Seaboard Marine is committed to providing the highest level of customer service, without exception. In our ongoing effort to uphold that commitment, we are required to abide by a new environmental regulation that will globally impact the ocean transportation industry.
The United Nations International Maritime Organization (IMO) has issued a new, global regulation to limit the sulfur content in fuel that is used to power ships. The new regulation, effective January 1, 2020, will reduce the sulfur content in fuel from 3.5% (outside of Emission Control Areas) to 0.5%. This requirement is perhaps the most expensive regulation that will impact the international shipping industry. The global “low sulfur” mandate will have a significant impact on the cost of fuel used to operate our ships, and therefore Seaboard Marine has implemented a recovery method that provides our customers the ability to predict, plan and track how changes in fuel costs for shipping will impact the total shipping freight rate.
Effective from March 17, 2019, Seaboard Marine will begin using the below Marine Fuel Surcharge Index to provide our customers with greater visibility as adjustments are required in our fuel recovery program. Every month, Seaboard Marine will adjust the Marine Fuel Surcharge using calculations based on Platts Bunkerworld benchmarked IFO380 (3.5% sulfur) fuel in Houston and New York. Any necessary adjustment will be per our published Marine Fuel Surcharge Index. We will convert the benchmarked fuel from the current IFO380 (3.5%) to fuels that comply with the new regulation effective November 1, 2019 because we will need to start purchasing compliant fuel (0.5% sulfur or lower) beginning in November 2019 to completely clear our vessel tanks of the high sulfur fuel by year-end.
Every month, the Carrier will calculate the average of New York and Houston IFO 380, equally weighted, prices as published by Platts Bunkerworld. The average price will be published on this web page so that our customers can monitor the cost of fuel as it relates to the Marine Fuel Surcharge Index.
The average price will be calculated based on the daily IFO 380 price starting each 16th day of the month through the 15th day of the following month.
If the average price is higher or lower than the current index tier average price, Seaboard Marine will adjust the fuel charge based on the Marine Fuel Surcharge Index corresponding tier level on the first day of the next available month (about 45 days later). Example – For the review period February 16-March 15 any change would be effective May 1.
Starting with the August 2019 review period (August 16 through September 15) Seaboard Marine will review the average of New York and Houston MGO prices against the same index table (in place of IFO380 prices). From this point forward the Carrier will continue to use MGO fuel prices until a reliable 0.5% Low Sulfur fuel cost index is available. If a reliable 0.5% Low Sulfur fuel cost index is available on August 16, 2019, Seaboard Marine will use the prices of 0.5% Low Sulfur in the computation instead of the MGO price.