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GSCC Annual Report and AGM

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GSCC Anual Report and AGM

From the Chairman

Dear Colleagues,

It is with great pleasure and some sadness that I present our 85th Annual Report in 2020. I stress sadness because over the last six months the COVID-19 virus has affected our world in a manner unlike anything we have experienced in our lifetime.

This tragic event has claimed lives in every single country and has ravaged every continent and changed our world in ways none of us expected. Our resilience as humans is such that we will survive and overcome this tragedy but not without very significant consequences. Before we progress to what may seem to be our usual mundane and pedestrian problems of everyday shipping, I wish to express the following sentiment.

The men and women who work in the shipping industry, especially at sea but also ashore have performed magnificently over this six-month period going about their daily work with so many limitations. The world in general has not appreciated the silent and unsung manner in which shipping has provided the most vital artery of trade flowing, keeping us all fed, clothed and warm. It is very disappointing that maritime countries around the world have welcomed the cargo every ship carries but have not welcomed the crew itself. Seafarers should be considered essential or key workers and afforded the right to repatriation,
embarkation and disembarkation when necessary. It is incumbent upon all nations which trade internationally to designate ports where crew can be exchanged but also nearby airports that can take them to their final destination.

Looking at developments over the last 12 months, the Greek Shipping Industry has reaffirmed its position as the world’s largest fleet. The fleet has grown younger through deliveries of new ships as well as judicious purchases of modern second-hand ships. Unfortunately, due to COVID-19 the recycling of older ships since March has been impossible up to about two weeks ago.

However, in the Tanker, Bulk Carrier, Container, LNG, LPG sectors Greek companies still dominate the market with modern, technically advanced and  environmentally sensitive vessels. The Cruise ship sector, which is generally not a market with a major Greek presence has suffered hugely due to the negative publicity of disease outbreaks on board ships and as such has more or less shut down at least until the third quarter, and in some cases the fourth quarter.

The freight markets themselves were active until COVID-19 struck and then a general malaise transpired except for the tanker sector which experienced a temporary boom brought upon by the anomalies of oil price fluctuations and demand reductions. Let us hope that soon trade will recover and all sectors will normalize again.

With all these problems, limitations and dangers deep sea shipping is still proving to be the most energy efficient, low carbon transportation mode bar none.

During this period the G.S.C.C. has not stopped lobbying at the highest levels in order to solve problems brought about by COVID-19, and all the other issues that need our attention and we are working together on the international stage with the
relevant individuals and organizations to bring about workable maritime solutions to all these issues.

Looking at these issues individually:

A. 2020 IMO Sulphur Cap Whilst initially there may have been some supply bottlenecks this has calmed down and now most ports have sufficient quantities of low sulphur fuels in order to meet fleet requirements.

However, the technical problems have multiplied as the composition of this new fuel is not the same globally and vessel’s purification systems as well as the main engines themselves are incurring much more maintenance and a fair amount of
damage. These main engine damages have compromised vessel safety. IMO must be made aware of this. We must still get to the point of having a common composition to this fuel.

B. 2050 Greenhouse Gas Reductions
As this is a project that requires an enormous amount of work, investigation and experimentation some non-IMO Legislators seem to want to progress in an unseemly and hasty manner often based on half-baked solutions.

The Shipping Industry itself, with little or no help from the technology providers such as Engine manufacturers, Shipbuilders and Energy suppliers are valiantly trying to come forward with viable short, medium and long-term solutions to this issue. It must be stressed that this must be carried out through the IMO only and not through any other less experienced institutions.

C. Large Ore Carriers
The scuttling of the modern VLOC Stellar Banner proves that the effort to build cost-effective ships is being achieved at the risk to the vessels themselves, and most of all to crew safety.

Regulators, Shipyards and Classification Societies should take a more responsible attitude and reassess the design process and build more robust and safer ships. It is unjustifiable that such modern VLOCS can suffer damage in the laden condition, with so little reserve buoyancy and hence survivability.

D. Maritime Training
Whilst this is mainly a national issue, we urge the Greek Government to be more flexible and permit private and not just state academies to exist in order to both increase the proportion of Greek Seafarers on board ships and reduce unemployment among the young, which is still stubbornly high. Within Greece itself, it must be stressed that shipping is the Country’s most important international industry and must be supported in every way possible.

Apart from Maritime training, which has to be upgraded, it is very important that there is a more flexible approach to employing Greeks in all ranks on board.

To maintain this link with Greece, the Ministry of Merchant Marine should not weaken the inherent strength of the Hellenic Coast Guard and its great contribution to Greek Shipping worldwide.

Apart from its close and warm links with the Union of Greek Ship Owners in Greece, and the united position we take on all national and international issues, the G.S.C.C. prides itself on maintaining a close dialogue with all major international maritime organizations.

The I.M.O., I.C.S., INTERTANKO, INTERCARGO, BIMCO, the E.U., National Governments and M.E.P.’s, are amongst the leading groups with whom we have such exchanges.

Further to the above, we cherish our close contacts with the International Group of P & I Clubs, having Club Chairmen and Directors on our Council.

Our relationship with the senior IACS members is also very close, not least due to our presence as individual members on the boards of many National and International Committees of leading Classification Societies. We also work together with them in pressing for ever higher vessel standards in construction and operation.

Being based in London, gives us the opportunity to keep in close contact with the Baltic Exchange (the world’s leading shipping indices provider), the UK Chamber of Shipping, Maritime London, and other London-based organizations.

We also support the aims of London International Shipping Week in reminding our global shipping community of the importance of the U.K. and London in particular.

Finally, I would like to thank our Member Offices for their support, the Council and the Secretariat for their hard work, which allows us to continue keeping our membership well-informed and lobby on a global basis in favor of positive practical legislation and where this is negative, to make our opinion very wellknown, backing it up with well-reasoned arguments.

I am particularly grateful to our Vice-Chairmen, Constantinos Caroussis, John M. Lyras and Spyros Polemis, our Honorary Chairman Epaminondas Embiricos, our Treasurer Diamantis Lemos and Deputy Treasurer Dimitri Frank Saracakis.

My special thanks go to Stathes Kulukundis and his team John Hadjipateras, George Embiricos, Filippos Lemos, Alex Hadjipateras and Basil Mavroleon, without whom our monthly reports and other documents would not be as professionally prepared as they are. My thanks also go to Thimios Mitropoulos for his invaluable knowledge on international legislation, and for keeping his eagle eye on our Council minutes.

Our Director Konstantinos Amarantidis, ably assisted by Maria Syllignaki, continue to run the Committee smoothly and very professionally, and I thank them for their sterling efforts.

But most of all, this year I wish to thank all the seafarers in the world for going about their daily lives without mentioning the huge sacrifices they have made during this difficult period and keeping world trade flowing.

G.S.C.C. Council Members
Mr. Haralambos J. Fafalios Chairman
Mr. Constantinos I. Caroussis Vice Chairman
Mr. John M. Lyras Vice Chairman
Mr. Spyros M. Polemis Vice Chairman
Mr. Diamantis J. Lemos Treasurer
Mr. Dimitri Frank Saracakis Deputy Treasurer
Mr. John A. Angelicoussis Member
Mr. Dimitri C. Dragazis Member
Mr. George E. Embiricos Member
Mr. Alexandros J. Hadjipateras Member
Mr. John M. Hadjipateras Member
Mr. Antonios C. Kanellakis Member
Mr. Alexandros C. Kedros Member
Mr. Stathes J. Kulukundis Member
Mr. Filippos P. N. Lemos Member
Mr. Basil E. Mavroleon Member
Mr. Efthymios E. Mitropoulos Member
Mr. Anthony P. Palios Member
Mr. Michael G. Pateras Member
Mr. Andreas A. Tsavliris Member
Mr. Epaminondas Embiricos Honorary Chairman
G.S.C.C. Secretariat
Mr. Konstantinos Amarantidis Director
Ms Maria Syllignaki Assistant Director

Fleet Statistics

The World Fleet

As of 2 March 2020, according to IHS data, the world fleet of self-propelled, sea-going merchant ships,greater than 1,000 Gross Tons (GT), stood at 56,498 vessels of 1,512,763,100 GT, including 3,609 vessels of 137,703,507 GT on order.

The Greek Controlled Fleet

As the aforementioned IHS data suggest, as of 2 March 2020, that Greek interests controlled 3,968 vessels of various categories of 340,823,637 total deadweight (DWT), and 199,693,859 total GT. Compared to the data in the past year, this
represents a decrease of 49 vessels, and an increase of 1,274,280 DWT and 1,529,779 GT. These figures include 158 vessels of various categories of 18,411,004 DWT and 13,017,734 GT, which are on order. In view of the unstable market conditions experienced during the period, the slight decrease in the number of vessels, and the increases in GT and DWT are encouraging.

With respect to vessel type, the Greek owned fleet recorded a slight decline in the categories of Chemical & Products Tankers and Ore & Bulk Carriers, in terms of vessel numbers and DWT. Cargo and Passenger vessels also recorded a slight decrease in vessels number but an increase in DWT. On the other hand, Oil Tankers, Liquefied Gas Tankers, Container and other Cargo vessels presented a slight increase both in DWT and number of ships in relation to the corresponding world fleet type for the year 2018.

What is noteworthy is that Greek parent companies represent 26.6% of the world tanker fleet, and 14.7% of the Ore and Bulk fleet, in terms of vessel numbers.

Overall, the Greek owned fleet stands at 7% of the global fleet in terms of number of vessels, 13.2% in terms of GT and 15.6% in terms of DWT.

According to the data, the past year saw an increase in the average age of the world fleet, from 13.7 years in 2018/2019, to 14.1 in 2019/2020. However, the average Greek-controlled vessel, at 11.7 years of age, is 2.4 years younger than the industry average. When calculated in terms of GT and DWT, the average age is reduced to just 9.9 and 9.8 years, respectively, as against 10.1 and 10.8 of the world fleet.

The fleet registered under the Greek flag, as a percentage of the world fleet, in terms of number of ships, GT, and DWT is 1.1, 2.6 and 3 respectively. It should be noted, however, that for oil tankers the percentages are 7.3, 7.7 and 7.9 respectively.

The Greek registered fleet has decreased in terms of vessel numbers as well as DWT and GT, now comprising of 636 ships of 38,799,270 GT and 65,640,708 DWT. The significant decrease in the number of vessels registered under the Greek flag should be taken into consideration by the Greek administration.

(Source: IHS Markit)

Developments in Greece

Economic Outlook

At the start of the new decade, the Greek economy has corrected the major macroeconomic and fiscal imbalances that had caused the economic crisis, and is now trying to pick up pace towards a sustainable growth trajectory. Along the way, however, Greece faces a number of significant challenges, largely a legacy of the economic crisis, as well as external risks. The outbreak of the coronavirus and an exacerbation of the refugee/migrant crisis weigh heavily on the short-term growth outlook and temporarily raise serious obstacles on the path to normality. The coronavirus pandemic is testing the limits of societies and economies around the globe and calls for an unprecedented level of scientific, social and economic cooperation and coordination. Bond and capital markets have already suffered heavy losses, with the weaker economies hit hardest.

Until recently, the Greek economy continued to recover. In 2019, the Greek economy maintained its growth momentum, with 1.9% real GDP growth. According to the available general government cash data for 2019, the primary surplus target was overachieved for the fifth consecutive year, with provisional data suggesting an outcome of close to 4% of GDP. Restored confidence in the banking sector enabled the full lifting of capital controls in September 2019. In acknowledgement of the progress made by Greece, Standard & Poor’s upgraded the Greek sovereign’s rating by one notch in October 2019, and Fitch followed suit in January 2020, while Greece’s ranking in Transparency International’s perception of corruption index improved by seven places.

The forecast for 2020 was that the fiscal target would be met, as a result of the implementation of a growth-friendly and fiscally neutral policy mix, consisting mainly of an easing of the tax burden and measures to encourage electronic transactions. However, the coronavirus pandemic requires significant new expenditure to address the disease, support businesses and preserve jobs and will have a strong negative effect on economic growth and, thereby, on public revenue. Against this background, the general government primary balance is expected to fall several percentage points of GDP short of the initial target of 3.5% of GDP.

The growth of the Greek economy is projected to slow down considerably in 2020 although, it cannot yet be accurately quantified, due to a lack of available data and given that the pandemic is still unfolding. According to the baseline scenario
of the Bank of Greece, GDP growth in 2020 was projected to be zero in April, rather than 2.4% as last revised in March 2020, after incorporating the National Accounts data for the fourth quarter of 2019. Based on the latest information on the pandemic developments, the most likely scenario is that there will be a strong negative impact in the first two quarters of 2020, partly offset in the last two quarters. The baseline scenario of the Bank of Greece incorporates the offsetting measures already adopted.

There are three main channels through which the impact of the Covid-19 outbreak is affecting the Greek economy. On the demand side, through a slowdown of Greek exports of goods as well as services (transport, shipping and tourism), weaker domestic consumption and investment. On the supply side, through disruptions in the global and regional supply chains of intermediate and capital goods, and business closures as a way to contain the pandemic.

Finally, through the international financial system, as an increase in funding costs amid global repricing of risks leads to tighter financing conditions for banks, businesses and households, as well as for the Greek State.

The greatest challenge facing fiscal policy today, and in fact a total game changer, is to utilise all available means in order to finance the expenditure needed for addressing the coronavirus pandemic, and minimise the adverse effects on the
real economy, with the smallest possible impact on public debt sustainability.

In order to achieve strong growth in the medium-to-long term, once the current crisis is behind us, the Greek economy will need to address, apart from the two major external shocks that are clearly national priorities, a number of medium-term challenges, namely the large investment gap, high unemployment, the high stock of NPLs, high public debt and slow digital transformation. Thus, mainly supply-side economic policy interventions are necessary, so as to expand Greece’s productive capacity and increase actual and potential output. Obviously, some of the policy interventions required cannot possibly be achieved in the current environment of sharp corrections in international markets.

With regard to risks and sources of uncertainty in the future, the projected outlook for the Greek economy is subject to
significant downside risks associated with the volatile global economic environment, geopolitical tensions in the Eastern Mediterranean region, extreme weather events as a result of climate change, the recent exacerbation of the refugee/migrant crisis, but above all the coronavirus outbreak. As for the external environment, downside risks arise from the uncertain and weak recovery of the global economy.

Covid-19

In Greece, the government moved well before the virus reached its shores, as it saw infections spread in Italy. An ad-hoc scientific committee was set up with top epidemiologists, virologists and infectious disease experts. The first confirmed
case in Greece was recorded on 26 February, and the country reacted swiftly.

Greek Prime Minister Kyriakos Mitsotakis imposed tight restrictions. In February the carnival festivities were cancelled. In early March, the schools and universities closed. On 12 March, Greece confirmed its first Covid-19 death. A day later, all cafes and restaurants were shut and social distancing was  enforced, while on 22 March restrictions on movement were imposed. Greek enforcement was strict. More than 60,000 fines were issued for violating the lockdown which, according to Greek police, totalled €9,247,800 (£8.1m). All this is believed to have restricted the spread of Covid-19.

With the spread of the virus under control, in late April the gradual lift of restrictions was announced. The government’s two-month plan, consists of seven stages in a coordinated return to a new normal. with continuous monitoring. The first step was the re-opening of some businesses in early May, continued with allowing further business openings and freedom of movement. Domestic travel has already resumed, while some international travel is now allowed, in an effort to support the hospitality industry as we enter into the summer months.
However, a well-structured and efficient strategy for welcoming visitors in the country and minimizing the risk of spread is essential for keeping case and toll numbers to low levels.

As of June 14, a total of 183 Covid-19 related deaths were reported in Greece, according to WHO.

Change in Governance

A change in leadership took place in July 2019, when New Democracy won the Greek snap general election. Centre-right regained power under Kyriakos Mitsotakis, following four years of Alexis Tsipras’s leftist Syriza governance. New Democracy party won a parliamentary majority, with 158 seats in the 300- seat legislature. Turnout in the election was about 57%, one of the lowest figures in decades. It was the sixth time in just a decade that Greeks went to the polls.

One day after New Democracy’s election victory, Greece’s new Prime Minister Kyriakos Mitsotakis named his cabinet. Christos Staikouras was appointed Finance Minister and Nikos Dendias heads the Foreign Ministry. Ioannis Plakiotakis was appointed Minister of Shipping and Island Policy, while theMinistry’s stand-alone identity was kept.

Mr. Plakiotakis was the maritime affairs co-ordinator for New Democracy party, and has been a member of parliament for Lassithi, the eastern prefecture of Crete, since 2004. The maritime brief will be his first full ministerial post. He has twice
served as Deputy Minister in previous administrations. He was Deputy Minister of Defence from 2007 to 2009, and Deputy Minister of Labour, Social Security and Welfare from 2014 to 2015. Mr. Plakiotakis has also served in many senior positions in the New Democracy party, including acting as its transitional president before Mr. Mitsotakis became leader in early 2016.

October 2019, saw a change in the leadership of the Hellenic Coast Guard. After more than three years as head of H.C.G., Admiral Stamatios Raptis handled over his position to Vice Admiral Theodoros Kliaris. The handover ceremony took place in the presence of the Minister of Shipping and Island Policy, Mr. Plakiotakis.

Vice Admiral Theodoros Kliaris graduated from the Hellenic Naval Academy in 1987. As a graduate of Merchant Marine Academy of Syros for Marine Deck Officers, he served as 3rd Officer on ocean-going vessels. He has attended a series
of seminars on Search and Rescue, Ship Inspections, Marine Environment Protection, International Safety Management Code etc. He served as Director of the National Maritime Sea Border Centre, as Maritime Attaché in Durban, South Africa, as a Safety Officer and Head of duty of the Joint Search and Rescue Coordination Centre. In addition, he served as Director in the Minister’s Office, in Directorates of the Ministry of Shipping and Island Policy. In 2015, he was promoted to the rank of Rear Admiral, and was appointed Commander of the 1st regional administration of the H.C.G. in Piraeus. With his promotion to the rank of Vice Admiral in 2016, he took up his duties as 1st Deputy Commandant of the H.C.G.

More recently, the Greek parliament elected the country’s first female president in a historic vote by parliament in January 2020. Ministers overwhelmingly endorsed the nomination of Katerina Sakellaropoulou as head of state. The new President of Greece is a French-educated high court judge and ardent human rights advocate. No woman has held the post in the nearly 200 years since Greece proclaimed independence. A week prior to her election, Kyriakos Mitsotakis had
proposed Katerina Sakellaropoulou to assume the role of head of state stating that  it is time for Greece to open up to the future, emphasising that the choice embodied unity and progress.

Migrant Issues

Throughout the course of the past year, Greece saw many leadership changes while the country battled to control the massive influx of migrants and the Covid19 pandemic.

With Greece still under significant economic strain, a further pressure was added as the country became Europe’s gatekeeper. Greece is the busiest entry point for illegal migration in the European Union, with most arrivals occurring on eastern Greek islands from the nearby Turkish coast. Between September 2019 and January 2020, 36,000 new arrivals crossed the Aegean to
Greece from Turkey, to a system that has long reached overcapacity and is unable to absorb any more people. The Greek
government transferred 14,750 people from the islands to the mainland, establishing additional camps in the mainland and new detention centres on the islands.

Additionally, in late February 2020, before Covid-19 began to spread across Europe, Turkey opened its western borders, sparking chaotic scenes as Greek troops attempted to prevent refugees from entering Europe en masse. A titanic battle was waged to keep the Greek frontiers closed. Hundreds of migrants started arriving on buses on the borders with Greece and Bulgaria, provided by the Turkish state, after a senior Turkish official said Ankara would no longer abide by the 2016 EU deal and stop refugees from reaching Europe. As reported, few of those arriving in Greece were from north-west Syria, with the majority being other nationals who had been living in Turkey for a long period of time. Greece bolstered its eastern land border, while Bulgaria sent an extra 1,000 troops to its border with Turkey. At the same time further south, dinghies with migrants were arriving in the island of Lesbos. Greek authorities increased the number of vessels patrolling the seas around Lesbos, along with other Aegean isles, in an effort to deter clandestine voyages. The move was supported by the E.U., providing funds for an immediate upgrade of the Greek-Turkish border infrastructure, and Frontex’s border intervention squad.

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A number of migrants were stuck between the two countries for nearly a month, as trying to return to the Turkish side was not allowed by the Turkish authorities. On March 27, the trapped migrants were transferred back to Turkey, with the Turkish Minister of Interior affairs stating that when the Covid-19 crisis is over, Turkey will not impede migrants from crossing the border.

In May, arrivals were reduced by more than 90%. Approximately 250 people entered Greece last month, compared to more than 3,000 in May 2019. According to the Migration and Asylum Minister, Notis Mitarakis, the significant decrease in migrant arrivals was influenced by the pandemic to some extent, but mainly by the determination of Greece to protect its borders. In order to deal with the immigration crisis, Greece has a three-stage plan in place. The first step was to better guard the borders, the second is to separate real refugees from economic migrants, according to the Minister. The third stage will be to have less and safer structures, with security measures in place. The Minister stated that Greece is protecting its land and sea borders and will continue to do so even now that the borders are slowly reopening.

(Sources: Bank of Greece, Hellenic Coast Guard, World Health Organization, London School of Economics, Lloyd’s List, Seatrade-Maritime, Reuters, BBC, CNN, the Guardian, Euro News, E Kathimerini, Proto Thema, Greek City Times)

Developments in the UK Economic Outlook

In 2019, UK GDP growth was modest according to Bank of England, with growth levels in Q4 around zero, dampened by slower global growth and elevated Brexitrelated uncertainties, which weighed on business investment, consumer spending
and manufacturing production. The Bank’s indicators in January 2020, suggested that UK GDP growth was projected to pick up a little in early 2020 as global growth was considered to be stabilising.

However, the spread of Covid-19, which caused the loss of more than 41000 lives in the UK, and the lockdown measures introduced on 23 March 2020 are having a significant impact on businesses and the economy. The budget deficit and public
debt are expected to increase significantly, reflecting both the associated economic disruption and the Government’s economic policy response, designed to support incomes and minimise business failures to prevent greater economic damage, according to UK Office for Budget Responsibility (OBR).

According to UK Office for National Statistics (ONS), as of April 2020, one quarter of companies in the UK had temporarily closed due to the lockdown and the majority of those still operating reported lower turnover, with more than half a million companies reported to be in significant distress. Britain’s largest companies expect the pandemic to reduce their sales by more than a fifth this year, a gloomier outlook than the financial crisis of 2008-09, according to asurvey published by Deloitte in May. The quarterly survey of Chief Financial Officers at more than 100 of Britain’s largest businesses showed the biggest drop in confidence since it began in 2007, and the lowest risk appetite since the global financial crisis in 2008.

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OBR produced an initial assessment of the potential impact of the coronavirus onthe economy and public finances on 14 April, which is depicted below. This was a scenario rather than a forecast, based on the illustrative assumption that economic activity would be heavily restricted for three months and then gradually return to normal over the subsequent three months.

More recently, OBR reviewed the cost of Covid-19 measures taken by the British government forecasting that cash borrowing will increase by 103.7 billion pounds this financial year. The sum, made up of 99.3 billion pounds in extra spending and 4.4 billion pounds of tax cuts, is slightly higher than the first estimate published earlier.

According to ONS, the UK employment rate in the three months to February 2020 was estimated at a record high of 76.6%, 0.4 percentage points higher than a year earlier and 0.2 percentage points up on the previous quarter. However, more
recent forecasts predict unemployment rate to spike up to 10% in Q2, gradually decreasing over the next quarters of the year.

The data and analysis related to the coronavirus pandemic highlight the major impact on UK’s economy and society. UK currently has the highest death toll in Europe. In addition to the significant impact of the pandemic on public health,
wellbeing levels have also been severely affected, according to ONS April report.
UK government is continuously reviewing the situation, taking action as appropriate and gradually easing restriction measures.

New UK PM & Transport Minister

Following the announcement of Theresa May in June 2019, that she was stepping down as Conservative Party leader, the Conservative Party members voted for a new leader. Boris Johnson won the Conservative leadership election over his rival
Jeremy Hunt, and became PM in July 2019.

Former Prime Minister Theresa May’s snap election in 2017 had deprived her of a working majority in the House of Commons, leaving Britain in a political standstill. That result prevented May frompassing her Brexit deal three times. What is more, by means of a relatively recent legislation, the Fixed-Term Parliaments Act, the next election was not due to take place until 2022. Johnson came to the same conclusion as May, that the only way out of the impasse was to hold an early vote in an
attempt to seek a parliamentary majority to enact his Brexit plan. The Prime Minister’s proposal to hold an election in
December received the approval by the majority of MP’s, securing a snap poll at fourth time of asking.

UK general election was held on December 12, with Conservative Party leader Boris Johnson winning a sweeping victory. Boris Johnson secured the largest Conservative majority since Margaret Thatcher’s third victory in 1987, and the largest share of the vote (44%) won by any party since Thatcher’s first win in 1979. It was the UK’s third general election since 2015, and the first to be held in December for almost 100 years. The desired outcome to increase the Party’s parliamentary majority was achieved, paving the way for Brexit.

Two months after winning the general election, PM Boris Johnson carried out a major reshuffle of Ministers in cabinet positions in February 2020. A few individuals that left the cabinet included Chancellor of the Exchequer Sajid Javid,
who was replaced by Rishi Sunak, as well as Nusrat Ghani.

UK transport minister Nusrat Ghani, who had responsibility for overseeing shipping and maritime had been in the post since January 2018, was moved out. Ghani had been instrumental in working on the UK’s Maritime 2050 strategy, the nation’s 30-year vision for its maritime industry. Her departure was met with dismay from UK maritime organisations.

Kelly Tolhurst MP was appointed as the UK’s new Minister for Maritime. Kelly Tolhurst was previously the Parliamentary under Secretary of State for the Department for Business, Energy and Industrial Strategy, and has served as Rochester and Strood’s Member of Parliament since 2015. The new Minister has a strong maritime connection being the daughter of a boat builder and a marine surveyor by trade.

Brexit

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UK’s exit from the EU was repeatedly delayed amid a period of deadlock and turmoil in the British parliament, which ended after Boris Johnson replaced Theresa May as Prime Minister and renegotiated the deal.

In October 2019, negotiators from the U.K. and EU reached a draft, revised Brexit deal. Most of the changes to the deal agreed by Theresa May with EU in November 2018, were in relation to the status of the Irish border after Brexit, an issue which dominated talks for months. The deal consisted of a Withdrawal Agreement on the terms of departure, accompanied by a Political Declaration on future ties. The terms in the Withdrawal Agreement cover matters such as the UK’s financial settlement, provisions for Northern Ireland, and safeguarding for the rights of EU citizens living in the UK, and British citizens living on the continent.

Subsequently, the Withdrawal Agreement cleared all hurdles and completed its passage through both houses of parliament. After the MPs gave their initial approval to the 11-month transition period before the Christmas recess, the House
of Commons gave its final approval to the Withdrawal Agreement Bill on 9 January, which then passed to the House of Lords. Despite the fact that the House of Lords requested five changes, which were rejected by the MPs, it was decided
not to continue a battle with the Commons, and agreed to pass the bill so as to allow Brexit to happen at the end of January. On 22 January, the EU Withdrawal Agreement Bill completed its passage through both houses of parliament, and received royal
assent on the next day. On 29 January, the Withdrawal Agreement was approved by the European Parliament, which concluded the process and allowed Brexit to finally take place.

On 31 January 2020, the UK left the EU entering an 11- month transition period. During this period, the UK effectively remains in the EU’s customs union and single market, continuing to follow EU legislation, though without being part of the EU political institutions. The withdrawal agreement allows for a two-year extension of the transition period to give more time for negotiation. However, both sides expressed their hope to reach an agreement by the end of the transition period on 31 December 2020. The negotiations will cover a new trade deal and the terms of the future relationship, covering a wide range of areas including goods and services, fishing and farming, security cooperation, data policy, education and science.
So far, the progress made in post-Brexit trade talks between the UK and EU has been limited, with serious differences reported between both sides. Additionally, no sooner had negotiations begun than the coronavirus pandemic restricted the proceedings. A first round of talks took place in early March 2020, but subsequent face-to-face talks were suspended for six weeks, with EU’s chief negotiator reported to have contracted the disease. Later, Downing Street announced that the talks are continuing to take place over the phone, amid the coronavirus outbreak. Negotiations resumed by videoconference on April 20, May 11 and June 1.

For the moment, the focus is mainly placed on fighting the pandemic but very soon decisions will need to be taken on post-Brexit ties. On 30 June, a joint decision needs to be taken regarding whether to extend the transition period or not. In case no extension is agreed in June, the UK will either start a new relationship with the EU on 1 January 2021, provided that a trade deal has been agreed and ratified by both parties, or UK’s exit transition will be made without a trade agreement in place. Despite the Covid-19 related hurdles, the UK government has stated that it will refuse to extend the period beyond December, even if the EU requested a delay. The exit path which the UK will soon choose to follow remains to be seen.

(Sources: UK Government, Office for National Statistics, World Health Organization, Bank of England, European Parliament, KPMG, PWC, Lloyd’s List, Trade Winds, FT, Bloomberg, BBC, CNN, Reuters, Euro news, CNBC, the Guardian, Spectator, Statista, MIS Marine)

COVID-19 Outbreak – Impact on Shipping

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The COVID-19 pandemic, the fifth documented pandemic since the Spanish flu in 1918, is the defining global health crisis of our time. Since its emergence in Asia late last year, this highly contagious virus has spread to every continent except Antarctica. The novel coronavirus disease COVID-19 was first reported in Wuhan, China, in December 2019, and soon spread across the globe.

On 11 March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. As of 14 June 2020, the number of confirmed cases globally stood at 7,690,708, with the death toll exceeding 427,000, according to WHO.

The spread of COVID-19 has placed the entire world in an unprecedented situation, with the ripple effects of the pandemic sending shock waves through the global economy. The shipping industry as the backbone of world trade has been particularly impacted due to the closely knit web of international trade lanes which are connecting ports, people and cargoes. The Cruise ship sector has suffered hugely due to the negative publicity of disease outbreaks on board ships, resulting in an almost complete shutdown of the cruise industry.

With the coronavirus becoming a global pandemic and lockdown measures introduced in many parts of the world, new ways of working became the new norm for many. However, for seafarers this has plunged them into serious difficulties as travel bans were enforced and borders were closed. Transport hubs have been affected, while ports closed and vessels were denied entry. The need for ships to change crews and for seafarers to fly home at the end of their periods of service have emerged as two of the biggest challenges facing the shippingindustry as a result of the COVID-19 pandemic.

Due to ongoing restrictions, large numbers of seafarers are having to extend their service on board ships after many months at sea, unable to be replaced after long tours of duty or be repatriated via aircraft to their home countries. Each month about 150,000 seafarers need to be changed over to and from the ships which they operate to ensure compliance with international maritime regulations for ensuring safety, crew health and welfare, and the prevention of fatigue. Service periods on board ships cannot be extended indefinitely due to the dangerous impacts on the well-being of ship crew and safe ship operations.

Many shipping companies are still having difficulties conducting crew changes, especially in Asia. The crew change crisis during the COVID-19 pandemic is far from over, even if the situation may appear to be gradually improving.

It is crucial that all seafarers are recognised as key workers, with any barriers to their documentation removed, and to lift national travel restrictions so that seafarers can get home on conclusion of their contracts and re-join their families.
The IMO has highlighted the importance of crew changes and has issued Circular Letter No.4204/Add.6, which contains recommendations to Member States about measures to facilitate ship crew changes in seaports during the pandemic.

Expanding on these recommendations, the IMO later issued Circular Letter No.4204/Add.14, which provides a recommended framework of protocols for ensuring safe ship crew changes and travel during the pandemic, proposed by a broad cross section of global industry associations. The Secretary-General of IMO, Mr. Kitack Lim, urges the implementation of these protocols by all stakeholders.

As seafarers are held onboard ships for extended periods, statutory certificates are eventually expiring. Regional port state control organisations, maritime administrators and classification societies across the world are acknowledging the      tremendous impact of the COVID-19 crisis, and are taking a pragmatic approach, as suggested in several IMO circulars, by issuing categorical extensions to expired certificates.

The restrictions are having a knock-on effect in other areas, challenging compliance with global regulations. Scheduled installations of exhaust gas cleaning systems and ballast water management systems at yards are being significantly delayed due to lockdown measures and supply chain disruptions. In light of the unprecedented circumstances, the IMO and port state inspection authorities are again taking a pragmatic approach, recognising the need to maintain crucial sea trade supply chains, including the flow of vital medical supplies, critical agricultural products, and other goods and services.

The ship building industry has also been severely affected due to lockdown measures, with significant delays in newbuilding deliveries reported, while owners, crew and surveyors have been unable to arrange yard visits, which has increased the delays. Shipbuilders and their associated supply chains have faced difficulties in resuming normal production of vessels under construction, resulting in missing timely deliveries. In light of the newbuilding delays and the goalbased ship construction
standards for bulk carriers and oil tankers, which will enter into force in July, the IMO issued guidance concerning unforeseen
delays in the delivery of ships, with a focus on oil tankers and bulk carriers.

Further consequential issues involve port closures, congestion and delays in cargo deliveries. Due to lockdown measures and restrictions, cargo lying uncollected at ports has created congestion, reducing capacity for incoming cargo and containers. The ports which remained open were operating with reduced workforce, exacerbating the issue. The closure of ports and port congestion have caused significant disruptions in the supply chain, driving legal and insurance implications.

Maintaining the ports around the globe open as continuously as possible is essential. A sensible and well-organised plan needs to be in place, ensuring that the ability for shipping services and seafarers to deliver goods is not hampered.
In view of a second possible resurgence of COVID-19 cases in the future, taking urgent action for addressing the matter is crucial. To help support and restore economies worldwide, it is essential for international trade to continue. The maritime industry continues to be a vital artery for the global economy. The need for all involved to work collaboratively to address practical issues caused by this unprecedented global situation is imperative.

(Sources: IMO, IUMI, BIMCO, IACS, Swedish P&I Club, World Health Organization, Maritime-Executive, Ship-Technology).

Sulphur Cap

Beyond 01.01.2020

A milestone was reached on January 1, 2020, when IMO’s Global Sulphur Cap regulation entered into force, limiting the amount of sulphur permitted in fuel oil to 0.50% m/m from 3.5%. This was a significant step towards limiting the shipping industry’s environmental footprint and achieving IMO’s emissions reductions targets for 2030 and 2050, which aim at protecting human health and the environment.

The regulation stipulates that vessels are required to use new compliant bunker fuels or alternative marine fuels such as LPG, LNG or methanol, or to install and operate exhaust gas cleaning systems, otherwise known as scrubbers. All options
presented their own technical and compliance challenges, while operating costs were expected to significantly increase. Shipowners and operators were called upon to make the difficult decision on opting one of the aforementioned options
to achieve compliance.

The switch in January appeared to be somewhat turbulent initially, with a number of issues reported. Low debunkering capacity in ports worldwide was a cause of worry, with a number of vessels experiencing difficulties in getting rid of highsulphur fuel oil. Fuel samples were another significant concern, with some owners reporting having purchased very low-sulphur fuel oil (VLSFO), accompanied with a bunker delivery note that specified a sulphur content below 0.5%, while their own tests showed higher sulphur levels. The issue appeared to be occurring globally, according to North P&I Club, suggesting that the initial batches of VLSFO were blended too close to the 0.5% limit. In addition, bunker suppliers were reported to be delivering their own samples and put the crew under pressure for accepting them, leaving shipping companies in a weak legal position.
Companies also reported resistance by charterers in accepting the relative BIMCO clauses that would bolster their position in fuel disputes. Bottlenecks were built up at several parts of the bunker chain, with delays in low-sulphur fuel deliveries and price spikes.

With regard to fuel stability, Lloyd’s Register Fuel Oil Bunker Analysis Service (FOBAS) issued a warning to shipowners and operators that some of the VLSFOs on sale in Singapore contained sediment levels above the ISO standard, noting that such levels are high enough to block filters and cause engine damage. The issue was also highlighted by AmSpec Services and Veritas Petroleum Services (VPS), with the latter stating that the issue surfaced in 6 major bunkering hubs around the world, over a four-week period in December/January.

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Despite the aforementioned hurdles, this major rule change was considered to have been implemented successfully without significant disruption to maritime transport, according to IMO’s Secretary General, Mr. Kitack Lim. The progress was
considered relatively smooth, with only 10 instances of compliant fuel unavailability reported in first 20 days after enforcement.

In February, while the transition phase appeared to be better managed, the impact of the Covid-19 outbreak was already felt by the maritime industry. The outbreak resulted in delays to retrofit installations of scrubbers, leaving some owners/operators at risk with non-compliant fuel on board.

Bunker prices were also greatly affected. While IMO’s sulphur regulation led to VLSFO increases of about 35 – 45% during December and January, since midJanuary the price fell significantly due to the slump in global oil demand triggered by the Covid-19 outbreak, as well as the breakdown of the OPEC+ agreement, with millions of extra barrels of oil entering the market. The price drop was good news for those who had opted for VLSFO. However, the price of 3.5% HSFO remained fairly steady and thus, the significant decline in the spread between HSFO and VLSFO raised concerns amongst those who had installed scrubbers and had invested heavily. Despite the lower spread however, the investment payback period for a scrubber is between half a year to one and a half years,depending on the cost of the scrubber and daily consumption, which allows for substantial fuel oil cost savings for scrubber-fitted ships, according to BIMCO. It is also argued that once the pandemic is behind us, the demand for VLSFO is expected to increase, leading to a widening in the spread compared to current
levels.

A further concern with regard to exhaust gas cleaning systems, is the ban of openloop scrubbers. Vessels fitted with open-loop scrubbers discharge their wash waste into the sea, with ports now examining the impact in their waters. A number of ports and regions around the world have already restricted the discharge of wash water from open-loop scrubbers, while more are expected to follow. Further limiting the use of open-loop scrubbers would put companies that have invested significantly in installing them in an adverse financial position.

..

A few days prior to the Convention’s entry into force, major international maritime organizations submitted a proposal to form a new nongovernmental R&D organisation, to help eliminate CO2 emissions from international shipping in the future. The proposal includes core funding from shipping companies across the world of about USD 5 billion over a 10- year period. The move to accelerate R&D is considered an important step for ensuring that the CO2 reduction targets are met. However, it is crucial to ensure that these resources are channelled towards the right direction and achieve the desired outcome.

Following the regulation’s entry into force at the start of the year, another significant date was March 1st, with the carriage ban entering into force. The carriage ban prohibited the carriage of non-compliant fuel oil for combustion purposes for propulsion or operation on board a ship, unless the ship has a scrubber installed.

The carriage ban was expected to be accompanied by greater enforcement by Port State Control, with the Tokyo and Paris MOUs in early March warning there would be zero tolerance of breaches. However, in April, temporary guidance was issued by the Paris, Tokyo, Caribbean and Indian Ocean MOUs as well as the

USCG, recognising the need for flexibility under the current circumstances. The UK Maritime and Coastguard Agency had also announced that PSC inspections were suspended and thus, cheques on compliance with MARPOL Annex VI requirements has ceased temporarily. As Covid-19 related restrictions taken by individual States have impacted the PSC inspection regime, PSC authorities are responding with a pragmatic approach. This practical approach is intended to be used on a case by case basis for extension periods up to three months.

Overall, a high level of compliance was noted in the start of the year. The great efforts to achieve compliance by the shipping industry were highlighted and applauded by the IMO. In China and Singapore, PSC enforcement actions of MARPOL Annex VI regulation reported encouraging signs, with cases not a result of blatant non-compliance efforts but based on improper changeover procedures.

Local and Regional Legislation

While there has been no change after January 1st to the 0.10% sulphur limit of MARPOL ECAs, which is in effect since 2015 and includes the Baltic, North, US Caribbean Sea and North America ECA, a new ECA was recently introduced at the national level. Well-established ECAs in other countries or regions include China, Hong Kong, Taiwan, the European Union, Turkey and the State of California in the US. Recently, South Korea also enforced an ECA in some regions of the country.

The new ECA and speed reduction limits in South Korean ports were announced in late April. The South Korean Ministry of Maritime Affairs and Fisheries released a “Special Act on improvement of air quality in port areas”, which defines selected South Korean ports and ECAs, introducing a maximum sulphur limit of 0.1%. The ports/areas covered by the air quality control programme are Busan, Busan(west) area, Incheon, Pyeongtaek (Dangjin Area Yeosu), (Gwangyang area), and Ulsan area.

As of 1 September 2020, vessels berthing or anchoring at the aforementioned Korean ports, must use max. 0.1% sulphur content fuel, or reduce emissions below this target. From 1 January 2022, this limit also applies when navigating the ECA area. In addition, port fees will be reduced for ships which lower their speeds to set targets defined in the Vessel Speed Reduction programme Sea Areas.

With a number of countries having special Emission Control Areas and different rules applying, it is advisable to ensure adherence to the strictest sulphur requirement, in case of conflict between the local rules and the MARPOL global sulphur cap.

With regard to the to the implementation, compliance and enforcement of IMO MARPOL Annex VI, each jurisdiction around the globe is adopting slightly different approaches. It is thus worth noting some key policies recently announced.

In December 2019, the Australian Maritime Safety Authority finalised and formally issued its detailed regulations, policy and guidelines for the implementation, compliance and enforcement of IMO MARPOL Annex VI. AMSA will adopt a rigorous approach to compliance and enforcement, noting in particular that in addition to the penalties that apply under the Act vessels found to be non-compliant may be subject to detention, refused access or granted conditional entry to Australian ports. AMSA must also be notified prior to the arrival in Australian waters of any vessel using an EGCS, and be provided with detailed information about the EGCS and its use, while samples of wash water discharges might be taken. Importantly, in the event of a malfunction, if an EGCS cannot be returned to a compliant condition within one hour, the vessel must then change over to compliant LSFO.

Guidance & Achieving Compliance

In an effort towards aiding compliance, a number of international maritime organisations issued guidance a few months prior to the 1 January 2020 deadline.

In July 2019, ICS issued updated guidance to shipping companies and crews on preparing for “Compliance with the 2020 Global Sulphur Cap”. The guidance incorporates the latest decisions of the IMO’s MEPC and MSC meetings, such as fuel oil non-availability reporting, fuel safety and fuel quality.

In September 2019, INTERTANKO issued a guide, which provides practical guidance in order to remain compliant at all times, while continually maintaining efficient tanker operations. The “INTERTANKO 2020 Practical Guide” also provides information on local and regional requirements, which may be different from the relevant requirements of Annex VI of MARPOL.

A Joint Industry Guidance was released in August 2019, by major maritime organizations, on “The supply and use of 0.50% sulphur marine fuel”. This report provides guidance on the technical and safety implications of the new requirement for use of VLSFO, and is applicable to personnel involved in the marine fuels and shipping industries, from fuel blenders and suppliers through to end users.

The IMO has issued a Frequently Asked Questions document on the 2020 sulphur limit and its implementation, as well as a compilation of all related guidance, best practices and so on, in its publication “IMO 2020: Consistent Implementation of MARPOL Annex VI”, 2019 Edition.

More recently, the USCG released the Mission Management Statement Work Instruction (WI), an updated guidance on the implementation of compliance and enforcement policy for MARPOL Annex VI Regulation 14. The guidance outlines how the USCG will enforce MARPOL Annex VI requirements for all ships within either of the two US ECAs. In addition, the WI clarifies that, since the US is a party to the Convention, the USCG will take necessary steps to determine whether a ship is complying with the applicable 0.50% fuel sulphur limit even when operating beyond US waters. The same control procedures will apply to vessels in US waters but outside the ECA (e.g. Guam, American Samoa, Western Alaska).

Points to consider after 1 March 2020

The International Air Pollution Prevention Certificate (IAPP)

As of 1 January 2020, ships must be issued with an IAPP Certificate by their Flag State. This certificate includes a section stating that the ship uses fuel oil with a sulphur content that does not exceed the applicable limit value as documented by bunker delivery notes, or uses an approved equivalent arrangement. Port and coastal States can use port State control to verify that the ship is compliant.
As of 1 March 2020, the standard format of the IAPP certificate changed. A new tick-off box with the following text needs to be included in the supplement: For a ship without an equivalent arrangement approved in accordance with regulation 4.1 as listed in paragraph 2.6, the sulphur content of fuel oil carried for use on board the ship shall not exceed 0.50% m/m as documented by bunker delivery notes.

The IAPP certificate is required to be re-issued in the new format no later than the first IAPP survey after 1 March, being the annual, intermediate or renewal survey. If, for other reasons, the certificate is to be re-issued after this date, it will be in the new format.

Sample Verification

When inspections begin to take place again as usual, PSC will have the opportunity to sample and verify the sulphur content of fuel carried for use. It is worth noting that when verifying the sulphur content of samples taken on board, as opposed to the MARPOL sample taken during bunkering, a 95% confidence interval has been given. This means that a sulphur content of up to 0.53% may be accepted as compliant when testing such samples, as DNV GL advises. This is to ensure that ships are not unjustly penalized for marginal excess in sulphur content beyond their control (MEPC.1/Circ.882).

Disruptions in Scrubber Installations

With the carriage ban March deadline behind us, and Covid-19 related disruptions interfering with planned installations of scrubbers, some vessels might still have HSFO in their bunker tanks.

According to DNV GL, there is no general procedure in place on how to deal with ships, which are currently in dry dock for installation of EGCS, having noncompliant fuel oil on board. Vessels without an approved EGCS, which are carrying non-compliant fuel exceeding 0.50% sulphur, are in breach of MARPOL Annex VI. Vessels which are not able to de-bunker will need to find a solution acceptable to PSC and the flag. In such cases, MEPC.1/Circ.881 GUIDANCE FOR PORT STATE CONTROL ON CONTINGENCY MEASURES FOR ADDRESSING NON-COMPLIANT FUEL OIL applies.
DNV GL recommends being proactive, transparent and cooperative with authorities, if a vessel is this situation. Enforcement falls to the port state, with the guidance stating that “the port State, the flag state and the ship should work together to agree on the most appropriate solution to address the non-compliant fuel.” This may imply de-bunkering or retaining the fuel on board.

In dealing with the bunker, PSC must evaluate and decide on “managing the noncompliant fuel oil in accordance with a method acceptable to the port state”. In order to ensure no emissions to air beyond what is acceptable by MARPOL, the classification society advises to seal off the inlet and outlet valves of the tank containing the non-compliant fuel, noting the seal numbers and tank sounding in the oil record book (ORB) under “Additional operational procedures and general remarks”, witnessed and endorsed by a surveyor.

Prior to the de-bunkering or after completing the scrubber installation the same would apply, breaking off the seal should be witnessed and the ORB endorsed accordingly and any receipt for delivered fuel should be filed on board in the ORB. This should be followed up with a Condition of Authority, or a short term IAPP, depending on flag instructions.

(Sources: IMO, USCG, AMSA, ICS, BIMCO, HFW, UK P&I Club, North P&I Club, West of England P&I Club, UK P&I Club, Standard P&I Club, DNV GL, Trade Winds, S&P Global Platts, Maritime-Executive, Hellenic Shipping News, Safety4Sea, Heavy Lift & Project Forwarding International)

IMO DCS and EU MRV Regulations

Data collection policies of the IMO and EU are now both in place, with a common goal: to reduce GHG emissions from maritime activity. IMO DCS and EU MRV regulations are the first step in a process to collect and analyse emission data related to the shipping industry. IMO’s ambitious strategy to reduce GHG emissions to 50% by 2050, will be driven by the information gathered through

IMO DCS. The data collected through both policies are intended to be used in the future to cut emissions through the introduction of an Emission Trading Scheme or by providing incentives to owners.

IMO’s Data Collection System for fuel oil consumption (DCS), adopted in October 2016, took effect in January 2019, covering all vessels of 5000 GT and above. For ships for which this regulation applies it is important that a valid Statement of Compliance (SoC) is readily available onboard for inspection, together with the Confirmation of Compliance (CoC) for the SEEMP part II. The CoC (SEEMP part II) and the validity of the SoC (DCS) will be checked at each periodical statutory survey. As this is a new requirement, it is thought that Port State Control might focus on the SoC on DCS during any inspections in the future.

With the first reporting period for IMO DCS concluding at the end of the previous year, 2020 saw the first deadline for reporting the data to the verifier on March 31. A Statement of Compliance (SoC) was then required to be issued by the verifier no later than 31 May 2020, which must be kept onboard. By 30 June at the latest, the Administration or authorized organization will need to submit the reported data to the IMO Ship Fuel Oil Consumption Database in GISIS.
Data will be collected by the Administration and reported annually. Besides the annual issuance covering the emissions for the previous year, the SoC is also required in case of change of flag and/or company. The SoC is valid until 31 May the following year, or when superseded by a new SoC.

EU’s Monitoring, Reporting and Verification Regulation entered into force in July 2015, for vessels larger than 5000 GT calling at any EU and EFTA (Norway and Iceland) port regardless of flag. Data collection started in January 2018, and is made on a per voyage basis with reporting performed on an annual basis.

By 30 April in the year following the reporting period, an emissions report for each vessel must be verified by an accredited organization and submitted to THETIS-MRV system of EMSA. By 30 June of each year after the reporting period, the Document of Compliance (DoC), which is issued by the verifier, must be kept on-board. For EU MRV compliance, only the DoC on the annual Emissions Report must be on board. The MRV Regulation entitles EU Member States to establish and therefore, enforce a system of penalties in case of noncompliance.

The main differences between the two schemes, aside from the reporting deadlines and their international vs regional nature, are:
1. The EU MRV regulation requires reporting of actual cargo carried, whereas the IMO DCS only requires reporting of DWT as cargo proxy.

2. The EU MRV regime requires verification by an accredited body i.e. a class society or other accredited body, whereas the IMO DCS is a statutory requirement, with details to be defined by each individual Administration, and require verification by a recognized organization (mainly but not limited to class societies).

3. The EU will publish annually aggregated data on a per-ship basis, whilst the IMO will keep the per-ship data anonymous.
According to IACS, the main obstacles for the EU to fully align with the IMO lie in the above differences. EU MRV and IMO DCS are two similar systems, which will run in parallel as long as they remain un-aligned.

The EU is currently in the process of reassessing the MRV regulation and aligning  it with the IMO fuel data collection system to an extent. In October 2019, the ambassadors of EU member states agreed on their position on a proposal which updates existing EU rules, and partially aligns them with IMO DOCS. The European Council agreed that partly aligning the definitions, the monitoring parameters and the monitoring plans and templates of the MRV regulation contributes to reducing the administrative burden for shipping companies and national authorities and facilitates compliance with the reporting obligations
under the two systems.

However, the Council believes that the monitoring and reporting of cargo carried should remain compulsory as such information contributes to a better understanding of the fuel efficiency of ships. The Commission had proposed to turn cargo carried into a voluntary reporting element. The Council also added a clause which asks the Commission to review the functioning of the regulation.

The agreement reached among the ambassadors of EU member states means that the Council is ready to start negotiations with the European Parliament. The European Parliament however, has not yet reached a position on this proposal.

Key international maritime organizations, including IACS and ICS, hold the position that EU’s MRV scheme should be technically credible and aligned as far as possible with IMO’s internationally agreed scheme, as provided for in the MRV regulation itself.

Article 22 of the EU MRV Regulation provides that “in the event that an international agreement on a global monitoring, reporting and verification system for greenhouse gas emissions (…) is reached, the Commission shall review this Regulation and shall, if appropriate, propose amendments to this Regulation in order to ensure alignment with that international agreement.”

The EU developed its own first step in a process to collect and analyse emission data related to vessel emissions prior to an international agreement being reached by the IMO. However, the maritime industry strongly supports that regulations should be internationally agreed by the IMO.

The European Commission should aim at ensuring to the full extent the establishment of a single efficient and effective collection system serving the final goal of reducing CO2 emissions from international shipping, in accordance with the Paris Agreement, as Intercargo argues.

Full alignment would not only serve the purpose of creating an internationally unified reliable data base for ships CO2 emissions, it would also be in line with the better regulation agenda of the European Commission, which aims for targeted regulation in order to achieve its objectives and bring benefits at minimum cost to the European economy.

According to ECSA and ICS, it has been calculated that double verification requirements will incur an additional cost to the EU shipping industry of 5000 euro per vessel per year.

Full alignment and harmonisation of the EU MRV with the IMO DCS would mean that:
▪ The EU MRV Regulation is amended to provide for reporting exactly the same data monitored under the IMO DCS on an annual basis;
▪ The verification procedures of the IMO DCS will be used within the EU MRV Regulation; and
▪ The monitoring plan templates and reporting formats, procedures and systems are identical for both systems.

The EU MRV should be fully aligned to the IMO data collection system with common verification requirements and data being anonymised before publication. This would remove the administrative burden imposed on the industry and ensure an international level playing field, as required by the European fleet, while at the same time still allowing all to monitor the impact of the measures taken to reduce the GHG emissions globally.
(Sources: IMO, European Council, IACS, ECSA, ICS, DNV GL, LR, ABS, INTERCARGO, Hellenic Shipping News)

Cyber Security

Cyber security threats are continuously evolving, growing in reach and complexity. While it is the large-scale attacks that get the most attention, cyberattacks affect large and small firms alike in the maritime industry. As a consequence, cyber security has become a concern, requiring consideration as an integral part of the overall safety management in shipping and offshore operations.

The IMO, with Resolution MSC.428(98) on Maritime Cyber Risk Management in Safety Management Systems, adopted in 2017, encourages administrations to ensure that cyber risks are appropriately addressed in existing safety management systems (as defined in the ISM Code) no later than the first annual verification of the company’s Document of Compliance after 1 January
2021.

While the IMO has given shipowners and operators until 2021 to incorporate cyber risk into ships’ safety management systems, cyber criminals are already at work. Scammers are taking advantage of the coronavirus outbreak to carry out investment frauds and cyber scams. Such frauds involve claims that a company’s products or services will be used to help stop the Covid-19 epidemic, according to an alert issued by the United States’ Securities and Exchange Commission
(SEC). Meanwhile, the US Center for Internet Security (CIS) also warned of cyber threat actors leveraging on the outbreak to conduct financial fraud and disseminate malware. CIS’ Multi-State Information Sharing and Analysis Center has noted recently the registration of names containing the phrase “coronavirus.”

The Center said the majority of these new domains include a combination of the words “help,” “relief,” “victims,” and “recover” and should be viewed with caution. It said malicious actors are likely to post links to fake charities and fraudulent websites that solicit donations for relief efforts or deliver malware.

Further cyber-attacks targeting shipping have been recorded recently.

In mid-April, MSC experienced an outage at its data centres, which affected the availability of some of MSC’s digital tools, including the company website. The incident was confined to MSC’s Geneva headquarters and luckily no data were lost. The company said that only a small number of physical computer systems were involved and the malware attack was based on an engineered targeted vulnerability, meaning a targeted attack on a vulnerability in the company’s IT systems.

In February 2020, the Australian transportation and logistics company Toll Group announced that it had been subject to a cyber-attack across its land and sea operations. The company reported it had shut down a number of systems across multiple sites and business units in response to the attack on 31 January. Toll stated that it had shared samples of the relevant variant with law enforcement, the Australian Cyber Security Centre, and cyber security organisations to ensure the wider community is protected. The ransomware that infiltrated the company IT network was a variant of the Mailto ransomware. The Mailto ransomware or
Netwalker, is still new, with early sightings reported in October 2019, according to ACS Information Age.

A few months later, the logistics company Japan Post, parent company of Toll Group, shut down its computers and IT systems, after detecting unusual activity on some of its servers. This time the attackers used ‘Nefilim’, a relatively new and sophisticated form of malware. Investigations found the hacker had accessed at least one specific corporate server with information on Toll employees, commercial agreements and customers. The full impact of the cyber breach was yet to be seen but tracking cargo was predicted to be disrupted as with the first attack.

Last year, hackers attempted to take over a cargo ship headed for the Port of New York and New Jersey. In February 2019, the vessel on an international voyage reported that they were experiencing a significant cyber incident impacting their shipboard network. An interagency team of cyber experts, led by the US Coast Guard, responded and conducted an analysis of the vessel’s network and essential control systems. The team concluded that although the malware significantly degraded the functionality of the onboard computer system, essential vessel control systems had not been impacted. Although most crewmembers didn’t use
onboard computers to check personal email, make online purchases or check their bank accounts, the same shipboard network was used for official business, to update electronic charts, manage cargo data and communicate with shore-side facilities, pilots, agents, and the Coast Guard. The interagency response found that the vessel was operating without effective cyber security measures in place, exposing critical vessel control systems to significant vulnerabilities. In July 2019, the USCG issued a safety alert on the Potential Vulnerabilities Onboard Commercial Vessels, surfacing trough this incident.

Recommendations & New Guidelines

The U.S. Coast Guard strongly recommends that vessel and facility owners, operators and other responsible parties take the following basic measures to improve their cyber security:
• Segment Networks
“Flat” networks allow an adversary to easily maneuver to any system connected to that network. Segment networks into
“subnetworks” to make it harder for an adversary to gain access to essential systems and equipment.
• Per-user Profiles & Passwords
Eliminate the use of generic log-in credentials for multiple personnel. Create network profiles for each employee. Require employees to enter a password and/or insert an ID card to log on to onboard equipment. Limit access/privileges to only those levels necessary to allow each user to do his or her job. Administrator accounts should be used sparingly and only when necessary.
• Be Wary of External Media This incident revealed that it is common practice for cargo data to be transferred at the pier, via USB drive. Those USB drives were routinely plugged directly into the ship’s computers without prior scanning for malware. It is critical that any external media is scanned for malware on a standalone system before being plugged into any shipboard network. Never run executable media from an untrusted source.
• Install Basic Antivirus Software
Basic cyber hygiene can stop incidents before they impact operations. Install and routinely update basic antivirus software.
• Don’t Forget to Patch
Patching is no small task but it is the core of cyber hygiene. Vulnerabilities impacting operating systems and applications are constantly changing, patching is critical to effective cybersecurity.

Governments are considering cyber threats as a top risk, taking appropriate action. In February 2020, US President Donald Trump issued an executive order directing the Pentagon to minimise the number of US systems dependent on GPS for navigation and positioning due to hacking fears. The risk of GPS interference, done by either state actors or lone operators, is on the rise globally, according to experts on the field.

The UK Department for Transport, in January 2020, refreshed its cyber security guidance to future-proof ports and the wider maritime industry against cyber threats. The guidance helps ports develop cyber security assessments and identify gaps in their security, while also providing advice on handling security breaches and incidents, setting up clear roles and responsibilities to deal with cyber-attacks, and clarifying points raised by the industry from previous iterations.

As cyber-attacks are listed as a top-tier threat to UK national security, a new project, funded by Research England, aims to create a national research centre in maritime cyber security. The £3m Cyber-SHIP Lab in Plymouth is set to bring together experts from the worlds of cybersecurity and IT alongside equipment manufacturers and shipping operators to tackle the matter at hand. The facility will house the latest systems found in maritime technology, including radar equipment; a voyage data recorder (VDR); an electronic chart display and information system (EDCIS); an automatic identification system (AIS); and communication devices. These will feature alongside Plymouth’s university existing maritime facilities, which include a training simulator and lab. The aim is to create a real-world lab, equipped with an actual ship’s bridge set-up with combinations of actual devices instead of simulations. The idea is to get a realworld grounding in real-world cyber scenarios, and then to develop mitigations.

The lab was due to open in July this year.

IMO’s MSC-FAL.1/Circ.3 Guidelines on maritime cyber risk management, issued in 2017, provide a point of reference for the maritime industry. The guidelines offer high-level recommendations on maritime cyber risk management to safeguard shipping from current and emerging cyber threats and vulnerabilities, including functional elements that support effective cyber risk
management.

A number of maritime organizations have been placing their focus on the protection against cyber threats, with many new guidance and recommendations published recently.

In April 2020, IACS published “No. 166 Recommendation on Cyber Resilience”. This single, standalone Recommendation consolidates IACS’ previous 12 Recommendations related to cyber resilience (Nos. 153 to 164) and applies to the use of computer-based systems which provide control, alarm, monitoring, safety or internal communication functions, which are subject to the
requirements of a Classification society. Part of the objective in consolidating the 12 Recommendations was to define responsibilities, harmonise and simplify the language used therein. This Recommendation provides information on matters such as reference guidelines and standards, terms and definitions, goals for design and construction, functional requirements, technical requirements and verification testing. This new recommendation is applicable to a vessel’s network
systems using digital communication to interconnect systems within the ship and ship systems, which can be accessed by equipment or networks off the ship.
Operational aspects that were included in the superseded 12 Recommendations have been identified and grouped under a separate annexure. Following the publication of this consolidated Recommendation, the earlier 12 Recommendations have been officially deleted by IACS.

In late 2019, BIMCO and ICS published “Cyber Security Workbook for On Board Ship Use” with a view to support the master and officers on board ships in case of a potential cyber incident. Using detailed, step by step checklists, the workbook provides a ship’s crew with the practical skills to identify cyber risks and to protect vulnerable onboard systems. It also gives guidance on how best to detect, respond and recover in the event of a cyber-attack. The new workbook gives an explicit introduction to incorporating cyber security into the ship’s management system.

Furthermore, the “Guidelines on Cyber Security Onboard Ships”, developed by leading international maritime organisations, are again up for review. Since the publishing of the latest version of guidelines, the concepts for cyber risk management have continued to develop in several areas, with the complexity of networks and the possibilities for data cross utilization seeming endless. In light of this, a cyber working group has commenced the review of the Guidelines, with the new version expected to be released in autumn this year.

In the meantime, the latest version of the “Guidelines on Cyber Security onboard Ships (version 3)”, should be noted as point of reference. The Guidelines offer guidance to shipowners and operators on procedures and actions to maintain the security of cyber systems in the company and onboard the ships, and are aligned with IMO’s guidelines and the US National Institute of Standards and Technology (NIST) framework.

GARD, drawing on these Guidelines, provides the following three recommendations:

Recommendation No.1: Focus on policies, procedures and risk assessments Companies need to assess the risks arising not only from the use of IT equipment but also from OT equipment onboard ships and establish appropriate safeguards against cyber incidents involving either of these. Company plans and procedures for cyber risk management must be aligned with existing security and safety risk management requirements contained in the ISPS and ISM Codes as included in company policies. Requirements related to training, operations and maintenance of critical cyber systems should also be included in relevant documentation onboard.

Recommendation No.2: Ensure that system design and configuration are safe and fully understood and followed

The problem with procedures is that good intentions can become paper pushing exercises. It is therefore important to ensure that those performing tasks involving cyber security understand that the purpose of the procedures is to prevent unauthorised access and not simply to satisfy the regulators or their immediate superiors.

Cyber risk management is made more challenging due to the lack of facts about incidents and their impact. Until there is such evidence, the scale and frequency of attacks will continue to be unknown. Modern technologies may add vulnerabilities to ships especially if there are placed on unsecured networks and give free access to the internet onboard. Additionally, shoreside and onboard personnel may be unaware that some equipment manufacturers maintain remote access to shipboard equipment and its network system.

Unknown, and uncoordinated remote access to an operating ship should be an important part of the risk assessment.

Gard recommends that companies fully understand the ship’s IT and OT systems and how these systems connect and integrate with the shore side, including public authorities, marine terminals and stevedores. This requires an understanding of all computer-based systems onboard and how safety, operations and business can be compromised by a cyber incident.

Below are some common cyber vulnerabilities, which may be found onboard existing ships, and some on newbuild ships:
• obsolete and unsupported operating systems,
• outdated or missing antivirus software and protection from malware,
• inadequate security configurations and best practices, including ineffective network management and the use of default administrator accounts and passwords,
• shipboard computer networks lacking boundary protection measures and segmentation of networks,
• safety critical equipment or systems always connected to the shore side,
• inadequate access controls for third parties including contractors and service providers.

Recommendation No.3: Provide proper onboard awareness and training

It is argued that the weakest link when it comes to cyber security is still the human factor. It is therefore important that seafarers are given proper training to help them identify and report cyber incidents. When assessing cyber risks, both
external and internal cyber threats should be considered. Onboard personnel have a key role in protecting IT and OT systems but can also be careless, for example by using removable media to transfer data between systems without taking precautions against the transfer of malware. Training and awareness should be tailored to the appropriate seniority of onboard personnel including the master, officers and crew.

In October 2019, Inmarsat issued a guide for shipowners and managers focusing on assembling systems that are minimally vulnerable to cyber-attack. Inmarsat recommends that software systems be rugged enough to be able to last three to five years at sea without having to be updated by IT staff. This is key in maintaining a system that is robust and easy to maintain long term. Remote access to a vessel for troubleshooting can take place, although it is advisable to connect through a virtual
private network (VPN) to frustrate potential cyber attackers.

Inmarsat also advises annual cyber-attack drills to cement crew preparedness in the event of such an incident. A response plan to cyber-attacks should comprise quarantining systems from one another; keeping corporate IT departments abreast of the newest developments, including secure communication channels; and shutting down and recovering critical systems remotely. However, there should also be a capability for recovering these systems locally if shore contact becomes available.

In March 2020, the Digital Container Shipping Association (DCSA) has published the “DCSA Cyber Security Implementation Guide.” The best practices outlined by DCSA provide shipping companies with a common language and a manageable, task-based approach for meeting the IMO’s January 2021 implementation timeframe. The guide aligns with existing BIMCO and NIST (US National Institute of Standards and Technology) cyber risk management frameworks, enabling shipowners to effectively incorporate cyber risk management into their existing Safety Management Systems (SMS). It is a tool for container carriers however, the guidance can also inspire the thinking in other shipping sectors. The DCSA cyber security guide can be freely downloaded from the DCSA website.

In August 2019, an assessment by the Norwegian Maritime Authority (NMA) found that its maritime and oil and gas sectors recently fell victims of cyber campaigns specifically targeting companies in the US, Europe and the Middle East, advising companies to be prepared for continuous activity in the short to medium term. The assessment also stated that both obvious and less obvious companies may be affected, which means all types of ships as well as shipowners’ land-based infrastructure can be vulnerable to cyber incidents.

In September 2019, BIMCO together with Safety at Sea published a cyber security white paper, presenting the findings from cyber security surveys produced over the last four years. Nearly one-third of respondents (31%) said their organisation had experienced a cyber incident in the last 12 months, with phishing (68%), spear phishing (41%), and malware (33%) being the most common causes of cyber-attack. The top three cyber-attack outcomes were said to be loss of money (28%), systems outage onshore (23%), and reputational damage (15%).

According to USCG, it is likely that cyber risk and cyber breaches are a bigger problem than alluded to in the press. It is argued that cyber-attacks on shipping, while generally identical to those that occur on land, are more prevalent than is generally reported, with companies preferring to deal with the attacks internally. Cyber experts call this tendency unhelpful, indicating that a lack of information is hampering a robust response to cyber attacks in the shipping segment.

DNV GL recognises the need to increase maritime cyber security, identifying the three main drivers:
➢ An increase in cyber-attack incidents, despite low industry transparency
and reporting;
➢ International, regional, and commercial cyber security regulations, the most crucial being the IMO resolution MSC 428(98), making cyber security a regulatory requirement as part of ISM;
➢ And the complexity of software being placed onboard vessels.

As the industry calls for further vessel digitalisation through remote operation, fleet and performance optimisation, and logistics to improve the efficiency of ship operations, all this technology requires more automation, more complicated software and more connectivity. In an era with increasing technological transformation, use of cloud, and broader networking capabilities towards vessels, the threat landscape continues to increase.

GARD recommends that shipowners and operators who have not already done so, need to undertake risk assessments and incorporate measures to deal with cyber risks in their ship’s safety management systems and crew awareness training. It is important that a culture of cyber risk awareness is embedded into all levels and departments in the office and on board the vessels. The result should be a flexible cyber risk management regime that is in continuous operation and constantly evaluated through effective feedback mechanisms.

(Sources: IMO, ICC-CCS, ICS, BIMCO, GARD P&I Club, Standard P&I Club, IACS, DNV GL, LR, Lloyds List, Wall Street Journal, Safety at Sea, The Digital Ship, Ship-technology).

Piracy

Seafarers face continuing threats from pirates and armed robbers on the world’s seas according to the ICC International Maritime Bureau (IMB), reporting 47 attacks in the first three months of 2020, up from 38 in the same period last year. Pirates boarded 37 ships in the first quarter of 2020.

Source: IMB ICC

In 2019, an unprecedented number of crew were kidnapped from their vessels, with 134 crew taken in 19 separate incidents. The Gulf of Guinea accounts for over 90% of global crew kidnappings and has increased more than 50% year on year, with 121 crew taken in 2019 compared to 78 in 2018. In Q1 2020, seventeen crew were kidnapped in three incidents in these waters, at distances of between 45 and 75 nautical miles from the coast. During April and May, three more major incidents involving crew kidnappings were reported in these waters, including a Greek bunker with the majority of its crew kidnapped off Nigeria.
The kidnapping of crew is not just a phenomenon faced by one sector of shipping.
All types of vessels have been targeted at various distances from the coastline.
Overall, in 2019 IMB recorded 162 incidents of Piracy and Armed Robbery against Ships, compared to 201 for 2018. The 2019 figures are broken down as four vessels hijacked, 17 attempted attacks, 130 vessels boarded and, 11 vessels fired upon. While the overall decline in piracy incidents is an encouraging development, vessels remain at risk in several regions, especially the Gulf of Guinea.
Source: IMB ICC

The last quarter of 2019 saw 64 crew kidnapped in the Gulf of Guinea in six separate incidents, with 19 and 20 crew taken in two incidents in the first half of December. Both incidents were more than 100 NM from the coast. There can be no doubt that the Gulf of Guinea presents a serious and immediate threat to the safety and security of crews and vessels operating in the region.

In the Singapore Straits, five ships were boarded while underway in the first quarter of the year. Towards the end of the previous year, a spike in activity was noted in these waters, with 11 of the 12 incidents for 2019 reported in the last quarter. Vessels whilst underway were successfully boarded in ten incidents. The majority of attacks are low level, aimed at armed theft from the vessel and tend to take place in the hours of darkness. However, IMB reports that seven crew have been taken hostage. The attackers are usually armed with knives and guns.
Source: IMB ICC

Attacks in Indonesian ports have further decreased from 36 incidents in 2018, to 25 in 2019. The trend continued in the first quarter of the year, with just five anchored vessels reported boarded in Indonesian waters. In the anchorage of Callao, in Peru, during the first quarter of the year, three crew were apprehended by nine robbers who boarded the vessel to steal ship’s stores.
Two crew were injured during the incident. In total, Callao recorded three incidents in Q1 2020. In 2019, ten low level incidents were recorded in Callao, with five reported in the last quarter.
In Brazil, at Macapa Anchorage, a watchman was confronted while on duty and held temporarily by a group of robbers in March 2020. A month later, a seafarer lost his life by an intruder on a German containership in Cartagena, Colombia.

In the Gulf of Aden, an incident in late May, off Yemen, raised the concerns regarding the security in the area, while it has been reported that vessels are now regularly being approached by pirate skiffs looking at whether armed guards are aboard. No incidents were reported in the first quarter of 2020 in the waters around Somalia, with the situation equally quiet in 2019. The international navies patrolling these waters continue to coordinate and liaise with merchant and fishing fleets to identify and apprehend pirate action groups. However, the IMB notes that Somali pirates continue to possess the capacity to carry out attacks in the Somali basin and wider Indian Ocean and therefore continues to recommend that Masters and crew maintain vigilance and remain cautious when transiting these waters.
With regard to vessel type, bulk carriers and product tankers were mainly targeted in 2019.

The managing countries whose vessels were attacked the most are Singapore with 26 attacks recorded in 2019, followed closely by Greece with 25 attacks.

Source: IMB ICC

West Africa

In Q1 2020, IMB’s Piracy Reporting Centre recorded 21 attacks in the Gulf of Guinea. Of these, 12 were on vessels underway at an average of 70 nautical miles off the coast. All vessel types are at risk. The perpetrators are usually armed. They approach in speedboats, boarding ships in order to steal stores or cargo and abduct crewmembers to demand ransom.
In recent months, numerous incidents were reported in these waters. In April, eight seafarers were kidnapped from an A.P. Moller – Maersk chartered containership while at anchorage off Cotonou, Benin.
The eight seafarers were reported to have been released in May. On 30 April, the Panama-flagged, 6,200-dwt Vemahope Greek bunker was attacked 106 nautical miles west of Agbami, Nigeria, during the evening. The majority of its crew, including the master, were kidnapped. In early May, four crew members were abducted from two vessels attacked by pirates off Equatorial
Guinea on the same day. A Cosco VLCC was also pursued on the same day by a speedboat off Cameroon. In late May, a general cargoship Cyprus flagged was attacked by pirates off Nigeria, prompting crew to retreat to the citadel. The incident occurred 136 nautical miles (252 km) south-west of Bayelsa state, outside the South Nigerian exclusive economic zone, while the Nigerian navy was reported to have intervened.
On the other hand, a positive development is the first prosecution of pirates arrested in international waters under Nigeria’s new Suppression of Piracy and Other Maritime Offences (SPOMO) Act, which is about to take place. Ten pirates arrested by the Nigerian navy will face trial for hijacking a Chinese fishing vessel off the coast of Cote d’Ivoire this year. Nigeria is now the first country in West and Central Africa to have specific anti-piracy legislation.
In 2019, the Gulf of Guinea recorded an unprecedented rise in crew kidnaps, accounting for over 90% of global kidnappings reported. In the last quarter of 2019 alone, 64 crew members kidnapped across six separate incidents.
In Nigeria, incidents continue to rise substantially, especially kidnapping of crews for ransom. Vessels are advised to take additional measures in these high-risk waters. While ten vessels were fired upon worldwide for the whole of 2019, four
already were reported being fired at within Nigerian Exclusive Economic Zone in the first quarter of the current year. This includes a container ship underway around 130 nm southwest of Brass.
Source: IMB ICC

In another incident, around 102 nm northwest of Sao Tome Island, a container ship was boarded by pirates. The crew retreated into the citadel and raised the alarm. On receiving the alert, the IMB liaised with Regional Authorities and the vessel operator until the vessel was safe and the crew had emerged from the citadel.
In Cameroon kidnappings also increased in 2019, with 31 crew reported kidnapped. The majority of the incidents reported happened while anchorage in/off the country. In Benin, 35 crew were reported kidnapped the previous year in three incidents. In some cases, ships were fired upon and crewmembers were injured. In Togo seven crew members reported kidnapped, with two attacks at anchorage reported in 2019. In Congo attacks were also on the rise last year. In Ghana and Guinea robberies have been reported at anchorages in 2019. Incidents in Ivory Coast dropped during the previous year but the area is still considered risky.

The IMB commends Regional coastal state response agencies and international navies in the Gulf of Guinea region for actively responding to reported incidents. With many more attacks going unreported, IMB advises seafarers in the region
to follow the recently published Best Management Practices West Africa (BMP WA).
Best Management Practice West Africa provides guidance to assist companies and seafarers assess the risks associated with voyages through the Gulf of Guinea and mitigate any potential threats to their safety. The publication particularly highlights the need for a Vessel Hardening Plan, which can ensure that vessels are fully prepared for operations in the Gulf of Guinea, where the threat levels are significantly increased. The BMP WA is a new addition to the well-established BMP series, which was last updated in June 2018, with the 5th edition of the publication.

East Africa

Although no incidents and zero hijackings were reported to IMB around Somalia in the last two quarters, it is important to stay vigilant as piracy threats still persist.

Source: IMB ICC

More recently, a gunfight was reported, off Yemen, between pirates and armed guards on a Norwegian chemical tanker, which has raised concerns over ship security in the region. The attack in late May led to an explosion in the exchange of fire, destroying one of the two pirate skiffs that approached the vessel. The company stated that the bridge area sustained minor damage from bullets but luckily there were no injuries or pollution.
The incident is one of the recent cases of piracy recorded in the Gulf of Aden, according to TradeWinds. The attack is thought to be the ninth in the region this year. Security briefings suggest vessels are now regularly being approached by
pirate skiffs that want to test whether armed guards are aboard. The pirates usually depart when security guards show their weapons.
Another concern was raised during the pandemic, as difficulties in getting armed security guards to board vessels in the region were reported due to travel and quarantine restrictions. A matter which urgently needs to be addressed as obstructions of this sort can put the safety of crews in jeopardy. On the whole, although the overall level of piracy in the area is far below that
seen in the first half of the last decade, the threat when transiting these waters still looms and thus, the need to remain vigilant at all times and take precautionary measures still remains.

Asia

In Indonesia, strategic deployment of marine police patrol vessels has resulted in a continued decline in attacks on ships in most Indonesian anchorages and waterways, with only 5 anchored vessels boarded in Q1 2020.
Despite the fact that armed robbery attacks in Indonesian ports also declined in 2019, compared to 2018, the number of attacks is still significant and the highest throughout Asia.
In 2019, 5 attempted attacks were recorded in Indonesia and 20 actual attacks with pirates boarding the vessels. These are often low-level armed robbery attacks. The attackers usually attack vessels during the night. When spotted and alarm is sounded, the pirates usually escape without confronting the crew. IMB notes that many incidents may have gone unreported and therefore, a strict antipiracy watch is recommended.
The Indonesian marine police have advised all ships intending to anchor to do so near the ten designated areas where it conducts patrols for greater protection.
In the Singapore Straits, five ships were boarded while underway in Q1 2020, in contrast to zero attacks reported in Q1 2019. In one incident the crew managed to lock their assailants in the storeroom, which enabled their later arrest. A general warning was issued in December 2019, indicating a sudden rise in attacks in Singapore Straits, especially during the night. The same region accounted for just three incidents in 2018. In 2019, within a space of a few weeks, 12 incidents were recorded. Many may have gone unreported.
Source: IMB ICC

The incidents are low-level armed robbery attacks, while navigating in congested waters. The perpetrators usually abort the attempted attack once spotted and the alarm is sounded. Remaining vigilant, maintaining adequate security watches and measures while transiting these waters is highly advisable.
In Malaysia, five crew were kidnapped for ransom in an attack on a fishing vessel off Sabah in January. In the previous year, a number of tugs/barges/fishing vessels were attacked and crews kidnapped off Tambisan, Sabah by militant activities. Merchant vessels are also at risk. In Bandar Penawar and Johor vessels were attacked at anchorage, while off Tanjung Piai vessels were attacked while underway. Ships are advised to take precautionary measures and maintain strict anti-piracy watch.
In the southern Philippines, pirates-militants conduct attacks on vessels in/off Sibutu passage, off Sibutu island, Tawi Tawi, Sulu sea, Celebes sea and off eastern Sabah, attacking mainly small vessels but also merchant ships to rob and kidnap crews for ransom.
Vessels transiting these waters should refer to the Sabah Notice to Mariners NTM 14 of 2017 on the Ship Reporting System. Vessels are also urged to monitor the IMB PRC Warnings on potential incidents locations issued by the Philippines and Malaysian Intel.
In the Indian sub-continent, Bangladesh reported zero incidents for 2019. This is the first time since 2015 that no piracy or armed robbery incidents have been reported around Bangladesh.

South America

In Peru, Callao anchorage has seen a spike in piracy. In Q1 2020, three crew members were apprehended and two crew were injured during an attack. In 2019, two crew members were taken hostage. Overall, during the first quarter of 2020, three incidents were recorded at Callao anchorage, while a total of 10 incidents were reported in 2019, all occurring at anchorage.
In Venezuela, robbery incidents are still occurring in Puerto La Cruz and Puerto Jose, while one crew member was taken hostage in 2019. Three attacks were reported in Ecuador during the previous year, with a vessel boarded while steaming and two crew assaulted and taken hostage. Despite the fact that the majority of attacks occurring in South America are lowlevel thefts, the risk and potential escalation is still significant. This is reflected in the recent incident reported in April in Cartagena, Colombia, with a seafarer losing his life by an intruder. IMB highlights the need for maintaining a vigilant watch and strict anti-piracy measures in these waters.

Source: IMB ICC
(Sources: IMB-ICC, ReCAAP, West of England P&I Club, GARD P&I Club, ICS, Trade Winds).

Ship Recycling

In 2020, recycling locations remained quiet following the outbreak of the pandemic. The spread of Covid-19 paralysed the ship demolition market in South Asia, with stringent lockdown measures introduced across the subcontinent. The three major ship recycling nations, India, Pakistan and Bangladesh, ceased their operations in March. After a month of standstill, a few ship recycling yards in India reopened, slowly re-starting their dismantling activities. Ship breaking activity was also reported to have slowly resumed in the rest two countries.

However, with lockdown measures still in place, the ship recycling market has not yet returned to normal levels. IMO HKC With regard to regulatory developments, 2019 marked significant progress in ship recycling regulation. IMO’s Hong Kong Convention (HKC), following two years with no new ratifications, received 9 new accessions to the Convention in 2019, raising the number of
Contracting States to 15. This marked the first condition of the Convention being satisfied, with the required 15 States now party to it.
The Contracting States at present are Belgium, Congo, Denmark, Estonia, France, Germany, Ghana, India, Japan, Malta, Netherlands, Norway, Panama, Serbia and Turkey. They represent 29.62% of the world merchant shipping tonnage, according to IMO.
India’s accession in November 2019, brought the HCK a step closer to entry into
force. The country’s ship recycling volume has considerably contributed to the
required recycling capacity for meeting another challenging condition of the
Convention.
The Convention will enter into force 24 months after the following three separate criteria have been met.
➢ It must be ratified by 15 States,
➢ Representing 40% of world merchant shipping by gross tonnage,
➢ With a combined maximum annual ship recycling volume during the preceding 10 years not less than 3% of their combined gross tonnage.
India might be one of the world’s five major ship recycling countries but further tonnage and recycling volumes are needed before the convention can enter into force. The top five ship recycling countries in the world, between them accounting for more than 98% of all ship recycling by gross tonnage, are Bangladesh, China, India, Pakistan and Turkey. With only two of these States
Parties to the Convention, the key to entry into force is ratification by other major recycling states, particularly China or Bangladesh.

Although China has banned the import of vessels for recycling and thus, its recycling volume has significantly declined, ratification by the country before 2022 would signal a significant step towards entry into force since the country’s peak recycling year in 2012 would contribute to reaching the required recycling capacity of the Convention. However, if China’s ratification is delayed, and the 2012 figure falls out of the 10-year window, the country’s impact on reaching the
necessary recycling volumes will decline.

The entry into force of the HKC is of great significance as it will set global standards for safe and environmentally-sound ship recycling. IMO urges all countries, yet to do so, to ratify this important convention so it can enter into force and provide a consistent, global regulatory regime for this vital industry.
EU SRR
EU’s Ship Recycling Regulation (EU SRR) was adopted in 2013, with its requirements gradually coming into force. The regulation requires that EUflagged vessels of 500 GT and over carry an Inventory of Hazardous Materials (IHM). When calling at EU ports, vessels from non-EU countries will also be required to carry an IHM, identifying all the hazardous materials on board. EUflagged vessels must also be recycled in EU-approved recycling facilities.
As of 31 December 2018, the EU Ship Recycling Regulation required all large sea-going vessels sailing under an EU Member State flag to use an approved ship recycling facility included in the European List.

In January 2020, the EU published its 6th version of European List of ship recycling facilities, adding seven new yards to the List. These include 4 European yards, one each in Latvia, Lithuania, the Netherlands and Norway, and 3 yards in Turkey. With the new update, the European List of ship recycling facilities currently contains 41 yards, representing a total available annual recycling capacity of nearly 2.85Mi Light Displacement Tonnes (LDT). Several yards on the European List are also capable to recycle large vessels.
From 31 December 2020 onwards, the EU Ship Recycling Regulation will require vessels of 500 GT of all flags calling at European ports to carry a certified IHM on board.

IHM preparation for a vessel can be quite time-consuming. Therefore, starting the process as early as possible and submitting the IHM for approval before endOctober 2020, is recommended.
According to DNV GL, the IHM can be approved by Recognised Organizations (ROs), while the shipowner is responsible for the preparation of IHM Part I of vessels in operation and may draw upon assistance from a hazmat expert. The hazmat expert can either be an individual from a third-party hazmat expert company or an employee of the ship owner who has received appropriate training.
The hazmat experts prepare the IHM by taking samples and making visual checks on board based on the collected ship-specific information. It may take up to one month to generate the IHM Part I report for a single vessel due to the long waiting times between each step of preparation.

The shipowner is responsible for the maintenance of IHM Part I, for which the owner can designate a person who may be employed ashore or on board.
According to the EU SRR, the designated person must be qualified. IHM Part I shall be properly maintained and updated throughout the operational life of the ship, reflecting new installations containing any hazardous materials referred to in Annex II of the EU SRR as well as any relevant changes in the structure and equipment of the ship.

The IHM Part I certificate / SoC (Statement of Compliance) will be issued after the initial survey, and then be subject to periodical checks by the flag states or ROs during the five-yearly renewal surveys and by Port State Controls during
inspections. There is no annual survey scheme defined in the regulation.
The IHM certificate shall cease to be valid if the condition of the vessel does not correspond substantially with the particulars of that IHM certificate, including where IHM Part I materials have not been properly maintained and updated,reflecting changes in ship structure and equipment, taking into account the relevant IMO guidelines.
If a PSC officer has clear grounds to believe that there is no procedure implemented on board the ship for the maintenance of IHM Part I, a detailed inspection may be carried out. The lack of the IHM certificate on board may be areason for PSC detention.

The process for an EU, Norway or Iceland-flagged vessel going for recycling, according to EU requirements, involves obtaining a Ready for Recycling certificate, in addition to selecting among the facilities listed in the European List.

In specific, prior to recycling, the IHM shall incorporate Part I and Part II foroperationally generated waste, and Part III for stores, and be verified by the administration or an authorised RO. The shipowner shall send the IHM to the selected ship recycling facility for the preparation of the ship recycling plan (SRP). During the final survey, the IHM and SRP will be verified on board and aReady for Recycling certificate will be issued by the surveyor.

Raising the Standards

In many Asian yards, a number of improvements have been reported as well as a significant move towards achieving compliance with international standards. In India more than half of the yards voluntarily upgraded their premises to comply with HKC standards and are certified with a Statement of Compliance by many classification societies. The country, apart from becoming the first south Asian nation to ratify the HKC, enacted “Recycling of Ships Bill 2019”, to regulate ship recycling by setting certain international standards and enforcing them. Under the new bill, ship recycling facilities are required to be authorised, and ships can in future only be recycled at such authorised ship recycling facilities. The bill also includes restrictions against the installation and use of hazardous materials, and provides that ships will be recycled in accordance with a ship-specific recycling plan and shall be required to have a Ready for Recycling Certificate in accordance with the Hong Kong Convention. Penalties have been introduced in the Act to deter any violation of the new statutory provisions. When the HKC comes into force, its provisions will be implemented under the country’s Recycling of Ships Bill 2019. The new Act is part of India’s efforts to double its ship recycling capacity by 2024.

Despite the fact that a number of Indian facilities have improved their recycling standards and gained independent certification against the requirements of the HKC, they have not yet received approval for inclusion on EU’s list. EU SSR stipulates that it will be reviewed not later than 18 months prior to the date of entry into force of the HKC, to consider the inclusion of ship recycling facilities authorised under the Convention. It is hoped that alignment of the EU’s ship recycling regulation with international standards will be achieved in the future, allowing for global consistency.

In Bangladesh, PHP, a ship recycling facility in Chattogram (Chittagong), was issued a Statement of Compliance from ClassNKverifying that the facility is in line with the HKC.

These improvements are welcomed and much-needed. However, as the number of fatalities and accidents recoded in south Asian yards is still significant, further raising the safety standards is essential. An international regulation in place is vital for ensuring that vessels are recycled in a safe, environmentally friendly and transparent manner, with global oversight. Ship recycling is an important global issue with major implications for safety and the environment.

(Sources: IMO, EU, ICS, Clarksons, DNV GL, LR, BV, Lloyd’s List, SeatradeMaritime, Ship Insight, Hellenic Shipping News, The Maritime Standard, Rivieramm)

Shipbuilding

The Coronavirus pandemic is having a severe impact on newbuilding activity, as anticipated. Contracting activity was extremely limited in the first quarter of 2020, with the economic impact of the Covid-19 outbreak negatively affecting investor sentiment and amplifying existing concerns over newbuild technology and fuelling choices.

Investment in newbuildings in the first three months of 2020 was at the lowest quarterly figure for 11 years. The world orderbook stood at its lowest level since 2004. It shrunk to 2,915 units in the three months to the end of March, totalling a combined 171.8 million dwt and 73.3m Compensated Gross Tonnage (CGT), which measures the level of shipbuilding output. According to Clarksons Research, 100 vessels comprising 7m dwt, were ordered in the first quarter, which was down 71% year-on-year in CGT terms. These totals included nine containerships of a combined capacity of around 122,000 teu, all contracted at Chinese yards. Only 36 tankers were ordered during the quarter.

According to Clarksons, 302 vessels of a combined 23m dwt were delivered in the first quarter, with bulkers accounting for 56% of these in dwt terms. Disruptions due to the lockdown as well as the lack of equipment were recorded.

However, most of the facilities had restarted production by mid-March, while some implemented temporary
overtime schedules in a bid to limit the impacts. Shipyard deliveries are likely to be delayed by yard closures, equipment shortages, travel disruption and financial stress on owners.

Clarksons also noted that a downward pressure on newbuilding pricing appears to be emerging. Despite this, the continued uncertainty of the coronavirus outbreak is expected to have an even more severe impact on newbuild order potential in 2020. Clarksons forecasts that delivery volumes will fall 26% year-on-year to 73.8m dwt this year, representing a drop of about 18%
on its original figure.

According to May’s forecast from Lloyd’s List Intelligence, for the 2020-24 period, it is predicted that the total fleet will grow at an average annual rate of just 0.9%, adding 5,597 vessels, which is 35% or 1,964 vessels less than in the 2015-19 period. However, in dwt terms, the average growth will be much higher at 3.9% on average per year.

The tanker fleet will have the highest growth rate over the coming five-year period, with 10.1% growth over the five years, increasing the fleet to 18,941 vessels.

The container and ro-ro fleet will grow by 7.0% to 7,737 vessels. Up to 2024, the passenger fleet is set to grow by 5.7% up to 11,255 vessels. The bulker and general cargo fleet will grow by 5% to 33,485 vessels.

Source: Lloyd’s List Intelligence

With regard to deliveries, in the 2020-2024 period, a total of 12,461 vessels will be delivered to the market, which is a decrease of about 220 vessels compared with the past five-years. Most ships delivered will be bulker and general cargo, with 3,823 ships forecast for this type. Tanker deliveries are forecast at 3,013 vessels, while offshore and service at 2,428 vessels.

China
With 55 new orders in the first quarter of the year, the Chinese shipbuilding industry is struggling with significantly reduced newbuilding orders. New business is scarce at the moment for China, the world’s biggest shipbuilder, with little new enquiries from foreign owners, aside from business that was already in progress before coronavirus became a global pandemic. As a result, the Chinese Association of the National Shipbuilding Industry, which is China’s state-run yard trade body, announced that Chinese yards will be offering up to a 20% discount on new orders, depending on the customer and the type of ships.

Despite the tempting offer to lure new orders, contracts in China are forecasted to shrink to 388 vessels in 2020, which is its lowest number since 2001. However, that figure is expected to grow to 1,134 vessels by 2024, according to Lloyd’s List Intelligence.

Amid the uncertainty of a weak shipbuilding market and the Covid-19 pandemic,small to medium-size privately owned Chinese shipyards are at high risk. The fact that private yards lack the support of the banks and state makes them especially vulnerable in the current tough market environment. Private yards are also believed to be currently facing more severe delays in the delivery of
newbuildings, compared to state-owned yards.

On a more positive note, the Chinese shipbuilder Hudong-Zhonghua Shipbuilding (Group) delivered its first, and the world’s biggest, LNG bunker vessel newbuilding on the 1st of May. The 18,600-cbm MOL-owned, Totalchartered Gas Agility was set to leave China later in May, while its delivery had been delayed by the outbreak of Covid-19.

China State Shipbuilding Corp. (CSSC), had aimed for on-time deliveries of newbuildings. Following the strict lockdown measures imposed in China, the firm gradually resumed business operations in February, while supporting the construction of two new hospitals in Wuhan, the epicentre of the coronavirus outbreak. CSCC had stated in February that group firms were starting to bring production back online to ensure the on-time deliveries of shipbuilding and shiprepairing orders. However, the scale and impact of the pandemic brought about delays, with one to two months expected delays in the delivery newbuildings, as
Bao Weidong stated in March. The deputy general manager of CSSC Shipping also stated that no delays are forecasted for the vessels delivered next year.

The trend toward large conglomerates continues to be prevalent in the shipbuilding industry, with CSSC and CSIC, China’s main two state-owned shipbuilding companies, merging in November last year, creating China Shipbuilding Group, the largest shipbuilder in the world. The merger essentially restored CSSC to its original form, as CSSC and CSIC used to belong to the same
company but were split up in 1999. The conglomerate is now the world’s largest shipbuilder by sales and backlog, with 20% of global market share, retaining its first place even after the merger of South Korea’s Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering (DSME) will be completed.

South Korea
In 2019, South Korea ranked first in attracting newbuilding orders, securing 37% of the deals placed around the globe, according to Clarksons Research. Five prominent shipbuilding companies recorded a combined $26.2 billion in 2019. Hyundai Heavy Industries won $12 billion in new orders to build 135 ships, achieving 76% of its order target. Daewoo Shipbuilding & Marine Engineering clinched $6.11 billion worth of orders to build 33 vessels, reaching 73% of its annual order target. Samsung Heavy Industries built 44 ships winning $7.1 billion, which accounted for 91% of its order target.

At the end of March 2020, Samsung Heavy Industries had an orderbook of 102 vessels of a combined 11.4m dwt, the largest orderbook of any shipyard globally, according to Clarksons. The yard boasts the biggest haul of LNG carrier orders of any facility with 38 vessels, accounting for half of its orderbook in CGT terms and the largest share of boxships of 15,000 teu plus vessels with 11 vessels on order. However, in the first quarter of 2020, South Korean shipyards secured only 13 new contracts, an 81% decrease in CGT terms year-on-year.

Financially, the South Korean yards appear to be still struggling due to the weak newbuilding market and increasing operating costs. Despite its strong orderbook, Samsung Heavy Industries posted a higher net loss for the third quarter in 2019, on the back of a cancelled shipbuilding deal. Hyundai Heavy Industries reported a 59% drop in full-year net profit to Won115.3bn in 2019, while turning in a net loss of Won102.6bn in the fourth quarter of the year, indicative of the worsening conditions in the sector. DSME, the world’s third-biggest shipbuilder, announced that it finished KRW 46.5bn ($39m) in the red in 2019, against profit of KRW 320bn in 2018. The loss was attributed to the fact that the company began to build ships that were ordered years ago in low-priced deals and, with fixed costs increasing due to a decline in new orders, there has been a deterioration in profitability, according to DSME’s statement.

At a time of consolidation among the world’s largest shipbuilders, South Korea’s two largest shipbuilding companies, Hyundai Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co., have long announced their plan to merge, and control 20% of the world’s market for oceangoing vessels. The merge was met with resistance by Japan while Singapore’s regulatory body, the Competition and Consumer Commission of Singapore, warned the merger would remove competition in the global shipbuilding industry. But Hyundai officials assert the merger is necessary for the industry’s survival in South Korea.

Japan

Japanese shipbuilders saw newbuilding orders reduced by almost 21% in 2019 fiscal year, compared to the previous year. A total of 183 vessels of 8.45m gt were ordered between April 2019 and March 2020, versus 214 ships of 10.69m gt in fiscal year 2018, according to the Japan Ship Exporters’ Association. Bulkers made up the majority of the orders with 146 vessels, followed by 24 tankers and 13 general cargo ships, including containerships.
Out of the 183 orders, 47 vessels totalling 2.07m gt were signed up between January and March 2020, a significant increase compared to the same period last year when 55 new ships totalling 2.77m gt were ordered. These comprised of a pair of post-panamax bulkers, two handymax bulkers, seven handysize bulkers, two containerships, two product tankers and single orders for a VLGC and an LPG carrier. Despite the recent uptick, the order backlog stood at 25.17m gt across 496 vessels at the end of March, down 2.12m gt year-on-year, which is approximately 7%.

Japan’s presence in the commercial shipbuilding market is poised to shrink in the face of the challenging market conditions and the severe price competition from South Korea and China. Four of the country’s major shipbuilding companies namely, Japan Marine United (JMU), Mitsui E&S Shipbuilding, Kawasaki Heavy Industries (KHI) and Mitsubishi Heavy Industries (MHI), are
scaling back construction.

The third largest shipbuilding nation in the world and formerly the first up until to the turn of the century, Japan, is currently exploring the possibility of integrating 15 of its major shipyards under the “all Japan Shipbuilding merger plan”, in a bid to keep pace with lower cost rivals in South Korea and China.

The merger plan comes after Japan’s two largest shipbuilders, Imabari Shipbuilding and Japan Marine United (JMU), announced in December 2019 their plans to form an alliance. The joint venture will be named Nihon Shipyard and combine JMU and Imabari’s design, planning, marketing, procurement, research and development and production facilities. The pair plan to work together on newbuilding projects for containerships, bulk carriers and tankers, although the partners have agreed to keep LNG shipbuilding out of the agreement.
What is more, the Japanese government filed a petition at the World Trade Organization (WTO), questioning the legitimacy of the merger between HHI and DSME. A bilateral consultation paper on the dispute in shipbuilding industry between Korea and Japan, was released in February on the WTO’s website. A few weeks earlier, Japan asked for bilateral talks on the WTO dispute settlement process over the Korean government’s measures to restructure the shipbuilding industry. The bilateral talks are considered to be the first step in the WTO dispute settlement process. This is the second time that Japan has requested a resolution of the WTO dispute regarding the restructuring of South Korea’s shipbuilding industry. The first complaint was made in December 2018, but Japan has since not demanded the establishment of the panel, an official trial procedure.

(Sources: International Institute of Marine Surveying, Clarksons, Lloyds’ List, Trade Winds, Reuters, Wall Street Journal, Hellenic Shipping News, Maritime – Executive, Seatrade Maritime News, Naval News).

US Sanctions against Venezuela

Over the course of a year, additional sanctions affecting shipping have been imposed by the US against Venezuela, with
further sanctions action by the US considered highly likely in the future. The recent designation of four Greek-managed
tankers to OFAC’s SDN list clearly reflects the increased focus on shipping as a means of enforcing the US’s foreign policy goals.

The US measures against the government of Venezuela, which were first introduced in 2015, were significantly extended in January 2019, to target the Venezuelan state oil company, Petroleos de Venezuela (PdVSA). Following the designation of PdVSA to the Specially Designated Nationals and Blocked Persons (SDN) List, the US administration increased its sanctions programme
against the Government of Venezuela on 5th August 2019, issuing Executive Order (EO) 13884, as well as amended and new FAQs, and general licenses. The EO 13884 essentially blocks all property in the US of the Government of Venezuela, and prohibits US persons from engaging in any transaction with the Government of Venezuela. EO 13884 authorised asset freezing on “any person” determined to
(i) have materially assisted or supported any person or entity whose property is blocked pursuant to the EO, or
(ii) be owned or controlled by or to have acted on behalf of any such person or entity.

The carriage of cargo can well fall within the scope of material assistance. The intention behind the EO appears to be exposing non-US persons and entities to US sanctions or at the very least to deter them from doing business with the Venezuelan regime. This was reflected by the US National Security Advisor, who stated that “We are sending a signal to third parties that want to do business with the Maduro regime: Proceed with extreme caution”.

From its side, the Government of Venezuela took measures requiring payments in Petro, the cryptocurrency launched in 2018, which is thought to have been created as a means to circumvent US sanctions. In January 2020, the Maduro government, with Decree 4096, ordered various ‘decentralized’ services and entities in Venezuela to charge for services in Petros. This Decree extends to the Institute of Aquatic Spaces (INEA), which acts as the maritime authority in Venezuela. This meant that services including pilotage, towage, launch service, re-floating services, custody and logistic launches provided to foreign flagged vessels may have to be paid, at least in part, in Petros, according to Standard Club.

This was not the first time that payment for maritime services in Petros was proposed in Venezuela. However, this time, payment infrastructure for the Petro has been put in place, making it more likely that the requirements in the latest Decree will be enforced. In particular, the Standard club reported that local shipping agents must now register for the ‘PetroApp’ and that, in due course, INEA intends to receive payments through this system in Petro currency.

This would add further complications to trading with Venezuela since EO 13827 of March 2018, bans any US person or person within the US from dealing in any digital currency issued by the government of Venezuela, while containing a further provision
which is not specifically limited to persons and entities falling within US jurisdiction. It is therefore possible that the secondary provision might sanction a non-US entity which causes a US entity, such as a bank processing US Dollars, to deal in the Petro currency.

On 18 February 2020, the US took further action introducing new designations which impact shipping. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Rosneft Trading S.A., a Swiss-incorporated, Russian-controlled oil brokerage firm, for operating in the oil sector of the Venezuelan economy in breach of provisions of Executive Order 13850. OFAC also designated the chairman of the board of directors and president of Rosneft Trading S.A., Didier Casimiro, for purporting to act for or on behalf of, directly or indirectly, Rosneft Trading S.A.

Previously, designations of non-U.S. persons under EO 13850 had been for carriage of cargoes from Venezuela to Cuba. The new designations in February however, reflected the willingness of the U.S. Government to apply the sanctioning powers under EO 13850 more widely.

OFAC also issued General Licence 36, while additional FAQs were later issued aimed at providing some clarity around the designations. FAQ 818 clarifies the operation of General Licence 36 with regard to both U.S. and non-U.S. persons, stipulating that both are subject to the wind-down period in effect until 20 May 2020, and that new business not in place before 18 February 2020, will not beconsidered as wind-down activity.

In addition, FAQ 817 makes clear that the sanctions only apply to Rosneft Trading and not to its parent Open Joint-Stock Company Rosneft Oil Company or any subsidiary or affiliate which is not more than 50% owned by the designated entities. It should be noted, however, that both Rosneft Trading and Rosneft Oil Company are separately subject to U.S. Sectorial Sanctions imposed against Russia under Executive Order 13662, and it remains prohibited to provide both entities with certain services
primarily related to debt finance.

Overall, the effect on shipping companies, including non-U.S. persons is significant as OFAC’s liberal interpretation of the term operating in the “oil sector” of the Venezuelan economy is being used as a means of imposing secondary sanctions on non-U.S. persons and includes a prohibition on “material assistance” which is likely to be construed widely against those engaging in trade with Rosneft Trading. It is consequently strongly advisable to very carefully consider any transactions with Rosneft Trading.

Rosneft criticised the sanctions as illegal and unjustified, stating that in Venezuela it “conducts exclusively commercial activities for the benefit of its shareholders and does not pursue political goals”. The company said in a statement that the restrictions were “arbitrary and selective” as they did not apply to US oil companies, including Chevron, who had been granted waivers to continue operating in Venezuela. In late March, Rosneft announced its sudden departure from Venezuela, selling its assets in the country.

A month later, OFAC issued amended General License 8F, which authorizes transactions involving PdVSA necessary for limited maintenance of essential operations in Venezuela or the wind-down of operations in Venezuela for certain entities like Chevron.

The amended version of this license is different from prior versions in key respects. It allows Chevron additional time to wind-down its joint ventures with PdVSA but restricts Chevron’s ability to export oil out of Venezuela. The revised License runs from 22 April until 1 December 2020.

The License contains a notable exclusion for “The drilling, lifting, or processing of, purchase or sale of, or transport or shipping of any Venezuelan-origin petroleum or petroleum products”.

Although the License is technically intended to only apply to U.S. persons it will by extension also impact non-U.S. shipowners since oil cargoes shipped by Chevron and its joint venture partners from Venezuela, are now expressly excluded from the protection of General License 8 and may therefore expose carriers undertaking such trades to enforcement action by the U.S. authorities.

According to U.S. attorneys Freehill Hogan and Mahar, these new prohibitions may be a foretaste of wider action by the U.S. against Venezuelan oil shipments generally. The law firm notes that the changes in the license are indicative of the administration’s enhanced focus on Venezuela and international shipping. Venezuelan-origin petroleum and petroleum products may become a direct focus of the U.S.’s sanctions policy. As such, any voyages involving the carriage of such present significant sanction risks.

More recently, the US took further action asserting its aggressive sanctions policy by designated four Greek-managed tankers flying Panama, Marshall Islands, Malta and Bahamas flags to the SDN list. The aframax Athens Voyager, the suezmax tanker Chios I, and two very large crude carriers, Seahero and Voyager I, were blacklisted.

To conclude, it is advisable to continually assess the overall sanctions risks posed by the carriage of oil and petroleum products from Venezuela. Previous actions by the U.S. authorities related to Venezuela have shown their willingness to designate entities with immediate effect, which has grave consequences for the future trading and sale of any vessel as well as on insurance cover.

(Sources: Britannia P&I Club, GARD P&I Club, Standard P&I Club, Steamship Mutual P&I Club, SKULD P&I Club, Swedish P&I Club, UK P&I Club, W.est of England P&I Club, Trade Winds, Lloyd’s List, FT, NY Times, BBC)

US Sanctions against Iran

The US has been following a tough sanctions policy against Iran as tensions between the two countries continue to escalate.

In 2019, a significant number of sanctions against Iran were imposed by the US. OFAC designated approximately 124 entities related to commercial shipping in 2019, and 123 in 2018. Following its withdrawal from the Joint Comprehensive Plan of Action (JCPOA) agreement in May 2018, the US launched a “maximum pressure” campaign on Iran, levying extensive sanctions. In previous years, numbers were far lower with 33 designations in 2015, 28 in 2016 and 43 in 2017, according to TradeWinds. The growing figures are concerning, adding unnecessary pressure on maritime companies.

On 10 January 2020, the US issued a new Executive Order (E.O.) imposing sanctions against anyone who is engaged in owning, operating, trading with, or assisting sectors of the Iranian economy including construction, manufacturing, textiles, and mining or any other sector of the Iranian economy as may be determined by the US authorities. As a result, trade with Iran in almost all industry sectors is now barred except for trade in medicine/medical items, food and agricultural commodities.

The E.O. also authorises sanctions with respect to foreign financial institutions for transactions involving the designated industries. US authorities opened up for a 90 day period to winddown operations that could be sanctioned under E.O.13902.

The wind-down period expired on 9 April 2020. However, with regard to the designation of Republic of Iran Shipping Lines and
E-Sail Shipping Limited, OFAC issued two FAQs on 11 December 2019, clarifying that the wind-down period ends on 8 June 2020, and following that date transactions related to the aforementioned companies will be subject to US sanctions under “Weapons of Mass Destruction Proliferators Sanctions”. This prohibition extends to non-US persons who knowingly engage in certain transactions with these entities, including shipment of agricultural commodities food and medicines.

On 31 October 2019, US further strengthened secondary sanctions against Iran by making two determinations. The first one makes sanctionable the sale, supply or transfer, directly or indirectly, to or from Iran of any raw and semi-finished metals, graphite, coal, and software for integrating industrial processes if used in connection with the construction sector. The second determination defines four strategic materials (“Strategic Metals”) used in connection with the nuclear, military, or ballistic missile programs of Iran and makes sanctionable the sale, supply or transfer, directly or indirectly, of any Strategic Materials to or from Iran, regardless of the end-user or end-use. Subsequently, on 16 December 2019, the US issued an advisory to “alert persons regardless of nationality or location to the “significant” sanctions risk involved in transfers or exports to Iran of graphite electrodes or needle coke”. The risk is said to apply to entities/individuals, including producers, exporters, port operators, shippers, shipping companies, vessel operators, and owners, even when the intended enduser is not in Iran’s metal sector. The advisory states that revenue from such materials may be used to advance Iran’s proliferation programme, regional aggression, and support for terrorist groups.

September 2019, saw a significant number of listings by OFAC, with E.O. 13224 designating a shipping network comprising of officials, shipping and insurance companies directed by the Islamic Revolutionary Guard Corps (IRGC), a branch of the Iranian Armed Forces. In addition, OFAC turned its attention to the bunkering of vessels engaged in Iranian trade or involving Iranian
vessels, issuing an “Advisory to the Maritime Petroleum Shipping Community” regarding the sanctions risk related to shipping
petroleum and petroleum products from Iran. OFAC also highlighted the risk of secondary sanctions to non-US persons “that knowingly own, operate, control or insure a vessel that transports crude oil exported from Iran … could be subject to secondary sanctions”. The steps confirm that OFAC continues to focus on international shipping as a means to implement the Iranian sanctions program.

On 7 August 2019, OFAC amended the Iranian Sector and Human Rights Abuses Sanctions Regulations to implement the Executive Order 13871. This expanded sanctions by blocking all property and assets in the US of any entity/person operating in iron, steel, aluminum or copper sector of Iran; or engaging in transactions for sale/supply/transfer to Iran of goods and services used in connection with these sectors; or engaging in transactions for purchase, sale, transport, marketing from Iran of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products; or materially assisted, provided financial material or technological support to such entities/persons. The E.O. also warned of sanctions on foreign financial institutions if they have after 8 May 2019 conducted or facilitated any transaction prohibited under the E.O.13871.

On 24 June 2019, US President Trump issued a further EO, placing the Supreme Leader of Iran, the Supreme Leader’s Office, certain individuals associated with it as well as a number of senior Iranian military commanders on the SDN list. US property belonging to the people and entities added to the SDN list was blocked, and foreign persons or financial institutions who transact with these people or entities may also be sanctioned.

 

The aforementioned sanctions were introduced following a row of incidents, which created a sharp rise in tensions between the two countries. In June 2019, it was reported that Iran shot down an unmanned US drone. June 2019 also saw suspected attacks on two oil Tankers in the Gulf of Oman, with the US blaming Iran and Iran denying any involvement stating that the attacks were carried out by someone looking to derail Iran’s relations with the international community.

The attacks in one of the world’s busiest oil routes came only a month after four oil tankers were attacked off the United Arab Emirates. The strait of Hormuz continued to be an incident hotspot later in the year. In October 2019, Iran stated that a National Iranian tanker vessel was hit by two missiles off Jeddah in a terrorist attack, causing a fire and small oil spill.

In July 2019, UK forces seized Iranian VLCC Grace 1 in Gibraltar. A few days later, UK thwarted Iranian approach to BP tanker in the Persian Gulf and subsequently, Iran seized the UK-flagged Swedish-owned Stena Impero tanker. Iran seized a number of ships over suspected fuel smuggling. The Iraqi product tanker Riah was also seized in July 2019. In August, it took a second Iraqi ship that it claimed was a tanker, but instead appeared to be a supply ship. In September, Iran arrested two more ships for allegedly smuggling more than 500,000 litres of diesel combined. In the second incident, the unidentified ship was said to be headed for the UAE and arrested near Greater Tunb, another island that Iran administers and the UAE has a claim. September also saw an attack in two major Saudi Arabia oil facilities by Houthi drone strikes, with the US holding Iran responsible. In December, a small tanker and its crew were seized 15 nautical miles offshore Abu Musa, an island near the Strait of Hormuz administered by Iran and also claimed by the UAE. Its cargo of 1.3 million litres of fuel was confiscated. More recently, in April 2020, US President Trump instructed the US Navy to shoot down and destroy any and all Iranian gunboats if they harass US
ships at sea.

According to a report of the US Center for a New American Security, Iran is likely to launch several attacks on commercial shipping in 2020 as it seeks to extract concessions from the US. The report also argues that the most likely scenario for an escalation of tensions in the strait of Hormuz would be the attacks on tankers and oil facilities that shook shipping in 2019, designed to signal to the US, the Gulf states, and the international community that the American strategy of strangling Iran economically will not be cost-free, and to Saudi Arabia in particular that it is highly vulnerable to Iranian retaliation.

What is more, the conflict between US and Iran also intensified in Iraq. In January 2020, the US launched a targeted airstrike at Baghdad airport, killing a top Iranian general. The airstrike came after a rocket attack on 27 December 2019, targeting a military base in northern Iraq, which killed an American contractor and wounded several service members. Further hostilities broke out in March 2020, with the US waging a series of air strikes against an Iran-backed militia in Iraq, which it blamed for a major rocket attack a day earlier that killed two American troops and a British soldier.

With regard to the JCPOA deal, the risk of the 2015 agreement falling apart has significantly risen, following several reported breaches by Iran. In January 2020, Germany, France and Britain, the European nations involved in JCPOA, invoked a dispute resolution mechanism, designed to resolve issues with the deal or refer them to the U.N. Security Council. The move was instigated due to breaches of key parts of the deal by Iran, as the country had gradually lifted the limits on its production of enriched uranium, which can be used to make reactor fuel but also nuclear weapons. Iran argued that it is entitled to do so in response to sanctions reinstated by the US when it abandoned the deal in 2018, an argument which was not accepted by the three countries. The European countries stated that the move aimed at salvaging the accord. However, this also meant that if the issue is not resolved, re-imposing sanctions lifted under the deal is a possibility.

In early March 2020, the three European countries as well as China and Russia, called on the US to ease sanctions so that Iran can respond more effectively when the country became the first major Covid-19 hotspot outside Asia. The US refused to offer a sanctions relief to Iran. Thus, France, Germany and the UK began to send medicine and food to Tehran through “Instex” trade system, designed to avoid US sanctions on Iran. In January 2019, the “E3” (France, Germany and the UK) had created the “Instrument for Supporting Trade Exchanges” (Instex), a stopgap plan that was designed to allow trade through nonUS dollar transactions or barter without risking US sanctions. But for a long time, the plan never really took off. On 31 March 2020, more than a year after it was founded, the first Instex transaction took place, consisting of medical supplies.

Looking ahead, further sanctions are expected in 2020, with even more focus on Shipping. According to IHS Markit, banks, shippers and others need to ensure that they have no internal weaknesses or holes in any of their due diligence procedures when it comes to screening vessels, vessel movements, vessel ownership and past vessel activities. Any gaps in a bank’s sanctions programme regarding vessel screening requires serious attention in today’s climate.

In addition, enforcement action in 2020 will likely cover multiple actors and agents within a single transaction. Most OFAC penalties deal with a single institutions failure to conform with economic sanctions policies. This could be adapted and changed so that where goods have been loaded and shipped on sanctioned transportation, those involved such as the bank, shipper and insurer for example, could all be fined. In terms of overall penalty action, it is expected that 2020 will have more similarities with 2019 rather than 2018. In 2018 only seven OFAC enforcements were issued, 2019 by comparison reached 26 actions with an overall settlement bill touching $1.3 billion. With an increased emphasis on shipping and other areas in global trade compliance, similar fines and industries that were targeted in 2019 might again characterize 2020.

(Sources: UK P&I Club, SKULD P&I Club, Swedish P&I Club, IHS Markit, Trade Winds, Reuters, FT, BBC, CNN, CNBC, NY  Times, ABC News, the Guardian, Economist, Radio France Internationale)

Panama Canal

In December 2019, Panama Canal celebrated the 20-year anniversary of its handover to the state of Panama, following an 85-year period of US administration. The celebration took place amid a climate change crisis, posing significant operational sustainability problems to the waterway. Despite extensive water-conservation measures taken by the Panama Canal Authority (ACP), the past year’s rainfall was 20% below the historic average and the fifth-driest year in 70 years. This follows several years of lower than average rainfall coupled with a 10% increase in water evaporation levels due to a 0.5- 1.5ºC rise in temperature.

The changing waterfall patterns and historic low water levels at Gatun Lake, the main source of water for the Canal, have led to operational changes and a significant increase in the 2020 toll rates.

A modification to the Canal’s 2020 tolls structure, was proposed in June and approved in September 2019. The modification involved the tolls charged to Neopanamax Dry Bulk vessels carrying iron ore, Neopanamax Dry Bulk vessels transiting in ballast, the Vehicle Carrier/Roro Segment and the Liquid Bulk Segment (including Oil and Product Tankers, Chemical Tankers, LPG and LNG vessels). According to ICS, this toll modification could increase the cost up to 17% for some vessels passing through the Canal. Rates were also reduced on a sliding scale for shipping lines in three categories, with the Canal expanding its loyalty program for frequent customers.

The approved modifications of September, included adjustments made in response to topics discussed during meetings with customers and industry representatives and feedback received during the consultation period. The initial proposal was that the new tolls be introduced as of 1 January 2020. However, following the consultation, the implementation date for tolls applicable to certain segments was postponed until the months of April and May 2020, while for some the effective date remained January 1st, 2020.

New water conservation strategies were announced by ACP in January, which came into effect on 15 February 2020. A fresh water surcharge, a booking fee and a transit itinerary creation fee were imposed on transiting vessels, while the total number of daily booking slots was decreased from 31 to 27 slots. The charge was set at $10,000 for any vessel over 125 feet long, while the additional variable surcharge will be based on the level of the Gatun Lake at the time of transit. ICS estimates that this increases costs to ships passing through the Panama Canal by up to 15%. When both increases are combined, some vessels passing through Panama Canal after April 1st face price hikes of over 30%.

The maritime industry raised concerns over the new charge, with ICS and other major industry organizations requesting an extension of at least six months, which was not granted. The Canal was also criticised for the fact that the period between
the announcement of the new charges and the date of implementation was only a month, giving little time to consider the decision and its potential effects, while the stakeholders were not engaged in the process as is usually the case when tolls
are revised.

Stakeholders were engaged in the decision-making process for the toll modification last year, and the Panama Canal Authority at this time agreed to defer increases to allow shipowners to factor in the rise. But the new freshwater charge, which came ahead of the significant changes in rates to the Panama Canal Authority 2020 Tolls Modification, took the shipping industry by surprise according to ICS.

The industry is currently facing increased price pressures globally, as demand has been hit hard by coronavirus, while markets are still adjusting to the new regulations on sulphur levels and companies have recently invested heavily in a low emissions future. It was therefore highly inadvisable for the Panama Canal Authority to put increased strain on industry and the wider global economy at this time. Cost hikes in this range, without sufficient warning, place undue pressure on the industry at a sensitive time.

As ICS argues fairly that the global shipping industry is supportive of the need for economic sustainability of the Panama Canal, as one of the most important Canals in the world. However, it is equally important that the ACP fully considers
and take account of the very challenging economic conditions under which the global shipping industry is currently operating, noting that the economic sustainability of the Panama Canal is inextricably linked to that of shipowners and operators that use the Canal.

Following the implementation of the new water conservation strategies in February, significant delays for vessel transits were reported. The waiting time varied depending on the vessel category, vessel restrictions, and transit direction, with some delays reported reaching to 11 days. However, vessels that book their transit for a particular date have transit certainty for that date and compliance with the booked vessels is over 99%, according to ACP Operations team.

Amid the pandemic and economic uncertainty, the Panama Canal announced in May a temporary adjustment to its reservation system, intended to provide relief and flexibility for its customers. Effective as of May 4, 2020, the waterway implemented changes to the requirements for the placement of booking guarantees, advance payment of reservation fees when the reservation is confirmed, and provides more flexibility for swapping booking slots. The measure will be in place until September 2020.

More recently, the ACP minimized the draft restrictions. Following the reduction of the authorised draft for vessels transiting the Neo-Panamax locks in March due to drought and the low levels in Lake Gatun, and the announcement of a second reduction which was later suspended, the conditions turned favourable in May.

Based on the current projection of the levels in Gatun Lake, the ACP announced on May 28 that the Maximum Authorized Draft for vessels transiting the Neopanamax locks will be 13.87 m (45.5 feet), with immediate effect. Vessels arriving with drafts over 13.87 m (45.5 feet) TFW may be allowed to transit, depending on the actual level of Gatun Lake at the time of transit. With the water levels at Gatun Lake now higher than projected for the beginning of the rainy season, the forecast for the following months appears encouraging.

However, a sustainable long-term solution to water challenges is required for the benefit of the Canal and the shipping industry.

Statistics
Total toll revenues in 2019 amounted to B/.2.592 billion, a 4.3% increase over 2018 figures.

The Panama Canal achieved a new tonnage record of 469.6 million PC/UMS tons during fiscal year 2019, a 6.2% increase to the previous fiscal year’s tonnage. However, total transits decreased slightly from 13,795 in fiscal year 2018, to 13,785 in fiscal year 2019, as a result of less refrigerated cargo, container and dry bulk vessels transits. Nonetheless, vessels transporting LNG, LPG, tankers and vehicle carriers, increased their transits through the Panama Canal, compared to the previous year. LNG and LPG vessel transits increased the most compared to fiscal year 2018. Tankers, dry bulkers, gas carriers and container vessels account for almost 80% of all large vessel transits.

However, in recent years the Canal has come under serious economic pressure, particularly during the US-China trade war, its two most frequent users. A potential threat also looms with regard to the Northern Sea Route (NSR), the proposed network of shipping lanes that connect the major manufacturing centres in Asia with the consumer markets in North America and Europe.
Source: Panama Canal Authority

The aforementioned factors, including this year’s particularly dry season, which significantly increased tolls, threatens the competitiveness of the Canal, requiring careful consideration and the adoption of a viable strategy.

(Sources: Panama Canal Authority, Japan P&I Club, UK P&I Club, ICS, Trade Winds, Lloyd’s List, Reuters, Journal of Commerce, Ports Europe, SeatradeMaritime, Hellenic Shipping News, Rivieramm)

Suez Canal

In November 2019, the Suez Canal celebrated its 150th anniversary of the waterway’s opening to international navigation. Since its inauguration in 1869, the Suez Canal has played a vital role in serving world trade and the shipping industry.

Egypt’s waterway remains competitive to date, with encouraging navigation statistics recorded during the previous year. In 2019, the Canal accommodated 18,880 vessels compared to 18,174 vessels in 2018, marking an increase of 3.9%.

The total net tonnage accommodated through the Suez Canal reached 1.2 billion tons in 2019, compared to 1.1 billion tons in 2018, an increase of 5.9%. The Canal’s flexible pricing policies encouraged additional traffic in the waterway, with revenues increasing from $5.7 billion in 2018 to $5.8 billion in 2019.

In light of unfavourable conditions in the global economy and international trade, transit tolls for 2020 remained at 2019 levels for all vessel types, with the exception of dry bulk vessels and LPG carriers, which rose by 5% as of April 2020.

Despite the challenging landscape of global trade and political tensions, the Chairman and Managing Director of the Suez Canal Authority, Osama Rabie, expressed his optimism in the start of the year toward the navigation statistics for the waterway in 2020, which witnessed a surge in the number of vessels crossing the canal and in tonnage in the first months of the year. In April 2020, the Authority reported that traffic through the Canal was not affected by the coronavirus pandemic, recording an increase in vessels passing through the canal in both directions in March 2020, compared to the same period in 2019.
The growth in revenues is of significant importance to the Suez Canal Authority in view of its strategy to further expand the waterway and develop its services over the next decade. The sailing draft of ships would likely increase from 20 meters to 21.3 meters along parallel channels each measuring 315-meters in width along with increased sailing beam, ship length and deadweight tonnage that could likely transit oil tankers.

Additional development plans in the nearer future were announced in February this year, regarding the construction of a new military base on the country’s eastern border to secure the Canal’s shipment activity and its economic zone. In regards to IMO’s global sulphur cap regulation, the Suez Canal banned the discharge of wash-water from open-loop scrubbers while transiting the Canal. Many jurisdictions around the world have imposed similar restrictions within their waters. At the end of 2019, the Suez Canal Authority issued Circular No. 8/2019 imposing the ban, and further clarification on the matter in January 2020. To conclude, new requirements and developments in the shipping industry are closely monitored by the Suez Canal, which has demonstrated its ability to adapt to the new circumstances. Throughout its history, the Suez Canal has been greatly supported by the Egyptian government, adopting a series of developmental projects in the waterway and maintaining its competitive edge over other maritime routes.

(Sources: Suez Canal Authority, Swedish P&I Club, BIMCO, Lloyd’s List, CNBC, Hellenic Shipping News, Maritime-Executive, See.News, Marine Insight, Ports Europe, Middle East Monitor)

Ongoing Mediterranean Migrant Crisis

Over the previous four years, a significant reduction in the influx of migrants reaching Europe was recorded. However, tensions between states affected have continued to escalate, with a number of pressing issues being far from resolved.
Between 1 January and 3 June 2020, 24,262 refugees and migrants arrived in Europe, with more than 20,000 making the crossing via sea routes. Once more, the highest number of arrivals was registered in Greece.

It is estimated that approximately 182 died or went missing while attempting the perilous journeys. Most lives are still lost during the crossings to Italy and Malta, but also to Spain.

Although the figures might still appear to be high, illegal border-crossings at Europe’s external borders have reduced significantly in comparison with the previous six years. In the first four months of 2020, arrivals dropped slightly, compared to the same period last year, while April saw a significant reduction in numbers. Fewer than 100 people arrived in Greece by land and sea routes in April as COVID-19 fears limited movements in the region. Just over 500 people arrived in Spain by land and sea routes in April, compared to more than 1,200 in March.It should also be noted that arrivals in the Canary Islands continued, and some 1,900 people have arrived by this route so far in 2020, compared to fewer than 300 in the same period in 2019.

A decrease in migrant arrivals was also recorded in 2019, 13% less compared to 2018, with approximately 123,700 refugees and migrants arriving via the three Mediterranean routes from North Africa and Turkey. The majority originated from Afghanistan, Syria, Morocco and Algeria. 56% of arrivals were men, 17% women and 27% children.

Due to the high risks associated with crossing the Mediterranean Sea, it is estimated that approximately 1,336 people have died or gone missing in 2019, a 41% decrease as compared to the 2,277 deaths in the same period in 2018. Most deaths occurred between North Africa, Italy and Malta, as well as, between North Africa and Spain.

The majority of crossings in 2019 were attempted through the Eastern Mediterranean from Turkey, with Greece receiving the highest influx of refugees and migrants compared to the rest Mediterranean nations. In 2019, Greece recorded a total of 74,600 sea and land arrivals, a surge in figures compared to 2018 and 2017, when the country had recorded 50,500 and 36,300 sea and land arrivals respectively. Sea arrivals in Greece during the previous year accounted for 59,700, while land arrivals for 14,900. The leading nationalities represented were Afghans (38%), Syrians (23%), Iraqis (6%) and Congolese (5%).

Italy recorded 11,500 arrivals by sea in 2019. Figures during the two previous years were notably higher, with 23,400 registered arrivals in 2018 and 119,400 in 2017. Most of the migrants on this route originated from Tunisia, Pakistan, Cổte
d’Ivoire and Algeria.

In Spain, arrivals by sea and land reached 32,500 in 2019, a significant drop compared to 2018, when arrivals totalled 65,400. The highest number of migrants crossed the sea border. The most represented nationalities on this route were Morocco, Algeria, Guinea and Mali.

In Cyprus, the number of arrivals registered more than doubled in 2019, compared to 2018, with the country registering 1,700 arrivals during the previous year. Nationals of Syria accounted for the largest number of arrivals on the sea route in the Eastern Mediterranean, with the majority being men.

In Malta, arrivals by sea surged in 2019 reaching 3,400, compared to 2018 when the country had recorded 1400 arrivals. Nationals of Sudan, Eritrea, Nigeria and Morocco accounted for the largest numbers of irregular migrants.

As the state of affairs has shifted in the Mediterranean, the number of migrant rescues carried out by merchant shipping has seen a reduction. Nevertheless, merchant vessels are still diverted from their course to assist. In accordance with
the IMO Safety of Life at Sea Convention, vessels have a legal obligation to come to the assistance of anyone in distress at sea. Aside from the legal and humanitarian obligations, which merchant vessels have always willingly followed, it should be stressed that a vessel’s crew can be exposed to a number of risks when involved in a rescue operation. The incident of March 2019, when rescued migrants hijacked a merchant vessel off Libya, highlights one of the dangers seafarers might face. It is therefore essential that coastal states take responsibility of search and rescue operations.

Operation Sophia of EUNAVFOR MED was scaled down last year, and permanently ceased its activities in March this year. During the previous year it was announced that Operation Sophia would cease the maritime missions but extend its air patrols. In September 2019, the EU renewed the mandate of Operation Sophia for six months relying solely on air patrols and closer
coordination with Libya.

Operation Sophia made a valuable contribution to dismantling the modus operandi of the human traffickers operating in the Central Mediterranean region, as well as to the regional stability, security, and the protection of Europe’s maritime borders. With the number of migrants leaving Libya to reach Europe drastically reducing over the past four years, and the trained Libyan Coast Guard now considered in a position to carry out its responsibilities in this area, it was decided early this year that the operation would cease. In 2019 approximately 50% of the rescues in the search and rescue area off Libya were conducted by theLibyan Coast Guard.

The revival of Operation Sophia had been considered but, as concerns were raised about the redeployment of vessels which could encourage an increase in migrant flows, it was decided not to move forward with the operation’s revival.

Operation Sophia was soon replaced by Operation Irini, with an initial mandate until 31 March 2021. EUNAVFOR MED Irini has, as its core task, the implementation of the UN arms embargo through the use of aerial, satellite and maritime assets. In particular, the mission will be able to carry out inspections of vessels on the high seas off the coast of Libya suspected to be carrying arms or related material to and from Libya, in accordance with United Nations Security Council Resolution 2292 (2016).

As secondary tasks, EUNAVFOR MED Irini will monitor illicit exports of petroleum and crude oil products from Libya, contribute to the training and capacity building of the Libyan Coast Guard and Navy in law enforcement tasks, as well as contribute to the disruption of human smuggling and trafficking networks through information gathering and patrolling by planes.

A few days following the commencement of the new operation, Malta announced that it will veto decisions on Operation Irini, which involve spending for disembarkation of migrants, port diversions, and the use of drones. This is a move which could drain the mission’s funds.

The Maltese Foreign Minister, Evarist Bartolo, had stated a few days earlier that Italy and Malta were being left alone to deal with thousands of migrants crossing the central Mediterranean and criticised EU governments for not taking in those migrants after they have arrived in Maltese and Italian ports. The migrant crisis appears to be taking a political direction, with tensions due to concerns about migration increasing across Europe.

It is feared that the situation in the Mediterranean might be exacerbated by the intensifying conflict in Libya, which, in in view of the additional threat arising from the spread of COVID-19 within the country, could push more migrants to attempt the perilous Mediterranean crossing.

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Increased numbers of migrants leaving the Libyan shores, coupled with the refusal of Libya to allow rescued migrants to return to the country, as well as Malta’s and Italy’s hesitation to allow migrants to disembark, could pose challenges to merchant shipping. This scenario could place increased pressure on vessels operating in the region to come to the rescue of migrants, despite the potential lack of a port which will then accept them. Local port state authorities must recognise the importance of permitting disembarkation in the event of involvement by a merchant vessel in a migrant rescue operation.

(Sources: UNHCR, ICS, EU, EU NAVFOR MED, Reuters, Maritime-Executive)

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