The 74th session of the IMO’s Marine Environment Protection Committee (MEPC 74) took place on 13-17 May 2019 at the IMO headquarters in London.
A key area of interest for shipowners preparing for IMO’s 2020 global sulphur cap is fuel oil non-availability reporting (FONAR) which may be necessary if, despite best efforts, a ship is unable to obtain compliant fuel.
What is a FONAR?
The starting point is that individual Member States will implement their own regulations and penalties in order to implement the global sulphur cap.
Regulation 18 of Annex VI of the MARPOL Convention sets out factors to be taken into consideration by a Member State Party in situations where a ship is found not to be compliant with the sulphur limits. Factors to consider include steps taken by the ship to mitigate the risk of non-compliance. Specifically, a ship may provide records of its attempts to achieve compliance with the limits, and evidence of its best efforts to obtain compliant fuel.
If, despite best efforts, a ship is unable to obtain compliant fuel, the ship’s Flag State as well as the competent authority of the port of destination should be notified . This notification is commonly referred to as a Fuel Oil Non-Availability Report (FONAR).
The submission of a FONAR is not expected to result in waiver or an exemption from compliance with the global sulphur cap. However, it will be a key document or piece of evidence in assessing whether, in the eyes of the authorities, the unavailability of compliant fuel is reason for a ship not having compliant fuel. It will also be a key document for the IMO (as Member States are required to upload a FONAR to an online system for the IMO) to monitor the availability of compliant fuel.
This FONAR system is not new for shipowners. A FONAR system is already in use in the North American ECA which came into force on 1 August 2012. Accordingly, there is already about 7 years of experience with the application of such a system and the United States Environmental Protection Agency (US EPA) has issued useful guidance to assist shipowners and operators which can be found here.
The IMO FONAR template can be found here.
What should a FONAR contain?
The FONAR should present a record of actions taken by the ship in her attempts to bunker compliant fuel oil and provide evidence of attempts to purchase compliant fuel oil in accordance with her voyage plan. Further, if compliant fuel was not made available at the point or location stipulated in the voyage plan, the FONAR should record evidence of attempts to locate alternative sources of such fuel oil.
For more detailed guidance on what should be included in a FONAR, this will be up to each individual Member State. However, the US EPA model does provide helpful guidance on how authorities might approach FONAR from 2020. Adapting the useful guidance provided by the US EPA to a global sulphur cap, it could reasonably be expected that a FONAR should contain:
The US EPA regime guidance provides that ships are not required to deviate from their intended voyage in order to obtain compliant fuel although a ship operator is expected to make “any adjustments that can be made” to allow the purchases of compliant fuel. Further, it is not expected that a ship is to subject itself to undue delays in order to achieve compliance. Member States are obliged to take reasonable steps to promote the availability of compliant fuel oils. It is not unforeseeable however that disputes could arise as to whether a delay to a ship is to be considered undue or unreasonable in the context of achieving compliance.
However, it must be stressed that individual Member States may develop more detailed guidance for the consistent use and acceptance of these reports, including what evidence is needed to accompany a report. Accordingly, whilst the current guidance from the US EPA is useful in planning for the global sulphur cap, this should be further reviewed on a country by country basis as Member States issue their own regulations and guidance.
When should a FONAR be submitted?
A FONAR should be submitted as soon as it is determined, or when the ship becomes aware, that compliant fuel oil will not be available. A copy of the FONAR should be kept on board for inspection for at least 36 months.
There have been discussions regarding the types of situations in which a FONAR should be submitted. The paradigm example of where there is a genuine lack of supply of compliant fuel is a clear scenario where a FONAR would be required. It is less clear however whether a FONAR should be submitted in other situations such as, where, following delivery, bunkers represented in the BDN to be compliant have, according to Owner’s analysis, a non-compliant level of sulphur. Another example could be a breakdown of a scrubber system on a ship with limited reserves of LSMGO. According to the PSC Guidelines approved at MEPC74, such situations should be notified in writing to the ship’s flag state, the relevant port of destination and the authorities where the bunkering took place. It seems that the FONAR format may not to be used in such situations. It should be borne in mind that FONAR is a reporting format; the main concern following any non-compliance is to get the information out to the flag state/port state. On a practical level, subject to further developments and guidance, if the circumstances are not clear, the safest approach would be to issue a FONAR and also to inform the flag state, port of destination and place of bunkering of the situation by email. In real terms, ship managers should also be calling the flag state over the phone or meeting the local representatives to make necessary representations.
Under a voyage charterparty, Owners are responsible for fuel. It therefore follows that compliance with the sulphur regulations and the FONAR procedure are all comfortably within the Owners’ sphere of responsibility.
However, in the case of a time charterparty, it is the charterers who supply fuel to the ship whilst the Owners remain responsible for compliance with the sulphur regulations. The regulations include requirements to use “best efforts” to supply compliant fuel and the FONAR requirements. However, a tension exists as the evidence required for the FONAR will be in the control of the charterers as it is the charterers who are in communication with bunker suppliers and brokers. It follows that Owners will be entirely dependent on charterers to provide the paper trail to demonstrate that “best efforts” have been made to find compliant fuel.
BIMCO and INTERTANKO have both released clauses dealing with the respective obligations between Owners and Charterers in relation to compliance with the global sulphur cap. However, these were drafted prior to the IMO Guidelines with respect to FONAR and Owners should consider whether the existing clauses are sufficient to deal with issues which might arise in this area.
For example, it is not yet known how authorities will interpret the requirement to use “best efforts” to find compliant fuel. Is this a requirement that can be delegated to charterers? To what extent are the Owners required to make their own enquiries to find compliant fuel?
Another potential issue could arise if it proves necessary to deviate from the intended route for the purpose of bunkering the ship with compliant fuel (where, for instance, no fuel is available on the intended route).
There is a strong argument that the parties’ respective obligations with regard to “best efforts” to supply compliant fuel and FONAR are within the scope of the BIMCO clause. So, a shipowner should be able to establish liability and enforce the indemnity requiring charterers to supply evidence of “best efforts” to supply compliant fuel for the purpose of submitting a FONAR. That said, in the absence of express wording dealing with “best efforts” and FONAR, there is scope for argument that the BIMCO clause would not apply to that situation. Similar issues arise under the Intertanko clause. Additional wording to the charterparty and bills of lading might also be required to allow for a deviation in order to bunker with compliant fuel. In order that parties better know where they stand, it would be preferable to include express wording to the BIMCO/Intertanko clauses specifically addressing these issues. Please contact your usual claims contact who can assist you in this regard.
Members will be aware that the UK P&I Club provides broad cover for ship-sourced pollution liabilities. This not only includes liabilities relating to ship-sourced oil pollution but also pollution caused by cargoes onboard ships, hazardous and noxious substances, garbage, sewage, ballast water and exhaust emissions.
P&I cover for claims arising under the 2020 global sulphur cap is still under discussions between the International Group of P&I Clubs. These discussions are to ensure consistency of cover across the IG Clubs for liabilities which might arise non-compliance. The UK P&I Club expects to be able to report further to members in this regard soon.