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Solutions to major tanker owner challenges highlighted in Cyprus

Wed 14 Jun 2017 by Edwin Lampert

Solutions to major tanker owner challenges highlighted in Cyprus
Investing in education is laudable. But delegates heard that a fatigued tanker crew is equivalent to an untrained crew

Crew control and staying the right side of the taxman and the law in one of the tanker markets most significant emerging markets dominated discussions at Reed Smith’s Annual Shipping Law Seminar in Cyprus.

Reed Smith admiralty manager Ron Clark from the Hong Kong office analysed the oft-overlooked factor of fatigue, and how a finding of incompetency of the master and crew brought about by fatigue can render a vessel unseaworthy. Citing the Hague Rules and an Owners’ obligation to exercise due diligence to make the vessel seaworthy by providing a competent crew, Ron highlighted the judgment in the Eurasian Dream case as an example of how a crew suffering from fatigue can amount to the same thing as a lack of training because the result in terms of their ability to perform competently might be no different.

This topic is especially relevant to the tanker community, where the crew is subjected to heavy workload both in port and at sea as well as the demands of other parties such as SIRE and port State inspectors minimising their rest periods.

Mr Clark considered the steps which owners and managers might take to mitigate the risk of fatigue, including the incorporation of a Fatigue Risk Management System into the vessel’s Safety Management System (recognising the effects of both physical and mental exhaustion, including stress and social-wellbeing) and involves internal training and the promotion of policies to encourage transparency on issues of tiredness, and identifying the cultures and mindsets which facilitate fatigue. Ultimately, it is important that if a crew member feels tired or unable to work, they are encouraged to tell the right people in order that this can be addressed.   

Paying your taxes

Legal associate Christian Ayerst and legal counsel Antonia Panayides discussed the sudden introduction by India of tax on ocean freight imposed on cargoes and carried by foreign tonnage. This topic should be of particular interest to tanker owners and operators, who when supplying one of the world’s largest oil importer may find themselves being forced to pay the tax to avoid complications (if the importer/agent refuse to do so), and whose financial liability may be large (but unknown, as the liability will arise from transactions down the line), given the volume and value of the cargo being carried.

A brief background of the current position (importers pay tax on the value of the freight) was followed by an analysis of the current questions being asked by clients: what if Owners have already paid freight to local agents, only to find that importers are now the party responsible for payment? What amount should be paid (15 per cent of 30 per cent of the freight value, 4.5 per cent of the total value or 15 per cent of the total value)? How to respond if local agents/importers seek an indemnity or other protection against authorities later seeking reimbursement of a larger amount (plus interest)?

The concluding observation was that there is no simple answer, and that owners should be careful of reacting hastily and paying the wrong person or the wrong amount. Ultimately, any step taken by Owners should be documented to justify their position. The tanker industry should pay particular attention to these steps, as owners face significant risk of arrest and attachment by other parties unless any dispute is carefully managed.

US sanctions update

Partner Leigh Hansson spoke on the ever-evolving issue of sanctions, in respect of Cuba, North Korea and Iran. U.S. sanctions in particular continue to be a source of confusion and unease for those in the shipping community, and organizations are anxious about potential changes to a number of sanctions regimes. Several government officials have stated that the Trump Administration will announce changes to the Cuba sanctions program as early as Friday, June 16. These changes are likely to include rolling back some of the relaxations made by former President Obama to open up travel and trade opportunities with Cuba.  Other changes expected by the Trump Administration include tightening up restrictions on Iran and North Korea.  Although the U.S. Department of State announced in May that the U.S. government would renew waivers of certain sanctions necessary to continue to implement U.S. commitments under the Joint Comprehensive Plan of Action (“JCPOA”), the U.S. government has continued to sanction individuals and entities involved in Iran’s ballistic missile program, and has also announced that further sanctions on Iran should be expected.