Puerto Rico’s Tuna Canners Are in Hot Water : Fishery: Far East competition and efforts to protect dolphins doubled-teamed the area. Cannery closures put 2,000 people out of work.

Puerto Rico’s tuna canning industry, which accounts for more than half of U.S. tuna processing, is struggling to stay afloat in a sea of Far East competition and efforts to save dolphins.

This year, two of the island’s five tuna canneries closed and a third reduced operations, putting about 2,000 people out of work.

Puerto Rico is the center of the U.S. tuna packing industry, a $634-million-a-year business that at its height employed 8,000 people. Last year, 535,069 tons of tuna were processed in the United States--more than half of it in Puerto Rico, according to the U.S. Department of Commerce.

Most of the tuna canned here comes from the eastern Pacific Ocean, where dolphin and tuna swim together. Dolphins are air-breathing mammals that drown when captured in nets along with tuna.

In April, the three largest tuna canners in the world--Starkist, Bumble Bee and Chicken of the Sea--responded to an international outcry and said they would stop buying and selling tuna caught with dolphins.

That led tuna fishing boats to move to the Western Pacific and Indian Ocean, where tuna and dolphins swim separately, according to industry spokesmen.

Companies say the expense of transporting tuna from those regions to Puerto Rico is too high to meet the competition. Also attracted by cheaper labor in the Far East, companies are relocating.

In late July, Bumble Bee’s plant in the Puerto Rican city of Mayaguez laid off 800 employees and said it was transferring part of its operation to Santa Fe Springs and Thailand.

“This industry is labor-intensive. It will go where the rates are more beneficial,” Bumble Bee plant manager Pat Vella said in an interview.

In July, Van Camp, which cans Chicken of the Sea tuna, closed its plant in the southern Puerto Rican port city of Ponce and said it was moving operations to Indonesia and American Samoa. Neptune, the sole tuna cannery of the Japanese conglomerate Mitsui, closed its Puerto Rican operation in August.

Puerto Rico is left with just three plants--Star Kist Caribe, the largest cannery in the world, the Mitsubishi-owned Caribe Tuna, and a scaled-down Bumble Bee.

“The main problem with the tuna industry is costs,” said Jimmy Seda, a vice president at Neptune.

Many fear that such plant closings, if they continue, could topple Puerto Rico’s tuna industry and hurt the island’s overall economy.

“It would be catastrophic,” said Jorge Orama Monroig, chairman of the Puerto Rico Senate’s Treasury Committee, which is studying incentives for local tuna canneries. “If an industry that big leaves the island, you’re also going to have indirect job losses. In Mayaguez, it’s an important part of the economy.”

In July, Star Kist and Bumble Bee were among the top 25 employers on the island, with Star Kist employing 5,900 workers and Bumble Bee 2,000.

Puerto Rico, a U.S. Commonwealth, is subject to many U.S. laws. The minimum wage here is $3.85 an hour. In Thailand, where much of the tuna is now being canned, it is about $2 to $3 a day.

Seda said that with added expenses such as health insurance, workers here cost about $7 an hour.

“But it’s not just wages,” he said, adding that environmental and health regulations are less restrictive in Thailand than in the United States. “Our waste-water treatment plant alone was costing about $1 million to operate,” he said.

Lured by tax incentives and cheaper labor, the tuna canning industry expanded in this Caribbean island in the early 1980s when Star Kist, Bumble Bee and Van Camp closed their operations in California.

American companies operating in Puerto Rico enjoy the benefits of a federal tax code provision that exempts them from paying federal income tax on profits earned by their Puerto Rican subsidiaries.

Commonwealth officials are asking the International Trade Commission for higher tariffs on tuna imported to the United States. Under current tariffs, oil-packed tuna is taxed at a rate of 24%, while water-packed tuna, preferred by consumers, is taxed at 12.5%.

“If the United States does not review its import tariff policy, the whole industry here is going to be in trouble,” said Seda, the Neptune vice president.

Raul Velez, president of the Tuna Employees Assn., is doubtful the lobbying will be effective because it faces opposition from the large tuna canneries. Asian owners control the major tuna processors except Star Kist, so higher import tariffs are not in their interest, he said.