UK: Update On BIMCO 2020 Fuel Transition Clause For Time Charter Parties

Last Updated: 14 January 2019
Article by Marcus Dodds

Most Read Contributor in UK, June 2019

On 21 December 2018 we commented on the newly released BIMCO clauses intended to address the International Maritime Organization's revised sulphur content limits with regard to the consumption and carriage of marine fuel (in accordance with Regulation 14 of Annex VI of the International Convention for the Prevention of Pollution from Ships, 1973 as modified by the Protocol of 1978, MARPOL), which enter into force on 1 January and 1 March 2020 respectively.

Since then we have received a number of enquiries relating to how the BIMCO 2020 Fuel Transition Clause for Time Charter Parties addresses the cleaning of fuel tanks ahead of 1 January 2020.

The clause outlines the two-stage process (found at (c)(i) and (ii)) that must be completed before compliant fuel (i.e., fuel that complies with the lower sulphur limits coming into force on 1 January 2020) can be loaded into any fuel tank.

The first stage (found at (c)(i)) requires that any non-compliant fuel (i.e., fuel that does not comply with the lower sulphur limits coming into force on 1 January 2020) remaining onboard after 1 January 2020 be "discharged" by the charterers before 1 March 2020 (or redelivery, if earlier), when the prohibition on carriage of non-compliant fuel comes into force.

The second stage (found at (c)(ii)) requires that the owners must make a (now discharged) recipient fuel tank fit to receive the intended compliant fuel.

While the need for such a provision as is found in (c)(i) is obvious, it is not obvious why this should be a prerequisite to owners having to comply with (c)(ii) or the supply (by charterers) of compliant fuel, bearing in mind that the charterers are (necessarily) also required to have supplied a quantity of compliant fuel ahead of 1 January 2020 by virtue of their obligations under (b)(i) to have "sufficient Compliant Fuel to reach the nearest bunkering port" at such date. Indeed, the inclusion of the first stage as a prerequisite to the supply of compliant fuel is potentially problematic.

It would therefore seem preferable for the relevant sentence to be amended as follows:

"Compliant Fuel shall not be loaded into any of the a Vessel's bunker tanks until the steps described above in subclause s (c)(i) and (c)(ii) hasve been carried out in respect of any such bunker tanks."

Further, as (c)(i) seems to ignore the need (as per the charterers' obligation under (b)(i) of the clause) to have at least some fuel tanks fit for the loading of compliant fuel ahead of 1 January 2020, it might be preferable also to amend (c)(i) to read something akin to:

"In order to meet the Requirements, the Charterers shall at their risk, time and costs ensure that: (1) sufficient bunker tanks are free of liquid and pumpable fuel ahead of the Effective Date so as to permit Owners to comply with their obligations under (c)(ii) to make such tanks fit to receive Compliant Fuel and for Charterers to supply sufficient quantity as required to comply with (b)(i); and (2) 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 of the Vessel, whichever occurs first; and"

The clause is also silent as to the possible need (or at least operational preference) for a supply of compliant fuel or distillate fuel for cleaning or flushing purposes, as part of the second ((c)(ii)) stage. Where the underlying charter is on a ShellTime standard form or other form that has a provision permitting an owner to require (or at least request) the supply of a compliant fuel or distillate fuel that the charterer would not otherwise be required to supply, this should not be an obstacle to the owner's preference (albeit the price differential would fall to such owners). However, an equivalent provision is rare under a non-tanker charter and the cooperation provision under the BIMCO clause is not broad enough to assist. Parties to charterparties without such rights may wish to consider whether the same should be included.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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