On 1 January 2020 the permissible limit of sulphur in fuel oil used on vessels will be reduced from 3.5% to 0.5% pursuant to the International Maritime Organisation's (IMO's) 2020 regulations (known as 'IMO 2020'). This change to the International Convention for the Prevention of Pollution from Ships (MARPOL) aims to improve air quality and protect the environment.
Although it has been more than three years since the IMO approved Regulation 14.1.3, Annex VI of the MARPOL, the new guideline still concerns most industry players due to uncertainties with regard to the application of the regulation in different jurisdictions.
Issues that have been addressed by shipowners, charterers and other players include:
- the possibility of using exhaust gas cleaning systems (ie, scrubbers);
- the potential unavailability of compliant fuel at destination ports;
- risks of delays at ports due to ships' compliance inspections; and
- who will bear the extra costs.
With less than one month until the regulation enters into force, how prepared is Brazil for IMO 2020?
According to major Brazilian oil company Petrobras, compliant fuel is already available for vessels. The company stated that as of October 2019, all marine fuel sold by the company has complied with the 0.5% sulphur limit and that it has stopped offering fuel with a high sulphur content.
Petrobras stated that it is investing in its oil refineries to produce compliant fuel. As the sulphur content of Brazilian pre-salt oil is favourable to the intended reduction, Petrobras seems to be optimistic with regard to the new regulation, expecting that it will not only fulfil domestic demands, but also be able to export the surplus.
On 23 May 2019 the National Agency of Petroleum, Natural Gas and Biofuel (ANP) issued Resolution 789/2019, imposing a cap of 0.5% sulphur content in marine fuel sold to vessels. However, the resolution allows the supply of fuel with a 3.5% sulphur content as long as vessels are fitted with scrubbers. This resolution will also enter into force on 1 January 2020.
Pursuant to Law 9.847/1999, the commercialisation of marine fuel which violates the ANP's rules can lead to severe fines and other penalties.
While the ANP is responsible for regulating the commercialisation of marine fuel, the Directorate of Ports and Coasts (DPC) is the authority responsible for supervising vessels and their compliance with IMO 2020. The DPC is a body of the Brazilian Maritime Authority and its agents have authority to board vessels and verify whether the fuel complies with MARPOL.
At present, the DPC has not issued any specific regulations with regard to IMO 2020. However, Circular 7/2019 has been sent to some organisations and associations saying that inspections will be performed as part of port state control activities, initially by analysing documents presented on board a vessel which demonstrate its fuel specifications. If needed, the DPC may collect samples.
Thus, if a vessel uses fuel with a 0.5% sulphur content, the shipowners must present evidence in this regard (eg, a bunker delivery note). If the fuel used has a 3.5% sulphur content, the shipowners must demonstrate that the vessel is fitted with scrubbers. If the fuel does not comply with IMO 2020 because the shipowner could not find 0.5% fuel at the port of departure, they must present a fuel oil non-availability report from said port.
In the mentioned circular, it is said that where it is verified that a vessel has non-compliant fuel or a deficient scrubber, the Maritime Authority may inform the flag state, grant a deadline to correct the deficiency, apply fine and detain vessel.
With the environmental agenda becoming increasingly important, IMO 2020 proposes significant changes to help the cause. However, given the potential revision of freight prices due to fuel cost alteration, the rules will affect not only the shipping industry, but all international maritime trade.
Such impact – especially during the transition period where vessels still carry non-complaint fuel and must discharge and clean their bunker tanks – will raise issues for charter disputes due to possible delays and vessels' detention by maritime authorities worldwide.
Nonetheless, the Brazilian authorities have shown a commitment to compliance with IMO 2020 and seem ready to adopt control measures, even though specific penalties and other issues are still to be ascertained.
While many countries are facing the uncertainty of having compliant fuel, Brazil appears to be one-step ahead and ready to supply vessels with marine fuel in accordance with IMO 2020.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
