GERMANY REPORT 2001 was another year of fleet renewal for German shipowning companies: 128 newbuildings with 3,3 Mn GT and a gross investment of 4.400 Mn EUR were put into service by German shipowners. On 1 January 2002, the tonnage owned by German companies flying the German or foreign flags added up to 2110 vessels with a total of 26,6 Mn GT. This is an increase of 100 vessels and a total tonnage of 3,6 Mn GT compared to the figures at the beginning of the year. German shipowners, including their affiliated companies abroad, have placed orders for about 216 vessels with 4,6 Mn ( 6,0 Mn tdw respectively) as per June 2002. The majority of the newbuildings are container vessels. This will keep the fleet modern, strong and efficient. The total number of seafarers employed on board German-flag vessels is 12.400 (1 June 2002), 66% being Germans and 34% foreign nationals. This means that there is no change in the quota of foreign seafarers. German shipping policy and with it shipping under the German flag has been facing an important turning point in recent years. The German fiscal policy has totally cancelled financial support measures. The new course of German shipping policy is in line with the new strategic concept that has been submitted by the European Commission to the Council. The German Shipowners' Association (VDR) has been successfully campaigning for political support to create a business climate that is more attractive for the shipping industry in Germany. To achieve this an optional tonnage tax system has been introduced as of 1 January 1999, but before this could become effective there had to be issued essential definitions and stipulations to the existing rules and regulations. This took several months to happen. So 2001 was the second complete year that the new tonnage tax system could become effective. The new system is accepted on a broad basis, although shipowning companies are granted a period of 3 years (i.e. until the end of 2002) to decide whether they will opt for the new system or not. Vessels are transferred from foreign registers back to the national register. The same happens to ship management activities that had been transferred to foreign locations before. This applies particularly to crew management activities. VDR is continuing to campaign for the reduction of vessel's running costs. One of the achievements is a regulation that 40 % of the seafarers' wage taxes may be withheld in the company in order to reduce the cost of employing German personnel. But this still does not bridge the difference in cost compared to other European competitors but it does help to achieve international competitiveness. German shipping is still waiting for clear signals from Berlin whether the direction the national policy with regard to national labour markets will head will be that as has been observed in other European countries. This will be essential for answering the question whether German shipping companies will operate their vessels from Germany mainly under foreign flags or whether they will return to the national flag.