2020 Fuel Transition Clause for Time Charter Parties

Overview

BIMCO has produced two clauses for time charter parties to address key contractual issues relating to the switch to fuel with a maximum sulphur content of 0.50% as of 1 January 2020. The two clauses are the 2020 Marine Fuel Sulphur Content Clause, which replaces the BIMCO Fuel Sulphur Content Clause 2005, and the 2020 Fuel Transition Clause, which deals with switching between fuel with a maximum sulphur content of 3.50% and fuel with a maximum sulphur content of 0.50% by 1 January 2020. Both clauses should be incorporated into time charter parties.

This clause was published on 10 December 2018.

BIMCO 2020 Fuel Transition Clause for Time Charter Parties

(a) Definitions

For the purpose of this Clause:

“Carriage Ban Date” means 1 March 2020.

“Carriage Ban” means the prohibition of the carriage for use of Non-Compliant Fuel as of the Carriage Ban Date.

“Compliant Fuel” means any fuel that meets the Sulphur Content Requirements with effect from the Effective Date.

“Effective Date” means 1  January 2020.

“Non-Compliant Fuel” means any fuel with a sulphur content of more than 0.50%.

"Sulphur Content Requirements" means any sulphur content and related requirements as stipulated in MARPOL Annex VI (as amended from time to time) and/or by any other applicable lawful authority.

(b) Requirements

(i) Before the Effective Date, the Charterers shall have supplied the Vessel with fuel so that on the Effective Date the Vessel shall have sufficient Compliant Fuel to reach the nearest bunkering port where Compliant Fuel is available.

(ii) No later than the Carriage Ban Date there shall be no Non-Compliant Fuel carried for use by the Vessel.

Together subclauses (b)(i) and (ii) are the “Requirements”.

Notwithstanding the Carriage Ban, Owners and Charterers shall cooperate and use reasonable endeavours so that no later than the Effective Date there shall be no Non-Compliant Fuel carried for use by the Vessel.

(c) (i) In order to meet the Requirements, the Charterers shall at their risk, time and cost ensure that any Non-Compliant Fuel remaining on board after the Effective Date shall be discharged from the Vessel’s bunker tanks until such tanks are free of liquid and pumpable fuel latest by the Carriage Ban Date or the redelivery date of the Vessel, whichever occurs first; and

(ii) in respect of the bunker tanks that are free of liquid and pumpable fuels, Owners shall at their risk, time and cost ensure that such tanks are fit to receive Compliant Fuel, taking into account the type of Compliant Fuel that will be loaded into such bunker tanks. 

Compliant Fuel shall not be loaded into a Vessel’s bunker tanks until the steps described above in subclauses (c)(i) and (c)(ii) have been carried out in respect of such bunker tanks.

Once bunker tanks are fit in accordance with subclause (c)(ii), no Non-Compliant Fuel shall be loaded into such bunker tanks.

(d) Disposal of Non-Compliant Fuel - In respect of Non-Compliant Fuel, if any, which needs to be discharged from the Vessel in accordance with subclause (c)(i), Charterers shall dispose of such fuel in accordance with any applicable local regulations at Charterers’ risk, time and cost.

(e) Segregation - Unless otherwise agreed between Owners and Charterers, each supply of Compliant Fuel shall be bunkered into empty tanks within the Vessel’s natural segregation. 

Background

Switching to low sulphur fuels

The 2020 Fuel Transition Clause is not part of the Suite of Bunker Clauses as it deals with the one-off event of switching between fuel with a maximum sulphur content of 3.50% and fuel with a maximum sulphur content of 0.50%. The switchover is a process that will need to be started before the coming into force date of 1 January 2020 and so requires the owners and charterers to cooperate to ensure a smooth transition. The clause is designed to provide a fair allocation of responsibilities and liabilities between the owners and charterers in managing remaining stocks of fuel that will become non-compliant under MARPOL on 1 January 2020. This may involve agreeing to reserve tank space as and when it becomes free so that it can be made fit to receive compliant fuel.
The clause has been specifically designed for time charter parties that will span 1 January 2020. We would also recommend incorporating the clause into time charter parties with redelivery very close to 1 January 2020 where delays or extensions might result in the ship redelivering after the coming into force date.

Drafting team

The 2020 Bunker Clauses have been developed by a team comprised of owners, charterers, bunker suppliers, P&I clubs and legal experts. BIMCO is grateful to the following individuals for assisting us with this important project:

  • Peter Eckhardt, F. Laeisz, Hamburg (Chairman)
  • Daniel Chu, Navig8, London
  • Nicola Ioannou, Oceanfleet Shipping, Athens 
  • Ann Shazell, Cargill Ocean Transportation, Geneva
  • Rob Crees, World Fuel Services, London 
  • Michele White, INTERTANKO, London
  • Tiejha Smyth, North of England P&I Club, Newcastle 
  • Paul Dean and Alessio Sbraga, HFW, London 

The BIMCO secretariat was represented by Lars Robert Pedersen, Deputy Secretary General; Grant Hunter, Head of Contracts and Clauses; and Mads Wacher Kjærgaard, Assistant Manager, Contracts & Clauses.

Explanatory Notes

The following explanatory notes are intended to provide some background to the thinking behind the 2020 Fuel Transition Clause for Time Charter Parties. If you have any questions about the clauses that we haven’t answered in the explanatory notes, please contact us at contracts@bimco.org and we will be happy to help.

2020 Fuel Transition Clause for Time Charter Parties

The transition to 0.50% sulphur content fuels on 1 January 2020 is essentially a one-off event. We have written the 2020 Fuel Transition Clause as a “single-use” clause for time charters spanning the transition period. It is not part of the suite of standard bunker clauses but should be used together with the other bunker clauses, including the 2020 Marine Fuel Sulphur Content Clause, for ships delivering into a time charter before 1 January 2020 and redelivering after that date. We recommend that you also incorporate the 2020 Fuel Transition Clause into time charters with an expected redelivery date immediately before 1 January 2020 where there may be a risk of late redelivery or where the clause would form a useful part of owners’ implementation plan (as recommended by the IMO).

Preparing a ship for compliance with the MARPOL Annex VI sulphur content requirements as from 1 January 2020 requires time and careful planning. The 2020 Fuel Transition Clause sets out what tasks need to be achieved and when. Because some of these tasks need to be completed ahead of the coming into force date, owners and charterers need to cooperate to ensure a smooth implementation. The clause allocates responsibilities to each of the parties. As there is no “one size fits all” solution that can cover all different ship types and conditions, the clause avoids being too prescriptive about the extent of cleaning required to permit bunker tanks to be used for 0.50% sulphur content fuels.

Subclause (a) - Definitions

Subclause (a) contains six definitions of terms that are used consistently throughout the clause.

The definition of “Non-Compliant Fuel” has been given a special meaning for the purposes of the clause. This is because fuel with a sulphur content greater than 0.50% only becomes “non-compliant” on 1 January 2020. However, the clause needs to deal with the use or removal of such fuel before the coming into force date – at which point in time it is still compliant fuel as far as MARPOL Annex VI is concerned. The reference to non-compliant Fuel is used only in the context of use or removal of fuel with a sulphur content greater than 0.50%.

The definition of “Compliant Fuel” on the other hand refers to the requirements of MARPOL as of 1 January 2020.

The definition of “Sulphur Content Requirements” is identical to the one used in the 2020 Marine Fuels Sulphur Content Clause. It’s essentially the maximum sulphur contents and applicable dates stated in MARPOL Annex VI (including ECAs). The phrase “and related requirements” refers to any additional documentary requirements such as the Bunker Delivery Note.

The phrase “and/or by any other applicable lawful authority” means any additional regulation that may be applied by authorities as a supplement to MARPOL Annex VI and which must be complied with.

Subclause (b) – Requirements

Subclause (b) sets out the minimum requirements that owners and charterers need to achieve for the ship to be in compliance. It’s essential that the owners have a ship that has compliant fuel on board even before 1 January 2020 so that it can reach a bunkering port after the coming in to force date to take on additional stocks of fuel. This aspect should be considered by owners for ships redelivering immediately before 1 January 2020.

Although having non-compliant fuel on board the ship for use is not banned until 1 March 2020, the clause treats the carriage ban date as an absolute deadline while encouraging the parties to remove fuel with a sulphur content greater than 0.50% by 1 January 2020, if possible.

At the very heart of this clause is the need for the owners and charterers to cooperate. Although it is not a strict obligation on the parties, it requires them to use reasonable endeavours. The preferred option is to burn any fuel with a sulphur content above 0.50%. If time does not permit all the fuel to be burned, then any remaining fuel should be offloaded by the coming into force date. 

Subclause (c) – Responsibility of the Parties 

This subclause sets out the obligations of the owners and charterers. The balanced approach obliges the charterers to pay to offload and dispose of any remaining non-compliant fuel they have been unable to burn, and an obligation on the owners to ensure the ship is fit to receive compliant fuel. The wording “… fit to receive Compliant Fuel, taking into account the type of Compliant Fuel that will be loaded…” reflects that depending on factual circumstances such as the ship’s age, the type of fuel it has been using, the types of bunker tanks and especially the type of fuel that is to be loaded, different procedures could be required to prepare bunker tanks. In some cases, a thorough cleaning of tanks might be needed, but in other case the tanks might be prepared using additives. This issue should be addressed on a case by case basis, so the clause intentionally avoids being too prescriptive.

Subclause (d) – Disposal of Non-Compliant Fuel 

The charterers are responsible for the disposal of non-compliant fuel and this must be done in accordance with local regulations. This subclause has been added to help avoid owners facing fines or trade restrictions imposed on the ship due to the improper disposal of the non-compliant fuel.

Subclause (e) - Segregation 

Empty tanks in the context of this clause assumes that there will normally be unpumpable residuals.

Issues not addressed in the 2020 Clauses

The 2020 Fuel Transition Clause is not intended for use by vessel fitted with and operating exhaust gas cleaning systems (i.e. scrubbers).

Careful consideration should be given to bunker delivery/redelivery clauses in terms of the types of fuel on board and the prices to be paid – particularly for time charters spanning 1 January 2020 up until the carriage ban date on 1 March 2020.

 

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