2 shipping firms seek foreign flags Lack of U.S. reform spurs bid to cut costs

June 30, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer

Angered by the federal government's failure to enact maritime reform, the nation's two largest container shipping companies said yesterday that they would seek to register part of their fleets under foreign flags.

Sea-Land Service Inc., the nation's largest container shipping company and a unit of the CSX Corp., filed an application yesterday with the U.S. Transportation Department to transfer registry of 13 of its 41 U.S.-flag vessels to the Marshall Islands in the Pacific Ocean.

Also yesterday, American President Cos., the second-largest U.S. container shipping company, announced that it intended to reflag six of its 15 Pacific fleet vessels and to register six new vessels in foreign countries as well.

For more than a year, the two companies have been pushing for a comprehensive maritime reform package that would significantly increase subsidies and tax breaks for the shipping industry. So far, the reform measures have been stalled in Congress by a lack of money.

"We can no longer afford to continue operating these vessels under the U.S. flag, competing against lower-cost foreign-flag operations or subsidized U.S.-flag operators," John P. Clancey, president and chief executive of Sea-Land, said in a statement.

U.S. carriers have said they need $5 billion in subsidies and tax breaks over a 15-year period to offset the higher costs of operating under the U.S. flag.

The Clinton administration had promised to deliver a plan to Congress to bolster the U.S.-flag merchant fleet and the nation's shipbuilding industry. But so far, the administration has not come up with the money to pay for such a plan.

Yesterday, Transportation Secretary Federico F. Pena said he regretted the decisions to reflag the vessels. He pledged to continue to work for a policy to revitalize the American maritime industry. "I remain hopeful that a solution can be found," he said.

The decision to reflag is not expected to affect Sea-Land's zTC regular service at the port of Baltimore or other U.S. ports. American President Cos., which operates as American President Lines, does not serve Baltimore. But the move by both companies will mean the loss of jobs for American seamen.

"We expect to hire foreign crews on these vessels," said William C. Summers, a spokesman for Sea-Land in Liberty Corner, N.J. He said that reflagging the 13 vessels would save Sea-Land $39 million a year, with 90 percent of the saving coming from lower labor costs.

Internationally, shipping companies can register their vessels in whatever jurisdiction they choose. Vessels flagged in the United States must operate U.S.-built ships, use U.S. crews and comply with standards much tougher than those imposed on ships flagged in most other countries.

Because of the higher cost of operating vessels flagged in the United States, only a handful of companies remain here. Since 1970, the number of U.S.-flag vessels has plummeted to 350, from 840, and the number of jobs for seamen has dropped to 9,165, from 40,248.

Yesterday, Michael Sacco, president of the Seafarers International Union of North America, denounced the decision to transfer registry of the U.S. vessels.

"Any time there is a danger of a loss of American-flag ships and a consequent loss of American jobs, it is cause for deep concern, not only to seamen but also to the nation as a whole," he said.

The federal government subsidizes shipping companies, largely to help them pay higher wages to the U.S. crews. But because of restrictions attached, Sea-Land has chosen not to seek the subsidies.

Sea-Land and other shipping companies have been pushing for increased subsidies in the form of a payment per vessel, in exchange for their making ships available to the U.S. military. In addition, shipping companies have proposed a tax restructuring for the industry.

"These are businesses operating in an international market and subject to things that keep them from being competitive," said Jean Godwin, vice president of the American Association of Port Authorities, which represents most of the nation's ports.

"If nothing else, this should make people realize that their concerns have to be taken seriously," she said. "You don't want all foreign-flagged vessels calling here."

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