The Effects of Coronavirus (COVID-19) on Shipping and Maritime Industries

Written by: Anna Adamou

The worldwide transmission of coronavirus (COVID-19) has led to stressful and difficult situations worldwide, ranging from ceasing usual daily routines to loss of lives and tremendous influences on the economy of all countries. One of the most seriously affected fields is the shipping and maritime industry. Some major issues that arose will be mentioned briefly and analysed explicitly in this article.

Unfortunately, this global outbreak has imposed pressing challenges for both the import and export trade, gradually not only from Chinese ports but to most of the ports around the world. Some countries decided to proceed with the closure of certain ports, to avoid possible further spread of the virus. Moreover, due to the urgent nature of the circumstances, several countries established a ban regarding specific vessels’ entry, especially those originating from China. Additionally, several disputes arose between charters and owners, concerning vessels’ hire period, laytime, and discussions of clauses. Another serious problem was that many companies experienced bankruptcy and thus a significant number of people were left unemployed (Firm, 2020).

To begin with, the responsible health authorities of each nation, to restrict the chance of virus transmission, have limited the export and the import trade, among the several countries. During this coronavirus outbreak, the transportation of perishable goods needed to comply with a specific set of rules and a particular process, which significantly reduced the cargo demand (Firm, 2020). Moreover, the lengthening of that transportation caused even more decrease in cargo orders. Specifically, the perishable goods could not be carried, because of the waiting time interval of 14 days or due to the time period specified by the responsible authorities of each country.

Another major challenge was the closure of ports during the quarantine time interval, to prevent the further spread of the virus amongst the workers. Also, some countries imposed a ban on vessels’ transit into particular countries of concern for the COVID-19. This ban required the aforementioned vessels to be on the water and not go to their destination ports. Therefore, several countries decided to prohibit or restrict the vessels’ entry, leading to enormous disorganization between many shipping companies worldwide (Firm, 2020). The hindering of the particular operations seriously blocked the finances of the affected shipping companies. As a result, the halting/delay of goods transportation during quarantine has led to a low capacity in ports, and the storage spaces were significantly crowded.

Furthermore, a significant issue was the disputes among the charters and owners, because of the loss of money and time. The origin of those disputes was related to the vessels’ hire period since the charter was entitled to a particular vessel, for a particular restricted time interval. However, the force majeure, the unforeseeable situation of the pandemic, and the quarantine prevented the contract completion as agreed initially (Firm, 2020). Consequently, the hire period agreement was exceeded in many cases worldwide.

Moreover, disputes regarding the settlement of laytime were also encountered. The granting of vessels by the owners to the charters, for a set period of time, entailed specific unchanged costs. Therefore, in case of exceeding those time periods, extra costs had to be imposed and paid. The coronavirus outbreak has led to serious problems regarding laytime settlement since the vessels were not allowed to enter particular ports and thus had to stay on territorial waters for a longer time (Firm, 2020). Subsequently, those vessels were considered as the party that had to pay extra costs, due to the arising disputes. However, because of force majeure, those additional charges were not being paid, leading to the losses of the vessels.

An important aspect to be taken into account was the discussion of clauses between parties. Most of the ship-owners were willing to include a clause regarding the infectious disease, in the provided guidelines and directives. However, this resulted in a dispute among the charters and the ship-owners, since both of them would like to include clauses that would be beneficial or safe for themselves (Firm, 2020). Consequently, the duration of agreements between parties could be extended considerably, or even ended up in complete disruption of their cooperation.

Unfortunately, several smaller companies involved in the maritime and shipping industry experienced bankruptcy, as a direct result of lower demand for cargos and incapability to manage the company’s financing issues, during the pandemic period (Firm, 2020).

Besides the aforementioned issues, the effects of COVID-19 specifically on board must be discussed as well. Thus, the following parameters must be taken into account (Bourgi, 2019):

• The safety of crew members onboard: employees must be extremely cautious to avoid transmission of virus onboard since the vessel might be in a geographic area where the medical assistance would be restricted or delayed.
• The crew embarkation and disembarkation matter: during those difficult and chaotic times, several crew members were unable to write repatriation letters (after their contract completion) either because of the strict period of isolation (quarantine) or due to other safety matters that arose. Additionally, some restrictive measures in traveling could prevent some people from joining a vessel. This could have serious consequences because long contracts would cause fatigue, “burnout syndrome”, or even depression to seafarers. As a result, the motivation and productivity of crew members would decrease considerably, causing significant negative effects on the safe operation of the vessel. On the other hand, the seafarers who wanted but were unable to embark on the vessel may face financial issues, since they stayed too long onshore without being employed. 

• The supplies provided in the vessels were decreased considerably. Therefore, the shipping companies encountered difficulties not only in gathering medical supplies but also electronic or mechanical vessels’ parts.
• The onboard inspections were seriously affected as well. At several ports, inspectors and other qualified personnel had restricted access to the vessels. Hence, the legally necessary inspections regarding safety, environment, training, etc., may not take place.
• The onshore support was also significantly reduced, since shipping companies’ officers, shore, and port authorities were functioning either distantly or just with emergency personnel. Subsequently, the vessels would be more likely to encounter delays or receive onshore support of lower quality.

As a result, various national or regional authorities have published guidelines, to cope with the challenging situation of COVID-19 outbreak. For instance, the Federal Transport Authority (FTA) in the United Arab Emirates (UAE), announced certain guidelines to establish several precautionary measures against the spread of the virus globally. Those guidelines have demonstrated the necessary methods and measures that need to be implemented by vessels. The purpose was to reduce the negative effects and consequences of the outbreak but also to ensure that the means of transport and users are safe. Some of those instructions include (Firm, 2020):

1. Decreasing employees involved in transportation procedures.
2. Adopting the policy of preventive distance.
3. Applying frequent disinfection in the means of transport according to the responsible authorities.
4. Having extra employees on call as a backup plan, to ensure usual operations in case the current employees get infected.
5. Establishing means of communication with the corresponding health organizations to report suspected cases of the virus so that they could be handled based on the necessary procedures of each state.
6. Providing education guidelines to the employees regarding the needed and fundamental precautionary measures of the working environment’s operations.
7. Ensuring the establishment of significant disinfection equipment and on-time delivery of the corresponding supplies.
8. Prioritizing to distribute duties on the vessels for employees who are not medically fit anymore or those who require emergency medical care.
9. Prohibiting the entry of vessels into dry docks or other workshops for maintenance or repair purposes, except if the crew complies with quarantine rules before entry. Those rules dictate that the repair can take place only after 14 days since the last assigned port or since the last time a crew member has interacted with people external to the ship.
10. Reporting on-time by captains to the corresponding health authorities regarding any suspicious symptoms of the infectious disease of the crew, so that no penalties will be imposed. Specifically, before a vessel gets permission to enter a port by the Vessel Traffic Service (VTS) of the State, the captain must inform the authorities regarding the health of the crew. In case the captain fails to report an infected person prior to entry, the Port State Control can impose a fine on the company.
11. Banning the entry of yachts from some countries that have a high number of coronavirus cases.

The aforementioned instructions were provided by the FTA, to be followed strictly. In cases of noncompliance, large fines will be imposed on the violators. Those guidelines are set in cooperation with the necessary authorities to ensure employees’ safety during transportation procedures. Additionally, adequate health screening and clearance from ports is necessary prior to any vessel entry into port. Unfortunately, after the COVID-19 outbreak, the activity of maritime and shipping industries has considerably decreased and the recovery route seems long, difficult, and challenging (Firm, 2020). On the other hand, many people are still hopeful for recovery, especially if some extra precautionary measures are established and if the current measures continue to be followed strictly. If this occurs, we can be optimistic regarding the re-establishment of shipping and maritime activities which are so crucial for the global economy.

References:

Firm, S. (2020). Impact Of COVID-19 On The Shipping And Maritime Industry – Transport – United Arab Emirates. Retrieved November 18, 2020, from https://www.mondaq.com/marine-shipping/958770/impact-of-covid-19-on-the-shipping-and-maritime-industry

Leptos-Bourgi, S. (2019). Shipping industry responding to COVID-19 – Keeping the lights on with a response strategy plan. Retrieved November 18, 2020, from https://www.pwc.com/gr/en/industries/shipping-covid-19.html