Contents

1. Purpose, Objectives, and Significance of Study ...................................................................1

2. Methodology ........................................................................................................................2

3. Terminology used ................................................................................................................2

4. Options for end-of-life and phased-out single hull oil tankers ...............................................2

5. Health, safety, and environmental risks of ship recycling .....................................................7

6. Governance of ship recycling ...............................................................................................7

7. Ship recycling perspectives and practices ..........................................................................16

8. Analysis of the Hong Kong Convention ..............................................................................27

9. Relevance of the Hong Kong Ship Recycling Convention to Malaysia ...............................37

10. Assessment of the impact of the Hong Kong Ship Recycling Convention to Malaysia ........40

11. Need for a Ship recycling strategy .....................................................................................46

12. Recommendation ...............................................................................................................48

13. Limitation of study ..............................................................................................................49

14. Future research..................................................................................................................49

Annex 1: List of References ......................................................................................................... i

List of Tables

Table 1: Tonnage reported sold for breaking, by vessel type, 2000-2008....................................3

Table 2: Average age of broken-up ships, by type, 1998 - 2008 ..................................................4

Table 3: Age distribution of the world merchant fleet, by vessel type, as of 1 Jan 2009 ...............5

Table 4: Top 25 flag States by scrap tonnage and top 25 flag States by tonnage .....................34

Table 5: Summary of the Strengths, Weaknesses, Opportunities, and Threats of the HK

Convention ................................................................................................................................36

Table 6: Unit cost related to the Convention requirements for certificates for ship in operation .43

Table 7: Unit cost related to the Ready to Recycle Certificates .................................................45

Table 8: Unit cost related to the checking of ships calling at State party port ............................45

List of Figures

Figure 1: Age profile of the Malaysian fleet .................................................................................4

Figure 2: Age profile of world fleet, all vessel types .....................................................................5

Figure 3: Age profile of world fleet by 8 major vessel types .........................................................6

1

1. Purpose, Objectives, and Significance of Study

The purpose of this study is to assess the implications of the Hong Kong International

Convention on the Safe and Environmentally Sound Recycling of Ships 2009 to Malaysia.

The objectives of this study are:

(a) To assess the feasibility of Malaysia ratifying the Hong Kong Convention (b) To recommend a policy option for the safe and environmentally sound recycling of ships (c) To disseminate information to parties affected by the obligations imposed by the Convention

to enable them to plan and manage their operations in anticipation of the Convention.

This study is significant to Malaysia because ship recycling is the most environmentally sound

and most profitable means of disposing ships that are no longer fit for operations. Malaysia

represents 0.85% of the world total tonnage1 which will eventually be scrapped. Whether or not

Malaysia ratifies the Convention, the regulations contained therein represent best industry

practices for shipbuilding and ship recycling. As such, their implications to the Malaysian

shipbuilding industry should be assessed in addition to providing a policy recommendation on

preparing Malaysian ship owners and ship builders for compliance with the Convention.

The beneficiaries of this study would include:

(a) Ministry of Transport (Marine Department) (b) Malaysia Shipowners‟ Association (MASA) (c) Ship builders and repairers (d) Ship surveyors (e) Parts suppliers

1 Based on data on Shipbuilding Statistics, September 2009 from the shipbuilders' Association of Japan for the top

25 flag states by tonnage, extracted from European Commission DG Environment “Support to the impact

assessment of a new legislative proposal on ship dismantling” Final report December 2009

2

2. Methodology

The research conducted is mostly desk based involving the analysis of the Hong Kong

Convention. We also reviewed ship recycling strategies of the European Union and the United

Kingdom and the ship dismantling practices of India, Bangladesh, Pakistan, and China through

available literature obtained from the public domain. We also visited ship yards to interview ship

yard operators and discussed with the Department of Environment, Marine Department, and

representatives of the Malaysia Shipowners‟ Association.

3. Terminology used

„Ship recycling‟ is the term used by the International Maritime Organisation and by Ministries of

Transport/ Shipping. „Ship dismantling‟ is used by the Basel Convention, by the Ministries of

Environment, and by the European Commission. „Ship breaking‟ is used by the International

Labour Organisation (ILO), and by environmental non-governmental organisations. „Ship

scrapping‟ is used by shipowners. These terms are often used interchangeably to refer to the

process in which end-of-life ships are dismantled, so that their steel hulls and other components

can be salvaged and recycled back into the market. Although the terms refer to the same

process, each term reflects a different focus of the project.

These terms are used interchangeably throughout this report.

4. Options for end-of-life and phased-out single-hull oil tankers

Most ships have a life span of around 28 years before they are taken out of operation because

they are no longer economically feasible and for safety reasons. The number of ships that would

need to be scrapped is increasing, particularly as old single-hulled tankers are currently being

phased out.

An alternative to ship recycling is mothballing or indefinite storage of ships, which involves

anchoring ships at ports with regular maintenance to keep them afloat. As a result, mothballing

entails exorbitant maintenance costs and imposes serious safety and environmental risks to the

areas where they are docked. Ships could also be used as storage facilities or be converted into

museums. However, like mothballing, the maintenance cost and impact to safety and the

environment needs to be considered.

Other options are dry-docking (wherein the ship is removed from the water and grounded on to

the beach) and sinking ships to form artificial reefs. Both options are considered to be

prohibitively expensive and environmentally perilous. The deliberate sinking of ships into the

ocean is considered as dumping and contravenes the London Dumping Convention 1972.

The prevailing practice within the maritime industry is to export obsolete vessels to major ship

recycling nations like India, China, Bangladesh, Pakistan, and Turkey for scrapping.

3

Due to international and European legislation on the phasing-out of single hull tankers, two

peaks of scrapping have been forecast for the years 2010 and 20152. The number of such

tankers is currently assumed to be around 800 worldwide. It is uncertain, however, to what

extent they will require immediate dismantling, as many of them can be converted to double-hull

tankers or used for non-oil transport or storage purposes3.

The following tables and figure are extracted from the UNCTAD (2009) report.

Table 1: Tonnage reported sold for breaking, by vessel type, 2000-2008

(millions of dwt and percentage shares)

2 2 Commission of the European Communities (2008). An EU Strategy for Better Ship Dismantling:

Communication from the Commission to the European Parliament, the Council. The European Social and Economic Committee and the Committee of the Regions, COM (2008), 767 final. Retrieved at http://ec.europa.eu/environment/waste/ships/pdf/com_2008)767.pdf 3 Bhattarcharjee S (2009). From Basel to Hong Kong: International Environmental Regulation of Ship-

recycling Takes One Step Forward and Two Steps Back. Trade L.& Dev. (2009), Vol 1(2), pages 193-230

4

Table 2: Average age of broken-up ships, by type, 1998 - 2008

Source: Compiled by UNCTAD Secretariat, on the basis of data supplied by Lloyd‟s Register -

Fairplay

Figure 1: Age profile of the Malaysian fleet

5

Figure 2: Age profile of world fleet, all vessel types

Table 3: Age distribution of the world merchant fleet, by vessel type, as of 1 Jan 2009

Source: Compiled by UNCTAD secretariat on the basis of data supplied by Lloyd‟s Register –

Fairplay

6

* Vessels of 100 gross tons and above

Figure 3: Age profile of world fleet by 8 major vessel types

7

5. Health, safety, and environmental risks of ship recycling

There are two aspects to the ship recycling issue: (1) the environmental effect of dismantling

hazardous material without pre-cleaning or containment, and (2) the occupational health and

safety of workers performing the dismantling.

Ship recycling can potentially cause serious long-term and irreversible harm to local

environment and human health. Along with economically valuable materials like steel, old

electrical items, machineries, furniture and plumbing, ship-recycling also generates massive

quantitiess of hazardous and toxic substances like asbestos, polychlorinated biphenyls (PCBs),

waste oils, Tributyltin compounds (TBTs), mercury, arsenic, and cadmium and metal paints.

A Greenpeace study of major ship recycling yards in Asia found that levels of TBTs in the

sediments at the Alang shipyard in India were 10 to 100 million times higher than internationally

recognized limits. The same study revealed that five out of six soil samples taken from the

workplace, living quarters and surrounding public areas, were contaminated with asbestos4. The

release of these toxic substances exposes the workers to the risk of serious health hazards

including cancer, neurological disorders, reproductive effects such as reduced birth weight and

gestational age and is also likely to cause irreversible damage to the local environment5.

The harmful consequences of ship recycling is accentuated in South Asia ship yards as the

dismantling operations are carried out along the beaches, using the tidal waves to help break

the hulls and wash away waste oils, and also by unskilled labourers with minimal training and

protective gear. The official industry estimates that about 40-50 workers die from ship breaking

activities per annum although some environmental groups claim that on average one shipyard

worker dies each day6.

6. Governance of ship recycling

(a) Voluntary guidelines

(i) UNEP Technical Guidelines for the environmentally sound management of the

full and partial dismantling of ships

4 Judit Kanthak & Nityanand Jayaraman, Ships for Scrap III, Steel and Toxic Wastes for Asia: Findings of

a Greenpeace study on Workplace and Environmental Contamination in Alang-Sosiya Ship breaking Yards, Gujarat, India, Greenpeace Report 15 (2001), available at http://www.ban.org/Library/ALANG%202000%20final.pdf 5 Matt Cohen, U.S. Shipbreaking Exports: Balancing Safe Disposal with Economic Realities, 28-SPG

ENVIRONS ENVT‟L L & POL‟Y J. 237, 241 (2005) (citing U.S. Environmental Protection Agency, A Guide for Ship Scrappers, Tips for Regulatory Compliance, EPA 315-B-00-001, at 3-3 (April 2000) available at http://www.epa.gov/oecaerth/resources/publications/civil/federal/shipscrapguide.pdf 6 Mitra, B (2005). Creative destruction: breaking ships, building the economy, cleaning the environment.

Liberty Institute Working Paper, in association with the Danish Center for Political Studies (CEPOS), Copenhagen, 2005. Retrieved at http://www.policynetwork.net/es/environment/publication/creative-destruction-breaking-ships-building-economy-cleaning-environment Last accessed 4 June 2010

8

The guidelines seek to minimize or eliminate risks associated with ship

dismantling by introducing universally applied principles for its environmentally

sound management. They detail procedures and good practices for

decommissioning and selling obsolete ships, dismantling them, sorting the parts

(for reuse, recycling and disposal), identifying potential contaminants, preventing

toxic releases, monitoring environmental impacts, and responding to

emergencies and accidents. They also address the design, construction and

operation of ship dismantling facilities.

(ii) ILO Guidelines on safety and health in shipbreaking

The growing concerns on the health and safety of workers in the booming ship

breaking industry in Asia saw the development of the International Labor

Organization (ILO) guidelines which seeks to facilitate the occupational health

and safety aspect of the industry. This guideline seeks to address issues

pertaining to the protection of workers from occupational hazards in addition to

securing workers health and also assist and facilitate management to such

extents.

The Regulation lays down sets of responsibilities encompassing national

institutions, labor inspectors, employers and employees involved in this industry.

National institutions are encouraged to be identified in holding the responsibility

to facilitate and manage implementation of relevant policies, the development

and implementation of OHS relevant laws which are compatible with existing

domestic and international obligations. Labor Inspectors engaged under such

national institutions are encouraged to conduct inspections at employment sites

to ensure standards established are maintained. Ideally, employers are required

to ensure workers have safe and healthy working and living environment.

Workers on the other hand are provided with a set of recommended

responsibilities and rights while in the course of employment. Obligations include

avoiding acts or omissions as well as situations which could expose health and

safety risks to them and others, reporting employment hazards to employer,

representative or responsible authority, and avoiding the use of unauthorized

equipment. This instrument also recognizes the importance of employees in

being represented.

In essence, the regulations cover the operational planning and management of

occupational safety measures, providing for the requirement of reporting and

recording of incidents relating to work health and safety and the provision of

occupational health services. In regulating for the safe execution of ship recycling

operations, the guidelines include provisions on safe ship breaking operational

planning, protective and preventive measures, measures dealing with hazardous

substances, physical hazard as well as psychological hazards. Issues on

emergency preparedness, worker competency, equipment and tool safety, and

personal safety equipment management are also addressed. Interestingly, this

9

guideline goes so far as to account for social and welfare issues such as living

accommodations, drinking water, as well as social and employment insurance.

The comprehensiveness of this guideline is appreciable, however, its classification as a framework instrument of persuasive nature gives no „bite‟ and thus depends upon the voluntariness of nations to adopt such measures. As the guidelines seek to target developing nations, the provision of this instrument with lacking options on funding poses as a challenge in securing political will.

(iii) United Nations Environment Programme, Guidelines for the Environmentally

Sound management of Full and Partial Dismantling of Ships, Technical Working

Group of the Basel Convention (2002)7

The guidelines address the need for „clean‟ ship design practices in the

construction of new vessels and the issue of ship dismantling and hazardous

wastes. It sets forth „good practices‟ which specify three stages involving a

seven-step process in the decommissioning of a ship for disposal. Good

practices also require a hazardous materials inventory which identifies and

documents the location and quantity of all hazardous and potentially polluting

materials before any work is undertaken. The technical guidelines are detail and

provides for a sequential process that should be followed in ship dismantling and

the type of facilities needed.

(iv) International Maritime Organisation (IMO) Guidelines on Ship Recycling (A.962)

The IMO instituted a set of voluntary guidelines aimed at improving the ship

disposal process in December 2003. Known as the IMO Guidelines on Ship

Recycling, it adopts a „Green Passport‟ approach to ship breaking. It envisaged

that this Green Passport, a document containing an inventory of all materials

potentially hazardous to human health or the environment, used in the

construction of a ship would accompany the ship throughout its working life. It

also encourages shipbuilders and designers to use alternatives to hazardous

materials in designing their ships. Owners of existing ships are directed to

develop a „Ship Recycling Plan‟ which would include the identification of suitable

recycling facilities under IMO guidelines. However, the voluntary character and

the lack of enforcement mechanisms have seriously inhibited the potential of

these guidelines as an effective instrument of regulation over the ship-breaking

industry.

(v) Baltic and Internationals Maritime Council (BIMCO) Guidelines on Transitional

Measures for Ship-owners8

7 Glisson, LM. & Sink, HL. (2006). Maritime Shipbreaking: law and Policy Part III. Journal of

Transportation Law, Logistics, and Policy. (2006). Vol. 73, Issue 4. Pages 463-483

10

In light of furthering the spirit of the Hong Kong Convention which strives to strike

a balance between the principle of grounded ship recycling and the occupational

safety and health, and environmental costs, a transitional set of guidelines have

been developed to facilitate the sale of ships for recycling.

These guidelines have received support from numerous nation‟s ship owner

associations among others that of Australia, India, Hong Kong, Singapore, the

United Kingdom, the United States, Canada, Italy, and Japan. These guidelines

cover the obligations arising under the Hong Kong Convention with respect to

ship owners and cash buyers. Obligations of ship owners include the

establishment of an inventory of hazardous substances and the selection of a

reasonably competent recycling facility. The cash buyer is deemed to be treated

in most instances as a ship owner however, under some circumstances they hold

more responsibility since these guidelines seem to equate cash buyers as

“agents” of ship recycling and are thus expected to provide reliable source of

information and guidance on ship recycling.

Interestingly, it may be said that these guidelines seem to impose further

undertakings upon ship owners by addressing the need for pre-cleaning of ships

prior to their sale to recycling facilities thus indicating the shipping industry‟s

initiative in internalizing some of the environmental costs.

(vi) ISO 30002:2010 on Ships and Marine Technology – Guidelines for selection of

Ship Recyclers (and proforma contract)

This document provides guidance for shipowners to follow when selecting a ship

recycling facility. In order to ensure that vessels are recycled as far as possible in

a safe and environmentally sound manner, shipowners should carefully consider

facilities to which they wish to sell their ships, and it is therefore important that

these facilities provide certain objective information to assist in this selection

process. Facilities that are unwilling to provide this information on request by the

shipowner should therefore not be considered. Since the shipowner may not be

able to verify the information given it is the sole responsibility of the facility to

ensure that it is correct. However, it is important that shipowners are critical in

their consideration of any such information, and facilities which publish obviously

false information, or where other data makes it obvious that the information

supplied does not reflect reality, then a shipowner should not consider the facility

in question for ship recycling. This document applies to the process of selecting

ship recycling facility and the use of pro forma contract only and does not

consider other aspects of ship recycling. Such aspects are covered by other

standards of the ISO 30000 series. This document is applicable to any shipowner

8 “In Preparation for the entry into force of the IMO Hong Kong International Convention for the Safe and

Environmentally Sound Recycling of Ships BIMCO” 2009 edition

11

who wishes to: a) select a ship recycling facility in order to carry out safe and

environmentally sound ship recycling, b) demonstrate conformity with the

standard of the ISO 30000 series, c) assure itself that the ship recycling facility

chosen is in conformity with the ISO 30000 series. This document is intended to

be used by shipowners when selecting a ship recycling facility as guidelines only.

(vii) Others

The following voluntary strategies and guidelines are discussed in the Ship

recycling perspectives and practices section of this report.

EU Strategy for better ship dismantling

UK Ship Recycling Strategy

(b) Legal Regime

(i) The Basel Convention on the Control of Transboundary Movement of Hazardous

Waste and Their Disposal 19899

The Basel Convention imposes an obligation of „due diligence‟ on all parities. All

parties are required to provide information about a proposed transboundary

movement of hazardous wastes, to the countries concerned. An exporting

country must refuse the export of a ship containing hazardous materials, if it

suspects that the waste will not be properly dealt with by the ship-breaking

country. Three elements are crucial for the application of the Basel Convention:

(1) proof that the hazardous waste will be dealt with in a sound manner in the

ship recycling state; (2) the legal recognition that ship are waste; (3) an

established „intention to discard‟ by the owner of the ship. The Basel Convention

at its Open Ended Working Group has noted that a ship may become waste, in

accordance with Article 2 and that it may be defined as a ship under other

international rules. This is a loophole that ship owners can exploit. The London

Convention together with MARPOL is the main treaty regime that relates to

marine pollution. The London Convention requires parties to take effective

measures to prevent marine pollution by disposal of wastes into the sea. In fact,

the fundamental obligation under the London Convention is to prohibit the

deliberate disposal from vessels at sea, of waste. However, the application of this

Convention on the issue of ship recycling is debatable. At the time when the

Convention was set up the issue of ship recycling was not a problem.

(ii) The Stockholm Convention on Persistent Organic Pollutants 200110

The Stockholm Convention is designed to end the production and use of a class

of the world‟s most poisonous chemical known as persistent organic pollutants

9 Bhattacharjee S (2009)

10 Bhattacharjee S (2009)

12

(POPs). This Convention is relevant for the purposes of regulation of ship-

breaking as PCBs, one of the toxic materials generated while scrapping a ship,

are included in the list of prohibited POPs under the Convention. Therefore,

Article 3(2) of the Convention, which specifically limits the import and export of

PCBs unless environmentally sound disposal and use are provided for, could

arguably be used to limit export of end-of-life ships. Further the Convention also

bans disposal operations that may lead to recovery, recycling, reclamation, direct

reuse or alternative uses of POPs. It is argued that due to the strong likelihood of

generation of PCBs in ship-breaking, exports of ships for ship-breaking

operations would be covered by these prohibitions. However, its potential for

regulating ship recycling would be limited as a result of its primary concern being

only PCBs and not ship recycling issues. Lastly, it also lacks the institutional

mechanism equipped to deal with the specific features of international end-of-life

ship trade.

(iii) The Hong Kong Convention for the Safe and Environmentally Sound Recycling

of Ships 2009

Growing concerns on the inadequacy within the Basel Convention (BC) and the

numerous non-mandatory guidelines in environmental and health safety to

regulate the ship recycling industry spurred the initiative in developing an

international regulatory regime. The Hong Kong Convention was developed to

regulate the safe and environmentally sound recycling of ships in order to

prevent, reduce, minimize and, to the extent practicable, eliminate accidents,

injuries and other adverse effects on human health and the environment caused

by this activity and enhance ship safety, protection of human health and the

environment throughout a ship‟s operating life.11 The Convention not only

acknowledges but also seeks to promote by virtue of its preamble, principles of

sustainable development, substitution and precaution.

The Hong Kong Convention applies to State Party flagged ships12 which are over

500 gt and ship recycling facilities under state party jurisdiction. It is to be noted

that this Convention excludes applicability upon non-commercial governmental

ships, navy ships as well as ships traversing within domestic waters but

nevertheless recommends adoption of consistent measures. This Convention

goes further in expressing that States party to this instrument are to avoid from

providing more favourable treatment to non State parties thus indicating

application of similar standards when dealing with the latter.

In essence, targeted entities under this Convention include:-

11

This is expressed in Article 1 and Preamble to Hong Kong Convention 12

Article 2.7 Hong Kong Convention ““Ship” means a vessel of any type whatsoever operating or having operated in the marine environment and includes submersibles, floating craft, floating platforms, self elevating platforms, Floating Storage Units (FSUs), and Floating Production Storage and Offloading Units (FPSOs), including a vessel stripped of equipment or being towed.”

13

(a) ship equipment and parts manufacturers- in identifying and disclosing substance content of the equipment and parts;

(b) ship builders- identifying and disclosing substance composition of the ship (c) ship yards- identifying and disclosing installations and substances used, (d) ship owners- maintaining inventory (e) ship recycling facility- regulations in conducting environmentally sound

management, recycling plan (f) flag states- enforce certification regulations (g) recycling state- facilitate and authorize recycling facility (h) port states- inspection of certificates

The Hong Kong Convention comprises 21 Articles which are procedural in

nature, 25 regulatory provisions and 7 Appendices. Six voluntary guidelines are

currently being developed to provide clarifications, interpretations, and uniform

procedures for technical issues arising from the provisions of the Convention.

Three mechanisms are present in facilitating the safe and sound recycling of

ships namely:

I. Regulating the requirements for ships

The provisions of this convention take a comprehensive approach by

adopting a cradle-to-grave regulatory mechanism accounting for the entire life

cycle of a ship. This is done by regulating the design, construction, operation

and preparation of ships so as to facilitate safe and environmentally sound

recycling without compromising their safety and operational efficiency. Both

flag and port state parties are obliged to conform by prohibiting and restricting

use and installation of hazardous materials listed in Appendix 1 to the

Convention on ships flying their flags or whilst in their ports, shipyards, ship

repair yards or offshore terminals respectively.

An inventory mechanism identical to the “green passport” concept introduced

by the shipping industry is the fundamental feature of control and regulation.

The duty lies with each ship owner to establish and maintain an inventory

containing a list of hazardous materials onboard, and this list is to subsist

throughout the operating life of the ship.13 While this requirement is

mandatory for new ships upon commencing its operational life, older vessels

are given a grace period of 5 years to take effective measures. 14

13

Regulation 5 Hong Kong Convention 14

Id

14

Appendix 1 of the Hong Kong Convention designates the following materials as hazardous and

stipulates its control measures.

Hazardous Material Control measures

Asbestos New installation of materials which contain asbestos shall be prohibited.

Ozone-depleting substances New installations which contain ozone-depleting substances shall be prohibited on all ships, except that new installations containing hydro chlorofluorocarbons (HCHCs) are permitted until 1 January 2020.

Polychlorinated biphenyls (PCB)

For all ships, new installation of materials which contain Polychlorinated biphenyls shall be prohibited

Anti-fouling compounds and systems (AFS)

1. No ship may apply anti-fouling systems containing organotin compounds as a biocide or any other anti-fouling system whose application or use is prohibited by the AFS Convention

2. No new ships or new installations on ships shall apply or employ anti-fouling compounds or systems in a manner inconsistent with the AFS Convention.

II. Regulating the requirements and obligations for ship recycling facilities

From this regulatory perspective, each host state of such services is

obligated to grant prior authorization to such facilities to the extent that the

recycling facilities are in compliance with the Regulations (Art. 6). Such

authorization is to remain for a period not exceeding 5 years.

Ships accepted for recycling should comply with the Convention and attain

prior authorization for such purpose. The ship recycling facility will then need

to prepare a ship specific recycling plan corresponding to the ship‟s certificate

of hazardous substances. These plans which contain information on

measures that will be employed in the recycling activity have to be either

authorized or acknowledged by the recycling state authority and upon such

approval, communication is to be transmitted to the flag state, ship owner and

the recycling state. This ship recycling plan is instrumental under this

regulation in enabling flag states to certify the ships as „ready for recycling‟

upon which the ship owner may send the ship to the recycling facility in

question.

The facility is also required to develop and implement a Ship Recycling Facility Plan (SRFP) that covers: worker safety and training; protection of human health and the environment; roles and responsibilities of personnel; emergency preparedness and response; and systems for monitoring, reporting and record-keeping. Reg.9 of the Annex to the Convention requires ship recycling yards to provide a ship recycling plan for respective ships specifying the manner in which the ship would be recycled corresponding to the ships profile and inventory. Parties are required to adhere to the provisions by ensuring and taking effective measures in complying with the Convention.

15

III. Enforcement through the regulation of survey, certification, reporting

requirements, and inspection, investigation and detentions

Part C of the Regulations further subjects the ships to surveys and

certification.

Surveys

The first form of survey corresponds to the verification that the contents of the

International Certificate on Inventory of Hazardous Materials (ICIHM) are in

compliance with the Convention. Such surveys are to be conducted at

multiple stages, namely, at an initial stage before the ship is put to service or

before the ICIHM is issued; at a renewal stage not exceeding 5 years; at any

interval be conducted in general or in part according to circumstances which

may be made by a ship owner after the ship has undergone some form of

work (i.e., change, repair, etc) (Reg 10); and at a final stage prior to the end

of the operational life and recycling of a vessel.

The final stage survey also serves the purpose of verifying the fact that the

recycling plan corresponds to the information provided in the inventory and

that the ship recycling facility in question holds a valid authorization as per

the Convention.

Surveys may also be conducted under Reg.10 for the purpose of

enforcement by requiring ships to comply with the provisions of the

convention. These surveys may be conducted at the request of port states.

Reporting

Both, ship owners and recycling facilities are required under the Convention

to inform their respective states of their intention to engage in ship recycling,

thus enabling the flag state country to conduct a survey of the ship

corresponding to the recycling plan and issue the Ready to Recycle

Certificate (RRC).

The convention imposes further obligation of reporting on the recycling facility

in three instances; firstly, notification to the state authority upon preparation of

receiving a ship, notification on the planned start date upon the ships receipt

of the RRC, and a submission of a statement of completion upon the end of

the recycling activity.

In addition, Art. 12 of the Convention requires parties to report a list of

authorized recycling facilities, annual lists of ships that are recycled or

deregistered to be recycled, and information on violations of the Convention

and corresponding actions to the IMO.

16

Inspection, Investigation, and Detention

Article 8 to Article 10 of the Hong Kong Convention provides several

enforcement mechanisms ranging from inspection and investigations to

detentions. Although port states are given the power to inspect ships in ports

and offshore terminals by virtue of Article 8 of the Convention, this power is

arguably limited in scope to verifying the presence of a International

Certificate on Inventory of Hazardous Materials (ICIHM).

7. Ship recycling perspectives and practices

There are two possible routes which ship owners might take when selling a ship for

scrapping: either to contact recycling facilities directly or to use the services of a cash buyer.

Selling directly to a recycling facility is likely to be an option for larger shipping companies

that have a sizable amount of obsolete tonnage to be recycled and sufficient in-house

capacity to deal with a rather complex process and having in depth knowledge of the

recycling market.

The majority of ship owners sell end-of-life ships to cash buyers who purchase the vessel

either during its final voyage or at the point of handing over to the recycling facility. Cash

buyers usually have considerable knowledge of the recycling industry and their familiarity

with recycling facilities increases the likelihood of their finding a suitable yard.

Ship owners or cash buyers selling end-of-life ships to ship scrapping facilities, have a

choice of the „green passport‟ option or the „money-making‟ option. The former involves the

need to pay for a survey, an inventory of hazardous materials and a recycling certificate

before a ship can be accepted for recycling in an approved yard. The latter is when a ship is

sold to be demolished or beached at the yards in India, Bangladesh, or Pakistan. Owners

who choose the more profitable option could sell their ships for up to a third more than what

an approved ship recycling facility would offer.

Europe

Europe‟s recycling yards are seen as one of the weakest links in the global ship recycling

industry. Of the 400 – 600 ships that were scrapped annually during the past five years,

industry figures show that almost 80% went to yards in India, Pakistan and Bangladesh. The

main reason is due to economics; labour costs and expensive infrastructure, as well as

stringent conformity with pre-cleaning policies and hazardous materials inventories, make

recycling at European yards, more expensive compared to South Asia yards. Recycling at

European yards is done in an environmentally sound fashion and the industry complies with

mandatory rules and regulations which include a minimum wage and requirement for all

workers to be registered for social security reasons. There is a combination of semi-skilled

and skilled labour employed, which includes specialized workers with special licensing, such

as crane operators and hazardous material removal experts. There are also significant

17

investment and maintenance costs associated with both fixed/ mobile infrastructure/

equipment for the safety of hazardous materials.

The EU waste shipment regulation applies to all ships defined as "waste" under the EU

waste framework directive to mean when its holder discards or intends or required to discard

the ship. With regard to recycling facilities, EU waste legislation covers the management of

waste at all stages at all types of facilities thus even including interim operations, during the

entire period of shipment. Should an end-of-life ship contain hazardous substances listed in

Annex V of the regulation (e.g., asbestos or PCBs), it is likely to fall within the scope of the

export ban. On the contrary, non hazardous waste would be allowed for export purposes if

the facility of destination is capable of and compliant with environmentally sound

management of waste, and practices good human health and environmental standards

broadly similar to that in the EU. The regulation, directly applicable in member states,

requires them to take necessary measures to ensure that the regulation is enforced,

includes the setting of penalties which are effective, proportionate and dissuasive. Member

states must provide, inter alia, for inspections of establishments and undertakings in

accordance with the Waste Framework Directive, spot checks on shipments of waste or on

related recovery or disposal, and also the facilitating of the prevention and detection of

unlawful shipments. Member states are required to designate the competent authority or

authorities responsible for the implementation of this regulation and identify the permanent

staff and focal points responsible for cooperation and physical checks. Nevertheless,

problems have been identified in enforcing the regulation upon ships that are rendered

waste outside European water. Uncertainty has also arisen within national authorities on

regulating and enforcing shipment waste regulations on suspected end of life ships.

In addition to the EU Waste Shipment Regulation, the EU has also adopted a community

strategy15 aimed at elevating occupational and environmental safety of ship recycling

activities. In recognizing the fact that many EU decommissioned ships end up on South

Asian beaches for dismantling coupled with the knowledge that sound environmental and

health safety regulatory regimes are absent, the strategy intends to put into place measures

aimed to improve current standards particularly for applicability during the interim period

prior to the Hong Kong Convention coming into force.

The measures include:16

preparations to introduce measures on key elements of the new IMO convention, in

particular concerning surveys, certification and the inventory of hazardous materials

present on board ships;

15

” Summaries of EU Legislation “A Better Strategy for Ship Dismantling Practises” (05/05/2009) Available

at: http://europa.eu/legislation_summaries/environment/waste_management/ev0011_en.htm last

accessed: 15/09/2010

16 Commission of the European Communities (2008). An EU Strategy for Better Ship Dismantling:

Communication from the Commission to the European Parliament, the Council. The European Social and Economic Committee and the Committee of the Regions, COM (2008), 767 final. Retrieved at http://ec.europa.eu/environment/waste/ships/pdf/com_2008)767.pdf Last Accessed: 15/06/2010

18

encouraging voluntary industry action through various measures, such as awards for

exemplary “green” recycling activities, the publication of guidelines and a list of “clean”

dismantling facilities.

providing technical assistance and support to developing countries for training

programmes in safety and the establishment of basic infrastructure for environmental

and health protection;

improving the application of current rules on waste shipments by intensifying controls in

European ports, enhancing cooperation and exchange of information between European

authorities and the establishment of a list of ships ready for scrapping.

Acknowledging the potential gaps in the Hong Kong Convention, the strategy proposes that

the Commission examine the feasibility of the following measures:

develop a system for auditing and certification of ship recycling facilities worldwide and evaluate how EU ships might be encouraged to use this scheme;

ensure that warships and other government vessels which do not come under the scope of the convention be subject to Community rules for their “clean” dismantling;

establish a mandatory international funding system for “clean” ship dismantling.

United Kingdom17

The UK government initiative in regulating the ship recycling activity led to the adoption of

the national Ship Recycling Strategy in 2007 which is to apply to all ships above 500 gt

comprising government or governmental agencies‟ ships and also UK flagged commercial

ships except for those exempted.

The UK initiative strives to develop a strategic approach for the recycling of all UK flagged

ships consistent with the UK‟s national and international sustainable development

commitments. In so doing, the strategy hopes to encourage the development of capacity of

recycling ships in an environmentally sound way.

The UK government has also adopted a policy for its governmental vessels. In the event of

a sale of a government ship, the seller is to conduct an assessment on the condition of the

vessel and if deemed suitable, the ship is to be sent for recycling. If the ship is slated for

sale instead, a set of provisions will be negotiated for inclusion pertaining to the new

owner‟s responsibility upon the end of the ships life. This responsibility is based upon policy

that government would adopt in dealing with their own ships.

Provisions which will be included:

ensuring that the vessel‟s Green Passport is updated throughout the remainder of its

service and passed to the recycling facility;

disposal of the ship has to be with the prior written consent of the Government

17

This section provides a brief summary of “The UK National Strategy”

19

demonstrating that the vessel will be recycled in accordance with all applicable

legislation, and with reference to the IMO and Basel Guidelines on ship recycling and

dismantling respectively

ensuring that the selected recycling facility conforms with acceptable health, safety and

environmental standards.

In the event of a breach of obligation by the new owner, the government will review the

matter on a case by case basis in determining its possible recourse.

Where a government vessel is to be recycled, the contract would be tendered to an OECD18

country and minimum environmental, health and safety standards would be stipulated. If a

ship is to be exported, the principles of prior informed consent and environmentally sound

management are to be adhered to.

As The UK is a party to the EC, the EC Regulations adopting the Basel and Basel Ban

regulations are applicable and the Strategy is aligned to this extent. Thus all export and

import of recycling bound ships are rendered „waste‟ as per the Basel Convention and the

ships will have to conform to the green passport requirement, requirements of notification,

ban on export of hazardous waste (ship) to non OECD countries.

In addition to pre-existing legislations, the UK government recommends the application of

the IMO guidelines by ship owners in every stage of a ship‟s life cycle namely in considering

design of ships and ships‟ equipment to facilitate recycling

inventory of hazardous materials onboard and preparation of a Green Passport (for new

builds and existing ships);

selection of a recycling facility which practices reasonable standards

preparation of a ship recycling plan

pre-decontamination

gas freeing

Ship owners are encouraged to ensure their practices correspond to this strategy in

preparation of the Hong Kong Convention.

18

Countries party to the Convention on the Organisation for Economic Co-operation and Development

(OECD) Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France,

Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico,

Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden,

Switzerland, Turkey, United Kingdom, and United States. – OECD website available at

http://www.oecd.org/document/58/0,3343,en_2649_201185_1889402_1_1_1_1,00.html Last Accessed:

15/10/2010

20

The Strategy also sets out a set of recommendations for recycling facilities whereby

interested ship recyclers in the UK are encouraged to consult the Defra guidance „An

Overview of the Ship Recycling Process in the UK‟ in addition to engaging with relevant

regulators at an early stage. The Strategy also seeks to boost capacity and develop the

information base of ship recycling activities and welcomes the establishments of joint

working groups.

In addition to providing for a national recycling strategy for ships, mechanisms were

implemented in 2003 for the sound placement of an end of life vessel on the sea bed off the

UK coast.

The National Maritime Authority, the purchaser of end-of-life ships is required to apply for a

licence under the Food and Environment Protection Act 1995 (as amended) to undertake

the deposit of the fully cleaned vessel on the seabed and the Licence granted by the Marine

Consents & Environment Branch of the Department of Environment, Food and Rural Affairs

(Defra) in 2003 as the regulator for this activity. 19 The terms of the licence stipulated

provisions for the pre-cleaning, placement and subsequent monitoring of the vessel.20

The requirements of the Licence include:21

full stripping and cleaning of the vessel in accordance with the licence issued by Defra;

Licence Holder to provide the Licensing Authority with recognised certification that the vessel was, immediately prior to its placement, free from asbestos, PCBs, ammunitions, radioactive materials, refrigerants and halons;

Licence Holder to allow a final inspection and certification of „fitness for placement‟ by appointed environmental inspectors;

vessel be monitored for a period of ten years beginning on the first day on which the vessel was placed on the seabed;

sufficient funding be available for appropriate remedial action should evidence arise of any significant adverse environmental effects on the marine environment or the living resources it supports as a result of placement of the vessel.

China 22

19

OEWG-V/8: Environmentally sound management of ship dismantling „Information on pre-cleaning and

decontamination‟ Submitted by United Kingdom

20 Id. The licence was created in accordance with guidance set out in the Convention on the Prevention of

Marine Pollution by Dumping Wastes and Other Matter (the London Convention 1972): London

Convention Waste-Specific Guidelines for Assessment of Vessels.

21 Supra 17. Other authorisation included approval from the Department for Transport, under the Coast

Protection Act 1949, and agreement from the Crown Estate Commissioners as the owner of the seabed;

the conduct of an Environmental Impact Assessment that examined the environmental conditions at the

placement area. This assessed the likely impact on marine life due to the shifting nature of the seabed.

21

More than 50 ship recycling yards exist in China. Large, ocean-going vessels are handled in

the two major ship dismantling regions of China of the Pearl River Delta and Yangtze River

Delta. Smaller yards, located along rivers, are responsible for disposing of fresh water ships.

The total ship dismantling capacity is currently between 3 - 3.5 million LDT a year.

Many ship recycling yards such as the Zhongxin and Shuangshui yards in Jiangmen, and

the Xiagang Changjiang yard in Jiangsu province have obtained international certification for

Environmental Management –ISO 14001 and for Occupational Health Safety Management –

OHS18001. These major yards have mastered the technology to dismantle all types of ships

with the exception of nuclear-powered vessels.

The China shipping recycling industry has invested greatly in environmental and safety

protection as well as in employees‟ health and safety. The yards properly treat the ballast

and bilge waters from the ships at waste water disposal centers. Asbestos, PCBs and other

hazardous materials are transferred to qualified subcontractors for further treatment and

disposal

Workers in the industry are said to maintain a high level of proficiency through good, on-

going training. Safety, health, and insurance are well covered for them as are labor rights.

Some technologies of ship recycling have reached advanced levels in the world, such as the

facility for dealing with waste water at Zhongxin‟s yard, and the treatment of asbestos in the

Changjiang yard. The advanced ship dismantling yards in China are developing and

applying new technologies for environmental protection such as Rough Paint Treatment

(RPT) for ships‟ plates facility now installed at Zhongxin.

The cooperation between Holland P&O Nedlloyd and Chinese Changjiang Ship recycling

Yard is a model solution to resolve the issues arising from shiprecycling. From 2000 to 2006,

a total of 21 retired ships from P&O Nedlloyd were dismantled in the Changjiang yard in a

„green‟ manner. Resulting pollution levels are greatly reduced and the workers enjoy healthy

and safe working conditions.

The China National Ship recycling Association (CNSA) was established in 1991. Under the

guidance of the government, the aim is to harmonize the technical development of the

industry and promote the growth of associated companies.

22

“ Present Situation and Future Development of the Ship Recycling Industry in China‟ power point

presentation by Mr. Xie Dehua Executive vice-chairman & Secretary-general of China National Ship

recycling Association; June 6, 2007 Hong Kong, China

http://www.google.com.my/url?sa=t&source=web&cd=1&ved=0CBcQFjAA&url=https%3A%2F%2Fwww.bi

mco.org%2Fsitecore%2Fshell%2FControls%2FRich%2520Text%2520Editor%2F~%2Fmedia%2F85FFC

57576924EEE90F65E9E5B7F1165.ashx&ei=5RK8TIXtAsyXcavxxLYB&usg=AFQjCNEN3JsaTR3wUDoz

oCsaL4OLUC0Lyg Last Accessed: 18/10/2010

22

The Regulation of Environmental Protection for Ship recycling in China was adopted in

1988, requiring all ship yards to pass an environmental assessment in addition to scheduled

and random inspections and annual licensing renewal by local governmental authorities.

China brought forward “The Recycle Economy Law (draft)”, which gives preferential tax

treatment to the companies which utilize resources most effectively. The government

encourages companies to use advanced technologies, to save energy and resources and to

reduce pollution. Quality supervisory measures were also introduced to facilitate equipment

management. Maritime affairs management was established to manage the surface and

underwater operations involved in ship dismantling, such as oil cleaning, explosion

detection, and cutting. Security supervision was also put in place to establish the system of

security and emergency management; to carry out periodic and random spot inspections.

A Green ship recycling general regulation was introduced and came into force in 2005. This

regulation is said to reflect the concept of security and environmental protection in ship

recycling industry, bring forward the technology and the management regulation as the

basic standard for Chinese ship recycling companies.

Basic requirements under this regulation include

the control of water pollution during ship dismantling

the control of air pollution during ship dismantling

the control of noise during ship dismantling

safety requirements during dismantling

basic requirements for health of employees

special requirement for health of workers who work with asbestos.

special requirements for health of personnel who engages in cutting and hot work.

Aacident prevention and response measures in emergencies

„Green‟ ship dismantling management re certification of „green‟ ship dismantling

companies

South Asia

India, Pakistan and Bangladesh accounted for more than 80% (in terms of tonnage) of the

larger end-of-life ships that were globally dismantled between 2004 and 200823. Availability

of cheap and surplus labour, rudimentary environmental and labour standards and their

modest implementation, huge domestic market for scrap steel, and topography suitable for

simple beaching operations have lent a decisive competitive edge to ship-breakers in these

countries24. The ship recycling industry provides valuable materials like steel to these

23

Commission of the European Communities, An EU Strategy for Better Ship Dismantling: Communication from the Commission to the European Parliament, the Council, the European Social and Economic Committee and the Committee of the Regions, COM (2008) 767 final, (Nov. 2008), available at: http://ec.europa.eu/environment/waste/ships/pdf/com_2008)767.pdf 24

International Federation for Human Rights (FIDH), Where do the „floating dustbins‟ end up? Labour rights in ship breaking yards in South Asia: the cases of Chittagong (Bangladesh) and Alang (India), 4 (Dec 2002), available at: http://www.fidh.org/IMG/pdf/bd1112a.pdf Last Accessed: 17/06/2010

23

economies at relatively cheaper price. Ship breaking yards in Alang, India, contribute an

estimated 15% of the total steel output of the country. Similarly, Bangladesh which lacks any

significant domestic iron output relies heavily on ship breaking to supply steel to its factories.

In addition, millions of jobs are generated through ship breaking operations. More than

40,000 workers are directly employed by the Alang yards, and another million workers are

dependent for their survival on the secondary industries that have sprung up from ship-

breaking in India. Ship-breaking is not considered to be a regulated industry in

Bangladesh25.

Both Bangladesh and India are making efforts to make ship-breaking safer and greener.

However, environmental, health and safety standards are issues directly linked with the level

of economic development, as such, it is unrealistic to expect developing countries to match

the high standards for environment, health and safety of developed countries. Mitra (2005)

argues that the attempt to impose standards of developed nations on workers and industries

located at developing countries only serve the interest of the former at the cost of the latter

and such approach would lead to economic inefficiencies, prevent technological innovation

and mask the unseen costs borne by poor countries.

Bangladesh

Ship breaking activity in Bangladesh is concentrated in Sitakund (Bhatiary to Barwalia), just

north of Chittagong city on the Bay of Bengal. It is of key significance from an economical

point of view in providing a source of employment. Nevertheless, the large scale activity is

yet to be recognized as an industry and thus remains unregulated at large thus posing

problems at multiple levels. The breaking activity takes place along the muddy beaches

where no specific equipment is used but for hand tools and brutal force. Employment

functions without appointment letters and unions are disallowed making it difficult to

advocate workers rights. 26

The Labor Law Act 2006 has provisions on working conditions, health and compensation

mechanisms but was deemed ineffective in enforcement and compliance due to lack of

political will and resources27. The Ministry of Labour and Employment has initiated the Safe

and Environment Friendly Ship Recycling project, with the support of the United Nations

Development Programme (UNDP) and the International Labour Organisation (ILO).

However, the effects have yet to be seen.28

A high court directive in 2009 led the Commerce Ministry to incorporate a condition in its

Import Policy Order 2009-2012, which requires an exporter of a vessel to submit a pre-

25

G. Feringa (2005). Ship Recycling in Bangladesh – Findings of Baseline Survey. Draft report to the ILO. (2005) 26

Young Power in Social Action (YPSA) Ship Breaking in Bangladesh „ Environmental pollution‟

http://www.shipbreakingbd.info/Environment.html Accessed on 17/09/2010

27 Ship Breaking in Bangladesh http://www.shipbreakingbd.info/Environment.html

28 ID

24

cleaning certificate from the country of origin stating that the ship was cleaned before

exportation.29 However, such regulatory regime was short lived as, in early 2010, due to

repercussions of the directive resulting in the sky rocketing of steel prices and economic

implications, the Bangladesh government amended the position to no longer requiring

documentation certifying toxic free status of ships bound to the country for recycling. 30

India

India is one of the dominant players in the ship recycling industry which is actively carried

out in Alang, Gujarat. It has been reported that almost 40% of old ships are broken in

India.31 The Government of India has recognized ship breaking an industry and in recent

years two regulatory regimes have been introduced namely the Supreme Court directive,

and the 2006 Regulations. 32

The Judgment of the Supreme Court of India regarding ship recycling in September 2007,33

provided some framework on the regulating of the activity. Key aspects addressed include

the procedure for anchoring, the requirement for physical verification of the hazardous

substances by ensuring „Gas Free‟ conditions and Fit for „Hot Work‟ conditions and prior

removal of radioactive substance. Procedure for ship dismantling was also identified by the

court to require authorization and approval of a Recycling Facility Management Plan by the

State Pollution Control Agency followed by approval of a dismantling plan by the State

Maritime Authority. The Government of India was also recommended to prepare a

comprehensive framework incorporating the above procedures.

A new policy governing the Ship Recycling industry in Alang is the Gujerat Maritime Board

(GMB) Ship Recycling Regulation 2006 which was adopted in 2008. These regulations

mainly facilitate the authorization and the granting of „permission‟ in operating a ship

29

Gurumia.com „Critics blast Bangladesh‟s ship-breaking law move:Bangladesh climbdown over toxic

ship‟ Available at: shttp://gurumia.com/2010/04/13/critics-blast-bangladeshs-ship-breaking-law-move/ Last

Accessed15 September 2010

30 Id

31 Martin, Andrew “Ship Breaking in the Beach of Doom” Direct Action available at

http://directaction.org.au/issue6/ship_breaking_on_the_beach_of_doom Last Accessed : 20/09/2010 32

Ship Recycling in India: compliance with the IMO convention available at http://webcache.googleusercontent.com/search?q=cache:8vxJlAHHg-cJ:shimizu-kazumichi.com/source/sr_symposium2010/05-forum2_mr_%2520ajoy_%2520chatterjee.pdf+alang+recycling+regulations&cd=8&hl=en&ct=clnk&gl=my Other regulatory mechanisms can be found in the provisions of other domestic legislation such as Air

(Prevention & Control of Pollution) Act, Water (Prevention & Control of Pollution) Act, Factory Act for

Safety and Health related aspects, Explosive Act for Gas Free for Hot Work Conditions, AERB Rules for

Management of Radio Active Wastes, Workers Compensation Act and Labor Laws

33 Research Foundation of Science vs. Union of India & Anor. Indian Supreme Court Order of 6

September 2007,Available at http://judis.nic.in/supremecourt/qrydisp.aspx?filename=29507 Last accessed: 17 September 2010

25

recycling „plot‟ (facility).34 In addition, Schedule V of the Regulations stipulate inter alia the

requirements that works to be employed ought to have attained basic training and hold

relevant certificates which is received from a recognized institution, ship recyclers have to

adopt technologically savvy methods and equipment in executing the activity, penalty is

imposed upon the casualty of workers, and requiring the employers to provide housing

within a specific time. 35

In addressing the issue of waste management, a Hazardous Waste Management System

developed by GMB operated by M/s Gujarat Environment Protection Infrastructure Ltd

(GEPIL) is entrusted to manage such waste by providing land fill sites for disposal of

asbestos & glass wool waste and hazardous wastes established compliant with legislative

requirement of construction aspects of land fill and operational aspect under the frame work

of Central Pollution Control Board Criteria.36

A Safety Training and Labour Welfare Institute is also present in Alang which conducts

various class room training of labors of various jobs of ship recycling on safety and waste

management, and different displays posters & pictures communicating safety priority

messages. 37

Furthermore, ship yards in Alang provide ship owners with opportunities of conducting

independent inspections to determine compatibility of the facility with green recycling

methods and standards of worker safety and health. 38

Non-governmental Organisations

While developed nations continue to enhance ship recycling standards and developing

nations which dominate the industry receive immense criticism, international regulations and

guidelines continue to affirm and reinstate the former conveniently disregarding the

difficulties and challenges faced by the latter nations. As important as regulations are the

provision of adequate funding mechanism is essential to render the implementation and

enforcement effective.

34

Gujerat Maritime Board 2006 Ship Recycling Regulations available at http://www.google.com.my/url?sa=t&source=web&cd=2&ved=0CCAQFjAB&url=http%3A%2F%2Fwww.sriaindia.com%2Fimages%2FNew%2520Policy%2520GMB.doc&rct=j&q=ship%20recycling%20regulations%202006%20india%20gujerat&ei=YN3pTOG3L5PsvQO24f3CCA&usg=AFQjCNHs4Hkz0NISNDPMEicmLPOUR_niyw Last Accessed: 19 September2010 35

ID. 36

Gujerat Maritime Board „Visit of IMO to Alang‟ available at http://gmbports.org/showpage.aspx?contentid=1462 Last Accessed: 19 September 2010 37

ID. 38

„Ship Recycling in India- Myth vs. Fact‟ available at http://webcache.googleusercontent.com/search?q=cache:JkRAotfG_44J:www.gmsinc.net/gms/news/ship-recycling-in-india.pdf+indian+caselaw+and+guidelines+for+ship+recycling+facilities&hl=en&gl=my : Last Accessed 22 September 2010; STOLT Neilson sent their own inspectors and upon vetting several yards at Alang and being satisfied with standards implemented, ships were sold to India for recycling.

26

Such initiative corresponding to the issue of funding was visited by „Greenpeace‟ in 2003

which led to the publication of the „Ship Recycling Fund- Matching Corporate Responsibility

with Shipping Practice‟39 report.

The report not only highlights the ability of the industry to bear financial costs arising from

the safe handling of end-of-life ships, but also goes further in depicting the nature of the

costs which are deemed manageable and constituting a small fraction of the overall turnover

of the industry.

The report identifies two funding mechanisms namely contributions at the new-built phase,

and a second option is contribution subsisting throughout the ships life. The latter option

presents ideas to include recycling charges in the insurance premium of ships, as well as

the suggestion to levy the recycling contributions through the Flag State.

Recommendations forwarded include:40

the IMO and the Basel Convention were urged to develop a set of mandatory regulations

a point of reference for a funding facility identical to the Global Environmental Facility under the United Nations Environmental Program ought to established

governments in ship breaking countries need to set and implement a uniform set of criteria under which ship breakers can apply for financial input from the Fund to upgrade their existing scrap-facilities and finance clean scrapping.

states need to endorse the Fund, for example by making a donation to the fund a standard requirement for ships

understanding by ship-owners that zero pollution ship breaking is a service to the shipping industry and thus they should provide a minimum of 0.5% of their annual turnover from each of their vessels as a contribution to the Ship Recycling Fund.

insurance companies like P&I clubs need to consider what role, if any, they can play in maintaining or establishing the Fund in a similar way to the inclusion of wreck removal costs in the overall P&I bill.

Countries that have signed the Hong Kong Ship Recycling Convention

As of 31of October 2010, the Convention has been signed, subject to ratification or

acceptance, by France, Italy, Netherlands, Turkey, and St. Kitts and Nevis. The earliest the

Convention is expected to enter into force is 2015.

France is the first country to sign, showing its commitment to work actively at the

international level to advance the entry into force of the Convention. Meanwhile, France will

support an EU approach to apply its provisions in advance in agreements with third

39

GREENPEACE INTRODUCTION „A Ship Recycling Fund, matching corporate responsibility with shipping practice‟ Greenpeace commissioned Available at http://www.google.com.my/url?sa=t&source=web&cd=2&ved=0CBsQFjAB&url=http%3A%2F%2Fwww.greenpeace.org%2Findia%2FPageFiles%2F128201%2Ffund.pdf&rct=j&q=GREENPEACE%20INTRODUCTION%20%E2%80%98A%20Ship%20Recycling%20Fund%2C%20matching%20corporate%20responsibility%20with%20shipping%20practice%E2%80%99%20Greenpeace%20commissioned%20&ei=N4DvTPKfKo-AvgPD5oSRDg&usg=AFQjCNEdubAbBeWVu7afRJUQrGQXkyekZg Last Accessed: 11/10/2010 40

ID

27

countries, thus exemplifying the important role Europe will play in supporting the upgrading

the shipyards of developing countries.41 In 2009, the top five ship recycling nations were

Bangladesh which scrapped 65% of total scrapped tonnage; India, 21%; followed by China,

Pakistan, and Turkey which account for the remaining 10-15%. It is observed that France,

Netherlands, and Italy are members of the European Union; are ship owning nations; and

have ship recycling facilities. Turkey is the only signatory representing the major ship

recycling nations. The Saint Kitts and Nevis registry has registered over 150 ships going for

recycling in the last 4 years and has been active in assisting buyers, banks and lawyers

involved in purchasing ships for recycling.

8. Analysis of the Hong Kong Convention

The following section assesses the strengths and weaknesses of the Hong Kong

Convention, and identifies the threats and opportunities arising from its ratification and

implementation.

Strengths

1. Recycling, Sustainable Development and the Human Right to Development

This Convention seeks to translate the principle of sustainable development into a

framework for the ship recycling industry by seeking to regulate and not impose a total

ban on the external trade of recycling of dilapidated ships. It thus provides scope for

elevating the standards of health and environmental safety in this industry by not

restricting ship recycling nations from developing through this industry. The economic

value of the ship recycling industry to recycling developing states is thus appreciated in

fostering economic and employment opportunities.

2. Regulating the “make” to “break” of a ship.

In accounting for every stage of a ships life cycle, it makes it easier for the process of

recycling as it saves time and costs in addition to providing caution through the inventory

system.

Furthermore, targeting the design, construction and management of ships helps in

encouraging the search and innovation for alternative substances thus promising a

future for ships with zero composition of hazardous materials.

This mechanism also provides for a delegated structure of responsibility thus allowing

respective shipping sectors be it ship building, ship repairing or ship equipment to

internalize costs to this extent. This in turn is an implication of adherence to the principle

of “common but differentiated” responsibility.

41

Wohrer (2010)

28

3. Reporting to IMO Article 12

Another significant improvement is the information sharing by state parties to IMO by

reporting on the respective authorized recycling facilities, ships recycled, and relevant

violations as per Article 12. Establishment of such a knowledge base is notable in

facilitating compliance.

4. Harmonization of Standards

The HKC incorporates an enforcement regime coupled with technical requirements

within the text which is of binding nature unlike previous international efforts which were

mere guidelines and not mandatory. Regulations governing the recycling facilities in

particular under Annex 1 provide scope for harmonization of international standards.

5. Amendment of list in appendices

By providing room for amending the list of hazardous materials, future substances which

may pose environmental and health threats will not go unregulated.

Weaknesses

1. Exclusion of government/ navy vessels, domestic vessels, and those below 500 gwt

A notable issue relates to the exempt category of ships which are known to have similar

hazardous compositions and yet remains unregulated. This exemption is thus likely to

result in inconsistencies in the regulatory systems.

2. Absence of provision for an independent assessment as check and balance

With regard to the authorization and certification of ship recycling facilities, it has been

argued that the failure of the Hong Kong Convention to appoint or provide for an

independent institution to conduct assessments may lead to abuse due to potential

vested interests. The credibility of the enforcement mechanism is thus possibly

compromised. 42

3. Beaching operations

As a ship has to be fully operating in a beaching process, parts and equipment remain

onboard the vessel. Thus, in the event of beaching, a high degree of hazardous

substance are released and directly exposed to the workers and the environment.43 The

42

EU Strategy on Better Ship Dismantling 43

Supra 8

29

Hong Kong Convention however fails to neither restrict beaching operations nor

mandates pre-cleaning of vessels.

Again a gap is present which attacks the very purpose of the Convention. The increasing

environmental and health concerns amongst the international community pertaining to

the beaching operations in the Southern Asia Region was a driving factor that led to the

adoption of the Hong Kong Convention however, the issue is arguably amplified through

the implied legalization of this activity under the convention. 44

4. Burden of cost

Principle 16 of the Rio Declaration invokes the Polluter Pays and Producer

Responsibility Principles by demanding the polluter to internalize such costs45. However,

the Convention having cited the Rio Declaration on a varying principle, conveniently

neglected to address the question of the costs of disposing end-of-life ships which are

laden with toxic materials, thus providing a refuge for wealthy ship-owners (usually from

developed nations) to avoid liability and responsibility and thus burdens recycling states

with economic, environmental and social costs.46

5. Trade with non state parties

The export of end-of-life ships as between parties and non parties of the Hong Kong

Convention is not addressed by the Convention thus enabling ship-owners to export

ships to non party and non compliant states. Demand as such would not encourage

corresponding recycling states to ratify the Convention and this in turn would provide

scope for distortion of disseminated information as reporting to IMO is not applicable.47

Although Article 3, paragraph 4 provides that states should refrain from providing more

favourable treatment to non parties, the provision remains ambiguous in scope thus

potentially undermining intended protection.

44

Basel Action Network „New "Ship Recycling" Convention Legalizes Scrapping Toxic Ships on Beaches of Poor Countries – "A major step backwards‟ Available at http://www.ban.org/ban_news/2009/090515_major_step_backwards.html 45

Rio Declaration on Environment and Development‟ Principle 16 “National authorities should endeavour

to promote the internalization of environmental costs and the use of economic instruments, taking into

account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to

the public interest and without distorting international trade and investment. “ Available at;

http://www.unep.org/Documents.Multilingual/Default.asp?documentid=78&articleid=1163 Last Accessed: 15/10/2010

46 Legal Shipwreck: IMO Convention Legalizes Toxic Ship Dumping Running from Basel to Turn Back

the Clock, Available at http://www.google.com.my/url?sa=t&source=web&cd=1&ved=0CBUQFjAA&url=http%3A%2F%2Fwww.ban.org%2FLibrary%2FBP05_May_2009.pdf&rct=j&q=legal%20shipwreck%20running%20to%20basel%20to%20turn%20back%20the%20clock&ei=3GnvTNTWJISGvgP4-dzEDQ&usg=AFQjCNEuz0RRacaXm5H2PGcGh3N1621ibw Last Accessed: 14/06/2010 47

Supra 8

30

6. State to State Notification

Having made provisions on the need for notification between recycling facilities and the

corresponding state authority and ships to flag states, the requirement for notification as

between ship recycling states and flag states remains neglected under the Hong Kong

Convention. As such, recycling states and flag states have arguably weak rights in

objecting the entry of ships or the sending of ships respectively.

Although recycling states may opt for enforcement through national legislation invoking

rights available under UNCLOS48 or Article 9 of the Hong Kong Convention by denying

entry, the absence of prior knowledge would deter the state from taking effective

measures. 49

In the event that a flag-state wishes to object to the sending of a ship to a recycling

facility which is deemed inadequate, the State may request for information pursuant to

Article 7 on the premise of making a decision to authorize the facility. Non co-operation

may amount to refusal of the grant of a Ready for Recycling Certificate. However,

reflagging of the vessel would render the refusal redundant.

7. Non criminalization of illegal traffic

The Hong Kong Convention, unlike the Basel Convention neglects to explicitly obligate

State Parties to criminalize illegal traffic in hazardous wastes through domestic

legislations. Although Article 10 does require states to prohibit violation of the convention

and impose sanctions for such violations, such imposition of sanctions is not the

equivalent of criminalization. 50

8. Principles of international Environmental Law

The text of the Hong Kong Convention appears to be incompatible with numerous

principles of International Environmental Law although it makes reference to several

either explicitly or implicitly. The principles of sustainable development and precaution

have been expressly employed whereas an element of common but differentiated

responsibility may be implied through the regulations employed.

48

United Nations Convention on the Laws of the sea- Provisions applicable to this point include Article

194 which compel member states to individually or jointly develop measures to prevent, reduce and

control pollution of the marine environment; Article 211 which governs the pollution from vessels allows a

state to adopt state legislation applicable to foreign vessels with the aim of preventing, reducing and

controlling pollution with due publicity of these laws; Article 218 which governs enforcement by port states

to include instances where ships are likely to pollute internal waters.

49 Supra 8

50 Supra 8

31

However, the failure to address the polluter pays principle potentially tips the balance

created by the implied „common but differentiated responsibility‟ spirit present in the

Convention in that the burden of cost is conveniently left to impoverished nations as

discussed above.

In addition, the IMO by adopting the Hong Kong Convention has been accused of

inaction in altering the current situation whereby a handful of impoverished developing

nations are managing the hazards and risks of over 90% of the world‟s toxic ship waste

thus operating in direct contradiction with principle 14 of the Rio Declaration which calls

for non transference of harm from one state to another.51

This Convention is also arguably in defiance of the principle of Environmental Justice

which establishes that no peoples should receive a disproportionate burden of global

harm, and further undermines the principle of National Self-Sufficiency in waste

management embodied in the Basel Convention (Article 4,2,b).52

Opportunities

1. Scope for stricter domestic legislation Art. 2

Nevertheless, in striving to elevate and secure environmental and health standards in

the ship recycling industry, individual or collective initiatives through the implementation

of stricter domestic regimes under Art. 1 of the Hong Kong Convention appear to provide

hope. For instance, should major shipping states implement legislation requiring all new

ships to come with an inventory or even a disposal insurance plan, ship providing

nations would be coerced into adhering to environmentally safe and sound building

whereas insurance companies may start providing for „package insurance policies‟ to

cover ship disposal. Although the implications of stricter domestic measures may seem

farfetched and is sometimes contested, such measures have been successfully

employed under some international agreements an example being under the CITES

framework. 53

2. Prospects for being involved in green ship recycling

Whilst it may be that Malaysia will not be a recycling state, there are opportunities in ship

recycling for Malaysia in developing green shipbreaking technology and in maritime

services.

51

Supra 14 52

Supra 14 53

The Convention on International Trade in Endangered Species (CITES) allows member states to employ stricter regulations in the protection of endangered wildlife than that provided for under the Convention thus allowing instances of total ban of trade in certain species where otherwise regulated trade is permissible. Australia and the United States are known to have adopted such measures.

32

It is observed that the problem with ship recycling lies with the low-technology processes

that are used to break highly sophisticated ships. This imbalance can be remedied with

the introduction of affordable technology to assist the ship recycling nations in making

ship breaking a safer and cleaner industry.

Greendock, a Dutch company and a leading European ship recycling technology

provider has begun introducing new solutions and technology to make ship breaking in

Bangladesh safer and cleaner54.

Ships will be designed and constructed in a way that will ensure that their eventual

scrapping would be safe and environmentally sound. The IMO and Basel Convention

guidelines on shipbreaking both require detailed documentation in the form of a

hazardous material inventory and survey and maintenance records. This is potentially a

new revenue-generating area for maritime service providers. For example,

Germanischer Lloyd, Ship Classification has begun providing services catered to ship

recycling55.

Ship owners too can take advantage of the new legal regime for ship recycling by

exploring the feasibility of investing in green ship recycling yards. The approach taken by

AP Moller-Maersk and their collaboration with China‟s Changjiang Ship Recycling Yard

is an example to emulate56.

There is even opportunity for Flag Administration. There are open registries which

specialize in older fleets: such as Cambodia, Dominica, Mongolia, Saint Kitts and Nevis,

Saint Vincent and the Grenadines, and Tuvalu57. Reference could be made to the Saint

Kitts and Nevis Registry58 which has made a business out of assisting buyers, banks

and lawyers in purchasing ships for recycling.

Threats

1. Potential delay or non entry into force

The nature of the Article 17 requirements coupled with the ambiguity pertaining to the

doctrine of equivalency between the Hong Kong Convention and the Basel Convention

pose threats in delaying the entry into force of the latter. Such delay is detrimental

considering the high volume of ships destined for recycling in the coming years.

2. Marginalizing yards featuring labour-intensive operations

54

http://www.newstoday.com.bd/index.php?option=details&news_id=12532&date=2010-11-13 last accessed: 13 November 2010 55

http://www.gl-group.com/en/sio/ships_in_operation.php last accessed: 9 December 2010 56

http://bymnews.com/news/newsDetails.php?id=71488 last accessed: 7 July 2010 57

UNCTAD (2009). Review of Maritime Transport, 2009. 58

http://www.stkittsnevisregistry.net/News.htm last accessed: 9 December 2010

33

Strict compliance with the Hong Kong Convention would entail significant capital

investment in infrastructure. Whilst the Convention did not specifically prohibit beaching

as an acceptable method for ship breaking, its guidelines nonetheless suggest that there

is a need for ship yards to be equipped with facilities to break different types of ships.

This practically means that yards which feature labour-intensive operations are ruled out

as suitable or approved ship recycling yards. By denying poor countries access to

industrial wastes, the Convention is reducing their ability to develop appropriate

technologies59. Ship breaking is an industry which contributes to employment and meets

the steel demand for developing countries. Shifting ship dismantling to high-tech yards in

Europe would threaten the livelihood in developing countries.

3. Issue of reflagging

The issue of reflagging a ship to a „flag of convenience‟ permeates the ship recycling

industry as noted in the 2009 „Fairplay‟ magazine. It has been reported that evasive

action is sought through cash purchasing of dilapidated ships only to reflag the vessel

under a jurisdiction of weaker standard of regulation, only to be delivered to India,

Pakistan, and, Bangladesh for recycling. To this extent, some comfort is provided

through the certification, inspection, and detention provisions of the Convention.

Nevertheless, existing gaps will not prevent unscrupulous ship owners from selling ships

close to the end of its operational life to willing buyers in ship recycling states through

the potential abuse of the exempt class of domestic ships.

The non reflective nature of the two categories illustrated in the table below is a plausible

indication of the degree to which reflagging takes place. States which do not appear in

the top 25 list of flag states by total tonnage but emerge as top 25 recycling states

include Tuvalu, St. Kitts-60. In addition, the top seven flags which accounted for 19.5 %

of the world recycling tonnage in 2008 have been reported as only holding 2%

composition of world operating fleets thus indicating significant flagging of ships to these

states61.

59

Mitra, B (2005), page 7 60

ID 61

ID

34

Table 4: Top 25 flag states by scrap tonnage and top 25 flag states by tonnage

Top 25 Flag states by scrap tonnage gt Flag states by tonnage gt

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

Panama (7. 858.946)

Liberia (3.782.618)

Tuvalu (1.622.954)

Malta (1.268.069)

St. Kitts-Nevis (1.174.742)

St. Vincent & Grenadines (985.977)

Bahamas (866.141)

Republic of Singapore (820.376)

Unknown (715.099)

Cyprus (708.852)

Hong Kong (706.488)

Mongolia (668.009)

Norwegian International Register (621.710)

Marshall Islands (602.969)

United States of America (511.715)

Greece (395.253)

People's Republic of China (377.692)

Comoros (270.651)

Cambodia (263.694)

India (217.203)

Philippines (201.104)

Russian Federation (199.849)

Republic of Korea (193.419)

Turkey (186.214)

Panama (183.503.000)

Liberia (82.389.000)

Bahamas (46.543.000)

Marshall Island (42.637.000)

Singapore (39.886.000)

Hong Kong 39.100.000)

Greece (36.822.000)

Malta (31.633.000)

China (26.811.000)

Cyprus (20.109.000)

Norway (18.311.000)

Germany (15..283..000)

U.K. (15.247.000)

S. Korea (14.145.000)

Italy (13.600.000)

Japan (13.536.000)

U.S.A. (11.268.000)

Denmark (10.570.000)

Bermuda (9.952.000)

Antigua & Barbuda (9.537.000)

India (9.283.000)

Isle of Man (8.965.000)

Netherland (8.249.000)

Russia (7.527.000)

35

25 Dominica (158.505)

Malaysia (7.078.000)

World total (27.821.376) World total (830.704.000)

Source: This table has been drawn up based on data on shipbuilding statistics, September 2009 from the Shipbuilders‟ Association of Japan for the top 25 flag states by tonnage and on data from EMSA, LMIU for the top 25 flag States by scrapped tonnage.62

62

European Commission DG Environment “Support to the impact assessment of a new legislative proposal on ship dismantling” Final report December 2009

36

Table 5: Summary of the Strengths, Weaknesses, Opportunities, and Threats of the HK Convention

Strengths 1. Recycling, sustainable development and the human right to development

2. Regulating the ‘make’ to ‘break’ of a ship

3. Reporting to IMO Article 12

4. Harmonization of standards

5. Amendment of list in appendices

Weaknesses 1. Exclusion of government/ navy vessels, domestic vessels and those below 500

GRT

2. Absence of provision for an independent assessment as check and balance

3. Beaching operations

4. Burden of cost

5. Trade with non state parties

6. State to State notification

7. Non criminalization of illegal traffic

8. Incompatibility with principles of international environmental law

Opportunities 1. Scope for stricter domestic legislation Article 2

2. Prospects for being involved in green ship recycling

Threats 1. Potential delay or non entry into force

2. Marginalizing yards featuring labour-intensive operations

3. Issue of reflagging

37

9. Relevance of the Hong Kong Ship Recycling Convention to Malaysia

Malaysian shipping represents 0.85% of merchant tonnage (above 300 GRT) and 95% of its

international trade (by volume) is carried by ships. The age profile of the national fleet

averages 11.1 years63, which is considered relatively young, compared to the average age

of ships scrapped in 2008 which is 31.1 years (tankers), 30.6 years (dry bulk carriers), 29.1

years (container ships), and 33.6 years (general cargo ships)64. Shipbreaking.com reports

that six Malaysian-flagged vessels were sent for recycling in the first 6 months of 2010, five

of which to Bangladesh. Considering the age profile of the national fleet and the low volume

for ship breaking, Malaysia‟s ratification of the Hong Kong Convention will have minimal

impact on the Convention‟s entry into force65.

It is unlikely that the Hong Kong Convention will enter into force in the immediate future. At

present, only five states have signed the Convention but none have ratified it. Also

ambiguity pertaining to the doctrine of equivalency between the Hong Kong Convention and

the Basel Convention threatens to delay the entry into force of the former at least among

States party to the Basel Convention. Malaysia as a party to the Basel Convention is under

an obligation to ratify only those conventions which are deemed to ensure environmental

protection to a level equivalent to that imposed by the Basel Convention. It is still debatable

whether the Hong Kong Convention is equivalent to the Basel Convention.

Malaysia does not have ship recycling facilities. Its ship yards carry out fabrication,

modification, conversion, and repair work. Interviews with ship yards on the feasibility and

ease of which ship building yards can also undertake ship dismantling activities or be

converted into ship recycling facilities indicate that ship yards are not keen to explore ship

recycling as a primary business activity due to the volatility of the recycling industry, which

price is highly dependent upon demand for recycled steel, cost of freight, labour costs, and

costs of compliance with environmental and labour regulations.

Whilst the current facilities of larger ship yards (such as MMHE) may undertake dismantling

activities, much capital investment will be required to upgrade the facilities and work force

capacity to allow it to dismantle hazardous material in increasingly sophisticated ships safely

and to dispose the materials in an environmentally sound manner. Investment in

infrastructure is not limited to ship yards cum ship recycling facilities, but also extend to

waste management facilities in Malaysia. Materials which cannot be recycled will need to be

disposed and whether existing waste management facilities and approach can adequately

deal with hazardous waste from ships warrants further study. It is to be noted that the

Department of Environment is opposed to the importation of obsolete ships for recycling

purposes or for use as artificial reefs in Malaysia.

63

UNCTAD (2009). Review of Maritime Transport, 2009, page 52. 64

UNCTAD (2009). page 65. 65

Article 17 of the Hong Kong Convention provides that the Convention will enter into force when it is ratified by 15 States whose fleet amount to at least 40% of the world fleet and whose combined maximum annual ship recycling volume is at least 3%.

38

The impact of the ship recycling facility on the environment, the fishing community and the

marine tourism industry needs to be considered.

Whilst ship recycling may contribute to employment and provide a service to local ship

owners, it is still a business which must generate profit to remain feasible. A feasibility study

of a ship recycling facility in Malaysia has not been conducted.

Ship recycling States in the Asia are Indonesia, Vietnam, Philippines, China, Bangladesh,

Pakistan, and India.

Our findings indicate that Malaysian shipyards are not engaged in extensive ship

dismantling activities, but carry out ship building and ship repairing activities instead.

Attention with respect to the Malaysian ship building industry has to be particularly drawn to

the fact that the role the country plays is mostly the assembling of ships. It was noted that

both repairing and building do not expose individuals as well as the environment to

hazardous elements. However, conversion which requires a shipyard to dismantle the entire

vessel prior to converting it into another type of vessel might involve hazardous elements.

Whilst the process may resemble recycling in that it involves the dismantling and reuse of

parts and equipment, it is not synonymous with the recycling industry which the Hong Kong

Convention attempts to regulate thus rendering the regulation of recycling facilities as

irrelevant. However regulations pertaining to the design, construction, operation, and

preparation for the eventual recycling of vessels and the establishment of an appropriate

enforcement mechanism for ship recycling are relevant to Malaysian ship builders, ship

owners, and Flag Administration.

The Centre for Ocean Law and Policy visited four shipyards from 21 to 25 August 2010 to

determine the extent of ship recycling carried out at the ship yards. The shipyards visited

were:

Boustead Penang Shipyard (Pulau Jerejak)

Ironwood Shipyard (IWS)

Sealink International Sdn Bhd

Labuan Shipyard

The visits confirm that the yards carry out only fabrication, modification, conversion, and

repair work. The primary activities involve the reshaping of large steel into vessels and the

installation of equipment and machinery, for vessels, tugboats, and barges. These yards do

not carry out ship recycling activities envisaged by the Hong Kong Convention.

However, the Hong Kong Convention is relevant to ship builders to the extent that they are

required to develop an inventory for hazardous material for new ships and existing ships

undergoing conversion or repairs.

In addition to regulating ships, the Hong Kong Convention also regulates recycling facilities.

Despite there being no ship-breaking facilities in Malaysia, this research nonetheless

provides an opportunity for the review of the adequacy of existing health, safety, and

39

environmental legislation in ensuring that ship building facilities protect workers from health

risks and the environment from pollution associated with ship building activities.

According to the Department of Environment, there are two types of wastes namely

Scheduled Waste (Hazardous) and Solid Waste. PCB66, a hazardous material identified

under Appendix 1 of the Hong Kong Convention, is similarly identified as a Scheduled

Waste. The existing Malaysia laws governing the control of scheduled wastes are similar to

the Controlled Hazardous Materials stipulated in the Convention. If Malaysia is to adopt the

regulatory mechanism accounting for the entire life cycle of ship, as proposed by the Hong

Kong Convention, the construction and dismantling activities will have to be in compliance

with the Hong Kong Convention to be deemed an environmentally sound process. The

Department of Environment has provided a comprehensive framework for regulating

Controlled Hazardous Materials; although not specific to shipbuilding and ship recycling, the

legal framework nonetheless, can be applied to ensure clean ship-breaking corresponding

to the extent of ship dismantling activities carried out at Malaysian ship yards.

The primary environmental concern of ship yards is in ensuring that hazardous waste is

properly managed. Due to the nature of the work carried out at Malaysian ship yards, paint

is the most hazardous material which needs to be managed. The Environmental Quality Act

1974 (EQA) is the dominant governing legislation on the issue of environmental safe

management of waste and it provides for mechanisms to manage paint residue where such

residue can only be stored at a shipyard for a maximum of 180 days at a maximum of 20

tons after which it has to be contracted to the waste disposal party.

The Environmental Quality (Schedule Wastes) Regulations 2005 requires prescribed

premises to submit monthly Notification of Scheduled Wastes with the production data (ie:

Code Number of the schedule waste / raw materials / chemicals for example: SW -305) .

This notification shall include the quantity / tons of the wastes. They are required to send a

notification every month.

The EQA also requires shipyards to accept vessels which have been deemed to be

asbestos free, gas free, and hazardous free. Clearance to this extent has to be attained

from the port authority, government chemist and an auditor upon their inspection.

The site visit also confirmed that in addition to compliance with EQA and Regulations, larger

shipyards have their own international mechanism (ISO 9000 and Job Safety Analysis)

administered by a Health, Safety, and Environment (HSE) officer to ensure that the ship

yard complies with all environmental regulations.

At first glance, it would appear that the Hong Kong Convention has little relevance to

Malaysia. However, this belies the fact that Malaysia is a member in the IMO Council and

should be seen to be at the forefront of ratifying key conventions. As increasing attention is

drawn to „green ship recycling‟, an interesting pattern has begun to emerge in that ship

66

Polychlorinated biphenyls (PCB) have been used in many different products such as electrical equipment, surface coatings, inks, adhesives, flame-retardants, and paints. PCBs may be released into the environment when it is incinerated or stored in landfills.

40

owners are seen to take voluntary initiative in opting for environmentally sound and safe

ship disposal be it through collaborative effort and support in producing Guidelines under the

BIMCO framework, or by international ship owning companies such as MAERSK through

the vehicle of Corporate Social Responsibility.

As such, it is possible that the recognition of green recycling means may adduce a growing

appetite for such services. Even at this pre-entry stage of the HKC, a number of

international entities have hopped on the potentially promising train of opportunity by

providing services such as surveying and developing Inventory of Hazardous Substances

for ships. Ship yards in some countries such as in China have adopted „green recycling of

ships‟ measures and as such have tapped into this industry. In tangent with Malaysia‟s

commitment to go green (as evidenced by its commitment to reduce carbon emissions at

COP 15), Malaysia should at least consider ratification of the Hong Kong Convention.

10. Assessment of the impact of the Hong Kong Ship Recycling Convention to Malaysia

(i) Where Malaysia ratifies the Convention

Malaysian ship builders

When building new ships to be flagged by a State party, Malaysian ship builders will

have to develop Part 1 of the Inventory of Hazardous Material (IHM) for materials listed

in Appendix 2 of the Convention at the design and construction stage. Ship builders will

require the cooperation of suppliers on the ship building supply chain to provide a

Material Declaration, which is information of the specific chemical substances contained

in machinery, equipment, materials and paints to be used. Ship builders need to be

aware of the prohibition/ restriction in the use of Hazardous Materials listed in Appendix

1 of the Convention.

For ships already built, the builder is required to develop Part 1 of the IHM at least for

materials listed in Appendix 1 of the Convention.

The International Maritime Organization (IMO) has prepared technical guidelines on the

preparation of an Inventory of Hazardous Materials which Malaysian ship builders should

note.

Malaysian ship repairers

Malaysian ship repairers should note the prohibition/restriction in the use of Hazardous

Materials listed in Appendix 1 of the Convention in ship repairs and maintenance and to

provide information required for the updating of Part 1 of the IHM after any installations

of materials listed in Appendix 2 of the Convention. They should take note of the

technical guidelines on the preparation of an Inventory of Hazardous Materials prepared

by the IMO.

41

Malaysian ship survey service providers

The Convention requires an initial survey for the issuance of the ICIHM, periodical

surveys whenever the IHM is updated, and a final survey for the issuance of the

International Ready for Recycling Certificate. The technical guidelines on the preparation

of an Inventory of Hazardous Materials prepared by the IMO should be noted.

Owners of Malaysian-flagged ships

The implication to owners of Malaysian-flagged ships is additional administration

obligations and costs in developing the IHM which in most likelihood will be passed on to

ship owners. It is also likely the additional costs in using only materials allowed by the

Convention and the requirement for an initial survey verifying the IHM and the

procurement of the ICIHM from the Flag Administration will increase new-shipbuilding

costs which will be borne by the ship owner.

Existing ships must also comply with the IHM, survey, and ICIHM requirements of the

Convention. The IHM requires updating after any installation of materials listed in

Appendix 2 of the Convention following repairs and maintenance. Renewal/ additional

survey will be required to verify that Part 1 of the IHM continues to meet the Convention

requirements, and the ICIHM is to be renewed every five years.

Also, the costs involved in disposal of ships for recycling is likely to increase owing to the

additional procedures, surveys and approval requirements, and the limited choices of

authorized recycling facilities. The ship owner is required to cooperate with the recycling

facility to prepare a Ship Recycling Plan for the approval of the Flag State, and then

procure the IRRC from the Flag State before recycling can commence.

There is however no legal restriction to selling, de-registering, and re-flagging the ship

with a non-State party, which will effectively circumvent the requirements of the

Convention. It is estimated that flagging-out costs to owners is about $10K compared to

compliance costs of around $30K.

Malaysian Flag Administration

The Marine Department is the Flag Administration and is required to issue the ICIHM, its

update and renewal, and the IRRC. Flag States are required to establish necessary

legislation to ensure that ships are designed, constructed, and operated in a safe and

environmentally sound manner in accordance with the regulations of this Convention.

Mechanisms for ensuring that compliance with the Convention must be established.

There is also the risk that the implementation of the Hong Kong Convention may result in

the Malaysia Ship Registry becoming less attractive as compared to Registry‟s which are

not party to the Convention.

42

Cost implications67

The main costs identified for ships in operation are:

Establishing Inventory of Hazardous Materials (IHM)

Issuing and checking of certificates based on the IHM

Port state control of certificates for ships

Flag-state control for State party flagged ships

Checking of IHM certificates for ships calling at State party ports

The main costs identified for preparing ships for recycling are:

Update of the IHMs

Issuing and checking of the Ready to recycle certificates

Issuing and checking of ship recycling plans from authorized recycling facilities

Costs (loss of net revenue) for selling a ship for recycling at a facility with a certain

minimum HSE standard

The following tables indicate the estimated unit cost implication of implementing the

Hong Kong Convention. These estimates are based on an assessment for Denmark68

and scaled up to a European level through applying the relevant labour costs and

number of ships. There are no equivalent estimates for Malaysia or for South Asia

recycling facilities. The unit costs included here are meant to provide an indication of the

potential costs implication in the event of implementing the Hong Kong Convention.

67

European Commission DG Environment, Support to the impact assessment of a new legislative proposal on ship dismantling – final report (December 2009). ec.europa.eu/environment/waste/ships/pdf/final_report080310.pdf 68

Memo on Socio economic impact assessment of IMO Ship Recycling Convention implementation in Denmark. Prepared by Litehauz for the Danish Environmental Protection Agency.

43

Table 6: Unit cost related to the Convention requirements for certificates for ship in operation

Costs Consequence Cost Unit cost

€1 = RM4.17

Inventory of hazardous

materials (ship owners)

Each European flagged

ship and ships calling at

EU ports has to have an

IHM

Cost for the ship owner

to prepare the

inventories

€1830/new ship

(RM7,631)

€9505/existing ship

(RM39,636)

€318/five years for

renewal (RM1,326)

Certificates

(ship owners)

Each European flagged

ship has to obtain an

IHM certificate

Cost for the ship owner

to obtain the certificate

€2956/new ship

(RM12,327)

€2519/existing ship

(RM10,504)

€1680/re-certification

every five years for

each ship (RM7,006)

Certificates

(Administration, ship

owners)

Administrative costs in

relation to the checking

of the existence and the

correctness of the

certificates as part of

flag state control

Cost for checking the

certificates

(policy decision – how

this cost is to allocated

between ship owners

and public

administration)

€271,024/ year

(RM1,130,170)

Certificates

(Administration, public)

Administrative costs

related to the checking

of the existence and the

correctness of the

certificates as part of

flag state control

Cost for checking the

certificates

(policy decision – how

this cost is to allocated

between ship owners

and public

administration)

€271,024/ year

(RM1,130,170)

44

45

Table 7: Unit cost related to the Ready to Recycle Certificates

Costs Consequence Cost Unit cost

€1 = RM4.17

Update of the inventory

of hazardous materials

just before dismantling

(ship owners)

The inventory will need

to be updated just

before being shipped for

dismantling

Cost for the ship owner

to have the update

prepared (part I, II, and

III)

€769/ship (RM3,207)

Ready to recycle

certificate

(ship owners)

Each European flagged

ship has to obtain a

ready to recycle

certificate before

recycling

For each ship a ready

for recycle certificate

should be issued

€3360/ship for first five

years (RM14,011)

Later €6719/ship

(RM28,018)

Table 8: Unit cost related to the checking of ships calling at State party port

Costs Consequence Cost Unit cost

€1 = RM4.17

All ships calling State

party port should have

IHM

(Administration)

Administrative cost

related to the checking

of the existence and the

correctness of the

inventories

Cost of checking the

inventories

(Public administration)

€32.5/ship calling

(RM136)

(ii) Where Malaysia does not ratify the Convention

Even where Malaysia is not a State party to the Convention the Convention would apply

when the choice of a recycling facility is located in a State party. In this case, the

fulfillment of the obligations of the Ship Recycling Facility will require the cooperation of

the ship owner and the Flag Administration. In such cases, ship owners of Malaysian

flagged ships have the flexibility of recycling vessels at non-State party recycling

facilities and avoid administrative obligations and costs associated with recycling.

46

11. Need for a Ship recycling strategy

The Convention is unlikely to enter into force in the immediate future unless the five ship

recycling nations (Bangladesh, China, India, Pakistan, and Turkey) ratify the Convention,

effectively removing commercial competition considerations from safety and environmental

protection factors, and compelling Flag States to ratify the Convention as well.

In the interim, Malaysia has the option either to maintain the status quo (do nothing) or

voluntarily implement the relevant technical requirements of the Convention (adopting a ship

recycling strategy).

a. Maintaining the status quo

Activities relevant to the Convention would include ship building, repairs, and

maintenance. The main safety and environmental risk of such activities are

regulated by the Factories and Machinery Act 1967 (pertaining to work place safety),

the Environmental Quality Act 1974 (pollution management), the Environmental

Quality (Scheduled Wastes) Regulations 2005 (the environmentally sound

management of waste and hazardous material). The Environment Quality Act 1974

requires shipyards to accept vessels which have been deemed to be asbestos free,

gas free, and hazardous free. Inspection and clearance on this has to be secured

from the port authority, government chemist and an auditor.

Considering that Malaysia does not have ship recycling facilities, the existing controls

would appear to be adequate, and would provide the flexibility for recycling of

Malaysian-flag ships at any facility. It is likely that ship owners will choose the most

profitable option and sell their ships for up to a third more than what an approved

ship recycling facility would offer.

b. Voluntary implementation of interim measures

The interim measures that can be considered for implementation are:

1. Provision of the Inventory of Hazardous Materials to ships going for recycling

2. Safe-for-hot work and Safe-for-entry obligations for ship owners

3. Preparation of a Ship Recycling Plan for ships destined for recycling.

Safe-for-hot work and Safe-for-entry obligations for ship owners

This would include pre-cleaning of ships to ensure that the ship is safe-for-hot work

and safe-for-entry. It is currently being implemented for ships coming into Malaysia

but remains voluntary for ships being „exported‟ for dismantling to another State. The

trend among European ship owners and some Asian ship owners (Japan, Singapore,

and Hong Kong) are for the ship owners to take the initiative to self-regulate and

adopt voluntary measures even before the Hong Kong Convention enters into force.

47

Such measures being voluntary cannot be enforced or imposed upon a ship owner

and it is up to the ship owner to weigh the economic factors against the social

responsibility factors.

Provision of the Inventory of Hazardous Materials and Preparation of a Ship

Recycling Plan for ships going for recycling

At the Pattaya IMO Regional Workshop on the Early Implementation of the Technical

Standards of the Hong Kong Convention in May 2010, representatives of the five

recycling States have recognised the need for an international standard for ship

recycling and agreed on the need for interim measures although there was no

agreement as to a specific date for a start of the voluntary implementation of the

measures. The Pattaya workshop recommended, among others, that stakeholders

commence the voluntary implementation of the technical standards of the Hong

Kong Convention on the provision and usage of the Inventory of Hazardous Material

and for stakeholders to assist in the development of the guidelines for the Ship

Recycling Plan, and thereafter voluntarily facilitate its implementation.

These measures are not currently being applied by Malaysia and successful

implementation would require the cooperation of ship owners. If these measures are

to remain voluntary, there is no incentive for their implementation. Furthermore,

these measures would be effective provided recycling facilities utilise the Inventory

and Recycling Plan for safer and cleaner recycling. If owners of Malaysian flagged

ships prefer non-approved recycling facilities, it makes no difference whether the

Inventory of Hazardous Material is provided and it is also very likely that the recycling

facility will not be providing a Ship Recycling Plan. There is also the strong possibility

that ship owners would choose to dispose obsolete vessels to cash buyers to avoid

the administrative burden of recycling in meeting the requirements of the Convention.

Ship builders must be compelled to develop the Inventory of Hazardous Materials

and for ship owners to prepare a Ship Recycling Plan through regulation/policy. This

can be implemented through the mechanism provided under the Basel Convention,

and by expanding the interpretation of „waste‟ to include obsolete ships designated

for scrapping.

However, in determining a policy on ship recycling, the Flag Administration would also

need to consider whether the policy would apply only to international commercial vessels

of 500 GT and above, or also to all vessels including warships, government-owned non-

commercial ships, exclusively domestically operated ships, and ships below 500 GT.

48

12. Recommendation

Although there is no immediate urgency at present to ratify the Convention, it is

recommended that Malaysia adopt the interim measures proposed by the IMO.

This strategy would satisfy Malaysia‟s obligation to the IMO and also the Basel Convention.

Awareness programmes should be implemented to educate ship owners, ship builders, ship

surveyors, and Flag Administration of the developments in ship recycling requirements, and

to highlight new business or product opportunities for the ship building and engineering

industries. It is suggested that the awareness programmes be initiated by the Ministry of

Transport in collaboration with the ship owners as they are the interest group most affected

by this Convention and are most proactive in green-shipping initiatives.

Flag Administration should not compel ship owners to adopt the interim measures. Instead

ship owners should be encouraged to adopt the measures voluntarily as part of the ship

owner‟s corporate social responsibility activities.

It is further recommended that incentives be offered by the Ministry of Science, Technology

and Innovation, the Ministry of Energy, Green Technology and Water, or the Malaysian

Industrial Development Authority to encourage research and development into technologies

for green ship breaking.

Collaborations between the government and universities could be established to encourage

research into technology for green shipbreaking and develop materials, equipment, and

processes that can contribute to green shipbreaking. The universities with the relevant

marine technology and engineering departments are Universiti Teknologi Malaysia,

Universiti Kuala Lumpur, Universiti Malaysia Terengganu and Universiti Sains Malaysia.

It is recommended that Malaysia be supportive of the Ship Recycling Convention, as it

opens opportunities for Malaysian ship owners, maritime service providers, and also Flag

Administration.

In the final analysis, Malaysia should not have to be a major player in the activity to be seen

to adopt international best practices. By way of its dependence on merchant shipping and its

not insignificant merchant tonnage and international clout as a shipping nation, it must be

seen to be at the forefront of supporting measures to green the shipping sector.

49

13. Limitation of study

This research focuses more on the qualitative aspects rather than the quantitative

assessment of the Hong Kong Convention. It also focuses on commercial ships and does

not include the dismantling of government ships, naval vessels, yachts, fishing vessels, and

fixed/floating platforms. Also, there is a lack of literature on ship recycling from the Asian

perspective as such the bulk of the literature on ship recycling is obtained from the IMO

website, and from the European perspective.

14. Future research

Feasibility study of a ship recycling facility in Malaysia

Implementation of control on movement of obsolete ships

i

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