The Proper Description Of Vegetable Oil And Biodiesel Cargoes In The Bills Of Lading

The shippers of vegetable oil and biodiesel cargoes must provide in the Bills of Lading a cargo description that must be compliant with both trade requirements and shipping regulations.

The Trade Requirements Regarding The Cargo Description In The Bills Of Lading Issued For Vegetable Oil And Biodiesel Cargoes

Over the last years a number of international and national agencies have been set up to promote the sale of sustainably produced commodities.
The first of these was the Roundtable on Sustainable Palm Oil (RSPO) set up in 2004 with the purpose to prevent the deforestation for the conversion of land covered by tropical forest into palm plantations and to promote the production and use of sustainable palm oil. The parties to RSPO are the growers, processors, traders, environmental and social NGOs and financial institutions.
They have agreed a set of principles and criteria to define what they mean by sustainability¹ and an international certification scheme has been developed to ensure that the palm oil sold as sustainable palm oil has indeed been produced sustainably.
The sales of sustainable palm oil certified by RSPO started in November 2008.
The crude palm oil certified by the RSPO is referred to in international trade as "Certified Sustainable Palm Oil", so that by this trade name the cargoes of crude palm oil are described in the sale contracts, commercial invoices, cargo manifests and Bills of Lading.
The end product manufacturers who wish to use the RSPO Trademark and claim that their products are produced from RSPO certified palm oil can procure the palm oil through any of the four supply chain systems used by RSPO to trace the origin of palm oil: i.e. "Identity Preserved",  "Segregated"², "Mass Balance"³, "Book and Claim"⁴. Therefore, in case of sustainable palm oil certified by RSPO, the Bills of Lading will also mention the supply chain system used. There is a similar procedure for the shipments of certified sustainable palm kernel oil.
The second international agency was the Roundtable on Sustainable Biofuels (RSB) set up in 2007 to promote the production and use of sustainable biofuels. In 2013, RSB extended its scope to cover all biomaterials and changed its name in "The Roundtable on Sustainable Biomaterials".
The third international agency was the Roundtable on Responsible Soy Association (RTRS) set up in 2011 to promote the production and use of sustainable soy.
In 2015 the Malaysian government set up its own certification scheme for sustainable palm oil - "Malaysian Sustainable Palm Oil (MSPO)". MSPO uses two supply chain systems to trace the origin of palm oil: "Mass Balance" and "Segregation".
Similarly to the Malaysian government, the Indonesian Ministry of Agriculture set up its own certification scheme for sustainable palm oil - "Indonesian Sustainable Palm Oil (ISPO)".
Whatever certification scheme it is used by the traders, they will have to comply with the certifiers` requirements to enable the end product manufacturers to use the certifiers` trademark.

The Shipping Regulations Regarding The Cargo Description In The Bills Of Lading Issued For Vegetable Oil And Biodiesel Cargoes

The vegetable oils and biodiesel products are classed as "noxious liquid substances" in Annex II of the MARPOL Convention and have to be carried by ships pursuant to the provisions of the MARPOL Annex II and IBC Code⁵. To enable the carriers to comply with the requirements of the MARPOL Annex II and IBC Code, the shippers of vegetable oils and biodiesel products have the obligation under the IBC Code to properly describe their cargoes in the shipping documents.
The shippers must provide in the shipping documents the cargo`s product name by which it is listed in the Chapter 17 of the IBC Code. This requirement is stipulated in the paragraphs 16.2.2 and 17.2 of the IBC Code with the following provisions:

"Any cargo offered for bulk shipment shall be indicated in the shipping documents by the product name under which it is listed in chapter 17 or 18 of the IBC Code or the latest edition of the MEPC.2/Circular under which it has been provisionally assessed ..." (paragraph 16.2.2)

"The product name shall be used in the shipping document for any cargo offered for bulk shipments. Any additional name may be included in brackets after the product name ..." (paragraph 17.2)

For instance, a cargo of crude palm oil certified by the RSPO shall be described in the Bills of Lading by the trade name "Certified Sustainable Palm Oil" and the product name "Palm Oil" by which it is listed in the Chapter 17 of the IBC Code.
A cargo of crude palm kernel oil certified by the RSPO shall be described in the Bills of Lading by the trade name "Certified Sustainable Palm Kernel Oil" and the product name "Palm Kernel Oil" by which it is listed in the Chapter 17 of the IBC Code.
A cargo of biodiesel produced from palm oil certified by the RSB shall be described in the Bills of Lading by the trade name "Certified Sustainable Palm Methyl Ester" and the product name "Palm Oil Fatty Acid Methyl Ester" by which it is listed in the Chapter 17 of the IBC Code.
Similarly, a cargo of biodiesel produced from soyabean oil certified by the RSB shall be described in the Bills of Lading by the trade name "Certified Sustainable Soy Methyl Ester" and the product name "Soybean Oil Fatty Acid Methyl Ester" by which it is listed in the Chapter 17 of the IBC Code. But a blend of "soybean oil fatty acid methyl ester" and "palm oil fatty acid methyl ester" shall be shipped under the generic description "Fatty Acid Methyl Ester (m)".
The shippers must also provide in the shipping document the cargo`s viscosity at 20ºC, if it is equal to or greater than 50 mPa.s at 20ºC, and the cargo`s melting point, if it is equal to or greater than 0ºC, to enable the carriers and discharge port authorities to know whether or not a pre-wash of the vessel`s cargo tanks is necessary following unloading of the cargo⁶. This requirement is stipulated in the paragraphs 16.2.6 and 16.2.9 of the IBC Code which have the following provisions:

"16.2.6 Where column o in the table of Chapter 17 refers to this paragraph, the cargo`s viscosity at 20°C shall be specified on a shipping document, and if the cargo`s viscosity exceeds 50 mPa.s at 20°C, the temperature at which the cargo has a viscosity of 50 mPa.s shall be specified in the shipping document.
16.2.9 Where column o in the table of Chapter 17 refers to this paragraph, the cargo`s melting point shall be indicated in the shipping document."

The requirement is also stipulated in the Section 5 of the Procedures and Arrangements Manual in the MARPOL Annex II which contains the following provisions:

"Information relating to melting point and viscosity, for those substances which have a melting point equal to or greater than 0ºC or a viscosity equal to or greater than 50 mPa.s at 20ºC, shall be obtained from the shipping document."

The pre-wash requirement of the MARPOL Annex II came into force on 1st January 2007 and was initially applicable only to the high-viscosity substances defined in the Regulation 1 Paragraph 17.1 of the MARPOL Annex II as noxious liquid substances in Pollution Category X or Y with a viscosity equal to or greater than 50 mPa.s at the unloading temperature.
The pre-wash requirement of the MARPOL Annex II is not currently applicable to vessels carrying palm oil cargoes because the palm oil cargoes are unloaded at a temperature range between 50 and 55ºC where the palm oil viscosity is 24 mPa.s. But it would normally be applicable to vessels carrying cargoes of rapeseed oil, soyabean oil and sunflower seed oil in bulk.
The rapeseed oil cargoes have a discharge temperature range between 15 and 20ºC and a viscosity at 20ºC between 72 and 82 mPa.s⁷.
The soyabean oil cargoes have a discharge temperature range between 20 and 25ºC and a viscosity at 20ºC between 59 and 62 mPa.s⁸.
The sunflower seed oil cargoes have a discharge temperature range between 15 and 20ºC and a viscosity at 20ºC of 68 mPa.s⁹.
However, there were veg oil shippers and charterers who sought to avoid the additional cost of tanks` pre-washing by giving heating instructions to the carriers to get the cargoes out of the high-viscosity range.
Following a number of pollution incidents in the Gulf of Finland caused by the vessel discharges into the sea of tank washings containing residues of such veg oil cargoes, the IMO ESPH Working Group<sup>10</sup> has drafted a number of amendments to the MARPOL Annex II and the IBC Code to extend the application of the MARPOL`s pre-wash requirements to the high-viscosity and solidifying substances considered to be persistent floaters. In the Regulation 13 of the MARPOL Annex II it was introduced a new paragraph 7.1.4 where the high-viscosity persistent floaters are defined as substances in Pollution Category Y with a viscosity equal to or greater than 50 mPa.s at 20ºC, while the solidifying substances considered to be persistent floaters are defined as substances in Pollution Category Y with a melting point equal to or greater than 0ºC.
These amendments will enter into force on 1 January 2021.
The vessels carrying such cargoes to ports in the Baltic Sea, Norwegian Sea and North Western Europe area including the United Kingdom, Ireland, Belgium, France, Spain and Portugal will be required from 1 January 2021 to pre-wash their cargo tanks prior to leaving the port of discharge and then discharge the residue/water mixture generated during the pre-wash to a shore reception facility until the vessel`s cargo tanks are empty.
These substances are identified in the column "o" in the table of Chapter 17 of the IBC Code by reference to the newly introduced paragraph 16.2.7 of the IBC Code which has the following provisions:

"Where column "o" in the table of chapter 17 refers to this paragraph, the cargo is subject to the prewash requirements in regulation 13.7.1.4 of Annex II of MARPOL."

Amongst the substances identified in the table of Chapter 17 of the IBC Code that will become subject to the mandatory tanks` pre-washing are: camelina oil, castor oil, coconut oil, corn oil, cotton seed oil, grape seed oil, groundnut oil, illipe oil, jatropha oil, mango kernel oil, olive oil, palm kernel oil, palm oil, rapeseed oil, soyabean oil and sunflower seed oil.
The cost implications of the new regulations will have to be considered by the commodity traders in the price quotations and vessel fixtures for the vegetable oils carried in large quantities such as palm oil, palm kernel oil, rapeseed oil, soyabean oil and sunflower seed oil to ports in North Western Europe.
The palm oil has a melting point of 39ºC. At 20ºC the palm oil is solid.
The palm kernel oil has a melting point ranging from 25 to 28ºC<sup>11</sup>. At 20ºC the palm oil is solid.
The rapeseed oil has a melting point of -10ºC<sup>12</sup>. At 20ºC the rapeseed oil has a viscosity ranging from 72 to 82 mPa.s<sup>13</sup>.
The soyabean oil has a melting point equal to 0ºC<sup>14</sup>. At 20ºC the soyabean oil has a viscosity ranging from 59 to 62 mPa.s<sup>15</sup>.
The sunflower seed oil has a melting point ranging from -12 to -8ºC<sup>16</sup>. At 20ºC the sunflower seed oil has a viscosity of 68 mPa.s<sup>17</sup>.
The vessels carrying cargoes of rapeseed oil, soyabean oil and sunflower seed oil in bulk to ports in North Western Europe cannot avoid anymore the tanks` pre-washing requirement by heating the cargoes during the voyage.
In the last twelve years, the veg oil shippers sought to avoid the responsibility for the costs related to the tanks` pre-washing by not providing the required information about the cargo`s viscosity and melting point in the Bills of Lading on the grounds that this information would make the Bills of Lading non-compliant with the other commercial documents when tendered for payment under letters of credit.
It should not be difficult to add a clause in L/C to allow the presentation of Bills of Lading containing the required information about the cargo`s viscosity and melting point.
To overcome this issue INTERTANKO proposed at the 56th session of the Marine Environment Protection Committee that the shippers use an optional shipping document instead of Bill of Lading for the provision of information about the cargo`s viscosity and melting point.
After the amendments to MARPOL Annex II and IBC Code related to the discharge of cargo residues and tank washings of high-viscosity, solidifying and persistent floating products will enter into force on 1 January 2021¹⁸, the commodity traders who ship vegetable oils in bulk to destinations in North Western Europe will have the obligation to provide in the shipping document, whether such document is the Bill of Lading or the optional shipping document proposed by INTERTANKO, the cargo`s viscosity at 20ºC and melting point.

by Vlad Cioarec, International Trade Consultant

This article has been published in Commoditylaw`s Biofuels Trade Review Edition No. 1.


Endnotes:

1. RSPO Principles and Criteria for Sustainable Palm Oil Production are referred to as "RSPO Supply Chain Certification Standard". RSPO Principles and Criteria are used by the independent auditors approved by the RSPO to verify the growers and processors. See www.rspo.org
2. In the "Identity Preserved" and "Segregated" supply chain systems, the sustainable palm oil originated from certified mills is kept separate from the non-sustainable palm oil throughout the supply chain. See www.rspo.org
3. In the "Mass Balance" supply chain system, the sustainable palm oil originated from certified mills is mixed with ordinary palm oil, but monitored administratively throughout the supply chain.
4. See the document "RSPO Supply Chain Certification Systems" approved by RSPO Executive Board on 25 November 2011 (page 11-12) at www.rspo.org
5. The International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk.
6. The Regulation 13.7 Section 7 paragraph 3 of the MARPOL Annex II stipulates that after the carriage of solidifying and high-viscosity cargoes in Pollution Category Y, the vessels are required to pre-wash their cargo tanks prior to departure from the port of discharge and discharge the residues/water mixture to a shore reception facility at the port of discharge.
7. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
8. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
9. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
10. The Working Group on the Evaluation of Safety and Pollution Hazards of Chemicals
11. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
12. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
13. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
14. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
15. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
16. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
17. See the Annex to the IMO document ESPH 22/10 at www.imo.org in IMODocs section
18. The draft amendments to MARPOL Annex II and IBC Code were approved by the IMO`s Marine Environment Protection Committee at its seventy-third session held between 22 and 26 October 2018, then by the IMO`s Maritime Safety Committee at its one hundredth session held between 3 and 7 December 2018. The amendments to MARPOL Annex II were formally adopted by the IMO`s Marine Environment Protection Committee on 17 May 2019 by the Resolution MEPC.315(74). The amendments to the IBC Code were formally adopted by the IMO`s Marine Environment Protection Committee on 17 May 2019 by the Resolution MEPC.318(74) and then by the IMO`s Maritime Safety Committee on 14 June 2019 by the Resolution MSC.460(101).