The Sino-British Joint Declaration provided for the continuance of a shipping registry to be administered by the Hong Kong Special Administrative Region (HKSAR) Government. Rather than retaining the existing register and instituting changes after 1997, a new register was established to ensure that ships on the Colonial Register could continue their operations under the HKSAR Government. Between 1990 and 1997, Hong Kong-registered ships were considered as British ships until the handover.

The Marine Department had, as early as 1990, taken responsibility for promoting the Hong Kong Shipping Register, which met the shipping industry’s needs for an effective system of ship registration. Procedures for registration of ships and mortgages had been reviewed and translated into new and improved legislation. The Register was proposed to be centralised in a single registry office in the Marine Department, which was equipped with modern communication equipment for instantaneous worldwide communications. Ships on the Register were required to comply with international standards on construction and equipment. The standards set out in maritime conventions that had been applicable to Hong Kong ships continued to apply. In addition, Hong Kong had to fulfill all obligations arising from these conventions and actively participate in the work of the International Maritime Organization (IMO).

The Hong Kong Shipping Register

The Gross Registered Tonnage (GRT) of the autonomous Hong Kong Shipping Register when it was first established on 3 December 1990 was 6.446 million. The Register was quite popular with Hong Kong shipowners and shipowners abroad. As a result, the tonnage figure showed a continued  growth and the GRT reached at 9.1 million in May 1996.

Registered tonnage boost – Reviews and developments^[4]

The Marine Department carried out various studies to find out reasons for the decline of GRT in 1997. However, due to the political uncertainty leading up to 1997, many shipowners switched their ships' Hong Kong flag to other flags prior to 1997. At the end of 1997, the gross tonnage on the Register fell to a record low of about 5.4 million. Even after the anxiety surrounding the transition had been relieved, the tonnage figure remained stagnant for a couple of years. In order to reverse this situation, the Marine Department re-engineered the Hong Kong Shipping Register in 1999 in consultation with the local shipping industry. Thanks to a series of measures introduced, the Hong Kong Shipping Register managed to regain the support of local shipowners and attracted many major owners in the Greater China Region. After that, the Register achieved a growth rate of about 20% annually for several years until 2005. The size of the Hong Kong fleet increased by more than 15.6 times, from a gross tonnage of 6.4 million in 1999 to more than 100 million in September 2015.

Flag State Quality Control adopted in 1999^[5]

It is the responsibility of every flag state to ensure that ships flying its flags are in full compliance with all applicable international conventions and national requirements. Most flag states rely on authorised classification societies as recognised organisations (ROs) to conduct surveys on their behalf. Many flag states carry out their own inspections periodically to ensure the quality of their ships and the performance of the ROs. The Marine Department followed this approach before re-engineering the Shipping Register in 1999, and conducted flag state inspections on all its ships every five years concurrently with safety equipment surveys.

In seeking a more liberal and comprehensive approach for flag state control, it was realised that the performance of all stakeholders regarding quality control of ships on the Register had to be taken into account. These key players included the ROs, the management companies, and crew on board. After thorough consideration, it was decided that resources would be better utilised if the Marine Department took up an overall monitoring role in upholding the quality of Hong Kong registered ships. Thus, the Flag State Quality Control (FSQC) system was introduced in 1999.

FSQC inspections of Hong Kong registered ships are conducted by the Marine Department’s own surveyors on a selective basis. The criteria for selection of ships for FSQC inspections include performance assessment of the ship company, port state control (PSC) records of the ship, age and type of the ship, time lapse since the previous FSQC inspection was carried out on the ship under the same company, survey and audit reports, and casualty and incident records of ships managed by the company. All costs incurred by the FSQC inspections are borne by the Hong Kong Marine Department as the flag administrator.

All FSQC inspections are followed up by in-depth discussions with the ship company and RO concerned. If the inspection indicates deficiencies in the technical management of the ship, an FSQC audit of the company will be carried out to seek immediate improvements in cooperation with the concerned RO and the senior management of the company.

A comprehensive computerised database is maintained for each ship, management company and RO. Results of all FSQC inspections and audits, PSC records, survey records, and other relevant details are documented, which form the backbone of the selection criteria for FSQC inspections and audits. More attention is paid to older ships, ships changing ROs, and ships having higher target-factor values under the PSC regimes, etc.

Pre-Registration Quality Control adopted in 2003^[6]

The number of ocean-going ships on the Hong Kong Shipping Register rose from 174 in 1999 to 547 in 2003. It is of paramount importance to maintain the quality of the rapidly growing fleet. Ships joining the Register should, at the time of entry, meet all safety and pollution prevention standards promulgated by the IMO. Hence, a Pre-registration Quality Control (PRQC) system was set up to screen ships applying for registration in Hong Kong.

On receiving notice that a ship has applied to join the Hong Kong Shipping Register, the Marine Department will carry out a research on the vessel through various sources for information. The quality of the ship will then be assessed, taking into account the following factors:

• Ship age
• Ship type
• Number of PSC detentions in the past three years
• Number of PSC deficiencies and the deficiency ratio (i.e. average number of deficiencies per PSC inspection) in the past three years
• Existing flag
• Existing classification society
• Accident/incident records of the ship

Points are allocated for each factor in accordance with the established criteria, which together will give a fair indication of the quality of the ship. Quality indicators of both the ship and the management company will decide whether or not a PRQC inspection is required for the ship concerned. If the ship is found not of acceptable standard, registration will be refused.

Merits of the Hong Kong Shipping Register

The objective of setting up the Hong Kong Shipping Register is to attract more shipping businesses to establish foothold in Hong Kong. The office of the Hong Kong Shipping Register helps clients register their ships and endeavours to reply to queries speedily and efficiently.

In general, Hong Kong is a popular gateway to Mainland China. Many reputable shipowners, ship management, finance, insurance, brokerage and related companies establish their businesses in Hong Kong.

The Hong Kong Flag is a reputable flag. The detention rate of ships flying Hong Kong Flag in PSC regimes around the world is low. The International Transport Federation does not consider it a flag of convenience.

Hong Kong adopts a well-established and respected common law legal system. All policies and administrative decisions are made after thorough consultation with the relevant industry, ensuring that there are no untoward surprises in the implementation of legal requirements and policies.

The costs of ship registration and operation are important to the shipping industry. The Hong Kong Shipping Register gives two-fold assistance to shipowners and ship managers in terms of a simple fee structure which covers all services provided by the Hong Kong Flag and a speedy response mechanism to shipowners and ship managers in times of trouble which reduces, if not eliminates, the down time of ships during port visits. The annual tonnage charge for the registration of ships on the Hong Kong Shipping Register is relatively low compared with other flag states. Government services, including the issue of trading certificates, are either free of charge or provided at a very low cost to shipowners and ship managers.

Hong Kong has a simple tax system with a low tax rate. All profits generated by Hong Kong-registered ships trading worldwide are not taxed in Hong Kong. Hong Kong-registered ships also enjoy preferential port dues in Chinese ports. Moreover, double taxation agreements have been signed between Hong Kong and its major trading partners.

The registration and deregistration of ships can be completed within two hours. Ship registration service is available round-the-clock throughout the year. Ships running into trouble in ports around the world may seek assistance from the Hong Kong administration. Unreasonable detentions will be followed up by the Hong Kong administration automatically with or without requests from shipowners and/or ship managers.

The Hong Kong Shipping Register only accepts high quality ships. A free quality assurance system is in place to ensure that ships registered comply with Hong Kong’s international obligations. Shipowners and managers can obtain technical support and advice free of charge.

The Hong Kong Shipping Register has no restriction on the nationality of crew. In fact, Hong Kong is the only registry in the world that uses both English and Chinese as the official languages for its law and publications relating to mariners, which helps create an ideal operating environment for shipowners and managers in Hong Kong.

Ships registered in Hong Kong can obtain assistance from embassies and consulates of the People's Republic of China worldwide. The anti-piracy convoy operation conducted by the People's Liberation Army Navy in the Gulf of Aden also covers Hong Kong-registered ships, which amount to forty percent of all vessels protected by the Navy ships in the mission. Other ships opt not to be included in the convoy operation can still make their presence known to the Navy in order to seek assistance if necessary.

The “One-stop-shop” was introduced in 2002 to provide convenience to clients such that the ship registration applications and related matters (radio station license application and application for minimum safe manning certificate) can be handled in one single office – the Shipping Registry and Seafarers Branch (SRSB) Office. Such one-stop-shop service will deliver more efficient and better quality services to the shipping industry.

The QUALSHIP 21 scheme aims to eliminate substandard ships in the ports of the United States by providing incentives to owners who maintain quality operations. Hong Kong, as a flag state, has qualified for the scheme. Hong Kong fleet has superior PSC records and an outstanding PSC history in US waters. Ships flying the Hong Kong flag are subject to fewer PSC inspections by the United States Coast Guard whilst in US waters. It further suggests that ships registered in Hong Kong are managed by well-run companies and have been acknowledged by relevant classification societies as possessing exemplary track records.