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Sulphur 2020 – cutting sulphur oxide emissions

The main type of “bunker” oil for ships is heavy fuel oil, derived as a residue from crude oil distillation. Crude oil contains sulphur which, following combustion in the engine, ends up in ship emissions. Sulphur oxides (SOx) are known to be harmful to human health, causing respiratory symptoms and lung disease. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contributes to the acidification of the oceans.

Limiting SOemissions from ships will improve air quality and protects the environment.

IMO regulations to reduce sulphur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulphur oxides have been progressively tightened.

From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50% m/m (mass by mass). This will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts.

Below you will find answers to some of the frequently asked questions about the sulphur limit.

You can also download a more detailed set of FAQ here.

Limiting SOx emissions from ships will have a very positive impact on human health: how does that work?

​Simply put, limiting sulphur oxides emissions from ships reduces air pollution and results in a cleaner environment. Reducing SOxalso reduces particulate matter, tiny harmful particles which form when fuel is burnt.

A study on the human health impacts of SOx emissions from ships, submitted to IMO’s Marine Environment Protection Committee (MEPC) in 2016 by Finland, estimated that by not reducing the SOx limit for ships from 2020, the air pollution from ships would contribute to more than 570,000 additional premature deaths worldwide between 2020-2025.

So a reduction in the limit for sulphur in fuel oil used on board ships will have tangible health benefits, particularly for populations living close to ports and major shipping routes.

Why are ships already less harmful than other forms of transport?

​Ships do emit pollutants and other harmful emissions. But they also transport large quantities of vital goods across the world’s oceans – and seaborne trade continues to increase. In 2016, ships carried more than 10 billion tons of trade for the first time, according to UNCTAD.

So ships have always been the most sustainable way to transport commodities and goods. And ships increasingly becoming even more energy efficient. IMO regulations on energy efficiency support the demand for ever greener and cleaner shipping. A ship which is more energy efficient burns less fuel so emits less air pollution.

It has sometimes been quoted that just a few ships (all using fuel oil with maximum permitted sulphur content) emit as much harmful air pollutants as all the cars in the world (if the cars were all using the cleanest fuel available).

Not only is this the very worst case scenario, but this does not take into account the amount of cargo that is being carried by those ships and the relative efficiency. It is important to consider the amount of cargo carried and the emissions per tonne of cargo carried, per kilometre travelled. Studies have shown that ships are by far the most energy-efficient form of transportation, compared with other modes such as aviation, road trucks and even railways.

It is also relevant to remember that shipping responds to the demands of world trade. As world trade increases, more ship capacity will be needed.

How can ships carry so much cargo so efficiently?

Ships are the largest machines on the planet and the world’s largest diesel engines can be found on cargo ships. These engines can be as tall as a four-storey house, and as wide as three London buses. The largest marine diesel engines have more than 100,000 horsepower (in comparison, a mid-sized car may have up to 300 horsepower). But the largest container ships can carry more than 20,000 containers and the biggest bulk carriers can carry more than 300,000 tons of commodities, like iron ore.
So powerful engines are needed to propel a ship through the sea. And it is important to consider how much energy is used to carry each ton of cargo per kilometre.  When you look at the relative energy efficiency of different modes of transport, ships are by far the most energy efficient.
Ships can reduce air pollutants by being even more energy efficient, so they burn less fuel and therefore their emissions are lower.

What is the current regulation on SOx in ships emissions and by how much is that going to be improved?

​We are going to see a substantial cut: to 0.50% m/m (mass by mass) from 3.50% m/m.

For ships operating outside designated emission control areas the current limit for sulphur content of ships’ fuel oil is 3.50% m/m.

The new limit will be 0.50% m/m which will apply on and after 1 January 2020.

There is an even stricter limit of 0.10% m/m already in effect in emission control areas (ECAS) which have been established by IMO. This 0.10% m/m limit applies in the four established ECAS: the Baltic Sea area; the North Sea area; the North American area (covering designated coastal areas off the United States and Canada); and the United States Caribbean Sea area (around Puerto Rico and the United States Virgin Islands).

Fuel oil providers already supply fuel oil which meets the 0.10% m/m limit (such as marine distillate and ultra low sulphur fuel oil blends) to ships which require this fuel to trade in the ECAs.

What must ships do to meet the new IMO regulations?

The IMO MARPOL regulations limit the sulphur content in fuel oil. So ships need to use fuel oil which is inherently low enough in sulphur, in order to meet IMO requirements.

Refineries may blend fuel oil with a high (non-compliant) sulphur content with fuel oil with a sulphur content lower than the required sulphur content to achieve a compliant fuel oil. Additives may be added to enhance other properties, such as lubricity.

Some ships limit the air pollutants by installing exhaust gas cleaning systems, also known as “scrubbers”. This is accepted by flag States as an alternative means to meet the sulphur limit requirement. These scrubbers are designed to remove sulphur oxides from the ship’s engine and boiler exhaust gases. So a ship fitted with a scrubber can use heavy fuel oil, since the sulphur oxides emissions will be reduced to a level equivalent to the required fuel oil sulphur limit.

Ships can have engines which can use different fuels, which may contain low or zero sulphur. For example, liquefied natural gas, or biofuels.

Are low sulphur blend fuel oils safe? Can new low sulphur fuels cause problems for a ship’s engine?

​All fuel oil for combustion purposes on a ship must meet required fuel oil quality standards, as set out in IMO MARPOL Annex VI (regulation 18.3). For example, the fuel oil must not include any added substance or chemical waste that jeopardizes the safety of ships or adversely affects the performance of the machinery.

IMO is currently discussing how to identify any potential safety issues related to new blends of fuel oil as it is recognized that if these fuels are not managed appropriately, there could be compatibility and stability issues. If needed, additional guidance for crew and ship operators could be developed.

An International Standardization Organization (ISO) standard (ISO 8217) specifies the requirements for fuels for use in marine diesel engines and boilers.

Could the 0.50% limit be delayed?

​No. There can be no change in the 1 January 2020 implementation date, as it is too late now to amend the date and for any revised date to enter into force before 1 January 2020.

Will new fuels be needed to meet the 2020 limit? Will there be enough?

It is likely that new blends of fuel oil for ships will be developed, For example, a gas oil, with a very low sulphur content can be blended with heavy fuel oil to lower its sulphur content. ​

These new blends are likely to cost more initially than the “heavy fuel oil” bunkers (fuel) used by the majority of ships today.  Ships can also choose to switch to a different fuel altogether. Or they may continue to purchase heavy fuel oil, but install ”scrubbers” to reduce the output of SOx in order to have an equivalent means to meet the requirement.

Of course, some ships are already using low sulphur fuel oil to meet the even more stringent limits of 0.10% m/m when trading in the already-established emission control areas. So those fuel oil blends suitable for ECAS, will also meet the 0.50% m/m limit in 2020. However, there is a cost differential, and these blends are more expensive than heavy fuel oil.

A study commissioned by IMO into the “Assessment of fuel oil availability” concluded that the refinery sector has the capability to supply sufficient quantities of marine fuels with a sulphur content of 0.50% m/m or less and with a sulphur content of 0.10% m/m or less to meet demand for these products, while also meeting demand for non-marine fuels. The full study can be downloaded here.

Consistent compliance with the new limit is vital. What is IMO doing about that?

​Monitoring, compliance and enforcement of the new limit falls to Governments and national authorities of Member States that are Parties to MARPOL Annex VI. Flag States (the State of registry of a ship) and port States have rights and responsibilities to enforce compliance.

IMO is working with Member States as well as industry (including the shipping industry and the bunker supply and refining industry) to identify and mitigate transitional issues so that ships may meet the new requirement.

For example, developing guidance, developing standardised formats for reporting fuel oil non availability if a ship cannot obtain compliant fuel oil and considering verification and control issues.

Do small ships have to comply with the sulphur limit from 2020?

​Yes, the MARPOL regulations apply to all ships. Only larger ships of 400 gross tonnage and above engaged in voyages to ports or offshore terminals under the jurisdiction of other Parties have to have an International Air Pollution Prevention Certificate, issued by the ship’s flag State. But all sizes of ships will need to use fuel oil that meets the 0.50% limit from 1 January 2020.

Some smaller ships may already be using fuel oil that meets the limit, such as a marine distillate suitable for their engines. (Small ships operating in the already-designated emission control areas will be using fuel oil that meets the 0.10% limit in those emission control areas.)

​For more detailed information on the sulphur 2020 limit and its implementation, please download the IMO Sulphur 2020 FAQ.
Source: IMO

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How the new fuel regulations change the entire shipping industry

LSF2020 refers to the new “Low Sulfur Fuel” regulations, which will come into effect on 1 January 2020. These regulations are the biggest of a series of steps by the International Maritime Organisation (IMO) to reduce marine pollution (MARPOL) in response to the threat of climate change. The LSF2020 emission regulations mean ships will have to significantly reduce emissions on the high seas as well as in coastal areas. This change does not only concern Hapag-Lloyd but it challenges the entire shipping industry. The good news is however: Thanks to the regulations, the industry will become much greener.

Now, the question is how to comply with the new regulations and how much it will cost. Ship owners are effectively having to decide whether to switch to burning the more expensive low sulfur fuel, or place investment bets on Exhaust Gas Cleaning Systems (EGCS) or Liquefied Natural Gas (LNG) powered ships. There are however only limited facts and experience upon which to base these decisions, which will continue to have an impact on the profitability and competitiveness of liner shipping companies, long after the facts have become clear in hindsight.

Three main ways to go

The simplest way to comply with the new regulations is just to switch to using new, compliant 0.5 percent “Low Sulfur Fuel”. The problem: The lower the sulfur content, the higher the cost of bunker fuel. Oil industry experts estimate 0.5 percent Sulfur “Low Sulfur Fuel” will be 150 to 250 US Dollar more expensive per ton than the current 3.5 percent Sulfur “Heavy Fuel Oil”. According to estimation this will increase global average prices per TEU by around 80 to 120 US Dollar, or about 10 percent. All alternative approaches to enable ships to burn cheaper fuels, require considerable additional capital investment.

One option is to install an Exhaust Gas Cleaning System (EGCS), to remove the excess pollution from the exhaust gases – and continue to burn the cheaper 3.5 percent Sulfur “Heavy Fuel Oil”. EGCS are desulphurization systems that remove unwanted particles from industrial exhaust flows. The systems are installed inside the ship’s funnel and can work in a number of different ways. The two main kinds are “open-loop” and “closed-loop” (and “hybrid”, able to switch between open-loop and closed-loop operation). Operating in open-loop mode removes the pollution from the exhaust gases and then flushes it into the sea, instead of into the atmosphere. Operating in closed-loop mode retains the pollution in tanks on board the ship – but this is not practical for long distance journeys. The challenge: So far, these systems have not yet been used with large container ships, only with cruise liners and short sea ferries. There is also the risk that regulations will change in the coming years and will prohibit flushing the pollution into the sea at all.

Another alternative is to switch to Liquefied Natural Gas (LNG). Hapag-Lloyd currently owns 17 so called “LNG-ready” ships – these are ships with engines that can burn LNG as well as fuel oil. They just need an additional LNG fuel tank to be installed in a cargo bay, together with some additional piping and machinery. Then they are able to switch between LNG and fuel oil. The other approach is to build new ships, designed from the beginning to only burn LNG. The challenge: The capital costs to convert ships or to build them from new to burn LNG, are quite high. Moreover, since there is as yet little demand for marine LNG – a resource that is otherwise freely available onshore – there are as yet still only a small number of LNG bunker vessels available in a few ports.

Lastly, there are many limitations to how many ships can be converted to LNG or retrofitted with EGCS. It also takes time to build new ships fitted with scrubbers or designed to burn LNG. The vast majority of the global container fleet will therefore have no other choice than to switch to the new, much more expensive compliant 0.5 percent Sulfur “Low Sulfur Fuel” – or to break the law.

That shows: Each solution comes with its challenges. That is why right now there is no one right way to go. Liners have to individually decide the mix which seems best for them. However, low sulfur oil bunkering will have to start in the fourth quarter of 2019 due to the long round voyage times – which will mean higher costs for customers already by the end of next year. All in all, industry experts guess that the new fuel regulations will cost the shipping industry about 60 billion US Dollar per year.

Source: Hapag-Lloyd

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European Shipowners encourage the European Commission to have sufficient recycling capacity on the EU approved ship recycling yards list

All vessels sailing under an EU flag will eventually be required to use an approved ship recycling facility, once the EU Ship Recycling Regulation effectively applies. This will be on 31 December 2018.

The current edition of the EU list of approved ship recycling facilities only features yards situated in Europe and has a capacity of around 300.000 light displacement tonnes (LDT). It is far away from the 2.5 million LDT mentioned in the Regulation. In the past, all European co-legislators agreed upon this figure: the EU Parliament, the EU Council and the EU Commission. It is based on international research and studies carried out to back the Commission’s legislative proposal in 2012.

“ECSA finds these figures[1] generally reflecting the reality”, ECSA Secretary General Martin Dorsman said.

“For ECSA, this demonstrates clearly that only when third country ship recycling yards will get EU recognition and added to the list, there will be sufficient capacity. This is a message we have tried to pass on to the European Commission – for the moment, the yards on that list will not be able to respond to the recycling capacity demand”, said ECSA Secretary General Martin Dorsman.

“We only have another six months to go before the regulation will come to effect and oblige the European flagged ships to be dismantled in the facilities on the EU list. There is no time to waste but new, also outside-EU, yards that comply with the EU Regulation should urgently be accepted on the list”, he concluded.

On Monday 18 June the EU Member States’ experts on ship recycling met in Brussels to discuss the current situation. ECSA shared its experience with the EU legislators regarding the continuous progress which is taking place today in several Indian Ship Recycling Facilities. One of the most important drivers for the improvements in the Indian facilities is in fact their ambition to work towards approval and inclusion in the EU list of facilities. An important tool in that process is technical cooperation on the ground and a close monitoring of the recycling process, wherever the ship recycling facility is located for that matter.

[1], An indicative calculation shows that the real capacity needed is in line with the data from the recognised studies. In 2016 around 10 mio LDT has been recycled. The EU fleet (incl. Norway) is, expressed in GT, around 22 % of the world fleet. 22 % out of 10 mio is around 2.2 mio LDT.

Source: ECSA

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PORT RECEPTION FACILITIES: ESPO WELCOMES DRAFT REPORT BUT CALLS FOR STRICTER APPLICATION OF THE ‘POLLUTER PAYS’ PRINCIPLE

The European Sea ports Organisation (ESPO) welcomes the proposals put forward by the European Parliament Rapporteur Ms Gesine Meissner in the draft report of the Transport Committee on the review of the Waste Reception Facilities Directive (Com (2018) 33).  The Draft Report will be discussed in the Transport Committee meeting of 10 July.

The proposals of the Parliament’s rapporteur are aiming to better protect the marine environment and decrease the administrative burden for stakeholders. ESPO welcomes in particular proposals such as the definition of catering waste which would increase the quantities of recycled plastics and contribute to the targets of the European Plastics Strategy.

European ports believe however that the ‘polluter pays’ principle, which has been the cornerstone of the EU’s environmental policy, needs to be strengthened. Introducing a fee system whereby ships would deliver unreasonable quantities of garbage, including dangerous waste for a fixed fee would be a severe divergence from the ‘polluter pays’ principle. It risks to discourage reducing waste at the source.

“The report of Ms Meissner is clearly a step forward. Overall, the report pursues the objectives of the circular economy and aims to reduce administrative burden for authorities and stakeholders. We strongly believe however that the ‘polluter pays’ principle needs to be better reflected in the new Directive. We cannot accept a regime whereby ships are not incentivised to limit waste at the source and ports have to carry the costs of delivering unreasonable amounts. Additionally, we oppose an automatic rebate for “green” ships. Any green rebate, if not corresponding to a real cost reduction, will have to be borne by the port authority. Not all port managing bodies have the financial ability to cover this cost and to give such rebates. We plead for an efficient, but responsible management of ship waste. We count on the rapporteur and Transport Committee members to further optimise the Directive in that sense” says ESPO’s Secretary General, Isabelle Ryckbost.

Any mandatory green rebates for waste, as proposed by the Commission proposal, would prevent ports from addressing local environmental challenges. In some areas, waste pollution is a great environmental concern while in others it is air quality and emissions. Furthermore, mandatory rebates disregard the existence of different business and governance models in ports across Europe.

The Commission has been preparing an EU submission to the IMO proposing a 100% indirect fee without quantity thresholds at international level (here).  “I regret that a submission is being introduced to the Council when Parliament has not expressed any views, and negotiations with the Council have not even started. This initiative seems to bypass the ongoing democratic process and lacks legitimacy” adds ESPO’s Secretary General, Isabelle Ryckbost.

 

Source: ESPO

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European shipowners support the proposal for better waste handling Port Reception Facilities

The recently published proposal for a new Directive on Port Reception Facilities is welcomed by ECSA, as it addresses major issues with the current system in place. The new proposal will help in ensuring there are adequate port reception facilities available, require an advance waste notification from ships as well as a waste delivery receipt for reception facilities, and facilitate monitoring and enforcement through existing systems for electronic reporting and the exchange of information.

 

It also suggests a reasonable, transparent and functional fee system forming an incentive to shipowners to deliver waste ashore. “We believe that the procedures in ports should be as efficient as possible, to keep costs at acceptable levels. Therefore, the 100% indirect system for MARPOL Annex V residues should exclude hazardous waste, as not all ships deliver this type of waste all the time”, said Martin Dorsman, ECSA Secretary General.

 

“Additionally, by requiring that ships have to deliver all their waste every time they leave for a port outside the European Union, the EU would ignore the importance of International Maritime Organization’s (IMO) international database of port reception facilities, in which IMO’s member states list all their approved port reception facilities. A better alignment with IMO rules and procedures would ensure that ships can deliver their garbage in any facility which is included in IMO’s Global Integrated Shipping Information System (GISIS) database and thus not only in European facilities”, he added.

 

With regard to Short Sea Shipping, the movement of cargo and passengers by sea over short distances, Martin Dorsman commented: “Shifting transport from land to water has many advantages. It would reduce current road congestions and lower external cost and the impact on our environment. This could well be achieved with the Directive if the right choses are made. Short sea vessels that are not sailing on fixed routes according to a published schedule, but may be calling regularly and frequently at the same ports, should be allowed to skip delivering waste every time they call at a port under the same conditions as for example ferries. This is not the case in the current proposal. Short Sea Ships should also be guaranteed differentiated fees as this will increase the competitive position”.

 

ECSA believes that applying differentiated fees for ships that treat waste in an environmentally sound manner is good. However, ECSA does not support defining a new concept of “Green Ships” at the EU level, as it is already carried out by the IMO. In addition, it would create yet another ranking system with already many such ranking systems operational.

 

Finally, vessels not having received a waste receipt will not be allowed to leave the port. ECSA suggests to have special arrangements in place for small ports, since they may need more time to issue a waste delivery receipt, especially outside normal working hours.
Source: ECSA (European Community Shipowners’ Associations)

Posidonia 2018: Shipowners Stand Alone in Cutting CO2 Emissions

The new environmental regulations have been at the center of attention at this year’s edition of Posidonia trade show in Athens, Greece, which took place from 4-8 of June.

The upcoming sulphur cap in 2020 and the initiative to halve shipping industry’s carbon footprint by 2050 have been in the spotlight together with the immediate implications of the ballast water management convention.

Despite being supportive of the overall aim behind the decarbonization drive, the “tsunami of regulations“ has not been very welcome by the industry due to the lack of pragmatism in their application and the availability issues with respect to effective infrastructural solutions to enable the switch to a cleaner future.

In particular, John Platsidakis, Chairman of Intercargo and managing director of Anangel Maritime Services, believes that the overall burden for reducing emissions from shipping is being unfairly put on ships and shipowners.

Speaking during the 6th Analyst and Investor Day within Capital Link’s Shipping Forum, Platsidakis stressed that such an approach “will take us nowhere“, adding that providers of assets, i.e., shipyards and engine manufacturers should be pushed to provide better equipment to owners.

“As a result, we have to stand up and raise our voice about the real issue here. Therefore, we are asking the providers of assets to come up with the adequate solutions and we will be the first ones to adopt it,” he emphasized.

Furthermore, the very fact that refiners have not committed to make the sufficient amounts of alternative fuel available by 2020 poses another uncertainty for shipowners.

In addition, he pointed out that it was “unfair“ and “highly regrettable“ that at the end of the day the consumers would be paying the price for the implementation of the new regulations.

George Prokopiu, Chairman of Dynagas LNG Partners, agreed, urging that the new regulative framework should be a task for manufacturers and shipyard, not owners.

Prokopiu insisted that shipping companies have very little voice in the overall decision making process about the new rules and that they were standing alone in the implementation process.

The message was echoed by Theodore Veniamis, President of the Union of Greek Shipowners, during the opening ceremony of the event saying that “shipping is often held disproportionately responsible for meeting environmental standards compared to other industries.”

“However, as shipowners, we have no say in the manufacturing of the ships’ engines, nor are we responsible for the quality of the fuels that we have to use. It is obvious that, while the links in the chain of responsibility are many, it has so far proved to be more expedient, at a political level, to solely focus on shipowners, a choice that is misguided and practically ineffective in the end,” he pointed out.

There is no silver bullet and the way forward for the industry to become complaint with the 2020 sulphur cap is attainable through three solutions: scrubbers, slow steaming and low sulphur fuel, Prokopiu said.

Finally, Platsidakis expressed concern over “what comes next in terms of regulations“, emphasizing that the industry is not afraid of new rules as long as they are pragmatic.

However, he stressed that a huge issue in the introduction of new regulations was the lack of proper analysis and understanding of the problem at hand.

“Regulators, with all the noble intentions in the world, often don’t know what they are talking about. Secondly, a lot of the said issues are politically motivated and promises politically motivated were not realistic,” he said.

Specifically, referring to the promise to halve shipping’s emissions by 2050 by upgrading propellers and ship designs, Platsidakis said that this was not feasible.

As explained, the only way for these reduction targets to be met is to introduce a carbon free fuel.

“With the existing types of fuel, we will never achieve the promised reductions,” he went on to say.

Reported by Jasmina Ovcina Mandra

Source: World Maritime News

ESPO Calls For The Full Recognition Of The EU Added Value And Cross-Border Impact Of European Ports In The New CEF

On 6 June, the Commission published the proposal for the next Connecting Europe Facility (CEF II). The proposal sets out the objectives of the financial instrument and the funding modalities. In total, the Commission proposed a CEF budget for 2021-2027 of €42.3bn, with a transport envelope of €30.6bn.

The CEF II proposal supports three overarching transport objectives: 1) the development of projects of common interest relating to efficient and interconnected networks (with a focus on core network, 60% of the budget), 2) infrastructure for smart, sustainable, inclusive, safe and secure mobility (core and comprehensive network, 40% of the budget) and 3) the adaption of the TEN-T network to military mobility needs.

 

The European Sea Ports Organisation (ESPO) welcomes the new proposal. The budgetary envelope, the integration of missing ports in the corridors, the rebalancing between the investments in basic infrastructure and the investments in smart, efficient and sustainable infrastructure projects, the focus on climate-proof investments and the synergies between transport, energy and digital are all elements to be supported by ESPO.

 

The new CEF proposal is clearly prioritising cross-border projects, both in the identification of projects as in the levels of co-funding. ESPO believes that the definition of the “cross-border” element should not be limited to the land-based connections, but should include the cross-border impact of projects, as well as the maritime dimension. Seaports must be seen as internationally cross-border in nature and thus be placed on an equal priority with other cross-border projects.

 

“We welcome the new Commission proposal on CEF as a good basis for addressing the huge investments requirements ports are facing at the moment. While we are supporting the general priorities of the new proposal in terms of strengthening the connectivity, the efficiency, sustainability and smart mobility, we must focus on applying these concepts in the right way to achieve a better integration of European seaports into the network. European ports are nodes of transport, energy, industry and blue economy. We must ensure that this important and complex role of European ports as spiders in the transport web should be better reflected in the new CEF,” comments Isabelle Ryckbost, ESPO’s Secretary General in a first reaction to the proposal.

 

The Commission proposal is going to be discussed by the European Parliament and the Council. The Commission hopes to finalise the text before the end of the legislative period (mid 2019).

 

In order to contribute in a constructive and substantiated manner to the preparation of the CEF II and the negotiations to follow, the European Sea Ports Organisation (ESPO) commissioned a study with a view to:

• Identify the Drivers and Investment needs of European ports;
• Analyse the ports’ ability to make use of EU funding and financing instruments;
• Recommend how CEF can be further improved.

 

The study reveals that the ports’ investment needs amount to 48 billion EUR for the coming ten years. The needs are very diverse and mirror the complex and diverse role of ports in Europe. Many investments create high societal value, but the limited and slow return on investment makes external funding necessary.
Source: ESPO

NEW LAW ON TONNAGE TAX

SUMMARY ON THE NEW LAW ON TONNAGE TAX

On Friday 13th April, 2018 Legal Notices 127 and 128 were published amending Malta’s tonnage tax system in order to comply with the European Commission’s decision which was published at the end of last year. The new law will come into force on the 1st of May.

Legal Notice 128 seeks to clarify certain provisions relating to the applicability of Malta’s tonnage tax system and in particular it lists the type of vessels to which tonnage tax shall apply as well as those which are excluded. New provisions have also been included in relation to the treatment of tonnage tax benefits to (i) bareboat chartering; (ii) tugs; and (iii) dredgers.

A revised list of registration fees and tonnage tax payments have also been issued by Legal Notice 127 whereby a distinction has been made between the two and the possibility for non-Maltese companies owning vessels registered in Malta to opt to pay tonnage tax in Malta.

 

MORE DETAILED UPDATE

The European Commission on the 19th December, 2017 conditionally endorsed the Maltese tonnage tax system. Following such endorsement Legal Notices 127 and 128 have been published, which amend the current tonnage tax system. The new law will come into force on the 1st of May, 2018.

The salient features of the new law include the following:

 

  1. Ships excluded from the Tonnage Tax Regime

 

As will be highlighted later on, the Malta Tonnage Tax System, in line with EU Guidelines, will apply to ships which are involved in the international carriage of goods or passengers by sea. Therefore, in line with this reasoning the following vessels are excluded from benefiting from the Malta Tonnage Tax System:

(i)                Fishing Vessels;

(ii)               Private Yachts;

(iii)              Fixed offshore installations and floating storage units;

(iv)              Non-ocean going tug boats and dredgers;

(v)               Ships whose main purpose is to provide goods or services normally provided on land;

(vi)              Stationary ships employed for hotel and/or catering operations;

(vii)             Ships employed mainly as gambling and/or casinos;

(viii)             Non-propelled barges.

 

  1. Shipping Activities and Tonnage Tax

 

In order to qualify as a tonnage tax ship and thus benefit from the Malta tonnage tax system, the vessel has to be declared a tonnage tax ship by the Minister. Therefore, the Shipping Organisation which will own the vessel will need to show that the vessel is a sea-going vessel engaged in the international carriage of goods and/or passengers by sea. A number of documents would need to be provided to the Registrar-General in order for the vessel to be declared a tonnage tax ship.

 

Should the vessel qualify as a tonnage tax ship then the Shipping Organisation would not be liable to pay any income tax to the extent such income is derived from shipping activities. Furthermore, no income tax or capital gains will be paid on proceeds derived from the sale of a vessel which is declared a tonnage tax ship.

 

It is important that separate accounts are kept for the income derived from shipping activities and any other income derived from non-shipping activities. A simplified income tax return can be filed by the Malta Shipping Organisation for income derived from shipping activities. On the other hand, if the Shipping Organisation also derives income from non-shipping activities then the full income tax return would need to be filed.

 

The new law also seeks to clarify a number of grey areas in relation to Tugs and Dredgers. In order for these type of vessels to benefit from tonnage tax, they would need to be registered under an EU or EEA flag and spent at least 50% or more or their time in activity which constitutes maritime transport.

 

As regards to bareboat chartering, Shipping Organisations who derive income from chartering out vessels on a bareboat basis will benefit from the tonnage tax system if (i) the amount of the vessels bareboated out does not exceed 50% of the shipping companies’ fleet; (ii) the term of the bareboat is limited to a maximum period of 3 years; (iii) it is shown to the satisfaction of the Registrar General that the ship was bareboat chartered due to short term over capacity.

 

Furthermore, the new law provides for a list of vessels which to the extent that they are involved in  the  international  carriage  of  goods  or  passengers  by  sea  in accordance  with  the  EU  Maritime  State  Aid  Guidelines  and provided that they satisfy the criteria set out in the regulations, may also benefit from the tonnage tax system. These vessels include:

(i)          Cable laying ships;

(ii)         Pipe laying ships;

(iii)        Crane vessels;

(iv)        Research vessels; and

(v)         Multi-purpose, break-bulk and other types of support vessels.

 

Specified provisions have also been included in relation to tonnage tax ships which are owned by the Malta Shipping Organisation which however are not flagged in Malta. If such ships are flagged under an EU or EEA flag, then there is the option to pay the equivalent of 25% of the tonnage tax if the vessels had been registered in Malta to the relevant authority and such vessel would be entitled to benefit from the Malta tonnage tax system.

 

If however, the vessels are flagged under a non-EU flag, then it would be possible for such vessel to qualify for the Malta tonnage tax system if it is shown that the strategic / commercial management of all ships by such shipping organization is actually carried out from the EU and it is proved that the shipping organization owns, manages or operates at least 60% of its total tonnage under an EU flag or  percentage  of  the  tonnage  owned,  managed  or operated by the shipping organisation is Union-flagged and that the  percentage  of  Union-flagged  tonnage  that  is  owned, managed,  administered  or  otherwise  operated  by  shipping organisations established in Malta has not decreased on average over a period of three years. The law further provides that at least 25% of the applicable tonnage tax on such vessels is paid to the relevant authority in Malta.

 

For further details, contact us on:

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IMO and EBRD sign new partnership to support sustainable shipping

The International Maritime Organization (IMO) has signed a new partnership agreement with the European Bank for Reconstruction and Development (EBRD). The agreement will help promote sustainable shipping through a range of safety- and environment-focused capacity-building activities in the maritime and port sectors in selected countries.

It brings together IMO, the United Nations maritime agency which sets global standards  for safe, secure, efficient and environment-friendly international shipping, and the multilateral development bank EBRD, which has experience in supporting comprehensive transport related development activities and practices in the maritime and port sectors.

A Memorandum of Understanding (MoU) was signed on Thursday (8 February) by IMO Secretary-General Kitack Lim and the First Vice President of the EBRD, Phil Bennett. (Photos here.)

“This strategic partnership, combining IMO’s global mandate and outreach and EBRD’s experience and expertise on investment and finance, is expected to contribute a great deal to sustainable maritime transport and the implementation of the United Nations Sustainable Development Goals,” said Secretary-General Lim.

As part of the United Nations family, IMO is actively working towards the 2030 Agenda for Sustainable Development and the associated SDGs. Most of the elements of the 2030 Agenda will only be realized with a sustainable transport sector supporting world trade and facilitating the global economy.

The IMO/EBRD MoU represents the first such arrangement to be established between IMO and a multilateral development bank.

In addition to providing investment financing, IMO and EBRD will work together under the agreement to provide technical advisory services, project preparation and planning, capacity building and institutional development, focusing initially on joint projects with the national authorities of Azerbaijan, Egypt, Georgia, Morocco, Tunisia and Turkey.

Gap analysis will be carried out with specific projects likely to focus on a range of safety- and environment-related issues, centred on implementing and enforcing IMO regulations.  These projects could include:

  •  investment opportunities in sustainable transport
  • safe transport of solid bulk cargoes and dangerous goods
  • facilitation of maritime traffic and electronic business and implementation of a maritime single window
  • identification of locations and business models for port reception facilities for ship-generated waste
  • sensitivity mapping and oil spill exercises
  • promoting acceptance and implementation of IMO’s 2012 Cape Town Agreement on fishing vessel safety
  • assessing emissions in ports and developing emission-reduction strategies;
  • looking at opportunities to improve ships in terms of reducing air pollution and greenhouse gas emissions and improving energy efficiency
  • potential regulatory and policy reforms associated with ships using shore-based power sources in port (known as ‘cold ironing’)
  • identifying opportunities to invest and propose investment for LNG bunkering infrastructure
  • risk assessments for marine bioinvasions and identifying key locations for port-based reception facilities and contingency measures, as well as appropriate commercial models.

Source: International Maritime Organization

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The Economic value of Malta’s Maritime Industry

This feature has no pretence to be a professional economic analysis of the contribution which the Maltese maritime industry makes to Malta’s gross domestic product. We hope that in the near future the Malta Maritime Forum will be able to undertake such a study which is essential to raise awareness about this industry.

What this paper aims to achieve instead is to highlight the economic drivers which are generated by the maritime industry but even then one has to narrow the definition of the term maritime industry because it is so vast and diverse that to make a reasonable assessment one has to segmentalize and focus. The focus here is on ships, terminals and related services such as ship repair.

According to Oxford Economics, the economic value of the EU shipping industry amounts to Euro 140 billion by way of total GDP contributions. The same analysis concluded that the EU shipping industry generates a total of 2.1 million jobs and, more important, that it has a multiplier effect of 2.6. Hence, crudely speaking, for every Euro 1 spent in this industry there is the creation of another Euro 2.6. One can go into much deeper analysis of these economic criteria to differentiate between direct and indirect impact as against induced impact or catalysed impact to assess the total impact of the shipping industry on the economy. However, as stated above, this is not the scope of this feature.

To understand better the economic value generated by the maritime industry, one can perhaps take into consideration the economic activity generated when a vessel enters our ports. Such a normal occurrence entails:

  • A communication system to record the ships arrival and an authority (Transport Malta) to ensure that the arriving vessel is conforming with rules and regulations applying to ships’ traffic and port entry.
  • A customs authority to control the movement of vessels, personnel and cargo.
  • A shipping agent to coordinate the ships’ arrivals and organise the services required.
  • A pilotage corps to provide qualified and professional pilots to assist a vessel to come into port.
  • Tug boats to assist the vessel during its manoeuvring operations.
  • Mooring men to moor the vessel to a quay.
  • A terminal where the ship is moored and where it can undertake its discharge / loading operations.
  • Stevedores and / or terminal operators to undertake the cargo operation.

Considering that in 2016 there were 13,090 ship calls, one can appreciate better the turnover generated by ships calling at Malta.

The list is endless if one were to factor in the range of services that a vessel might require while calling in a port or when a vessel is calling in Malta to undertake repairs and / or other services. Each one of these service providers is in turn employing personnel and generating economic turnovers which run into millions of Euro.

Taking some real examples, Malta Freeport Terminal employs 836 personnel and has invested over 270 million Euros since its privatisation. During 2017 Malta Freeport handled over 3.15 million TEU’s (20ft containers). The Valletta Gateway Terminal handles over 1,000 vessels per year, employs about 100 personnel and generates a turnover of over 12 million Euros.

These two terminals, apart from their own personnel, employ also the licensed stevedores who between full timers and casuals amount to almost 500 persons. Another 113 licensed hauliers (burdnara) are engaged in the transport of cargo from and to the terminals.

Other stake holders such as Palumbo Shipyards who undertakes ship repairs at Malta, employ a work force of about 220 persons and handle an average of 200 ships per year. It is estimated that over the last seven years this enterprise generated over 250 million Euros to the local economy. This is not taking into account other ship repair facilities such as Bezzina Ship Repair Yard Ltd (120 employees) and Cassar Ship Repair Ltd (150 employees). Other entities that go to make up this market segment include Medserv PLC (turnover of Euro 32.8 million in 2016) and Malta Maritime Hub (turnover of Euro 12.6 million in 2016). These are but a few examples of contributions that are made by the local maritime industry to the Maltese economy.

If one were to bring into this equation the Malta flag which is the sixth largest flag in the world and under which are registered 8,123 vessels, this contribution takes an even wider perspective with the inclusion of professional services such as legal and financial which in turn generate employment in interesting numbers. As things stand today, the income from this  market segment is mainly generated from services related to ship registration, but other countries, in competition with Malta, have managed to attract other services such as ship management, crewing and ship finance. In recent years Malta has attracted some key players from these activities, but more needs to be done to bring in more investment through these maritime activities which are not insignificant in terms of economic contribution. Just by way of example, ship management companies in Poland are estimated to generate on average 25 million Euros per annum to the Polish economy.

In Malta we have been fortunate that the maritime industry has always kept away from partisan politics and all administrations have realised and supported the positive value of this industry. It is however a considerate opinion that more value can be obtained from this industry by having more focus from the administration and long term planning with a holistic approach to guide within the geographical constraints of Malta and the environmental considerations that need be respected to strike an appropriate balance.

The local maritime industry has come a long way in its development but the opportunities that still need to be tapped are enormous and time is of the essence.

Source: Times of Malta

For further details, contact us on:

Tel: (00356) 21 651387
Fax: (00356) 21 651384
Email: management@combinedmar.com
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