All ships have to be registered in a country of the owner’s choice. Many owners choose to register their ships in their own country (e.g. a German shipowner will register his ship in Germany or a Japanese shipowner will register his ship in Japan.) However, for several reasons, a shipowner may register his ship in another country (e.g. a German shipowner may register his ship in Singapore or a Japanese Shipowner may register his ship in Panama.) Here are some terms that relate to ship registration :
Flagging a ship (This means the same as registering a ship.)
The ship will be registered in a country of the owner’s choice and will show the port of registry on the stern just below her name. When in a port, she will fly the flag of the country at the stern. For example, a ship registered in New York will have NEW YORK displayed on the stern, and when in Cape Town or any other port, she will fly the American flag at the stern. See the example below.
Major Ships’ Registers
The following countries are among those in which many shipowners choose to register their ships (in brackets are the main ports that usually appear on the sterns of ships registered in that country : Panama (Panama); Liberia (Monrovia); Cyprus (Limassol); Marshall Islands (Majuro); Singapore (Singapore); Malta (Valetta); Gibraltar (Gibraltar); Bermuda (Hamilton) ; Bahamas (Freeport); St Vincent & Grenadines (Kingstown); China (many Chinese-flagged vessels are registered in Shanghai or Hong Kong. Those registered in Hong Kong fly both the Chinese and Hong Kong flag at the stern when in port.) Some British vessels are registered in Isle of Man whose main port is Douglas.
The map below shows the places where most of the world’s ships are registered.
Flag of Convenience
If a ship has been flagged out, the term flag of convenience is given to the country in which she has been registered. In the example above, Purple Beach is registered in Majuro, Marshall Islands, and, in this case, Marshall Islands is the Flag of Convenience. The concept of flags of convenience has attracted much unfair negative attention in recent years. Some believe that shipowners use a flag of convenience to avoid strict maritime control in their own countries. Some also allege that shipowners flag their ships out so that they can use cheaper crews, and by inference, less capable crews or that the shipowner exploits cheaper crews. Most responsible shipowners view their ships as valuable assets and do all they can to ensure that the vessels are well-maintained and well-operated, and have nothing to hide from diligent officials who may need to undertake surveys of their ships from time to time. They also want the best possible crews aboard their ships to maintain them properly and so that accidents are avoided. Cheaper crews do not necessarily mean less capable crews. Asian crews are generally paid less than European crews because rates of pay – approved by their unions – are lower than European rates of pay. For all the right reasons, the Durban-based Grindrod group, for example, have flagged most of their ships in Singapore or in Britain. Both of these countries are – in this context – flags of convenience, but both countries are renowned for their insistence on high quality of ship maintenance and proper training of crewmembers, and their strict surveys of ships on their register.
Reasons for Flagging out
A shipowner may have many reasons for flagging his ships in another country (i.e. for flagging his ships out.) These reasons include the following :
- The registration fees in the other country may be lower than in his own country.
- To buy a ship, a shipowner may have to secure a loan from a bank. In some countries, the banks who provide such loans are low on the list of creditors to be paid if a shipping company goes bankrupt. This means that they may not get all their money back in the event of the shipowner going bankrupt. Banks therefore will probably not grant loans to shipowners whose ships are registered in such countries. In other countries, the banks are higher on the list of creditors to be paid if the company goes bankrupt. Banks are more likely to grant loans to shipowners whose ships are registered in these countries.
- The country in which he has flagged his ship may offer better tax benefits for him than his own country.
- He may wish to use cheaper, foreign crews, rather than German crews who are more expensive. By flagging his ship in a carefully chosen country, he can employ crews from any country. If he had flagged his ship in Germany, he would have had to employ German crews.
- He may want to trade to certain countries where his ship cannot trade unless she is flagged in a particular country. For example, if a shipowner wishes to move cargo between South American ports, he will have to register his ship in one of those South American countries.
- For political reasons, a shipowner may choose to flag his ships in another country. For example, an Israeli shipowner may not want to flag his ship in Israel as she might be targeted for attack or boycott by extremists. So that she is not easily identifiable as an Israeli-owned vessel, her owner may register her in another country, e.g. Panama.
Flag State Control
- Once a ship has been registered in a country, she falls under control of the maritime authorities of that country. This authority is called the Flag State Control that in South Africa is known as the South African Maritime Safety Authority. In the USA, the Flag State Control Authority is known as the US Coast Guard, and in Britain that authority is known as the Maritime Coastal Agency. The role of Flag State Control varies from country to country but usually includes the following functions relating to ships registered in that country:
- Register ships in that country
- Approve ships’ plans before the vessels are built.
- Monitor the construction programme in the shipyard where the ship is being built. (This is to ensure that the ship is being built to the approved specifications.)
- Conduct various trials on new ships – stability tests, sea trials, lifting trails of ships’ cranes, etc – prior to the owner taking delivery.
- Conduct periodic surveys of ships to check their seaworthiness, the management of the ships, the crewing of the ships
- Approve any plans to modify the ship in any way (e.g. a containership owner wishes to modify the ship so that she can carry more containers)
- Conduct inquiries into any accident involving ships flying the flag of that country.
- Check the seaworthiness of any ship flying the flag of that country after an accident.
- Undertake special surveys of ships every five years.
- Approve maritime training courses offered by institutions (and monitor the competence of maritime training staff) in that country, ensuring that they conform to the standards of the International Maritime Organisation in terms of requirements of the STCW 95-2010.
- Approve and moderate examinations that lead to STCW95-2010-related qualifications.
- Conduct some examinations leading to STCW 95-2010 qualifications.