Japanese Shipping Policy Issues

Yoshikiyo OnoDirector General

Japanese Shipowners’ Association

16 October 2013Tokyo

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Contents

1. Outline of the JSA

2. Piracy Issue

3. Environmental Issue

4. Canals Issue

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1. Outline of the JSA

The Japanese Shipowners’ Association (JSA): nationwide representative body of the Japanese shipping industry

Members of JSA: Japanese owners, charterers and operators of ships of 100 gross tons and over

100 member companies (16/10/2013)

2.-1 Piracy Issue – recent trend

It is reported that there has been a serious escalation in the number of incidents of violent armed robbery in the Gulf of Guinea, while the total number of piracy attacks is declining, especially in the Indian Ocean.

Source: IMB

* January - June

Piracy Crisis is not over.

*

Focus on Gulf of Aden, Somalia, NigeriaAfrica

South East Asia

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2.-2 Piracy Issue – JSA activities

To express our gratitude for their engagement, a JSA delegation led by its President has visited Djibouti for 4 consecutive years from 2010, where the Japan Maritime Self-Defense Force established a naval base there.

The current deployment of 2 escort ships in the region will be changed from December 2013 to one escort-ship for the operation of CTF-151, and the other escort-ship for merchants, which reflects the JSA’s view.

The Japanese Government has dispatched 2 escort ships and 2 patrol airplanes to enhance the navigation safety of vessels transiting off the coast of Somalia.

Close communications between Japanese government and JSA are continuing to address ongoing piracy crisis.

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2.-3 Piracy Issue – Armed Guard

Contribution of Private Armed Guard to stable maritime transport

The combined success of the military forces, the use of the industry’s Best Management Practices (BMP) and the increased deployment of private armed guards is an important factor in achieving a reduction in Somali pirates attacks.

The JSA appreciates the enormous efforts of BIMCO to develop an environment of facilitating the use of a private armed guard through the establishment of frameworks such as GUARDCON.

In Japan, the JSA is striving for the earliest adoption of the bill to permit private armed guards on board Japanese flagged vessels in the extraordinary session which started from 15 October 2013.

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3.-1 Environmental Issue – CO2 Emission Regulation

Under the 1990s Kyoto Protocol, Article 2.2 stipulates that GHG emissions reductions from international transport (maritime and aviation) shall be pursued through their own professional organisations (IMO and ICAO), in light of their characteristics (borderless transport).

Shipping is the only major industrial sector which has a binding global regime to reduce its CO2 emissions with entry into force of the amendments to MARPOL Annex VI from 1 January 2013. - “Energy Efficiency Design Index (EEDI)” - “Ship Energy Efficiency Management Plan (SEEMP)”

Any regulation on air emissions from ships should be pursued through IMO.

EEDI Concept

(Source: MOL)

(Source: Lloyd’s Register)

SEEMP Concept

IMO is now considering an establishment of a global system of “Monitoring, Reporting and Verification (MRV)” as an introductory phase to develop a scheme of Market Based Measures (MBM), which aims to achieve further reductions of CO2 emissions.

The JSA’s firm stance is to oppose any regional regulation of MRV under consideration in the EU.

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3.-2 Environmental Issue – UNFCCC discussion

At COP15 in December 2009, developed countries promised to mobilise long-term finance of US$100 billion a year by 2020 from a variety of sources (public/private) for climate change adaptation projects in developing countries.

No agreement on sources of long-term finance (LTE) has been made, but several reports (UN, IMF, as well as UNFCCC) consider that international transport could be candidate sources without any persuasive argument. These reports suggest that international maritime transport could contribute a large US$ 15 billion (15% of total amount of LTE) for this financial purpose.

Shipping Industry is not “Cash Cow”.Unduly excessive burdens of contribution should not be imposed on particular industries.

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3.-3 Environmental Issue – Ballast Water

To address the above damage, the Ballast Water Management Convention is expected to enter into force in the first half of 2015, designed to meet the required standard by a treatmentsystem installed on an operating vessel.

Reasonable Sampling Procedure for Ballast Water is yet to be established.

The ballast water from ships has the potential to damage local marine ecosystems, caused by the unwanted transportation of invasive species.

A tie-up between the JSA and Class NK has been established to propose reasonable methodology for sampling to IMO via the Japanese Government.

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4.-1 Canals Issue – Panama Canal ①For efficient global trade, the Panama Canal is a crucial key junction connecting the Atlantic Ocean and the Pacific Ocean.

14,544 transit ／ 337.7 million PC/UMS tons

Total Toll Revenues: US$1,852.4 million (highest recorded)

Fiscal Year 2012

Panama Canal Authority (ACP)repeated unilateral and sharp toll increases in the past and tollshave already increased to a certain level.e.g. Container Vessel2002: US$120,000/per transit2012: US$430,000/per transit<<more thanmore than tripled in the 10-year period> tripled in the 10-year period> * *based on JSA provisional calculations

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4.-2 Canals Issue – Panama Canal ②Total revenues of the Panama Canal Authority (ACP) in 2012: US$2,411MUS$2,411M *The total revenues are composed of toll revenues (USD$1,852.4M) and other revenues.

　　 representingrepresenting around around 10%10% of Panamanian GDP in 2012, of Panamanian GDP in 2012, US$25,756MUS$25,756M

Toll is stable, sizable and provides controllable income for Panama

Needs continuous and substantial income for future growth

The construction process started in 2007, and will finish in mid- 2015.

Canal Expansion Project

Source: Panama Canal Authority

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4.-3 Canals Issue – Panama Canal ③

Calculated based on each vessel’s PC/UMS, except container vessels

Differentiating toll structure depends on type of vessel and its cargo

Starting from December 2012Being carried out by: <High Level Meeting > ACP & ICS, BIMCO and sectoral shipping organisations such as WSC, INTERTANKO, SIGTTO and INTERCARGO <Sectoral Meeting> ACP & each sectoral shipping organisation

ACP intends to ACP intends to finalisefinalise its process of introducing the new toll structures its process of introducing the new toll structures

and rates during 2014.and rates during 2014.

Current Toll Structure

ACP’s attempt to change the structure in conjunction with opening new locks

Dialogue with Shipping Industry

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4.-4 Canals Issue – Panama Canal ④In order to deter further unilateral and irrational toll increases in

conjunction with opening new locks and ensure a healthy relationship

between the ACP and Canal users, we should, correspondingly, urge

the ACP to:

give due attention to shipowners’ earlier contributions through

accepting the recent toll increase towards the Panama Canal

expansion, and therefore maintaining the toll amount its current level;

show clearly the toll review mechanism, including base data or indices;

ensure a sufficient prior notice period and consultation period for

users,

in the event that the tolls have to be reviewed in the future;

maintain regular dialogue with Canal users in the future.

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4.-5 Canals Issue – Suez Canal The Suez Canal is also a crucial key junction for efficient global trade, connecting the the Mediterranean Sea and the Red Sea.

17,225 transit ／ 928 million SCNT

After 2005, the Suez Canal Authority (SCA) constantly implemented unilateral and irrational

toll increases with sudden and short notice.

primary importance of establishing a healthy dialogue and relationship between the primary importance of establishing a healthy dialogue and relationship between the SCA and Canal usersSCA and Canal users

(Currently the SCA does not have a system to listen to Canal users’ voice. ）

Fiscal Year 2012

Source: Suez Canal Authority

Ship Type Distribution in 2012 (SCNT)

Total Toll Revenues:Total Toll Revenues:US$5,129 millionUS$5,129 million

One of most important sourceOne of most important sourceof foreign currency earnings of foreign currency earnings for Egypt for Egypt

Source: Suez Canal Authority

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4.-6 Canals Issue – Importance of Governments’ Involvement

In October 2012, the Japanese Prime Minister stated to the Panamanian

President the importance of promoting a dialogue between the industry and the

ACP.In May 2013, the Japanese Foreign Minister held talks with the Panamanian

President and he conveyed the shipping industry’s serious concern over

successive/unilateral toll increases and emphasised the importance of giving

due consideration to the Canal users’ voice.The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) have been

asking interested countries to keep a close watch on Canal issues via various

opportunities.

We should continue to urge various governments to continually pay due attention to We should continue to urge various governments to continually pay due attention to Canal issues for Canal issues for securing the stabilised and smooth growth of world trade.securing the stabilised and smooth growth of world trade.

The involvement of interested countries in this issue is indispensable for The involvement of interested countries in this issue is indispensable for ensuring a healthy relationship between the ACP and Canal users. ensuring a healthy relationship between the ACP and Canal users.

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Thank you for your attention!!