LEBUHN & PUCHTA SPOTLIGHT: Planning Compliance with the 2020 Global Sulphur Cap

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Technical planning for the shift to compliant fuel by the end of 2019 and checking that contracts are fit for purpose must be on the shipping community’s “to do” list to ensure a smooth transition into the 2020 global sulphur limit era.

The new rules which underpin the 2020 sulphur emissions cap are part of a dynamic and developing global movement towards cleaner shipping, which means that, beyond compliance issues, developing the business case for green shipping will be a way of staying ahead of the game.

Ted Maguin, Partner

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The IMO’s global cap on sulphur content in fuel oil will enter into effect on 1 January 2020.

From that date on, in practice all ships which are subject to MARPOL Annex VI will be required to use fuel with a maximum sulphur content of 0.50% m/m (mass by mass), in accordance with regulation 14 of MARPOL Annex VI, unless they operate an approved equivalent method of reducing sulphur emissions.

In the so-called Emission Control Areas (ECAs) designated by regulation 13 of MARPOL Annex VI, the current lower sulphur limit of 0.1% will remain applicable.

The Maritime Authorities of the Paris and Tokyo Memoranda of Understanding are in the process of issuing Letters of Warning on the occasion of their inspections in order to raise awareness on board vessels of the importance of complying with the new global cap as from 1 January 2020 (https://www.parismou.org/early-warning-global-2020-sulphur-cap-compliance).

To assist owners and charterers in planning for the change, BIMCO has released two new clauses for incorporation in time charters:

  • The 2020 Fuel Transition Clause for Time Charter Parties
  • The 2020 Marine Fuel Content Clause for Time Charter Parties

Parties entering into a charter which could – either on account of its initial term or by way of an extension of its period – run into or start in 2020 must consider whether these or alternative clauses are appropriate for their contract.

It should be borne in mind that there is not only a consumption ban coming into effect on 1 January 2020, but also a carriage ban coming into effect most probably on 1 March 2020. As from that date, the presence on board of non-compliant fuel for combustion will be prohibited, though not for vessels operating an approved scrubber system.

In other words, after the consumption ban date (assuming vessels will operate non-compliant fuel up until that date), any remaining non-compliant fuel will need to be discharged from non-scrubber-equipped vessels before 1 March 2020.

This raises issues surrounding the time and cost of tank emptying and cleaning and the use of tanks once they have been emptied and cleaned.

Parties should be aware that Bimco’s (now replaced) Marine Fuel Content Clause for Time Charter Parties 2005 is tailored to the specific requirements applicable in ECAs, but is ill-suited to cater for the 2020 global sulphur limit. It therefore does not offer the level of clarity parties would wish to have when dealing with the transition to compliant fuel.

If you have questions about how the new sulphur emissions regime may affect your business, we at LEBUHN & PUCHTA will be happy to help you navigate the transition.