AMO Welcomes Senator Rockefeller’s Inquiry On Cruise Ship Industry

by Elias Rudnikas Maritime Articles

Despite the highly publicized cruise ship accidents such as the Concordia disaster in Italy and the Carnival Triumph in the Gulf of Mexico, the cruise ship industry continues to be largely profitable and unregulated. However, that may soon be changing now that U.S. Senator Jay Rockefeller is demanding an inquiry into the industry’s practices, which include: employment standards, safety procedures, the mechanical condition of the ships, the number of American crewmen on hand, and much more.

Uses of flags of convenience to cut costs

Though many cruise ship companies are headquartered in the United States and are publicly traded, they avoid U.S. taxes and regulations by registering their ships under other countries’ flags, known as the “flag of convenience“. This enables the companies to cut costs by paying as little tax as legally allowed and by hiring the cheapest workers possible, all without technically violating U.S. law. The increasing globalization and lack of accountability are the biggest factors behind the latest cruise ship accidents, which will hopefully end once the cruise ship industry cleans up its act.

According to the American Maritime Officers Association (AMO) President Tom Bethel, none of the ships involved in the accidents were crewed by Americans. Since U.S. certified crewmen are among the most highly trained, they also are expensive to hire, at least compared to international mariners who hail from former Soviet Bloc countries or Southeast Asian nations who are willing to work for a fraction of what Americans are paid.

Cruise liners seek to pay lower wages and provide fewer benefits

"Although the best-known cruise lines are publicly-traded U.S. corporations, these companies register their ships to foreign nations and, rather than employ American officers, the vast majority of captains, deck and engineering officers are from other countries and the crews are from undeveloped nations," explains Bethel. "The reason cruise lines hire foreigners is because most of them are willing to accept lower wages and fewer benefits."

"For years, AMO has attempted to convince American cruise line CEOs to employ its U.S. officers. It’s frustrating to know that although all AMO-member officers undergo training that exceeds all international standards and, unlike their foreign counterparts, all AMO-member officers are documented, licensed and vetted by the U.S. Coast Guard, yet, they are denied employment opportunities in the cruise industry."

The environment that allowed Bethel, who started as a ship’s engineer and became a respected maritime executive, is almost extinct in today’s current cruise ship industry climate. Still, AMO continues to agitate for better employment opportunities and economic fairness for American crewmen under Bethel’s stewardship.

A better work environment for cruise ship crew members

Better employment opportunities, workplace standards, and wages for crew members may seem beyond the typical cruise passenger’s concern, but it shouldn’t be. A well trained, well rested, and properly vetted crew is essential for ensuring passenger safety and a healthy vacation experience, after all, what is the point of saving a few hundred dollars on a cruise vacation if the result is an overworked and undertrained crew that cannot effectively respond to an emergency? How much do cost savings matter when the passengers’ life and well-being are at stake?

Of course, workplace issues and safety standards are just the tip of the iceberg when it comes to cleaning up the cruise ship industry. For now, the reality is that American cruise companies can legally avoid compliance with U.S. taxes and regulations. How much longer the American public will continue to subsidize the lack of accountability, however, remains to be seen.

What impact do Flags of Convenience Have on sailors and passengers?

by Elias Rudnikas Maritime Articles

These days, flag of convenience ships are commonplace, something many people are unaware of. For the uninitiated, a flag of convenience ship is a ship that is registered to sail under the flag of a country other than the actual country of ownership.

There are many reasons why ship owners choose “Flags of Convenience”. Because other countries have cheaper registration fees, low or non-existent taxes, and more “relaxed” legislation regarding labor practices and other adult oriented activities on the ship such as gambling and drinking, the ship owner can save a significant amount of money by choosing to sail his or her ship under a flag of convenience.

The Flag of Convenience status of a ship has consequences beyond the profit margins of the ship owner—it can also impact the safety and well being of the ship’s passengers, as well as the ship’s crew. Because of this, the International Transport Workers Federation union (ITF) was formed to bargain on behalf of crews working on Flag of Convenience ships.

Because ships are subject to the regulations of the state it is registered under, a ship owner can avoid paying better wages to the crew, ignore strict safety and training regulations, and even avoid paying taxes to the country of ownership as long as the ship owner chooses a permissive flag state to sail under. This legal quirk has allowed ship owners to evade financial responsibility and liability when something goes wrong while traveling in international waters.      

Many countries compete for flag registries by emphasizing low registration costs, little or no taxes, low oversight, and a bare minimum of regulation that superficially complies with United Nations Convention on the Law of the Sea (UNCLOS). Because there is no international body that can hold the flag state accountable for its failure to enforce international safety guidelines, there is little redress available for victimized passengers and exploited crewmembers.

The proliferation of Flag of Convenience ships is one of the unfortunate results of globalization, which has exerted a downward trend on working conditions and wages for ship workers. Ship safety is often sacrificed at the altar of cost cutting, because enforcing safety standards can add to the overhead of running a ship. This encourages ship owners to hire the cheapest workers, who may be poorly trained and are unable to communicate effectively to manage the ship without incident.

Passengers can also be negatively affected by a ship’s Flag of Convenience status when a crime or an accident occurs while sailing in international waters. Crime victims have to depend on the flag state to provide the resources for investigating the incident and prosecuting the perpetrator. If the flag state fails to do so, there is little recourse since the victim’s home country has no jurisdiction over a Flag of Convenience ship traveling in international waters. 

For now, passengers and ship employees alike need to be educated on the rights they currently have, and what they can do to protect their own interests and well being.

Carnival Cruise Lines will partially reimburse the U.S. Government

by Elias Rudnikas Maritime Articles

In the face of an escalating public relations nightmare, Carnival Cruise Lines has announced that it will reimburse the U.S. Government for a portion of the costs incurred for rescuing its disabled cruise ships. The Triumph and Splendor experienced problems at sea, which left thousands of passengers adrift in international waters without power or plumbing for days. The disasters triggered a spate of lawsuits, as well as negative news coverage that may affect the cruise company’s ability to attract future customers.

It doesn’t help that cruise companies are known for evading U.S. taxes and regulations by registering ships in foreign countries. According to Democratic U.S. Senator Jay Rockefeller of West Virginia, Carnival Cruise Lines has used regulatory loopholes to avoid paying tax on millions in profit while abusing the generosity and goodwill of American taxpayers.

Though the cruise companies are often headquartered in the United States, its ships often sail under "flags of convenience", which allows cruise companies to claim that their ships are under the jurisdiction of another sovereign state. That way, the cruise lines do not have to pay U.S. taxes or adhere to national regulations unless the ship is docked at an American port or is still sailing within national waters. Today, the majority of ships sail under the flag of Bermuda, the Bahamas, Panama, or Liberia.

Senator Rockefeller wrote a strongly worded letter to Carnival Corp. CEO Micky Arison, pointing out that the U.S. Coast Guard has provided invaluable assistance to Carnival ships for the last 5 years, which amounted to 90 recorded events. The Triumph and Splendor incidents already cost the taxpayers $4.2 million—which is just a drop in the bucket when the rescue costs for the other incidents are taken into account.

"These costs must ultimately be borne by federal taxpayers. Given that you reportedly pay little or nothing in federal taxes, do you intend to reimburse the Coast Guard and Navy for the cost of responding to either the Carnival Splendor marine casualty or the Carnival Triumph marine casualty", the senator demanded.

Carnival Cruise Lines’s senior VP of corporate maritime policy James Hunn responded in tone deaf fashion, declaring: "Carnival’s policy is to honor maritime tradition that holds that the duty to render assistance at sea to those in need is a universal obligation of the entire maritime community." He insinuated that since the cruise industry already made significant contributions to the American economy, federal assistance should be provided without hesitation. He also added that Carnival ships already adhere to international maritime tradition by helping other ships in distress at their own expense.

The angry public did not buy the cruise company’s line of reasoning, however. Memories over the latest cruise ship disasters are still fresh in people’s minds, as many lawsuits have yet to be settled.

In a bid to turn around its public image, Carnival reversed its position, stating: "Although no agencies have requested remuneration, the company has made the decision to voluntarily provide reimbursement to the federal government." The company also clarified that they never resisted the request for reimbursement, stating: "It should be clearly noted that at no point in time has Carnival stated it would refuse to reimburse federal agencies if they sought remuneration."

This means that Carnival Cruise Lines will pay an unspecified amount to help defray the costs "related to the Carnival Triumph and Splendor incidents".

The most recent incident involved the Triumph, which floated aimlessly in the Gulf of Mexico for 5 days without power or plumbing. More than 4,000 passengers were stranded, who had to endure food shortages, sleep in tents, and endure unsanitary conditions. The Splendor broke down in international waters in January 2010, subjecting thousands of vacationers to a similar nightmare. Both times, the U.S. Coast Guard came to the cruise liners’ rescue.

Some critics point out that cruise ship safety may be compromised when ship owners prefer to hire less expensive international marine officers rather than credentialed American officers and mariners to cut costs. Said Tom Bethel, president of the American Maritime Officers (AMO) union: "None of these recent [cruise ship accidents] involved an American-flagged ship and none of these incidents involved an American officer. American passengers taking cruises today, I believe, would feel a lot more comfortable and a hell of a lot safer if they knew they had American officers manning the bridge and engine rooms of these vessels".

However, this charge was dismissed as political nativism by Cruise Lines International Association (CLIA) CEO Christine Duffy, who wrote: "all crew members, regardless of nationality, undergo rigorous training before serving on a cruise ship and participate in continuous drills and exercises to hone their skills".

In the end, the problem isn’t a matter of skill or training as much as it is about accountability. The practice of sailing under "flags of convenience" has undermined maritime safety because passengers have no idea that American laws do not apply when accidents or crime occurs in international waters. When something bad happens, unlucky passengers have no choice but to hope that the flag state is serious about investigating the incident, which is usually not the case.  

"People don’t fully understand that when they sail out of U.S. territorial waters, they’re essentially in a no man’s land," noted Miami based maritime lawyer Jim Walker. "If there’s anyone overseeing the ship’s operation, it’s a country like Panama or the Bahamas".

Even though most flag states have signed the International Convention for the Safety of Life at Sea (SOLAS), which is a set of principles specified by the International Maritime Organization (IMO), enforceability is still questionable at best. As Walker explained to NBC News: "People talk about international maritime laws, but there’s no such thing as IMO law. There are no consequences when people break them".

The U.S. Coast Guard does its part by inspecting foreign flagged ships twice a year, but that is often not enough when a crime or accident occurs during international waters. The port states have a responsibility to investigate these incidents, but if there is no regulatory body that can hold port states accountable when there is a failure in prosecution or resolution.

The cruise ship industry, according to Nova Southeastern University maritime law professor Bob Jarvis "is a very fractured industry where customers are relying on the tender mercies of the businesses they’re patronizing. Because of the jurisdiction issues – the flag state, the port state, international waters – it’s just a mess".

That said, cruise ships are generally one of the safest vacation options overall. In the end, cruise companies will opt to do the right thing. As expensive as taxes, regulations, and upgrades can be; it’s still far less costly than the consequences of negative publicity.

A flag of convenience can be detrimental to Seamen

by Elias Rudnikas Maritime Articles

A “flag of convenience" is a popular loophole used by large boat owners to evade international maritime laws and save taxes. But this practice can be detrimental for mariners when a crisis strikes, as depicted by the insolence of Azal Shipping & Cargo, the owner of Iceberg 1, a ship that was assaulted by Somalian pirates, and the government of Panama, the flag of convenience for the Iceberg 1.

The International Transport Workers’ Federation (ITF) requested Panama to contribute financially to help the crew of the Iceberg 1, recently released from a hellish kidnapping. The sailors of the Panamanian-flagged ship remained nearly three years kidnapped by Somali pirates; they were subjected to torture, starvation and even mutilation before being released in December, 2012, after an armed confrontation.

The first officer is still missing, presumed dead, and one sailor committed suicide during captivity. The remaining 22 hostages are in their home countries, but they need urgent help to rebuild their lives. The trauma they were deliberately subjected to has left psychological scars. Many of them suffer medical problems.

On top of the brutal kidnapping, the mariners’ employer, Azal Shipping & Cargo, stopped their pay as soon as they were captured. Some of the abused sailors have returned home to families who have been devastated by the nearly three-year interruption of financial support.

ITF seafarers’ section chair Dave Heindel stated: “There is a good understanding across the shipping industry of just how much these seafarers and their families have suffered over the last three years, and it’s no surprise that some people in the industry have offered financial support. However, we’d particularly like the flag state, which in this case is Panama, to join them and us in sponsoring this relief effort".

He continued: “It is unfortunate that the flag state has not discharged its duty of care set out by the IMO to these seafarers during their captivity, even though they were serving on a vessel flying its flag. There is now an opportunity for it to contribute to their support and rehabilitation."

He concluded: “The cruel and barbaric treatment meted out to these mariners must serve as a constant reminder of why pirates have to be fought, pursued and prosecuted."

The Iceberg 1 had been held by Somali pirates since March 2010. The ship owner, Azal Shipping of Dubai, abandoned the vessel uninsured when it was captured. The company paid no wages to either the seafarers or their families. Twenty-two crew members were freed during gun battles in December, 2012: eight Yemenis, five Indians, four Ghanaians, two Pakistanis, two Sudanese and one Filipino. One seafarer, Wagdi Akdram, a Yemeni, was driven to suicide by his ordeal. The fate of the Indian chief officer, Dhiraj Tiwari, is unknown. He was tortured and separated from the other crew. Another hostage had his ears mutilated. All the mariners were subjected to torture and starvation. Panama, the flag of convenience state, has not provided assistance to the captured crew. This situation demonstrates one of the many problems arising from the use of flags of convenience. The flag of convenience state may not take the needed and required responsibilities when abuses occur. Not only did Azal Shipping get away with not paying its workers, Panama ignored its responsibilities to the captured sailors and their families.

Flag of convenience and abuse of international maritime law

by Elias Rudnikas Maritime Articles

The International Law of the Sea is, although vast, incomplete, having significant gaps. Its application is uneven and patchy, largely determined by the non-binding nature of certain agreements or the wide margins of discretion that much of this legislation grants to governments.

In April 29, 1958, the first United Nations Convention on the Law of the Sea (UNCLOS) signed the Geneva Convention on the High Seas (CHS). This convention establishes in article five that “Each State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly. There must exist a genuine link between the State and the ship; in particular, the State must effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag”.

Protected by this Convention, large shipping companies and cruise lines choose to register their vessels in certain countries, taking advantage of their lax laws of convenience, avoiding high international standards – this practice is known by the term "flag of convenience".

Understanding the importance of international maritime trade, it would be easy to assume that there should be a relationship between the most developed countries and the number of vessels that carry their flag. This leads us to assert that countries with more vessels would have to correspond with the major economic powers: USA, England, Germany… but we would be mistaken.

In 2007, 22.2% of the world tonnage was registered in Panama, followed by Liberia, with 9.8% of the world fleets. Bahamas was third with 5.6% of the world fleet. It should be noted that 51.9% of the merchant fleet of bulk carriers are registered in Panama, while 50.6% are oil tankers are registered in Liberia. 50% of the world fleet of cruise ships is registered in the Bahamas.

Maritime accidents due to the use of a flag of convenience from countries with low requirements

The data presented reveal that the vast majority of shipping companies choose to flag their ships by the tax breaks they could gain from the flag State or, worse, by the weakness or lack of rigor in compliance with the flag states’ international requirements. This will have increased the so-called "flags of convenience" phenomenon characterized by the registration of ships that do not meet minimum safety conditions for transporting dangerous goods and cause several preventable accidents.

This situation constitutes a major safety breach and requires a solution. States should be required to comply with the rules of international maritime law on the supervision and control of ships registered in their territory. Shipping companies and cruise liners should be restricted in their choice of their flag, requiring a clear link between the ship and the flag State.