is not only king” but “cash is, quite literally, the lifeblood of business.”

Logistics, shipping and the esoteric world of maritime law might not initially lead one to think about the topic of supply chain finance solutions. However, there is some beneficial supply chain finance solutions explicitly designed for this world.

At least one is almost as old as shipping itself! Accounts receivable factoring, or “factoring,” was invented by the Romans sometime before the first century. It is common in Europe and is expected to become more popular as a result of the CanadianEuropean Comprehensive Economic & Trade Agreement (CETA).

A second tool, called Purchase Order Financing (POF), can dramatically shorten the CCC by impacting both ends of the supply chain. It’s not uncommon for suppliers to require a substantial deposit, full payment before shipping and/or a letter of credit to perform the work. This creates a considerable cash flow burden for a company that doesn’t expect to collect on the ultimate sale for at least several months and sometimes a year or more. With POF, a finance company steps into the picture, uses a Letter of Credit or Collection Against Documents to induce the manufacturer to perform and then (usually) factors the receivables, upon delivery, to clear the Letter of Credit. Ison observes that “shippers who have pre-sold their goods will find POF an effective tool.”

Many companies use a broader spectrum of products, depending on the nations in which they operate to be able to diversify their risk exposure between countries,

buyers and industries. “One solution doesn’t work equally well in all markets. For example, Asia is a large market that often requires traditional trade instruments such as ”Letters of Credit” or “Guarantees” whereas trade within North America is predominantly oriented to Open Account transactions,” according to RBC’s Duggan.

Shippers capturing the full spectrum of international trade opportunities are increasingly using a variety of instruments such as Open Account, Guarantees, Letters of Credit, Documentary Collections and Cash in Advance, as well as various forms of insurance, depending upon their transactional requirements, according to Duggan.

He also cited growth in “Approved Payable Financing” for the suppliers to large international corporations that want to make their payable structures more uniform in all of their markets as another supply chain financing trend worth watching.

The supply chain role of marine insurance

Mariella Dauphinee, Marine Claims Manager, Western Division, Intact Insurance Company, emphasized the point that “discussions about supply chain finance solutions would not be complete without mention of insurance as a risk management tool.”

Marine cargo insurance is designed to provide comprehensive coverage for goods in transit (with incidental storage), not only by water (sea/river) but also during transportation by air, road, rail for manufacturers, importers and exporters, commodity traders, logistics companies and the like.

According to the Marine Insurance Act, a person has insurable interest wherein they may benefit by the safety or due arrival of insured property or may be prejudiced by its loss damage. Dauphinee noted: “The assured, or the person to whom the claim is payable, does not need insurable interest when the insurance is taken but does need to have an insurable interest at the time of the loss.”

The International Commercial Terms (Incoterms) are often used as the basis to determine which party has an insurable interest for a particular leg of transport. The Incoterms specify the “critical point” during February 2018 — BC Shipping News — 27

SUPPLY CHAIN FINANCE transit which defines the passing of risk (of loss or damage to the goods) from the seller to the buyer.

Traditionally, traders relied on negotiating commercial transactions on the most favourable terms of sale so that the risk of cargo loss and damage was transferred to the other party as early as possible (if you are the seller), or as late (if you are the buyer).

Ison observed that “now savvy shippers also have more tools where they can better align their choice of supply chain financing tool to not only reduce risk but improve their company’s cash flow and thereby become a more agile competitor.”

Canadian International Freight Forwarders data indicates that freight forwarders play a vital role in expediting the movement of an estimated 70 per cent of Canada’s containerized cargo.

Consequently, due diligence in marine carrier selection may be a financial risk management step that even some container shippers may be tempted to skip.

The demise of the international carrier, Hanjin Shipping, in 2016 demonstrated the adverse impact shippers could face from carrier failure. For example, the cash

conversion cycle resulting from long delays, or possibly non-delivery of goods to customers was negatively impacted. Carrier failure can also result in additional costs related to finding alternative means of transporting goods and reputational damage if products are not available for delivery to end users.

Shippers who regularly review the insurance coverage will have systems in place to ensure that their coverage has kept pace with changes in their logistics practices. For example, an insurance review will determine whether there is coverage in place for things such as forwarding charges should the voyage be interrupted short of the destination.

Conclusion

RBC’s Chris Duggan commented, “companies should perform a regular risk analysis on each of the markets they are involved in to determine if they need to change their risk mitigation and working capital requirements.” But shippers don’t have to wait before exploring new tools that will help make their business more competitive in international markets.

Given the menu of financing tools available, making the best choice involves

proactively identifying specific business needs and requirements since the devil is, indeed, in the details. When thinking holistically, shippers will realize that basic information such as the nature of the product, the origin, the destination, and nuances in the contracts and credit history are all required by various financial underwriters.

Since underwriting requirements respond to changing market conditions and the details of the individual transaction, it can be time-consuming for shippers who don’t plan. Planning allows firms to see how the various tools could be utilized to implement their international business strategy. At the very least, by planning a better understanding of how to optimize both the availability and cost of capital to manage growth and supply chain insurance risks will strengthen a firm’s existing position in domestic markets.

Darryl Anderson is a strategy, trade development, logistics and transportation consultant. His blog Shipping matters focuses exclusively on maritime transportation and policy issues: http://wavepointconsulting.ca/shipping-matters.

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SHIP FINANCE Vancouver shipping

A missed opportunity?

By Haijun Yu and Bernie Jones, Vancouver ShipInvest and Management Ltd.

T

he government and various individuals have, for a number of years, tried to establish the Vancouver Shipping Community on the international stage.

However, the global shipping world has not really recognized Vancouver until the last two years through the efforts of Vancouver International Maritime Centre (VIMC).

Why is it so hard to promote Vancouver as an International Maritime Centre? Apart from various reasons, here, we would like to emphasize two important factors — the cargo owner’s role and shipping finance availability — to make our point.

In 1991, the first version of the VIMC successfully took advantage of the influx of Hong Kong ship owners. A number of owners moved their offices here, but it soon became apparent that there was no local business to support such a move. Owners who stayed, relegated their office to branch office status; others closed their office entirely.

We are now coming to the end of a term of the second version of the VIMC. The protagonists of the VIMC have done a great job in raising the profile of Vancouver on the world shipping stage, as well as encouraging a number of owners to open or consider opening offices here. However, we still have a long way to go to establish Vancouver as an international shipping hub.

So why is it so difficult to get Vancouver to be a shipping success story?

One of the major reasons is the way local cargo is moved.

Vancouver exports over 90 million tons of cargo exported every year; but the fact is that, apart from a couple of exceptions, nearly all that cargo is shipped on an FOB basis. Thus, the control of the cargo movement has been given away to third parties. If we retained control of even part of the cargo movement together with Vancouver-based shipping companies such as joint venture or COA, then the cargo owners could not only protect their interests through stable freight rates but also strengthen their trading position to become more competitive when dealing with cargo buyers.

Principals of Vancouver ShipInvest and Management Ltd., Haijun Yu and Bernie Jones.

Historically, the cost of owning and running ships has been cheaper than that of just chartering.

By doing so, cargo owners indeed are able to generate a lot of activity locally in chartering and ancillary activities. This would go a long way in attracting the shipping activity we so sorely need here. As a benefit, they finally would enjoy a favorable rate through co-operation with shipping companies.

There are a few other potential advantages that could help as well.

If major cargo owners and charterers were willing to participate in freight, they could have their own shipping arms through ship acquisitions or joint ventures. There would be the ability to hedge their freight and participate in some asset play by using the freight they pay to amortize the acquisition of vessels, either by themselves or by thirdparty local owners. The main point is that we need the major cargo owners and charterers here to change the way they think and there will be some good benefits for all.

In the mid-1970s, Canada had a substantial international shipping presence through CP Ships which owned Capesizes, Panamaxes, open-hatch bulk carriers as well

as tankers and container ships. Then, in one of those corporate decisions, it was decided to get out of vessel ownership. That spelled the last significant presence of international ship ownership in Canada with the notable exception of the active Lakes operators that we still have. Those ships traded in the international market but they also carried domestic cargoes to world markets and acted as a useful hedge against freight variations, allowing owners to have their finger on the pulse of the world market.

Historically, the cost of owning and running ships has been cheaper than that of just chartering. If you factor in the ability to hedge freight long term and also potentially make asset appreciation, then the arguments are pretty pressing to follow this course.

The second major aspect that we are missing is ship finance.

Ship ownership is a capital-intensive business, so shipping finance plays a fundamental role for any shipping acquisition. The West Coast of Canada lacks any February 2018 — BC Shipping News — 29

SHIP FINANCE Ship ownership is a capital-intensive business, so shipping finance plays a fundamental role for any shipping acquisition.

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international shipping presence in banking and financial institutions. Any presence that we have, which is very small, is based in head offices in Toronto.

In order to stimulate investment, we need a strong and knowledgeable banking sector. The banking sector here lacks shipping knowledge and it is our job as a shipping community to help educate them and to provide them with the necessary information to make decisions.

There is a lot of capital based on the West Coast of Canada and in recent years a lot of high net-worth potential investors coming to live in Vancouver. Along with the charterers, there can be a large investor presence in the shipping market in Vancouver. In order to give the investors confidence, we need to show them that we have a strong banking community willing to finance shipping deals.

Our job as a shipping community is to educate investors or investment institutions of the possibilities and to bring the different sides of the equation together to come up with a workable formula.

The VIMC has done sterling work to promote and elevate the status of Vancouver as an international shipping hub, so what we as a community need to do is to carry on that work to provide tangible results.

We have created a company, Vancouver ShipInvest and Management Ltd (VSIM), to gather funds from investors, manage the assets, arrange employment and disburse dividends from profits. Our target is to create a Vancouver Shipping Fund to invest in both international shipping and local shipping assets.

Over the past decades, we have been tracking shipping asset values. We looked at various types of ships and decided to focus on Supramax (50,000dwt) up to Kamsarmax (82,000dwt) bulkers around 10 years old.

These are the most generally used types of vessels and therefore the ability to always have them chartered was high. We started to educate our investors at the end of 2015 and through 2016 when ship prices were low since we predicted the dry market would improve in coming years.

For example, in March 2017 we inspected several Supramax and Panamax vessels and identified a 2006 Japanese-built Supramax bulker as being a good candidate.

Unfortunately, we could not get our investors in line with the short bidding time. The ship was sold at $9.6 million — today that same ship is worth around 30-35 per cent more. This demonstrates that we were right by judging the investment timing through our years of experience and market knowledge however, we need to have our funds ready in time.

There still exist opportunities in the bulker market, but there are new regulations coming into force such as Ballast Water Treatment (BWT) and low sulphur fuel which could add significant costs to a second-hand ship. Thus, we have to be fully aware of all these factors when we propose any investment opportunity to our investors.

In addition to these investments, we believe that there are other opportunities within Vancouver. Tugs, barges and other locally traded tonnage are needed to answer increased requirements from local terminals and increased production in other industries.

Even shore-based equipment could be a possibility. We would like to work with the local shipping community to create investment opportunities.

We will source projects from our extensive network of contacts, thoroughly analyze the financials and show them to prospective investors. This involves looking at the current and potential asset values and positive cash flow. One major incentive is obviously capital appreciation.

Our idea is to obtain medium to long-term charter employment, which would depend on the type of vessel. If the vessels are specialized, then we will need to see a longterm charter party to secure the investment return. If it is a conventional type of ship, then we would look at shorter-term commitments to take advantage of any upswing in charter rates or values.

In our estimations, we are looking at a rate of return of around 8% to 10% p.a. and an initial capital outlay of US$9-10 million.

We would take this opportunity to raise funds from all sources including banks, financial institutions and individual investors. Meanwhile, our professional team is open to any type of shipping project locally and internationally.

If you are interested in discussing investments, please visit our website at www.vancouvershipinvest.com.

MARITIME LAW

Norton Rose Fulbright merger proving successful for all

C

oming up on the first anniversary of the merger between Vancouverbased Bull Housser & Tupper LLP and the global law firm of Norton Rose Fulbright, local partners David Bain, Shelley Chapelski and Bill McFetridge reflect back on an exciting and productive first year and provide insights into the future — not just for the firm locally and worldwide, but also for Vancouver as an up and coming global maritime hub. Spoiler alert, all hold great promise. “Indeed, it was Vancouver’s potential as an international centre that caught the eye of Norton Rose Fulbright in the first place,” said Bain.

Background

With about 4,000 lawyers operating out of more than 50 offices worldwide (Canada, Europe, the U.S., Latin America, Asia, Australia, Africa, Africa and the Middle East), Norton Rose Fulbright has a presence in every major shipping hub with over 200 lawyers dedicated to shipping. “These are hard-core shipping people — specialists in litigation, finance and regulations,” Harry Theochari, Global Head of Transport, told BCSN last year when he was in town for the welcome dinner, hosted by the Vancouver International Maritime Centre.

During that interview, Theochari provided insights into the decision-making process that led Norton Rose Fulbright to Vancouver.

While the idea was actually borne out of a visit by Theochari to Vancouver in 1998, it wasn’t until 2011 that timing and opportunities began to align. “Vancouver’s location means it is a key port for Canada to be able to benefit from the growth of the Asian markets,” he said. “China’s Belt and Road Initiative, for example, has a budget in the range of $8 to $11 trillion that will be spent on infrastructure development, especially focused on trade routes.”

Finding the perfect fit with Bull Housser was the final piece to fall into place. “A significant part of Bull Housser’s work is in the shipping sector and they had a great global reputation so it made a lot of sense for the two firms to pursue the idea of a merger,” Theochari said.

From Bull Housser’s point of view, the benefits for clients and the opportunity

Both Bain and McFetridge give a lot of credit to the Vancouver International Maritime Centre for creating a climate conducive to growth... to expand into new markets were appealing. At the time of announcing the merger, Shelley Chapelski noted that Norton Rose Fulbright’s dominance in the shipping sector and its global reach were persuasive factors in their decision to merge.

The process of merging

In describing the process of integration — both domestically and internationally — Bain, Chapelski and McFetridge unanimously agreed that it had been “seamless.”

With five other offices in Canada (Calgary, Toronto, Ottawa, Montreal and Quebec City), operational integration was “surprisingly easy,” said Chapelski. “In terms of international integration, that takes on more of the form of business development and identifying opportunities that can provide the greatest benefits for clients. It’s been exciting to meet with other shipping partners from cities like New York, London, Singapore, Tokyo, etc., and find that we have mutual clients. And we’ve been able to build on those relationships.”

Bain and McFetridge both noted that lawyers from other offices have been extremely welcoming. “Bull Housser’s name and reputation were already known to many of the lawyers we’ve met so far, especially on the litigation and finance side,” said Bain. “Overall, the merger has exceeded our expectations.

We’re already trending upwards for growth and our ability to identify new business opportunities has definitely been enhanced.”

Chapelski further added that the merger was allowing the Vancouver office to leverage their expertise in new ways. “For example,” she said, “Mike Posnikoff’s shipping law practice — while based in Vancouver, primarily involves offshore deals, buying and selling vessels. He is one of a handful in Canada that has expertise on ship financing and company restructuring in the marine industry and we’re seeing other Canadian Norton Rose Fulbright offices recognize this and call for his assistance.”

Vancouver’s potential

Both Bain and McFetridge give a lot of credit to the Vancouver International Maritime Centre for creating a climate conducive to growth for Canada’s West Coast shipping industry. They recognized the value of recent reports published by the VIMC — for example, Deloitte Monitor’s report that highlighted Vancouver’s potential as a major maritime hub — as well as their encouragement and support in welcoming Norton Rose Fulbright to the local market. “As you mentioned earlier, Harry Theochari perceives Vancouver as a logical place for owners from China to establish their North American presence,” said Bain.

“Our geography, political stability, strong banking systems and favourable tax regimes — all messages that the VIMC has been promoting to ship owners around the world — are key factors in convincing Norton Rose Fulbright that Vancouver has great potential.

“One of the key findings for us in the Deloitte report was the perception that Vancouver is lacking in business services like legal and finance to service the shipping industry,” he continued. “We want to be part of the solution that demonstrates Vancouver does indeed have this expertise.”

Bain went on to say that even before the merger, Bull Housser was doing a lot of work with P&I Clubs and Lloyd’s underwriters and growing the practice to become strong commercial maritime lawyers. He estimated that reaching the critical mass for Vancouver to truly be recognized as a maritime hub is a long-term goal, one that will take at least five to 10 years.

Like the VIMC, Bain considers the one area of growth that is challenging is that of Canadian interest in ship finance. “There is a lot of private equity in Canada but we don’t have much expertise to tap into it for ship finance and that needs to be built,” he said, pointing to companies like Vancouver ShipInvest and Management that have recognized the potential of this niche market.

February 2018 — BC Shipping News — 31

MARITIME LAW A promising future

For Bain, Chapelski and McFetridge, the biggest challenge, when it comes to the future for Norton Rose Fulbright’s office in Vancouver, is time. “There are so many opportunities but not enough time,” said Chapelski. “It’s important for us to focus and prioritize those opportunities. The ultimate game plan is to increase Vancouver’s ranking as a maritime hub and build the legal and financial sectors within Vancouver to truly take advantage of the potential here. There’s an energy and a desire and we now have terrific resources internationally that can be used to heighten the appeal of Vancouver.”

Indeed, Chapelski added, “the reason for merging with one of the strongest, commercial maritime law firms in the world is to use that global recognition and include it with all of the other attributes Vancouver has going for it.”

Bain added that he sees Norton Rose Fulbright as taking a leading role in the continued development of the marine and port industry. “We want to be part of the industry rather than be seen as just a service provider.”

Photo: BC Shipping News

Bill McFetridge, Shelley Chapelski and David Bain.

All in all, it’s a very promising time for Norton Rose Fulbright and the growth of Vancouver as an international maritime hub.

“Industry wide, everyone wants to build a

bigger pie,” said Bain. “And the other Norton Rose offices are eager to collaborate and see the Vancouver office as well as the Vancouver maritime industry succeed.” BCSN

SUPPLY CHAIN

The many moving parts and partners for W.A. Grain

T

o demonstrate the complexity of Canada’s supply chain, BC Shipping News wanted the perspective of a company whose success relies on the seamless operations between producer, processing plants, trucks, rail, terminals, ports and shipping lines. Enter W.A. Grain & Pulse Solutions (WAG) — exporters of pulses, cereals, oilseeds, and other specialty grain products. As described by David Smythe, Export Liaison for W.A. Grain, “communications and collaboration at each step of the export process are critical.”

Background

Chris and Tracey Chivilo established W.A. Grain & Pulse Solutions in the spring of 2007. Their initial focus of peas and cereals saw them ship over 18,000 metric tonnes out of CATT Terminal in Innisfail, Alberta in their first year. Between 2008 and 2010, they added three more shipping locations and increased volumes of peas and domestic grains to 60,000 MT. Expansion between 2011 and 2012, including the construction of their first plant in Penhold, Alberta and the purchase of Bashaw Processors, saw volumes grow to 140,000 MT. Between 2013 and 2015, the company expanded into Saskatchewan, purchasing an existing facility and constructing a new plant which further helped to diversify the company into lentils, chickpeas and mustard. Expansion into Ontario, Quebec and Prince Edward Island also took shape as did selling seed of all types, particularly peas and fababeans. Total volumes during this time grew to 300,000 MT. By 2016, W.A. Grain purchased yet another facility in Southwestern Saskatchewan and further expanded their shipping capacity through a total of 24 third-party suppliers.

Today, W.A. Grain has five processing plants, plus a newly built facility set to open in Prince Edward Island, 28 thirdparty suppliers and ships to over 50 countries worldwide. They have also recognized the growing trend toward organic and nongenetically modified (GMO) products and recently formed a new division which is certified as a trader through Pro-Cert Organic Systems Ltd., one of North America’s foremost certifiers of organic products.

A key consideration for Smythe when working with RayMont has been their ability to increase their capacity in step with W.A. Grain’s growth...

The process

For W.A. Grain, the process starts with contractual relationships with farmers to produce a wide array of pulses (lentils, peas, fababeans and chickpeas); cereals (wheat, barley, oats and rye) and oilseeds (canola, flaxseed and mustard).

From the farm, the product travels by truck to the processing plant where it is cleaned and prepared for export. “Once it has been cleaned,” Smythe explains, “there are basically two options: we can ship it by bulk rail car or intermodal truck to RayMont Logistics where it is transferred into containers, transported to the terminal and loaded onto the ship. The other option is to source load it from origin, in which case, we’ll still deal with Ray-Mont but under a freight-forwarder agreement.”

For their part, Ray-Mont Logistics has been proud to support W.A. Grain throughout their 10-year history. “Using both our Montreal and Vancouver transloading facilities — and now, since September, our new facility in Prince Rupert — we have enjoyed their stability and professionalism

and share their passion for our industry,” said Loui Stathatos, Vice President, Chief Commercial Officer. Stathatos went on to note that he saw many similarities between Ray-Mont and W.A. Grain: “Throughout our long-term working relationship and with our mutual focus on asset-based strategies to working on the organic platform and looking at innovation as the key to longevity, we are very proud to support W.A. Grain’s growth, especially with their most recent venture, New Leaf Essentials.”

Like W.A. Grain, Ray-Mont Logistics is also certified by Pro-Cert. “It takes three years to become certified and then you must renew every year,” said Smythe. “For RayMont, they preserve the integrity of the crop and make sure there is no cross-contamination — very important tasks in upholding the quality of our products.”

Relationships

A key consideration for Smythe when working with Ray-Mont has been their ability to increase their capacity in step with W.A. Grain’s growth, so much so

Tracey and Chris Chivilo, owners of W.A. Grain & Pulse Solutions.

February 2018 — BC Shipping News — 33

SUPPLY CHAIN

Ray-Mont Logistics’ new facility in Prince Rupert has provided additional options for W.A. Grain. that “we’ve never had to consider other options — they’ve always been able to accommodate whatever we throw at them.”

Smythe also highlighted the huge negotiating power Ray-Mont has with the shipping lines because of the size of their operations.

“They book the space on the ship in bulk so their buying power is so much more than we could ever expect if we booked the shipment ourselves.”

Smythe also noted that Ray-Mont’s assistance in terms of meeting the import requirements of many countries was

another mark in their favour. Using an example of shipping a non-GMO specialty product to a Middle Eastern country and also the process for certifying organic products, Smythe had great confidence in Ray-Mont’s abilities to continue to expand our relationship. “There are so many rules, especially when it comes to non-GMO or organic products, that having access to their knowledge is a big plus for us, especially when it comes to managing our expansion into this market.”

Another key relationship for Smythe is

IMS Marine Surveyors & Analytical Laboratories Ltd. Port of Vancouver, Canada Marine & Cargo Surveyors & Inspectors

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34 — BC Shipping News — February 2018

with CN Rail & CP Rail. “With where the prairies are located in relation to the port, there are 1,000-plus kilometres to cover so we have a real focus on forward planning,” he said. “We need about two weeks to order the rail cars; then you have to have the product in position for when the cars arrive; then you have to clean the cars so planning starts well in advance to ensure a seamless process.”

CN’s relationship with Ray-Mont also factors into Smythe’s overall operational plans.

“When we book with Ray-Mont, it gives us equal access to the ports in Vancouver and Prince Rupert as well as Montreal,” he said. “The final destination is a function of where we originate the product along with a number of other considerations but we deal directly with the railways to do all of our bookings.”

For Smythe and W.A. Grain, the importance of a seamless supply chain can’t be overstated. Whether it is working with the farmers to ensure a product to sell, getting the product from the processing plant to the ship and, further, to the buyer, each step of the way requires close collaboration with a number of partners and moving parts.

Summing it up, Smythe cited constant communications as a main factor in their success. “There are so many pieces of the puzzle to put in place that the relationships we have with all of our partners are critical to our success. One small issue anywhere along the logistics chain can turn into a delayed shipment and the loss of our reputation, so we put a lot of effort into ensuring close collaboration.” BCSN

SURVEYING

New genetic testing lab adds to IMS’ capabilities

W

ith over 26+ years in operation, IMS Marine Surveyors and Analytical Laboratories has established themselves as one of Vancouver’s largest, independent marine surveying and cargo inspection organizations. Now, with the addition of a new genetic testing lab division, IMS is proving once again their ability to recognize and anticipate the needs of their clients and provide real-time solutions for shippers. This new capability builds on IMS’ already extensive array of services offered and meets a growing demand for more accurate testing of the genetic make-up of grain.

Background

Reflecting back on a 40-plus-year career, IMS President and Principal Surveyor Captain Jostein Hoddevik described experiences that included travel around the world on many different types of vessels. “I was the youngest captain in Norway when I received my first Masters command at the age of 25,” he recalled. “Before going to the Maritime Academy, I worked on various types of ocean-going fishing vessels, factory trawler in the Barents Sea, Greenland and off the East Coast of Canada and seine net fishing off the West Coast of Africa; then after receiving my Mate ticket I working on a Survey Vessel, Anchor handling/Tug/ Supply vessels for the offshore oil industry in the North Sea; sailing with a reefer vessel on Moroccan to European routes as well as being the Master on one of the most advanced anchor-handling, multi-purpose tugs of that time.”

Following a short time in the fish farming industry which brought him to Canada, Captain Hoddevik eventually settled down in North Vancouver and established IMS in January, 1992. “In the early days, our main focus was on inspecting container suitability for food — products like malt and barley as well as chilled meat transloading from truck-trailers to reefer containers,” he said.

“Today, with 14 staff, the services we offer have expanded significantly.”

Indeed, a quick review of the IMS website shows an extensive diversity of both products and services, including marine and cargo surveys, consultations, inspections and testing services for ship owners,

..with the addition of a new genetic testing lab division, IMS is proving once again their ability to recognize and anticipate the needs of their clients... charterers, underwriters, P&I Clubs, terminals and stevedores as well as law firms and flag state organizations; the issuance of certification documents for such things as weight, quality/analysis, sampling, hold/ tank cleanliness, and origin; and products that include bulk cargoes (coal, concentrates, ores, sulphur, potash), steel products, grains, seeds, canola meal/pellets and other bulk foodstuffs as well as forest products, machinery and motor vehicles, project and heavy lift cargoes, bulk liquids (edible oils, tallow, petroleum and chemicals), frozen and chilled meats and seafood, and containerized and reefer cargoes.

Heading up the Laboratory, Dr. Tatiana Hoddevik, Vice President of IMS — a genetic scientist who has worked in such institutions as the University of British Columbia and the Children’s Hospital — is proud of her team that provides professional analysis and consultation for companies in the marine, environmental and food-related fields.

Using the most modern instrumentation

available, Dr. Hoddevik highlighted the efficiencies of her team and their wide-ranging experience that allowed for multi-tasking on numerous projects as well as the quick turnaround of results. “I believe these are the features that distinguish us from other labs,” she said. “The team we have in the lab is very capable and well-educated — and they recognize that clients require efficient and reliable results that will allow ships to be processed quickly to reduce costs of having the vessel at berth.”

Captain Hoddevik added that IMS has developed a proprietary program used during the loading process that can actually declare final figures within one hour. “Many surveyors will send preliminary figures that are then used by the client for documentation,” he explained. “Providing accurate, final figures reduces the amount of revisions required and provides for greater efficiencies for our clients.”

Dr. Hoddevik further outlined that she and her team work with organizations such

Captain Jostein Hoddevik (far left) and Dr. Tatian Hoddevik (centre) with a few of the lab technicians that make up the team at IMS. February 2018 — BC Shipping News — 35

SURVEYING ...more and more countries like China, the European Union and the U.S. are starting to require labelling that includes a percentage of GMO within a product. as the COPA (Canadian Oil Producers Association) to bring testing procedures up to modern standards. “Technology is so advanced now that it is driving the need for changes to many of the regulations in place,” she said. “Working with an organization like COPA, we’re able to advise them on the modern technology available for testing procedures which in turn is driving an update to the rules and regulations.”

Genetic testing — meeting a growing demand

In working with some of the largest food producers in the world, Captain Hoddevik pointed to a growing concern over the prevalence of GMO in food products amidst the rising demand for non-GMO and organic products. “The problem right now is determining the definition of organic,” said Dr. Hoddevik. “We are seeing that quantifying the content of GMO in a product is becoming

36 — BC Shipping News — February 2018

very important for both producers and the buyers of their grain. Thresholds are being set around the world to establish acceptable limits.”

Adding to their capabilities of analytic work, the Hoddeviks described their new genetic testing lab as being developed to meet the emerging issue of genetically modified organisms (GMO) in grain and other food stuff. “There is growing attention and focus on the quality of grain products being shipped and the demand for the testing that goes beyond providing a positive or negative result for genetically modified organisms (GMO). Our new lab division allows us to additionally specify the percentage of GMO, which in turn can be used for accurate labelling.

Dr. Hoddevik reiterated that, more and more countries like China, the European Union and the U.S. are starting to require labelling that includes a percentage of

GMO within a product. “The new lab uses the most advanced technology available to provide consistent high standard results,” she said.

Keeping a leading edge

In addition to the new genetic lab, the Hoddeviks are continually upgrading both their equipment and skills to be able to meet new demands from clients. “We value the relationships we have with our clients and we consider their needs very carefully,” said Dr. Hoddevik. “The new lab is just one example of how we are anticipating their demands.” Captain Hoddevik was quick to agree. “While we have extensive experience in all areas of surveying and testing, we’re always watching out for new procedures, new regulations and new ways to improve efficiencies that will benefit our clients.”

With capacity already built in to their recently modernized facilities in Burnaby, the Hoddeviks are confident that they’ll be able to continue to meet and exceed the expectations of clients who have come to recognize the value IMS brings to every project. BCSN

PORTS & TERMINALS Grain history part II

Vancouver’s golden age of grain

By David Hill-Turner

W

hile dust and cobwebs cloaked Vancouver’s lonely grain terminal in 1920, nobody could predict how the port would soon be going through its greatest period of development.

The war years had frustrated the growth of grain exports as ships and markets remained elusive. In 1920, wartime controls over the price of grain were removed. In Winnipeg, Chicago and New York, grain merchants were looking to export wheat to Europe as Canada and the U.S. became more dominant in the world grain market. It was a heady time as speculation pushed prices higher and merchants cast an eye to Vancouver and its year-round shipping opportunities.

While previous grain shipments from Vancouver were government-to-government wartime transactions, 1921 was a new era as merchants regained control of the trade. In Vancouver, nobody on the dock on January 7, 1921, realized they were participants in an event that would change not only the port but also the Canadian grain trade. Over the previous seven years, Alberta grain farmers and the Vancouver Board of Trade had achieved their goal of constructing a grain terminal on Vancouver’s waterfront that was to launch the port as a player in the grain trade. The U.K. was a significant buyer of high protein Canadian wheat and the Panama Canal reduced the shipping distance by over 5,000 miles. A 1917 trial cargo and several subsequent subsidized shipments had proven the route’s viability. “Stephen’s Folly,” however, remained a dormant reminder of what one national newspaper called “government jobbery.” Perhaps the critics were right.

The ship that day, the Effingham, arrived and departed without ceremony. Already onboard was a mixed cargo of lumber, flour and other Northwest products that had been loaded in Seattle. In Vancouver, 2,048 tons of Alberta grain was loaded before she departed for the U.K. and Northern European ports. By the end of 1921, just 500,000 bushels were shipped through the port. Behind the scenes, changes were happening and the Vancouver Harbour

Vancouver was unknown as a grain port in 1921. Port promoters were frustrated by the lack of interest of railways in moving grain west.

Commission reported “the present facilities for storing, handling and cleaning grain have been proved, by experience this season, to be insufficient for even a moderate movement, and on the most conservative estimate of future expansion, increased facilities are urgently required.”

Vancouver was unknown as a grain port in 1921. Port promoters were frustrated by the lack of interest of railways in moving grain west. With prairie settlement, they had established patterns of transportation to the Great Lakes and eastern American ports.

Railways also charged a much higher rate to ship to the West Coast than comparable distances to the east. Canadian Pacific Railway and Canadian National Railway had made significant investments in Thunder Bay and Montreal, then Canada’s leading ports, and they saw no reason to support the westward

movement of grain. Shorter hauls, after all, meant less revenue. The lower cost of shipping grain east coupled with cheaper Atlantic shipping costs kept Vancouver uncompetitive. The Harbour Commissioner’s 1922 report noted: “A bushel of grain shipped from Calgary to Vancouver by rail, a distance of about 600 miles, costs 15 cents. To carry a bushel of grain from Vancouver to Liverpool, a distance of 8,500 miles, costs approximately 20 cents. It is apparent from this that the cost of carrying one bushel of grain one mile is fully 10 times as great by land as by water.” The CPR demonstrated its reluctance by charging a 11.5 cent/bushel premium for moving grain an equivalent distance to the Pacific.

Western governments, farmers and the Vancouver Harbour Commission staunchly promoted their alternative route. Since the

Photo source: Vancouver Public Library

Unbeknownst on the day, the Effingham’s arrival on January 7, 2012, was the start of a change to Canada’s grain trade.

February 2018 — BC Shipping News — 37

PORTS & TERMINALS war, more land in Saskatchewan and Alberta had opened to wheat farming. New farming technologies, such as the combine harvester, shortened the harvest season. The development of new hybrids suited to the prairies also led to higher yields. Western governments lobbied the railways and by 1927, the surcharge to move grain west was just a half cent/bushel.

By the end of 1921, the Globe and Mail reported that seven million bushels had poured down the spouts of the government terminal.

Over the next three years, two additional government terminals, including Ballantyne Pier, “one of the most substantial and commodious and best-equipped piers in the world,” according to the Vancouver Harbour Commissioner, boosted the port’s storage capacity to 6.5 million bushels.

The development of scheduled shipping between Pacific ports and Europe also attracted more ships to the region. By late 1923, proposals for more grain terminals on both sides of Burrard Inlet created excitement on the waterfront. With the arrival of private capital, there were calls for less government control of the industry — but not for decreased federal port funding. Vancouver’s terminals were capable of handling over 600 cars per day. In one day, the now vindicated Stephen’s Folly shipped 551,168 bushels while also unloading 223 boxcars. The completion of the Second Narrows Bridge in 1925 created opportunities on the North Shore that included the Midland Pacific Terminal. By 1929, there were seven private or semi-public terminals on Burrard Inlet with a total capacity in excess of 17.8 million bushels. In nine years, Vancouver had developed a solid reputation as a grain port, the largest grain exporter on the Pacific Coast and one of the world’s leading grain ports.

38 — BC Shipping News — February 2018

Photo source: Vancouver Public Library

What a difference 100 years makes...Vancouver’s first grain elevators.

So where did all the grain come from? Thunder Bay at the head of the Great Lakes was operating at capacity, as was Montreal.

Vancouver’s growth was not at the expense of eastern terminals but American terminals. In the 1922-23 crop year, 57 per cent of the crop was shipped through American ports, 33 per cent Canadian ports and just nine per cent through Vancouver. Because much of the trade was developed by diverting from American ports to Vancouver, eastern Canadian ports saw very little change in the volumes they handled. November through March, when shipping on the St. Lawrence and Great Lakes stopped due to freezing, became peak shipping season for Vancouver. And what of deadheading empty grain boxcars?

Surprisingly, Eastern Canada had been almost a negligible market for West Coast sawmills. With improved rail capacity because of the grain trade, over 300 million board feet of lumber was being shipped eastward by 1929.

The resilience of the Vancouver grain trade was demonstrated in October 1929. On Black Thursday, not only the stock market crashed but also the wheat market the following week. Speculation had pushed wheat futures higher than they had ever been. Promoters who were anticipating that Europe would pay a premium for American wheat were shocked when not only the market crashed, but also Europe announced a bumper wheat crop and cancelled its North American orders. Canada was somewhat spared, because of a preferential buying policy by the U.K. and its reputation for delivering high protein Canadian wheat. European flourmills blended their lower protein European wheat with higher protein Canadian wheat. Over 105 million bushels were exported during the 1932 crop season, accounting for 70 per cent of the total exports from the port.

Some say this marked the end of a “golden era” for Canadian grain. The development of the grain trade through the Port of Vancouver was nothing short of phenomenal. It is a Cinderella story where berated believers in the potential of the trade saw it develop far beyond their wildest expectations. The opening of the Panama Canal not only opened Europe to exports from the West Coast but also renewed interest in shipping grain to the Orient. The next time you pass one of those, “leviathan masses of concrete” remember the role they played in developing Canada’s trade on the Pacific Ocean.

For more than three decades, David Hill-Turner has been engaged in a variety of communications projects focusing on British Columbia’s heritage. His particular interest is maritime history and he is presently working on projects relating to grain, Alaska cruising and pilotage.

LNG BUNKERING

Future trends in LNG bunkering

By Captain Stephen Brown West Pacific Marine

F

or the past 10 years or so, there has been global acceptance within the marine industry that a paradigm shift in the use of bunker fuels would be an inevitable consequence of the establishment of Emissions Control Areas (ECAs) under the provisions of the International Maritime Organization (IMO) MARPOL Annex V1 legislation. The initial ECAs in the Baltic and North Seas were followed by a North American ECA extending approximately 200 nautical miles offshore from the east and west coasts of the United States and Canada, and which the U.S. subsequently extended to its territories in the Caribbean.

In parallel with the establishment of ECAs, ship owners have been faced with increasingly stringent specifications of allowable bunker fuel which, on January 1, 2020, will culminate in a global standard of 0.5 per cent maximum sulphur content. In the meantime, China (including Hong Kong) and the European Union have adopted their own mandatory fuel standards for vessels at berth outside of the strict IMO framework.

For their part, a small number of ports have elected to go one better by investing in the provision of shore power at berth in tandem with incentives for ships to shut down their generators while alongside. The Port of Vancouver was an early leader in this field at Canada Place and is currently expanding the program to container terminals. A key aspect with shore power is that in addition to eliminating vessel emissions while at berth, it also addresses the issue of noise from vessel generators, a frequent source of complaints from residents in close proximity to marine terminals.

With the direction of legislation firmly set by the IMO and with many ship owners keen to be leaders in Corporate Social Responsibility, the move to develop solutions has slowly gained momentum. A heavy initial focus on the installation of Exhaust Gas Cleaning Systems (scrubbers) in lieu of burning low sulphur fuel or gas oils was accompanied by research into hybrid diesel and LNG-capable marine propulsion systems.

In a recent report published by Foreship, a leading naval architecture and engineering consultancy, it was predicted that up to 30

...some of the best and brightest minds in our industry have been scratching their heads to come up with a credible solution to meet future demand for LNG bunkering. per cent of commercial shipping will gravitate back to high-sulphur fuel oil by 2030 as scrubber technologies improve.

Not everyone agrees, hence the momentum towards LNG-fuelled propulsion as a credible and economical long-term solution to the global marine industry’s stated commitment to playing its part in meeting the goals of the Paris Climate Agreement.

So, what are the obstacles? The most obvious is of course the lack of a global LNG bunkering infrastructure. Just as the switch from sail to coal generated similar logistical challenges, some of the best and brightest minds in our industry have been scratching their heads to come up with a credible solution to meet future demand for LNG bunkering. Simultaneously, bunker suppliers are understandably reluctant to commit to major investments in an LNG bunkering infrastructure before they are convinced of the demand.

The answer of course lies in partnerships.

The successful switch to LNG-fuelled ferries in the Baltic Sea and Europe is now well underway. Initial reliance on LNG tanker trucks has, in many cases, evolved into fixed installations or more commonly, purpose-built LNG bunker tankers or tug assisted purpose-built barges. The major ports in Europe have also made no secret of the fact that they see the provision of

LNG bunkering capability as a commercial imperative, hence the decision of many to get ahead of demand.

Here in British Columbia, BC Ferries’ new Salish Class vessels and Seaspan’s new Trailer Ferries (Swift and Reliant) were built for dual-fuel propulsion. BC Ferries also currently has the Spirit of British Columbia in the Remontowa Ship Repair Yard, Gdansk, for conversion to duel fuel and extensive midlife upgrades to be completed this spring.

Spirit of Vancouver Island will follow this fall and be complete by the spring of 2019. By using LNG instead of conventional diesel, BC Ferries expects to save approximately C$9 million per annum in fuel costs on the Spirit Class vessels alone.

We should also mention that TOTE Maritime has committed to conversion of its two Tacoma-based Orca Class ro-ro container carriers — Midnight Sun and North Star — to LNG propulsion while also building two 3,100 TEU capacity hybrid LNGfuelled Marlin class container vessels for the company’s Jacksonville to Puerto Rico Jones Act trade. Both Crowley and Matson have also ordered LNG-fuelled propulsion for new Con-Ro vessels under construction for their own Jones Act protected trades.

However, many have been waiting for a real game changer. This may have occurred in 2017 given that 11 per cent of all new

Source: Sirius Shipping

The ice class blue hulled LNG bunkering vessel Coralius.

February 2018 — BC Shipping News — 39

LNG BUNKERING

The purpose- built vessel Seagas bunkering the LNG-fuelled Viking Grace in Stockholm. vessel orders involved LNG fuelled propulsion systems including the announcement by CMA CGM in September of an order for nine 22,000 TEU capacity LNGpowered container vessels. The project is a collaboration between CMA CGM, China State Shipbuilding Corporation (CSSC), Gaztransport & Technigaz (GTT) and Bureau Veritas. The new ships, the first of which will be delivered in 2019, will have a bunker capacity of 18,600 m3 which

40 — BC Shipping News — February 2018

represents a significantly higher volume demand than any previous commercial vessel. The additional new build price for LNG propulsion is estimated to be $17 million per vessel and the company has selected an affiliate of France’s Total Group, Total Marine Fuels Global Solutions, to develop a tailor-made bunkering solution to support these vessels which are inevitably destined for the Asia-to-Europe-and-return trade loops.

So, what are the bunkering solutions? Our October 13, 2017, Ship of the Week featured in the Chamber of Shipping’s weekly newsletter (and on my website) provided an example of one such major investment, the 5,800 cbm capacity duel-fuel LNG bunker supply vessel Coralius. Commissioned in May 2017, owned

by Anthony Veder and Sirius Shipping, and chartered by Skangas of Norway, she is the first such vessel to be built in Europe and, being 1A Ice Class, is intended for service in the Baltic and North Seas.

Turning to the example of the Baltic ferry industry — the real trendsetter in duel-fuel propulsion systems — Viking Line has partnered with Swedish AGA Gas for bunkering of LNG using the purpose-built vessel Seagas (shown above in Stockholm while bunkering the LNG fuelled Viking Grace).

Elsewhere in Europe, the major ports of Hamburg, Antwerp, Rotterdam and Zeebrugge are all now offering some form of LNG bunkering infrastructure. By way of example, the Port of Rotterdam has partnered with Shell to provide the 6,500 cbm capacity dedicated LNG bunker vessel Cardissa with a similar vessel to follow. In December 2017, the Estonian port of Tallinn,

LNG BUNKERING

Artist’s impressions of the Q-LNG Transport ATB under construction in the U.S. a major ferry hub, announced discounts of four per cent on harbour dues to all vessels using LNG as a primary fuel.

For its part, TOTE Maritime has partnered with Applied Cryogenics Technologies (ACT) of Houston, Texas, to provide bunkers to its new duel-fuelled container ships Isla Bella and Perla Del Caribe. Both vessels currently bunker from LNG ISO tank containers while at the company’s container berth in Jacksonville, Florida. In Tacoma, TOTE is partnering with Puget Sound Energy to provide LNG bunkering direct from an LNG liquefaction plant, which will have a cryogenic pipeline linked directly to a bunkering dock.

Of courtse, it’s not all about container ships and ro-ro vessels. The advent of ECAs has considerably impacted fuel costs for the cruise industry. While investing in the retrofit of a number of existing vessels with scrubbers, there is a growing momentum towards LNG for the future with Carnival, MSC and Royal Caribbean leading the way.

As things stand, 13 of the 73 cruise ships to be delivered between now and 2026 will be LNG fuelled. Of seven on order for the Carnival Group, the first of two 5,200 passenger capacity vessels will be delivered in 2019. MSC Cruises has four mega LNG fuel cruise ships on order with STX France for delivery by 2026 and Royal Caribbean has placed an order with Meyer Turku for two LNG and fuel cell-powered vessels to be built on a prototype platform, with deliveries in 2022 and 2024.

To this end, U.S. home ports for cruise ships recognize that there is an urgent need to advance LNG bunkering solutions if they wish to remain relevant. In response, Shell Trading (US) has signed a long-term charter agreement with Q-LNG Transport for an

...the end game is clear, the path to LNG-fuelled propulsion is set and not just for the cruise, ferry, container and ro-ro sectors.

LNG articulated bunker barge to service the cruise industry in Florida. With capacity for 4,000 cbm LNG, the barge will be owned and built by Q-LNG Transport, and operated

by Harvey Gulf International Marine.

Further afield, ports in Asia are also bowing to the inevitable. Korea is an obvious hub for LNG bunkering and is moving in that direction. Likewise, Japan has nominated Yokohama to be that country’s initial LNG bunkering hub and China has approved the development of an LNG bunkering hub at the strategically located port of Zhoushan on that country’s central coast.

Long a visionary leader in recognizing the trend towards maritime dependency on LNG-fuelled propulsion systems, the Maritime and Port Authority of Singapore (MPA), has, in addition to building a major LNG distribution hub for S.E. Asia, initiated an LNG bunkering pilot program involving up to six LNG-fuelled harbour craft to a maximum of S$2 million per vessel. The objective is to determine the optimum mode of LNG delivery as the port seeks to maintain its status as the world’s No.1 bunker port. Of the S$12 million allocated for the co-funding program, S$8 million has been awarded to Harley Marine Asia, Keppel Smit Towage and Maju Maritime on the understanding that the vessels to be built will include tugs, bunkering barges and/or small tankers. Going one step further, and in order to encourage the uptake of LNG, MPA has waived five years of port dues for new LNG-fuelled harbour craft that register between October 1, 2017, and December 31,

2019. To complement this effort, MPA will also grant an additional 10 per cent concession on port dues to qualifying LNG-fuelled vessels as part of the Green Port Program.

So, what are the conclusions? Not every port can be a trendsetter; most will inevitably be trend followers. However, the end game is clear, the path to LNG-fuelled propulsion is set and not just for the cruise, ferry, container and ro-ro sectors. Specialized LNG-fuelled cement carriers are already in service and Hyundai Mipo has just delivered the first 50,000 DWT LNG-fuelled bulk carrier. It is also no secret that designs are well advanced for LNG-fuelled Capesizes.

As a final comment, one thing seems clear. The foundation for development of LNG bunkering options, given the scope of logistical, technical and financial issues to be resolved for any project to proceed, will in most cases come back to partnerships.

While a short article such as this cannot do full justice to the subject, I hope it at least provides you with a small insight into the journey we are on.

Captain Stephen Brown spent 21 years at sea where he served as Master for the last five years with Gearbulk Shipping.

After coming ashore, he worked in various levels of operational management before going on to serve as Chamber of Shipping of BC Director (2000 to 2008) and President (2008 to 2016). Captain Brown is currently the owner of West Pacific Marine Ltd., Marine Consultancy. For more information, visit www.westpacificmarine.ca.

February 2018 — BC Shipping News — 41

OP-ED: CABOTAGE

Fight for cabotage gathering global strength

By Terry Engler, President, I.L.W.U. Local 400

M

y thanks to BC Shipping News for providing a venue for debating cabotage. I was delighted to see Professor Gold’s latest take in your November 2017 issue — and am delighted to respond on behalf of the workers who move the goods that power our economy.

Professor Gold’s perspective may accurately reflect the views of international shipping interests and some very shadowy owners who operate behind corporate veils, hiding from their financial responsibilities to their workers, and from responsibility for the environmental havoc they wreak.

Me? My view is the same as other Canadian seafarers. We want an industry that is safe, environmentally sensitive, offers good benefits and pays a proper family-supporting wage to Canadians in Canada.

We want an industry that is safe, environmentally sensitive, offers good benefits and pays a proper family-supporting wage to Canadians in Canada.

So I’m delighted to talk about how Professor Gold’s take on cabotage looks to those of us who work the seas and power our economy.

Developing nations

Brazil, Argentina, Indonesia, Nigeria and South Africa — among others — are in fact all actively planning to introduce or strengthen cabotage regulations, contrary to what Gold argues. They have judged it the smart thing to do. Cabotage regulations support local and national companies and employ local workers. In many cases, wages are low, but under

cabotage, workers have an ability to influence those wage rates to national standards.

They aren’t competing against international companies that can simply move the work away or replace them with other nationalities when they refuse to accept major concessions. These countries know that better wages help a country’s economy.

Indonesia, for example, introduced cabotage regulations in 2005 and within eight years, the number of national flag vessels doubled, benefiting local players and increasing investment in the Indonesian shipping industry. In Nigeria, the Nigerian

OP-ED: CABOTAGE Shipowners Association has acknowledged the difficulties of corruption and past lack of political will, but remains relentless in its focus on ensuring that provisions of the Coastal and Inland Shipping (Cabotage) 2003 Act No. 51 are followed.

We know these things because we do our research and, as workers, pay attention to economic life as it unfolds in the real world.

The U.S.

Professor Gold laments the failure of Senator John McCain’s recent attempt to repeal the Jones Act. It wasn’t McCain’s first attempt and likely won’t be his last. In the U.S., such persistence generally indicates a politician has received donations from the industry he is stumping for — which in McCain’s case would be the global logistics industry bent on serving international interests ahead of America’s. We assume that McCain will have as much success dismantling cabotage as he and his hand-picked former running mate — Sarah Palin, wasn’t it? — enjoyed in securing the White House.

Worse, Professor Gold reflects his industry’s practice of denying its own shortcomings. He comments on the age of U.S.-flagged vessels but fails to acknowledge there are many vessels as old, and in much worse shape, in the flag-of-convenience fleet. He fails to quote any statistics to show the U.S.-flagged vessels have more casualties or worse safety records than others. We assume that, given Gold’s expertise in shipping, if he doesn’t have those statistics, it’s because they do not exist.

As I wrote earlier this year, a study by the Canadian Merchant Service Guild determined that Canada’s cabotage regulations add almost $900-million in revenue to Canada every year. Extrapolating that to the U.S., the revenues from the Jones Act would be in the billions of dollars. Finally, we find it hard to believe that the Jones Act “hits consumers hard,” given that most consumer goods are cheaper in the U.S. than in Canada.

It’s all about perspective. When you work on deck, the question arises naturally: Who would benefit from the end of the Jones Act? The answer comes naturally too: Certainly not workers, and certainly not local or national companies.

Indonesia, for example, introduced cabotage regulations in 2005 and within eight years, the number of national flag vessels doubled... effort can’t have clouded what he surely knows about the immense sacrifice made by the Australian Merchant Marine during the Second World War. The Australian Parliament put on record its gratitude for the seafarers’ efforts during the war and recognized that one in eight Australian seafarers gave their lives for the war effort — among the highest casualty levels of any branch of the Australian military. It’s disrespectful to state that Australian seafarers and their unions sabotaged the war efforts. In fact, they gave their lives to win the war. When the conflict ended, Australian seafarers and their unions — like our Canadian Seaman’s Union — rightfully demanded proper pay

and working conditions. So did workers in many other industries.

Any attention to real-world economics indicates that the decline in marine coastal traffic in Australia is in fact due to the subsidies offered by the government to the rail and trucking industry and its corresponding weakening of cabotage laws. Had Australia allowed cheap foreign labour and foreign companies to flood the trucking and rail industries, they would have been devastated as well. Had marine, rail and trucking been treated equally, it is possible that the marine industry would in fact have come out on top.

Finally, we must note that while there may be no advance evidence that removing cabotage

Australia

Gold’s comments regarding Australia illustrate the polarizing debate on cabotage underway in that country. We know it well.

Professor Gold makes Herculean efforts to promote the industry’s interests. But the February 2018 — BC Shipping News — 43

OP-ED: CABOTAGE regulations will harm Australia’s physical and economic security, we note that the Australian Border Force has warned that “organized crime syndicates or terrorist groups may seek to exploit” foreign workers on flag of convenience (FoC) fleets. According to a Senate report, FoC shipping “could compromise Australia’s economic interest, the health of our labour market and skills base, to say nothing of posing a security risk.”

Great Britain/Norway

Much like his taste in American politicians, Professor Gold’s grasp on the realities of real-life wages differs from our own.

In dismissing our argument that Canadian seafarers should not be forced to compete with foreign workers paid as little as US$4, Gold suggested “it is unlikely that any international ship owner operating modern, highvalue ships would pay this rate.” It is not only likely; it is true. I have on my desk the Total Crew Cost collective agreement for crews on FoC tankers. The pay for eight of the ratings, including the AB, is below US$4. There’s more. The Cable Innovator, a cable-repair vessel stationed in Victoria for work that has gone on for more than five years, pays most of the ratings US$4 or less as well.

44 — BC Shipping News — February 2018

Skills matter too. Professor Gold failed to acknowledge the very real threat that marine skills in the EU are lost when cabotage is not enforced. At this time, fewer than 40 per cent of seafaring posts on European ships are filled

by EU seafarers. OECD countries now supply just 23 per cent of the world’s officers and 14 per cent of the world’s ratings, compared with 28 per cent and 24 per cent a decade ago. Mark Dickinson, the General Secretary of the trade union Nautilus International, flagged the problem at a European Shipping Week 2017 seminar: “The drastic decline in training has left us with an increasingly aging population of European seafarers and maritime clusters, and the wider economy faces damaging consequences as the pool of knowledge and experience diminishes as they move towards retirement with woefully inadequate numbers of young seafarers to follow in their footsteps.”

Canada faces the same issues with retention and continued development of marine skills.

But the loss of jobs that pay wages that support families is as critical for us. The election of Donald Trump in the U.S. and the Brexit vote in the U.K. has made it clear that globalization and the trickle-down theory has failed miserably in protecting the middle class.

People are angry and industry should be taking note. In a speech last year, David Lipton, the International Monetary Fund’s deputy managing director, warned: “Too many people in the developed world see only a loss of jobs to lower-wage destinations. Too many people fear that immigration is compromising their economic well-being.” He went on to say it’s time for a new form of globalization that works for all. We agree. The global elites — including international shipping companies — have profited greatly from globalization, and it is time that they learn to play fair.

Cabotage is part of a fair system.

We remain focused. Maritime unions in Canada recently settled several court cases with the government that will support and strengthen cabotage. I thank Professor Gold for taking the time to offer the industry’s views on the subject. For our part, we’ll stick with the view that maritime unions have always held — that work belongs first to those who make their lives here. And we will continue to use every tool available to us in this battle to keep Canadians on deck.

Terry Engler, president of International Longshore and Warehouse Union Local 400 - Marine Section, can be reached at ilwu400@telus.net.

CABOTAGE

Cabotage in Canada: A short assessment

By John Roberts, Member, Nautical Institute

C

abotage is a topic that tends to attract very strong and often opposing arguments both for and against.

The European Union defines “maritime cabotage” to mean transport services to and from ports in the same country, and includes off-shore supply services and island cabotage. It seems this may apply to all cargo movements including commodities and also to passenger trades, largely ferries. EU member states appear to be subject then to formal rules and regulations that apply to all EU states, ensuring certain common standards. It should be noted that within the EU, cabotage is by common agreement among those member states. The reality and the best course for Canada may be somewhere between the extremes, recognizing our very special coastal shipping concerns and vulnerable environments.

Shipping has always been a highly competitive cost driven business going back to and even beyond the days of so called coffin ships in the 19th century before the advent of the Plimsoll Line. Naturally, a seafarers’ union leader in Canada and elsewhere, will be inclined take an aggressive, militant and partisan stance on behalf of union members.

This is only to be expected. On the other hand, proponents of unrestricted cabotage may be tempted to develop a rationale of cheaper and more efficient coastal transportation that may defy sound empirical evidence, especially with respect to Canadian waters.

The EU approach has been cited by some as a sound way of encouraging effective competition in EU waters and reducing transport costs by moving freight movements from land modes to the seas. In terms of efficiency, it has been suggested that 40 per cent of European domestic freight is by sea versus only two per cent in the U.S. My questions would be what are the measurement parameters, are they based on tonnage, or value, containerized, bulk shipments, etc., and do they account for shipments between mainland Europe and islands or other situations and whether a much shorter sea route is a factor or not? The reality is that the true

Shipping has always been a highly competitive cost driven business going back to and even beyond the days of so called coffin ships in the 19th century... volume of freight by sea as opposed to by land may be far less than such a comparison may suggest. A possible consideration is the volume of containers that are transhipped to smaller ports from massive EU ports like Rotterdam, Antwerp and Felixstowe in the U.K. using smaller “box” ships in so called feeder services. There is also the added complication of the enormous volume of freight transported in ro-ro ferries operating via multiple ferry routes linking the U.K. to the Continent and routes within the EU. The statistic of a mere two per cent by sea in the U.S. may also lack some significance because much of the U.S. hinterland is relatively remote from seaports and the greatest flow of freight movements may well be oriented across the continent rather than northerly or southerly. Intuitively, it does seem likely though that more economical ocean freight could take some traffic away from freight movements between large population centres that are close to the Atlantic or Pacific oceans.

This leads directly into consideration of examples of extreme protectionism in internal maritime trades in a number of major countries. As noted by the EU, cabotage markets in Japan and China are also subject to strict regulation. There is no mention of other large countries such as Russia.

One of the most extreme examples of protectionism is the US Jones Act, of course, but this is more complex than only protection of U.S. flag and crewed vessels, owned by U.S. citizens or other permanent residents.

As mentioned elsewhere in BCSN, the Act also requires that qualifying vessels must be built in U.S. shipyards, adding significantly to shipping costs for U.S. domestic trades.

It also has been suggested that the Act has allowed aged, unseaworthy vessels to remain in service far longer than was prudent. The 2015 sinking of the U.S.-flagged

El Faro with all hands has been cited as a prime example of this. My own belief is that age itself is not the prime factor in determining the safety of a vessel but can be a contributory one in many cases. Rather, I suggest that management dedication to responsible maintenance, appropriate refits and strong leadership are more important than age alone in determining fleet safety and vessel seaworthiness.

Locally, we have examples, admittedly in generally more sheltered waters, of vessels such as the Coho and other ferries remaining in safe operational condition for periods of over 50 years. Having said that, it is very clear that the El Faro was poorly maintained and managed by the U.S. owner. A synopsis of the newly released NTSB report cites systemic failures of operations, including the Safety Management System (SMS) as well as on-board management by the Master but found that “mechanical condition of boilers, steering, electrical power and machinery were not factors in the accident.” A US Coast Guard (USCG) report found that hull integrity was not a factor either. The NTSB findings indicate that there were deficiencies in practices of both the USCG and the vessel’s classification society.

Naturally, shippers of goods in most cases will select the most efficient and lower cost options. One issue, however, arises from what economists refer to as “externalities” when it is difficult to measure the monetary impact of societal issues like pollution, affected communities and livelihoods.

Shippers seldom face the costs of major mistakes directly since they are spread among consumers through insurance mechanisms or otherwise absorbed by society at large and affected communities. Some of this has changed significantly in the movement of crude oil following a series of well-known environmental catastrophes that have February 2018 — BC Shipping News — 45

CABOTAGE Excessive relaxation of Canadian cabotage restrictions could be a slippery slope and a Pandora’s Box of unforeseen and unintended consequences. resulted in major oil companies as charterers of oil tankers having to assume more responsibility to select safer vessels and their operators. This has hugely improved construction standards for modern oil tankers as well as much tighter crewing and training requirements.

Excessive relaxation of Canadian cabotage restrictions could be a slippery slope and a Pandora’s Box of unforeseen and unintended consequences. Although it is not a cabotage issue per se, the sinking of the Kirby-owned pusher tugs Nathan E Stewart and now the Jake Shearer have created a political firestorm on the mid-coast bringing into question the whole matter of pilotage exemptions. The broader question is the wisdom of using integrated tug/barge units moving large quantities of petroleum products in environmentally sensitive hazardous and restricted local waterways — i.e., the Inside Passage. There are quite safe integrated tug/barge units in use in the Georgia Strait in waters that are less hazardous from both a weather and narrowness perspective.

The origin of these integrated units seems to have been U.S. river systems such as the Mississippi and the Intra Coastal Highway and possibly certain EU internal waterways.

Once the tug becomes detached from its notch in the barge it is difficult to secure it again in adverse weather conditions as in the Jake Shearer incident. So, if similar pilotage exemptions became common and unrestricted cabotage became the norm would it become far too easy for other foreign operators to demand the same liberal provisions that have been offered to U.S. operators? The motivation for such units is, of course, cost-driven since crew requirements for the tug/barge unit are probably far lower than for a self-propelled vessel.

The crux of the current issue seems to be concern over terms of the CanadaEuropean Comprehensive Economic and Trade Agreement (CETA) as it relates to maritime cabotage in Canada. This requires changes to our Coasting Trade Act (CTA).

Presumably, EU countries have agreed on certain safety standards that are uniformly applied by all EU members. EU members have accepted almost free movement of vessels (owned by EU member companies) within their various territories but it would be a vastly different matter to suggest that 46 — BC Shipping News — February 2018

Canada should freely accept unrestricted rights to our coastal waters for all EU member states. This is not part of the CETA agreement though and the geography of our two continents is very different. Our major population centres in Canada are not well positioned to facilitate efficient movement by sea between our ports. Even in the U.S., it is debatable whether coastal freight could ever make significant inroads into land transportation in contrast to Europe’s apparent efforts to promote the use of “coastal highways.”

A quick read of material from Transport Canada, although somewhat obscure initially, indicates that under CETA, there are three categories where “coasting trade services” can be provided by EU eligible (my emphasis) vessels. These categories comprise the following: • Feeder services between Halifax and Montreal • Repositioning empty containers if an EU vessel travels between Halifax and Montreal • Dredging services The verbiage requires careful reading but Transport Canada explains in some detail what may be meant. One of the more contentious matters could be TC’s reference to providing “continuous” feeder services between those two ports for international freight containers. It may have been simpler for Canada to refer to transhipment services since that seems to be the intent under CETA. Repositioning of empty containers may permit EU entities to use vessels that are not registered in EU states. The use of such “flag states” could become an area of concern. In addition, if an EU owner develops experience in “continuous weekly services” in feeder vessels, as may have happened in the EU, there could be pressure to allow special pilotage exemptions on the St. Lawrence River.

The subject of “dredging services” is quite complex. It appears that CETA may allow use of EU-registered vessels for dredging contracts in excess of $8.5 million. This may be logical as it would seem to allow port authorities to access “leading edge” technology developed by large EU entities such as Boskalis that may not be readily available locally. Canadian taxpayers, and indirectly consumers, could be the beneficiaries.

Even though we have three oceans as our maritime border, we are possibly less of a maritime country than we could be. Our three coastal regions have arguably the largest portions of potentially hazardous waters in the world. My biggest concern over the argument for possible unrestricted cabotage beyond the CETA changes is where does it begin and end? Would it extend to all trade by sea, even encompassing tug and barge operations and even the Great Lakes for movements of bulk grain and ore cargoes?

There is also the annual resupply operation for the Canadian high Arctic. My interest tends to be risk focused as that later became my passion and professional life.

In terms of transportation safety, we do not allow foreign airlines to operate solely within Canada even for cargo movements, we do not allow U.S. truckers to transport goods solely within Canada and we have tight restrictions on rail shipments (although after Lac Megantic they clearly need tighter regulation) so why would we allow unrestricted open cabotage to creep in on the oceans? CETA does not seem to open the door to that currently but there may be adverse effects in some sectors.

Some labour interests seem to have demanded an extremely tight definition of cabotage as it may apply in Canadian waters even if a vessel is based in a Canadian port merely for geographical convenience.

Examples may include cable service vessels that on occasion may do minor installation work here, as well as other specialized vessels that do not carry cargo, like deep water research and perhaps even very special salvage equipment and tugs.

Clearly, I am against unrestricted cabotage and potential limitations to our ability to ensure the continuation of a well-trained knowledgeable source of Canadian mariners and the preservation of an environmentally well-protected coast. Having said that, I do believe that Transport Canada’s proposed changes to the CTA may be a reasonable approach to protect our interests providing there is more clarity around the definitions and intent re “feeder services.” Perhaps what is needed is an objective think tank approach of various stakeholders and experts with sound technical knowledge and awareness of the real issues with a view to ensuring the best maritime policy for Canadian consumers, taxpayers and the general public at large.

John’s career includes being a licensed deep sea mariner, marine insurance underwriter, maritime policy analyst, corporate risk manager and risk consultant.

WATERJETS

Operational realities of jet drive boats

By Michael Gardiner, Technical Sales Manager, Jastram Technologies

I

n the last few years we have seen an upswing in the number of waterjetdriven craft here on the West Coast of Canada. While waterjets are extremely popular in Alaska, Washington State, Oregon and California, around B.C.’s West Coast, there has been almost a black hole with relatively small ownership of jet boats until recently.

This has been especially true of the 28-45foot segment of aluminum fish boat, water taxi, pleasure craft and workboats.

Why? It’s largely about product perception and a history of dodgy application engineering. Even today, some drive system manufacturers do a really poor job of matching their products to the boat that they will propel. Let’s look first at product perception, with a typical list of concerns from aluminum boat owners about jet drives: • Excessive fuel consumption • Jet drives clog up a lot, with weed, rope, flotsam etc.

• Jet drives are too expensive to install • Jet drives are too complex and expensive to fix • Jet drives are only good in shallow water • Jet drives are difficult to drive • Jet drives make your steering difficult • You cannot tow with a jet drive • Parts are difficult to find Many of these concerns stem from the fact that some jet drive manufacturers used to leave the naval architects, shipyards and boat

Even choices like coatings make a difference to the finished product, and thus we can probably surmise that every boat is different, and an individual approach must be taken... owners to work out proper jet sizing on their own, and this led to boats being underpowered with incorrect jet drives; incorrect impeller pitch and other complications that resulted in most if not all of the above complaints. More seriously, it can lead to premature wear on the major mechanical components including engines and gear boxes.

Even today, some manufacturers of competing jet drive or propeller systems have little backup work done before a system is chosen. Builders take pride in their designs that not only differentiate them from their competition, but are designed to suit the operational conditions in which they will be used. Each builder is slightly different in their approach to design and construction of their boats. Material choices and gauges (thickness) can add significant displacement to a vessel. Hull resistance varies significantly for each boat, how the boat rides in the water is a key element when choosing propulsion. Even choices like coatings make a difference to the finished product, and thus we can probably surmise that every boat is different, and an individual approach must be taken when

we are considering the major machinery components.

No boat builder wants a finished product that does not deliver the best performance from the hull form and machinery.

Recreational jet boats are relatively easy to work with and size the appropriate machinery since the duty cycle is much less demanding on machinery. Commercial boats are another ball game entirely, where owners depend on reliability and economically sound operation for their livelihood.

Taking chances is simply not good enough.

Hamilton Jet quickly recognized that there were burgeoning issues with jet driven boats. The company is credited with the invention of the waterjet drive system, and there is — as they say — only one way to go.

It’s like a marriage of mechanical systems to the hull form. The engineering team at Hamilton Jet have developed a set of standards for performance evaluations and have a formula taking factors like hull resistance, hull warp, dimensions, gearing, available power and light, trials, and maximum displacement that works every time and is tailored to the expectations of the owner,

Western Canada Marine Response Corporation opted for waterjets for the Kaien Sentinel and the Gil Sentinel.

February 2018 — BC Shipping News — 47

WATERJETS naval architect, shipyard and machinery supplier. Whether it is a new build vessel or a re-power application, the same standards are used, and a data set is gathered and is essential to ensure that the owner’s requirements are fully met. Hamilton Jet and its distributors work hand in hand with the design team to computer model the boat using a software set that is based on sound naval architectural principals, and provide a performance evaluation curve that is sent to the boat builder. The information contained there includes projected plane speed, minimum zero cavitation speed, proposed engine detail, a complete power and jet thrust curve which will show how the boat will handle at all design speeds, suggested gear ratio to match maximum engine revolutions, and a suggested cruise speed at 80 per cent and 60 per cent throttle opening. Most importantly, it will provide correct jet sizing and impeller matching information. Hull problems can be detected and suggestions made to optimize the hull for jet performance in the expected sea conditions at the design stage.

Waterjets are sized on hull resistance at maximum displacement and craft speed, but also ensuring there are adequate margins over cavitation. Hamilton Jet likes to see at least 30 per cent cavitation margin before they will release a performance evaluation.

This helps to ensure equipment longevity. Cavitation can result in damage to the impellers and stators of the jet. Impellers are pitched to match maximum shaft power/rpm using the coarsest possible impeller pitch.

This information will enable the builder and owners to work together to choose engine, gearbox and other options that will

Positions available in 2018:

- Able Seamen - Electricians - Carpenter - Deck Hands - Engine Hands - Engineering Administrator - 4th Engineer

48 — BC Shipping News — February 2018

Installation is simple, with rapid change out of an entire jet as required. match the hull characteristic exactly. This information exchange takes place early in the project so that the builder can use their specialist knowledge to keep the desired displacement accurate, place machinery and tanks so that the vessel’s centre of gravity is maintained to design specification — in other words, to properly plan and execute their job. As many builders will testify, the course of a boat build never runs smoothly, and owners will often add or change other equipment. Builders will usually include a fudge factor to accommodate these requests for change orders, but owners need to realize that by making those changes, there may be a payback in loss of performance, no matter which drive system you choose. It is not uncommon for the Hamilton Jet distributor to receive changes to proposed boats several times and the application must be redone each time and a new performance evaluation provided to ensure that the application is still workable. Hamilton Jet provides this service

as part of the cost of their products. It’s a good service with remarkable accuracy.

As a precautionary measure, Hamilton Jet always does a final performance evaluation before they will accept an order for their product. Hamilton Jet will not release product without full knowledge that the vessel will perform to expectations, and verification of final data when the boat is ready for commissioning ensures that the data provided matches the final data at the proposal stage. Commissioning is another service provided for and built into the cost of the jet drive. A Hamilton Jet trained technician will typically spend a day or sometimes two when the vessel is launched and tested at sea trials. Performance data gathered at sea trials is then compared to the original design specifications and the final performance evaluation that was completed before the boat was built. So far, the actual boat performance has either met or exceeded predictions in every case.

The benefit of all this engineering work is that the boat performs exactly as it was predicted to — every time. From manufacturing to end use, the customer is always kept fully updated on how their boat will perform before it ever touches water. Not only that, they have optimized performance and optimized their machinery to its efficient operation.

Hamilton Jet has spent a lot of time and effort to make their product as efficient as possible. Just like its airborne counterpart, the jet drive gets more efficient as the boat moves faster. The same is not true of any propeller-driven boat, whether conventional or surface-piercing, as the propeller itself provides drag, and simply cannot be as efficient. Propellers, again like aircraft, are more efficient at lower speeds but the efficiency tapers off and decreases significantly above 40 knots.

WATERJETS The “sweet spot” for jet drive efficiency is about 25-55 knots where they exceed any other form of boat propulsion by a significant margin. These cruising speeds are right in the ball park of water taxis, workboats, ferries, pollution control, fire and law enforcement, pilotage, military and other users of aluminum boats. More efficient propulsion means less fuel is used, and this benefits the owners and lessens environmental impact for the boat.

Practical ownership of waterjet-driven boats has yielded good information and debunked the rumour that jets clog up regularly with flotsam. Even in very dirty waters, operators find jet drives may have to be cleaned out once or twice a year directly resulting from debris in the jet intake. Operating in very shallow weed-laden water may require more frequent back flushing of the jet drives to remove weed.

In extreme cases, the inspection hatch on the jet can be opened and debris cut free without the need for diver intervention or taking the boat out of the water. Most jet drives are mated to a gearbox so debris is easily cleared by shifting into reverse and, given a little gentle throttle application, the debris is quickly expelled back out of the jet intakes. Gearboxes are desirable for this reason, and also to provide a true neutral, since direct drive means that the jet impeller is always turning when the engines are running. Particularly with commercial vessels, it’s important to have stationary impellers, for example with boats certified to carry passengers, allowing the engines to remain running while docked without the chance of boat movement, or on fishing vessels deploying or retrieving crab or lobster pots where the ropes or lines may become entangled in the drives if running. The fact is, it is just as easy to have a rope wound around a propeller as it is to have a rope ingested into a jet drive, probably less so with a jet, since the intake is fully underneath the hull. The same is true of survey vessels that run very expensive tethering cables to ROV or towed detection equipment. Owners and operators report that there are far fewer incidents since they moved to jet drives from either conventional propeller or other forms of propeller drives.

Next we should address installation. Hamilton Jet provides 2D or 3D CAD drawing packages to the builder with all the necessary instruction to complete the required work. Once the hull plating is cut, and the base hull assembled, the aluminum intakes are shipped to the builder to weld into the hull. Holes are cut in the base of the hull and the transom to accommodate the jet drives, and then they are simply bolted into place. Shop time is substantially less than installing a conventional drive system, and therefore should be less expensive.

All hydraulics, steering gear are integral to the jet itself, and the only thing required is to hook these up to the vessel subsystems and controls, couple the jet to the output shaft of the gearbox, align and set in place. There is no need to beef up the transom, since thrust forces are directed to the horizontal stringers of the hull, the same ones to which the engine is mounted. Thus, the vessel is less prone to vibration and thrust forces are directed to the strongest part of the hull.

Waterjets are simple in design, essentially you have a main shaft, with oil or grease lubricated bearing assembly and a hydraulics package inside of the transom, the impeller assembly roughly in the middle of the jet body, and a water lubricated bearing in the tailpipe.

Within the tailpipe is a stator, that acts to straighten out the water flowing past it, after being accelerated past the impeller. The reverse deflector moves upward to allow water flow to the stern and down to direct the flow under the boat.

There is no need to shift into reverse gear in order to move the boat backwards; simply lowering the reverse deflector is enough. This significantly helps gearbox life expectancy; as you are not constantly shifting gear when docking. Steering in either direction is carried out

Water flows through the jet – no appendages in the water.

Steer in the direction you want the bow to go — regardless of forward or reverse movement. by the jet nozzle. Holding a neutral position on the reverse deflector offers equal thrust both in forward and reverse, which allows full manoeuvring at zero boat speed, and gives waterjets one of their greatest advantages in close quarters manoeuvring.

Approximately 65 per cent of full engine power is available in reverse. The reverse deflector is designed to be fully deployed even at full throttle at full forward speed, to the full reverse position.

The boat will “crash stop” under these conditions, a manoeuvre that is used mainly by military, rescue or law enforcement vessels.

Typically, this can bring the boat to a dead stop in about two to three boat lengths, and allow for very fast emergency manoeuvring.

Steering is also achieved under normal forward or reverse motion by judicious inputs from the reverse deflector. The more reverse applied, the faster the boat will turn. Thrill rides use this method extensively to control their boats. In Class 5 or 6 rapids, such as on the Niagara River in Canada, the reverse deflectors are controlled by a simple solenoid that forces the deflector immediately into full reverse. This allows for amazing levels of boat control in waters that are otherwise not navigable.

Jet drives are very simple to fix when they do go wrong. Hamilton Jet provides free technician courses to help educate repair shops February 2018 — BC Shipping News — 49

WATERJETS

on the finer points of waterjet repairs. There are less moving parts and no complicated gearing as in stern drives, and if properly and regularly lubricated, your waterjet drives will run trouble free for many years. Major service intervals are 6,000 hours, and an annual service for haul out usually only involves changing the anodes that form a part of the corrosion protection system on the jet drives. A typical 6,000-hour service for a military customer, where equipment is changed out regardless of condition, would be about $1,900, and an annual anode change about $500 per jet. Add grease and or oil to this, and that’s your service cost for an average 35-45-foot boat, operating for an average of 1,000 hours per year. Compare this to your servicing costs for stern drive, outboard or conventional propeller drive and you will find that there are significant cost savings.

There is no danger of your impeller or drive being broken off by debris in the water, as there are no appendages in the water with jet drives. Many stern drive owners have to replace the entire drive one or more times annually due to accidental damage, and comparing the longevity of a stern drive to a jet drive we typically see a jet drive run for 25-26,000 hours before it needs major attention or replacement.

There are plenty of 25-30-year-old jet boats here in Canada that are still running well, on the original jet drives and require replacement of only seals and minor parts.

50 — BC Shipping News — February 2018

It is said that jet drives are only good in shallow water. They are indeed very good in shallow water. The US Navy proved this with their fleet of landing craft when they changed the propulsion systems to Hamilton Jet drives. The landing craft had no losses of drives after replacement, and this saved the Navy millions of dollars in comparison to what they were spending on replacing broken stern drives and outboard motors. Jet drives also perform extremely well in deep water, heavy weather, and every water state.

They are also not difficult to drive. What is difficult is to convince people that they can easily learn how to drive a jet boat effectively.

This is particularly true in reverse. There is no secret sauce, you steer in the direction that you want the bow of the vessel to follow, regardless of forward or reverse boat motion. Remember that and you will have your boat under control at all times. You have your regular helm wheel, and you can also steer and control your boat easily by combining helm steering and reverse deflector (bucket) steering. Not difficult. Typically about four hours of wheel time is enough to learn the system and have ability to place the boat exactly where you want it.

Our customers tell us that once they have mastered the jet drive, they prefer it over conventional drives, as it is much more manoeuvrable and easy to operate. Electronic steering is available with a “mouse” type interface. You can drive your boat much as you drive a laptop.

Move the mouse to starboard, the boat will move sideways, turn the mouse to starboard; the boat will turn to starboard. The mouse boat system enables very inexperienced boaters to look like they were born behind the helm, and dock with pinpoint accuracy. It is of course best to be able to properly control the boat manually, and this is why manual backup controls are part of the package. The Blue Arrow or “mouseboat” system can be hooked up to autopilot, and JetAnchor, a virtual anchor that is a phenomenal tool for applications like survey vessels. This system allows you to pick an anchorage point, roughly 15 metres from the boat, using GPS; press a button on the mouse and your boat will instantly keep station. Not only that but it will also hold the bow into the wind, the most comfortable position for the crew. The engine and jet controls are automatically operated to keep the boat on the same heading. Simply moving the mouse alters your position until you want to “anchor” again.

Towing with a jet drive is certainly an option. The Royal Canadian Marine Search and Rescue (RCM SAR) marine units have been using RHIB vessels for some years now to take other craft into tow. While towing is always best done with a large propeller, it is certainly an operation that falls under the waterjet application.

Lastly, at least for Hamilton Jet, parts are very easy to access here on the West Coast. There is a large local stock held in Vancouver, and access to Worldwide Emergency stock held in Seattle WA. Once you are tied in with Hamilton Jet, you can expect to be supplied from any of its distributors worldwide, and the company takes its promise of customer satisfaction seriously. That’s one reason why Jastram Technologies is proud to represent the Hamilton Jet product range in Canada, and why our customers normally see immediate delivery available on product and parts. The product is supported very well by the manufacturer, both at pre and post-sale.

These are some of the realities of jet boat operation. We got them from the folks that use Hamilton Jets, and who have proved their worth over years of successful operation. Perception is not always the reality. The experience is all about performance, dependability, reliability, and most of all, less expensive to operate over the lifetime of the product.

Michael Gardiner is the Technical Sales Manager for Jastram Technologies. He can be reached at MGardiner@jastram.com.

LEGAL AFFAIRS

Feds introduce new measures to address abandoned vessels

By Catherine A. Hofmann, Bernard LLP, Vancouver

O

n October 30, 2017, Transportation Minister Marc Garneau tabled Bill C-64, an act respecting wrecks, abandoned, dilapidated or hazardous vessels and salvage operations, marking the one year anniversary of Canada’s $1.5 billion Ocean Protection Plan. The legislation forms part of a larger strategy of reforms and policies aimed at protecting Canada’s coasts and waterways from the ongoing threat these potentially hazardous vessels pose.

The first of those policies was introduced last spring, when Transport Canada launched the Abandoned Boats Program (ABP). The ABP will provide up to $5.6 million over the next five years towards the removal and disposal of hazardous small boats. While the ABP has a component dedicated to public education and research on vessel recycling, it is the assessment and removal arm of the policy which is of the greatest interest. Under this program, the feds will provide financial assistance to support eligible recipients in the assessment and permanent removal and disposal of abandoned and wrecked small boats from Canadian waterways.

Eligible recipients include the provinces, territories, municipal and local governments, indigenous groups, private ports and marinas (excluding federally owned small craft harbours), Canadian Port Authorities and both for-profit and not-for-profit organizations. Transport Canada is presently accepting applications for assessment and removals to be completed for 2018-19 funding with the deadline for all such applications being March 15, 2018. Under the program, all projects must be completed by March 31, 2022. It is also worth noting that the ABP is based on the premise of reimbursement of eligible expenses, and does not involve advanced payment of any kind. It is therefore imperative that grant applicants demonstrate that they have sufficient funding available to conduct a boat assessment as well as the proposed removal and disposal of the abandoned or wrecked vessel.

To be eligible for a grant to conduct a boat removal assessment, applicants must

Under this program, the feds will provide financial assistance to support eligible recipients in the assessment and permanent removal and disposal of abandoned and wrecked small boats from Canadian waterways. first establish that the vessel is either abandoned or wrecked. For these purposes, abandonment means that the owner of the vessel is either: (i) unknown, and the location and condition of the vessel indicate that it has been intentionally abandoned; or (ii) known, and has intentionally abandoned the vessel. A wrecked vessel is a boat that is sunken, stranded, beached, partially submerged or dismantled. Whether or not a vessel in fact meets the definition of abandoned or wrecked will be determined by the Navigation Protection Program (NPP) which administers the Navigation and Protection Act (Canada) and in order to be eligible for funds under the ABP, applicants must first get authorization from the NPP to take possession of it. Lastly, it should be noted that boats involved in legal disputes of any kind are not available for funding.

If the ABP (and its companion the Small Craft Harbours Abandoned and Wrecked Vessels Removal Program which was established in September 2017) are aimed at the removal of existing hazardous vessels, Bill C-64 is directed at prohibiting and preventing future vessel abandonment.

The proposed legislation also attempts to impose liability for clean-up costs directly upon irresponsible owners and gives governmental authorities’ greater power to undertake hazard assessments of vessels, as well as to impose stronger compliance and enforcement measures.

The new Wrecked, Abandoned or Hazardous Vessels Act (the Act) has broad application and, subject to some limited exceptions, encompasses both Canadian and foreign-owned, licensed or registered vessels. Part 1 of the Act, among other things, implements the Nairobi International

Convention on the Removal of Wrecks, 2007. The Convention was adopted at an International Maritime Organization Diplomatic Conference in 2007 and has, as its purpose, the establishment of a set of uniform rules for the prompt and effective removal of shipwrecks from the exclusive economic zone of a member state and from international waters. The Convention was entered into force on April 14, 2015, and since then it has been ratified by over 31 member states, including Denmark, France and the United Kingdom.

Under Part 1 of the Act, and subject to any limit set out in the Marine Liability Act (Canada) and certain limited exceptions, the liability of an owner of a vessel includes the costs and expenses incurred by any person in Canada (including the Minister of Fisheries and Oceans) in determining whether a wreck poses a hazard and any loss or damage caused by any measures taken in respect of such vessel. Moreover, for vessels greater than 300 gross tons, and unregistered vessels being towed, the Act requires owners to maintain wreck removal insurance or other financial security for any liability arising under the Act and the Convention.

Part 2 of the Act prohibits an owner of a dilapidated vessel to leave it stranded, grounded, anchored or moored in the same location for a period of 60 consecutive days, except where such owner has obtained express consent (from a person with the authority to give such consent) to leave the vessel in that condition throughout that period. For these purposes, a dilapidated vessel means any vessel, greater than 5.5 metres in length, which is significantly degraded or dismantled or incapable of being used for safe navigation. Part 2 also prohibits: February 2018 — BC Shipping News — 51

LEGAL AFFAIRS • the abandonment of a vessel by an owner (except for the purposes of averting danger to human life); • an owner from letting a vessel become a “wreck” by reason of failing to maintain it; and • any person in charge of a vessel to knowingly cause it to sink, partially sink or to be stranded or grounded (except for the purposes of averting danger to human life).

Depending on where the offending vessel is located, either the Minister of Transportation or the Minister of Fisheries and Oceans may direct the authorized representative or owner of the vessel to repair, secure, move, dismantle, sell, destroy or otherwise dispose of it or its contents. Should the owner or authorized representative not be known or located, the respective Minister may take such measures as he or she may consider necessary to deal with the vessel.

Prior to taking such action, however, 30 days must have elapsed from the date on which notice of his or her intention to dispose of the vessel was given to the public and any known interested parties, including any known holder of a mortgage or maritime lien.

What is perhaps the most surprising aspect of Bill C-64 are the proposed fines and penalties which may be imposed upon owners of abandoned vessels and wrecks. In some cases, offenders may, upon

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conviction, be liable for up to three years’ imprisonment and fines up to $1 million. In addition, owners may be liable to the Crown for the costs and expenses incurred by the relevant Minister arising from the measures taken in respect of the vessel or wreck, including any monitoring of the vessel. The owner may also be liable to any other person, in respect of such measures that they were directed to take by the minister or in respect of any loss or damage caused by those measures, or caused by the use of property in the vicinity of such vessel or wreck. Finally, the Act allows the Minister of Transport to suspend, cancel or refuse to issue or renew any documents including a certificate, licence or permit if the applicant or holder of the document has contravened a direction given under the Act or has not paid or reimbursed the government for a fine or penalty imposed on them.

There is no question that some of the maximum penalties are high and are clearly intended to promote compliance with the Act and to curb irresponsible vessel ownership. Consequently, and given the breadth and severity of these measures, identifying who the precise owner of the vessel or wreck is will be of particular importance. For the purposes of Part 2 of the Act, an “owner” means a registered owner, the holder of a pleasure craft licence or a person who has, either by law or contract, the rights of an owner of the vessel in respect of its possession and use. This is a very expansive definition and potentially puts multiple “owners” at risk to the extent that the legal and beneficial ownership or the legal and operational control of the vessel do not reside with the same person (intentionally or otherwise).

This increased potential for liability becomes an even greater concern to the extent that Transport Canada has, in the past few years, reduced some of the formalities of registration and to the extent that the Act relies upon the pleasure craft licensing system as a means of determining ownership, a purpose for which it was never intended.

Since vessel registration and now pleasure craft licensing may give rise to substantial liability, it is imperative that the process by which one obtains or relinquishes registered or “licensed” ownership should become more stringent. Although the federal government has promised to work with the provinces and territories to improve the registration and licensing system, whether the increased resources required to effect changes in administration and enforcement will be available is yet to be seen. As a result and in view of the increased exposure to potential liability, extreme caution should be taken by existing and prospective owners to ensure that all steps and documents regarding the transfer of legal and/or beneficial ownership and use of a vessel are completed in each case.

While the need for some form of legislation to address the issue of abandoned vessels across Canada is clear, who will ultimately bear the cost of removing these vessels is less obvious. The Transport Minister has suggested that the bill will “reduce the financial burden on taxpayers, who have, in the past, borne many of the costs to remove and dispose of problem vessels.” However, no fines or penalties will be imposed on the owner of a boat that has already been abandoned.

To this end, the government hopes to establish an inventory of existing derelicts with the goal to remove them all. Presumably the funds needed to create such an inventory will form part of the Ocean Protection Plan budget. Finally, although it is hoped that the severity of the enforcement provisions of the Act will reduce the number of abandoned vessels in the future, and thereby moderate the taxpayer burden, there is concern that the government will in fact be able to both collect and enforce the fines over the long run as it is seldom the financially secure who abandon a dilapidated vessel.

Catherine Hofmann is a lawyer with the maritime law firm Bernard LLP and can be reached at hofmann@bernardllp.ca.

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AAL Shipping......................................................................................................................... 23 Arctic Shipping Summit.......................................................................................................... 32 Bernard LLP........................................................................................................................... 38 Bracewell Marine Group......................................................................................................... 40 Canadian Lifeboat Institution................................................................................................... 54 Cargo Logistics Canada ....................................................................................................... IBC Chamber of Shipping.............................................................................................................. 11 CN Railway............................................................................................................................ BC DP World............................................................................................................................... 17 Envirosystems....................................................................................................................... 10 Firstwatch / Western Marine Company................................................................................... 43 Fraser Surrey Docks.................................................................................................................... 24 Gillespie-Munro Inc...................................................................................................................... 20 Greenwood Maritime Solutions.................................................................................................... 10 Harken Towing......................................................................................................................... 8 IMS Marine Surveyors & Analytic Labs................................................................................... 34 Int’l Sailors’ Society Canada................................................................................................... 50 ISS GMT - Global Marine Travel.............................................................................................. 30 Jastram Technologies Ltd....................................................................................................... 44 John Horton, Marine Artist..................................................................................................... 19 Lonnie Wishart Photography.................................................................................................. 14 Lubri-Lab BC......................................................................................................................... 29 Mari-Tech 2018...................................................................................................................... 53 Maritime Museum of BC......................................................................................................... 54 Mercy Ships........................................................................................................................... 48 Mission to Seafarers.............................................................................................................. 52 Nanaimo Port Authority.......................................................................................................... 22 Osborne Propellers................................................................................................................. 10 Port Alberni Port Authority...................................................................................................... 26 Port of Prince Rupert............................................................................................................. 21 Port of Vancouver.................................................................................................................... 3 Ray-Mont Logistics................................................................................................................ 15 Robert Allan Ltd....................................................................................................................... 7 Samson Tugboats.................................................................................................................. 19 Stewart World Port.................................................................................................................. 8 Sylte Shipyard.......................................................................................................................... 9 Tactical Marine Solutions Ltd.................................................................................................. 27 Tidal Coast Terminals............................................................................................................... 4 Toplift North America............................................................................................................. 13 Transas Global Conference..................................................................................................... 36 Vancouver International Maritime Centre.................................................................................IFC Vancouver Maritime Museum............................................................................................ 47/54 Wainwright Marine................................................................................................................. 10 Western Maritime Institute...................................................................................................... 42 Western Stevedoring.............................................................................................................. 28

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