Direct shipping across the Taiwan Strait: flag selections and policy issues

The restriction on direct shipping across the Taiwan Strait under which ships registered in Taiwan were banned from calling at China's ports might have restricted the expansion of the Taiwanese flagged fleet. The cross-strait direct shipping link was established since the Cross-strait Sea Transport (CST) Agreement was signed in 2008. According to the Agreement, only ships owned and registered on either side of the Taiwan Strait or registered in Hong Kong may, with due approval, engage in direct cross-strait carriage of cargos and passengers. The aim of this study is to find the optimal flag selection for Taiwanese shipping companies under the provisions of the CST Agreement. The Fuzzy Analytic Hierarchy Process (FAHP) method is applied to find the preferred registry location among Taiwan, Hong Kong, and China. Sensitivity Analysis is also applied to test how criteria weights influence three alternative hierarchies. The results show Taiwan is the lowest priority with an unchangeable position in flag selection because Taiwanese national fleets mainly suffered higher operational costs. A lower tax rate and appropriate financial systems are therefore recommended in revising relevant shipping policies. Furthermore, to assist shipping companies to obtain China's approval is also helpful to inspire ships flag back.