Germany: Flagging-back increases as owners reward Berlin

	RKS: German ships are coming home as the government gets it right.

A promise by German shipowners to return 200 flagged-out vessels to the German flag in return for more sympathetic government policies towards shipping appeared to be bearing some fruit this spring.

Klaus Köstner, a leading official with Germany’s Verband Deutscher Reeder in Hamburg told SSG it was still early days for the promised ships to come home but that the VDR was “confident that the Lübeck Conference pledge will be met”.
That was a reference to the May 2003 Third National Maritime Conference in Lübeck. The bi-annual event is a vehicle for the VDR and its members, along with shipbuilders, the German government, the German coastal Läender, and the trade unions to establish an alliance aimed at safeguarding German maritime know-how.

In Lübeck, Chancellor Gerhard Schroeder’s government promised to ease much criticised government policies which had previously led to a flood of “cheap flag” registrations. Agreement was reached that the tonnage tax and a reduction in non-wage labour costs on vessels under the German flag were essential to keep Germany competitive as a location for shipowners and ship financiers.
In return, owners pledged to flag 200 ships back to Germany and increase training at sea.

Tonnage tax was introduced in 1999 but the government has since then introduced long-urged measures. Among them have been a two-thirds reduction in non-wage labour costs – the so-called deductibles – for seafarers, the replacement of social security requirements for non-EU seafarers on German ships by an accident insurance obligation, and an increase from 30 to 45 million euros a year in aid for shipping companies.

Shipowners said about 100 of the 1,500 foreign registered ships would come home by the end of 2004 and a further 100 up to the end of 2005. Köstner told SSG “its still not possible to take stock but we suspect that a trend might become apparent in June”.

Beginning to trickle home
Ships are already beginning to trickle home after a year in which the number of flagged-out ships rose. In January leading Hamburg shipowner E.R. Schiffahrt announced support for Berlin’s shipping policies and said it was flagging back ten of 66 container ships and increasing training.

	VDR's Nöll: tinkering with tonnage tax now would be “political suicide”.

E.R. said the move “became possible after changes in taxation and legal conditions for the maritime industry in Germany”. CEO Albert Schumacher added “the government has created better framework conditions to facilitate the return of vessels to the German flag. Now it is up to the shipowners.”

Hapag Lloyd has since said it was flagging back the 3,324 TEU Frankfurt Express and the latest to come home is Reederei Karl Schlüter, which said in April it was flagging back ten of its 17 ships and expanding ship training.
Company head Jens-Peter Schlüter said “we want to set a signal which hopefully many more German shipowners will follow”.

One thing that has undoubtedly contributed to the current climate in which flagging back is now happening has been a government promise not to meddle further with tonnage tax, but retain it as the cornerstone of its efforts to strengthen Germany’s shipping position.

The system has been modified, but attempts floated last year by Berlin to abolish it altogether, presumably to recoup lost tax revenue, were abandoned after a storm of protest from the VDR and others.

The new General Managing Director of the VDR, Hans-Heinrich Nöll, has warned politicians that any further attempts to tinker with the successful system would amount to “political suicide”. If the system died then so too would German shipping, he warned.

VDR Chairman Frank Leonhardt also cautioned the government not to view the shipping industry as an easy source of tax revenue. “Every change in tonnage tax can jeopardise Germany’s status as a place to do merchant shipping business. Shipping companies need to be able to plan ahead”, he said.

//Tom Todd