Flag Of Convenience Case Study

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Flag of convenience (FOC) can be defined as a business practice under which a vessel's owners register their vessel in a vessel register of a country that they do not necessarily belong to, and the vessel sails the civil flag of that country, which called the flag state. This practice especially used since 1950s and is mentioned to the flag that a vessel flies in the practice to show its registration from its particular country. This country of registration will select the regulation under which this vessel is required to operate, and that to the only applied in that related admiralty case ( HG.org, 2018). In 2009, over half of the world’s merchant vessels were registered with open registries, with Panama, Liberia, and Marshall Islands flags, …show more content…

It is related to the manning costs where flagging out rules allow various stages of freedom to be attained from the restrictions of Union agreements and national manning regulations. Vessel owners who use flags of convenience can save expenses especially on the crew salaries and the maintenance fees. Flags of convenience do not have any restrictions on the nationality of the crew members and are not required to minimum wage scales. Since the crew cost is one of the most crucial aspects of the vessel’s OPEX (operational expenses), through having no restrictions, the vessel owner can employ the most inexpensive crew (Mitroussi & Marlow, 2015). For instance, the Philippines and the People's Republic of China supply a huge percent of maritime labour generally, and main flags of convenience particularly. In 2009, the flag-states, Panama, the Bahamas, Liberia and the Marshall Islands employed the maximum amount of expatriate-Filipino seafarers with more than 150,000 Filipino sailors. According to a study issued by United States Maritime Administration (MARAD) in 2006, sailors from China covered almost 40% of the crews on measured vessels sailing the Panamanian flag, and about 10% of those sailing with the Liberian flag. The MARAD study considered that both China and the Philippines are low cost crew sources (Morfotiko , 2015). Furthermore, the flags of convenience offers looser operating rules and more relaxed safety criteria than the closed registries, which successively outcomes lower costs on maintenance and repairs. A comparison between US-based vessel-owners that registered their ships below the US flag and US-based vessel-owners that registered their vessels blew a flag of convenience presented that the average crew expense for the US-flagged ships was around $13,600 a day whereas the average expense

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