Unions, Operators Endorse Tax Breaks For Mariners

Unions, Operators Endorse Tax Breaks For Mariners

H.R.3262 Would Ease Burden On Seafarers In Some Trades, Cut Cost Of U.S. Shipping

      A coalition of seagoing unions and merchant vessel operators Dec. 6 endorsed legislation that would lower the cost of doing U.S.-flag business on the high seas.
      The bill is H.R.3262, the Merchant Marine Cost Parity Act, filed by Minnesota Democratic Rep. James Oberstar and co-sponsored by Alaska Republican Rep. Don Young. The Congressmen are ranking minority member and chairman, respectively, of the powerful House Transportation and Infrastructure Committee.
      H.R. 3262 addresses tax, wage, insurance and inspection costs Rep. Oberstar said "drive capital investment away from the U.S.-flag shipping industry."
      In a letter to Reps. Oberstar and Young, the labor-industry coalition--which includes American Maritime Officers--said H.R. 3262 would "increase the competitiveness" of the U.S. merchant fleet in international trade. "The tax and regulatory areas covered by your legislation ... must be addressed," the coalition said.
      Specifically, the legislation would:

Replace the corporate income tax on U.S.-flag foreign trade shipping revenue with a flat tonnage tax comparable to that applied by other seafaring countries.
Exempt up to $80,000 of a U.S. mariner's overseas income from federal taxes.
Allow U.S.-flag vessels to be designed and built in compliance with International Maritime Organization standards, instead of with more demanding and expensive U.S. Coast Guard criteria
Permit insurance compensation when officers or crew members are injured or killed aboard ship to reduce litigation.

      The coalition's letter noted that U.S.-flag vessels are subject to "a multitude" of "rules, regulations and tax obligations" that are not imposed on foreign-flagged and crewed ships "which compete with our merchant marine for the carriage of America's foreign trade."
      The letter also pointed out that many foreign-flag merchant vessels and the foreign officers and crew members aboard them "pay little or no taxes to their respective governments" and often operate in "a tax-free and regulation-free environment." As examples, the letter cited the flag-of-convenience shipping states of Liberia, Panama, Malta, Cyprus and the Bahamas, which exempt commercial vessel operations from taxes and provide "haven" for fleets that compete against the U.S. merchant fleet for commercial U.S. imports and exports.
      "Despite the efficiencies associated with American vessel operations, the disparities in the tax and regulatory treatments between American vessels/American crews and foreign vessels/foreign crews have placed our industry at a serious economic disadvantage that adversely affects our industry's ability to compete in the international shipping arena," the coalition wrote. "The number of U.S.-flag vessels in the U.S. foreign trade continues to decline, employment opportunities for American merchant mariners continue to decrease, and foreign-flag vessels and crews continue to control approximately 95 percent of all the cargo entering and leaving our country."
      Tax and regulatory reform as provided in H.R. 3262 would "supplement and make even more effective" such maritime policy elements as the 10-year, $1 billion Maritime Security Program and the cargo preference laws that set aside specific shares of government financed imports and exports for U.S.-flag ships, both of which are crucial to national security, the coalition continued. "Without changes in the requirements and application of American tax laws and regulations ... the ability of the U.S.-flag merchant marine to continue to function as our nation's 'fourth arm of defense' will be jeopardized," the coalition explained. "It is critical--especially in these dangerous and uncertain times, that the U.S. continues to have the trained, loyal American merchant mariners available to crew the government's reserve fleet vessels that provide the surge build-up at the outset of military operations, and the American vessels and crews needed to provide reliable, cost-effective and immediate sealift sustainment capability to supply our armed forces overseas."
      The proposed tonnage tax that would replace the corporate income tax "should mirror the ... regimes that are presently working to increase the size of the national flag fleets in other nations," the coalition said.
      Income tax exemption for U.S. merchant marine officers and crews' overseas earnings would extend to the mariners the same break available to U.S. citizens working abroad in other industries, the coalition said, adding that the exemption would "help preserve and increase employment opportunities" for U.S. seafarers and reinforce the civilian seagoing labor base that is so critical to U.S. defense policy.
      "We agree that allowing U.S.-flag vessels to meet IMO rather than domestic design standards will help reduce the economic disincentive to the operation of commercial vessels under the U.S. flag," the coalition wrote. "We agree that allowing U.S.-flag vessel owners and the representatives of their crews to agree on an alternative system for compensation arising from employment-related injury or death will similarly help reduce the economic disincentive to operate U.S.-flag vessels."
      The coalition urged hearings by the Congressional committees with jurisdiction "as quickly as possible."
      When he introduced the measure in mid-November, Rep. Oberstar recalled that, during Operations Desert Shield and Desert Storm in the Persian Gulf in 1990 and 1991, the U.S. "needed more than 200 cargo ships" for military support services. "We called up retired seamen who had sailed during World War II," the Congressman said. "Today, we have fewer ships and fewer trained personnel."
      Fifty years ago, there were 1,238 active privately owned and operated U.S. merchant ships "sailing on the oceans of the world," Rep. Oberstar added. "Today, there are 94 U.S.-flag vessels in the U.S. (commercial) foreign trade and seven U.S.-flag vessels in trade between foreign countries. The question is: Why has this happened? The answer: The higher cost of operating a vessel under the U.S. flag due to various federal requirements."
      With the worldwide proliferation of flag-of-convenience registries, many traditional maritime nations--Norway, Germany and the United Kingdom, for example--have adopted favorable tax laws to help their national-flag fleets compete, Rep. Oberstar said. "It is time for the U.S., once the greatest maritime power in the world, to make similar changes. Instead of proposing a subsidy program ... it is time to look at the underlying laws that increase the cost of operating under the U.S. flag."
      H.R. 3262 can "provide the foundation" for "a long-term and integrated strategy" to overcome the built-in disadvantages of U.S.-flag shipping, Rep. Oberstar said.
      Endorsing H.R. 3262 with AMO were American Maritime Congress, American Maritime Officers Service, American Ocean Enterprises Inc., American Ship Management LLC, central Gulf Lines Inc., Crowley Maritime Corp., Farrell Lines Inc., First American Bulk Carrier Corp., the International Organization of Masters, Mates & Pilots, Lykes Lines Ltd. LLC, Maersk Inc. Maersk Line Ltd., the Marine Engineers Beneficial Association, the Marine Firemen's Union, the Maritime Institute for Research and Industrial Development, the Maritime Trades Department of the AFL-CIO, Matson Navigation Co., the Sailors' Union of the Pacific, SaltChuck Resources Inc., the Seafarers International Union, Transportation Institute, the Transportation Trades Department of the AFL-CIO, U.S. Ship Management Inc., and Waterman Steamship Corp.

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