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BIMCO CII and Emissions Clauses

BIMCO (Baltic and International Maritime Council), the world’s largest international shipping association representing approximately 60% of the world fleet, has developed a comprehensive set of standard charter-party clauses to allocate the regulatory and commercial cost of climate compliance between owners and charterers. The principal clauses are: the BIMCO CII Operations Clause for Time Charter Parties (issued November 2022, addressing the Carbon Intensity Indicator compliance under MARPOL Annex VI); the BIMCO Emission Trading Scheme Allowances Clause for Time Charter Parties (issued July 2023, addressing the EU ETS for shipping extension to maritime); the BIMCO Emission Trading Scheme Recap Clause (issued July 2023, providing an alternative shorter form for inclusion in voyage and time charter contracts); the BIMCO FuelEU Maritime Clause for Time Charter Parties (issued December 2023, addressing the FuelEU Maritime intensity regulation effective January 2025); and a number of related clauses covering bunker delivery notes, fuel quality, virtual arrival and green fuel premium pricing. The clauses provide a widely-adopted contractual framework that is used in over 80% of the time-charter contracts signed for vessels above 5,000 GT calling EU ports, and in a smaller but growing share of voyage charter and contract of affreightment (COA) contracts. Adoption is highest in the bulk carrier and tanker sectors (where the time-charter market is large and standardised) and in the container ship sector (where freight rates are increasingly tied to ETS pass-through). ShipCalculators.com hosts the principal computational tools: the CII pass-through cost calculator, the EUA pass-through calculator, the FuelEU pooling negotiation calculator, the voyage charter ETS recovery calculator, the CII Attained calculator and the WtW intensity calculator. A full listing is available in the calculator catalogue.

Contents

Background

Why standard clauses matter

Charter-party contracts (time charter, voyage charter, contract of affreightment) are the principal commercial framework through which shipping services are bought and sold. The contracts allocate operational responsibilities (manning, maintenance, fuel supply, port costs) and commercial risks (delays, off-hire, weather) between the owner and the charterer in a structured legal way.

Until approximately 2020, the contracts were largely silent on climate compliance costs because there were essentially no climate compliance costs to allocate. The introduction of the CII rating framework in 2023, the EU ETS for shipping in 2024, the FuelEU Maritime in 2025, and the IMO Net-Zero Framework in 2027 collectively created substantial new compliance costs that needed to be allocated. The costs include direct financial costs (EUA surrender, FuelEU penalties), indirect financial costs (capex for retrofits, additional fuel cost for compliant fuels), and operational impacts (slow steaming, route optimisation, schedule constraints).

The BIMCO standard clauses provide a widely-recognised contractual framework that:

  • Reduces transaction costs by avoiding bespoke negotiation of each cost-allocation issue.
  • Provides legal certainty through tested wording and case-law-developed interpretation.
  • Allocates costs based on the underlying cause and control principle (the party that controls the underlying activity bears the related cost).
  • Provides flexibility for the parties to vary the allocation by mutual agreement.

BIMCO’s role

BIMCO is a non-governmental international association headquartered in Copenhagen, with approximately 1,900 member companies in over 130 countries representing approximately 60% of the world fleet by tonnage. BIMCO’s principal activity is the development and maintenance of standard contracts, with over 250 standard contract forms covering all major commercial shipping segments.

BIMCO’s standard contract drafting process involves:

  • Sub-committee comprising representatives of owners, charterers, brokers, lawyers and Class societies.
  • Public consultation through BIMCO’s website and via BIMCO Documentary Committee.
  • Approval by the BIMCO Documentary Committee.
  • Publication on the BIMCO website with explanatory notes (the “Explanatory Note”).
  • Periodic review and update as legal and regulatory contexts evolve.

The CII, ETS and FuelEU clauses were each developed through this process between 2020 and 2024.

The BIMCO CII Operations Clause for Time Charter Parties

Scope and effect

The BIMCO CII Operations Clause for Time Charter Parties, issued in November 2022 and updated in 2023, is designed for inclusion in time charter contracts. It addresses the issue that:

  • Under standard time charter terms (e.g. NYPE 2015, BIMCO Standard Time Charter), the charterer controls the operational decisions (route, speed, port call sequence, cargo loading) that drive fuel consumption and therefore CII Attained.
  • Under MARPOL Annex VI, the owner is the regulated entity that bears the legal CII compliance liability (CII rating publication, CII corrective action plan requirement, eventual port-state-control consequences for non-compliance).
  • Without a contractual mechanism, the owner has no commercial leverage to require the charterer to operate the vessel in a way that maintains CII compliance.

The CII Clause provides this mechanism through:

  • Cooperation provisions: the parties undertake to cooperate to maintain a satisfactory CII rating, with the charterer providing speed and routing information needed to project the rating.
  • Information exchange: the charterer provides voyage data; the owner provides CII calculations and projected outcomes.
  • CII shortfall remediation: if the projected CII rating drops below the contractual target (typically C rating, sometimes B), the parties confer on remedial steps including slow steaming, route changes, hull cleaning.
  • Cost allocation: the cost of remedial steps is allocated based on the underlying responsibility (e.g. slow steaming saves charterer fuel cost; hull cleaning is at owner’s account).

Key provisions

The principal sub-clauses are:

  1. Sub-clause (a) - Definitions: defines CII, AER, AER Required, AER Attained, CII Year (the calendar year), CII Reference Lines (the IMO reference lines for the relevant ship type and DWT), Reporting Year.
  2. Sub-clause (b) - Cooperation: parties shall cooperate in good faith to provide a CII rating not lower than [insert agreed rating] for the calendar year.
  3. Sub-clause (c) - Information: the charterer shall provide voyage information; the owner shall provide CII projections and reports.
  4. Sub-clause (d) - Remedial action: if the projected CII drops below target, parties shall agree remedial steps; in default, owner may instruct certain remedial steps.
  5. Sub-clause (e) - Off-hire and CII non-compliance: if the charterer’s actions cause the CII non-compliance, the resulting consequences (CII corrective action plan submission, related delay) shall not constitute off-hire of the vessel.
  6. Sub-clause (f) - Disputes: dispute resolution typically referred to London arbitration under LMAA rules.
  7. Sub-clause (g) - Variation: the parties may agree to vary the target CII rating by mutual consent.

Adoption

The CII Clause is widely adopted in the bulk carrier, chemical tanker, crude oil tanker and LNG carrier time-charter markets. By end-2024 approximately 70% of new time charter contracts in these segments include the BIMCO CII Clause or a substantively equivalent bespoke clause.

In the container ship sector the adoption is lower (approximately 40%) because container charter contracts are more bespoke and the CII compliance is typically managed through fleet-wide pooling rather than per-vessel.

Practical experience and cases

Initial 2023 to 2024 experience with the CII Clause has highlighted several practical issues:

  • CII reference line uncertainty: the IMO is updating the CII reference lines periodically, creating uncertainty about the future target. Some contracts now include provisions for adjustment of the agreed CII rating if the underlying reference lines change.
  • Charterer disagreement about remedial steps: in some early disputes, charterers have resisted slow-steaming requests on the grounds that they would slow voyage delivery and impact charter party performance. The standard clause provides for owner instruction in default, but the practical resolution typically requires negotiation.
  • CII Year accounting: some short-charter situations create ambiguity about which party is responsible for the CII Attained at year-end. The clause includes default rules but practical disputes have arisen.

A small number of disputes have been arbitrated under the LMAA rules; published awards remain limited as of end-2024.

The BIMCO Emission Trading Scheme Allowances Clause

Scope and effect

The BIMCO Emission Trading Scheme Allowances Clause for Time Charter Parties, issued in July 2023, is designed for inclusion in time charter contracts and addresses the EU ETS for shipping cost.

The EU ETS extension to maritime requires the shipping company (defined as the entity entered in the EU ETS register, typically the owner) to surrender EU Allowances (EUAs) equal to the CO2 emissions of the vessel on EU-related voyages. The EUA cost in 2024 is approximately EUR 70 to EUR 100 per t-CO2, equivalent to approximately EUR 250 to EUR 350 per tonne of fuel burnt on EU voyages.

The Clause provides for:

  • Cost passthrough: the charterer reimburses the owner for the EUA cost of voyages performed during the charter period.
  • EUA price determination: the EUA cost is calculated using the EUA daily settlement price on a defined date (typically a business day after the voyage ends).
  • Voyage allocation: the EUA cost is allocated between the charterer and any subsequent charterer for voyages spanning charter changes.
  • EUA delivery vs cash settlement: the parties may agree on either physical delivery of EUAs to the owner (less common) or cash settlement at the EUA market price (more common).
  • Charterer EUA management option: the charterer may, at their option, deliver EUAs in lieu of cash payment.

Key provisions

The principal sub-clauses cover:

  1. Definitions: EU ETS, EU Allowance, Voyage, Surrender Obligation, Phase-In Schedule (40% surrender for 2024 emissions, 70% for 2025, 100% for 2026 onwards).
  2. Charterer’s obligation: charterer to compensate owner for EUA surrender obligations attributable to voyages.
  3. Calculation: detailed methodology for calculating the EUA cost per voyage.
  4. Payment terms: payment due [insert days] after the end of the calendar quarter.
  5. EUA in lieu of cash: charterer may opt to deliver EUAs.
  6. Audit rights: each party has audit rights over the calculation.
  7. Disputes: London arbitration.

Phase-in schedule

The EU ETS phase-in is a critical contractual element:

  • 2024 emissions: 40% surrender obligation (charterer pays for 40% of EUA cost).
  • 2025 emissions: 70% surrender obligation.
  • 2026 onwards: 100% surrender obligation.

The Clause incorporates the phase-in schedule and provides for adjustment if the phase-in is changed by EU regulation.

Adoption

The ETS Clause has very wide adoption (approximately 90% of new time charter contracts for vessels calling EU ports), reflecting the magnitude and certainty of the EUA cost. Charterers have largely accepted the cost passthrough as a normal cost of EU trade.

The BIMCO FuelEU Maritime Clause for Time Charter Parties

Scope and effect

The BIMCO FuelEU Maritime Clause for Time Charter Parties, issued in December 2023, addresses the FuelEU Maritime Regulation (Regulation (EU) 2023/1805, effective January 2025).

FuelEU Maritime requires that the annual GHG intensity of energy used onboard by vessels above 5,000 GT calling EU ports does not exceed a specified maximum (89.34 g-CO2eq/MJ in 2025, declining to 18.23 g-CO2eq/MJ in 2050). Non-compliance triggers a compliance deficit that can be remedied through pooling, banking, or penalty payment (EUR 2,400 per t VLSFO-equivalent of deficit).

The Clause provides for:

  • Cost allocation: the cost of FuelEU compliance is allocated based on the underlying responsibility for the fuel choice and the operational pattern.
  • Compliance balance management: the owner manages the FuelEU compliance balance for the vessel.
  • Charterer information: the charterer provides voyage and bunker information needed for the calculation.
  • Pooling option: the parties may agree to pool the vessel’s FuelEU compliance balance with other vessels in the same company or with third parties.
  • Penalty pass-through: any FuelEU penalty is allocated based on the cause.

Pooling complexity

A novel feature of FuelEU Maritime (compared to EU ETS) is the pooling mechanism: a vessel with surplus compliance can pool with a vessel with deficit compliance, with both vessels deemed compliant. The pooling can be internal (within the same shipping company) or external (between companies via a third-party pooling agreement).

The Clause provides a framework for owner-charterer cooperation on pooling decisions, with the value of any pooling surplus allocated based on the agreed split (typically 50/50 or based on the underlying contribution).

The FuelEU pooling negotiation calculator implements the pooling economics.

Multiplier complexity

A second novel feature is the 2x multiplier for RFNBO fuels: each MJ of RFNBO counts as 2 MJ for compliance through 2034. The Clause addresses the allocation of the RFNBO cost premium and the corresponding compliance benefit.

Adoption

The FuelEU Maritime Clause is rapidly being adopted (approximately 60% of new time charter contracts for vessels calling EU ports as of end-2024). The complexity of the underlying regulation has slowed adoption relative to the simpler ETS Clause.

EU Emission Trading Scheme Recap Clause

The BIMCO Emission Trading Scheme Recap Clause (July 2023) is a shorter alternative to the full ETS Clause, designed for inclusion in voyage charter contracts and in the recap of fixture (the brief summary of agreed terms exchanged between brokers). The Recap Clause is approximately 200 words long and provides only the essential cost-allocation provisions without the detailed calculation methodology.

Bunker Quality and BDN Clauses

BIMCO maintains several bunker quality and bunker delivery note (BDN) clauses that govern the contractual aspects of bunker supply, including FuelEU compliance information requirements. The clauses are integrated with the FuelEU Maritime Clause to ensure that the BDN provides the certified WtW intensity data needed for the FuelEU compliance calculation.

Virtual Arrival Clause

The BIMCO Virtual Arrival Clause (originally 2010, updated 2018) provides a contractual framework for just-in-time arrival, allowing the charterer to instruct the owner to slow the vessel for arrival at a specified time, with related cost adjustments.

Sea Cargo Charter Recommendations

BIMCO is a co-sponsor (with the Sea Cargo Charter Secretariat) of recommended language for charterers signed up to the Sea Cargo Charter to incorporate the Charter’s reporting requirements into their charter contracts.

Green Fuel Premium and Carbon Cost Clauses

BIMCO has published green fuel premium clauses for use in charter contracts that contemplate the use of higher-cost low-carbon fuels (RFNBO methanol, ammonia, biofuels). The clauses allocate the premium cost between owner and charterer based on the underlying compliance benefit.

Implementation across charter party types

Time charter

The BIMCO clauses are designed primarily for time charter use, where the charterer has operational control of the vessel for an extended period (typically 6 months to 5 years). The clauses fit naturally into the standard NYPE 2015 (New York Produce Exchange) and BIMCO Standard Time Charter forms.

Voyage charter

The Recap Clause provides a simpler version for voyage charter inclusion. Under voyage charter, the owner typically pays for fuel and bears the direct compliance cost, but the standard freight rate is increasingly determined with the compliance cost factored in. The Recap Clause provides for the transparent passthrough of incremental costs.

Contract of Affreightment (COA)

Long-term contracts of affreightment (typically 1 to 5 years, with a series of voyages) increasingly include BIMCO climate clauses as part of the master COA. The complexity of allocating compliance cost across multiple voyages with potentially different vessels is addressed through specific provisions.

Pool agreements

For commercial pools (where multiple owners pool vessels under a common operator, sharing earnings), the BIMCO clauses provide a basis for the pool agreement to allocate compliance costs back to participating vessels.

Implications for owners, charterers and insurers

Owners

Owners benefit from the clarity and certainty provided by the BIMCO clauses but bear the operational complexity of managing the compliance reporting. The standard clauses incentivise owners to:

Charterers

Charterers benefit from the standard cost allocation but face increased complexity in voyage planning and bunker selection. The clauses incentivise charterers to:

  • Provide accurate voyage data to the owner for compliance calculation.
  • Cooperate on remedial steps when CII compliance is at risk.
  • Consider the FuelEU and ETS cost in voyage economics, not just the bunker cost.

Insurers

Marine insurers (P&I clubs and hull underwriters) follow the BIMCO clauses to allocate insurance liability appropriately. The clauses do not transfer regulatory liability but do affect the financial exposure of each party.

Banks and finance

Ship-finance banks signed up to the Poseidon Principles increasingly require borrower owners to use the BIMCO climate clauses in their charter contracts, as evidence of structured climate-cost management.

Future developments

IMO Net-Zero Framework Clause (in development)

BIMCO is developing a standard clause for the IMO Net-Zero Framework GHG Fuel Intensity (GFI) standard for use from 2027. The clause is expected to be finalised by approximately mid-2026 to allow charters spanning the 2027 effective date to be properly drafted.

Pooling and compliance trade clauses

BIMCO is developing pooling and compliance trade clauses to address the secondary market in FuelEU compliance balances and IMO Net-Zero Framework remedial units. The market is expected to grow significantly from 2025 onwards.

Standard clauses for non-EU jurisdictions

BIMCO is monitoring the development of analogous regulations in the UK ETS for shipping (UK ETS), Korean ETS, Japanese carbon pricing and other jurisdictions, and is expected to develop standard clauses for each as the regulations crystallise.

Charter party reform

The cumulative effect of the BIMCO climate clauses is reshaping the standard charter party forms themselves. Discussions are underway about a revised NYPE form (potentially “NYPE 2030”) that integrates the climate clauses into the main body rather than as appendices.

See also

Regulatory frameworks

Voluntary frameworks

Marine fuels

Operational and technical efficiency

Cargo and ship operations

Ship types

Calculators

References

  • BIMCO. BIMCO CII Operations Clause for Time Charter Parties. BIMCO, 2022 (updated 2023).
  • BIMCO. BIMCO Emission Trading Scheme Allowances Clause for Time Charter Parties. BIMCO, July 2023.
  • BIMCO. BIMCO Emission Trading Scheme Recap Clause. BIMCO, July 2023.
  • BIMCO. BIMCO FuelEU Maritime Clause for Time Charter Parties. BIMCO, December 2023.
  • BIMCO. BIMCO Virtual Arrival Clause. BIMCO, 2018 update.
  • BIMCO. NYPE 2015: New York Produce Exchange Time Charter. BIMCO, 2015.
  • BIMCO. GENCON 2022: Voyage Charter Party. BIMCO, 2022.
  • IMO Resolution MEPC.328(76): 2021 Revised MARPOL Annex VI. International Maritime Organization, 2021.
  • IMO Resolution MEPC.336(76): 2021 CII Guidelines (G1). International Maritime Organization, 2021.
  • Regulation (EU) 2023/1805 of the European Parliament and of the Council of 13 September 2023 (FuelEU Maritime). Official Journal of the EU, 2023.
  • Regulation (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023 (EU ETS Maritime). Official Journal of the EU, 2023.
  • LMAA (London Maritime Arbitrators Association). Annual Reports and selected awards. LMAA, 2023 and 2024.

Further reading

  • BIMCO. BIMCO Chartering Update. Quarterly publication.
  • BIMCO. Explanatory Notes to the BIMCO CII, ETS and FuelEU Clauses. BIMCO, 2023.
  • ICS. Catalysing the Fourth Propulsion Revolution. International Chamber of Shipping, 2022.
  • DNV. Maritime Forecast to 2050. DNV Energy Transition Outlook, 2023.