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they would have to switch to a country flag that would be less privileged according to IMO and would therefore cost them more insurance fees and have a larger inspection burden etc.

I am clueless about shipping. How does this work?

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by A swedish kind of death on Thu Jun 14th, 2012 at 07:45:16 AM EST
IMO = International Maritime Organization

According to my vague understanding - the IMO rates the shipping inspection regimes of various countries and this rating forms part of the insurance assessment.

So if you switch from Greece to Liberia all sorts of costs may go down, but the likelihood is your insurance costs will go up.

by Metatone (metatone [a|t] gmail (dot) com) on Thu Jun 14th, 2012 at 08:02:39 AM EST
[ Parent ]
Shipping is not as simple as some rich guy wanting to own a ship.
There is a lot of know-how in Greece and it's no coincidence that a small country like that can boast such a position in Int'l shipping.
That know-how lowers the risk to clients and the costs to both maily from insurance fees.
by Euroliberal on Thu Jun 14th, 2012 at 08:17:19 AM EST
[ Parent ]
You overestimate those guys.

"Eurozone leaders have turned a 50bn Greek solvency problem into a 1,000bn existential crisis for the European Union." David Miliband
by Kostis Papadimitriou on Sat Jun 16th, 2012 at 11:34:46 AM EST
[ Parent ]
The International Maritime Organization, from the little I have read has some sort of evaluation of "flag credibility" which affects such things as insurance rates, and inspection procedures (that could be time-consuming). I.e. liabilities based on Greek law is something insurers prefer compared to flag-of-convenience countries... Also Greek shipowners will no longer have the advantage of being part of a country block that supports their interests in more ways that one and at all levels. The single most active area of intervention by Greece in EU affairs concerns shipping laws and regulations. The Greek commissioner is of Shipping and Fisheries.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Thu Jun 14th, 2012 at 08:08:25 AM EST
[ Parent ]
In other words, they're very likely bluffing.

I can't see that a move to a flag of convenience in the long term would be cheaper than a one-off payment in the short term.

Some business owners may still throw their toys out of the economic pram to make a politcal point. But I'd guess a majority would be more hard nosed about.

The current narrative counts as lobbying and persuasion, not a genuine statement of intent.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jun 14th, 2012 at 08:26:04 AM EST
[ Parent ]
Some of these companies are run with the long term in mind, like Diana Shipping run by Simeon Palios, but other companies such as DryShips run by George Economou have shown a proclivity toward hopping on the quick dollar even at the expense of future business and reputation. So it's anyone's guess what these people would do if Greece instituted a new law.

But, don't expect help from Europe, if you're Greece. When a soda tax was prescribed by the troika for Greece, Hellenic Coca-Cola bottling (#2 bottling in the world after Coke Atlanta) threatened to move, and apparently there were suitors in Eastern Europe.

This is just like the transparency in banking accord that was just nixed by Austria and Luxembourg (among others) even as Switzerland AGREED to it!!

by Upstate NY on Thu Jun 14th, 2012 at 09:02:02 AM EST
[ Parent ]
There is no such thing as long-term shipping for Greek ship-owners now. The Chinese are preparing to squeeze them out and they really know it. So they are going for the short-term bonanza to move to some new business.That's part of what is currently happening in Greece behind the screens.

"Eurozone leaders have turned a 50bn Greek solvency problem into a 1,000bn existential crisis for the European Union." David Miliband
by Kostis Papadimitriou on Sat Jun 16th, 2012 at 11:38:01 AM EST
[ Parent ]
Furthermore, shipping rates are very, very weak, at least tanker rates. Many companies have lost 80% or more of their market values in the last year alone. Even the ones who have strong balance sheets and lots of long-term fixed-price contracts are down about a third (to my sorrow, as I have a small (now even smaller :p ) position in one of them).

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Jun 17th, 2012 at 05:21:55 AM EST
[ Parent ]
Hope the IMO are better at rating things than S&P and Moodys... :p

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Jun 17th, 2012 at 05:19:15 AM EST
[ Parent ]
The statement you quoted is not really correct. For one, taxing Greek owned ships will not change flagging in any way. There is nothing now in place stopping ships that are owned by a Greek or any other company from flying whatever flag they choose. The one general exception is for ships operating in cabotage (i.e domestic service). A quick look at the fleet of Greek owned Danaos bears this out: there are ships with flags from Malta, Cyprus, Panama and Liberia but none from the sample I looked at with a Greek flag. Some of the generally richer countries offer financial or tax incentives to maintain some semblence of a domestic fleet in case of emergency or for pride but as far as I know, there are no legal restrictions in place that would keep the ship's owner from changing flags at their convenience.

Flag choice will have little if any impact on insurance rates. No matter the flag, a ship owner can easily under-insure a ship, especially for old junkers hauling non-hazardous (bulk) cargo. It's their risk after all, plus tracing actual ownership can be very difficult if not impossible. For older ships, this option can be very attractive. Far more important to insurers is where (actually with whom) the ship is classed. The use of a reputable classification society (Lloyd's, American Bureau of Shipping, Det Norske Veritas...) will do much more to impress insurers than the flag on the stern.

Flag choice will impact inspections. Increased inspections by the three major Port State Control organizations (Tokyo MOU, Paris MOU and the US Coast Guard) will result in lower ship productivity and there will be greater uncertainty for a shipper but the major benefit is low crewing requirements/costs. Note also that the relationship between flags and their performance rating is not necessarily intuitive. Simply being European doesn't help the Belgians who are currently targeted by the Coast Guard and in the gray area for Tokyo MOU. Meanwhile, the Marshall Islands and Liberia are white (i.e. not targeted) for both of the MOU's and also non-targeted by the Coast Guard.

Regardless of the ship's classification or flag, I agree with the quote from the ship owner, good luck tracking these guys down now to make them pay taxes. For this tax to have been effective, they would have had to establish it quickly and without the ship owners' prior knowledge. Forget it now.

by Jace on Thu Jun 14th, 2012 at 05:43:39 PM EST
[ Parent ]
But Greek real estate, financial companies, hotels and media companies along with the concept of imputed wealth could be another matter. If shipowners and other oligarchs want to play hide and seek with their ships their other assets might become fair game. But the assets should be encumbered before the claims are made.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 15th, 2012 at 12:45:24 AM EST
[ Parent ]
You can't tax the ships, but you can confiscate any still domestically held assets, potentially to the tune of the sum total of any assets remaining in Greece.

I say take away their houses, their TV stations, their newspapers, their bank accounts (retroactively too) and the clothes on their back when they try to leave the country. And just for good measure, they should be banned from owning property of any kind until they have returned the stolen assets.

For that matter, you can lock them up if they are dumb enough to stay in Greece after expatriating valuable assets for tax avoidance purposes.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 15th, 2012 at 01:07:26 AM EST
[ Parent ]

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