U.S. DEPARTMENT OF LABOR OFFICE OF THE DEPUTY SECRETARY 20210 June 20, 1990 The Honorable William Clay Chairman Subcommittee on Labor-Management Relations U.S. House of Representatives Washington, D.C. 20515 Dear Chairman Clay: I am writing to express the Administration's views on H.R. 3283, a bill "to extend the coverage of certain Federal labor laws to foreign flagships", which is scheduled for consideration in the Subcommittee on Labor-Management Relations today. The Administration is aware of the serious decline of America's maritime industry. Such a situation can lead to increased dependence on foreign carriers to the detriment of our balance of trade and our national security. Therefore, it is in our economic and national security interests to develop and maintain a strong domestic merchant marine. To begin to meet this challenge, the Department of Transporta- labor. The Administration is, of course, concerned with the welfare and working conditions of all seafarers. However, the bill raises difficult issues in the area of international law and custom, specifically regarding the extention of U.S. law and regulation beyond national borders. Long-standing principles of international law and comity recognize that the nationality of a vessel is determined by its flag (or registry), and that the flag state has exclusive jurisdiction over shipboard matters relating to the internal order and economy of the vessel. Applying U.S. domestic law to regulate shipboard labor relations and establish minimum wages and maximum hours of work for foreign seafarers would clearly contravene "the well-established rule of international law that the law of the flag state ordinarily governs the internal affairs of a ship." (McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U.S. 10, 21 (1963)). The United States has long been subject to sharp criticism, and threats of retaliatory action, from even its closest friends and allies, over what are perceived to be unwarranted assertions of U.8. jurisdiction over persons and activities in their territory or with respect to which they otherwise may claim primacy of jurisdiction under international law. It is for such reasons that the Governments of Belgium, Denmark, Finland, France, the Federal Republic of Germany, Greece, Italy, Japan, the Netherlands, Norway, Spain, Sweden, the United Kingdom and the Commission of the European Communities have already formally expressed to us their concern over the jurisdictional reach of the pending legislation. Due to the concerns detailed above, the Administration must oppose H.R. 3283. The Office of Management and Budget advises that there is no objection to the presentation of this report to Congress from the standpoint of the Administration's program. Sincerely, Roderick DeArment Deputy Sec, of Lamin SHANNON J. WALL TALMAGE E SIMPKIN AFL-CIO MARITIME COMMITTEE THE VOICE OF MARITIME LABOR 444 NORTH CAPITOL STREET, N.W., SUITE 820, WASHINGTON, D.C. 20001 (202) 347-5980 June 26, 1990 Mr. Roderick DeArment Deputy Secretary of Labor U.S. Department of Labor 200 Constitution Avenue, N.W. Washington, D.C. 20210 Dear Mr. DeArment: Thank you for scheduling time to discuss with us the position you have taken on behalf of the Administration on H.R. 3283. We very much regretted to learn of your letter to Congressman William Clay, stating the opposition of the Bush Administration to H.R. 3283, the bill which would permit the coverage of U.S. labor and wage laws to certain foreign-flag ships. It is most unfortunate that the two concerns you cited in your letter, reasons why the Administration opposed H.R. 3283, do not stand up to reasonable interpretations of the law or to the history of existing laws which cover foreign entities. In addition to containing what we believe are errors Having been told that these agencies could not make a determination on the bill without completion of the study process, you can imagine our surprise to your letter shortcircuiting this process. None of the meetings that we have had with the Domestic - 2 . The President's commitment is not unrelated to our efforts on behalf of H.R. 3283. While we will obviously be taking every opportunity to point out to the Congress the ways in which the Administration is mistaken, we also wanted to let you know in the hope that this position would be withdrawn or amended so as not to conflict with the Bush/Quayle National Maritime Policy. (Copy attached.) First, your reliance on the case of McCullough v. Sociedad Nacional de Marineros de Honduras to establish the primacy of the flag state in matters regarding the internal affairs of a ship, disregards a well-established body of law in place for nearly thirty years that looks beyond the flag. The courts, including the Supreme Court, beginning with Lauritzen v. Larsen, 1/ repeatedly have ruled that the flag is only one of numerous factors to be considered in determining what law rules the internal affairs of a ship. In addition, foreign seamen on foreign-flag vessels are already under the statutory protection of other U.S. laws. Foreign-flag seamen and foreign-flag vessels are specifically covered by the Seamen's Wage Protection Provisions of the U.S. Shipping Code. Section 10313 2/ guarantees to seamen prompt and complete payment of wages on foreign and intercoastal voyages. Section 10314 3/ prohibits unauthorized deductions of various kinds from seamen's wages. Seamen aboard foreign-flag ships may sue in U.S. courts to collect wages withheld in violation of these statutory provisions. Another statute, the Jones Act 4/ gives any seaman suffering personal injury during employment a right of action for damages against his or her employer. In Hellenic Lines Ltd. et al. v. Rhoditis, 5/ the Supreme Court held that the Jones Act covered a foreign seaman's suit for injuries suffered aboard a foreign-flag vessel while in a U.S. port. In its decision, the Court looked through the facade of the ship's foreign registration to the facts showing that the vessel and 5/ 398 U.S. 306 (1970), rehearing denied 91 S.Ct. 23 (1970). 3 its owner had significant business operations in the United States; such contacts warranted application of U.S. law to the suit. The Court stated: "the facade of the operation must be That this body of law is at odds with the position stated in your letter is best illustrated by a recent decision of the United States District Court for the District of Delaware, that rejected a claim by Philippine seamen that a U.S. law, the Fair Labor Standards Act, was enforceable on a vessel registered and documented under U.S. law and sailing under the U.S. flag. Ernesto C. Cruz, et al v. Chesapeake Shipping Inc., et. al Civil Action No. 89-366-JLL (May 17, 1990). Second, the United States has a history of passing legislation that our trading partners and allies first viewed as intrusive or an imposition, but which proved to be of little or no consequence to our diplomatic relations. Such U.S. laws regulate foreign companies with contacts with the U.S. and plainly demonstrate that the lack of regulation in the maritime industry is the exception rather than the norm. American tax laws recognize and specifically regulate certain industries that are highly internationally mobile and can easily exploit the legal system to avoid regulation. Under Sub-Part F of the Internal Revenue Code, the American tax laws capture an appropriate portion of the income of American companies in such industries, including shipping, even if on paper, or through legal manipulation, the income is earned through a foreign subsidiary. Moreover, under the Tax Reform Act of 1986, foreign ships transporting cargo to and from the United States are now subject to a 4 percent tax on their U.S. source gross income (as long as that income is not effectively connected with a U.S. trade or business.) With this change, an appropriate portion of the income of foreign-flag vessels is subject to U.S. tax laws. The loopholes in the American labor laws, unlike these tax laws, only exacerbate the unfair trade practices and abuse of U.S. trade markets that are so deleterious to our maritime industry. 6/ 398 U.S. at 310. |