Flags of Convenience: Avoiding Taxes, Safety & Labor Regulations, and Justice

Panama Flag of ConvenienceA reader of Cruise Law News (CLN) brought an excellent opinion piece from the New York Times regarding the shipping industry's use of "flags of convenience" to my attention.  Entitled "Flying the Flag, Fleeing the State" and written by Rose George, the article explains how unscrupulous ship owners evade responsibility for environmental damage, exploitative labor and unsafe work conditions, and criminal behavior. 

The article reveals that ships used to fly the flags of their nation which protected the seafarers and passengers and punished the shipping companies when they broke the law.  But this changed when American flagged ships began flying the flags of foreign countries in order in order to avoid U.S. laws and government oversight.   The "foreign registries" were in countries with no government oversight and no real connection to the vessel or its owners in the first place, like Panama (flag above left), Liberia, North Korea and even landlocked Mongolia.  The registries often fail to monitor the safety and working conditions on ships or investigate accidents.    

What are the real consequences to employees working on foreign flagged ships? 

The New York Times article points out that there is a "human cost" which includes long hours, punishing work, and little rest; some international regulations permit 98-hour work weeks.  Cruise line employees are a good example.  Stateroom attendants and cleaners work a minimum of 12 hours a day and often are pushed to 14 to 16 hours when required to handle luggage on embarkation days, ending up with a 90 plus hour work week and no days off.  Cruise ship cleaners earn a maximum of $545 a month working a minimum of 360 hours a month.  Repetitive injuries to these crew members frequently occur, and just as frequently the cruise lines abandon them in countries like Nicaragua or India with inadequate medical care.

No foreign registry in Liberia, which often rages in civil war itself, gives a damn about the working conditions which men and women from Nicaragua or India face daily on Liberian flagged cruise ships.    

Because most ship employees are non U.S. citizens, the U.S. public has been indifferent to their plight.  But the problem inherent in flags of convenience came home to the U.S. last year when the offshore Deepwater Horizon oil rig exploded and 11 American oil and gas workers perished.  

The U.S. Coast Guard just released a preliminary report  about the Deepwater Horizon oil rig. The Coast Guard criticized not only rig owner, Transocean, but the foreign registry in the Marshall Islands (flag below) where Transocean registered the rig.  Just like a cruise ship, the Deepwater Horizon oil rig was considered to be a vessel which had to be registered. 

Why did the rig owners decide to go all of the way to an island in the Pacific to register its oil rig, you may ask?   For the same reason cruise lines like Carnival and Royal Caribbean went to South America and Africa to register their cruise ships in Panama and Liberia - to avoid U.S. taxes, U.S. Marshall Islands Flag of Conveniencesafety regulations, and U.S. labor laws.  

One of the the Coast Guard's initial conclusions is that the Marshall Islands "abdicated" its safety responsibilities.  Transocean got just what it wanted - lax safety inspections and substandard safety requirements from the little spec of an island in the Pacific.   The owners enjoyed lower operating costs in addition to the substantial tax benefits of flying a flag of convenience.  But the financial benefits came at the expense of poor training, poorly maintained equipment, and even poorer safety procedures which resulted in inoperable alarms and failed shut-down systems.  

The ultimate result of the Marshall Islands flag of convenience?  11 dead men.  And 11 families consumed with grief and suffering.  

 

For additonal information, read:

Like Cruise Ships, Foreign Flagged Oil Rigs Avoid U.S. Laws

No Taxes - The Cruise Lines' Dirty Little Secret

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Comments (5) Read through and enter the discussion with the form at the end
Sandra - April 26, 2011 11:40 AM

Very transparent article,they are free of tax's but
they can provide jobs.

My husband also provide jobs but the "sad" side he

have paid 30% of the revenue last year and no one

employe have a such salary of $50 monthly.

This is the business of "Venus Planet",the U.S.justice

need's to improve otherwise "Miami vice" we end up in

the hands of FAT CATS.

Jo - April 26, 2011 11:47 AM

Mr Jim , is your job to protect the U.S.economy and
the equal rights and values of U.S.A. culture .

Jonhson - April 26, 2011 2:34 PM

Amazing,where is the justice of this country??

samwel makaboi - January 18, 2012 8:10 AM

we need more detail about FOC

Ambar - September 23, 2012 1:43 PM

When I worked on Cruiseships I use to wonder in what country is legal to work 50 plus hours a week for a montly salary of 600 wich is what galley and facilities staff makes! I had a nice well paid job but most of the crew works for peanuts but they do it cos is way more what what they could earn in their countries, Great article cos after realising that the ships were register in countries with no or little interest in labor laws. Very sad to see Cunard doing it specially after so long sailing with the South hampton name.
I left my job at sea after i saw how the cruiselines care little or nothing for their crew, a friend was injured and still working for a month. I told him to sue, he didnt, got better and still working.

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