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Friday, January 19, 2018

PORT ISSUES

Iraq - UN puts Master in focus in change of destination issue

The UN has put the Master in focus under its oil-for-food programme after a shipment of 2m barrels of Basrah crude was unexpectedly diverted from US discharge to discharge in Singapore. The LOC, endorsed by the Oil Overseers, had a US destination.

We have received brief information on this issue, including the fact that the Master in future would be obliged to sign an undertaking that no change of destination of an Iraqi shipment will be made without the authorisation of the UN.  It appeared that the Master could be placed in a difficult legal position if ordered by his company (his charterers) to divert to a different port of discharge than originally scheduled, which still might have been well within the terms of the c/p.

INTERTANKO therefore contacted the “UN, Office of the Iraq Programme” for the purpose of clarifying the responsibility which it intends to place on the master and/or owner by requiring the Master to sign a notification.  We stressed the fact that the owner/master is contractually only bound by the c/p governing the transport(s) in question and that the vessel must be free to take charterers’ orders to sail to any port within the discharge ranges specified; without legal consequences provided it is within the terms of the c/p.

The complaint about the diversion was brought by the Iraqi authorities who reportedly claim that E8.5m (USD 8m) was lost in potential revenue because the tanker did not discharge in the US. The reason for the loss is that countries like Saudi Arabia, Mexico, Kuwait, Iran and Venezuela do not allow their crude oil to be freely traded on the world oil markets and still maintain a system of destination dependent pricing.  The customers who purchase crude oil from these countries sign a contract that stipulates that the crude oil can only be discharged at a certain geographical location. These contracts are between producer and end-user directly and it is therefore the sole responsibility of the end-user to make sure that the oil is discharged at the intended geographic location.

In the case of Iraq, the purchaser of the oil also signs a contract with such a destination clause in it.  Since by far the majority of these contracts are with middlemen and traders, and not directly with end-users, this requires compliance of all contract parties in the supply chain for the oil to be discharged in the authorized geographic location.

 According to the UN, Office of the Iraq Programme, masters will not be directly responsible if a change of destination is ordered but will be obliged to sign a notification on behalf of the shipping company. We understand that this undertaking not only means that the UN will have to sanction a change of destination, but prohibits transhipment of the cargo unless it involves lightering of the vessel close to the final discharge port.  The attached Notification is by the UN said to “simply be a way of advising the Master of the ship (who is also acting on behalf of the Ship Owner) that permission to export the oil is given by the 661 Committee only on the condition of strict compliance with the destination clause.  In the opinion of the Oil Overseers, the Master of the ship personally, and also the shipping company he represents would be less inclined to get involved in any action that has not been authorized by the 661 Committee”.  The Notification will be issued by Saybolt to the Master of the ship before it leaves the load port.

Please click here to view the Notification.

Members with additional information on this issue are encouraged to contact gunnar.knudsen@intertanko.com

We will revert when further information becomes available.      

Source: United Nations, Office of the Iraq Programme, New York