Opinion: Convenient flags — inconvenient truths

By Ben Carey

In the early 1920’s two American cruise ship companies were faced with a difficult task.

The public wanted alcohol to be served on the ships, but America was in a time of prohibition.

Because the cruise ships flew the US flag, according to international maritime law, they were governed by United States law no matter where they sailed in the world.

Something had to be done, so they did what they thought was best for business and looked offshore to register their ships under a different nation’s flag, and hence the term ‘flags of convenience was born”.

If you visit any port in New Zealand you would have no doubt seen a ship’s name on the vessel’s stern (back end of the ship) and where the vessel is registered.

“Flags of convenience” are an unbelievably good deal for the ship owners and crewing agencies. If you flag your ship out you will be able to register your ship to any nation you please, despite not being a citizen of that country. It can be done very easily over the phone or by email For a couple of thousand dollars. Some ships are processed and registered within 24 hours.

By re-flagging a ship to another nation, ship owners can skip their own country’s labour laws, minimum wage requirements and flout immigration laws to their advantage.

These crew, mainly of Filipino or Indonesian descent, can be chosen from anywhere in the world. In some instances the international shipping companies pay no income tax to their home nation and siphon off millions of dollars each year in tax revenue.

Another example is the cruise ship industry and New Zealanders definitely love to go on them.

The Carnival Cruise line and Royal Caribbean cruises for example, both have their head offices in Florida, however their ships are registered in Panama, where international shipping companies pay no corporate income tax.

This is also why here in New Zealand we have foreign container ships , tankers, and cruise liners operating and delivering cargo all around the New Zealand coast, docking in Ports fully crewed with foreign nationals (Filipino, Indonesian, Chinese, Polish etc) running these vessels with absolutely no New Zealand ship mariners or crew members.

If you don’t know what I mean, then take a look at the Rena disaster which happened off Motiti Island in the Bay of Plenty in 2011. The Rena was a container ship which ran aground on the Astrolabe reef causing New Zealand’s worst environmental marine disaster.

It was owned by Greek shipping company Costamare Incorporated, chartered and leased out to the Mediterranean Shipping Company, and was registered to the African country of Monrovia – Liberia, with a crew of about 25, mostly of Filipino descent.

There is no doubt foreign ship owners are getting one very sweet deal out of it all with many companies flying the flag of convenience knowing all too well that many third world registries have no direct involvement or enforcement of their own maritime laws, and many flout this with impurity.

In New Zealand, we used to have our own merchant ships (the Union Steamship company) flying the New Zealand flag with registered vessels traveling the world.

The beauty about that was taxes paid by the ship owners and their crews went directly to New Zealand and in our own economies, and even our own maritime authorities had direct control over the vessel operation, the crewing and manning requirements, the annual surveys and inspections, to make sure it was in a safe condition.

Once our own merchant industry became de-regulated that basically all flew out the door, with offshore companies starting to transfer their flags of convenience to other nations. New Zealand companies lost their own offices, their own shipping industry and of course jobs. Now we have a cheaper foreign workforce operating container ships, tankers, and even cruise ships on our own coast.

With the arrival of Covid-19, the worldwide shipping industry has been caught out like possums looking at the headlights- and now people have begun to question it.

Why is it governments ordered cruise ship back to their port of origin – their flagged state – instead of their home country?

Well it’s a simple one really, it’s because they didn’t pay taxes in that country, they didn’t park their ships in their country, leaving crew members stranded onboard for months on end.

And that is what I call a cockup.

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