The crew isn't sure if the Captain will take them back to North Korea after the humiliating meeting they've had with the Americans or if he'll just sink the ship instead.
The Captain's pretty annoyed with Jun Do for being unable to act like a fisherman even after spending three months with fishermen. If Jun Do could have pulled it off, Pak might not have been suspicious of them.
Jun Do reminds the Captain that he's not an intelligence officer—he's just a linguist.
The Captain tells Jun Do that he should at least have pretended he was a journalist or a scientist studying shrimp. He reminds Jun Do not to be fooled by the good will gestures of the Americans.
Now, the crew needs to come up with a story that will adequately explain what happened to their flag and to the portraits of the Dear Leader (Kim Jong Il) and the Great Leader (Kim Il Sung).
The Captain emphasizes that in North Korea, all people care about are usable stories.
The machinist suggests that they say a fire started and that the portraits burned in it. He will also say that he burned his hands trying to save the portrait. Of course, this means he'll really have to burn them.
The Second Mate chimes in to say that the fire started because of cheap Chinese fuel. The First Mate one-ups him by revising it to "tainted South Korean fuel."
The pilot says that he burned his hair off trying to save the portraits.
Only Jun Do is silent. He finally says that he poured buckets of water.
The Captain is not impressed with this contribution. They need something heroic to feed the propaganda machine.
The crewmembers decide that they can't explain their huge haul of Nike shoes, so they dump them all overboard. The Second Mate, who'd ditched his old pair of shoes, chucks his "America shoes" and has to remain barefoot.
Jun Do tries his hand at storytelling again: he will speak of the Second Mate's bravery, about how he took on the entire American Navy with a knife. The Captain thinks this is much better.
The crewmembers know they also have to throw the American fire extinguisher and the life raft overboard, but it's hard—they really need that stuff.
The Captain decides to deploy the life raft, just to see how it works. It's perfect and new and would fit all of them, but they watch it sail away.
The crew returns to Kinjye port and finds a "welcome party" waiting for them. They are Party officials who heard the radio transmissions from the American frigate—and they want an explanation.
Jun Do tells the agreed-upon story to a reporter and pretends to be humble enough not to give his name. The reporter is impressed, and Jun Do learns that it really is all about a "usable" story.
Jun Do goes back to his squat in the canning master's house, and the Second Mate is taken off by a scary older man who has clearly served in the military as an interrogator (not the nice kind—of there even is a nice kind).
We learn that no one else wants to live in the old canning master's house because of something awful that happened to him and his family. Jun Do doesn't much care about ghosts.
Jun Do's homemade transmitter is in pieces on the table, still waiting to be finished. He doesn't know what he would broadcast with it, so his progress has been slow.
But now Jun Do's going to rig the antenna on the roof, under the cover of darkness (he's not supposed to be doing any of this).
In the morning, the Second Mate appears at Jun Do's door. He is quite drunk.
The Second Mate tells Jun Do that he's been made a hero—with medals and a pension—for standing up to the American Navy. It appears that his story really was convincing.
Jun Do and the Second Mate have a drink, and the Second Mate reveals his beautiful wife, who is standing outside the canning master's house, waiting for him. She is afraid of ghosts.
The conversation reveals more about the "something" that happened to the canning master's family: it happened in the nursery upstairs, and it had something to do with survival.
The Second Mate also doesn't believe in ghosts. He thinks they are more like something you feel or know is there but can't actually see. He uses the example of an amputee feeling a missing limb.
Jun Do says he doesn't believe that ghosts are dead. He thinks of them as living but just out of reach. The Second Mate uses the Captain's absent wife as an example.
The Second Mate thinks that Jun Do believes in ghosts because he is an orphan, and the Captain said that orphans are always after something they don't have.
Jun Do gets annoyed and lists all the other unflattering things people say about orphans. The Second Mate tells him to chill; but the Captain did say that orphans don't know about loyalty.
Jun Do makes his usual move: he reminds the Second Mate that he's not really an orphan.
The Second Mate is like, "Sure, sure..."—but then he reminds Jun Do that orphans are always chosen for special military service that requires a lack of empathy for other people.
The Second Mate doesn't understand why Jun Do didn't just defect to a freer country, since he doesn't have any family in North Korea that the government could torture.
Jun Do wants to tell the Second Mate that he can't leave because he's trying to figure out his past and maybe get news of his mother—whoever she is.
Instead, Jun Do tells the Second Mate to go to the Captain for stitches, but the Second Mate reminds him that he can't go to the hospital now because he's a hero.
The Junma is blinged out with new portraits, a new galley, and a bathroom, and it's sent back out to sea. Jun Do goes along.
The Captain shows the crew something else they've received: a hand grenade. They're supposed to blow up the Junma if the Americans board them again.
But the Captain throws the grenade into the sea. Nothing happens.
The crew examines the "new" life raft, which is an old provision from Russia.
The Captain produces his own tattoo kit in order to make Jun Do an official member of the crew. But since Jun Do doesn't have a wife, he'll have to improvise.
The crew decides to make the national actress Sun Moon Jun Do's "wife"—at least for the purposes of a chest tattoo.
Jun Do wants to know the point of tattooing your wife's face on your chest.
The Captain says it's for the Americans: he'll look like a legitimate fisherman if he also has a tattoo. The pilot tells Jun Do it's so they can identify your body if you drown. The First Mate says it's to keep them faithful to their wives.
The Captain finally comes up with the most sentimental reason: the tattoo is there in order to place your wife in your heart forever. Jun Do wants to know if this will place Sun Moon in his heart forever.
The Captain tells Jun Do not to worry—she's just an actress. And as Jun Do has never seen her movies, he's in no danger.
It turns out that the Captain is a pretty good tattoo artist. As he works, he and the crew fill Jun Do in on his new "wife."
We learn that Sun Moon was discovered by Kim Jong Il—and that he forbade her to marry. But Commander Ga came along—a true military legend—and demanded Sun Moon as a reward for his excellence at taekwondo.
Now, the Captain says, Sun Moon is a sad wife with two children.