Energy Efficiency Design Index for new ships and the Ship Energy Efficiency Management Plan will be mandatory

IMO's Marine Environment Protection Committee (MEPC 62) met in London last week and agreed mandatory measures to reduce emissions of greenhouse gases (GHGs) from international shipping. IMO says this is the first ever mandatory global greenhouse gas reduction regime for an international industry sector.

Amendments to MARPOL Annex VI Regulations for the prevention of air pollution from ships, add a new chapter 4 to Annex VI on Regulations on energy efficiency for ships to make mandatory the Energy Efficiency Design Index (EEDI), for new ships, and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. Other amendments to Annex VI add new definitions and the requirements for survey and certification, including the format for the International Energy Efficiency Certificate.

However, the Richard Branson-founded Carbon War Room says it will deliver a letter to IMO delegates calling for the mandatory use of energy efficiency ratings across the entire fleet, signed by 50 organizations, including owner-operators of 60 million tons-worth of vessels. Signatories include Denmark’s Maersk Line (containers) and TORM, Canada’s Teekay, America’s Heidmar (tankers) and Wallenius Wilhelmsen Logistics (ro-ro) of Norway/Sweden. German consumer electronics company Schneider Electric has also signed, along with the Port of Los Angeles and the NGO Forum for the Future.

Peter Boyd, Carbon War Room's COO, says: “Today’s new standards if applied to all ships, not just newbuilds, would save the industry more than 220m tons of CO2 and USD50bn a year. This is a historic move by the IMO but there’s a bigger environmental and economic opportunity out there that’s too good to miss.”

The regulations apply to all ships of 400 gross tonnage and above and are expected to enter into force on 1 January 2013. However, under regulation 19, the Administration may waive the requirement for new ships of 400 gross tonnage and above from complying with the EEDI requirements. This waiver may not be applied to ships above 400 gross tonnage for which the building contract is placed four years after the entry into force date of chapter 4; the keel of which is laid or which is at a similar stage of construction four years and six months after the entry into force; the delivery of which is after six years and six months after the entry into force; or in cases of the major conversion of a new or existing ship, four years after the entry into force date.

IMO stresses that the EEDI is a non-prescriptive, performance-based mechanism that leaves the choice of technologies to use in a specific ship design to the industry. As long as the required energy-efficiency level is attained, ship designers and builders would be free to use the most cost-efficient solutions for the ship to comply with the regulations. The SEEMP establishes a mechanism for operators to improve the energy efficiency of ships.

MARPOL also now includes a a regulation on promotion of technical co-operation and transfer of technology relating to the improvement of energy efficiency of ships, which requires governments, in co-operation with IMO and other international bodies, to promote and provide, as appropriate, support directly or through IMO to States, especially developing States, that request technical assistance.

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New index will be based on 40ft container rates

UK based Drewry Shipping Consultants and Cleartrade Exchange have announced that they will be publishing a new weekly container index. The World Container Index (WCI) is scheduled for launch in September 2011 and is designed to underpin the nascent container derivative trade.

The weekly index will report spot container freight rates for major East West trade routes and consists of 11 route-specific indices and a composite index. The assessments will be reported in USD per Forty Foot Equivalent Unit (FEU) and will cover backhaul as well as headhaul routes.

The WCI assessments are based on reports of the value of agreed freight rates between major Asian, European and North American container lines and shippers or freight forwarders.

According to WCI “only freight rates that are agreed between participants and on which cargo is, or is expected to move will form the assessments. Rates for quotes, tariffs, estimates, bids or offers are excluded.”

Richard Heath of the WCI says: “We are pleased to announce this important step in the process of bringing a viable, tradable container index to market. We are now working with a number of parties on final feedback to ensure that we deliver a product which is tailored to the requirements of the market. Interest in the potential of the WCI has been very encouraging and we already have a number of pre-orders for subscriptions.”

The rates reported by the index are spot rates with a validity of seven days to one calendar month from the date the assessment is reported. The value of agreed freight rates is defined as the total ocean freight including bunker adjustment factor and all other applicable surcharges, plus terminal handling charges when it is common market practice to include them, but excluding any surcharges related to inland transportation.

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Maritime London member Clyde & Co reports that Chinese charterers are deducting taxes from vessel hire payments. In a briefing paper, the firm writes that Chinese charterers have put owners on notice that they intend to “withhold” amounts from hire or freight payments of between 4.25% and 15% of the payment on the basis that the owners in question are allegedly liable for Business Tax, or Enterprise Tax in China, even though the owners have no China presence.

According to Clyde & Co, the Chinese tax authorities have recently hardened their stance and have placed the onus on the charterer to collect the tax. The charterer, acting as a withholding agent on behalf of the Chinese authorities, is obliged under Chinese law to collect the taxes. Should the withholding agent fail to collect the taxes, the potential fines range from 50% to 300% of the amount that the charterer should have withheld and collected.

Clyde & Co advises owners to protect themselves with clearly worded charterparty terms. It also notes that many jurisdictions have entered into double taxation treaties with China and that in many cases the owners may not be liable.

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UK tabloid the Daily Mirror reports that on 7 July there were 4,322 jobs available across the UK’s marine and shipping industry. The findings are part of the paper’s ongoing “Get Britain Working” campaign.

The paper says: “Whether it’s building aircraft carriers, luxury yachts, or working in the busy ports and shipyards there are opportunities at all levels from apprentices to experienced engineers and from crane drivers to general labour.”

The Daily Mirror, which has a readership of over 1.1m, derived its figure from a search of a range of sources including job centres and employment agency Reed.

According to Maritime UK, the sector supports more than half a million jobs and contributes a hefty £26.5billion to the British economy.

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Lloyd’s Agency Department has a new Controller of Agencies following an announcement that Mark Patterson has taken the helm. David Lawrence has been promoted to Deputy Controller.

Mr Patterson joins Lloyd’s following a marine insurance career spanning over thirty years with INA, AIG and CV Starr.

Mr Patterson described the appointment as “a great honour,” noting that during his time in the marine insurance industry “the work of the Lloyd’s Agency has been known to me. I look forward to working with the team to build upon the solid foundations that have been forged over the past 200 years.”

Lloyd’s Agency was established 200 years ago to protect the interests of Lloyd’s marine underwriters overseas. It now has over 300 Lloyd’s agents and 340 sub-agents located in every major port around the globe forming the world’s most extensive surveying and adjusting network.

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Specialist smaller vessel P&I insurer, the Shipowners’ Club has announced and increase of 39%in free reserves and a combined ratio of 85%, with a USD25.2m underwriting surplus.

Club chairman Donald MacLeod puts the recent success of the Club down to the diversity of its members and the results of organisational changes over the last two years that are now coming to fruition.

“Our strong performance coincides with the culmination of a period of change for the Club. The most significant of which was the process of rationalising activities between our London, Singapore and Vancouver branch offices, which has brought us closer to more of our members and their brokers,” he said in his chairman’s statement.

Additionally, the volatile trading environment did not affect shipowners as dramatically as it did others.

“The Club is uniquely suited to volatile conditions. Our members, by and large, are not dependent on freight rates or commodity pricing. Club vessels can be found throughout the world, engaged in a broad spectrum of activities from fishing to offshore to passenger carriage, dredging and towage. Such geographic and sectoral diversification acts as a natural hedge for the Club against regional,industry-specific trading volatility,” said Mr MacLeod.

Last year's good operational performance, resulting in the underwriting surplus, contrasted with a small deficit in the previous year and, together with a 6.8% return on investments producing an income of USD27.6m, returned an overall surplus of USD52.9m.

This addition to free reserves brought an increase of 39% to US$187.9 million and a combined ratio for the 2011 year of 85%; total funds under management rose by 17% to USD431.0m. Claims reduced by 9% compared with the previous year and totalled US$107.2m, while operating expense increased by just over US$6m to USD40.5.

The club reported a 9.5% increase in tonnage entered to 17.8 million GRT, an increase of 8.4% in vessel numbers to 26,998.

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UK government needs to be aware of importance of UK maritime services to its economy

The government has issued consultation papers on statutory residence and the taxation of non-domiciliaries. Shipping accountant and adviser, Moore Stephens, has welcomed the move, but warns that the UK shipping industry faces a growing threat from other jurisdictions.

Revenue & Customs’ consultation papers propose a statutory residence test and certain changes to the taxation of non-domiciliaries with effect from April 2012.

“These could have important implications for shipping,” says Moore Stephens shipping partner and Maritime London member, Richard Greiner, “and are generally to be welcomed."

“The government’s commitment to consult on these issues is particularly positive, but is in stark contrast to its recent unilateral decision to reinterpret the rules on UK tonnage tax. The importance of tonnage tax should not be underestimated. A recent report by UK Maritime notes that, had the UK-owned fleet continued to decline at the rate seen in the years immediately before the introduction of tonnage tax, the UK shipping industry would have contributed £3.9 billion less to UK GDP in 2009 than it actually did, and there would have been 81,000 fewer jobs in total.”

“UK shipping faces a serious and growing threat from other, more user-and-tax-friendly regimes. We have already seen movement to other jurisdictions. If this is not to become an exodus, it is essential to maintain the competitiveness of the UK shipping industry.”

The stated objectives of the non-dom taxation reforms are to ensure that non-doms make a fair tax contribution and to encourage non-doms to invest in the UK. To achieve the latter objective, the government intends to allow non-doms to remit overseas funds to the UK tax-free for commercial investment in a qualifying business.

Mr Greiner says: “Although these measures are at present the subject only of a consultation paper, and could change as a result of responses received by the government before the cut-off date of 9 September 2011, they represent a positive development.

“Similarly, the draft proposals for a statutory residence test should result in rules which are clear and fair, providing some long-overdue clarity in what has previously been a very grey area. This is especially appropriate for a country which seeks to attract, and retain, international business. “

Baltic Exchange chief executive Jeremy Penn notes that as a result of recent changes to the UK’s non-dom taxation regime about 30% of the non-domiciled shipowners who were based in the UK five years ago have now left. In a letter to Lloyd’s List last week he wrote:

“With them go the jobs in their chartering operations and, over time, in other businesses which need to be close to the decision-makers, for example, shipbrokers, lawyers, bankers, insurers and accountants.”

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Next year looks set to be the biggest year for containership newbuilding deliveries in history, in terms of TEU capacity entering the cellular fleet, according to Braemar Seascope's latest Containership Fleet Statistics.

The Maritime London member says boxship deliveries in 2012 are expected to reach 1.55m TEU - beating the previous record of 1.52m TEU achieved during 2007.

Braemar Seascope expects a cellular fleet expansion in the region of 9.5% for 2012, increasing the available capacity to 16.8m TEU. Of the 230 ships due for delivery next year, 59 have a nominal container capacity of 10,000 TEU or more. This will introduce an additional 0.8m TEU to this segment.

Fleet growth for the 10,000 TEU plus size bracket is expected to reach 70% year on year for 2011 and a further 57% in 2012. Bearing in mind that the vast majority of ultra-large containerships are currently deployed on Asia - Europe services, next year's delivery influx would be sufficient tonnage to create another five loops deploying ten x 13,000 TEU vessels.

For vessels up to and including 5,100 TEU capacity, it is a very different story: the lower level of investment in newbuilding projects is apparent as growth is expected to reach only 2.9% this year before hitting 3.0% in 2012. Since January 2010, owners have ordered 1.7m TEU capacity of boxships with a capacity of 5,100 TEU or more compared with 0.4m TEU of smaller ships (below 5,100 TEU).

Containerships of 10,000 TEU or more comprise 49% of the global orderbook by capacity whereas containerships up to 5,100 TEU represent only 20% of the global orderbook.

Since the KG market has largely exited the newbuilding arena, investment in smaller containerships has been lacklustre. However, Braemar expects renewed interested in feedermax tonnage once the current cycle of investment in post panamax ships has waned.

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International Union of Marine Insurance (IUMI) has welcomed the recently announced initiative by two leading containership operators that they are spearheading a new safety drive for enhanced container safety. The aim is to reduce the number of accidents caused by hazardous cargoes, poor stowage in boxes and inaccurate weight declarations. MSC and Maersk are being joined by other prominent container lines in a pilot scheme to establish a database of information that would be widely available throughout the industry.

IUMI says that any initiative to improve the safety of property and human life deserves the fullest support.

“It will be of positive benefit to ship and cargo owners and to insurers, who are concerned about the rising number of dangerous containerised cargo incidents. “Marine insurers have over many years been much more involved in promoting maritime safety. GDV, the German marine insurance association, has carried out extensive work, again over many years, on container transport and safety.”

IUMI will focus on the issue of accidents caused by poorly stowed containers or inaccurate weight declarations at its annual conference in September (18-21) in Paris.

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