A lot has already been written and said about the amended Regulation 14 of Marpol Annex VI, which was amended by the IMO and becoming effective on 1st January 2020.
These writings mainly aim to provide Shipowners or Operators with information on the amended regulation, but little so far has been said when looking at it from a Charterers’ perspective.
What is the aim and effect of the amendments to Regulation 14? The amended Regulation 14will result in a new global Sulphur limit cap of 0.5% in HFO against the present 3,5% Sulphur cap limit. The most important amendment in the Regulation is that the ban to release air pollution from burning high Sulphur HFO is supplemented with the prohibition to also carry high Sulphur HFO on board of a vessel with effect from 1st March 2020, unless scrubbers are installed.
Assureds involved in time chartering usually hold title to the bunkers onboard during the Time Charter period. Under the Time Charter bunkers clause, Charterers normally warrant to be compliant with MARPOL and in many cases have given an indemnity to the owner of the vessel for fines, costs, liabilities and other expenses when breaching MARPOL compliance. Consequently, the amended Regulation 14 directly impacts Time Charterers and owners may seek indemnification from Charterers for fines or other costs levied on owners under the charter party.
Charterers need to prepare for the legal, practical and operational sides of the new MARPOL Regulation. For charter parties stretching beyond the 1st of January 2020 we recommend Charterers to enter into discussions with owners. All parties are affected and will need to find a common action plan to comply with the amended Regulation 14. Matters to be considered are for example timely cleaning of bunker tanks, pipes which can take up to two weeks’ time to perform. Questions like where tank cleaning will be done, who is to pay for the costs and so on should be discussed.
Increased costs for Charterers can be another challenge. Costs can increase as vessels may have to burn MGO instead of high Sulphur HFO to comply with the new Regulation. There may also be a depreciation of the value of Charterers high Sulphur bunkers before and after redelivery in 2020.
With effect from 1st March 2020 vessels are not allowed to have on board high Sulphur bunkers on board unless scrubbers are installed. It could be that in some cases bunkers will have to be taken of the ship and Charterers will have to prepare for debunkering operations and the involved costs. Some ports may treat bunkers which are not compliant as toxic waste for which an import license is required to debunker.
Vessels arrested by port authorities for non-compliance with MARPOL before the discharge of cargo could result in substantial demurrage claims with no practical indemnity.
Another potential issue could be an increase in off spec bunker claims. It remains to be seen how engines will sustain -on the long run- burning of the low sulfur fuels and how compliant to the required specifications the low Sulphur fuels will be. Technical expertise will be needed to assess whether the cause of the engine damage was due to the composition of the fuel or whether it was caused due to the engines not being able to run on the low sulfur fuels. Our recommendation is to be particularly careful when deciding where and with whom to purchase the bunkers and to contract a very clear and detailed clause on bunker sampling and testing to have all evidence available and a clear process when an issue arises.
Should you have any questions following this information, please do not hesitate to contact us. EF Marine can assist Assureds with general advice under the Defence (FD&D) cover concerning the above-mentioned issues and our claims handlers can assist with disputes under for example charter parties and bunker supply contracts arising as a result of the new regulations.
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