How Digitalization Can Help Promote Transparency In The Maritime Industry

Data quality and fastidious administration is vital to ensuring compliance with the latest hazardous material requirements in the European Union (EU) and the growing international regulation framework. But inconsistencies, data issues and a lack of knowledge across the sector is causing shipowners to be fined thousands of euros by port state control (PSC) officers.

Riviera’s Webinar 

These issues were debated by an expert panel during Riviera’s Through-life data: the key to compliance in ship recycling webinar, held on 5 February 2021 during Riviera’s Ship Recycling Webinar Week.

Panellists in this webinar were Columbia Shipmanagement (CSM) project manager Rangel Vassilev, GSR Services Cyprus managing director Henning Gramann and independent industry commentator Martin Crawford-Brunt, who was chief executive of RightShip between May 2018 and December 2020.

The webinar addressed the vulnerabilities of existing regulations and owner requirements for maintaining data on ship condition and onboard hazardous materials.

The panel debated how shipowners, operators and managers could achieve data management best practice throughout a ship’s lifetime. How data-driven processes needed to be transparent to uphold compliance and what lessons had been learned from Inventory of Hazardous Material (IHM) certification to date.

Mr Crawford-Brunt said there was still too much complex regulation in ship recycling. “The legal framework is not clear,” he said.

Regulations hindering recycling 

Main regulations affecting ship recycling include IMO’s Hong Kong International Convention for Safe and Environmentally Sound Recycling of Ships (HKC, 2009) and EU’s Ship Recycling Regulation (EU-SRR, 2013). These are applicable to ships of more than 500 gt and the relevant ship recycling facilities.

EU-SRR applies to ships flying an EU-flag and ships visiting an EU-port regardless of flag from the beginning of 2021, estimated to be 30,000-40,000 ships.

Both require a certified and maintained IHM on ships and recycling practices for the demolition yards. But there are issues according to panel experts.

“The EU’s law is not fit for purpose,” said Mr Crawford-Brunt, “and the Hong Kong convention is not a regulation. It is not a level playing field.”

Against this backdrop, shipping companies and breaking yards are expected to follow best practice in terms of safety and sustainability. To achieve this, the industry needs to work together to align their interests and attain good practice.

“What is good for the environment and society is also good for business” said Mr Crawford-Brunt, adding this should involve the Ship Recycling Transparency Initiative (SRTI), which aims to accelerate a voluntary market-driven approach to responsible ship recycling practices through transparency.

Advocating transparency

SRTI seeks to influence and improve decision-making about ship recycling, creating an industrywide level playing field, while promoting transparency.

“Improving data quality can make this sector more visible to key decision makers,” said Mr Crawford-Brunt. “Being transparent about shipowners’ ship recycling policies and practices will create fair competition, improve performance and hold the shipping industry to account for their vessels – from cradle to grave.”

With data, shipowners can demonstrate their sustainability “benchmark and improve by making better decisions” he continued, and “invest in more sustainable practices”.

So far, there are 26 signatories to SRIT and 11 disclosing shipowners, including Altera, AP Moller-Maersk, China Navigation, CMA CGM, Hapag-Lloyd, Stolt Nielsen, Swire Pacific, Teekay and Wallenius Wilhelmsen.

Confusion 

Mr Gramann said a key element of the EU and Hong Kong Convention, the IHM rules, has caused shipowners issues and heavy fines, for they are responsible for maintaining this data from delivery to when their asset is sold.

“In many cases, it is too much work and there is confusion,” he said. Shipbuilders are responsible for providing IHM for newbuildings, but shipowners are responsible for obtaining them from Tier 1 suppliers for existing ships. These suppliers request information from their providers, and thus requests head down the supply chain and information should return. But there are issues.

“Suppliers depend on information from their own supply chain,” said Mr Gramann. “They are struggling to get documentation and material declarations from their suppliers.” Tier I suppliers need to provide shipowners and managers with Suppliers Declaration of Conformity (SDoC) and Material Declaration for products.

Maintaining IHMs

The procedure for achieving an initial IHM is clearly defined in MEPC 269 (68) & EU-SRR, as are necessary credentials of hazardous material (HazMat) experts and accredited laboratories.

A designated person should be responsible for ensuring IHMs are maintained. They need to identify all relevant items, collate supplier documentation and track HazMat-containing items on board ships, keeping the IHM updated accordingly.

“Tracking HazMat and maintaining IHMs is a complex issue, but it needs to be handled to avoid penalties,” said Mr Gramann.

Strict penalties 

Penalties from PSC inspections for failing to demonstrate compliance with IHM rules can be fines and even imprisonment. In the UK, there is a financial penalty and potentially two-years imprisonment. In France it could be a €100,000 (US$120,000) and one year in prison, said Mr Gramann. In one example, a shipowner was fined more than €5,000 in an Italian port.

He thinks many shipowners may be at risk of their ships being uncompliant with IHM requirements. “For some, requests to suppliers are just beginning and many shipowners have not started with IHM yet,” he said. “It is important for everyone to be prepared, but a manual approach is cumbersome and inefficient.”

Mr Gramann said a data-driven, automated approach is required. “We combine artificial intelligence and expert knowledge,” he said. This would reduce the risk of having poor quality IHMs. There are many IHMs that are substantially wrong, or poor quality, that are certified,” said Mr Gramann. “And there is a lack of knowledge in port states of what is required. PSC need proper training. It is alarming what is happening.”

Regulating chemical substance 

CSM’s Mr Vassilev said a solution for shipowners is to outsource IHM management. He said IHM maintenance processes are part of the procurement process.

“Owners will require suppliers to have an established policy in their quality system for the management of the chemical substances they manufacture or sell,” he explained.

An SDoC issuer confirms compliance with the regulation and collects information from sub-suppliers on chemical substances, by requiring them to issue SDoCs and provide Material Declarations.

“It is a never-ending flow or paperwork,” said Mr Vassilev. It can be a huge endeavour for owners managing large ship fleets. “They are only able to achieve compliance through digitalising IHM maintenance.” And the supply chain faces the same problems as owners.

“Some organisations need to urgently develop IHM capabilities,” he continued. “Owners require personnel to update IHM, either a person on board or onshore. They need to own the IHM maintenance process.”

Compliance of EU regulations

Mr Vassilev also said seafarers have to be trained to play their part in the IHM maintenance. While suppliers and their sub-suppliers need better education on IHM. “But keeping this inhouse is impossible,” he said. “Owners do not want to be bombarded with documentation and administration.”

It is important to categorise ship orders and request relevant items for IHM. It will take time to write SDoC and to certify them.

“The brute force of IHM maintenance will be outsourced,” said Mr Vassilev. “Most large fleet owners will outsource IHM maintenance to third-party experts. It is the safest and easiest way to ensure compliance with EU requirements.”

These outsourcers need extensive IT capabilities because of the volumes of data. “These are extensive IT projects for owners and vendors,” Mr Vassilev continued.

“There are between 20,000 and 160,000 data items per year, so they need IT, security and machine learning to file relevant SDoC,” he said.

Online Polls

Attendees of the webinar were asked to respond to the following questions by way of an online poll. The vast majority (95%) agreed IHM is a useful tool for improving ship recycling practices.

In another poll, attendees were asked if it was possible to develop a level playing field globally in ship recycling. Around 60% thought so, while 40% said no.

They were then asked what the best method is for a wider adoption of responsible ship recycling. Around 26% said global regulations, another 26% thought it should be benchmarking and increased transparency. 21% said better enforcement of existing regulations, 16% said additional funding for ship recycling facilities and 11% said improved standards and best practice.

The rest of the polls covered implementing IHM practices. Attendees were asked the status of IHM compliance for their EU-visiting or EU-flagged fleet. Around 33% said this was under development or awaiting certification, 23% said it was completed but maintenance was yet to start, then 21% thought full compliance had been achieved. Just 11% said it was all completed, 7% said it was contracted out and 5% said it had not been started.

In another question, 79% said their organisation’s procurement system was able to automatically push relevant purchasing information digitally to an IHM maintenance tool, with 21% saying theirs could not.

In a final poll, attendees were asked if their organisation was planning to appoint an IHM maintenance-designated person. About 52% said it had not yet been confirmed, 15% said it would be done inhouse from ashore, 5% from on board ships, 14% said it would be done through an external entity and 14% said it would be a combination of these.

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Source: Riviera