PANAMA: Home of "Convenience"
Ever since the United States encouraged Panama's independence
from Colombia and orchestrated the 1903 treaty that gave it
the right to build and operate the Panama Canal, Panama has
frequently been a convenient haven for U.S. businessmen. In
1922, the transfer of two passenger liners, the Reliance
and the Resolute, from the U.S. to the Panamanian registry
represented the first major step in the development of the flag
of convenience system. Panama offered ship registration in a
country free of burdensome laws and regulations found elsewhere.
In this case, the passenger liner company wished to avoid the
U.S. prohibition laws against serving alcohol on board.
The Panamanian registry, run from offices in New York, has
grown steadily since then and now includes more than 6,000 ships.
Ship registration generates approximately $255 million annually
in revenue for the Panamanian government. Owners from Japan,
Greece, China and South Korea claim 70 percent of Panama's fleet.
In 2001, Panama's registry made the mistake of selling a first
officer's certificate to the general secretary of the International
Transport Workers' Federation (ITF), David Cockroft, in spite
of his having absolutely no seafaring experience. The ITF, an
international federation of transport trade unions, is well-known
for strongly opposing the flag of convenience system. "The laugh
is on Panama," said Cockroft, "whose controls are so lax that
they hand out a vital document to the head of an organization
that for 53 years has challenged the abuses permitted by flags
of convenience states such as theirs. It's like awarding a good
conduct medal to Attila the Hun."
Perks of the Flag
Shipping companies with vessels flagged in Panama are free
from Panamanian taxation and do not have to be located in Panama.
Panamanian Law requires that 10 percent of the crew be Panamanian,
but a study has shown that this rule is generally ignored. Ships
pay a flat registration fee as high as $3,000 and annual fees
that range between $1,800 and $3,000; discounts of up to 50
percent are available for larger fleets. Registration itself
is easy and can be completed in one day by fax.
WHAT THE REGULATORS SAY
The relatively high detention rate for Panama's ships has
placed the country on international blacklists as a "medium
risk" flagging nation. This rating suggests that Panamanian
ships are more likely to be violating international safety,
labor or environmental codes and encourages members of the shipping
industry to keep a close watch on vessels flagged there. Between
1999 and 2001, port authorities operating in Europe and North
America inspected more than 5,000 Panamanian ships. Of these
ships, 525 were found to have serious enough problems that the
vessel was detained until those problems were resolved. Panama
also has more casualties, or ships lost through accident, than
any other registry -- 15 ships were lost in 2001 alone.
A MEMBER OF THE FLEET: GAZ POEM
In November 2002, a fire broke out inside the engine room
of the 26-year-old gas tanker Gaz Poem. The ship was
38 km east of Hong Kong. Given that the tanker was carrying
a highly volatile load of liquefied petroleum gas, the fire
posed a serious threat for a major explosion. Fortunately, the
prevailing wind kept the fire away from the cargo hold, and
the fire eventually burned itself out. Later, investigations
showed that the cause of the fire was a burst oil pipe. The
Gaz Poem turned out to be 10 years older than the average
age of the Panamanian fleet, yet in February 2002, the ship
had passed a Renewal Class Survey as well as statutory surveys
on behalf of Panama. So the accident raised a couple of questions.
How was a ship of that age able to pass the surveys? And even
if it did pass the surveys legitimately, why would a ship that
age be permitted to carry dangerous cargo?"
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Panama: Home of "Convenience"
Tonga: Closed for Security Concerns
Liberia: Ruling the Waves From Virginia
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