The Impact of the Flag of Convenience Regime into Shipping Industry

Abstract

The term “flag of convenience” (FOC) describes the business practice of registering a merchant ship in a sovereign state different from that of the ship’s owners, and flying the civil ensign of that registrant state on the ship. This is for purposes of reducing operating costs or avoiding government regulations of the owner’s country, include tax avoidance, the ability to avoid national labor and environmental regulations, and the ability to hire crews from lower-wage countries. However, flag of convenience registries are often criticized. As a result of this lack of flag state control, flags of convenience are criticized on grounds of providing an environment for conducting criminal activities, supporting terrorism, providing poor working conditions for seafarers, and having an adverse effect on the environment. This article will discuss the process of formation and development of FOC, will analyze for researchers to clearly understand its impacts on the maritime industry.