An improved methodology to measure flag performance for the shipping industry

doi:10.1016/j.marpol.2009.09.002

Marine Policy

Volume 34, Issue 3, May 2010, Pages 395-405

https://doi.org/10.1016/j.marpol.2009.09.002 Get rights and content

Abstract

The subject of measuring the performance of registries has been a topic of policy discussions in recent years at the regional level due to the recasting of the European Union (EU) port state control (PSC) directive which introduces incentives for flags which perform better. Since the current method used in the EU region entails some shortcomings, it has therefore been the subject of substantial scrutiny. Furthermore, the International Maritime Organization (IMO) developed a set of performance indicators which however lacks the ability to measure compliance as set out in one of its strategic directions towards fostering global compliance. This article develops a methodology to measure flag state performance which can be applied on the regional or global level and to other areas of legislative interest (e.g. recognized organizations, Document of Compliance Companies). The proposed methodology overcomes some of the shortcomings of the present method and presents a more refined, less biased approach of measuring performance. To demonstrate its usefulness, it is applied to a sample of 207,821 observations for a 3-year time frame and compared to the current method.

Introduction

Following a series of major oil tanker accidents in the 1970s, the concept of port state control (PSC) evolved to allow port states to conduct safety inspections on foreign flagged vessels entering their ports. The countries grouped themselves into PSC regimes based on Memoranda of Understanding (MoU) and today, 10 PSC regimes exist, covering most port states. These regional MoU's enforce international legislation and act as a second line of defence against substandard shipping where the first line of defence is the flag state itself.

The topic of measuring flag state performance was first introduced by the oldest PSC regime, the Paris MoU³ and was later adopted by the Tokyo MoU.⁴ Each year, the Black/Grey/White List (BGW-list) is published which is compiled using a specific method to classify registries into three groups—black, grey and white—where black listed flags perform worse than average and white listed flags perform better. In order to classify for any preferred treatment under the new recast EU directive, a registry needs to be on the white list. Given this new incentive, the current method of calculation has come under scrutiny recently because of its perceived inaccuracy in correctly determining each registry's classification and, consequently, a debate has started with the aim of developing a more accurate method. Since its introduction, the list however has become the industry benchmarking standard for flag performance although it is only applied at the regional level.

Despite the development of a complex legislative framework in the shipping industry, enforcement can be weak due to its international nature and can vary greatly at the flag state level. The legislative framework of about 50 conventions is developed by the International Maritime Organization (IMO) which is the regulator of the shipping industry but which lacks enforcement powers and does not monitor performance of its member states directly.

Notwithstanding the lack of enforcement, the IMO, through its Technical Cooperation Committee (TCC), provides training and support to member states of developing countries and promotes harmonized enforcement of the legislative framework. In this respect, the IMO developed the Voluntary Member States Audit Scheme (VMSAS) which, at this stage, is voluntary but provides a mechanism to foster compliance.

Furthermore, one of the IMO's latest developments at council level encompasses the Strategic Plan for the Organization, of which the latest for the period 2008–2013 is based on Assembly Resolution A.989(25) [1] and sets out 13 broad strategic directions. Resolution A.990(25) [2] provides the corresponding High Level Action Plan (HLAP) for the 2008–2009 biennium. The IMO also developed a set of 42 performance indicators (PI) to measure progress made towards the 13 strategic directions. Strategic direction 2 deals with fostering global compliance but the level of compliance is only measured as a global average and not on an individual member state level. The current PIs further only measure the willingness of countries to undergo a voluntary audit or present aggregated non-compliance rates. No individual measurement of flag states or countries is made and this limits the IMO's ability to identify weaknesses in the system.

Given this situation, this article analyzes the current method for compiling the BGW-list in Section 2 and presents its major shortcomings. Section 3 develops a new method and applies it to a unique dataset of combined PSC inspection results and incident data. Section 4 summarizes the advantages of the method and provides a set of recommendations to the regulators on the regional level (e.g. PSC regimes) and the global level (IMO). The article ends with identifying other areas of application such as improved targeting for inspections and the measurement of performance of recognized organizations (RO) or Document of Compliance companies (DoC) on the regional or global level.

Section snippets

General concept of the current method

The current method in force is presented in Eq. (1a), (1b) [3] and is used to construct a confidence interval (the grey area) for the allowable number of detentions, centered by the allowable number of detentions (the yardstick) with a range on the left-hand side from the lower limit to the yardstick (white to grey) and a range on the right-hand side from the yardstick to the upper limit (grey to black). The assumption underlying the formula is that the number of detentions follows a binomial

General concept of the method

The proposed method ranks flag states based on one characteristic (Q: quality of a flag) which is common for all lists which facilitates comparisons across flags. By focusing on the ratio of the number of detentions over the number of inspections, smaller flag states can also be included in the BGW-list, which in this article we will denote by the list of flag performance (LFP). A further strong point of the proposal is, however, that the quality of a flag can be based on more information than

Evaluation of proposed method and relevant policy implications

This last section of the article provides a discussion of the results and relevant policy implications. In evaluating the proposed method, the following underlying criteria are used:

1.
The validity and workability of the method presented from a statistical perspective and its ability to deal with smaller sample sizes.
2.
The combination of information used to measure performance and the level of access to the requested data.
3.
The added value of changing the method including its possible impact.
4.
The

Acknowledgements

We would like to acknowledge and thank Vladimir Semenov for his valuable input into the development of the methodology. We further acknowledge the following port state control regimes as data sources: Paris MoU, Viña del Mar Agreement, Indian Ocean MoU, Caribbean MoU, the United States Coast Guard and the Australian Maritime Safety Authority (AMSA). Finally, we would like to thank Lloyd's Register Fairplay for providing casualty data.

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²: Disclaimer for Knapp and de Pooter: The views expressed in this article present those of the authors and do not necessarily represent those of the International Maritime Organization (IMO) nor those of the Board of the Governors of the Federal Reserve System or any other employee of the Federal Reserve System.

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