Greek Shipping Co-operation Committee

Annual Report

2017 -2018
Contents

From the Chairman .............................................................................................................................. 3

G.S.C.C. Council Members ................................................................................................................... 9
Fleet Statistics ...................................................................................................................................... 10
The World Fleet................................................................................................................................. 10
The Greek Controlled Fleet ............................................................................................................... 10
Developments in Greece ..................................................................................................................... 12
Economic Outlook ............................................................................................................................. 13
Developments in the UK ..................................................................................................................... 16
Economic Outlook ............................................................................................................................. 17
Ballast Water Management ............................................................................................................... 19
A closer examination of MEPC 71 ..................................................................................................... 20
Californian State Lands Commission Regulations ............................................................................. 22
USCG BWM Regulations.................................................................................................................... 23
PSC BWM related deficiencies .......................................................................................................... 24
Collecting & Reporting CO2 Emissions............................................................................................ 27
Timeline & Differences...................................................................................................................... 28
Further guidance & ensuring compliance ......................................................................................... 31
Cyber Threats...................................................................................................................................... 34
New guidance ................................................................................................................................... 36
Piracy ................................................................................................................................................... 39
West Africa ........................................................................................................................................ 41
East Africa ......................................................................................................................................... 42
Asia .................................................................................................................................................... 44
South America ................................................................................................................................... 45
Ship Recycling ..................................................................................................................................... 46
Shipbuilding ........................................................................................................................................ 51
Yards outlook .................................................................................................................................... 53
Standards of Training, Certification and Watch keeping for Seafarers ........................................ 55
Sanctions against Iran ........................................................................................................................ 57
Sanctions against Venezuela .............................................................................................................. 59
Panama Canal ..................................................................................................................................... 62
Suez Canal ........................................................................................................................................... 67
Migrant Crisis – The Mediterranean Situation ............................................................................... 68
From the Chairman

Dear Colleagues,

It is with great pleasure that I present our 83rd Annual Report in 2018.

In the past year yet again we have seen great political changes, both in Europe and globally
where new governments and alliances of political parties are bringing about a change in the
political landscape and a more activist approach to the global status quo.

Whilst America would seem to be retreating from its role as the world’s strongest nation and
policeman, Russia and China are eagerly picking up the slack and creating new treaties in
extending their friendship with nations which would not otherwise be part of their orbit.

More seriously for global shipping all these threats about tariffs and trade wars could easily
bring about dislocations in world trade and an instability which was not up to now very
prevalent. Whether these tariff wars are just acts of bravado or brinksmanship they cannot be
helpful to the smooth execution of commerce and could bring an overall reduction in volumes
of cargo, if not thought through.

It is against such a background that the world and in particular the Greek Shipping Industry
have to operate and assess future cargo flows and hopefully make the correct calculations of
the future fleet needs and requirements.

Whilst the last 12 months has seen a better Dry Bulk and Container Market, Tankers and Gas
Carriers are still not at freight rates which can guarantee an acceptable return on investments.

It has to be said that the world orderbook is still quite large in volume terms, even if in
percentage terms it seems less so. The number of Larger Bulk Carriers, Tankers,
Containerships and Gas Carriers on order far exceeds replacement needs and can only dampen
the chance of very significant freight rate increases.
Within this environment it must be said that Greek Companies, apart from being major
participants in the Dry Bulk and Tanker sectors are probably becoming the dominant LNG
Carrier operators and are increasing their share of the Container Ship Market.

They are doing this mainly with newbuilding orders and some judicious second-hand
purchases.

Now that LNG seems to be becoming a very prominent energy cargo, more and more Greek
Companies are entering the sector and could soon become the dominant players.

However, against all this a legislative tsunami of new regulations that has to be dealt with and
put into place in a realistic and workmanlike manner so that world shipping can function
properly without undue dislocation.

In this regard, the G.S.C.C. is fighting hard on the International stage to bring about realistic
and workable solutions to some positive and some not so positive demands from our legislators.

It is our duty to present a realistic way of solving many of our global issues.

Whilst shipping has amongst the smallest carbon footprints of any transportation mode and is
by far the most efficient by any measure, outside influences wish to unduly weigh it down with
legislation to reduce its footprint still further.

The Greek Shipping Industry with its substantial order book is rapidly becoming among the
greenest in the world and its technical knowhow is second to none.

We urge those in the International arena to work with us to bring about workable, safe and
maritime solutions to bring about a low carbon, zero future for us all.
Looking at these issues individually:

A. 2020 IMO Sulphur Cap

Whilst it is understood that IMO does not wish to be excessively flexible after the Ballast Water
Treatment debacle it is still incumbent on them to strongly urge oil refiners and bunker
suppliers worldwide to provide a workable solution. This will give the IMO a transitional
process to allow the supply and worldwide availability of safe compliant fuel in order not to
avoid a dislocation of world trade and short-term bottlenecks.

There can be no more obfuscation on this issue.

B. 2050 Greenhouse Gas Reductions

Whilst we all laud IMO’s ground-breaking decision to make such a massive reduction in Green
House Gases, this will require a technological breakthrough of enormous proportions. We urge
all the participants in the project i.e. Shipbuilders, Engine Manufacturers, Fuel Suppliers and
Legislators to drastically and urgently increase R & D funding, so as to provide workable
solutions for a long term carbon free future.

Our industry will do its best to reduce GHG Emissions through short, medium and long term
measures, but we need full co-operation from the other participants and especially to develop
plentiful carbon free fuels suitable for worldwide shipping.

C. Piracy

Whilst the Indian Ocean has calmed down there are still other areas of the world where it still
exists and we must have proper solutions to this problem.

D. Cargo Liquefaction

Carriage of Nickel Ore, Bauxite and other ores has created too many casualties with many lives
lost. Pressure by Cargo Shippers and Charterers to risk lives and carry unsuitable cargoes
should not be allowed and I.M.O. should play a proactive role in this issue. The IMSBC code
should guarantee the shipment of safe cargoes.

E. Maritime Training

Whilst this is mainly a national issue we urge the Greek Government to be more flexible and
permit private and not just state academies to exist in order to both increase the proportion of
Greek Seafarers on board ships and reduce unemployment amongst the young which is still
stubbornly high.

F. Migrant Rescue

As events over the last few days have shown, there still is no overall policy on this issue in
Europe and that is against every seafarer’s humanitarian instincts.

Within Greece itself if must be stressed that shipping is the Country’s most important
international industry and must be supported in every way possible.

Apart from Maritime training, which has to be upgraded it is very important that there is a more
flexible approach to employing Greeks in all ranks aboard.

To maintain this link with Greece, the Ministry of Merchant Marine should not weaken the
inherent strength of the Hellenic Coast Guard and its great contribution to Greek Shipping
worldwide.

Finally, it is hoped that in the next few months a final solution is found to the E.U. inquiry into
the State Aid to Maritime Transport.

It is not in the E.U.’s or Greece’s interest to have a weak maritime sector, where at present
Greek and the E.U. are still maritime leaders of the world.
We support the U.G.S.’s position on this issue and believe that a maintenance of the status quo
is the best way to compete in an uneven global environment where our competition grows
stronger every day.

Apart from its close and enduring links with the Union of Greek Ship Owners in Greece, and
the united position we take on national and international issues, the G.S.C.C. prides itself on
maintaining a close dialogue with all major international maritime organizations.

The I.M.O., I.C.S., Intertanko, Intercargo, BIMCO, the E.U., National Governments and
M.E.P.’s, are amongst the leading groups with whom we have close dialogues.

We are proud to welcome Panagiotis Laskaridis as President of ECSA, heralding another top
position held by a Greek of great distinction.

Further to the above, we cherish our close contacts with the International Group of P & I Clubs,
having many Club Chairmen and Directors on our Council.

Our relationship with the senior IACS members is also very close, not least due to our presence
as individual members on the boards of many National and International Committees of leading
Classification Societies. We also work together with them in pressing for ever higher vessel
standards in construction and operation.

Being based in London, gives us the opportunity to keep in close contact with the Baltic
Exchange (the world’s leading index provider), the UK Chamber of Shipping, Maritime
London, and other London-based organizations. We also support the aims of London
International Shipping Week in reminding our global shipping community of the importance
of the U.K. and London in particular.

Finally, I would like to thank our Member Offices for their support, the Council and the
Secretariat for their hard work, which allows us to continue keeping our membership well
informed and lobby on a global basis in favor of positive legislation and where this is negative,
to make our opinion very well-known, backing it up with well-reasoned arguments.
I am particularly grateful to our Vice-Chairmen, Constantinos Caroussis, John M. Lyras and
Spyros Polemis, our Honorary Chairman Epaminondas Embiricos, our Treasurer Diamantis
Lemos and Deputy Treasurer Dimitri Frank Saracakis.

My special thanks go to Stathes Kulukundis and his team John Hadjipateras, George Embiricos
and Filippos Lemos without whom our monthly reports and other documents would not be as
professionally prepared as they are. My thanks also go to Thimios Mitropoulos for his
invaluable knowledge on International legislation and for keeping his eagle eye on our Council
minutes.

With great sadness we are saying goodbye to two longstanding members of our board, Matthew
Los and George Mouskas. Both have served the G.S.C.C. loyally over many decades and we
thank them for their invaluable contributions.

Finally, our Director Konstantinos Amarantidis, ably assisted by Maria Syllignaki continue to
run the Committee smoothly and very professionally, and I thank them for their sterling efforts.
 G.S.C.C. Council Members

Chairman
Mr. Haralambos J. Fafalios
Vice Chairman
Mr. Constantinos I. Caroussis
Vice Chairman
Mr. John M. Lyras
Vice Chairman
Mr. Spyros M. Polemis
Treasurer
Mr. Diamantis J. Lemos
Member
Mr. John A. Angelicoussis
Member
Mr. Dimitri C. Dragazis
Member
Mr. George E. Embiricos
Member
Mr. John M. Hadjipateras
Member
Mr. Antonios Kanellakis
Member
Mr. Alexandros Kedros
Member
Mr. Stathes J. Kulukundis
Member
Mr. Filippos P. N. Lemos
Member
Mr. Matheos T. Los
Member
Mr. Efthymios Mitropoulos
Member
Mr. George Mouskas
Member
Mr. Anthony P. Palios
Member
Mr. Michael G. Pateras
Member
Mr. Dimitri Frank Saracakis
Member
Mr. Andreas A. Tsavliris
G.S.C.C. Secretariat

Mr. Konstantinos Amarantidis Director

Ms Maria Syllignaki Assistant Director

Fleet Statistics

The World Fleet

As of March 2018, the world fleet of self-propelled, sea-
going merchant ships, greater than 1,000 Gross Tons (GT),
stood at 54,362 vessels of 1,442,591,312 GT, including
3,869 vessels of 152,967,521 GT on order, according to
IHS data.

The Greek Controlled Fleet

As the aforementioned IHS data suggest, as of March 2018, Greek interests controlled 4,148
vessels of various categories of 341,925,357 total deadweight (DWT), and 199,286,013 total
GT. Compared to the data in the past year, this represents an increase of 63 vessels. An increase
in DWT, which rose to 13,161,590, as well as in GT, reaching 6,855,494, was also recorded.
The aforementioned figures include 200 vessels of various categories of 23,953,312 DWT and
14,205,765 GT, which are on order.

The total carrying capacity controlled by Greek parent companies has risen to above 341
million DWT over the period of a year, compared to 328 million DWT for the same period last
year. This, represents an increase of the Greek owned fleet of 13,161,590 DWT.

Despite the unstable market conditions, the slight increases are encouraging. On the one hand,
the oil tankers and liquefied gas carriers have slightly increased both in DWT and number of
ships in relation to the corresponding world fleet type for the year 2017/2018. On the other
hand, the remaining categories presented minor decreases, with the exception of ore & bulk
carriers, which increased slightly in terms of vessels but decreased in DWT. What is
noteworthy is that the Greek parent companies represent 26.4% of the world tanker fleet and
16.3% of the Ore and Bulk fleet.
Overall, Greek-owned capacity has slightly increased, representing 16.4% of the world fleet,
up from 16.2% in the previous year. In terms of number of vessels, it has remained unchanged,
representing 7.6% of the global fleet, 13.8% in terms of GT and 16.4% in terms of DWT.

According to the data, the past year saw an increase in the average age of the world fleet, from
13.2 years in 2016/2017, to 13.4 in 2017/2018. However, the average Greek-controlled vessel,
at 10.6 years of age, is still 2.8 years younger than the industry average. When calculated in
terms of DWT and GT, the average age is reduced to just 8.9 and 9 years respectively. The
fleet controlled by Greek interests is at a record high in terms of DWT and GT. Leading
companies are diversifying successfully into more lucrative, but more technically challenging
new areas such as shuttle tankers, containerships, gas carriers and offshore drilling.

The fleet registered under the Greek flag has decreased in terms of vessel numbers as well as
DWT and GT, now comprising of 723 ships of 43,393,089 GT and 74,537,350 DWT. The
significant decrease in the number of vessels registered under the Greek flag should be taken
into consideration by the Greek administration.

(Source: IHS Markit)

Developments in Greece

Economic growth was slow but steady for Greece, over the course of the year. In 2017, the
economy grew by approximately 1.3 %, marking its second full-year expansion for a decade.
Annual growth in 2017 was the highest since the financial crisis, yet slightly lower than
previous estimations of 1.6 %, with economic growth slowing again in the fourth quarter of the
year. In July 2017, a notable development was the first issuance of Greek bonds in three years.
This was oversubscribed, as were subsequent issuances in February 2018.

The beginning of the year saw the

agreement of the Eurogroup to start
technical work on a growth-adjustment
mechanism, as part of the medium-term
debt relief measures to be implemented,
if needed. Negotiations on a fourth
compliance review of reforms for rescue
funds began in February, with bailout
inspectors representing the EU and
International Monetary Fund.

At the same time, preparations for post-bailout economic life and the national elections
scheduled for next year have begun. A growth strategy is among the conditions attached to the
final review by the creditors. In August 2018, after eight years and three bailouts, Greece and
its creditors will have to decide whether the country will need some sort of post-bailout
program.

In April, the Greek government’s plans were presented to European finance ministers during
their meeting with Mr. Tsakalotos in Bulgaria. According to Bloomberg, the draft holistic
growth strategy for the future includes restoring collective bargaining in the labour market, a
gradual increase in the minimum wage and the creation of a Hellenic Development Bank. More
recent reports advised that the creation of a state-owned development bank with the aim of
reducing bad loans was considered with disfavour by the country’s creditors.
The Greek Prime Minister, Alexis Tsipras, supports the view that the completion of the fourth
and final bailout review ahead of the scheduled European finance ministers meeting in July,
combined with some form of debt relief, will allow for a “clean bailout exit”.

Earlier this year, Mr. Tsipras, made an emergency cabinet reshuffle following the resignation
of two ministers over housing benefit claims. Deputy Prime Minister, Yannis Dragasakis,
assumed the key portfolio of Economy and Development Minister, while Dimitris Vitsas
replaced Yiannis Mouzalas as Migration Minister. In addition, Mr. Fotis Kouvelis, former
leader of the Democratic Left party, was brought into government as Deputy Defence Minister.

With regard to the Hellenic Coast Guard, in March this year, Mr. Dionisis Temponeras was
appointed Secretary General of the Ministry of Shipping. Mr. Temponeras served as consultant
to the Shipping Minister in 2017. During the same month, Vice Admiral Athanasios Dounis
was appointed 2nd Deputy Commandant of the Hellenic Coast Guard.

Economic Outlook
Greece is finally recovering from a deep depression. According to the OECD’s 2018 Economic
Outlook, GDP expanded by 1.3% in 2017, and is projected to accelerate to 2% in 2018 and
2.3% in 2019, as presented in the below graph:

Source: OECD
The public debt has stabilised, but, at about 175% of GDP, is still one of the largest in the
world. A three-pronged strategy would place this on a downward path for the long-term. This
includes: additional pro-growth reforms; large but realistic primary surpluses; and, additional
debt restructuring.

The budget surplus is on track to exceed the 2017 target, through improved tax compliance and
restrained expenditure. Further progress is needed in addressing tax arrears. Greece’s high
public debt and banks’ large stock of non-performing loans (NPLs) are sources of financial
vulnerabilities. Putting public debt on a stable downward path will require sustained reforms
to boost potential output and additional debt restructuring. Carefully phasing out capital
controls, while preserving financial stability, will also be needed to restore access to finance.

Source: OECD

Labour market reforms have improved competitiveness and exports are leading the expansion.
Overall, the economy is becoming more open. Exports rose from 24% of GDP in 2008 to 34%
in 2017. Exports should continue to increase, supported by rising external demand.
Accelerating imports will subtract from growth in 2019. Excess capacity is reducing but
remains exceptionally large, limiting price and wage pressures.
Investment has dropped by 60% since the onset of the crisis and has yet to recover, because of
a mixture of weak demand, tight financial conditions and structural problems. The productive
stock capital is now falling, dragging down GDP growth. Private consumption and investment
is expected to lead the recovery, responding to reduced policy uncertainty and gradually
improving financial conditions.

Source: OECD

Employment is rising strongly. However, reducing the high levels of poverty, especially among
young people, continues to be an urgent requirement. The long crisis has left deep scars in
society that have yet to heal. GDP per
capita is still 25% below its pre-crisis
level. The public debt is still high and
wages are low. Though poverty has
stabilised, it remains near a record high,
especially among the young and families.

Social protection overall needs to be

refocused, with the recent spending
review identifying fiscal space for a
Source: Eurostat
moderate expansion of targeted social programmes. The OECD’s 2018 Economic Survey of
Greece suggests that maintaining the reform momentum and strengthening reform ownership
will be essential to sustaining the recovery and moving towards a more inclusive and
prosperous society. Keeping the reform momentum is crucial to tackle three key challenges:
Improving debt sustainability, sustaining job growth and reducing poverty, and boosting
investment.

(Sources: ΥΕΝ, OECD, FT, Bloomberg, BBC, the Guardian)

Developments in the UK
After almost nine months of discussions on the opening issues of Brexit negotiations, an
important breakthrough was achieved late last year, with talks shifting from phase one to phase
two.

In December 2017, the UK government and

the EU reached an agreement, marking the
completion of stage one. In principle, the
agreement concerned three areas: (a)
protecting the rights of European Union
citizens in the UK, and of UK citizens in the
European Union; (b) the framework for
addressing the unique circumstances in
Northern Ireland; and (c) the financial
settlement.

The agreement reached helps to clarify the situation regarding the rights of the 4.2 million UK
and European Union citizens, assuring permanent rights of residence for EU nationals and
family members with five years of continuous residence in the UK as of the date of the UK’s
withdrawal from the EU, and those who have not yet completed five years or who move to the
UK between now and the date of withdrawal, will have the possibility of achieving ‘settled’
status after five years.
During stage two, or the implementation period, the focus of the discussion is on the terms of
the transition period and trade, which is expected to take two years from the formal date of the
UK’s withdrawal from the EU in March 2019. During this period, the UK will continue to
abide by EU law, but will not have a role in any decision-making institutions. Subsequently,
anticipated in 2021, discussions will move on to agree the UK’s final, post-Brexit relationship
with the EU.

Differences on Brexit and sexual allegations,

among other matters, have caused a string of
resignations in Prime Minister May’s Cabinet,
increasing the instability of the British
government. In January 2018, seven months
after the general election, Mrs. May reshuffled
the Cabinet, though the most senior figures
remained in their existing positions of office.

During the reshuffle, Mr. John Hayes resigned from his post as Minister for Transport and was
replaced by Mr. Jo Johnson, sibling of Mr. Boris Johnson. Previously, from July 2016 to
January 2018, Mr. Johnson had been Minister of State for Universities, Science, Research and
Innovation. He was head of the Downing Street Policy Unit and served as Minister of State at
the Cabinet Office from July 2014 until May 2015. In addition, Ms. Nusrat Ghani MP was
appointed Parliamentary Under-Secretary of State at the Department for Transport and
Assistant Government Whip.

Overall, in spite of the challenges Brexit may lead to over the coming years, Brexit could also
offer the opportunity to re-appraise the UK shipping industry and make the UK more attractive
as a location to do business, provided that the UK Government takes the appropriate measures.

Economic Outlook
UK economic growth slowed in 2017 as inflation rose sharply, with economists fearing that
Britain’s economy is losing momentum. An even weaker start of the year was recorded as the
UK’s Office for National Statistics (ONS) estimated GDP to have increased by only 0.1% in
the first quarter of 2018, compared with 0.4% in the fourth quarter of 2017.
The snowfall in the first quarter of 2018 impacted GDP in the construction and retail sales
sectors. However, the effects were generally small according to the ONS, with very little impact
observed in other areas of the economy.

London has outperformed other UK regions for most of the past 20 years, but the capital’s
growth rate appears set to fall back to close to the UK average in 2018-19. House prices in
London were down 3.2% between January and March compared with the previous quarter,
falling at the fastest rate in nine years, according to IHS data published by Halifax.

Overall, in 2018 UK growth is expected to remain modest at around 1.5%, as reported by

economists to the Financial Times and PricewaterhouseCoopers (PWC). The UK economy is
expected to remain stable into 2019, but lacks the momentum to drive growth significantly. In
2019, growth of 1.6% is forecast by PWC. Continued subdued real consumer spending growth
and the drag on business investment from ongoing economic and political uncertainty
emanating from the outcome of the Brexit negotiations, are expected to slow down the pace of
economic growth in the UK.

The UK unemployment rate is at a record low, but, with slower growth, this is unlikely to
persist according to the OECD. Exchange rate depreciation should support exports, while
import growth is projected to fall, owing to weaker private consumption.

Source: OECD
The OECD’s economic forecast for the UK also estimates that growth will continue to be weak
in 2018 and 2019. However, the agreement about the transition period linked to the exit from
the EU after March 2019, should support growth in 2018 and 2019, reducing the extent to
which uncertainty weighs on domestic spending. Meanwhile, the prospect of maintaining the
closest possible economic relationship between the United Kingdom and the European Union
would further support economic growth, according to OECD.

(Sources: OECD, Office for National Statistics, UK Gov., Bank of England, FT, BBC, The
Guardian, NY times, EY, PWC, University of Edinburgh, economia.ecaew)

Ballast Water Management

After more than fourteen years of complex negotiations between IMO Member States, the
International Convention for the Control and Management of Ships' Ballast Water and
Sediments was adopted in 2004. Thirteen years after its adoption, the IMO’s Ballast Water
Management Convention finally came into force on 8th September 2017.

As of May 2018, the Convention has been ratified by 69 countries, representing 75.11 % of the
world tonnage, with the most recent ratifications made in February of this year by Qatar and
Lithuania, whilst numerous ratifications were recorded in the second half of the previous year.
The Convention aims to prevent the spread of harmful aquatic organisms from one region to
another, by establishing procedures for the management and control of ships' ballast water and
sediments. With the spread of invasive species posing a great threat to the wellbeing of the
maritime ecosystem, taking appropriate measures is of utmost importance.
However, implementation of the requirements of the Convention has proved to be quite
challenging, not merely due to differences between regional and global requirements, but also
due to the complexity and cost of
retrofitting BWM systems onto
existing vessels, the inefficient
functionality of a significant
percentage of the systems installed,
as well as the availability of post
installation support.

Over the course of a year, significant

regulatory developments have been
marked, with Marine Environment
Protection Committee (MEPC) at its
71st session in July 2017, seeing the
approval of a revised implementation schedule for BWM compliance and its later adoption at
MEPC 72 in April of this year. The long-awaited agreement provides certainty to the maritime
community regarding the mandatory compliance dates for treatment of ballast water discharge.

A closer examination of MEPC 71

In more detail, MEPC 71 reached a compromise on compliance dates for ballast water
discharge. According to DNV GL, a highly anticipated compromise agreement was reached on
the implementation dates for the D-2 discharge standard. Generally, compliance with the D-2
standard translates to the date by which individual ships must have a ballast water treatment
system installed. The agreement ensures full global implementation by 8th September 2024,
and contains the following key elements:

 Ships constructed (keel-laid) on or after 8th September 2017 need to comply with the
D-2 standard upon delivery.
 Existing ships should be D-2 compliant on the first IOPP renewal following entry into
force if:
 1. this survey is completed on or after 8th September 2019, or
2. a renewal IOPP survey is completed on or after 8th September 2014 but prior to 8th
September 2017.

Furthermore, the ship should be D-2 compliant on the second IOPP renewal survey following
entry into force, if the first renewal survey following the date of entry into force of the
Convention is completed prior to 8th September 2019, and if conditions 1 or 2 above are not
met. This means that a ship which is due for an IOPP renewal survey between 8th September
2017 and 8th September 2019 cannot decouple its IOPP survey for a second renewal before 8th
September 2019, without then having to comply with the D-2 standard.

Ships constructed before 8th September 2017, and delivered (including the initial IOPP survey)
after that date, need to comply with the D-2 standard at the first IOPP renewal survey after
delivery. It was also agreed that a ship to which the IOPP renewal survey does not apply
(generally ships less than 400 GT in size) shall be D-2 compliant no later than 8th September
2024. The agreement implies that vessels with the last IOPP renewal carried out before 8th
September 2014 have nothing to gain by decoupling, but instead actually risk losing up to 2
years on the D-2 implementation date by doing so.

Source: DNV GL
As of 8th September 2017, all vessels for which the convention is applicable, shall conduct
ballast water exchange in accordance with an approved BWM plan until compliance with the
D-2 regulation becomes mandatory.

US legislation remained unaffected by the outcome of MEPCs 71 and 72, since the US is not
a party to the IMO BWM Convention and has introduced its own legislation, with the State of
California due to impose even stricter requirements as of 2020.

Californian State Lands Commission Regulations

Regarding the Californian State Lands Commission (CSLC), a significant development was
made in July 2017, with the announcement that ships in Californian waters are authorised to
use USCG type-approved BWM systems or USCG-accepted Alternative Management Systems
(AMS).

However, the various formalities to be followed and forms to be submitted when discharging
treated ballast water in Californian ports should not be overlooked. In February 2018, the
London P&I Club reported a case where the CSLC sought to impose fines exceeding
US$100,000 despite determining that the ballast water after the exchange was free of invasive
species.

Early experience of the activities of the CSLC points to very thorough investigations being
made on board. Vessels arriving at ports in California from outside of the Pacific Coast Region
intending to de-ballast in California waters are currently required to conduct any ballast
exchanges in open seas. The location where each ballast tank exchange took place is plotted
precisely and substantial fines are imposed by the CSLC, rather than the US Coast Guard.

The state of California has its own Interim Performance Standards for BWM, which are due to
come into effect on 1st January 2020, and are stricter than those of the USCG.

USCG BWM Regulations

The US Coast Guard’s BWM
Regulations entered into force in
June 2012, applicable to new ships
constructed on or after 1st December
2013, and to existing ships after their
first dry-docking in 2014 or 2016.

Extensions may still be granted by the USCG under certain circumstances, although the
requirements for receiving one became significantly more stringent in 2017, following the
granting of USCG type-approvals to BWM systems in December 2016, and during the first
half of 2017.

Since then, no further USCG type-approvals have been granted, with the total number of
systems which have received approval still standing at 6. However, a record number of new
applications has been noted recently, with 10 new applications received between September
2017 and April 2018, all of which are currently under review by the USCG.

The US Coast Guard published various circulars over the course of the year to provide guidance
so as to ensure a more complete understanding of, and maximum compliance with, ballast
water management requirements.

In February 2018, the USCG issued guidelines on what to do if a ship is bound for a US port
and does not have a fully functioning BWM system on board. The following month saw the
publication of Navigation Inspection Circular 01-18, which provides a comprehensive
summary of all applicable regulations, making reference to the various compliance options for
the use of an AMS until reaching the compliance date for installing a USCG-approved BWM
system. In April the 2017 USCG Annual report was published, which provides important
insights into BWM compliance statistics, as presented below.

PSC BWM related deficiencies

During 2017, in US waters, a surprising 99% increase in compliance deficiencies relating to
BWM was reported, according to the Annual Report of the US Coast Guard. Despite the fact
that the number of BWM examinations conducted by the USCG in 2017 only increased by
almost 2%, the deficiencies increased from 110 in 2016 to 219 in 2017.

The majority of the deficiencies were related to logs/records, AMS, mandatory practices, BWM
plan, and the discharge of untreated ballast water into US waters, as presented below.

Source: USCG

Across the globe, during the first seven months of the IMO’s BWM Convention entering into
force, various deficiencies were identified by Port State Control (PSC). In the Paris MoU area,
PSC issued more than 70 deficiencies relating to BWM in the last four months of 2017.
Worldwide, more than 160 BWM-related deficiencies were identified up to March 2018, as
reported by DNV GL.

According to the findings of the classification society, the most frequent BWM-related
deficiencies detected by PSC are as follows:
 About one-third of deficiencies are for incorrectly completed or missing entries of all
ballast water movements (inboard, treatment, circulation, discharge), or because the
BWM record book, itself, is missing.
 About one-quarter of the deficiencies are the result of incorrect ballast water exchange;
either the ballast water was not exchanged at all, or the amount of water exchanged was
insufficient.
 In 25 cases, either the BWM plan was not approved, incorrect or missing. In this
respect, attention should be paid to the re-approval of the BWM plan after change of
flag.
 Also, lack of familiarization and training of the crew proved to have a significant impact
on the handling of ballast water.

DNV GL notes that for a BWM system

to operate reliably, it must be used
regularly and in accordance with the
manufacturer's specifications, as this
improves crew operational knowledge of
the system and its reliability. It is clear
that familiarisation with the
requirements of the IMO’s BWM
Convention and appropriate crew training is crucial. In addition, a BWM plan should include
routine shipboard operations and contingencies for those situations when compliance with the
BWM requirements is not possible.

A PSC BWM checklist could aid in the preparation for PSC inspections, ensuring compliance
and avoiding potential penalties. DNV GL as well as Danish Shipping have developed their
own checklists on the implementation of the BWM Convention, which are available online and
are free to download. The following tables contained in “The Little Blue Book on Ballast
Water” launched by Danish Shipping, depict the check list for compliance with D-1 and D-2
Standards of the IMO BWM Convention.

Source: Danish Shipping

To conclude, several challenges related to implementing the BWM Convention must be
overcome. It is clear that at this stage attention should be paid to crew training and
familiarisation, dealing with failures and addressing the matter of insufficient support from
manufacturers. However, the need to develop international, pragmatic and practical,
harmonised testing procedures for samples of treated ballast water cannot be overlooked. Last
but not least, sampling/testing of ballast water should not interfere with ships’ operations, and
shipowners should not be liable for the time and costs of sampling and testing, as BIMCO
notes.

(Sources: IMO, USCG, State of California, EU, DNV GL, ABS, ClassNK, Danish Shipping,
INTERCARGO, Maritime Cyprus, London P&I Club, West of England P&I Club, Britannia
P&I Club, BIMCO, Lloyd’s List, Safety 4 Sea, Marine Executive)

Collecting & Reporting CO2 Emissions

The first step towards the reduction of GHG emissions from shipping is the introduction of
requirements on collecting and analysing CO2 emission data, a process which has already
begun. EU Regulation 2015/757 on Monitoring, Reporting and Verification (MRV) of CO2
emissions and IMO’s Data Collection System (DCS) requirements might be separate schemes
but have a shared goal: reducing GHG emissions from ships.
Timeline & Differences
Over the course of the year, various deadlines related to EU MRV lapsed, signalling the
transition to implementation.
 August 2017 saw the submission of a monitoring plan, indicating the method chosen to
monitor and report CO2 emissions and other relevant information for each vessel falling
under the scope of the EU regulation to independent verifiers for verification.
 January 2018 marked the start of the first reporting period for EU MRV. Data collection
on a per voyage basis, using the verified monitoring plan will recur annually from 1
January to 31 December.

To comply with the requirements, companies for each vessel need to determine the CO2
emissions in accordance with any of the methods set out in Annex I of the Regulation, and
Monitor other relevant information (distance sailed, time spent at sea, cargo carried) in
accordance with the rules set out in Annex II of the Regulation. Upcoming key MRV dates are
as follows:
 As of 2019, and then every successive year, submission of the verified emissions report
to the Commission and to the authorities of the flag States will be required by 30 April.
 As of 2019, and then every successive year, the aggregated ship emission and efficiency
data will be published by 30 June 2019.
Below is a comprehensive timeline of key EU MRV and IMO DCS dates:

Source: DNV GL
IMO’s three-step approach is based on collecting and analysing fuel consumption data prior to
introducing legislation targeting GHG emissions reduction, as explained in the previous
chapter.

 On 1 March 2018, amendments to IMO’s MARPOL Annex VI on data collection

systems for the fuel oil consumption of ships, adopted by resolution MEPC.278(70),
entered into force.

Key implementation dates in the future for IMO DCS are the following:

 By 31 December 2018, the Ship Energy Efficiency Management Plan (SEEMP) will
need to include a description of the methodology which will be used to collect the data
and the processes to report the data to the ship's Flag State.
 1 January 2019 will mark the first reporting period for IMO DCS on fuel consumption.
 By 31 January 2020, and every successive year, a Fuel Oil Consumption report will be
required to be prepared and submitted to flag State/Recognised Organisation.
 By 31 May 2020, and every successive year, the flag State/ Recognised Organisation
will issue a Statement of Compliance for the Fuel Oil Consumption Report.
An all-encompassing comparison of the two schemes, prepared by DNV GL, is shown below:

Source: DNV GL
The IMO system has many similarities to the EU system, and may trigger an EU review of the
MRV regulation, conceivably leading to changes aimed at aligning the EU MRV with the IMO
systems. However, there are still uncertainties with respect to aligning the EU rules with the
IMO regulations. Whether, how and when the two regimes will converge still remains a
question mark. This process is complicated and is expected to take at least some years, most
probably, with both systems operating in parallel.

The industry has long encouraged alignment of the EU MRV Regulation with the IMO Data
DCS, ensuring global regulatory uniformity. The establishment of a single emissions collection
system on a global basis would minimise the additional burden, at the same time as achieving
the desired goal of reducing CO2 emissions from international shipping, in accordance with
the Paris Agreement.

Further guidance & ensuring

compliance
A number of guidance documents and
circulars have recently been published,
reflecting the industry’s efforts to
support the preparation for the new
requirements on the collection of emission
data and ensure smooth transition.

IMO has developed the following guidelines/circulars for ensuring the uniform and effective
implementation of its DCS regulations.

 2016 Guidelines for the development of a Ship Energy Efficiency Management Plan
(SEEMP) (resolution MEPC.282(70));
 2017 Guidelines for Administration Verification of Ship Fuel Oil Consumption Data
(resolution MEPC.292(71));
 2017 Guidelines for the Development and Management of the IMO Ship Fuel Oil
Consumption Database (resolution MEPC.293(71)); and
  MEPC circular on Submission of Data to the IMO Data Collection System of Fuel Oil
Consumption of Ships from a State Not Party to MARPOL Annex VI
(MEPC.1/Circ.871).

In addition, IMO Ship Fuel Oil Consumption Database has been launched as a new module
within the Global Integrated Shipping Information System (GISIS) platform, IMO’s
communication platform, and Member States now have access to the Database (Circular Letter
No.3827).

With only a few months before IMO DCS data collection starts, DNV GL has also compiled a
list of a few practical clarifications and recommendations. The practical advice on IMO DCS
prepared by DNV GL which is available on their website, analyses the reporting required from
ships to meet the regulatory and verification obligations in depth. Furthermore, in June 2018,
the classification society will launch a web application to ease the completion and submission
of SEEMP Part II.

Lloyd’s Register has also issued Guidance, which includes a template, on SEEMP Part
I and Part II. Additionally, to assist with the practical application of the IMO DCS regulation
and the relevant EU scheme (MRV), LR has prepared Guidance for shipowners and operators
on the EU MRV regulation and the IMO DCS.

It is highly advisable to start as early as possible, considering the means for collecting the fuel
oil consumption data which is most appropriate for each vessel and update the SEEMPs of
vessels to reflect this process. Following this, early submission of SEEMPs Part II to a
Recognised Organisation for approval is recommended.
With regard to the EU MRV, in late June 2017, the European Commission released guidance
on best practices. A series of documents prepared by experts, who identified guidance best
practices in the following areas relevant for the implementation of the MRV Shipping
Regulation, are available on the EU website:

 Preparation of monitoring plans by

companies;
 Monitoring and reporting of fuel
consumption, CO2 emissions and other
relevant parameters;
 Dealing with situations where the
accreditation is suspended or withdrawn
close to the planned issuing date of the
Document of Compliance (DOC) by the
verifier etc.

In August 2017, EMSA launched THETIS–MRV, the first of several steps in EU’s efforts to
include the maritime transport sector in its overall policy to reduce GHG emissions. THETIS-
MRV is a web-based application which enables companies to work together with accredited
verifiers to prepare monitoring plans in a voluntary module and, importantly, to release
emission reports and documents of compliance to the European Commission and relevant flag
state authorities using the mandatory module.

In case of non-compliance with the EU requirements penalties are small dissuasive and
proportionate sanctions, which gradually get stricter, with the possibility of prohibiting entry
to EU ports in case of failing to comply for two or more consecutive reporting periods.

(Sources: IMO, EU, EMSA, DNV GL, LR, ABS, INTERCARGO, IBIA, Standard-Club,
Tecnoveritas.net, Hellenic shipping news, World Maritime News)
Cyber Threats
Cyber security is a business priority for the maritime industry and still a key challenge.
Awareness of cyber threats is increasing. However, the industry needs to move from awareness
to action as the number of cyber incidents is on the rise.

In the past twelve months, the shipping industry has seen several incidents, ranging from data
breach at Clarksons in November 2017, to the damage done to the A.P. Møller-Maersk Group
by NotPetya malware in June 2017. This occurred only a month after the WannaCry major
ransomware attack. Maersk, which transports roughly 20% of the world’s cargo containers,
was among the hardest hit by NotPetya ransomware which cost it as much as $300 million.

According to the Be Cyber Aware At Sea initiative, a campaign which was created to tackle
maritime cyber security issues, the cost of ransomware attacks grew from £630 million in 2016
to £3.7 billion in 2017. However, 52% of all cyber-attacks worldwide in 2017 were non-
malware attacks. The research highlighted how ransomware attacks, along with malware and
non-malware attacks, have created a ‘vast attack surface’ for hackers who are becoming more
creative and persistent.

In 2017, I.H.S. Fairplay conducted a maritime cyber security survey, to which 284 people
responded. 34% of the respondents stated that their company had experienced a cyber-attack
in the previous 12 months. Of those attacks, the majority were ransomware and phishing
incidents; exactly the same sort of incidents affecting companies everywhere and not at all
specific to the maritime world.

A positive finding was that only 30% of those responding to the survey had no appointed
information security manager or department, reflecting that the majority of companies have a
resource able to respond and mitigate any attack. However, the survey showed that many
employees had not received any cyber awareness training. It should also be noted that 47%
believed that their organisation’s biggest
cyber vulnerability was the staff.

Training is key to mitigating

cybercrime. A robust workplace IT
security policy is the first step, but
that can only work when also
supported by training where
employees can see the risks through
demonstrations, simulations and
good teaching. In addition, there are
very simple changes that a company can make to ensure better security in the workplace. From
enforcing a zero tolerance on BYOD (Bring Your Own Device) (allowing the employees to
use their own computers, smartphones, or other devices for work purposes), to separating crew
and administrative or operational networks, blanking unused USB ports etc. As for employees
dealing with accounts, additional rules may be required to ensure the risks of phishing and
social engineering are reduced.

The mitigation methods for preventing and dealing with a cyber-attack, according to a former
US Federal Bureau of Investigation officer, is keeping controlled networks separate from
unsecure ones, patching software and training crew to prevent unintentional malware
infections. Having layered defences to isolate protected data from the internet, implementing
multi-factor authentication and retaining outside security experts to help plan for a cyber-attack
are required to ensure security.

The risks are not limited to the shore and naturally, extend to vessels as they are connected and
rely on computer and software. Electronic Chart Display and Information System (ECDIS),
Automatic Identification System (AIS) and Global Positioning Systems (GPS), cargo handling
and management systems, propulsion and machinery management systems and power control
and communications systems, are vital for the safe navigation of a vessel but vulnerable to
interference from cyber threats.

New guidance

As concerns about cyber risks are increasing, so do the efforts of the industry and governments
to educate and protect stakeholders from cyber threats. In December 2017, the UK government
issued “Future of the Sea: Cybersecurity”, a report examining the cybersecurity challenges
facing the maritime sector and their implications for the UK.

According to the report, potential technological developments within the maritime industry,
including advances in communication, improved sensing, intelligent and autonomous control
systems, merit special attention. These pose challenges within cyber security as they build over
existing digital technologies, allowing broader access to ships and vessels. They also make
potential software-dependent weaknesses easier to access for those who wish to exploit them.

A few months earlier, during London International Shipping

Week (LISW), the UK government had published, “Code of
practice: cyber security for ships”, providing actionable
advice on developing a cyber security assessment and plan
to manage risk, handling security breaches and incidents,
highlighting national and international standards used.

The US National Institute of Standards and Technology's Framework for Improving Critical
Infrastructure Cybersecurity, which is a voluntary framework consisting of standards,
guidelines, and best practices to manage cybersecurity-related risk, recently updated its
guidance issuing Version 1.1 of the Framework, inclusive for all kinds of organisations.

In July 2017, the second edition of the “Guidelines on Cyber Security Onboard Ships” was
released by the joint industry group, which is led by BIMCO, OCIMF, IUMI, CLIA, ICS,
INTERCARGO and INTERTANKO. The updated edition includes information on insurance
issues and how effectively to segregate networks, as well as new practical advice on managing
the ship to shore interface, and how to handle cyber security during port calls and when
communicating with the shore side among others.

In June 2017, IMO’s Maritime Safety

Committee, adopted Resolution
MSC.428(98) - Maritime Cyber Risk
Management in Safety Management Systems.
The resolution states that an approved safety
management system should take cyber risk
management into account in accordance with
the objectives and requirements of the ISM
Code, making cyber risk management
onboard ships mandatory as of 1 January 2021.

Subsequently, IMO issued MSC-FAL.1/Circ.3, “Guidelines on maritime cyber risk

management.” The guidelines set out the following actions that can be taken to support
effective cyber risk management:

1. Identify: Define the roles responsible for cyber risk management and identify the
systems, assets, data and capabilities that, if disrupted, pose risks to ship operations;
2. Protect: Implement risk control processes and measures, together with contingency
planning to protect against a cyber incident and to ensure continuity of shipping
operations;
3. Detect: Develop and implement processes and defences necessary to detect a cyber
incident in a timely manner;
4. Respond: Develop and implement activities and plans to provide resilience and to
restore the systems necessary for shipping operations or services which have been
halted due to a cyber incident;
 5. Recover: Identify how to back-up and restore the cyber systems necessary for shipping
operations which have been affected by a cyber incident.

In July 2017, USCG also published a draft copy of Navigation and Vessel Inspection Circular
entitled Guidelines for Addressing Cyber Risks at MTSA (Maritime Transportation Security
Act) Regulated Facilities. The draft circular provides guidance on how to develop and
implement measures and activities for effective self-governance of cyber vulnerabilities that
shipowners and operators may find useful.

In line with IMO, the US Coast Guard, has

announced its intention to scrutinise cyber
security practices of companies, requiring
a written cyber safety plan by 2021.

A few months ago Singapore’s Marine Port

Authority announced its plans to set up a
maritime cyber security centre, aiming to
drive the protection of critical information structures. By the end of the year, the authority will
establish a 24/7 Maritime Security Operation Centre to aid in early detection, monitoring,
analysis and response to potential cyber-attacks.

Overall, establishing cyber risk management onboard ships as a mandatory requirement as of

January 2021, was among the most significant developments which is expected to drive
progress in addressing cyber risks. The efforts of the maritime industry and governments to
mitigate cyber risks, will be further strengthened through IMO’s decision. Action is required
more than ever before by companies and manufacturers, which need to invest in necessary
measures such as system enhancements, process changes or people development to be cyber
resilient. Businesses need more prevention and preparation to respond to attacks that occur
while addressing cyber security should start with the senior management of a company. Thus,
the shipping industry has to go even further, for its own security.

(Sources: IMO, USCG, US Department of Transport Maritime Administration, UK Gov.,

Singapore Maritime Port Authority, ICS, GARD, TradeWinds, Safety 4 Sea, Seatrade
Maritime, Maritime Executive, Maritime Cyprus, Marinemec, News deeply)
Piracy

According to the International Chamber of Commerce’s International Maritime Bureau (IMB),

180 incidents of piracy and armed robbery against ships were reported in 2017, the lowest
annual number of incidents since 1995, when 188 reports were received. Reported incidents in
2017 were specified as 136 vessels boarded, 22 attempted attacks, 16 vessels fired upon and 6
vessels hijacked.

Whilst the continued decline in overall numbers is welcome, it should be noted that the effects
on crew and their safety continue to be a cause of concern. Three crewmembers were killed in
2017 and 6 were injured. In 15 separate incidents, 91 crewmembers were taken hostage; 75
were kidnapped from their vessels in 13 other incidents.

The managing countries whose vessels were attacked 12 times or more in 2017 were Singapore
with 56 attacks, followed by Germany and Greece, both with 22 attacks. The chart below shows
the type of vessel most frequently attacked in 2017, led by Bulk Carriers with 38 attacks,
followed by Product Tankers and Containers, with 29 and 23 attacks respectively.

Number of attacks in 2017 per ship type

Source: IMB

Looking at the geographical location of the incidents, the Gulf of Guinea and the waters around
Nigeria remain piracy hotspots. Although the number of attacks was down in 2017 compared
to 2016, and the Nigerian authorities have prevented a number of incidents from escalating,
this area still poses a significant threat to seafarers. This is also reflected in the number of
incidents reported to the IMB during the first quarter of 2018, which stands at 29, accounting
for more than 40% of the global total figure.

The Gulf of Aden experienced a marked rise

in piracy incidents, with attacks doubling
last year compared to the previous year. This
increase, along with the sophisticated nature
of the incidents, demonstrates that Somali
pirates retain the capability and intent to
launch attacks against merchant vessels
hundreds of miles from their coastline.
Although there have been fewer incidents in
the first months of 2018, operations for
protection against piracy in the area need to
be maintained to ensure this trend continues.

Developments in Asia were mixed, with both positive and negative outcomes for 2017. Overall,
kidnap-for-ransom incidents in Asia decreased compared to 2016. In the Philippines, however,
the number of reported incidents more than doubled, with the majority of these being low-level
attacks on anchored vessels. Indonesia saw a slight decrease in piracy incidents in 2017 and
Indonesian Marine Police patrols continued to be effective in the country’s 10 designated safe
anchorages. However, the current situation appears less secure, with a significantly increased
number of incidents reported during the first quarter of 2018.

Incidents in the South American and Caribbean regions increased by 160%, in 2017, reflecting
the opportunistic nature of criminals in these regions. A matter of great concern for South
America is Venezuela, which experienced a significant increase in piracy figures in both 2017
and the first quarter of 2018. The reported incidents rose from 5 in 2016 to 12 in 2017, mainly
at anchorages in the ports of Puerto Jose and Puerto la Cruz. The number of incidents in
Colombia also increased slightly in 2017. A positive development for the continent was Peru,
with only 2 reported incidents in 2017, significantly down from 11 in 2016.
The locations with the highest number of attacks in 2017 are shown in the graph below:

Source: IMB

West Africa
Between January and March 2018, more than 40% of the total global incidents occurred in the
Gulf of Guinea, according to IMB, and almost all crew kidnappings and hostages took place in
this region. Nigeria remains a piracy hotspot accounting for all of the 4 ship hijackings and 8
of the 11 ships fired upon worldwide in 2018. Also worrying is the increasing number of actual
versus attempted attacks; actual attacks reached 22 in Q1 2018 compared to 7 in Q1 2017.

According to Oceans Beyond Piracy (OMB), although the number of seafarers affected in West
Africa were slightly down in 2017, there were 3 more successful kidnappings than in 2016.
100 seafarers were taken hostage, and at least 2 were killed, representing a significant increase
in the level of violence. In addition, the number of armed robbery incidents increased in 2017.
2016's geographic patterns were seen again in 2017, with the overwhelming majority of attacks
happening off the Niger Delta. No attacks were recorded south of the Equator. In what may be
a new trend, a series of attacks took place on anchored ships in ports along the western coast
of Africa, from Sierra Leone to Cape Verde.
 Mapping of attacks in West Africa in 2017

Source: OBP
Regional navies reported an increase in patrol days and maritime enforcement agencies
recorded a 27% increase in response rates. However, piracy continues to pose a threat in the
Gulf of Guinea despite a broad array of countermeasures implemented by coastal states and
maritime security companies. In conclusion, ensuring compliance with the Best Management
Practices (BMP4) and related guidance when transiting these waters is essential.

East Africa
The IMB figures on attacks reported in East Africa during the
first quarter of 2018 are lower than the same period in 2017.
However, 2017 overall saw a dramatic increase in the number of
incidents in the Western Indian Ocean Region, recording a surge
of 100% from 2016. The number of seafarers affected by
incidents of piracy and armed robbery reached 1,102 in 2017, up
from 545 in 2016, according to OBP.
Source: OBP
In 2017, for the first time in two years, incidents of hijacking and kidnapping at sea were
recorded in the region. The short surge in hijacking attacks in the first quarter of 2017 is
attributable to several factors, including the continued intent of pirate action groups to launch
attacks and the increased opportunity to do so, due to lessened adherence to ship self-protection
measures, including Best Management Practices (BMP4). Independent deployers represented
the primary naval presence in the region, but both coalition forces and independent deployers
decreased their days of operation, or days on station, in 2017.

Mapping of attacks in East Africa in 2017

Source: OBP
Spillover from the political conflict in Yemen continued to affect the maritime space in the
region, with several incidents occurring off the Yemeni coast. The European Union Naval
Force and the Combined Maritime Forces advised of a range of threats other than piracy due
to the Yemeni conflict, such as sea mines and water-borne improvised explosive devices. In
January, in response to these threats, BIMCO, ICS and INTERTANKO published interim
guidance on maritime security in the southern Red Sea and Bab al-Mandeb, providing practical
guidance and insight on the new threat patterns in the area.

The array of threats in this region makes clear the need for a comprehensive maritime security
approach. The long-term solution for piracy includes the need to establish a secure maritime
space. In conclusion, when transiting these waters, IMB urges adherence to the latest Best
Management Practices guidelines while being cautious not to mistake fishermen for pirates in
some heavy fishing areas.
Asia
According to the Regional Cooperation Agreement on Combating Piracy and Armed Robbery
against Ships in Asia (ReCAAP), a total of 101 incidents comprising 89 actual and 12
attempted incidents were reported in 2017, compared to 85 actual incidents in 2016. Overall,
kidnapping declined significantly from 22 incidents in 2016 to just 4 incidents in 2017, as
reported by OBP.

Of the 101 total incidents reported in 2017, 68 occurred onboard ships while at anchor/berth,
and 33 onboard ships while underway, according to OBP. This follows past trends where the
majority of the incidents reported in Asia involved ships at anchor/berth.

The number of incidents onboard ships anchored at ports and anchorages increased in
Bangladesh (Chittagong) and the Philippines (Manila and Batangas). There were also
increased incidents onboard ships anchored and underway in the South China Sea and ships
underway in the Singapore Strait. However, there was a decrease in incidents at ports and
anchorages in India, Malaysia and Vietnam compared to 2016. The decrease in overall
incidents can be attributed, at least in part, to the actions of local military and law enforcement.
In total, regional law enforcement responded to 27 of the 99 incidents, which is considered a
notable improvement over previous statistics.

Mapping of incidents in Asia in 2017

Source: ReCAAP
The situation in Philippines continues to be of concern, with a total of 22 incidents reported
last year, according to ReCAAP. 12 incidents were reported in the South China Sea in 2017,
compared to 5 in 2016. The number of incidents in the Straits of Malacca and Singapore
increased to 9 in 2017, from 2 in 2016. By contrast, 33 incidents were reported in Indonesia in
2017, marking the lowest number of incidents in the previous five years.

During the first quarter of 2018, a decrease was noted in the attacks reported to IMB in South
East Asia, with the exception of Indonesia where 9 incidents were noted. China and Vietnam
saw a slightly higher figure compared to the past two years. In respect of armed robbery,
robbers continue to target ships whilst underway or whilst at anchor, especially during the
night.

Overall, although the number of piracy attacks has dropped substantially in Asia, IMB advises
vessels to continue maintaining anti-piracy watches when transiting these waters.

South America
For the first three months of 2018, incidents in Venezuela and Guyana increased significantly,
according to IMB, reflecting the further economic deterioration and instability in these
countries.

Mapping of attacks in South America in 2017

Source: OBP
In 2017, OBP recorded 71 incidents in South America and the Caribbean, a 163% increase
compared to 2016. Anchorages in Venezuela, Saint Vincent and the Grenadines, Colombia,
and St. Lucia represented incident hotspots during 2017. Anchorage crime against yachts
continues as the most pressing issue as these incidents made up roughly 59% of all cases in
2017.

(Sources: OBP, IMB, ReCAAP, INTERTANKO, ICS, BIMCO, GARD, Standard-Club)

Ship Recycling

Shipbreaking, among the most vital yet criticised sectors, faced few regulatory developments
over the course of a year. IMO’s Hong Kong International Convention (HKC) for the Safe and
Environmentally Sound Recycling of Ships, which was adopted in 2009, has yet to achieve its
entry-into-force criteria. According to IMO, as of 16 April 2018, only Norway, Congo, France,
Belgium, Panama and Denmark had acceded to the Convention.

However, Japan and India have begun the process of ratifying the Hong Kong Convention, in
a major boost to attempts to bring the regulation into force globally. To enter into force, the
HKC needs to be ratified by 15 states representing 40% of the world fleet and by ship recycling
countries representing a proportion of global shipbreaking capacity. Among the ship recycling
nations, so far only Japan, India and Turkey are in the process of bringing the HKC into law,
with China expected to follow. Those three countries alone would most likely represent enough
shipbreaking capacity to bring the convention into force.
Ratification and enforcement of the Hong Kong Convention is considered a matter of urgency
by the industry. In a joint submission to IMO's 30th session in November 2017, the
International Chamber of Shipping and international shipping law association Comite Maritime
International urged member states to push on with ratification of key conventions, including
the HKC, which are still well short of their entry-into-force requirement.

The requirements of IMO’s HKC are also being brought forward by the European Regulation
on Ship Recycling, with the aim of contributing to its global entry into force. EU’s Ship
Recycling Regulation, brought into force at the end of 2013, released its first version of the
European List of approved yards in December 2016. As for the UK, after its withdrawal from
the European Union, the country will be exempt from the EU Ship Recycling Regulation. The
European Commission in a recent statement clarified that the regulation will not involve the
UK, following the planned Brexit day in March 2019.

2018 is expected to see the publication of the updated EU list of approved ship recycling
facilities. From this day onwards, large commercial seagoing vessels flying the flag of an EU
Member State may be recycled only in safe ship recycling facilities included in EU’s list. The
list will be an important reference point for sustainable ship recycling, updated in the future
through Implementing Acts to add more compliant facilities or to remove facilities which have
ceased to comply.
Ship Recycling Locations in 2017
Concerns regarding the capacity of the EU approved
yards still remain, as the current list includes a mere
18 yards, which are not enough to cope with
demolishing the EU-registered fleet. Demolition
specialists have highlighted the global dependence on
Asian yards for scrapping large vessels warning that,
if the matter is not addressed, some areas of the world
could become dumping grounds where old ships are
left to rust. Source: NGO Shipbreaking Platform

The approved yards are based in Europe while applications from India, Turkey and China are
currently under consideration, with the main opposition to granting an approval stemming from
the use of the beaching method. Each year, hundreds of large ships are dismantled on the
beaches of South Asia.
In 2017, according to NGO shipbreaking platform, a total of 835 vessels, accounting for 20,7
million GT, were dismantled globally. 543 of them, accounting for 16,6 million GT, were
beached in Bangladesh, India and Pakistan, representing 80,3% of all tonnage dismantled
globally.

India scrapped the highest number of ships in 2017, but Bangladesh dismantled the most in
terms of GT, indicating that it was the preferred destination for larger vessels. On the other
hand, EU ship recycling yards mainly dismantled small-size vessels in 2017.

Sources: NGO Shipbreaking Platform

India, Bangladesh and Pakistan had a decrease in the number of vessels and GT scrapped in
2017, compared to 2016. China had an increase in the number of ships but a clear decrease in
GT recycled in 2016. Turkey, EU and RoW scrapped more vessels in 2017, compared to 2016.

Number of Ships & GT recycled 2014-2017

Sources: NGO Shipbreaking Platform

The practice of beaching has caused dozens of fatalities among workers, and significant
pollution to the surrounding environment and populations. Accidents in Bangladesh
shipbreaking yards are alarmingly frequent. In Pakistan, a yard in Gadani was sealed off in
November 2017, due to a fire caused by the same floating oil production tanker that had
exploded last year, taking a high toll. Fortunately, this time there have been no reported
fatalities or injuries as a result of the fire.
Naturally, such reports have attracted strong media attention and reaction from organisations.
In January 2018, the Norwegian Central Bank announced its decision to exclude 4 shipping
companies from the Government Pension Fund Global. The exclusion was based on the
companies’ poor management of their end-of-life ships and their sale for dangerous
shipbreaking on the beaches of Gadani, Pakistan and Chittagong, Bangladesh.

However, it should be noted that there

seem to be many ongoing improvement
initiatives, offering hope for a more
optimistic future. In India, 66 yards now
have certificates from classification
societies attesting that they meet standards
laid down under the HKC. Shree Ram
Group yard in India has gone further,
investing $15 million to bring its facilities
up to a standard that it hopes will bring it
certification under the new European rules.

In Bangladesh, at least 4 yards are investing to upgrade their facilities. Recently, a recycling
yard in Chittagong, Bangladesh, has received a Statement of Compliance with HKC granted
by RINA classification society. The Statement of Compliance is an important development
towards a more sustainable ship recycling industry, raising the bar in the standards in
Bangladesh. What is more, in January 2018, the second phase of an IMO-implemented project
to enhance safe and environmentally sound ship recycling in Bangladesh begun, following a
$1.1 million funding agreement with Norway.

Overall, the positive progressive actions which have been taken by many recycling facilities
worldwide cannot be overlooked. Nevertheless, the road to ensuring all shipbreaking facilities
globally provide a working environment where employees can work without risk to their
health, safety or welfare and maintain high environmental standards, still appears long.
Ratification of IMO’s HKC can only raise the ship recycling bar higher, with a unified and
international approach paving the way forward.

(Sources: IMO, EU, ClassNK, Shipbreaking Platform, TradeWinds, Worldmaritimenews)

Shipbuilding

The order book marked a steady upward movement in 2017. However, 2017, overall, was
another difficult year for the shipbuilding industry, with most shipyards continuing to feel the
pressure. A number of sectors saw improved contracting activity, with deliveries remaining
relatively firm. According to Clarksons Research, 902 orders of 72.8m DWT were reported
globally, a sign of improvement from record lows in 2016, when only 604 vessels were ordered.
Greeks once more topped the buyer and seller charts, followed by the Chinese, while German
owners were the biggest sellers of containerships.

It should be noted however that 2017 was merely the third year in the past twenty in which less
than 1,000 new orders were reported. The shipping markets are renowned for their volatility
but currently there is one aspect of the industry where the last cycle has taken 20 years. The
orderbook expressed as a percentage of the existing fleet, a widely used statistic, is back where
it was twenty years ago. At the start of April 2018 the number of ships on order stood equivalent
to 3.7% of the existing fleet, the lowest figure on record over the last 20 years, whilst in GT
capacity terms, the orderbook stood at 10.8% of the existing fleet.
In 2017, bulkcarrier orders saw the biggest uptick, with 286 vessels contracted, although this
remained subdued compared to historical levels. Driven by large crude units, tanker contracting
increased to 271 vessels, but fell well below the level of ordering in 2015. Meanwhile, the
boxship newbuilding market showed fewer signs of improvement and just 108 units were
ordered. Gas carrier and ‘ship-shaped’ offshore ordering was also limited, with just 39 and 37
contracts reported respectively in 2017.

The orderbook began to stabilise towards the end of 2017 but declined 13% in dwt. terms in
the full year, to reach 3,158 units of 196.9m dwt. This marks the first time the orderbook has
fallen below 200m dwt since 2004, accompanied by a decline in the number of ‘active’ yards
(those with at least one vessel of 1,000+ GT on order) from 440 at the start of 2017 to 360 as
of start 2018.

Although contracting remained limited in 2017, shipbuilders continued to deliver a steady

volume of tonnage. Total shipyard output reached 97.0m dwt, although ‘non-delivery’ of the
scheduled start year orderbook was still significant at 30% in dwt terms. However, given the
smaller orderbook, deliveries are currently projected to decline by around 20% in tonnage
terms in 2018.
Yards outlook

In 2017 China returned to the top of the output charts, with a 39% share of deliveries, followed
by Korea (32%) and Japan (21%). In Europe, the strength of cruise newbuilding continued to
benefit European shipbuilders. This sector accounted for 38% of global estimated contract
investment in 2017 in value terms, though many yards operating outside of the cruise sector
struggled.

Chinese yards

Chinese builders won the largest share of orders, picking up the majority of bulker orders and
taking 9.2m CGT in total. What is more, China’s government is planning to combine its two
biggest shipbuilders to create an industrial giant that would dwarf its South Korean rivals.
China’s cabinet has given preliminary approval to merge China State Shipbuilding
Corp. with China Shipbuilding Industry Corp. While the two are engaged in designing and
building the Chinese navy’s fleet of aircraft carriers, CSSC also has plans to design and build
cruise ships.

Korean yards

As for Korean yards, ordering improved in 2017 but remained limited at 6.4m CGT. In 2018,
the Korean shipbuilding industry is continuing to land orders, with a recovery in the Korean
shipbuilders’ business performances expected after the second half of the year. In particular,
Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering surpassed one
trillion Won in cumulative orders, respectively, for the current year. Hyundai Heavy Industries
Co. swung to a net loss in the first quarter of 2018 amid decreased work volume across all
segments. The result was largely impacted by impairment losses from the shutdown of Gunsan
dockyard, Green Energy business as well as costs from cancelled vessels and a foreign
exchange loss. However, Hyundai is now expecting to see more new orders with improved
vessel prices.

Japanese yards

Contracting at Japanese yards reached 2.0m CGT in 2017. However, competition from Chinese
and South Korean yards has led to a number of alliances and operational changes in Japan over
the course of the year. In December 2017, Kawasaki Heavy Industries indicated it will step up
its commercial shipbuilding operations in China and reduce production in Japan. Specifically,
the yard will boost capacity at a facility in Dalian that is jointly operated with COSCO. In
January 2018, Japanese shipbuilder, Imabari Shipbuilding, announced acquisition of domestic
rival, Minaminippon Shipbuilding, seeking to boost production capacity and international
competitiveness. More recently, Japan's Mitsui Engineering & Shipbuilding and Tsuneishi
Shipbuilding have concluded an agreement on commercial ship building which involves
collaborating on design, development capacity and cost competitiveness.

Overall, despite the moderate upward trend in orders in 2017, shipbuilders still face challenging
times following multiple years of weak contracting and are in need of further positive changes
to make the return to prosperous times. On a positive note, with a more optimistic global
economic outlook, the reinforcement of environmental regulations and rising oil prices, order
volume is expected to exceed deliveries in three years’ time.
(Sources: Clarksons Research, Bloomberg, TradeWinds, Hellenic Shipping News, World
Maritime News, Marine Executive)

Standards of Training, Certification and

Watch keeping for Seafarers
The key to maintaining a safe shipping environment and keeping our oceans clean, lies in all
seafarers across the world observing high standards of competence and professionalism in the
duties they perform on-board.

The International Convention on Standards

of Training, Certification and Watch
keeping for Seafarers 1978, as amended in
1995 and again in 2010, sets those standards,
governs the award of certificates and
controls watch keeping arrangements. Its
provisions not only apply to seafarers, but
also to shipowners, training establishments
and national maritime administrations.

The 2010-amended STCW Convention came into force on 1 January 2012, with a five year
transitional period up to 1 January 2017, to allow for a phased in implementation of the
provisions.

With concerns raised by the industry over the level of preparedness of maritime administrations
for this major transition, IMO had issued guidance to Port State Control inspection regimes,
requesting that they apply a pragmatic approach until 1 July 2017. For the most part, the
changeover appears to have gone smoothly with little evidence of serious problems, according
to ICS.
The new STCW provisions include updated seafarer competences, as well as changes to some
seafarer grades and certification requirements. One new requirement that should not be
overlooked according to ICS, is that trainee ratings, including the new STCW grades of Able
Seafarer (Deck) and Able Seafarer (Engine), now need to provide documentary evidence of
structured on board training that has been recorded in an approved training record book.
Therefore, in September 2017, ICS published a revised version of its Personal Training and
Service Record Book for qualified seafarers, which has been fully updated to take account of
the current STCW regime, as well as relevant requirements under the ILO Maritime Labour
Convention.

October 2017 saw a change in respect of the effective date for the Polar Code amendments to
STCW, which were adopted back in November 2016. The new STCW amendments for the
training and qualifications of masters and deck officers on ships operating in Polar Waters will
take effect on 1 July 2018, instead of 1 January 2018. The amendments include transitional
provisions which will allow seafarers who began their approved seagoing service in Polar
Waters before 1 July 2018, to meet the alternative basic training or advanced requirements by
1 July 2020.

Overall, despite the fact that the STCW Convention has set the international benchmark for the
training and education of seafarers, it seems that we still have a long way to go as accidents
continue to occur and the human element is still responsible for most incidents on board ships.
This highlights the need for effective standards of training, which constitute the foundation of
a safe and secure shipping industry.

“While compliance with its standards is

essential for serving on board ships, the
skills and competence of seafarers, and
indeed, the human element ashore, can only
be adequately underpinned, updated and
maintained through effective maritime
education and training”, as was stated by
Mr. Sekimizu, previous Secretary General
of the IMO.

(Sources: IMO, ICS, DNV GL, ITF Global, Standard Club)

Sanctions against Iran
US sanctions have become a swiftly changing picture, with the recent withdrawal of the US
from the landmark 2015 Iran nuclear deal, a major development among other sanctions
imposed by the country. The new state of affairs is likely to have significant ramifications for
maritime trade with Iran and the insurance of such trade.

In October 2017, US President Donald Trump refused to recertify that Iran was complying with
the Joint Comprehensive Plan of Action (JCPOA), signed between Iran and China, France,
Russia, the UK, US, Germany and the European Union, despite the fact that the International
Atomic Energy Agency had confirmed that Iran is honouring its commitments under the
JCPOA.

Under US law, President Trump has to certify to the US Congress, every 90 days, that Iran is
complying with the JCPOA. Prior to October, he had issued 2 such certifications, in April and
June 2017. The US Congress had 60 days to decide whether to re-impose Iranian sanctions.
This deadline passed with Congress taking no formal action on the matter.

Subsequently, on 8 May 2018, President Trump announced that the US is terminating its
participation in the JCPOA. The President directed the US administration immediately to begin
the process of re-imposing US nuclear-related secondary sanctions which had been lifted under
the JCPOA and which apply to non-US persons and entities. Shortly after the President’s
announcement, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC)
issued a statement, as well as a set of FAQs relating to the re-imposition of US secondary
sanctions measures.

In particular, two separate winding down periods have been established, one for 90 days, up to
6 August 2018, and another for 180 days, up to 4 November 2018, to enable non-US persons
and entities to wind down transactions involving Iran, entered into prior to 8 May 2018.

The 90-day winding down period applies to the sale or supply to/from Iran of graphite, raw or
semi-finished metals such as aluminium and steel, coal and software for integrating industrial
processes. The 180-day winding down period applies to the purchase of petroleum or petroleum
products from Iran and the provision of insurance/reinsurance.

In addition, the US plans to revoke specific and general licenses issued in connection with
sanctions relief provided under the JCPOA, again subject to wind down periods, including
General License H, which authorised US-owned or controlled foreign entities to engage in
certain activities involving Iran.

Overall, on JCPOA implementation day in

January 2016, hundreds of individuals and entities
were removed from the US sanctions lists. These
parties will now be relisted no later than 5 November
2018. After their relisting, most of these parties will be
subject to secondary sanctions. The importance of
secondary sanctions is that they effectively have extra-territorial
reach so that they will affect non-US persons and entities.

It should be noted that OFAC has informally indicated that penalties could be imposed on
sanctionable activities entered into after 8 May 2018, even if they are concluded within the
applicable wind-down period.

According to the International Group of P & I Clubs (IG), a potential ramification of the US
withdrawal from JCPOA regarding calls at Iranian ports could be that, in the event of ship
detention, P&I Clubs could encounter difficulty putting up security in the context of any claim
with an Iran nexus. This is particularly relevant if security is required for a major claim relating
to an Iranian port, since the US will re-impose sanctions against Iran’s port operators. However,
the full ramifications of the re-imposition of secondary sanctions against Iranian ports are still
unclear.

A full assessment of the likely impact of the US withdrawal will only be possible following
receipt of clarification of the position of the remaining JCPOA partners, who have reaffirmed
their support for the JCPOA, together with further clarification from OFAC in relation to the
management of the wind-down periods envisaged under the decision.

Due to the uncertainty surrounding

the application of the re-imposed
secondary sanctions against Iranian
ports, caution should be exercised in
respect of all calls at Iranian ports,
especially if they are made under
post-8 May contracts and under all
transactions after November 4, 2018.

Due diligence is required to ensure that neither the cargoes carried nor the parties involved in
the transactions offend US sanctions, as recommended by the IG of P&I Clubs, noting that
there is no clear guidance from the US authorities so far on the issue of routine transactions
with Iranian port operators.

(Sources: IG of P&I Clubs, Shipowners Club, Standard-Club, London P&I Club, Freehill
Hogan & Mahar LLP)

Sanctions against Venezuela

The US sanctions landscape continues to change, with sanctions against Venezuela, causing
currency dilemmas for vessels proceeding to the country’s ports.

In August 2017, US President Trump issued Executive Order 13808, imposing additional
sanctions with respect to the situation in Venezuela. According to Freehill Hogan & Mahar
LLP, E.O. 13808 was designed to put pressure on the Venezuelan government by prohibiting
US persons, or anyone within the US, from extending new debt, with a maturity greater than
30 days, to the Venezuelan government or to Petroleos de Venezuela S.A. (“PDVSA”), with a
maturity greater than 90 days. The E.O. also prohibited US persons or those in the US from
dealings in bonds or securities issued by the Government of Venezuela or from paying any
dividend to the Government of Venezuela.

On January 9, 2018, President Maduro of Venezuela announced that the country would issue
its own crypto-currency, the Petro, which would be backed by its petroleum reserves. This
move was designed to minimise the impact of the US prohibition on the extension of new debt
and to create a new means of payment for goods and services.

In response, in early March, President Trump issued Executive Order 13827, which prohibits
US persons and persons within the US from providing financing for or engaging in any dealings
in “any digital currency, digital coin or digital token,” including the Petro, issued by Venezuela
on or after January 9, 2018.

Subsequently, on March 23rd, the National Institute

of Aquatic Spaces (INEA), which acts as the
Venezuelan maritime authority, issued a circular to
shipping agencies in Venezuela, advising that
payment for services rendered to foreign flag
vessels must thereafter be paid in Petros.
Additionally, this mechanism could be extended to
port services payable to Bolipuertos S.A., running the country´s main public ports. This means
that foreign shipowners are required to pay for services such as pilotage and towage in Petros.

It should be noted that the United States Office of Foreign Assets Control (OFAC) have
informally indicated that causing a US bank to remit funds to an agent to pay in Petros would
amount to a breach of sanctions. Thus, non-US shipowners calling at Venezuelan ports could
be in violation of the sanctions, as funds (often in US$) remitted to ship agents to pay port
charges and disbursements may include sums, which will be used by the local agents to
purchase Petros.
However, a second circular issued later by INEA announced that no payments in “Petros” had
been implemented so far, and that this will be done only when technical aspects are covered
for which the users will be duly informed. Therefore, payment for these services for foreign
flag vessels is still working in US$ or Bs, although it has been announced that payments in
US$ would be shifted to Euros shortly. In any case, it has been revealed that INEA intends to
collect an initial 10% of the payment for port services in Petros and the rest in foreign currency.

In the wake of E.O. 13827 and the INEA

Circulars, Freehill Hogan & Mahar
anticipates that US banks will scrutinise all
financial transactions relating to Venezuela
with great care, particularly those involving
shipping, with a view to ensure that any
remittances made through the US financial
system in connection with Venezuelan
trade are not ultimately being used to
purchase Petros.

More recently, on 18 May 2018, OFAC added four further Venezuelan individuals to its
"Special Designated Nationals" (SDN) list. According to Standard Club, the effect of these
designations is that the assets of the designated individuals concerned are blocked, and US
persons are generally prohibited from dealing with them.

A few days later, President Trump issued a new Executive Order imposing further economic
sanctions against Venezuela. The Executive Order prohibits all transactions related to:

1. the purchase of any debt owed to the Government of Venezuela, including accounts
receivable;
2. any debt owed to the Government of Venezuela that is pledged as collateral after the
effective date of the order, including accounts receivable; and
3. the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela
of any equity interest in any entity in which the Government of Venezuela has a 50%
or greater ownership interest.
The prohibition applies to US persons and all transactions within the US. The prohibition
extends to "financing" or "any other dealings" with regard to all such transactions.

In conclusion, the latest sanctions against Venezuela provide further evidence of the Trump
administration's combative approach to the Maduro regime in Venezuela, and its willingness
to impose further economic sanctions against this regime, which it considers, in the words of
the Executive Order, to be responsible for a "deepening humanitarian and public health crisis"
at the expense of the Venezuelan people.

While the latest Executive Order mainly targets financial transactions, the sanctions and
addition of further Venezuelan individuals to the SDN list serve as a reminder of the
substantial sanctions risk involved in Venezuelan-linked trade. Thus, carrying out necessary
commercial due diligence in respect of Venezuelan trade, in order to ensure that the relevant
trade is not sanctioned, is deemed essential.

(Sources: Standard Club, North of England P&I Club, Britannia P&I Club, London P&I Club,
UK P&I Club, Freehill Hogan & Mahar LLP)

Panama Canal
In 2017, the expanded Panama Canal drew the attention of the maritime community by
strengthening the competitiveness of this route.

According to the Canal’s Administrator, Mr. Jorge Quijano, the number and size of the ships
that transit has increased and continued growth is expected in the short term. The daily transit
average is currently around five vessels, higher than estimated figures. Cargo reached a record
figure of 403.8 million PC/UMS tons (Panama Canal Universal Measurement System), an
increase of 22.2% compared to fiscal year 2016.
 Source: Panama Canal

The new cargo record is attributable to the strong performance of the container, liquid bulk,
dry bulk and passenger vessel segments, which had increases in billable tons of 19%, 54.5%,
20.2%, and 13.3%, respectively. As a result, for fiscal year 2017, the Canal obtained total cargo
revenues of 2,886 million Panamanian Balboas (PAB), 383 million PAB more than the
previous fiscal year. Total toll revenues were 2,707 million PAB.

Source: Panama Canal

According to Mr. Quijano, the revenue increase was achieved in a market influenced by
purchases and acquisitions of shipping lines, new deals between operators, and alliances
between shipping companies, all of which resulted in a change to the outlook of liner services
transiting the Panama Canal.

Panama Canal New Tolls

The first toll changes since the opening of the Canal’s new locks in June 2016 were introduced
in October 2017. The new tolls were set in response to the consolidation of the containership
industry and global restructuring of operating alliances. The move aims to maximise revenue
while keeping the waterway competitive with alternatives such as the Suez Canal and
intermodal routings via US West Coast ports.

The Panama Canal Authority deemed it necessary to provide additional incentives to the
containership segment, the largest user of the expanded Canal, to revise the tolls for liquefied
petroleum gas and liquefied natural gas vessels, and to reclassify container and breakbulk
vessels. A decrease in the toll for boxships using the neo-panamax locks for southbound transits
was implemented while an increase in the cost of LPG and LNG carrier transits was introduced.

Panama’s tolls are based on a complex formula reflecting a ship’s type, size, and cargo load.
The new containership formula reduces backhaul tolls for new panamax ships that were at least
70 % full on their headhaul voyage through the Canal. To qualify for the discount, ships must
return through the Canal within 28 days, excluding time at anchorage or in Panamanian ports.
Under the new toll structure, a 9,000-TEU ship carrying 6,500 loaded TEU, or 72.2% of
capacity, is expected to pay a regular $677,500 toll for its headhaul voyage. That same ship,
carrying 4,000 TEU on its backhaul, is expected to pay $550,000, a 6.8% reduction from the
previous $590,000 toll.

The new toll structure reduces rates by slightly more than 8% for laden container-breakbulk
vessels, which will be reclassified into a general cargo category with lower tolls.

A new two-tier toll structure for LPG carriers is now in place. For neo-panamax VLGCs laden
with 82,000 cubic metres (cbm) of LPG, the cost of a transit is approximately $248,500. For
narrower panamax VLGCs, which can carry about 75,000 cbm of cargo, the cost of a transit is
around $209,500. Costs will also increase for LPG carriers travelling in ballast.

For LNG carriers laden with a cargo of 160,000-cbm, the toll is now $408,000, compared to
$355,000 previously.

Other Panama Canal developments include the signing of a Mutual Cooperation Agreement
between the Panama Canal Authority and Busan Port Authority (South Korea) to maintain a
collaborative alliance aimed at promoting new business for the maritime route between the east
coast of the United States and Asia, the Panama Canal and Busan Port. In March, a
Memorandum of Understanding was signed between the Panama Canal Authority and
Aprosoja, a trade association of soybean and corn producers in the central Brazilian state of
Mato Grosso, promoting the use of the Canal for their grain cargoes travelling to Asia.
Despite the significant achievements and optimistic outlook, the Canal did experience
difficulties meeting the needs of its LNG users. According to TradeWinds, shipping companies
and operators that used the Canal expressed dissatisfaction due to forfeiting tolls and booked
slots when a vessel was delayed, a situation which was sometimes caused by adverse weather.
Subsequently, the Panama Canal Authority announced it would offer more flexibility for LNG
bookings to accommodate exporters’ needs, even if the route was not in their original plan. In
addition, in December 2017, the number of available daily neo-panamax reservations was
increased to seven and in the first quarter of 2018, to eight.

As production levels in the US expand and Asian import demands rise, the Panama Canal
Authority anticipates a five-fold increase in LNG shipments through the Canal by 2020.
Volumes could hit 30mt per annum (mtpa) in a little less than two years, up from 6mtpa in
2017, Mr. Quijano told Reuters. Some analysts are reportedly concerned about the prospect of
the Panama Canal becoming a
‘bottleneck’ for LNG exports to Asia.

The Panama Canal’s

enlargement has enabled it to win
back most of the all-water traffic
between Asia and the US east coast
that it had lost to the rival Suez Canal
route. According to Alphaliner, the
Canal’s share of the total headhaul
capacity on the route has risen to
74%, a level it had in 2010, after
slumping to 48% at the beginning of
2016.

With a history of 103 years, Panama Canal continues to make improvements, working on
various infrastructure projects in order to accommodate more traffic safely and efficiently and
thus, ensuring a sustainable future.

(Sources: Panama Canal, Journal of Commerce, TradeWinds, Reuters, Seatrade Maritime

News, World Maritime News)
Suez Canal
Higher traffic through the waterway resulted in 2017 being a good year for the Suez Canal,
bringing about an increase in revenue of 5.6%, totalling US$5.3 billion. The navigation traffic
was up by 4.6%, while net tonnage marked an increase of 7.1% when compared to the
corresponding figures from 2016.

The Suez Canal Authority works to attract more ships to transit the waterway, offering
discounts in transit tolls, in view of the stiff competition from the expanded Panama Canal. A
survey by the Japanese Shipowners’ Association had revealed a decrease of 9% in ships passing
through the Suez Canal in 2016, compared to 2015. The figures help shed light on the
competition for market share among the two canals, which has led the Suez Canal Authority to
institute steep discounts for ships on certain routes, as Panama had reformulated its pricing
policy.

Specifically, the discount offered to dry bulk vessels back in April 2017, has been extended
to December 2018. This equates to a 75% rebate of the listed Suez Canal transit tolls being
offered to laden or ballasted dry bulk vessels coming from or heading to ports in the South
West, South and East of Australia. The toll cut relates to bulkers starting their voyage at the
port of Geraldton in the South West of Australia and ending at the port of Cairns in the East of
Australia, as well as ships heading to or coming from ports in North West Europe, starting at
Cadiz and its northern ports. The extension also relates to dry bulk vessels coming from ports
in the Republic of South Africa and heading to ports in the Mediterranean Sea and the Black
Sea.
Apart from being the fastest shipping route between Europe and Asia, the Suez Canal is also
one of the Egyptian government’s main sources of foreign currency. Egypt relies heavily on
the Suez Canal Economic Zone to drive the economic growth of the country. The Suez Canal
Economic Zone extends over 461 square kilometres across the three Suez Canal governorates
of Suez, Port Said, and Ismailia. The zone is estimated to be completed by 2045 and will include
six maritime ports, an international logistics hub and areas for light, medium and heavy
industry, as well as commercial and residential developments. Over the past two years, Egypt
has been seeking foreign investment for the Suez Canal Economic Zone, achieving the signing
of an agreement in November 2017, with the Dubai-based port and terminal operator, DP
World. The two parties agreed on forming a joint development company, with an aim to
develop the international port industry in Sokhna. This is projected to start in 2018.

Notwithstanding that the Suez Canal’s history dates back to 1869, when it was inaugurated, it
still remains one of the world's most heavily used shipping waterways, striving to remain
competitive and adapting to the ever-changing global needs.

(Sources: Japanese Shipowners’ Association, Journal of Commerce, Reuters, Seatrade-

maritime, Worldmaritimenews, Hellenicshippingnews, Dailynewsegypt)

Migrant Crisis – The Mediterranean

Situation
The number of refugees and migrants reaching Europe over the course of a year has dropped.
However, the dangers faced along the way have in some cases increased, setting out changing
patterns of migrant movement. As European States took increased steps to control access to
their territories, those seeking international
protection in Europe took even more
dangerous journeys, sometimes with
smugglers, or attempted alternative routes
in order to reach their intended
destinations.

Source: UNHCR
The most notable trends in 2017 were the significant reduction of arrivals to Italy from Libya,
with the number of refugees and migrants using this route decreasing from July onwards, as
well as the increase in sea arrivals to Spain.

Arrivals increased in Spain by 101% in 2017, mainly due to a large increase in sea arrivals.
The numbers of people arriving in Italy from Libya dropped significantly from July onwards.
As for Greece, sea arrivals in 2017 decreased significantly, compared to 2016.

Source: UNHCR

In 2017, asylum-seekers arriving by sea to Greece faced extended stays in overcrowded

conditions on Greek islands. Those trying to reach Spain mostly resorted to crossing the sea,
often in flimsy inflatable boats. Those trying to cross the sea to Italy faced the increased
prospect of interception or rescue at sea by the Libyan coast guard, which has scaled up its
operations, and detention following disembarkation in Libya. According to El Pais, human
rights groups have accused the Libyan coast guard of working with human traffickers, claiming
former smugglers are even leading the coast guard patrols. Meanwhile, migrants who arrive in
Europe stated that Libyan authorities send the people they rescue to detention centres and
prisons in poor conditions where abuses are commonly committed. In light of these conditions,
refugees and migrants attempted different and often more dangerous routes to enter Europe.
Despite the above, a positive development was the steps taken by a number of states to provide
greater access to safe and legal pathways to protection in Europe, including the establishment
of new humanitarian corridor programmes for admission, a new scholarship programme in
France, and evacuations directly from Libya to Italy. However, these steps remain insufficient
to respond to the numbers of those in need, according to the UN refugee agency.

New and existing operations in the central Mediterranean have significantly contributed to
saving migrant lives. Last year, Frontex, the European Border and Coast Guard Agency,
assisted in the rescue of 38,000 people at sea in operations in Italy, Greece and Spain. In
February this year, Frontex launched the new joint operation, Themis, which replaces Triton.
Operation Themis still focuses on search and rescue operations, better reflecting the changing
patterns of migration and cross border crime, assisting Italy in border control activities.

In addition, EU Naval Force last July extended operation Sophia until December 2018.
EUNAVFOR MED Operation Sophia is primarily focused on combating smuggling and
human trafficking in the southern central Mediterranean but has helped significantly in migrant
rescue.

The shipping industry has greatly contributed to migrant rescue efforts, and still offers
significant aid. According to ICS, merchant ships continue to be diverted routinely by rescue
co-ordination centres to support large scale rescue operations. However, the crisis appears to
be taking a more political direction, with attitudes towards illegal immigration in Europe
hardening. Thus, there are increasing concerns regarding a potential prompt disembarkation of
rescued migrants being refused, which could adversely affect the shipping industry.

From 1 January to 11 June 2018, more than 33,848 people in total have risked their lives
reaching Europe by sea, while 784 are feared drowned. Syrians make up the majority of sea
arrivals, with the number reaching 5,522.

As the situation in the Middle East and many parts of Africa has yet to stabilise, the migrant
crisis in the Mediterranean is expected to remain a key humanitarian challenge in the future.
 2018 Migrant Numbers - as of 11 June 2018

(Sources: UNHCR, FRONTEX, Operation Sophia, Consilium.europa, ICS, Reuters, El pais)