Ship registration can be likened to a person receiving a passport, however, the act of registering a Ship to a flag represents a significant undertaking and demands the consideration of a myriad of factors. After all, what ship owners are actually doing is registering a significant asset in the jurisdiction of a State, country or territory. Amongst the traditional range of factors that that ship owners must consider, for example registration fees and taxes, the reputation of the flag state, and economic incentives for enrolment, incentives offered by a Flag Administrations relating to the efficiency and environmental impact of vessels are increasingly numerous and, according to one maritime law expert, do influence ship owners to register their fleet under a specific flag.
In this week’s spotlight, Ship Efficiency News talks to maritime law expert Jorge Quijano of Quijano & Associates to gain insight into what ship owners should be considering when it comes to making registry and the influence of green incentive schemes on ship registry choice.
SER: What Advice Should Ship Owners Look For Before Making Ship Registry Choices?
JQ: Vessel registration is a strict requirement for ships willing to sail internationally and in certain cases within domestic waters. Pursuant to latest statistics, the percentage share of world´s registered tonnage is led by Panama and followed by Liberia, Marshall Islands and Hong Kong which are widely considered “open registries” or “flags of convenience”. In this sense, ship owners must look forward and hire technical, financial and legal advice whenever purchasing a vessel as these are the most important aspects that come into play during the shipping market nowadays.
For example, certain registries require a minimum of number of crew members that are citizens of that flag state while others are more flexible on such restriction.
Regarding the financial aspect, banks and financial institutions incline their preference for Panama Flag as they can fully rely on the Public Registry of Panama at the moment of registration of their preliminary or permanent mortgages against the vessel. The electronic database of this governmental entity is so accurate and transparent that enables any bank, ship owner or ship management companies to view the status of ownership titles, mortgages and liens cancellation 24 hours online.
SER: What Are The Key Things Ship Owners Should Consider For Ship Registration?
JQ: Ship owners face the decision of considering several aspects at the moment of acquiring a new vessel from a shipyard or purchasing a second hand vessel from a previous owner. The key things that must be taken into consideration are the following:
Ownership of Vessel. Some ship registries require that the ownership of the vessel must be held by a corporation or legal entity from said flag state. Panama, in the contrary does not impose such requirement and thus allows any individual or company regardless of nationality or place of incorporation as eligible to register any type of vessels.
Registration Fees and Taxes. The main two worries of all ship owners in today´s market are minimising costs and raising income on their daily operations. Regarding these concerns, registration and annual tonnage fees are relatively low under Panama Flag compared to other ship registries. Additionally, ship owners will be pleased to learn that profits derived from operation of Panama flagged ships, engaged in international trade, are totally exempted from Panamanian income tax.
Economic Incentives for enrollment. Many ship registries in an effort to attract ship owners are offering incentives and discounts upon registration. Panama Ship Registry does not stay far behind and offers such incentives to vessels and MODUS (Mobile Offshore Drilling Units) as Newbuildings, Fleet and No PSC detention discounts.
SER: Do Green Incentives Offered By Flags Influence Ship Registrations?
JQ: Green or Eco-Friendly incentives do influence ship owners to register their fleet under a specific flag. Throughout the years, the world maritime industry has been implementing new measures to prevent the pollution of the seas, environment and to avoid the destruction of the ecosystems, not only through the enactment and enforcement of conventions but through the use of new technology and stricter criteria aboard the vessels.
Last year, Panama Maritime Authority enacted two (2) resolutions, one in October 2015 and another in November 2015 granting a 50% discount on the annual tax fee, annual consular fee, annual inspection fee and casualty investigation and IMO Contribution Fee for the first 3 years provided the ship owner presents a copy of a corporate social responsibility plan based on reduction of atmosphere and sea pollution starting from January 2016.
SER: How Can A Ship Owner Choose A Flag State For Better Ship Operations?
JQ: Before choosing a flag, each and every ship owner must take in consideration the reputation of the flag. For example, if the flag state is found in any black list within the different port state controls around the world, ships flying under such flag will be target to more strict inspections at all ports at the moment of arrival. Panama Registry still maintains its status in the Paris MOU white list of low-risk vessels.
