Category Archives: Shipping

New shipping regulation to combat global warming is under fire

The International Maritime Organization (IMO) has issued their rules for the Carbon Intensity Indicator (CII), which is intended to combat global warming by reducing carbon emissions. It’s been years in the making.

But some of those affected by the regulation think there are flaws in the index which can produce some unintended consequences.

We know that many ships are chartered– they are operated by firms or people who are not their owners. Charter contracts determine how the ship will be operated and how the ship owner will be paid for allowing the use of his ship. But the contracts may allow the charterer to operate the ship in a way that reduces the CII score and causes the ship to fall into a lower class. Perhaps the ship falls into Class E which says the ship should be withdrawn from commerce– sentenced to the shipbreaker.

The Baltic and International Maritime Council (BIMCO), a non-governmental group that offers clauses for contracts addressing numerous international shipping issues, has prepared a contract clause for chartering contracts. This is a useful starting point, because BIMCO contracts and clauses are often used as a starting point for making a charter contract. Use of the BIMCO contracts or clauses is totally voluntary.

The article below explains some of the issues that can arise between charterers and owners, with equations to boot. The essence of the problem is that the index is based on ship capacity, not cargo carried. So sailing empty miles improves your score on the index two ways– first because sailing light burns less fuel, and second because the miles add to the denominator of the measure, reducing it. The examples given show the effect.

Many feel the index should be based on carrying cargo. And some believe the BIMCO clause will not be workable in contracts, and will not use it. But the problem remains of how to divide responsibility between ship owner and charterer for managing the CII score.

I tend to believe any rule is better than nothing. And I think charterers and shipowners will work out how to manage the contract problem. As for empty sailing or sitting in port, I don’t think anyone wants to sail without a paying cargo, or suffer delays even to improve the index. So everyone, owners and charterers, will continue to fill their ships when they can, and sail shorter routes when they can, simply because it’s expensive to operate the ship you’ve chartered; you have to earn a profit at it.

For all the complaining, the CII is still a good thing. We will have to see if it can be tweaked to everyone’s satisfaction.

Greg Miller·Wednesday, December 21, 2022

New shipping regulation to combat global warming is under fire

FMC ruling could be crucial in other ‘unfair D&D fee’ complaints

Shipper complaints about demurrage and detention (D&D) charges by carriers have been many, especially over the Coronavirus period, when many facilities were congested and supply lines were overloaded. One of the main complaints was the uncooperative attitude of port terminals and yards when asked to release cargo.

The Federal Maritime Commission (FMC) held a hearing over one case involving Evergreen, a major container carrier, and trucker TCW Inc, in December. Evergreen was forbidden to make per diem charges on days when the motor carrier could not pick up the cargo.

The essence of the FMC argument is that you can’t charge D&D when it’s impossible to pick up the container. Frequently ports and yards may have reasons to deny a trucker from picking up, but if it doesn’t lead to congestion and is the yard or terminal problem, the carrier can’t charge D&D.

The latest case involves carrier Hapag-Lloyd and rail line CSX, versus a Wisconsin forwarder, ME Dey, and the trucker New Age Logistics. Hapag-Lloyd has already waived over $150,000 in charges, and the case is still ongoing. CSX rail may well cave in also.

The principle established by the FMC is important, and may prevent some D&D charging errors in freight bills. Carriers are going to need to be careful and monitor conditions at the facilities holding the containers.

This may go some way toward increasing communication among logistics ‘partners’. Now a carrier must keep informed about the conditions at the yard where the container is located. They will need to ask for information on a continuous basis, which they have a right to, because it is affecting their billing process. If the yard is closed for a holiday, or has the container under a big stack that cannot be moved fast, they will need to tell the carrier, so that the billing can be waived. This information exchange is a crucial part of the financial wing of the supply chain.

When there’s money involved, action often follows.

I think it’s great for the FMC to proactively insist on attention to the possibility of congestion. It will encourage yards to reduce it, and carriers to monitor it, and shippers to work to avoid it.

By Nick Savvides 03/01/2023

FMC ruling could be crucial in other ‘unfair D&D fee’ complaints – The Loadstar

China cancels crew change quarantine against Covid

It’s long been a problem for seafarers. Due to Covid restrictions on entering and leaving a country, they could not go home after their shift on the vessel nominally ended. They had to stay with the ship because of the covid restrictions.

In China, that’s ending now. The new rules allow seafarers to leave the ship and fly home. There won’t be a requirement for quarantine.

This is good news for seafarers.

Let’s hope continued progress can be made in working conditions for crews.

Katherine Si | Jan 09, 2023

China cancels crew change quarantine against Covid