IMO 2020 FAQ: Marginal sulphur exceedances
It is an all too familiar scenario: A ship has sent one of its own samples for independent testing and has received a test result indicating that the sulphur content exceeds MARPOL Annex VI limits, while the bunker delivery note (BDN) shows a compliant sulphur content. As a result, the receiving ship may raise a sulphur claim against the supplier and the master may document it through a notification – or note of protest – to the ship’s flag administration. Copies of the notification may also be sent to authorities at its next port of call, the Administration under whose jurisdiction the bunker supplier is located and to the bunker supplier.
This issue has been with us since the first emission control area (ECA) took effect, because this is not only about a potential “off-spec” under the terms of the commercial contract, but a potential statutory breach. There has, since the outset, been a conflict between the commercial approach to test precision which is typically based on ISO 4259 principles regarding test precision, and the approach to sulphur verification described in appendix VI of MARPOL Annex VI. IBIA has campaigned at the IMO for years to improve understanding of test precision, in particular the 95% confidence boundary of the test method, and lobbied to align the regulatory approach with that. We have had partial success as there is now agreement that the 95% confidence should be applied when testing in-use and on-board samples taken from ships, but it is not applicable to the MARPOL delivered sample.
So, the question is how to deal with situations where a ship’s initial independent test result indicates non-compliant sulphur content, meaning there is a potential discrepancy with the sulphur value on the BDN. Naturally, shipowners are nervous about the vessel potentially facing enforcement actions despite having ordered compliant fuel.
The commercial reality
There are reports now of a growing number of sulphur-related claims against the 0.50% sulphur limit. Under most commercial contracts, bunker suppliers will not accept any off-spec claim unless the ship’s test result exceeded the 95% confidence test boundary of the relevant limit, expressed as the limit +0.59R (if it is a maximum limit). Hence, a commercial claim will not be considered unless the test result exceeds 0.53% against the 0,50% sulphur limit or 0.11% against the 0.10% limit.
If the ship’s test result is above that threshold, however, the buyer has legitimate reason to raise a claim. There is a dispute resolution procedure described in ISO 4259 which is most commonly simplified to say that the supplier’s retained sample should be tested. Unless that sample meets the limit, with no confidence margin added, the supplier cannot claim to have met the limit.
The revised sulphur verification procedure under MARPOL Annex VI works in a similar way by treating samples differently.
Regardless of the commercial reality, if the ship ends up being penalised for breaching the sulphur limit and it is proven that the root cause is because the fuel, as delivered, was non-compliant, the supplier will face liability for that.
MARPOL Annex VI sulphur verification
The 74th session of the IMO’s Marine Environment Protection Committee (MEPC 74) issued a circular, MEPC.1/Circ.882, inviting Member Governments to apply approved amendments to appendix VI of MARPOL Annex VI related to the verification procedure for a MARPOL Annex VI fuel oil sample in advance of their entry into force, in order to “ensure a consistent approach to verifying the sulphur limit of the fuel oil delivered to, in-use or carried for use on board a ship until the entry into force of the approved amendments.” Entry into force will likely not be until September 2021 assuming MEPC 75 formally adopts the amendment. These are the key points:
Sulphur verification procedure for MARPOL delivered sample (Appendix VI part 1):The average of two test result from one laboratory must be at or below the applicable limit, e.g.0.10% or 0.50% sulphur, to be considered to have met the requirement of the regulation. This means that 95% confidence, or 0.59R (where R is the reproducibility of the test method) does not apply to MARPOL delivered samples.
Sulphur verification procedure for in-use and onboard samples (Appendix VI part 2):
The 95% confidence principle will apply, meaning an average two test results up to the limit +0.59R will be considered to have met the regulatory requirement. This means a test value of up to 0.11% against the 0.10% sulphur limit and up to 0.53% against the 0.50% sulphur limit will be considered to have met the requirement.
What does the MARPOL sulphur verification procedure mean in practice?
Along with IPIECA, IBIA had asked for MEPC 74 to apply the same principle to the MARPOL delivered sample because having different procedures creates confusion and opens the door to unfair penalisation on the basis of authorities deciding to test a MARPOL sample and finding it to be marginally above the limit. In reality, when basing this on testing at a single laboratory there is a high statistical likelihood that the same fuel sample would return a compliant test result at another laboratory.
The question remains: will a ship face penalty, and even be required to debunker, if a port state control authority decides to test its MARPOL sample and finds it to be above 0.50% sulphur, but at or below 0.53% sulphur?
Each state has discretion as to how they deal with this scenario but logically speaking, the above outcome should not result in any action against the ship, because if that same sample was judged against the MARPOL Annex VI verification procedure for what the ship can use, or carry for use, a test result up to and including 0.53% sulphur for the 0.50% sulphur limit, or 0.11% for the 0.10% ECA limit, is acceptable.
Owners want to know what to do when they have test results indicating potential non-compliant fuel. Should they always notify authorities at their next port of call for example, thereby essentially putting their hand up to say that they have a potential non-compliance situation? It’s a tricky one, because there is no obligation on the ship to test the fuel for sulphur compliance and as long as the ship has a BDN showing compliant fuel, it has met its obligation.
IMO guidance on the subject can be found in two documents; the 2019 Guidelines for port State control under the revised MARPOL Annex VI – Res. MEPC.321(74) and in the IMO’s Best Practice for Member/Coastal States – MEPC.1/Circ.884. The first advises that the master “may” have documented it to the ship’s flag administration and that copies “may” also be sent to relevant authorities. The second advises member States that analysis of the MARPOL delivered sample “may be relevant” if there are indications that the BDN is not representative of the fuel delivered.
Advice to ships will vary, but at least one fuel testing agency tells the ship that a sulphur test result, as long as it is within 95% confidence of the limit, is in compliance with MARPOL limits and “no further action is required”. Others may advise to report all test results above the limit, even when within 95% confidence. For a test result that is clearly off-spec (e.g. 0.54% sulphur or above) it is more clear-cut, when it is recommended issuing a letter of protest to all relevant parties and seek confirmation of the original test result by testing an additional sample.
Whatever shipowners decide to do with regard to reporting or not reporting test results marginally above the sulphur limit to their flag administration and other relevant parties, it should be noted that:
a) Non-compliance is not proven on the basis of testing the ship’s own sample, it is merely an indication of potential non-compliance. Only samples obtained and tested by the relevant authority can prove non-compliance and it is up to the authorities whether they will do so.
b) If an authority decides to test the MARPOL delivered sample, it will determine whether the fuel as delivered meets the relevant requirement. If the fuel tests above 0.50% sulphur and as such has not met the requirement as delivered, it should nevertheless be considered as having met the requirement for the ship to use, or carry for use, unless the test result exceeds 0.53% sulphur. This would be in line with the MARPOL Annex VI sulphur verification procedure for in-use and onboard samples.
The European Maritime Safety Agency has issued a Sulphur Inspection Guidance intended to provide guidance for a harmonised approach to the inspection of ships, ascertaining their compliance, identifying non-compliances and applying control procedures for European Union countries which does recognise the 95% confidence principle in line with appendix VI, part 2 of MARPOL Annex VI.
IBIA hopes shipowners will take comfort from this and that all relevant authorities will bear this in mind when carrying out sulphur compliance inspections.