THE COST OF NON COMPLIANCE

Posted on Jul 30, 2018 in BLOG, Compliance

DON’T MESS WITH THE UNITED STATES

Stringent ballast water regulations and enforcement by the U.S. Coast Guard leaves no room for BWMS complacency. Shipowners looking to enter U.S. waters basically have to “shape up or ship out”.

“Prior to embarking on a voyage to the United States, shipowners must ensure that they are able to properly manage their ballast water when operating in waters subject to U.S. jurisdiction,“ says Jeanne Grasso, a specialist maritime attorney and partner in Blank Rome,an Am Law 100 firm with 13 offices and more than 600 attorneys and principals.

The USCG is committed to the protection of the marine environment through strong and robust administration and oversight of ballast water management practices. This year, it will conduct Port State Control (PSC) examinations, which include compliance with ballast water management requirements, on about 10,000 foreign vessels.

According to Grasso, routine PSC inspections in the United States may include reviews of vessel documentation, visual inspections of the condition of BWMS equipment, actual operations of ballast equipment, and queries to the vessel’s crew on their knowledge of BWMS operations. Since the 2012 Final Rule was released, the USCG has issued more than 600 deficiencies and taken close to 20 enforcement actions that have ranged from written warnings to fines of $5,500.

“Stakeholders should expect those enforcement numbers to increase in the near future,” she says.

NON-COMPLIANCE CAN BE COSTLY


Non-compliance with the BWMS regulations can be costly for several reasons. For example, if a vessel comes into port and has not utilized one of the five compliance methods set forth in the USCG’s regulations, the vessel almost certainly will not be able to discharge ballast water in port.

In such cases, the USCG may require the vessel to divert its voyage, modify cargo operations, and sail outside 12 nautical miles to discharge ballast water, which could result in incurring pilotage and launch fees, extra fuel fees, demurrage, and other financial repercussions.

In recent cases, such activities reportedly ranged from $35,000 and $150,000 for one port call. The new Navigation and Vessel Inspection Circular (NVIC 01-18 dated March 1, 2018) offers insight into the USCG’s enforcement posture and scope of enforcement options that range from education to criminal penalties.

Says Grasso, “Put simply, non-compliance is costly, and it would behoove all owners to ensure compliance. Absent that, forethought about a contingency plan is imperative.”

CAN I GET AN EXTENSION
To make the compliance process more reasonable due to the lack of USCG type-approved BWMSs at the outset of the regulatory regime implementation, the USCG developed an extension policy under which it has issued compliance date extensions to nearly 15,000 vessels. Even so, there has been quite an evolution in the manner in which the extensions have, or have not, been granted as a result of more BWMSs achieving USCG type-approval.

Essentially, extensions were easy to obtain at the outset, but now they are extremely difficult to secure, though not impossible – Grasso.

The USCG’s policy currently allows for an extension of a vessel’s compliance date. However, absent a detailed timeline and strategy, including the selection of a specific BWMS for installation on a particular vessel, an owner will almost certainly not receive an extension. Also, extensions will be shorter in duration— whereas at the outset they were tied to the vessel’s next drydock, now they will likely only be for one year, absent extraordinary circumstances.

If owners select a BWMS that is not yet type-approved, they bear the risk of not being in compliance or preparing for possible operational constraints should that BWMS not ultimately receive type-approval. As such, if their BWMS of choice does not get type-approval, owners better have a contingency plan, such as an alternative BWMS that can be installed before the extension expires.

FRUSTRATING AND CHALLENGING
It has been about 30 months since the U.S. Coast Guard (“USCG”) type-approved the first three ballast water management systems (“BWMSs”) in December 2016; six moreBWMSs have been type approved since, with several more in the queue.

Yet, ballast water management remains one of the most challenging and frustrating regulatory issues of the past decade because of inconsistencies in the international and domestic regimes.

This is largely because the United States is not party to the International Maritime Organization’s (“IMO”) Convention on the Control and Management of Ships’ Ballast Water and Sediments (the “Convention”). Rather, the United States regulates ballast water unilaterally under the National Invasive Species Act and Clean Water Act, which differ in certain ways from the Convention, especially when it comes to approving equipment to meet the standards set forth in the Convention and the USCG’s implementing regulations.

As such, ballast water compliance challenges remain far from resolved. In some cases, for example, especially with respect to USCG compliance date extensions, the policies continue to evolve on an ad hoc basis, often causing confusion.

Jeanne Grasso, partner at Blank Rome

GRASSO’s ADVICE
It is vital to have a contingency plan in place and understand how to manage a non-compliance before you come into a U.S. port. There are many things an owner can do to minimize risk and manage a non-compliance, but, hiding that non-compliance is not one of those things.

“Lack of preparation, especially in these circumstances, will inevitably be costly,” warns Grasso.