Some Hong Kong-based shipowners are looking to navigate US tariffs and Washington’s escalating trade war with China by changing their vessels’ registration flags to jurisdictions with fewer geopolitical risks such as Panama and Liberia, the Post has learned.
According to industry sources, some shipowners are preparing exit plans to mitigate rising political risks even though a recent executive order by US President Donald Trump did not include an earlier threat to impose a US$1.5 million fee per port call in the United States on Chinese-linked ships. The fees were also supposed to apply to Hong Kong.
The owners’ considerations have cast a shadow on Hong Kong’s development as “three centres and one hub”, that is, an international centre for finance, shipping and trade and as a prominent talent hub.
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“There are discussions among some shipowners about changing the Hong Kong flag to Panama and Liberia to minimise political risks, costs and exposure to the US tariffs,” a stakeholder who requested anonymity said on Wednesday.
“Geopolitics is a teething issue, and shipowners are talking about the feasibility of carrying a flag from elsewhere.”
In reply to Post inquiries, the Transport and Logistics Bureau said ship registrations with the Hong Kong Shipping Registry remained “solid, strong and stable”.
The bureau noted that Hong Kong was a separate customs territory from mainland China and its free-port status provided a foundation for the maritime industry’s development.
It said Hong Kong was in fourth place globally in terms of ship registrations, after Liberia, Panama and the Marshall Islands as of January this year.
More than 2,600 ships with a total gross tonnage of 132.2 million tonnes were registered in Hong Kong, a 10-year high.
Hong Kong Shipowners Association deputy chairman Richard Hext told the Post that “Washington keeps changing its mind” over tariffs and the industry needed to let things settle down before making any decisions.
“Shipowners are always looking at different alternatives all the time, and risk management, there are owners who have always had ships in different flags,” he said.
“Shippers have survived by staying nimble and by keeping up with things. And, of course, we need to stay agile.”
Hext said Hong Kong remained a strategic location for shipping because it was situated next to the mainland, the world’s most important source of cargo and shipbuilders, in addition to the city’s developed ecosystem.
Mandarin Shipping chairman Tim Huxley said what the industry needed was clarity on policies.
“There is always some turnover on flags but I don’t think many people are leaving because of the potential trade issues,” he said.
“What we need before anything happens is clarity on tariffs and the rule about the Chinese-connected payments.”
Francis Lui Ting-ming, adjunct professor in the economics department at the Hong Kong University of Science and Technology, said changing flags to another jurisdiction was not a long-term solution.
“Shipowners registering in other countries might help temporarily, but I doubt that this makes any difference,” he said.
“Trump wants shipbuilding to return to the US. So he will try hard to drag the fleet of ships made in China. It is easy for him to figure out that the registration place of a ship company is unimportant.
“What matters is where the ships are actually produced.”
The mainland is a leading global commercial shipbuilding power. It built more commercial vessels by tonnage last year than the entire US shipbuilding industry has done since the end of World World II, according to a study by Washington-based think tank the Centre for Strategic and International Studies.
Beijing’s top official overseeing Hong Kong affairs, Xia Baolong, warned on Tuesday that the US “isn’t after our tariffs, it is after our very survival”.
The bureau said it saw opportunities for Hong Kong amid geopolitics.
“The US tariffs are expected to reshape global trade and cargo flow patterns, presenting both challenges and opportunities for Hong Kong,” it said.
It noted that the city was known for being a “catch-up” port, as an ocean-going vessel had a turnaround time of one day on average compared with 1.94 days for the world’s top 20 container ports. Hong Kong was second to Kaohsiung in this regard.
The bureau also said the Hong Kong registered fleet was safe and reliable in terms of quality. It said the detention rate under the port state control – a global inspection regime on vessel conditions and equipment compliance – averaged 0.69 per cent in 2024, much lower than the world’s average of 3.3 per cent.
Hong Kong’s rate is within the top three lowest among the 10 largest flag administrations.
“This reflects the unrivalled degree of safety and reliability of the fleet of Hong Kong registered ships, as well as important contributions of Hong Kong to international navigation safety and standards,” the bureau said.
The government would continue to foster a facilitating environment for the maritime industry and raise its competitiveness through tax concessions, clarity, certainty and transparency in policies, it said.
More from South China Morning Post:
- ‘Shameless and arrogant’: Beijing’s top man on Hong Kong affairs slams US tariffs
- US business sector also ‘victim’ of Trump tariff war: Hong Kong’s Regina Ip
- Hong Kong exporters warned against evading US tariffs on small parcels
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