Maritime experts advocating both for and against plans to flag foreign ships in the U.S. Virgin Islands claimed Friday to be working in the best interest of seafarers. The debate has turned up the heat on a long-simmering labor battle at the heart of global trade.
Gov. Albert Bryan signed a memorandum of understanding with Northeast Maritime Institute to explore making the territory an open-registry state for commercial ship owners. So-called flags of convenience are much maligned by labor and environmental groups for allowing for minimal wages and safety standards. Lax inspections in these flag states have been blamed for tax evasion and other forms of smuggling.
Labor groups like the U.K.-based International Transport Workers’ Federation rail against flags of convenience as irresponsible systems that place profit above safety. They reiterated their objection in an email to the Source on Friday. On Thursday, the Maryland-based International Organization of Masters, Mates & Pilots issued a stark written rebuke of a USVI open-registry plan.
Flags of convenience allow shipowners to maximize their profitability by avoiding the rules, regulations, tax obligations, and crew requirements attached to a national-flag fleet, according to the organization’s statement. The statement described such schemes as designed to generate registry fees and enrich foreign shipowners at the expense of American workers and America’s national interests, saying the practice is “an affront to American mariners.”
With its high standards for financial transparency and labor practices, U.S.-flagged vessels account for less than 0.2 percent of the global market share. At least 50 percent of large commercial ships are flagged in just three jurisdictions: Panama, Libera, and the Marshall Islands. As such, American sailors find themselves working on foreign-flagged ships, often lacking labor and safety standards found on U.S. ships.
The USVI flag will protect sailors under U.S. federal labor laws rather than what Panama or Libera offer seafarers, said John Konrad, founder of the seafarer website gCaptain. The USVI has the only U.S. ports exempt from the Jones Act, which requires ships traveling from one U.S. port to another have American crew.
“U.S. mariners get a lot of protection under the Jones Act and U.S. laws, but there aren’t many jobs, so even a lot of Americans are sailing under a foreign flag. So if you can have a flag that is subject to U.S. law — it might not give them all the protection of the Jones Act but will give them the protection of a U.S. state — that would be a huge improvement over what most of the ships have now, and their sailors,” Konrad said.
Shipowners are willing to pay more to meet labor and safety standards because shareholders and investment funds are pushing for increased accountability and transparency, he said.
“They’re rewarding them with lower cost for capital and more investor interest. Shipping companies are interested in being held to a higher standard because that’s what investors want,” Konrad said.
The USVI registry will be exclusively for companies that want to fully comply with best practices and commit to complete transparency, said Anuj Chopra, CEO of shipping safety and regulatory compliance facilitators ESGPlus.
“We want to offer that transparency, that value, that best management practices,” Chopra said at the Washington meeting. “Shipowners will have to apply for it and qualify for it rather than be taken for granted. It’s trying to create an exemplary force, an exemplary fleet, an exemplary flag where not only can the industry — the users of shipping — rely on it, at the same time, so can the government.”
The current system isn’t working, he said.
“We’ve had policies that were made decades ago which served us well as a nation. I think we’re rewriting those policies today that will better serve us in the 21st century — whether it’s treatment of seafarers, movement of cargo, whether it’s security of delivery,” Chopra said.
Eric Dawicki, president of Northeast Maritime Institute and co-signatory of the memorandum with the governor, said the USVI flag would be the opposite of low standards imposed by these states. The idea is to end the race to the bottom, where shippers look for the least regulations. The USVI flag would bind shippers to U.S. federal laws and regulations. There’s a growing pool of would-be investors eager to put their money in industries that operate in full transparency and cannot be linked to even a perception of impropriety, he said.
“What has been discovered over the years is there really needs to be a way to facilitate a much higher level of transparency and compliance for ships trading globally,” Dawicki said.
Stephen Flynn, a founding director of the Center for Global Resilience at Northeastern University, Homeland Security advisor under the Bush and Obama administrations, and global expert on supply chain resilience, said shipowners flying the USVI flag are looking to be in the “good guys club.” At a signing event in Washington Tuesday, Flynn said the pandemic-related disruption of the global supply network has large international firms looking for reliability, not corner-cutting.
“Now we have a convergence of interest from the users of the maritime industry, the providers of that, and the public-good imperatives of the environment, the need for greater security, and the need to look out for the humanitarian interest of the mariners, and the public good that is so critically provided by the transportation system that upholds the global economy. How do we bring them together? The U.S. has not been playing a leadership role in this space for too long. The opportunity we see in this strategy is a toehold, but if we can re-enter the game with a Virgin Islands fleet, attract the best players who want to be in the good-guy club, who are willing to bring transparency and accountability and best practices into that effort, we reward them for being there economically as well as regulatory support, the U.S. can play a vital leadership role at a critical moment,” he said.
The International Organization of Masters, Mates & Pilots did not respond to requests for comment.