“In France, it is perfectly possible to remain under temporary admission and under a commercial certificate of registry. In Spain, it is also possible, but it requires obtaining a chartering license which is very difficult to obtain. As a consequence, the client would like to have a commercial certificate of registry when renting the boat out in France to non-EU resident charterers and a pleasure certificate of registry when using his boat privately in Spain.”
If at this point in the game, the owner hasn’t decided to ditch the idea of buying a boat, Mag. Virna Ayala points out that at the Panama Ship Registry, there are no pros or cons of commercial or private registration. A private yacht has to pay a fixed tax of $1,000 (if Panamanian national) or $1,500 (for a foreign company) every two years.
WILL THE FLAG STATE HAVE ME?
Once an owner chooses a flag state to approach for registration, is there a chance he will be rebuffed at the door? Jallow explains, “Every registry has their own criteria on who they will accept on to their registry. Firstly it depends on the type of registry: traditional or open. Certain registries may not accept persons from countries in any UN sanctions list or the black list of the Financial Action Task Force. The BVI has its own eligibility list as well.” The Panama Ship Registry doesn’t have any owner’s nationality, age or vessel tonnage criteria, once the owners comply with the requirements.
WHAT TYPE OF REGISTRY?
So we’ve got this far, but we’re still a marathon away from flying a flag. Now the owner has to choose the ‘type’ of registry he/she wants: Open? Traditional? Offshore? Onshore? What does all that mean? “There are many differences between the types of registry,” says Ayala, “the most significant of which are the taxes…”
A Traditional Closed Registry is open only to ships of its own nation. “In other words they allow only vessels that are owned by companies or persons that are residents of that country,” advises Jallow. “Traditionally, closed registries have a two¬fold requirement, firstly, incorporation in country of registration and secondly, principal place of business in country of registration. In a closed registry, the tax is charged on the earnings as compared to open, wherein the taxes are on the basis of tonnage.”
An Open Registry has virtually no restrictions, “However, this has led to allegations of sub-standard ships,” warns Jallow. ‘Open registers denote flags of convenience for ships”.
A ship registered in a country is required to fly the flag of that country and is entitled to the privileges and protection of the country. Registration provides title to a ship which is important for the ship to enter into trade relations.
Offshore Registries permit, as an economic incentive, the hiring of foreign crews at wages lower than those payable to domestic crews. Says Jallow, “It was viewed as an alternative to open registry, to counter its effects on shipping. Prior to the advent of secondary registry, traditional maritime countries were offering various forms of financial incentives to ship owners, thus the main objective of secondary Registry was the phasing out of subsidy and incentive schemes.” Attard confirms, “States such as Malta and Cyprus offer an open, or international registry. Owners opt for registration under these open registries for a variety of reasons including reliability, stability, reputations, fiscal planning and opportunities for crew employment.”
Hybrid Registers offer attractive combinations of national and open registry features designed to lure shipowners. Just as open registers developed in response to national registries, so hybrid registers have developed in response to open registries. Jallow explains, “They are easier to access and have fewer entry requirements than most national registries. They tend to maintain a nationality link between beneficial owner or management of the vessel and the flag State. In general, hybrid registries tend to offer financial incentives and advantages similar to open registers.
Some hybrids allow foreign shipowners access to the registry once certain technical standards are met. The Norwegian and Danish International Ship Registers, the Isle of Man, and Madeira permit foreign owned or controlled vessels in certain circumstances while the German and the French International Ship Registers do not have nationality requirements. But, what about changing legislation?
The new Red Ensign Group (REG) Code came into force on 1 January 2019. The code consolidates an updated version of the Large Yacht Code (LY3), and the latest version of the Passenger Yacht Code (PYC). The new Code also has what is known as a ‘retrospective application clause’. This means that there are sections within the Code that will be applied not just to new vessels, but to existing vessels also that are currently certificated under the existing Large Yacht Code or Passenger Yacht Code, from the first annual survey after 1st January 2019. The revised Marpol Annex 5 under regulation MEPC 70 came into effect on 1st March 2018. The main change for yacht owners is the additional category (E-Waste) to be included in the garbage record book. The Republic of Panama decided to adopt the REG YACHT CODE, edition January 2019, part A, for the yachts up to 12 passengers and part B, for the yacht up to 36 passengers.