Copyright 2001 Journal of Commerce, Inc.  
Journal of Commerce - JoC Week
July 16, 2001
SECTION: COLUMNS; Pg.54

LENGTH: 771 words

HEADLINE: Patriot or mercenary?

BYLINE: BY JOHN GAUGHAN

BODY:
The American Heritage College Dictionary defines the word "patriot" as "one who loves, supports, and defends one's country." The dictionary defines "mercenary" as "motivated solely by a desire for monetary or material gain."You might wonder why an essay about U.S.-flag citizenship should start with these definitions. It is necessary to set off in sharp relief what underlies a debate bubbling beneath the surface over the Maritime Security Program, the leading program ensuring U.S. government access to commercial sealift assets. That debate concerns the necessity of retaining the "Section 2 citizenship" requirement for operators of MSP-enrolled vessels.

That requirement has a long and hallowed lineage. "Section 2," enacted as part of the 1916 Shipping Act, carried forward citizenship concepts embodied in the earliest statutes of the republic. Those laws, providing for the documentation of U.S.-flag vessels, required the owner and operator to be U.S. citizens. Similarly, Section 2 citizenship was essential for receipt of subsidies under the 1936 Merchant Marine Act.

The world has obviously changed since 1789, 1916 and 1936. The maritime industry, which has always been international, has become even more so. And when Congress enacted the Maritime Security Program in 1996, it did so with internationalization in mind. It permitted foreign ownership of MSP-enrolled vessels, but only so long as the vessels are operated by Section 2 U.S.-citizen companies.

This change has facilitated the foreign acquisition of a number of U.S.-flag maritime companies. Neptune Orient Lines acquired APL Ltd., Canadian Pacific acquired Lykes Lines, Maersk acquired Sea-Land, and P&O Nedlloyd acquired Farrell Lines. As a result, 34 of the 47 MSP-enrolled vessels are foreign-owned.

Some would say that foreign ownership of MSP vessels is itself dangerous. Although there may be reason for concern, there is also reason for confidence that ample safeguards are in place to ensure that MSP vessels are reliably available for national emergencies.

First and foremost, the officers and crew of every U.S.-flag vessel must be U.S. citizens. A U.S. citizen crew is the best sealift insurance policy.

There is another less-well-known, but equally important, national security safeguard: In each of the transactions mentioned previously, a "true blue" U.S. citizen vessel operator is in actual control of the vessel. The citizen operator hires the crew, maintains and provisions the vessel and generally is in charge of the vessel.

The vessel operator obviously takes direction from the foreign vessel owner as to where the vessel should go and what cargo it should pick up. But as the bareboat charterer, the vessel operator is, under traditional maritime law and well-worn precedents, in actual and legal control of the vessel.

The Maritime Administration, which administers

MSP, also has required the operator to be independent of the owner. Indeed, Marad rejected the initial Canadian Pacific-Lykes transaction, in part because Marad determined that the proposed vessel operator was not independent of Canada-based CP.

Thus, we now have the best of both worlds. Substantial foreign companies now own U.S.-flag vessels. These companies have greater financial and other resources to survive the vicissitudes of international shipping than the U.S. companies they replaced. And, the U.S.

government has access to a far broader array of capabilities in the event of a national emergency.

At the same time, the U.S. government has a high degree of confidence that the vessels will be available under all conditions, including internationally unpopular wars. We should not forget that even NATO allies balked at providing bases and assistance during the

Arab-Israeli War of 1973. Therefore, it is essential to have both a U.S.-citizen crew and a U.S.-citizen operator.

As we look toward a continuation and strengthening of the Maritime Security Program to help ensure U.S. sealift capabilities, we need to continue to be mindful

of the assurance that only a U.S.-citizen operator can provide. To do otherwise would be to place reliance on mercenaries rather than patriots which would imperil the very purpose of the MSP program.

The United States cannot afford to rely on the uncertain loyalties of foreign companies. Only patriotism will do.

John Gaughan, president of First American Bulk Carrier Corp. in Washington, D.C., was U.S. maritime administrator from 1985 to 1989. First American operates five ships under the Maritime Security Program -- three for Lykes and two for P&O Nedlloyd (Farrell).

LOAD-DATE: July 11, 2001