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Navigating Sulphur 2020

The International Maritime Organization (IMO) has praised the implementation of the 0.5 percent sulphur cap on marine fuel, claiming that, so far, the transition has been “relatively smooth”, although charter party disputes are expected to emerge soon.

After rising significantly at the beginning of the year – when the official implementation deadline of the sulphur cap came into force – prices for very-low sulphur fuel oil (VLSFO) and marine gas oil (MGO) appear to be stabilising, said the IMO.

Further still, as of January 20, only ten cases of compliant fuel being unavailable had been reported in IMO's Global Integrated Shipping Information System (GISIS); and the dedicated email address established by the IMO secretariat has not received any specific correspondence reporting issues with implementation.

IMO secretary general Kitack Lim said: “I believe it is testimony to the diligence and dedication of IMO, its member states, the shipping industry, the fuel supply industry and other relevant industries that such a major rule change is being implemented successfully without significant disruption to maritime transport and those that depend on it.”

He warned, however, that the next important target is fast approaching – when carrying non-compliant fuel oil on board ships becomes prohibited on March 1, 2020.

“I urge all shipowners, operators and masters to comply with the carriage ban, where applicable, when it comes into effect. IMO will remain vigilant and ready to respond and provide any support,” added Lim.

The praise may be somewhat premature, however, as many predict that the amount of disputes arising from IMO 2020-related issues will rise over the next six months, once the situation has stabilised.

Some claims are already arising from charter disputes, mainly focusing on the rising costs of compliant fuel – something that parties have tried to pass up and down charter chains.

Yet it is the interpretation of clauses in contracts – such as surcharges, or bunker adjustment factors – designed to cover the cost of compliance with the regulations that will be one of the main sources of arbitration going forward.

Availability of compliant fuel is also inconsistent. Liner operators have the benefit of being able to plan where their refuel but for tramp operators, forward fuel buying is much more difficult.

The true difficulties resulting from the regulatory changes will likely take some more time to come to the fore.

www.imo.org

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