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