IMO 2020: Are we ready?

Introduction

The maritime industry is bracing itself for the rapid approach of January 1, 2020 – the day on which the sulphur limit imposed under IMO 2020 comes into effect. But who is ready for IMO 2020; and who is not? 

There is a somewhat inconsistent approach to the implementation of IMO 2020 and varying degrees of readiness among port and flag states. If this is not adequately, and urgently addressed, this will result in confusion and delays when IMO 2020 comes into force. 

The effect of IMO 2020

IMO 2020 is a term used to describe the implementation of the Regulations to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL). MARPOL is one of the most important international marine environmental conventions and IMO 2020 aims to improve air quality and to protect the environment by reducing sulphur oxide produced by ships.

With effect from January 1, 2020, ships will be required to use:

1. fuel oils with a sulphur content of 0.5 percent m/m or lower;
2. an approved equivalent means of compliance such as exhaust gas cleaning systems (EGCS) commonly referred to as “scrubbers”; or
3. Non-fuel oil alternatives such as switching to liquefied natural gas (LNG) as fuel.

It is anticipated that, at least initially, most ships will utilize new blends of fuel oil which meet the 0.5 percent limit on sulphur in fuel oil or compliant marine gas or diesel oil.

It is important to note that IMO 2020 will not affect designated emission control areas (ECAS) where there is already a stricter sulphur limit of 0.1 percent m/m in place, such as in the Baltic Sea, the North Sea, the North American ECA and the US Caribbean ECA as well as the 0.1 percent sulphur cap already in place in European Union ports.

Who will enforce IMO 2020?

Following the 74th session of the IMO’s Marine Environment Protection Committee (MPEC), the IMO released the 2019 Guidelines for Consistent Implementation of the 0.5 percent Sulphur Limit under MARPOL Annex VI (the 2019 Guidelines) which aim at ensuring a consistent implementation of IMO 2020 across port and flag states. The 2019 Guidelines provide helpful guidance to state parties on interpreting their obligations under, and implementing, IMO 2020.

Enforcement, compliance and monitoring of the IMO 2020 sulphur limit is the responsibility of the state parties that have ratified MARPOL and acceded to Annex VI and are therefore obliged to give effect to, and enforce, its provisions. This includes both flag states (in whose registries ships are flagged) and port states who are obliged to enforce IMO 2020 within their territorial waters.

Port states must enforce the provisions of MARPOL by monitoring vessels within their territorial waters, reporting non-compliance to the relevant flag state, ensuring that there is adequate low sulphur compliant fuel available within their jurisdiction and providing shore-based facilities for the receipt and removal of scrubber waste.

How will ships be monitored for compliance?

Under Annex VI and the 2019 Guidelines, port states should take appropriate measures to ensure compliance. Specifically, port states should conduct initial inspections based on documents including Bunker Delivery Notes (BDN), as well as the use of remote sensing and portable devices. If there are “clear grounds” to conduct a more detailed inspection, the port state may conduct sample analyses and other detailed inspections to verify compliance with the Regulations. What exactly constitutes “clear grounds” is not defined in Annex VI or the 2019 Guidelines.

Regarding the use of remote sensing and portable devices, the 2019 Guidelines indicate that the former can trigger inspections and the latter may be used during initial inspections but the results of both should be considered indicative only. They should not be regarded as evidence of non-compliance although they may be considered clear grounds for expanding the inspection to check for non-compliance.

The 2019 Guidelines expressly provide that all possible efforts should be made to avoid a ship being unduly delayed or detained as a result of the steps taken to implement IMO 2020. In particular, the analysis of fuel oil samples should not unduly delay the operation, movement or departure of a ship. However, delays may be inevitable in ports where there are limited or less efficient mechanisms for testing of fuel oil and particularly where ships are only in port for several hours in order to stem bunkers rather than working cargo.

Non-compliance by ships

When a port state identifies clear grounds of suspected non-compliance of a ship based on its initial inspections, then the port state may require samples of fuel oils to be analyzed. Where a sample is taken from a ship, a receipt should be provided to the ship and the ship should be advised of the outcome of such analysis.

If non-compliance with IMO 2020 is established by a port state, the port state may prevent the ship from sailing until the ship takes suitable measures to achieve compliance, which may include debunkering all non-compliant fuel oil. However, ship’s tanks are designed to receive fuel oil and not to pump it out, which renders debunkering very difficult and time-consuming.

In addition, the port state should report any non-compliance to the flag state. The port state should also advise the state in whose jurisdiction the bunker delivery note was issued in respect of non-compliant fuel oil.

When determining what sanction to impose on a non-compliant ship, a state party must take into account all relevant circumstances and the evidence presented, which may include not taking any steps against the non-compliant vessel. Flag and port state control authorities may take into account the ship’s implementation plan when determining compliance with the 0.5 percent sulphur limit requirement.

What if there is no compliant fuel oil available at a port?

Concerns have been raised that the shift to low sulphur fuel may result in a shortage of compliant fuel on or after January 1, 2020. For ships that have not been fitted with scrubbers, or are not equipped to use alternative fuel such as LNG, this may result in sudden non-compliance when calling at port states after the deadline.

The Regulations and the 2019 Guidelines require that where a ship, despite its best efforts, is unable to obtain compliant fuel, the Master or shipowner must present a record and evidence of actions taken to obtain compliant fuel oil and show that, despite best efforts to obtain compliant fuel oil, no such fuel oil was available. Best efforts to procure compliant fuel oil include, but are not limited to, investigating alternative sources of fuel oil prior to commencing the voyage. If, despite best efforts, it was not possible to procure compliant fuel oil, the Master or shipowner must immediately notify the port and flag state. This notification by the ship is commonly referred to as a Fuel Oil Non-Availability Report (FONAR).

The 2019 Guidelines have a standard reporting format for a FONAR but state parties may develop more detailed guidance for the consistent use and acceptance of these reports, including specifying what evidence should accompany a FONAR. In order to minimise disruption and to avoid delay, the Master or shipowner should submit a FONAR as soon as it is determined, or becomes aware, that it will not be able to procure and use compliant fuel oil. The submission of a FONAR does not render a ship compliant with the Regulations but rather is a factor that shall be taken into account by a port or flag state when determining what steps to take against a ship for non-compliance.

The IMO and the International Chamber of Shipping have confirmed that whilst safety or operational concerns regarding the quality of low sulphur fuels is a sufficient reason for shipowners to issue a FONAR, this does not give ships or shipowners blanket permission to use or carry non-compliant fuel after the deadline. The increased price of low sulphur fuel oil is also not a valid basis for non-compliance. Master and shipowners should retain bunker samples for use in the event that they may use sulphur quality as a basis for alleging the non-availability of compliant fuel oil.

State parties are obliged to take all reasonable steps to promote the availability of compliant fuel oil, to investigate reports of non-availability and to report non-availability of compliant fuel oils in its ports and terminals to the IMO. This process is important to ensure a consistent supply of compliant fuel as well as preventing incentives for ships to use ports where it is known that compliant fuel is not available on an ongoing basis. Critical to this process will be the sharing of information between states parties on reported compliant fuel oil supply issues.

The use of scrubbers

An alternative to the use of low sulphur fuel oil is the fitting of scrubbers to a ship. Scrubbers remove particulate matter, sulphur oxides and nitrogen oxides from the exhaust gases produced by a ship’s engines. Open-loop scrubbers use seawater to remove chemicals and particulates and the waste is then treated before being discharged into the sea. In closed-loop systems, the water is recycled back into the scrubber. Hybrid scrubbers are a combination of open and closed-loop systems.

The Regulations do not prescribe the type of scrubbers that may be used but some jurisdictions have rejected the use of scrubbers or specifically the use of open-loop scrubbers within their territorial waters. Where a ship is fitted with open-loop scrubbers and enters a port in a state where these are not permitted, the ship will be obliged to use compliant fuel oil. Where the ship is fitted with a hybrid loop system, the ship will need to switch over to a closed-loop system.

Jurisdictional approaches to IMO 2020

A number of countries have not ratified MARPOL Annex VI including Argentina, Bahrain, Colombia, Ecuador, Egypt, Hungary, Israel, Mexico, Oman, Pakistan, Qatar, Thailand and Venezuela.

Other countries that have ratified Annex VI have not yet adopted appropriate legislation to give effect to their obligations. South Africa has yet to pass legislation indicating how it intends to enforce IMO 2020. Whilst the South African Maritime Safety Authority previously issued a marine notice authorising the use of all types of scrubbers within South African territorial waters, it subsequently indicated that it would make the decision on whether to allow any types of scrubbers during September 2019. However, at the time of publication no such decision has been taken.

The Maritime and Port Authority of Singapore (MPA) has indicated that Singaporean and foreign-registered ships calling at Singapore will be selected for inspection based on a risk matrix that takes into account the compliance option of the ship and whether a FONAR has been submitted. Inspectors will be equipped with portable sulphur kits for onsite testing of in-use fuel and the MPA may send fuel oil samples to a laboratory for detailed fuel oil analysis. Singapore has banned the use of open-loop scrubbers and ships fitted with hybrid scrubbers will be required to switch to closed-loop mode whilst in Singaporean waters.

As a signatory to MARPOL and Annex VI, Indonesia originally undertook to enforce the Regulations in respect of all ships operating within Indonesian waters. It subsequently backtracked and indicated it would not enforce IMO 2020 sulphur limits in respect of domestic shipping and would only do so in respect of international shipping. As of August 2019, the Indonesian Ministry of Transportation has said that it will enforce IMO 2020 limits in respect of both Indonesian and foreign-flagged ships.

With effect from January 1, 2018, China has already implemented a 0.5 percent sulphur cap within its designated emission control areas, which have subsequently been expanded. Ships may use scrubbers or other alternative means to meet the emission control requirements. From January 1, 2020, oceangoing ships will be required to use low sulphur content fuel not exceeding 0.1 percent m/m when entering China’s inland water ECA and stricter sulphur limits will also be imposed on ships entering other Chinese ECAS over the next few years.

The United States has already implemented a 0.1 percent sulphur cap within its ECA and accordingly ships calling at US ports ought already to be familiar and accustomed to a significantly stricter sulphur limit than that imposed by IMO 2020.

Information regarding the implementation of IMO 2020 in other member states is not always readily available and will need to be clarified and publicised well before January 1, 2020 to ensure that ships calling at those ports can comply with the particular requirements imposed by each jurisdiction.

What still needs to be done?

State parties that have not yet adopted legislation to give effect to their IMO 2020 obligations need to do so as a matter of urgency. Flag and port states must ensure adequate publication of their specific requirements so that ships can ensure timely compliance. MARPOL Annex VI does not specify what penalties are to be imposed for non-compliance, but MARPOL does require that penalties must be sufficiently severe to discourage contravention. Accordingly, member states must determine what civil and possibly criminal penalties will be imposed on non-compliant ships.

Ships that have been fitted with open-loop scrubbers need to be aware of the risk that they may not be permitted to operate these within the territorial waters of certain port states. They will need to ensure that they will be able to procure compliant bunkers in those jurisdictions.

Crew members need to be properly trained and made aware of the importance of accurately recording information in the ship’s logs such as the date, time, and position of the ship when a fuel oil changeover occurs as well as the volume of low sulphur fuel oil in each tank.

Port states need to ensure that they have adequate compliant fuel oil or alternative fuels available from January 1, 2020. They need to ensure that they have adequate inspection and testing protocols in place and port facilities to receive scrubber waste residue.

Conclusion

Much work remains to be done to ensure a consistent approach to compliance with IMO 2020. Given that January 1, 2020 is only a few months away, all relevant parties, including port and flag states, bunker suppliers, shipowners, Masters, charterers and ship builders, need to prepare themselves urgently.