In a Tight Market, Flag States Offer Added Value
All sectors of shipping, from liquid to dry bulk to container lines, face low rates and slim margins in today's market, and flag states are responding by offering services and price structures intended to meet shipowners' needs. Whether for yachts, actively trading vessels or cold-stacked ships, flag states have new options to save money, deliver value and keep shipping safe for owners.
Tonnage leader Panama Ship Registry has discounts of up to 60 percent for newbuilds and existing fleets, plus a special lay-up registry, which does not require any certificates so long as minimum pollution prevention and safety requirements are current. This option costs 40 percent less than Panama's standard registration while reducing crew costs as well. The second-largest flag state, Liberia, has fee waivers for new registrations and an annual tonnage tax deferral for flagging-in laid up vessels.
The Cayman Registry has also instituted fee changes, including a $3,500 cap on its tonnage fee for vessels actively trading, and a full waiver of this fee for vessels in lay-up, says John Aune, the registry’s deputy director. But he emphasizes that while value is important, quality remains paramount. "In addition to providing a cost-effective solution, our clients are focusing on the service level –being able to get immediate, 24/7 support," he says. "Being white-listed and low-risk rated in the major port state control MoUs are essential for the majority of shipowners, as it leads to less frequent port state control inspections for their vessels."
In 2015, the Cayman Islands flag rose six places in the Paris MoU inspection standings, and Aune says that this is due in no small part to the efforts of the flag's shipowners. "The clients we are fortunate to work with are focused on maintaining an outstanding safety and quality record,” he said. "We also believe that our regular meetings with the shipowners and the support provided during port state control inspections also have a positive impact on our PSC records."
Cayman Islands' technical team has also helped develop major yacht codes, including the “Large Commercial Yacht Code (LY3)” and “Passenger Yacht Code (PYC),” which makes the flag a leading choice for this class of vessel. Aune also said that the nation's maritime legislation allows for flexibility and pragmatism without compromising quality.
The Bermuda Ship Registry also competes on quality, with high standards and a top-tier ranking on the Paris MoU. It offers a well-established legal system, 24/7 service for transactions and the option to demise register a vessel and separate operational jurisdiction from mortgage and title registry. Bermuda is also a “Category 1” member of the Red Ensign Group, a select group of flag states whose vessels receive British consular representation and are authorized to fly the British flag. Other group members include the UK, the British Virgin Islands, Isle of Man, Cayman Islands and Gibraltar, and the group's combined tonnage puts them at seventh place worldwide.
Newer arrivals on the open flag market offer solid value for shipowners, says Mr. Panos Kirnidis, CEO of Palau International Ship Registry (PISR).
Kimidis sees quality and a timely service as the cornerstones of a registry; he says that PISR’s competitive services are grounded in experience earned by working for many of the world’s leading shipowners.
“Our shipowners benefit from a modern and highly competitive service regardless of ship size and location. Our aim is to offer shipowners a registry that ensures they are compliant with regulations and can feel confident about the flag they are under,” Kirnidis says. “To this end, we go the extra mile to build trust and place the Palau flag among the world's foremost ship registries.”
Flagging out offers shipowners an excellent value proposition in a tight marketplace. Quality registries offer shipowners great service at low cost; in turn, registration fees go to support flag states' government budgets. 75 percent of the world's tonnage is flagged through this beneficial arrangement – and with so many new incentives for registration, from discount pricing to lay-up registry, shipowners have more choice than ever before.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.