CircularsNews
September 2014

Ukraine - Custom Fines

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

  • One tonne of carbon dioxide (CO2), or;
  • The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
  • The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
  • ~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
  • ~~9.000 * EUR 75 = EUR 675.000
  • ~~7.000 * EUR 75 = EUR 525.000
  • ~~4.000 * EUR 75 * 50% = EUR 150.000
  • ~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
  • For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
  • Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
  • The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
  • Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en

Sayin Ilgili;

Ukrayna’da gümrük deklerasyonunda yapilacak hatali bildirimlerin kayda deger cezalara sebep olacagi yönünde uyarilar içeren sirküler asagida bilgilerinize sunulur. Sirkülerde; özellikle yakit deklerasyonlarinda yapilacak yanlis bildirimlerin onbinlerce dolar cezaya neden olabilecegi açiklamalari yer almaktadir.

Konu ile ilgili olarak asagidaki sirkuler birçok kulübün Ukrayna yerel temsilciligini yapan Dias firmasi tarafindan hazirlanmis olup Grup Kulüplerinden Skuld araciligi ile elimize ulasmistir.

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Ukraine: Customs fines - renewed caution

Advisory to members

Applicability: Shipowners and Technical managers

The Association is grateful to its correspondents DIAS for their continued contribution to the Club's and its members' information on Ukraine and related developments.

The development

Members will be aware of the challenging situation with respect to making successful customs declarations in Ukraine, and thereby avoiding otherwise very significant fines.

The latest information received is that customs in the Nikolaev Sea Port have begun a very rigorous inspection campaign that has already led to vessels being subjected to significant fines.

A particular issue of concern is the sounding of the vessel's bunker tanks, which may see the customs officers conduct a full survey of all bunker and diesel oil on board the vessel during her inward clearance or immediately thereafter.

If the findings show that more fuel is on board than has been declared by the master or the chief engineer then a significant fine, amounting to tens of thousands of USD or more could be impose on the vessel, as well as a possible criminal prosecution for fuel smuggling.

Loss prevention advice

Members are referred to the Association's previous Loss Prevention Advisory 13 January 2014 and the Association would now like to advise further as follows.

Our correspondents believe that although most shipping agents in Ukraine do provide vessels with detailed arrival procedure advice in advance, it may be that the ship's master does not always fully appreciate the significance of having to comply very accurately and strictly with those requirements, especially when it comes to the details of the customs declaration.

The consequence of failing to give these matters the attention they require is likely to be a significant fine, which cannot usually be argued with at that time. A vessel will usually have to pay the full amount of the fine in to court before it is released and then the matter would have to go through the process of local legal action if the intention is to appeal the fine.

The only way this risk can be mitigated against is by adhering very closely to the shipping agent's advice, which should be detailed, and to prepare as comprehensive a pre-arrival customs declaration as possible, with close attention paid to the full quantity of all fuel and lubes on board.

Should a vessel not receive a detailed set of arrival instructions from the local shipping agent, find it is subjected to more than a cursory customs inspection, or otherwise be concerned about the call at a Ukrainian port, the master should not hesitate to contact the Association's local correspondents for immediate assistance.

Should members have further queries, they are asked to contact the Association:

lossprevention@skuld.com.

Christian Ott
Vice President Head of Claims, Skuld Singapore Branch
Loss Prevention and Recurring Claims Team Leader

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