CII: what it means in practice and why a workable clause is essential

From 1 January 2023, the way in which shipowners and charterers co-operate will need to change fundamentally to allow the shipowner to comply with the CII regulation that enters into force. How can BIMCO produce a fair and balanced clause that works in practice for both shipowners and charterers when one has to comply and the other holds the key to compliance? 

BIMCO Deputy Secretary General, Lars Robert Pedersen, and Director, Contracts & Support, Stinne Taiger Ivø, explain the nature and pitfalls of the regulation and why the CII clause needs careful drafting to work in practice. 

Decarbonising the shipping industry is a multi-layered process where many paths are being tested. The paths explored include research for sustainable alternative fuels, development of technical energy efficiency solutions, improving operational procedures aimed at reducing trading emissions, and much more. 

Until sourcing of alternative fuel has been established, most of the world fleet will have limited choice and will run on traditional fuel emitting carbon dioxide. Improving transport efficiency in terms of carbon emissions per deadweight ton-mile is what the MARPOL Annex VI Carbon Intensity Indicator (CII regulation) is all about. 

The CII regulation, which takes effect on 1 January 2023, sets out obligations for ships of 5,000 gross tonnage and above of certain ship types, including tankers, bulkers and containerships. The operations of such ships shall aim at achieving at least the required annual operational CII which is the middle point of rating level C on the regulation's A – E ratings scale. 

BIMCO's focus is initially on the development of a clause for long term time charter parties. Once this work is completed more clauses will follow to help the industry decarbonise. The CII regulation could be the starting point for reframing charter parties or inspiring the development of a new area of shipping contracts. The BIMCO CII clause will, however, be drafted with the aim to fit into today's charter party formats as we know them; either into an existing one by negotiation or into a new one where the clause can be incorporated in the standard form. 

Source: BIMCO

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