[Federal Register Volume 90, Number 98 (Thursday, May 22, 2025)]
[Notices]
[Pages 21926-21929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-09236]
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FEDERAL MARITIME COMMISSION
[Docket No. FMC-2025-0009]
Investigation Into Flags of Convenience and Unfavorable
Conditions Created by Certain Flagging Practices
AGENCY: Federal Maritime Commission.
ACTION: Order of investigation and request for comments.
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SUMMARY: The Federal Maritime Commission (Commission) is initiating a
nonadjudicatory investigation into whether the vessel flagging laws,
regulations, or practices of foreign countries, including so-called
flags of convenience, or competitive methods employed by the owners,
operators, agents, or masters of foreign-flagged vessels, are creating
unfavorable shipping conditions in the foreign trade of the United
States. The Commission invites the public to submit comments for its
consideration.
DATES: Submit comments on or before August 20, 2025.
ADDRESSES: You may submit comments, identified by Docket No. FMC-2025-
0009, by the method listed below. The Commission orders that all
comments shall be public under 46 CFR 502.291, unless confidential
treatment is specifically requested for good cause.
Federal eRulemaking Portal: Your comments must be written and in
English. You may submit your comments electronically through the
Federal Rulemaking Portal at www.regulations.gov. To submit comments on
that site, search for Docket No. FMC-2025-0009 and follow the
instructions provided.
FOR FURTHER INFORMATION CONTACT: For questions regarding submitting
comments, including confidential treatment of comments, contact David
Eng, Secretary; Phone: (202) 523-5725; Email: [email protected].
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission intends to broadly examine whether the laws,
regulations, and practices of foreign governments, or the competitive
methods employed by owners, operators, agents, or masters of foreign-
flagged vessels, might violate statutes administered by the Commission,
including 46 U.S.C. Chapter 421, such as by creating unfavorable
shipping conditions in the foreign trade of the United States. The
Commission notes that it has consistently held that its statutory
authorities not only protect United States flagged shipping, but that
foreign governmental actions that are detrimental to third-flag
carriers can also create conditions unfavorable to shipping in the
United States foreign trade within the meaning of Chapter 421. Petition
of Ace Line, 19 S.R.R. 481, 482 (FMC 1979).
The Commission is now soliciting comments to assist in its
investigation.
II. Summary of Investigation
The Commission's statutory authority includes the mandate to
monitor and evaluate conditions that affect shipping in the foreign
trade of the United States. 46 U.S.C. 42101(a).
The Commission is concerned about the conditions created by the
wide and uneven range of foreign vessel flagging laws, regulations, and
practices. Many foreign nations take great care in creating standards
for vessels flagged by their registries. These standards ensure the
efficient and reliable transit of goods throughout the ocean shipping
supply chain. Other foreign countries, however, have engaged in a
``race to the bottom''--a situation where countries compete by lowering
standards and easing compliance requirements to gain a potential
competitive edge. By offering to register and flag vessels with little
or no oversight or regulation, countries may compete against one
another to gain revenue from the associated fees and to minimize the
expenses associated with inspecting vessels and ensuring compliance
with appropriate maintenance and safety requirements. In doing so,
these nations compete to lower the cost of registering and flagging
vessels beyond a point where they can ensure the efficiency,
reliability, and safety of the vessels used in the ocean shipping
supply chain. The use of these flags of convenience endangers the ocean
shipping supply chain.
The International Maritime Organization (IMO) has issued policy
recommendations and adopted resolutions to address flags of convenience
and fraudulent registries. However, the IMO's approach has not brought
about meaningful change nor deterrence to what is clearly a growing
global problem. Moreover, if the IMO were to develop a policy solution
to address these issues, member and cooperating countries would still
be required to domestically enact such regulations, leaving room for
some countries to choose their level of compliance. Patchwork policies
and uneven compliance have proven ineffective in ensuring the
reliability and efficiency of ocean shipping. Naming and shaming
countries suspected of flagging or operating shadow fleets or using
flags of convenience does not prevent such practices and often leads to
further concealment of illicit activities. Additionally, the lack of
standardized definitions for terms like flag of convenience, open
registry, fraudulent registry and shadow/dark fleet makes problems more
difficult to identify, and successfully regulate, on a global scale.
Varying and unclear definitions of those terms lead to inconsistent
interpretations and result in fragmented policies that do not serve as
an effective deterrent to vessel owners or operators who exploit lax
rules or engage in deceptive practices. A lack of clarity and
consistency when different organizations classify various countries'
registries leads to confusing and conflicting results. As the IMO lacks
the authority to enforce vessel registry standards or penalize non-
compliant nations, its efforts are unlikely to serve as an effective
deterrent or bring about meaningful change to curb abuses. A
comprehensive and enforceable approach is needed.
For these reasons, the Commission is hereby initiating a
nonadjudicatory investigation to assess vessel flagging laws,
regulations, and practices and identify ``best practices'' that
contribute to responsible and safe operations of vessels as a critical
component of a reliable and efficient ocean shipping system in the U.S.
foreign trade. As part of the investigation, the Commission will also
assess and identify practices that allow or contribute to unsafe
conditions which endanger and imperil the reliability and efficiency of
ocean shipping.
At this initial stage of the investigation, the Commission's
efforts are concentrated on encouraging comments on worldwide vessel
flagging practices from all interested stakeholders.
III. Global Flagging Practices
A. Responsible Flagging Practices
Ships flying the flags of countries engaged in responsible flagging
practices operate under strict regulatory compliance and follow robust
maritime laws drafted consistent with
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international standards like the IMO's Safety of Life at Sea (SOLAS),
the International Convention for the Prevention of Pollution from Ships
(MARPOL), and Standards of Training, Certification and Watchkeeping for
Seafarers (STCW), among others, which provide for regular inspections
and certifications. Operators of these vessels incur higher operational
costs in complying with stricter regulations, higher wages for crews,
and more comprehensive, regular maintenance and safety measures. They
also comply with more stringent safety protocols and environmental
regulations, offering better protection for the crew and the
environment. Ownership and management are often transparent, tied to
the country of registration, with clear accountability and oversight
under national laws. Crews benefit from better labor standards,
including fair wages and safer working conditions, mandated by the
flagging country's labor laws. These restrictions and protections are
typically much more robust than those of countries offering flags of
convenience. Vessels flagged under responsible laws are far more likely
to adhere to international maritime conventions adopted to ensure
vessel safety, protect the crew, and reduce pollution. Because they
follow sound practices, vessels operated under these flags are much
more likely to be perceived as reliable and trustworthy due to their
commitment to higher operational, safety, and ethical standards.
B. Unfavorable Flagging Practices
Ships registered under so called flags of convenience (FOC) operate
under lax regulatory oversight, leading to lower safety, environmental,
and labor standards. These ship owners may pay substandard wages that
attract inexperienced crews who lack specialized training in operating
the vessel or following strict safety protocols. Since FOC ships have
no real commitment to the flagging country, or in some cases to any
country, they are beyond the reach of any single national seafarers'
trade union. This results in poor working conditions, less experienced
mariners, and fewer labor protections for multinational crews, which
contribute to unsafe conditions onboard a vessel. Additionally, FOC
vessels exploit lower operational costs through reduced taxes, cheaper
labor, and irregular maintenance or safety measures. Many FOC vessels
also fail to fully comply with international maritime conventions like
STCW, SOLAS, or MARPOL, and may avoid regular inspections or
certifications. In some instances, vessels deactivate their Automatic
Identification Systems (AIS) to hide their location or use fraudulent
IMO numbers to disguise illicit activities.\1\ A report by a leading
maritime artificial intelligence company, Windward, indicates a major
change in how vessels experiencing GPS jamming appear on tracking maps.
The average distance vessels jump when their AIS is jammed grew from
600km in Q4 2024 to 6,300km in Q1 2025. The report concluded, ``This
distance completely disrupts trade and safety measures at sea, making
it nearly impossible to track vessels within any realistic or relevant
geographical vicinity''.\2\ \3\ Disabling a ship's AIS massively
increases the chance of colliding with another vessel on the open sea.
The ownership and management flexibility provided by FOC registries
allow shipowners to avoid national regulations, including stricter
safety, working conditions, and tax laws. This lack of accountability
poses significant reputational risks for FOC vessels, which are often
associated with poor environmental records, substandard safety
practices, and worker exploitation. Furthermore, flag-hopping or the
use of false flags exacerbates these issues by undermining regulatory
oversight,\4\ enabling the circumvention of laws, and creating
inconsistencies in enforcing environmental standards, ultimately
jeopardizing both crew welfare and maritime safety.
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\1\ Lloyd's List describes a vessel spoofing AIS location data
to enable delivery of sanctioned oil and ship-to -ship transfers off
the coast of Singapore. China's Dongying Port Acts as Sanctions
Bypass Valve Following Vessel Calls, Lloyd's List (Feb. 18, 2025).
\2\ Windward Tracks Change to GPS Jamming Hotspots, MarineLink
(Apr. 9, 2025), https://www.marinelink.com/news/windward-tracks-change-gps-jamming-524514.
\3\ GPS is a satellite-based navigation system that provides
precise location data to a receiver, while AIS is a short-range
coastal tracking system that transmits a vessel's information,
including position, speed, and course, to other AIS-equipped vessels
and shore stations.
\4\ Off The Hook: How Flags of Convenience Let Illegal Fishing
Go Unpunished, Environmental Justice Foundation (2020), https://ejfoundation.org/resources/downloads/EJF-report-FoC-flags-of-convenience-2020.pdf.
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Another concerning practice is fraudulent ship registrations
whereby owners or operators register vessels under a flag state without
the knowledge or approval of the relevant maritime administration,
often to evade regulations or conceal illicit activities. In 2019, the
IMO Assembly urged governments to send the names of their ship
registration authorities and field offices, along with contact details,
to the IMO Secretary-General to update the Global Integrated Shipping
Information System (GISIS) \5\ module. France and the Netherlands
reported that as of January 15, 2025, only 62 member states responded
with this information.\6\ Based on this lack of responsiveness, France
advocated for ``an effective, concerted, and global approach.''
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\5\ GISIS is an online system created by the IMO to share and
manage important maritime information globally. It collects and
provides key shipping information, such as ship details, ownership,
and safety data, helping countries, companies, and organizations
stay updated on regulations and track important maritime
information.
\6\ Declan Bush, IMO Wonders How to Start Its Fight Against
Flagging Fraud, International Maritime Organization (Mar. 25, 2025),
https://www.lloydslist.com/LL1152982/IMO-wonders-how-to-start-itsfight-against-flagging-fraud/.
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The ``shadow fleet'' refers to a group of ships that operate
outside the regular or official frameworks of the global maritime
industry, often engaging in illegal or illicit activities such as
smuggling, sanction evasion, or transporting prohibited goods,
sometimes without proper documentation to avoid international
scrutiny.\2\ Shadow fleets are a direct response to international or
unilateral economic sanctions. The ownership and operational details of
shadow fleet ships are often concealed or disguised, using false
documentation or shell companies to obscure the true identity of the
owner.\7\ These vessels operate in secrecy, occasionally turning off
their AIS or using fraudulent IMO numbers to avoid detection. Shadow
fleet ships may also be unregistered, operating in international waters
where oversight is minimal, which complicates enforcement efforts and
regulatory compliance. By exploiting regulatory loopholes, they avoid
taxes, bypass labor and environmental laws, and engage in unregulated
shipping practices. In some cases, shadow fleets have been linked to
organized crime and serious egregious offenses like human trafficking
and arms smuggling. Shadow fleet vessels may tend to operate outside
the constraints of international law to facilitate activities like
illegal fishing.
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\7\ Russia's 'Shadow Fleet': Bringing the Threat to Light,
European Parliament (Nov. 2024), https://www.europarl.europa.eu/RegData/etudes/BRIE/2024/766242/EPRS_BRI(2024)766242_EN.pdf.
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C. Risks to U.S. Foreign Commerce
The Commission's purposes include ensuring an efficient and
economical ocean commerce transportation system and promoting the
export of United States goods through a competitive and efficient
system. This global race to the bottom could dramatically undermine the
efficiency and reliability of the
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international ocean shipping supply chain.
Recent domestic incidents linked to flags of convenience highlight
the urgent need to address these issues. A March 2025 National
Transportation Safety Board report \8\ underscores how flags of
convenience have been associated with serious safety risks, such as
bridge collapses and near-misses. One example is the MV Dali, which
lost power and caused the March 2024 collapse of the Francis Scott Key
Bridge in Baltimore, Maryland. This vessel was registered in the
Marshall Islands \9\ and flagged in Singapore, with the Marshall
Islands flag being one of the most commonly used flags of convenience.
Less than two weeks later, another large containership, the APL
Qingdao, lost power and narrowly avoided colliding with New York City's
Verrazzano Bridge.\10\ The vessel had been flagged in Malta since
2021,\11\ considered a flag of convenience by some organizations. The
crash of the MV Dali into the Francis Scott Key Bridge highlights not
only the fragility of domestic and international supply chains, but
also the dangers posed to critical infrastructure by international
ocean shipping vessels operating under flags of convenience. One
malfunctioning vessel can incapacitate a port for weeks, or longer, and
force the rerouting of global streams of commerce, a risk that
increases exponentially when flagging nations eschew oversight and
owners and operators ignore best practices. Responsible ship owners and
operators that use registries and flags of responsible foreign nations
bear these negative externalities through elevated costs created by
irresponsible foreign nations and parties that cut all costs associated
with flagging to an unacceptable minimum.
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\8\ Safeguarding Bridges from Vessel Strikes: Need for
Vulnerability Assessment and Risk Reduction Strategies, National
Transportation Safety Board (Mar. 18, 2025), MIR-25-10 https://www.ntsb.gov/investigations/AccidentReports/Reports/MIR2510.pdf.
\9\ Dali, Equasis, Ministry of Ecology, Sustainable Development
and Energy (Mar. 27, 2024), https://www.equasis.org/EquasisWeb/restricted/ShipInfo?fs=Search&P_IMO=9697426.
\10\ Another Box ship Loses Propulsion Near an Iconic East Coast
Bridge, The Maritime Executive (Apr. 8, 2024), https://maritime-executive.com/article/another-container-ship-loses-propulsion-on-approach-to-an-e-coast-bridge.
\11\ APL Qingdao, VesselFinder (Apr. 9, 2025), https://www.vesselfinder.com/vessels/details/.
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Other recent events emphasize the severity of risks created when
vessels operate under flags of convenience or without a flag. On March
23, 2025, the Taiwanese Coast Guard detained a Chinese ship for
operating without registration,\12\ and in February 2025, a Djibouti
flagged oil tanker, MS Melenia, and crew were left stranded without
fuel after the tanker vessel was abandoned for a third time in two
years, disowned by its flag state, and sanctioned by the U.S.\13\
Further, vessels tied to the shadow fleet have recently suffered
explosions at sea and at berth. A vessel carrying tons of fuel and
lacking adequate maintenance or safety oversight has the potential to
devastate an entire port. These kinds of incidents very likely create
conditions unfavorable to shipping in the foreign trade.
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\12\ Taiwan Detains Chinese Fuel Barge Operating Without
Registration, The Maritime Executive (Mar. 24, 2025), https://www.maritime-executive.com/article/video-taiwan-detains-chinese-fuel-barge-operating-without-registration.
\13\ Paul Peachey, VLCC Crew Left Adrift Without Fuel After
Sanctioned Tanker Abandoned for Third Time in Two Years, TradeWinds
(Mar. 24, 2025), https://www.tradewindsnews.com/regulation/vlcc-crew-leftadrift-without-fuel-after-sanctioned-tanker-abandoned-for-third-time-in-two-years/2-1-1796938.
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IV. Investigation and Initial Request for Comments
The Commission has determined that the above situation bears
further scrutiny. The Commission therefore orders and initiates a
nonadjudicatory investigation under 46 CFR part 502, subpart R
(Sec. Sec. 502.281-502.291). The Commission designates the General
Counsel to lead the investigation, under 46 U.S.C. 46104 and 46 CFR
502.284.\14\ The Commission also orders that all comments shall be
public under 46 CFR 502.291, unless confidential treatment is
specifically requested for good cause.
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\14\ Under the authority of 46 U.S.C. 46104, the Commission
delegates to the General Counsel: (1) authority under 46 CFR
502.286, 502.287 and 502.288 to compel the production of information
and witnesses or evidence; (2) authority under 46 CFR 502.291 to
withhold from public disclosure a response to this investigation,
and (3) authority under 46 CFR 502.289 to take appropriate action
against parties for failure to comply with the investigational
process.
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As part of the investigation, the Commission is asking interested
persons to submit written comments containing evidence, experiences,
and/or data relevant to the wide range of flagging practices across
foreign nations. In particular, the Commission seeks:
1. Specific examples of responsible flagging laws, regulations,
practices, and proposals, including how they contribute or would
contribute to the efficiency and reliability of the ocean shipping
supply chain.
2. Specific examples of unfavorable flagging laws, regulations, and
practices that endanger the efficiency and reliability of the ocean
shipping supply chain, including:
a. how irresponsible vessel flagging laws, regulations, and
practices endanger the efficiency and reliability of the ocean shipping
supply chain;
b. which irresponsible laws, regulations, and practices pose the
greatest danger;
c. whether irresponsible vessel flagging laws, regulations, and
practices foster the development of malign actors or fleets, such as
the so-called shadow fleet; and
d. how irresponsible vessel flagging laws, regulations, and
practices endanger maritime infrastructure, such as ports, bridges,
canals, and chokepoints;
3. Practices by owners or operators of vessels that undermine the
efficiency and reliability of international ocean shipping, including:
a. dangers posed by under-insured or uninsured vessels, including
to other vessels, maritime infrastructure, and mariners;
b. dangers posed by vessels with poor or non-existent maintenance
programs and few or no safety measures;
c. dangers posed by inexperienced vessel owners, operators, or
agents;
d. dangers posed by inexperienced or unqualified mariners; and
e. dangers posed to freedom-of-navigation principles by
irresponsible vessels owners and operators, such as dragging anchors
damaging undersea cables/infrastructure, or through turning off,
jamming, or spoofing \15\ AIS/GPS.
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\15\ Jamming involves broadcasting a strong signal to interfere
with the reception of legitimate navigation signals, effectively
blocking them. Spoofing, on the other hand, involves sending false
navigation signals to trick the receiver into believing it is in a
different location.
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4. The benefits to international ocean shipping of responsible
vessel registration and flagging practices, including:
a. potential benefits to ocean shipping efficiency and reliability
of standards for flagging laws, regulations, and practices;
b. the most important responsible flagging laws, regulations, and
practices that contribute to the efficiency and reliability of ocean
shipping;
c. how Commission regulations could support responsible flagging
laws, regulations, and practices; and
d. how Commission regulations could deter irresponsible flagging
laws, regulations, and practices.
5. The burdens to foreign nations and vessel operators or owners of
irresponsible flagging practices.
The Commission's jurisdiction is broad, and the agency welcomes
comments from all members of the public, including shippers, carriers,
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governments, and nongovernmental organizations. The Commission is
particularly interested in input from international standards setting
organizations, such as the IMO and International Transport Workers'
Federation, countries with large ship registries, and those with
evidence of the burdens and risks created by irresponsible flagging
practices.
As the Commission proceeds with this investigation, the General
Counsel or the Commission may decide to request additional comments or
gather information through other means as authorized under 46 U.S.C.
40104, 42104, 42109, and 46 CFR part 550.
By the Commission.
David Eng,
Secretary.
[FR Doc. 2025-09236 Filed 5-21-25; 8:45 am]
BILLING CODE 6730-02-P