Foreign owners tied to US fleet
Reliability during crisis questioned
WASHINGTON -- Three-fourths of the cargo ships in a special fleet carrying vital supplies to US military forces are owned by foreign companies, raising concerns about the lack of American-owned vessels to help the Pentagon in a global crisis, according to government records reviewed by the Globe.
The foreign ownership of cargo ships that deliver rocket launchers, attack helicopters, high-tech safety gear, and other equipment to US troops around the world has received relatively little notice. But the arrangement, under which each ship receives a $2.6 million annual subsidy, is coming under new scrutiny as a result of the furor over the now-canceled plan to have a Dubai-based company take over management of six US ports.
Representative Gene Taylor, a Mississippi Democrat whose district includes major shipbuilding facilities, said Pentagon officials offered assurances when the subsidy program began a decade ago that few of the cargo ships in the US Maritime Security Program would be foreign owned.
But with so many vessels in the program now under the control of four foreign companies, Taylor said he wants Congress to require all cargo ships that supply US military forces to be owned by US companies. Taylor said the military would be vulnerable to a cutoff of crucial supplies if a foreign-owned vessel suddenly pulled out of the program.
Similar qualms have been raised at past congressional hearings by officials including the former head of Transcom -- the Pentagon's transportation command -- and House Armed Services Committee Chairman Duncan Hunter, but the Defense Department has said it had little choice but to utilize foreign-owned ships because so many US owners have sold out to overseas conglomerates.
''First they said, 'No big deal, it is just a couple of foreign-owned ships,' " Taylor said, referring to how Pentagon officials, a decade ago, defended the program to him. ''It is a seduction by degrees of our national security . . . I am hoping that this Dubai ports deal will cause enough Americans to learn about this and put pressure" on their congressional representatives to require American ownership.
Under the program, budgeted at $1.7 billion over 10 years, the Defense Department pays the owners of 60 ships an annual subsidy of $2.6 million in exchange for the right to take over the operations of the cargo vessels at any time. After the ship owners receive the call from the Pentagon, the ships move as soon as possible to report for military duty. They fly American flags and are staffed by American crews.
Robert Johnson, a spokesman from the US Maritime Administration, which helps manage the program, said the government maintains strict oversight of the ships when they are carrying military supplies.
''The ships in the program fly the US flag, they are operated by US crews with a US captain, and, when they are activated, they are under US government control," Johnson said.
But Taylor and others worry that in a global emergency, a foreign owner could suddenly pull his ships from the program, leaving the Pentagon in the lurch. Although the ships are owned by countries in Europe and Asia that are considered US allies, the countries do not always support American military interventions.
It was fear of a similar situation that led to the creation of the subsidy -- called the Maritime Security Program -- in 1995. The initial program required that all ships be American owned, but made a special exception for five vessels.
By the third year of the program, however, the Maritime Administration allowed additional exceptions for foreign ownership, and takeovers of the two largest American companies in the program quickly led to the majority of the ships being owned by foreign companies.
Today, out of 60 ships in the program, 45 are controlled by conglomerates whose parent companies are headquartered in Singapore, Denmark, Germany, Norway, and Sweden. Most of the ships have been used to supply US forces during the Iraq war.
Recent decades have seen a precipitous decline in the American manufacture and registration of cargo vessels. While the US still makes naval vessels, the manufacture of large commercial ships has mostly gone overseas, as exemplified by the demise of facilities such as the Fore River Shipyard in Quincy. Foreign governments, meanwhile, have helped subsidize competing shipyards.
About 97 percent of US international trade is carried on foreign-flagged vessels, many of which register in nations with comparatively lax requirements and lower taxes, according to a government report on the national security implications of the nation's decline in commercial shipbuilding.
The 2001 report warned that the ''US commercial market for merchant vessels does not support the construction of the type of large sealift vessels needed in wartime."
That concerns some experts who worry that it gives foreign countries too much control over US commercial and military shipments.
''There is no doubt that America has outsourced its merchant marine," said Richard Gurnon, president of the Massachusetts Maritime Academy, which trains civilians to operate merchant ships. ''We are the biggest importing nation in the world. What if foreign countries say, 'We aren't going to ship things to you any more; we don't like your foreign policy.' "
One of the US executives who fought for the subsidy program -- and then sold his company's ships to a foreign firm -- was John Snow, now the US secretary of the treasury.
In 1995, Snow was the chief executive of CSX, a large US transportation company that included Sea-Land, which had 15 ships in the Maritime Security Program. CSX and other ship owners, in a joint statement submitted that year to Congress, asked for the new subsidy program, saying, ''If we do nothing, American flag vessels and their American crews will fast become extinct in international liner trades. A fundamental part of our national sealift capability will be lost."
Subsequently, in 1999, CSX sold Sea-Land to a Danish firm, A.P. Moller-Maersk. Maersk had previously won approval for four of its own ships to participate in the program. Maersk initially operated the 15 additional ships acquired from Sea-Land through a US-owned company, but later received approval from the US Maritime Administration to take control of the vessels on its own, and added five more ships to the program through another acquisition.
Maersk spokeswoman Barbara Garrow said Maersk has a long and trusted track record with the Pentagon.
''The Department of Defense . . . has called us a 'true partner' in the war on terrorism. We are extremely proud of our decades of service to the United States and in the war on terrorism," Garrow said.
Garrow said the US subsidiary operates independently from the Danish headquarters, saying it is ''controlled by a board of directors comprised entirely of US citizens."
But the plan to allow the Maersk-owned ships to stay in the program had drawn opposition from US-owned shipping companies, who questioned whether a foreign company would cooperate in a global crisis.
''Maersk has financial interests and conducts business in many countries, some of which have strong policy conflicts with the United States," said Joseph T. Keegan, former president of U.S. Ship Management Inc., at a 2002 House Armed Services subcommittee hearing. ''Let's consider this hypothetical: If our government determines to deploy . . . ships to the Taiwan Straits. . . . my company will unhesitatingly do what's asked. However, please consider the factors which a company like Maersk, which does a huge amount of business with the People's Republic of China, would be forced to consider in the event of such a contingency."
At a hearing later that year, General Handy -- then head of the transportation command -- said, ''I certainly am more comfortable with a totally US-owned company. I mean, there is no question in my mind . . . I would be far more comfortable with a US company."
But he added that, due to the insufficient supply of US-owned ships, he would ''favor the flexibility of going on the market and being able to deal with both" foreign- and American-owned companies.
The hearing ended with members of Congress expressing concern about the lack of US-owned ships but taking no action.
In addition to CSX, companies representing more than a dozen other ships sold out to foreign companies. American President Lines, which had nine ships in the program, was acquired by Neptune Orient Lines, controlled by the Singapore government. 