FLAGS OF CONVENIENCE DRAW CONGRESSIONAL FIRE
The U.S. House Armed Services Committee is concerned that certain ship registries, or so-called “flags of convenience,” serve as easy conduits for terrorist activities.
In particular, the committee believes there’s sufficient evidence to link the second-largest flag of convenience, the Liberian International Ship and Corporate Registry, to funding Liberian President Charles Taylor’s war machine and reported links to the al Qaeda terrorist group.
“It is critical that we are able to guarantee that the Liberian flag registry revenues are transparent and are going toward the needs to the people of Liberia, who have suffered so much,” said Rep. Frank R. Wolf, R-Va., before the House committee’s Oversight Committee Panel on the Merchant Marine. If we cannot guarantee this, it should be shut down — clearly without any doubt.”
According to an October 2001 United Nations report, the Liberian ship registry accounts for about 50 to 75 percent of Liberia’s annual revenue.
“If the flag registry can be effectively audited and ‘ring fenced’ and these funds used for legitimate purposes, then I believe the flag registry should be saved,” Wolf said. “Instead, the revenue from the registry is still controlled by the ‘Executive Mansion,’ meaning Charles Taylor.”
U.S. government maritime officials and labor groups expressed similar concern about the lack of operational controls of open registries during the panel session.
“I would like to see the truly bad flag-of-convenience operators relegated to a role of ‘flag-of-inconvenience,'” said Capt. William G. Schubert, maritime administrator. “We neither need nor want those ships whose owners try to circumvent the legitimate demands of the world maritime community for safe, high quality ships.”
“We urge the U.S. Congress on a unilateral basis to enact legislation authorizing the U.S. Coast Guard to refuse entry to U.S. ports to any foreign-flag vessel that does not provide transparency and/or full identity of the vessel’s beneficial owner,” said David Heindel, second vice chairman of the seafarers’, fisheries and inland navigation section of the International Transport Workers’ Federation, and secretary-treasurer of the Seafarers International Union of North America. “Undoubtedly, the lack of transparency in the corporate structure of flag of convenience vessels is a threat to national and maritime security.”
According to the Maritime Administration, from 1980 to 1998, countries with developed economies, such as the United States, Japan and Western Europe, lost about half of their general vessel tonnage to open registries, such as Liberia, Panama, Cyprus, the Bahamas, and Malta. These registries account for about 60 percent of the world merchant fleet’s capacity.
The carrier industry blames higher costs of operating under the U.S.-flag as its chief reason for seeking out flags of convenience for their ships.
Duncan Hunter, R-Calif., chairman of the House Oversight Panel on the Merchant Marine, said Congress should focus on benefits to draw carriers back under the U.S. flag. “Why aren’t these companies flagging American? The answer is simply dollars,” he said.
Yoram M. Cohen, chief operating officer of the Liberian International Ship and Corporate Registry, defended the registry’s operations as operating within the confines of the domestic and international regulations. Cohen explained that a new Liberian law, which takes effect June 19, would help to eliminate abuse in the country’s financial system. He said the registry has tight controls over ship crews, but he admitted that there’s a lack of information about the chain of ownership of the vessels in the registry.
Since the Sept. 11 terrorist attacks against the United States, Coast Guard officials have intensified their efforts to gather ownership information of vessels entering the nation’s ports.
“Information collection and analysis can identify suspicious patterns that may point to terrorist activities,” said Rear Adm. Paul Pluta of the Coast Guard in his testimony to the oversight panel. “Also, with this information flag states can ensure that their merchant fleets are not being used for illegitimate purposes.”