Worldwide shipping: the world’s most opaque industry


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When a cargo ship the size of the Empire State Building got stuck in the Suez Canal this week, blocking a vital artery of global trade, it was a natural question of who was in charge of the ship.

The answer turned out to be rather complicated. The Ever Given is registered in Panama but is operated by a Taiwanese shipping company called Evergreen Marine.

However, the “technical manager” of the ship is Bernhard Schulte Shipmanagement, based in Hamburg.

Who does the ship belong to? It turns out to be a Japanese company called Shoei Kisen Kaisha, which is itself a subsidiary of Japanese shipbuilding company Imabari Shipbuilding.

Incidentally, the 25-person crew does not consist of Panamanians, Taiwanese, Germans or Japanese, but of Indian nationals.

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This multinationalism in the world of merchant shipping is not particularly uncommon. And one might expect an industry like global shipping to become globalized.

However, the complex web of registration, ownership and operational responsibilities raises questions of accountability.

Michelle Wiese Bockmann, shipping analyst at Lloyd’s List, says it is remarkable how invisible the heads of the companies involved were during this crisis.

“I would expect Evergreen to have their CEO on the ship to explain – that’s what you’d expect if it were a different industry,” she says.

And not only the lack of transparency by the shipping industry in such a crisis is a problem, according to critics.

It is also a problem when it comes to protecting the welfare of seafarers, reducing the sector’s significant carbon footprint and curbing corruption.

Good for the sailors

The Panamanian registration of the Ever Given raised no eyebrows in the shipping industry. The Central American state with 4.2 million inhabitants is the largest shipping register in the world.

For decades, shipowners around the world have chosen to register their ships in Panama primarily to lower their taxes, according to critics, and avoid the stricter shipping regulations of their own countries.

The International Transport Workers’ Federation (ITF) has campaigned against so-called “flags of convenience” since the 1950s, suggesting that this undermines the welfare and conditions of seafarers and makes it difficult for unions to gain recognition.

In 2014, the ITF described the Panamanian security regime as “seriously flawed in areas such as oversight, accident investigation and crew support,” although the general view is that it has improved in recent years.

However, concerns about the safety of seafarers in global merchant shipping have heightened during the pandemic.

Last September, the International Chamber of Shipping (ICS) estimated that 400,000 commercial seafarers were unable to leave their ships due to coronavirus restrictions and another 400,000 waited to see the crew on land again who received little or no pay.

The editor of the maritime publication gCaptain, John Konrad, published a passionate video last September listing a multitude of accidents at sea.

“Maritime interests around the world are fragmented and isolated, and seafarers from every country have little opportunity to communicate,” he warned.

The ITF believes that flags of convenience should be scrapped, arguing that there should be a “real connection” between shipowners and the country where it is registered.

pollution

Shipping is estimated to be responsible for 2.5 percent of annual global greenhouse gas emissions.

The International Maritime Organization (IMO), a United Nations agency, has set itself the goal of reducing annual greenhouse gas emissions from shipping by at least 50 percent by 2050 compared to 2008 by increasing the fuel efficiency of ships and developing biofuels.

The United Nations Paris Agreement targets for 2050 to keep global temperature rise below 2 ° C do not include shipping emissions, but the IMO argues that its targets would be “consistent” with these.

But environmental groups fight The actual actions of the IMO are, in fact, far too weak to achieve this.

And researchers have found that oversight of climate issues among shipping companies, even at board level, is very low compared to other industries, and pollution disclosure is poor.

Michelle Wiese Bockmann from Lloyd’s List suspects that many shipowners don’t really take decarbonization seriously.

“There are very strong elements in the industry that don’t like change or anything that would cost them money,” she says.

The opaqueness of shipping at the company level might have helped them evade this responsibility towards other, more consumer-oriented transport sectors such as aviation or automobiles.

corruption

Alexandra Wrage, the founder of the anti-bribery group Trace, says the shipping industry naturally faces more corruption challenges than most other industries as ships keep switching from jurisdiction to jurisdiction. The fragmentation of the industry also adds to the risk that shipping companies will not follow best practices.


The opportunity for corruption [when the Suez Canal re-opens] is pretty obvious

Alexandra Wrage, track

“From a corporate perspective, they are almost self-contained,” Ms. Wrage notes.

And she cites the Suez Canal incident as an example of the kind of temptations that arise.

“As soon as they are able to debug things [in the Canal] There will be a large number of ships and each of these ships will have an exceptional incentive to approach the top of the queue, ”she says.

“The possibility of corruption there is pretty obvious. Shave hours [a journey] can save a company money, now they have an incentive to shave their days off. “

Mr Wrage says some shipping companies are trying to clean up their act, but “quite a few are not”.

However, she stressed that governments also need to do more by digitizing operations to reduce the number of face-to-face meetings where bribery could take place.

“Shipping companies can prioritize governance and transparency, but the governments that control ports also need to be strengthened,” she argues.

Change of tide?

Experts agree that the opacity of global shipping is extreme. And for those in the industry who want to avoid scrutiny and accountability, they like it.

But just as a cargo ship stuck in a canal is hard to ignore, it can also be a little harder for an industry that is used to operating out of the public eye to do so.





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