Business

Sulphur cap to bite as shippers comply with regulator from January

Lines will pass costs on to prices of shipped goods you buy

 

FRIDAY October 4, 2019

By Tranquility News Correspondent, Arusha

Consumers of products shipped from overseas should brace for surging prices of the goods come January 2020, maritime administrators in East Africa have warned.

Shippers will impose surcharge on cargo to comply with a regulation by the International Maritime Organisation (IMO) to lower global limit for sulphur content in marine fuels with effect from January next year, they say.

Maritime administrators from Burundi, Kenya, Tanzania, Uganda and Zambia were mulling over a common approach to take against the regulation in Arusha recently.

Kenya, Tanzania, Uganda and Zambia formed an Intergovernmental Standing Committee on Shipping (ISCOS) in 1967 to perform on their behalf functions such as negotiations on freight rates, fighting against unjustified surcharge and other charges on seaborne cargo. In 1987, member states signed an agreement legally establishing the institution with its permanent secretariat headed by Secretary General based in Mombasa, Kenya.

Kenya Maritime Authority (KMA) and Tanzania Shipping Agencies Corporation (Tasac) have already received requests from some shippers of big volume cargo for imposing surcharges for the IMO 2020 sulphur cap.

“When you impose any cost in business, a final consumer will be mostly affected,” the director general of Tasac, Mr Emmanuel Ndomba, says, explaining that a secondhand clothes importer will recover the cost from whoever will buy the garments.

Mr Emmanuel Ndomba, the Director General of Tanzania Shipping Agencies Corporation (TASAC), addresses a past meeting. PHOTO | AGENCY

“As maritime administrators, we’ve to deliberate on this to see how we can protect our customers. With collective voice, we will be considered,” Mr Ndomba says.

East Africa does not have big ships and its environmental pollution level is insignificant, he adds, arguing that the region does not deserve the surcharge rate applied to high risk areas such as US and Europe.

“One ship carries up to 15,000 containers along the Europe-Asia lane, we don’t have a port for such a village-like vessel to dock,” he says, cautioning:

“A higher surcharge rate added to freight charges will prevent small and medium enterprises with niche markets from growing.”

Surcharge is applicable to a temporary incident; we don’t know exactly when the sulphur challenge will be resolved, wonders Mr John Omingo, the KMA head of Commercial Shipping.

Mr John Omingo, the Kenya Maritime Authority (KMA) Head of Commercial Shipping speaks at a past event. PHOTO | AGENCY

All modern commercial ships run on fossil fuels such as marine gas oil, marine diesel oil, intermediate fuel oil, marine fuel oil and heavy fuel oil collectively known as bunker fuel. These fuels have a high content of sulphur which is quite harmful to the environment.

IMO has since 1960s been enforcing regulations of Air Pollution from Ships globally to control airborne emissions from the vessels in a bid to progressively reduce their harmful impacts on the environment.

The Director of Finance and Administration and Acting Secretary General of Intergovernmental Standing Committee on Shipping (ISCOS), Mr Kassim Mpaata.

At the 70th session of the Marine Environment Protection Committee (MEPC) meeting in London in 2016, IMO took the landmark decision of setting the January 1, 2020, as the implementation date for a significant reduction in the sulphur content of the fuel oil used by ships.

The regulatory authority for international shipping revised the lower global limit for sulphur content in marine fuels from 3.5 per cent by mass (mm) to 0.5mm.

It gave shipping lines several options for them to meet the emission standard, including using low-sulphur fuel oil, gas, methanol or exhaust cleaning system dubbed scrubbers, which clean emissions before they are released into the atmosphere.

A higher surcharge rate added to freight charges will prevent small and medium enterprises with niche markets from growing,” – Mr Emmanuel Ndomba, the Director of Tanzania Shipping Agencies Corporation (TASAC).

Depending on the shipping line and trade, the Sulphur surcharges range from a low of $5 per a 20-feet container to a high of $35 per a 20-feet container. A 40-feet container will attract the low of $40 and a high of $70.

A line that ships about 10,000 containers a year will pay a surcharge of $50,000 on the low end and $350,000 on the high end.

A line will pay a surcharge of $100,000 if it ships the 20-feet containers only or $500,000 for the 40-feet containers only.

Each line will calculate its surcharge depending on several factors, including services, trade lanes, the efficiency of ships on trade lanes, the weight distribution on the head haul and backhaul, consumption per day and port stays.

Shippers are expected to spend up to $24 billion globally in complying with the IMO 2020 regulation.

Many of the lines already have announced that they will pass the costs on to customers in prices of products they buy.

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