This is a thesis defense titled "SHIP REGISTRATION SYSTEM OF BANGLADESH: AN ASSESSMENT" presented in Bangabandhu Sheikh Mujibur Rahman Maritime University, Bangladesh for the purpose of completion of Masters program in 'Port and Shipping mangement'

1. THESIS DEFENSE

2. SHIP REGISTRATION SYSTEM OF BANGLADESH:
AN ASSESSMENT
Presented By :
Md. Mostafa Aziz Shaheen
ID NO: 16212010
Master in Port and Shipping Management
Supervised By :
Cdre M Ziauddin Alamgir
Dean,
Faculty of Shipping Administration

3. SEQUENCE OF PRESENTATION

4. INTRODUCTION

5. BACKGROUND OF THE STUDY
• Ship registration: prerequisite of ship operation
• Ensures freedom of navigation throughout the world
• Brings a vessel within legal regime
• Generates revenue, annual tonnage fees & employment
• 93161 vessels with aggregated capacity of 1.86 billion DWT (2017)
• More than 70% of the fleet is registered under FoC
(CONTD.)

6. BACKGROUND OF THE STUDY
• Panama Flag covers 19% of total tonnage
• Liberia is the 2nd
largest with earning approximately $18 million in a
year which accounts for 25% of the Liberian national income
• Singapore as a FoC created employment opportunities for
Singapore nationals over decades
• Bangladesh has 720km coastline along the Bay of Bengal
• Bangladesh is on ‘white list’ of the IMO

7. STATEMENT OF THE RESEARCH
PROBLEM
• Bangladesh started her journey with 2 vessels after independence
• Currently the country captures only a small share of global shipping
with 38 foreign-going ships
• Potentials of ship registry is yet to be tapped with expansion of
fleet
• This study aims at examining existing ship registry policy of
Bangladesh in order to suggest ways and means for improvement

8. RESEARCH QUESTIONS
1. What is the prevailing ship registration system in Bangladesh?
2. What are the issues involved in ship registration under Bangladesh flag?
3. What are the impacts of ship registration for Bangladesh?
4. What are the challenges militating against ship registry in Bangladesh?
5. What are the prospects of ship registration in Bangladesh?
6. What are the strategies to mitigate challenges militating against ship
registry system in Bangladesh?

9. OBJECTIVES OF THE STUDY
• To highlight the prevailing ship registration system in Bangladesh
• To examine the issues involved in ship registration under Bangladesh flag
• To assess the impacts of ship registration for Bangladesh
• To identify the challenges militating against ship registry in Bangladesh
• To examine the prospects of ship registration in Bangladesh
• To proffer strategy to mitigate challenges militating against ship
registration system in Bangladesh

10. SIGNIFICANCE OF THE STUDY
This study would be beneficial for-
• Government of the People’s Republic of Bangladesh
• Ministry of Shipping
• Department of Shipping
• Mercantile Marine Office
• The Blue Economy Cell
• Shipping Companies
This study might also be a reference for the next researchers in
relevant fields.

11. SCOPE OF THE STUDY
Timeline: 1972 To 2017
Space: Ship Registration Issues in Bangladesh
Content :
• Ship Registration Policy,
• Revenue Structure,
• Fleet Expansion Under Bangladeshi Flag
• .

12. RESEARCH METHODOLOGY
Type of research: Descriptive research.
Source of data: Both primary and secondary data.
Primary data: interviews and discussions with resources personnel -
mostly Government official, shipping company and concerned seafarers.
Secondary data: relevant books, journals, documents, reports, articles,
newspapers, magazines and internet resources.
An electronic questionnaire survey was administered by sending Google
doc. through E-mails.
(CONTD.)

13. RESEARCH METHODOLOGY
Data analysis:
The analysis of the data collected for the study employed both
qualitative and quantitative method.
Data presentation:
Analyzed data were presented through tables and charts for clarity.

14. LIMITATION OF THE STUDY
• Scarcity of data
• Dearth of relevant literature
• Limited access to official documents

15. LITERATURE REVIEW

16. CONCEPTUAL DISCOURSE
Key Variable Ship Registration
Procedural device
through which nationality
is conferred on a ship by
the flag state.
(Dr. P.K. Mukherjee)
Nationality allows a ship
to travel internationally as
it is a proof of ownership
of the vessel.
(Maritime New Zealand)
Source: Mukherjee, P.K (1993, Jan/Mar). Flagging Options: Legal and Other Considerations. Mariner, pp-32
(CONTD.)

17. CONCEPTUAL DISCOURSE
Ship registration refers to documentation procedure that allow citizen or
non-citizen owner through which flag and nationality is conferred on a ship
by the flag state whether it has maritime access or land-locked that permits
to travel internationally and has a regulatory control by the national and
international maritime rules and regulations.

18. REVIEW OF EXISTING
LITERATURE
Literature Summary Gap
“Ship Registration”
by Nigel Ready (1991)
Legal concept of ship registration,
flags of convenience and
bareboat charter arrangements
as well as dual registry
Lacks in concrete illustration of the
dynamics of rise and fall of flagging in
developing nations from register point
of view.
“Ship registration:
A critical analysis”
by Rhea Rogers (2010)
Illustrates challenges facing the
industry in the areas of security,
safety, crewing, taxes in different
registration process
Did not analyze the financial benefit
of ship register and how can ship
registration impacts on developing
country like Bangladesh
“Flag of Convenience
Practice: A Threat to Maritime
Safety and Security” by
Hamad Bakar (2016)
Describes the effect of maritime
safety and security threats in flag
of convenience
Way out for overcoming safety and
security threat is wanting.
(CONTD
.)

19. REVIEW OF EXISTING
LITERATURE
Literature Summary Gap
“Policies to Promote Shipping
Registration in Singapore” by
Sock-Yong Phang& Rex S.
Toh (1994)
Highlights the development of ship
registration policies in Singapore and
examines the underlying motivation
behind changes in policies towards
open registration
Did not cover the safety, security
and pollution issues that
counteract in application of FOC
and how Singapore flag
addresses those challenges
“Flag vessel protection law in
Bangladesh: A critical analysis”
by Md. Ashraful Alam & Md.
Golam Zakaria (2016)
Focuses how flag vessel protection
is impeding foreign trade in
Bangladesh, abrogating efficiency in
shipping and how to overcome those
legal barriers.
Did not venture to explore
plausible reasons that led to
insufficient Bangladesh flag
vessel and low invest in the
sector.

20. EXAMPLE OF OTHER COUNTRIES:
PANAMAPANAMA
• Panama established open ship register in 1916 allowing
Panamanian companies owned by foreigners
• Flag registration is automated capable of registration within 4 hours.
• Taxation. The income stems from the commercial operation of
merchant ships registered under the Panamanian flag are not
subject to income tax in Panama.
• Payment of taxes and fees is based on tonnage under a system of
highly competitive tariffs
• Fleets with three or more vessels may enjoy discount on registration
rates from 25% up to 65%.
(CONTD.)

21. EXAMPLE OF OTHER COUNTRIES:
PANAMAPANAMA
Source: Piniella, F, et al. (2016). The Panama Ship Registry: 1917–2017.
(CONTD.)

22. EXAMPLE OF OTHER COUNTRIES:
SINGAPORESINGAPORE
• In 1969, Singapore started its vessel registry owned by any national
that established Singapore as a flag of convenience
• Initially, vessels recruiting minimum 25% Singaporean crew subject to
50% refund on the annual tonnage tax.
• Competitive registration fee and tonnage tax made her close
competitor of Panama and Liberia ship register.
• Profit incurred from international shipping operation and charter are
exempt from income tax
• Unique, environment friendly and attractive incentive under BTS and
GSP scheme offers discount up to 80%on initial registration fee.
(CONTD.)

23. EXAMPLE OF OTHER COUNTRIES:
SINGAPORESINGAPORE
Source: UNCTAD. Review of Maritime Transport 2011,2013,2015,2016, 2017

24. LESSONS LEARNT FROM
SELECTED COUNTRIES
• Taxation is the major determinant for ship owner/operator in
decision making regarding flag selection.
• Flexibility in taxation encourages vessel owner for registering
vessel in any flag.
• Introduction of ICT ensures speedy disposal avoiding complexity
• Incentive package is another driver in safety management and
pollution prevention promotion for ship owners

25. ASSESSMENT AND FINDINGS
SHIP REGISTRATION IN BANGLADESH: OVERVIEW
Figure: Phase of Bangladesh flag registered Ship
(CONTD.)Source: Compiled by the researcher

26. Figure: Sea Going Vessel Registered with Mercantile Marine Department.
Source: Based on data from Mercantile Marine Office,
Chittagong
SHIP REGISTRATION IN BANGLADESH: OVERVIEW

27. ISSUES INVOLVED IN VESSEL
REGISTRATION
• LEGAL FRAME
• REGISTRATION PROCESS
• TAX & FEE
• INCENTIVE
• INVESTMENT
(CONTD.)

28. LEGAL FRAME
Article 91 of the UNCLOS reads:
“Every State shall fix the conditions for the grant of its nationality to
ships, for the registration of ships in its territory, and for the right to fly
its flag.”
(CONTD.)
Source: Compiled by the researcher

29. LEGAL FRAME
Clause 3 of chapter 1 of BMSO defines Bangladesh ships and eligibility
criteria:
“Bangladesh ship” means a ship belonging to a statutory corporation or a ship
acquired and owned by a foreign national or company and leased out to the
Government or a citizen of Bangladeshi or a Bangladesh company under such
an agreement that the ownership of the ship shall be transferred after a
specified period of time to the Government or such citizen or company.”
(CONTD.)

30. LEGAL FRAME
Source: Compiled by the researcher

31. REGISTRATION PROCESS
Source: Based on Data from Mercantile Marine Office, Chittagong

32. TAX & FEE
Level of Tax Type of Tax Description Statutory Rate
Import
Import Duty All kinds of vessel 0-25%
Value Added Tax (VAT) Imported vessel 15%
Advance Income Tax
(AIT)
Imported vessel 5%
Operation Income tax at source
Total freight received or
receivable from vessel
5%(for in or out of Bangladesh)
3% (for two or more foreign countries)
Income Tax
Corporate Tax Company income 35%
Advance Income Tax
(AIT)
Based on vessel owner/directors
income
10%
Table: List of taxes applicable for ship operation in Bangladesh
(CONTD.)
Source: Compiled by the researcher

33. TAX& FEE
Vessel specifications
Building year 2010
Type Bulk Carrier
Gross Tonnage (GRT) 32,305
Net Tonnage (NRT) 18,900
Vessel (Contracted price) TK.400,000,000 (assumption)
Cost of Registration (Bangladesh) Cost of Registration (Panama)
Type of Fee TK. Type of Fee US$
Provisional Registration
(for collecting MMSI, Call Sign and Station Licence)
4000
Registry fee
($ 0.10 per GRT up to a maximum fee of
$ 6,500)
$6500
Provisional CSR
(for collecting MMSI, Call Sign and Station Licence)
4000
Annual Tax
($0.10 per NRT)
$1890
Provisional SEC
(for collecting MMSI, Call Sign and Station Licence)
4000
Annual Consular fee
(More than 15,000 GRT)
$3000
Provisional SRC
(for collecting MMSI, Call Sign and Station Licence)
4000
Annual Inspection fee
(More than 15,000 GRT)
$1200
Final Registration
(More than 15000 GT)
175000
Annual Investigation fee
(More than 10,000 GRT)
$500
VAT 15%
(On Final Registration)
26250 +3% of net tonnage $567
Maritime Tanning
(Gross ton×1.2)
38766
Sub-Total
(Second hand vessel)
$13657/
TK.1092560
Carving and Marking Note 1000 - Discount of 60% for new building -$8194.20
Registration Cover Fee 1000
Total
$5462.80/
TK.437024
Registration Supervision Fee
(2.5% on contracted price)
1000000
Total TK.1258016
Vessel specifications
Building year 2010
Type Bulk Carrier
Gross Tonnage (GRT) 32,305
Net Tonnage (NRT) 18,900
Vessel (Contracted price) TK.400,000,000 (assumption)
Comparison of applicable fees for a vessel between Bangladesh and Panama
Source: Based on the data from MMO, Chittagong , Consulate General of Panama in New York and Toronto

34. INCENTIVE
• Incentive scheme is the driver for most of the flag register.
• SRS facilitates the ship owner with BTS, GSP and AAF Scheme
• Panama provides incentive for vessels having good PSC record
• VAT exemption for more than 5000 DWT vessel at import stage
• At least 40% of the sea-borne foreign trade shall be carried by
Bangladesh flagged vessel.

35. Investment
• In Bangladesh, vessels are owned by state and private company
• In ship acquisition, BSC got loan assistance from different friendly
countries. Of late, with the financial assistance from China Exim
Bank, BSC will get USD184.5 million for procuring 6 new vessels
from China each of them having 39000 DWT capacity.
• Several business groups from different shipping company are the
private entities of Bangladesh flag vessel.

36. IMPACT OF PREVAILING SHIP
REGISTRATION SYSTEM
• Ship owners register fleet under foreign flag mostly on open register
• Shrinkage of Bangladesh flagged vessel
• Bangladesh-flagged vessel could tap less than 5% of total foreign trade
• Bangladeshi seafarers face unemployment
• NBR received only Tk. 160 crore from the sector in last 3 years
• MMO collected non tax revenue nearly 24 crore from all types of vessel
including foreign going vessel in FY 2016-17

37. SUMMARY OF THE FINDINGS
• MMO of the DOS is the sole authority dealing with vessel registration.
• To be eligible as a Bangladesh ship, it must fulfil some conditions so as
to empower Bangladeshi citizens with more than 50% of voting power
in decision making. It is not allowed to hold permanent ownership by a
foreign citizen.
• Manual registration process are mostly based on papers involving
several steps at different offices
(CONTD.)

38. SUMMARY OF THE FINDINGS
• Owners are required to pay both the tax and fee separately to
different authorities at different stages in the absence of a one stop
service
• Most of the tax and fee are based on ship’s price rather than on GT
and NT.
• Incentive provided by Bangladesh flag register is not sufficient to
drive investment in ship owning resulting in insufficient vessels to
cater to demand and compelling reliance on foreign flagged vessel
• Increased reliance on foreign flagged vessels is a road block to
revenue growth and the scope for recruitment in the sector.

39. CHALLENGES MILITATING AGAINST
PRESENT SHIP REGISTRATION
RIGID LEGAL FRAME AND INSTUTIONAL ARCHITECTURE
•Foreign investors are deprived of making decision owing to inadequate voting power
•One nautical surveyor is not in a position to survey all the vessel in que
•Vessels positioned in foreign port are kept waiting for conducting survey
COMPLICATED REGISTRATION PROCESS
•Ship owner/agent have to pursue several offices namely MMO, BTRC, BTCL, NBR etc.
•Vessel registration is time consuming because of manual processing
•Unavailability of simplified guideline in MMO’s website
•Absence of overseas survey facilities
(CONTD.)

40. CHALLENGES MILITATING AGAINST
PRESENT SHIP REGISTRATION
HUGE TAX BURDEN
•Taxation at three levels is required for a ship to operate in Bangladesh
•Importing a vessel the buyer have to pay nearly 27% immediate tax
•Payment of tax on freight received from shipping operation
•Owners required to pay 35% corporate tax and personal income tax
respectively on profit earned
NET PROFIT (YEAR) TK.10 LACS
DEDUCTING CORPORATE TAX (35%) TK. 6.5 LACS
DEDUCTING INDIVIDUAL INCOME TAX
FROM THE PROFIT (10%)
TK. 5, 85,000
(CONTD.)
Source: Compiled by the researcher

41. CHALLENGES MILITATING AGAINST
PRESENT SHIP REGISTRATION
INADEQUATE INCENTIVE
•Incentives that exists in Bangladesh is not enough to encourage ship owners to register their
vessel in Bangladesh
•In FY 2015-2016, Bangladeshi owners demolish most of their vessels due to low freight rate
•Even when recession is over, several shipping companies still registered their vessel
oversea due to high tax
INSUFFICIENT INVESTMENT
•Investment on vessel can enlarge fleet of a flag state
•No foreign shipping company registered their vessel in Bangladesh
•Due to high interest rate, entrepreneurs are discouraged to make investment
•More than 95% of the freight transferred to overseas.

42. PROSPECTS OF SHIP REGISTRATION
Source: Based on the data from Bangladesh Bank, Chittagong port and Mongla port

43. STRATEGIES
• FLEXIBLE LEGAL FRAME & INSTITUTIONAL CAPACITY BUILDING
• AUTOMATION OF REGISTRATION PROCESS
• BUSINESS FRIENDLY TAX AND FEE STRUCTURE
• INTRODUCE INCENTIVE
• FACILITATE INVESTMENT

44. CONCLUSION

45. RECOMMENDATIONS
a) Introduction of a second register and inserting a provision of increasing share of non-
Bangladeshi citizens in the existing register may be considered
b) Reformation of MMO should be a priority agenda
c) Overseas maritime consular offices in relevant major port cities with outsourced
vessel inspection services may be set up
d) To avoid procrastination in registration process, Automation service may be launched
at MMO
e) One stop service in MMO may be introduced
f) Payable taxes and fees may be fixed on the basis of vessel size (i.e. GRT, NRT)
instead of import price of vessel
g) Ship owners or operators may be given tax incentive on the basis of performance and
compliance of parameters set by MMO
h) Investment may be facilitated through proactive engagement with major ship owning
nations, renowned shipping companies and financial institutions.