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Liberian Registry Refutes 'Flag of Convenience' Stigma

by Lorys Charalambous, Tax-News.com, Cyprus

20 February 2013


Scott Bergeron, CEO of the Liberian International Ship & Corporate Registry, has called for an end to the "outdated thinking" which he said results in all open registers, irrespective of their safety record, being referred to pejoratively as "flags of convenience."

Open registers, which allow the registration of both domestic- and foreign-owned vessels, have faced the term "flag of convenience" since the 1920s when US shipowners began registering vessels under the Panamanian ensign. By the late 1960s, Liberia had become the world's largest shipping register.

Previously, it was perceived that shipowners had sought to deregister from national registers to unlock tax advantages being offered by more competitive registries abroad. However, in modern times, leading open registries, such as Liberia, have honed world-leading shipping regimes that secure shipowners' businesses with a number of operational benefits, such as reduced bureaucracy at ports (for instance under the US's Qualship 21 initiative) on the back of highly positive port state-control records.

Bergeron argued: “Liberia is one of thirteen flags which have just been given a clean bill of health by the International Chamber of Shipping (ICS) in its flag state performance table. This means it has earned positive indicators from the ICS with regard to its performance in relation to port state control, convention ratification, recognized organizations, age of vessel, IMO attendance, and completion of Standards of Training, Certification and Watchkeeping (STCW) and International Labor Organization reports."

He pointed out that: “The ICS itself says, there is nothing inherently unusual in an international ship registry system in which the owner of a ship may be located in a country other than the state whose flag the ship flies.” He noted also that the ICS called for "a balance to be struck between the commercial advantages of selecting a particular flag and the need to discourage the use of flags that do not meet their international obligations."

He continued: "Liberia fully agrees with this, and endorses the ICS performance table as an effective way to encourage shipowners and operators to examine whether a flag state has sufficient substance, and to put pressure on flag administrations to effect any necessary improvements, especially in relation to safety of life at sea, protection of the environment, and the provision of decent working and living conditions for seafarers."

“There is no longer any need in shipping for the term ‘flag of convenience.’ It has purely negative connotations, which is especially perverse in light of the positive indicators accorded to Liberia and to certain other open registries by the ICS. It would be more meaningful to refer instead - as does the ICS - to open registers, in order to distinguish them from national registers, many of which perform well below the level of the best open registries and yet enjoy an undeserved reputation for excellence. It would be more meaningful still - and more accurate - to refer simply to ship registries, and to judge those registries on how they rate under independent performance monitoring guidelines, such as those produced by the ICS."

“The monitoring and policing of ship safety on an international basis is now tighter than ever before, and the book on registering ships under the flags of their domiciled owners has long been rewritten. It is time the language of the industry was changed to reflect this," he concluded.

The Liberian Registry is one of the world’s largest and most active shipping registers. It has recently surpassed all-time tonnage records, with a registered fleet of approximately 4,000 ships, aggregating more than 131m gross tons.

TAGS: tax | business | marine | Liberia | offshore | standards

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