US to take on possible fraud in foreign-flag registries

WASHINGTON — The Federal Maritime Commission is opening an informal investigation into whether so-called foreign “flags of convenience” are unfairly competing against the United States in the international container trades.

In a notice published Wednesday, the FMC said it is concerned about conditions created by the “wide and uneven” range of foreign vessel flagging regulations and practices, versus those of foreign countries that uphold high standards in their registries.

Some countries “have engaged in a ‘race to the bottom’ – a situation where countries compete by lowering standards and easing compliance requirements to gain a potential competitive edge,” according to the FMC.

By offering to register and flag vessels with little or no oversight or regulation – ship registries that are widely referred to within the industry as “flags of convenience” – countries can compete against each other to profit from registry fees while minimizing expenses associated with vessel inspections and ensuring compliance with maintenance and safety requirements, the agency stated.

“In doing so, these nations compete to lower the cost of registering and flagging vessels beyond a point where they can ensure the efficiency, reliability, and safety of the vessels used in the ocean shipping supply chain. The use of these flags of convenience endangers the ocean shipping supply chain.”

As an initial “non-adjudicatory” investigation that will not involve a formal legal process with a resulting decision, the FMC is opening a 90-day public comment period to gather examples of unfavorable flagging laws, regulations and practices.

“The commission is particularly interested in receiving comments from individuals and organizations with expertise or experience in vessel operations, international trade, international law, and national security,” the agency stated in a press release, and is seeking participation from foreign governments, international organizations, shipowners, shipping companies, shippers, and labor.

In particular, the FMC would like to know:

• How irresponsible vessel flagging laws, regulations and practices endanger the efficiency and reliability of the ocean shipping supply chain, and which laws and rules pose the most danger.
• Whether those laws and practices foster the development of bad actors or fleets, such as the so-called shadow fleet (ships that attempt to conceal their operations).
• How certain vessel flagging laws and practices endanger maritime infrastructure, such as ports, bridges, canals and choke points.
• Practices by owners or operators of vessels that undermine the efficiency and reliability of international ocean shipping, including:

• Dangers posed by underinsured or uninsured vessels to other vessels, maritime infrastructure and mariners.
• Dangers posed by vessels with poor or nonexistent maintenance programs and few or no safety measures.
• Dangers posed by Inexperienced vessel owners, operators, agents and unqualified mariners.
• Dangers posed to freedom-of-navigation principles by irresponsible vessel owners and operators, such as dragging anchors and damaging undersea cables or infrastructure, or turning off, jamming or spoofing AIS and GPS.

The deadline for submitting comments to the investigation is Aug. 20. Comments can be submitted online here, search for Docket No. FMC-2025-0009.

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• US opening investigation into container shipping choke points
• FMC investigating Spain’s alleged blocking of US ships

Click for more FreightWaves articles by John Gallagher.

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