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Shippers Beware.

Flying the wrong flag-especially a Latin American flag-can mean big delays.

CROWLEY MARITIME'S SALE OF ITS South American shipping service to German company HamburgSud more than a year ago ended a tradition for U.S.-owned container ships: the Stars and Stripes disappeared from the stems of container vessels plying the region.

The U.S. flag wasn't alone. The Union Jack and the standards of other former shipping powers have all but disappeared. And it's just as hard to spot the banners of Brazil, Argentina or other regional powerhouses in South America's international-trade lanes.

Instead, ships serving the region's trade lanes-and the world's ocean routes-are flying the flags of Panama, Honduras, even Belize. Maritime giants, they are not. But they are centers for vessel registries. It's easier to register a ship in some of these places than it is to get a driver's license in many countries. It's no accident, for example, that Panama boasts the largest registered fleet in the world. The Central American nation even advertises the ease with which companies can cut through its registry paperwork.

Shippers of commercial cargo will salute any flag on the back of the vessel that carries their goods, as long as the ship gets the cargo to its destination on time at a reasonable price. But, while it's cheaper to register and operate under a ship flying the flag of Panama, Belize or some other countries, shippers relying on those vessels may be saddled with greater delays and headaches.

Before, shippers rarely had to concern themselves with what flag was flying. That's because ships moved relatively easily in and out of ports no matter what banner they boasted. But the United States, Brazil and other countries are starting to target ships registered under certain countries because of a newfound concern for safety.

So now, shippers may have to start paying attention to the flags if they want to make sure increased scrutiny doesn't waylay their cargo in some port.

The reason behind the flag flutter is, of course, money.

Old shipping powers like the United States or Brazil require vessels bearing their flags to also carry home-country crews and captains. These sailors are often union-controlled and protected; they earn adequate salaries and receive employment benefits. These countries often also mandate that government cargo be carried on ships bearing the national flag--a move aimed at keeping a national merchant marine program intact, mostly for domestic security reasons.

Profit motive. Those mandates, of course, cut into shipping company profits, which have thinned over the past decade.

Some shipping lines have managed to hang onto their national flags thanks to government subsidy programs. But many have found it just too expensive. More and more companies are turning to socalled "boutique registries." That means the ships hoist the flags of Panama or Belize or Honduras. Captains and ships' officers are usually chosen with care but crews are plucked from the cheapest maritime labor pools. These days, that's Filipino or Eastern European.

The nationality of crew members has, however, become less of a concern than it was five years ago. At that time, there was a correlation between the quality of the care of cargo, especially for refrigerated containers and fragile goods, and the nationality of crew members. But crew capabilities have evened out in recent years.

A more relevant issue is ship safety. International labor leaders, especially in the United States and Britain, argue that flag-of-convenience registries allow vessels to sidestep even the most basic safety standards. The ships, they say, are unsafe and incapable of providing stable cargo service.

"Ships that are registered under a flag of convenience do represent a danger risk, while others are normally safer," says Carsten Gelhaus, the manager for Hamburg-Sud in Santos, Brazil. "We know there are some pretty precarious ships in our waters."

The contents of the cargo and whether a vessel belongs to a major shipping fleet can also be factors, he acknowledges.

He recalls a ship that, earlier this year, bypassed Santos after unexplained delays and was diverted to the southern port of Paranagua. Port officials there checked the ship and found machinery problems and other faults. They blacklisted the vessel, barring it from use in Brazilian ports until the problems were fixed. Shippers expecting their cargo in Santos had to make other arrangements. And anyone booked on the ship for more trips had to find another vessel.

In the United States a couple of years ago, Liberian-flagged Bright Field slammed into New Orleans' shipping and shopping pier. The U.S. Coast Guard found that the vessel's failure to fix Longstanding engine problems had led to the accident. "The Bright Field accident is proof positive that flags of convenience are substandard to a significant degree," says Bruce Vail, a spokesman for the Marine Engineers Beneficial Association, a U.S. seafarers union.

Keeping watch. That said, most countries have recently developed their own systems to ensure that the ships entering their ports are in safe working order. Under these systems of state port control, the countries can, and often do, hold up vessels owned by a company or sporting the flag of a country that has had problems in the past. Watchdog organizations monitor whether ships meet international standards.

When there is a problem, the local coast guard or related agency can redflag any vessel, detaining it and examining it more carefully. Detention can last hours, days--or longer. In some cases, the cargo can be unloaded. Any cargo for the next port, or next trip, is bound to be delayed.

The U.S. Coast Guard is probably the strictest international-shipping cop. The agency keeps a point system calculated on the number of times it has to detain a ship because of a safety problem. Some of those problems are minor lapses, such as failure to conduct a good fire drill. Others are more serious offenses, such as holes in cargo holds.

Some shippers complain that the United States and some other countries are causing more delays by targeting certain flags and ships than the situation warrants. "Sometimes they are just overkill," says Peter Gatti, a spokesman for the U.S. National Industrial Transportation League, the largest organization of U.S. importers and exporters. Any delay, he says, can be too costly.

While some of the problems may seem minor, keep in mind that the ships face sea voyages that are considerably tougher than a trip down an interstate highway. Bough seas cannot only sink weakened ships, the water and weather can destroy cargo that's improperly stowed or riding in a vessel not commercially shipshape.

The Coast Guard started the state port control system about three years ago. The average of detentions is 5.05% of ships checked, Of the 14 countries on the current list of country registries whose ships have a greater likelihood of needing examination, six are from Latin America. The highest rate belongs to Belize--50.56%.

Mexico turned up on the list in 1999 but was removed when its vessels stayed problem-free. Certain ships from Panama and Honduras are among those listed as Priority 1 by the Coast Guard; they have been detained four times more often than the overall average.

The Coast Guard held up 14 ships during the first three weeks of September for safety violations. Eight flew the flag of Panama, while one flew Bolivias colors and another had a Belizean flag. Coast Guard officials say they expect to ground even more ships throughout this year.

Thierry Ogier in Santos contributed to this report.
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Author:FABEY, MICHAEL
Publication:Latin Trade
Date:Dec 1, 2000
Words:1253
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