Countries register ships, provide ships with evidence of ship registration, record mortgages against the titles of such ships and generally regulate all activities of such ships no matter where ships steam in the world.
Country of registry has authority to regulate ships it registers. Furthermore, countries that ships steam also have significant authority to regulate ships.
Port state countries might refuse entry to ships registered by the offending Country of Registry (Flag Sate) country. Much of the regulation of ships depends on the law of the Country of Registry (Flag Sate).
Country of Registry (Flag Sate) provide ships with a Certificate of Registry which the ship must always have on board the ship. Certificate of Registry indicates the name of the registering ship owner company or individual.
Ship Registration is necessary for entry into most of the ports. While in port, ships fly the national flag of the country which registers the ship. For example, Panama registered ship fly Panama Flag. That is why, the country of registration is usually referred to as the Flag State. Ships engaged in international trade fly the flag of the country that registers the ship.
According to The Geneva Convention on the High Seas 1958, a ship has the nationality of the country which registers the ship. Many countries in the world, including tiny states such as the Marshall Islands or the Isle of Man, maintain a Ship Registration and have enacted laws governing which ships they will register, how the registry works and which laws apply to the ships it registers.
There are two kinds of Ship Registrations:
- Open Registry or Flag of Convenience (FOC)
2- National Registry
Generally, Open Registry or Flag of Convenience (FOC) permits any person or company to register a ship in that country without regard to whether the person or company is a national or citizen of that country, or otherwise has a connection to that country.
Generally, National Registry restricts the registration of ships to nationals or citizens of the country.
Panama, Liberia and the Marshall Islands are examples of Open Registry or Flag of Convenience (FOC).
United States is an example of a National Registry.
The number of Open Registry or Flag of Convenience (FOC) increased in the early 20th century as a mechanism to avoid certain trading restrictions, to take advantage of less stringent manning, taxation, inspection, other requirements. Panama opened its open registry in 1917. Liberia opened open registry in 1948.
Top 10 Ship Registration countries in DWT (Deadweight Tons):
3. Marshall Islands
4. Hong Kong
Choosing country of Ship Registration depends on many factors like:
- Fees that countries charge
- Efficiency of administration
- Other requirements countries impose
Open Registry or Flag of Convenience (FOC) countries tend not to impose any legal requirements beyond what is required by widely adopted international conventions such as the SOLAS Convention (Safety of Life at Sea).
National Registry countries generally impose their domestic laws on the ships they register, including tax, labor, safety, environmental, and other laws not typically imposed on open registry ships.
Furthermore, National Registry countries usually require that all, or at least a certain number, of citizens of the country of registry be employed as seafarer. This significantly increases crewing costs.
Open Registry or Flag of Convenience (FOC) countries generally permit seafarers of any nationality, so ship owners significantly decrease crewing costs.
Consequently, national registered ship operation costs might be substantially costs more than open registry countries.
National Registry countries’ navy play an important part to protect ships flying that country’s flag. During war or acts of piracy it is more important. Sometimes a navy also protect ships owned by companies or citizens of their country even if the ship is registered with another country.
Many maritime nations inspect foreign ships calling their ports for safety, environmental and general compliance with applicable law. Such inspection regimes often target ships from certain registries deemed by the port-state country to warrant such increased scrutiny because of the general record of ships from such registries.
In sum, a ship owner should choose ship Ship Registration country very carefully in terms of inspection expense and other risks. Ships can be requisitioned by the countries that register them. For example, United States and UK have laws granting authority to the government to requisition ships that they register under some critical circumstances. United States Government sees privately held U.S. flag fleet as an important reserve of sealift capacity available to serve national interests in times of war or emergency.
Each maritime country has different requirements for Ship Registry. Open registries tend to maintain offices in places easily accessible to ship owners, such as in London, Singapore and New York. Prospective ship owner must file an application for ship registration, notarized evidence of title, a tonnage certificate confirming the tonnage of the ship, classification certificates.
Open Registry or Flag of Convenience (FOC) and National Registry countries charge fees in various formulations. Builder’s Certificate is issued for new building ships at shipyards. Builder’s Certificate certify that the ship was built for the new ship owner and was delivered directly to that new ship owner. Builder’s Certificate starts the chain of title for the ship. For secondhand ships that have already been registered, the evidence of title is a Bill of Sale. Bill of Sale confirm title to a new ship owner. Bill of Sale must convey clear title to the ship, and must state some consideration but does not need to state the whole purchase price.
Most Ship Registries accept any form of Bill of Sale, as long as Bill of Sale fully identifies the ship, conveys clear title of ship, and states some consideration and is notarized.
When Transferring Ship Registry to another country or when a ship is sold to be registered in another registry, the seller must first obtain the permission of the current registry to Delete or Cancel the current Ship Registration. Ship sale can proceed once a Permission to Transfer is granted by the current registry. Seller must obtain a certificate evidencing deletion of the ship from the Former Ship Registry, and provide that certificate to the buyer.
Most Ship Registries require that a company or individual who is selling a ship first clear all liens and mortgages recorded against the ship. Seller obtains releases from the lien and mortgage holders of record.
Most Ship Registries will permit ships to be transferred upon acknowledgment of the transfer from the lien and mortgage holders of record. Maritime Lien need not be recorded at all to be effective and maritime lien will remain against the ship even if the ship is sold to a buyer who is not aware of the maritime lien. Ship’s radio license and pollution certificates also must be transferred.