Laura Ronan and Yassmin Hamzeh of the Standard Club on Thursday (3 February) published an article on the P&I Club’s website updating readers of ‘excess bunker’ claims at Turkiye:

The club has seen an increase in ‘excess bunker’ claims in Turkiye in recent months, causing delays to the member’s ships as well as the possibility of fines and criminal proceedings.

According to the Turkish Customs Regulations, seagoing vessels (Turkish and foreign flagged) entering Turkish ports must report the quantity of bunkers on board the vessel (via Ship’s Stores Lists declarations) to the customs administration. If there is a difference between the declared figures and the quantity calculated by the local authorities, the customs authorities may impose customs fines on the owners and crew, or even initiate criminal proceedings. The difference in the quantity may be detected by routine controls of custom authorities, who may then carry out an onboard inspection.

Consequences

1. Customs Fines

Customs fines for excess bunkers are divided into two categories and customs authorities can apply one of the following:

1. a) Fine for irregularities: This is deemed appropriate for what they consider to be a simple error in declaration that cannot be interpreted as a fundamental declaration error.
2. b) Fine for tax losses: This relates to the tax losses caused by undeclared excess bunkers. The value of the fines are calculated based on the quantity of excess bunkers, which may result in higher fines than those imposed for irregularities.

Shipowners may benefit from a deduction of ¼ of the total amount of the fine if the payment in respect of a fine for irregularities is made within one month and in respect of a fine for tax losses within 15 days following the service of written notification. Alternatively, owners have the right to object and appeal the decision within 15 days from the notification of the fine. If the initial appeal is rejected, further appeal may be available. The ship may be allowed to depart in the meantime if acceptable security is posted (see below).

2. Criminal Proceedings

The Public Prosecutor may initiate criminal proceedings against the crew and/or confiscate the vessel if there is suspicion of smuggling as a result of a discrepancy in the bunker figures. They will likely also order the seizure of the excess bunkers.

If the Public Prosecutor’s office is involved, officials would proceed to take statements from the crew (generally the master and chief engineer).

In the best case scenario, the crew and the vessel would be free to sail after the statements are collated. Although less likely, it is also possible that the vessel could be arrested and a bank guarantee or cash may need to be provided to allow the vessel to sail (a club Letter of Undertaking will not be accepted by the customs authorities). The value of the bank guarantee could be up to the value of the vessel, as determined by the court-appointed experts. If a criminal case is not commenced, the bank guarantee or cash would be returned. If, however, criminal proceedings are concluded against the member, the vessel may be sold by state auction.

In theory, appealing against any customs fine and criminal decision is possible. However, in reality, customs fines are usually settled amicably with the customs authorities.

Club cover

Fines issued by Turkish customs authorities as a result of ‘excess bunkers’ may fall within the category of ’fines for smuggling and breach of customs regulation’ depending on how they are categorised by the customs authorities. This could be a key differentiator as fines concerning the misdeclarations may be covered as of right under r. 3.16.1, save in respect of smuggling of goods or cargo, which would be dealt with under r. 3.16.4, and thus would be discretionary.

Reimbursement of discretionary claims is subject to the approval of the club’s board. When deciding whether the discretionary claim would be recoverable under P&I cover, the board would consider, among other things, whether the member took all such steps as appear to the board to be reasonable to avoid the event giving rise to the fine. If the board is satisfied that that test is met, the amount which the member may recover from the club will be determined by the board. The board has wide discretion to determine the extent of any recovery.

Members are expected to act as a ’prudent uninsured’ in responding to fines / criminal proceedings issued by customs authorities as a result of excess bunkers (or for any other reason). Of course, the club is willing to assist members in the handling of the claim (to the extent that it can) and preparing the claim submission for the board’s consideration.

A distinction, however, should be noted between fines issued for smuggling which are covered by the club on discretionary basis (as per the above), and fines for breach of regulations concerning the declaration of goods or the documentation of cargo, which would be covered as of right under club’s rules.

For further information on discretionary smuggling fines please refer to the club’s article here.

Conclusion

Particular attention should be paid by the vessel and the crew when declaring the quantity of bunkers generally, and particularly in Turkiye. The quantity of bunkers on the vessel must be correctly declared and in accordance with the vessel’s records. Members are strongly recommended to measure the quantity of bunkers with soundings. The crew should regularly monitor whether the fuel tank indicators are working correctly, and should not feel under pressure to provide the calculation until they are certain of the figures. If any issues arise, members are strongly recommended to contact their usual P&I contact as the prompt involvement of lawyers and local correspondents may assist in resolving the problem without further serious consequences.

With thanks to Ismail Aydin of Aydin & Partners for their assistance in preparing the guidance above together with the club.

Source: Standard Club
Photo credit: Meriç Dağlı on Unsplash
Published: 7 February, 2022