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Controversial carrier Shipper: Baltimore's port is bullish on Cosco, but others regard the Chinese line as a rogue business and a threat to national security.

November 08, 1998|By Robert Little | Robert Little,SUN STAFF

"Although presented as a commercial entity, Cosco is actually an arm of the Chinese military establishment," reads a declassified report from the House Task Force on Terrorism and Unconventional Warfare, disseminated by congressmen trying to block the Cosco terminal.

"Cosco provides services to the logistics and transportation arms of the [People's Liberation Army], navy and air force.

"Cosco is also a front for the purchase of assets [real estate, etc.] overseas for use by the Chinese military/intelligence services."

Transportation duties

Chinese President Jiang Zemin ordered a large-scale demobilization of the Chinese military last year, the second in a decade. And during that downsizing, Cosco assumed much of the transportation duties of the PLA fleet, according to the report.

Yet if Cosco is a threat to national security, it is one that is routinely granted passage into nearly every deep-water port in America. Besides Baltimore, the company's container ships call in New York, Houston, Los Angeles, Charleston, S.C., and other cities. Its bulk carriers visit even more ports.

Cosco ships sail weekly into Norfolk, Va., and cruise within a few hundred yards of the Norfolk Naval Base -- home port for five aircraft carriers, more than a dozen nuclear submarines and the bulk of the U.S. Atlantic fleet.

And as for the line's brushes with the law and the Coast Guard, it is hardly unique. The most recent ships detained by the Coast Guard in Baltimore for safety or environmental violations were Portuguese, Greek, Panamanian and Russian.

Ports and other shipping interests treat Cosco as a business like any other. The company formed an alliance last year with the Japanese carrier, Kawasaki-Kisen-Kaisha Line, and the Taiwan-based Yangming Marine Transport that won an award for on-time service from Lloyds of London.

The Federal Maritime Administration guaranteed Cosco a $138 million loan for four container ships it plans to purchase from the Alabama Shipyard in Mobile.

Even as Congress debated whether Cosco was too great a security threat to have its own cargo terminal in Long Beach, officials for the adjacent Port of Los Angeles went to Beijing to persuade the company to move there instead.

"Our charge is to put cargo through our terminals, and Cosco does that. They're no different than any other line," said Johnson of the Maryland Port Administration. "They're a very innovative company and one that we value as a customer."

More than 600 ships

That American port officials are so hungry for Cosco's favor is no mystery. Since its founding in 1961, Cosco has grown into a global fleet of more than 600 ships with a reputation for charging some of the lowest freight rates in the world.

The company files no public financial reports, but a Federal Maritime Commission survey said the company's Cosco Pacific subsidiary had a $75.5 million profit in 1996.

Some American shipping lines say the company is, in fact, too successful -- that its rise in the global shipping trade is a direct result of socialist exploitation of a capitalist market.

Because it is owned by the People's Republic of China, Cosco is what the Federal Maritime Commission refers to as a "controlled carrier." It is generally prohibitted from lowering its rates for U.S. trade without giving 30 days notice, and the FMC can reject those rates if they are not deemed "just and reasonable." The restriction is designed to prevent government-financed businesses like Cosco from reaping unfair advantages on the open market.

But even as Cosco protests its treatment in American waters, the Federal Maritime Commission is investigating whether the Chinese government is imposing unfair trade restrictions on American shipping interests -- a probe that could lead to fines or sanctions against China. The FMC's restrictions, critics argue, have done little to temper Cosco's advantage in American trade.

Foreign corporations seeking to augment their trade with China to meet market fluctuations need approval from Beijing that can take 90 days or more. And many companies are prohibited from establishing branch offices in China. Rather, they often must work through Chinese firms that they argue are simply subsidiaries of Cosco or the government-operated freight handler China National Foreign Trade Transportation Corp., or "Sinotrans."

'Protected environment'

"In this protected environment in China, Cosco and Sinotrans have thrived and grown to be among the largest, most successful shipping and forwarding companies in the world," wrote an attorney for Sea-Land Service Inc., the largest American ocean carrier, in a brief filed with the FMC.

"While Sea-Land faces severe market access and doing-business restrictions in China, Cosco and Sinotrans operate virtually unfettered in the United States."

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