C39796516enc 001

EUROPEAN
COMMISSION
DIRECTORATE-
GENERAL
TRANSPORT
TRANSPORT RESEARCH
APAS
MARI TI ME TRANSPORT
VII 38
Structure and organization
of maritime transport
Mercer Management Consulting Lloyd's Mari t i me
I nf ormat i on Services
The information contained in this publication does not necessarily reflect either the position or
the views of the European Commission
A great deal of additional information on the European Union is available on the Internet. It can be
accessed through the Europa server (http://europa.eu.int)
Cataloguing data can be found at the end of this publication
Luxembourg: Office for Official Publications of the European Communities, 1996
ISBN 92-827-7990-4
ECSC-EC-EAEC, Brussels Luxembourg, 1996
Printed in Belgium
Contents
it t u . . Mfft^TtmrnrriMff immirtrnirrTnrffiinTil'"''"' " " * -
Annexes:
Introduction
Flagging Out of EU-Owned Vessels
"Sub-Standard" or "High Risk" Vessels
Impact of Flagging Out and of High Risk Vessels on the EU Economy
Impact of Industry Structure, Corporate Strategies and Government Policy
Conclusions and Recommendations
Flag Definitions
Profile of Selected Open Registries
Profile of Selected EU Fleets
"One-Dimensional" Evidence of High Risk Vessels
Output from the Regression Model on High Risk Vessels
Estimation of EU Shipping Industry Turnover
EU Owned and Flagged Fleet Tables
Page
5-10
11-102
103-179
181-212
213-239
241-253
255-256
257-274
275-289
291-298
299-315
317-319
321-328
Introduction
Introduction: Objectives of the Study
The following objectives are at the basis of this study
DG VII wants to understand better:
- The different aspects of flagging out and its consequences
- The impact of "sub-standard vessels" on the EU maritime economy
- The organisation and structure of EU and non-EU shipping companies
Improved understanding of the competitive position of the EU fleet
What are the requirements for an attractive EU register?
What policy initiatives should DG VII pursue?
What research priorities need to be pursued under the 4th Framework Programme?
oo
Introduction: Project Activities
The Study Team completed an extensive series of analyses and investigations:
An in-depth analysis on the extent of flagging out by European owners
Research on cost factors involved in using Open Registries (direct market research and leverage of other DG
VII work undertaken by the Team)
Survey of 20 shipowners on flag selection criteria and actual flagging practices
Detailed statistical research into the correlation between Open Registries and various flag/vessel/owner
characteristics, on the basis of large vessel-specific databases and using sophisticated statistical modelling
approaches
Survey of definitions used for "substandard vessel" through expert interviews with key industry participants
Detailed modelling of the impact of crew cost and corporate tax on the EU maritime economy
In-depth review of major trends in the liner shipping industry
Introduction: Contents of the Report
This report provides details on a variety of analyses undertaken
Section A
Flagging Out
Section
Sub-standard Vessels, their
Deployment and Impact
Section C
Organisation and Structure of Liner
Shipping Sector and Companies
p
Quantify (lagging out
-Degree
-Correlation between
registers and ship
types/sizes
Assess (dis-)advantages
of non-EU flags
Determine flag selection
criteria of shipowners
1
Establish parameters for the
definition of "sub-standard
vessel"
- Detailed regression modelling
Assess correlation between
high-risk vessels and vessel
characteristics
Assess comparative EU
performance
Evaluate impact of high-risk
vessels on EU maritime
economy
Conclusion s and
Recommendations
Industry structure
Financial performance
Partnerships
EU competitive position
Key drivers of fleet growth
Cos! structures
CO
o
Executive Summary
Overall Conclusions
The degree of flagging out of EU owned vessels is significant and has accelerated over the last decade
EU owners have sought to take advantage of crew cost and corporate tax advantages under Open Registries
The financial performance of the shipping industry is poor, putting pressure on owners to seek cost savings
- Most major (liner) operators in Europe, Asia and North America have, or are planning to, flag(ged) vessels to
Open Registries
The average safety record of the EU owned fleet is certainly not better than the world average, and probably
worse
- In addition, there is significant variation around the mean, i.e., some EU owned fleets are certainly much
worse than the world average
In particular, there is evidence that the safety record of the EU owned fleet that has flagged out is worse than
that of the EU flagged fleet
Specific Conclusions and Recommendations
The Chapter on "Conclusions and Recommendations" (pages to ) is a self-contained chapter providing
details of the conclusions and specific recommendations
Flagging Out
of EU - Owned Vessels
lp> Quantification
(Dis) Advantages of Open Registries
ro
Flag Definitions
' - %* - >" " =- -
Administration
carried uut in an EU
state
or
Representation in an
EU parliament
EU Flags
Austria
Belgium
Denmark
France
- French Guiana
- Guadelope
- Martinique
- Reunion
Finland
Germany
Azores
Madeira
Canary Islands
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
Second Register
Laws and Labour
codes apply as for
1st register
Flag of host nation
flown
No size or type
restrictions
DIS
GISO)
- ' . ; .
Affiliated Flags
EU state as a
signatory at the IMO
(May fly own or host
nation flag)
Faeroes, Greenland,
French Antarctic Terr.,
French Polynesia,
Kerguelen Is., Mayotte,
New Caledonia.Sl. Pierre,
Wallis and Futuna, Netherlands
Antilles, Macao, British Virgin
Is., Cayman Is., Channel Is., Isle
of Man, British Indian Ocean
Terr., Anguilla, Bermuda,
Falkland Is., Gibraltor, Hong
Kong, St. Helena,
Turks and Caicos, Monserrat,
Norwegian Antarctic Terr.
(1) noi split out from German Register due to lack of Information from GIS
Flagging Out: Definitions and Scope
The "Owned Fleet" consists of those vessels owned by European "parent owners" (termed "owner"), i.e.
"nationals" of one of the 15 member states of the EU
- The "parent owner" of a vessel is defined as the controlling interest behind that vessel
The "Registered Flagged Fleet" consists of those vessels registered under the relevant state flags, regardless
of the nationality of the parent owner (short: Flagged Fleet)
The analysis comprises all seaborne cargo vessels (the Merchant fleet) over 100 gt and consists of six
categories:
- Liquid bulk - General cargo
- Dry bulk - Ro/Ro
- Container - Other dry cargo
The affiliated countries are defined as countries with an EU state as a signatory at the IMO
0)
EU Owned Fleets 15 Countries
Number of Vessels Million of dwt
16000 400
Other Flags
Affiliated Flag
International Secondary
Registers (DIS)
EU Flags
300
C
O
200
100
Other Flags
Affiliated Flags
International Secondary
Registers (DIS)
EU Flags
1985 1994 1985 1994
Note: GIS Is not split out from the German Register in the Lloyds Database and hence is not shown separately
Source: LMIS database, Team analysis
Flag
Q EU & second Registers
Other Flags
Flagging Out: EU Owned Fleets
1985
12464
232
1994
11426 vessels
259 million dwt
While total tonnage under EU ownership has increased over the last decade, the degree of flagging out has also increased
substantially
The vessel count under EU ownership has decreased by 8% (1,039 units) between 1985 and 1994, but the
aggregate tonnage has increased by 12% (27 million dwt)
- EU owned fleet:
- As a result, the average size of the EU owned vessel has increased from 18,600 dwt to 22,600 dwt. This
contrasts with the average size of a vessel in the world fleet increasing from 16,200 dwt to 17,200 dwt
only
The EU-owned vessels flagged out are larger than the EU flagged ones (27,500 dwt vs. 18,500 dwt)
The flag composition of the EU fleet has changed dramatically
- EU owners registered nearly 47% of vessels in 1994 under non-EU flags (ie. 'other flags') vs. only 28%
in 1985
- In tonnage terms 56% of EU owned tonnage was registered under non-EU flags in 1994 vs. 38% in 1985
0)
This compares to "world fleet flagging out":
1985
12%
31%
1994
19% by vessel numbers
45% by dwt tonnage
Note: (1) Vessels registered under Open Registries, as defined by the ITF
Oi
CD
EU and Affiliated Flagged Fleets
Percentage Change 1985 1994
Vessel Numbers
EU Flags
Affiliated Flags
1985
8,936
798
1994
6068
793
Total
Total
9,734 6,861
DWT (millions)
EU Flags
Affiliated Flags
1985
149
15
1994
104
26
DWT (millions)
EU Flags
Affiliated Flags
Total
164 130
Vessel Numbers
40
EU Flags _
3
2/
c
Affiliated Flags
Total 30%
30%
20
21%
20 40 60 80

1 %
73%
Note: See annex "EU Owned and Flagged Fleet Tables", tables 1 & 2 lor further details
Source: LMIS, 1995
Flagging Out: The EU Registered Flagged Fleets 1985-1994
The EU Flagged Fleets have declined substantially over the last decade
The EU registered flag vessel count has declined by 2,873 vessels or 30%, the corresponding tonnage drop has been
34 million dwt or 21%
- The average vessel size under EU flag has increased from 16,800 dwt in 1985 to 19,400 dwt in 1994
The EU flagged fleet has contracted from 8,936 vessels in 1985 to 6,068 by 1994, representing a 32% fall. Deadweight
tonnage has been reduced by 30% to 104 million dwt over the same time period
- The average size of an EU vessel in 1994 is 17,600 dwt vs. 16,700 dwt in 1985
The vessel count under affiliated flagged fleets has declined only marginally, but tonnage capacity has increased by
73% to 26.4 million dwt
- This has been caused by the establishment of new registries such as Netherlands Antilles and a doubling of
tonnage in the Gibraltar and Bermudan flags, arising from an influx of larger sized vessels
00
Age Profile of EU Fleets
.
EU Registered Flag Vessels:
EU Owned Vessels:
Japan
Taiwan
South Korea
USA
Norway
NIS
World Fleet
1985
16
17
9
13
14
24
20
-
14
1994
r
21
19
9
13
16
28
29
13
17
Difference
+5
+2
0
0
+2
+4
+9
N/A
+3
Source: LMIS, 1995
Flagging Out: Age Profile of EU Fleets
The average age of the EU flagged and owned fleet has increased markedly (particularly the age of the flagged fleet)
The EU owned fleet has increased its age profile by 2 years over the past decade to
19 years, whilst the EU registered fleet has increased by five years to 21 years
In contrast the world fleet age profile has increased by 3 years to 17 years
It appears that EU owners have reinvested less in new tonnage than owners in
other geographical areas (particularly those in Asia)
CO
ro
o
Flagging Out of EU Fleets
Percentage of Vessels Flagged Out
0
Dry Bulk
General Cargo
Container
Liquid Bulk
RoRo
% 25/
1 | ,
EU Owned Fleet
50%

54%
47%
44%
29%
75%

68%
100%

Source: LMIS, 1995
Flagging Out: Vessel Types
Two-thirds of the EU dry bulk fleet is flagged out
EU owners have flagged out 68% of their bulk vessels
EU owners flagged out over half (54%) of their general cargo vessels and a large proportion (44%) of
their liquid bulk vessels
Vessels which operate under relatively stringent safety regulations (eg. Ro-Ros) are generally not
flagged out
ro
ro
ro
Change in EU Owned Fleets, 19851994
By DWT (millions)
Composition of EU Owned Fleet, 1994
By DWT
232
dvrt 14.4
.6
2T
259
40.7 <
6 . 4
1 2.6
A \
1.7
,003 OOI +0.03 tO.3 ' J
0.7
0.9
1.5 Hf
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F i
r r 'o
al
Aus,na
2% Spain 1% / ^ 0.2%
Netherlands \ 2 % / / ^ ^ Ireland
0.1%
Lux emb our g
0. 004%
Denmark
5%
Ger many
7%
Gr eece
4 8 %
Sour ce: LMI S V essel dat ab ase, 1995
Flagging out: Change in the EU owned fleets
The EU owned fleet increased by 12% in total dwt between 1985 and 1994
Over the past decade the Greek owned fleet increased by 40.7 million dwt,
more than accounting for the total increase in dwt of all EU owned fleets
Other significant increases were in the Swedish (6.4 million dwt) and Danish
(3.5 million dwt) owned fleets
These increases were offset by major decreases in the UK (-14.4 million dwt),
Spanish (-6.6 million dwt) and Italian (-2.6 million dwt) owned fleets
In 1994 the Greek owned fleet accounted for almost half of EU owned tonnage
r\j

ro
Change in EU Owned Fleets, 19851994
By Number of Vessels
Composition of EU Owned Fleets, 1994
12.464
u
373 | |
372 | _ J_
94 +36 +28 .9 *
+4 *3
+ 3
11.426
4 25 .
12
ZZ
i l l 1 1
11
s
i I f
u ^ in E

I I I I l ' ' I
(/)
s
i
a.
E
a i I I II
(
5 I <*

I
< 13 S

3
3
LU
3
LU
Ireland 0.7%
Portugal 0.7% | Austrti
Finland 2%
Belgium
Spain 3%
France
Luxemburg 0.1%
Sweden 4%
Netherlands 6%
Denmark 7%
Italy 7%
Germany 14%
Source: LMIS Vessel Database, 1995
Flagging Out: Change in the EU Owned Fleets
The German and UK fleets have lost most vessels over the last decade. The 1994 EU fleet is fairly concentrated
ro
01
Between 1985 and 1994, the Spanish, German and UK fleets suffered a net loss of 372, 331 and 373 vessels
respectively. This combined loss accounts for 88% of the loss of the EU owned fleet over the same period.
The EU fleet is fairly concentrated with the top five EU owned fleets representing 8,953 vessels, some 78% of the fleet.
The Greek owned fleet (3647 vessels) accounts for over a third of the EU fleet. The UK accounts for 18% (1,991 vessels)
of the EU fleet and Germany for 14% (1,632 vessels).
- With 9,746 vessels, the same five EU country owners in 1985 accounted for 77% of the EU owned fleet. Greece
represented 30% of the fleet, followed by UK 19% and Germany 15%.
ro
CD
Change in EU Flagged Fleets, 19851994
By DWT (millions)
Composition of EU Flagged Fleet, 1994
By DWT
Sweden Portugal
2%
Luxembourg Finland
2 %
i n
5 %
Austria
2%! / /
3 %
Netherlands
3%.
Ireland
0.2%
Belgium
0. 1%
104
3.7 dwt
Germany
6%
2.9
0.04 O.04
r
l4
z

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j5>

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(
3
UJ
C
ra
c
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ra

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LL
S
S >
U.
?
CT)

S
3
UJ
Denmark
7%
Italy
9%
Source: LMIS Vessel database, 1995
Flagging out: Change in the EU flagged fleets
The EU flagged fleet decreased by 30% in total dwt between 1985 and 1994
ro
-NI
The UK, Finnish and Spanish flagged fleets account for 83% of this loss
Only the French, Greek and Luxembourg flagged fleets increased their
registered dead weight tonnage over the period
In 1994, Greek flagged tonnage accounted for 57% of total EU flagged tonnage
ro
oo
Change in EU Flagged Fleets, 19851994
Composition of EU Flagged Fleets, 1994
8936
124 111 .9 5 . 4 0 .1 2
_l2S
2 6066
zz
zz
'S "> >
s
l i
O)
I
3
UJ
1
3 a
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f f
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I
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'JS>
1
2
(
LL
(S

m

c
i
ra
S

O)
1
r
<
l

S.
3
UJ
Ireland 1.1% Belgium 0.7%
Portugal 1.5%
France 3%
Finland 3%
Spain 5%
Sweden 5%
Nelherlands 8%
UK 9%
Denmark
10%
Luxembourg 0.7%
Austria 0.5%
Greece
26%
Germany
12%
Note: Denmark Includes DIS (423 vessels)
Source: LMIS Vessel database, 1995
Flagging Out: Change in the EU Flagged Fleets
Several EU flags have lost large numbers of vessels over the last decade
The drop in EU flagged fleets is far more pronounced than in the EU owned fleets
In particular the German, Greek, UK and Spanish registers have lost over 400 vessels each
The EU flagged fleet is slightly less concentrated than the EU owned fleet: the top-six
registers account for 78% of the fleet
ro
co

o
Flag Composition of the Major EU Owned Fleets
1985
1994
% of Vessel
Numbers
100%
75%
50%
25%
% of Vessel
Numbers
100%
75% -
50%-
25% -
0%

Greece UK Germany Italy Denmark Greece UK Germany Italy Denmark
Other Flags E2D Affiliated Flags EU Rags Other Flags I V/ I Afflllaled Flags RSS1 International Secondary Registers I I EU Rags
EU flags
Affiliated flags
2nd Registers
Other flags
58%
y
4 1 % V 76%
1% " 17% # 1 %
'
96%
1%
41% 42% ' * 3 % ^: i - - ; . i
81%
6%
13%
40%
1%
-
59%
24%
16%
.' .
60%
44%
2%
* ' , m
54%
87%
1%
-
12%
19%
20%
50%
11%
Source: LMIS, 1995
Flagging Out: Flag Composition of the Major EU Owned Fleets
In 1985, the top five national owners flagged 61% of their fleets under EU flags. This proportion fell to 44% by 1994.
There is a noticeable contrast between the countries: UK, Greek and German owners tend to flag-out, while Danish
owners opt for the DIS and Italian owners generally remain with the national flag
The German fleet shows the greatest swing (some 24% of the fleet) from EU to non-EU flagging over the ten year period.
- This assumes that 198 East German vessels were not part of the German flag in 1985
In contrast, at least 87% of the Italian fleet remains with the national flag, only 5% less than in 1985
By 1994, 415 vessels (50%) of the Danish owned fleet are flagged under the Danish second register, the Danish
International Ship Register

ro
Analysis of EU owners "Other Flags"
DWT, 1994
Breakdown by Nationality of EU Owners Breakdown by Major NonEU Flag Used
88
1985
146
1994
J
EU Owned
Tonnage Flagged
outside the EU
Spain 1.5 (2)
Belgium 1.7% (2)
My 1.6% (2]
Roland 16% (2)
Franc 2.2% (3)
Denmark 37% <S) \
SwwJen 6 OX (6]
Ner*rUnd I 5% (2>
Ira. Pwi. Aust 0 4% (2)
/
146 Million DWT
(1994)
Greece
46 6% (68)
Manhal laiand 1.2% (2)
11.3% (2)
NIS1.4%(2) \ * ' '
St Vincent 2.4% (3) '
Singapore 36% (6>
Ohara 4 2% (5)
Bahamai
11.0% (16)
Malta
116%(17)
Ubaria 24 4 (36)
Cyprus IB.4% (28)
Panama
16 2% (27)
146 Million DWT
(1994)
Note: ( ) number DWT. Ire, Port, Aust = Ireland, Portugal and Austria
Source: LMIS, 1995
Flagging out: Use of "Other Flags"
In terms of DWT, Greece, UK and Germany account for 80% of the EU owned fleet which has been flagged out
Of the 146 million dwt flagged to vessels in non-EU or affiliate countries, 47%
(68 million dwt) is owned by Greek interests, 23% (38 million dwt) by UK owners
and 17% (11 million dwt) to German shipowners
The Liberian flag represents 24% of flagged out tonnage (36 million dwt). The
Cypriot (28 million dwt) and Panamanian (27 million dwt) flags in second and
third place, have market shares of 19% and 18% respectively

Analysis of EU owners' "Other Flags"
Number of Vessels, 1994
Breakdown by Nationality of EU Owner Breakdown by Major nonEU Flag Used
3523
195
Franca 2 0% (106)
Italy 2 0 \ ( 106)
Spam 2 0% (106)
Sweden 2 4% (128)
Denmark 3 9% (211)
Netherlands 4 0% (214)
5311
1994
J
EU Owned
Vessels Flagged
outside the EU
Germ any
16 6% (662)
Belgium 1 8% (97)
'. Port.Ausi 1 0% (49)
Finland 0 9% (46)
Singapore 2 l%(114)
Hondrus3 6%(192)
5311 Vessels
(1994)
Greece
40 8% (2166)
51 Vincent 5 1% (276
Antigua 6 6% (369)
Others 6 9% (411)
Baliamas 9 4% (504
Malta 10 2% (547)
PnlNpinet 1 2% (65)
Cyprus 22 0% (1163)
Panama
20 6% (1104)
Liberia
10 2%
(546)
5311 Vessels
(1994)
Nole: ( ) = number of vessels. Ire, Port, Aust = Ireland, Portugal and Austria
Source: LMIS, 1995
Flagging out: Use of "other flags"
In terms of vessel numbers Greece, UK and Germany account for 80% of the EU owned fleet which has been flagged out.
Five Open Registries have taken in 85% of the EU's flagged out vessels
Greece accounts for 41% (2168 vessels) of the 5311 vessels flagged to non-EU or
affiliated countries, followed by UK 23% (1,200 vessels), Germany 17% (882 vessels)
In terms of fleet percentages flagged out, the UK is the highest at 60%, followed by
Greece 51%, Belgium 57% and Germany 54%. In contrast, Italy is the lowest at 12%,
followed by Finland 21 and then Ireland 22%
The EU owned vessels are flagged out to 68 different flags, with the top ten flags
(Cyprus, Panama, Liberia, Malta, Bahamas, Antigua, St Vincent, Honduras, Singapore
and the Philippines) accounting for 4,900 vessels, representing over 90% of the flagged
out vessels
Open registries account for 5,000 (94%) of the flagged out vessels

en
Patterns of Flag Choice by Germany, Greek and UK Owners
European-Owned Vessels
Flagged to "other" flags
Selected European-Owned Vessels Flagged to the six major non-EU flags
(all open registers)
5311
Bahamas
Ger many
Cyprus
1985 1994
H J ^
Anti gua
Panama
3537 Vessel s
Mal ta
3537 Vessel s
Key
I I = German, Greek and UK vessels registered In Antigua,
Bahamas, Cyprus, Liberia, Malla and Panama
K V s N = Other European-owned vessels flagged outside Europe
Source: LMIS 1995
Flagging Out: Patterns of Flag Choice
Vessels owned by German, Greek and UK interests account for 64% of the EU owned fleet and their flagging out to the six
major Open Registries accounts for nearly 70% of all EU owners flagging out
The proportion of total Europe flagging-out accounted for by these three European fleets has remained fairly constant at
just under 70%
- Greek owners account for half of the 3561 vessels
The Cypriot flag has the most European-owned vessels from this sample (1063 or 30%), followed by Panama (932 or
26%)
The next few pages show for this sub-set of 3 EU owned countries and 6 Open Registries:
- Correlation between EU ownership and Open Registries
- The age profile of the sample
- The vessel size profile of the sample
- The vessel type characteristics of the sample

-^ 1

Largest European-Owned Fleets under Open Registry
In Vessel Numbers, 1994 Compared with 1985
Owner Nationality
Greece
UK
Germany
Totals
Cyprus
804
(+382)
27
(0)
232
(+159)
1063
(+541)
Panama
416
(-77)
480
(+45)
36
(-159)
932
(-191)
Liberia
129
(-51)
180
(-224)
127
(+69)
436
(-206)
Malta
439
(+324)
30
(+15)
28
(+24)
497
(+363)
Antigua
_
348
(+347)
348
(+347)
Bahamas
115
(+115)
134
(+113)
12
(+12)
261
(+240)
Total
1,903
(+693)
851
(-51)
783
(+453)
3,537
(+1,094)
Note: 804 = Current number of vessels In the flag
(+382) = Change in vessel numbers since 1985
Flagging Out: Largest European-Owned Fleets in Open Registries
Flagging out activity is increasing. Most European-owned fleets have flagged out to multiple Open Registries, but there are
"patterns of preference"
Net new additions to the six Open Registries (1,094 vessels) account for 31% of today's European
"contribution" to these six Open Registries
Two major traditional Open Registries (Panama and Liberia) are losing share to four relative newcomers
Liberia is the only flag used in a major fashion (i.e. over 100 vessels) by all three countries. However, the
Greek and UK use is decreasing over the ten year period.
There are some patterns of preference:
- The Greek and German owners show a preference for the Cypriot flag (1036 vessels)
- UK owners for the Bahamian flag (134 vessels)
- The Greeks are also increasingly using the Maltese flag (439 vessels)
- The Germans like the Antiguan flag (348 vessels)

CD
o
Age Profile of Largest European-Owned Fleets under Open Registers
In Years, 1994 compared with 1985
Owner Nationality
Greece
UK
Germany
EU Average
Antigua
^

12
(N/A)
12
(N/A)
Bahamas
17
(0)
15
(+5)
13
(0)
16
(+3)
Cyprus
19
(+1)
19
(+4)
14
(0)
18
(+2)
Liberia
17
(+5)
15
(+6)
10
(0)
14
(+4)
Malta
20
(-1)
19
(+3)
17
(-19)
19
(0)
Panama
21
(+2)
18
(+3)
19
(+4)
19
(+3)
Note: All figures in years
14 = Current average age of the flag
(+11) = Change in flag average age since 1985
N/A = Not applicable
Flagging Out: Age Profile of Largest European Fleets under Open Registry
Most of the non-EU flags are younger than the average age of the EU flag fleet (21 years). There is considerable variation of
average ages between owner country / Open Registry combinations
The German-owned Liberian-flagged vessels are the youngest fleet (10 years), followed by the German-owned Antiguan-
flagged vessels (12 years) and Bahamian flagged vessels (13 years). These three owner-registry combinations have not
increased their average age over the past ten years, suggesting a heavy influx of relatively new vessels. The UK vessels
flagged to the Bahamas register average between 14-15 years, with a five year increase in average age, since 1985.
The older flags include Panama (average age 18-21 years) utilised by the Greek and UK owners respectively, and the
Cyprus flag used by the Greek (19 years) and German (14 years) owners. The Maltese flag, used extensively by Greek
owners has an average age of 20 years, compared to 21 years in 1985.
ro
Vessel Size Profile of Largest European-Owned Fleets, under Open Registry
In thousand dwt, 1994 compared with 1985
Owner Nationality
Greece
UK
Germany
Antigua
^

4
N/A
Bahamas
45
(-41)
20
(-24)
8
(0)
Cyprus
30
(+13)
33
(+24)
9
(-D
Liberia
81
(+21)
64
(-14)
35
(-23)
Malta
34
(+18)
22
(+3)
9
(+8)
Panama
20
(+1)
31
(+14)
39
(+24)
Note: All figures in (000's) dwt
31 = Current average dwt per vessel in the flag
(+5) Average dwt change per vessel since 185
N/A = Not applicable
Flagging Out: Analysis of the major non-EU flags by vessel size
Average vessel sizes vary considerably by European owner / Open Registry combination

The Greek owned fleet comprises of significantly larger vessels than in 1985 and this is reflected in higher average vessel
sizes in the Open Registries used by Greek owners. In comparison, the Greek-owned Liberian-flagged fleet has increased
vessel size by 35 %; this is the result of an influx of liquid bulk vessels.
In contrast, the average size of the UK-owned, Bahamas-flagged fleet has fallen by 55%, due to a large movement of
relatively small general cargo vessels into the flag.
The Liberian flag shows smaller vessels for the German and UK owned fleets. This may be due to the scrapping of the
larger liquid bulk vessels. The UK-owned Panamanian-flagged fleet has seen an influx of liquid bulk vessels as a result of
which the average vessel size has almost doubled.

5
Vessel Type Profile of Largest EuropeanOwned Fleets under Open Registry
1994
fr.Vdfrt'
Mi',
Owner
Nationality
. y * , :
il.
. ' ; " *
Antigua
> , .
Bahamaa Cyprus Liberia
&tf
l a - V:
Malta
I
') ;
rf 'h^,
Panama
f <to.T
JM .< ,'
Greece
Germany
UK
General Cargo Dry Bulk
General Cargo General Cargo
Dry Bulk Dry Bulk General Cargo
Liquid Bulk General Cargo
General Cargo General Cargo Liquid Bulk Liquid Bulk Liquid Bulk
Flagging Out: Vessel Type Profile of Largest European-Owned Fleets under Open Registry
There are some patterns of correlation between vessel types and Open Registries
There are some easily identifiable correlations:
- The Antiguan, Bahamian and Panamanian flags generally comprise of general cargo vessels
- The Liberian flag is characterised by liquid bulk vessels
- Cypriot and Maltese flags have both general cargo and dry bulk vessels
The Liberian and Panamanian flags used by UK and Greek owners have seen a change in vessel type profile, with liquid
bulk vessels increasing in importance and a corresponding decline in general cargo and, to a lesser degree, dry bulk
vessels.
UK owners have increasingly used the Bahamian flag for general cargo vessels at the expense of dry and liquid bulk
vessels.
Dry bulk vessels have shown marked gains in the Greek-owned Maltese and Cypriot flags, whilst in the German-owned
Cypriot-flagged fleet their share has doubled since 1985.
In terms of absolute vessel numbers, container vessels on average represent less than 5 % of each owned fleet.
Therefore, container vessels do not appear as a major type of flagged out vessels.
- Nevertheless, the German owned fleet utilises the above flags for container vessels. For example, the German
owned Antigua flagged vessels account for 31 container vessels, Cyprus 43 and Liberia 21.
- In contrast, the Greek owned Cypriot fleet represents just 10 container vessels and the Liberian flag, one.
r n
O)
Flagging Out: Summary
While total tonnage under EU ownership has increased over the last decade, the degree of
flagging out has also increased substantially
- In 1994, EU owners registered nearly 47% of vessels under non-EU flags vs. only 28% in
1985 (In tonnage terms 56% and 38% respectively)
- Proportionately, EU owners have registered a greater share of their fleet under Open
Registries than owners in the rest of the world
The average age of the EU owned fleet is higher than the world average (19 years vs. 17), and
the average age of EU flagged vessels is even higher (21 years)
A significant portion of all vessel types and sizes are flagged out, and in particular, more than
two-thirds of the EU-owned dry bulk fleet is flagged out
The UK, Spain and Germany have seen the largest decreases in their owned fleets. Greece,
the UK and Germany have experienced the largest decreases in their flag registered fleets
A total of 5,311 EU-owned vessels, representing 146 million dwt, are currently flagged to non-
EU or EU affiliated flags
- Greece, the UK and Germany account for 80 percent of the vessel count as well as tonnage
- Open Registries (Cyrus, Panama, Malta, Liberia, the Bahamas and Antigua) account for 72
percent of this vessel count and 85 percent of the tonnage
Most European-owned fleets have flagged out to multiple Open Registries, but there are
Flagging Out
of EU - Owned Vessels
Quantification
1^ (Dis) Advantages of Open Registries
Open Registries: Introduction
This section presents an overview of the differences between Open Registries and EU Flags, and in particular:
Quantifies the size and growth of Open Registries
Quantifies EU owners' use of Open Registries
Reviews the advantages of Open Registries, and highlights, in particular, the potential for important crew cost and
corporate tax savings
Presents the result of direct market research with shipowners on:
- Flag selection criteria
- Actual use of flags
- Comparisons between EU Flags and Open Registries
- The "mechanics" of choosing a flag
- Crewing practices
The Appendix contains further details on the three largest Open Registries (Liberia, Panama and Cyprus), and on
selected second registers in the EU and Norway
CD

o
Vessel
numbers
es

5000
300
3000
2000
1000
U MI
na M
11 7
H M
" a Sa. i t a
I H I I i i i l l l l f l l
Total: 15,515 vessels
19% of vessels in world fleet
45% of world fleet dwt
(up from 31% in 1985)
BOO
700
600
500
0 -
3O0
200 -
100
0
749
470
123
To
f I
3
5
3
47 40
i . i
If
f
Total: 1,502 vessels
2% of vessels in world fleet
7% of world fleet dwt
(up from 0.25% in 1985)
Notes: (1) Defined by International Transport Workers Federation
( ) = country of affiliation
Source: Lloyds Register data all vessel types at December 31st 1994
Open Registries: Types of Registers
Open Registries and Second Registers in Europe comprise over half of world fleet tonnage
National Registers treat a shipping company in the same way as any other business in that country.
International or Open Registries are set up with the objective of offering shipowners internationally competitive terms and
to provide fee income to the country of registry. There are two types:
- Flags of Convenience (FOC) are defined in the Donaldson reporf
1)
as "registers where the State does not have the
capability of supervising the safety of its ships or does not do so effectively".
- Second Registers - copy FOCs in so far as they have considerable freedom for manning purposes but they target
mostly nationally owned vessels. They are accountable to an effective Maritime Authority and are liable to varying
degrees of tax.
The ITF maintains a list of what it considers Open Registries (FOCs); this list currently comprises 22 Registers
Forty-five percent of the world fleet's tonnage (dwt) is in Open Registries
- Only 18% of vessels in the world fleet, because smaller coastal vessels are less often flagged out
Seven percent of the world fleet's tonnage (dwt) is under a Second Register in Europe
- Again, typically larger vessels
Source: (1) Report of Lord Donaldson inquiry, May 1994

CTI
sr
) fleg etrlef *
12,000
10,000
8,000
Vtt
number o
000
4,000
2,000
8,234 205.0
11,287
292.8
300
250
200
DWT
1 5 0
(millone)
100
50
1985 1994
m
1994 Statu*
9Si&1994 Status pf theTop Fh/ Open Registri e
> Five Open Registries
7,000
S
6,0001 '
5,000
V M
4
'
number
3,000
2,000
1,000
O
97.1
I
::
if
946
3
39.3
!:
s
35.4
PH

: ,
26.2

100
90
80
70
60
DWT
50 (mlllons)
40
30
20
MO
o
Panama Liberia Cyprus Bahamas Malta
CAGR 4% 4%
% All Open
Registries
98% 91%
l ~| Vessel numbers DWT
Source: LMIS. 1995 all vessel types
Open Registries: Growth of Open Registries
The Open Registry fleet is still very concentrated, but new competitors are emerging
In 1994, the top-five Open Registries accounted for 91% of all vessels under Open Registry, down from 98% in 1985
Since 1985, the top five Open Registries by dwt (Bahamas, Cyprus, Liberia, Malta and Panama) have grown at an annual
rate of 4% in vessel count and dwt)
- These five flags represent 14% of the world fleet vessels and 42% of dwt
- They have generally been in existence for more than 30 years
A series of newer Open Registries have come into existence since the 1980's
- Collectively, they now account for 9% of the tonnage under Open Registry
Open Registries accounted for 3,200 vessels (26%) of the 1985 EU owned fleet, this increased to 5,000 vessels (44%) of
the 1994 fleet. Cyprus, Panama, Liberia and Malta are the most utilised flags, representing 3,380 EU owned vessels by
1994
The Greek fleet has 58% of its fleet (2,109 vessels) represented by Open Registries, followed by Germany (53%, 860
vessels), UK (53%, 1,060 vessels) and Belgium (47%, 80 vessels). Countries with the lowest percentage of owner's
fleets flagged to Open Registries are Italy (10%, 82 vessels), Denmark (18%, 151 vessels) and Ireland (19%, 12 vessels)
en
co

994 Ranking of the Open Registries

By number of EU owned vessels
Number of vessels in Open Registries Percentage of Open Registry owned by EU interests
Cyprus
Panama
Malta
j **
Liberia
Bahamas
Antigua
St. Vincent
Honduras
Neth. Antilles
Vanatu
Canary Island
Bermuda
Gibraltar
Lebanon
Belize
Sri Lanka
Tuvalu
Myanmar
Marshall Island
Cayman Island
Mauritius
Cook Island
1183
C
.
1104|
1 ' I
547 C
546 C
5041
369 C
276 C
192 C
105 C
34
301
261
24|
15|
141
11
7
6|
6
5
2
0
1 1 ! 1
^| 76%
Z125%
ZJ36%
ZI 48%
58%
|35%
Z]24%
| ! 1M
12/%
Iur.
141%
j ' f i v .
|11%
I 8%
ZI 38%
| t . ! . " .
| 9%
18%
Z] 25%
Z]18%
0%
1 1 1 I
1400 1200 1000 800 600 400 200 20% 40% 60% 80% 100%
Note: Percentage of fleet refers to cargo carrying fleet
Source: LMIS, 1995
Open Registries: EU Ownership
The five most popular Open Registries have attracted over 500 EU-owned vessels each. The proportion of the Open Registry
represented by EU interests varies considerably
en
en
Cyprus (1183 vessels) and Panama (1104) have, in fact, attracted over 1000 vessels
each
EU interests account for the majority of the Open Registries of Cyprus, Malta and
Antigua
The largest proportion of an Open Registry used by EU shipowners is Gibraltar (98%)
followed by the Canary Islands (90%) and the Netherlands Antilles (88%)
en
CD
Open Registries: EU Owner Distribution
Greece, the UK and Germany provide the bulk of EU owned vessels under Open Registry. For each of these countries,
between 5060% of the owned fleet is under Open Registry
EU Owned Fleet
Greece
UK
Germany
Netherlands
Denmark
Spain
Sweden
France
Italy
Belgium
Finland
Portugal
Austria
Ireland
Luxem bourg
2109
2500 2000
1994 Degree of Flagging to the Open Registries
1060
B60
251
151
130
101
'* m&m
tttty.:r=.. I '* > ^t?vj> '< ~\ se
rî^:'s. iile Mmm ^mî^jîA
53
^wmM^^m^^^
mi
18
KKai &^^ Mfl i Si a
34
82
80
46
19
13
12
0
23

aîiZtLI^S
bit*Ji.iJA4A4iS
26
rmho
$wmm lv:
:
.5'ta^l&.i'i
J
Jj
47
" " * &
21
ktmw&mm*
mm*
^ _ _ 19
1500 1000 500 10% 20% 30% 40% 50% 60%
j | Number of vessels in Open Registries { | % of Fleet In Open Registries
Open Registries: Advantages of using Open Registries
There are several advantages to Open Registries:
Anonymity of Ownership:
- This may enable the shipowner to escape tax liabilities in the country of establishment.
- Potential to avoid responsibility for failure to observe laws relating to safety, environmental protection and labour
conditions.
Economic Factors:
- Utilisation of non-nationals and perhaps lesser known classification societies.
- Freedom to repair vessels anywhere, without being tied to national shipyards.
Political Factors:
- Ability to trade world-wide without any restrictions imposed by the flag state, e.g. by-pass trade embargoes.
- Avoidance of overseas discrimination against vessels trading under certain flags, e.g. Taiwanese operators vessels
invariably flagging out since Taiwan is only recognised as a state by a small number of countries.
- Freedom from requisition in time of conflict.
Vessel registration is low cost, simple and can generally be completed within one day.
The traditional FOCs are accepted by the international lending institutions and the insurance industry does not weight
premiums by flag.
In conjunction with ship registration, many of the FOC states offer attractive corporate jurisdictions including:
- No Government intervention
- Easy transfer of capital
- Tax free environment
- Free circulation of the US dollar
en
vi
en
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Open Registries: FlagSensitive Costs
Crew cost and corporate tax are the most flagsensitive cost categories
Ship operating cost
ICrew cost
Maintenance & Repairs
Stores & Supplies
Lubricating oil
Insurance
Drydocking accrual
Ship management
Capital cost
Voyage cost
Fuel cost
Port dues
Canal dues
Light dues
Tug & pilotage costs
Administration &
management
Sales & commission
General management
Corporate taxes
oM;H3elatd
^ Flexibility ^f

..
bfr'" ji

Crew size, net wages, taxes, social charges, effective working days
Country regulation, age of the vessel
Engine type, ratio port/sea days, crew size
Engine type, maintenance and repair policy
Age, type of the vessel, purchase cost
Classification rules, maintenance and repair policy
Headcount: personnel, recruitment, legal, training, engineering, etc.
Purchase cost, interest rate, terms of the loan
Engine type, speed, # miles
Size/Dimension
Size/Dimension
Size/Dimension
Size/Dimension
Wages, taxes, social charges
Wages, taxes, social charges
Legislation
Note: (1) Requires change in shipowner strategy
Open Registries: Summary of Crew Cost Differences for Ten Vessel Types
Crew cost differences between selected EU flags and lower-cost Open Registry vessels range from $0.1 to $1.2 million per
annum, or +22% to +333% over the lower-cost Open Registry
Crew Cost Gap
EU Flags

Lower cost
Open Registry
(non ITF)
Annual Cost
Difference <*>
(in '000 $)
A
Cost Index m

Tankers
Suezmax (140 000 dwt)
Product tanker (40 000 dwt)
Bulkers
Cape Size (150 000dwt)
Panamax (65 000 dwt)
Handy-size (28 000 dwt)
Container
Large (4 000 TEU)
Line - Haul (2 700 TEU)
Deepsea Feeder (1 500 TEU)
General Cargo
Breakbulk (15 000dwt)
Ro-Ro (6 000 dwt)
Italy
Italy
Italy
Italy
UK
Neth.
Germany
Germany
Germany
Italy
Greece
Greece
Greece
Greece
Greece
Denmark
France
Greece
Greece
Greece
Panama
Panama
Panama
Cyprus
Panama
Panama
Panama
Panama
Cyprus
Panama
1 228
1 192
865
794
472
630
1 144
1 144
1221
587
185
179
155
149
144
380
1 124
91
88
82
368%
370%
313%
304%
227%
279%
433%
433%
383%
265%
140%
141%
138%
137%
139%
208%
427%
126%
122%
123%
(1) Against lower-cost Open Registry
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O)
Open Registries: Drivers of Crew Cost Differences
Differences in number of people on board, nationality of crew and officers, number of days worked, gross wages, social charges
and travel cost differences in crew cost
Example for Suezmax Tanker (140,000 dwt)
Italy
Crew Costs. 1993
Greece Liberia
()
Panama
(2)
Number of Officers Required
Number of Seamen Reauired
14.1
26.6
11.5
21.2
10.8
21.2
10.2
207
European Officer Gross Wage (per Month)
NonEuropean Officer Gross Wage (per Month)
European Seaman Gross Wage (per Month)
NonEuroDean Seaman Gross Waae (Der Month
$2.717
$1,584
$2.041
$521
$2,152
$521
$1,828
$368
Overtime fin % of Gross Wage)
Leave (in % of Gross Wage)
26%
63%
Social Chames naid by emDlover fin % of Gross Waa. 39%
33%
31%
8%
9%
36%
2%
10%
24%
2%
$3.6201 Total Travel Cost (Officers plus Seameni
$4.799 $2.945 5.Q35
Total Cost per Officer
Total Cost per Seaman
$7.209
$4.449
$3.785
$977
$3.424
$977
$2,611
$735
$38.197 I Total Crew Cost per month $140.519 $53.591 $50.346
$1,256 | Total Crew Cost per dav
$1520 $1.762 $1.655
Note : (1) 'Higher F0C means minimum ILO and ITF conditions are met or exceeded (wages, accommodation, etc.)
(2) 'Lower FOC means ILO and ITF standards are not necessarily respected
Sources : Interviews with manning agencies, shipowners, shipowner associations, seafarer unions; Mercer analysis
Open Registries: Corporate Tax Rates
The percentage of corporate tax levied on pre-tax profit of maritime enterprises varies considerably across countries
? Country ^ U ^ ,
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
Cyprus
Liberia
Panama
% Tax on Profit
34.0%
39.0%
25.0%
34.0%
33.3%
27.0%
0.0%
10.0%
52.2%
33.3%
35.0%
10.8%
35.0%
28.0%
33.0%
0.0%
0.0%
0.0%
Comments r
Ordinary corporate rate
If paid in the current accounting year
For international trade operations
Rate specific to shipping operation
Plus $6900 if profit > $138 000
Rate specific to international shipping operation
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Open Registries: Tonnage Tax Systems
Some countries, such as Greece, Cyprus, Liberia and Panama, have adopted a system of tonnage tax. This is a tax based on the
Gross Registered Tonnage or the Net Registered Tonnage of each vessel
fflaWfu&u&SMMGreece
Tax on Gross Registered Tonnage (GRT)
For each GRT:
Up to 10 000 GRT
Between 10 000 and 20 000
In excess of 80 000
$1.2
$1.1
$1.0
$0.9
$0.8
This figure is then multiplied by the relevant factor:
Age of the vessel:
Up to 4 years
Between 5 and 9 years
Over 30 years
0.911
1.634
1.599
1.544
1.170
I
. i , ' i r ;.'
'MmMKmii &wx* &fMamm
For each GRT:
Up to 1 600 GRT $0.26
Between 1 600 and 10 000 $0.16
Between 10 000 and 50 000 $0.06
In excess of 50 000 $0.04
This figure is then multiplied by the relevant factor:
Age of the vessel:
Up to 10 years 0.75
Between 11 and 20 years 1.00
Over 20 years 1 30
tmmmmm^ SVA-. ). ;V, ,
Tax on Net Registered Tonnage (NRT)
$0.40 for each NRT, plus an annual tax of $1 800
i^^^fc:;.Panama : fr ^ ^ I j f c
$0.10 for each GRT, plus an annual tax of $3 500
Open Registries: Summary of Corporate Tax Gap for Ten Vessel Types
Corporate tax differences between the selected EU flag and lower cost FOC vessels range up to $960,000 per annum.
Tankers
Suezmax (140 000 dwt)
Product tanker (40 000 dwt)
Bulkers
Cape Size (150000dwt)
Panamax (65 000 dwt)
Handysize (28 000 dwt)
Container
Large (4 000 TEU)
Line Haul (2 700 TEU)
Deepsea Feeder (1 500 TEU)
General Cargo
Breakbulk (15 000 dwt)
RoRo (6 000 dwt)
EU Flags

Italy
Italy
Italy
Italy
UK
Neth.
Germany
Germany
Germany
Italy

Greece
Greece
Greece
Greece
Greece
Denmark
France
Greece
Greece
Greece
Lower cost
FO
(non ITF)
Panama
Panama
Panama
Cyprus
Panama
Panama
Panama
Panama
Cyprus
Panama
Corporate Tax Gap
A
958.2
494.4
709.1
439.3
202.8
782.1
372.0
253.3
168.1
308.9
Annual Cost
Difference <
1
>
iin '000 $)
i
107.1
38.8
119.5
58.8
27.2
752.8
460.6
29.3
16.3
4.6
(1) Against lowercost FOC
CD

2
7%# i ,
Rag
Cyprus
Liberia
Panama
DIS
NIS
Isle of Mar
=
Registration Costs for an Aframax Tanker
Ownership
Registration in
Relevant Country
$250ID
$1,525(2)
$500 p.a.

1
Initial Annual Fee
Registration
Fee
$6,080 $6,450
$2,500 $12,475
$6,500 $8,365
$81,5300) $7
(6
53
$24,020) $16,084)
$788
,
Other Fees
$40 p.a.
$1,767

$100
Note: (1) Company has a presumed share capital of under $5,000
(2) Foreign maritime entity
(3) Based on secondhand vessel price of $20 million
(4) Combined Maritime Directorate and NIS fees.
(5) It Is assumed the vessel has 27 crew, secondhand value of $20m; 100,000 dwt; 51,000 grt; 25,500 nrt; 1986 year of build
Open Registries: Flag Registration Costs
Registration fees are low in comparison to the value of a vessel
en

Registration fees do not appear to be a primary criteria in choosing a flag
- E.g., the Isle of Man Registry has a one-off registration fee of $788, but has only attracted 117 vessels.
Liberia has a low, fixed registration fee and a relatively high annual fee compared to other Open Registries,
determined on a tonnage basis.
- Cyprus and Panama's initial and annual fees are both determined on the basis of weight and, for an
Aframax tanker, are about 50% below those of Liberia.
The second registers such as DIS and NIS have significantly higher registration fees.
Age Limits and Classification Requirements
Flag
Cyprus
Liberia
Panama
DIS
NIS
Isle of Man
Age limitations of vessels
17, can be increased to 23 years
subject to certain conditions!
1
)
20 years, but can be increased on a
case-by-case basis
None, but over 20 years a special
inspection is required
None*
None*
None*
Nominated Classification Societies
IACS members and the Greek, Romanian
and Cypriot classification societies
IACS members
IACS members and others including
Portuguese, Greek and Yugoslav
classification societies
ABS, BV, GL, DnV, LR, NKK
ABS, BV, GL, DnV, LR
ABS, BV, GL, DnV, LR
Note: (1) Cyprus unlike Liberia or Panama does not use independent surveyors for the vessel inspection prior to registration.
* No age restrictions, "provided the technical standard of the vessel is acceptable*.
IACS (International Association of Classification Societies) membership includes: American Bureau of Shipping (ABS), Bureau Veritas (BV), China Classification Society,
Den Norske Veritas (DnV), Germanischer Lloyd (QL), Korean Register, Nippon Kaiji Kyokai, (NKK), Polish Register, Italian Register, Russian Register.
Open Registries: Age Limits and Classification Requirements
Age Limits and Classification requirements differ by flag
Classification societies can be broadly divided into three:
- The top six: ABS, BV, GL, DnV, LR and NKK are generally perceived as industry leaders, and are often nominated
as only acceptable shortlist by European flag state authorities
- Other members of IACS are regulated by an internal code of ethics and work practices
- Other classification societies e.g., the Greek or former Yugoslav classification societies.
Most OECD National flag registers and the European second registers (e.g. DIS, Isle of Man) use the top six classification
societies. Open Registries generally require IACS membership, plus the option of using "other" classification societies.
- For example the Cyprus flag (with a high proportion of Greek owners) can use the Greek, Cypriot or Romanian
societies.
Survey and repair costs are dependent on the individual vessel, however classification societies do have different
interpretations of convention requirements. Survey costs can be substantial (up to $15,000) as can the repair
requirements.
Most Registries require additional surveys beyond a certain age, but there is no consistent approach
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Open Registries: Shipowner Interviews
We interviewed 20 decision makers in Ship Owning/Managing Organisations with
the following characteristics:
EU based companies
Significant fleet size (more than 10 vessels)
Significant proportion flagged out (generally more than 30% of vessels)
Company
Louis-Dreyfus & Cle
Baum & Co.
Dohle Peler
Schulte Bernard
Thien & Heyenga
Transocean Ship management
Cominos Enterprises
Eastern Med. Maritime
Golden Union Shipping
Good Faith Shipping Co.
Naftomar Shipping
Unlmar Maritime Services
Poseidon Scheepvaartbedrijf
Shell Tankers BV
ICB Shipping
BP
Holbud Ship Management
P&O Bulk Shipping
Shell Tankers
Stephenson Clarke Shipping Ltd
Country
France
Germany
Germany
Germany
Germany
Germany
Greece
Greece
Greece
Greece
Greece
Greece
Netherlands
Netherlands
Sweden
UK
UK
UK
UK
UK
Respondent
Assi. Fleet Manager
Chartering Manager
Registration Manager
Fleet Manager
Director
Inspector
Chartering Manager
Operations Manager
Director
Commercial Manager
Fleet Manager
Head ol Insurance
Broker
Fleet Supply Manager
Marine Sup. Ini.
Marine Super. Int.
Operations Director
Group Manager
Project Economist
Managing Director
Total
Fleet Size % Flagged Out Vessel Types
22
21
21
24
20
40
21
27
25
33
30
26
30
15
14
12
20
11
26
13
4SI
95%
100%
100%
100%
100%
100%
86%
96%
12%
100%
100%
100%
33%
33%
93%
92%
100%
100%
64%
46%
Average 82%
Dry Bulk
Dry Bulk, Container
Container, Dry Bulk
Container, Tanker
Container, Tanker
Tanker, Dry Bulk, Gen. Cargo, Container
Gen. Cargo, Dry Bulk
Dry Bulk, Tanker
Dry Bulk
Gen-Cargo, Dry Bulk Tanker
Tanker
Dry Bulk
Dry Bulk, Container
Tanker
Tanker
Tanker
Dry Bulk
Dry Bulk
Tanker
Gen. Cargo
Owner or Manager
Owner
Manager
Manager
Manager
Owner
Owner
Owner/Manager
Manager
Owner/Manager
Owner/Manager
Manager (part ol Owner Group)
Manager
Manager
Owner
Owner
Owner
Manager
Owner/Manager
Owner
Owner
Note: The sample is broadly representative ot the EU Owned Fleet in terms ol owner nationality, but is not designed to be a statistically representative sample of shipowner segments
due to the small overall sample size
Open Registries: Interview Sample
The flags used by the sample are a good reflection of the full EU fleet
Interview Sample Fleet
Not Flagged Out
18%
451 Vessels
EU Flags
France 4% .êO
e

/
GIS 12%

UK 15%
Netherlands
36%
% of vessels
41
Greece 32%
NonEU Flags
Bermuda 3% t
n e r
s 6%
Kerguelen 3% LJ
Hong Kong 4% A T \ \
Isle of Man 5%
^ v Panama 24%
_^ | % of vessels
Liberia I Z l \ I
12% \ y Z I \ / Cyprus 17%
Antiga 12% *
Malta 16%
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Open Registries: Interview Sample
Dry Bulk and Container Vessels are represented more heavily in the sample than in the full EU fleet
Vessel Types
Interview Sample EU Fleet
General Cargo
13%
Container
14%
Tankers
29%
General
Cargo
55%
Tankers
24%
Dry Bulk 17%
Container 4%
Dry Bulk 44%
Open Registries: Use of Flags
Owners use multiple registries for their vessels but Cyprus, Liberia and Panama are the most popular
Open Registries
EU Flags
No. of Owners
Cyprus [
Liberia
Panama
Antigua
Malta
Bahamas
Hong Kong
Kerguelen
St. Vincent &
Grenadines
Singapore
Isle of Man
Others
Source: Shipow ner/l
6 | _
Manager
4 |
3|
3|
3|
41
2|
21
21
21
Interviews
No. of Vessels
| 52
Z l
4 2
! >''
H
4
1 13
Z U io
|3
I
3
117
~^\22
^ ] 44
~]53
No. of Owners
GIS 4 |
Greece 3 [
UK 3
Netherlands 2
France 2
Italy 11
Sweden 1
No. of Vessels
10
26
|12
3
1
]1
30
- v i
ro
Number and Concentration of Flags Used
5
4-
3-
fJumbers of
Owners
2.
1-
0-
2
- h
5
-+-
5
- h
4
2 2
-t- - h H
1 2 3 4 5 6
Number of Flags Used
70
T
60 --
50- -
Average % 40
of Vessels
for each
Owner
30
20 --
10 -
0
64.1%
2 1 . 5 %
8.9%
,
3
3 %
, 1- 3 % 0. 9%
| |
+
1st
Flag
2nd
Flag
3rd
Flag
4th
Flag
5th
Flag
6th
Flag
Average Number of Flags Used = 3.25
Open Registries: Number and Concentration of Flags Used
Owners/Managers use a mixture of flags for their fleet but generally have a 'preferred flag'
Ship owners/managers use, on average, over three different flags for their fleet
A 'preferred' flag is used for the majority (64%) of the fleet with other flags being used as
alternatives
German owners are more diverse in their use of flags than other nationalities:
- 4.6 flags/owner versus 2.9 for other nationalities
Flags other than the preferred flag are used for historic reasons or in special circumstances:
- Owner's insistence
- Charterer's request
- Trading region reasons
- Building Subsidy requirements
-si

si
Flags Used by Different Nationalities

Number of Vessels
Open Registries EU Flags
Owner Countries/'
Germany
Greece
UK
Netherlands
France
Sweden
Total 90
WMyÂVW^/4
36
14
3
8
61
58
58
44
44 43
17
17 13
11
11

10
m/
1&&AP
</*

O7 OV OW>W
5
5
1
1
2
4
1
2
3
1
2
3
3
3
2
2
1
1
Open Registries EU Flags
Number of Owners
Owner Countries / <?
wm-
Germany
Greece
UK
Netherlands
France
Sweden
Total
Open Registries: Flags Used
Clear patterns of flag usage are evident among different nationalities
Panama, Cyprus and Liberia are used heavily by almost all nationalities
Greek owners/managers make little use of Liberia but heavy use of
Malta in addition to Panama and Cyprus
- Reputedly cheaper than Panama or Cyprus
- No political problems due to status as independent state
UK owners/managers make little use of Cyprus but frequently use Isle
of Man, Hong Kong and Bermuda
- These three flags allow the Red Ensign (UK flag) to be flown
German owners/managers favour Antigua in addition due to:
- Local flag registry office in Germany
- Ability to use national crew licences
->l
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Open Registries: Flag Selection Criteria
When unprompted, cost issues are the key criteria in flag selection, closely followed by union considerations and efficiency
and location of the flag registry
Total Number of Mentions
Unprompted Factors 0
Overall Costs
Crew Costs
Union Considerations
Efficiency/Location of Flag Registry
Owners Choice
Minimum number of Hags
Annual Registration Fees
Customers'/Charterers' Prelerence
Political Factors
Availability ol Crew
National Consciousness ('Flying the Flag')
Banks/Underwriter's Agreement
Others
- t - - 1 ..1
14
14
14

12
12
|2
12
12

13
13
13
Key:
] Factors not in prompted list
Source: Interviews with EU Shipowners/Managers
When prompted, issues relating to crew cost and corporate tax are by far the most important criteria in flag selection
Importance Rating (1-5 scale)*
Prompted Factors 0
Crew costs
Tax and Other Financial Factors
Political Factors
Costs of Compliance
Annual Registration Fees
Union Considerations
Customers'/Charterers' Preference
Corporate Confidentiality
National Consciousness ('Flying lhe Flag')
Building Subsidies
Maintenance & Safety Requirements
Off-Shore Management
Operating Subsidies
Trading Region of World
Choice of Classification Society
' Mean Score ot Respondents weighted by number of vessels
Respondents rated each tactor on a 1-5 scale where 1 is less important and 5 is most important
- J
-si
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co
Comparison of Prompted and Unprompted Responses
Importance
Rating
Scale (1-5)
Number of
Mentions
Key: [ J Prompted Factors | | Unprompted Factors
Unprompted and prompted responses are largely consistent, with the exception of corporate tax
Costs, particularly crew costs, are the key factors in both prompted and
unprompted responses
There are fewer unprompted mentions of corporation tax as a key criteria
than the corresponding prompted importance rating:
- Possibly included in Overall costs' category of unprompted responses
Union consideration given more emphasis in unprompted responses
Efficiency and location of flag registry, together with minimising
administration by reducing the number of flags used, are important
considerations that are not in the prompted list
For managers, the view of the owner is important and may, in some cases,
override the manager's own opinion
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Open Registries: Vessel Characteristics
There appear to be no general relationships between vessel characteristics and flag selection
Ship owners and managers did not suggest a relationship between vessel characteristics (type, size,
age, etc.) and their choice of Open Registry
Additionally, no criteria based on vessel characteristics were identified as influencing the decision of
whether to flag a vessel to an Open Registry or EU flag
Some Open Registries (e.g. Cyprus, Bahamas) restrict the age of vessels than can be registered. Thus
the age of a vessel may actually influence the choice of Open Registry in certain circumstances
Open Registries: Nationality Differences in Flag Selection
There are some differences in flag selection by owners/managers in various EU countries, but these do not override the
general conclusions
By Nationality of Owner/Manager
. ' ' . " " . ' ' . ' . . ' . . " , " I
1
! .
Cost is the key issue (all factors are taken together)
Worldwide recognition of flag is important
For ship managers, owner input is a critical factor in
the flagging decision
l l i i i Wfe,Qe^?|l i Ji i ^^

Trading region is an important factor
Efficiency and location of registry taken into account
Generally consider more factors than other
nationalities
^TWUSS'SI
4l?feifiiifc
;
*
fSBET. :
Bae ' '"
Red ensign on vessels is important (available with
UK, Bermuda, Gibraltar, IOM, HK flags)
Aim to minimise bureaucracy and paperwork
$$Othr*(
Wanting to fly national flag is still a factor, although
overridden by cost considerations
Availability/requirements for subsidies a key
determinant
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Rating of Open Registries
Panama
Cyprus
Antiga
Liberia
Malta
Top 5 Prompted and Unprompted Criteria
~.
wners,
ing Fit
8
4
+ +
+ +
+ +
+ +
+ +

Tax Level
m
* ,
+ *'
~
+ +
+
^
iM
_ _
Very good
Good
Neutral
Poor
Very poor
Source: Shipowner/Manager Interviews, based on qualitative Interpretation of benefits and drawback of Individual flags
Open Registries: Rating of Open Registries
The Top 5 open Registries (Panama, Cyprus, Antigua, Liberia and Malta) are rated very similarly by Owners/Managers
Overall, few differences between the top 5 Open Registries
Specific differences:
- Panama has very low annual costs
- Cyprus has significant political problems with Turkey
but balanced by good union recognition
00

Open Registries: Comments on Open Registries
Specific comments on Open Registries include:
___
y
~
Negative ! .
Cyprus
Liberia
Panama
Antigua
Malta
Positive
;* :
Well organised and efficient "more than just a
mailbox"
Good international reputation
Efficient administration
Privileges in Panama Canal
Can use second flag at same time
Local office in Germany
Can use national licences for crew
Independent state with no political problems
No local office in Germany
Problems with Turkey
Will not register vessels over 17 years old
High registration fees but offset by lower tax
Frequent inspections required
Surveys required every year
Special crew licences required
Higher port charges than other Open
Registries
Will not register out of class vessels
Source: Shipowner/Manager Interviews
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Rating of EU Flags
%$* Union
Rcognition
Greece
i e r s
Inf Flag
JciP
Cstq
K
wj . . . ;;i'/!'<'* . i
^Tax Level r
mm
\':
t Politicare
r,.'Factofs I.
+ + + +
Germany
(International
Register)
4 + = + + =
a
UK
Netherlands
France
3
2
2
+ +
+ +
+ +
M m
't , ' "
+ +
+ +
+ +
WBBSM ESiMll
++
+
=
Very good
Good
Neutral
Poor
Very poor
Source: Shipowner/Manager Interviewe, based on qualitative interpretation of benefits and drawback of specific flags
Open Registries: Rating of EU Flags
EU flags are considered to be significantly less attractive than Open Registries in the areas of crew costs, tax levels and
annual costs
Between EU flags there is greater differentiation than between Open Registries
Greece stands out as the most attractive EU flag, particularly due to
competitive crewing costs and favourable tax treatment for shipping companies
based on a tonnage tax rather than a corporate tax rate
The German International Register is viewed as favourable in terms of crewing
costs but this is offset by union recognition issues
UK, Netherlands and France are viewed as similar and considered to be
expensive for all factors; Netherlands particularly so for annual costs
00
--
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CD
Open Registries: Comments on EU Flags
While EU flags are seen to be expensive, they do provide some secondary benefits
Netherlands
Greece
UK
Germany
(International Register)
France
MMU
[Positive W f t
Building & operating subsidies available
Often the charterer's or owner's preference
Discount repairs in Greece
Lower insurance costs than Open Registries
Union approval
Able to fly UK flag
Building subsidies available
Crewing flexibility
Good safety record
Very expensive
Lack of availability of Greek officers
Expensive for all factors (crew, annual fees,
certification etc.)
Bureaucratic and inflexible in interpretation of
maintenance ol safety requirements
ITF threatening to classify as FOC
More expensive than Open Registries
Expensive
Open Registries: International Secondary Registers
International Secondary Registers are unlikely to be used by non-nationals in preference to a traditional Open Registry
GIS is considered to be the same as the full German flag by German
companies but with commercially viable costs
International secondary registers viewed as not applicable or not available
to non-nationals
Few advantages perceived of ISR's over traditional Open Registries, except
the ability to fly the national flag - rarely an important factor, particularly for
non-nationals
Viewed as more expensive than traditional Open Registries
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Decision Process
Who manages
decision process?
> V . :
Managing Director
Finance Director
Operations Manager
Fleet Manager
Other
' : : M^f ^.^ r
' Shipowners!?
'
0%
0%
0%
17%
] S3*
BIB^KSPP]
78%
8%
8%
8%
0%
Who signsoff the
decision?
Owner
Board
Managing Director
Charterer
o%
o%
8%
7%
92% J 42%
8%
0%
Who Is consulted
to help make
decision?
Lawyers
Bank
Charterer
Manning Agency
Classification Society
Owners Club
No one
25%
25%
17%
U 17%
0%
50%
42%
33%
17%
0%
8%
8%
50%
Note: Percentages do not necessarily sum to 100% due to multiple answers
Open Registries: Decision Process
Flag selection for both owners and managers is a high level decision, involving top management and outside specialists
The selection of a flag for a vessel is a high level decision usually
requiring sign-off by the board level
A number of outside specialists provide input for the decision, most
commonly lawyers or bankers
In the case of ship managers, the decision will usually have to be
agreed on by the owner
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Timing and Scope of Decisions
~-r-* - r^
1
:
Shipowners
lr' ''''y^&.&V&Wk
Ship Managers f | |
PTTf
F T ]
When is flag
selection made?
Vessel acquisition
If change in circumstances (flag
regulations or company situation)
Every X years
Continuous monitoring
When building subsidy rules
expire
No specific occasions
83%
33%
8%
8%
8%
0%
67%
42%
17%
8%
8%
8%
For how many
vessels at a time is
the decision made?
Each vessel individually
Whole fleet
Certain type, age or weight groups
58%
33%
75%
33%
17% 8%
Open Registries: Timing of Scope of Decisions
Flag selection is generally an up-front decision made on a vessel-by-vessel basis
Flag selection is usually made at vessel acquisition
Changes may be made in reaction to changes in flag characteristics
and availability, vessel related factors, or company situation
The decision is generally made on a vessel-by-vessel basis, with
owners having a greater tendency to make fleet or vessel-group
based decision
For ship managers, the choice of flag is often part of the proposal to
the owner to manage the vessel
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f
information Sources
^^m^^m':-^
;$m^
nse
m

^Shi powners' ^| ^| Shi p Managers^
Where do you get
information about
potential flags?
Experience
Flag Registries
Other National Owners
Lawyers
Consulate/High Commission
Banks/Insurers
Manning Agency
Other nonnational owners
Local Flag registry offices
Shipping Publications
8%
17%
8%
17%
17%
8%
8%
33%
83%
67%
25%
25%
8%
17%
0%
0%
0%
0%
75%
50%
Open Registries: Information Sources
Flag decisions are generally experience driven
Ship owners and managers rely very much on
experience when making flagging decisions
Multiple sources of information are often used
CD
1

Active Marketing by Flags
Number of Mentions of Active Selling
Flag
Vanuatu
Malta

Bahamas
Cyrpus
Cayman Islanda
Panama
Liberia
Isle of Man
.
Greece
Belize

St. Vincent
Glbralta

Mauritius

Netherlands Antlllies
) 1 2 3 4 !
14
12
13
I*
5
5
Key:
1 Mentioned as having
Active Sales Force
Source: Shipowner/manager Interviews
Open Registries: Active Marketing by Flags
Open Registries are actively marketing themselves through brochures and sales forces
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Many Open Registries have an active sales policy, predominantly based on
brochure mailings
Bahamas, Mauritius and Cayman Islands are named as having active sales
forces making telephone or direct contact
Greece is the only EU flag mentioned as actively marketing itself
The largest open registries (Panama, Liberia, Cyprus) are estimated to have
annual incomes of $10-$20 million, and are run as commercial undertakings
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Crewing Policies for FlaggedOut Vessels
^W
J ^Managers

^0thr^0ffi^sr8|^
?!$ Ownsrs
P9

^Cre'
J0wnerii\*
National
Other EU
Filipino
Polish
Indian
Eastern European
Other
Unknown/Refused
4%
0%
0%
8%
0%
2%
17%
68% 54%
3%
0%
2%
13%
8%
5%
17%
53%
6%
8%
]
]
10%
0%
]
6%
8%
39%
3%
D
8%
0%
13%
8%
5%
25%
0%
0%
10%
0%
0%
0%
0%
52%
30%
8%
42%
:
13%
8%
]
9%
12%
17%
Open Registries: Crewing Policies
On flagged-out vessels, national officers are frequently retained but non-EU crew are used
CD
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Flagged out vessels mostly have officers of the owner country
nationality
Use of nationals from other EU countries, either officers or crew, is very
limited
Filipino crew are the most commonly used
Polish, Indian and East European officers and crew are also used to a
moderate extent
Most owners/managers avoid using A/B of EU countries
o
o
Open Registries: Mixing Crew Nationalities
Ship Crews on flagged-out vessels are largely kept to a maximum of two nationalities on any one vessel
15
10 --
Number of
Owners/Managers
/
15
+
<-
a
S
J
85% of owners/managers employ a maximum of
two different nationalities on board any one vessel
55% of owners/managers employ mainly national
officers and single nationality, non-EU crew
Open Registries: Summary
Open Registries and Second Registries in Europe comprise over half of world fleet tonnage
Greek, UK and German owners have flagged over half of their vessels to Open Registries;
these three countries account for the bulk of European entries into Open Registries
The top 6 Open Registries have attracted over 5,000 EU-owned vessels
- This corresponds to 85 percent of all EU-owned vessels under Open Registry
- Cyprus and Panama have attracted over one thousand EU-owned vessels each (together
they account for 46 percent of all EU-owned vessels under Open Registry)
- EU-owned vessels account for 40 percent of the total fleet under Open Registry
There are several advantages to Open Registries, including anonymity of ownership, economic
factors, political factors and ease of doing business
- In addition, the concept of Open Registries is fully accepted by the international banking and
insurance industries
From a cost perspective crew cost and corporate tax are the most flag-sensitive cost categories.
Flagging out may result in significant cost savings in both categories depending on vessel
type/size and flag:
- Crew cost differences between EU flags and lower-cost Open Registry vessels may be up to
$1.2 million per annum, or up to three times the cost under Open Registry
- Depending on assumptions made on average profitability and required rates of return,
corporate tax differences may be several hundreds of thousands of dollars per annum for
larger vessels in high-tax EU countries
o
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Open Registries: Summary (continued)
Owners and managers typically use multiple flags; their home flag and a preferred Open
Registry, with further flags used for specific reasons (e.g. a charterer request, building subsidy
schemes)
Issues relating to crew cost and corporate tax are by far the most important criteria in flag
selection
EU flags are considered to be significantly less attractive than Open Registries in the areas of
crew costs, tax levels and annual costs
International Secondary Registers are unlikely to be used by non-nationals in preference to a
traditional Open Registry
Flag selection is a high-level decision, involving top management and outside specialists
- For ship managers, the choice of flag is often part of the proposal to the owner to manage
the vessel
Open Registries are actively marketing themselves through brochures and sales forces
Flagged-out vessels are usually manned by officers from the owner's country, but staffed with
non-EU crew
Most flagged-out vessels limit the crew (officers and A/B) to two nationalities
"Substandard" or "H igh Risk"
Vessels
fc^ Parameters for Definition of "Substandard"
or "H igh Risk" Vessels
Correlation between Risk and Vessel Characteristics
("Risk Factors")
o

H igh Risk Vessels: Introduction
The objective of this section of the report is to arrive at a workable definition of "substandard" vessels (the team
prefers to think about "high risk" vessels)
To this end we first present feedback from interviews with industry experts
Then we present the approach and findings of a very exhaustive and sophisticated statistical analysis performed
on over 40,000 vessels and linking casualty information with vessel characteristics
At the end of this section we propose a definition for "substandard" vessels
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H igh Risk Vessels: Introduction

As part of the analysis, we contacted a series of industry experts
To undertake this remit the study team has contacted eight individual Port State Control Agencies (PSC)
in the following countries:
- UK, Marine Safety Agency
- Germany, Bundesministerium fur Verkehr
- Sweden, Maritime Safety Inspectorate
- Spain, Maritime Authority
- Denmark, Maritime Authority
- Norway, Maritime Directorate
- USA, U.S. Coast Guard
- Australia, Maritime Safety Authority
Furthermore, we have consulted with various industry experts, including the MOU, IMO, Classification
Societies, and ILU.
High Risk Vessels: Definitional Problems
Half of the Port State Control agencies we interviewed reported they do have a set definition for a substandard vessel; the other
half suggested there is a need for greater flexibility in the definition to cover all circumstances
Most definitions for a substandard vessel are based on compliance with the statutory requirements laid down by the IMO
(International Maritime Organisation) and the ILO (International Labour Organisation).
Most European PSC's follow the Paris MOU in complying with the following "relevant instruments":
- International Convention on Load Lines, 1966;
- Protocol of 1988 relating to the International Convention on Load Lines, 1966;
- International Convention for the Safety of Life at Sea, 1974, as amended;
- Protocol of 1978 relating to the International Convention for the Safety of Life at Sea, 1974;
- Protocol of 1988 relating to the International Convention for the Safety of Life at Sea, 1974.
- International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1987
- International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1987;
- International Regulations for Preventing Collisions at Sea, 1972, as amended;
- Merchant Shipping (Minimum Standards) Convention, 1976 (ILO Convention No. 147)
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Substandard Vessels: Definitions from Major Industry Participants
There is no internationally agreed definition of "substandard vessel'
IMO
U.S. Coast Guard
Australian Maritime
Safety Authority
Paris MOU(1)
Most Individual
European PSC's
Sweden and UK
PSC
Do not have a definition for a substandard vessel
- Have established a Working Group ("Flag Implementation"); a discussion paper was submitted in
April 1995 by the USCG which-is currently under discussion and has not been made public
"A substandard vessels one whose hull, crew, machinery or lifesaving, fire fighting and pollution -
prevention equipment are substantially below the standards required by US Law or international
conventions".
"A vessel is deemed not seaworthy unless it is in a fit state as to condition of hull and equipment, boilers
and machinery, stowage, number and qualification of crew to encounter the ordinary perils of the
voyage".
"A substandard vessel may be seaworthy but conditions on board the ship are clearly hazardous to
safety and health".
"A substandard vessel is a vessel which has deficiencies stemming from insufficient maintenance or
caused by negligence or by not complying with the standards laid down in the relevant instruments".
(This definition is in the process of being reviewed).
Generally adopt the Paris MOU definition.
"A substandard vessel is one which is unsafe to go to sea at that time".
Note: (1) Paris MOU - Paris Memorandum ol Understanding, is an international agreement between lhe marilime authorities ol 16 mainly European countries. It includes all EU
member stales apart from Luxembourg. The aim of the Paris MOU is to eradicate the operation ol substandard stiips In their ports, through a harmonised system of port
state control.
High Risk Vessels: Definitional Problems
There are shortcomings to the present set of definitions for "substandard vessels"
The main weaknesses of the substandard definitions are:
- In reality, situations are not "black and white" and that flexibility should be built into the definition. This is the logic behind
the UK and Swedish PSC definition which is meant to cover all eventualities
- Most industry definitions only cover the physical characteristics of the vessel and only now are definitions (from the U.S.
Coast Guard and Australian Maritime Authority) becoming more comprehensive to cover the crew and the operations of
the vessel
- None of the current definitions include either onshore administrative structures or the acceptance of accountability.
Responsibility and accountability for a vessel is only now being identified as a key issue, which will be covered in the
forthcoming ISM code
The International Safety Management (ISM) Code, adopted unanimously by the IMO as a recommendation, will become
mandatory no later than June 1998, with a draft directive forseen to be implemented in 1996 with the objectives to provide:
- Safe practices in ship operation
- A safe working environment for personnel
- Plans for emergency preparedness
- Defined levels of authority, accountability and effective lines of communication amongst ship and shore based personnnel
o
CD
Paris MOU Member State Inspection Activity
Ship Types
Number of vessel inspections:
Number of deficiencies:
- Ratio of deficiencies/inspections
Number of vessel detentions:
- As percent of inspections
% of individual vessels involved:
1991
13,955
22,623
1.6
448
3.2%
4.48%
1992
14,379
25,930
1.8
525
3.7%
5.20%
1993
14,783
27,136
1.8
588
4.0%
5.62%
1994
17,294
43,071
2.5
926
5.4%
8.23%
CAGR
7.4%
23.9%
N/A
27.4%
N/A
N/A
N/A = Not Applicable
Source: Paris MOU, Annual Report 1993
H igh Risk Vessels: Inspection Activity
Inspection activity suggests there are considerable shortcomings in present-day seagoing vessel operations
During 1993,17,294 inspections were carried out on 11,252 vessels which were registered in 111 different flag states.
According to the MOU, this represented 26% of all foreign vessels which called at MOU ports ( port calls).
In 1993, deficiencies have increased by 59% over 1992 levels to 43,000. The 1993 deficiency rate (representing the ratio
between the number of deficiencies and number of individual vessels involved) was 3.8%. This compares to 2.6% for
1992 and 1991, suggesting more deficiencies per vessels were identified in 1993. The most common deficiencies are:
- Life saving appliances (24% of all deficiencies)
- Fire fighting appliances (17%)
- Safety in general (13%)
- Navigational equipment (12%)
Vessels are only detained if they are considered "unsafe to go to sea for that voyage". The MOU attributes the marked
increase to 926 detained vessels for 1993 (58% above 1992 levels) to:
- Further deterioration of the global fleet
- Better targeting by the various PSCs
- Higher standards imposed by the PSCs
ro
High Risk Vessels: Background
The Study Team undertook an extensive multiple-regression analysis to arrive at a definition of "substandard" vessels
There is no widely agreed definition of a "substandard vessel" so one has to be constructed
before we can quantify the extent of the problem'
We recognise that non-asset related factors (crew competency, owner policies, communication
procedures) may be at least as important as vessel-related factors, but we wanted to check on
statistically relevant linkages between "risk" and " hard" vessel characteristics, if any
There is considerable "one-dimensional" evidence that readily identifiable vessel characteristics
may help identify higher risk vessels
- Various market participants publish data linking either flag, age, classification society or vessel
type to loss or detention
- No ownership or non-asset related factors are measured
We needed to think through options that go beyond "one-dimensional" approaches, and therefore
performed multiple regression analysis on a set of fleet and casualty data
- Flag/age/type/size/class/owner combinations
H igh Risk Vessels: Objectives
The multiple-regression analysis had the following objectives:
To determine whether 'high-risk vessels' can be identified on the basis of vessel
characteristics
To develop a definition of 'high-risk' vessels based on vessel characteristics
To explain the importance of the different vessel characteristics (e.g., Flag,
Vessel Type, etc.) in determining the 'riskiness' of a particular vessel and identify
high-risk characteristic combinations
To examine the risk profile of the European owned/flagged fleet vs. the rest of
the world fleet, and identify differences between the European owned & flagged
fleets

High Risk Vessels: Approach
The characteristics and casualty record of over 40,000 vessels were analysed In a multiple regression model
The characteristics of 43,400 vessels have been examined and related to
3,800 casualty incidents reported between 1990 and 1994
A multiple regression model based on six key vessel characteristics has
been constructed
The importance of each characteristic in determining risk has been identified
A definition of high-risk vessels has been developed based on the analysis
High Risk Vessels: Casualty Definition
Both total losses and serious incidents are included in the definition of a casualty
Total losses: vessels which ceased to exist as a result of the casualty due to:
- Being irrecoverable or sunk
- Being broken up after the casualty
Serious incidents:
- Structural damage making the vessel unseaworthy
- Breakdown
- Declared 'total losses' undergoing repairs
- Other situations resulting in serious financial loss
Source: Lloyds Maritime Casualty Return
1
CD
Casualty Data Coverage
Coverage Map - by Oceanic Region
Information available to Lloyd's from
Lloyd's Reporting Network (over 2000
sites) which includes Agents, Coast
Guards, Port Authorities, Insurance
Market & International Salvage
Association (until March 1994)
Serious casualties and total losses
reported for all vessels
Non-serious casualties reported for
tankers only (not included in analysis)
Approximately 2,000 casualty incidents
are reported per year I I A / MI of high cover
Arn ol medium covar
I I A I M ol low covtiig
Note:The coverage regions shown are based on information from Lloyd's Register. No further information, such as a geographical index of coverage, is currently available
High Risk Vessels: Casualty Data Coverage
The European focus of the study and detailed level of analysis required implies that both total loss and serious
casualties should be included in the dataset
Total loss casualties are significant events in the maritime industry which are
unlikely to be missed by the Lloyds Reporting Network
Lloyds Register has a team of investigators continually verifying the integrity of the
Lloyds database. Any possible unreported total losses are likely to be picked up
through this process
Serious casualties may be under reported in areas of low coverage by the Lloyds
Reporting Network. However top level analysis of casualty data indicates that total
loss and serious casualties are largely consistent in terms of owner nationality
This study is focused on the European owned fleet. Hence the casualty data
coverage is medium or high in key areas of interest for the analysis. However
comparisons between European and non European vessels should be treated with
caution due to potential geographic differences in operating regions
In order to have sufficient data for the detailed level of analysis of this study, both
total loss and serious casualties have been included
CD
High Risk Vessels: Methodology
The methodology required the manipulation, transformation and transfer of large amounts of data across different analysis
environments
Define
Modelling
Approach
Modelling technique
- Linear probability
model
- Logit model
Select platform
Define output
format
Define
Data
Needs and
Build
Dataset
Determine dataset
- Casualty data
- Past vessel data
- Current vessel
data
Select variables
Determine time
period
Prepare
Data and
Computer
System
Integrate vessel
and casualty
databases
Select cargo
carrying vessels
over 100 grt. only
Define categories
for each variable
Code vessels
according to
variable categories
Construct
Model
Set-up regression
analysis linking
casualty profile to 6
major variables
(Flag, Type, Age,
Size, Classification
Society, Owner)
Build model
Build in diagnostics
Run tests to
validate model
Examine
Output
Overall correlation
coefficient
Variable
coefficients
Predicted vs. Actual
results
Partial correlations
Define
and
Optimise
Model
Remove non-
significant
variables
Redeline categories
lor variable
High Risk Vessels: Analysis Steps
The preparation and transformation of data were critical steps in the analysis.
LM1S
Vessel
Database
1993
vessel
data
83,100 vessels
LMIS
Casualty
Database
1990-1994
casualty
data
8,200 vessels
Vessels
with no
casualty
reported
78,000 vessels
Vessels
already In
casualty
data
5,100 vessels
Serious
and total
loss
casualties
4,800 vessels
Non-
serious
casualties
Cargo
carrying
vessels
>100grt
39,600 vessels
Non-cargo
carrying
vessels and
vessels
<100 grt
38,400 vessels
Cargo
carrying
vessels
>100 grt
3,800 vessels
Non-cargo
carrying
vessels and
vessels
<100 grt
Combination
of all cargo
carrying
vessels over
100grt without
(39,600) and
with (3,800) a
casualty in the
last five years
43,400 vessels
Combinations
of 6 key vessel
characteristics
(Flag, type,
age, size,
classification
society,
owner)
4,608 combinations
Combinations
containing >50
vessels
Input into
Regression
Analysis
186 retained
combinations
3,400 vessels 1,000 vessels
CD
ro
o
Vessel Categorisation
Key Vessel Characteristics
Flag
Owner
Vessel Type
Date of Build
Size (GRT)
Classification
Society
+
Categories for each
Characteristics
Flag categories
- Based on casualty profile
of each flag
Owner categories
- Based on casualty profile
of each owner nationality
Type categories*
(tanker, bulk, container,
general cargo)
Age categories
(0-10 years, 10-25,25+)
Size categories
(0-200 GRT, 200-600, 600-
4000, 4000-t-)
Classification society
categories
(top 6\ other IACS
2
, non-
IACS)

Category Combinations
Representing combinations
of Flag, Owner, Type, Age,
Weight and Classification
society
- No vessel specificity
Ordered by number of
vessels
Combinations with fewer
than 50 vessels excluded
from model (=6516 vessels,
15% of fleet)
43,400 Vessels 186 Retained Combinations
' Eventually removed as a non-significant variable
(1 ) American Bureau of Shipping; Bureau Veritas; Germanischer Lloyd; Lloyds' Register; Nippon Kaijc Kyokac; Norske Veritas
(2) Korean Register; Polski Register; Registro Cubana de Buques; Registro Italiano Navale; Register of Shipping In the USSR; Register of Shipping of Peoples Republic of China
High Risk Vessels: Vessel Categorisation
43,400 vessels were transformed into 186 combinations of vessel characteristics

Six key vessel characteristics were identified
Each characteristic was split into a number of categories, either based on a logical division
of the fleet or a numeric division of the fleet
e.g. Type logical split into Tankers, Bulk, Container, General Cargo
Type numerical split into 4 size categories with equal
number of vessels in each
For all possible combinations of the various categories, the number of vessels and number
of casualties within the combination was computed
Combinations containing fewer than 50 vessels were then excluded
ro
ro
ro
Casualty Database Structure
Vessel Number
(LR Number)
5009518
3815
records
^
Casualty Database
Incident
Number
9232026
Incident
Date
07/11/92
Serious (S)
or Total (T)
Casualty
Number
Killed/Missing
H igh Risk Vessels: Regression Analysis
The multiple regression analysis is able to quantify the relationship between the vessel characteristics and the casualty risk
Combinations containing more than 50 vessels were retained
For each retained combination the risk indicator is computed as the
proportion of vessels having experienced a casualty
A 'logit transformation' is then applied to the risk indicator
The logit transformation takes the form:
/ " Risk Indicator " \
9 e
VJ - Risk Indicatory
It is a statistical technique for improving the fit of regression model which
predict a yes or no outcome (i.e. casualty or no casualty)
The multiple regression is run with the logit transformation as the explained
variable and the 0/1 codes representing the category combinations, as the
explaining variables
ro

ro
Flag Categorisation
Non-casualty
and Casualty
Vessels
Flag database - alphabetical order
r
231
flags
<
K
Casualties
Total Fleet
Sort on Risk
Indicator
(high to low)
Flags - Risk Indicator order
Flag
Code
ABB
ABU
AGL
AJM
AU
ALB
ALG
ARG

Country
Antigua & Barb.
U.A.E. (ABU DH)
Anguilla
U.A.E. (Ajman)
Angola
Albania
Algeria
Argentina

Non-
Casualty
Vessels
311
43
8
9
26
18
78
68

Casualty
Vessels
60
1
2
3
3
2
4
6

Total
Fleet
371
44
10
12
29
20
82
74

Risk
Indicator
0.162
0.023
0.200
0.250
0.103
0.100
0.049
0.081

Flag
Code

SLI
MAI
SYR
PAN
GHA
SIE

Risk
Indicator

0.115
0.114
0.114
0.111
0.111
0.111

Cumulative
% of Fleet

20.7%
20.8%
21.1%
31.1%
31.1%
31.1%

Categorise
into 6 classes,
each equal in
fleet size (1/6
of fleet each)
H igh Risk Vessels: Flag Categorisation
231 flags were transformed into 6 flag categories according to a "risk indicator"
For each flag the number of vessels was counted and divided between those
experiencing a casualty and those not experiencing a casualty
For each flag a risk indicator was computed, equal to the proportion of all
vessels in that fleet experiencing a casualty
The 231 flags were then sorted in decreasing order of risk indicator
The cumulative percentage of the world fleet was then calculated against
each flag, in order to divide the fleet (in terms of number of vessels) into 6
equal categories
Each vessel was then coded according to the category that its flag was in (1
to 6)
ro

ro
en
Structure of the Regression Analysis
6 variables
with multiple
categories per j
variable
186 Records
(retained ^
combinations)
Flag variable
represented by
6 flag
categories
Age variable
represented by 4
categories
- 0-5 yrs.
- 5-15 yrs.
- 15-25 yrs.
- 25+yrs.
Rag
F1 F2 F3 F4 F5
tf
Size variable
represented by
4 categories
- 0-5 yra.
- 5-15 yra.
- 15-25 yrs.
- 25+yre.
1 0 0 0 0
0 1 0 0 0
0 1 0 0 0
Dass. Society
variable
represented by 3
categories
- top 6 societies
- other lACs
members
- Non lACs
member
Age
A1 A2 A3
0 1 0
0 0 1
0 0 0
Size
W1 W2 W3
^
' Owner nationality
variable
represented by 4
owner
categories
0 0 0
0 0 0
0 0 1
Class.
Society
C1 C2
1 0
1 0
0 0
Type variable
represented by
4 vessel types
- Tanker
- Bulker
- Container
- General Cargo
Owners
01 02 03
1 0 0
0 0 0
0 0 1
-
Risk indicator
represents the
%ol
casualties (or
the particular
combination ol
characteristics
'Logit Model'
transformation ol
risk Indicator,
which improves
the 'tit' of the
regression model
Typ
01 02 03
0 1 0
0 0 1
0 0 1
Risk
Indicator

A 7C
if I /
0.203
0.067
0.014
Log
e
(
P
/1-P)
-1.370
-2.639
-4.277
Results of Regression
Quantification of relationship
between explaining and
explained variables (i.e.,
between the combinations
of vessel characteristics and
their casualty risk indicator
Indication of 'robustness'
and 'fit' (i.e., how well do the
explaining variables predict
the casualty risk profile)
v_

Explaining variables representing
4,608 possible combinations
J
Regression
Technique
High Risk Vessels: Regression Analysis
The multiple regression analysis is able to quantify the relationship between the vessel characteristics and the casualty risk
Combinations containing more than 50 vessels were retained
For each retained combination the risk indicator is computed as the
proportion of vessels having experienced a casualty
A 'logit transformation' is then applied to the risk indicator
The logit transformation takes the form:
f~ Risk Indicator " \
9 e
V j - Risk Indicatory
It is a statistical technique for improving the fit of regression model which
predict a yes or no outcome (i.e. casualty or no casualty)
The multiple regression is run with the logit transformation as the explained
variable and the 0/1 codes representing the category combinations, as the
explaining variables
ro
High Risk Vessels: Factors Influencing the Regression Analysis
The Study Team examined factors that might influence the regression analysis, and concluded that the "fit" of the model
and the model diagnostics would serve as sufficient warning signs. Some discretion in the interpretation of results is
required, nevertheless
Are all explaining variables included (e.g. training days/crew
member, maintenance & repair schedule)?
Are we approaching the analysis from an appropriate
perspective? (e.g. voyage basis rather than vessel basis,
including assessment of weather conditions)?
Is the coverage of casualty reports geographically uniform?
Is there overlap of explaining variables?
Is there sufficient data?
Are the variable categories appropriate?
Reduced explanatory power of model if key variables are
missing
- No "human" or circumstantial factor included
- "Fif of the model will reveal to what extent these factors are
important
Poor predictive model and reduced explanatory power if
perspective inappropriate
Biased sample of casualty reports world lead to distortion of
geographic risk level
No impact as model implicitly copes with overlap. However,
careful interpretation of model output is required
Inadequate explanatory or predictive power of model if data
set insufficient
Reduced explanatory power of model and poor practical
applicability if categories are inappropriate
ro
CD
o
Regression Model Fit
Graph of Actual Proportion of Casualties vs. Predicted Proportion of Casualties
40%
35%
30%
Predicted
Casualty
Proportion
25%
20%
15%
10%
5%
0%
Overall R
2
= 0.721
o%
5% 10% 15% 20% 25% 30% 35% 40%
Actual Casualty Proportion
Source: LMIS Vessel and Casualty Databases, Regression Model, Mercer Analysis
H igh Risk Vessels: Model Fit
The regression analysis indicates that vessel characteristics can be used to construct a workable definition of high risk
vessels
A version of the model explains 72.1% of the variation in the risk level of different combinations of
vessel characteristics
The 'risk level' of a vessel can be defined in terms of the combination of its characteristics:
- Flag nationality
- Size (GRT)
- Age
- Owner nationality
- Classification society
The 'risk level' represents the proportion of vessels with the same combination of vessel
characteristics that have experienced a total loss or serious casualty within a 5 year period
It can be concluded from the good model fit that a workable definition of high-risk vessels can be
developed on the basis of vessel characteristics
"Sub-standard" or "High Risk" vessels can be defined as those which have a risk level above a
certain threshold

ro
Risk Profile of World Fleet
Risk Level
35%
H igh Risk J 25%
(Substandard)'S
12.2% V
Medium Risk <
60%
Cumulative % of world fleet

Source: Lloyds Vessel & Casualty Databases, Regression Model, Mercer Analysis
H igh Risk Vessels: Profile of World Fleet
The world fleet can be divided into 3 groups according to the risk level of the combination of vessel characteristics. For the
purpose of this study we define the high-risk portion of the world fleet as "substandard"
The points on the chart represent combinations of vessel characteristics
The slope of the graph suggests that the world fleet can be divided approximately into thirds
High risk vessels are defined as those falling into category combinations with a risk level above
12.2%, which implies that 29.4% of the world fleet is high risk
- For the purpose of this study we define this portion of the world fleet as "substandard"
Medium risk vessels are defined as those falling into category combinations with a risk level
between 3% and 12.2%, which implies that 37.3% of the world fleet is medium risk
Low risk vessels have a risk level of below 3%, and account for 33.3% of the world fleet

"Substandard" or "H igh Risk"
Vessels
Parameters for Definition of "Substandard"
or "H igh Risk" Vessels
a^ Correlation between Risk and Vessel Characteristics
("Risk Factors")

en

Risk Factors: Introduction
This section has two major objectives:
To determine the correlation between "risk" on the one hand and vessel characteristics on the other hand (flag,
owner, age,...)
To assess the relative "risk performance" of EU owned and flagged fleets
Therefore, this section contains the results of two major analyses:
An examination of model output to review the linkages between risk and vessel characteristics
A detailed mapping of actual casualty data, comparing EU owned and flagged fleets to world averages (including
details on relative performance by individual EU countries)
Risk Factors: Review of Model Output
We constructed three separate model runs
Initially a model containing six vessel variables (flag, age, size, type, owner, and classification society) was
constructed
- the variable "type" was found to be insignificant in explaining casualty risk and was excluded from further
analysis
Next, a five-variable model was constructed
- The overall "fit" improved
- The relative order of importance of the (remaining) five variables was unchanged from the order found in the
six-variable model
Finally, we constructed a five-variable model only taking into account larger vessel sizes
- This greatly reduced the sample size, but focussed the analysis on the most "commercially relevant" vessels
- The overall "fit" declined somewhat
- The order of the five variables also changed which is not surprising since we restricted the sample data in a
non-random way (i.e. left out smaller vessels only)

-si

CD
Variation in the
level of risk
between
different
characteristic
combinations
Six-Variable Analysis - Importance of Variables
Flag, Size and Age explain
y 58.4% of the variation in the level
of risk
Classification
Society
3.5%
Type
0.3%
" \
Total variation
in level of risk
All variables
included in model
y explain 66.9% of the
variation in the level
of risk
Others
% variation
explained by
variable alone
Rag
40.7%
Size
20.8%
Age
6.9%
Owner
31.9%
Classification
Society
29.1%
Type
0.4%
Risk Factors: Six-Variable Model
In the six-variable model the variable "Type" is shown to be non-significant, enabling the model to be simplified to five
variables
The six-variable analysis indicates that flag, size and age are the three key
explanatory variables
Vessel Type is shown to be a non-significant variable and so was removed
from the analysis
Although owner nationality is a strong explanatory variable when used on
its own, once flag has been included in the analysis, it adds relatively little
additional power to the model. This is an indication of a large degree of
overlap between Flag and Owner
33% of the variation is unexplained by the variables included in the
analysis
CO
CD
O
Variation in the
level of risk
between
different
characteristic
combinations
100%
Total variation
in level of risk
Five-Variable Analysis - Importance of Variables
All variables
included in model
y explain 72.1% of the
variation in the level
of risk
% variation
explained by
variable alone
Rag
50.9%
Size
21.7%
Age
5.6%
Owner
29.3%
Classification
Society
24.5%
Source: LMIS Vessel & Casualty Databases, Regression Model, Mercer analysis
Risk Factors: five-Variable Model
Flag, size and age are the key variables in explaining risk

Reducing the number of variables to five improves the overall explanatory power of
the model
With all five variables (Flag, Size, Age, Owner Nationality of Classification Society) the
model explains 72.1% of the variation in risk level
The top three variables are Flag, Size and Age which together explain 66.0% of the
variation in risk level
The results have been interpreted by ordering the explaining variables in terms of
their extra explanatory power. The explaining power allocated to each variable is the
additional percentage explanation achieved by the addition of that variable
There is a large degree of overlap in explanatory power between Owner Nationality
and Flag, and between Classification Society and Flag. This means that little
additional explanatory power is achieved by adding either of these variables once
Flag has been taken into account
Risk Factors: Overlap of Variables
The five explaining variables (Flag, Size, Owner, Age, Classification Society) overlap
in their ability to explain casualty risk
The regression model explicitly recognises this overlap and is able to quantify it
The degree of overlap between various combinations of variables can be represented
as a percentage.
Explanatory Power
of Variable 1
Explanatory Power
ol Variable 2
Vi
v
2
* * .
v
////
/7

Overlap % = (V
t
+ V
2
) V
12
V
1 +
V
2
x 2
y
r"i2 Combined explanatory
power ol both variables
J
0%
t
Flag +
Age
12%

Age +
Size
20%
32.8%
t
Flag +
Size
40%
| 42.4%
t
Flag +
Class Soc.
60%
57.3%
t
Size +
Class Soc.
80%
77.0%
t
Flag +
Owner
100%

Variation in the
level of risk
between different
characteristic
combinations
100%
Total Variation
in level of risk
Large Vessel Analysis (5,000 - 250,000 GRT)
Owner
All variables included
in model explain
58.7% the variation
in the level of risk
% Variation
Explained by
Variable alone
Owner
41.6%
Rag
34.6%
Size
5.1%
Age
2.1%
Classification
Society
9.1%
Source: LMIS Vessel and Casualty Databases, Regression Model, Mercer Analysis
Risk Factors: Large Vessel Analysis
For larger vessels (5,000 - 250,000 GRT) the combination of owner and flag is key in explaining risk
For large vessels, owner becomes the key variable
- To determine the risk levei of larger vessels it is important to
distinguish between ownership nationality and flag
The overall variation explained by all the variables is less than for
the full fleet analysis - this is due to a smaller vessel database to
work from (16,200 vs. 43,400 vessels)
Ol
Risk Factors: Review of Actual Casualty Data
In the remainder of this section we review actual casualty data in order to assess the relative "risk performance" of EU
fleets. We show consecutively:
An assessment of aggregate EU performance
- First: EU owned fleet versus non-EU owned fleet (table 1)
- then, within the EU owned fleet (table 2) a comparison between:
- Home flagged vessels
- Vessels flagged to EU flags other than the home flag
- Vessels under the Danish International Register
- Vessels flagged to non-EU flags
Country -by-country comparisons within the EU owned fleet, as follows:
All flags
Home flags
Non-EU flags
All
Casualties
table 3
table 4
table 5
Total
Losses
table 6
table 7
table 8
Finally we show the casualty record of Open Registries and the EU impact on that record (table 9)

Table 1 : Actual Casualty Record - All Vessels
All Casualties Total Losses Only
20%
18%
16%
14%
12%
Percentage
Casualties Q%
(5 Year
Period)
8 %
6%
4%
2%
0%
-
8.8%
6.5%
14.3%
No. of Vessels
No. of Casualties
World
43,368
3,815
Non EU
owned or
flagged
30,839
2,010
EU
owned
12,346
1,770
Percentage
Total Loss
(5 Year
Period)
3.00%
2.75%
2.50%
2.25%
2.00%
1.75%
1.50%
1.25%
1.00%
0.75%
0.50%
0.25%
0.00%
-
1.68%
1.56%
1.86%
World
No. of Vessels 43,368
No. of Total Losses 716
Non EU
owned or
flagged
30,839
480
EU
owned
12,346
230
Source: LMIS 1993 Vessel Database, 1990-1994 Casualty Database, Mercer Analysis
Risk Factors: Actual Casualty Record
Both in terms of total losses and all-casualties the EU owned fleet has a worse casualty record than the world fleet
EU owned vessels have an all-casualty record almost twice that of the world
average (14.3% vs. 8.8%)
In terms of total losses EU owned vessels are only 11% worse than the world
average
Vessels with no connection to the EU (non EU-owned or flagged) are below the
world average casualty record for both total losses and all-casualties
- Possibly due to higher reporting of casualties other than total losses in regions
where EU flagged vessels are likely to operate (eg. EU waters)
CD

o
Table 2: Actual Casualty Record - Total Losses only
(U\L ,
O.Uu/B
2.75% -
2.50% -
2.25% -
2.00% -
Percentage 1-75%-
Total Loss
(5 Year
1
-
5 0 %
"
Period)
1 2 5 %
_
1.00%-
0.75% _
0.50% -
0.25% -
/ i no/ _
U.Uli /o -
All Vessels EU Owne d Vessi
sis
-
1.68%
1.86%
1 5fi%
0.90% 0.90%
2.79%
1.11%
World EU EU Non EU EU EU EU flagged
owned flagged, owned or flagged, flagged to other EU
and flagged and to non- (excluding
owned owned EU DIS)
No. of Vessels 43,368 12,346 5,423 30,839 5,423 6,210 270
No. of Total Losses 716 230 49 480 49 173 3
1.13%*
EU
flagged
to DIS
443
5
Note: ' Based on very small number of total losses
Source: LMIS 1993 Vessel Database, 1990-1994 Causally Database, Mercer Analysis
Risk Factors: EU Actual Casualty Record
EU owned vessels flagged to the home country have a significantly better casualty record than all other EU owned vessels
EU vessels flagged and owned vessels have a significantly lower casualty record
than vessels flagged to non-EU countries (flagged out) for both all-casualties and
total losses
EU vessels registered to EU flags other than the home country (e.g., Reunion,
Azores etc.) or registered to DIS have a worse all-casualty record than home
flagged vessels
The total loss record of EU owned vessels registered to other EU flags or DIS is
only slightly worse than that of the home flagged vessels. However, the sample
size for this data is very small and hence should be interpreted with caution
Oi
en
ro
Table 3: Actual Casualty Record All Casualties
35%
30%
25%
20%
15% JZ
10%
50%
0%4
1
s.
I
3 X
UJ
European Owned Fleet Casualty Profile
E
3
>

S
c

8
u.
c

3
a s
E
3
E

s
i

O)
3
t:
o
.

!

f l
Number of vessels 12,346 50 162 928 235 377 1,779 3,760 71 974 3 729 99 439 530 2,210
Number of Casualties 1,770 8 19 156 37 35 261 566 21 59 117 53 5B 373
Source: LMIS 1993 Vessel Database, 19901994 Casualty Database, Mercer Analysis
Risk Factors: EU All-Casualty Profile
Even without considering Ireland, there is significant variation in the casualty profile of EU owned fleets
en

For larger EU owned fleets (i.e. with at least 100 vessels in the fleet) the results
range from 6% to 17%
Ireland's appalling casualty record (29.6%) is based on a small fleet
2
European Flagged and Owned Fleet Casualty Profile
35% r
30%
25%
20%
15%
10%
I
e
3
UJ
Number of Vessels 5,423
Number of Casualties 551
3
<
D>
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m
E
c
c
il
31 34 159 165 164
12 18 15
>.
c
co

O
836
104
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I
O
1,569
152

2
3
s
oc
53
15
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1
862
49
3

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3
r
o
.
405 45
52
c
ce

(
289
c
Ol

IO
364
E
0
"O
c

444
27 26 71
For EU vessels flagged to the home country the degree of variability in the all-casualty record is similar to that for the total
EU owned fleets
For larger EU owned and flagged fleets (i.e. fleets over 100 vessels) the range
extends from 7% to 16%
Denmark, France, Greece, Italy, Spain and Sweden all have casualty records
below the EU average level of 9.7%. Together they account for 66% of the EU
home country flagged fleet
The casualty rate for Greek owned and flagged vessels is almost half that of all
Greek owned vessels (9.7% vs. 15.9%)
Ireland stands out again with a level of 28.3% (on a fleet of 53 vessels only)
en
en
en
CT)
European Flagged to NonEU Fleet Casualty Profile
35%
30%
25%
20%
33.3%
5 o>
O o
l
2 1

3
UJ
Number of vessels 6,210
Number of casualties 1.107
15%
1 0 %
1 I
<
c
cg
O
19 87
2 5
310 58
66 IB
3 fl
3
.

te
:

'C
191 919 2,185 18 111
20 154 412 6 10

3
S
I

li
VI

c
(0
r
T.
2

3
t

.

.
<
$

c
2
e
3
0 302 29 103 150 1,728
0 64 2 20 29 289
Non-EU flagged vessels have a significantly worse all-casualty record than home flagged vessels for 13 out of 15 countries
All countries except Austria have a worst all-casualty record for vessels
flagged to non-EU flags than those registered to the home flag
Denmark, Finland, Greece and Sweden have a non-EU flagged all-casualty
record over twice that of their home flagged vessels
Finland and Ireland stand out as having the two worst all-casualty records for
non-EU flagged vessels (31.0% and 33.3% respectively)
The United Kingdom is the only country to have very similar records for both
non-EU and home flagged vessels (16.7% and 16.0% respectively)
01
en
00
Table 6: Actual Casualty Record Total Losses Only
European Flagged & Owned Fleet Casualty Profile
fi n~ .
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
0.90%
0.0%
r r
5.66%
1.26% 1.27%
1.21%
0.0%
I
0.60%
j | 0.36%

L
T
1.16%
I 1
0.90%
0.55%
0.25%
3 5
*
0.0% j 0.04%

L
""
J
I I
S) (D
S s
I X <

3
<
E
3
)

CD

E
c
0)
Q
a
c
m
c
il
0)

c

iL
C
(Q
CD
O
Xl
3

cu
cc
C

c
2
O)
I .
3
O

E
u
(

C

-
-C
01

ca
O)
3
E
o
Q.
C
1
co
c
0)

SI
I
3
c
Number of Vessels 5,423 31 34 159 165 164 836 1,569 53 862 405 45 289 364 444
Number of Total Losses 49 20 10
Risk Factors: EU Total Loss Casualty Record
There is a high degree of variation in total loss rates amongst EU owners
Part of the explanation lies in the small absolute numbers of incidents
Total losses represent only 13% of all EU casualties
Four countries have had no total losses over the 1990-1994 period (Austria,
Belgium, Luxembourg and Portugal) although they all have relatively small
fleets
Ireland again stands out as having a total loss record over twice the EU
average (4.23% vs. 1.86%)
Greece has a total loss record of 1.6 times the EU average, with the UK at
around the EU average and Germany significantly below it
The high degree of variability in total loss rates is a reflection of the small
absolute numbers of incidents - only 230 in total for the EU owned vessels
between 1990 and 1994
en
CD
o
European Owned Fleet Casualty Profile
5. 5%
5. 0%
4. 5%
4. 0%
3. 5%
3. 0%
2. 5%
2. 0%
1.5%
1.0%
0. 5%
U.U AJ |
1.86%
1
0%

1
0%
1
4.23%
2.98%
2.13%
.51 %
1
1.06%
1 1 2 %
1 1 1 1
1.13%
I
0%
1
0.69%
1
0%
I
1.99%
1.82%
1
0.75%
1
Number of Vessels
51
i !
UJ
12,346
E
3
>
CD

E
o
c
a
c
S
c
e
LL
C
01
O
Q
3
a
cg
oc

l/l
c
5
3
3
c

3
r
o
.
co

co
E
o

c
5
c
3
50 162 928 235 377 1,779 3,760 71 974 729 99 439 530 2,210
Number of Total Losses 230 14 20 112 11 44
C;( . , , , . . . k i i o i o n i \ r K . i r i * , t-*. ._... i n n n - * *-%.._. ..*.* \ ~ ^ _ .
Riek Factors: EU Total Loss Casualty Record
Total loss records for home flagged EU owned vessels are almost all better than the world average
For EU owned vessels flagged to the home country the total loss record is
significantly below the worid average for all countries except Ireland.
Ireland's record is based on only 3 total losses and hence should be viewed
with caution
Denmark, Finland, Greece and Italy have home flagged total loss records
above the EU average while France, Germany, Netherlands, Spain and
Sweden have records significantly below the EU average
>
O)
ro
European Flagged to NonEU Fleet Casualty Profile
6 0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
2.79%
I
4.21%
3.45%
2.26%
0.0% 0.0%
1
1
1.85%
1.57%
1
1 1
" T
0.90%
0.0%
I I
1.32%
0.0%
I 1
5.83%
0.0%
1
2.26%
1.33%
I
I
1 &
en co
! *
LL
e
3
LU 7
E
3
{
a
E
"5
c

C
a
e
il
S
c
E
>>
c
co
S
o

3

DC
C
M
c
I
3
C
(D

-

o.
co

co
li
2
Number of Vessels 6,210 19 87 310 58 191 919 2,185 18 111 302 29 103 150 1,728
Number of Total Losses 173 17 92 39
Risk Factors: EU Total Loss Casualty Record
EU owned vessels registered to non-EU flags vary widely in their total loss records, and on average they are significantly
worse than the world fleet
The total loss record for EU owned vessels flagged to non-EU countries is
significantly worse than the world average (2.79% vs. 1.68%), but there is a
high degree of variation between countries
Finland, Greece and Spain are the only countries worse than the EU
average, with Spain having a record over twice the EU average (5.83% vs.
2.79%)
France, Germany, Italy, Netherlands and Sweden all have total loss rates
for vessels flagged to non-EU flags that are significantly lower than the EU
average and around the world average level
CD

Table 9: Casualty Record of Open Registries
Actual Casualty Record
of all Vessels In Open
Registry
Open Registries
30
30.7%
Actual Casualty Record 20
of EU Owned Vessels
within Open Registry
10
10
20
30 J
13.7%
Average
27.8%
20.3%
26.5%
' ? ?
2 3
* 23.2% 22.9%
U
:
19 6%
22.6%
11%
21.0%
19.6%
9.3%
16%
' ?* 17.7% 17.2%
t!
11.1%
I
uf * ' * * 16.1%
14.6%
13.9%
12.5%

9.7%
6.0%
7.4%
4.3%
11%
9.9%
0.0%.
2.6%
10.9%
16.2% 1.1%
16.6%
16%
24.4%
22.8%
3 S
.
27 8% 26.2%
0
i i i i
^ ^ 2 3 3
5 .1

St
>

u.
o

< 3
co
c c? S S
3 g
I *
ra
? f S
LL
o CO

u.
Number of EU vessels 5,835 283 18 34 33 555 82 35 190 81 1218 60 1179 516 95 333 31 590 318 125 27 34
Total number of vessels 14,745 800 18 , 39 45 973 92 136 7211089 1525 793 4317 913 115 371 31 1596 373 698 64 36
% EU

* H
4
*
10
%
178
*
73
^
ST% 8 9
1
*
2 6 7 % 2
4
^ 7.4% 79.7% 7.6% 27.3% 66.6%62.6%69.8% 100% 37% 65.3% 17.9% 422% 94.4%
Source: LMIS 1993 Vessel Database, 19901994 Casualty Database
Risk Factors: Open Registries Casualty Record
EU owned vessels in Open Registries appear to have a markedly worse casualty record than the totality of vessels under
Open Registry
The average casualty record for Open Registries is 13.7%, well below the
casualty record of EU owned vessels in Open Registries, which stands at
18.3%
Ten out of 21 Open Registries have a significantly greater EU owned
casualty rate than their average casualty rate (for all-casualties)
- These include Malta, Panama, the Bahamas and Liberia, which have
registered large numbers of EU owned vessels
Data coverage issues may have an impact here, as well, since casualties for
vessels under Open Registry trading in regions with less good casualty
reporting may be underreported
CD
CD
Risk Factors: Possible Causes of EU Casualty Record
There are several possible causes that may explain the poor casualty and total loss record of EU owned vessels, including:
EU owned vessels operate in geographic areas with a higher inherent risk level
Crews employed on EU owned vessels are less well trained/qualified
EU owned vessels have lower maintenance standards and/or safety procedures
j ^ v The study team has investigated some aspects of lhe first of
*^ these possible causes
The other possible causes are outside the scope of this study
Risk Factors: Riskiness of Geographic Regions
The objective of the following section is to try and find evidence that the risk profile of the EU fleet is not driven by
disproportionate activity in high risk areas
CD
-si
The analysis we have performed has been restricted to those possible based on the data
currently available:
- The inherent riskiness of different geographic areas in terms of total loss
- The distribution of EU total losses across these geographic areas
- Within EU waters the relative total loss record of EU owned and non EU owned vessels
The data currently available consists of three pieces:
- The risk profile of each geographic area
- The risk profile of total losses for EU/non-EU owned vessels
- Some indicators of activity within EU waters

These are first indications; more detailed work may be useful
co-
Geographic Regions
Source: LMIS Marsden Grid / SIS Zone Data
Risk Factors: Riskiness of Geographic Regions
The total loss records of 31 zones were compressed into 9 geographic regions to identify the geographic risk level
The analysis consisted of four steps:-
1. Examination of total losses divided into 31 geographic zones (SIS zones)
2. Grouping of 31 zones into 9 geographic regions
3. Estimation of world shipping activity within each geographic region
4. Calculation of geographic risk level of each geographic region as share of
total losses divided by share of shipping activity
CD
CD
J
o
Risk Level by Geographic Region
3.00 _..
u
<
en
c
' .

'si
co
o
cu
u
ro
c
co
cu
(
(
O
ro
O

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se
ro
r.
co
2.50 .
2.00 . .
1.50 _.
1.00
~ 0.50 4
cu
>
cu
I
J
0.00
0.77
1.82
1.41
0.87
2.73
1 1
North Europe Asi a/ Paci fi c Sout h
Ameri ca Ameri ca
0.83
0.23
Average Risk Level
0.89
0.12
Al ri ca Mi ddl e
East/ Indi a
Atl anti c
Ocean
Pacific
Ocean
Indi an
Ocean
Geographi c Regi on
Risk Factors: Risk Level by Geographic Region
European waters are slightly less risky than the world average
The risk level of European waters is below the average level for all regions (0.87
vs 1.00)
Non-coastal areas are generally less risky than coastal areas
African waters are by far the most risky of all regions
South American waters and Asian/Pacific waters are also above average in
terms of risk level
Source: LMIS 1990-1994 Casualty Databases, 1993 WFFS Voyages Data, Mercer Analysis
r^
Total Losses by Geographic Region
Percentage of Total Losses Occurring in Each Region
North America
Europe 365%
Asia/Pacific
South America
Africa
Middle East/India
Atlantic Ocean
Pacific Ocean
Indian Ocean
EU Owned Vessels Non-EU Owned Vessels
3.9%
'" V//////////////, //////////////////////////////////
4.3%
WMk**
v//////////,7zm
14.8%
3.9%
1.3%
5.8%
12.3%
14.9%
1.4%
1.2%
CZ3 Areas above
average risk
50% 40% 30% 20% 10% 0% 10% 20% 30% 40% 50%
Source: LMIS 1990-1994 Casualty and Vessel Databases, Mercer Analysis
Risk Factors: Total Losses by Geographic Region
It does not appear that the higher overall casualty rate of the EU owned fleet is explained by a large number of casualties in
geographic areas with above-average risk
Only 39% of EU owned total losses occurred in high risk regions (i.e., Africa,
South America, Asia/Pacific) vs. 64% of non-EU owned total losses
37% of total EU owned losses occurred in European waters, compared to 12%
of non-EU owned losses
CO
Risk Factors: Activity within European Waters
To conduct an analysis of the relative risk profile of EU owned and non-EU owned vessels operating in EU waters we had to
make some assumptions about the data sources available
We had data on the number of vessels operating in EU waters (EU owned and non-EU owned) over
the period March - September 1994, including actual number of European port calls by vessel
The risk element of a voyage may lie in the voyage preparation and port area movements or in the
deep sea part of the voyage
In order to clarify which portions of the voyage are more risky, further information is needed about:
- The root causes of casualties and total loss
- The profile of the types of accident occurring
- The characteristics of voyages performed by EU owned and non-EU owned vessels (length of
voyage, ratio of port days to sea days)
In the absence of exact data to clarify the relationship between risk, voyages and port calls we have
"ignored" port calls, i.e., underestimated the number of voyages
It is reasonable to assume that EU owned vessels make more voyages within European waters than
non-EU owned vessels (e.g., strictly intra European shuttles by smaller vessels)
en
VJ
CD
Total Losses in EU Waters
Total Losses )n EU Waters^)
Vessels in EU Watered)
# Vessels
10,337
# Total Losses
144
(1) Based on vessels entering EU waters between March and September 1994
(2) Based on total losses occuring between 1990 and 1994
Source: LMIS 1990-1994 Casualty Databases, 1993 Vessel Movement Database, Mercer Analysis
Total Loss Rate
(Total Losses/Total Vessels)
1.56%
29% higher
1.21%
EU
Owned
Non-EU
Owned
E22 = EU Owned
I | = Non-EU Owned
Risk Factors: Activity within European Waters
Within European waters, EU owned vessels have a worse total loss rate than non-EU owned vessels under the assumptions
we made. It should be remembered, however, that EU owned vessels made significantly more port calls per vessel
For European waters, the total loss rate for EU owned vessels is 1.56% vs. 1.21% for
non-EU owned vessels (29% higher)
It should be noted that on average, during the six month period studied, EU owned
vessels entering EU waters made over twice as many port-calls per vessels as non-
EU owned vessels (31.7 vs. 14.6)
it is reasonable to assume that if the number of port calls made by vessels was
included in the analysis, then the total loss rate of EU owned vessels would improve
relative to non-EU owned vessels
It is therefore not exactly clear whether, after adjustment for the number of voyages,
EU owned vessels would be shown to be more or less risky than non-EU owned
vessels and hence the results of this particular analysis are inconclusive
Nl
-vl
00
Risk Factors: Geographic Regions Summary
The analysis of the riskiness of the EU owned fleet in different geographic regions is not
complete and requires further data and analysis
European waters are slightly below average in terms of total loss risk level (share of total
losses divided by share of shipping activity)
African, South American and Asian/Pacific waters are above average in terms of total loss
risk level
A smaller proportion of EU owned total losses than non-EU owned total losses occurred in
high risk geographies
With European waters the analysis of the riskiness of the EU owned fleet vs the non-EU
owned fleet is inconclusive

Notwithstanding some open issues in the foregoing analyses, it seems fair to
conclude that the inherent risk of operating in different geographic regions does not
seem to be a major factor in explaining the worse casualty/total loss record of EU
owned vessels
Further investigation should focus on other possible explanations of casualty risk
(i.e., non-geographic, non asset related factors such as crew qualifications/training or
maintenance and safety procedures)
Conclusions: Risk Factors and Casualty Records
When all vessels over 100 grt are considered, flag, size and age are the key variables that explain risk
- There is significant overlap in the explaining power of individual vessel characteristics
When only vessels over 5000 grt are considered, the combination of owner and flag is key in explaining risk
Actual Casualty Records
The EU owned fleet has a worse casualty record than the world fleet
- Both in terms of "total loss" and "all casualties"
- Partly due to some bias in the underlying data
EU owned vessels flagged to the home country have a significantly better casualty record than all other EU
owned vessels
There is significant variation in the casualty profile of EU owned fleets
- This is particularly true for total loss rates
EU owned vessels in Open Registries appear to have a markedly worse casualty record than the totality of
vessels under Open Registry (again, some bias in the underlying data is possible)
- It does not appear that the trading activity of European owned vessels (i.e., which routes they operate on) is a
major factor in explaining the worse casualty/total loss record of EU owned vessels
-si
CO
Impact of Flagging Out and of
High Risk Vessels on the EU
Economy
CO
co
ro
Impact on EU
Flagging Out High Risk Vessels
Key Flag Sensitive Cost
Crew Costs
Wages and benefits
losl to EU seamen in
last 10 years due to
flagging out
Economic Impact
Corporate Tax
Corporate tax lost to EU
due to 'olf-shore' held
vessels
Environmental
Impact
Trade-off between
improving safety
standards and "risking"
freight rate increases
due to capacity
restrictions
Outside the scope of this study
Impact: Overview
The key impacts that have been investigated are crew wages/benefits and corporate tax lost to the EU, and the impact on
freight rates of 'banning' high-risk vessels from EU waters
Crew cost and corporate tax are the two major flag-sensitive cost categories
- We have modelled the aggregate impact, based on detailed fleet statistics, a profile of the
flagged out fleet and an understanding of cost drivers. This has allowed us to quantify the
economic impact of flagging out
The key economic impact of high-risk vessels would be the trade-off between improving safety
standards and "risking" freight rate increases due to capacity restrictions
- We have explored the options available to restrict high-risk vessels from EU waters and
evaluated the potential impact on freight rates
- The environmental impact of marine accidents is outside the scope of this study
CO

Impact: Crew Wages Roadmap
The impact of flagging out on crew wages and benefits can be estimated by identifying vessels flagged
out since 1985
Identify number of
EU owned vessels
flagged out between
1985-1994
Determine EU
crew wages,
benefits and
crew levels on
flagged out
vessels
Evaluate
potential crew
wages, benefits
and total
numbers lost on
flagged out
vessels
Estimate
potential cost
savings for EU
shipping
industry
By owner nationality
and vessel type
1974 vessels
CO

OD
CD
Fleet Changes
11,425 5,510
EU
flagged
5,289
Flagged
out but
owned
Flagged
V Out
' Fleet '94
626
Flagged out and
registered
outside EU
1994 EU
owned Fleet
Ragged Out
1994
Flagged Out
1985
Note: (1) Vessels registered In OECD countries excluded
(2) Includes vessels flagged to EU affiliated flags and second registers
Source: LMIS 185 and 194 vessel databases, Mercer analysis
Impact: Fleet Changes
Over and above flagging-out levels in 1985, an additional 18.8% of the EU owned fleet has been flagged out since then
CO
The 1994 EU owned fleet which has been flagged out can be divided into:
- Vessels fully owned within the EU, and hence liable to EU taxation (5,289
vessels)
- Vessels whose ultimate owner is within the EU but which have a 'registered
owner" outside the EU (but not in an OECD country - 626 vessels)
Between 1985 and 1994,1,974 additional EU vessels have been flagged out, an
increase of 48%, whilst over the same period the EU owned fleet has decreased
by 8.3%
co
00
Impact: Flagged Out Vessels
We Identified the 2000 vessels by type and country of ownership
Vessels Flagged Out Since 1985
Country
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
Total
Tanker
2
40
74
17
35
71
12
45
3
1
8
36
100
624
Dry Bulk
11
6
3
7
3
426
12
7
6
9
490
Vessel Types
Container
4
10
19
78
11
2
1
1
21
147
Ro-ro
7
3
7
23
18
50
4
2
6
2
12
25
159
General
Cargo
3
11
26
5
39
273
4
9
123
47
14
554
rV.i
Total
5
73
119
32
123
443
679
8
70
139
4
62
71
146
1974
Source: LMIS 1985 and 1994 Vessel Databases, Mercer analysis
Impact: Crew Costs and Levels
We identified typical crew sizes and monthly costs for officer and A/B
Average EEA Crew Levels by Vessel Type
Average EEA Crew Costs per
Month by EEA Nationally
' : ; ' ; ' . ; ' ' ' ' ' . ; > . '
Vessel Types
Tankers
- Suez Max
- Product
Bulkers
- Cape Size
- Panamax
- Handy-size
Container
- Large
- Line Haul
- Deepsea
General Cargo
- Break bulk
- Ro-Ro
EU Crew Levels
Number of
Officers
9
9
9
9
9
7
7
7
7
7
Number of
Seamen
17
16
14
12
11
11
10
10
11
9
1 . . ' ? '
Country
Austria
Belgium
Denmark
France
Finland
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
Average Non-EU
Monthly Crew Cost ($)
(1)
Officer
$9,504 *
$6,033
$6,979
$10,604
$6,979 *
$9,504
$3,440
$6,076
$6,050
$6,033 *
$7,988
$4,300
$5,694
$6,979 *
$6,480
$3,288
Seaman
$5,741 *
$3,181
$4,768
$4,809
$4,768 *
$5,741
$1,770
$3,114
$3,546
$3,181 *
$3,680
$1,685
$3,272
$4,768 *
$3,181
$955
' estimated based on data for other countries
Note: (1) 1993 figures adjusted to 1994 levels
Source: ISF, Earnings Survey 1993, Shipowners, Manning Agencies, Shipowner Associations and Seafarers Union
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Impact: Crew Wages Lost
The potential crew wages and benefits lost per annum to EU Seamen, on all vessels flagged out since 1995, are over $2
billion
Vessel Type
Tankers
Dry Bulk
Container
Ro-Ro
General Cargo
Total
# Vessels
624
490
147
159
554
1,974
EU Equivalent Staff
Officers
5,616
4,410
1,029
1,113
3,878
16,046
Crew
10,121
5,634
1,475
1,431
6,094
24,755
Monthly Crew Cost ($)
Officers
$ 6,093
$ 5,030
$ 7,822
$ 6,459
$ 6,660
Crew
$3,344
$2,650
$4,448
$3,619
$3,671
Total Crew
Cost ($m)0>
$816.8
$ 445.3
$ 175.3
$ 148.4
$ 578.4
$2,164
(1) Based on average European crew costs for each vessel type
Source: LMIS 1985 & 1994 Vessel Databases, Mercer analysis
Impact: Non EU Crew
Replacing EU crews with Non EU crew on vessels flagged-out between 1985 and 1994 would potentially reduce total crew
wages and benefits costs to under $1 billion
Vessel Type
Tankers
Dry Bulk
Container
Ro-Ro
General Cargo
Total
# Vessels
624
490
147
159
554
1,974
EU Equivalent Staff
Officers
5,616
4,410
1,176
1,272
4,432
16,906
Crew
11,507
6,769
1,916
1,590
6,648
28,430
Monthly Crew Cost ($)*
Officers Crew
$ 3,288 $955
$ 3,288 $955
$ 3,288 $955
$ 3,288 $955
$ 3,288 $955
Total Crew
Cost($m)d)
$ 353.5
$251.6
$68.4
$68.4
$251.1
$993
* Assumes 95% use of ITF approved crew
Source: LMIS 1985 & 1994 Vessel Databases, Mercer State Aid Analysis 1994
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Impact: Cost Saving by Flagging Out
EU Owners would have paid around 13.8% extra on Crew costs in 1994 if no vessels had been flagged out since 1985
$50 billion
$8.7 billion
-17.4%
y-
12.6%
1994 EU
Shipping Industry
Turn Over
Estimate M
Total Crew Costs
of EU Owned
Fleet 1994
$1.2 billion
1994 Annual
Saving by
Flagging out (all
Vessels Flagged
out) since 1985
ESTIMATE
Estimated
increase in Net
ROS of 1.8% <
2
>
#
Notes: (1) See annex for methodology
(2) Applying estimated EU shipping industry effective tax rate of 23.6%
Source: Eurostat, Wordscope, LMIS Vessel database 1994, Mercer Analysis
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Crew Losses due to Flagging Out
230.000
y Potential crew loss due to flagging out
= 51% of total losses
Number of
EU Seamen
1985 Estimated
Crew loss due
to flagging out
Crew loss due
to fleet
reduction
(1,039
vessels)
Crew loss due
to reduction in
crew/vessel
(reduction of
8%)
1994
Source: Committee of Transport Waters Union in European Committee, LMIS 1994 and 1985 Vessel Databases, Mercer Analysis
Impact: Crew Losses
Flagging out has led to about half of EU crew losses over the last 10 years
EU seamen numbers have reduced by 35% from 230,000 to 150,000 over the
period 1985 to 1994
This is due to three main drivers:
- Flagging out and employing non-EU crew
- Overall reduction of the EU fleet
- Reduced number of crew/vessel
Flagging out potentially accounts for 51% of the total EU crew lost
The EU owned fleet has reduced by 1,039 vessels over the period accounting for
27% of job losses (21,500 positions)
The reduction of around 8% in average manning levels per vessel accounts for
remaining 22% of crew losses (17,700 positions)
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Impact: Corporate Tax Roadmap
Identify flagged out
vessels registered
in tax favourable
locations
Estimate profit
per vessel
By owner nationality
and vessel type
626 vessels
By vessel type
Compute
effective EU
corporate tax
rates
Estimate
potential EU
annual tax loss
By country
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Impact: Off-Shore Registered Vessels
Country
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Irish Republic
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
Total
Vessel Types
Tankers
5
7
3
26
22
10
2
1
17
87
180
Bulkers
9
16
1
17
26
5
1
5
64
144
Container
5
33
3
1
1
8
51
Ro-Ro
1
5
5
4
8
2
1
10
36
General Cargo
2
15
1
4
55
41
3
14
18
1
4
6
51
215
Total
22
43
1
13
135
100
3
31
23
1
6
28
220
626
Note: Includes all EU owned vessels registered lo non OECD locations
Source: LMIS 1994 Vessel Database, Mercer Analysis
Impact: Off Shore' Registered Vessels
5.4% of the EU owned fleet is registered to 'off-shore' locations
Only 10.6% of all EU owned and flagged-out vessels are off-shore registered
The UK, Germany and Greece account for 72.7% of these vessels
Despite Greece having a fleet 83% larger than the UK fleet, the UK has over
twice as many vessels held off-shore. This is likely to be a reflection of the
relatively favourable tax position for Greek shipowners in their home country
(tonnage tax situation)
It is assumed that tax efficiency is the key reason for off-shore registry. However,
other reasons may be valid and hence it is the "potential" or "maximum" tax loss
to the EU that has been calculated
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Impact: Vessel Profitability
Vessel profitability has been determined based on the EU shipping industry average ROI
Vee tel Type
' ' *' '. ' ' 'li hi]
Tankere
Bulkers
Container
General Cargo
Suez Max
Produci
Cape Size
Panamax
Handysize
Large
Line Haul
Deepsea
Breakbulk
RoRo
Average Investment
In vessel ($m)
$39.1
$20.3
$28.9
$18.0
$13.1
$47.1
$29.7
$20.3
$13.4
$12.6
Profit After Tax
($m)(i)
$1.0
$0.5
$0.8
$0.5
$0.3
$1.2
$0.8
$0.5
$0.4
$0.3
Average
DWT
140.000
40,000
150.000
65,000
28,000
60,570
44,080
22,162
15,000
6,000
Estimated OffShore Registered
Corporation Tax (a) .Va j $
$11,508
$5,024
$12,415
$6,856
$4,132
$8.284
$6.803
$ 3,859
$ 3.276
$2.537
Average Pretax
Profit ($m)
$1.04
$0.54
$0.77
$0.48
$0.35
$1.25
$0.79
$0.54
$0.36
$0.33
Notes: (1 ) Estimated based on 1993 EU shipping posttax ROI of 7.5%
(2) Average of Cyprus, Panama and Liberia for particular vessel type/size
Source: Worldscope, Annual Reports, Mercer Analysis
Impact: Effective Tax Rates
The EU average effective tax rate for the shipping industry is 23.6%, approximately three-quarters of the average theoretical
tax rate that should apply to the shipping industry
Country
Austria
Belgium
Finland
France
Denmark
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
Average
Actual Tax
Rate
34.0%
39.0%
25.0%
33.3%
34.0%
27.0%
10.0%
52.2%
33.3%
35.0%
10.8%
35.0%
28.0%
33.0%
31.5%
Effective Tax
Rate
23.8%
19.8%
18.0%
29.6%
23.8%
20.6%
9.6%
10.0%
46.9%
29.7%
24.8%
10.8%
25.9%
19.6%
28.8%
23.6%
Comments
If paid in the current accounting year
For international trade operations
Tax based on ship size/age (average/vessel = $38,000)
Special tax rate for extemal trade based activities
Includes local taxes
Rate specific to shipping operations
Plus $6,900 if profit >$138,000
Rate specific to shipping operations
Note: arithmetic average
Not es: (1 ) Est i mat ed based on aver age of other countri es
Source: Nat i onal Taxat i on Organi sati ons, I nternati onal Tax Sur vey 1994 ( Cooper s & Lybrand) , Worl dscope Anal ysi s
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Corporate Tax Lost
Vessel Type
Tankers
Bulkers
Container
General Cargo
Suez Max
Product
Cape Size
Panamax
Handy-size
Large
Line Haul
Deepsea
Breakbulk
Ro-Ro
Total
# Vessels
69
111
28
37
79
3
1
47
215
36
626
Profit Made
on Vessels
($m)
$ 57.51
$ 47.84
$ 17.32
$ 14.24
$22.13
$2.99
$0.63
$ 20.20
$61.33
$9.60
$ 253.80
(1)
Tax "Lost"
($m)
$13.82
$ 12.36
$4.42
$3.58
$5.03
$0.70
$0.13
$4.27
$ 13.52
$1.98
$ 59.81
Note: (1) Applying effective tax rate to profits
Impact: Corporate Tax Lost
The corporate tax loss due to EU owned vessel held in off-shore locations could be as high as one-fifth of total EU shipping
industry corporate tax
$50 billion

$1.0 billion
\
2.4/
>
y 31%
$0.31 billion
19%
/ $59.8 million
' ' I > ' '
1994 EU shipping
industry turnover
estimate <
1)
1994 EU shipping
industry net profit
estimate
(2)
1994 EU shipping
industry corporate
tax estimate
1994 potential
corporate tax 'lost'
due to off-shore
held vessels
Notes: (1) See annex for methodology
(2) Based 1985-1993 EU shipping industry average net ROS of 2.0%
Source: Worldscope Analysis, Eurostat, Annual Reports, Mercer Analysis
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Impact: Excluding Substandard Vessels
To help understand the economic impact of excluding substandard vessels from EU waters, three key questions have been
explored:
Question
1. To what extent would long-term freight rates be
affected by any form of excluding substandard/high-
risk vessels?
2. What would be the effect on capacity within EU
waters of excluding substandard/high-risk vessels?
3. In a truly competitive market, what is the
relationship between capacity and freight rates?
Answer Approach
Logic tree of exclusion options
EU capacity profile
Freight-rate elasticity analysis
Impact: Logic Tree of Exclusion Options
It is unlikely that excluding substandard/high risk vessels from EU waters would have a significant longterm effect on
freight rates
Issue Action Response Impact
Banned vessels most
likely to trade outside
EU waters

Temporary reduction
in capacily offered al
EU ports restored
as olher vessels
begin trading in EU
walers
Effect on
Freight Rates
Evaluation of
Likelihood
After some period of
fluctuation, little or no
longterm effect on
freightrales
*
Most likely outcome if
particular vessels
banned from EU waters
due to dispersed
capacity supply and
highly competitive
nature of industry
How can
substandard/ high
risk vessels be
excluded from EU
waters?
Refuse entry/ ban
trading of specific
vessels
Target "root causes"
Specify crew
qualifications/
educational level
Specify special
safety equipment/
standards
Some vessels may
'upgrade' to become
nonhigh risk
Most vessels trading
in EU waters, not
currently meeling
specified criteria,
would upgrade to
meet requirements
Some vessels not
currently meeting
requirements may
choose not to trade in
EU waters
S
Change in cost
structure of all
vessels upgrading
&
Risk to financial
health of some EU
owners
More or less
permanent reduction
in capacity offered at
EU ports
Operators unlikely to be
able to pass on costs to
customers due to:
Dispersed industry
supply
Some operators
already competing
effectively whilst
meeting
requirements
Hence, limited potential
for freightrate
increases
Possible freight rate
increases for
shipments passing
into, out of, or
through EU waters
Most likely outcome if
"root causes" targeted
as costs are absorbed
or operators go out of
business and vessels
purchased by olher
players
Least likely outcome for
both exclusion options
due to global,
competitive nature of
industry
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Reduction in EU Capacity as H igh Risk Combinations Excluded
c
o

3
D
0)
CC

a.

O
LU
10
Line representing equal ratio of
world to EU capacity reduction
0% 10% 20% 30% 40% 50% 60%
World Fleet Excluded
80%

20
~~i 1 1 1 1
30 40 50 60 70
Substandard Combinations Excluded
80
90%
90
100%
98
Source: LMIS 1990-1994 Vessel and Casualty Databases. 1994 Movement Database, Regression Model, Mercer Analysis
Impact: Reduction in EU Capacity
In the short-term, EU capacity could potentially be reduced significantly if high-risk vessel combinations were excluded
from EU waters
EU capacity has been estimated based on the total dwt available within EU waters
at any one time (*)
For the most risky third of the world fleet, EU capacity would reduce by about
twice the proportion of world fleet excluded. For example, if 10% of the world fleet
was excluded from EU waters, EU capacity would be reduced by about 20%.
The actual reduction in EU capacity associated with excluding substandard/high
risk vessels will vary as the risk level threshold for defining a vessel as
substandard/high risk is increased or reduced
() Vessels 'available' derived from movement data of all vessels calling at EU ports within period March-September 1994
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Relationship between World Overcapacity and Freight Rates

C
(0
E

3
O
s.

Q
Q.
i

35%
30%
25%
20%
15%
10%
5%

Bulkers
Overcapacity
^ y\
<7 \
y VX\
H / ^ \ ^ ^
\ / ^ ^
\ / Frelghtrate 0)
Y
<^ A
^^ L / N _
^ s ^ / i i ^
w
Vo^^s,
Or
c o c o c o o o c o c o c o o > 0 ) 0 ) d )
O ) O ) O ) 0 ) O ) O ) 0 ) O > 0 ) O ) 0 )
14
12
10
8
6
4
2
0
' S
ra

o
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52
If)

ra
CC
t .

e
ra
C
O

E
XJ
c
ra
E

'S
en
ra
g
o
ra
Q.
ra
t

>
O
Tankers
i i
60%
50%
40%
30%
20%
10%

Overcapacity * Z \ .
> f \
*/ Y.
\ cZ \ y ^
\ / Freightrate (1)
/ y
^ r t l
^^^^^^fir ^V.
\ l
^ v
ôooo^,
4 5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5

S w c o r . o o m Q r c v j c o i r
0 0 0 0 0 0 ( 0 0 0 0 0 0 ) 0 ) 0 ) 0 ) 0 )
O > 0 ) O ) O ) O ) O ) 0 ) 0 ) 0 ) O ) 0 >
; /''*K
C
5
te
*;

ra

o
c

Q.
(1) Frelghiraies not adjusted lor Inflation which averaged 8.8% over the period
Source: Uoyds Shipping Economist 19841994, Mercer Analysis
Impact: Elasticity of Freight Rates
Over the past decade, a 1% reduction in the level of global overcapacity has lead to an increase of about 0.7% in average
worldwide freight rates
In a fully competitive market we would expect freight rates to rise and fall as the level of overcapacity increases or
decreases, respectively
Over the past decade, for both bulkers and tankers (which together account for almost 80% of total dwt capacity)
a significant relationship exists between changes in the level of overcapacity and changes in freight rates
This relationship can be quantified as an elasticity which is defined as:
% increase (or decrease) in freight rates
% decrease (or increase) in level of overcapacity
The elasticity is not fully elastic (the proportional increase in freight rates is smaller than the proportional
decrease in capacity
- This is due to a significant "overhang" of capacity
The elasticity may vary:
- Depending on the time period examined, the industry segments included and geographic limitations imposed
- Analysis of data over the past decade indicates that, on a global scale, the elasticity of freight rates varies from
0.4 to 1.1, with an average of 0.7
The above relates to global averages; there may be significant differences at the local level
- Elasticities may vary by region
- In localised situations ("thin markets") capacity reductions may be lumpy, and therefore cause sharp swings in
local freight rates in the short term
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Impact: Impact on Freight-Rates
The impact on freight rates of excluding high-risk vessels from EU waters is likely to be minimal
In order to apply world market elasticities to EU related freight rates, two key assumptions would have
to be made:
- Vessels excluded from EU waters would not be replaced by other vessels offering capacity at EU
ports
- Freight rates within EU waters are independent of world-wide freight rates
Under these assumptions it could be argued that freight rates with EU waters would potentially rise
significantly if high-risk vessels were excluded.
However, neither of these assumptions is likely to hold under real market conditions and hence the
study team's view is that the impact on freight rates of excluding high-risk vessels is likely to be
minimised due to:
- The substitution of excluded vessels by non-excluded vessels
- The off-setting effect of worldwide freight markets on EU markets (continued overcapacity globally)
Impact: Summary
Crew Wages and Benefits
The potential crew wages and benefits lost per annum to EU seamen, on all vessels flagged out since 1985, are
over $2.1 billion
Replacing EU crews with non-EU crew on those newly flagged-out vessels may have "saved" EU shipowners
$1.2 billions in crew cost
This translates into roughly 1.8 percent of the estimated 1994 shipping industry turnover in the EU. Since the
average Return on Sales of EU shipping companies is around two percent, this implies that without flagging out,
the EU shipping industry as a whole would have barely broken even
Pressure to reduce costs forces EU shipping companies to either flag out, reduce manning levels or get out of
(selected) business(es). Each of these approaches, unfortunately, results in crew losses
- Flagging out has led to about half of EU crew losses over the last 10 years. Reductions in the EU owned
fleet accounted for 27 percent, reduction in manning levels in 22 percent
- From a safety point of view, both flagging out and crew size reduction may raise some concerns
Corporate Tax
Over five percent of the EU owned fleet is registered to off-shore locations, which may convey tax "efficiencies"
On the basis of current levels of return and average effective tax rates for the EU shipping industry (about three
quarters of the average theoretical tax rate that should apply to shipping) we have estimated corporate tax losses
to the EU economy at $60 million per annum
While seemingly not a very large number, this could be as high as one-fifth of the total EU shipping industry's
corporate tax bill
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Impact: Summary (continued)
Freight rates
While in the short term EU capacity could potentially be reduced significantly if high-risk vessel combinations
were excluded from EU waters, it is unlikely that there would be a significant long term effect on freight rates
Given a significant "overhang" of overcapacity, th elasticity of freight rates over capacity reduction is less than
fully elastic
impact of Industry Structure,
Corporate Strategies and
Government Policy
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* Structure: Introduction
The main objectives of this section are to:
- Understand the impact of industry structure, corporate strategy, national conditions
and government involvement on competitive positioning
- Understand the drivers of recent fleet expansion in selected non-EU countries
The analyses focus on the liner shipping industry
In particular, we look at:
- Financial performance of the industry
- Industry structure
- Market share evolution
- Company-specific strategies
- National conditions
- Types of government involvement
- Positioning of individual companies
Structure: Overview of the Liner Industry
The global liner shipping industry is a relatively large, medium growth, maturing industry, with high levels of competition
driving continuing change in industry structure
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Worldwide, the liner shipping industry is a $70 billion industry with the largest players
generating revenues in the $3.0-3.5 billion range
In.volume terms the industry has grown at a 6.5 percent annual rate over the last 10 years
and is projected to continue at this rate over the next decade
Approximately 500 separate firms compete in the industry today. Joint ventures,
consortia, and regional or niche subsidiaries are common
There is increasing concentration with the top 20 carriers controlling 46.4 percent of
ship capacity in operation or under construction today - up from 37.7 percent in 1984
Increasing competitive pressures on middle tier companies have forced the recent
departures of EAC/Benline, Merzario, and Lloyd Brasileiro and make the future of others
questionable
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Definitions of ROE and ROI
ROE =
N e t l n c o me
ROI =
EB, T( 1>
Equity Capital Employed
2
)
(1) Earnings before interest and tax
(2) CapH al employed = Interest bearing debt and equity
Structure: Financial Performance
(Liner) shipping lags other industries in terms of Return on Equity and Return on Investment
ROE of Different Sectors
(1984-1993 average)
ROI Of Different Sectors
Source: Worldscope, Annual Reports, Mercer analysis
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Structure: Relative EU Financials
At the aggregate level, there are no major differences in profitability between European and non-European shipping
companies
Average ROE and ROI (1984-1993)
ROI
ROE
European
8.5%
6.0%
Extra-European
8.3%
8.3%
Note: HOI = EBIT / (equity + Interest bearing debt)
ROE net Income / equity
Source: Worldscope, Annual Reports, Mercer Analysis
Structure: Industry Concentration
The concentration of economic power in this industry has increased significantly since the early 1980s
Concentration in the World Container Shipping Industry
Thousands of
TEU Slots in
Operation and
on Order
5,000
4,000
3.000
2,000
1,000
1981 1984 1994
D Total number ol slots
Slots controlled by top 20 carriers
Source: Mercer Management Consulting and Conlainerisation International.
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Structure: EU Share
European and North American operators continue to lose share to Asian carriers
Distribution of Top 20 Carriers' Share by Headquarters Location
1984
1994
Olher
Olher
Europe
Far East
(Excluding Japan)
Europe
Japan
USA
Far East
(excluding Japan)
USA
Source: Conlainerisation International
Structure: Trade and Fleet Growth
While European container lines have expanded their fleets faster than trade volumes to and from their home market, Asian
lines have expanded their fleets even faster
Compound Annual Growth Rates in:
Container Trades, 1990-1994 Top-20 Carrier Fleets, 1984-1994
15%
10%
5%
10.5
7.5
6.8
Far East Europe Uniled States
15%
10%
5%
13.8
89
5.5
Far East Europe United States
Source: Mercer/PRI World Sea Trade Service, Containerisalion International, Mercer analysis
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Structure: Top 20 Operators
There has been significant change among industry leaders over the last decade
Top 20 Container Shipping Firms, Based on Capacity
1
Ca r r i e r (Country)
1. Evergreen Line (Taiwan)
2. United States Lines (USA)
3. Sea Land Service (USA)
4. Overseas Containers Ltd. (UK)
5. Mitsui OSK Lines (Japan)
6. Hapag Lloyd (Germany)
7. Nedlloyd Lines (Netherlands)
8. NYK Line (Japan)
9. Orient Overseas Container Line
(Hong Kong)
10. Maersk Line (Denmark)
11. USSR (USSR)
12. Scandulch (Netherlands)
13. Zim Israel Navigation (Israel)
14. CGM (France)
15. American President Lines (USA)
16. COSCO (China)
17. United Arab Shipping Co. (UAE)
18. Barber Blue Sea (Norway)
19. Neptune Orient Lines (Singapore)
20. Line (Japan)
Top 20 Total
Balance of Fleet
Total Fleet
TEU Slots
(OOO)
70
59
57
48
46
43
41
37
36
34
34
31
31
30
2B
26
24
23
23
23
744
1,232
1,976
Percent ol
World Pleet
.
35%
30
L'y
2.4
2 3
2.2
2 I
1 9
1
1.7
1.7
1.6
1.6
1.5
14
1 3
1 2
1 1
1.1
1.1
37.7%
62.3%
100.0%
:4;i Carrier (Country) l' i
^ S
imii
1. Maersk Line (Denmaik)
2. Everyreen Line (Taiwan)
3. SeaLand Service (USA)
4. NYK Line (Japan)
5. Mitsui OSK Lines (Japan)
6. COSCO (China)
7, Ammu;.m President Lines (USA)
8. DSRSenator Lines (Geimany)
9. Hanjln Shipping Co. (S. Korea)
10. 8.0 Containers (UK)
11. Neptune Orient Lines (Singapore)
12. Nedlluyd Lines (Netherlands)
13. Line (Japan)
14. Hapag Lloyd (Germany)
15. Zim Israel Navigation (Israel)
16. Yangmlng Marine Transport (Taiwan)
17. Orient Overseas Container Line
(Hong Kong)
18. United Arab Shipping Co. (UAE)
19. Mediterranean Shipping Co. (Switz.)
20. Hyundai Merchant Marine (S. Korea)
Top 20 Total
Balance of Fleet
Total Fleet
;;1TEU sloten
$j :
:
( 000) : :
209
178
148
140
115
110
98
90
89
89
86
84
80
72
71
56
53
50
44
40
1,904
2,197
4,101
| l H: V ' V ' l ' . r
.'Percento* ;
f'World Fleet
5.1%
4.3
36
3.4
2.8
2.7
2.4
2.2
2.2
2.2
2.1
2.0
2.0
1.8
1.7
1.4
1.3
1.2
1.1
1.0
46.4 %
53.6%
100.0%
Htes: ' Includes current fleet al year end 1993 plus vessels on order.
2
Bold Text indicates new lop 20 members since 1984. Unties denote dropouls from lop 20 ol 1984.
Source: Conlainerisation International, Mercer analysis.
Stucture: CompanySpecific Performance
There are major differences among individual shipping companies' performance level
ROE for European and ExtraEuropean Shipping Companies
19841993 average
(1)
European
50
40
30
20
S? 10
UJ m

I

o
u

30
40
50
130

I "
)

1,000,000 2,000,000

Sales ($)

^ 1
3.00TJ,000 6.000,000
ExtraEuropean
50]
40
30
20
* 10
8 '
te 10 ^
20
30
40
50

f m m m H
| |

| | ""
) 1,000,000 3,000,000 5,000,000

Sales ($)

10,000,000
Note: (1) Each square represents a company
Source: Wordscope, Annual Report, Mercer Analysis
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Structure: Approaches for Success
A continuum of approaches for success In liner shipping can be identified ranging from company-specific strategies to
active government involvement
Company specific
strategies, largely
independent of
government support
Government support for
individual shipping companies
1
National or regional factors
supporting shipping industry
Active government
support for shipping
industry
- Market positioning
- Globalisation
- Cost structure
- Partnering
- Asset rationalisation
- Financial leverage
- Factor conditions
- Demand conditions
- Related and supporting industries
- Company strategies, structure and
rivalry
- Flag preference/
discrimination
- Maritime subsidies
- State intervention
Structure: CompanySpecific Strategies (Market Positioning)
Liner companies can be grouped according to trade coverage and relative market share. European companies compete
(effectively) in all quadrants
High
r13 Companies!
fJFwof;GlobBf
b
'
Relative Share of
Capacity in Areas
Served
362 Companiei
Competitive Positioning
Low
| I M| Regional Operators >
r
.
Regional Container Line
WanHai
HamburgSud
Canada Maritime
U/
NSCSA
\SC
# Salmarine
ACL C
# ANL
1 e Bell
e Weslwood
f Shorthaul/Specialty Operatori
GM
it Major Global Carriers
APL
Evergreen
1
K'Line
Hanjin OOCL.
NC
POL

Maersk
SeaLand
pso|
MOL
Cosco
*

|DSnSenalor|
Yangmg
)L e Nedlloyc
Hapag
Lloyd
t
NYK
Zim ChoYang
i
SecondTier Global Carriers
WKBIIK
Low
Global Coverage
High
11 Companies] '
30% of Global]
Capacityl!
14 Companies
16% of Global
Capacity "
Source: Mercer analysis positioning includes currently announced plans through 1996.
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Structure: Company-Specific Strategies (Global Players)
Four European companies (Maersk, P&O, Hapag Lloyd and Nedlloyd) are part of a select group of carriers that position
themselves as 'global operators'. The increasing role of these operators is being driven by several factors:
Increasing trend toward global sourcing and distribution by major
multinational shippers
Operational advantages from networks of linehaul and feeder services being
able to serve a number of overlapping and potentially counter-cyclical
markets
Relatively low risk and investment required for incremental growth by major
players into new markets from established bases, for example:
- Sea-Land entry into Asia/Europe trade (originally, via joint services with
Norasia, then Hyundai; shortly in joint service with Maersk)
- APL entry into Asia/Europe trade via joint service with OOCL, Nedlloyd, and
Mitsui OSK line
- Reentry of Hapag Lloyd into transpacific trade via joint service with NYK/NOL
- P&O entry into transpacific trade in 1996 via joint service with NYK, Hapag
-Lloyd and NOL
- NYK entry into transatlantic trade via joint service with NOL/Hapag Lloyd
- Hanjin entry into transatlantic trade in 1995
Cost Structure
2,700 TEU Container Vessel
Cost/day in $
30 000-
25 000-
20 00O
15 000-
10 000-
5 000-
Dry-Docking
Reserve
Ship Management
Insuranc
Stores &
Supplies
Maintenance
& Repair
- 8 0 0 0
Cost/Day in $
_ 6 0 0 0
4000
_ 2 0 0 0
Total Vessel Costs Ship Operating Costs
Nole (1): Cargo handling and container/inland cosls excluded (may be 50% ol cost lor major container carrier with significant door-to-door activity)
Source: Shipowner interviews ; Mercer eslimates
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Structure: Company-Specific Strategies (Operating Costs)
In a very competitive industry with low returns, liner operators need to reduce costs wherever possible. Crew cost is an
area that many operators are focussing on
Crew costs account for half of typical ship operating costs for a mid-sized/large vessel,
assuming an EU crew
I ht*.-.* t v: . l : ; I ' . I I I K> ml sitjnifii.willy, .is shown pi ovi ousl y in this l opoi t
Another major cost item is capital cost, which operators are seeking to reduce through
asset rationalisation with partners (vessel, terminals, equipment)
Voyage costs represent relatively few opportunities, except through better purchasing
strategies (fuel, spares, victuals)
Structure: Company-Specific Strategies (Flag Selection of Asian Countries)
Major Asian carriers have flagged out their vessels to reduce crew costs
Carrier
NYK
Hainjin
Evergreen
OOCL
NOL
Total
Home
Country
Japan
Korea
Taiwan
Hong Kong
Singapore
No.
Vessels
54
35
45
24
26
184
Slot
Capacity
(TEU)
108,794
83,884
129,524
60,165
51,429
433,796
Flag Distribution (No. vessels)
Home Open Other
Flag Registry
13
22
24
9
18
86
37
13
21
10
5
86
4
5
3
12
Slots under
Open Registry
65%
49%
48%
44%
18%
48%
Source: Conlainerisation International, Mercer analysis
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Structure: CompanySpecific Strategies (Partnerships)
Strategic partnerships are a mechanism to improve asset utilisation and decrease capital costs. Partnerships typically link
participants from 'both ends of the trade'. European carriers participate fully in partnering on all major trade lanes
Major Container Carrier Partnerships
1995 - 1996
Sea
P&O
.and 'Maersk/Nedlloyd/|
SeaLand/OOCL
ACLMSC/POL
DSRSenatot'Cho Yang
Canada Maritime/OOCL
Hapag Lloyd NYK/NOL
Lykes/Evergreen
$f$fo Europe/Far Ea s f t $ # l
Mitsui/OOCL/APL Nedlloyd
/MISC
P&O, NYK/NOL/HapagLloyd
SeaLand'Maersk*
Evergreer/LloydTriestino
(Med.)
DSRSenator'ChoYang
KLine/Yangming
NorasiaMed. Shipping'
as of 1996
m\ P
a
r East/North America

SeaLand'Maersk
APLVOOCLVMitsui OSK
NYK/NOL Hapag Lloyd/P&O
Hyundai/KLine/Yangming
DSRSenator'Cho Yang
Structure: CompanySpecific Strategies (Asset Rationalisation)
Over the last decade, European Companies have been better at rationalising assets, as evidenced by higher Sales over
Invested Capital Ratios than nonEU companies, but their interest rates have been somewhat higher, impacting capital cost
negatively
Rotation for European and ExtraEuropei i n
Shipping Companies
1.801
1. 60
mm
Si
1.40

I 1.20

CO
"5 1.00

8 0

. 60

UI
r 0.40
M
S
<S 0.20
0 oo
:
"kr
r r r I
1
1984 1965 1986 1987 1968 1989 1990 1991 1992 1993 Average
1
8493
Y ears
Interest Rates for European and ExtraEuropean
Shipping Companies
I 1 ExtraEuropean
BB European
Source: Worldscope, Annual Report, Mercer Analysis
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" Structure: Company-Specific Strategies (Financial Leverage)
The financial leverage (gearing) of EU shipping companies has remained reasonably constant over the last decade
Gearing for European and Extra-European Shipping Companies
g 40% J
30% J
<3
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Years
Average
84-93
I I Extra-European
B l European
Note: (1) Interest Bearing Debt / Interest Bearing Debt and Equity
Source: Wortdscope, Annual Report, Mercer Analysis
Structure: National Conditions (Framework)
A useful framework for explaining national conditions, be they 'historical accidents', geographic factors or deliberately
influenced economic conditions, is shown in Porter's "Competitive Advantage of Nations"
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Porter distinguishes between four factors which can influence the international
competitiveness of companies
- Factor conditions: the nation's position in factors of production, such as skilled labour or
infrastructure, necessary to compete in a given industry
- Demand conditions: the nature of domestic demand for the industry's product or service
- Related and supporting industries: the presence or absence within the country of supplier
and related industries that are internationally competitive
- Company strategies, structure and rivalry: the conditions within the country governing how
companies are created, organised and managed, and the nature of domestic rivalry
According to Porter, all four types of supporting conditions need to work together to provide
significant international competitive advantage
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National Supporting Conditions for the Shipping Industry
Factor Conditions
- Crew/officer availability
- Maritime expertise
- National infrastructure
- Geographic location/features
- Capital resources
Related and Supporting Industries
- Presence of internationally
competitive supplier or related
industries (e.g. shipbuilding,
mining, fishing)
Demand Conditions
- Structure of demand for shipping
- Sophsitication and 'demandingness' of
shippers
- International outlook of shippers
- Growth of home demand for shipping
II; '
Company Strategies, Structure and Rivalry
- Time horizons of company stakeholders
- Attitudes towards risk
- National prestige of maritime industry
- Domestic rivalry amongst shipping
companies
Source: Adapted from Michael E Porter, The Competitive Advantage of Nations, Macmillan Press, 1990
Structure: National Conditions in Shipping
Applying Porter's methodology to the shipping industry, it is clear that there is a wide range of factors that may influence he
international competitiveness of shipping companies from various European countries
For example, the UK and Netherlands have long seafaring traditions which are
likely to provide a strong supply of qualified crew
Denmark has internationally competitive shipbuilding, repair and marine
engineering industries which are likely to have supported the development of the
national fleet
It is clear that these factors are very different between various EU nations giving
rise to different national supporting conditions
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Structure: National Conditions (Local Demand)
Over the past several years, Asian trades have substantially increased their share of world container volume
Major World Overseas Container Trades
1
1990-1994
Total Volume in 1990: 24 Million TEUs Total Volume in 1994: 32 Million TEUs
Trans-
pacific
Transatlantic
Other World
Intra-Asia
Middle East and
Indian Subcontinent
Transpacific
CAGR: 8.5%
Transatlantic
CAGR: 3.4%
Europe - Far
East
Intra-Asia
CAGR: 13.8%
Olher World
CAGR: 5.0%
Middle East
and Indian Subcontinent
CAGR: 6.2%
Europe -
Far East
CAGR: 11.0%
Notes: ' Indicates share of total.
' Includes all OECD and Far Eastern NIEs (Newly Industrialised Economies) container trade with the world. Excludes
domestic United States and European Intra-regional trade, and LDC/LDC trade.
Source: Mercer/DRI World Sea Trade Service; Mercer analysis.
CAGR 1990-1994 = 7.6%
Structure: Active Government Support
The methods of active government support for national fleets fall into three main categories
Flag Preference/Discrimination
- Cargo reservation
- Exclusion of 'foreign' flags (cabotage, bilateralism,
multilateralism)
- Port surcharges/discriminatory fees
Maritime Subsidies Operatiing subsidies
Building subsidies
Investment/modernisation grants
Tax benefits
State Intervention
Government directives/regulations
State ownership/nationalisation
Export incentives/foreign exchange controls
Government investment in maritime education
Source: Ademuni-Odeke: "Protectionism and the Future of International Shipping", Martinus Nijhoff, 1984
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Structure: Position of Leading Liner Shipping Companies
European companies can be found across the spectrum, but those towards the "active government" side tend to be problem
cases, as opposed to Asian companies on that side
Company specific
strategies
MSC (Switzerland)
Government support for
individual shi ppi ng compani es
I ,
OOCL (Hong Kong) P&O (UK)
Sea-Land (USA)
Nedlloyd (Netherlands)

Nati onal or regi onal factors
Hanjin (Korea)
Hyundai (Korea)
ZIM (Israel)
Evergreen (Taiwan)
Maersk (Denmark)
MISC (Malaysia)
DSR/Senator (Germany)
NOL (Singapore)
Hapag Lloyd (Germany)
NYK (Japan)
Active government
support for shipping
industry
State Owned Companies:
COSCO (China)
Yang Ming (Taiwan)
PNSL (Malaysia)
CGM (France)
Trasmediterranee (Spain)
Structure: Summary
While the industry's financial performance is poor overall, at the aggregate level, there are no major differences in profitability between European
and non-European companies
The liner industry is seeing more concentration, and, at the aggregate level, European and North American operators continue to lose share
- European operators are expanding their fleets faster than trade volume growth to and from their home markets, however
A continuum of approaches for success in liner shipping exists, ranging from active government support (e.g., state ownership) to company
specific strategies
Points on the continuum are not mutually exclusive in that an organisation can have a well focused company specific strategy and be supported
by national or regional factors, or receive active government support in the form of grants or subsidies
Examples ol companies who have succeeded largely due to their own specific strategies can be found in all geographic regions of the world
Major European companies are positioning themselves as members ol a select group of "global operators"
Elements of company-specific strategies include market positioning, approaches to globalisation and partnership, and cost control
In a very competitive industry with low returns, liner operators need to reduce costs wherever possible:
- Crew cost is an important area, and Far Eastern operators have flagged out significant portions of their fleet to Open Registries
- Partnerships are a mechanism to improve asset utilisation and decrease capital costs. Major European companies are active participants in
global partnerships, and have started to rationalise assets well
- It would appear European shipping companies pay higher interest rates than their counterparts elsewhere. They have not significantly
diverged their capital structure from that of non-EU companies as a result, however
National or regional conditions which support liner shipping companies (such as world leading related industries or location close to major trade
routes) exist in both European and Asian countries
Present-day government support by European states has tended to be -alter the fact' in order to rescue organisations already in difficulty. Asian
governments have concentrated on fostering younger, growing companies (and been mostly successful at is)
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Conclusions and
Recommendations
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Conclusions: Flagging Out
While total tonnage under EU ownership has increased over the last decade, the degree of
flagging out has also increased substantially
- In 1994, EU owners registered nearly 47% of vessels under non-EU flags vs. only 28% in
1985 (In tonnage terms 56% and 38% respectively)
- Proportionately, EU owners have registered a greater share of their fleet under Open
Registries than owners in the rest of the world
The average age of the EU owned fleet is higher than the world average (19 years vs. 17), and
the average age of EU flagged vessels is even higher (21 years)
A significant portion of all vessel types and sizes are flagged out, and, in particular, more than
two-thirds of the EU-owned dry bulk fleet is flagged out
The UK, Spain and Germany have seen the largest decreases in their owned fleets. Greece,
the UK and Germany have experienced the largest decreases in their flag registered fleets
A total of 5,311 EU-owned vessels, representing 146 million dwt, are currently flagged to non-
EU or EU affiliated flags
- Greece, the UK and Germany account for 80 percent of the vessel count as well as tonnage
- Open Registries (Cyrus, Panama, Malta, Liberia, the Bahamas and Antigua) account for 72
percent of this vessel count and 85 percent of the tonnage
Most European-owned fleets have flagged out to multiple Open Registries, but there are
Conclusions: Use of Open Registries and Cost Implications
Open Registries and Second Registries in Europe comprise over half of world fleet tonnage
Greek, UK and German owners have flagged over half of their vessels to Open Registries;
these three countries account for the bulk of European entries into Open Registries
The top 6 Open Registries have attracted over 5,000 EU-owned vessels
- This corresponds to 85 percent of all EU-owned vessels under Open Registry
- Cyprus and Panama have attracted over one thousand EU-owned vessels each (together
they account for 46 percent of all EU-owned vessels under Open Registry)
- EU-owned vessels account for 40 percent of the total fleet under Open Registry
There are several advantages to Open Registries, including anonymity of ownership, economic
factors, political factors and ease of doing business
- In addition, the concept of Open Registries is fully accepted by the international banking and
insurance industries
From a cost perspective crew cost and corporate tax are the most flag-sensitive cost categories.
Flagging out may result in significant cost savings in both categories depending on vessel
type/size and flag:
- Crew cost differences between EU flags and lower-cost Open Registry vessels may be up to
$1.2 million per annum, or up to three times the cost under Open Registry
- Depending on assumptions made on average profitability and required rates of return,
corporate tax differences may be several hundreds of thousands of dollars per annum for
larger vessels in high-tax EU countries
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Conclusions: User Feedback on Open Registries
Owners and managers typically use multiple flags: their home flag and a preferred Open
Registry, with further flags used for specific reasons (e.g. a charterer request, building subsidy
schemes)
Issues relating to crew cost and corporate tax are by far the most important criteria in flag
selection
EU flags are considered to be significantly less attractive than Open Registries in the areas of
crew costs, tax levels and annual costs
Non-nationals are unlikely to use International Secondary Registers in preference to a traditional
Open Registry
Flag selection is a high-level decision, involving top management and outside specialists
- For ship managers, the choice of flag is often part of the proposal to the owner to manage
the vessel
Open Registries are actively marketing themselves through mailings and sales forces
Flagged-out vessels are usually manned by officers from the owner's country, but staffed with
non-EU crew
Most flagged-out vessels limit the crew (officers and A/B) to two nationalities
Conclusions: Defining Substandard Vessels
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en
There is no internationally agreed definition of a "substandard vessel"
The study checked on the correlation between casualty ("risk") rates and
vessel characteristics (flag, owner, size, age, class, type) in order to
develop a working definition of a substandard vessel
For the purposes of this study, combinations of vessel characteristics that
experienced a total casualty rate greater than 12% over the last five
years were defined as substandard
Based on this definition, about 29% of the world fleet is "substandard"
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Conclusions: Risk Factors and Casualty Records
When all vessels over 100 grt are considered, flag, size and age are the key variables that explain risk
- There is significant overlap in the explaining power of individual vessel characteristics
When only vessels over 5000 grt are considered, the combination of owner and flag is key in explaining risk
Actual Casualty Records
The EU owned fleet has a worse casualty record than the world fleet
- Both in terms of "total loss" and "all casualties"
- Partly due to some bias in the underlying data
EU owned vessels flagged to the home country have a significantly belter casualty record than all other EU
owned vessels
There is significant variation in the casualty profile of EU owned fleets
- This is particularly true for total loss rales
EU owned vessels in Open Registries appear to have a markedly worse casualty record than the totality of
vessels under Open Registry (again, some bias in the underlying dala is possible)
- It does not appear that the trading activity of European owned vessels (i.e., which routes they operate on) is a
major factor in explaining the worse casualty/total loss record of EU owned vessels
Conclusions: Economie Impact
Crew Wages and Benefits
The potential crew wages and benefits lost per annum to EU seamen, on all vessels flagged out since 1985, are
over $2.1 billion
Replacing EU crew with non-EU crew on those newly flagged-out vessels may have "saved" EU shipowners
$1.2 billion in crew cost
This translates into roughly 1.8 percent of the estimated 1994 shipping industry turnover in the EU. Since the
average Return on Sales of EU shipping companies has been around two percent over the last decade, this
implies that without flagging out, the EU shipping industry as a whole would have barely broken even
Pressure to reduce costs forces EU shipping companies to either flag out, reduce manning levels or get out of
(selected) business(es). Each of these approaches, unfortunately, results in employment loss for EU seafarers
- Flagging out has led to about half of EU crew losses over the last 10 years. Reductions in the EU owned
fleet accounted for 27 percent, reduction in manning levels in 22 percent
- From a safety point of view, both flagging out and crew size reduction may raise some concerns
Corporate Tax
Over five percent of the EU owned fleet is registered to off-shore locations, which may convey tax "efficiencies"
On the basis of current levels of return and average effective tax rates for the EU shipping industry (about three
quarters of the average theoretical tax rate that should apply to shipping) we have estimated corporate tax losses
to the EU economy at $60 million per annum
While seemingly not a very large number, this could be as high as one-fifth of the total EU shipping industry's
corporate tax bill
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Impact: Summary (continued)
Freight rates
While in the short term EU capacity could potentially be reduced significantly if high-risk vessel combinations
were excluded from EU waters, it is unlikely that there would be a significant long term effect on freight rates
Given a significant "overhang" of overcapacity, the elasticity of freight rates over capacity reduction is less than
fully elastic
Structure: Summary
While the industry's financial performance is poor overall, at the aggregate level, there are no major differences in profitability between European
and non-European companies
The liner industry is seeing more concentration, and, at the aggregate level, European and North American operators continue to lose share
- European operators are expanding their fleets faster than trade volume growth to and from their home markets, however
A continuum ol approaches for success in liner shipping exists, ranging from active government support (e.g., state ownership) to company
specific strategies
Points on the continuum are not mutually exclusive in that an organisation can have a well focused company specific strategy and be supported
by national or regional factors, or receive active government support in the form of grants or subsidies
Examples of companies who have succeeded largely due to their own specilic strategies can be found in all geographic regions of the world
Major European companies are positioning themselves as members of a select group of "global operators"
Elements of company-specific strategies include market positioning, approaches to globalisation and partnership, and cost control
In a very competitive industry with low returns, liner operators need to reduce costs wherever possible:
- Crew cost is an important area, and Far Eastern operators have flagged out significant portions of their fleet to Open Registries
- Partnerships are a mechanism to improve asset utilisation and decrease capital costs. Major European companies are active participants in
global partnerships, and have started to rationalise assets well
- It would appear European shipping companies pay higher interest rates than their counterparts elsewhere. They have not significantly
diverged their capital structure from that ol non-EU companies as a result, however
National or regional conditions which support liner shipping companies (such as world leading related industries or location close to major trade
routes) exist in both European and Asian countries
Present-day government support by European states has tended to be 'alter the fact' in order to rescue organisations already in difficulty. Asian
governments have concentrated on fostering younger, growing companies (and been mostly successful at is)
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Overall Conclusions and Recommendations
Overall Conclusions
The degree of flagging out of EU owned vessels is significant and has accelerated over the last decade
EU owners have sought to take advantage of crew cost and corporate tax advantages under Open Registries
The financial performance of the shipping industry is poor, putting pressure on owners to seek cost savings
- Most major (liner) operators in Europe, Asia and North America have, or are planning to, flag(ged) vessels to
Open Registries
The average safety record of the EU owned fleet is certainly not better than the world average, and probably
worse
- In addition, there is significant variation around the mean, i.e., some EU owned fleets are certainly much
worse than the world average
In particular, there is evidence that the safety record of the EU owned fleet that has flagged out is worse than
that of the EU flagged fleet
General Recommendations
Improving the attractiveness of EU flags
Improving Saftey
Areas for further research
Recommendations: Improving the Attractiveness of EU Flags
From an economic point of view, any initiatives at Community or national level to retain existing EU flagged
vessels and even regain EU owned flagged-out vessels, should be competitive with Open Registries in terms of
crewing flexibility
- A minimum level of EU crew requirement should be retained (at least Ship Masters)
- The EU should define a minimum requirement for the number of EU crew
- National Registers should be free to set higher requirements if preferred
- EU nationals should be fully interchangeable across EU flags
The Commission should study corporate tax arrangements for the EU shipping industry that will improve EU
owners' competitive position
The Commission should promote high safety standards as a quality "stamp of approval"
The EU should help underwrite an active marketing campaign on behalf of EU register(s)
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Recommendations: Improving Safety
The Commission should support initiatives that target inspection activity based on the detention and casualty
track-record of flag registries, owners and individual vessels, in order to optimise the allocation of PSC
inspection resources
The Commission should encourage the exchange of information about substandard vessels, including
published "black lists", between individual Port States and across geographic regions. This would enable
inspection resources to be allocated more effectively and encourage commercial pressure from charterers on
substandard vessel operators
The EU should promote the idea of imposing fines on vessel operators whose vessels are detained by Port
State Control inspectors. This would aim towards making the operation of substandard vessels an uneconomic
activity
An EU standard regarding the definition of substandard vessels should be agreed to enable consistent vessel
targeting activity to be exercised across member states
The EU should pursue the standardisation of training and safety procedures across member states
The EU should support private sector initiatives aimed at improving ship safety (e.g., the IACS initiative
regarding substandard vessels)
The EU should consider the development of incentive schemes aimed at rewarding owners with clean
inspection and casualty records
Recommendations: Areas for Further Research
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Industry tiends affecting the competitiveness of EU shipowners
Initiatives that relatively high cost operators (i.e., EU) can pursue to compete effectively in an industry
characterized by over-capacity
Relationship between non-asset related factors (crew competency, owner policies, communication procedures,
trading region) and "substandard" or "high risk" vessels
Development of a tool to improve the targeting of Port State Control inspection activity by identifying high-risk
vessels

Annexes
Flag Definitions
'One-Dimensional' Evidence of High Risk Vessels
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> Flag Definitions
liPPflPHiW: WliBS^S'
Administration
carried out in an EU
state
or
Representation in an
EU parliament
Austria Greece
Belgium Ireland
Denmark Italy
France Luxembourg
French Guiana Netherlands
Guadelope Portugal
Martinique Spain
Reunion Sweden
Finland UK
Germany
Azores
Madeira
Canary Islands
Second Register,
Laws and Labour
codes apply as lor
1st register
Flag of host nation
flown
No size or type
restrictions
DIS
GISO)
fiiM P^^ffiHatedFlagalgll'y;;,^
EU state as a
signatory at the IMO
(May fly own or host
nation flag)
Faeroes, Greenland,
French Antarctic Terr.,
French Polynesia,
Kerguelen Is., Mayotte,
New Caledonia,St. Pierre,
Wallis and Futuna, Netherlands
Antilles, Macao, British Virgin
Is., Cayman Is., Channel Is., Isle
of Man, British Indian Ocean
Terr., Anguilla, Bermuda,
Falkland Is., Gibraltor, Hong
Kong, St. Helena,
Turks and Caicos, Monserrat,
Norwegian Antarctic Terr.
(1) not split out from German Register due to lack ot Information from GIS
Annexes

Flag Definitions
One-Dimensional' Evidence of High Risk Vessels
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Annex
Profiles of Selected Open Registries and Second Registers
Liberia NIS
Panama
Cyprus
DIS
Isle of Man
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Background
Registry is administered principally Irom New York by
US nationals within International Registries Inc ().
This Organisation also administers the Marshall
Islands register.
IRI regional offices are located in Hong Kong,
London, Piraeus, Rotterdam, Tokyo and Zurich.
Reasonable safety track record, on par with world
average.
Fleet Statistics^
Vessel Types
Liquid Bulk
Dry Bulk
General Cargo/C<
Others
TOTAL
Vessel
numbers
527
431
)ntainer 336
327
1621
Gt
(millions)
32.6
15.8
4.8
4.4
57.6
Average
Size (Gt)
61,900
36,700
14,300
14,000
35,500
Average
Age(years)
11
13
10
13
12
Major Owners
Major vessel owners by country of
domicile!
3
):
US
Japan
Norway
14%
14%
10%
General Indicators
Open register ranking by Gt:
World register ranking by Gt:
1990-1993 Loss ration:
1990-1993 World Loss ratio:
2
2
0. 21%
0.20%
Source: (1) Lloyd's Register, December 1994
(2) Institute of London Underwriters - loss as % of flag fleet
(3) Vessel numbers as % of flag fleet
Open Registries: Profile of Liberia
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The Liberian fleet is almost a third younger (12 years) and its average vessel size (35,500 gt) is a least double that of the
Panamanian and Cypriot flags.
In tonnage terms 57% of the Liberian fleet comprises of large tankers, which by their nature are more closely regulated
(e.g. OPA90) than the general cargo or drybulk fleets.
The 1993 safety record of the flag (0.14%) is better than the USA (0.16%) and world average (0.15%).
14% of the Liberian fleet is owned by US interests, this maybe due to the register being based on Delaware and New York
State Law.
International Registries Inc is currently negotiating to take over the administration of the Gibraltar register.
Liberia
Flag
Liberia
Age
Less than 20
years, unless
evaluated by the
Marine Safety
Department
Nominated
Classification
Societies
IACS members
Ownership
Requirements Manning Registration Fees (in USD)
Vessels of over 1,600 tons can
only be registered by a Liberian
national or corporation. Initial
cost = $713 plus $350 in annual
fees.
The Liberian ownership can be
waived if the vessel meets all
other requirements of
registration.
Registration of a foreign
maritime entity costs:
- Statutory Registration Tax=
$510
- Trust Company Service =
$1,000
- Miscellaneous fees = $25
Thereafter annual government
fee = $200 and annual
Registered Agents fee = $300
No nationality
requirement for olficers or
crew.
No statutory manning
levels.
Initial Fee
Initial registration fee
Annual Fee
i) Annual tonnage tax
ii) Marine investigations,
nautical training and
international
participation
Other Fees
Marine inspection (per Inspection)
Provisional certificate of registry
Permanent certificate of registry
Temporary radio authority
$2,500/vessel
$0,40/nt
$1,000+$0.05/nt
$725
$200
$200
$100
Combined Maritime Publications folder
Oil record book (non-tankers)
Oil record book
Articles of Agreement
Recording of mortgage
$5
$10
$2
$475
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Background
Registry is administered by the Panamanian
Directorate General lor Consular and Maritime Affairs
(SECNAVES). Work is delegated to its New York
Representative Office
Since 1993, largest register in the world, when It
surpassed Liberia in tonnage terms lor the first time
Ranked 18th by PSC in 1993 for number of vessel
detentions
Other overseas offices are in Singapore, Piraeus and
Manilla
Fleet Statistics*
1
*
Vessel Types Vessel
number
Liquid Bulk
Dry Bulk
General Cargo/Container
Others
TOTAL
1.033
837
2,156
1,773
5799
Gt
(millions)
21.7
22.1
13.9
6.4
64.7
Average
Size (Gt)
21,000
26,400
6,400
3,600
10,300
Averag
Age(years)
17
13
17
18
15
Major Owners
domicile!
3
):
Japan
Greece
Hong Kong
22%
6%
4%
General Indicators
1
1
0.49%
0.20%
Open Registries: Profile of Panama
The Panamanian fleet is characterised by a large number of general cargo/container vessels (2156) accounting for 37%
of the fleet, with an average age of 17 years. The customer base of the registry is largely Asian, with Japan and Hong
Kong owners representing over a quarter of the register.
The 1993 safety record of the registry at 0.26% is significantly worse than the world average (0.15%). Only small
improvements in the Panamanian safety record have been witnessed since the mid-1980's.
During 1994 the registry has instigated two key policy changes to improve safety:
- All vessels must provide details on:
whether they are in class
which classification society is used
IMO number
- Reduced the number of classification societies undertaking statutory inspection on Panamas behalf.
to
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Panama
Flag
Panama
Age
No age limitations
Nominated
Classification
Societies
IACS members and
Fidenavis, Rinave
Portuguesa,
Hellenic Register,
Yugoslav Register
Ownership
Requirements Manning
Foreign owned vessels only
need legal representation in
Panama.
No nationality
requirement.
Minimum manning levels
only relate to officers and
are based on length of
voyage and size of
vessels.
Registration Fees (in USD)
Initial Fee
0 to 2,000 grt $5,000
2,001 to 5,000 grt $2,000
5,001 to 15,000 grt $3,000
15,001 and over $3,000 plus $0.10 It
each gii or fraction
thereof In excess ol
15,000 grt to a
. r. maximum ol $6,500
Annual Fee
i) Annual Tonnage Tax USD0.10/nt
ii) Annual single rate (per vessel)
international maritime trade
Oto 1,000 grt
1001 to 3,000 grt
3001 to 5,000 grt
5,001 to 15,000 grt
15,001 grt and over
$1,200
$1,800
$2,000
$2,700
$3,000
iii) Annual Marine Inspection Tankers and
cargo vessels
0 to 500 grt $
5 0 0
501 to 1,600 grt $
7 5 0
1,601 to 5,000 grt $
8 5 0
5,001 to 15,000 grt $
1
-
0 0 0
15,001 grt and over $1,200
iv) International participation and Marine
Investigations oil tankers, passenger
vessels, gas and chemical tankers $
8 5 0
Other vessels not specified above:
0 to 500 grt
501 to 10,000 grt
10,001 grt and over
$300
$400
$500
v) All vessels shall pay US$0.03 per nil or
fraction thereof
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Background
Registry is administered in Cyprus by the Department
of Merchant Shipping.
One of the fastest growing registers, trebled in vessel
numbers since 1983.
Criticised in the mid 1980s for the age and safety
record of vessels, responded by introducing a 17
year age limit
Ranked 12th by PSC in 1993 for number of vessel
detentions.
In 1994, opened Its first overseas office in Rotterdam.
Fleet Statistici
Vessel Types Vessel
numbers
Liquid Bulk
Dry Bulk
General Cargo/Container
Others
TOTAL
161
556
722
180
1619
Gt
(millions)
4.9
12.3
5.3
0.8
23.3
Average
Size (Gt)
30,400
22,100
7,300
4,400
14,400
Average
Age(years)
14
17
16
17
16
Major Owners
domicile!
3
):
Greece 45 %
Germany 13%
Russia 3 %
General Indicators
3
5
0.38%
0.20%
Open Registries: Profile of Cyprus
This register is characterised by Greek interests (45%) and dry bulk vessels, representing 53% of the fleet in tonnage
terms.
The safety record of the registry between 1990 -1993 has been almost twice as bad as the world average but better than
Panama. However this has recently improved with the 1993 Cyprus loss percentage (0.08%) being on par with Russia
(0.09%) and better than the world average (0.15%).
The dry bulk sector is the oldest (at an average of 17 years old) vessel category on the registry and has been responsible
for the majority of losses.
The Department of Merchant Marine has yet to ratify ILO 147 (a standardised protocol governing the fair treatment of
seafarers).
- This may be bureaucratic delays rather than opposition to ratification.
The maritime sector accounts for 10% of Cyprus' GDP, some $240 million. Direct revenue from the Department of
Merchant Shipping was $10 million in 1993.
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Cyprus
Flag
Cyprus
Age
Below 17 years ol
age, but up to 23
years subject to
certain conditions
Nominated
Classification
Societies
IACS members and
Cypriot, Greek and
Romanian
Societies
Ownership
By a Cypriot
By a corporation established
in Cyprus
The fee is dependent on share
capital
Share Capital
Up to $2,500
2,500 to 5,000
Over 5,000
Fee
$150
$250
$0.6 for every
$200
15% of the crew should
be Cypriots this
condition is never
observed. Therefore
there is no nationality
requirement.
Minimum manning levels
5315,000 gt vessel = 15
people
1880,000 gt vessel = 19
people
81,000 gt vessel = 20
people
Initial Fee
a) Vessels except passenger vessels 20 cents
The lee per gross ton up to 5,000 grt 16 cents
5,00110,000 grt 8 cents
for each additional gross ton over 10,000 grt
The minimum fee is $250
The maximum fee is $6,000
Radio Station Fee
The radio station installation license fee is paid
at the provisional registration of the ship and is
$20.
The radio license renewal lee is $20
Annual Tonnage Tax
The annual tonnage tax is calculated as follows:
A fixed amount of $200 plus
Gross Tons Cen
1600 5
160010000 3'.
1000150000 ;
50000 8
for each gross ton up to
for each additional ton between
for each additional ton between
for each additional ton over
The resulting figure from the above calculation is
then multiplied by the corresponding rate shown
Age of Ship
Up to 10 years
1120 years
Over 20 years
Rate
0.75
1
1.3
There is a 30% discount on the tonnage tax
when the vessels' crew and technical
management is carried out by a Cypriot ship
management company
There is also discount of up to 50% on the
tonnage tax when Cypriot seamen are engaged
on board the vessel.
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" Danish International Ship Register
Flag
Danish
International
Ship Register
Age
No age
limitations,
provided the
technical
standard is
satisfactory
Nominated
Classification
Societies
American Bureau of
Shipping
Bureau Veritas
Get manische Lloyd
Den Norske Veritas
Lloyds Register
Nippon Kaiji Kyokai
Ownership
Requirements
Danish or Foreign.
Foreign owned vessels must
have at least 20%
Danish owned capital and a
representative in Denmark
Manning
No restrictions on the
nalionality of the crew -
only the Master must be
Danish
Initial Fee
Tonnage measurement: $0.03 per gt
plus
0.001 of newbuild price
or
0.004 of secondhand price
Annual Fee
$0.15 per gt
plus
$0.15 per seafarer employed
Isle of Man
Flag Age
Isle of Man No age
limitations,
provided the
technical
standard is
satisfactory
Nominated
Classification
Societies
American Bureau of
Shipping
Bureau Veritas
Den Norske Veritas
Germanische Lloyd
Uoyds Register
Ownership
UK or Foreign.
Foreign owned vessels must
have over 51%
UK owned capital
No nationality
requirements for ratings
Senior officers must be
either EU or NATO
nationals, junior officers
maybe from
Commonwealth countries
/n/7/a/ Fee
Where the ship exceeds 1,500 gross tons $563
Registry of the transfer of ownership of a
ship by bill of sale or by transmission or of
the mortgage
Where the ship exceeds 1,500 gross tons $225
Each inspection of the register book $15
No annual fee
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Norwegian International Ship Register
Flag
Norwegian
International
Ship Register
Age
No age
limitations,
provided the
technical
standard is
satislactory
Nominated
Classification
Societies
American Bureau ol
Shipping
Bureau Veritas
Germanische Lloyd
Den Norske Veritas
Uoyds Register
Ownership
Requirements
Norwegian or Foreign. Vessel
must have Norwegian
authorised representative
Manning
No restrictions on the
nationality of the crew -
only the Master must be
Norwegian
Registration Fees (In USD)
Fees are payable to the Norwegian Maritime
Directorate and to the NIS Register as follows:
1. The Maritime Directorate Fees
Initial Fee
Cargo vessels of 400 grt and above Base fee
$1764 plus the following per net ton (nt)
First 5,000nt $0.71/nrl
Next 10,000nt $0.57/nrt
Next 30.000nt $0.43/mt
Next 70,000nl $0.28/nr1
Over 70,000nl $0.14/nrt
Annual Fee
Cargo vessels of 400 grt and above
Base fee:
Plus the following:
First 5,000nt
Next 5,000nt
Next 20,000nt
Next 40,000nt
Next 70,000nt
$1764
$0.40/nrt
$0.35/nrt
$0.28/nrt
$0.21/nrt
$0.14/nrt
2. The NIS Register Fees
Initial Fee
$100 payable upon registration
Annual Fee
$560 payable at the time ol registration and
subsequently by by 31st January each year
Annexes

Flag Definitions
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Profiles of Selected EU Fleets
Greece
UK
Germany
Denmark
Italy
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1985-1994 Profile of the Greek Owned Fleet by Flag
1985 1994
Greece
40%
Panama
14%
Cyprus
12%
Others
10%
Others
11%
The Major Non-EU Flags
Vessels Numbers:
Average DWT:
Average Age:
Cyprus Flag
1985 1994 Trend
422 804 Increase
17,500 29,800 Increase
18 19 Increase
Liberia Flag
1985 1994 Trend
180 129 Decrease
60,400 80,900 Increase
12 17 Increase
Malta Flag
1985 1994 Trend
115 439 Increase
15,600 34,400 Increase
21 20 Decrease
Panama Flag
1985
493
18,600
19
1994 Trend
416 Decrease
19,600 Increase
21 Increase
Main Vessel Types: GC (57%) 20 DB (54%) 18
DB (26%) 15 GC (35%) 19
LB (10%) 13 LB (7%) 18
DB (60%) 12 DB (48%) 18
LB (26%) 10 LB (40%) 15
GC (13%) 13 GC (11%) 19
GC (70%) 22 DB (39%) 18
DB (25%) 18 GC (30%) 21
LB (4%) 21 LB (26%) 19
GC (55%) - GC (40%) 23
DB (28%) - LB (29%) 17
LB (11%) - DB (25%) 20
Key: LB-Liquid Bulk, DB=Dry Bulk, GC=General Cargo, CC=Container, RO=Ro-Ro, (%) 15=% of vessel type in the flag, with an average age of 15 years
Flagging Out: The Greek Owned Fleet
The four major non-EU flags used by Greek interests represent 1788 vessels or 49% of the Greek-owned fleet and 16%
of the EU owned fleet. In contrast, the Greek national flag (average age 23 years) has shown a marked decline to 40% of
the owned fleet, with the removal of over 600 general cargo vessels and 170 dry bulk vessels.
Over the ten year period, the Maltese flag shows the fastest expansion by increasing three-fold to 439 vessels, followed
by a near doubling of the Cypriot flag to 804 vessels.
- Both these flags exhibit the same changes in vessel profiles and similar average ages (19-20 years).
- Dry bulk and general cargo vessels (averaging 18-21 years) are the most prevalent, and have probably switched from
the Greek national flag.
In contrast, the Liberian and Panamanian flags (averaging 17 and 21 years respectively) have shown net falls of 22% in
vessel numbers, but a gain in liquid bulk vessels (averaging 16 years).
- This has resulted in the Liberian flagged vessels increasing in average size by 30% to 81,000 dwt (over double the
size of the Maltese and Cypriot flagged vessels).
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1985-1994 Profile of the UK owned Fleet by Flag
1985 1994
Hong Kong
8%
Bahamas
7%
Vessels Numbers:
Average DWT:
Average Age:
Main Vessel Types:
Bahamaa Flag
1985 1994 Trend
21 134 Increase
44,500 20,000 Decrease
10 15 Increase
LB (71%) 10 GC (46%) 15
GC (24%) 10 LB (16%) 14
CC (5%) 4 RO (14%) 14
Liberia Flag
1985 1994 Trend
404 180 Decrease
70,000 64,000 Decrease
9 15 Increase
DB (47%) 9 LB (45%) 14
LB (28%) 9 DB (29%) 15
GC(20%) 11 GC (16%) 17
Panama Flag
1985 1994 Trend
435 480 Increase
17,300 30,500 Increase
15 18 Increase
GC (54%) 18 GC (46%) 21
DB (22%) 8 LB (23%) 17
LB (13%) 4 DB (23%) 15
Hong Kong Flag
19B5 1994 Trend
200 186 Decrease
38,800 50,000 Increase
9 14 Increase
DB (49%) 6 DB (39%) 10
GC (18%) 8 LB (26%) 17
LB (16%) 12 GC (16%) 15
Key: LB-Liquid Bulk, DB-Dry Bulk, GC=General Cargo, CC=Container, RO=Ro-Ro, (%) 15=% of vessel type in the flag, with an average age of 15 years
Flagging Ont: The UK Owned Fleet
The four major non-EU flags used by the UK, represent 49% of the UK owned fleet and 9% of the EU owned fleet.
Over the ten year period, the UK flag has declined by 46% to 447 vessels, with a halving of the liquid bulk, general cargo
and container vessels and the removal of almost all dry bulk vessels.
- The average age of vessels within the UK flag is currently 24 years.
The Bahamas flag has experienced over six-fold growth to 134 vessels, with an average age of 15 years by 1994
- The increased attraction of general cargo vessels (62) has halved the average vessel size to 20,000 dwt.
- Ro-ros accounted for 19 vessels in 1994.
The 10% growth in the Panamanian flag and doubling in average vessel size (30,500 dwt) is due to the influx of large
liquid bulk vessels into the flag since 1985.
- Their mean age is 17 years.
In contrast, the 57% decline in the Liberian flag is due to departure of up to 75% of the dry bulk and general cargo
vessels, in all likelihood to the Bahamas flag.
The Hong Kong flag has fallen by 9% to 186 vessels, due to the exit of dry bulk vessels.
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1985-1994 Profile of the German Owned Fleet by Flag
Germany
76%
1985 1994
Germany
44%
Panama
10%
Antigua
21%
Vessels Number:
Average DWT:
Average Age:
Main Vessel Types:
Antigua Flag
1985
1
193
74
GC (100%)
1994 Trend
348 Increase
4,300 Increase
12 Decrease
74 GC (86%) 13
CC (10%) 7
LB (3%) 17
Cyprus Flag
1985
73
9,900
14
GC (59%)
DB (8%)
CC (7%)
1994 Trend
232 Increase
9,300 Decrease
14 Static
14 GC (59%) 15
14 CC (19%) 6
9 DB (15%) 16
Liberia Flag
1985 1994 Trend
58 127 Increase
57,700 34,500 Decrease
10 10 Static
GC (47%) 8 LB (32%) 12
DB (26%) 27 GC (32%) 10
LB (24%) 12 CC (17%) 8
Key: LB-Uquid Bulk, DB=Dry Bulk, GC=General Cargo, CC=Contalner, RO=Ro-Ro, (%) 15=% of vessel type In the flag, with an average age of 15 years
Flagging Out: The German Owned Fleet
Since 1985, the German owned fleet shows the largest swing (24% of the fleet) to flagging out.
In 1994, the Antiguan, Cypriot and Liberian flags used by German owners represent 701 vessels, some 43% of the
German owned fleet and 7% of the EU owned fleet.
- The German flag has declined by 40%, and is characterised by the withdrawal of dry bulk and general cargo vessels,
but a 20% growth to 119 container vessels.
The Antiguan flag (348 vessels) is the most important register, after the German national flag (708) and is dominated by
general cargo (300) and container (31) vessels.
- With an average vessel age of 12 years (compared to 16 years for the German flag), it represents a relatively young
fleet.
The Cyprus flag has witnessed a three-fold increase in size to 232 vessels by 1994, with an average age of 14 years.
Since 1985, the vessel profile has changed, with a greater proportion of container (43) and dry bulk vessels (34), though
the average age of the flag has remained static.
Since 1985, the Liberian flag has increased by 118% to 127 vessels, with an average age of just 10 years. The average
size of vessels has significantly decreased from 57,000 to 34,000 dwt. This is due to the smaller size liquid bulk vessels
now in the flag.
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1985-1994 Profile of the Danish Owned Fleet by Flag
1985 1994
Denmark
82%
Liberia 2%
hers 10%
ahamas 2%
Panama 4%
Denmark 18%
Panama
50%
Bahamaa Flag DIS Flag
Vessels Numbers:
Average DWT:
Average Age:
Main Vessel Types:
1985
16
20,400
9
GC (43%) 7
DB (25%) 7
RO (19%) 17
1994
83
11,200
10
GC (53%)
LB (34%)
RO (7%)
7
13
16
1985 1994
418
- 15,400
12
GC (54%) 14
CC (22%) 9
DB (12%) 7
Liberia 18%
Others 10%
Bahamas 4%
Key: LB-Liquid Bulk, DB=Dry Bulk, GC=General Cargo, CC=Container, RO=Ro-Ro, (%) 15=% of vessel type in the flag, with an average age ol 15 years
Flagging out: The Danish Owned Fleet
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The Danish owned flagged fleet represented 567 vessels with an average age of 16 years in 1985,
by 1994 this has declined to 148 vessels, with a 25 year average age. Many of the vessels (and a
high percentage of newbuilds) have moved to the DIS register, which accounts for 418 vessels by
1994.
The DIS comprises of a relatively young fleet with an average age of 12 years. General cargo
vessels (226 units), liquid bulk (92) and container vessels (50) are the major vessel categories.
The only other significant flag is Bahamas with an average age of just 10 years. This registry is
comprised mainly of general cargo and liquid bulk vessels, which have average ages of 7 and 13
years respectively.
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1985 -1994 Profile of the Italian Owned Fleet by Flag
Others
4%
Others
Italy
96%
1985
1994
The major non-EU flags - NONE
Flagging out: The Italian Owned Fleet
Over the ten year period the Italian flagged vessels have declined by just 133 vessels to 744. This
still represents 87% of the fleet.
The next most significant flags are Malta (with 31 vessels), followed by Liberia (14). Both these
registries are generally composed of liquid bulk vessels averaging 20 and 8 years respectively.
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Flagging out: Patterns of Flag Choice by Danish and Italian Owners
Denmark Italy
Number of Vessels
1000
Number of Vessels
1000
S
D
Q

Others
Affiliated
DIS
EU
1985 1994
1985 1994
* Includes 4 Italian owned vessels registered under EU affiliatoci flags in 1994 (Isle of Man, Netherlands Antilles) and 3 in 1985 (Bermuda)
Flagging out: Patterns of Choice
Vessels owned by Italian and Danish owners account for 15% of the EU owned fleet, but only 6% of the Other flags.
The percentage of the Italian and Danish owners fleets flagged to Other flags in 1994 is 12% (211
vessels) and 25% (110 vessels) respectively, compared to the EU owned fleet average of 47%
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Annexes
*
Flag Definitions
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H igh Risk Vessels: One Dimensional Evidence
There is considerable "one-dimensional" evidence for a linkage between vessel/flag characteristics and "risk"
Link between "flag" and "detention rates"
Link between "vessel type" and "detention rate"
Link between "flag" and "casualties"
Link between "vessel age" and "casualties"

>
Presented on
following pages
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Exceeding the 1993 Detention Rate of 8.23%
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Rag State
Syrian Arab Republic*
Cuba
Honduras'
Romania
Morocco
Lebanon'
Iran
St. Vincent & Grenadines*
Egypt
Turkey
Cyprus*
Brazil
Malta*
Portugal
Bulgaria
India
Algeria
Panama*
Latvia
Myanmar, Union of
Antigua & Barbuda*
Total
Detention Rate
%
51.85
32.00
30.71
23.17
19.51
19.23
18.75
18.18
16.98
16.40
15.51
13.33
12.57
12.12
11.11
10.96
10.87
10.15
9.52
9.52
9.47
Number of Vessels in the
1993 EU Owned Fleet
1
-
159
-
1
-
-
241
9
-
1,114
-
468
46
-
1
2
1072
-
-
335
3,449
Main EU and Applicant States
(in vessel numbers)
Greece 1
-
Greece 91, UK 29, Germany 13
-
UK1,
-
Greece 2
UK 90, Greece 53, Netherlands 27
Greece 9
-
Greece 740, Germany 222, Netherlands 55
-
Greece 372, UK 29,
Portugal 45, UK 1
-
UK1
Spain 1, Belgium 1
UK 458, Greece 394,
-
-
Germany 318, Denmark 6, Belgium 5
Note: (') = Open Register
Detention rate = number of detentions/number of Individual ships involved
High Risk Vessels: Flag States Exceeding the 1993 Detention Rate
Several flags used extensively by EU owners exceed the 1993 detention rate
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There are 3,449 EU State owned vessels which are flagged to these higher risks flags, some 28% of the
1993 EU owned fleet. Greek owners represent 1662 vessels, UK owners 609 vessels and German owners
553 vessels. The Liberian flag is noted by its absence.
The top three ranking flags (Syria, Cuba and Honduras) represent fleets which have over three times the
average detention percentage of 8.23%. Their detention rates are 52%, 32% and 31% respectively.
The EU states owned fleets generally utilise the Panamanian, Cypriot, Antiguan and St. Vincent flags. Their
detention rates are respectively 10%, 16%, 9% and 18%.
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High Risk Vessels: Link with Vessel Type
There is some linkage between vessel type and detention rate
Detentions by Vessel Type
Ship Types
General dry cargo ships
Bulk carriers
Tankers/combination carriers
Gas tankers
Chemical tankers
Passenger ships/ferries
Refrigerated cargo ships
Ro-Ro/container/vehicle ships
Other ship types
Total
Number of
Inspections
5,326
5,018
1,928
304
965
659
853
1,745
496
17,294
Number of
Individual Ships
3,286
3,222
1,352
195
596
406
612
1,191
392
11,252
Number of
Detentions
383
257
99
12
49
11
53
42
20
926
Detention in % of
Individual Ships
11.66
7.98
7.32
6.15
8.22
2.71
8.66
3.53
5.10
8.23
Source: Paris MOU, Annual Report 1993
High Risk Vessels: Flag and Casualty Risk
There is a link between 'flag' and 'casualty risk'
Flags with Losses above the World Average
- Five-year Average 1989-1993 -
0.00%
Honduras
Irish Republic
Bangladesh
Thailand
Malta
Colombia
South Korea
Venezuela
Turkey
Cyprus
Pakistan
SI. Vincent & Grenadines
Nigeria
Vanuatu
Panama
Greece
Peru
Indonesia
Vietnam
Chile
Morocco
Bulgaria
Antigua & Barbuda
New Zealand
Philippines
Gibraltar
Italy
Cayman Islands
Cuba
Sri Lanka
World
Average Percentage of Tonnage Lost
0.50%
_ J
1.00%
_ J
1.50%
I
1.35%
1.01%
0.98%
0.86
0.91%
0.80%
0.80%
3 0.76%
I 0.75%
0.74%
0.66%
0.58%
0.53%
I 0.50%
ZU 0.48%
ZI 0.47%
3 0.47%
0.44%
J 0.43%
J 0.38%
0.36%
| 0.34%
I 0.33%
ZD 0.33%
I 0.33%
ZJ 0.32%
ZJ 0.32%
3 0.31%
J 0.28%
D 0.28%
I 0.27%
Note: Excluding flags of less than 100,000 gross tons
Source: I LU, presented to IUMI Conference, Toronto 1994
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H igh Risk Vessels: Age and Casualty Risk
There is a clear link between the "age of the vessel" and "casualty risk"
Casualties (Total Losses)
Percentage of World Fleet
Tonnage Lost
Percentage Share of Tonnage Lost:
Vessels over 15 Years of Age
0.50%
1989
1990
1991
1992
1993
0.41
1994
(D
0.25%

0.20
0.33
0.26
0.20
N/A
50%
I
60.8%
100%
l
77.1%
82.6%
84.2%
91.3%
92.2%
Note (1): January-June 1994
Source: ILL), presented lo IUMI Conference, Toronto 1994
Annexes

Flag Definitions
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Model Output: Summary
This annex shows details of the Regression Model Output and flag/owner risk categories. It contains the
following:
Statistical Output from the Multiple Regression Models
Details of flag and owner risk categories
The positioning of EU owners and flags within the risk categories
Details of high risk category combinations
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5 Variable Model Output
Regression Statistics
Multiple R 0.866
R Squared 0.750
Adjusted R Squared 0.727
Standard Error 0.683
Observations 186.00
ANOVA
Regression
Residual
Total
df
16.00
169.00
165.00
SS
237.279
78.899
316.178
MS
14.630
0.467
F
31.765
Sianifcance F
0.000
Coefficients Standard Error t Stat P-value Categories
Intercept
Flagl
Flag 2
Flag 3
Flag 4
Flag 5
Base Flag
Age1
Age 2
Age 3
Base Age
Sizel
Size 2
Size 3
Base Size
Class Soc 1
Class Soc 2
Base Class. Soc.
Owner 1
Owner 2
Owner 3
Base Owner
-4.598
1.951
1.383
1.200
0.934
0.704
-0.274
0.363
0.451
-1.245
-0.187
0.141
0.573
0.486
0.816
0.373
0.042
0.207
0.251
0.225
0.237
0.238
0.217
0.187
0.153
0.139
0.230
0.156
0.128
0.133
0.259
0.219
0.212
0.188
-22.201
7.760
6.156
5.056
3.921
3.249
. -1.466
2.379
3.250
5.408
-1.195
1.103
4.316
1.874
3.725
1.760
0.224
0.000
0.000
0.000
0.000
0.000
0.001
0.144
0.018
0.001
0.000
0.234
0.272
0.000
0.063
0.000
0.080
0.823
0-16% of fleet
16+-33% ol tleet
33+-50% of fleet
50 f-67% of fleet
67+-83% of fleet
83+-100% of fleet
0-5 yrs
5+-15yre
15 + -25yrs
25+ yrs
0-200 GRT
200+-600 GRT
600+- 4000 GRT
4000+ GRT
Top 6 IACS members
Other IACS members
Others
0-25% of fleet
25+-50% of fleet
50+-75% of fleet
75+-100% of fleet
Source: Regression Model, Mercer Analysis
Model Output : 5 Variable Model
4 variable categories were removed from the model on the basis of non-significance once the model output was examined
The coefficient for each variable represents the increase (or decrease) in riskiness
above the base category, associated with that variable category. Each coefficient
should be considered relative to the coefficients for other categories of the same
variable
The t-stats and p-values indicate the significance of each variable. Categories with
a p-value above 0.1 do not add to the explanatory power of the model and hence
were removed from the analysis

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5 Variable Model Output - Significant Categories Only
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.860
0.739
0.721
0.690
186.00
ANOVA
Regression
Residual
Total
df SS
12.00 233.700
173.00 82.478
185.00 316.178
MS
19.475
0.477
F
40.850
Sianificance F
3.55705E - 44
Coefficients Standard Error f Star P-value Cateaories
Intercept
Flag 1
Flag 2
Flag 3
Flag 4
Flag 5
Base Flag
Age 2
Age 3
Base Age
Size 1
Base Size
Class. Soc. 1
Class. Soc. 2
Base Class. Soc.
Owner 1
Owner 2
Base Owner
-4.723
2.033
1.462
1.264
1.004
0.751
0.481
0.561
-1.200
0.551
0.508
0.805
0.341
0.149
0.220
0.201
0.212
0.195
0.211
0.132
0.120
0.203
0.119
0.257
0.170
0.153
-31.677
9.245
7.260
5.973
5.143
3.556
3.645
4.664
-5.699
4.625
1.978
4.733
2.220
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.050
0.000
0.028
0-16% of fleet
16^-33% of fleet
33+-50% of fleet
50+-67% of fleet
67+-83% of fleet
63i-100% of fleet
5+-15yrs
15+-25yrs
0-5, 25+ yrs
0-200 GRT
200+ GRT
Top 6 IACS members
Other IACS members
Others
0-25% of fleet
25 + -50% of fleet
50+-100% of fleet
Model Output: Interpretation
Increased risk generally follows an intuitively correct or explainable pattern
Flag and owner variables indicate increased risk as a vessel moves from the base
category to the more risky categories. This is clearly as we would expect.
Age shows that medium aged vessels (5-25 years old) are more risky than young
(<5 years) or old (>25 years) vessels.
- Vessels less than 5 years old have had less opportunity to have a casualty during
the period 1990-1994, and hence appear less risky
Size shows that very small vessels are less risky than larger vessels. A further
analysis has been run to examine the riskiness of larger vessels specifically
Classification Society is counter-intuitive in showing that vessels registered with the
IACS members are more risky than those registered with other-societies. This is a
relatively small effect and is likely to be due to factors not included in the model
coming into play, such as trading region. Additionally, reporting of casualties is likely
to be better for vessels registered with IACS classification societies

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Flag Risk Categories
Risk Category 1
Country
Irish Republic
Isle of Man
Malta
Austria
Cyprus
Honduras
Norway (NIS)
Denmark (DIS)
United Kingdom
Others
Total
# Vessels
73
92
973
31
1,525
721
793
446
493
2,066
7,213
Risk
31.5%
22.8%
19.6%
19.4%
18.6%
18.0%
18.0%
17.0%
16.6%
21.0%
19.2%
Risk Category 4
Country
Sweden
Denmark
Korea (South)
United States
Italy
Portugal
Norway
Belgium
Others
Total
# Vessels
390
165
753
730
890
47
820
38
3903
7736
Risk
7.7%
7.3%
7.0%
6.6%
6.5%
6.4%
6.1%
5.3%
7.0%
6.9%
Risk Category 2 .
Country
Bahamas '
Netherlands
Panama
Others
Total
# Vessels
953
455
4,317
574
6299
Risk
14.8%
13.2%
11.1%
12.7%
12.0%
Risk Category 5
Country ,:rv
Singapore
Canada
Indonesia
Luxembourg
Others
Total
# Vessels
698
268
1257
50
636
2909
Risk
4.3%
4.1%
4.0%
4.0%
3.5%
4.0%
..
Country
: :%*~'*-.
Liberia
France
Germany
Finland
Greece
Hong Kong
Spain
Philippines
Others
Total
- itJfiitiaWiiû
Rl e k Ca l e gbr y r , ^ ^ ^
i g
'
# Vessels
.'.,Virteil'.': . :i
1,596
185
845
172
1,626
373
308
1,089
1,451
7,645
IIP
&!&?'*''I
11.0%
10.8%
10.7%
10.5%
10.1%
9.9%
9.7%
9.3%
9.9%
10.2%
Country. V S I
Japan
Russia
China, People's R.
Ukraine
Others
Total
#iVessels,
5708
1790
1738
583
1747
11566
2.8%
1.7%
1.6%
1.5%
1.4%
2.1%
Flag Risk Categories
EU flags generally appear in medium risk categories, except Ireland and the UK in risk category 1

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231 flags have been coded into 6 risk categories
EU flags appear in risk categories 1 to 5, although
predominantly in categories 3 and 4
Japan, Russia and China are amongst the lowest risk flags
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Owner Nationality Categories
Risk Category 1
Country
Irish Republic
Liberia
Isle Of Man
United Kingdom
Denmark
Netherlands
Austria
Greece
Finland
Germany
Hong Kong
Malta
Others
Total
Vessels
71
62
. 68
2,210
925
729
50
3.760
235
1,779
1,357
159
1,446
Risk
29.6%
25.8%
17.6%
16.9%
16.5%
16.0%
16.0%
15.9%
15.7%
14.7%
14.1%
12.6%
21.6%
12,851 | 10.5%
Risk Category 3
Country
Portugal
Korea (South)
Panama
Italy
Singapore
Canada
Bahamas
Others
Total
Vessels
84
1,028
306
974
1,131
279
63.00
3,868
7,733
Risk
8.3%
8.2%
7.8%
6.1%
6.1%
5.7%
4.8%
4.1%
5.4%
Risk Category 2
Country
Norway
Spain
Belgium
Cyprus
Sweden
Honduras
Philippines
United States
France
Others
Total
Vessels
1,800
439
162
432
530
173
776
1,349
377
3,365
8,587 I
?. rfl '
Risk
12.2%
12.1%
11.7%
11.1%
10.9%
10.4%
9.5%
9.5%
9.3%
9.8%
10.4%
RtokCategoiy4 . . &&;
Country #$&:'
Japan
Indonesia
China, People
Ukraine
Russia
Luxembourg
Others
Total
Vessels
7,665
1,323
1,766
568
1,747
3
1,125
14,197
Risk
3.9%
3.7%
1.7%
1.6%
1.5%
0%
1.3%
3.0%
Owner Risk Categories
202 owner nationalities were transferred into 4 owner risk categories

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The owner categories were developed in a similar way to the flag categories
EU owners appear in all four risk categories, but eight out of fifteen appear in
risk category 1
Japan, China and Russia are among the lowest risk owner nationalities as
well as having low risk flags
EU Flag and Owner Risk Categories
EU Flags EU Owners
***
:
Irish Republic
Austria
Denmark (DIS)
United Kingdom
Netherlands
Germany
Finland
Greece
France
Spain
Portugal
Sweden
Denmark
Italy
Belgium
Luxembourg
Number of
Vessels
73
31
446
493
455
853
172
1,626
205
343
83
390
165
890
38
50
Risk Level
31.5%
19.4%
17.0%
16.6%
13.2%
12.1%
10.5%
10.1%
9.8%
9.6%
8.4%
7.7%
7.3%
6.5%
5.3%
4.0%
Risk Category
> : .
1
1
1
1
2
3
3
3
3
3
4
4
4
4
4
5
.^ .CountrV'-v
Irish Republic
United Kingdom
Denmark
Netherlands
Austria
Finland
Greece
Germany
Spain
Belgium
Sweden
France
Portugal
Italy
Luxembourg
&nt
71
2,210
928
729
50
235
3,760
1,779
439
162
530
377
99
974
3
- Rl e^ Uvel !
29.6%
16.9%
16.8%
16.0%
16.0%
15.7%
15.1%
14.7%
12.1%
11.7%
10.9%
9.3%
7.1%
6.1%
0.0%
<;
mm
Category
2
2
2
2
3
3
4
Total 6,319 Average 11.1%
Total 12,346 Average 14.3%
Source: LMIS Vessel & Casualty Databases, Mercer Regression Analysis
EU Flag and Owner Positioning
Almost 80% of EU owned vessels are in the top risk category
There is a strong relationship between flag and owner risk levels
EU owners are more risky than their flags - due to EU owned and flagged
out vessels being of higher risk than EU flagged vessels
79.1 % of the EU owned fleet is in the most risky category, compared to
only 16.5% of the EU flagged fleet

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High Risk Combinations
m-T'"
. 15' I r
Flag
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 1
Risk Level 4
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 1
Risk Level 2
Risk Level 2
Weight
200f GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
200+ GRT
Age
15-25 yrs
5-15 yrs
15-25 yrs
15-25 yrs
15-25 yrs
0-5, 25+ yrs
15-25 yrs
5-15 yrs
15-25 yrs
0-5, 25+ yrs
0-5, 25+ yrs
15-25 yrs
5-15 yrs
5-15 yrs
0-5, 25+ yrs
Owner
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 2
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 1
Risk Level 2
Risk Level 1
Risk Level 2
Risk Level 1
Risk Level 1
Risk Level 1
Class. Soc.
Non IACS
Top 6 IACS
Top 6 IACS
Non IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Non IACS
Non IACS
Non IACS
Non IACS
Top 6 IACS
Top 6 IACS
Total
Number of
Vessels
228
848
1648
70
699
701
866
604
81
193
391
59
60
770
400
7,618
Risk
Level
31.6%
23.7%
23.2%
21.4%
20.2%
20.1%
20.1%
18.9%
18.5%
17.6%
17.4%
16.9%
16.7%
16.5%
15.3%
Cumulative %
^ of Fleet'
0.5%
2.5%
6.3%
6.4%
8.1%
9.7%
11.7%
13.1%
13.2%
13.7%
14.6%
14.7%
14.9%
16.6%
17.6%
H igh Risk Combinations
The 15 most risky combinations account for over 17% of the fleet

Almost all of the most risk 15 combinations are in flag categories 1 and 2
All combinations are in the larger size bracket
- A follow up analysis has been performed to examine vessels between 5,000
and 250,000 GRT so that environmental and economic implications can be
considered
No consistent pattern for age, although combinations are generally between 5 and
25 years old
High Risk Combinations - Large Vessels (5,000 - 250,000 GRT)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Owner
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 2
Risk Level 1
Risk Level 3
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Flag
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 2
Risk Level 1
Risk Level 1
Risk Level 1
Risk Level 2
Risk Level 2
Risk Level 1
Risk Level 3
Risk Level 1
Risk Level 1
Weight
5,000-15,000 GRT
5,000-15,000 GRT
5,000-15,000 GRT
5,000-15,000 GRT
5,000-15,000 GRT
5,000-15,000 GRT
50,000+ GRT
25,000-50,000 GRT
5,000-15,000 GRT
5.000-15,000 GRT
5,000-15,000 GRT
5,000-15,000 GRT
5.000-15,000 GRT
25,000-50,000 GRT
50,000+ GRT
Age
0-5, 25+ yrs
5-15 yrs
15-25 yrs
5-15 yrs
15-25 yrs
0-5, 25+ yrs
15-25 yrs
5-15 yrs
15-25 yrs
5-15 yrs
5-15 yre
15-25 yrs
15-25 yrs
15-25 yre
15-25 yre
Class. Soc.
Top 6 IACS
Top IACS
Non IACS
Top IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Top 6 IACS
Top IACS
Top 6 IACS
Non IACS
Top 6 IACS
Top 6 IACS
Total
, Number of
Vessels
50
202
58
144
296
31
85
84
128
218
68
541
30
139
57
2,131
Risk
Level
* ti eV
34.0%
27.7%
27.6%
24.3%
24.0%
22.6%
22.4%
21.4%
21.1%
20.6%
20.6%
20.5%
20.0%
19.4%
19.3%
Cumulative %
of Fleet ^v ;
0.1%
0.6%
0.7%
1.0%
1.7%
1.8%
2.0%
2.2%
2.5%
3.0%
3.1%
4.4%
4.5%
4.8%
4.9%
H igh Risk Combinations - Large Vessels (5,000 - 250,000 GRT)
Even among large vessels, the largest vessels are still lower risk

L
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The majority of owners for the 15 most risky vessel characteristic
combinations are in owner risk category 1 (10 out of 15)
Almost all flags of risky combinations are in flag risk categories 1 and 2
The majority of high risk combinations are in the smallest size category
(5,000 -15,000 GRT) with exceptions of categories 7, 8,14 and 15
All except 2 combinations involve IACS top 6 classification societies

Flag Definitions
'One-Dimensional' Evidence of H igh Risk Vessels
Output from the Regression Model on H igh Risk Vessels

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Estimate of the EU Shipping Industry's Turnover
Country
AUSTRIA
BELGIUM
DENMARK
FINLAND
FRANCE
GERMANY
GREECE
IRISH REPUBLIC
ITALY
LUXEMBOURG
NETHERLANDS
PORTUGAL
SPAIN
SWEDEN
UNITED KINGDOM
TOTAL / Average
1990
Turnover ( ECU m)
(Euroslat)
2,081
1,226
1,041
2,232
435
1994
Vet i el t
46
169
829
217
334
1,632
3,647
62
854
3
724
88
386
443
1,991
11,425
1994
DWT
609.508
4,264.372
12,458.097
3,606,544
7,639.591
17,319,902
123.474,066
164,443
11,621,108
10,336
5.680,831
855.825
4,182,534
12,003,345
54,830.578
258,701,080
Avg DWT
/ Vei !
13.250
25.233
15,028
16,620
22,873
10,613
33,856
2,652
13,608
3,445
7,846
9,725
10,784
27.096
27,539
22,643
1992
Employee
523 *
1.553
10.800
2.465 *
10,300
14,448
25,554
1.259
25,000
34 '
6,137
1,711
11,000
5,032*
14,495
122,255
Turn Over
/Vessel
12.31
1.48
0.64
3.08
4.94
4.49
Turn Over
/DWT
0.49
0.10
0.06
0.39
0.51
0.14
TumOver
/Employe
1.34
0.11
0.07
0.36
0.25
0.43
Estimated Turn Over
TO/Veeeel
207
975
1,500
16,380
278
3,836
13
1,734
1.990
8,942
ECU 42,868
$ 49,708
$ average
TO/DWT TO/Employe
86 224
507 1,057
1075 4,418
17373 10,955
23 540
1635 10.717
1 15
586 4,716
1689 2,157
7715 6,214
37.704 48,025
43,720 55,687
49,705
* Estimated based on average employees/vessel
Source: Eurostat, LMIS Vessel Database 1994, Wortdscope, Mercer Analysis
Estimating: EU Shipping Industry Turnover
Eurostat
Main shipping
Indicators
LMIS Vessel
Database
Number of
Vessels/country
Total DWT/county
Eurostat
EC Shipping
Industry Employment
Employees/country

(D
Turnover for 5 countries
Belgium, Denmark,
Germany, Netherlands,
Portugal
Notes: (1) 1990 data
(2) 1994 data
(3) 1992 data
#
(2)
Turnover/DWT
Turnover/Vessel
(2)

Estimate of EC shipping
industry turnover
Turnover/employee
(3)

.
co

Flag Definitions
'One-Dimensional' Evidence of H igh Risk Vessels
Output from the Regression Model on H igh Risk Vessels
CO
ro
co
ro
ro
EU Flagged and Owned Fleet Tables
Table 1 Summary Table of 1985 EU Flagged Fleet
Table 2 Summary Table of 1994 EU Flagged Fleet
Table 3 Summary Table of 1985 EU Owned Fleet
Table 4 Summary Table of 1994 EU Owned Fleet
Table 5 Breakdown of 1985 Owned Fleet by Flag Category
Table 6 Breakdown of 1994 Owned Fleet by Flag Category
Table 1: Summary of 1985 EU Flagged Fleet
EU Flags Affiliated Flags
Country
Austria
Belgium
Denmark
France
Finland
Germany:
East Germany
West Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal:
Portugal
Azores
Madeira
Spain:
Spain
Canary Islands
Sweden
UK
TOTAL
Vessel
Numbers
29
136
587
327
206
1,533
198
1,335
2.244
65
906
614
96
93
1
2
730
682
48
415
1,048
8,936
DWT
(OOO'S)
227
3,634
7,220
13,032
2,746
10,747
1,723
9,204
55,448
216
14,123
4,809
2,321
2,317
2
2
10,458
10,347
111
4118
20,282
149,411
Avg.
Age
10
13
16
13
20
15
14
16
18
13
21
11
21
21
11
20
15
15
17
22
17
16
Country
French interests
Danish interests
Dutch interests
Portuguese inter.
UK interests
TOTAL
Vessel
Numbers
42
45
44
2
665
798
DWT
(OOO's)
114
58
588
1
14,309
15,070
Avg.
Age
21
13
16
60
15
15
CO
ro
co
CO
ro
--
Table 2: Summary of 1994 EU Flagged Fleet
EU Flags
Affiliated Flags
Country
Austria
Belgium
Denmark
France
Finland
Germany:
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal:
Portugal
Azores
Madeira
Spain:
Spain
Canary Islands
Sweden
UK
TOTAL
Vessel
Numbers
31
41
575
152
423
729
1,568
64
782
39
461
87
77
6
4
290
257
33
304
522
6068
DWT
(OOO's)
264
91
6,953
496
6,457
6,207
58,342
177
9,666
1,756
3,468
1,789
1,758
19
12
1,565
1,228
337
2,345
4,305
103,881
Avg.
Age
13
17
15
25
12
16
23
14
23
9
13
23
23
17
27
24
24
23
28
25
21
Country
French interests
Danish Interests
Dutch interests
Portuguese Inter.
UK interests
TOTAL
Vessel
Numbers
106
36
122
2
527
793
DWT;;!
(000's)
2,533
34
1,285
1
22,547
26,400
'MS/Nm
18
24
15
69
17
17
Table 3: Summary of 1985 EU Owned Fleet
EU Owners:
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
TOTAL
Vessel Numbers
42
141
735
211
380
1,963
3,644
53
917
688
113
758
455
2,364
12,464
DWT
(000s)
585
2,791
8,930
2,693
9,577
17,023
82,782
192
14,235
4,949
2,517
10,726
5,634
69,234
231,868
Average
Age
9
14
15
20
14
15
19
14
21
13
21
15
21
15
17
CO
ro
fTI

ro
O
Table 4: Summary of 1994 EU Owned Fleet
EU Owners:
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
TOTAL
Vessel Numbers
46
169
829
217
334
1,632
3,647
62
854
3
724
88
386
443
1,991
11,425
DWT
(000s)
610
4,264
12,460
3,606
7.639
17,320
123,474
164
11.621
10
5,681
857
4.163
12,003
54,830
258,702
Average
Age
14
14
15
22
19
15
21
15
22
10
14
22
23
24
19
19
Table 5: Breakdown of 1985 Owned Fleet by Flag Category
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
TOTAL
EU Flags
(Vessel no.)
26
107
599
197
305
1,498
2,115
42
87
-
530
92
711
388
870
8,357
DWT
(000s)
206
2,562
7,480
2,606
8,593
8,536
50,146
175
13,446
-
3,985
2,314
10,203
3,951
19,310
133,513
Affiliated
Flags
(Vessel no.)

-
44
2
39
7
23
-
3
-
39
3
1
17
406
584
DWT
(000's)
-
56
2
207
33
267
-
9
-
99
2
18
97
9,442
10,232
Other
Flags
(Vessel no.)
16
34
92
12
36
458
1,506
11
37
-
119
18
46
50
1,088
3,523
DWT
(000's)
379
229
1,394
85
777
8,454
32,369
17
780
-
865
201
505
1,586
40,482
88,123
CO
53
co
ro
00
Table 6: Breakdown of 1994 owned fleet by Flag Category
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
UK
TOTAL
EU Flags
(Vessel no.)
31
62
156
171
136
724
1,467
44
744
3
427
66
279
305
477
5,092
DWT
(000s)
264
1,289
537
1,188
2,201
6,190
54,997
119
9,063
10
2,683
66
1,984
2,322
3,714
87,225

Second
Registers
(Vessel no.)
_
-
418
-
-
-
-
-
-
-
-
-
-
-

418
DWT
-
6,423
-
-
-
-
-
-
-
-
-
-
-

6,423
Affiliated
Flags
(Vessel no.)
10
44
-
94
26
12
4
4
-
83
2
1
10
314
604
DWT
(000's)
_
582
168
-
2,194
308
566
17
197
-
745
1
1
961
13,605
19,345
Other
Flags
(Vessel no.)
15
97
211
46
104
882
2,168
14
106
-
214
20
106
128
1,200
5,311
DWT
(000's)
346
2,394
5,330
2,420
3,244
10,822
67,811
28
2,361
-
2,253
192
2,177
8,720
37,511
145,709
Titles available in the transport research publications series
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994 Ranking of the Open Registries

Flags Used by Different Nationalities

H igh Risk Vessels: Introduction

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