More "American" merchant ships owned by foreign companies.

by William R. Carr

13 June, 2000 Update: "Farrell Lines (one of the last American shipping companies), is to be acquired by P&O Nedlloyd... of England. ...Ferrell's current Maritime Security Program subsidies for all five of its ships would be transferred over to P&O Nedlloyd. ...Participation in the Voluntary Intermodal Sealift Agreement (VISA) program will also continue... a US citizen subsidiary of Farrell which will be will be spun-off into a separate, independent US corporation... FLI Ships Holdings, Inc., a Delaware corporation and a Section 2 Citizen, and P&ONL FAME, Inc., a Delaware corporation ("FAME") and a wholly-owned subsidiary of P&O Nedlloyd B.V., an affiliate of P&ONL, or Farrell Lines... In either case, the time charterer of the vessels (FAME or Farrell Lines) will be a citizen eligible to document a vessel under Chapter 121 of title 46, United States Code (i.e., a 'documentation citizen')..."


Previous to the above, Sea-Land Services, one of the last great hopes of the American flag merchant marine -- the outfit that pioneered containerization -- was sold foreign, to Maersk Lines. Fortunately, since the 15 ships involved in the purchase were part of the 47 ship Maritime Security subsidy program (MSP), Maersk has obligingly decided to keep the vessels under the American flag, to be operated by the newly formed U.S. Ship Management, Inc. (USSM). The U. S. Maritime Administration recently approved transfer of the subsidy to Maersk.

So now another great "American" steamship company is owned by a foreign company. American President Lines is owned by Singaporean Neptune Orient Lines, and Lykes Lines is owned by Canadian Pacific, a Canadian company.

Sea-Land, one of our truely great steamship companies, which rose like a meteor from about the early sixties on, has effectively ceased to exist. Former Sea-Land ships now owned by Maersk Sealand no longer display the famed Sea-Land logo, but rather the Maersk logo, on their funnels. The few ships that remained in the former parent company (CSX, the railroad giant, which bought out Sea-Land a few years ago) are CSX ships, not Sea-Land, though, ironically, they have retained ownership of the famed Sea-Land logo.

It is more than a just a little ironic that now 38 to 41 (I'm not sure which number is correct at the moment) of the 47 ships in the Maritime Security Program (81 or 87% of them!), are owned by foreign companies. For the foreign companies that own those ships, the American flag is a new kind of flag of convenience -- one that comes with a American taxpayer subsidy of $2.1 million per ship per year, manned by highly qualified American seamen.

In other words, almost our entire subsidized U.S. Flag fleet is now under foreign ownership! They are still considered "American owned" because fiction can now legally be made fact, at least under the color of law. U.S. corporations have been set up as U.S. subsidiaries to own them. These companies qualify as "legal (but nonetheless, foreign-owned), U.S. citizens." (Section 2 "documentation citizens" eligible to document a vessel under Chapter 121 of title 46, United States Code.) Of course, these foreign-owned "American" corporations have more substance than a traditional "dummy" corporation, thus have a much more convincing legitimacy, but their only real purpose is to make a fiction appear a substantial reality -- and under our modernized and internationalized federal codes, apparently this fiction has been rendered legal fact.

The Maritime Administration has approved all of this! Have our top policy makers, military strategists, and economic brains, gone completely mad?

Never fear... "In a statement of commitment to a continued US-flag presence, Farrell noted that: 'The  financial strength of the combined P&ONL-Ferrell Lines will support the future employment of the vessels and their crews under United States flag. In short, after implementation of the transfer which is the subject of this notice, there will be no diminution of the commitment to the Department of Defense, the Department of Transportation, or the officers and seafarers crewing the US-flag Ships.' "

Bluntly stated, under the new corporate international order, the U.S. flag is not only for sale -- it has, in fact, been sold! The world's largest maritime power, greatest trading nation, and only remaining superpower, for all practical intents and purposes, no longer possesses a truly American owned merchant marine!!! American taxpayers pay the subsidies, but corporate profits (i.e., all the freight revenues) go to foreign owners. We subsidize the foreign competition and let national asset ownership slip through our fingers. This is free trade, and this is the New World Order.

The Maritime Security Act of 1995 (signed into law in 1997), was passed to maintain a bottom line of 47 militarily ready, and commercially operating American flag ships. The Maritime Security Program (MSP), as it is called, replaced the former operating differential subsidy (ODS) which subsidized the American fleet to a much greater degree. It is incredible to think that our government -- our own Maritime Administration -- would permit such a travesty as allowing the core of our taxpayer subsidized merchant marine (the fourth arm of the armed forces), to be foreign owned. Such a development would have been as unthinkable as illegal only a decade or so ago. It's like putting our national defense assets on the foreign stock exchange, and its a literal outrage to the taxpaying public! (99.9% of whom are totally unaware of what's going on).

Clyde J. Hart, Jr., our trusty Maritime Administrator, sees nothing wrong nor inconsistent about this. He's convinced that those foreign companies are as committed to American national security interests as he apparently is. Mr. Hart feels that the ships will be available for United States military use during any future national emergency. He says, in fact, that "...the Maritime Administration carefully reviewed the proposed transactions and determined that the arrangements do not convey control over the vessels to a foreign entity." Oh, yea! They just convey ownership, and the owners have obligingly set up American dummy companies to operate them in order to take advantage of the MSP subsidy.

It's good news for American merchant mariners, of course, that the ships will continue to be American manned as long as the subsidies are in force. No American seamen have lost their jobs as the result of these transfers (yet), so a small portion of the subsidy money will actually find its way back into the American economy in the form of crew wages. The bad news is, that profits won't come back into the American economy. Nor will any of the freight charged for cargo carriage. They're gone for good -- gone to wherever corporate headquarters are -- gone to contribute to our soaring balance of payments and trade deficits.

The old operating differential subsidy was done away with because it was "too expensive." Besides that, it was too protectionist -- it protected an American industry vital to national defense and gave American ship owners and seamen a competitive chance in the world. But because both the companies and the personnel benefiting  from the subsidies where actually American by law, the entire subsidy, plus freight and profits, was returned to the American economy, resulting in an overall credit to the American economy. The cheaper MSP, especially since most of the ship owners are now foreign, is much more costly to the American economy than the ODS was.

A major component of our military sealift capability is the Navy's own Military Sealift Command (MSC), which owns many ships which are manned by merchant mariners. These are "United States Naval Ships" (USNS), as opposed to "United States Ships" (USS), which are naval "ships of the line" manned by naval personnel. Some MSC ships are manned by naval civil service personnel (federal civil service). Others are contracted out to private companies to operate. These ships comprise part of what is known as our "strategic sealift program." These companies, of course, must be American companies. But here again, we find that our top military policy-makers have gone along with the idea that "foreign-owned" American companies (an oxymoron, if there ever was one) qualify to operate United States Naval Ships. Since most of our bona fide American shipping companies no longer exist, an ever-larger share of our MSC fleet is operated by American subsidiaries of foreign companies.

Of course these contracts and charters to operate MSC ships are lucrative propositions for the companies involved. Where the parent company is foreign, it means that large amounts American tax dollars are being needlessly siphoned out of the American economy.

Another irony is that the Defense Department and Maritime Administration supports a 74 ship "Ready Reserve Force" fleet of merchant ships. These militarily useful inactive ships are subsidized to the tune of about $1.1 billion, or almost $15 million per ship. I don't know how many years that appropriation is supposed to provide for the maintenance and partial manning of those ships, and I don't argue with the rationale of keeping a ready reserve fleet. It would seem to me, however, that much of that money would be much better spent supporting commercially active, fully manned, ships, which at least pay for a significant part of their own keep in freight revenues, and provide a working and training base for the personnel required to man them and any ready reserve ships in times of emergency. It would seem to make more sense to spend money on active, revenue generating concerns than on idle ships.

As if these perversities were not enough, those same repositories of the national trust have seen fit to give up our national right to set professional standards of competency for our merchant marine personnel and safety and operational standards for our own ships. The largely British and European dominated International Maritime Organization (IMO), an agency of the United Nations, now sets those standards and calls the shots through the new International Convention on Standards for Training, Certification  and Watchkeeping for Seafarers (STCW), and the International Safety Management Code (ISM).

I find these developments truly incredible. What we have effectively done is to relinquish our sovereign rights in maritime affairs to international bureaucrats in the IMO. The fact that the IMO is dominated by British bureaucrats constitutes another particularly ironic turn of events vis-a-vis our former national independence and claim to the freedom of the high seas. We seem to have come full circle -- from a Declaration of Independence from British rule in 1776 and finally shaking off the British yoke in maritime affairs, through the winning of the War of 1812, to a voluntary de facto declaration of national regulatory dependence and subservience to the direct descendants of our former colonial masters through the IMO.

That's progress in the era of the new internationalism, I guess. Another sign of progress was our turn-over of the Panama Canal to Panama -- and  (as it turns out), the Red Chinese, in the guise of the Hong Kong registered Hutchison Whampoa company. Brilliant national strategy! Our title to what was once the American Canal Zone was as at least as good as our claim to the continental United States. The nation of Panama (formerly a province of Columbia), owed its existence to that claim. Theodore Roosevelt made a costly error in allowing Panama to straddle the Canal Zone. He should have either officially made Panama an American possession or given the real estate north of the Canal Zone to Costa Rica and made the Canal Zone the dividing line. Of course, he never imagined a time when the Canal Zone and American sovereignty might be threatened by little old Panama. (Actually, it was the Panamanian-based offshore banking industry that felt threatened, and to whom we capitulated.)

By rights, Panama, coveting our Canal Zone, should have been forced back to Columbia from which it came -- and we should have kept the Canal Zone. A weak internationalist president concluded that the Canal was un-defendable, so we might as well give it to Panama so they wouldn't get upset. That is Jimmy Carter's most enduring presidential legacy. But a slightly stronger internationalist president didn't have any trouble attacking Panama and kidnapping its head of state when occasion called for it in his opinion. If we had the power and "right" to kidnap the Panamanian head of state, we certainly had the power and right to defend our own vitally strategic territory on the Isthmus of Panama.

Since we bowed out, Hutchison Whampoa has moved in and taken control of our former port facilities at Balboa and Christobal.

Such perversities are the result of the convoluted logic at work at the highest levels of our government. All I can say is that we have some real brilliant economists, strategists, and planners in Washington.

The once great British Empire, having lost its North American colonies through the Revolutionary War, which was later clinched by the War of 1812, nonetheless maintained at least the honorary title of being the sovereign of the seas for another century. Having won World War One with our help, the British Empire soon found itself playing second fiddle to the United States as the de facto sovereign of the seas. One more World War, and Empire crumbled as the result of its victory. Thanks to winning that war, the British were finally forced to lay down the "white man's burden" and become a third rate world power. The sun finally set on empire, and the United States found itself the undisputed master of the high seas. The United States became the world's greatest maritime nation, both in naval power and ocean commerce.

What has happened since is a study in national self-nullification. The greatest maritime nation of all time has aggressively pursued a policy which repudiated every advantage it had won in its two centuries of national existence. The United States of America repudiated its national creed of economic independence and national sovereignty and adopted a policy of international interdependence calculated to render itself a dependency of a larger extra-national entity -- ostensibly a new world order of its own making.

The American government seemingly lost all interest in maintaining a nation merchant marine capable of carrying anything like an equitable share of its own increasing seaborne commerce, until now it boasts of almost no real national merchant marine at all. What is left is a largely foreign owned American flag fleet only large enough to carry about 2% of its international trade. Incredibly, it has done this while continuing to maintain a global military capability second to none, and globe-straddling naval fleets which now defend the world's shipping lanes on behalf of the growing merchant fleets of every other nation on earth.

The British government did the same thing, repudiating its own national merchant marine and betraying its centuries old traditions of the sea -- throwing thousands of its own professional seamen out of work. Circa 1964, the British merchant marine was still second only to that of the United States in its number of ships and tonnage. Since then the British and American fleets have declined in parallel, almost equally precipitously.

During this time of maritime decline in both England and the United States, the merchant tonnage of many other nations of the world was growing by leaps and bounds. Indeed, the decline of British and American merchant fleets was not really a decline in ships and tonnage but an abandonment of national flag on the part of both nations. It was merely a change of flag for the benefit and profitability of capital. The run-away flag became the fashion of the maritime industry in the name of capital profits for global shipping interests set free of national standards and interests. The same scenario has played itself out with regard to all of the traditional maritime nations of Europe as well as Japan.

Something else was growing besides the run-away flag merchant fleets -- the role of the United Nations and the International Maritime Organization with regard to regulation of the growing merchant fleets of the world. As merchant tonnage was freed from the well regulated traditional maritime national flags to third world flags of convenience, the international regulatory bodies found new life and purpose, and the IMO found a need for much new talent. Who were better suited to fill the void than the hundreds of recently disengaged masters, extra-masters, and other displaced officers of the former British national merchant navy? Their numbers, of course, have been supplemented by other European merchant marine officers also disenfranchised by the flight from their own national flags. These well trained and capable mariners have become the new regulatory bureaucrats of the IMO, their talents turned to writing the regulatory codes and manuals now making up the much expanded international maritime laws.

American merchant marine officers whose jobs have faded away in recent years failed to sign on with the IMO in significant numbers for several reasons. The main one was perhaps because most were naturally unaware and unconcerned with the machinations of the various United Nations bodies, especially those which remain European-based. Few Americans are drawn to those international bodies, since most Americans still consider the UN a distant and alien organization concerned mainly with international diplomacy issues. Also, the big expansion of the role of the IMO took place some years before the United States Congress signed onto the various covenants and agreements which later developed into the STCW and ISM codes. When Congress finally signed us up in 1991 and 1993, the IMO and its various bureaucratic assemblages were already very much a European show, staffed largely by former British, European, and Indian merchant marine officers and professional European bureaucrats.

While the United States Coast Guard did belatedly solicit input from American mariners with regard to the formulation and finalization of the STCW and ISM codes, input from American mariners was undoubtedly very limited. To put it in rather simplistic terms, we largely ignored the juggernaught until it literally over-took us and loomed, as if out of nowhere, as our new regulatory masters -- a done deal.

The British are naturals when it comes to the job of creating regulatory bureaucracies. They were meticulous colonial administrators, and the vastly enlarging regulatory goals and purposes of the IMO was made to order for the large pool of talent made available by the demise of empire. The IMO and its quickly expanding mission provided wonderful opportunities for the descendants of colonial office administrators from defunct agencies of a once vast colonial empire.

An army of meticulous European bureaucrats came together to staff the IMO in the sixties and seventies, and manufacture the global regulatory structures which became the STCW and ISM codes. These comforting codes, of course, are designed to henceforth govern all global merchant fleets and merchant mariners, including Americans. This has come to pass only two centuries after our forefathers saw fit to permanently severe the ties which once held us under similar rule. It took a Revolutionary War and another war in 1812 to finally successfully break the hold of our British colonial masters and afford the new American Republic true political and economic independence and sovereign freedom on the high seas. It took only one or two sessions of Congress to rebind us to colonial look-alike European regulatory shackles in the name of global interdependence and global uniform maritime standards.

Of course the numerical decline of the American merchant marine, in terms of both ships and men, has rendered the mariner a relatively voiceless entity in American politics. Our government, having effectively abandoned the American flag in favor of internationalized capital interests, has suffered our national merchant marine to become less than shadow of what it once was and what it could and should be.

Weakened maritime unions were in the embarrassing position of having to consider Congressional support for a 47 ship subsidized "Maritime Security Fleet" a major legislative victory for mariners and the maritime industry. The great legislative victory entailed a huge decline in federal funding from former levels of support, combined with major cuts in manning levels to make our ships more competitive in the international marketplace with reduced subsidies.

Unforeseen in all the hoopla was that in a very few years after passage of that maritime security legislation, even most of those 47 ships of our Maritime Security Fleet would come under actual foreign ownership. That they remain under the American flag at all is merely due to de facto smoke and mirror corporate manipulation. If the subsidies are ever withdrawn, flag switching can be as swift as it would be final. In the event of a national emergency where ships are needed, the American taxpayer will most likely find himself in the position of having to repurchase his own maritime tonnage at highly inflated prices.

Be all this as it may, what remains of the American merchant marine, and the regulatory standards that govern the mariners that continue to man the ships, are under the bureaucratic thumb of un-elected, unaccountable international bureaucrats at the United Nations and its IMO. The cry in the pre-Revolutionary colonial era was one against "Taxation without representation." It might just as easily have been against "Regulation without representation." The American colonies rebelled against both taxation and regulation without representation.

Of course, like Americans today, the American colonists were not really without representation at all. Trouble was, they were represented by the king of England, and he did what he damned well pleased, regulating the colonies the way he saw fit in what he perceived to be the interests of the crown and its global community. Today our American representatives have (by in large) sold out, in the words of W. C. Brann, the Great Iconoclast, "to foreign shylocks." Their only gauge of American economic well-being is in the volume of cash traded on the Wall Street and London stock exchanges -- and they have delegated their duly constituted regulatory authority over American Seamen and maritime affairs to foreign bureaucrats at the IMO.

The IMO, of course, will do what it damn well pleases, regulating global maritime affairs in accordance with what it perceives to be the best interests of the global community. American national interests, and those of the American people, are not part of its mandate.

American workers today have no Congressional representation in Washington. Only international capital has any measure of true representation -- and that capital is, by definition, nationless. Only those Americans who have enough invested in stocks and bonds, so as not to have to labor for a living, can consider that they have any representation at all in Washington. Thus an American flag merchant marine, and the lot of American mariners (and labor in general), is unimportant so long as profits from global trading continue to show up on Wall Street in sufficient volume. Our representatives throw us a bone from time to time, to keep us pacified, as kind king George once did, but they won't act in the interests of the people. Capital is their constituency.

History tells us that king George miscalculated. He eventually found himself with a full-blown rebellion on his hands in the American colonies. History tends to repeat itself because we tend to ignore its lessons. The United States is once again becoming a colony of a global corporate empire based in New York and London. Open rebellion, of course, as always, will be a long time coming. We're too well fed and too soft at this point in time to entertain such thoughts. It will be some time yet before our chains are solidified in place and tightened to the point of acute discomfort. Social Security checks are still being mailed out on a regular basis. But give it some time.

The regime now taking command of our lives, here in the United States as well as elsewhere, is unlike any tyrant, despot, or empire of old. It will be more difficult to organize an effective rebellion or defense against it, for it is defuse and globe-straddling, without a single head of state or body to which to attach blame. Its principals are many and well hidden, but they will eventually ferreted out. Already the World Bank, International Monetary Fund, and World Trade Organization have been singled out as the co-oppressors of labor -- and labor has begun to make its displeasure felt (in Seattle, and more recently in the Hague).

The International Maritime Organization is a part of the same beast, though perhaps seemingly more innocuous, impinging, as it does, on a mere small segment of the global population through its micro-management processes of regulation.

But America ought not to be a party to this global quagmire in the first place. Our forefathers executed a Declaration of Independence, and fought a revolution, and another war in 1812, to free us from such oppressions then -- and for what they intended would be perpetuity. What a lamentable commentary on the state of our contemporary American political representatives, thinkers, and policy makers that we seem destined to turn a glorious victory back into lasting defeat.

28 September 2000

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