Outline

• This circular summarises US requirements for approval of ship security plans for US flag ships, and for foreign ships trading to the US.

• Notwithstanding contrary recommendations from some US lawyers, the US Coast Guard (USCG) has confirmed that security plans of foreign ships covered by SOLAS/ISPS Code requirements need not be submitted to the USCG for approval.

• However, security plans of US flag ships must be submitted to the US Coast Guard (USCG) by December 31, 2003.

• Security plans of foreign flag vessels not covered by SOLAS/ISPS requirements (e.g. because they are below 500 GT or because their flag State is not a party to SOLAS) must also be submitted to the USCG by December 31, 2003.

TO THE MEMBERS

Dear Sirs

Members who trade to the United States may be aware of advice circulated by a US law firm indicating that under the US Maritime Transportation Security Act ("MTSA") security plans of non-US flag ships must be submitted by 31st December 2003 to the US Coast Guard ("USCG") for approval. The advice goes on to suggest that a shipowner could, as a consequence of a failure to comply with this requirement of the MTSA, be denied the right to limit liability in the event of a subsequent incident.

Approval Process

Notwithstanding that advice, the USCG has made clear in writing that it does not intend to operate a process of approving individual security plans for foreign ships subject to the International Ship and Port Facility Security ("ISPS") Code. Rather, the USCG has indicated an intention of accepting a valid International Ship Security Certificate ("ISSC") as prima facie evidence of a foreign ship's compliance with the ISPS Code, and thereby with the except where there are clear grounds to suspect non-compliance.

However, the USCG has emphasised that the USCG's acceptance of a valid International Ship Security Certificate ("ISSC") as prima facie evidence of a foreign ship's compliance with the ISPS Code is on the assumption that the security plan fully complies with SOLAS amendments and the ISPS code, and takes into account the relevant provisions of Part B. The USCG intends to vigorously verify implementation through a very active port state control regime.

USCG approved security plans may, however, be required in the case of certain foreign ships not subject to the ISPS Code, including cargo ships of between 100 and 500 gross tons. USCG approval will also be required for plans of US flag ships.

The ISPS Code includes provisions relating to validation and certification of ship security plans, confidentiality of information, and powers of port states. In particular, the ISPS Code requires ship security plans to be protected from unauthorised access, provides that certain sections of a ship security plan cannot be inspected without the consent of the Flag State and provides that once a plan is verified and approved by the Flag Administration, no changes can be made to it without that Administration's consent.

If the security plan of a foreign ship is disclosed in its entirety to the USCG for approval, without the consent of the Flag Administration, the ship may as of 1st July 2004 become in breach of the ISPS Code. There could be a further breach of the Code if the ship's security plan were to be amended, in response to a request of the US Administration, without the consent of the Flag Administration.

As at the date of drafting this Circular, it is understood that certain Flag Administrations have warned that they might decline to approve security plans if restrictions concerning disclosure of the security plan have been breached. It is understood that the relevant Administrations have raised these concerns with the US government.

Limitation

The law firm's advice on limitation contains no detailed analysis of why limitation rights would be prejudiced, but, for example, under OPA 90, limitation could be denied in respect of losses caused by breach of a federal operating regulation. However, the MTSA itself indicates that there is no requirement for a ship to operate in compliance with its security plan until 1st July 2004. It is difficult to see how limitation rights can be denied by reference to a failure by the shipowner to submit the ship security plan to the USCG, in circumstances where the shipowner is not required to comply with that plan and the USCG will not inspect it if submitted.

In summary, the risk of losing limitation rights by failure to submit security plans of non-US flag ships to the USCG seems relatively low, while the risk of being in breach of the international regime by unauthorised disclosure of security information seems more probable.

Members are, for the above reasons, encouraged to continue making timely progress to comply with the ISPS Code, but are not recommended to submit security plans to the USCG at this stage other than for US flag ships and for ships to which the ISPS Code does not apply. This advice may change if the USCG officially changes the position held hitherto, and if so the Managers will inform you accordingly.

Finally, the Association has in stock a number of copies of a Model Security Plan developed by the International Chamber of Shipping, which can be made available to Members who require it to assist them in their compliance preparations. The Plan, which includes an adaptable CD ROM text, is available free of charge on application to your usual Club contact.

Yours faithfully

Thomas Miller (Bermuda) Ltd