Staying Out Of Harm’s Way: Maritime Security, Port-State ...

Staying Out Of HarmStaying Out Of Harm’’s Way: s Way: Maritime Security, PortMaritime Security, Port--State State

Control, and Other Key Control, and Other Key UpdatesUpdates

The Hong Kong Shipowners The Hong Kong Shipowners Association Ltd.Association Ltd.

Jonathan K. WaldronMay 31, 2007

The information contained herein is abridged and summarized from numerous sources, the accuracy and completeness of which cannot be assured. This should not be construed as legal advice or opinion and is not a substitute for the advice of counsel.

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BACKGROUND

• Legislative Reactions to Incidents

• Oil Pollution Act of 1990 and International/EU Developments

• State Pollution Legislation

• MARPOL Developments

• Security/Pollution Related Developments

• Port State Control

• Sanctions

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OIL POLLUTION ACT 1990

• Liability: Responsible Party (RP), is directly liable under OPA 90 for removal costs and damages resulting from a spill up to its limits of liability (generally $1200/gross ton)

• Breaking Limits of Liability: An RP can lose its limits of liability– if the incident was caused by:

the RP’s gross negligence or willful misconduct, orthe violation of an applicable federal safety, construction, or operating regulation

– if the RP fails or refuses to report the incident, or fails to provide all reasonable cooperation and assistance in connection with removal activities

• Reaction: Stop operating in U.S. or comply with OPA 90• Today: EU and IMO Legislation

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STATE POLLUTION LAWS NOT PREEMPTED

• OPA 90 Savings Clause: Nothing in OPA 90 affects or preempts a state from imposing additional liability or additional requirements related to the discharge, or substantial threat of a discharge of oil

• Implications of U.S. v. Locke and Intertanko Decision: Supreme Court struck down Washington state tank vessel regulations in 2000 governing navigation watch procedures, crew training, English language requirements, and marine casualty reporting as preempted and remanded the case for consideration of whether other prevention planning regulations are preempted

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CALIFORNIA POLLUTION LEGISLATION

• Clean Coast Act (effective January 1, 2006)– Prohibits oceangoing ships over 300 gross tons from onboard

incineration and from releasing hazardous waste, sewage (even iftreated), graywater and oily bilge water within 3 miles of California’s coast.

– State Water Resources Board must be notified of releases within 24 hours.

– Ships must maintain certain information regarding the ship, its graywater and blackwater systems, and port of call information. This information must be communicated to the State Lands Commission.

• Air Emissions Regulations– Regulates emissions from auxiliary diesel engines and diesel-electric

engines operated on oceangoing vessels (both U.S. and foreign flag) to reduce PM, NOx, and Sox

– Operators may comply in three ways:• by using a specified fuel• through alternative control of emissions• by paying a non-compliance fee, in certain circumstances

– Went into effect on January 1, 2007 and applies out to 24 miles– Pacific Merchant Shipping Association has sued

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MASSACHUSETTS POLLUTION LEGISLATION

• Bouchard Spill on August 4, 2004– DOJ’s challenge – law “impermissibly treads on federal jurisdiction”– AWO, INTERTANKO, BIMCO, Chamber of Shipping of America

intervened– July 2006 - MA enjoined by a federal district court from enforcing the

law based on federal preemption of requirements related to financial responsibility, tug escorts, tank vessel design, drug and alcohol testing, state pilotage, manning, and mandatory vessel routing

– MA appealed the tug escort, manning of tank barges and towing vessels, and financial responsibility

– Decision expected by end of 2007

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RHODE ISLAND POLLUTION LEGISLATION

• LNG Legislation– Law enacted in July 2006 that prevents LNG tankers from transiting

Narragansett Bay by requiring security zones that almost certainly cannot be met

– Similar to Massachusetts analysis– No challenges to date

WASHINGTON POLLUTION LEGISLATION• Bunkering Rules: Sets standards for delivering vessels for prebooming bulk

oil transfers, alternative measures to be used when prebooming is not safe and effective, and advanced notice of transfer.

• Contingency Plan Changes: The new rule (1) combined the facility and vessel preparedness requirements into one rule; (2) moved planning standards and drill program from guidance into the rule; and (3) identified and addressed gaps in the current rule/preparedness

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DELAWARE POLLUTIONLEGISLATION

• Crude Oil Lightering Regulations– Effective May 11, 2007– Regulate the release of VOCs, a major source of air pollutions, during

lightering operations– Will reduce the amount of lightering done without vapor balancing, a

means of containing VOCs– Requirements will be phased in over several years– Concerns expressed over implications on foreign-flag vessels

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DISCHARGES UNDER THE CLEAN WATER ACT

• Northwest Environmental Advocates v. EPA– September 18, 2006, District Court for No. District of California

ordered EPA to eliminate its exemption for vessel discharges from the NPDES permit requirements

– EPA will have to develop a new permitting regime to address vessel discharges

• unclear whether EPA will issue individual permits to vessels or one general permit

• vessel operators will likely have to adopt monitoring and reporting programs for vessels

– EPA has until September 30, 2008 to issue new regulations, but incidental discharges will remain exempt until then

– Appeal file, briefs submitted, and set for oral argument in August 2007

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MARPOL ANNEX I DEVELOPMENTS

• Revised Annex I adopted in October 2004, and effective January 1, 2007

• Incorporates amendments relating to the phase-out of single hull tankers, and separates construction and equipment provisions from operational requirements

• Reportedly, a more user friendly, simplified version, with a newnumbering system

• Unified Interpretations to the Revised Annex I and MEPC/Circ.421 with cross-reference lists between the “old” and “new” regulations

• Coast Guard published CG-3PCV Policy Letter 6-09 on December 22, 2006, providing guidelines on implementation and enforcement of revised Annex I

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(continued)

• Coast Guard Enforcement Guidelines – The Coast Guard published new guidance for the enforcement of MARPOL Annex I during port-state control examinations. See G-PCV Policy Letter 06-01, dated January 20, 2006.

• New PPE Requirements

– Issue: Many in the maritime community have expressed concernsthat existing PPE, especially technology related to oil-water separator systems, does not work properly

– IMO/Coast Guard OWS Guidelines: IMO issued MEPC.107(49), "Revised Guidelines and Specifications for Pollution PreventionEquipment for Machinery Space Bilges of Ships." Subsequently,the Coast Guard issued MOC Policy Letter No. 04-13 on March 25, 2005, which provides guidance on implementation of MEPC.107(49).

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(continued)

– Tank Vessel PPE: IMO issued MEPC No.108(49), Revised Guidelines and Specifications for Oil Discharge Monitoring and Control Systems for Oil Tankers, which upgrades cargo monitor PPE standards. The IMO standards became effective internationally as an amendment to MARPOL on April 1, 2007

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MARPOL ANNEX VIIMPLEMENTATION

• Entered into Force on May 19, 2005

• Guidelines for Port State Control (Resolution MEPC.129(53)): Adopted July 2005

– Initial Inspection - Certificates, crew familiarity withAnnex VI related shipboard operations, evidence thatquality of fuel oil appears to be substandard

– More Detailed Inspection - Examine diesel engines,shipboard incinerator, procedures to use air pollutionrelated equipment, sulphur content, crew familiaritywith bunker delivery notes and procedures

– Detainable Deficiencies - Includes improper equipmentand failure to understand proper procedures

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(continued)

• Guidelines for Interim Voluntary Implementation: MOC Policy Letter 05-02 of May 3, 2005

• IMO Notification of U.S. Position - Notified IMO on June 15, 2005that U.S. had not become a party to Annex VI and that it cannotenforce its provisions or compel U.S. owners to comply

• U.S. Implementation of Annex VI 2007– Proposed 2007 Legislation (H.R. 802) Passed House on

March 26, 2007– Implement Annex VI into U.S. law by amending the Act to

Prevent Pollution from Ships– Applies to “navigable waters” which includes the U.S.

territorial sea (extends out to 12 miles from the coastline)– Applies to ships operating in an Emission Control Area

designated by EPA out to 200NM– Grants additional power to the EPA and the Coast Guard to

determine the adequacy of reception facilities and to create and enforce relevant regulations regarding such facilities

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(continued)

• Comparison with Proposed 2006 Legislation (H.R. 5811)– H.R. 802 based on many of H.R. 5811’s provisions – H.R. 802 delegates to the EPA and Coast Guard far greater

power to determine where APPS will apply; H.R. 5811 only allowed such determinations “by regulation and based upon the best scientific data”

– H.R. 802 expands the reach of APPS to 200 miles offshore for certain ships; H.R. 5811 was limited to the 12 mile territorial sea

– H.R. 802 expands the EPA’s role to regulate ozone depleting substances, incineration, reception facilities, platforms and rigs in addition to the H.R. 5811 proposed authority regarding NOx, Sox, VOCs and fuel oil quality

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MARPOL ANNEX VIIMPLEMENTATION (continued)

• Recent IMO Annex VI Action– BLG 11th Session (April 16-20, 2007)– NOx: Working Group agreed to a January 1, 2011 implementation

date for Tier II and 2015/2016 implementation of Tier III– Tier III Options: Option X (80% reduction to be applicable to all

marine diesel engines operating within 50 nautical miles from shore; Option Y (83-85% reduction to be applicable to large vessel engines only in specific areas); Option Z (40-50% reduction to be applicable to all marine diesel engines worldwide)

– Application to Existing Engines: Working Group reached a preliminary conclusion that engine modifications are technicallyfeasible for many, but not all, pre-2000 engines.

– Sox & Fuel Oil: Considering options to lower the SECA caps, setting lower limits near shorelines, gradually lowering the sulfur cap limits, and changing to distillate fuels

– Emissions Trading: Agreed to consider this at a later time– Volatile Organic Compounds: The BLG subcommittee agreed in

principle to require each crude oil tanker to have on board, andimplement, a VOC management plan to lower VOC emissions. The 2008 BLG Working Group will make its recommendations to MEPC 57 (March/April 2008) with the view towards the adoption of the recommendations in October 2008.

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SECURITY/POLLUTION LEGISLATION

• Maritime Transportation Security Act of 2002 (“MTSA”) November 25, 2002

– U.S. Facility and Vessel Vulnerability Assessments– Maritime Transportation Security Plans– Transportation Security Incident Response– Transportation Security Cards for Access to Secure Areas– Maritime Safety and Security Teams– Grants for Implementing Security Plans – Enhanced crewmember identification– Maritime security advisory committees– Maritime intelligence– Automatic identification systems– Long-range vessel tracking system

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SECURITY/POLLUTION LEGISLATION

(continued)

– Vessel Security Plans for Foreign-flag Vessels: Requirement for foreign-flag vessels to submit security plans to the Coast Guard for approval not adopted

– Enforcement: (1) Provides express authority for Coast Guard officials to carry firearms; (2) provides express authority for a Coast Guard member to effect an arrest of a person who commits a federal offense ashore; and (3) authorizes state and local law enforcement officials to make warrantless arrests related to the enforcement of Coast Guard security zones where the violation is a felony

• COAST GUARD MARITIME TRANSPORTATION ACT OF 2004(CGMTA 2004) August 9, 2004

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CGMTA (continued)

– Withholding Clearance and In Rem Liability for Civil Penalties: (1) Makes any vessel operated in violation of the Maritime Transportation Security Act liable in rem for any civil penalty assessed pursuant to the Act; (2) makes any vessel liable in rem for costs related to compliance with the carrying out of lawful orders; and (3) authorizes the Coast Guard to withhold clearance of a vessel if an owner or operator is suspected to be subject to a civil penalty resulting from port security violations

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SECURITY POLLUTION LEGISLATION(continued)

• Coast Guard Maritime Transportation Act of 2006 (CGMTA 2006) July 11, 2006

– Sec. 304: Requires a program to promote the transportation of LNG to the United States on U.S.-flag vessels; priority given to licensing of shore-based LNG plants

• MarAd initiative to utilize/train US crew on foreign-flag LNG vessels– Sec. 602: Requires a person to report the release of an object from a

vessel or facility into the navigable waters that creates an obstruction – Sec. 603: Increases the limits to liability under OPA 90 for oil pollution from

$600 to $950/gross ton for non-tank vessels and from $1,200 to between $1,900 and $3,000 for tank vessels; requires that limits be adjusted every three years;

– Evidence of Financial Responsibility requirements go into effect after final rule published

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THE SAFE PORT ACT

• Signed into law on October 13, 2006:– Sec. 103 – Announced/unannounced inspection of MTSA facilities two

times/year– Sec. 104 – Establishes a timeframe for the issuance of TWIC cards; final

rule by year’s end; phased implementation beginning at the top 10 ports by July 1, 2007

– Sec. 107 – Establishes a long-range automated vessel tracking system by April 1, 2007 for all vessels in US waters equipped with a GMDSS or equivalent system

– Sec. 109 – Coast Guard to promulgate a rule by April 13, 2007 requiring notices of arrival for foreign vessels on the OCS

– Sec. 110 – Requires DHS to finalize a program by October 13, 2007 requiring crewmembers to carry and present on demand identification satisfactory to DHS

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CONTAINER-RELATED ENHANCEMENTS

• Radiation Detection and Imaging (Section 121)

– Container Radiation Scanning: All containers entering theUnited States through the 22 largest ports (by container volume)must be scanned for radiation as of December 31, 2007

– Initial Strategy: An “initial strategy” implementing thisprogram is to be submitted to Congress by January 11, 2006,with a more complete evaluation to be submitted 180 daysafter the submission of the initial strategy

– Final Strategy: Final strategy must go into effect no laterthan October 13, 2009

– Other Ports: All other ports of entry shall be subjected to theradiation detection requirement as soon as practicable after(1) the initial strategy is submitted to Congress and (2) scanningis implemented at the 22 largest ports, but in no event, laterthan December 28, 2008

THE SAFE PORT ACT(continued)

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CONTAINER-RELATEDENHANCEMENTS

• Random Searches of Containers (Section 123)Develop Plan for Random Searches: DHS must develop,by October 13, 2007, a plan to conduct random searchesof containers

• Container Security Standards (Section 204)– Proposed Rule: Requires DHS to initiate a rulemaking by

January 11, 2006, to establish minimum standards andprocedures for securing containers in transit to the UnitedStates

– Interim Rule: Must be published by June 11, 2007, and allcontainers must meet such standards within two yearsafter the standards are finalized


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• Container Security Initiative (“CSI”) (Section 205)– CSI Program Background: Established in February 2002 to

help increase security for containerized cargo shipped to theUnited States from around the world by identifying andpre-screening high-risk containerized cargo before it departs aforeign port to the United States

– Formalizes Program: Statutorily formalizes CSI– Requirements: (1) designate foreign seaports for participation

in CSI, (2) notify Congress of those designations, and(3) negotiate with governments of those foreign ports to ensurefull compliance with the requirements of CSI


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• Pilot Integrated Scanning System (Section 231)– Pilot Scanning Program: DHS must designate within 90

days after the enactment three foreign seaports for theestablishment of pilot integrated scanning systems forcontainers that combine both non-intrusive imagingequipment and radiation detection equipment

– Implementation within One Year: DHS must achievefull-scale implementation of the pilot scanning systemswithin one year after enactment

• Screening of Containers (Section 232)– 100% Screening to Identify High Risk Containers: Requires

one hundred percent of all containers originating outside ofthe United States and unloaded at United States facilitiesto be screened to identify high risk containers

– Scanning/Searching of High Risk Containers: All containers identified as high risk must be scanned or searched before such containers leave a U.S. seaport facility


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– Implementation of Scanning System: Requires DHS todevelop and deploy, as soon as possible, an integratedscanning system that ensures all containers entering theUnited States are scanned before arrival. No deadline for implementation but DHS must submit reports every sixmonths on the implementation of this effort

• Empty Container Pilot Program (Section 235)– One Year Program: Requires DHS to conduct a one-year

pilot program to assess the risk posed by and to improvethe security of empty containers at U.S. ports

– Report: Requires a report to Congress within 90 days aftercompletion of the program


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INTERNATIONAL SUPPLYCHAIN ENHANCEMENTS

• Enhancement of International Supply Chain (Section 201)

– Strategic Plan: Requires the Secretary to develop,implement, and update a strategic plan to enhance securityof the international supply

– Reports: DHS must submit an initial report to Congresswithin 270 days of the enactment and a final report withinthree years after submission of the initial plan

• Post-Incident Resumption of Trade (Section 202)– Development of Protocols: Requires DHS to develop

protocols for the resumption of trade in the event of atransportation security incident

– Vessel Priorities: Gives priority to vessels with security plans, manned by U.S. mariners with a license or MMD, andoperated by a C-TPAT participant

– Cargo Priorities: Gives priority to cargo entering a U.S. portfrom a port designated under CSI, from a C-TPAT participant,and which has undergone scanning or searched


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• Automated Targeting System Improvements (Section 203)– Electronic Transmission of Additional Data Elements:

Directs DHS to develop regulations to require the electronic transmission of “additional data elements” prior to theloading of such cargo on vessels at foreign ports for“improved high-risk targeting” of shipments of cargo in the international supply chain destined to the United States

– Factors to Consider: DHS must consider ways to improvethe Automated Targeting System (e.g. cost, benefit, andfeasibility of requiring additional non-manifest documentation, reducing the time period allowed for revisions to a containercargo manifest, reducing the time period for submission ofcertain elements of entry data for vessel or cargo)


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• C-TPAT (Sections 211-223)– C-TPAT Background: Voluntary program established in

April 2002 that provides security related benefits to participantsin the supply chain (e.g. importers, customs brokers, air, sea,and land carriers, contract logistics providers) such as reducedCBP inspections, assigned account manager, and emphasis onself-policing

– Formalizes Program and Establishes Three Tiers of Membership:o Tier 1: Participants receive Automated Targeting System

benefits within 180 days o Tier 2: Participants receive, in addition, reduced inspection

of cargo and priority examination of cargo benefits within180 days

o Tier 3: Participants implementing higher security standards, receive additional benefits, including expeditedrelease of cargo in U.S. ports and further reduced inspectionsand priority examinations within two years


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• International Cooperation and Coordination (Section 233)– Technical Assistance: Allows DHS, along with

representatives of other government agencies, to providetechnical assistance, training, and equipment to facilitate the implementation of supply chain security measures atinternational ports designated under CSI

– Caribbean Basin: Places emphasis on port securityantiterrorism measures at ports located in the Caribbean basin


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• Foreign Port Reassessments (Section 234)– Requires the Commandant of the Coast Guard to assess the

effectiveness of antiterrorism measures at (1) foreign portswhere U.S.-flag vessels call, (2) where foreign flag vesselsdepart on a voyage to the U.S., or (3) other ports posinga risk to maritime commerce, not less than once everythree years


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• HR1: passed by the House on January 9, 2007 proposing to implement most of the remaining recommendations of the 9/11 Commission.

• Provisions : Includes (1) 100% inspection of all air cargo on passenger planes within three years; (2) 100% inspection of all containers entering the U.S. within five years; and (3) the deployment of approved container seals on all containers entering the U.S.

• DHS is to promulgate new standards for container seals and revise the standards every two years as the technology develops.

• Costs of New Requirements: HR 1 does not address the question of who should pay for the new inspections.

• Forecast

SECURITY LEGISLATIONPROPOSED IN 2007

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CURRENT CREDENTIAL REQUIREMENTS

• Requirement effective April 2006

• Prohibits access to waterfront facilities subject to MTSA by persons who do not possess appropriate identification credentials (33 C.F.R. § 101.515)

• Facility operators had to submit information on employees, longshoremen, and long-term contractors so TSA can conduct a threat assessment

• Information must be submitted via the Coast Guard’s Homeport or directly to TSA

• Interim measure until TWIC requirements are implemented

• Employers and unions must provide such information for all new employees and longshoremen on a continuing basis and in a timely manner

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PORT STATE CONTROL

• 2005 Highlights

– Vessel Detention Decreased: 10,430 SOLAS safety exams made; 9,117 ISPS exams conducted; Ships detained decreased from 176 to 127; arrivals increased from 7,241 to 7,850

– Flag State Safety Performance Improved: Annual detention rate decreased from 2.43% to 1.61%

– Flag State Security Performance Improved: Control action ratio fell to .89%

– Class-Related Detentions Decreased: From 10 to two detentions– ISM Related Deficiencies Decreased: Decreased from 51 to 35

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PORT STATE CONTROL STATISTICS BY REGION

SOURCE: COAST GUARD PORT STATE CONTROL REPORT 2005

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PORT STATE CONTROL (continued)


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TYPES OF SAFETY DEFICIENCIES


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QUALSHIP 21

• Less then 10% of all foreign-flag ships earned QUALSHIP 21 designation

• Must average 10 U.S. arrivals a year and have a three year running rate of 1% or less

• Results in reduced number of PSC examinations• In 2005 724 vessels enrolled (decrease in 9.7%)• Hong Kong has most number of vessel designated• Approximately 375 vessel to fall out of program by end of 2006• 11 flag States qualify

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SECURITY DEFICIENCIES BY CATEGORY

SOURCE: COAST GUARD PORT STATECONTROL REPORT 2005

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MAJOR CONTROL ACTIONSBY VESSEL TYPE

SOURCE: COAST GUARD PORT STATECONTROL REPORT 2005

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U.S. COAST GUARD PORT STATE CONTROL POLICY

• Policy embodied in NVIC 06-03, Change 1, issued on May 27, 2004• NVIC 06-03 contains three matrices prioritizing vessel boardings

– ISPS/MTSA Security Compliance Targeting Matrix– Port State Control Safety and Environmental Protection

Compliance Matrix– Security Boarding Decision Matrix (classified)

• Provides guidelines as to what Coast Guard boarding parties will be looking for during security compliance boardings

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PORT STATE CONTROL

• “Score” will determine control measures• Based on cargo type, ship status, previous port calls

(8 listed as non-compliant); flag state (14 flag states assigned points); and other security information

• Control measures include boarding at sea, boarding in port, detention in port, Sea Marshals, armed guards

• Delays likely to result

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LESSONS LEARNED

• Access Control and Proper Identification

– Acceptable Means of Identification: See MTSA/ISPS PAC #49-05 dated January 18, 2005

– Dealing with Boarding Officials: See MTSA/ISPS PAC #30-04 dated June 17, 2004

• Restricted Areas: Designate areas, personnel, monitor, and training

• Ship Security Officer, Crew Training, and Coast Guard Inspections: See NVIC 06-03 (change 1)

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ENFORCEMENT AND PENALTIES

• Enforcement– Inspection of the vessel/facility– Delay of the vessel– Detention of the vessel– Restrictions/conditions on vessel/facility operations– Denial of port entry– Expulsion from port– Lesser administrative and corrective measures

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PENALTIES

• Ports and Waterways Safety Act (33 U.S.C. § 1232)– Seizure and forfeiture– Vessels liable en rem for penalties– Civil penalties: $25,000 for each violation and each

day a violation continues– Criminal penalties: Individuals subject to a fine of not

more than $250,000 and not more than six years of imprisonment and for an organization not more than $500,000

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PENALTIES (continued)

– For cases involving willful and knowing violations, using a dangerous weapon, or causing bodily injury or fear of bodily injury to an authorized officer, not more than 12 years

• Magnuson Act (50 U.S.C. § 192)– Seizure and forfeiture– Criminal penalties: Subject to $10,000 fine and

imprisonment up to 10 years– Civil penalties: Subject to civil penalty of not more than

$25,000 for each violation and each day is a continuing violation

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PENALTIES (continued)

• Marine Transportation Security Act (46 U.S.C. § 70117)– Subject to a civil penalty up to $50,000– Vessel liable en rem– Liable for costs related to compliance of a lawful order– Coast Guard may withhold clearance for a vessel

suspected to be subject to a civil penalty

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QUESTIONS?

Jonathan K. WaldronBlank Rome LLP

600 New Hampshire Avenue, N.W.Washington, D.C. 20037

Tel. (202) [email protected]

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