INTRODUCTION
According to the United Nations Convention on the Law of the Sea (UNCLOS), the high seas are characterized by the principle of freedom of navigation, allowing access to all states This agreement outlines specific state-related issues regarding navigation and overflight, emphasizing that no state can claim sovereignty or authority over the high seas Consequently, all vessels enjoy unrestricted access to these waters However, the framework established by UNCLOS and public international law also imposes regulations that prohibit certain conditions aboard vessels, ensuring safe and lawful navigation.
Every vessel must possess a nationality through its registration under a state, enabling it to operate under that state's regulations and navigate the high seas effectively.
A national flag serves as an official endorsement, indicating that a vessel or vehicle is under the jurisdiction and control of a specific country As economic development grows, many ships from our country are opting to fly foreign flags for transportation and circulation, resulting in a surge in maritime trade and resource exploitation.
Therefore, the registration and flying foreign flags is only a form as well as a measure to make circulation and anchoring much more convenient at international ports.
Ship registration laws are categorized into open and closed registries Closed registries are managed by individual countries, allowing only their own ships, owned and operated by nationals, to be registered under their flag For closed registry, the ship owner must be a citizen of the registration country, and the business operations must be based there Additionally, ships registered under a closed registry can be requisitioned during wartime for transporting goods and personnel in national service.
Maritime registries often feature open registries in various countries, enabling vessel owners to register their ships under a foreign flag without a genuine connection to the flag state This practice allows ship owners of different nationalities to operate their vessels under the flag of the open registry country, which is typically displayed on the ship Additionally, the laws of the flag state govern the operations of these vessels.
Registering a vessel with an open registry can significantly enhance its trading potential and reduce operating costs for ship owners By choosing to register in a country different from their residence, owners benefit from lower administrative expenses and often face less stringent regulations Additionally, they can take advantage of tax incentives, such as tonnage tax, which applies a standard corporate income tax rate based on the size and number of ships Open registries, like those in Panama and Liberia, are attractive due to their liberal tax regulations, minimal citizenship requirements, and straightforward online registration processes This facilitates international trade participation, ultimately benefiting both ship owners and their respective nations.
While there are advantages to sailing under a flag of convenience, significant disadvantages must be considered by ship owners Ships operating under open registries often present more hazardous working conditions due to less stringent regulations, putting seafarers at greater risk This can lead to inadequate insurance and compensation, leaving crew members vulnerable in dangerous situations Additionally, fundamental rights for seafarers, such as the ability to form trade unions, receive fair wages, and work in safe environments, may not be guaranteed Furthermore, standard guidelines regarding rest periods may not be enforced, preventing seafarers from taking necessary breaks between duties.
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Figure 1 Top 10 flag States in 2019
In 2019, Panama dominated the list of the top 10 flag states, boasting the highest tonnage and number of boats registered Following Panama are Liberia and the Marshall Islands, highlighting their significant presence in the maritime industry, as reported by Lloyd's (2019).
With 9,367 vessels registered, the country boasts a significant lead over China, which has 4,486 ships Notably, only three nations—China, Hong Kong, and Greece—utilize a closed registry system, while the majority of countries operate under an open registry framework.
Our research stands out as one of the first to employ the best-worst method for determining the most and least significant criteria in ship registry selection While previous studies have utilized various methodologies such as fuzzy logic, SWOT analysis, and AHP for addressing ship flag choice issues, the ANP method has been less frequently applied Notably, Celik and Kandakoglu (2012) implemented a fuzzy quantified approach to analyze the strengths, weaknesses, opportunities, and threats related to ship flag selection.
The flagging-out dilemma in Turkey can be effectively analyzed using a SWOT framework Perepelkin et al (2010) presented an enhanced methodology to evaluate flag performance across global shipping industries Additionally, Kandakoglu et al (2009) developed a multi-methodological approach for selecting shipping registries within the maritime transportation sector Furthermore, Lua, Fan, and Li (2013) utilized individual ship registration data to investigate the factors influencing flag choice.
TIEU LUAN MOI download : skknchat123@gmail.com moi nhat behavior, used a binary choice model to analyze flagging-out decision, and used a nested logit model to analyze final flag choice.
Ship owners must recognize the key factors influencing their decision to register a vessel, as this choice significantly impacts their competitiveness in the international shipping market To operate their ships cost-effectively, selecting the right flag is crucial for successful shipping operations This leads to two important questions regarding the registration process.
“Which registry should the ship owner register their ship in?” and “How important are the factors that affect the ship registration decision?”
After reviewing previous studies, our team established eight key criteria to evaluate two alternatives: open and closed registries These criteria include shipbuilding standards, living and working conditions, crew wages, the availability of well-trained seafarers, types of ships, trading routes, tax implications, and bureaucratic control.
This study addresses the challenges faced by ship owners in the decision-making process for ship registration by utilizing the Best-Worst Method A significant strength of this research lies in its reliance on data provided by esteemed professors in the shipping industry, who possess extensive specialized knowledge.
This article will first examine existing documents on closed and open registries to identify factors influencing ship registration decisions and their purposes Methodology will be introduced, detailing the methods developed and their applications The study design process will also be outlined Data processing will be described, followed by an analysis of the estimated outcome model The research results will be presented, concluding the paper with final insights.
LITERATURE REVIEW
Ship registration is essential for commercial trading, as a vessel without a flag is not permitted entry to ports globally Therefore, selecting the appropriate type of registry is a crucial strategy for successful ship operation.
Ship registration primarily falls into two categories: closed registry and open registry Closed registration serves as the foundational type in the maritime industry, while open registration offers an alternative for shipowners seeking more flexibility.
The latest article on TIEU LUAN MOI discusses the emerging term "flag-out," which refers to the practice of ships registering under foreign flags instead of their national ones For more information, you can download the content by contacting skknchat123@gmail.com.
So why do ship owners flag out their ships?
Ship operators aim to maximize vessel efficiency while minimizing costs In developed nations, utilizing open registries allows them to tap into more affordable labor markets.
American-owned ships registered under Panama's flag of convenience are not required to adhere to U.S safety regulations, but instead must comply with Panama's rules This practice allows shipowners to circumvent strict American safety standards, raising concerns about maritime safety and regulatory oversight.
Open registries, often referred to as flags of convenience, are characterized by low operational costs and inexpensive labor By registering ships in these jurisdictions, ship owners can significantly reduce expenses, allowing them to transport goods at much lower rates compared to traditional registration in developed countries This cost reduction is achieved by lowering the living standards and working conditions of the crew.
(ITFseafarers) According to Judith Swan, open registries offer several benefits to ship owners:
Open registries offer numerous advantages, including minimal vessel restrictions, a favorable tax environment, and low administrative and registration fees They typically impose no or easily met nationality requirements, ensuring a quick and efficient registration process Additionally, flexible manning requirements enhance operational efficiency Notably, the absence or reduction of local income taxes stands out as one of the most significant benefits of these registries.
Open registration has sparked controversy due to its contrasting regulations compared to closed registries Closed registries prioritize high shipbuilding standards, crew qualifications, and welfare, while open registries often focus on revenue, leading to infrequent enforcement of maritime laws This profit-driven approach compromises maritime security, resulting in sub-standard shipping practices and crew maltreatment Research indicates that vessels flying the Flag of Convenience (FOC) are more likely to be involved in maritime accidents, highlighting the risks associated with deregulated and non-unionized segments of the shipping industry The rise of FOC has significant implications for global maritime safety and competition.
The organization of the maritime transport sector plays a crucial role in national fleets of industrial countries and central trade union activities, encompassing economic negotiations and organizational policies (Koch-Baumgarten, 1998) By operating under open registry flags, ships can circumvent union regulations that establish essential safety standards, security measures, and seafarers' rights, ultimately reducing operational costs and compensation expenses.
Selecting between two types of registries is similar to scaling the benefits and drawbacks of them in terms of costs, compulsory regulations, and maritime security.
We looked at some previous studies which share the same topic in order to identify the criteria of selecting ship registry.
In 2009, Celik, Er, and Ozok identified three primary categories influencing shipping registry selection: economic, social, and political factors Utilizing the Fuzzy AHP methodology, they determined that bank financing and tax-related expenses are crucial in the decision-making process Similarly, Kyriaki and Michael (2016) corroborated these findings within the economic category, emphasizing the significance of financial considerations in shipping registry choices.
The flag-out ratio for ship owners is influenced by a country's tax system, ease of starting a business, and levels of corruption and transparency An investor-friendly tax structure, coupled with efficient management, creates a supportive tax environment Ship owners consider five quantitative factors when deciding to flag out: vessel age, trade type, basic wage costs, national insurance payments, and training costs While basic wage expenses may negatively impact the decision, overall employment costs are more significant Additionally, qualitative factors such as crew salaries, availability of skilled labor, and fiscal reasons also play a crucial role in the choice to adopt a foreign flag.
In 1998, Angela and Peter identified crew expenses as the primary reason firms chose not to adopt a national flag Additional factors influencing this decision included the desire to evade bureaucratic oversight, the high costs associated with complying with national flag regulations, a lack of skilled labor, and various financial considerations Companies opting for a closed registry highlighted these challenges in their decision-making process.
TIEU LUAN MOI download : skknchat123@gmail.com moi nhat their decision was influenced by a variety of factors, including ship’s type, trading routes, public relations concerns, marketing, and historical considerations.
Key factors influencing ship registration include crew wages, the living and working conditions of seafarers, the availability of well-trained personnel, the type of ship, shipbuilding standards, trading routes, tax implications, and bureaucratic regulations.
Crew wages refer to the salaries of seafarers, which are determined by the number of days spent on board a ship There is a significant disparity in earnings between seafarers from developed countries and those from developing nations For example, the average salary of an ordinary seaman varies greatly, highlighting the economic divide in the maritime industry.
Philippines is about $5,258 while that in Japan is $32,544 ( ERI's Salary Expert Database) So that ship owners that base in Japan must carefully consider whether to register their ships in
Japan, a closed registry, or an open registry which allow them to outsource the seafarers.
Standard living and working conditions refer to the quality of life on board of the ship: food, drink, working and resting hour, medical treatment, accommodation, etc.
Those two criteria, which related to seafarers, are protected by International Labour Organization
The Maritime Labour Convention (2006) established by the International Labour Organization (ILO) aims to ensure that seafarers enjoy the freedom of movement essential for their well-being and professional activities, ultimately facilitating international commerce.
There are two main kinds of seafarers: national and non – national seafarers Availability of well
METHODOLOGY
When a problem is so complicated that it can only be modeled as a hierarchy or network, most
“Best-worst method” fall to arrive at a solution In a specific, ship registration is a multi-criteria
The latest concept in multi-criteria decision-making (MCDM) methods offers a valuable approach for evaluating the significance of various criteria across multiple fields These methods have been effectively utilized to address challenges in sustainable supply chain management and green port initiatives, among others For further information, you can download the latest thesis at skknchat123@gmail.com.
This study introduces the "Best Worst Method" (BWM), a novel approach that offers distinct advantages not previously utilized in this field A detailed description of the BWM will be provided in the following section.
Decision-making is the cognitive process of choosing an alternative from a variety of options A Multi-Criteria Decision-Making (MCDM) problem arises when a decision-maker must identify the most suitable alternative based on specific criteria To effectively tackle this challenge, the Best Worst Method (BWM) has been implemented, which is a multi-criteria decision-making approach developed to enhance decision accuracy.
Dr Jafar Rezaei from Delft University of Technology in 2015 This kind of method is based on a systematic pairwise comparison of the decision criteria used to evaluate a set of alternatives.
The most significantly unique of BMW is that it requires less data than other MCDM methods.
BMW utilizes fewer pairwise comparisons than the Analytic Hierarchy Process (AHP), requiring 2n3 comparisons compared to AHP's n(n-1)/2 The pairwise comparison method involves evaluating each alternative against every other alternative, ranking all possible pairs to determine their relative preferences.
The data analysis conducted with BMW yields more reliable results compared to AHP, as it facilitates more consistent comparisons This consistency in ratios enhances the reliability of the data, ensuring more accurate outcomes.
According to Chu and Kuang (2002), the consistency in research should be