Convention Requirements

1. National HNS Reporting RequirementsDavid Baker UKSome practicalities - the UK experienceto date

2. Convention Requirements Article 21 – requires Contracting State to identify persons liable Article 43 – requires that when ratifying the Contacting State submits to the IMO details of quantities of HNS in preceding year

3. The national legislation should : • Provide for introduction of the reporting system prior toratification • identify the principal receivers and (as applicable) physical receivers, the different HNS receipts and the quantities • provide a means to determine annual fluctuations, eg set a national threshold

4. Industry concerns • “The financial obligations will prove a costly burden on storage companies” • “Storage companies are generally just third parties with no responsibility for carriage by sea” • ”Most HNS stored will come from non states parties or will be destined for such states” • “Liable companies will fragment to avoid financial obligation”

5. Further industry concerns • Practicalities of passing on the financial obligations to principal receivers • Lack of contracts with principal receivers, eg port authorities • Liability when the principal receiver is not located in a contracting state

6. Various scenarios • The following scenarios focus especially on the financial responsibilities when HNS is handled through intermediaries • which raises the most complexities under the Convention

7. CARGO PHYSICAL RECEIVER DESIGNATED PRINCIPLE LIABILITY Receiver based in a State Party Principle based in a State Party Principle is liable HNS Receiver based in a State Party Principle based in a non-State Party Agent is liable HNS Scenarios

8. CARGO PHYSICAL RECEIVER DESIGNATED PRINCIPLE LIABILITY Receiver based in a non-State Party Principle based in any State Convention does not apply: No liability HNS Receiverbasedin a State Party Principle based in any State Owner of LNG prior to discharge is liable LNG Scenarios continued...

9. Final Scenario The physical receiver of HNS in a contracting state is unable to identify the principal receiver, eg a port authority without a contract: • The physical receiver becomes liable

10. In practise • Storage companies should be able to pass on the liability and, if necessary, apply liability on the principal receiver by contract • The liability only arises when the HNS is received from ships in a contracting state • The level of liability will arise only after incidents • The shipowner’s level of liability should cover many incidents – a minimum of 10 million SDR

11. Practicalities of reporting It will be necessary for national rules to apply : • a statutory obligation to report on the initial or intermediate receivers as well as the obligation on the principal receivers to pay levies • This will provide the ‘audit trail’ to monitor transhipments and to apply the financial obligations on the ultimate receiver

12. Summary The state will have to: • determine the national regulations best suited to the trading pattern, • provide a practical regulatory system which will ensure equity and certainty of meeting its reporting obligations, and • ensure the Fund is able to raise levies against the appropriate receivers

13. Summary (continued) Finally, the state should consider: • Applying the simplest practical definition of ‘receiver’ to avoid prolonged audit trails • Implementing a statutory reporting system with lower threshold than those set in the Convention.