A pathway to boost Philippine ship registry

As we shared in the previous column, the country’s ship registry plays a positive role in the maritime development of the country. It is an important administrative function of the Flag administration as an effective means to properly manage and maintain the safety of its fleet.

Ship registry system, however, has evolved over the years. Based on our research and information from our friends in the international shipping community, we can now identify at least three types of ship registries: Open registry, closed registry, and second ship registry.

The distinction between an open registry and a closed registry is based on how open the ship registry is to domestic and foreign ships. An open registry allows foreign ships to be registered in a country or Flag state other than the shipowner’s home country, while a closed registry generally requires ships to be owned by their nationals or by enterprises owned by their nationals.

An open ship registry is generally characterized by the country’s relatively lax tax laws, employment laws, and environmental protection laws. For this reason, an open registry has been derogatively referred to as “Flags of Convenience,” for allowing vessel owners to evade more stringent laws in their own countries by registering the vessel in an open registry country.

Compared with an open registry, a closed registry has made stricter restrictions on the conditions of the ship registry. Therefore, due to more lenient policies and more favorable tax systems, many shipowners choose to transfer their ships to countries with open ship registries.

With the rapid development of shipping, traditional ship-owning countries with closed ship registries are increasingly losing their fleets thus, the second ship registry has emerged in some countries.

A second ship registry has more obvious advantages. The second ship registry is an offshoot of the liberalization of shipping, striking a balance between closed and open registries.

It provides preferential policy conditions that can increase the convenience and opportunities of import and export trade in shipping ports, necessarily favored by shipowners seeking to maximize profits. At the same time, it guarantees the basic conditions of domestic registration. It is a complement and improvement to the closed registry system of the traditional shipping countries, and also a reference to the open registry system.

Between 1984 and 1998, 11 ship-owning countries established second ship registries. These are the United Kingdom, The Netherlands, Norway, France, Denmark, Belgium, Germany, Spain, Portugal, the United States and Italy. They created this new ship registry system to stop their shipowners from increasingly transferring the registry of their ships, and often the incorporation of the ship-owning company itself, to so-called Flags of Convenience.

Its successful practice in European countries has been widely recognized around the world, and more and more countries have begun to implement the second ship registry system. Australia, Canada, Brazil, and other countries in the European community have followed suit.

With the rapid development of economic globalization, the opening of the ship registration system is an inevitable trend in international shipping. To conform to this trend, most of the world’s shipping powers have adopted a semi-open second ship registry system.

As one of the traditional shipping countries, the Philippines now has the opportunity of modifying the traditional closed registry system and establish an international ship registration system.

The move can promote healthy competition and rapid development of the domestic shipping industry as shown by other countries with second ship registries by preventing the exodus of their shipowners to Flags of Convenience.

Moreover, the registration fee of ships is a source of considerable foreign exchange earnings for the country and, as an added value, the ship registration can expand the extent of Flag State’s fleet, thus, boosting its status in the international shipping market.

As we shared last week, having a strong ship registry brings many benefits and advantages, including an added push to our country’s economic development.

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