Lucrative foreign-flag registry weathers diverse pressures
Behind the risky business of world shipping lies the largely unnoticed business of ship registry.
The revenues from registering ships can be considerable. In fact, when a coup d'etat took place in 1980 in Liberia, the new regime quickly assured the world shipping community that business would continue as usual at its registry. It has.
Both initial registry and annual tonnage taxes are based on the gross tonnage of the vessels registered with the registry.
In the 1960s and '70s, with the growth of supertankers, the revenues of ''open registry'' systems like those of Panama and Liberia climbed with the size of ships. A single ship earned $10,000 to $100,000 a year in flag state revenue.
Yet the lucrative business of registry has its risks, too - political, international, and economic. In the last two years, for instance, the Liberian flag has faced - and survived - both the political coup at home and a plan to eliminate the registry mounted by a United Nations organization.
Since 1949, the registry of ships under the flag of Liberia has been handled by an American corporation, the International Trust Company. The operating subsidiary, Liberian Services Inc., with headquarters in New York and Reston, Va., has provided ship registry and ship officers' papers on a long-term contract with the Liberian Maritime Commission.
Under the leadership of Fred Lininger, chief executive officer of the services firm since its foundation, Liberian-registered tonnage has grown into the largest national merchant fleet in the world. Liberia had one-fourth of the world's tonnage by 1978. Through the 1970s, 5 to 12 percent of Liberia's revenue derived from ship registry.
The coup in Liberia in April 1980, led by Master Sgt. Samuel K. Doe, disrupted Liberia's placid political scene. Yet the new government, the People's Redemption Council, did not disrupt the registry.
Mr. Lininger reports that ship registry has ''fared well'' since the coup, despite a decline in world shipping and despite the concern of some shipowners with the stability and intentions of the new regime.
In recent months, Liberia has become even more dependent on ship registry revenue. A plan to increase the annual tonnage tax from 10 cents to 30 cents a ton, under consideration by the Liberian Congress at the time of the coup, was put in place by the People's Redemption Council Jan. 1, 1981.
Tax advantages of incorporating in their home countries have led shipowners to request exemption from the 1975 rule requiring that ompanies owning Liberian-flag vessels incorporate in Liberia. But the waiver procedure, Lininger says, does not reduce Liberia's revenue, because the fee for registering a foreign corporation in Liberia is higher than the revenue from direct Liberian incorporation.
Liberia's other revenues have declined, although exact statistics are unavailable. Exports of iron ore are down, while the departure of many independent rubber plantation owners after the coup disrupted that industry.
The US ambassador to Liberia, William Swing, noted recently that over 500 Liberians sought political asylum in the United States, but he believes efforts of the Redemption Council to welcome home such exiles are gradually succeeding.
But it may be years before the ''encouraging signs'' of normality noted by Mr. Swing bring local revenue back to pre-coup levels.
The registry system also faces the threat by the United Nations Council on Trade and Development to ''phase out'' open registry systems. The UNCTAD secretariat argues that open registry shipping led to ''irresponsible behavior in regard to seaworthiness'' and to the ''neglect of labor and social standards by owners.'' UNCTAD doubts whether benefits to particular nations like Liberia offset the world social and economic costs stemming from substandard shipping and distortion of competition. UNCTAD's Committee on Shipping voted in 1981 to work toward ''normal registries'' to increase accountability of owners.
Richard Bissell of the Foreign Policy Research Institute criticizes open registry for protecting shipowners' traditionally secretive practices. The lack of planning, regulation, and control, although advantageous to shipowners, places the modern world order at the mercy of an array of potential political and legal disruptions.
Mr. Bissell notes, ''Plainly, in the world of the 1980s there is no other industry of this magnitude that operates with such obscurity.''
But Lininger of Liberian Services maintains that, although UNCTAD's effort to stop foreign registry ''will not leave Panama and Liberia unscathed,'' the two systems will stay in business despite it.
Lininger holds that world shipping, rather than returning to registry under the owners' flags, will shift to a new pattern. He expects competition from a variety of new arrangements offered by several nations.
He does not believe that the OPEC nations will build major oil tanker registries, despite steps in that direction by Kuwait and the Saudis - partly because shipping, as a wasting asset, is not nearly as attractive in the long run as investment in Western real estate and blue-chip stocks.
Some countries, like the Philippines and Sri Lanka, which supply labor for world shipping are developing ship registries that require a minimum number of their citizens on crews while allowing foreign owners.
Other states may provide registry nominally restricted to national shipowners but in fact open to others. Singapore, after experimenting with open registry, initiated a plan requiring 50 percent Singapore ownership.