Confidence Level Low On US Enforcement Of IMO 2020

With just weeks remaining before the IMO 2020 low-sulfur fuel requirement goes into effect, domestic- and foreign-based shipowners trading in the United States are concerned that lax enforcement could leave them at a disadvantage with competitors around the world.

On Jan. 1, the cap on the amount of sulfur allowed in vessel fuel drops from 3.5% to 0.5%. An anticipated surge in over-the-road diesel prices as a result of the regulation has not materialized, FreightWaves recently reported, but the effects on other parts of the oil supply chain are still in play.

The most popular way the maritime sector plans to comply with the regulation — aside from installing a "scrubber" to lower the sulfur emitted through the smokestack — will be to purchase more expensive distillate fuel.

The U.S. Coast Guard, the agency responsible for enforcing the regulation at U.S. ports, confirmed at a meeting in Washington on Dec. 5 that it will rely heavily, at least initially, on checking a vessel operator's fuel purchase documents known as "bunker delivery notes" (BDNs) to enforce the measure.

However, for shipowners prone to operating around the regulation by burning cheaper, dirtier fuel on the high seas, it's extremely unlikely that a fuel supplier would issue — and a vessel operator would accept — a BDN for noncompliant fuel because it would prove the vessel operator was cheating.

"That would be insanity for both the shipowner and the fuel supplier," said Bryan Wood-Thomas, vice president for environmental policy at the World Shipping Council (WSC), who attended the meeting. "Therefore, simply checking BDNs for enforcement purposes is effectively worthless. We're of the view that the [Coast Guard's] inspection protocol, to be meaningful, needs to go beyond the examination of documents."

For shipowners, the issue is about more than protecting the environment. WSC represents 90% of the global container liner capacity, handling roughly 160 million twenty-foot equivalent unit containers per year.

"If I'm a company that operates ships that are complying with the regulation 24/7 around the world, my fuel expenses are measured in the millions of dollars," Wood-Thomas said. "In some cases, for our largest members, it's billions of dollars per year. So if my competitor is not being called out for cheating, it's a big commercial issue."

The issue is just as concerning for Chamber of Shipping of America (CSA), which represents U.S.-based companies that own or charter tanker ships and dry bulk vessels engaged in both domestic and international trades.

"We've asked multiple times and have gotten the same answer: that the U.S. Coast Guard's view is that a noncompliant fuel event that occurs outside 200 nautical miles is not within their jurisdiction unless there are false documents on board, or the crew lies about it" to an inspection officer, said CSA President Kathy Metcalf.

Instead of relying on BDNs, Wood-Thomas suggested fuel-testing methods, such as portable spectrometers, to make it easier to analyze fuel samples. "The bottom line is, from our perspective, a meaningful inspection protocol has to have some kind of periodic examination of fuel," he said.

Mike Rand, a USCG commercial vessel safety specialist, told meeting attendees that the agency has retained the authority to take samples when it feels vessels are not complying with an even stricter 0.1% fuel sulfur limit for ships operating in U.S. waters. "With the 0.5% global limit coming, we may decide to take more samples, but we're not discussing our sampling policy here."

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