Maritime Trading Crisis Expected

As much as 88 percent of Korean vessels for overseas business have failed to meet mandatory compliance with the International Ship and Port Facility Security (ISPS) Code that comes into force in July 2004.

The International Maritime Organization (IMO) decided, after 9-11, to prohibit ships failing to get approval of the ISPS Code from operating starting from July. Therefore, concern is rapidly increasing that a major crisis in maritime business is set to take place and that will make a negative impact on Korea’s international trade.

According to a report released by the Ministry of Maritime Affairs & Fisheries and the Korean Register of Shipping (KR) yesterday, among 383 ships, which are subjected to ISPS Code approvals, only 45, or 12 percent, received certificates.

In addition, among those that have not met compliance standards, 266 ships that registered for an approval plan a month ago and are currently under examination, but the rest has not even registered.

Cho Nam-soo, manager for planning and coordination for the Korean Register of Shipping, said, “Around May or June, applications are expected to increase exponentially. Considering that it takes at least one or two months to obtain approvals, it is highly unlikely to get certificates in timely manner unless applying within the end of next month.”

Regarding this issue, major counterparts of Korea’s international trade, such as the United States, Canada, Australia, and Japan, are expressing their strong intentions to comply with the ISPS Code.

Choi Jae-sun, research fellow of the Korea Maritime Institute, said, “If company or ship owners are caught while operating unauthorized ships, they will face a 50,000 dollar fine and, taking into account extra costs involving lawsuits and delays in transportation, enormous expenditures are inevitable.”

However, it is believed that local ship companies have delayed their applications, citing losses incurred during the examination period and the additional costs of installing security systems.

Experts in maritime business warn that if current trends continue, local trading companies and clients are expected to suffer great losses because it is getting difficult to find authorized domestic maritime service providers, as well as foreign ship companies, due to prevailing in-advance selling stimulated by the sharp rise of maritime transportation costs.

Choi also said, “Even though Korea’s approval rate is higher than that of other member countries of IMO, taking into account that over 98 percent of international trading relies on maritime transportation, we should get approvals as soon as possible in order to prevent any crisis in the maritime business.”

Meanwhile, the British government, aiming to encourage early applications, pinpointed a deadline for the end of May and imposed disadvantages against those companies which have not obtained certificates yet, and made a list of those companies available to public.

To enhance maritime security and block terror attempts since 9-11, the IMO has established new standards under which all kinds of international passenger ships and cargo boats with 500t carriage are subjected to ISPS Codes. Without approvals, all maritime operations are bound to be prohibited starting from July 2004.

Ji-Wan Cha cha@donga.com