Client Alert:

New Incentive to Scrap Old Vessels: the Turkish Ministry takes steps to rejuvenate the Turkish fleet

New Incentive to Scrap Old Vessels: the Turkish Ministry takes steps to rejuvenate the Turkish fleet

The Turkish Ministry of Transport and Infrastructure (the “Ministry”) has introduced a new regulation (the “Regulation”), which entered into force on 28 April 2021 the purpose of which is to rejuvenate the Turkish commercial fleet by providing an incentive to shipowners to build new vessels to replace those that are old and that are to be scrapped. The Ministry is also aiming to support an environmentally sustainable and cleaner shipping, both domestically and internationally.

The Regulation provides a mechanism for the allocation of financial incentives for the abovementioned purposes. The financial incentive will be provided to a maximum of 5 vessels each year, prioritizing older vessels.

The incentive will be available to commercial vessels that are;

  • Registered under either the Turkish National Ship Registry or the Turkish International Ship Registry (for at least 6 months prior to an application for the incentive payment),
  • Between 1000 GT and 5000 GT,
  • Liquid or dry bulk carriers, container vessels, general cargo vessels and special purpose-built commercial cargo vessels, and
  • Over 20 years of age.

Also, vessels intended for scrap are required to have valid seaworthiness certificates and be free from any arrests, mortgages, liens or other encumbrances.

The amount of the incentive to be provided pursuant to the Regulation will be calculated on a vessel by vessel basis by multiplying the lightship weight of the vessel with 75% of the scrap steel price per ton quoted by the London Metal Exchange. Once the incentive is granted, the shipowner will have 4 months to conclude the shipbuilding contract with the shipyard.

The payment plan foreseen under the Regulation is as follows:

  • 40% to be paid once the vessel under construction is registered under the Turkish Ship Registry for Vessels Under Construction,
  • 30% to be paid once the construction of the hull is completed, and
  • The final 30% to be paid upon the permanent registration with the Turkish registry.

The Transport Ministry will also require a first degree mortgage to be registered over the new-built vessel in order to secure the financial incentive it provides to the shipowner.

The Regulation also sets out the following list of requirements that have to be satisfied for the new built vessels pursuant to the incentive:

  • Over 1000GT,
  • A liquid or dry bulk carrier, container vessel, general cargo vessel or special purpose-built commercial cargo vessel,
  • Built under supervision of the Turkish Lloyd,
  • Built in Turkey with at least 50% domestic contribution (including labour), and
  • Completed within 3 years.

Once the new-built vessel is complete, the Regulation requires to be operate under the Turkish Flag for at least 5 years, during which the sale, transfer or charter of the vessel under another flag is not permitted. The Regulation also requires the new-built vessel to have a class certificate issued by a recognised classification society for at least the first 5 years after registration.

Please do not hesitate to contact us for any questions you may have.



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