Liberia leads drive to ensure effective implementation of BWMC

Liberia is leading a move to amend the Ballast Water Management Convention (BWMC) which will allow certain ships additional time beyond 2020 in order to ensure that adequate new ballast water management (BWM) systems are commercially available, along with the necessary dockyard space for installation.

Following representations made by Liberia at last week’s meeting of IMO’s Marine Environment Protection Committee (MEPC70) in London, David Pascoe, Senior Vice-President, Operations & Standards at LISCR, the US-based manager of the Liberian Registry, says, “Against significant odds, Liberia and other industry representatives at IMO were able to garner sufficient support from a majority of IMO members during MEPC70 to create an opportunity to re-visit the installation deadline through alternative proposals to amend the convention.

“There are two major constraints effecting smooth implementation and compliance with the convention – namely, lack of availability of systems that will meet the performance standards, and the evident lack of sufficient installation capacity. We are pleased that MEPC 70 adopted and advocates the early use of new guidelines for approval of BWM systems. Concerns remain however, that it might be several years before new IMO-approved equipment is readily available and that, with effect from 8 September 2017, tens of thousands of ships may be required to install existing systems that may not fully comply with the convention standards.

“We are equally pleased that MEPC agreed to our proposal for a review to determine whether a sufficient number of BWM systems are approved and available when required and will perform reliably, where and when necessary.

“The alternative amendment drafted by Liberia, industry and supporting states will go forward, together with the amendment approved by MEPC 69, to MEPC 71 in first-half 2017 for final consideration. We intend to work with other interested IMO member states and industry in advance of MEPC 71 to see if common ground can be agreed on one set of amendments. An amendment cannot be adopted until the MEPC 72 meeting in first-half 2018, after the convention enters into force.”

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Liberia provides lead with BWMS proposal to IMO meeting

The Liberian Maritime Administration is to introduce a proposal to the meeting of the IMO Marine Environmental Protection Committee (MEPC70) in London on 24 October to allow certain ships additional time beyond 2020 to install adequate ballast water management systems as required under the Ballast Water Management Convention, which comes into force in September 2017. The proposal, says Liberia, would ensure that enough adequate systems and sufficient dockyard space are available.

With effect from 8 September, 2017, most oceangoing ships engaged in worldwide operations will be required to install a ballast water management (BWM) system approved in accordance with IMO guidelines. But it has emerged that the current IMO guidelines are not sufficiently detailed to ensure that BWM systems have been adequately challenged to provide the required confidence that they will meet the required discharge performance standard, regardless of where a ship may operate.

David Pascoe, Senior Vice-President, Operations & Standards at LISCR, the US-based manager of the Liberian Registry, says, “Having conducted additional assessments of IMO type-approved BWM systems intended for installation on Liberian-flag ships, the Liberian Administration has identified certain potential limitations, which have been listed on the Liberian Type Approval Certificate issued to manufacturers. This additional information helps shipowners make informed decisions in connection with BWM systems.

“Liberia actively promoted the revision of the IMO BWMS approval guidelines. It is participating in the revision to make them more transparent, robust and fit-for-purpose, and is offering its proposals for smooth implementation to MEPC 70. These have already attracted strong support from concerned IMO member states and other organisations, with the Marshall Islands reportedly among those electing to follow Liberia’s lead.

“The revised BWMS approval guidelines are expected to be roughly aligned with the robust type-approval regime of the United States, thus establishing a rigorous global standard for BWMS type-approval. But there are no BWM systems currently approved by the US, and it could take several years for equipment approved under the new IMO guidelines to be readily available for installation. In the meantime, tens of thousands of ships may be required to install existing systems that may not fully comply with the convention standards.

“The compliance dates for ships are linked to the date a ship’s International Oil Pollution Prevention (IOPP) certificate is renewed after 8 September 2017. In order to allow more time for new systems to become available and for shipowners to decide which system to invest in and install (bearing in mind that the cost to retrofit a BWMS is estimated to be up to $5m per ship) Liberia has proposed that shipowners may decide if they wish to renew a ship’s IOPP certificate earlier than scheduled in order to have an additional 4-to-5 years to see if new equipment becomes available.

“It is by no means certain that adequate new systems will be commercially available in sufficient quantities within this period. Additionally, based on a study by Liberia, the dockyard capacity to fit systems on board ships will fall well short of peak demand, expected to occur in 2020-2021.

“While the IMO roadmap for implementation of the BWM Convention provides for non-penalization by port states of ships that have installed BWM systems (so-called ‘early movers’), it may be that this equipment will require modification or replacement in the future, as will be the case in the US. It would therefore seem reasonable not to require continued installation of BWM systems which have not been approved under the new guidelines and to allow certain ships additional time beyond 2020 in order to ensure that adequate new systems are commercially available, along with the necessary dockyard space for installation. ”

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Moore Stephens emphasises high cost to shipping of environmental regulatory compliance

International accountant and shipping adviser Moore Stephens says that finding enough money to remain compliant with environmental regulation is going to be a challenge for shipowners and operators over the next few years.

Moore Stephens shipping partner Michael Simms says, “The Ballast Water Management (BWM) Convention, for example, has not yet entered into force, although some countries, including the United States, have already implemented BWM regulations independently of the IMO. But it is known that BWM systems can cost between $500,000 and $5m per vessel, depending on the system as well as on the size and design of the ship. That cost may increase as a result of demand requirements and shipyard capacity. There are also operational costs to consider of between $10,000 and $50,000 per annum per vessel.

“Meanwhile, the regulation of emissions from shipping continues apace. Emissions Control Areas (ECAs) are currently in force in the North Sea/Baltic Region and in North America, and new IMO regulations mean that, by 1 January 2015, all vessels operating within these areas will be required to meet an 0.1 percent SOx emissions limit. In addition, there are more complex calculations for 2016, when IMO NOx limits based on the vessel’s age and engine’s rated speed enter into force.”

Simms acknowledges that the true cost of regulatory compliance is still unclear. He says, “Think of a number. Any number will do, so long as it is very big. Then double it. The answer is likely to be as accurate as any supposedly informed estimates currently circulating in the shipping sector about the likely size of the industry’s bill for achieving compliance with incipient environmentally-inspired regulations governing the operation of ships.

“Individual owners and operators may plot their own path through the regulations. For some, configuring new ships for easy installation of BWM systems when the convention enters force may be a viable option. Scrubbers, meanwhile, may be the most cost-effective solution for some when addressing the SOx/NOx dilemma.

“One thing is certain, however. Shipping is going to have to find a great deal of money over the next few years simply to stay within the rules. From an accounting perspective, the challenge will be how businesses should account for the expenditure and any associated costs to determine which items should be capitalised or expensed. In practice, whist additional operational costs should be expensed, certain expenditure should be recorded as an asset. But, of course, it is only an asset if you are able to recover it. “

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion. www.moorestephens.co.uk

For more information:
Michael Simms
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
michael.simms@moorestephens.com