Flag of Convenience

Flag of ConvenienceWith few exceptions, a yacht must be registered somewhere before you can enjoy sailing it. Deciding where to register the yacht is a big decision because the registration gives the ship its "nationality" and the yacht is subject to the laws of that country related to vessel operation, safety and crewing, as well as certain legal rights and protections.

The country of a yacht's registration is the yacht's "flag state." Traditional yacht registries have residency restrictions. A registry which does not have a nationality or residency requirement is often described as an open registry. Under the open registry system, "flags of convenience" as they are sometimes known, can be flown by the yacht regardless of the nationality of the owners, whether that be a natural person or a corporate owner. Registering a yacht in a different country than your home country is a popular practice.

Why choose a flag of convenience over your home country's registry? Yacht owners do this for a variety of reasons including:

  • Ease and lower expense of registration and renewal
  • Less strict, or in some cases, no survey or inspection requirements
  • Save money with no or low no taxation
  • Privacy for owners

What are some of the considerations for choosing where to register a yacht under a flag of convenience?

  • Details of ship (age, length, tonnage)
  • Plans for use (pleasure or commercial)
  • Where it will primarily be used
  • Reputation of the country of registration

From time to time, flags become more or less favorable, with some being white, grey, or black-listed, with white being favorable flags while black represents flags with poor reputations that could lead to problems with ports, lenders, and insurances companies.

Historically, Panama and Liberia have been well known open registries and remain on the white list, while the Marshall Islands, also having white list status, is gaining popularity and the Marshall Islands Ship Registry could be a good option for a flag state. While the USCG has citizenship requirements, the Marshall Islands Ship Registry has no such requirements and affords rights to operate in US waters.

If you've opted to fly a flag of convenience, which flag did you choose?