Clay Maitland

On a quest for quality in shipping

The changing face of flag authorities

Posted on | January 21, 2012 | 1 Comment

QUALITY and performance standards are, in these times of economic woe, often more important to the struggling shipowner and operator than back in the days when money grew on trees — or seemed to.

“Value is where you find it,” one owner recently remarked. “Particularly operational value. I have to run my ships. I need professional knowledge to do that. Knowledge — or skill — costs money. Competent professional skills must be two things: available and affordable.”

A great but little-noted change that has taken place in the last few years has been loss of seasoned, competent professional talent. Perhaps because of its expense, shipboard and shoreside establishments are becoming leaner.

There is less experience, at any price it seems, to be found on board ship; less experience can be found ashore, too, in the owner’s office.

In a time of narrow or disappearing profit margins, what another owner has called “the tyranny of the day-to-day” assumes great significance. Some “knowledge issues”, such as fuel and engine efficiency, loom large on the real profit and loss statement that spells the difference between success and the lack thereof. Increasingly, owners, managers and operators are obliged to go outside the company for the technical know-how that used to be available in-house.
Some of the bigger and better flag administrations are now filling the “service gap” once exclusively provided by the owner’s own shore-based personnel.

As Peter Cremers, a famously knowledgeable shipmanager, recently put it: “Years ago, if you had a technical issue, the last place you’d turn to would be your flag state.”

There are a number of reasons why this has changed. Some major flag administrations now advise — at no extra cost — on such subjects as Marpol Annex I issues such as the performance of oily water separators subject to scrutiny by port state control authorities; main engine breakdowns; steering gear failures; fire dampers in newly built vessels; defective lifeboat release mechanisms; and other common but urgent problems.

As one flag state hand puts it: “We’re like the canary in the coal mine: we’re often the first to spot a trend, especially if it’s a bad one.”

The rising rate of detentions, and their cost impact to the owner, is one such trend. Long-range information and tracking has vastly increased the amount and type of knowledge available to the well-organised flags, and therefore to their customers.

LRIT helps the flag states to identify problem areas, and has led to much more interaction between flag administrations and owners/operators.

The good administrations now know where ‘their’ ships are, and, to some extent, can predict the problems they may encounter. LRIT, the acquisition of sophisticated information technology, and the pulling in of huge amounts of proprietary information on inspections and documentation of ships flying their flag are on hand for use by the administration and its consumers.

A cost-effective example if the kind of service provided by the more competent flag administrations is the growing number of detentions and other penalties being levied by the authorities of the Tokyo Memorandum of Understanding governments in the Far East.
This negative trend is very striking in the case of large bulk carriers operating from Australia, Indonesia and elsewhere, carrying China-bound cargoes of iron and nickel ore.

The recent loss of the Vietnamese bulk carrier Vinalines Queen points up the value of an administration that informs its shipowners of the dangers (in this example) of cargo liquefaction. It will be asked, a bit late, whether the Vietnamese flag authorities issued that advisory, or if they knew what or where this vessel was loading.

Critical to an understanding of the altered role of the flag state administration is the evolving regulatory landscape, typified by big changes in the relationship between flag and class.
The arrival of the Code for Recognised Organisations, now in draft form at the International Maritime Organization’s Committee on Flag State Implementation, will bring with it, if adopted, extensive oversight, by the flags themselves, of recognised organisations conducting survey and statutory certification services on their behalf.

In other words, flags as well as port state control authorities will likely be charged with a big degree of oversight of International Association of Classification Societies members and non-IACS members. At the same time, the IMO’s Mandatory Flag State Audit Scheme promises to impose increasingly tight quality standards on the administrations themselves.

The increased demand for a higher level of flag administration quality has therefore tended to promote the improved quality and safety records of the leading registries.

The most recent Shipping Industry Flag State Performance Table (2011), issued by the International Chamber of Shipping (www.ics-shipping.org/flag-performance.htm) reflects solid progress in key indicators for two of the ‘big three’ flags. What about the others?

“They seem to be in a holding pattern,” an IMO veteran said recently. “Given the current economy, the number of newbuildings entering the world fleet will start to drop away; that fleet will itself age; existing vessels will develop problems not found in newbuildings; a two- or three-tier performance level will appear among the flag states — and not just the open registries — and then we will see which ones survive.”

This Darwinian prognosis may seem a bit overdrawn; we’ll surely find out.

Comments

One Response to “The changing face of flag authorities”

  1. Sarah Noonan
    January 23rd, 2012 @ 7:49 pm

    Interesting article, Clay, about the roles of flag states within the industry. I am definitely interested in any dialogue it may foster among owners, operators and registries themselves.

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