- New BIMCO Clause to Align Shipping Contracts with FuelEU Maritime Regulation.
- FuelEU Maritime Clause: A Step Toward Compliance for the Shipping Industry.
- BIMCO’s FuelEU Clause Faces Industry Review Ahead of January 2025 Rollout.
BIMCO has released the FuelEU Maritime Clause for Time Charter Parties to assist stakeholders in aligning their contracts with the FuelEU Maritime regulation, which will be implemented in January 2025. This clause applies to time charter parties and is intended to provide flexibility, especially for long-term charters, allowing charterers to select their compliance strategies, such as pooling, banking, or borrowing, reports Clean Shipping International.
Industry Consultation and Collaborative Process
BIMCO’s Deputy Secretary General, Stinne Taiger Ivø, emphasised the industry’s anticipation for the clause, noting the complexity of the FuelEU Maritime regulation. She said, “This clause has been eagerly awaited by the industry. January is almost here, and the FuelEU Maritime regulation is complex. Because of this, we have carried out several industry consultations during the drafting process to make sure that we arrived at a clause that works in practice.”
Nicholas Fell, Chair of the BIMCO Documentary Committee, highlighted that this regulation will significantly impact the shipping industry, even more so than the EU Emissions Trading System. He added, “The FuelEU Maritime regulation will significantly impact the shipping industry, even more so than the EU Emissions Trading System. The clause we have adopted today is the result of a collaborative process between owners, charterers, P&I legal experts and other stakeholders.”
Shipowner Responsibility for Compliance
In theory, the shipowner is responsible for compliance with FuelEU Maritime, but in practice, a third-party ship manager may assume the obligations under the International Management Code for the Safe Operation of Ships and Pollution Prevention (ISM). BIMCO is also developing a clause for their ship management agreement (SHIPMAN) to bring it into line with these regulations. During December 2023, BIMCO approved a new Emission Trading Scheme Allowances Clause for the SHIPMAN agreement and several ETS clauses for Voyage Charter Parties.
Alignment with Long-Term Charters
OceanScore believes the proposed solutions for long-term Time Charter Parties, typically covering an entire reporting period, align with market expectations and strike a balance between the interests of owners and charterers.
Role of DOC Holders
The designated parties responsible for FuelEU compliance are the DOC (Document of Compliance) holders. OceanScore stresses that clauses in Time Charter Parties must align with ship management agreements (SHIPMAN) to ensure consistent compliance, especially when third-party managers are involved.
Timing Considerations
OceanScore raised concerns about the timing of compliance balances. They explained, “The clause proposes providing compliance balances for the prior two years, but this will not be feasible until at least 2027 due to the rollout timeline. Proofs of Sustainability (POS), which are critical to FuelEU compliance, take 4–6 weeks to become available post-bunkering. The proposed 15-day reporting deadline for ‘verified’ compliance balances can be unrealistic.” They further suggested that “The charterer should notify the owner as early as possible of their intent to pool the compliance deficit.”
Pooling Compliance Framework
Pooling compliance balancing is identified as a potentially efficient solution. However, the clause lacks a clear framework for pooling in short-term charters, and greater clarity is needed on how pooling will be used across various scenarios. OceanScore noted, “Pooling compliance balancing is likely the most efficient way to secure compliance. But while the clause mentions this in the context of long-term charters, it does not offer a meaningful framework for short-term or broader application.”
Compliance Surpluses and Practical Solutions
OceanScore considers the approach for dealing with compliance surpluses as balanced and practical. However, they stressed the need for flexibility in pricing surpluses, particularly since pool prices will not be known until 2025 or 2026. “It might make sense to opt for some flexibility mechanism in this proposed price for surpluses,” they suggested.
Pricing Compliance Balances
OceanScore expressed concern about the proposed penalty pricing for compliance deficits. They pointed out, “The guidance provided that compliance deficits will be compensated for at the level of the penalty (€2.400 / ton VLSFOe) is an attractive, clear solution for the owner. But we do not see this stand the test of intense C/P negotiations, as there will be cheaper ways to comply than to pay the penalty.” They emphasized that realistically, there would be two options: “Either an adjusted surcharge below the penalty level or a flexibility mechanism reflecting the pool prices.”
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Source: Clean Shipping International
