China on Tuesday announced a new policy that encourages its overseas-registered vessels to change into the Chinese national flag, promising exemption of tariffs and import value-added taxes if they re-register at home.
As imported vessels are levied 27.53 percent tariff and import value-added taxes in China, many ship operators chose to register their vessels other than China to avoid a hike in costs to have an edge in the fiercely competitive market, causing worries over both vessel management and national security.
The new policy is expected to help expand the fleet of Chinese vessels flying the national flag by nearly four million deadweight tons (DWT) in terms of transport capacity in the next two years, said Weng Mengyong, vice minister of communications, at a press conference.
The measure will come into effect on July 1 and be valid for two years, and ship owners should apply for re-registration in this period to enjoy exemption, according to Weng.
Vessels applying for domestic re-registration could choose to register at Shanghai, Tianjin or Dalian ports according to the new policy approved by the State Council in February.
China had 1,920 vessels with capacities totaling 24.58 million DWT sailing under the national flag, accounting for about 50 percent of the total DWT, while about 700 domestic ocean shipping vessels with a total 23-million-DWT capacity are registered abroad.
However, many have argued that the disproportionate overseas-registered ocean vessels could threaten national security and hinder the proper management of these vessels.
About 90 percent of China's imports and exports are carried by ocean-going vessels. Some believe it would be safer to have domestically registered vessels undertake the shipping of goods that are vital to the national economy.
"The expansion of ocean-going vessels under the national flag would help enhance the country's control over the overseas shipping and safeguard the security of the national economy," said Weng.
Nearly 65 percent of the world's vessels are sailing under "flags of convenience", however they are usually loosely supervised by the registration country, and safety risks are more common in these vessels.
Many countries have introduced measures such as favorable tax policies and subsidies to have these vessels re-registered domestically to strengthen control over them.
In the latest incident involving overseas-registered Chinese vessels, China had investigated into the collision of a Republic of Korea (ROK) freighter with a Saint Vincent-registered Chinese container ship in accordance with the common practice of international maritime law, and the results had been affirmed by related departments in both ROK and Saint Vincent, said Xu Zuyuan, also vice minister of communications.