Top Flag States in Shipping: Panama, Liberia and More

The countries with the largest ship registries are mostly not traditional maritime powers. Panama, Liberia and the Marshall Islands carry far more of the world's merchant fleet than the countries whose companies own the ships. They compete for registrations with low fees, tax advantages, fast service and, in some cases, lighter regulation.

Most of the world's shipping now sails under a flag other than its owner's. This practice, known as using a flag of convenience or an open registry, lets owners avoid some of the taxes, rules and costs of their home country, and it has made competition between registries intense. This guide looks at seven of the biggest and best-known flag states, with figures from around 2020 unless stated otherwise.

Panama

Panama has long been one of the world's two largest flag states. In 2020 its registered tonnage grew 4.4% to 235 million gross tons, about 16% of the world fleet, and its registry is reported to bring the country close to $500 million a year in fees, services and taxes. Liberia has since overtaken Panama by gross tonnage.

Panama's location on the Panama Canal, linking the Pacific and the Atlantic, puts it at the centre of world trade routes. Owners choose its open registry for straightforward registration, exemption from income tax on shipping earnings and access to lower crew costs.

Liberia

Liberia, in West Africa, was the fastest-growing major flag state for two consecutive years around 2020, attracting owners from Greece, Japan, China, Singapore and the United States. Its registered fleet grew 8.06% from January 2020, adding 13.8 million gross tons.

During the COVID-19 pandemic the Liberian registry was among the first to offer remote registration and inspection, so owners could keep ships in service while surveyors could not travel. Owners also point to its lower cost of changing flag, simpler procedures and investment in digital systems, and to its practical stance on industry problems such as the crew change crisis.

The registry has worked with Hyundai on hydrogen-powered cargo ship designs, and in 2022 it gained ISO 9001:2015 certification through Lloyd's Register Quality Assurance.

Marshall Islands

The Marshall Islands registry has one of the youngest fleets of any major flag, with an average age of about 11 years, and the registry reported that 27% of its ships were fitted with environmental technology. It held about 12% of world gross tonnage and around 15% of the world's container ships, placing it in the top five registries for containerships. Its ships average about 75,000 deadweight tonnes, so the fleet leans towards medium and large vessels.

Owners choose the flag for its low taxes and flexibility. The registry had been on the US Coast Guard's Qualship 21 list for 16 consecutive years.

Singapore

The Singapore Registry of Ships, run by the Maritime and Port Authority of Singapore, has a modern fleet of tankers, bulk carriers and container ships, and has added offshore vessels to the types it registers.

During the pandemic it carried out more than 130 remote inspections from mid-2020. Its Green Ship programme had recognised 666 ships since 2011, and in the year covered it issued Green Ship certificates to 29 Singapore-flagged vessels.

Hong Kong

The Hong Kong Shipping Registry has a young fleet and a reputation for quality, safety and environmental standards. To serve owners outside the territory it has regional offices in Shanghai, London and Singapore, which handle new registrations and give emergency support to Hong Kong-flagged ships.

Malta

Malta has the largest ship registry in the European Union. At the end of 2020 it was the sixth largest in the world, with close to 85 million gross tons, after growing 22% in four years to a record level. The registry also grew sharply in superyachts, with registrations up 53% to more than 880 by the end of 2020. Maritime activity is reported to contribute more than 14% of Malta's GDP.

The flag is governed by the Merchant Shipping Act, which has around 400 articles in 10 parts and has been amended many times since 1986. It allows bareboat charter registration and has no trade restrictions. Malta has ratified the main IMO and International Labour Organization conventions and met all 18 criteria in the International Chamber of Shipping's flag state performance table.

The Bahamas

The Bahamas is a leading flag for cruise ships, with more than 100 flying its flag. The Bahamas Maritime Authority (BMA) runs the registry, has offices in several major shipping cities, and offers an online system called the Bahamas Electronic Registry Information System (BORIS). Through it owners can register and document vessels, handle crew certification, arrange technical support and inspections, and pay fees and taxes electronically.

The BMA also works with cruise operators, from the design stage onwards, and with the IMO.

Why flag states matter

A flag state is responsible for regulating the ships on its register. The choice of flag decides which laws apply to a ship, what tax its owner pays, and which inspections and certificates it needs.

Open registries took off in the 1960s, and Liberia passed the United Kingdom as the world's largest registry in 1968. Today more than half of the world's merchant ships are on open registries, and about 73% of the global fleet is registered in a country other than the one where its owner is based.

That growth has raised concerns about enforcement. Flag states are supposed to make sure their ships meet safety, environmental and labour rules, but a flag with little connection to the owner may have little ability or will to do so. The international principle of a "genuine link" between a ship and its flag is meant to guarantee real oversight, and flags of convenience test it.

Port state control fills part of the gap: under agreements such as the Paris and Tokyo Memoranda of Understanding, port states inspect visiting ships and detain those with serious deficiencies. Weak flag state oversight has also been blamed for unsafe ship recycling.

A flag's reputation matters to owners as well. A ship on a well-regarded register can be easier to market and to finance, and many registries add tax breaks and simpler registration to attract owners.

FAQ

What does a flag state do?

A flag state regulates the ships registered under its flag. It sets and enforces safety and pollution rules, carries out or delegates inspections, and issues certificates and documents. Every ship must fly the flag of its registry and follow that country's maritime law.

Which is the largest flag state?

Panama was the largest flag state in 2020, with about 16% of the world fleet by tonnage. Liberia has since overtaken it by gross tonnage.

Why do owners register ships in Liberia?

Liberia offers low costs, simple procedures and remote registration and inspection, which it introduced during the pandemic.

Why do owners choose the Marshall Islands?

Owners cite low taxes, flexible procedures and a young fleet with a strong inspection record, including 16 consecutive years on the US Coast Guard's Qualship 21 list.