THE US Federal Maritime Commission has launched a probe into the flagging practice of foreign nations, citing concerns that lax oversight and regulatory compliance by certain registries used to entice shipowners are creating conditions that could endanger supply chains.

The FMC announced the non-adjudicatory investigation on Tuesday, stating that its goal was to examine whether “the vessel flagging laws, regulations, or practices of certain foreign governments create unfavourable shipping conditions in the foreign trade of the US”.

In a notice with the Federal Register, the FMC said “many foreign nations take great care in creating standards for vessels flagged by their registries”, but argued that others “have engaged in a ‘race to the bottom’, a situation where countries compete by lowering standards and easing compliance”.

“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 minimise the expenses associated with inspecting vessels and ensuring compliance with appropriate maintenance and safety requirements,” the commission said.

These flag states compete to lower costs “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 commission said.

The FMC’s investigation starts with a 90-day comment period, and the commission said it is “seeking examples of unfavourable flagging laws, regulations, and practices that endanger the efficiency and reliability of the ocean shipping supply chain”.

The investigation is the latest example of how the FMC is moving beyond its traditional domain of regulating liner shipping and ocean carriers, and comes after chairman Louis Sola announced in April that the commission was examining “how to address the role flags of convenience play in enabling avoidance of sanctions”.

The rise of the dark fleet* of tankers involved in sanctioned oil trades has turbocharged the growth of small flag registries, which typically have neither the experience nor the capacity to regulate large fleets of tankers that are often elderly and poorly maintained.

That has raised concerns over the registries’ ability to oversee the registered organisations that conduct surveys on their behalf and ensure the safe operation of their fleets.

A posterchild for nascent registries scooping dark fleet tonnage is Gambia, which grew dramatically during the past two years, fuelled by an injection of tankers and gas carriers involved in sanctioned commodity trades.

* Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined in US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned.