Washington – the U.S. Federal Maritime Commission has launched an investigation into whether flagging practices of other countries and into the “competitive methods” of foreign shipping interests are violating U.S. law by creating unfavourable conditions in the foreign trade of the United States. The investigation will broadly examine the laws, regulations, and practices of foreign governments, or the competitive methods employed by owners, operators, agents, or masters of foreign-flagged vessels.
“The [Federal Maritime] Commission notes that it has consistently held that its statutory authorities not only protect United States flagged shipping, but that foreign governmental actions that are detrimental to third-flag carriers can also create conditions unfavorable to shipping in the United States foreign trade,” an official statement reads.
Noting that many countries take “great care” in creating standards for vessels, the Commission also notes that others have engage in a “race to the bottom” – a famous term indicating that countries are reducing standards to a minimum (or are removing them) to provide a competitive advantage.
“By offering to register and flag vessels with little or no oversight or regulation, countries may compete against one another to gain revenue from the associated fees and to minimize the expenses associated with inspecting vessels and ensuring compliance with appropriate maintenance and safety requirements. In doing so, these nations compete to lower the cost of registering and flagging vessels beyond a point where they can ensure the efficiency, reliability, and safety of the vessels used in the ocean shipping supply chain. The use of these flags of convenience endangers the ocean shipping supply chain,” a statement from the FMC notes.
A broadside against the IMO
Then, in a rather bold move, the US FMC takes aim at the International Maritime Organization, arguing that the IMO’s approach has not brought about meaningful change nor deterrence to what is clearly a growing problem.
“If the IMO were to develop a policy solution to address these issues, member and cooperating countries would still be required to domestically enact such regulations, leaving room for some countries to choose their level of compliance. Patchwork policies and uneven compliance have proven ineffective in ensuring the reliability and efficiency of ocean shipping,” the US FMC says, adding that the naming and shaming approach does not prevent such practices and often leads to further concealment of illicit activities.
The US FMC also complains that a lack of standardized definitions for terms like “flag of convenience, open registry, fraudulent registry and shadow/dark fleet makes problems more difficult to identify, and successfully regulate, on a global scale”.
Flags of what now?
Shipping Australia readers may may wish to note that the concept of ships sailing under the flags of nations other than the nationality of their owners is an ancient practice that has been going-on ever since ships started flying flags (see here) and that the phrase “flag of convenience” itself is a pejorative term invented in the 1950s by opponents of globalised shipping (see here, here, here, and here).
Additionally, readers may wish to note that the government of the United States refuses to ratify the UN Convention on the Law of the Sea and that UNCLOS is the main global regulatory instrument for the regulation of international shipping. UNCLOS is a Convention that the U.S. helped to create.
UNCLOS codifies and recognises the legal right of every country, whether coastal or land-locked, to sail ships flying their flag (Article 90 UNCLOS) and that every country has the right and the duty to fix the conditions for the grant of nationality to ships (Article 91 UNCLOS) so as to preserve national sovereignty. So the lack of standardisation in this area of international law isn’t a bug, it’s a feature. Incidentally, Article 90, which recognises the right of every country to have ships flying their flag on the high seas, is actually the legal manifestation of a basic human right, which is this: every person on the planet has a fundamental and inalienable human right to access the sea because access to the sea is part of the common heritage of all of humanity.
Flag states, port states, international standards
The FMC goes on to criticise inconsistent interpretations [of laws / rules / policies etc] and fragmented policies as not serving as an effective deterrent to vessel owners or operators “who exploit lax rules or engage in deceptive practices”. Then the US FMC apparently takes another pot-shot at the whole international system by stating that there is a lack of “clarity and consistency when different organizations classify various countries’ registries [which] leads to confusing and conflicting results.” Noting that the IMO does not have the ability or authority to enforce vessel registry standards or to penalize non-compliant nations, the US FMC argues that the IMO’s efforts are unlikely to serve as an effective deterrent to bring about meaningful change.
Readers may wish to note that a system of Port State Control was established by the IMO via Article X of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers. Port State Control officials have the power to board, inspect, and to detain non-compliant ships. And there are a series of other, mostly IMO, Conventions that have an application, such as the Safety of Life at Sea Convention, the Convention for the Prevention of Pollution from Ships, and other. More information about Port State Control in Australia can be found here. Enforcement is carried out by each sovereign nation in its own territory; nations work together through the “Memorandum of Understanding on Port State Control” system. The first such MoU was the Paris MoU, which still exists today. The Paris MoU publishes a White-Grey-Black list of vessels that reveals the quality levels of a given flag based on statistical analysis of the 18,000 or so ships subject to port state control inspections in the 27 signatory nations of the Paris MoU. It may be worth noting that there are many open registries on the White List of the Paris MoU, and there are non-open-registries on the Grey and Black lists i.e. it’s conclusive proof that the open / non-open status of registries is utterly irrelevant as to the quality of ships on that registry, as has been explained by Shipping Australia here, here, and here.
Vessels that are very severely deficient can be detained – which imposes very severe costs – and, in some cases, can be (and have been) banned from a nation’s waters. The first such banning in Australia took place when the Australian Maritime Safety Authority banned the Vega Auriga (IMO 9347789; Liberia flag) from Australian waters for three months on the basis of repeated failures in seafarer welfare, and in ship maintenance, leading to three port state control detentions.
Meanwhile, readers may also wish to note that the IMO set up the IMO Member State Audit Scheme in 2006 to promote the consistent and effective implementation of IMO rules – which contain a duty to establish and maintain an adequate and effective system to discharge their obligations as flag, port, and / or coastal states – and this scheme became a treaty obligation in January 2016. An Audit Scheme was set up using the IMO instruments Implementation Code to create a harmonized standard.
“The audit scheme, using the IMO Instruments Implementation Code (III Code) as the audit standard, aims to provide an audited Member State with a comprehensive and objective assessment of how effectively it administers and implements those mandatory IMO instruments which are covered by the Scheme. Audits under the Scheme became mandatory on 1 January 2016… each Member State [of the IMO] is responsible to facilitate the conduct of the audits and implement a programme of actions to address the findings, based on the guidelines adopted by the Organization,” the IMO notes.
Unfavourable flagging and bad behaviour
The US FMC complains that ships registered under so-called “flags of convenience”, claiming that they operate under lax regulatory oversight leading to lower safety, environmental, and labor standards. The FMC goes on to make a laundry list of complaints about safety, environmental, taxation, trans-national crime, state-sponsored activities, lack of compliance with maritime treaties, and other issues.
Risks to U.S. Foreign Commerce
The US FMC reiterate that its purposes include ensuring an efficient and economic ocean commerce system, argues that regulation has led to a “global race to the bottom,” that “could dramatically undermine the efficiency and reliability of the international ocean shipping chain”. The US FMC then spends some time discussing in brief, a range of famous maritime accidents and near-misses that have happened around the world.
US FMC’s request for comments
The Commission is seeking information on:
- Specific examples of responsible flagging laws, regulations, practices, and proposals, including how they contribute or would contribute to the efficiency and reliability of the ocean shipping supply chain
- Specific examples of unfavorable flagging laws, regulations, and practices that endanger the efficiency and reliability of the ocean shipping supply chain, including:a. how irresponsible vessel flagging laws, regulations, and practices endanger the efficiency and reliability of the ocean shipping supply chain;b. which irresponsible laws, regulations, and practices pose the greatest danger;c. whether irresponsible vessel flagging laws, regulations, and practices foster the development of malign actors or fleets, such as the so-called shadow fleet; andd. how irresponsible vessel flagging laws, regulations, and practices endanger maritime infrastructure, such as ports, bridges, canals, and chokepoints;
- Practices by owners or operators of vessels that undermine the efficiency and reliability of international ocean shipping, including:a. dangers posed by under-insured or uninsured vessels, including to other vessels, maritime infrastructure, and mariners;b. dangers posed by vessels with poor or non-existent maintenance programs and few or no safety measures;c. dangers posed by inexperienced vessel owners, operators, or agents;d. dangers posed by inexperienced or unqualified mariners; ande. dangers posed to freedom-of-navigation principles by irresponsible vessels owners and operators, such as dragging anchors damaging undersea cables/infrastructure, or through turning off, jamming, or spoofing (15) AIS/GPS.
- The benefits to international ocean shipping of responsible vessel registration and flagging practices, including:a. potential benefits to ocean shipping efficiency and reliability of standards for flagging laws, regulations, and practices;b. the most important responsible flagging laws, regulations, and practices that contribute to the efficiency and reliability of ocean shipping;c. how Commission regulations could support responsible flagging laws, regulations, and practices; andd. how Commission regulations could deter irresponsible flagging laws, regulations, and practices.
- The burdens to foreign nations and vessel operators or owners of irresponsible flagging practices.
A 90-day consultation period is now underway and the deadline for comments is 20 August 2025 which can be filed at the US Regulations.gov consultation website.
