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					International Chamber of Shipping
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ics@marisec.org        www.marisec.org         www.shippingfacts.com




26 May 2009

To:                MARINE COMMITTEE                                                                 MC(09)65

Copy:              ENVIRONMENT SUB-COMMITTEE
                   All Full and Associate Members (for information)

Transitional Measures for Shipowners Selling Ships for Recycling


Action Requested: Members are invited to consider the revised Transitional
Measures for Shipowners Selling Ships for Recycling and indicate any further
comments and support to the secretary.

Members are invited to consider the draft Transitional Measures for Shipowners Selling
Ships for Recycling, provided at the annex, which have been revised in light of
comments at the most recent meeting of the industry working group on ship recycling.
Comments and support should be provided to the undersigned.

Given the importance of industry action in the interim it is imperative that the measures
are published as soon as possible, and as such comments are sought by no later than
Monday 1 June 2009. If sufficient support is received the secretariat will publish the
measures on the ICS website and announce this event to the press.

Peter Hinchliffe
Marine Director




International Chamber of Shipping Limited. Registered in England No. 2532887 at the above address
        Transitional Measures for Shipowners Selling Ships for Recycling
 

Contents


1                 Introduction
2                 During the Lifecycle of a Ship
2.1               Inventory of Hazardous Materials
3                 Selling a ship in accordance with the Convention
3.1               Methods of Sale
3.2               Ensuring a Facility is Competent
3.2.1             Cash Buyer Versus Direct to Yard
3.2.2             Ship Recycling Plan
3.2.2.1           Prior Removal of Hazardous Materials
3.2.2.2           Clean for Gas Freeing
3.2.3             Certification and Flag State Reporting
3.2.4             Other Factors to Consider
3.2.4.1           Facility Management Plan
3.2.4.2           State Authorisation
4                 Feedback
Annex A           Inventory List (All ships)
Annex B           Inventory List (New Ships and New Installations)
Annex C           Inventory List (Stores and Operational Wastes)
Annex D           Feedback Form




 

 
       1.     Introduction
Although it will take some years for the Convention to enter into force there will be
pressure on shipowners and ship recyclers alike to begin enforcing its requirements
and moving towards compliance in the transitional period. This will provide obvious
benefits in terms of allowing industry time to adapt to the Convention and pre-
empting the system for sale and recycling that it will eventually enforce. However, in
the absence of the legal regime, the way in which stakeholders implement the
Convention requirements will be subject to considerable uncertainty. Variation will
exist in terms of quality across recycling capacity worldwide and it will be difficult, at
least in the immediate future, to obtain guarantees that standards are being applied
properly. This guidance therefore seeks to provide a means by which shipowners
can start to ensure that their ships will be recycled by facilities that are competent
and in line with the Convention to the greatest extent possible, whilst maintaining
commercial competitiveness in sales of ships for recycling.
       2.     During the Life Cycle of a Ship
The Convention enforces requirements from “Cradle to Grave”, i.e. from the point of
a ship’s construction to its total demolition. As such there are some actions which,
under the Convention regime, shipowners will be required to undertake and have
approved by their flag States or Class Societies as appropriate. It is likely that these
measures will constitute a sign of good faith during the transitional period and will
also be increasingly required by flag and recycling States alike as entry into force
approaches. Given this as well as the technical and logistical implications of the
measures in question, it is recommended that shipowners apply them as quickly as
possible.
       2.1    Inventory of Hazardous Materials
For shipowners the principle requirement that applies during the operational life of a
ship is the development and maintenance of an inventory of hazardous materials
which serves to identify the location and approximate quantities of materials found in
the structure that may present a hazard to workers in recycling facilities. The
materials which should be included in the inventory can be found at annexes A and
B to this document.
Different requirements apply for new-builds and existing ships. New-builds must
detail the materials in both annexes whilst existing ships need only account for those
in Annex A, describing Annex B materials only to the extent practicable. It is
recommended that shipowners ensure that inventories are developed for vessels
currently operating as well as any they may have on order since it is likely that they
will be increasingly required in sales for recycling and it also establish compliance for
ships which continue in service after the entry into force of the Convention.
Inventories will change in their particulars during the lifetime of a vessel and it is
important to ensure they are properly updated after being reequipped, refitted or
repaired in order to guarantee an accurate description of the hazards inherent in the
vessel and avoid unnecessary delays during the sale.


 

 
An inventory contains three sections, part one lists the hazards inherent in the
structure itself, whilst parts two and three concern operational wastes and stores.
Only part one needs to be maintained during the life of the ship, and parts two and
three should be completed prior to delivery as described in section 4.2.2 below.
Although it is possible for shipowners to develop inventories using their own
resources, in most cases it will be necessary to use class societies, many of which
already offer the service under different commercial guises, e.g. “Green Passports”.
Using services such as these can provide a number of benefits, class will undertake
the survey of the ship thoroughly since they hold liability in the event of error, whilst
options for follow-up surveys are likely to be included, ensuring that the document is
regularly updated. Finally using class will ensure that the inventory is certified,
thereby lending it a legal weight that will be invaluable to sale negotiations in terms
of compliance with the Convention.
       3.     Selling a ship in Accordance with the Convention
It is likely that the Convention regime will create a commercial environment that
differs considerably from that under which ships are currently sold, and furthermore
will redefine the roles of key stakeholders in that process. At present the form the
regime will take is unknown and this will remain the case for some time, though it is
hoped that the application of measures by all parties in the period preceding entry
into force will help define it and give rise to a system that combines legal integrity
with commercial flexibility, guaranteeing a safe and environmentally sound global
recycling capacity without sacrificing competition. A standard contract, such as the
amended DEMOLISHCON, will provide an ideal tool to help parties adapt to a new
commercial regime by providing a suitably clearly worded, balanced and
commercially flexible contract that enshrines the principles of the Convention. This
section describes how, in a non-Convention environment, shipowners can seek to
ensure they fulfil what is required of them by the Convention to the maximum extent
possible and also offers advice on further actions that may be pursued.
       3.1    Methods of sale
There are two possible routes which shipowners may take when selling a ship for
recycling, either to contact recycling facilities directly or use the services of a cash
buyer. Direct sale to facilities has benefits in as much as it cuts out the middle man
and can therefore, at least in theory, be a route to ensuring a better profit from the
sale. However, there are a number of factors which make this route viable only for
the largest of companies to pursue. Direct sales require considerable knowledge of
the recycling market that the majority of shipowners are unlikely to possess and
which furthermore is not yet publicly available in sufficient detail to allow an informed
decision to be made. Similarly the necessities of checking a number of facilities for
fitness and the requirements of the process itself will require considerable support in-
house unavailable to many companies. Furthermore, legal requirements for
financing a sale may prohibit the option of direct sales in certain recycling States.
As States ratify the convention it is likely that this process will become easier, since
lists of compliant facilities detailing their capacity will become available, and
shipowners garner more experience of what is required by the Convention.
However, for the foreseeable future selling direct to a recycling facility is likely to be
an option only for those large shipping companies that have a sizeable amount of

 

 
obsolete tonnage to dispose of and with sufficient in-house capacity to deal with the
process.
The route taken in the vast majority of sales of end of life ships is through a Cash
Buyer who will purchase the vessel either during its final voyage or at the point of
hand over. Under the Convention regime these entities will have legal responsibility
as a shipowner, although it is uncertain what this requirement will mean in reality.
However, it seems probable, provided sufficient market pressure is asserted to this
end, that the cash buyer will increase in importance as a facilitator in matching
vessels to yards and assisting shipowners in identifying suitable capacity for their
vessels in accordance with the Convention provisions. Cash Buyers have
considerable knowledge of the industry and their familiarity with the facilities
increases the likelihood of their finding a suitable buyer. It is the objective of this
guidance to provide shipowners with a means of utilising this knowledge to their best
advantage in compliance with the Convention requirements.
      3.2    Ensuring a Facility is Competent
Until the Convention enters into force and defines what constitutes acceptable global
capacity the ability for shipowners to identify acceptable yards and fulfil their
obligations under the Convention will be limited by how quickly States ratify and how
rapidly detailed information about capacity is disseminated to industry by the
responsible parties. However, it should still be possible, if shipowners apply the
measures recommended below, to obtain some guarantee that a facility is both
competent and has sufficient capacity to handle a vessel. What follows is a
mechanism which applies certain practical provisions in the context of a contract of
sale, either with a cash buyer or yard, thereby placing liabilities on the responsible
parties at the appropriate point in proceedings. As such this will give a legal weight
to proceedings and force parties to live up to their responsibilities under the
convention. This mechanism provides for the most basic provisions required to
ensure safe breaking and in cases where facilities refuse to accept them then an
alternative buyer should be sought.
      3.2.1 Cash Buyer versus Direct to Yard
The method of sale chosen by an owner will affect the way in which the proposed
measures are applied by which party. In cases where a shipowner contacts a facility
directly, the contractual obligations will be shared by the yard and shipowner
appropriately without an intermediary. Where a cash buyer is used it is likely that the
contract between them and the shipowner will require them to accept certain
liabilities based on the accuracy of the yard they select in accordance with the
owner’s demands. The extent of this liability will vary from case to case and will
almost certainly affect the sum received by the owner from the sale price.
      3.2.2 Ship recycling Plan
The principal requirement which a shipowner should make within the contract of sale
is that the yard to which the ship is to be sold should develop a ship recycling plan
for the specific vessel in question. Where yards do not develop such plans an
alternative buyer should be sought.
In order to assist with the development of such plans, shipowners should provide a
completed inventory of hazardous materials, including estimates of stores and
operationally generated wastes that will be present at the time of delivery (see Annex
 

 
C). Similarly, copies of plans and ships drawings and other appropriate records of
alterations to the structure of the ship relevant to its present condition should be
provided in order to ensure that the resulting recycling plan is as accurate and
comprehensive as possible.
When a plan has received a completed plan it should be checked to ensure that the
details of the hazardous materials match those described in the inventory and where
discrepancies are identified remedial action should be taken by the recycling facility.
       3.2.2.1       Prior Removal of Hazardous Materials
Whilst it is always recommended that a facility be selected that can demonstrate a
capacity and capability sufficient to handle all materials listed in a ship’s inventory,
their may be occasions where this is not possible and some prior removal of
hazardous substances is required prior to delivery. Such requirements should be
clearly detailed in the Ship Recycling Plan such that they can be documented and
authorised at the final survey.
Where facilities require prior removal it should be ensured that their removal does
not result in a consequential hazard to the ship’s crew or compromise its safe
operation. Furthermore such removal should be undertaken at a location where
such work can be undertaken in safe and environmentally sound circumstances in
accordance with the relevant international instruments.
       3.2.2.2       Gas Freeing
National legislation in a number of recycling States requires that chemical and oil
tankers are delivered with their cargo spaces having been cleaned for gas freeing,
and this requirement has been incorporated into the Convention itself. In effect it
should be ensured that the cargo holds of such ships are cleaned to a state which
would allow gas freeing procedures to begin and the recycling facility should be
made aware of this fact through the inclusion of a clause in the contract of sale.
Furthermore, shipowners should seek assurances, again through clauses in the
contract, that the recycling facility will ensure that all cargo holds and bunkers are to
be gas freed for hot work prior to the commencing of cutting throughout the
demolition process. This activity should also be included in the ship recycling plan.
Where facilities do not provide such an assurance an alternative buyer should be
sought.
       3.2.3 Certification and Flag State Reporting
A cornerstone of the Convention is the establishment of a reporting system between
parties to guarantee compliance with the provisions. Such a system is unlikely to
become a reality until a sufficient number of flag and Recycling States have ratified
the Convention, and may not until entry into force itself occurs. However, there are
clear benefits for shipowners in obtaining confirmation that they have acted in
accordance with the applicable terms of the convention and endeavouring to have
their flag State acknowledge this. Shipowners should seek to have class confirm
that the actions taken and this confirmation should be deposited with the flag State in
doing so it will not only demonstrate good will on the part of the shipping company,
but also establish a limit of liability with a legal entity in the event that problems are
encountered after the ship has been delivered. Furthermore, this process will
provide an indication throughout the period prior to entry into force of the extent to
which acceptable capacity is available worldwide.
 

 
        3.2.4 Other Factors to Consider
The actions described above are the minimum which shipowners should undertake
during sales of their vessels, and the liabilities which they should be prepared to
accept within that process as a matter of course. However, the transition towards
the Convention’s full entry into force is likely to see more activities become feasible
over time as the recycling industry comes to grips with its responsibilities and more
States ratify the instrument. The measures addressed in this section will not
ordinarily be within the control of the shipowner, nor will they be applicable in the
case of every sale and will depend on a number of factors both within and beyond
the control of a shipowner such as the availability of in-house expertise and the
impact of economic conditions on the recycling market.
        3.2.4.1      Facility Management Plan
The Convention requires each recycling facility to possess an approved facility
management plan which provides a holistic system to ensure that ships are recycled
in a safe and environmentally sound manner. It is unknown how many facilities
possess such a plan at present and if they do they extent to which it complies fully
with the Convention. As such obtaining confirmation that such a plan exists is
perhaps less important than obtaining cast iron guarantees in the contract of sale
with respect to the ship recycling plan and gas freeing. However, where shipowners
are able to do so, confirmation of the existence of a facility management plan and its
constituent subsidiary plans described below will serve as an indicator of the
competence of the facility and help develop a picture of the state of global capacity
throughout the transitional period.
A Facility Management Plan should contain subsidiary plans and sections
specifically addressing the following areas. The detail of this will indicate the
suitability of the facility to receive a ship and recycle it in a safe and environmentally
sound manner:
    Facility Management

       A programme for appropriate training of workers for the safe and
        environmentally sound operation of the ship recycling facilities;
       The implementation of an emergency preparedness and response plan;
       A system for regular monitoring of the performance of the ship recycling
        operations, and;
       A system for record keeping on how the ship recycling operation is performed,
        including reporting discharges, emissions and accidents causing damage, or
        with the potential of causing damage, to workers safety, human health and the
        environment.
    Worker Health and Safety

       The provision and availability of personal protective equipment and clothing
        needed for all ship recycling operations, and;
       Appropriate training of workers to safely undertake all operations they are
        tasked to do.
    Waste Treatment
 

 
       Capacity and treatment ability with respect to the following waste streams:
        -    substances or objects containing heavy metals such as lead, mercury,
             cadmium and hexavalent chromium
        -    paints and coatings that are highly flammable and/or leads to toxic
             releases during cutting
        -    asbestos and asbestos containing materials (ACMs)
        -    PCB and materials containing PCBs
        -    CFCs and halons.
        3.2.4.2        State Authorisation
The easiest means of identifying acceptable capacity is whether the State has
authorised the yard as being in compliance with the Convention. This process will
accompany the ratification of the Convention by States and it will be some time
before sufficient authorised capacity exists to fully act in accordance with the
Convention requirements. However, states who ratify the Convention in the interim
will authorise their facilities and where such facilities are available it will be
unnecessary to carry out the recommendations above.
        4.      Feedback
This is a “live” document and it will be reviewed and revised frequently in light of
industry experience in attempting to apply the Convention requirements during the
transitional period. It is likely that further measures will become feasible as the
market moves towards compliance and equally it is probable that some measures
are not as viable as fist imagined and require further amendment to improve them.
All owners who act in accordance with these recommendations are therefore
requested to assist in this process by providing comments on their experiences in
attempting to implement the transitional measures, in particular the ability and
willingness of recyclers and cash buyers to meet them, by completing the feedback
form at Annex D and returning it to ICS.




 

 
    Annexes
    A    List of Hazardous Materials
    B    List of Hazardous Materials
    C    List of Hazardous Materials
    D    Feedback Form




 

 
Annex D

Ship Recycling Feedback Report

*Ship Name                                Ship Type
Flag State
Recycling Facility                        Recycling State
Cash Buyer (where used)
*this information will not be passed on

              Summary of issues raised/problems/consequences




Reports should be sent to the International Chamber of Shipping
(Attention: John Stawpert) by fax (+44 20 7417 8877) or email
(john.stawpert@marisec.org)