THE Alliance is establishing a USD 50 million insolvency contingency fund to ensure smooth cargo flow in the event of another ocean carrier bankruptcy or catastrophic failure.
The parties to THE Alliance agreement submitted an amendment for the creation of the fund with the US Federal Maritime Commission (FMC) on September 14 and the Commission granted the request of petitioning parties for an expedited review. The amendment is effective immediately, the FMC said.
Each of the members of the alliance, including Hapag-Lloyd AG and Hapag-Lloyd USA LLC (acting as one party), Kawasaki Kisen Kaisha, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming Marine Transport, would initially contribute USD 1 million into the contingency trust fund and a further USD 9 million in additional funds or through a letter of credit.
The agreement also establishes procedures for the orderly removal and/or replacement of vessels in case of a bankruptcy and the rights of the remaining parties to negotiate directly with agents and subcontractors of the affected party. The contingency fund would be administered by a trustee, the FMC informed.
"Last year's collapse of Hanjin Shipping was a wake-up call for the entire ocean transportation and logistics chain. Over USD 14 billion worth of cargo was stranded at sea on 100 ships scattered around the globe. It is so important that another Hanjin debacle does not happen again," William P. Doyle, FMC Commissioner, said.
"I applaud the innovative actions taken by carriers of THE Alliance. It is a responsible commercial reaction to the events of last year and it serves to assure the shipping public that its cargo will be delivered in a reliable and timely manner," Doyle added.
Specialist marine and energy insurer Standard Club P&I has issued guidance on issues encountered due to the disruption to cargo vessels caused by Hurricane Irma.
The guidance, given from an English law perspective, includes deviations from route, changing the place of discharge, voyage charters - named load and discharge ports, frustration of contracts, force majeure, time charters – unsafe ports and berths, time charters – payment of hire, and cargo damage.
Where cargo-carrying vessels have deviated from their planned route to avoid and/or shelter from hurricane conditions, this will give rise to the late delivery of cargo and to potential losses to cargo receivers.
Cargo receivers who have incurred such losses, however, will not be entitled to recover where their cargo has been carried under bills of lading.
If it is not possible for cargo to be discharged at the place of discharge named in a bill of lading, the terms of the bill of lading may entitle the carrier to discharge the cargo elsewhere. If the terms of the bill of lading do not entitle the carrier to discharge elsewhere, it may nonetheless be possible for the carrier to agree with the holder of the bill of lading that the cargo is to be discharged at a substitute place of discharge.
Additionally, where the terms of a voyage charter name a port and/or berth at which cargo is to be loaded, or at which cargo is to be discharged, and it is not possible for cargo to be loaded or discharged at that place, further terms in the charter may give a right to the owners of the vessel to load or discharge cargo at a substitute place.
If it is not possible to load or discharge cargo at an agreed place of loading or discharge specified in a contract of carriage and there is no term in the contract permitting a substitute place to be used, the contract may be viewed as frustrated.
"If a contract is frustrated, the parties will no longer be obliged to perform it, and neither party will be able to recover from the other for any losses arising from non-performance," the Standard Club said.
Regarding force majeure, there is no general concept of force majeure under English law, or general right to declare force majeure as a way of avoiding or limiting contractual obligations. However, where terms in a charterparty or bill of lading specify what is to be considered force majeure, and set out what rights and obligations the parties are to have if force majeure occurs, those terms "will be effective".
Furthermore, time charterers of vessels are under an implied obligation to order the vessel only to ports and berths that are safe, and not to ports and berths that are unsafe. If a vessel is damaged at a port or berth due to an abnormal occurrence, however, this will not place the time charterer in breach of its implied obligation.
Where the time charterer of a vessel has ordered the vessel to a port or berth that is unsafe, there is an obligation upon the time charterer to name a substitute port that is safe.
Under time charters, hire continues to be payable for a vessel unless circumstances have arisen which bring the vessel 'off hire' as defined in the charterparty terms.
"Whether or not delays caused to vessels by Hurricane Irma will have brought time chartered vessels off hire will therefore depend upon the charter terms agreed for each vessel, which may need to be scrutinised closely by the owners and charterers concerned," according to the Club.
Finally, if cargo-carrying vessels have been unable to avoid the effects of Hurricane Irma, with the result that cargo on board has become damaged, the carriers of the cargo may have a defence to claims for that cargo damage under Article IV Rule 2 of the Hague and Hague Visby Rules which states that "neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from…Perils, dangers, and accidents of the sea and other navigable waters."
The above defence will only be available, however, to carriers who have exercised due diligence to make their vessel seaworthy before and at the beginning of the voyage.
South Korean shipbuilder Hyundai Heavy Industries (HHI) has agreed with its workers to implement a paid leave rotation scheme as a way of coping with work shortage.
The five-week program rotation would help resolve the issue of the idle workforce, HHI said, enabling the employees to keep their jobs.
The leave system, starting on September 11, was being proposed to unions last month, and it involves around 7 % of the company’s 8,930 workers.
The union seems to have hammered out a deal that involves workers being paid 70% of their average salary, instead of being sent to unpaid break, as was initially proposed.
Separately, Hyundai Heavy Samho Industries said that 2,680 of its production staff will be taking paid leave for five weeks from October 16 to June 24, 2019.
The move is being pursued as HHI is left with a lower order backlog, which currently stands at 85 ships, against last year’s 110 ships, with only ten ships being constructed at the yard at the moment.
Should the ordering activity continue to dwindle the shipbuilder might be faced to close more of its yards.
To remind, in May this year, HHI decided to temporarily close its Gunsan dockyard starting as of July 1, 2017, due to a lack of shipbuilding orders. During the period, maintenance and repair works are scheduled to take place at the site.
The latest workforce-related measure is said to be driven by HHI’s cost cutting efforts aimed at keeping the shipbuilder financially stable.
HHI reported a 49.7 percent drop in its net income during the second quarter of 2017 totaling in KRW 69.2 billion (USD 61.6 million).
The International Convention for the Control and Management of Ships’ Ballast Water and Sediments (BWM Convention) entered into force on September 8, 2017.
Adopted by the International Maritime Organization (IMO) in 2004, the measure for environmental protection that aims to stop the spread of potentially invasive aquatic species in ships’ ballast water requires vessels to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of aquatic organisms and pathogens within ballast water and sediments.
“This is a landmark step towards halting the spread of invasive aquatic species, which can cause havoc for local ecosystems, affect biodiversity and lead to substantial economic loss,” Kitack Lim, IMO Secretary-General, commented.
“The requirements which enter into force today (September 8) mean that we are now addressing what has been recognized as one of the greatest threats to the ecological and the economic well-being of the planet. Invasive species are causing enormous damage to biodiversity and the valuable natural riches of the earth upon which we depend. Invasive species also cause direct and indirect health effects and the damage to the environment is often irreversible,” Lim said.
“The entry into force of the Ballast Water Management Convention will not only minimize the risk of invasions by alien species via ballast water, it will also provide a global level playing field for international shipping, providing clear and robust standards for the management of ballast water on ships,” Lim concluded.
Under the rules of the convention, all ships engaged in international trade are required to manage their ballast water so as to avoid the introduction of alien species into coastal areas, including exchanging their ballast water or treating it using an approved ballast water management system. Initially, there will be two different standards, corresponding to these two options.
The D-1 standard requires ships to exchange their ballast water in open seas, away from coastal waters. Ideally, this means at least 200 nautical miles from land and in water at least 200 meters deep. By doing this, fewer organisms will survive and so ships will be less likely to introduce potentially harmful species when they release the ballast water.
D-2 is a performance standard which specifies the maximum amount of viable organisms allowed to be discharged, including specified indicator microbes harmful to human health.
New ships must meet the D-2 standard from September 8 while existing ships must initially meet the D-1 standard. An implementation timetable for the D-2 standard has been agreed, based on the date of the ship’s International Oil Pollution Prevention Certificate (IOPPC) renewal survey, which must be undertaken at least every five years.
Eventually, all ships will have to conform to the D-2 standard. For most ships, this involves installing special equipment.
Shipboard ballast water management systems must be approved by national authorities, according to a process developed by IMO. Systems have to be tested in a land-based facility and on board ships to prove that they meet the performance standard set out in the treaty. These could, for example, include systems which make use of filters and ultraviolet light or electrochlorination.
Ballast water management systems which make use of active substances must undergo a strict approval procedure and be verified by IMO.
To date, more than 60 ballast water treatment systems have been given type approval.
Reflecting on the BWM Convention’s entry into force, Sharyn Forsyth, General Manager of Maritime Standards for Maritime NZ, said that the main purpose of the convention is to manage and control the risk posed by biological materials leaving and coming into New Zealand waters. As explained, around 20 or so NZ-flagged ships that travel to overseas ports will be affected by the change in New Zealand’s maritime laws.
Foreign flagged vessels travelling to this country, such as those carrying cargo and cruise passengers, are expected to already comply with some of the initial standards in the convention. Forsyth said that traditionally ships on international voyages took on-board ballast in the coastal waters of one country, after unloading cargo, and then discharged this ballast water at the next port of call when loading more cargo.
“This is why the requirements relate to ships travelling internationally. Ballast water discharge typically contains a variety of biological materials, which often include non-native, nuisance, exotic species that can cause ecological and economic damage,” Forsyth added.
Unmanned vessels are no longer a futuristic concept, but a reality. In Norway, several projects involving the testing of unmanned vessels are currently ongoing. It is only a question of time before we see unmanned vessels operating in international waters.
Maritime law in the wake of the unmanned vessel
In this article we will first look at ongoing projects in Norway and the challenges faced from a national law perspective. Secondly, we will provide an overview of the legal implications for international maritime law, in particular the regulatory framework established through the IMO conventions. Finally we will briefly look at how the unmanned vessel will affect private maritime law, including transportation of goods at sea and insurance.
Maritime law is in many ways a conservative area of law, were traditions are not easily discarded. Even so, maritime law has over the years proved itself flexible and able to adapt to face technological developments.
The master and the crew have traditionally been considered instrumental in ensuring the safe operation of the vessel at sea, and many provisions in the maritime law regulatory framework seeks so achieve this by imposing duties and responsibility on the master and the crew. The introduction of unmanned vessels represents a significant deviation in the operation of the vessel, and will therefore inevitably require careful evaluation of the existing legal framework to make sure that appropriate regulations are in place to ensure safe operation at sea for all vessels, whether manned or unmanned.
An unmanned vessel is in simple terms a vessel which is not operated by an on board master and crew, and covers all vessels from those remotely operated to the fully autonomous. The different categories of unmanned vessels imply different challenges from a regulatory perspective, in particular with respect to the line of control over the vessel. The legal framework will therefore have to be flexible so as to ensure that the objectives of the various regulations are protected, regardless of how the vessel is controlled and operated.
The introduction of the unmanned vessel and the general digitalization of shipping, also begs the question of whether some of the institutions in maritime law, such as the role of the flag state, are appropriate for meeting the new risks and challenges.
The global refining and shipping industries will be hit by the new low-sulfur requirements for marine bunker fuels, set to enter into force five years earlier than many expected.
According to a new analysis from IHS Markit, the two industries are set to experience rapid change and significant cost and operational impacts, as they must comply with the new regulations by January 2020, as confirmed recently by the International Maritime Organization (IMO).
"While the IMO is taking positive action to address the environmental impacts of air pollution from ships, the rapid change creates significant disruption for both the refining and shipping industries," Kurt Barrow, vice president of downstream research at IHS Markit, said.
"The two industries are vastly unprepared," Sandeep Sayal, senior director of refining and marketing research at IHS Markit, said.
"Neither has made the necessary investments for compliance, which means that the 2020 implementation date will result in a scramble. Both industries are taking a wait-and-see approach until firm signals are in place by the IMO for compliance with the regulation," Sayal added.
Shippers will have several options to meet the new IMO regulations, IHS Markit said. Low-sulfur bunker fuels, primarily for smaller vessels, and liquefied natural gas (LNG), primarily for new builds, will be part of the solution.
However, IHS Markit researchers expect that on-board ship scrubbers, devices that clear harmful pollutants from exhaust gas, will be the primary compliance path for ships, which could continue to burn higher-sulfur fuels.
As ship owners respond to the large-scrubber investment incentives, high-sulfur bunker fuel demand will rebound, although not to prior 2020 levels. Due to increasing demand and addition of debottlenecking capacity for residue conversion, IHS Markit estimates price spreads will moderate within a few years, "but the timing of price recovery will be dependent upon a number of variables."
Tanker Owners need to understand the risks and raise safety standards. As ship recycling standards have increased across the sub continent, tanker owners need to adapt to the stricter requirements for cleaning vessels for hot works prior recycling.
As we have seen earlier this year, tragic accidents aboard vessels that were not cleaned thoroughly led to a tragic loss of life and closure of the Pakistani market for over 8 months now.
This should serve as a serious wake up call to tanker owners that their vessels must be totally cleaned of all
cargo residues, slops and sludges in all cargo and slop tanks in order to mitigate risks of an accident at recycling yards.
Regrettably, we have noticed a few ship-owners are shying away from such an important and fundamental responsibility. This is a dangerous precedent that must stop immediately. All in the shipping community need to sleep sound at night knowing that they have acted responsibly. Every effort should be made to prevent a repeat of the awful accidents witnessed in Pakistan that led to loss of life, enforced closure of recycling markets, created negative publicity, reduced (financially beneficial) resale options, which ultimately resulted in lowering prices for all wet units across the board.
After working closely with recycling yards, ship managers, gas freeing professionals and ship owners, GMS has developed the industry’s first guidelines for cleaning tankers for hot works prior delivery to recycling yards. These guidelines go above and beyond the routine requirements of gas freeing.
We request owners to go the extra mile so that lives can be saved and safety standards further enhanced across a rapidly developing ship recycling sector. GMS has adopted a policy that ALL tankers purchased by our principals on “as is where is” basis will be cleaned according to these guidelines.
Tanker owners are faced with some very important decisions moving forward, as they will be faced with the dilemma of whether it makes financial sense to retrofit their older vessels or just sell them for demolition. This in turn will likely alter the balance between demand and supply, creating a new dynamic in terms of freight rates. In a recent report, shipbroker Gibson said that “the impact of the Ballast Water Management (BWM) Convention on future levels of demolition has been a hot topic for quite some time. The convention, ratified in September 2016, required all existing tonnage to install an approved BWT system at the 1st renewal of the International Oil Pollution Prevention (IOPP) certificate from 8.09.2017, which has traditionally been done alongside special survey every 5 years. As retrofitting a tanker with an approved system is expensive (around $2 mln for a VLCC), many analysts believed at the time that once in force the BWM requirement would accelerate demolition activity. However, in our view, the impact was always likely to be delayed, as some owners took advantage of a loophole to decouple the renewal of the IOPP certificate from the special survey; in other words, renewing the IOPP certificate prior to 8.09.2017 in order to trade up to 7.08.2022 without a BWM system”.
“However, following the pressure from shipowners, last week the Marine Environment Protection Committee (MEPC) made amendments to the BWM Convention, in general requiring existing tonnage (to which convention applies) to install an approved BWM system at the 1st renewal of the IOPP certificate following 8.09.2019, two years later than first intended. In greater detail, below is text of what the MEPC has agreed to”, said the shipbroker.
According to Gibson, “by the first renewal survey: this applies when that the first renewal survey of the ship takes place on or after 8 September 2019 or a renewal survey has been completed on or after 8 September 2014 but prior to 8 September 2017. • By the second renewal survey: this applies if the first renewal survey after 8 September 2017 takes place before 8 September 2019. In this case, compliance must be by the second renewal survey (provided that the previous renewal survey has not been completed in the period between 8 September 2014 and 8 September 2017)”.
The London-based shipbroker added that “undoubtedly, the above wording is complex and far from easy to digest, perhaps due to the intention of the MEPC to prevent further decoupling. In very simple terms (from the perspective of the global tanker fleet above 25,000 dwt), it means that only vessels that have not renewed their IOPP certificate between 8.09.2014 and 7.09.2017 (either alongside the special survey or separately by decoupling) will be allowed to renew the IOPP certificate between 8.09.2017 and 7.09.2019, without the need to install an approved BWM system. For these units, the BWM will have to be installed at the 2 nd renewal of IOPP certificate, at latest up to 7.09.2024. In contrast, tankers that have renewed their IOPP certificate between 8.09.2014 and 7.09.2017 will be required to install an approved BWM system at their 1 st renewal, at latest up to 7.09.22 (the original deadline)”.
Gibson added that “due to the above distinction, largely only tankers built between Sep 2002 to Sep 2004 (and where the IOPP certificate has not been renewed between 8.09.2014 and 7.09.2017) will be in position to buy extra time before heading for scrap. For tonnage built within three years up to Sep 2002 and within three years after Sep 2004, the deadline for the BWM installation remains unchanged, up to 7.09.2022. Also, tankers built in 2000 or earlier are likely to face demolition over the next five years anyway due to their age and bunker pressures. Finally, tankers built in 2007 and later are too young to be considered for demolition, be it 2022 or 2024. On this basis, the latest MEPC ruling does reduce the potential for tanker demolition; however, it appears that only a portion of the fleet will be in position to postpone the decision whether to scrap or not beyond Sep 2022”, the shipbroker concluded.
Honduras has acceded to the Ballast Water Management Convention (BWMC), becoming the 61st country to do so.
The signatories now represent 68.46 % of the world’s merchant fleet tonnage.
Ivan Romero Martinez, Ambassador of Honduras to the United Kingdom and Permanent Representative of Honduras to the IMO, met IMO Secretary-General Kitack Lim at IMO Headquarters in London on July 10 to deposit the instrument of accession.
Scheduled to enter into force on September 8, 2017, the convention is to be implemented until 2019. Namely, the IMO Marine Environment Protection Committee (MEPC) approved a revised implementation scheme for ships relating to the BWMC, allowing for two-year delay of compliance for existing ships.
Under the treaty, ships are required to manage their ballast water containing thousands of aquatic or marine microbes, plants and organisms which are then carried across the globe.
The attempt to reverse the recently imposed 15% value-added tax (VAT) on ships being sent to Indian ship-recycling markets will likely be successful, according to GMS, a cash buyer of ships for recycling.
Namely, the announcement was made after the Bangladesh Shipbreakers Association (BSBA) voiced their concerns to the highest authorities in government in an attempt to reverse VAT on incoming ships.
Additionally, the finance ministry informed that VAT will now be postponed for at least another two years, which should see prices remain at par with those seen in the first quarter of the year.
In early June, ship-recycling sectors in Pakistan and Bangladesh witnessed a decrease in LDT price after the respective countries released their 2017 budget announcements.
The Pakistani budget first brought falls of about USD 10/LDT, “as rumors of an even worse fate for the Bangladeshi market surfaced and were eventually confirmed” by the announcement of their budget.
The Pakistan Shipbreakers Association (PSBA) is due to meet in the coming week in order to address some of the concerns arising from their recent budgetary changes affecting their industry, GMS informed.