CIRCULAR LETTER 1/2008

Dear Sirs,

Re: BALLAST WATER MANAGEMENT REGULATIONS IN BRAZIL

Recent changes in Port State Control inspections of vessels, trading on the Brazilian coast (either coastal trade, regular liner or tramp), may imply in fines being imposed on those vessels/Owners, in the event ballast water is discharged in port.

The Port Captaincy started issuing Deeds of Infraction against the vessels, when the analysis of the ballast water of their tanks is not found according to the dispositions of Norm 20 from the Directorate of Ports and Coast (DPC), which states that the ballast must contain ocean water:

Ships should conduct ballast exchange in deep water (>200 m), in open sea and at least 200 nautical miles offshore.

During random Port State Control (PSC) inspections, ballast water samples are taken and density measured, which in the event of ocean water, should give ≥1,025. On several occasions PSC officers found a density of 1,020 or less, thereby alleging that the ballast water was not taken on, as required in the above stated regulation. This resulted in fines being imposed on the vessel/Owners. The fines may range between USD 600.00 and USD 28,000,000.00 however depending on the Rate of Exchange valid the day the fine is imposed.

In the event a density is found of 1,020 or less, PSC explained that it is irrelevant to present to the Port Captaincy, documents from the vessel showing registration of the place where the ballast water exchanges were conducted. The result of the sample collected from the ballast water in the presence of the Master and of the Naval Inspector will prevail over the contents of the official documents from the vessel.

The same applies to the Ballast Form and other documents that must be presented to the Port Captaincy, which should comply with the dispositions of Norm 20. PSC explained that these documents are carefully examined and on several occasions, irregularities have been found, generally on older vessels. They further stressed that the analysis is done by using equipment called “Refractometer” in the presence of the Master, who has the opportunity to check the result together with the Naval Inspector. If the Master does not agree with the result presented by the Naval Inspector, he can perform his own analyses, provided he has such equipment on board. In case of different results, the result from the equipment which has technically presented a better functioning condition will prevail.

Regarding the fine, PSC clarified that as it is an international tendency to protect the environment, it is quite possible that the fines will be increased as a way to avoid this

RUA XV DE NOVEMBRO 65, 8ª, SANTOS/SP - CEP 11010-151, BRAZIL PHONE: + 55 13 3219-7228 FAX: +55 13 3219-3811 E-MAIL: [email protected] WWW.PANDIBRA.COM.BR behavior and also that sub-standard vessels, presenting several irregularities and with crewmembers not well prepared, call at Brazilian ports.

The issue of irregular ballast water is considered an environmental infraction - hydro pollution. For this reason, as the naval authority surely will inform these hydro pollutions to the Federal and State Prosecutors, the Public Ministry will most probably commence the respective Civil Public Actions, aiming at obtaining indemnities for damages to the environment. Although we do not have any precedent involving this kind of claims, in our experience with oil pollution cases, we understand that the claimed amount may be considerable.

Based on the above it is advisable that the Members are alerted to this problem and, apart from the registration of the place, where the ballast water is collected/exchanged, it would be recommendable to have a Refractometer/densimeter on board, in order to check the density/salinity of the ballast water some days before arriving at the (Brazilian) port of call, so that the Master would still have the opportunity to correct any irregularity.

At the port of call, the Master should be present when the naval inspector collects the samples and conducts the analysis. In case that the Master arranges the sampling, care must be taken that same is done from the same place/tank previously analyzed by him and found in accordance with the (local) demand: ocean/deep sea water. Care should be taken that the sample is a representative one.

Sincerely, 29.01.2008

Albert H. H. Carriere Senior Claims Executive

RUA XV DE NOVEMBRO 65, 8ª, SANTOS/SP - CEP 11010-151, BRAZIL PHONE: + 55 13 3219-7228 FAX: +55 13 3219-3811 E-MAIL: [email protected] WWW.PANDIBRA.COM.BR