On 1 January 2020 the UN IMO global sulphur cap took full effect, with strict enforcement by the world’s Port State Control authorities. Ships trading outside of existing sulphur Emission Control Areas (ECAs) will now have to burn compliant low sulphur fuels.

With the exception of a minority of ships that have elected to use LNG fuel or install Exhaust Gas Cleaning Systems (‘scrubbers’), the majority of ships will comply using a variety of fuels with a sulphur content of 0.5% or less. This compares to the 3.5% sulphur content which was previously permitted outside of ECAs.

This rule change implies a multi-fuel future for the shipping industry.

A regulatory game changer

ICS fully supports the new IMO regime: it will dramatically reduce the industry’s sulphur emissions and provide significant environmental benefits, not least to the health of coastal populations. Its immediate priority has been to help shipping companies prepare for the new regulations, and to persuade IMO to adopt vital guidance to ensure a smooth transition.

Notwithstanding, the change is a regulatory game changer, and will have a profound impact on shipping economics and the structure of the industry. Fuel is by far a ship operator’s greatest cost and the price of compliant fuels has proven to be expensive, up to 50% more than the residual fuel used by most ships for the past 40 years.

In September 2018, ICS produced its comprehensive Guidance on Preparing for Compliance with the Global Sulphur Cap, which has been distributed free of charge throughout the industry and well received by ship operators.

This ICS Guidance helped to demonstrate to IMO Member States that, when raising legitimate concerns about fuel availability, safety and compatibility of new fuels, the industry was acting in good faith and not seeking to circumvent compliance.

ICS updated this Guidance in 2019 to take account of subsequent IMO decisions, including the various guidelines adopted by the MEPC, as well as model charterparty clauses issued by BIMCO and INTERTANKO.

Guaranteeing a level playing field

ICS is particularly concerned to ensure a level playing field for ship operators. ICS, in co-operation with other international shipowner associations, was therefore instrumental in persuading IMO to adopt a prohibition on the carriage of non-compliant bunker fuels. This additional tool to help Port State Control inspectors check for potential non-compliance took full effect on 1 March 2020.

This resolved a key anomaly: in theory, a ship registered with a flag state that is not a party to MARPOL Annex VI and which trades to a port located in another non-party, could potentially have evaded compliance.
With the IMO carriage ban, any such ship can now be inspected for compliance as soon as it enters the majority of port states which are signatories to the global cap.

In addition, as requested by ICS, the MEPC has formally adopted extensive IMO Guidelines on implementation, including a template for ship specific Implementation Plans. IMO has agreed that the use of this Implementation Plan, supported by appropriate documentation, can be taken into account by PSC inspectors.

Assuring fuel quality

Meanwhile, with significant input from ICS, IMO also adopted guidelines on Fuel Oil Non Availability Reports (FONARs) in May 2019. These were particularly important in the early days of implementation, assisting ships which, through no fault of their own, were unable to operate using compliant low sulphur fuel.

IMO has also approved guidance on best practice for fuel oil suppliers to assure the quality of fuel oil delivered to ships, based on proposals submitted by ICS and the industry.

In July 2018, the International Organization for Standardization (ISO) delivered a statement to IMO that the requirements of ISO 8217:2017 cover “2020 0.50% max. sulphur fuels in the same way as they cover today’s fuels”.

ICS has therefore recommended that shipowners ensure that ISO 8217 is specified as the required standard when ordering 0.5% sulphur fuels for use after 1 January 2020.

IMO Member States considered a further ICS/industry submission at the Maritime Safety Committee meeting in December 2018 concerning quality and safety issues surrounding the new fuels, including new blended fuels.

Based on this submission, IMO recommended that all Member States take appropriate action to ensure that fuel suppliers under their jurisdiction deliver compliant fuels.

Furthermore, at the MEPC meeting in May 2019, IMO Member States also gave preliminary consideration to an ICS/industry submission on the development of a global bunker supplier licencing scheme. This is partly based on the scheme developed for use in Belgian/Netherlands ports, as well as the successful licencing system which now operates in Singapore.

As recommended by IMO, it is particularly important that shipping companies prepare a ship specific Implementation Plan for each of their ships, taking account of the ICS Guidance and the indicative format that has been developed by IMO.