The “Tai Prize” Case – The Court of Appeal reaffirms the Master’s duty to independently record the order and condition of cargo

The Tai Prize decision is unsurprising in result in that it reaffirms the Master’s obligations under the Hague-Visby regime.  It is, however, a demonstration of a failed attempt by a time charterer to pass liability to the voyage charterer for damage to soya beans due to pre-shipment conditions. Following their breakdown of the case, our authors discussed the options in such cases for Owners, Time Charterers and their P&I Clubs with Solicitor Darryl Kennard of Penningtons Manches Cooper LLC.

The Court of Appeal in PRIMINDS SHIPPING (HK) CO LTD V NOBLE CHARTERING INC (“The Tai Prize”) confirmed the commercial court’s decision which held that the shipper’s statement in a draft Bill of Lading presented to the Master does not amount to a warranty by the Shipper/Charterers of the cargo’s apparent order and condition. This is because the carrier has the free-standing and independent obligation under the Hague Rules to accurately record the apparent order and condition of the cargo on the Bill of Lading when shipped on board.

Background

The Tai Prize loaded a cargo of 63,366.150MT soyabeans in Brazil bound for China. Shippers presented Shipowners a Bill of Lading which contained the statements “clean on board” under “Shipper’s description of Goods” and “shipped … in apparent good order and condition.” At discharge, receivers raised a claim for burnt, discolored and moldy cargo. Receivers succeeded in their claim in Chinese court against the Head Owners as carriers under the Bills of Lading. Shipowners recovered a 50% contribution from Disponent Owners under the Inter-Club Agreement as incorporated in the Head Time Charterparty. In turn, Disponent Owners claimed 100% recovery from Charterers under an amended North American Grain Charterparty 1973. They succeeded in arbitration on the basis (as held by the Tribunal) that

(i)     it would, on a reasonable pre-shipment inspection, have been apparent to the shippers/charterers that the cargo was not in apparent good order and condition,

(ii)    in consequence of this, the draft bill of lading presented for signature was inaccurate because it stated that the cargo was shipped in apparent good order and condition and

(iii)  Owners were entitled to be indemnified for any liability they incurred by reason of signing inaccurate draft bills because the defective condition of the cargo was not apparent to the Master on a reasonable inspection during loading.

The Commercial Court

The Charterers appealed the arbitrator’s decision to the High Court, which considered the following questions:

1.     Did the pre-filled statements, “clean on board” and “apparent good order and condition” on the draft Bills of Lading, constitute a representation or warranty by shippers as to their knowledge of the apparent condition of the cargo as presented, or were the draft Bills of Lading merely an invitation to the Master to make his own assessment of the apparent order and condition of the cargo after reasonable inspection?

2.     Were the Bills of Lading, as issued, inaccurate as a matter of law?

3.     Would Charterers be liable to Owners either by way of warranty or implied indemnity if the Bills were inaccurate?

The High Court reversed the arbitrator’s decision, finding that a pre-filled statement on a draft Bill of Lading is neither a warranty nor a representation as it is the Master’s obligation independently to assess and record the apparent order and condition of the cargo. Furthermore, the Bills of Lading were not inaccurate as a matter of law, given that as far as the Master or crew could see during a reasonable inspection during loading, there was no damage to the cargo and thus no reason to remark the Bills of Lading. The last question then was moot as the Bills of Lading were not inaccurate.

The Court of Appeal Decision

The Court of Appeal considered the same three questions and confirmed the Commercial Court judgment.

First, they considered what the term “apparent good order and condition” means on a Bill of Lading. The arbitrator had accepted that the Master was unable to see any damage to the cargo at loading, but held that the damage would have been discoverable by shippers before loading, and thus the cargo was not in apparent good order and condition. The Court, citing The Nogar Marin, found that the arbitrator applied the wrong test; the words on a Bill of Lading are understood to be a representation by the Master, not the shippers. The authority of the David Agmashenebeli [2003] case was reconfirmed where it was held that the remark “in apparent good order and condition” is a statement made by the Master regarding the cargo’s external condition at the time of shipment arising from a reasonable examination by a competent Master based on the prevailing circumstances during loading. A reasonable examination does not entail that the Master is an expert in the cargo and cannot perform a granular inspection nor interrupt regular cargo operations for inspection. 

The principle that remarks about cargo condition are from the Master’s point of view is consistent with the Hague Rules incorporated in the Bills of Lading. Article III Rule 3 obliges the carrier to issue, upon the shipper’s demand, a bill of lading setting out certain information such as number of packages, leading marks, quantity, weight, and apparent order and condition of the goods. Further, Article III Rule 5 contains a guarantee (and associated indemnity) by the shipper to the carrier for accuracy of all this information save, importantly, for the apparent good order and condition of the goods. 

If the above establishes that it is the Master who is obliged to record the apparent order and condition of the cargo, what is the effect of the wording on the draft Bills of Lading, “shipped in apparent good order and condition” and “clean on board,” as presented by the shippers? Owners argued that this was a statement of shippers’ knowledge of the cargo condition, which gave rise to a right of indemnity where it was inaccurate. The court found that this was not the case, as it was contrary to the obligation of the Master to issue a Bill of Lading based on his own assessment of the apparent order and condition of the cargo. The presentation of the draft Bill of Lading by the Shippers is merely an invitation to the Master who must examine the external condition of the shipment at the time of loading and under normal loading procedures to confirm the cargo’s apparent good order and condition. If the shipper’s “clean” draft cannot be confirmed, the Master has a right, and a duty, to refer to cargo’s apparent condition at the time of shipment with a suitable remark. This principle leads back to the basic functions of a Bill of Lading, as a receipt from the Carrier for the goods as shipped on board, and as a contract of carriage (or evidence of a contract) between the holder of the Bill of Lading and the Carrier. 

In summary, on the questions of law, the Court found:

1.     The statements on the draft Bill of Lading provided by shippers do not amount to a representation or a warranty. They are an invitation to the Master to make an independent representation of the condition of the cargo as it is apparent to the Master.

2.     The Bills of Lading as issued were not inaccurate. 

On the question of implied indemnity, there could be no implied indemnity for shippers tendering a draft Bill of Lading; it would be contrary to the Carrier’s Hague Rules obligation to issue a Bill of Lading stating the apparent condition of cargo when shipped on board.
We took the opportunity to discuss the Tai Prize decision in the wider context of soya bean claims in China arising from inherent vice of the cargo with Darryl Kennard, Solicitor and Partner with Penningtons Manches Cooper LLC.

The Court of Appeal expressed some sympathy with the Owners in a theoretical case where the Shippers have actual knowledge of poor cargo condition, which the Master could have no reasonable means of discovering, suggesting in such a case there could be implied representation. What would be the applicable test to prove knowledge? And moreover, would gross negligence also pass the test?

The applicable test would be one of actual knowledge of the cargo being defective at the time of shipment. In any case, the question is only theoretical since there is neither an implied nor an express representation made by the Shippers who only provide a draft Bill of Lading to the Master. The Master has no obligation to follow what the pre-printed words mention if, according to his judgment, the cargo is not in apparent good order and condition. Another issue would be whether the party having suffered the loss (be the Head Owner or the Disponent Owner) would pursue its claim under the charterparty chain or under the bill of lading.

The latter may present better prospects of success. The party having suffered a loss, might possibly find an economic tort if it could be established that the Shippers knowingly and deliberately provided damaged cargo and tendered a draft “clean” bill of lading in order to obtain payment for defective cargo, and thereby benefited to the detriment of the Owners.

Is there any danger that Shippers/Voyage Charterer are “encouraged” to be careless or negligent as argued by Owners?

A clean Bill of Lading is simply a Bill of Lading without clausing, it is the Master who provides any information about the apparent order and condition. This case just makes clear that the Bill of Lading in draft form does not constitute a representation of the apparent order and condition of the cargo. How can the shippers be encouraged to do something they are not doing in the first place? If the defective condition is not apparent, then the Owners are not deprived of defenses, although they have to be careful to keep good records and overcome the burden of proof to show they have cared for the cargo and any defect was either not apparent at loading or not caused by the ship. It does not assist to conflate the cause of the claim with the remark on the bill of lading. The Owners did not succeed in China to convince the court that they had no liability for the damaged cargo condition. The cause of the liability was not the statements as to the apparent condition of the cargo as contained in Bills of Lading, which were accurate as far as the Master could determine.

The Hague Visby Rules, which are the benchmark of P&I cover, are clear with respect to Carrier’s obligations when signing a Bill of Lading. Does the “Tai Prize” bring Owners in a more onerous position or does it reiterate what is already known? (The David Agmashenebeli [2003] / Nogar Marin [1988])

This case aligns the risks with the provisions of the Hague Visby Rules. It was always the Master’s obligation to ensure the accuracy of the facts on the Bill of Lading insofar as concerns the apparent order and condition of the cargo, not of the Shippers. The obligation cannot be put on the Shippers who are only presenting the cargo for loading. The bill of lading is a receipt of goods being brought for loading, and it is the Master’s obligation to report the apparent condition of the cargo at the time of shipment under normal loading procedures, it always has been. The Master was never entitled to rely at what Shippers presented as being the condition of the cargo.

Is it an even balance of risk that Owners, or the Charterers in the middle, are left with a loss which was not their fault? For example, soya bean “inherent vice” claims represent significant exposure to P&I Clubs and Shipowners and this case makes it difficult to pass liability to voyage charterers, who would presumably have more information about the cargo condition. How can Owners protect themselves? Are express indemnity clauses the only solution? Could there be recourse against shippers under the Bill of Lading?

It is important to remember that although Charterers may be the agents of the shippers in a charterparty context, it cannot necessarily be said that it is the Charterers who would have more information about the cargo. The Master’s role in recording the condition of cargo at the time of shipment on a Bill of Lading has been the same for hundreds of years for a good reason, which is that the Master may be the only party that can give an independent assessment of the cargo.  In FOB sales contracts the buyer may be entirely reliant on the Master’s remarks that the cargo as provided by the seller is in good order and condition, and it is on this basis that they agree to pay for the cargo.

Express indemnity clauses may sound like a solution, but they are not getting to the root of the problem, and they will inevitably create more. For P&I insurance, any charterer agreeing to such an indemnity clause would likely have trouble with their Club. The market is unlikely to accept such clauses if they lead to uninsured losses. The trouble, really, is that by addressing these claims through the charterparty chain, there is going to be nothing but more narrow legal arguments until the liability rests with one or another party until the next case comes up. The cause meanwhile is going unaddressed, which is that the Owners have defences under the Bill of Lading when they can prove that any damage was pre-existing but not apparent to the Master. There was no inaccuracy in the Bills as issued, from the eye of the Master, and implying there is another test, that of the shipper’s representation, changes the meaning of the representation on the Bill of Lading as it has been understood through hundreds of years in international trade.
 

Is there any market-based approach to rectifying this imbalance?

It is important for the P&I Market to stem the tide of soya bean cases in China, and this is perhaps best done by a coordinated and concerted effort to push back against the main protagonists, the Chinese receivers and insurers. 

In this regard, the recent English court decision in The Frio Dolphin has (subject to appeal) given P&I insurers a powerful weapon in their fight against the injustice of being saddled wrongly with the cargo losses arising from inherent vice. In this case, the court held that a shipowner may bring arbitration proceedings against a subrogated cargo underwriter and claim “equitable compensation” (i.e. damages) in cases where the subrogated underwriters has obtained judgment in a foreign court in breach of the arbitration clause incorporated in the Bill of Lading contract. As the law currently stand, such damages would be equal to the amount the shipowner has had to pay pursuant to the foreign judgment, plus any associated costs. Of course, the challenges of enforcement remain but insurers are much more susceptible to enforcement proceedings than local receivers are.

Further, in The Eternal Bliss (another recent English High Court decision, which again is subject to appeal), it was held that demurrage does not liquidate damages for all losses incurred by reason of the detention of the Vessel. In consequence, an indemnity can potentially be sought from voyage charterers (and potentially by voyage charterers, if they are sellers in any underlying sale contract) for loss and damage incurred because of cargo deterioration sustained during the period spent waiting at the discharge port. That said, this potential remedy may not improve the position of a head owner (whose rights are recovery are governed by the ICA).  The result does, however, assist intermediary time charterers who have been held liable under the ICA pass that liability down to their voyage charterer.  

Finally, anti-suit injunctions remain a potent weapon and it should not be assumed that they will simply be ignored by Chinese receivers. In a recent soya bean case in which damages of US$10 million were claimed, we obtained an anti-suit injunction against a government owned Chinese receiver, and this stopped the claim dead in its tracks; the ASI was complied with and the security posted in China returned.

 

Exercise of maritime liens on cargo to secure credits for freight and demurrages

Facts

A cargo of coal was transported from Colombia to Italy under a voyage charterparty. The coal was destined for the Italian cargo receiver, the bill of lading holder, in Civitavecchia.

The charterparty provided that the charterer had to pay the owner the 10% freight balance within 30 days of completion of the discharge, and that any demurrages had to be paid within 30 days of the presentation of the final invoice, along with the timesheet and statement of facts.

While discharging operations were underway, the charterer informed the owner that an application to open insolvency proceedings had been filed with the competent court.

When the discharging operations were about to end, the owner applied to the Civitavecchia Tribunal, pursuant to Article 437 of the Code of Navigation, to exercise the maritime lien on a quantity of coal carried on board the carrying vessel to secure its credits for the freight balance, demurrages and expenses towards the charterer and, at the same time, obtain permission to deposit the cargo ashore under judicial authority. According to Italian law, a maritime lien can be exercised by the vessel owner only with the permission of the local court.

The owner served the lien application to the cargo receiver and the charterer. Both the cargo receiver and the charterer opposed the claimant's demand.

The charterer replied that:

• the owner's credit for the freight balance and demurrages had not yet arisen when it had filed the lien application because of the contractual provision deferring payment of such sums after a certain period from discharge;
• by agreeing to the deferred payment of the balance freight and demurrages, the owner had implicitly waived its right of lien;
• the lien clause invoked by the carrier could not be considered valid under Italian law as, under the Italian system, the only existing liens are those established by the law; and
• the bill of lading contained no specific reference to the voyage charterparty. As such, the owner's credits arising from the voyage charter were not enforceable against the bill of lading holder.

The claimant counterargued that, in any case, the credit for freight and demurrage had become immediately due as a consequence of the manifest insolvency of the charterer, as per Article 1186 of the Civil Code.

Decision

The tribunal granted the opponents' defense, thereby dismissing the lien application brought by the owner.

Preliminarily, the judge observed that Italian law applied in accordance with the Italian rules of private international law, which state that actions relating to proprietary rights and rights in rem in movable and immovable property are regulated by the law where the goods are located (ie, lex rei sitae). Therefore, it excluded the application of English law as argued by the cargo receiver.

Further, the court stated that the carrier was not entitled to claim a lien on cargo according to Article 437 of the Code of Navigation as security for its credits of freight and demurrages arising from the voyage charter when payment of such credits was contractually payable after the discharge of goods.

According to Article 437, the prerequisite for filing an application with the local court requesting permission to discharge and deposit a sufficient quantity of carried goods to secure the carrier's credit for freight and demurrage is that such credit must be outstanding (ie, payment failure must be established). In the present case, the parties had agreed in the voyage charter that payment of outstanding freight and demurrages was due only after discharge. Therefore, the credit to be secured could not be deemed outstanding.

Moreover, as per Article 564 of the Code of Navigation, the maritime lien set out under Article 561(4) of the code expires 15 days after discharge if the lien application is not presented beforehand. The court stated that the contractual provision according to which the balance freight and demurrage were payable 30 days after discharge amounted to an implied waiver of the abovementioned maritime lien and the right to place a lien on cargo for the carrier's credit.

Further, the court rejected the owner's argument that the credit was deemed outstanding in light of Article 1186 of the Civil Code – specifically, that the credit for freight and demurrage was considered accelerated in light of the charterer's patent insolvency. The court stated that the charterer's insolvency had been known to the parties even before the carriage contract was agreed between the parties and could not amount to a supervening circumstance.

As far as the existence of contractual lien was concerned, the court decided that the charterparty provision which set out a contractual lien was inconsistent with the provisions making the outstanding freight and demurrage payable 30 days after discharge.

The court found that the right of lien set out under the charterparty could not be claimed against the cargo receiver. The bill of lading did not incorporate a full reference to the lien clause or the specific charterparty, as it simply contained a generic reference to "all the terms and conditions of the voyage charter", which could not incorporate the lien clause contained in the charterparty.

In light of the above, the carrier's lien application was dismissed.

Comment

This decision was based on two 1980 precedents of the Genoa Court and reinforces the principles that under Italian law, a lien on cargo can be placed under the authority of only the local courts which, before granting such lien, will strictly verify the existence of the legal requirements set out under Italian law. These can be briefly summarized as follows:

• A lien on cargo can be placed to secure claims listed under Article 561 of the Code of Navigation.
• The bill of lading must expressly incorporate the charterparty from which the claim for unpaid freight or demurrages arises.
• In light of Article 564 of the Code of Navigation, according to which a maritime lien expires 15 days after discharge, contractual provisions making freight and demurrage payable more than 15 days after discharge may amount to an implied waiver of the right of lien on cargo.

 

Accepting LPG fuel stock for pre-2016 code gas tankers

Norwegian shipping company BW LPG wanted to use its LPG cargo as a fuel for a pre-2016 code vessel, since it offers environmental advantages over oil – but it needed a different regulatory regime to do so.

This was developed by the Isle of Man Ship Registry (IOMSR) Norwegian shipping company BW LPG wanted a regulatory methodology to permit a pre-2016 code VLGC (very large gas carrier) to be retrofitted to use liquefied petroleum gas (LPG), normally butane and propane as fuel for propulsion.

For the last four years, it has been possible for vessels to be designed and built to the International Gas Carrier code (2016 IGC code) and permitted to run on LPG fuel.

But for vessels built under the previous code (1983 IGC code as amended) this was not a permitted option.

So, BW LPG had discussions with its flag, The Isle of Man Ship Registry (IOMSR), about how this could be changed. Discussions began with IOMSR and BW LPG, as well as partners Wartsila Gas Solutions, MAN Energy Solutions and DNV-GL in 2018. Aside from the fact that LPG is already being carried (as the cargo), it offers benefits over LNG (which was allowed as a fuel under the 1983 code).

LPG does not need to be cooled to cryogenic temperatures, so the storage tanks can be made from less expensive materials. There is a much wider availability of fuel gas, which can be supplied by road tankers at most ports, whereas LNG isn’t.

LPG offers advantages over fuel oil. “Gas is cleaner to burn than fuel oils and allows a large reduction in particulate emissions, helping to meet ever-tightening restrictions placed upon the marine industry,” he says. After much discussion and research by interested parties, IOMSR put together relevant paperwork and submitted a design equivalence application to the International Maritime Organization.

This equivalence, granted in March 2020, allows the use of LPG as a fuel on the VLGC BW Gemini, setting a precedent in the industry and enabling the IOMSR to issue the world’s first flag acceptance of a modification to use LPG as fuel for older gas tankers.

“A full conversion of the ship, which has been in service for about ten years, was not an option because it would have run into millions of pounds and taken much longer to carry out,” says Mr Liddell.

“Instead, it was decided to carry out a modification of the engine and fuel supply system, which was much more commercially viable.”

The retrofitting work took place in Q4 of 2020 and lasted just over two months. It involved fitting the vessel with two extra LPG fuel storage tanks in the cargo area, a high-pressure liquid fuel system for the modified MAN Energy Solutions two stroke engines and significant upgrades to the fuel delivery and associated safety and control systems.

The work was timed to be carried out during the BW Gemini’s dry dock period, to ensure the vessel was not out of service any longer than necessary. In November, BW LPG announced the successful completion of sea and gas trials.

Pontus Berg, Executive Vice President (Technical and Operations), BW LPG, said: “BW LPG has chosen to commit 12 of our VLGCs to be retrofitted with pioneering LPG propulsion technology. This is a significant upfront investment of over USD100 million, and it represents our willingness to act on the ESG front.”

“Building new ships can provide the benefits of operating with LPG but comes at a heavy cost.” “Counting total emissions, a new ship represents about 70,000 tons of carbon dioxide in the materials and building process, compared to 2,000 tons of carbon dioxide for retrofitting.

“The sustainability outcome is much better from retrofitting than from building new vessels.”

“We thank the Isle of Man Ship Registry for its strong support and for embarking on this journey with BW LPG to take the lead and advance technology closer towards a zero-carbon future.”

The vessel is thought to have achieved a historic milestone as the world’s first VLGC to be fueled by LPG. It has sailed on LPG propulsion across the Pacific Ocean to Texas for loading, another historic first.

This voyage is expected to produce twenty percent less greenhouse gas emissions and use ten percent less fuel overall, compared to regular fuel oil, according to BW LPG. The work of IOMSR in gaining the design equivalence for their clients to enable the plans to go ahead, has paved the way for five other ships of the same class to undergo the same modification. Ships in other classes will be subject to the same discussions and application for design equivalence should their owners wish to modify them to run on LPG. IOMSR is able to assist with its expertise, Mr Liddell says.

  

What MEPC75 means for tanker operators

 Tanker operators will be keen to know exactly what they need to do to comply with MEPC 75 – if they will be able to keep a certain vessel in compliant operation until 2030 just through slow steaming, and when they need to consider switching to LNG fuel.

At a webinar organized by DNV GL about MEPC 75 on November 26, 2020 stated.

“You need to consult with your trusted classification society and see how they can help you with specific vessels. It depends on age, trade profile, investment willingness. There are a lot of factors playing into what is the most appropriate solution for each individual ship.”

Although “we think you can achieve 40 per cent improvement in efficiency with the toolkit we have available today. It won’t always be cheap, but it can be done.” In other words, we can manage until 2030 without new fuels.

“Getting to the absolute reduction levels of 2050 is a different ballgame - there we need other options.”

The MEPC 75 meeting was held online over November 16-20. Because people were attending

from their home countries, rather than travel to the IMO building in London, and all working in different time zones, the decision was made to restrict discussions to 3 hours a day, so 15 hours in total for the meeting.

The online format also did not allow as much interaction as usual. Many items were postponed to the next meeting (MEPC 76). Since the MEPC 75 meeting was originally planned for April 2020, it means some items are being postponed for a year. MEPC 76, planned for 2021, is also likely to be virtual, and so have a constrained agenda, and some issues may slide into MEPC 77.

A planned revision of guidelines for Exhaust Gas Cleaning Systems was pushed to MEPC 76.

Correspondence groups have been established to look at licensing fuel oil suppliers, a shaft power limitation concept, and interim minimum power guidelines.

The work to agree a definition of Phase 4 of EEDI was “deprioritized”. Phase 4 will apply to newbuilds of a number of ship types from 2022, and anticipated to come into force after 2025, so not considered urgent to discuss now.

Agreements at MEPC 75

At the November 2020 meeting, approval was given to the 4th IMO greenhouse gas study, by a consortium led by CE Delft, which counted emissions from shipping in 2018 of 1056 MT CO2 equivalent, up 9.6 per cent from 2012.

Methane and nitrous oxide emissions were included (and converted to a CO2 ‘equivalent’ amount). This study says that shipping’s share of global emissions was calculated to be 2.89 per cent in 2018, up from 2.76 per cent in 2012.

The study says that the overall “carbon intensity” of shipping decreased by either 21 per cent or 32 per cent over the period 2008 to 2018, depending on how it is calculated – 21 per cent if calculated by “capacity mile” or based on voyages, and 32 per cent if calculated by “tonne mile” (cargo carried). Carbon intensity is a measure of how much carbon is emitted per “transport work”.

If no additional policies are adopted to decarbonize, emissions are projected to end up growing by between 90 and 130 per cent by 2050, relative to 2008.

The focus of the MEPC work is to get emissions to a peak as soon as possible, and then reduce “carbon intensity” by 40 per cent by 2030, compared to 2008. (Note, 21 to 32 per cent reduction has already been achieved).

On the technical side, MEPC75 approved plans for an EEDI (Energy Efficiency Design Index) rule on existing ships, known as the “EEXI” (Energy Efficiency Existing Ship Index).

This is described in more detail below.

On the operational side, it approved plans to ask shipping companies to write a “SEEMP” (Ship Energy Efficiency Management Plan), showing how they will reduce their operational emissions. It is based around a Carbon Intensity Indicator – CII. This is also described in more detail below.

Each member state is encouraged to develop its own national action plan, an example being Norway’s Green Shipping Program.

MEPC75 considered a proposal from a number of shipping industry associations, including the International Chamber of Shipping, World Shipping Council, Intertanko and the International Parcel Tankers Association, to raise money for research and development of fuels, levied on fuel purchases.

The meeting also did not discuss plans to set GHG / carbon intensity guidelines for other fuels, also including emissions made in producing the fuels and delivering them to vessels (“well to tank”), methane slip, nitrous oxides, and emissions from VOCs.

So, for now, the regulations only relate to the amount of CO2 you emit per the amount of cargo tonne miles you make.

EEXI

EEXI is what will concern tanker operators the most. It follows EEDI, the “Energy Efficiency Design Index”, which says that new ships being built over 2025 to 2030 must have a 30 per cent improvement in energy efficiency compared to a baseline, calculated as the average efficiency for ships being built between 2000 and 2010.

Under EEXI, existing tankers need to achieve a “delta”, or improvement, of 15 to 20 per cent, compared to the baseline, with the same time periods as for EEDI for achieving the improvement and the base line. The delta is different for different ship types. Cruise ships and LNG carriers must get 30 per cent, gas carriers must get 20 to 30 per cent.

So, this should get existing ships “on par” with what is required for new ships, under EEDI phase 2 or 3. Ships need to comply with EEXI by early 2024. Specifically, the deadline is the “first annual, intermediate or renewal IAPP (International Air Pollution Prevention) survey after 1 Jan 2023.” So, by early 2024 - all ships which are in scope need to comply with EEXI.

The index is calculated by a complex formula which takes ship’s emissions, capacity and speed into account, with the speed based on that calculated in the sea trial, after the vessel was launched, or by other methods.

The way to reduce the score involving the least financial investment is probably to reduce the speed. The engine can be “de-rated”, so it operates at a slower speed, or you can set a “virtual” limit on engine power, basically an agreement that you will only operate the vessel with a certain power level. You are only allowed to exceed it in an emergency.

Shipping companies need to put all of this in a technical file, which is verified and approved in the first IAPP survey after Jan 2023.

SEEMP

All ships above 400 GT need to develop a “Ship energy efficiency management plan (SEEMP), by Jan 1, 2023.

A rating system will be designed by IMO so that if all ships are C or better, by 2030 shipping will reach its 40 per cent target of improving carbon intensity.

It will probably be calculated in emissions per deadweight mile. The threshold for reaching “C” will get more stringent in time. Cargo and cruise ships above 5000 GT need to achieve rating “C” in their Carbon Intensity Indicator, every year from 2023, their SEEMP should show their plan to achieve this. The plan should also have a continuous improvement focus.

Any ship scoring “D” for 3 consecutive years, or an E, will need to implement corrective actions, which will be included in their SEEMP, and need to be approved, for a vessel to receive its annual statement of compliance. Offshore vessels, passenger vessels (not cruise ships or ROPAX) will not have any index. The reason is that these vessels are very diverse, so it is very hard to calculate how one vessel compares to others in its ‘class’. Although they are still required to collect and report data.

The policy will be reviewed by Jan 2026, looking at strengthening the enforcement mechanism and corrective actions.

IMO’s 2050 target is that CO2 emissions should be reduced by 70 per cent compared to 2008, counted as CO2 emissions per transport work, and total GHG emissions from the industry should be reduced by 50 per cent, compared to 2008.

The company’s CII may become public, since it is included on the vessel’s “statement of compliance”, which is a public document in many jurisdictions. This means the data may be included in the various online vessel rating schemes.

The verification and audit will be done by the organizations accredited as “recognized” by flag states – mainly the classification societies.

IMRDB

There is a proposal from industry bodies, including ICS, World Shipping Council, BIMCO and Intertanko, to set up a research fund to develop zero carbon technologies, paid for with a levy per tonne of fuel purchased, proposed at $2 per tonne for all ships above 5,000 GT, building a purse of $5bn over the lifetime of the program.

A full day of the MEPC 75 meeting (3 hours) was taken up by discussing this. IMO members were talking about it as a “market based measure”, although the industry had been careful not to present it as a “market based measure”, saying that the money would be for research only, not to make certain fuels more viable.

There were inconclusive discussions about whether IMO could take on the responsibility of making this a legal mandate, Mr Longva said. “IMO agreed to invite further comment, so discussion will come back in MEPC 76.”

Other amendments

Other amendments made by IMO are changes to MARPOL Annex VI stating that you need to have a sampling point in your fuel system, either fitted or “designated”, for inspectors to sample and verify sulphur content. This needs to be approved by the first IAPP survey after April 2023. “There’s either technical or bureaucratic work to take care of,” Mr Nyhus said.

There are new verification procedures for how samples are to be analyzed and what kind of bandwidth is acceptable on sampling results.

Also, at MEPC 75 the International Convention on the Control of Harmful Anti-fouling Systems on Ships was amended to ban the biocide cybutryne.

There was a ban on use and carriage of heavy fuel oil in the Arctic from July 1, 2024, with exemptions for tanks with a double hull, or for Arctic coastline states which want to exempt their own ships in their own waters until 2029. This was a compromise agreed with certain Arctic states to get the ban passed. Audience poll Audience members were polled to find out what they anticipated their main measure would be to comply with EEXI.

21 per cent chose engine power limitation, 16 per cent retrofit energy efficiency devices, 17 per cent operational improvements, 25 per cent alternative fuels, 19 per cent said “I have not started looking into this.”

Useful reference links

https://www.imo.org/en/MediaCentre/MeetingSummaries/Pages/MEPC-75th-session.aspx

https://www.ukpandi.com/news-and-resources/legal-content/legal-articles/mepc-75-16_20-november-2020_summary-of-outcome/

https://www.imo.org/en/OurWork/Environment/Pages/Anti-fouling.aspx

https://www.iomshipregistry.com/media/1403/msn-047-anti-fouling-systems-convention.pdf

TSB Canada investigation: Collision of two bulk carriers after dragging anchor

TSB Canada issued an investigation report on the collision of the bulk carriers Golden Cecilie and Green K-Max 1 in the Plumper Sound, British Columbia, in March 2020. The Golden Cecilie suffered dragging anchor due to heavy winds, the report reveals, stressing that the crew did not follow established procedures to ready the vessel for impending adverse weather conditions.

The incident

On 30 March 2020, the bulk carrier Golden Cecilie was anchored at Anchorage C in Plumper Sound, British Columbia, with 20 people onboard, when it collided with the bulk carrier Green K-Max 1 anchored at Anchorage B, after reporting a dragging anchor due to gusting wind.

Following the collision, both vessels’ anchor chains became entangled. With the direction of a pilot on each vessel, and the assistance of two tugs, the anchor chains were disentangled and the two vessels returned under their own power to their respective anchorages and were secured in place. There were no injuries or pollution reported, but both vessels sustained damage to their hulls as a result of the incident.

 Key findings

The Golden Cecilie had an SMS manual that included guidance and recommendations on how to mitigate the risk of dragging anchor.

The investigation established that the crew did not collect the daily local weather forecast for the day of occurrence from the VHF radio, weather fax, medium frequency-high frequency broadcast, nor did the crew obtain an up-to-date weather warning from local authorities, such as Environment and Climate Change Canada (ECCC) or Marine Communication and Traffic Services (MCTS). As a consequence the crew did not follow established procedures to ready the vessel and crew for impending adverse weather conditions. As well, factors that impact dragging an anchor had not been taken into consideration as per the SMS, and the emergency preparedness to respond to adverse weather was inadequate, ...the report reads.

 Actions taken

Following the occurrence, the Golden Cecilie’s operator took the following safety action:

• The anchoring and anchor watch checklist was amended on 01 May 2020 to indicate that the master should be informed immediately if the barometric pressure drops by 3 mb during watch or if the wind speed exceeds 21 knots (force 5 on the Beaufort scale). In such circumstances, the engines are to be placed on standby and the deck watch is to monitor the anchor position.
• The checklist was also amended to specifically indicate the engine notice period as per the master’s instruction. A notice was sent to the vessels informing them that they should be documenting the engine notice period, the state of readiness, and the position of the second anchor in the bridge log book.
• A “Safety Flash” bulletin was circulated to all vessel crew members stressing the importance of proper anchor watches and compliance with the SMS.
• Bridge resource management refresher training was arranged for bridge watch officers.

Safety messages

When vessels are at anchor, crews need to:

• collect weather forecasts from all available sources in a timely manner;
• be aware of the risk factors that can lead to dragging anchor, in particular excessive freeboard and inadequate ballasting; and
• ensure that the main engines, anchors, and deck machinery are ready so that corrective action can be taken at the first sign of dragging anchor.

Between January 2015 and March 2020, a total of 102 dragging anchor occurrences along the BC coastline were reported to MCTS.

Full report may be downloaded at

https://safety4sea.com/wp-content/uploads/2021/02/TSB-Canada-DRAGGING-ANCHOR-AND-SUBSEQUENT-COLLISION-2021_02.pdf