I. Introduction On January 13, 2020, the U.S. Coast Guard issued Work Instruction 22(1) (CVC-WI-022(1), referred to as the “work instruction”) entitled “Implementation of Compliance/Enforcement Policy for MARPOL Annex VI Regulation 14, including IMO 2020 Sulfur Cap.” As it states in the preamble, the work instruction is not itself a rule, it does not substitute or supersede applicable laws or regulations, and does not impose legally binding requirements on any party. Instead, it “represents the Coast Guard’s current thinking on this topic and may assist industry, mariners, the public, and the Coast Guard, as well as other federal and state regulators, in applying statutory and regulatory requirements.” The purpose of this article is to dissect the work instruction to enhance marine industry understanding of U.S. Coast Guard enforcement policies and intent related to the new sulfur cap rules.
II. Background and Effect of Changes in the U.S. IMO Resolution MEPC. 305(73) amended MARPOL Annex VI Regulation 14 (Sulphur oxides (SOX) and particulate matter) to prohibit ships operating outside existing Emission Control Areas (ECA) from using or carrying aboard any fuel oil that exceeds 0.50% sulfur content after January 1, 2020. A complementary amendment prohibiting the carriage of non-compliant fuel oil after March 1, 2020 was adopted by the MEPC in October 2018. These amendments will not have a significant substantive effect on vessels operating in U.S. waters, since the majority of the United States is encompassed by either the North American Emission Control Area (ECA) or the U.S. Caribbean Sea ECA. Since January 1, 2015, the fuel oil sulfur cap in both ECAs has been 0.10%, and this standard, which exceeds the new standard established by the Regulation 14 modification, will remain in effect for all U.S. ports within the ECA. The only substantive effect will be in non-ECA ports, in which vessel operators will have to use fuel oil that does not exceed 0.50% sulfur content. The main effect in the U.S. of the IMO amendments (referred to as “Regulation 14 changes”) will be in the Coast Guard enforcement posture. Enforcement officials in ports within ECAs will continue verifying compliance with the 0.10% standard. Officials in non-ECA ports will begin verifying compliance with the new 0.50% limits. And since the U.S. is a party to Annex VI, U.S. compliance officials will also verify foreign vessels’ compliance with the Regulation 14 changes when operating beyond U.S. waters. How compliance is achieved, and how the Coast Guard will conduct compliance inspections, is the subject of the work instruction, which will be examined in the following sections. III. What the Coast Guard Will be Doing and Looking for During Annex VI Compliance Inspections The Coast Guard will use the ECA Job Aid (Enclosure 1 to the work instruction) when performing the portions of domestic inspections and port state control examinations related to Annex VI. The ECA Job Aid outlines the items the marine inspectors (MI) and port state control officers (PSCO) may review or examine. The depth and scope of the examination will be determined by MIs and PSCOs based on the condition of the vessel, compliance with the ECA through the use of low sulfur fuel oil (or other methods of compliance), the operation of its systems used for compliance, and the competency of the vessel’s crew. The Coast Guard may take fuel samples from service and bunker tanks to verify compliance. A. Enforcing ECA requirements In the two ECAs encompassing the U.S., the Coast Guard will continue to enforce ECA requirements by reviewing bunker delivery notes (BDNs), checking vessel logs for information regarding where the vessel changed over to ECA compliant fuel, and confirming the vessel has written change over procedures. B. Enforcing Sulfur content limits in non-ECA U.S. ports Coast Guard units outside either U.S. ECA (e.g. U.S. Coast Guard Sector Guam) will follow the same procedures as those in ECAs to ensure all vessels calling there are complying with the 0.50% sulfur limit. C. Enforcing Compliance with Annex VI Outside U.S. Waters As mentioned before, since the United States is a Party to Annex VI and bound to enforce it, the Coast Guard will review vessel documents to determine whether the vessel is complying with the applicable fuel sulfur limit when operating beyond U.S. waters. According to the work instruction, compliance with Annex VI can be achieved by several means: (1) Use of Low Sulfur Fuel Oil (Reg. 14); (2) by receiving Equivalence (Reg. 4); or (3) by receiving a (temporary) Exemption (Reg. 3). In order to determine the approved method of compliance, MI/PSCOs are directed to review the Supplement to the International Air Pollution Prevention Certificate (IAPP) sections 2.3. (content of sulfur used and equivalent arrangements, if any, as listed in 2.6). For vessels that are issued Exemptions under Annex VI Reg. 3, separate documentation will be issued by an Administration permitting the exemption. 1. Compliance by use of low sulfur fuel oil MI/PSCO will review BDNs and check logs to determine whether the vessel is complying with the applicable fuel sulfur limit when operating beyond U.S. waters 2. Compliance through equivalence An Administration may approve the use of any fitting, material, appliance or apparatus, alternative fuel oils, or other procedures or compliance methods provided the ship applies a method that is at least as effective in terms of emission reductions. Foreign-flagged ships that receive an Annex VI equivalency must ensure the flag state submits the equivalency to the MARPOL 5 Annex VI public area of IMO’s Global Integrated Shipping Information System (GISIS) prior to the ship entering either U.S. ECA. The Coast Guard may review any submissions it receives, but will use GISIS database to confirm the validity of an Annex VI equivalency. The most common “equivalent” is an Exhaust Gas Cleaning System (EGCS), commonly referred to as a scrubber, used in lieu of low sulfur fuel oil. Coast Guard MIs/PSCOs will verify that vessels relying on this compliance method have appropriate documentation, and will conduct spot checks as necessary to verify that this equipment is providing effective equivalence to the Regulation 14 requirements. In the event deficiencies are noted or inspected, the work instruction refers MIs/PSCOs to IMO guidelines that specify the standards for the testing, survey, certification, and verification of EGCSs under Annex VI Reg. 4, including Resolution MEPC.184(59), adopted on 17 July 2009: 2009 Guidelines for Exhaust Gas Cleaning Systems, or MEPC.259(68), adopted on 15 May 2015, 2015: Guidelines for Exhaust Gas Cleaning Systems. 3. Compliance through exception or exemption Annex VI Reg. 3 permits the Administration of a Party, in cooperation with other Administrations as appropriate, to issue an exemption from specific provisions of Annex VI for a ship to conduct trials for the development of ship emission reduction and control technologies and engine design programs. Such vessels will be issued documentation by their Administration reflecting the vessel’s status. Coast Guard MIs/PSCOs will examine such documentation during the course of their vessel examination. IV. Dealing With Non-Compliance A. Non-compliant fuel oil A MI/PSCO encountering a ship using fuel oil with sulfur content exceeding the allowable sulfur limit (0.10% while operating in either ECA under U.S. jurisdiction; 0.50% on or after January 1, 2020) will determine why the vessel is not in compliance and determine whether a valid claim of non-availability exists. OCMIs may apply contingency measures that range from allowing the fuel to be retained onboard until the fuel oil may be discharged ashore at a later date to requiring the vessel to offload the fuel oil at the current port. When determining the validity of a non-availability claim, the MI/PSCO will consider the following factors:
If the ship is claiming non-availability of compliant fuel as the reason for noncompliance, determine whether the ship submitted a Fuel Oil Non-Availability Report (FONAR)
Verify if notification was also provided to the Flag Administration;
Review records of actions taken to attempt to achieve compliance and any evidence that the ship attempted to purchase compliant fuel oil in accordance with the voyage plan;
Obtain a copy of the BDN(s) for the fuel oil in use while operating in the North American ECA/U.S. waters (VI/Reg. 18.7.1);
If the ship is scheduled to receive compliant fuel oil during the port call (or has already received bunkers); and
Refer to the ECA Job Aid (Enclosure 1 to the work instruction) for deficiency examples and recommended actions.
B. Non-compliance due to a marine casualty or equipment failure Annex VI, regulation 3.1.2, allows for non-compliant emissions resulting from damage to a ship or its equipment. Furthermore, Annex VI, regulation 5.5 states, “whenever an accident occurs to a ship or a defect is discovered that substantially affects the efficiency or completeness of its equipment covered by this Annex, the master or owner of the ship shall report at the earliest opportunity to the Administration, a nominated surveyor or recognized organization responsible for issuing the relevant certificate.” When equipment approved by an Administration under Annex VI Regulation 4 (equivalency – e.g., scrubber) experiences a failure, the Coast Guard expects a certain degree of redundancy so that the ship may continue to operate in compliance with Regulation 14 (e.g. pumps, available spare parts onboard, or alternative arrangements (e.g. Low Sulfur Fuel Oil tanks). The Coast Guard will take into consideration a ship that has reported an accident or a defect in accordance with Annex VI, regulation 5.5, whose flag Administration (or their representative) has issued an interim compliance scheme, and an outstanding condition due to equipment casualty or failure. Additionally, it is highly recommended that companies leverage their safety management system (SMS) to address Annex VI compliance robustly enough to empower shipboard crews to adequately respond to issues with method of compliance (e.g. scrubber malfunction, fuel oil compatibility etc.) through contingency plans. V. Sanctions The Coast Guard may utilize a range of sanctions in response to the discovery of Annex VI violations. These include the following, in increasing order of severity. A. Correction of deficiencies and detention order The Coast Guard may require immediate correction of a deficiency, or correction of the problem within a specified time frame (e.g., 30 days), allowing the vessel to continue to operate in the interim. In addition, the Coast Guard may issue a detention order, allowing the ship to proceed only when the Coast Guard determines that the ship can do so without presenting an unreasonable threat to the marine environment or the public health and welfare. B. Enforcement Action Whether or not the Coast Guard issues a detention order, an enforcement action can be pursued for any violations of MARPOL Annex VI. In selecting the appropriate type of enforcement action, Coast Guard personnel will consider such factors as the nature and seriousness of the offense, and the deterrent effect on the individuals involved. 1. Letter of Warning: The lowest level of enforcement action is a Letter of Warning, a “formal, written notice of an apparent violation, [for] which no monetary or other sanction is appropriate, with consequences for its refusal.” When accepted, the Coast Guard treats the underlying offense(s) as proven violations for the purposes of selecting an appropriate enforcement action and penalty for future enforcement actions. 2. Fine or civil penalty: Where the Coast Guard has reasonable cause to believe a ship, its owner, operator, or person in charge may be subject to a fine or civil penalty for a violation of MARPOL Annex VI, and that imposition of a fine or civil penalty is appropriate, the Coast Guard has a number of options it may consider.
It may issue a Notice of Violation (NOV, also known as a “ticket”);
If neither a LOW nor an NOV is appropriately severe, or if the Master or representative of the Owner or Operator refuses to accept an NOV, the Coast Guard may initiate an action for a Class I Administrative Civil Penalty, to be adjudicated by the Coast Guard Hearing Office.
The maximum civil penalty that may be assessed for a MARPOL violation is $74,552, with each day of a continuing violating constituting a separate violation. 3. Withholding Departure Clearance and Requiring Surety Bonds: The Coast Guard may also revoke or withhold a vessel’s customs clearance and demand a Letter of Undertaking, bond, or other surety “satisfactory to the Secretary” of the Department in which the Coast Guard is operating before permitting the vessel to depart. 4. Referral for Criminal Prosecution: In the most serious cases involving knowing violations, including fraudulent activity, the Coast Guard may refer a matter to the Department of Justice (DOJ) for criminal prosecution. VI. Bottom Lines, and What Ship Owners and Operators Should Do 1. The fuel oil sulfur content requirements in most U.S. ports (those in ECAs) did not change as a result of the 2020 Regulation 14 amendments. Thus, other than in non-ECA ports, in which 0.50% sulfur fuel must now be used, there should be no change to operational practices for operators utilizing U.S. ports. 2. As with compliance with MARPOL Annex I and ballast water requirements, the best advice that can be given to operators is to carefully study and comply with the new requirements. 3. If compliance is not possible, operators of vessels destined for U.S. ports should: a. Take all reasonable measures to correct the deficienc(ies); and b. Ensure that timely notification of the deficienc(ies) and efforts that have been or will be made to rectify them is made to the Coast Guard. There is little that makes the Coast Guard unhappier than failure of notification. Somewhat unhelpfully, the work instruction states that “there is no specific format for notification.” The lack of a standard process does not relieve vessel owners/operators from ensuring appropriate notice is made. Use of the Fuel Oil Non-Availability Report (FONAR) for non-compliant fuel or the Notice of Arrival to provide notice is always a good start. Ensuring that vessel agents provide and document the provision of actual notice to the nearest District or COTP is a good practice that should avoid notification issues. 4. The one thing that does make the Coast Guard unhappier than non-notification is falsehood. Lies, cover-ups, forged records, and associated activities have led to criminal prosecutions of individuals and companies for Annex I violations, have the potential to do the same in the ballast water realm, and pose equivalent dangers in the Annex VI realm. 5. The ECA Job Aid, enclosure (1) includes a deficiency matrix from pp. 14-22 that is a very useful insight into the Coast Guard Annex VI enforcement process. Shipping company environmental compliance managers should carefully review that matrix and keep it handy both for proactive training purposes, and if necessary to aid in responding to any incident that does occur in a U.S. port. 6. Proactivity is never a bad idea, as it can prevent incidents from occurring in the first place, and also demonstrate corporate responsibility and commitment to safety and environmental protection if an incident does occur. IMC has a robust network of highly trained and professional surveyors and compliance professionals available to conduct single vessel or fleet-wide compliance audits. Such audits best position vessel owners and operators to navigate the dangerous regulatory shoal waters posed by Annex VI and the myriad other rules and regulations existing in this highly regulated industry. Please click here for a .pdf with citations.