Ship Recycling and the IHM Ginger Garte Americas Environmental Manager May 2015

Aims Global ship recycling standards Hong Kong Convention EU Regulation – requirements LR’s Inventory of Hazardous Materials (IHM) process LR’s ship recycling Experience Strategy Services

Ship recycling and the IHM Global ship recycling standards

Ship recycling: Locations 5 countries recycle >98% of world tonnage 2012 figures: India 12.2m gt Bangladesh 8.8m gt China 8.1m gt Pakistan 5.5m gt Turkey 1.5m gt Rest of world 560k gt >95% of ships are sold to a ‘cash buyer’ A cash buyer purchases a vessel with 100% cash and sells the vessel to a recycling facility. For vessels purchased basis ‘as is’ the cash buyer takes over the vessel at the delivery port and boards his own crew to sail the vessel. In the meantime, the vessel is re-flagged, given a new name and is given a fresh set of insurance cover for the voyage to the yards. The cash buyer accepts ‘letters of credit’ as payment from the end ship recycler – therefore, the owners remain secure; their final payment for the vessel is NOT contingent upon receiving funds from the end ship recyclers.

Ship recycling methods: Dry-dock In general… Primarily western countries Provides a fully enclosed environment – prevents leakage of pollutants Best Available Technologies (BAT) are typically applied – good H&S record Expensive and therefore very rare <0.2% of all ship recycling PHOTO: MSC Napoli in dry dock at Harland and Wolff, Belfast, Northern Ireland. She was deliberately broken up by salvors after running into difficulty in the English Channel in 2007.

Ship recycling methods: Slipway / Landing Turkey: 3.6% (gt) of ship recycling, 2009-12 In general… Concrete extends into the sea – ship goes hard against slipway Lack of tides help contain any accidental spillage Dismantled in small sections using mobile cranes; sections out of the water are then cut Turkey scrap rate / price offered: Typically ranges from US$ 250 – 350 / ldt Slipway is sometimes known as ‘non-tidal beaching’ PHOTO: HMS Invincible at Aliaga, Turkey VIDEO (1 minute): P&O ferry (Ostend Spirit / Pride of Calais) arriving for recycling Video: Aliaga, Turkey http://www.youtube.com/watch?v=QYltdonj2iE#t=13

Ship recycling methods: Alongside / Afloat China: 25.2% (gt) of ship recycling, 2009-12 In general… Sheltered or calm waters; heavily regulated Top-down dismantling / horizontal cutting; superstructure and upper pieces first Most accidental / local pollution can be monitored, contained, and cleaned Video: Brownsville, USA http://www.youtube.com/watch?v=48aQEe48lsY China scrap rate / price offered: Typically ranges from US$ 220 – 360 / ldt There are around 110,000 people working in the sector. VIDEO (1 minute): 8000+ tonne ship at EMR, Brownsville, USA

Ship recycling methods: Beaching 69.3% of all ship recycling (gt) 2009-12 India, Bangladesh and Pakistan Photo: Bangladesh (2014) © Gönna Ketels, Deutsche Welle In general / historically… Large tidal differences Pollution of local ecosystems Lack of impermeable surfaces Lack of infrastructure / management systems Health & safety concerns 2,000 reported deaths since 1995 20 reported in Bangladesh (2013) 13 reported in India (2014) “Beaching” is the most common technique and, historically, has one of the worst safety records of any industry. (Photo: Bangladesh) In general workers are poorly paid and in most locations there appears to be little concern for health and safety of workers, or pollution of the environment. Often stretches of beach are rented out to companies that appear overnight, scrap one ship, then disappear until the next one. In this atmosphere proper control is impossible. More than 1 million people are estimated to be involved with ship recycling in South Asia. Common incidents: falling from height; objects falling from height; explosions; and long term issues (e.g. asbestosis)

Ship recycling: Latest developments India >160 yards in Alang To date, only 4 yards have invested heavily in upgrading their facilities ClassNK have been working with these 4 yards since 2013 As of May 2015, still no certification… LR provides gap analysis / assistance / advice to owners and facilities Bangladesh & Pakistan General / common view: there’s still much to be done… Photo: Bangladesh (2014) © Gönna Ketels, Deutsche Welle

Ship recycling and the IHM The IMO Hong Kong Convention

Ship recycling: IMO Hong Kong Convention IMO Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships Signed by 63 countries, May 2009 Shipbuilders, owner/operators and recycling facilities have responsibilities within the Convention All ‘ships’ over 500gt will be expected to maintain an Inventory of Hazardous Materials (IHM) Port State Control will be applied Growing international awareness of beaching resulted in a number of industry led initiatives and guidelines. And, in 2009, the Hong Kong Convention was adopted. It is designed to address concerns about global ship recycling standards. Definition of ship in SRC: “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), Floating Production Storage and Offloading Units (FPSOs), and includes vessels stripped of equipment/being towed.” Bullet 3 The Inventory of Hazardous Materials (IHM) is central to almost all of the Convention.

Ship recycling: IMO Hong Kong Convention Enters into force 24 months after the date on which: at least 15 states, with a combined tonnage of at least 40% of the world’s merchant fleet have ratified these states must have a combined annual ship recycling capacity of at least 3% of the world merchant fleet (gt) Entry into force date? e.g. Criteria met 2018; newbuild IHMs 2020; existing ship IHMs 2025 In the meantime: “Guidelines on Transitional Measures for Shipowners” should be followed The 3% criterion is to ensure there’s sufficient shipbreaking capacity for the member States – the figure of 3% is roughly equivalent to the replacement rate per annum, over the last 10 years; there’s no point the Convention entering into force when there aren’t enough recycling facilities signed up who meet the Convention’s standards. In other words, we need China and Turkey – and ideally Asia – to meet required standards. Only 3 state have ratified the Convention (as of May 2015) representing Norway, France and Congo (representing 1.96% of the fleet) Bullet 2: When will it enter into force? VERY hard to say… Controls on Recycling Facilities (regulations 15-23) can’t be met yet; certainly not by South Asia… The entry into force criteria could be met by 2017 (VERY optimistic guess) – if so, then entry into force could be as soon as 2019. Transitional “Selling Ships for Recycling” guidelines have been published by the Industry Working Group (which includes BIMCO, Intertanko, ICS and IACS) to assist owners selling ships for recycling before the convention enters into force.

Ship recycling: Inventory of Hazardous Materials (IHM) Restrict Appendix 1 hazards: Asbestos SOLAS Polychlorinated Biphenyls (PCBs) MARPOL Ozone Depleting Substances (ODS) MARPOL Organotin compounds (TBTs) Anti-Fouling Convention Polybrominated Biphenyl (PBBs) Polybrominated Diphenyl Ethers (PBDEs) Polychlorinated Naphthalenes (>3Cl) Radioactive substances Certain shortchain chlorinated paraffins Record Appendix 2 hazards: Cadmium & cadmium compounds Hexavalent chromium & hexavalent chromium compounds Lead & lead compounds Mercury & mercury compounds Appendix 1 already legislated for: SOLAS Chapter II-1,3-5 (asbestos), MARPOL (Ozone Depleting Substances and PCBs), Anti-fouling Convention (TBT paints) Appendix 2 materials covers an enormous number of materials presently used onboard ships; to manage and record all of these is incredibly difficult. These materials were taken from the RoHS (Restriction of Hazardous Substances) Code PHOTO: Greenpeace photo of a worker’s funeral pyre taking place on a beach – recycling facilities complain that this photo is out of date; other images in this presentation show that there is still much to be done to improve standards.

Ship recycling: Inventory of Hazardous Materials (IHM) Appendix 1 hazards: To be restricted on all newbuildings To be restricted on all new installations of equipment on all ships To be recorded on existing ships, if already present Appendix 2 hazards: To be recorded on all newbuildings – if above IMO threshold value To be recorded on all new installations of equipment – if above IMO threshold value To be recorded on all existing ships, as far as is practicable… When the convention enters into force… (LR is treating all current newbuildings as existing ships – Appendix 1 is required, Appendix 2 is encouraged as far as practicable (as per Reg. 5.2 of the Convention). Ships built now will be existing ships by the time the Convention is ratified) Appendix 2 hazards – some easier to record than others – lead, mercury etc. Others are a mystery to some suppliers & manufacturers. Threshold levels are still under discussion at IMO

Ship recycling: Shipbuilder responsibilities Restrict hazardous materials listed in Appendix 1 of the Convention Manage hazardous materials listed in Appendix 2 of the Convention Produce the IHM, based on supplier information (and sampling, as required) 2 years after entry into force… “New ship means a ship: for which the building contract is placed on or after the entry into force of the Convention; or in the absence of a building contract, the keel of which is laid or which is at a similar stage of construction on or after 6 months after entry into force; or the delivery of which is on or after 30 months after entry into force” Bullet 3: The IHM should be prepared by the yard using the official Lloyd’s Register template. The pick-lists / hover help fields in the template will assist, as will support from on-site team and our Guide to the IHM

Ship recycling: LR’s IHM procedures Approval of the IHM is the responsibility of the on-site team Site surveyors will make checks on material supply and control Shipyard will be asked to demonstrate that procedures are in place for subcontracted supply Issue “Statement of Compliance” Survey code / MSPM procedures: GPIL

Ship recycling: Shipowner responsibilities Person registered as owner of a ship or charterer 5 years after entry into force Shipowners will need: an IHM with Appendix 1 materials listed as a minimum and maintained throughout the life of the ship And, at the end of the ship’s life, shipowners will need: a Ship Recycling Plan from an Authorized facility permission from Flag State to conduct Final Survey an International Ready for Recycling Certificate BULLET 1: This includes “those who have ownership of the ship for a limited period pending its sale or handing over to a Ship Recycling facility”. 85% of ships to be recycled are sold through intermediary called a ‘cash buyer’ – the Hong Kong Convention allows a cash buyer to be formally identified as a ‘shipowner’. Cash buyers must comply with all requirements of the Convention, which LR considers to be excellent news. AFTER BULLETS: Shipowners need an IHM throughout the ship’s life. But, prior to recycling, they will also need to (1) advise Flag State of intent to scrap the ship, (2) identify an authorised recycling facility, (3) work with that facility to prepare a ship-specific Recycling Plan and (4) request a Final Survey: the Final Survey will verify the content of the IHM, including new information on stores and bunkers, and will check the Ship Recycling Plan – only then can an International Ready for Recycling Certificate be issued and recycling take place. PICTURE: Caricature of a shipowner, published in Vanity Fair at the turn of the 19th / 20th century

Ship recycling: Shipowner responsibilities The Convention states: “…for existing ships, a plan shall be prepared describing the visual / sampling check by which the IHM is developed, taking into account the guidelines developed by the Organisation.” LR has developed a visual / sampling check plan, based on the Guidelines MEPC 197(62)

Ship recycling: LR’s IHM procedures Once a contract is in place, the Ship-owner is provided with: Interactive IHM template Visual / sampling check plan LR’s Guide to the IHM Full procedures can be found in the Marine Survey Procedures Manual (MSPM) and in Process Maps The IHM template contains hover help fields, crop down pick-lists etc. The Guide to the IHM is regularly updated and contains a great deal of information regarding the Hong Kong Convention and the IHM The “IHM Approval Offices” are there to help and have a wealth of knowledge and experience regarding IHM…

Ship recycling: LR’s IHM procedures The ship-owner/operator prepares the IHM: Approved Service Suppliers can assist, particularly if sampling is required Ship-owners need to be aware of the bigger picture: HKC / SOLAS / ISM / SMS etc. The Inventory is submitted to a specified IHM Approval Office for review: IHM Approval Team checks for expected hazards for ship of similar age / type Community of Practice and Process Maps help guide Approval Teams Once approved: Onboard verification survey / issue Statement of Compliance Survey code / MSPM procedures: GPIL

Ship recycling: Ongoing maintenance of the IHM SoC valid for no more than 5 years LR Class IHM reviewed onboard (at annual Class Survey) Renewal survey onboard in the 5th year Non-LR class No annual review Office based review in the 5th year Renewal survey onboard following 5th year office based review BULLET 1: Statement of Compliance is issued following completion of the onboard verification survey – valid for 5 years (or sooner, depending on harmonisation dates) BULLET 2: Annual review for LR class vessels only. Non-LR class either call for a review after a ‘significant change’ has been made or maintain the IHM and wait for an office based renewal / survey in the 5th year AFTER BULLETS: There is no difference in the cost of maintaining the IHM for LR class and non-LR Class vessels. The 5 yearly renewal for a non-LR Class ship costs the same as 5 x annual reviews… Survey code / MSPM procedures: GPAA / GPCR

Ship recycling: Through-life benefits of the IHM Ensures compliance with Regulation 5.2 of the Hong Kong Convention Helps avoid asbestos related detentions (non-compliance with SOLAS II-1/3-5) Provides measurable & achievable objectives for ISO14001 certified companies Can assists with meeting Rating Scheme elements (e.g. Green Award foundation, TMSA, etc.) Enhances on board safety and reputation in market place Aids safer and more environmentally sound decommissioning of ships BULLET 2: Asbestos can be a particularly worrying problem for shipowners – many don’t know if they have an issue onboard and, if they do, how big an issue it actually is. Port State Control is detaining ships for non-compliance with SOLAS – an IHM is a proactive, relatively simple and cost-effective 1st step to understanding or proving the asbestos situation onboard. BULLET 4: OCIMF (The Oil Companies International Marine Forum) has challenged tanker owners and operators to evaluate their approach to the ISM Code, to improve their management systems and to demonstrate a strong commitment to safety and environmental excellence. The Tanker Management and Self Assessment (TMSA) guide is a tool created by OCIMF to help ship operators achieve this. The main concept is for the tanker operator to audit their own operational safety, quality and environmental procedures. Elements 3, 10 and 12 cover training of ship’s personnel, environmental management and showing continuous improvement. The Green Award certification scheme is open to oil tankers, chemical tankers and dry bulk carriers, LNG and containers carriers and inland navigation vessels – it rewards high safety and environmental standards in shipping. Maintaining an IHM and a Ship Recycling Policy can help a ship to qualify.

Ship recycling: Recycling facility responsibilities Once in force, the Hong Kong Convention requires facilities: To be authorised by their own National Authorities to agreed standards To produce ship-specific Ship Recycling Plans, in consultation with owners To advise before starting dismantling To report on completion, including details of any incidents Controls on the facility are less specific than for Shipbuilders and Shipowners as they rely on the competent authority of the recycling State. They must have emergency response plans, health and safety procedures and other basics. BULLET 1: Authorisation will take the form of an “IMO Document of Authorisation for Ship Recycling Facilities” – this document will be checked at Final Survey BULLET 2: Ship Recycling Plan will detail how the ship is to be dismantled BULLET 3 & 4: Facilities must report to the Flag State and the National Authority IMO Guidelines for the Authorization of Ship Recycling Facilities and Guidelines for the Development of the Ship Recycling Plan have been published.

Ship recycling: The EU Regulation The European Union Ship Recycling Regulation entered into force in December 2013, but without immediate impact; EU Flag ships and all ships entering EU waters will require an IHM: LR expects our IHMs and other ship recycling services will comply with the HKC and the SRR However, until official Guidance is published by the EU we don’t know full implications In summary: We’re still waiting for guidelines on ship recycling facilities and on the EU Regulation’s IHM requirements. Without EC guidelines we can’t advise or plan effectively… Class News and Blog on LR’s ship recycling webpages; the Hub includes latest news

Ship recycling and the IHM LR’s expertise, strategy and services

Ship recycling: LR’s expertise 20 years’ experience of decommissioning, legislation, standards and practices: 1999 LR started actively working on ship recycling projects 2003 Took up role of IACS’ representative at IMO for ship recycling 2005 Co-wrote the recycling facility management system standard (ISO 30000:2009) 2006 IACS’ representative to IMO for the development of the Hong Kong Convention 2007 Founder member of ISRA (International Ship Recycling Association) 2011 Attained Board membership of ISRA 2012 Began investing in sustainable ship recycling projects 2014 Started process of applying to EC to act as assessor of facilities for the EU List

Ship recycling: LR’s view We fully support the Hong Kong Convention We support the principles behind the EU Regulation We’re not anti-beaching… …but we choose not to support those facilities – regardless of location or method – with unacceptably dangerous practices We respond to credible requests from facilities, owners and other stakeholders

Ship recycling: LR’s view “At LR, we are dedicated to supporting sustainable ship recycling. Our services provide assurance at construction, in service and at the end of a ship’s life, helping to minimise risk. We recognise that an increasing number of companies want to design, construct, operate and dispose of their ships responsibly and this is reflected in the services we offer and the research we help to fund. LR is committed to supporting and actively promoting safe and environmentally sound ship recycling. As such, our comprehensive recycling facility assessment services are only available to responsible recyclers, in order to further improve standards globally and help shipowners select an appropriate facility.”

Ship recycling: LR’s services For Shipowner/operators Inventory of Hazardous Materials (IHM) Approval, verification and certification, delivered by specialist IHM Approval Teams and our global surveyor network 450+ existing ship contracts (of which 170 are not classed with LR) Hazardous Materials Service Supplier Approval Independent approval of companies providing ‘hazmat’ sampling, testing and/or reporting Approval covers asbestos, PCBs, TBTs and ODS Enhances the IHM – and SOLAS etc. Promotes onboard safety / best practice Helps limits shipowner liabilities

Ship recycling: LR’s services For Shipowner/operators Final Survey Review of the IHM, recycling facility documentation and the ship specific recycling plan, in accordance with the Hong Kong Convention Issue “Ready for Recycling” Statement of Compliance Audit During Recycling Final Survey plus: Pre-assessment of Ship Recycling Facility Plan Inspections during recycling, including the downstream handling of hazardous wastes Issue “Statement of Compliance on Ship Recycling”

Ship recycling: LR’s services For Recycling Facilities Ship Recycling Facility Plan assessments Review of SRFP against Hong Kong Convention, Regulations 18 – 23 and ISO 14001, OHSAS 18001, ISO 30000 Relevant local and EU standards Issue Report Statement of Compliance if appropriate Hong Kong Convention compliant SoC SRFP assessment plus site visit by LRQA environmental auditor and LR Marine surveyor Issuance of Compliance Report and, if appropriate, Statement of Compliance in accordance with Hong Kong Convention requirements – helps to differentiate facilities from their competitors

Ship recycling: LR’s services For Shipowners / Other Key Stakeholders Bespoke Consultancy Specific services at the request of owners, insurers, government agencies or other stakeholders Advice Assessment Audits Reporting Certification

Thank you Any questions

Ship recycling: Historical guidelines / initiatives ILO Guidelines on Safety & Health in Ship Breaking Basel Convention’s Environmentally Sound Management of Dismantling of Ships Basel Convention on Transboundary Movement of Hazardous Wastes; defines a ship as “waste” Industry Code of Practice on Ship Recycling ICS, BIMCO, Intertanko, Intercargo, IACS BULLET 1: Mid 1990s. Industry led initiative (ICS, BIMCO, Intertanko etc.) first introduced the concept of a hazardous materials inventory BULLET 2: The International Labour Organisation also developed guidelines relating to health and safety of workers in recycling facilities BULLET 3: The Basel Convention published guidance on environmentally sound dismantling BULLET 4: Around this time the Basel Convention began to be applied to ships, although not originally intended for this purpose. It classifies a ship destined for scrap as a “waste” product – and certain waste products can’t be moved from an OECD (Organization for Economic Co-operation & Development) country to a non-OECD country, such as China, India, Bangladesh etc. PHOTO: Section of a tanker. On the left is the winching house and you can clearly see the large marks where it has been dragged up the beach

Ship recycling: IMO Guidelines Voluntary guidelines, adopted December 2003 Implications throughout ship lifecycle (newbuilds and existing ships) Introduced the concept of the Green Passport Inventory: a record of materials present in the ship’s structure, systems or fitted equipment These voluntary guidelines – now replaced by the Hong Kong Convention – incorporated and built on the Industry Code of Practice. The guidelines (Resolution A.962(23)) were the first to refer to the “Green Passport”, essentially an inventory of materials present in a ship’s structure, systems or fitted equipment that may be hazardous to human health or the environment

World’s 1st Green Passport: Granatina, 2004 The world’s first independently verified Green Passport issued and maintained by a Class Society (LR) – awarded to the Shell gas ship Granatina in 2004. As of May 2014: More than 1,700 ships have signed up for Lloyd’s Register IHM / Green Passport Certification; 460 for existing ships (170 of which are classed with other societies). Undisputed market leader!

Ship recycling methods: Beaching In general… Ship sailed onto tidal flats; ballast tanks flooded to secure in place Dismantled from bow to stern (vertical cutting), leaving hull open to sea Use of cranes limited; gravity method Photo: Facility in India, 2015 Video: Facility in Pakistan, 2013 https://www.youtube.com/watch?v=TcGdXQryU4E LR works with owners and facilities to help them to improve standards. We also invest time and money in improvement projects, such as the Sustainable Shipping Initiative. South Asia scrap rate / price offered : Typically ranges from US$ 380 – 500 / ldt

Ship recycling: Shipbuilder responsibilities IMO Guidelines state: ‘Material Declaration’ and ‘Declaration of Conformity forms must be completed by those supplying items, components or materials Therefore, contracts between Shipowner & Shipyard, and Shipyard & Suppliers will need to recognise that materials, locations and quantities have to be identified and controlled… One of the biggest issues in the newbuild process is the control of subcontractors and sub-contracted supply. Shipyard will need to know about all materials being provided externally to place on ship – the only way to control this process is through the supply contract, which will be with the Shipyard Recommend that an example of a “Material Declaration Form” is shown – this can be found in Appendix IV of the “A Guide to the Inventory of Hazardous Materials (IHM)” publication, available on the Hub

Ship recycling: LR’s services For Shipbuilders Inventory of Hazardous Materials (IHM) IHM software, advice, approval, survey and certification, in accordance with the Hong Kong Convention, Regulation 5.2 1,450+ new construction IHM contracts (as of December 2014)

Ship recycling: LR’s services For Recycling Facilities ISO 30000 accreditation LRQA certification of recycling facilities to a recognised international standard Comprehensive audits to check management systems, method of accepting and recycling ships, emergency provisions, safe and environmentally sound operation ISRA Member assessment * Review of ISRA member checklist and elements of: Hong Kong Convention UNEP; Basel Convention ILO; Safety & Health in Shipbreaking ISO 14001 and ISO 30000 * At the request of ISRA ISRA: International Ship Recycling Association