The War of the Open Registries - Panama v Liberia

The year 2000 brought headlines indicating that the Marshall Islands were ready to offer a better service than its former relative, Liberia, which in turn announced with a fanfare a new administration and offered a service package could not be refused.

The package included a grace period to pay taxes, and availability of well-trained personnel similar to that being offered by the Marshall Islands. Undoubtedly, this is part of the marketing strategies designed by both, registries that rival with Panama and they were aimed at not only retaining its traditional users, but also appeal at users that preferred and the re-emerging Bahamas.

Those strategies do not appear have been too successful, when exactly six months after that, sensationalist marketing international maritime press headlines again began to announce newly, more lucrative offers.

Liberia lowers prices, were headlines on the front pages of Lloyd’s List and Tradewinds a few days ago. In reading and analysing the offers, we are reminded of the English saying that ten cents is more than half of nothing.Let's see why.

It should be remembered that until almost the end of the decade of the 1980s, Panama was charging a dollar per net ton to flag vessels under its registry. The gentlemen that are now managing the Marshall Islands registry, and which until December 1999 managed the Liberian registry are precisely the ones that decided to precipitously lower the price of the net ton to absorb the market, taking advantage of the crisis faced by Panama. Furthermore, without any scruples they adopted a flat tariff, forcing Panama to restructure rates to avoid the losses that the reduction would cause.

Today, the "new " management of the "new Liberia " decided to lower prices, although not so much as to be near the prices of Panama or Bahamas as they want us to believe, but to leave behind the Marshall Islands.

The table of collections by Liberia shows a single registry cost of US$ 2,500.00, regardless of the size of the ship, whether 500 or 3,000 to 60,000 tons. Furthermore. Liberia is not interested in small ships, which have always been identified with Panama. Liberia wants supertankers, Panamax, and post-Panamax, and if they are newbuildings, the better.

To register a ship of more than 50,000 tons costs $6,500 to $7,000 in Panama, if registered through Panama or a consulate. This is in addition to other expenses such as legal expenses, related to the process of registering a vessel.

As to annual taxes, Liberia guarantees today that they will not increase taxes in five years, but perhaps the reader does not knows that Panama guarantees taxes for twenty years when registering. Panama collects from ships four kinds of taxes and fees - the annual tax, a single annual tax, inspection tax and a fee to cover accident investigations, conferences and participation in international congresses. Although the calculation of these rates, which are based on tonnage tables and type of ship, is not complicated, a certain skill is needed.

In its last strategy to gain market share., Liberia has just announced that the annual tax that was formerly 40 percent of the ship's net tonnage has been reduced to 10 percent, equal to that of Panama's. Nevertheless, what they don't say is that they will continue to charge inspection at the rate of $1,200 per inspection. Additionally, the same as Panama, they have a fee for accident investigations and participation in confences and a percentae charge on net ton, a practice used by countries to collect the funds they must pay IMO anually in accodance with the tonnage registered in their books. Panama charges an investigation fee at the rate of $300 to $500 per ship, according to tonnage and type of ship, and 3 percent of the ship's net tonnage. On the same item, Liberia charges $1,000 per ship plus 7 percent of the net tonnage, 100 percent more than Panama.

It should be mentioned that the Bahamas did not alter its prices during the decade of the 1980s or 1990s and today their registry charge is just over a dollar per net ton,. in addition to annual taxes.

Five years ago I prepared a comparative study between Bahamas and Panama and discovered that Bahamas were more costly to register, but Panama’s annual taxes were higher and the cost curves of both countries met after 9.9 years in the registry; that is, beginning with the tenth year, Panama was more expensive than Bahamas. Of course, shipowners tend to constantly renovate their fleets and this activity of purchasing and selling ships makes the former conclusion baseless to make a decision on where to flag since these decisions are based on a combination of factors and marketing policies and trading areas of the different shipping companies.

There is a series of factors that shipowners take into account when selecting a new ship registry, such as national requiremerits of the owners, performance of the flags in detention lists at international ports, banking finance acceptance, flexibility, etc. Similarly, Panama has a special discount plan for fleets that is attractive and competitive. A cursory analysis of the flagging costs in Panama compared with Liberia of ships of two different tonnages shows that Panama is more economical than Liberia when the ship is small, but the opposite occurs when the ship has more tonnage.

In the past, the user only had the option of two, open registries. Today, the proliferation of ship registries, is such that they allow the user to choose the most convenient option.

A simple way of analyzing the current market would be to use as a starting point the fact that the number of users or ships does not change. What changes is the participation in the market of new registries and that could lead Panama sooner or later to suffer negative changes in its growth rates. This must be avoided at any cost since once a customer leaves, it takes four years for the customer to return. Let's not make the mistake of allowing the customer to leave and remember the saying that ten cents is more than half of nothing.

For example a cargo ship of 50.000 tons net,85.000 tons gross

The cost of registering this ship under the flag of:

 
 

Panamá

Liberia

BEFORE the discount/ AFTER the discount

Enrolment Fees

Through a Consulate: US$ 7,000

Panamá:

USD$ 6,500

US$ 2,500

US$ 2,500

Issue of Navigation Licence

N/A

N/A

US$ 200

US$ 200

Provisional Radio Licence

N/A

N/A

US$ 100

US$ 100

Permanent Radio Licence

N/A

N/A

US$ 200

US$ 200

Radio Licence with Inmarsat

N/A

N/A

US$ 275

US$ 275

Handling Charges

According to the place

N/A

US$ 85

US$ 85

 

US$ 7,000

US$ 6,500

US$ 3,160

US$ 3,160

The cost of the Taxes at the time of registering and annually thereafter:

 

Panamá

Liberia

 

BEFORE the Discount

AFTER the Discount

Annual Tax

US$ 5,000

 

US$20,000

 

US$ 5,000

Annual Fee

US$ 3,000

 

N/A

 

N/A

Inspection Tax

US$ 1,200

 

US$ 1,200

 

USD 1,200

Conference & Investigation Tax

Accd.y Conferencias

PLUS the applicable percentage according to the NRT

US$ 500 + US$ 1,500 =

 

 

US$ 2,000

US$ 1,000.00 +

US$ 3,500.00 =

 

US$ 4,500   

US$ 1,000 +

US$ 3,500 =

 

US$ 4,500  

Grand Total Annual Taxes

US$ 11,200

US$ 25,700  

US$ 10,700

 


© 2000 Maria Dixon - ISM Shipping Solutions Ltd.

Translated from the original version. An edited version was published in Mundo Maritimo section of El Universal, Grupo Editorial Universal, S.A. Panamá, with permission from the Author

The War of the Open Registries - Panama v Cyprus

Under the War of Flags series we have compared the registries of Liberia, Bahamas and Malta with Panama. On this occasion, following a descending order in terms of tonnage, we will examine the sixth-ranked Cyprus registry versus the Panama registry.

The island of Cyprus lies northeast of the Mediterranean facing the Turkish coast. The strategically located geographical position of the island has played a fundamental role in the development of its shipping industry, international trade and tourism activities.

Cyprus has maritime legislation based on the British model (Shipping Act) and, as Bahamas (Mundo Maritimo, July 26, 2000), it has the aspiration of becoming a member of the European Union. It should be mentioned that in 1974, Turkey invaded 36 percent of the Cyprus territory and currently the island is partitioned between the Greek Cypriot south and the officially unrecognized Turkish Republic of Northern Cyprus.

The total population is below one million and the Greek-Cypriot section, called the Republic of Cyprus, concentrates 87.5 percent of the island’s population. The ship registry operates there.

The registry announces numerous attractive advantages just as the majority of open registries do. One of the attractive advantages is flexibility in providing service. As to fiscal matters, it offers the advantage of having signed treaties with 27 countries to avoid paying taxes twice in addition to having bilateral agreements with ports in other countries.

Foreigners must obtain permits to hold shares in a Cypriot company, although obtaining these permits is routine.

Basically, its tariff structure is based on the ship’s age and type of service. The type of service, however, is sub-divided into only two types of ships–passenger and general cargo. Unlike Cyprus, Panama applies a wider range and its cost structure distinguishes among passenger ships, tankers, drilling platforms, ships without propulsion, crew boats, unspecified types, etc.

Since January 1, 2000, and perhaps coinciding with the disaster of the “Erika,” prior to registering cargo ships that are more than 15 years old, the registry imposes inspection controls that are more strict than in the past. Ships that are already in the registry and are more than 20 years old must go through a special inspection annually.

Another restriction of the Cyprus registry is that cargo ships of less than 1,000 gross tons and more than 20 years old cannot be flagged in Cyprus. As to passenger ships, there is greater flexibility in the age area. Passenger ships between 15 and 25 years of age must go through a special annual inspection. After passing inspection, ships of more than 25 years may register as long as the service itinerary is fixed and includes calls at two Cypriot ports. Additionally, the crew must be integrated by a minimum 25 percent of Cyprus nationals. The latter requirement is waived if confirmation is presented that no labor is available.

If operations are based on the island, the law provides for a discount on annual taxes. If the ship has been laid up for more than three consecutive months, the shipowner receives a discount of 75 percent from annual taxes. The registry does not charge fees on mortgage payments or for removing a ship from the registry.
At the time of flagging, ships must pay flagging fees and six months of taxes. Payments covering the other six months are paid later.

The calculation of payments on flagging fees and annual taxes is complicated, since a table is used to determine a base payment and a multiplier applied on the basis of the ship’s age. There are three rates–up to 10 years, up to 20 years and above 20 years.

In 1997, while the country was host to Cyprus Maritime, a maritime conference held every two years alternating with Posidonia, an unexpected event occurred amidst 1,200 visitors. The Cypriot passenger ship, the “Romantica,” which was navigating by the conference site in Limassol, caught fire all over. It had aboard 482 passengers and 185 crews. Unfortunately for the registry and the country, a large number of users, media personalities, shipowners and the international press gathered there were witnesses to that painful accident, the evacuation and all incidents that followed. This accident notably damaged the fragile image and reputation of the Cypriot registry in the world.


© 2000 Maria Dixon - ISM Shipping Solutions Ltd.

Translated from the Edited version published in Mundo Maritimo section of El Universal, Grupo Editorial Universal, S.A. Panamá, with permission from the Author

The War of the Open Registries - Panama v Bahamas

In a previous article we reported different strategies used by Liberia to resume a leading position in the world fleet, a leadership that it enjoyed until 1992 when Panama became the number one flag in the world merchant fleet.

Panama has retained this position for nearly a decade and although it should not fear Liberia or Marshall Islands, it should look at the moves of the Bahamas competitor closely and with caution

In 1977, the Bahamas registry had only 60 ships aggregating 60,000 gross tons. In 1985, the registry increased to 350 ships and 5 million gross tons. Presently, Bahamas is third in the world fleet with approximately 1,500 ships and 30 million gross tons.

Comprising the Bahamas fleet are tankers (23%), passenger ships (10%), general cargo (17%), containerships (10%), bulk carriers (12%), reefers (12%), tugboats and supply ships (8%), yachts (1%), combination carriers - OBOs (1%) and drilling platforms - MOUDs (2%), barges (2%), fishing vessels (2%).

The Bahamas Maritime Authority is a government entity that controls and manages the ship registry in a commercial and flexible way. All excess revenue, once operational expenses are covered, is sent to the National Treasury. It is important to make the distinction between this administrative regime and those of registries that are managed by private companies whose thrust is to obtain profits for its shareholders.

Flagging costs

Bahamas says its aim is to have a modern, quality fleet and has thus created a series of economic incentives:

Registry costs for ships of 2,000 to 5,000 net tons is US$1.00 per net ton or fraction. The annual tax is 13 cents per net ton plus US$1,650.00.

Ships of over 5,000 net tons pay US$0.90 per net ton to register and the annual tax is 12 cents per net ton plus US$1,650.00.

Ships of more than 25,000 net tons pay a maximum amount of US$22,500.00 for flagging rights and the annual tax is 12 cents per net ton plus US$1,650.00.

Special discounts

A discount of one third of the registry cost for ships of less than five years of age was introduced in 1998.

Fleets of three or more ships registering at the same time and with ages below 12 years receive a discount of one third of the registry cost.

The discount increases to 50 percent for fleets of ten ships.

All Bahamas flag ships are subject to an annual inspection that is paid directly at the time the inspection is carried out.

Analysis vs. Panama

Unlike the extensive network of consulates that Panama has available to provide service to ships, Bahamas has only four offices to register ships: Nassau, London, New York and Tokyo.

It offers, however, a telephone number in case of emergencies during non-working hours. Another positive point of the Bahamas registry is that accident investigations and damages are public knowledge and once the investigations are completed, they are published and made available to the public.

We observe, however, that flagging in Bahamas is more expensive than flagging in the Panama registry. Although Bahamas offers the user a series of benefits similar to those offered by Panama, including a banking center, incorporation of companies and ports, their tax regime is more expensive than Panama’s. Companies with fleets of 20 or more ships enjoy savings between $2,000 and $3,000 per ship, which translates into overall savings between $40,000 and $60,000 annually.

The Bahamas Shipowners’ Association

The Bahamas Shipowners’ Association was founded in July 1997 to establish a communication channel between the administrations and users. An executive committee formed by shipowners from all over the world meets several times a year to analyze in detail points of interest and issues discussed at IMO.

The Association has four sub-committees representing different sectors of the industry–tankers, cruise and passenger ships, and dry and liquid bulk carriers. These sub-committees must report to the executive committee. Steven Hillyard, of Chevron Shipping, is the current chairman of the association.

In addition to the official presence of Bahamas at IMO, the association appointed a correspondent in 1998 to attend IMO sessions and report results. This helps members to be informed on developments at IMO and allows them to participate more actively in discussions. The correspondent also offers advice and technical support to Bahamas representatives during the sessions, as well as to working groups at IMO.

Conclusion

The Bahamas registry shows that the gradual perseverance of a ship registry with continuous planning, training, work and growth programs based on logistical and futurist plans pays good dividends. The Bahamas registry has become the third in the world fleet after Panama and Liberia and aims to attain the coveted number one position. The Bahamas registry has a good reputation and a record of arrests below the average. Its marketing program is effective, and the personnel handling the registry are friendly and efficient. It can be concluded that Bahamas is a serious competitor of Panama.


© 2000 Maria Dixon - ISM Shipping Solutions Ltd.

Translated from the Edited version published in Mundo Maritimo section of El Universal, Grupo Editorial Universal, S.A. Panamá, with permission from the Author