Source: Office of Maritime Administration, US Department of
Tonnage by Country of Registry, 2013
The share of open registry ships operated under a "flag of convenience"
grew substantially after WWII. They accounted for 5% of
tonnage in 1950, 25% in 1980, 55% in 1995 and 68% in 2011. The usage
of a flag of convenience refers to a national beneficial owner choosing to register
one or more vessels in another nation in order to avoid higher regulatory
and manning costs. This enables three types of advantages for the ship
The countries having the largest registered
fleets are offering flags of convenience (Panama, Liberia, Marshall
Islands, Greece, Malta,
Cyprus and the Bahamas) and have lax regulations. Ship registry
is a source of additional income for these governments; even the landlocked
country of Mongolia is offering ship registry services. Still, ship
registries have to abide to international standards, which are
getting increasingly more stringent. Therefore, the regulatory
arbitrage of registries is becoming less relevant. Many open
flag registry countries have developed an expertise in the
governance of registry regulations, implying an effective
oversight of the involved regulations and recognized standards
for ships registered under they flag.
- Regulation. Under maritime law, the owner is bound to
the rules and regulations of the country of registration, which
also involves requisitions in situation of emergency (war, humanitarian
crisis, etc.). Being subject to less stringent regulations commonly
confers considerable savings in operating costs.
- Registry costs. The state offering a flag of convenience
is compensated according to the ship's tonnage. Registry costs are
on average between 30 to 50% lower than those of North America and
- Operating costs. Operating costs for open registry ships
are from 12 to 27% lower than traditional registry fleets. Most
of the savings are coming from lower manning expenses. Flags of
convenience have lower standards in terms of salary and benefits.