I.  Origin of GBS and HCSR

In November 2002, the International Maritime Organization ("IMO") first proposed the idea of developing "goal-based ship construction standards (GBS)" in order to better harmonize the construction specifications and requirements of major ship types such as bulk carriers and oil tankers. In November 2002, IMO first proposed the idea of developing "goal-based ship construction standards" ("GBS"), and in 2004 the Maritime Safety Committee ("MSC") at its 78th meeting started a technical study on these construction standards. Finally, on 21 May 2010, at the 87th MSC meeting, MSC.290(87) - the Amendments to the SOLAS (Regulation II-1/ 3-10) was adopted, making the GBS construction standards applicable to bulk carriers and tankers the new Regulation II-1/ 3-10 into the Safety of Life at Sea Convention ("SOLAS"). Under the requirements of the Code, all tankers and bulk carriers of 150m and above in length with construction contracts entered into after 1 July 2016, or keel placement after 1 July 2017, or delivery after 1 July 2020, must comply with the GBS construction standards. At the same time, in order to comply with the requirements of these construction standards, the International Association of Classification Societies (IACS) developed the CSR in April 2006 and subsequently started to develop a new HCSR based on the CSR in 2008 in accordance with the requirements of the IMO. HCSR which was promulgated on 7 May 2015. This means that ships meet the applicable requirements of the GBS construction standards mentioned above must also meet the HCSR in their construction specifications.

II. Risks and possible exemptions of GBS and HCSR for ships affected by covid-19

Since the Spring Festival this year, due to the impact of the COVID-19 on production personnel, logistics and transportation, material procurement, equipment supply and other aspects of shipyards in China, the resumption plans of Chinese shipyards have been severely influenced, resulting in serious delays in the project construction schedule. In particular, some of the vessels that are contractually required to be delivered by 1 July 2020 may not be delivered by the required delivery date and are at risk of meeting GBS construction standards and HCSR specifications. Once a ship is subject to GBS and HCSR, its design and construction requirements may need to be re-examined and it may face non-delivery.

In such circumstances, the China Classification Society ("CCS") and IACS jointly submitted proposal MSC 102/7/5 to IMO, proposing an exemption from the application of GBS construction standards and HCSR by the competent flag state authorities and port authorities for products whose delivery was delayed due to the impact of the epidemic. On 3 April 2020, the The IMO Secretary General issued a circular letter number Circular Letter 4024/Add.7 in response to the proposal. The circular letter, in the form of a recommendation, expressed the hope that Member States and international organizations would take note of the relevant documents approved by IMO and the above proposal by CCS and IACS, taking into account that the current epidemic is an unforeseen situation beyond the control of shipyards and shipowners, and attached two copies of the previous circular letter on the application of the PSPC due to force majeure Two circular letters (MSC-MEPC.5/Circ.8 and MSC.1/Circ.1247), are annexed for the information of the competent authorities and port authorities of Member States. It is clear that IMO is positive and encouraging to apply the exemptions from GBS and HCSR to such ships affected by force majeure that require delayed delivery.

It is important to emphasize that force majeure in the ship construction does not in itself necessarily lead to exemptions from the application of the GBS and HCSR, and that the circular letter issued by the IMO is merely a recommendation to the competent authorities and port authorities for their information when accepting applications for exemptions. The fact that it is not necessarily binding on the competent authorities, port authorities and shipyards does not prevent attempts to obtain the acceptance of such delayed ship products by the competent authorities, port authorities and classification societies through exemption applications, for the following reasons：

1. the IMO circular letter recommends that the relevant competent authority adopt a case-by-case principle and accept exemptions from the application of the GBS and HCSR by reference to the same principles as when exemptions from the PSPC Code were adopted, so that the relevant party may apply to the competent authority of the flag State on its own initiative and provide the appropriate written reports and detailed evidence that the construction of the ship has indeed been affected by the epidemic resulting in delivery having to be delayed beyond the target date to which GBS applies.

2. According to the CCS and IACS, once the competent authority has accepted the target ship for delivery after the above dates, such dates shall be indicated on the Certificate of Structural Safety of Cargo Ships or Cargo Ship Safety Certificate issued by the classification society. In other words, if the competent authority of the flag state and the port authority accept the exemption for the above-mentioned delayed delivery of the ship, the classification society shall consider the acceptance and issue the certificate according to the same criteria.

3. The IMO, as the world's largest maritime organization, issues circulars that are to some extent representative of the demands of the major shipbuilding countries. It is also possible that the CCS and IACS proposals will be adopted at a formal meeting of the MSC in the future, and that such a resolution will be followed.

III.  Suggestions

Based on the above analysis, it is feasible to attempt to apply for and obtain exemptions for such deferred deliveries, and in practice, some Chinese shipyards have indeed been granted exemptions. However, the CCS and IACS proposals have not yet been resolved and the case-by-case principle gives the reviewing authority full discretion. Therefore, the shipyard should prepare carefully since the tight delivery schedules and the continuing impact of the epidemic.

Firstly, the ideal solution is: based on the shipyard's current production capacity and project construction progress, and with full coordination with shipowners, classification societies and suppliers, and with the support of the relevant parties, the shipyard should expedite the construction progress through reasonable deployment of human resources and the arrival of equipment for installation and commissioning, so as to achieve the completion status and delivery before delivery, thus avoiding the application of GBS and HCSR.

Secondly, for projects where progressing the construction schedule is more difficult or impossible to complete.

1. submit applications for exemption from GBS and HCSR to the competent authorities of the flag state through the classification society as soon as possible in agreement with the shipowner, with emphasis on adequate preparation of evidence that the ship's products are affected by the epidemic and thus cannot be delivered on schedule. This includes the original construction schedule of the ship, the impact of the epidemic on the shipyard's staff, logistics arrangements, procurement and arrival of materials and equipment, the shipowner's supervisory staff, the supplier's installation and commissioning staff and the consequent delays to the construction of the ship, and government documents and official circulars issued by the governments of the countries and regions involved, including force majeure certificates issued by third party organizations. Force majeure certificates issued by third parties for review by competent authorities and port authorities.

2.communicate with the classification society as early as possible regarding the issuance of the classification society certificate to ensure that it can be issued at that time. Basically, all forms of shipbuilding contracts require a classification society certificate as a necessary condition for the ship to be in a state of ready for delivery. In the best case, a full clean classification society certificate is obtained some time before the target date, in the second best case a certificate with an endorsement (e.g. stating the above exemption), in the worst case the classification society is unwilling to issue a certificate for the current state of completion of the ship (e.g. the exemption application has not yet been passed, or there are other individual certificates, documents missing etc.) and in our experience, we can request the classification society to In this case, in our experience, we may request the classification society to issue a statement of completion, but this will depend on the classification society.

3. If the application for exemption of the ship's products is not successful, the shipyard may consider entering into a commercial arrangement with the shipowner, which is also a common practice in shipbuilding practice. This is a common practice in shipbuilding practice, whereby the legal delivery of the ship is completed by signing a delivery protocol or other document if the ship is partially completed. 

In summary, for the shipyard, the main requirement is to facilitate the smooth delivery of the vessel and to receive full payment for the shipbuilding. In view of the ongoing impact of the COVID-19, it is advisable to solve the relevant risk items and determine the solution as early as possible in order to successfully resolve the challenges.