Our special Nieuw Amsterdam blogger, Rose Abello, sat down in Italy with Holland America Line’s Vice President and General Counsel Kelly Clark to get an idea of the process involved in purchasing such a big item.
“It all begins with a contract,” said Clark. “And that contract, which is finalized several years before delivery, specifies the terms, conditions, guarantees, warrantees, payments and more.”
Over the 18 months to two years it takes to build the ship, Holland America Line, Carnival Corporate Shipbuilding, Fincantieri, the flag state and several other agencies work very closely together to ensure that the vessel is built according to specifications as well as any legal requirements that must be met.
Several months before taking delivery of the ship, a team of inspectors arrives on site to test, inspect and certify systems. An incredible number of certifications are required prior to delivery, most of these certificates are mandated before the ship can sail, and others are necessary before arriving at certain countries (like the United States).
For example, the ship cannot sail with guests without a “passenger ship safety certificate” on board. This ensures governing authorities that the vessel has all of the systems in place for the safe operation of a vessel carrying passengers (as compared to, say, a cargo ship). Other types of certificates allow the vessel to bunker or take on fuel, manage wastewater, operate radio equipment and even determine where the ship can sail — which in the case of the Nieuw Amsterdam is all over the world!
During sea trials in May, Holland America Line had the opportunity, together with Fincantieri, to take the vessel out to sea to conduct even more tests, mainly focused on the technical plant of the ship.
“During sea trials, the ship is not only tested in what would be ordinary operations, but also tested for emergency operations and a wide number of scenarios that are highly unlikely to ever occur,” said Clark.
A few weeks prior to delivery, even more inspectors arrive and test everything from every light socket and door knob to the paint job and finish on art installations. And even before delivery Holland America Line’s officers and crew move on board to ensure that all of the comforts are in place to receive guests. Once all of the certifications are in place and the inspectors have approved their areas of expertise and Holland America Line is satisfied with the vessel, it prepares to take ownership of the vessel and release payment.
So, just how do you pay hundreds of millions of dollars? Apparently, cash is not accepted!
Holland America Line issues a letter of undertaking to the bank letting it know that the line is going to be willing to pay a certain amount of money on a specific day. The bank in turn prepares a document called an irrevocable letter of payment. This letter, once executed, is a guarantee that the funds are in place and that the payment will be made. The bank will literally send a representative with this document to the signing. Once the transfer ownership is signed, the bank will receive a notice to proceed and the irrevocable letter of payment is executed. Then the money begins to transfer accounts.
During this day, in addition to the team of people at the shipyard, teams are in place in Seattle, Rotterdam, London and elsewhere to ensure that all of the proper documents are in place to register the ship in the Netherlands, Holland America Line’s flag state. More symbolically, when the ownership is transferred, the flags of the ship are changed. Fincantieri’s flag is lowered as Holland America Line’s flag is raised and the Italian flag of the vessel is transferred to the Dutch flag.
Does Holland America Line receive the ‘keys’ to the ship? we asked Clark.
“We receive piles and piles of documents and certificates, and I am sure literally thousands of keys for the various spaces and cabinets of the ship,” said Clark, “but not a ‘key’ that you just put in somewhere and start up the ship.”