Dear All,

First of all allow us to wish you a Happy New Year. Last year was a very hectic one for the KPMG Shipping Team in Malta and, undoubtedly, 2019 will be an equally exciting one.

First a glance at the year gone by, from a regulatory perspective during 2018, the new Tonnage Tax rules and the Highly Qualified Rules for the Maritime Sector required Advisory, Tax and Audit Members to rapidly update themselves and help clients transition towards the new rules coming into force. For a summary of the Tonnage Tax Rules  click here while a summary of the Highly Qualified Rules for the maritime sector can be found here.

In line with a trend commenced in 2012, the Maltese Flag’s popularity in 2018 continued to surge, registering a 7.5% growth over the previous year, with a registered gross tonnage of 77.5 and over 8,123 vessels registered in its books. The number of Superyachts registered a further growth of 19.5%, this notwithstanding the suspension of the VAT guidelines on long and short term lease of yachts. This is testimony of the Superyacht Industry’s trust in our Flag, irrespective of tax or VAT benefits.

Contrary to the previous KPMG Shipping Alerts, today’s issue will focus on the coming into force of the Ship Recycling Regulation (EU) No 1257/2013 (the “Regulation”) and its implementation by the Maltese Authorities through S.L. 234.56 Merchant Shipping (Ship Recycling) Regulations (the “Maltese Regulations”). This is a game changer and we believe practitioners in the industry should understand the implications of such rules. This Regulation (in force as from 31.12.2018) will have an impact on all those Ship-Financiers, Ship-Owners, Charterers, Money Buyers and Yards involved in ship breaking activities and having an interest in an EU & NON-EU flagged vessel. The EU Waste Regulation 1013/2006 is still applicable to those vessels falling outside the scope of the Regulation.
 
Although compliance is often considered an added cost, the Regulation does provide a number of opportunities.
 
For more information on Ship Recycling please contact us.

The EU Regulation applies to all vessels flying a European flag. Non-EU ships calling at a European port will only be required to carry on board an Inventory of Hazardous Materials.

Installation or use of Hazardous Materials which are listed in Annex I of the Regulation will be prohibited and/or restricted in accordance with the definitions and control measures set out in the said Annex I.

Each new ship will be required to have on board an Inventory of Hazardous Materials (IHM) verified by the Recognized Organization and identifying at least the hazardous materials referred to in Annex II of the Regulation and those contained in the structure or equipment of ship, their location and approximate quantities. Existing ships and ships going for recycling will be required to have on board an IHM which shall identify, at a minimum, the hazardous materials listed in Annex I of the Regulation.

Existing ships will be required to have the IHM on board as from 31^st December 2020 while ships that are marked for recycling have been required, as far as practicable, to have an IHM on board since the date of publication of the European list (19 December 2016). In all cases, the IHM must be properly maintained and updated throughout the operational life of the ship.

Ships covered by the scope of the Regulation may only be recycled at facilities that are included in theEuropean List of approved ship recycling facilities. A fully updated list may be accessed here.

Ship-owners must provide the relevant facility with all available information relating to the ship for the development of the Ship Recycling Plan that is required under Article 7 of the Regulation and conduct all other necessary preparations as required under Article 6 of the EU Regulation. When preparing to send a ship for recycling, ship-owners must notify the Maltese Flag Administration in writing not less than one month before the intended start of recycling, together with the information indicated in Article 6 (1)(b) of the Regulation.

Maltese-flagged ships will be subject to the following surveys:
 
An initial survey which, for new ships, will have to be conducted before the ship is put in service, or before the International Certificate on Inventory of Hazardous Materials is issued. For existing ships, the deadline for same is 31^st December 2020. The initial survey shall verify that Part I of the Inventory complies with the requirements of the Regulation.
 
A renewal survey must be carried out at intervals not exceeding 5 years. This survey shall verify that Part I of the Inventory of Hazardous Materials complies with the requirements of the Regulation.
 
An additional survey may be made at the request of the ship-owner after a change, replacement, or significant repair of the structure, equipment, systems, fittings, arrangements and material. The survey is intended to ensure that any such change, replacement, or significant repair has been made in the way that the ship continues to comply with the requirements of the Regulation and that Part I of the Inventory is amended as necessary.
 
A final survey must be carried out prior to the ship being taken out of service and before the recycling of the ship has started, verifying that:
(i) the Inventory is in accordance with the requirements of the Regulation;
(ii) the Ship Recycling Plan reflects the information contained in the inventory of hazardous materials and complies with the requirements of Article 7 of the Regulation; and
(iii) the Ship Recycling Facility(ies) where the ship is to be recycled is included in the European List.

Insofar as existing ships intended for ship recycling are concerned, the initial survey and the final survey may be conducted concurrently.

Ships will be required to carry on board a valid certificate attesting the inventory of hazardous materials or a valid ready for recycling certificate, as applicable, in accordance with the EU Regulation.

If the registered ship-owner of a Maltese flagged vessel fails to comply with the provisions of the Maltese Regulations and the provisions of the EU Regulation (s)he may be subject to a fine not exceeding five thousand (5,000) units.

EU Regulation shall not apply to:

(a) any warships, naval auxiliary, or other ships owned or operated by a state and used, for the time being, only

(b) ships of less than 500 gross tonnage (GT);

(c) ships operating throughout their life only in waters subject to the sovereignty or jurisdiction of Malta.

The full text of the EU Regulation may be accessed here.