Shipping is in transition with emerging regulations, the drive for decarbonization and geopolitical issues all increasing the pressure on both ship registries and classification societies. The pandemic impacted the business by driving up cargo volumes and demand for containerships. More recently, the war in Ukraine and implementation of sanctions impacted dry bulk, tanker and gas carrier usage.
All of this comes as shipowners and operators had to deal with increasing financial pressures and a growing shortage of qualified merchant sailors.
Responding to these issues, ship registries (flag states) are rethinking their role and how they work with owners. While finding themselves challenged as more shadowy operators seek to skirt regulations, flags – like class societies – are becoming more like advisors to the industry. They’ve also had to incorporate new technologies to address trends such as digitalization as they change the way they do business.
Increased sanctions over the past two years have placed a growing burden on registries. Flags and class societies alike have responded by increasing the number of ships and operators they’ve suspended and removed from their ranks. All the flags are also reporting that they’ve increased their vetting efforts to stop “flag hopping” and other deceitful practices.
Coming under pressure to address sanction busters, the Panama Maritime Authority – which for many years has been the largest registry – says it’s canceled more than 6.5 million gross tons since 2021 for issues related to Iran and North Korea or vessels included on the lists of international sanctions.
In an effort to stop operators or ships from hopping between flags, Panama together with two of the other leading international flags, the Liberian Registry (LISCR) and the Marshall Islands Registry (RMI), has had an agreement since 2019 for the exchange of information. It helps them identify ships being removed from a registry and seeking replacement flags.
The vetting of ships and their operators has also taken on new importance. The Liberian Registry, for example, which has grown rapidly to rival Panama, has taken significant steps to enhance its capabilities by collaborating with outsourced services to strengthen its ability to access accurate and up-to-date information. The Cayman Registry, a leader in yachting, is only accepting registrations from individuals or companies located in jurisdictions with stringent fiscal and anti-money laundering regulations.
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