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Wednesday, July 18, 2012

Tuvalu acquires fleet of Super-tankers

Marine Insurance is as vast as the expanse of the sea – practitioners or anybody dealing with insurance of cargo whilst they are in transit from places, would sure have heard of the term ‘Flag of Convenience’.  In earlier days, when there was tariff, there were many extras charged – which include Overage, Undertonnage, non-classification, non-approval and of these Overage again depended on whether the carrying vessel was flag of convenience.

Heard  of Tuvalu, formerly known as the Ellice Islands, is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia. It comprises four reef islands and five true atolls. Its nearest neighbours are Kiribati, Nauru, Samoa and Fiji. In terms of physical land size, at just 26 square kilometres (10 sq mi) Tuvalu is the fourth smallest country in the world.  Tuvalu became fully independent in 1978 and in 2000 became 189th member of the United Nations.

Kilikiti is one of several forms of the game of cricket. Originating in Samoa , this game is popular in areas with strong Polynesian populations. The game is the national sport of Samoa, is played in Tuvalu, and is particularly popular in New Zealand. The ball is made of a very hard rubber wrapped in pandanus. Players are not protected by any padding or masks.

The tiny-tot Tuvalu has acquired a fleet of super-tankers, yes.  The vision statement of Tuvalu Ship Registry aims at elevating Tuvalu's Maritime status to world standards and claims of a wide range of advantages and benefits that owners of Tuvalu flagged vessels.  They offer special discounted fees for first-time Owners / Operators who flag their vessels under Tuvalu; fleet discount for two (2) or more vessels registered at the same time or within a period of 12 months; vessels below the age of 15 years – discount increases as age decreases;    vessels above 20,000 GT – discount increases as GT increases.    Their website further claims of fast and convenient service coupled with efficient telecommunications, financial and legal services readily available to owners.  More importantly, there is no restriction on the nationality of ownership and there is no restriction on the nationality of officers or crew.  Three is tax exemption as well.  

Now read that statement again ‘Tuvalu has acquired a fleet of super-tankers’ but in flag name only. Reuters Freight Fundamentals reported that National Iranian Tanker Company had flagged 11 of its tankers, including seven large crude carriers, to Tuvalu. They have also renamed the Tuvalu tankers, switching VLCC Hoda to Precious, and other ships to European sounding names: Pioneer, Lena, Truth, Motion, Brawny and Blossom.

Arising out of the European Union ban on all Iranian oil imports due to international sanctions citing Iranian failure to allow international inspectors to verify its nuclear programmes, Merchant ships need a flag from national ship registries to gain access to most of the world's ports. Flags of convenience (FOC) allow shippers to avoid more stringent maritime and employment regulations of major nations. In the case of the tankers if any are involved in accidents, Tuvalu one of the world's poorest states, would be powerless to pay compensation or help clean up.

There are reports of Tuvalu and Kiribalti offering registration of vessels at low fees.  It has had its repercussions and reportedly a  prominent US lawmaker  asked the small South Pacific island nation Tuvalu to stop reflagging Iranian oil tankers and warned its government of the risks of running afoul of US sanctions. Primarily the reflagging of  ships could make it easier for Iran to obtain insurance and financing for the cargoes, as well as find buyers for the shipments without attracting attention from the United States and European Union.

In Marine parlance, the  flag state of a commercial vessel is the state under whose laws the vessel is registered or licensed. The flag state has the authority and responsibility to enforce regulations over vessels registered under its flag, including those relating to inspection, certification, and issuance of safety  and pollution prevention documents. As a ship operates under the laws of its flag state, these laws are used if the ship is involved in an admiralty case.  The term "flag of convenience" describes the business practice of registering a merchant ship in a sovereign state different from that of the ship's owners, and flying that state's civil ensign on the ship. Ships are registered under flags of convenience to reduce operating costs or avoid the regulations of the owner's country. The term "flag of convenience" has been in use since the 1950s and refers to the civil ensign a ship flies to indicate its country of registration or flag state.

With regards – S. Sampathkumar.

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