Masthead29_Mar2014 - page 7

Flags of Convenience
not likely tobe singledout for
special inspectionwhenarriving
inaU.S. port. TheU.K. flag is an
exampleof a flag that can
technically beusedas anFOC,
butwhichmeetsQualship21, a
signof excellentmanagement,
strong recordkeeping, anda
commitment to safety.
Inalmost all instances—to
register a shipor boat under a
flagof convenience—theowner
sets upa corporation in theFOC
country. The vessel is then
registeredunder the corporate
name. This offers twoadditional
is sold theowner can simply
transfer ownership in the foreign
corporation, whichowns the
boat, and the sale isdone. This
alsomeans anonymity if it’s
desired. The corporation is the
legal owner of theboat, so the
actual owner’s name canbehidden. It’s evenpossible to sell
theboatwithout revealing the trueowners personal
In commercial shipping twoof the largest FOC countries are
Panamaand Liberia. Othersmajor players areChina,Malta,
Singapore, andHongKong. For large yachts, someof the
most popular registries are theCayman Islands,Marshall
Islands, andSt. Vincent. These threeoffer relatively
protectedand inexpensive yacht registry services. Aswe’ve
seen, theoffshore registries require that theowner establish
a corporation in their jurisdiction, and that corporationowns
the vessel. Theowner is themajority or controlling
shareholder in the corporation. George Town, in theCayman
Islands, is a commonhailingport for flags of convenience
for yachts. TheCayman’s are ideally located for U.S. boat
owners. InEurope, TheChannel Islands,Malta, andCyprus
areoftenused. However, any FOC country anywhere in the
world canbeused if the vessel’s owner canmeet that
country’s requirements.
Flags of Convenience is for LargeYachts
Most boats under 90 feet (27m) can’t justify thepaperwork
and complications involved in foreign registry (flagof
convenienceor FOC). As size increases over 90 feet (27m)
sodoes cost and crew requirements. Accordingly, the larger
the yacht themore likely it is touseanFOC. You shouldbe
awareof flags of convenienceandwhat advantages they
may provide their boat’s ownerswhen youareworkingon
large vessels. On superyachts, foreign flag is almost the rule
rather than theexception.
Now, next time you seea yachtwithGeorge Townas the
hailingport and theCayman Island flagas its ensign, you’ll
knowwhat itmeans.
March 2014 Page7
Flagof ConvenienceCriteria
In1970aBritish committeeof inquiry set down the
criteria todefinea flagof convenience. This is often
referred toas theRochdaleCriteria. It is:
- Thenationallows non-citizens toownand control
- Access toand transfer from the register is easy
- Taxes on shipping incomeare lowor zero.
- Thenationof registrationdoesn’t require the
shipping tonnage for its ownpurposes, but is aiming
toearn the tonnage fees
- Crewingby non-nationals isallowed
- Thenationdoes not have theability or the
willingness to impose regulations on its shipowners
Cayman IslandEnsign
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