By David Rody, Doreen Rachal and Alexander Kellermann

Law360 (September 14, 2020, 4:44 PM EDT )

David Rody

Doreen Rachal

Alexander Kellermann

Fifteen days after the World Health Organization declared COVID-19 a global pandemic, the U.S. Coast Guard issued Marine Safety Information Bulletin 09-20 in response to the unprecedented circumstances.

Bulletin 09-20 announced that certain aspects of the USCG's environmental enforcement program — including vessel inspections, exams and checking required documentation such as compliance certificates and mariner credentials — would be curtailed in response to the heightened risks of the spread of COVID-19 within the shipping industry, resulting from frequent cross-border travel and close living quarters prevalent on vessels.

To that end, Bulletin 09-20 encouraged its personnel to "liberally use remote inspection techniques to verify vessel compliance and, if needed, defer inspections."[1] Other precautions in response to the global health crisis were also included in the bulletin.

But notwithstanding the limitations necessitated by the pandemic, the USCG's enforcement measures have, in many ways, not skipped a beat in 2020, with vessel detentions and criminal prosecutions continuing apace, and significant settlements still being announced. After a brief hiatus in detentions during the second half of March and April of this year, the USCG detained 11 vessels in the three months that followed.

In comparison, during the same three-month period from 2017 through 2019, the USCG detained an average total of 19 vessels. While the rate of detentions has been lower in absolute terms, it must be viewed relative to the global downturn in the shipping industry.

For example, the busy ports of Los Angeles and Long Beach, California, which together handle roughly 40% of all import cargo to the U.S., saw a decrease in port calls of more than 20% during May and June.[2] Viewed against this backdrop, one hard lesson of the COVID-19 experience for the already-stressed commercial shipping industry may be that — at least in the eyes of the U.S. government — even a global pandemic will not excuse the failure to maintain a rigorous environmental compliance program.

Inspection Changes Due To COVID-19

The impetus behind Bulletin 09-20 was the desire to avoid a disruption in commerce. The USCG has been challenged with executing environmental safeguards that protect against pollution, while simultaneously ensuring that all measures mitigate the risk of potential COVID-19 exposure and the further spread of the virus.

In its attempt to balance those competing goals appropriately, the USCG announced that it would "continue to use a risk-based program to determine which vessels will be required to undergo a Port State Control Exam [but] will not issue deficiencies or detain vessels for expired certificates, documents, or mariner credentials until October 1, 2020."[3]

While the USCG may choose to conduct an in-person certificate of compliance exam to determine whether a foreign-flagged vessel meets applicable compliance regulations, based on its evaluation of a particular vessel's compliance history, the USCG may permit the submission of "objective evidence of compliance."[4]

This objective evidence may include a prior port state or flag state exam, recent class surveys, pictures, videos, vessel logs, alarm reports, etc., that demonstrate compliance, in lieu of conducting full exams. The USCG may also opt to postpone a required inspection or exam for up to 90 days.

Moreover, even if it is decided that an inspection will go forward, prior to boarding any vessel or conducting the inspection, personnel must verify that no one on the vessel is ill — particularly with potential COVID-19 symptoms — and that all appropriate protective measures are used during all in-person inspections.

Ongoing Enforcement Regime

As indicated, while Bulletin 09-20 seeks to limit, to a certain extent, in-person inspections on vessels, the USCG has not backed down entirely from conducting in-person inspections related to potential violations of the Act to Prevent Pollution from Ships, or APPS,[5] and the Clean Water Act.[6].

Nor has the USCG ceased detaining vessels and crew members subject to investigation, despite the COVID-19 pandemic. In fact, the USCG, in collaboration with the U.S. Department of Justice, has continued to prosecute crew members, technical managers, and vessel owners and operators for their roles in environmental crimes.

By way of illustration, on June 10, the USCG detained the bulk carrier Protefs in Newport News, Virginia, for several potential environmental crimes violations, including bypassing the vessel's oily water separator and manipulating the general service pump to discharge the contents of the bilge tank directly overboard. Indeed, from May 2020 through the end of July, the USCG detained 10 additional vessels.

Moreover, notwithstanding the challenges with conducting government investigations as a result of the pandemic, the DOJ has also announced several significant environmental crimes settlements that have resulted in criminal charges, fines and multiyear probationary periods for international shipping companies, technical operators and crew members. These prosecutions are instructive of the types of criminal charges and legal risks companies may face if environmental crimes occur on vessels docking at ports within the U.S.

In short, just as in pre-COVID-19 times, the same types of charges, based on similar evidence — including a heavy reliance on whistleblowers — underlies these pandemic prosecutions. A few recent matters are summarized below.

U.S. v. Misuga Kaiun Co. Ltd.

The defendant company, the operator of the M/V Diamond Queen, was charged with violating APPS for failing to maintain an accurate oil record book.[7] Upon reaching Port Canaveral, Florida, a junior crew member informed USCG inspectors that he had information about illegal discharges that had taken place on the vessel.

The USCG inspection revealed that for approximately one year, low-level engineering crew members, acting at the direction of the chief engineer, discharged the contents of the bilge holding tank using the emergency dewatering system in the engine room. The defendant company failed to record the discharges in the oil record book.

The company pled guilty, and was fined $1.5 million, required to serve a probation term of four years and forced to implement an environmental compliance plan. The chief engineer also pled guilty, and was sentenced to probation for one year for knowingly failing to record the overboard discharges.

U.S. v. FGL Moon Marshal Limited et al.

The defendant company, operator of the M/T Zao Galaxy, was charged with an APPS violation for failing to maintain an accurate oil record book.[8] The crew members failed to record discharges of oily bilge water using a configuration of drums, flexible pipes and flanges to bypass required pollution-prevention equipment during the vessel's voyage from the Philippines to California in January and February 2019.

The USCG was again alerted to the discharges by a whistleblower. The defendant company pled guilty, was fined $1.6 million and was required to implement an environmental compliance plan during the four-year probation term.

U.S. v. Bernhard Schulte Shipmanagement (Singapore) Pte Ltd.

The defendant company, operator of the Topaz Express, was charged with an APPS violation for failing to maintain an accurate oil record book.[9] In June 2019,  on the Topaz Express failed to record several internal transfers and an overboard discharge of bilge waste without using the vessel's pollution prevention equipment.

In February 2020, the defendant company pled guilty, was fined $1.7 million and was required to implement an environmental compliance plan during the four-year probation term.

Robust Compliance Programs Required To Avoid DOJ Enforcement Actions

As the USCG and DOJ continue their efforts to enforce environmental laws and protect U.S. oceans and waterways, companies must continue to create and implement robust compliance programs, even during the COVID-19 pandemic, with the following considerations:

Keeping Accurate and Complete Records

Companies must ensure that all crew members, especially senior officers, are trained on proper recordkeeping requirements before joining a vessel. Companies must also create compliance programs that require regular reporting from crew members, and incorporate appropriate auditing features.

If a company fails to keep accurate and complete records, including omissions of potential criminal conduct, the company, through their crew members' actions, may be susceptible to APPS criminal charges, massive fines and placement on an environmental compliance plan for an extended period of time.

Moreover, companies must adequately train crew members on their obligation to provide truthful information to the USCG inspectors and any other U.S. government agent. A failure to provide such information could lead to potential criminal charges, including obstruction of justice and false statement charges.

Avoiding Shortcuts

Companies must ensure that their crew members are not taking any shortcuts — whether intentionally or unintentionally — that may result in marine pollution. One of the most common shortcuts taken by crew members is the installation of a device or devices that bypass required pollution-prevention equipment.

These devices, sometimes referred to as "magic pipes," allow crew members to discharge oil and/or oily water into the ocean. The motivation to create such a system varies from incident to incident, but crew members oftentimes engage in such conduct because of lack of training and experience; incentives from the company that drive such conduct (e.g., perceived savings of time and money); and/or a historical unspoken pattern and practice within the company.

Shortcuts, like magic pipes, are costly to both the crew members who engage in the conduct and to vessel owners, operators and technical managers, and can result in the same types of criminal charges, penalties and required remediation described above.

Maintaining and Replacing Equipment on Vessels

Companies must ensure that all equipment on their vessels is properly maintained and replaced, as appropriate under the circumstances — including the age of the vessel and the equipment, findings from inspections or audits, etc. — and that their crew members are properly trained and understand the importance of maintaining the equipment.

Companies that knowingly fail to adequately maintain and replace faulty equipment can create hazardous conditions on a vessel, endangering the lives of crew members, and could also be criminally liable for violating the Ports and Waterways Safety Act.[10] Such failures could also cause pollution of oceans and waterways, which could result in the types of criminal charges, penalties and required remediation described above.

Conclusion

Bulletin 09-20 has not signaled a significant decrease in the U.S. government's enforcement of environmental crimes, laws and regulations — particularly relative to the global downturn in shipping — and, therefore, it does not eliminate the need for companies to maintain thorough compliance plans.

As evidenced by the Misuga Kaiun matter and the recent detention of the Protefs, even in the throes of a pandemic, the USCG has continued to exercise its broad discretionary authority to conduct inspections, detain vessels and crews, and investigate all potential environmental crimes. Similarly, the DOJ has remained committed to prosecuting environmental crimes.

Therefore, to avoid criminal liability and fines, it is imperative that companies, technical managers, vessel operators and owners, and crew members maintain and implement robust compliance programs, including a comprehensive training program, as any limitations that may be imposed by the current pandemic will not likely mitigate against potential prosecution for violations of the marine environmental laws.

---

David M. Rody is a partner, Doreen M. Rachal is counsel and Alexander J. Kellermann is an associate at Sidley Austin LLP.

Sidley partner Tai-Heng Cheng and associate Drew A. Domina also contributed to this article.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] USCG, Bulletin 09-20, 1 (2020).

[2] See https://dornsife.usc.edu/uscseagrant/ship-traffic-affected-by-covid-19/.

[3] USCG, Bulletin 09-20, 2 (2020).

[4] Id.

[5] 33 U.S.C. § 1901 et seq.

[6] 33 U.S.C. § 1321.

[7] U.S. v. Misuga Kaiun Co. Ltd., 20 Cr. 103 (M.D. Fla. July 30, 2020).

[8] U.S. v. FGL Moon Marshal Limited et al., 19 Cr. 559 (N.D. Cal. March 21, 2020).

[9] U.S. v. Bernhard Schulte Shipmanagement (Singapore) Pte. Ltd., 20 Cr. 004 (D. Haw. Feb. 12, 2020).

[10] 46 U.S.C. § 70021 et seq.

For a reprint of this article, please contact reprints@law360.com.