How Should Shipowners Prepare for Bunker Quality Disputes?

The Shipowners’ Club gave its members tips on how to be prepared for potential bunker quality dispute claims which have lately been on the rise. 

The dispute claims, related to the delivery of allegedly off-specification or contaminated bunkers, have ranged from variation in the parameters of the bunker supplied to presence of contaminants. These claims can result in expensive claims not only because of the bunkers themselves but also related costs such as machinery damage, time lost and tank cleaning costs, the club said.

According to the association, bunker disputes are fraught with problems, both on an evidentiary and legal basis. This is perhaps not surprising, the club said, given that both the bunker supplier and receiver are working to strict schedules often resulting in important aspects of the bunker delivery operations being overlooked.

Depending on the charter arrangements, either the owner or the charterer will be responsible for ordering and arranging bunkers to be supplied to the vessel. Bunker receivers may find supplier’s terms onerous. In particular, the liability exclusion clauses and short time periods within which a claim has to be presented in a jurisdiction of the supplier’s choice. The Baltic and International Maritime Council (BIMCO) has issued a more balanced Standard Bunker Contract and mutual insurance association is advising shipowners to use it as a starting point when negotiating a supply contract.

In addition, it is also important that the correct grade of bunkers, based on the engine type and applicable regulations, is ordered and specified in sale and purchase agreement, according to the club. To avoid any confusion, it is best to specify the grade of bunkers by making a reference to their ISO 8217 grade. Blending of bunkers in the receiving ship’s tanks or in the hoses should be avoided to ensure homogenous bunkers are delivered, The Shipowners’ Club said.

At the time of delivery, the ship’s crew should be presented with a bunker delivery receipt detailing the specifications of bunkers being supplied. Prior to taking delivery, the ship’s crew should ensure that these details correspond with the stemmed specification, according to the club.

Furthermore, sampling is the most crucial evidence to preserve, according to the club, as it will be relied upon if a dispute later arises regarding the quality of bunkers supplied. Samples of bunkers already in the receiving ship’s tanks should be collected prior to commencement of bunkering operations and the mixing of new and old bunkers should be avoided as much as possible. The ship’s crew should attend the sampling on the barge to ensure that correct sampling procedures are followed and sufficient quantity of these samples is retained for future analysis. Sampling equipment should be clean and tamper proof and samples collected must be sealed and retained, the mutual insurance association further said.

Upon completion of bunkering, the supplier should present a bunker delivery note to the ship’s crew and a copy should be retained by the ship’s staff.

Newly supplied bunkers should only be used once their samples have been analyzed and they are found to be on-specification and free of contaminants. Not doing so exposes the ship’s machinery to damage from off-spec and/or contaminated bunkers and the owners of the vessel to a breach of the International Convention for the Prevention of Pollution from Ships (MARPOL) or other local regulations governing the specification of bunkers to be consumed by the vessel. The International Safety Management (ISM) Code and MARPOL checklists and records should also be preserved to demonstrate that proper procedures were followed, according to The Shipowners’ Club.

If the bunkers are found to be off-specification or contaminated they should not be used and a surveyor should immediately be appointed to collect the samples. Depending on the degree to which the bunkers are found to be off-specification or contaminated, an analysis of these samples will need to be carried out. Bunker quality experts may also need to be appointed to advise on mitigation of damage to the ship and to suggest further appropriate analysis which bolsters the claim/defense, the club advised its members.

Members are advised to also explore indemnity provisions in other relevant contracts, such as charter parties, when faced with bunker quality issues.

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