Shanghai International Shipping Institute

COMMERCIAL challenges and technical issues are expected to arise when the new global bunker fuel regulation comes into force capping sulphur content levels at 0.5 per cent.

Contracts and charterparties will likely be impacted unless the new fuel regulation is reflected in the clauses, especially spanning the changeover period of January 1, 2020 and beyond.

North P&I Club's Signals magazine highlighted its deputy director Tiejha Smyth as saying that challenges are expected on those vessels whose charterparties span the UN's International Maritime Organisation's (IMO) enforcement date.

She said that there is no single magic clause to deal with the issues that might arise, according to an article carried on the website of Sotra Anchor & Chain.

For example, all bunker clauses will most certainly need to be reviewed but other clauses might also need to be looked at, depending on the owner's chosen method of compliance.

Some of the key issues discussed included the carriage of non-compliant fuels come the cut-off date. It is likely that the carriage of non-compliant fuels will come into force on March 1, 2020 for vessels not fitted with exhaust gas cleaning systems (EGCS) or scrubbers.

Non-compliant fuels will have to be removed to avoid fines and possible vessel detentions. Ms Smyth warned that there may be significant logistical difficulties in removing the non-complaint fuels and it is likely that the resale value will be less than the original purchase price.

Issues might also revolve around who owns the non-compliant fuel and therefore, who has the right to remove it.

At present vessels burn either 0.1 per cent maximum low sulphur fuel in emission control areas (ECAs) or 3.5 per cent maximum outside. However, in 2020 there will be three levels: 0.1 per cent in ECAs, 0.5 per cent everywhere else, or plus 0.5 per cent by using a scrubber. This raises the question as to what low sulphur fuel will mean come January 1, 2020.

Ms Smyth advised moving away from descriptive terms such as low sulphur and high sulphur and instead specify the exact sulphur content of the fuel in the charterparty.

It is unlikely that existing charterparties will state who will be responsible for installing a scrubber system. If the charterer is likely to benefit from fuel cost savings then there might be a case for a commercial agreement as to who will pay for the system and installation.

It will be possible to meet the new sulphur regulations without installing a scrubber. Therefore, the absence of an exhaust gas cleaning system on board will not necessarily mean the vessel is in breach of MARPOL or impact on the vessel's documentation.

As for any fines, in the first instance, the owner will be responsible for paying any incurred penalties. However, they might be entitled to indemnification by the charterer depending on the charterparty's terms. It might be less clear who is responsible for lost time and costs should the vessel be detained by port state control.