The creation and utilization of FoC could be an advantage and loophole for shipping

entrepreneurs and ship owners who can avoid strict regulations continuously developed by other
countries. The main concerns of related parties include how now it is easier to register a
commercial ship to get a flag country because the ship can use the regulations contained in the
regulations of the FoC members. The second is that the advantage of being a member of the FoC,
the tax is low because a member of the FoC is a country that does not rely on the maritime sector
to generate foreign exchange. The third is the reduction of operating costs for FoC members, and
the last is full control from developed countries to FOC members who are none other than
developing countries.

From the explanation above, using the Flag of Convenience for these countries is advantageous
because later, many ships will register the country's flag to FoC members. In addition, FoC
member countries benefit from income taxes that can be taken from the flag country. However,
the facts state that the adverse effects of using FoC are even more extensive. For example, ship
owners avoid taxes, shipping safety regulations, and disown crew salaries below the ITF
standards. It is contradictory to the regulations of other countries like the United States and
Japan; the standard regarding crew salaries will be higher. This problem should be a shared
thought regarding the evaluation of the regulation. For this reason, a country must think again
when registering to become a member of the Flag of Convenience; even though it looks like it
will get much income from the tax sector, but the risk of losing income will also be considerable.
That is why a country must decide to adhere to a specific register system: the open registry and
close registry.

The practice of flag of convenience cannot be denied causing severe problems for the world of
international shipping. There is no particular requirement for ship owners to fly the flag for ships
according to their nationality, thus allowing ship owners to freely choose the ship's flag that is
considered the most profitable based on various interests. In general, this is based on the
economic interests of ship companies so that they can compete on an international level.

As has been stated in the previous chapter, generally, the place of registration to obtain
nationality for ships is a place that provides flexibility. At the same time, the national law of the
country does not prohibit such practice. Generally, the reasons that underlie ship owners using
the flag under the flag of convenience are1:

1. To avoid political restrictions on the freedom to trade.

2. In order to avoid chaos/government instability on shipping

3. To avoid high registration fees, taxes and other fiscal obligations

4. To circumvent national labour regulations

5. To get a crew ready to sail

6. Make it easier to get a loan

7. To avoid spending on safety and maintenance

If we look at the reasons underlying ship owners using the flag of convenience, we can see that
these reasons have a terrible influence on the other side. All of this can be summed up as:

- Lack of effective oversight by the flag state, lack of safety reports, poor crew conditions, low
wages and poor police reporting.

- Flag of convenience offers unfair competition against fleets from other countries.

For a better depiction, the above will be described in detail.

Lack of effective oversight by the flag state, lack of safety reports, poor crew conditions, low
wages and poor pollution reports. This paper emphasizes that the lack of supervision carried out
by countries of Flag of convenience2.

"The fact is, you can't expect small countries who gather a great deal of their revenue from
registering foreign ships to exercise stringent control of those ships. They want that revenue.
They want those fees. If panama Liberia. If the Liberians do they go to Malaysia".

Thus, it is impossible to expect flag of convenience countries to tighten regulations and

applicable standards because ship owners will shift them to other countries if this is done. The

1
Unhas, The Law of the sea and international shipping : Anglo-Soviet post-UNCLOS perspectives New York
( Oceana Publications 1985) 417.
2
US Government, recent tanker accidents: Legislation for Improved tanker safety (Lexis Newyork 1982) 617.
lack of regulations regarding ship equipment causes the flag of convenience fleet to be known
for a high accident rate. This, in turn, will result in severe marine pollution.

The things that generally mark the flag of convenience fleets are the absence of adequate
supervision by the flag state. Some ship owners use this opportunity to minimize expenses by
using ships that cannot be accepted through registration in other countries.