Gard Alert: US penalty policy for ECA violations


The US Environmental Protection Agency (EPA) has published a penalty policy which it will use when assessing civil penalties for violations of the fuel sulphur standards in the US sections of the MARPOL Annex VI emission control areas (ECAs). The policy’s aim is to remove the benefit of non-compliance and to reflect the gravity of the violations.
The EPA Penalty Policy for Violations by Ships of the Sulfur in Fuel Standard and Related Provisions was released two weeks after the ECA sulphur cap was lowered to 0.10 per cent and outlines the methods by which the EPA assesses civil penalties for violations of the fuel sulphur standards applicable in the US section of the North American ECA and in the US Caribbean ECA. The applicable ECA fuel sulphur standards are regulated through MARPOL Annex VI and enforced in the US under the Act to Prevent Pollution from Ships (APPS).
The penalty policy can be accessed using the following link:
The penalty assessment method
The policy establishes deterrence as an important aim of the penalty assessment. More specifically, it states that a penalty should remove any significant benefit of non-compliance. In addition, the penalty includes an amount beyond recovery of the economic benefit gained using non-compliant fuel to reflect the seriousness of the violation. With this in mind, the policy contains two components that together make up the preliminary deterrence amount:
1. The economic benefit component, which reflects the costs saved in not purchasing compliant fuel, compared to the price of the non-compliant fuel used. The policy establishes methods for estimating the amount of non-compliant fuel burned within an ECA when actual data from the ship is not available.
2. The gravity component, which reflects the seriousness of the violation. One example is the actual sulphur content of the non-compliant fuel burned while within the ECA and how much this exceeded the applicable standard. Another factor is the number of record keeping violations incurred. An operator that has violated the recordkeeping provisions more than once may be subject to a higher penalty.
In addition to deterrence, another aim of the penalty policy is to ensure that the EPA assesses fair and equitable penalties. The policy, therefore, allows a certain degree of flexibility and adjustment of the preliminary deterrence amount to account for the unique facts of each case such as degree of willfulness or negligence, degree of co-operation, history of non-compliance, litigation risk, ability to pay and performance of a supplementary environmental project (SEP).1
Important to note is also that:
• A threshold indicator of co-operation or non-co-operation applied by the EPA during adjustment of the preliminary deterrence amount is whether the violator promptly reported the non-compliance to the EPA. A typical situation could be when a ship, despite owners’ and operators’ best efforts, has not been able to procure compliant fuel prior to entering an ECA. It will then be of utmost importance that the ship secures all evidence of actions taken in their efforts to obtain compliant fuel and electronically submit a disclosure of fuel oil non-availability using a Fuel Oil Non-availability Disclosure (FOND) form available from an electronic portal.
• Although the current statutory maximum penalty set by the APPS is USD 25,000 per violation per day, a ship burning non-compliant fuel may also be in violation of other requirements of MARPOL Annex VI and could face additional penalties for these violations. This could typically be failure to maintain and/or follow the written procedures for fuel oil change-over (Reg.14.6), failure to record the required change-over details in the log-book (Reg.14.6), or failure to obtain and retain on board bunker delivery notes (BDNs) and representative samples of the fuel oil delivered (Reg.18).
• The policy applies to all enforcement actions initiated after 15 January 2015 as well as to all pending enforcement actions in which the government has not yet set a proposed penalty amount.
Members and clients are advised to note the newly issued penalty policy for violations of the fuel sulphur standards applicable in the US ECAs; to continue to focus on the increasingly stricter air emission control measures being introduced around the world; and to prepare their ships and crew for compliance accordingly.
Both the EPA and the US Coast Guard have made it clear that they are actively enforcing the North American and US Caribbean ECA requirements and will be strengthening their efforts to ensure compliance. With the new ECA penalty policy in place, there is now clarity as to the civil penalties that might be imposed on ships that violate the US ECA requirements.
Useful sources of information
• Gard: Loss Prevention Circular No.06-14 “Preparing for low sulphur operations”
• EPA: webpage on enforcement of MARPOL Annex VI
• US Coast Guard: Frequently Asked Questions on North American ECA revised per 3 December 2014
• IMO: Frequently Asked Questions on sulphur limits in ECAs from 1 January 2015
• IMO: Information on MARPOL Annex VI regulation sulphur emissions

1 Most federal actions against businesses or individuals for failure to comply with the environmental laws are resolved through settlement agreements. As part of a settlement, an alleged violator may voluntarily agree to undertake an environmentally beneficial project related to the violation in exchange for mitigation of the penalty to be paid. A Supplement Environmental Project (SEP) furthers EPA’s goal of protecting and enhancing the public health and the environment. It does not include the activities a violator must take to return to compliance with the law.

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