FMC launches probe into international flagging practices

The Federal Maritime Commission (FMC) has decided to conduct a nonadjudicatory investigation aimed at determining whether some foreign governments’ vessel flagging regulations and practices create “unfavorable” shipping conditions for the United States.

Specifically, the commission plans to examine whether the laws, regulations or the competitive methods utilized by shipowners, operators, agents or masters of foreign-flagged vessels violate statutes as set by the FMC, such as by facilitating ‘inauspicious’ conditions in the international trade of the US.

As disclosed, the initial stage of the investigation—which has a 90-day public comment period—is focused on encouraging comments on worldwide ship flagging practices from all interested stakeholders. The FMC has noted that commenters may also feel free to identify actionable steps high-quality registries can take to lower costs and compliance burdens, as long as these“do not result in diluting standards.”

Per the FMC, ships registered under responsible flag states operate under stringent regulatory frameworks aligned with international maritime standards, including the International Maritime Organization’s (IMO) Safety of Life at Sea (SOLAS), the International Convention for the Prevention of Pollution from Ships (MARPOL), and the Standards of Training, Certification and Watchkeeping for Seafarers (STCW).

These vessels typically undergo regular inspections and certifications, with operators bearing higher costs for compliance, crew wages, and rigorous safety and maintenance protocols. As informed, the result is enhanced protection for both seafarers and the environment.

As of February 2025, according to an analysis performed by the International Chamber of Shipping (ICS), the largest portion of the global maritime transportation industry sails under flags that enforce the international regulations. Among the top compliant registries this year were Greece, Hong Kong, China, Panama, Japan, Liberia, Malta, the Marshall Islands, and Singapore.

However, as the Federal Maritime Commission has underscored, a range of issues remain concerning vessel registration, including the practice of opting for flags of convenience (FOC), often chosen by stakeholders that do business under lax regulatory oversight. As explained, this can lead to lower safety, as well as ‘compromised’ ecological and labor standards.

What is more, FOC vessels exploit lower operational costs via reduced taxes, cheaper labor, and irregular maintenance or safety measures, and may avoid inspections or certifications, thus failing to meet conventions like SOLAS, STCW and MARPOL.

Moreover, practices like flag-hopping or using false flags weaken regulatory oversight, allowing shipowners to sidestep legal obligations, creating gaps in the enforcement of environmental guidelines. This puts both crew welfare and maritime safety at risk, the FMC has said.

When it comes to the United States, in particular, recent incidents linked to flags of convenience that happened domestically brought to the surface the ‘urgent’ need to address these issues, the commission added.

A National Transportation Safety Board report from March 2025 is said to have reiterated the same notion, underlining that FOC can bring about ‘serious’ safety risks like bridge collapses and near-misses, like the Singapore-flagged/Marshall Islands-registered MV Dali, which lost power and caused the March 2024 collapse of the Francis Scott Key Bridge in Baltimore, Maryland. As explained, the Marshall Islands’ flag is seen by many as one of the most popular FOCs right now.

At a time of increasing geopolitical shifts, the United States has endeavored to rejuvenate its maritime transportation industry, believing it to be under a ‘great disadvantage’ considering the ‘dominant presence’ of Chinese state-owned and private companies in shipping.

The country, spearheaded by President Donald Trump, has introduced numerous measures aimed at reviving its maritime sector.

For instance, the government has unveiled a New SHIPS for America Act that envisions breathing new life into American shipbuilding as well as commercial maritime operations. President Trump also declared that a designated Office of Shipbuilding at the White House would be opened to support US efforts in constructing a much larger number of units than it is currently capable of doing.

The target of these measures, as divulged by the US government, is to ensure that ‘at any point in time’, there are at least 250 US-flagged vessels in service.

Across the Atlantic Ocean, the European Union (EU) has been taking similar steps. In May this year, the European Commission gave a stamp of approval to the reintroduction of Italy’s “International Registry” scheme, which aims to encourage maritime transportation players to register their units in Europe.

As elaborated, under the vision, shipping companies that register their vessels in the International Registry are eligible for a corporate tax reduction, along with a range of additional incentives—including exemptions from seafarers’ social security and welfare contributions, reduced taxes on insurance contracts, and lowered taxes on the registration of seafarers’ labor contracts.