1

CHAPTER 1: Introduction

1.1 Background ....................................................................................................................... 1

1.2 Scope and objectives ......................................................................................................... 5

1.3 Structure and organization ................................................................................................ 6

CHAPTER 2: Basics of Flag State Control, Delegation and Monitoring

2.1. International conventions .................................................................................................. 8

2.2. IMO instruments ............................................................................................................. 11

2.3. Regional initiatives ......................................................................................................... 15

2.4. Authority, responsibility, and liability ............................................................................ 17

2.5. An overview of management of delegation and control ................................................. 19

2.6. Selecting measurement tool ............................................................................................ 24

CHAPTER 3: Flag State Control versus Port State Control

3.1. Substandard shipping ...................................................................................................... 26

3.2. Flag State Control ........................................................................................................... 27

3.2.1 Problems ................................................................................................................ 28

3.2.2 Considerations in flag state control........................................................................ 30

3.2.3 Flag state control in Archipelago Country, Indonesia .......................................... 32

3.2.4 Questionnaire on flag state control ....................................................................... 34

3.2.5 Associated costs .................................................................................................... 36

3.3. Port State Control ........................................................................................................... 38

3.3.1 Problems ............................................................................................................... 40

3.3.2 Effectiveness ......................................................................................................... 43

3.3.3 Associated costs .................................................................................................... 48

3

3.4. Relationships between flag state control and PSC ......................................................... 50

3.5. Resources and personnel ................................................................................................ 54

CHAPTER 4: Methods of Flag State Control

4.1. Classifications of method ............................................................................................... 58

4.1.1 Based on time interval .......................................................................................... 59

4.1.2 Based on initiatives ............................................................................................... 61

4.1.3 Based on target ...................................................................................................... 62

4.1.3.1 Targeting Ships ........................................................................................... 62

4.1.3.2 Targeting RO: Is auditing necessary? ......................................................... 65

4.1.3.3 Targeting Operator ...................................................................................... 67

4.1.3.4 Focus areas within ships, maintenance, and human factors........................ 67

4.1.3.5 Single criteria or multi criteria .................................................................... 71

4.1.4 Based on proportion .............................................................................................. 71

4.1.5 Combinations of approach .................................................................................... 73

4.2. Choice of methods ......................................................................................................... 75

Conclusion
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LIST OF TABLES

Table 1. Classification of detention based on type of registry in Tokyo MOU ............... 52

LIST OF FIGURES

Figure 1. Barriers by maritime organizations (modified from Swiss Cheese Model by

James Reason) ........................................................................................................................ 3
Figure 2. The Control Process (Dixon, 2003, p. 141) ......................................................... 19
Figure 3. Passenger ships traffic network in Indonesia (courtesy of Meyer-Werft) ...... 33
Figure 4. Tokyo MOU deficiencies record 2004-2006 ....................................................... 41
Figure 5. UNCTAD distribution of Merchant fleet of the world ..................................... 51
Figure 6. Distribution of detentions based on type of registry in Tokyo MOU .............. 52
Figure 8. Major deficiencies in Tokyo MOU during 2004-2006....................................... 68
Figure 9. Service and maintenance shortcomings (UK P&I Club, 1995) ........................ 70
Figure 10. Shortcomings in safety standard and equipment (UK P&I Club, 1995)....... 70

LIST OF ABBREVIATIONS

ASI Annual Ship Safety Inspection

BIMCO Baltic and International Maritime Council
CIC Concentrated Inspection Campaigns
DNV Det Norske Veritas
DWT Dead Weight Tons
EC European Commission
EMSA European Maritime Safety Agency
EU European Union
FOC Flags of Convenience
GT Gross Tonnage
IACS International Association of Classification Societies
ICS ICS International Chamber of Shipping
ILLC International Load Line Convention
IMO International Maritime Organization
5

INTERCARGO International Association of Dry Cargo Shipowners

INTERTANKO International Association of Independent Tanker Owners
ISF International Shipping Federation
MARPOL International Convention for the Prevention of Pollution from
Ships
MEPC Marine Environment Protection Committee
MOU Memorandum of Understanding
MSC Maritime Safety Committee
MTC Maritime Transport Committee
NGO Non Governmental Organization
OECD Organisation for Economic Co-operation and Development
P&I Protection & Indemnity
PSC Port State Control
QSCS Quality Management System Certification Scheme

RINA Royal Institute of Naval Architect

RO Recognized Organizations
SIRC Seafarers International Research Centre
SOLAS International Convention for the Safety of Life at Sea
UNCCROS United Nations Convention on the Conditions for
Registration of Ship
UNCLOS United Nations Convention on the Law of the Sea
UNCTAD United Nations Conference on Trade and Development
WTO World Trade Organization
1

Introduction

1.1 Background
The world had never been so small like today. Perhaps, it is the most suitable saying
to describe how we live recently with the global trade when goods are almost freely
transported around the world. If we can draw up the node of transportation today, we
would find that the globe which is covered by lines. In its International Trade
Statistics 2006, WTO reported that the total export value of world merchandise trade
in 2005 is 10,159 billion US Dollar or the highest in history (2006, pp. 15, 28). It
means that more and more people consume on goods produced by foreign countries,
instead of their own domestic products. As contemporary example is the appearance
of China as new emerging power in industry and trade, it really creates high
dependency of Americans for Chinese products. In her book A Year Without "Made
in China": One Family's True Life Adventure in the Global Economy published in
June 2007, an American business journalist named Sara Bongiorni wrote how
frustrated she was when trying to boycott Chinese products for the whole year of
2005.

If the world trade creates dependency on foreign commodities, similarly the

dependency to sea transportation does. The fact says that shipping contributes to
more than 90 percent of global trade with over 25 thousand billion tonne-miles of
cargo transported in 2003 (International Maritime Organization [IMO], 2005). While
the number of newbuilding ships that enter the world fleet is growing, it is certain
that the level of trade will continue to grow time over time. The implication of above
figure is to secure the world demand of imported supplies, the safe sea transportation
is a non negotiable issue.

It would be irrelevant if we discuss maritime safety without involving the central role
of flag states. Besides its obligation in providing service for registration, ownership,

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tax, and other commercial matters, maritime administration has ultimate

responsibility in ensuring that ships are seaworthy and properly manned. In other
words, the public side of maritime administration duties in maritime safety and
environmental protection is not less important than the private rights in collecting fee
and tax. There should be a comprehension inside maritime administration that ship
registration is a contract that contains obligation and rights. As the ships formally sail
under a particular flag, consequently they are eligible to enjoy rights of being
registered, to enjoy reputation of the flag, and to be closely supervised for their
ships‟ safety by maritime administration. For the latter issue, most of the time it is
technically handled by the technical department in administration.

Technical department has a mission to ensure that their fleet follows national and
international regulations by the application of acceptable standards. In the attempt,
the enforcement for these standards to be maintained at all time is by following the
procedure of regular survey and inspection. If only good supervision by the flag state
and proper maintenance by shipowner that the ship can sail without significant
hindrance such as detention at foreign ports. Being different to port state control that
is applicable to foreign ships, the enforcement function upon their own fleet is called
flag state control.

Unfortunately not all administrations exercise their control properly nor satisfactorily.
Not properly in terms of escape from their control duty and not satisfactorily in terms
of inadequate survey coverage and expected result. The statistics in some PSC
regime points out that there is a relationship between flag and suspected conditions
of the ships. Since 1999, Paris MOU in their annual report has been ranking those
flags that fall to black list, grey list, and white list. The published list together with
the recent trend of more active PSC cooperation indicates that there is a need to
„shame and blame‟ flag states that do not properly exercise their flag state control.
Moreover, there is a message from PSC regime that actually they are the next control
layer after flag state control. In other words, PSC is complementary of flag state

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control and not substitution. If the Swiss cheese model of Reason (1997) may be
adopted, it will look like the figure below.

Figure 1. Barriers by maritime organizations (modified from Swiss

Cheese Model by James Reason)

In practicing their statutory functions, many administrations are helped by the

existence of technical organizations that are willing to act on behalf of
administrations on mutual basis, so called recognized organizations RO. Some
maritime administrations mainly focus on the commercial side while leave their
statutory obligations of safety and environmental matters on the eyes of recognized
organizations, either fully or partially. The other traditional states insist to perform
these statutory matters by their own. However, the trend today indicates that the
involvement of RO in statutory works is growing. It is not only in the scope of
authorization, but also the number of RO involves. It may be interpreted as a signal
that more and more administrations intend themselves to be more dominant on
supervisory role than in operational level. The problem may arise if administrations,
as a consequence of delegation, do not know how to effectively monitor the RO. In
other words, it is not only a question about what and how to delegate, but how to
control the delegation as well. In the worst case, the delegation may become shift of

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work only and exposes higher hazard for higher risk of responsibility. It is necessary
to understand that delegation is a transfer of task, while on the other hand it creates
new tasks that need new skill –monitoring-, that administrations do not necessarily
have if they do the tasks by themselves.

In the rise of awareness to adopt new public management and to positioning

themselves as commercial agents who provide satisfactory level of service to their
customers, flag states see that the ship registration service is a business of reputation
and trust. The tendency of shipowners to search on quality and responsible flag states
also drives this transformation. The risk of being inspected more thoroughly in PSC
as a consequence of sailing on black list flag is something that shipowners really
want to avoid. PSC black list is not the only publication that the shipowners consider.
BIMCO, INTERCARGO, ICS/ISF, and INTERTANKO had even published the
Shipping Industry Guidelines on Flag State Performance for two times that are
intended to provide recommendation for shipping companies in choosing appropriate
flag (2003; , 2006). As customers, most shipowners enjoy the wide options in
choosing flag, as well as freedom to choose flag that suits their need.

Fortunately, some reputable registers react positively by providing not only

uncomplicated administration process, but at the same enforce high safety standard
to be considered as responsible flag states. They regarded the list as useful means of
advertising and therefore seek the way to improve their rank. Perhaps that is why the
number of black-list flags has been diminishing over the past few years (Paris MOU
Secretariat, 2006). With the today tougher competitiveness in the business and the
bad stigma of open registers as flags of convenience FOC, it really reminds the
registries that being cheap is not the only way to attract shipowners and to win the
competition. Inevitably, in today‟s era when irresponsible flags are heavily
publicized as escape of substandard ships, the option to be a quality flag state is more
favorable and profitable.

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In conclusion, it should be emphasized that it is not viable to become a quality flag

state without proper flag state control, including the challenge on formulating the
way to monitor the RO. Imagine Panama‟s effort in the management of 28 RO
(International Maritime Organization [IMO], 2007) and comprises a fleet of 141
million GT (United Nations Conference on Trade and Development [UNCTAD],
2006, p. 137). Therefore, the need to have a well-built flag state control is urgent and
also beneficiary for flag states. Bear in mind that for flag states, control would not
only benefit to the safety side but also financial side, which motivates the writer to
conduct this unit.

1.2 Scope and objectives

To provide area of focus and limit the subject studied on this unit, the flag state
specialist views. Thus, this unit will outreach the consideration taken by
administration to conduct flag state control including the resources issue. Since
between flag state control and PSC have similar nature of works, in many times that
the data and comparison will be made between them. The ineffectiveness of PSC in
specific conditions will be covered in subsequent part. In addition, the economic side
of flag selection and flag state control also will be discussed, including the market
trend in selecting flag states. Later on, this unit will encompass the classification of
methods in flag state control, together with the possible combinations among
methods. The discussion will be supplied with public domain data and experts‟ view
on specific subjects. However because of the limitation of sources and data, which
some flag states hesitate to disclose, the proportion of qualitative discussion will
dominate this studied subject. Related issues in flag state control that pertains to RO
will be in the scope of this unit as well.

In addition, the objectives of this unit is to bring the lecturer sight:

- To improve flag states understanding on the importance of flag state control.

- To study the relationship between flag state control and PSC.

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- To provide comparisons of flag state control and RO monitoring practice in

several countries.

- To provide flag states the possible methods in flag state control.

- To discuss issues of Administration resources in dealing with flag state

control and RO monitoring obligations.

1.3 Structure and organization

The unit will begin with basis of delegation and fundamentals in flag state control
and RO monitoring. It will examine the generality of IMO instruments and regional
initiatives to improve the practice in maritime administration. The display of some
interesting facts will further clarify the insufficiency of those instruments, which will
create non-uniformity among maritime administrations. The mechanism of how
diverse practice around the world coupled with administration limited resources, will
imply to the maritime safety can be found in this chapter. Economic factors on that
issue will also be discussed.

Next chapter is a review on legal instruments on flag state control. It will be divided
into some parts, each will be dealing with flag state control in international UN
convention, IMO conventions, followed by regional initiatives and its legal basis.
The experts‟ theory and view on the matters related to delegation and control will
constitute the management basis. The discussion on control management, its
principles, and problems will wrap up this chapter.

Third chapter will cover the issues both on flag state control and PSC. The
characteristics, effectiveness, associated costs, and challenges of each control will be
reviewed and followed by the comparison between flags state control and PSC. The
comparison of practice in several maritime administrations concerning the control
and RO monitoring will be examined. It will encompass the rationale and

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considerations, as well as the resource deployment in control and monitoring. The

review is not solely for the information or description purpose, but also to grasp the
link between backgrounds, monitoring mechanism chosen, and problems faced by
that particular administration.

Later on, the subsequent chapter has aim to introduce the possible methods in
conducting flag state control. The methods will be classified into four approaches
that mostly not exclusive to each other. In other words, those methods open a room
for combination. Each method will be evaluated individually to provide a grasp on its
compatibility to other methods. Again, those methods may receive significant
influences from PSC, which is more developed than flag state control

As the wrap up to this research, the final chapter on conclusions and

recommendations will go over the previous chapter in short and conclude them. It
will go along with the shortage of this research before the writer expresses his
opinion on better flag state control management in maritime administration.

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CHAPTER 2: BASICS OF FLAG STATE CONTROL, DELEGATION AND

MONITORING

2.1. International conventions

There is one characteristic of any product of law, it always comes with rights and
obligations. So does for the conventions under the auspices of UN that pertain to
shipping. Article 94.1 of UNCLOS 1982 stipulates that Every State shall effectively
exercise its jurisdiction and control in administrative, technical and social matters
over ships flying its flag. Therefore, flag states shall take necessary measures to
ensure safety at sea by surveying their ships periodically by qualified surveyors, as
mandate of Article 94.4. While those necessary measures shall conform to generally
accepted international regulations, procedures and practices, flag states also have
rights to take any steps which may be necessary to secure their observance (Article
94.5).

Those articles in UNCLOS had acted as clear grounds for what Administrations have
been performing until now, including the appointment of RO. Even though
delegation of flag state duties is not mentioned explicitly, it may be justified under
the right to take steps as necessary. There is no limitation of which surveyors are
entitled to survey the ships, as long as they are qualified to assess the construction,
equipment, and seaworthiness of the ship.

Another convention that is inseparable to flag state regime is the UN Convention on

the Conditions for Registration of Ships UNCCROS 1986. The nature as a UN
convention coming subsequently after UNCLOS brings its similarity to UNCLOS.
The most related provision to the issue is Article 5.3(b) of National Maritime
Administration, that states: “That ships flying the flag of such State are periodically
surveyed by its authorized surveyors in order to ensure compliance with applicable
international rules and standards;”. Even though this convention is not yet into force
due to the number of states and tonnage is still below the limit of 40 signatory states

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1
comprises not less than 25% of the world tonnage , the context of authorized
surveyors is not a controversial part since it has been a renowned and widely-applied
practice under IMO conventions.

As a practice, delegation to recognized organizations is not only widely-applied but

also lawful. It has been legalized and formalized in the most conventions produced
by IMO. Specifically in the SOLAS as the main convention of safety, so as
MARPOL to environment; both conventions have identical citation. Below is the
quote from Article III of SOLAS 74 Protocol 88:

(a) The Parties to the present Protocol undertake to communicate to, and deposit

with, the Secretary-General of the International Maritime Organization

(hereinafter referred to as “the Organization”):

(b) a list of nominated surveyors or recognized organizations which are

authorized to act on their behalf in the administration of measures for safety

of life at sea for circulation to the Parties for information of their officers,

and a notification of the specific responsibilities and conditions of the

authority delegated to those nominated surveyors or recognized

organizations；and

The similar text with similar meaning can be found in Article III of MARPOL 73/78,
as the replacement of MARPOL 73 Article 11(1)(b). The latter also has an identical
meaning to what we can find in Article III of SOLAS 1974. Tracing back to its long
history, the existence of delegated tasks to recognized organizations implicitly
reflects either some of the maritime administration‟s technical limited capacity or
commercially sound solution to their customer since long ago. In addition,

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Regulation I/6(a) of SOLAS 74 Protocol 88, which is analogous to MARPOL 73/78

Annex I Regulation 4(3)(a) and Annex II Regulation 10(2)(a) states that:

The inspection and survey of ships, so far as regards the enforcement of the

provisions of the present Regulations and the granting of exemptions therefrom,

shall be carried out by officers of the Administration. The Administration may,

however, entrust the inspections and surveys either to surveyors nominated for

the purpose or to organizations recognized by it.

There is also another similar article pertaining to the authority of RO, stating that RO
surveyors must be empowered to have the same legal influence on instructing repair
and necessary maintenance to the ship, whether it is a self-initiative or after a survey
on request of port states. We can find it in Regulation I/6(b) of SOLAS 74 Protocol
88, MARPOL 73/78 Annex I Regulation 4(3)(b), as well as in Annex II Regulation
10(2)(b).

This topic of legitimate power has been an endless question and discussion for a long
time, because of its pros and cons. People from classification societies believe that
dual functions bring advantage for simplicity reason, as one body handle and take
care of technical supervision from the ship is in construction until the end of its
lifetime (More, 1992). Other propositions say that it is a compromise solution since
all parties gain the benefit. Maritime administrations with their limited resources still
can run their duties, while shipowners get access to competent surveyors with a
worldwide network, and classification societies receive considerable revenue for
their operations.

At the other side, the oppositions say that there is a potential unhealthy relationship
between those three parties, since classification societies act simultaneously as public
and private entity (Hare, 1995). They may have no problem to act as class since it is
their nature business. Yet, to be there as a class surveyor and an independent flag

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state surveyor at the same occasion, for the same ship and same shipowner, will be
weakening their overall power to make objective judgment. This is true to the fact
that, especially for a flag state that recognizes several RO and shipowners who own
quite considerable fleet, classification societies are under double commercial
pressure to retain the ship for not moving to other class and RO. While König
expressed this phenomenon as “class-hopping” (Ehlers, Wolfrum, & Borgese, 2002),
we may call it as “RO and class-hopping”. Therefore, the considerations also
doubled, they realize that there will be double potential loss of income.

Whether it is a proposition or opposition, it is generally agreed that commercial

pressure tends to weaken the RO power, just as the fact that the existence of RO
brings benefit to safety. From the flag states‟ point of view, it is their responsibility
to ascertain the completeness of survey, as obligated by SOLAS Regulation I/6(d).
This obligation must be taken into considerations, for the flag states to find a creative
solution in controlling RO. Thus, the measures will help in reducing the risk of their
fleet for being caught by the net of port state control.

2.2. IMO instruments

Among other IMO instruments that relevantly touch upon the issue of RO are:
- Guidelines for the Authorization of Organizations Acting on Behalf of the
Administrations Resolution A.739(18)

This guidelines is the center of our analysis on flag state control on RO, as it
apparently stresses the control as a consequence of authorization. The
recommendation that flag states shall establish a verification and monitoring
system lies in the Annex, including the scope of such system.

The Appendix 1 supplies conditions that have to be fulfilled by an

organization to be authorized. General conditions as well as specific
conditions mainly act as guidance for maritime administration in assessing
the readiness of RO. While at the RO side, it acts as minimum criteria that

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they have to set up before submitting an application. In other words, this is

the meeting point between maritime administration demand and RO
compliance.

Appendix 2 mainly serves as areas to be covered by the agreement. These

elements of agreement are crucial as it provides rule of the game for the
contract between maritime administration and RO. As the main part, the
degree of authorization shall be included, as well as rights and obligations of
each party. The information on degree of authorization is one of the
documents that must be submitted to IMO Secretary General, as consent by
Article III of SOLAS 74.

- Specifications on the Survey and Certification Functions of Recognized

Organizations Acting on Behalf of the Administrations Resolution A.789(19)

It is suffice to say that it is an episode of Appendix 1 of Resolution A.739(18).

The main purpose is to specifically give details of the four areas to be
mastered by RO, namely management, technical appraisal, surveys, and
qualifications and training. Under each area, modules of competence are
given to specify capabilities.

In order to be authorized for specific survey and certification, RO must

possess a selected combination of modules in those four areas. The
combination may be different for other authorization. Therefore, this
Resolution is not only useful at the time of pre-authorization, but for post-
authorization as well. In the audit, flag states can re-examine the RO
capabilities in related modules that they have been delegated. In other words,
it will help flag states on areas of observation during the audit.

- Model Agreement for the Authorization of Recognized Organizations Acting

on Behalf of the Administrations MSC/Circ.710 MEPC/Circ.307

Generally, this model agreement serves as an aid to flag states when entering
into contract with RO. For the content, it is an elaboration of Appendix 2 of
Resolution A.739(18) that was issued on 1993. The structure is the Annex as

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the main agreement that will be signed by both parties, followed by Appendix
1 and Appendix 2 that each explains the degree of authorization and reporting
mechanism. Attachment can be referred to for additional provision, as
customization to flag state‟s need. Another important feature is the detailing
of agreement into full, partial, or limited delegation.

- Guidelines to Assist Flag States in the Implementation of IMO Instruments

Resolution A.847(20)

The background of this Resolution is that some Member States find

difficulties in fully practicing IMO instruments. One of the areas is delegation
of authority and supervision of delegated authority. In the observation,
Member States need practical guidance on how to promote uniformity of
inspections and to ascertain the quality of inspections. Even though the
content does have same tone as previous Resolutions, it should be highlighted
that IMO recommends the availability of a trained staff in maritime
administrations to conduct field oversight programme, not just behind the
desk remote monitoring.

- Self-assessment of Flag State Performance Resolution A.912(22)

In 2002, this Resolution was adopted and significantly provided a practical

package for flag states in measuring their compliance to their duties. As a
description, most of IMO Resolutions only provide obligations of flag states
without detailing the specific target and crucial points. This self-assessment
attempts to present criteria and measurable indicators in form of
questionnaire to fill in. By doing so, flag state can easily identify their weak
points, areas of improvement, and goals to achieve. To some extent, we can
say that this self-assessment serves as a model of strength-weakness analysis
of flag states. The self-assessment may also be useful as need-assessment for
technical cooperation project, to ensure that the aid would be best allocated to
the less developed areas.

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Another advantage of this voluntary self-assessment is its characteristic as

self-reflection. It means that flag states can do the measurement by and for
themselves. There is no external assessor involved, no marks, no submission
and they can keep it confidential. IMO acts as persuasive as possible by
launching this Resolution, considering to the reluctance and sensitivity of
some administrations to preserve their reputation if the assessment is made
public.

In general, the criteria are divided into internal and external criteria. While
internal belong to fulfilment of flag state obligation in areas of legal
framework, enforcement, delegation to RO, and casualty investigation,
external criteria are those that pertaining to port state control and number of
casualties. In another chapter of this dissertation, there will be a discussion
about self-assessment that had been published by some flag states,
specifically at the part of responsibility of RO.

- Code for the Implementation of Mandatory IMO Instruments Resolution

A.973(24)

This is one of the most recent Resolution that is comprehensive enough in

detailing the obligations of Member states in general, and particularly when
they act as flag states, coastal states, or port states. In some ways, it is akin to
a series of Resolution A.847(20) because of its similarity in assisting flag
states. Yet, considering that member states not solely act as flag states, the
scope is broadened to coastal states and port states. In this Code, all of the
obligations are pointed out together with the referred provisions. In relation to
monitoring of RO, one can find how difficult it is to act as responsible flag
states in monitoring enormous delegated tasks. When a member state deposit
their intention to participate in Voluntary IMO Member States Audit Scheme,
those listed obligations in Annexes are subject to be audited, while
Resolution A.739(18) constitutes an element in it.

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Most of those instruments contain general prescriptions on framework of delegation,

mechanism of control, and obligations on monitoring RO. As general prescriptions
they may not cover details. For example, in Resolution A.739(18) it is instructed that
to ensure adequacy of work performed by RO, Administration should design a
verification and monitoring system. Surely this is not an undemanding task for
maritime administrations that have wide range of responsibilities and limited
resources, which is even scarcer in developing countries (Cowley, 1987).

2.3. Regional initiatives

It is noteworthy that a regional initiative also has been adopted in European

Commission with their Council Directive 94/57/EC. This Directive has many
similarities with IMO instruments above, such as its Article 3 to SOLAS Regulation
I/6(a). Its Article 6 is analogue to SOLAS Article III and Model Agreement of
MSC/Circ.710 MEPC/Circ.307, so is its Annex to Resolution A.789(19). However,
there are at least three distinctions that bring this Directive to be stricter than IMO
instruments. The first one is if a member state intends to recognize an organization
that is not in Commission‟s RO list, it must follow a certain process as laid down in
Article 4. The procedure for an RO to join the list is to be initially assessed by
Commission and the respective Member State, with the scope of general minimum
criteria and specific minimum criteria in the Directive‟s annex. As it had been
mentioned before, this annex has parallel content with IMO Resolution A.789(19)
that demands organization and technical capability, administration, records, quality
assurance, information and publication. The fulfilment of those criteria may end up
with Commission approval. The practice outside EU is relatively looser, and
recognition and approval is up to assessment of individual IMO member state.

Secondly, there is a provision in Article 9 in light of monitoring RO based on their

safety and pollution prevention performance record. This performance rating mainly
refers to data from Paris MOU PSC regime. This feature is very useful as it

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integrates port state control data as basis for measuring performance. It is also
interesting to see that both regimes work hand in hand by recognizing each other‟s
work. Another remarkable point is the risk-based approach by categorizing RO by
their performance; it is in line with Paris MOU programme to migrate from 25%
annual target inspection rate to selective inspection, so-called target factor (Paris
MOU Secretariat, 2002, 2006). In any case it gives an example of monitoring method
compared to the generic in Resolution A.739(18).

Last distinction is that the Directive instructs each EU Member State to conduct an
audit on biennial basis, as a monitoring measure to the delegated functions. In
comparison to MSC/Circ.710 MEPC/Circ.307 Annex point 5 Supervision, the
method is to the discretion of Administration and audit on RO is not mandatory.
Even the audit frequency and the scope is to be decided between Administrations and
RO. In addition to the practice in EU, it is compulsory to have the report accessible
to all Member States and Commission. This report may be intended as a medium of
sharing information.

In their tasks, the European Commission is assisted by European Maritime Safety

Agency (EMSA), including in the scope of continuous monitoring on performance of
classification societies. The policy document “Community strategy for maritime
safety” on September 27, 2000 describes “Erika I package” highlighted the actions to
reinforce Port State Control and Improve control of Classification Societies (Det
Norske Veritas et al., 2001)

It should be noted that the comparisons between international and regional

instruments above do not indicate that one is better than another. With its character
as regional arrangement, EU has moved further to be more specific, more uniform,
stricter and smoother harmonized due to the countries similarity in economic and
technical capabilities. However, as one of the biggest challenges in law is
enforcement, member states especially those who are developing countries, need

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recommendations on how to conduct flag state control and monitor the RO. In most
cases the Administration may entrust and ask RO expertise, except in the task of
supervising and monitoring RO when they have to seek another solution without the
help of RO. The absence of such recommendations may bring flag state control into
ineffectiveness and reactive not proactive, and in the end an over-reliance to port
state control and RO as we have it today.

2.4. Authority, responsibility, and liability

From the legal perspective, the delegation of tasks has legal consequences both for
Administrations and RO. As both of them are engaged in contractual agreement and
similarly have juridical personality, a dispute may arise anytime. Juridical or legal
personality means having capacity to contract, to acquire and dispose movable and
immovable property, and to institute legal proceedings. Simply stated, legal
personality is having capacity to sue and to be sued2. The undergoing pollution case3
on the breaking of oil tanker Erika and blaming over the accident between Malta as
flag state administration, Registro Italiano Navale RINA as RO, furthermore
Savarese family as the owner and Total as the charterer is a good example of how a
delegation of authority can lead to severely complicated dispute and consequences.

Basically, major IMO conventions such as SOLAS and International Convention on

Load Lines (ILLC) provide ground for the authority and Administration
responsibility. Article III of SOLAS 74 Protocol 88 requires that in delegating the
authority to nominated surveyors or recognized organizations, the Member States
shall notify its specific responsibilities and conditions of the authority. Whereas
SOLAS regulation I/12 paragraph (a)(viii) stated: “…the certificates referred to in
this regulation shall be issued or endorsed either by the Administration or by any
person or organization authorized by it. In every case, that Administration assumes

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full responsibility for the certificates.” Likewise, the ILLC 1966 as modified by the
Protocol 1988 provision in article 16.

In case of liability, it is mentioned in the Attachment of MSC/Circ.710

MEPC/Circ.307 point I.C.2 as follow:

Subject to this Agreement, if a liability is finally and definitively imposed on

the [ ] State for loss or damage which is proved to have been caused by a wilful

or grossly negligent act or wilful or grossly negligent omission within the scope

of this Agreement by RO, its bodies, officers, employees or others who act on

behalf of [RO], its bodies, officers, employees or others who act on behalf of

RO, the Administration is entitled, on behalf of the [ ] State, to full

compensation from RO.

Subject to this Agreement, if a liability is finally and definitively imposed on

the [ ] State for loss or damage which is proved to have been caused by any

other negligent act or any other negligent omission by the RO bodies, officers,

employees or others who act on behalf of RO, the Administration is entitled, on

behalf of the [ ] State, to receive from RO compensation up to the amount of

financial liability as defined in the standard terms and conditions of the RO or

[ ] whichever is greater.

From the paragraph above, we can conclude that authority, responsibility, and
liability are different in characteristics. While the authority is the right to do the task
and distributable, the responsibility is competency to take over the consequences of
authority under its full name, and liability is physical or financial obligation to
remedy the suffered parties. These distinctions provide a legal basis for the clear

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division of tasks and penalty. In addition, in case of damage caused by any RO

negligence, it can bring a very serious financial consequence that may lead to RO
financial nightmare.

2.5. An overview of management of delegation and control

As we move on to management perspective, delegation is needed until certain degree

as an expression of trust. To delegate means to entrust or to appoint the
representative with power to act on his or her behalf. In this regard, the delegated
party imposes to be controlled by the delegating authority under the process of
setting standards, measuring performance, and correcting deviations (Dixon, 2003)
as can be seen in figure 2. In respect to the control process, setting standards has a
meaning of to establish objectives and the expected outcome thus provides a
measurement to evaluate performance, and both serve as a parameter of corrective
actions. Contemporarily, the emergence of today‟s public management to step
forward from quantity-based performance measurement to quality-based that is more
service-oriented, focus on customer satisfaction, and reliance to inspection.

Figure 2. The Control Process (Dixon, 2003, p. 141)

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Delegation should not act as a single independent action, meaning that delegation is a
result of assessment process. At the same time delegation has its consequences
afterwards. Since the process involves chain of action, identification of crucial points
is needed in order to achieve desired result:

- Selection

Before delegating the task, it is proper to conduct an assessment to make sure

that delegation falls into the right hands. The area of observation should
include competence, experience, track record, resources, innovation, and
possibility that the works will be properly conducted.

- Lines of communication

Instruction, objectives, circular, report, and any other means of

communication should be established to ensure that there is a common
understanding to the whole process and mechanism of accountability. Holt
(2002) stated that clear communication proves contribution to successful
delegation.

- Spell out the target, reward and consequences

Aside from the objective that is commonly general, the target and goal must
be specific and measurable. The statement of: “to be categorized in white list
of Paris MOU” is a clear articulation on how a maritime administration also
expects RO to perform.

Concerning reward and consequences, it is called as positive and negative

motivation. The published annual report of RO performance by maritime
administration is a kind of motivation, in a sense it motivates RO to perform
better. In general, if the ultimate mission and benefit is clear, they are more
motivated to take initiative (Shah & Shah, 2007).

- Effective control

Losing control is one of the main phobias after delegating authority (Blair,
1993). Nevertheless, to keep on eye continuously may consume time and

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energy, and finally brings the delegation to be ineffective. Therefore, Blair

claims that adoption of engineering principle may be helpful, that delegation
is not only distribution of work, but distribution of control as well. The
delegated authority is required to maintain parallel control by applying the
same criteria, so they will exercise authority and also control on your behalf.

Another issue on delegation is the limitation in supervision and control. The quality
awareness in maritime administration, scarce availability of resources and lack of
technical competences, ineffective method of controlling, wide geographical
coverage, increasing span of control, the lack of social control, are considerably
contributing factors that limit maritime administrations in exercising their control.

Quality awareness is a culture inside the maritime administration on how they

perceive quality. When it comes to slogan and motto, we often fiund that some open
registry declare themselves as quality oriented registry. While in reality the statistics
show that their compliance and enforcement to international standards is very weak.
Even though most of the statutory functions have been delegated, to assume that the
problem lies in RO is a premature, since those particular RO are also authorized by
other states with good performance. It is suffice to say that the quality commitment
of the flag state contributes to the statistics, and RO in certain degree are under
commercial pressure and unable to enforce standards without the backup from
maritime administration (Cowley, 1987, p. 131).

The limited number of surveyors is a serious problem for most maritime

administrations nowadays, especially in developing countries. The attractiveness and
remuneration as civil officers is very low due to limited budget in government. While
some of the prospective graduates reasonably prefer to pursue their career at sea or as
class surveyor that offer better incentives. The incentives are not only in monetary
terms, but also include the development of career, training, higher education, and
reputation. In some least developed countries, those skilled labors do not only have
the low interest to serve as civil servants but also growing interest to work in foreign
countries that offer better wages, better career, and better living environment. This

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trend is popularly introduced by UNCTAD as brain drain and brand gain (Manning,
2007). Therefore, it should be a shift of paradigm in maritime administration,
particularly in developing countries, in organization and recruitment. It is better to be
consistent in delegating most of functions, except monitoring, control, and public-
sensitive functions. The reshaping will help administration in managing the
organizations better, by hiring selected qualified and better-paid employees who will
focus in supervision role, and limit their depth of involvement in technical matters. In
other words, this is a restructuring of maritime administration to focus on strategic
level, and dispense the operational level on the hands of RO. This is a trade off
between the limited resource and the vast work span of administration, without
losing administration‟s ultimate responsibility.

Another source of restraint is the ineffective method in monitoring. As had been

mentioned above, administrations face a limited number of personnel. Thus, they
have to empower their resource carefully. There is no other way to get their optimum
use than to work effectively. Effective method of monitoring may help to achieve
objective of supervision with the least effort and least personnel, and avoid
unnecessary deployment of resources. The simple example is whether to choose
unscheduled inspection on a three years old container ship or sixteen years old
chemical tanker ship. Even though young age does not indicate better condition than
ageing ships, it could have been assumed that newer ship is less risky and less
targeted by port state control. Container ship also does not belong to high risk
category. To concentrate more on latter option is assumed to be more appropriate use
of resource. Similarly, Jansen (1991, p. 47) prescribes that when extensive
authorization has been made, the system of monitoring and supervision should
consist of several interacting elements such as:
- audit of authorized organizations

- regular reports on the status of all delegated ships

- thorough examination on survey report of a number of selected ships

- random inspections and verification on documentation

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- unscheduled inspections on board

He affirmed that combinations of above elements, if applied may help

administrations in evaluating performance of RO and concentrate their own limited
resources to the greatest benefit to safety and protection of environment. Even
though this description is logic and systematic enough, it would be better if the
criteria in selecting ships for additional inspection is also optimizing other available
data such as RO performance at PSC report and ships that fall under high risk
category, as it is suggested by EU Council Directive 94/57/EC.

The wide geographical coverage comes up as another shortcoming, again affected by

limited resources. When most of the ships operate globally, it may become difficult
for maritime administration to send inspectors. Panama has initiative to employ
inspectors who are stationed around the world to conduct Annual Safety Inspection
(ASI)4 for ships engaged in international trade. Even though this scheme may serve
as additional safety net, its effectiveness can be dubious since the inspectors who
conduct the ASI are also from RO5 . The objectivity is in question, because how
objective it is if an RO judges themselves or another RO. Since the items of
inspections is similar to annual survey, such as valid documentations, hygiene on
board, proper manning, it may turn out to be not more than a duplication of work.
The intention may not be achieved, despite only adds bureaucracy, consumes time
and additional expenses.

Concerning the contribution of increasing span of control to monitoring, it is based

on research by Aghion and Tirole (1997). Their finding is that an increase in the span
of control increases the real authority of subordinates. In the application to our topic,
by having a considerable number of RO and the fleet that is continuously growing, it
will broaden the maritime administration span of control, thus more and more RO

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activities would be out of sight. Imagine in the case of Panama, to watchdog the
condition of 141 million GT fleet and activities of 28 RO is simply not an
undemanding task. To overcome the problem they may establish ASI as additional
ship inspection, unfortunately by dispensing more authority to RO thus losing the
check and balance mechanism.

Meagher and Wait (2005) amplify that there is a lost of control for the principal as
the span of control increases.

Finally, the last barrier to overcome the constraint of supervision is social control.
Public perception towards risk, non-governmental organizations and media pressure
may belong to social control.
Basically, public do not tolerate accidents, especially casualties with the lost of lives.
If media can manipulate safety as public concerns, it would be most likely that
government will spend more effort in safety measures, including being more rigid in
their supervisory role.
This is in line with a theory saying that if the risks are already feared by the public,
then increased concern is the likely result (Kasperson, Renn, & Slovic, 1988).

2.6. Selecting measurement tool

Specifically to performance measurement in the safety context, the experts in

loss/failure control have endeavored to find one measurement tool for universal use.
Needless to say, such a tool would never be existing. Bird and Loftus (1976) recalled
that the most important things to recognize are what to measure and what is the
influence of measurement result to reach the desirable objectives.

Therefore, they listed characteristics of a good measurement tool as follow:

- It should be administratively practical

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- The measurement criterion should be quantifiable

- It should be a valid measurement of what it is supposed to represent

- It should be as objective and error-free as possible

- A good measurement system should be understandable

- It should be sensitive to change

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CHAPTER 3: FLAG STATE CONTROL VERSUS PORT STATE

CONTROL

3.1. Substandard shipping

According to IMO Procedures for Port State Control – 2000 Edition, the term of
substandard ship means: “a ship whose hull, machinery, equipment, or operational
safety is substantially below the standards required by the relevant convention or
whose crew is not in conformance with the safe manning document.” In the scope of
control, whether by port state or flag state, this definition of substandard ship is
applied.

It is important to enlarge the scope of substandard to the area of shipping, not only
the ship itself. The rationale is that the state of substandard is not only characterized
by a ship‟s physical condition, but also lack of crew competence, unskilled action,
and their irresponsible and imprudent conduct, not excluding the linguistic inability
to communicate with other crew members. Moreover, irresponsible management
ashore and incompetent shore staffs also contributes to substandard conditions as a
whole. To view the substandard shipping as a matter of system will provide better
comprehension on safety management system. That is why the extent of ISM audit
encompasses both shipboard management and shore management.

As a matter of fact, improper control may lead to substandard shipping. Any chain in
the circle of maritime responsibility, namely owner – shipper – charterer – broker –
financier – insurer – lawyer – ship manager – classification society – flag (Spremulli,
2004, p. 39) may have direct or indirect role to the condition of substandard. To
include port state in that circle will lead to a broader spectrum of agents in maritime
responsibility. Nevertheless, between port state and flag state control, the previous is
known to be more objective for they have no interest in control but their environment
protection. The nature of port state control is the last defense of port states in
protecting their waters from threats. While, the latter is generally assumed to be

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weaker since its likelihood to be in the mid of interest. In other words, flag states
could have neglected the low standard of their vessels, especially when those vessels
sail to port states. It is port states that are threaten most by substandard ships, not the
flag states.

3.2. Flag State Control

It would not be comprehensive to discuss flag state control without touching upon
the issue of safety, open registry, flags of convenience FOC, economy, shipowner,
and sub-standard shipping. All of those factors react and interplay to set up an
unhealthy climate as we have today. To find the relationship between them is simply
saying: how flag state control can be exercised for the sake of safety, in a condition
where some relaxed open registries, known as FOC, provide an economic solution
for shipowners engaged in sub-standard shipping operations.

It should be underlined here that there is a distinction between open registers and
FOC, meaning that not all open registers are FOC. International Transport Workers‟
Federation ITF explains that where beneficial ownership and control of a vessel is
found to lie elsewhere than in the country of the flag the vessel is flying, the vessel is
considered as sailing under a flag of convenience. Essentially, the term of relax can
be divided into fiscal and technical. The fiscal relaxation is acceptable due to it is a
prerogative of the flag on determining the policy in gaining revenue, there is no
global standard for it, and it might not affect the safety. In contrast, open registries
shall not offer technical relax as competitive advantage as there are certain standards
to be met. In fact, Liberia and Netherlands Antilles are among states that meet the
ITF criteria but can perform as white list flags in Paris MOU6. Surely they are open
registers but not FOC.

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Therefore it is obvious that open registers enjoy better status than FOC, who are
stamped for bad stigma (Mukherjee, 2000). They are popular as flags which allow
cheap labour with incompetent crew, short term solution for shipowners who focus
on the financial earnings only but not in operational, and have ships that are likely
indicated to be substandard ships.

3.2.1 Problems

Ideally the two sides of a coin, the economical attractiveness and the flag state
control obligation should not be assumed as a separate entity (Mukherjee, 1993). In
the real shipping world where the industry is not self adjusted, it is the task of a
regulatory body to ensure that the relationship would be linear between one and
another. In a more straight way, flag states should provide zero tolerance for players
with no safety awareness. It is noteworthy then that a flag state control possesses a
significant role on balancing these different interests.

Concerning the relationship between safety and economy, there are two schools of
taught. One assumes that safety or quality does pay. For shipowners, to enforce ship
safety standard means that the probability to incur a loss is less, thus safeguarding the
ships as asset and capital. In the interaction with other players in maritime industry,
safer ships mean better market value for the ships, lower premium for insurance,
lower maintenance cost, higher operational reliability, less risk for needless stay in
being caught by PSC, and then attract more shippers who need safe and timely
transportation. Ultimately for shipowners, what they want to achieve is less lifecycle
cost in ship operation. For flag states, they believe that the enforcement of safety
standard in the form of strict flag state control does pay as well. With the better state
of fleet safety, the flag would be ranked in white list, less targeted by PSC, and then
the fleet detention record would be low, less casualty record, and finally will attract
more shipowners to register their ships, which means more income from ship
registration. This is the condition when quality flag states meet quality shipowners.

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Another school of taught believes there is a market for price sensitive people that
have low safety awareness. They believe that the willingness to pay would increase
when the price gets lower. When the intention is to get the price as low as possible
and safety is assumed only to increase the delivery price, reasonably safety factor
will be excluded from consideration. The shipowner will find that the price of second
hand old ships is cheap, and with some negotiation the previous owner finds that it is
more economic to sell it and avoid high disposal cost in ship recycling. It is logic
then if an aging ship, that needs higher maintenance and operational cost, is suffered
to operate on low cost basis to attract price sensitive shippers. Roughly to say, the
profit margin would be only enough to keep the ship in operation. To accommodate
these dubious ships, the shipowners will also try to re-flag to a register that will offer
more lenient safety regimes. It is assumed that primary motive for flagging out is
assumed to be to maximize profit or conversely minimize costs (Det Norske Veritas et al.,
2001). This is the condition where irresponsible flag states, that find demands for
price sensitive registration, provide a solution for „second-class‟ shipowners.

Unfortunately, the real world today is filled by both good and poor performers.
According to EU THEMES project (2001), it was evident that different flag states
have varying competence and motivation to undertake their role. In the principle of
sovereignty, the maritime world can only give pressure in spite of getting them out of
the business. As long as the gap in economy exists, there must be a demand for cheap
solution for the world where safety is not a main concern. What the international
regulatory regime can do is to eradicate the practice where safety can be bargained to
compete with quality players. A study conducted by Seafarers International Research
Centre (SIRC) of Cardiff University shows that the fleet of the new entrants open
registries has a growth rate far above the average rate of the world fleet. In the search
of quality shipping, Embiricos (2005) underlined that substandard ships have role in
promoting unfair competition by saving costs7. To see that the competition is going
unfair, and the quality players switch to irresponsible players because of its

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convenience would be a drawback to the society. To promote fair competition by

fighting against sub-standard shipping is one importance of flag state control.

The second importance is „to right the bend‟ or to put flag state control in its original
position. There is a common misconception of safety layers in maritime world. To
impose control on port state prior to flag state is certainly a big mistake. Imagine in
archipelagic country where the shipping traffic is dominantly domestic, there is no
control by port state. Does it mean that there will be a vacuum of control? Therefore,
flag state control and port state control cannot be used interchangeably, but they are
complementary. The growing powers on PSC regime does not mean that the flag
state control can rely more on them and release their own obligations. It should imply
as political pressure of low confidence to flag states in exercising their control.
Therefore the port state finds there is a need in „naming and shaming‟ (Spremulli,
2004). It is important for the flag states to exercise more control and be more
responsible than they are today.

3.2.2 Considerations in flag state control

The method to exercise flag state control may be different from one state to others.
As it had been explained before, the variation in competence and motivation brings
variations in practice. However, apart from the willingness to control, the availability
of resources also plays a significant role in the selection of method. There are general
rules in this issue. Firstly, the size of the fleet does matter. The bigger the fleet is, the
more likely it is that the control personnel and efforts to be more extensive. For that
reason, no wonder that Panama in 1987 already employed around 400 inspectors at
over 300 ports around the world, and not including the inspectors in USA and UK
that were delegated to RO (Cowley, 1987, p. 131). Second rule is that the size of the
fleet corresponds to the economies of scale in flag state control. With the example of
Panama above, to employ and station inspectors around the world would be without
long discussion, compared to their status as the biggest fleet in the world. In the case

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of different administrations, let‟s say fleet within the size of Fiji, it would not be
efficient neither to station inspectors abroad nor to dispatch inspectors every time
inspection dues.

Third rule is, as had been explained in previous chapter, the more functions delegated
to RO, the higher probability for flag state to lose control8. It does not mean that RO
does not possess a control system or their system of control is not well-built, but the
efforts for flag state control are just simply not the same with delegation as it is
without delegation. With the statutory functions delegated to different entity (RO),
they have to compensate the „losing‟ function by doing more control.

Fourth rule is that there is a tendency that flag state will empower more resource in
control after an accident. Even though this is a good sign of learning from lesson, it
is a pity that they have to wait until the accident happened, than taking preventive
measures. Not only for flag state control, even in EU the stricter measures were taken
after Prestige and Erika accident9. In some cases, the control was temporarily taken
due to high pressure from public, media, and international attention. The character of
public fear towards risk is that they put their social trust (or distrust) in fore front,
whether they have comprehensive understanding on the problems or not (Earle &
Cvetkovich, 1995 as in Adams & Thompson, 2002). Thus, it is often that the
measures taken by administration are beyond the reasonable limit. Frequently, when
the motive is only to please the public, the stricture will loosen by the time that
public anger fades away.

Finally, flag state control is more crucial where, for specific reasons, PSC is absence.
When a country because of its geographical characteristics relies heavily in sea
transportation, while most of the ships‟ traffic is domestic and those ships sail under
the flag of the country, there is no control layer from PSC. In one side, they actually

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have more freedom to decide on how to look over their domestic shipping, because it
is a customary law that domestic ship inspection is under a country‟s self
arrangement. Furthermore, there is no obligation to inspect those ships under any
PSC regime and there would be no statistics published that is shaming their
performance. On the other hand, it is crucial because of the need of safe
transportation both for mobilization of people and inter island trade, and they need
actually stricter control for their ships to not pollute their domestic waters. At the
same time there is only one control that exists, and that is flag state control, without
the help of PSC. In short, the flag state control is even more needed because it is their
ships, their people, their goods, and their waters. Countries like Indonesia,
Philippines, Bangladesh, and Japan are countries that belong to that group.

3.2.3 Flag state control in Archipelago Country, Indonesia

As already discussed, flag state control becomes more vital where the PSC is absence.
In the context of Indonesia, it is an archipelago country that consists of over 17,000
islands where goods are mostly transported with the means of sea transportation. In
2005 Ministry of Transportation published data, stating that there were a national
fleet of 6,689 ships and almost 95% sail in archipelagic waters. In addition, the
traffic was served by 725 seaports with 755,781 ships call, comprised of 9 million
GT (BPS, 2006)10. It can be assumed that two third of the ships call were national
flag. This is a very huge task of flag state control in terms of seaports involved, the
number of ships, the number of calls, and the coverage area of operations. How to
deal with this with only 500 national marine inspectors, who also carry out PSC
inspections, is considerably a tough challenge, especially when those inspectors have
obligation for PSC as well. Figure 3 is traffic of (only) passenger ships as a
description of sea transportation network in Indonesia.

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Figure 3. Passenger ships traffic network in Indonesia (courtesy of

Meyer-Werft)

To deal with this challenge, there should be a strategic move to recruit more
inspectors. The ratio between the number of ships call and the number of inspectors
is noticeably low to a number of over 1500 ships call per inspector. Even the 500
inspectors have to be shared across 725 seaports, meaning that many ports do not
possess their own inspectors. With current situation that no statutory survey was
delegated except load line survey, the workload of each inspector is remarkably very
high, since their main priority is the mandatory statutory surveys and not flag state
control inspection. However in this Indonesian context where it is feasible to
preserve statutory surveys in hands of national surveyors, it is an advantage that
every ship is guaranteed to be visited once a year, thus reducing the need of flag state
control inspection. It might not be feasible in case of full delegation to RO, since
there is a necessity of flag state control inspection even tough it means double check
for the same object.

In the case flag state control inspection is still needed, some solutions may be
affected. Either by mandatory pre-departure check or applying risk based inspection.
The involvement in ISM audit may also become a good occasion to get impression
on how well the company and shipboard management is, particularly in the area of
maintenance management.

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As a matter of fact, despite the absence of PSC in domestic waters, it should be

easier for exercising flag state control in archipelago country that is served by a
dominantly national fleet. Because of the ships make many calls in national ports, the
national inspectors can visit and monitor them often. It is needless to dispatch or
station inspectors in foreign countries, thus it would reduce the effort to conduct
monitoring abroad. For Administrations that have more fleet in international service,
they have to distribute national inspectors to in-house PSC and flag state control
abroad. While in Indonesia case, the national inspectors who are often both PSC and
flag state control inspectors, can be better managed to do both tasks efficiently, thus
enabling more number of inspections.

In relationship with RO, Administration can conduct flag state control inspection
without involving any RO, consequently supervision for adequacy of inspection is
relatively easier since they just have to control their own inspectors. This
arrangement also has advantage in education investment for national inspectors. It is
a self investment for Administration‟s own inspectors. The inspectors also become
more mature and experienced with their high frequency in visiting ships, both for
PSC and flag state control purpose. In an environmental protection issue, when flag
state control is conducted in foreign countries, it is their waters that mostly benefit.
While in domestic case, the careful inspection of national fleet also contributes to
preserve the domestic waters environment.

3.2.4 Questionnaire on flag state control

From a practical view this unit has been based on a recent research that consisted of
a set of questions in form of questionnaires which were distributed to ten
11
Administrations . Only three of them returned back but with significantly
comprehensive answers. The questionnaire mainly aims to get the

11
See Appendix 1, 2, and 3.

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overview of Administrations practice in monitoring RO, on how Administrations

established a monitoring system as required by IMO Resolution A.739(18).

While these three Administrations objected to be quoted, they can be called as X, Y,

and Z. In Paris MOU, X and Y are in white list and Z is in grey list. While in Tokyo
MOU, X and Z are in white list and Y is not on the statistics since the number of Y
flag PSC inspections is less than thirty in 3-year period.

While the summary of questionnaire result can be found in appendix, it is needed to

highlight some points here. Those three states do not delegate the statutory functions
fully to the RO, in other words the delegation is partial. X Administration still retains
passenger ship safety surveys and certification, most probably because they want to
take care of the sensitive issue of human lives. Some states in the world also take
similar policy regarding the passenger ships, on the strong public sensitivity on
passenger safety. Y Administration preserves the safety equipment and safety radio
surveys for cargo ships. This policy ensures the Administration to at least visit their
cargo ships once a year. Some delegated surveys were also restricted to periodical
surveys and endorsement, but not to the issuance of full term certificates. However,
the policy still looks feasible since their fleet of over 1.5 million GT mostly export
and import by making calls to their ports. While Z keeps the tonnage survey and
certification, on the hands of their national Administration. It is relatively unique that
an Administration holds a non-safety and non-periodic survey instead of regular
safety survey that allows periodical visit. A tonnage survey is commonly performed
at the beginning, when a ship enters the registration. However, the survey allows an
Administration to have a general impression on the ship condition.

Concerning checking the adequacy of RO works, the three Administrations state that
there is no limit for expenses on random inspections, at anytime the need for random
inspections arises. Z Administration mentioned that statistically they conducted ten
random inspections a year, which is quite a few. This policy, of not specifying the
budget limit for random inspections, may be associated with the country‟s focus on

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quality at any cost. No wonder that their flag is ranked among the best in Paris MOU
and Tokyo MOU.

X and Z admitted that they ever sent warning notice to RO, to remind them the
importance of better performance. However as a preventive measure, X, Y, and Z
also stated that they monitor RO continuously by audit. The scope of audit is quiet
similar, administratively on quality, technically by visiting offices and ships with
historical deficiencies. On the quality system most of them assumed that IACS QSCS
is beneficial but the Administrations need to audit RO to ensure it by themselves.

Finally, Y and Z view that there is a necessity for IMO to develop a flag state control
system, particularly in area of RO monitoring. This system is useful for the reason of
uniformity, commonly accepted and globally used by member states. Therefore, in
their opinion IMO should produce guidelines. X surprisingly has an opinion against
that idea, but unfortunately without specific reason. However, it does not mean that
X wants to dispense their obligation since X is in the white list of two leading PSC
regimes, Paris MOU and Tokyo MOU. Certainly, they are in position that needs no
assistance in exercising RO monitoring. In their comments, X stated that RO
monitoring is not as complicated as ships monitoring, due to the circumstances that
the ships operate under tight schedule and often in remote locations. To maintain
fleet quality and balance it with constraint ships operation absolutely needs good
management. Additionally, Administration X strongly believes that there is no
inverse relationship between the strict monitoring and the declining market of ship
registration. They even added that shipowners support measures taken by
Administration and respect them as responsible flag state, and also consider the flag
state as a reputable one.

3.2.5 Associated costs

According to three flag states under the survey above, all of them implicitly stated
that the cost associated with RO monitoring and flag state control inspection is not

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specified. In some countries the tax is used in funding the expenses. When a ship
intends to join a register, it is common to have a payment of registration fees and
periodical tonnage tax. Once the ship is registered, automatically control obligation
and expenditure leans under the Administration shoulder and shipowner obligation is
under the area of daily maintenance and operational requirements. However, in some
states Administrations may charge fee for unscheduled inspection, when it deemed
necessary. Frequently the inspection is carried out right after serious detention or
after receiving information from RO that ship is suspected in less satisfactory
condition. In this case, whether it is an inspection performed by RO surveyor or
national inspector, it is common that the shipowner bears the cost.

In case of Hong Kong, it is a combination of free and charged inspection. It is a free

inspection for the first time only. Anytime Marine Department receives information
about ship detention with serious deficiencies, the Director has right to dispatch
national inspector to the scene for special inspection. The coverage of inspection may
be broadening into an audit of ISM to check whether it involves poor safety
management or not. Yet, it is not always free. For any reoccurrence shipowner has to
12
pay the bill , which usually includes transportation, accommodation and hourly
charges. The first free inspection is a kind of basic protection and warning, so that
shipowner would pay more care to their ships to prevent subsequent inspection that is
charged.

Panama is somewhat different as the additional inspection is not unscheduled but run
on periodical basis. Panamanian Administration adopts mandatory Annual Safety
Inspection (ASI) also charges a fee, namely the annual inspection fee. The fee is
based on ship type and its gross tonnage13. It can be presumed that it is the price that
shipowners have to pay to obtain a certain degree of protection from flag state.
Whatever method is applied, whether free, charged or semi-free, it is upon individual
flag state discretion, which may differ from one flag state to others.

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3.3. Port State Control

The concept of PSC is as next safety barrier after flag state control. As the
competition among flag states gets tough, it motivates the flag states to „offer‟
another advantage other than financial, namely technical. This is the condition that
port states want to anticipate by providing another safety net. Ships are inspected to
check the conformance between the certificates and the real conditions. In the worst
scenario, ships would never be allowed to leave the port before having the
deficiencies rectified.

Hare (1995) stated that the concept is not new. Article 25 of UNCLOS 1982
empowered states, whose ports were used by vessels to take necessary steps to
prevent any breach of the conventions. Article 216 and 218 enable port states in
taking measures to combat international anti-dumping and anti-pollution. Similar to
provisions of flag state control that can be found in major IMO conventions,
provisions pertaining to PSC also can be found there. The tone of SOLAS 74
Protocol 88 Regulation I/19 is analogous to MARPOL 73/78 Annex I Regulation 8A
and regulation 15 of Annex II, LOADLINES 66 article 21, STCW 78 article X and
regulation I/4, and TONNAGE 69 article 12. In addition, there is also IMO
Resolution A.787(19) Procedures for Port State Control, as amended. Besides safety
and environmental side, security matter is also subject to PSC according to SOLAS
Regulation XI-2/9.

PSC is now regarded as more than technical movement, but also embeds political
issue when the publication of flag states performance also press flag states to be
morally more responsible. The publication may act as diplomatic vehicle in
conveying message: we request you to follow the achievers, or do something if you
do not want to be ashamed. However, this attempt is not always effective since the
statistics shown that poor performers are considerably still the same old players.

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Basically, the PSC movement is very logic. In case any serious damage occurs to the
ships, it is the coasts of port states that are threatened most, not the coasts of the ships
flag state. Even sometimes the flag states, if landlocked countries, do not have any
coastline. In addition to environmental issue, in many cases port states have to
provide search and rescue operations, medical assistance, towing and salvage,
because of the lack of control from flag states. This may cause considerable efforts
that port states want to minimize.

That is the rationale on why the development of PSC is some steps ahead of flag
state control. There is a significant interest for national physical protection, the
interest that is considerably low when it comes to flag state control. In the
development, this interest is shared with other port states. The regional cooperation
promised more effectiveness since the risk could be reduced in regional basis. This
is the regional spirit that inspired the establishment of Paris MOU in 1982 and other
following PSC MOUs.

Up to now, there are nine regional PSC regimes, namely Paris MOU (Europe and
North Atlantic region), Acuerdo de Viña del Mar (Latin American region), Tokyo
MOU (Asia-Pacific region), Caribbean MOU (Caribbean region), Mediterranean
MOU (Mediterranean region), Indian Ocean MOU (Indian Ocean region), Abuja
MOU (West and Central African region), Black Sea MOU (Black Sea region), and
Riyadh MOU (The Gulf region). US Coast Guard is considered as a non regional but
single independent PSC. Unfortunately, the method and enhancement between one
MOU and other MOUs does not proceed to the same level. There are many
similarities between Paris MOU and Tokyo MOU, including the more advanced
statistical use of excess percentage in 3 years period. However, Indian MOU, even
though it uses 3 years period data, adopts a more simple statistical method such as
percentage and average, and do not possess white, grey and black list flags. Some
MOUs do not even have any website for the public to access the PSC records14.

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3.3.1 Problems

Many experts in maritime safety consider PSC as significant step forward to reduce
the casualty rate. It may be true since the statistics from Paris MOU shows even
though the method in targeting ships is more sophisticated that the number of
deficiencies, the number of detentions, and proportion of detentions to inspections
has been decreasing since the year of 2000 (Annual Report 2005, p. 29). This is a
very good indication that there are more visits by quality ships in this geographical
area for 6 years period in a row. However, it does not imply that the problem of
substandard shipping is reaching to an end.

As the ships move globally, to rely on one PSC regional statistics may mislead the
whole world condition. In comparison for Indian MOU, though less number of
inspections in 2006 than previous year, the detention percentage shows an increase
number (Indian Ocean MOU Secretariat, 2007, p. 9). As data of 3 years period 2004
to 2006, the percentage of inspections with deficiencies to number of inspections is
54.25%, 55.15%, and 55.34% respectively, or shows an increasing trend. In addition,
the percentage of detentions to inspections is 7.92%, means that it is still higher than
3 years average.

Looking at statistics from another PSC MOU (data from Annual Report on Port State
Control in the Asia-Pacific Region 2006 (Tokyo MOU Secretariat, 2007)), it can be
calculated that from 2004 to 2006 the percentage of inspections with deficiencies is
increasing year by year 67.27%, 68.48%, and 68.78%. While for every inspection
with deficiencies, the average number of deficiencies is 5.08, 5.17, and 5.40. It
shows the rising trend that more deficiencies can be found in every inspection with
deficiencies. A quote from page 10 of the report says that: “The detention rate of
ships inspected was about 5.40%. Compared with the last year, the detentions rose up
slightly in 2006, with 74 in number or 7% in percentage.”

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69 68.78 5.5

68.48
68.5 5.4
5.4
68 5.3

67.5 67.27 5.2

5.17
67 5.1

5.08
66.5 5
2004 2005 2006

percentage of inspections with deficiencies

average number of deficiencies per inspection with deficiencies

Figure 4. Tokyo MOU deficiencies record 2004-2006

What can be indicated from those statistics? The system is good enough in
suspecting ships to be inspected. It is widely known that Paris MOU has the best
resources compared to other MOUs. They also have a practice with minimum
variations and follows common standard. Most of Paris MOU members are listed in
white list. In other words, when they really enforce the standards among themselves,
they will have common interest to protect their waters from outsiders with poor
performance. In relation to the statistics from various PSC regimes, it indicates that
when a PSC in one region is more rigorous than the others, it is more likely that
shipowners will assign more quality ships to trade in that area to lessen the risk of
being caught. As a consequence, it is natural that the less quality ships will be
operated in areas with less stringent PSC. This phenomenon is called „balloon
phenomenon‟, it occurs when you press balloon in one side, it will be blown or get
inflated at the other side. That is the reason why promising statistics in one MOU
might be an alarming statistics in other MOUs.

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If the above problem pertains to shipowners reaction to PSC, another problem arises
related to flag states‟ stand point to PSC. When Tokyo MOU regarded PSC as
measures complementary to the flag State control15, flag states often have their own
formula. The assumption is that global control value, which consists of PSC and flag
state control, should be constant. Thus when the PSC is absent e.g. domestic shipping,
global control value is equal to flag state control. At the other condition hence
international shipping where PSC exists, the value of flag state control may be
diminished since it would be compensated by PSC.

Unfortunately in today‟s era when the trend of PSC is stricter and becoming stronger,
then, to keep the balance flag state control tends to react more relax. Consequently,
every step forward in PSC developments could be regarded as a signal for the flag
state control to step back. This equation can be true but to lean the initiative on PSC
only may bring a drawback to the equation. In international shipping there is a
condition that is not expected, and that is when the proportion of PSC is more than
flag state control, or even worse when flag state control is very small. Ideally, the
proportion and quality of flag state control inspection should be more rational to
reduce the effort of PSC.

The assumption is not totally incorrect if the sharing of control is followed by the
sharing of costs between PSC and flag state control, which could be described as a
compulsory sharing of the costs of FOCs over the whole industry (Spremulli, 2004, p.
40). Sadly to say that it does not happen. Most of the time flag states have not
incurred any cost directly. It is always shipowners or operators who will grab their
own pocket to rectify the deficiencies, and cost for any delay or longer port stay.
Logically, their expenses are doubled. One for flag state to give a proper protection, a
protection that they ought to be given but rarely received, and another expense is the
risk cost of being targeted or the actual cost when the ship is detained. Surely quality
operators expect more responsible flag states.

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This mind setting might be different for substandard shipping operators as they do
not expect much from the flag states. Their cost consciousness encompasses very
broad spectrum of cost system. It includes low cost of registration, low tax, low cost
of crew, low cost of non compliance, which in turn will be compensated by high
chance of detention, high insurance premium, high depreciation cost, and other high
opportunity costs.

3.3.2 Effectiveness

It is commonly understood that PSC has less conflict of interests in conducting ship
inspection. As had been reviewed before, the individual defence from outside threat
is the main issue. It is their waters that they want to protect and those ships are not
their own ships. Consequently no reason to provide relaxed enforcement while they
can focus on finding the right method. The Concentrated Inspection Campaigns CIC
is one of their innovations to target specific issue on ships. During specific period of
time, hence from February to April 2006, Tokyo MOU jointly with Paris MOU
inspected 4,603 ships focusing on the maintenance and procedures of MARPOL
16
73/78 Annex I . From the shipowners side, the CIC is aimed to provide better
awareness on specific issues. For PSC, the result of CIC was proven to provide better
understanding on general reatment to CIC items on the ships side.

However, to review the existence of PSC, it is paramount to question the efficiency

of PSC and whether it is still relevant or not. To answer such questions it might not
be sufficient with answers based on rhetoric, but also they must be supported by data.

First fact is that the effect of shaming and naming has not been as effective as
expected. Publication, seminar, annual report, and online database are already there
but shamed parties (flag states and RO) just continue to perform less than expected
without significant change. Even though no new flag states have joined the Paris

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MOU 2006 black list, generally the flags in the black list are the same old players.
Paris MOU called them as “hard core” flag states17. There are ten flags that appear
both in 2006 and 1999 statistics, or they have been bad performers even since eight
years ago. In addition, there is a similarity between Tokyo MOU and Paris MOU,
where six flag states appear in both MOU 2006 black lists18.

Second fact is the interpretation on the fact that flags in the white list that is
continuously growing, and at the same time the number of detentions and
deficiencies demonstrates a rise as well. Statistics of Paris MOU shows that in 2006
there are three states joined the white list and two others disappeared from the black
list, compared to each three and three states in 2005. In 2006 Tokyo MOU shows
similar result that three states are listed in white list and four states receive reward to
move away from black list. This is a good indication that more flag states move
towards better flag states and qualify as responsible flag states. In contrast, data of
number of deficiencies and detentions move towards an increasing trend. If this
symptom can be analyzed, there must be a rationale on the increasing of good
performers while some “hard core” players just stay idle comfortably in their
position in the black list, and why that total number of deficiencies is slightly
increasing. One assumption is that more flag states become stringent to their fleet
thus the level of ships compliance gets higher, but this usually takes longer time and
not instantaneously affects the statistics. Another assumption is that is as result of
„flag hopping‟, meaning that less performing shipowners feel uncomfortable with the
move of some flag states towards better quality. As these shipowners feel less
convenient, they will change their vessels to flags that are more convenient.

To prove which assumption is true, the data from UNCTAD Review on Maritime
Transport 2005 and 2006 is referred to. The extracted data is the fleet of some flag
states that are suspected to be involved in „flag hopping‟. It shows that three flag
states with progressing track record in Paris MOU lost considerably number of

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tonnage, namely Cyprus, Estonia, and Romania. Their fleet tonnage shows a
deduction of 12.40%, 14.72%, and 26.70% respectively. In total it comprises lost of
2,481,000 GT from 2005 to 2006.

The inverse condition occurs to a number of flag states in Tokyo MOU and Paris
MOU black list. In 2006 these acute blacklisted flags obtained 11.29%, 11.93%, and
54.75% additional tonnage compare to previous year. They are Georgia, DPR Korea,
and Comoros. It aggregates a tonnage of 457,000 GT. It is quite small, but the
number does not include the tonnage gained by Cambodia, as a result of
unavailability of data. Panama, as the Paris MOU blacklisted flag in 2004 and the
flag in margin line to blacklist in 2006, also gained a remarkable tonnage of
10,507,000 GT.

In general, this statistics of tonnage may not provide the real reason behind losing
and gaining, as the total world tonnage is also progressing. However, it is a fact that
quality shipowners will be less likely to register their ships in low reputable flag.
Shipowners with relatively young fleet, with relatively maintained to standards, tend
to register their fleet in quality flag as well, as their fleet need less technical
convenience due to good condition. The probability is very low for the newbuilding
or young fleet ships to join blacklisted flags. Then it can be concluded that the
expansion of tonnage for the poor performers is due to they welcome flag hopping of
ships, most likely to the reason of seeking registers that can provide less stringent
control compared to previous registration. In short, it is an escape from strict flags to
more convenient flags. That is why the fleet of Cyprus, Estonia, and Romania is
shrinking while flags with poor performance are enjoying greater tonnage.

In the same mechanism, some flag states are boosted to white list due to the
significant deduction of substandard shipping under their fleet. In contrast, some flag
states become worst in their PSC records, enough to set them idle in black list. There
is a losing of tonnage but gaining in quality, as well as gaining in tonnage but losing
in quality vice versa. Another conclusion from the statistics is that the market of

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good record flags and poor record flags becomes more segmented. Shipowners are
helped with a wide range of choices in flags provided by the market. With the
increasing number of flags in white and grey list, surely there is a widening gap
between white list pole and black list pole, in which the dispersion is becoming less
and less concentrated to the black pole. Moreover, the number of acute players is less,
thus it becomes easier to target. The acute players‟ power should be reducing as well.
PSC is successful in distinguishing between good performing and poor performing
flag states. PSC achievement in pushing some flag states for better performance also
must be congratulated, though not yet pulling out substandard shipping from the
market.

Third fact is that the emerging power of PSC creates a condition where public
expectancy on PSC is very high, which is a common mistake. More and more states
become more selfish that they apply strict enforcement on PSC and empower more
resources in PSC, while discriminating their ultimate responsibility on flag state
control. This is a phenomenon that happens today. This trend brings a change in
safety barriers order where PSC is located prior flag state control, which is a slip that
is difficult to turn upward.

It is interesting that in Tokyo MOU, some members are very active in PSC while at
the same time their ships are also being actively targeted by other members. In 2006
the inspection rate in Vietnam was 30.89% or still higher than other busy port states
such as Hong Kong and Singapore who only at a rate of 13.95% and 12.01%
respectively. They are also actively involved in Tokyo MOU committee, meetings,
seminars, and trainings. At the same time it is an ironic that they are on their PSC
regime‟s black list. Even though inspecting is easier than being inspected, this
condition shows that the knowledge is not the main issue. The most probable cause is
that the priority and effort given to PSC is not balanced to flag state control.

This is different compared with Paris MOU, that is more selective in accepting new
member. Since most of Paris MOU members are EU members, they incorporate the

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regulation on PSC in EC Directive 95/21/EC that is binding to EU members. Even

for any new member of EU, this is a part of harmonization before a country can
officially join the membership. This harmonization fosters better enforcement and
uniformity in flag state obligation, not only in PSC but also in flag state control.

In Paris MOU, it is known that there are stages of membership. Before applicants
receive full membership status, they should first pass as cooperating members.
Cooperating members are subject to assessment on their fleet performance. They are
also in close cooperation with Paris MOU and under assistance for managing their
fleet better. As it had been displayed before, Cyprus, Estonia, and Romania
experienced losing a significant tonnage. It is assumed as the effect of their effort on
becoming quality flag states. This effort is partly the result from assistance and
19
pressure given by Paris MOU in order to receive full membership status . For
Cyprus, they were in black list in 2003 and moved to grey list the year after. They
did not wait for long, because in 2005 they climbed up again to white list and finally
received full membership status in 2006. The provision that members(p. 18) must
demonstrate an acceptable flag state record is a good model for the other PSC
regimes.

Fourth fact is brought up by Spremulli by questioning: Is PSC driving the

substandard operator out of business? He stated that in most cases when ships are
detained, it would not take a long time to rectify the deficiencies and therefore the
ships may proceed without delay. He concluded that: “it may well be cheaper to risk
and suffer a detention than to prevent it.” The policy of „detained but not delayed‟
may be counter productive in driving substandard operators out of business. Another
argument, that PSC is not operating effectively, is based on the fact that a significant
percentage of operators have no idea how bad their ships are or many of them believe
that the chance of deficiencies being detected is minimal (Sanyal, 2004).

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In general, the climate of PSC today has not yet successfully combated substandard
shipping and forced flag states to perform better. The effect of naming and shaming
bad performers is not as it was expected. The black list states that share growing
tonnage in world fleet is one of indications. Another problem that faced PSC is their
internal problem. How can we expect PSC members to conduct another control,
while they have difficulty in controlling their own fleet? Belize is under Caribbean
MOU and Honduras is Viña del Mar member, but both are on the Paris MOU and
Tokyo MOU black list. Indonesia, Thailand, and Vietnam are example of Tokyo
MOU members that are also recorded in black list of their own PSC regime.

In the future, PSC should be driven as a means of pressure. Not only pressure for
shipowners or operators, but also there should be a considerable pressure even
among one PSC regime members. In operational practice, PSC may act as an agent
of control of substandard shipping. In PSC meetings, the members should act as
agent of control to other members. The cooperation should be extended from
capacity building and information sharing, also to include support to the duty on flag
state control. This is an extended interpretation that PSC is complementary to flag
state control.

3.3.3 Associated costs

Generally, cost of PSC inspections can be divided into initial inspection cost and
follow up inspection cost. It is common that initial cost is on the account of port
states. However, in other cases there are other costs that have to be born by
shipowners or operators. Costs to rectify deficiencies and costs for the competent
authority to ensure that ship complies with the conditions from previous port of
inspection shall be charged to shipowner or ship operator. It is similar to costs of
inspection after detention, or inspection of ship leaving another port without prior
lifting the deficiencies, will be charged to the owner or operator of the ship20. This

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common practice is quite uniform for EU countries, as they adopt the measures
contained in Council Directive 95/21/EC of 19 June, 1995 in its up-to-date version.

Knapp (December 2006) estimated that costs of PSC inspection is USD 747 per
inspection. She also calculated costs of PSC inspections associated with zero
deficiencies, which are accounted for 54% of all inspections, estimated to be at USD
12.5 million per year for the regimes used in her study. Those PSC regimes are Paris
MOU, Caribbean MOU, US Coast Guard, Viña del Mar Agreement on PSC, Indian
Ocean MOU, and AMSA. This huge amount of money and the existence of other
inspections from private initiatives will lead us to global savings opportunity, which
will be discussed in sub chapter 3.5.

PSC inspections with its implications may guide the shipowners to take into account
other costs also, which are indirect cost. Even though there is a policy of avoiding
unnecessary delay, detentions with delay would cause not only higher associated port
costs, but also penalty for not arriving on time in the next port of call. The case of
Probo Koala, which is famous for transporting and dumping waste illegally in Ivory
Coast, may serve as an example on how expensive it is with delay penalty charge.
Even though this case is not connected with detention, at that time the manager of
Probo Koala would be expected to pay USD 250,000 for contractual penalties in case
21
of ship's delay to arrive at its next port of call in Estonia . This high amount
explains why shipowners or ship operators perceive PSC as Frankenstein monster.
PSC is simply viewed as a cost-burden on operators, because of requiring a major
effort by ship operators, agents and crew to rectify at short notice seemingly minor
deficiencies in documentation and equipment, listed by inspectors but actually of
little importance to the safe operation of the ship or the health of seafarers (Bloor,
2003, p. 13).

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3.4. Relationships between flag state control and PSC

As it had been described before, flag state control and PSC shall work hand in hand
in their duties. The better flag state control is in exercising the duties, the lighter the
tasks of port states are. Yet, this spectrum of work shall not work vice versa. It means
that it is not the correct mechanism for the port states to work harder than flag states.
In ideal it is a must for the port states to have a better life than flag states, for
enjoying status as second filter and not as main filter. This emphasis of control in the
shoulder of flag states may be well explained by recognizing their similarities and
distinctions below.

The distinction between flag state control and PSC may not be significant in role, as
both are acting as barriers in maritime safety and pollution prevention. The area of
controlling is almost similar as well, covering ship structure, machinery, fire fighting,
seafarers competencies, hygiene, safety management, and so on. The goal of the
inspections is ultimately on eliminating substandard shipping.

However, there are some characteristics that distinguish flag state control to PSC.
One is exercising their obligation, while the other one is exercising their right on
deciding which ships can enter their ports. Flag state control arose as a manifestation
of responsibility on looking after their fleet, on controlling whether their ships are
seaworthy and the crews are sail worthy. This obligation is attached wherever the
ships move. In case of PSC, it was established when port states considered that in
order to protect their waters from threat, they need to control and select which ships
may enter their ports. It is kind of self defence.

Scope and thoroughness between flag state control and PSC is also different. That
explains why mandatory statutory functions commonly are called surveys, such as
SAFCON survey or load line survey. A surveyor is a person who assures that the
ship and its components comply with the respective regulations, and he or she proves
it by the endorsement. It is reasonable then that a surveyor needs sufficient time and

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work space for thorough look up. It is slightly different with PSC check, commonly
called inspection. The nature of PSC inspection is a confirmation of surveys carried
out by flag state surveyors.

Is there any relationship between the type of registry and PSC? Based on the
merchant fleet distribution list issued by UNCTAD in its Review of Maritime
Transport 2005, the proportion of ships over 100 GT under open registry countries
constitutes 404 025 thousand dwt, aggregate to world total of 895 843 thousand dwt.
This equals to 45.099 % of the world fleet registered under the umbrella of the open
registry system.

UNCTAD 2005 World Tonnage Distribution List

Open Close
register register
45.099 % 54.901 %

Figure 5. UNCTAD distribution of Merchant fleet of the world

At the same time, as a quantitative basis to study the relationship between open
registry and substandard shipping, the simple statistics of detention reported by
Tokyo MOU will be used. The use of the method is to sort the detention list by the
flag state of the ship during 6 months, from October 2005 to March 2006. Later on,
all of the flag states will be classified into two major groups, the closed registry
states and open registry states. It is well-known that the open registry system is
dominated by countries such as Panama, Liberia, Bahamas, Belize, Mongolia,
Tuvalu, and Bermuda. The result can be seen in Table 1 and Figure 5 below.

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Table 1. Classification of detention based on type of registry in Tokyo MOU

Open Total Percentage
Month register Detention %
Oct-05 83 112 74.11
Nov-05 69 84 82.14
Dec-05 61 74 82.43
Jan-06 42 63 66.67
Feb-06 76 94 80.85
Mar-06 111 132 84.09
Σ 442 559 79.07

Fleet Summary of Tokyo-MOU PSC Detention List

October 2005-March 2006

Open
register,
79.07 %

Close
register,
20.93 %

Figure 6. Distribution of detentions based on type of registry in Tokyo MOU

It is important to find the reason behind connection of above graphs. Cowley‟s

indication may serve as an answer. He stated that flag state control is even more
significant when the full delegation is adopted. In other words, the degree of flag
state control effort is in line with the degree of delegation. He emphasized that
procedures of flag state control are very necessary, as in general it may be said that
Administrations which delegate all statutory functions have casualty rates above the
world average unless special measures are taken. In fact, most of open registry states
delegate all their statutory functions to RO. This extensive delegation, if not packed
with extensive monitoring on RO, would probably cause the high number of
detentions as shown in the statistics above.

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The fact that most detentions were dominated by open registry states reveals that
most of them have to improve their flag state control functions. This also indicates
that if open registry states work harder in their flag state control, to the level that
closed register states do, the detention may decrease significantly thus helping the
port states effort in PSC inspections. Similarly the work of PSC would be tougher in
inspecting ships where flag state control is absence.

The relationship between flag state control and PSC becomes more difficult when a
problem of global non uniformity arises. It is commonly known that even for PSC
incorporated under one MOU, the practice between the members is not uniform. This
is true in a case when some members are better equipped and possess sufficient
skilled inspectors, while some others are struggling with their resources. This
condition could result in a ship leaving a member state with zero deficiency but
being subject to detention three days later in another member state‟s port. It is the
condition that triggers the PSC MOU also to focus on training, other than
information sharing activities.

The challenge is even harder for fostering uniformity on flag state control, as there is
no formal association on flag state control like on PSC, except in EU. The problem
of practice that might be different from one country to others, as well as problem of
implementation and enforcement is called „implementation gap‟ by Global Integrity,
an NGO on public administration based in Washington22. This problem had been
addressed by other experts as well. Churchill and Lowe (1999, p. 273) stated that the
problem is not on shortage of legislation on ship safety, but lies in enforcement and
implementation which varies between flag states. This „implementation gap‟ explains
why that some flag states can perform better than the others.

In general, the relationship between flag state control and PSC is complementary.
However, both are still living with their own problems. In a condition when the

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degree of responsibility of each flag state is different, when some flag states more
focus on commercial target than performance, when some flag states do not have
sufficient resources to exercise control, it is difficult to minimize the room for
substandard players. As an effect, PSC who is already more developed will take over
the lead control and be more dominant than before.

The measure to expand PSC framework to collaborate more with flag states should
be fostered. Since most of port states are also flag states, the forum may be extended
on how to establish a mechanism where PSC and flag state control can work hand in
hand, as measures taken in flag state control will reduce the measures needed for
PSC, which will bring the global effort into balance or equal as before. However, the
good effect is that more and more flag states will join the white list. More flag states
would be categorized as responsible quality flag states, thus driving the trend in
eliminating substandard shipping. Another benefit is to force landlocked countries to
spend considerable effort for controlling their fleet, without gaining double
advantage on the absence of need of PSC and simultaneously laying their flag state
control obligation on PSC.

3.5. Resources and personnel

In sub chapter 3.2 it is clearly shown that the endeavour of flag states in exercising
control differs and depends on competence and motivation to undertake their role.
This sub chapter mainly discusses about the resources on managing control and
exploring the opportunity for the control regime to become more efficient.

Apart from the willingness to control, where the lack of resources turns out to be the
main problem, states have to distribute the available resources efficiently. This
distribution of resources primarily depends on the characteristics of the states.
Cowley (1987, pp. 130-131) stated that the longer and more vulnerable the coastline
and the greater the number of ship visits are, the larger is the proportion of surveyor
resources employed on PSC, even if the state only has a relatively small number of

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fleet. The example of state belongs to this category is United States with their US
Coast Guard. Similarly, a relative small country, or maybe landlocked, that have
large merchant fleet the proportion of resources employed on flag state duties will be
greater.

The problem arises when a state has to share its resources for both flag state control
and PSC at the same time. Since flag state duties can be delegated while PSC duties
cannot, delegation is the easiest way out in most of the cases. Some states just omit
the fact that flag state control is mandatory and PSC is voluntary. They even manage
their best resources on PSC.

In case of Vietnam, a flag state with fleet of 1,671,000 GT (UNCTAD, 2006), while
managing to conduct PSC under Tokyo MOU satisfactorily, their fleet is also being
targeted for being classified as black list flag in the same MOU. It is better for
Vietnam to allocate their resources in flag state control first. The principle is in an
umbrella of PSC MOU, when one member controls their fleet better it will help other
members on PSC. The total use of resources under a PSC MOU also may be reduced.

The case of Indonesia is a different combination, where there is a lack of resources

both in flag state control and PSC. From the total number of Tokyo MOU inspections
in 2006, Indonesia only shares 0.27% compared to Vietnam 2.15%. While from the
individual ship visits Indonesia accounts for 3984 compared to Vietnam 1366.
Together with the fact that Indonesia is also in Tokyo MOU black list, it is very
obvious that Indonesia has difficulty not only in resources for PSC but also for flag
state control. This condition also frequently happens when the times that even very
high-targeted ships are not inspected simply because no inspectors are available
(Sanyal, 2004).

To cope with this problem, it can be tackled if states reshape themselves to become
more efficient. Today we recognize a numerous kind of inspections, of which the
area and objects are sometimes overlapping. These overlapping inspections open a

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room for resource savings by avoiding multiple checks for the same object of
inspections.

In a public side, under the cooperation within PSC MOU, port states can entrust pre
departure inspection to flag state or to another port state, to ensure that the ship can
smoothly arrive at other port states. This will avoid excessive inspections on ships,
thus also can save considerable time and resources. Definitely, there should be a state
of trust among the states in one PSC MOU.

Other solution for resources efficiency is entrusting statutory surveys or ISM audit
on another capable contracting government. It is allowed by the IMO conventions to
delegate surveys to other contracting governments, upon request. This solution will
not only combine PSC and flag state control at the same time, but also combine the
interest in it.

For the private side, there are a lot of inspections on the initiative of classification
surveys, hull machinery insurance, P&I, and charterers. On the initiative of the
Maritime Transport Committee (MTC) of OECD, they have over the past several
years produced several substantive reports relating to these integration possibilities
on inspections, especially in their Action Plan to Combat Substandard Shipping
(2002). In the Shipper inspection schemes, they built a discussion with the managers
of existing shipper inspection schemes on the scope for further integration and
development of those schemes. They also encourage greater dialogue between the
shipper scheme administrators, other organizations that generate similar information
(such as IACS) and national administrations in order to improve and facilitate the
flow of information.

In terms of monetary advantage, Knapp (December 2006) found that total inspection
costs of mandatory and non mandatory inspections per vessel per year are estimated
vary from USD 47,000 for tankers to USD 17,500 for other ship types, while the
frequency of all inspections performed in the name of safety is estimated to be 11

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inspections per year for tankers, 6 for dry bulk carriers and 5 for other ship types.
These findings shown that there is a lot of room for savings time, money, man hours,
and the savings might be even greater when between public and private side are
combined.

The only obstacle on the integration is the lack of recognition in each other‟s work.
Knapp again underlined that the lack of trust in industry between flag states, port
states, classification societies, insurance companies and cargo owners has created a
playground for many inspections in the name of safety. For PSC regimes, they can be
more efficient if they recognized each other. Up to now, Paris MOU, Viña del Mar,
Black Sea MOU, and Indian Ocean MOU, are observers in Tokyo MOU. Yet, they
do not accept each others inspections. The roadmap ahead is towards the
simultaneous combination on flag state control and PSC, global PSC, harmonization
in procedures, training, targeting criteria, and a global database across global
industry.

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CHAPTER 4: METHODS OF FLAG STATE CONTROL

4.1. Classifications of method

In this chapter, the methods of flag state control are discussed. The definition of
methods in this chapter means the way in selecting ships for inspection, including
aspects to consider in the selection. In the mean time, the scope of „flag state control‟
term belongs to measures taken to ensure the fitness of the fleet to relevant
regulations, specifically the non mandatory measures and non typical arrangement,
such as additional inspections, participation in RO statutory surveys, and partial
delegation.

The methods range from the simple one to the more complex one. Even though those
methods are still feasible to be applied in flag state control, the chosen method
should consider the need and capability of the flag states. In other words, there is no
one best method that can be best applied for all Administrations. The small
Administration, which is responsible for small number of vessels may find it hard to
establish a world wide network of inspectors thus will select a simple method. The
method does not have to be suitable with another method chosen by another small
Administration but with big fleet, which mostly sail on international voyage.

The methods of flag state control may also have many similarities with PSC. It is
true since both are closely linked. However, because PSC is more developed than
flag state control, it is understandable if flag state control to some extent adopts PSC
system for the reason of its sophistication. In fact, flag state control is also dealing
with ship inspections, RO, and shall in serious cases use its power to prevent ships to
proceed to sea. In the attempt to monitor RO, even EC Council Directive 94/57/EC
Article 9 instructs that data of RO safety and pollution prevention performance
records shall be derived from the data produced by Paris MOU.

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The inspection approach may be classified into four categories:

1. Based on time interval.
Time interval approach provides three alternatives, as it may be either regular
or irregular or both. This approach is closely related to the previous approach
of proportion. When it is decided to inspect ships in certain proportion, a
certain period of regularity must be decided as well. It is up to the
Administration whether to inspect 50% of the entire fleet in a period of every
2.5 years or 100% every year, or other arrangements.
2. Based on initiatives.
Initiatives mean the inspection activity itself relative to time. There are three
kinds of initiatives, namely Pro-active Preventive, Reactive Curative, and
combination between both of them.
3. Based on target.
The choice is to conduct random inspection or inspection based on risk.
Random in this category means without specific target and choosing ships to
be inspected in random, without any specific preference. While considering
the risk means that ships are inspected (or not inspected) based on the risk.
The risk considers the type and age of the ships, RO, operators, and so on.
4. Based on proportion.
This approach is very basic and uncomplicated. The options are whether to
inspect 100% ships in the fleet or any specific proportion. Specific proportion
means an agreed percentage, such as 25% or 50%.
However, those approaches above are not exclusive and a combination is acceptable
to fulfill the need of flag states. An example of the combination of proportion, time
interval, and target approach is when 50% of passenger ships with age more than 10
years are subject to annual inspection.

4.1.1 Based on time interval

As it previously explained, based on time interval inspections are divided into regular,
irregular inspection, and combination of both. The time interval of regular inspection
must be decided right after a flag state decides to inspect their fleet entirely. Liberia
is an example of flag state which subjects all Liberian flag ships for regular
inspections, so called Annual Ship Inspection (ASI). Another country may have
another arrangement. In 1987 United Kingdom had legislation that at least one survey
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every five years had to be conducted by one of the Department of Transport‟s

surveyor. This decision for excluding RO might cost additional significant expenses
for shipowners. Even though for a quality flag state the decision might not be popular
but it gives significant reward to their performance record.

Irregular inspections cover a very broad spectrum of reasons. The Administration

might choose irregular inspections because of the limited resources. Limited
resources set a limitation in budget to conduct regular inspection. It is also possible
that no sufficient personnel is able to inspect ships in regular manner, so that the
Administration decides to have irregular inspections only when ships are caught by
PSC. The limited resources might not always be the background.
Oppositely, the existence of advanced tool in targeting ships to be inspected may
simplify the task. The tool automatically selects which ships are meeting criteria for
irregular inspection.
Hong Kong Marine Department is one Administration, which is successful in
building database and tool similar to that23.

A combination between regular and irregular is also a viable solution. Whatever the
choice is whether regular, irregular, or combination, an Administration must consider
their fleet characteristics. If their performance record is satisfying, then there is less
reason to conduct additional regular inspection.
If the performance record is quite disappointing, they might better consider to have
more frequent inspections. Performance record can be obtained from PSC annual
report or other publications by the initiative from private organizations e.g. BIMCO
INTERCARGO ICS/ISF INTERTANKO Shipping Industry Guidelines on Flag State
Performance.

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4.1.2 Based on initiatives

From the flag state control action relative to time, it can be divided into Pro-active
Preventive, Reactive Curative and combination between them. The typical reactive
curative flag state can be characterized by being passive, not innovative, and in lack
of initiative action. Only incidents or accidents would trigger them to take action. In
a simple case, the flag state is focusing on rectification of PSC deficiencies rather
than prevention. In a worst case, the flag state does not spend effort for preventon,
but rather on next components of safety system, namely secondary safety actions
such as salvage and tertiary safety actions, namely compensation (Boisson, 1999).

It is important for the Administration to be more pro-active preventive, and

considerably spend more efforts there. This is not only in a sense of running the
business in classical way, but also to always innovate and keep up with the change.
An example is Hong Kong, with their pre-registration quality control system (PRQC)
launched in 200324. The quality control even starts before the ships actually join the
register, and enacts as a measure to prevent cases where some ships do not meet the
required standards, although they have supposedly been inspected by RO in the
change-of-flag survey. It is not only beneficial for the sake of safety, but also
commercially praised by private bodies, such as INTERTANKO25. Boisson stresses
that prevention of accident is capital importance for several reasons. Firstly, the
effectiveness of secondary safety action is in question when serious accident occurs.
Secondly, present mechanisms for compensation only provide partial reparation of
the injury suffered, particularly in the event of accidents, since in general maritime
law provides a limitation of liability.

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Therefore, it is advised that the combination of both pro-active preventive and

reactive curative is adopted by flag states. Reactive curative is still needed in case the
flag states fail to act as filter agent. In a past Mare Forum 2005 in Rome, with topic
of Shipping in a Responsible Society, it was recommended for the shipping
community to break away from a compliance culture that resists change, to one of
continuous improvement and proactivity.

4.1.3 Based on target

To choose ships for random inspection is not recommended, since each ship has
characteristics that are specific in type, specific in purpose, with particular
classification, and operated by particular operator, which brings a wide variation in
flag state‟s fleet. Random in a sense of no special criteria will provide a chance in
getting good ship to be inspected, which is certainly fine but from the resource
management may be a kind of waste. To visit good ships once a year in mandatory
annual surveys is sufficient and additional inspection may not bring significant
impact to their performance. In general, the statistics data is used in analyzing target,
mostly from PSC statistics, casualty statistics, and private inspections statistics.

4.1.3.1 Targeting Ships

Even though we recognize term of substandard shipping, substandard ship as one of

the components is still the main object for inspection. The aspects within a ship are
also numerous and therefore only general safety related aspects will be discussed in
this part.

From the type of the ship, it is a common misconception that tankers (oil, chemical,
gas) are more vulnerable compared to other ship types. In fact, tankers are one of the
safest. Most probably it is due to the strict operational requirements for tankers that
are set by both flag state and industry initiatives such as insurance, classification

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society, cargo owner, and shipowner itself. According to a research done by Lloyd‟s
Register, tankers perform better than cargo ships. The statistics shown that small and
medium size bulk carriers and general cargo ships are by far the types of ship most
frequently detained, with general cargo ships proportionally four times the rate for
tankers which have generally good record, being subject to the greatest political and
environmental pressures (Spremulli, 2004, p. 43).

The annual number of mandatory and non mandatory inspections for general cargo
ships is five, compare to dry bulk carriers and tankers which is individually six and
eleven (Knapp, December 2006). The annual expenses for tanker inspections are also
among the highest, with USD 47,000 compares to USD 17,500 for other ship types.
Then it is no wonder that tankers are subject to public attention, which perceives the
risk mainly by media without having in depth knowledge about the safety regime as
a whole. Data from several PSC in 2006 such as Tokyo MOU, Indian MOU, and
Paris MOU reveal the issue that oil tankers and gas carriers are among the less risky
ships type.

Figure 7. Comparison of inspections with deficiencies per ship type

(Tokyo MOU Secretariat, 2006, p. 37)

It is important to include the reference from private bodies. Royal Insitute of Naval
Architects (RINA) highlighted the findings of investigation of general cargo ship
losses and associated fatalities relative to other types of ship in 2002. The mentioned
research concluded that although general cargo ships account for nearly 20% of the
world merchant fleet, they suffer over 40% of the total losses and almost 40%
of the fatalities. The research considered a fleet of 16,755 general cargo ships,

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comprising nearly 20% of the world fleet of merchant ships over 100 GT in 200026.
This research has alarmed the safety regulators to pay more attention on general
cargo ships. Even until now, there has been no concrete action taken to follow up this
notice. In Tokyo MOU, general cargo ships have been the type of ship that has
highest number of inspection with deficiencies above average since 2004 (Tokyo
MOU Secretariat, 2007, p. 37). In the latest annual report, the comparison of
inspections with deficiencies per ship type indicated that general dry cargo ships and
refrigerated cargo carrier shows no trend for improvement. Moreover, in Paris MOU
general cargo ships have not been classified as high risk ships. It indicates that
serious measures have not been taken to respond the RINA submission.

Another aspect is ships‟ condition related to their age. The statistics from P&I clubs
pointed out that for insurance purpose, the percentage of older ships to be surveyed is
higher than younger ships (UK P&I Club, 1995, p. 15). It demonstrates the ships
condition deteriorates as the ships get older. Perhaps, the combination of ship type
and age and its relationship with the technical condition, inspires the EU
Commission to issue 2001/106/EC Directive following the Erika and Prestige
disasters. The concept of „Mandatory Expanded Inspection‟ (MEI) and the term of
„high risk ships‟ in PSC were introduced in this Directive27. The vessels subject to
MEI are oil tankers above 3000 GRT and more than 15 years old, gas and chemical
tankers more than 10 years old, bulk-carriers more than 12 years old, and passenger
ships more than15 years old (excluding those covered by the EU Ferry Directive
1999/35/EC). The vulnerability of high risk ships is also recognized in Paris MOU
by adopting above Directive to its Target Factor calculation.

In general, flag state control may refer to statistics that is available when targeting
ships to be inspected, based on ship type and ship age. Even though this targeting

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may not directly correspond to ships factual condition, it helps Administration on

narrowing the suspected ships population thus maximize the probability in inspecting
the substandard ships.

4.1.3.2 Targeting RO: Is auditing necessary?

In chapter 2, the related IMO instruments on RO monitoring are already discussed.

As an extraction, RO performance indicators can be mainly divided into areas of
Technical, Communication, and Management systems. Technical aspect receives the
input data from PSC detentions, PSC deficiencies, flag state inspection, casualty
statistics, and average age fleet. RO with less output in research and development
may be assumed as possessing less technical capabilities.

In the scope of RO‟s communication performance, Administration shall ensure

accessibility to RO information database, on time notification for serious cases
(detention, ship unseaworthiness, class suspension), and on time survey report. In the
practice within Hong Kong Administration, they consider on time copy of certificate
and on time report on severe condition when ship cannot proceed to sea, as part of
RO communication performance.

On the aspect of management systems, flag state may choose to audit RO. Under the
umbrella of IMO, the model agreement MSC/Circ.710 MEPC/Circ.307 only offers
audit of RO on non mandatory basis. The IMO model agreement only recommends
the audit, not oblige the flag states. Even the audit itself may be directly conducted
by Administration or by independent group of auditors. While in EU the requirement
is stricter, and the Administration is prescribed to audit RO on biennial basis. In
relation to this audit, the questions of effectiveness and efficiency are arisen. It might
not be effective to audit RO in few days in few branches to get the full picture of RO
management systems. Since the number of flag states is more than the number of RO,
it might not be efficient if each flag state audits the same RO individually since it

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will make them busy all year long. In addition, most RO are also quality certified and
subject to be audited periodically. In case of RO who are members of IACS, the
IACS Quality Management System Certification Scheme (QSCS) is already made
mandatory28. IACS QSCS requires that RO quality management system to conform
with the requirements of ISO Standard 9000, EN 45004, IMO Resolutions A.739(18)
and A 789(19), and other applicable standards (Villanueva Jr., 2004, p. 58). The
QSCS itself is already run under continuous evaluation and in a report issued in 1996
by an IMO consultant, the QSCS programme was described as “substantially
complete”, compatible with Resolution A.739(18), and its present development was
judged positive (Boisson, 1999, p. 127). Will the audit by Administrations be useless
and only create duplication?

The answer is yes and no. In the report of „Ships of Shame‟, Parliament of Australia
suspected that some RO were established by the flag states and carrying special
mission to service a particular trade, type of vessel or flag state (Australia House of
Representatives, 1992). This is the reason why sometimes audit by flag state is less
useful. In this case, it might be reasonable to assume that external quality audit by
independent external body is more objective.

On the other hand, audit is still relevant because some RO need additional pressure to
boost their performance on system implementation. In Paris MOU annual report
2006, the performance of RO is remarkably wide in variation. Some RO just
performed far better than others and some others are just extremely good. Moreover,
we are not living in ideal world where everyone including RO are subject to
commercial pressure and therefore, audit as a mean of control is unavoidable (Rueter,
1991). The purpose of audit is not solely to control, but in practice of some
Administrations it is intended as a performance evaluation as well. Finnish Maritime
Administration (FMA) conducts audit on biennial basis with the agenda of reviewing
RO PSC records and to seek communication improvement between them (2001, p. 2).
If a flag state decides on auditing RO, it is advised to avoid overlapping by not trying

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to replace a position of external quality auditor. Therefore, it is a general rule to

compact and limit the scope of their audit as necessary.

4.1.3.3 Targeting Operator

Since substandard shipping encompasses broad definition, operators and managers

are also included into the measurement. In reality, not all operators are willing to
follow regulations in all aspects. Some of them are good in company policy and
motto, but when it comes to practice they cannot execute their own policy due to
attempt on cost savings. They are recognized as irresponsible shipowners or
managers.

If we review their reason on substandard operation, most of them are targeting the
market for „cheap solution‟. In other words, there is always a demand for service for
price sensitive market. This pertains that willingness to pay of that market is not high,
either because of less economic power or less knowledge on safety and quality.

In addition to the issue of substandard operator, from insurance general average

statistics it is the bad shipowner, operating with old, substandard vessels, that totals
the largest number of incidents (Boisson, 1999, p. 33). This fact emphasizes that the
attitude of shipowner influences the safety value inside the company. Therefore the
most practical way to rate the performance of operator is reviewing their ISM record,
either the ISM related deficiencies in PSC record or the typical non conformities
after several DOC audits.

4.1.3.4 Focus areas within ships, maintenance, and human factors

Since the broad coverage of ship inspection and the nature of inspection itself is less
thorough than survey, it is important to spotlight the critical areas. For that reason,

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another kind of risk targeting is to define the focus on ship inspection. It is an attempt
to minimize the risk of skipping the existing deficiencies during inspections. In order
to find the focus on ship inspections, it is crucial to close up on major deficiencies
found during PSC inspections.

In Tokyo MOU 2006 Annual Report, the comparison of deficiencies by categories

for 3-year period is displayed (p. 42). While the trend of discovered deficiencies is
increasing, fire safety measures, safety of navigation, and life saving appliances are
the top three deficiencies by category. In the fourth is stability, structure, and related
equipment and then followed by load lines at the fifth. The summary can be seen in
below chart.

Tokyo MOU deficiencies 2004-2006 Fire safety

measures

16% Life saving

appliances

Safety of navigation
40%
14%
Stability, structure,
and related
equipment
Load lines
14%
8% 8%
Others
Figure 8. Major deficiencies in Tokyo MOU during 2004-2006

In addition, the statistics extracted from Indian MOU Annual Report 2006 also
shows a similar result, in which the top five deficiencies are fallen exactly to those
categories. It is remarkable to find that the pollution prevention measures under
MARPOL did not constitute a major share to the top five deficiencies. This implies

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that safety measures are more potential to be focus on, than pollution prevention or
seafarers living condition.

The next question is to find the rationale on safety as the most deficiencies found
onboard ships. One could argue that it is logic since safety items onboard are
numerous and difficult to keep on eye of every single item. Another one could say
that safety is the main concern of inspectors and they would be more focus on safety,
so that the likelihood of safety deficiencies is higher. However, just like inspectors
who try to decide area to focus, shipowners also set up priority in their operations
and reasonably they would focus on revenue-earning items. Consequently, less
priority is given to non revenue-earning items, which, nonetheless, may be critical to
the safety of personnel, the ship and the environment (Spremulli, 1994, p. 43).
Spremulli points out that these non revenue-earning items include life-saving
equipment, fire prevention and equipment, cleanliness (accommodation and
machinery spaces), and navigation equipment.

It would not be comprehensive to include the non revenue-earning items only on the
expensive physical equipments. In fact, small size items which are simple but
possess great importance on ship operations repeatedly neglected by ship operators.
Figure 8 and 9 displays the fact during private initiative inspection, which safety
procedures and ISM related items often are considered as less important to ship
operations. Even though procedures are continuously used by the crew, their
existence is easily forgotten and less maintained once the crews are getting familiar
with the procedures. These procedures become emergence when there is crew change
and the new crew needs to familiarize him/herself with the procedures that might be
not exist in his/her previous ship.

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Figure 9. Service and maintenance shortcomings (UK P&I Club, 1995)

Figure 10. Shortcomings in safety standard and equipment (UK P&I Club, 1995)

Therefore, in the light of safety management it is vital to concentrate the inspection

in the area of human factors. Crew awareness to safety culture especially the safety
attitude, safety behaviour, and familiarization over safety issues may be observed
from simple things such as the placement of flammable materials and the use of
safety equipment during cargo operations. The idea to address human factors in
inspection is supported by Australian Maritime Safety Authority (AMSA) inside the
report of House of Representatives Standing Committee on Communications,
Transport and Microeconomic Reform (Parliament of Australia, 1998, p. 32). The
transcript from the hearing is: “… many of the problems we come across now in port
state control do not relate to structural or machinery issues but rather to operational
difficulties which reflect on the way the ships are managed and operated by their
crews.”

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In conclusion, whenever a ship is decided to be inspected, the flag state control

inspector should optimize his/her time of inspection to assist shipowners improve the
safety and environmental protection standards. Focusing on above top five
deficiencies and non revenue-earning items may help inspectors‟ task. In addition, to
combine the inspections with emphasis on human factor issues will bring great effect
to safe ship operations as a whole.

4.1.3.5 Single criteria or multi criteria

Risk approach for the purpose of this discussion is a method for suspecting
substandard shipping in attempt to improve the fleet performance. In the application
of inspection with the risk approach, the criteria may be decided as single criteria or
multi criteria. The single criteria may be based only in type of ships, age of ships,
RO of the ships, or operator of the ships. Multi criteria is applied when more than
one criteria is selected or when it involves one combination or more. An example of
single criteria is to focus on type of ship with highest accident record, it is general
cargo ships. Once the criteria is joined with another criteria, it is no longer single
criteria but multi criteria. For instance focus on type of ship with highest accident
record, which is classed by RO with worst detention record.
It has to be born in mind that the intention of having multi criteria is to guide
Administration to highly suspected ships. Therefore the decision on which criteria to
be used must be based on well-built hypothesis, otherwise the result may be
misleading. The implications might be less probability on inspecting less good ships.
The more complex our combination is, the less targeted ships there are in the
population, thus the bigger the chance will be to inspect suspected ships.

4.1.4 Based on proportion

The option is easy whether to inspect all ships in the fleet or only partially. Panama is
an example which all ships are subject to additional annual inspection, which partial
inspections mean the inspections only cover specific percentage of the fleet, such as
25% or 50%. If the inspection is to cover entire fleet, the two factors to be considered
are the size of the fleet and the size of Administration. It is noteworthy that the size

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of Administration must be ideally comparable to the size of their fleet, or the size of
Administration shall linearly correspond to the size of the fleet. Even though these
days the development of IT brings considerable efficiency in working load, the ratio
of size of Administration to size of fleet does not change dramatically, due to the
challenges and tasks of Administrations today are tougher than twenty years ago.

The variable of fleet size is an interesting topic to be discussed. In one side, the
smaller the size of the fleet would simplify the task of inspection. It is logic since the
number of ships is less then the task would be easier to accomplish. However, the
question of economies of scale is arisen whether it is economically acceptable to
inspect only a hundred of ships with the effort of traveling around the world. Imagine
Austria a land locked country with 34,000 GT or Nicaragua 6,000 GT ships in total.
The converse challenge is applied to flag states with huge number of fleet. There
would be a little question about economies of scale, but the main dilemma is on how
to manage inspections of those ships in additional to regular surveys. Bahamas with
its 38,382,000 GT fleet is an example.

Commonly, the problems of higher ratio of fleet to Administration, the economies of

scale, and the possibility to inspect huge fleet are answered with the existence of
world wide network of RO and private surveyors. It is important to appoint RO other
than classification societies, because of they are not normally used for inspection
purposes as it may be considered invidious to have them checking the standards
onboard a ship which they have dealt with statutory surveys (Cowley, 1987). Those
RO and private surveyors are available as an efficient solution for flag states with
any size of fleet. As an example, Panama employs private surveyors and additional
RO to conduct control over their extensive 141,959,000 GT fleet. Administrations

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can keep control over their fleet while reducing their direct involvement in technical
aspect. However, in any circumstance Administrations should keep their
organizations in reasonable size. The diminishing technical task means the emerging
task of control management, both controlling the fleet and controlling the adequacy
of RO works.

4.1.5 Combinations of approach

Based on our review above concerning the approach in flag state control, the
inspection can be categorized into based on proportion (all or x%), based on time
interval (regular or irregular), based on initiative (pro-active preventive, reactive
curative, or both), and based on target (random inspection or risk-based inspection).
Since this categorization is not exclusive, it means the combination between one
approach to another approach is possible. An example of combination is if a flag
state decides to conduct irregular inspection and then they pair it with preventive
measure, and later on they can connect it with inspection based on risk.

The possible combinations between those approaches are drawn up in Figure 8. In

total there are eight options that represented by six colours, namely blue, red, light
green, dark green, yellow, and purple. For yellow and purple colour, each has two
options since risk approached inspection can be done across all fleet or only on
selected proportion. For instance of yellow colour, after a major ferry disaster the
Administration decided to have one time (IRREGULAR and PREVENTIVE)
thorough inspection on all ferries age more than twenty years (RISK) or only 50%.
The proportion choices here are ALL or 50%.

Each line itself has double ended arrows to imply that the direction can move upward
and downward. The choice may start from any point but once a colour has been
selected, the choice must follow that particular colour. As an example, if an
Administration agrees to only have curative inspection then there is no other choice

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than dark green colour or combination between curative and irregular e.g only
inspect ship after detained by PSC.

Approach

IRREGULAR REGULAR Time

Interval

CURATIVE BOTH PREVENTIVE Initiative

RANDOM RISK Target

X% ALL Pro-
portion

Figure 11. Possible combination among inspection approaches

Another example is an Administration‟s response to 35% of their ships was detained

for the reason of fire safety measures. Then an Administration decides to adopt RISK
approached by having concentrated inspection on fire safety measures. The lines then
go up to PREVENTIVE action. At this stage, there are still three colour options
namely blue, red, and yellow. Since to have it regularly might get strong opposition
from shipowners due to high additional cost, the Administration decided to conduct it

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only once (IRREGULAR). Then now the colour is only yellow colour. Last decision
to make is whether to have it on all ships or only on particular proportion
(PROPORTION).

Administrations may decide which combination is more favourable to them, by

considering the risk of their fleet, the necessity to have additional inspection, the
input from shipowners, and so on. This diagram just provides option that should be a
tailor customization to each Administration condition.

4.2. Choice of methods

Whatever the method or combination of method chosen by Administration is, it must

meet the need of the organization. Drucker (1997) specifies seven conditions that
controls must be met:
- they must be economical;
- they must be meaningful;
- they must be appropriate;
- they must be congruent;
- they must be timely;
- they must be simple; and
- they must be operational;

The Administration is advised to build their own system. Drucker mentions that the
criterion of better control design is when it needs less effort to gain control. The
fewer controls needed, the more effective they will be. Indeed, he says, adding more
control does not give more control. Control must be meaningful in a way that the
events to be measured must be significant e.g high age is more relevant than the
shipbuilder. These criteria of control provide very good rules to be considered by
Administration in selecting an appropriate method.

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The establishment may start on set up the information on what kind of data would be
needed to be analyzed. Then after set up of database, the system must be able to sort
the data based on combination that is desired. For instance, all bulk carriers over
twenty years of age that are classed by ABS and have been detained more than once
in the last six months.

Next step is the definition of specific value that a ship falls into the criteria to be
inspected. In a simple approach to reduce the number of targeted ships, single criteria
or multi criteria as shown in chapter 4.1.4.5 may be adopted. If the more advanced
system is desired, the system of PSC may be a good option that a target factor is
29
developed . In general, the target factor is a risk scoring and it is divided into
generic factor and historical factor. Generic means whether the characteristic of a
ship are matched to criteria of being high risk. As an example is the high risk ships
that match to mandatory expanded inspection (MEI) by EC 2001/106/EC. Historical
factor is dynamic factors related to the record of ships in PSC.

In conclusion, it is important for the Administrations to keep the methods are suitable
to their fleet characteristics, able to discriminating ships by their risks, not leading to
over control situation and economically practicable. It is no doubt that every single
new regulation issued by Administration is monitored by private sector. Again, in
Mare Forum 2005 which was attended mostly by private maritime sectors, the
attendants stated that they need to convince the regulators that their regulations are
valid and relevant, that their impacts are properly tested, and that their results are
practical.

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CONCLUSION

Flag state control is not a new issue but it is always an interesting topic to be
discussed. The fact that it is an old issue but enjoy a less popularity than PSC is the
reason why flag state control issue is interesting. Flag state control is also defined as
an obligation that is mandatory to exercise, as the ultimate responsibility of safety
and pollution prevention lies on the shoulder of the flag states, not on port states.
Then why does PSC seems to be better developed than flag state control? The reason
is simply because many Administrations pay more attention on PSC rather than on
flag state control, due to public pressure and port states are more sensitive for the risk
of substandard shipping than flag states are.

The challenges on Administrations in conducting flag state control may be

temporarily overcome by the existence of RO. Especially in the recent situation,
when the development of regulations is very rapid, it affects many developing
Administrations, which are left behind the technology advancement, a problem
which is not experienced by many RO. RO with their abundant resources can just
stay ahead, since some of the IMO developments were just raised with the concern
from RO. Some leading RO are very advanced in research and development. With
the support of their vast network of resources, they can fulfil the need of
Administrations especially underdeveloped Administrations with lack of expertise
and infrastructure.

Therefore, no wonder that many Administrations are willing to delegate their

obligations to RO. For traditional maritime states and developed maritime
administrations, the reason is mainly for simplicity. They might not be forced in
doing so, since basically they have possibility in exercising obligations by
themselves. Yet, for the developing countries with developing maritime
administrations, the delegation and authorization to RO seems as an unavoidable
solution for satisfying both their national interest and obligations simultaneously.

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Although there are some IMO resolutions regarding delegation, namely Resolution
A.739(18), Resolution A.789(19), and MSC/Circ.710 MEPC/Circ.307, delegation
and authorization are still issues which are quite liberally regulated. It is regulated by
the existence of instruments that permits authorization and some provisions about
general requirements. Most of them are requirements related with the technical
competence and capability that must be possessed by RO. This assessment on RO
qualifications does not come in package with self assessment of Administration. It
seems that there are only a few requirements regarding the capacity of
Administration itself. That is why it is liberal, in a sense that it does not prerequisite
what kind of capacity an Administration should have after delegation. The release of
technical obligations has consequence that Administration should be more active in
control management level. Because even to control needs specific management skill
related to set up target, performance measurement, performance evaluation, and
monitoring issues. Delegation followed by improper control means losing control.
The Administration‟s control skill would prevent both under delegation and over
delegation. On the other hand, it is a liberal issue because it is up to the
Administration whether to release full authorization, partial, or limited authorization
regardless to the size and capacity of the Administration. There are less specific
conditions to be met by Administration in order to balance the greater scope of
authorization. In other words, it is regulated more on RO side but it is more liberal
when it comes to Administration side.

As the control in public side is powered by flag state control and PSC, their existence
is closely related and complementary. Their relationship is when one control is
stricter, it will help another. The problem arises when the proportion of PSC is more
than flag state control, or when PSC is more powerful than flag state control. This
might be an unhealthy relationship since the ultimate control is on the flag state, for
no reason that PSC may replace the power of flag state. Imagine in an archipelago
country like Indonesia where PSC is absence in domestic shipping, the flag state
should take all control functions by themselves. Therefore, the atmosphere of recent

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control must be gradually shifted to proper position. It does not solely mean that PSC
is less needed than flag state control, but there should be a development of joint
framework between port state and flag state, where the sharing of responsibility is
shared proportionally.

This framework might not be running smoothly as it is difficult to deny the existence
of flag states that offer „cheap solution‟ to the market, known as flags of convenience.
They are really convenient not only in terms of fiscal, but also technical, which is a
burden to the above mentioned framework. They are hated by one party but they are
demanded by another party. At least they are existing and their existence shown to be
a serious threat to society‟s safety endeavour. It would be difficult to expect them to
exercise their control as flag states. The statistics also show that their fleet is growing,
most probably because of more flag states are considering to be quality and
responsible flag states, thus triggering „flag-hopping‟ phenomenon.

However, this phenomenon should not be over worried since, in the number of
individual states, the trend is decreasing. A smaller number of FOC means that
greater pressures can be pushed on them, since most of the states are good
performing states, thus they are more powerful. In addition, most of ships sailing
under FOC flags are engaged in international voyage, thus they will always be
subject to PSC. The publication of PSC report and flag state control report by quality
flag states should continue, as an attempt for greater effect on „naming and shaming‟.

The greater challenge faced by society is the global PSC record and to collaborate
more on the joint framework between PSC and flag state control. The harmonization
of public control by flag states and port states will bring significant benefit. Not only
financial benefit but also the efficient use of time for inspections, number of
inspectors, and man-hours spent. It is also more effective in a way that sharing of
information will reduce the overlapping in inspections, since recently inspected items
will not be inspected in the next inspection, thus in total the coverage of inspection
would be broader. Efficiency and effectiveness of inspection will help

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Administration in spending and distributing their resources better. From the private
side, less overlapping inspection means more operating time for ships and crew, less
time in port, and less expenses.

As another form of collaboration, flag state may adopt the method of PSC to be
applied in flag state control. It is a fact that PSC has more advanced tool in targeting
ships for inspection. The methods available for flag state control can be classified
into four approaches, namely based on time interval, based on proportion, based on
target, and based on initiative. However they do not live as separate entities, as the
combinations between more than one approach is possible. The selected combination
of methods by flag states should fulfil their need, match to the characteristics of their
fleet, and consider their available resources as well. In the end, the integration and
joint work in control between port states and flag states logically will benefit the
maritime safety and environmental protection, and the society as a whole.

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Appendix 1. Returned questionnaire from country X

Position
Senior Surveyor/Cargo Ships Safety Section

1. Does your country adopt open registry system?

Yes X No

2. How many Recognized Organizations RO act on your behalf?

9 ABS, BV, CCS, DNV, GL, KR, LR NKK, RINA

3. Does your administration delegate all statutory surveys to RO?

Yes X No, still retain a number of surveys namely...
Passenger Ships Safety Certificate

4. Does your administration leave all delegated surveys to RO surveyors?

X Yes No, a few surveys have to be accompanied by flag
state surveyors, namely….

5. Does your administration follow IMO Res A.739 (18)30 as guidelines?

X Yes No

6. Does your administration assign some personnel to conduct random inspection

in ensuring sufficiency of RO work?
X Yes No
If yes, how often? ...... When situation arises
If yes, how much is the budget allocation for random inspection? .... As necessary,
No limit

7. Has your administration ever warned any RO for inadequacy of work?

X Yes No

8. Has your administration ever suspended the delegation to any RO?

Yes X No
If yes, in what case?.........

9. Does your administration have any RO monitoring system as prescribed by

IMO Res A.739 (18)?
X Yes No
If yes, can you describe the system?

10. Do you think that it is emergence to have a common accepted monitoring

system for administration?
Yes X No
If yes, should IMO provide guidelines on it?

11. What does your administration do to related RO concerning the ship detention
by PSC?
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Find out the cause and ask the RO to propose corrective and preventive actions.

12. Has your administration ever conducted audit on RO?

X Yes No
If yes, what is the focus on audit (safety, technical, quality)?
Anything which relates to the deficiencies identified.

Do you think that RO quality system (ISO 9000 or IACS QSCS) is

sufficient? ..................
No, flag State monitor is necessary

13. Does your administration rate RO based on their performance?

X Yes No
If yes, can you describe the method? performance indicator as published in the
MOU‟s annual report

14. Is there any relationship between RO bad performance and stricter monitoring
by administration?
X Yes No

15. Does your administration assign specific unit to monitor RO?

Yes X No
If yes, is there special skill needed for the personnel?

16. Please fill in the space below if you have any general comment regarding the
RO monitoring system, its difficulty or challenge?
Economically, does it attract more shipowners to register their vessel?
Yes, in fact responsible shipowner would welcome a responsible flag State. Strict
monitor would make shipowner consider that the flag State is a reputable flag
State.

Appendix 2. Returned questionnaire from country Y

Position
Senior Maritime Inspector

1. Does your country adopt open registry system?

Yes X No

2. How many Recognized Organizations RO act on your behalf?

7

3. Does your administration delegate all statutory surveys to RO?

Yes X No, still retain a number of surveys namely...
According to attachment.

4. Does your administration leave all delegated surveys to RO surveyors?

Yes X No, a few surveys have to be accompanied by flag
state surveyors, namely….
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According to attachment.

5. Does your administration follow IMO Res A.739 (18)31 as guidelines?

X Yes No

6. Does your administration assign some personnel to conduct random inspection

in ensuring sufficiency of RO work?
X Yes No
If yes, how often? ....... According to attachment.
If yes, how much is the budget allocation for random inspection? ......As much
as needed.

7. Has your administration ever warned any RO for inadequacy of work?

Yes X No

8. Has your administration ever suspended the delegation to any RO?

Yes X No
If yes, in what case?.........

9. Does your administration have any RO monitoring system as prescribed by

IMO Res A.739 (18)?
X Yes No
If yes, can you describe the system? An audit every second year.

10. Do you think that it is emergence to have a common accepted monitoring

system for administration?
X Yes No
If yes, should IMO provide guidelines on it? Yes

11. What does your administration do to related RO concerning the ship detention
by PSC? Cooperate.

12. Has your administration ever conducted audit on RO?

X Yes No
If yes, what is the focus on audit (safety, technical, quality)?
Quality system as a whole.

Do you think that RO quality system (ISO 9000 or IACS QSCS) is

sufficient? ..................
Yes.

13. Does your administration rate RO based on their performance?

Yes X No
If yes, can you describe the method?....................

14. Is there any relationship between RO bad performance and stricter monitoring
by administration?
Yes X No
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15. Does your administration assign specific unit to monitor RO?

X Yes No
If yes, is there special skill needed for the personnel? All members have to be
experienced auditors.

16. Please fill in the space below if you have any general comment regarding the
RO monitoring system, its difficulty or challenge?
……………………………………………………

Appendix 3. Returned questionnaire from country Z

Position
DEPUTY DIRECTOR

1. Does your country adopt open registry system?

Yes No

2. How many Recognized Organizations RO act on your behalf?

TWO
3. Does your administration delegate all statutory surveys to RO?
Yes No, still retain a number of surveys namely...
Government surveyor doesn't do any statutory survey even passenger ship. But
they do tonnage calculation and issue the International tonnage cert.

4. Does your administration leave all delegated surveys to RO surveyors?

Yes No, a few surveys have to be accompanied by flag
state surveyors, namely….

5. Does your administration follow IMO Res A.739 (18)32 as guidelines?

Yes No

6. Does your administration assign some personnel to conduct random inspection

in ensuring sufficiency of RO work?
Yes No
If yes, how often?.10times a year......
If yes, how much is the budget allocation for random inspection? Not
seperately.

7. Has your administration ever warned any RO for inadequacy of work?

Yes No

8. Has your administration ever suspended the delegation to any RO?

Yes No
If yes, in what case?.........
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9. Does your administration have any RO monitoring system as prescribed by

IMO Res A.739 (18)?
Yes No
If yes, can you describe the system?.RO supervising and administrating
part.......
RO should report to the Government all the statutory survey results.
And government officer regularly and randomly audit their work which was
delegated by government. This audit includes offices and ships.

10. Do you think that it is emergence to have a common accepted monitoring

system for administration?
Yes No
If yes, should IMO provide guidelines on it?.....yes...................

11. What does your administration do to related RO concerning the ship detention
by PSC? Analysing the RO survey report and have the government psco
check the the ship detended.

12. Has your administration ever conducted audit on RO?

Yes No
If yes, what is the focus on audit (safety, technical, quality)?
ALL PART ON THE ABOVE.………………………………

Do you think that RO quality system (ISO 9000 or IACS QSCS) is sufficient?
..YES................
……………………………….

13. Does your administration rate RO based on their performance (good, medium,
bad)?
Yes No
If yes, can you describe the method?....................

14. Is there any relationship between RO bad performance and stricter monitoring
by administration?
Yes No

15. Does your administration assign specific unit to monitor RO?

Yes No
If yes, is there special skill needed for the personnel?

16. Please fill in the space below to make a general comment regarding the RO
monitoring system, its difficulty or challenge ……………………………