BIMCO Releases New Biofuel Clause for Time Charter Parties 2026

BIMCO has launched its Biofuel Clause for Time Charter Parties 2026 to provide a standard legal framework governing the quality, handling, and commercial risks of alternative marine fuel blends. The clause introduces an LCV Adjustment Factor to fairly recalibrate vessel speed-and-consumption warranties while establishing strict 90-day consumption limits to mitigate biofuel degradation risks.

Copenhagen | June 11, 2026 – Global shipping association BIMCO has officially published its highly anticipated Biofuel Clause for Time Charter Parties 2026. The new standard contractual framework aims to resolve a growing spectrum of legal, commercial, and operational friction points as the global merchant fleet increasingly relies on liquid biomass drops-ins to meet strict international decarbonization mandates.

As regional and global regulations, such as the European Union Emissions Trading System (EU ETS) and FuelEU Maritime, ratchet up the financial penalties on conventional fossil fuels, biofuels have emerged as the primary intermediate tool for compliance. However, integrating these marine fuels into legacy charter party agreements has frequently triggered complex disputes regarding fuel quality, storage stability, technical engine liabilities, and speed-and-consumption warranties.

Navigating the Calorific Gap: The LCV Adjustment Factor

One of the most innovative and commercially critical elements of the BIMCO 2026 clause is how it addresses the lower energy density inherent in many biofuels compared to conventional fuel oil.

Because biofuels often have a lower calorific value, a vessel may burn more volume to maintain the same speed. To ensure that owners are not unfairly penalized under existing performance warranties, the clause introduces a structured calculation mechanism:

LCV Adjustment Factor = LCV of the Reference Fuel / LCV of the Biofuel

If the contracting parties do not manually insert specific speed and consumption percentage adjustments into subclause (j), the clause automatically deploys this factor.

• Fuel Warranty Adjustments: Conventional consumption warranties are multiplied directly by the LCV Adjustment Factor.
• Speed Warranty Adjustments: If a vessel cannot maintain its warranted speed due to the fuel’s density or lower calorific value, owners have the contractual right to adjust speed warranties, provided they deliver verified calculations and documentation to the charterer before fuel consumption begins.
• Verifying Energy Content: The charterer must provide the supplier’s documented Lower Calorific Value (LCV). In the event of a dispute, either party can demand independent laboratory testing via the ASTM D240 standard.

Technical Fuel Specifications and Blend Limits

The clause establishes clear boundaries on what constitutes an acceptable “Biofuel,” breaking the definition down into three distinct marine fuel segments:

1. Bio-based fuel: Fuel derived wholly or partially from biomass.
2. Bio-distillate marine fuel: A blend of conventional petroleum distillate and liquid bio-fuel.
3. Bio-residual marine fuel: A blend of conventional heavy residual fuel oil and liquid bio-fuel.

To safeguard marine engines, subclause (a) outlines a menu of strict compliance standards:

Operational Risk Allocation: Storage, and Co-mingling

Because biofuels are susceptible to degradation, microbial growth, and water absorption over time, the clause places strict operational boundaries on both owners and charterers.

The 90-Day “Use It or Lose It” Clock

A standout risk-mitigation feature is the inclusion of a strict consumption timeline under subclause (k). Charterers must issue instructions to ensure the supplied biofuel is consumed within a negotiated window, which defaults to 90 days if left blank.

If the fuel remains unconsumed past this deadline:

• Owners can demand a joint, independent laboratory test at the charterer’s expense to verify the fuel is still stable and fit for purpose.
• If the fuel passes, it must be burned within a maximum of 30 additional days.
• If the fuel fails testing due to degradation, the charterer faces strict liability for all losses, damages, and costs associated with off-loading the soured fuel.

Segregation vs. Co-mingling

• Segregation Mandate: Owners are contractually obligated to segregate different grades and batches of biofuel within the vessel’s natural tank configurations. Owners are explicitly exempted from liability for any resulting total bunker capacity restrictions.
• Co-mingling Restrictions: Physical co-mingling of different fuel stems in lines or tanks is strictly forbidden without express written agreement. Bunkering “on top” of unpumpable remaining quantities does not legally constitute co-mingling, provided the owner does not anticipate an incompatibility issue.

Cross-Industry Consensus: The Drafting Team

Reflecting BIMCO’s standard practice of building cross-industry consensus, the 2026 clause was forged by a specialized subcommittee representing major shipowners, charterers, marine fuel suppliers, and legal underwriters:

• Shipowners: Lars Mathiasen (Torm), Jenny Bazakas (Norden), Michael Rasmussen (Hafnia).
• Charterers / Operators: Mathias Drost (CMA CGM), Kelly Vouvoussiras (Rio Tinto).
• Bunker Suppliers / Industry Experts: Gunnar Kjeldsen (Bunker Holding Group).
• P&I Clubs: Joanne Sharma (Steamship Mutual P&I).
• BIMCO Secretariat: Carl Wilhelm Lindahl and Vasileios Patonis.

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About BIMCO

BIMCO (Baltic and International Maritime Council) is the world’s largest international shipping association, representing the interests of shipowners, operators, and charterers. Established in 1905, BIMCO is renowned for its global leadership in maritime policy, legal, and operational matters.

With over 2,000 members from more than 120 countries, BIMCO plays a pivotal role in shaping the future of global shipping. The organization provides a wide array of services, including the development of standardized contract forms, operational guidelines, and policy advocacy to ensure the continued growth and sustainability of the shipping industry.

BIMCO is at the forefront of the maritime industry’s efforts to meet the decarbonization challenge, collaborating with international organizations, regulatory bodies, and stakeholders to develop practical solutions that align with global emissions reduction goals. Through initiatives like the Biofuel Clause and other sustainability efforts, BIMCO is helping its members navigate the evolving regulatory landscape and transition to greener, more sustainable maritime operations.

Source: BIMCO