IMPACT OF IMO TIER III NOx REGULATIONS ON SUPERYACHTS

International Maritime Organization (IMO)’s Tier III regulations requires NOx emissions to be 70% lower than the permitted standard under Tier II.

Implemented from 1 January 2016, the new limits apply to ships installed with diesel engines, particularly those:

– Ships constructed on or after January 2016 and is operating in the North American Emission Control Area or the United States Caribbean Sea Emission Control Area (ECA)
– Ships operating in an ECA designated for Tier III NOx control
– Ships with keel laid on or after the adoption date of such an ECA

The regulation shall not apply to ships that are less than 24m and used solely for recreational purposes. Ships equipped with marine diesel engine having a propulsion power of less than 750kW are also exempted from compliance due to design or construction limitations.

But by 2021, yachts under 500 GT (gross tonnage) and over 24m will be required to meet the new limits.

Impact on superyachts
When the global Tier II limits came into force in 2011, engine-makers were able to tune the engines to comply with these new emissions limits. Tier III poses a challenge to engine designers, as tuning is not an option anymore and they are required to apply NOx reduction measures using other engine technologies.

According to studies carried out by superyacht builders, the available technologies for compliance with the IMO NOx Tier III limits currently include:

– Selective catalytic reduction (SCR) systems: This is the most widely used method for purification of NOx from an engine’s exhaust gas
– Exhaust gas recirculation (EGR): Recirculation of the exhaust gas back to the engine’s combustion process. This is still a relatively new technology for maritime applications but is developing into a competitive option for NOx compliance.
– Alternative fuels such as liquefied natural gas (LNG)

All these options will result in either reduced cabin space (for guests) or additional construction costs to extend the length of the yacht. For existing models still in production, this could mean re-tooling and remoulding. For new models, guest cabin arrangements will offer significantly reduced value.

The studies also considered the implications across the whole range of yachts but has placed more focus on the 24-30m segment of the market.

The loss of cabin space and/or additional costs may heavily affect the production of the 24-30m, size range of yachts.

According to sector studies, the superyacht industry might be adversely impacted by the application of Tier III NOx emission standards in yachts; up to at least 500 GT.

Maritime Cook Islands (MCI), will remain available for any technical issue in order to support owners and shipyards to comply with MARPOL Annex VI requirements.

 

WHITE RABBIT THE LARGEST ALUMINIUM TRI-HULL IN THE WORLD FLAGS WITH THE COOK ISLANDS

Photo credit: Mark Truenorth

MCI has just entered the majestic 84-metre trimaran superyacht White Rabbit – the largest aluminium and tri-hull superyacht in the world.

This adds 3,000 gross tonnes to the flag’s total tonnage, as MCI moves closer towards its goal of 10% of the world’s superyacht fleet on its register.

Designed by Sam Sorgiovanni and built by Australian custom superyacht builder, Echo Yachts, MCI was selected as the flag of choice due to its commitment to highest international safety standards and stringent quality control over vessels and crew.

MCI CEO Glenn Armstrong said today: “Adding White Rabbit to our fleet marks another major milestone for our expanding ship registry and we are certainly grateful for this trust. This reflects our efforts in becoming a major player in the yacht registration business.”

He added: “In 2019, as we continue to grow and develop more products for the yacht market, we also strive to constantly improve ourselves in upholding the highest quality and safety standards in shipping, as well as assisting our owners comply with regulation requirements.”

 

WHAT LIES AHEAD: PROGRESS AND PROJECTIONS FOR 2019

A quarter into 2019, and MCI is making steady growth and progressing aggressively. Here’s a look at how the ship registry’s yacht business is doing to-date:

Outlook of the yacht market
Optimistic about this year’s yacht market, Gary Miller, MCI’s Deputy Registrar in Spain said: “We continue to see encouraging growth in the industry worldwide – with increases to size and more developed innovation/design.”

Hilda Loe, MCI’s Deputy Registrar in Singapore, concurs this, citing that in Asia, the increasing concentration of wealth as well as the overall increase of wealth in ASEAN means that the number of super and mega yachts is increasing faster than the overall economic growth.

She added: “Depending on the orientation – Asian or Western, the yachts emphasise indoor luxury or a connexion with the out-of-doors (a karaoke room is a bigger draw than a schooner rig!); good-sized entertaining and dining areas are more important than sunbathing areas and staterooms.”

The growing demand for designs to include hybrid propulsion systems is one key trend MCI expects to persist.

There are also increasingly more discussions around the topic of producing cleaner vessels, with young owners driving the change for less environmental impact, according to Gary.

Currently working on multiple explorer yacht-related projects, Gary also envisage the explorer yacht market to expand further, as yacht owners seek new and more remote locations.

Issues facing the yacht industry in 2019
For the Asian region, Hilda highlighted the possibility of the slowdown in the growth rate in China to likely spill over to ASEAN with a consequent decline in the sales delta of new yachts and turnover delta of used ones.

Hilda also noted how high taxes, especially in Indonesia, at 45% for imports (vs. only 7% in Singapore), and over-regulation continues to hamper the growth in the number of yachts in ASEAN and China.

The relative number of Asians buying yachts is also increasing, but the process is hampered, in part, by the lack of understanding of the “boating lifestyle”, or perhaps by the still very strong Asian work ethic, which leaves little time to enjoy one’s yacht. Hilda said: “Perhaps, using a name like “cabin catamaran” instead of yacht would help – then Asians could long for the six Cs instead of the five Cs (Cash, Car, Credit Card, Condo, Country Club & Catamaran).”

In Europe, according to Gary: “There is now better awareness of preservation of our oceans and here in the Balearics, a growing movement to reduce waste in the Mediterranean, most notably with regards to single use plastics. Yachts visiting are embracing this and contributing to the campaign to prevent unnecessary damage to sea life.”

“Here in Spain we are now seeing the results of the modifications to tax laws which has brought us into line with our competing EU states in the charter industry. Not only are we seeing an increase in yacht owners choosing Spain to charter their yachts but there is steady growth in the demand for winter refit projects in Spain as well.”

“The success and increase in size of the relatively new Superyacht show in Palma (established 2013) is evidence of the popularity of the Balearics for yacht owners now.”

Needed changes to the industry
On market expansion, Hilda suggested: “A joint effort rather than simply depending on organic growth is needed. Specifically, yacht designers and boatyards benefit from more luxury, super and mega-yachts but we would benefit from expansion of the lower end of the market as our effort for registering a mega-yacht isn’t substantially different than that of registering a small yacht.”

“With significantly more people capable of owning a small yacht, encouraging that sort of ownership will disproportionately benefit our segment of the industry.”

Gary raised on the frustrations surrounding legalities (with varying interpretations at times). He added: “This also applies to the bureaucracy in many of the European countries which our clients operate in – so a clearer mandate and more equal playing field would make the difference.”

 

TOP 10 LARGEST YACHTS REGISTERED WITH COOK ISLANDS

 

 

 

 

 

 

 

 

 

 

INTERVIEW WITH FORRESTER GRANT, MCVEAGH FLEMING LAWYERS

Could you share a little about McVeagh Fleming Lawyers? And the services you offer to clients?

McVeagh Fleming is a full-service law firm with two offices based in Auckland offering legal advice on matters including property, immigration, commercial/corporate matters, trusts/wills, employment and litigation. We recently celebrated our 100th year of providing legal advice to local and international clients!

Outside of general commercial and commercial property work my focus is on the commercial side of maritime law including vessel sale and purchase, rebuild/re-fit, chartering, vessel ownership structuring, management/crew agreements, yacht syndication, mortgages and flagging/registration considerations along with advising clients on operational compliance (on a local and international scale). Our litigation department is well placed to handle contentious matters such as vessel arrests, shipping claims and general disputes.

How is it like working with MCI? What do you enjoy most about your working relationship with the registry?

At the risk of sounding clichéd, the people that work for MCI make it an absolute pleasure to deal with the Registry. Whilst we’ve had our ups and downs over the years (no relationship is perfect right!), I’ve always found the Registry to be professional, prompt and the staff a delight.

Having dealt with many Registers, I can honestly say that it isn’t often that you will find a Registry with a ‘hands on’ approach in trying to craft a solution to work for a client (always within the law and with a ‘safety first’ ethos!) which is why MCI is one of my favourites!

Approachability is another aspect of my working relationship with MCI that I really enjoy. It’s uncommon in larger Registers for the CEO and Registrar to be prepared to discuss matters with clients (or their lawyers!) directly (when appropriate) which is something I’ve always found refreshing.

When speaking to clients/potential clients, what are they most concerned about when selecting a flag? In other words, the factors for their consideration.

The simplest way of phrasing a client’s concern is ‘If I choose this flag, will it meet my objectives without too much risk or compromise?’ Factors/objectives driving a client to a particular flag are extremely varied and range from tax imperatives to operational/manning flexibility, intended areas of operation (geographical and scope) and ease of dealing with a Registry.

Whether the venture will be commercial or private, or a mix of both is another important factor. The commercial/private hybrid is becoming important for superyacht clients who may not want a full scale commercial charter operation, but want to be able to charter their vessels out when not in use to recoup operational costs.

How do you then address their concerns? Or what solutions do you offer?

Where possible I try to meet with the clients face to face (or over Skype) to better understand their drivers and what is important to them at the end of the day. There is no ‘one size fits all’ solution in the maritime space and a little time spent trying to understand the bigger picture tends to focus things not only in my mind, but that of the client. From that point I work with the client (or their vessel manager/Master/operations team) to find a solution that offers the best possible return with risk and compromise mitigated as far as possible. I like my clients to see me as a trusted advisor that will be with them for the long haul.

If you would like to get in contact with Forrester Grant email fgrant@mcveaghfleming.co.nz 

HILDA ATTENDS THAILAND BOAT SHOW & RENDEZVOUS 2019

MCI’s Deputy Registrar Hilda Loe attended the fourth edition of the Thailand Yacht Show & Rendezvous which took place at the award-winning Royal Phuket Marina over four consecutive days from 10-13 January.

Six Cook Islands-flagged yachts were on display at the show, alongside the very best and latest of luxury yachts. More photos below:

 

A WORLD MARITIME DAY 2019 SPECIAL: INTERVIEW WITH DEPUTY REGISTRAR HILDA LOE

With the World Maritime Day theme this year ‘Empowering Women in the Maritime Community’, we spoke to Deputy Registrar Hilda on her involvement with MCI.

Tell us about your role as a Deputy Registrar with MCI.

As Deputy Registrar I take on educational, sales and administrative roles. From the educational perspective, it is my duty to explain to yacht owners why it is beneficial to register their yacht in certain offshore locations. Once they understand that, I need to then explain why the Cook Islands is the most advantageous jurisdiction for their registration. Finally, once they are convinced that they should register with the Cook Islands, it is necessary to help them through the process of getting their yacht registered. Most clients are clueless with the forms & documentation and often times, we complete these for them.

What attracted you to the maritime industry, in your case yacht registration business?

Business expansion. We entered the yacht industry to fulfil the need of yacht owners to form companies to own their yachts which can be advantageous for tax, confidentiality and liability reasons.  Once we understood this segment of the market, it made sense for us to expand our services to become a registrar so that we could be a one-stop shop for the paperwork requirements of yacht ownership.

The World Maritime Day theme this year is ‘Empowering Women in the Maritime Community’. What is your view on contribution/representation of women within the maritime sector?

This is still largely a man’s field stemming from the traditionalism of the maritime industry in particular but also of the slow growth of opportunities for women in general at the senior levels. We expect to see this change as senior management opportunities for women in business and the maritime industry improve, which will attract more women to the industry, in turn sparking a virtuous cycle leading to much greater representation of women in the industry.

Shipping has historically been a male-dominated industry. How do you think we can attract more women into the industry?

The first step towards attracting women into the industry is for the women already in the industry to be taken seriously and to be given positions of significant responsibility, including as yacht and ship captains, senior executives in shipping companies and so forth. Women will not be attracted to dead-end jobs or an industry noted for its antipathy towards women executives. Put women in positions of power and more women will be attracted.

What would be your advice to women who are considering a career in the maritime industry?

Go for it! The maritime industry requires a broad range of skill sets so there’s almost certainly a skill set that closely matches yours or is one you can gain. Decide where in the industry you want to work, acquire the necessary skills and then pound on the door until they let you in. With luck, you’ll find the door has already been opened by someone who went before.