Proposed Cruise Bill Could Lead to Stormy Seas for Hawaii

February 11th, 2008

Having worked in the yachting industry for two years, I wanted to learn more about the proposed federal rule stipulating that foreign flagged vessels must stop in a foreign port for a minimum of 48 hours before entering a U.S. port.

How could this impact Hawaii’s cruise market? The proposed rule claims it was designed to help U.S. flagged ships operated by NCL America on their Hawaii cruises be more competitive with foreign-flagged cruise lines sailing from California. The change is an extended length of stay required by foreign flagged vessels, increased to a 48-hour stay instead of the previous 4 to 12 hours.

The irony of the new rule is that now due to the increased 2-day stay, foreign ships may have to alter their itinerary to comply – skipping Hawaii completely. Since Hawaii is the most isolated island chain in the world, it takes time to get here from the west coast.  Now with the new rule, there simply may not be enough time for foreign vessels to comply with the ruling and make it to Hawaii. Governor Lingle has come out against the bill as cited in the Honolulu Advertiser, “If foreign vessels drop Hawaii, it could cost the state $200 million annually and eliminate more than 1,400 jobs.”

U.S. flagged ships are built and registered in the United States and hire only U.S. citizens. The business conducted on the vessel must concur to U.S. law and employment regulations. Therefore the costs of running a U.S. flagged vessel are higher than a foreign flagged vessel. Foreign flagged ships are registered outside the United States and therefore avoid the stricter U.S. labor, health, tax, safety and environmental laws.

Where did this new rule come from? It is called the “Passenger Vessel Services Act”, a federal law that forbids foreign-flagged vessels from transporting passengers directly between U.S. ports. It is the Customs and Border Protection Agency’s new interpretation of the 122-year-old law.  It directly targets rival foreign-flagged ships based in Los Angeles and San Diego that stop briefly in Ensenada, Mexico en-route to Hawaiian waters.

Other port locations likely to be left off foreign ship’s itineraries are Juneau, Alaska, Portland, Maine and Key West, Florida. Many elected officials and tourism professionals have criticized the rule claiming it could drive ships away from U.S. ports and force them to drop shorter trips. As one of the world’s top cruise destinations, Juneau could lose an estimated $68 million in direct spending in one summer as ships are forced to spend more time in British Columbia.

As it stands now, NCL America hasn’t backed down from its position that something needs to be done to protect it’s U.S. flagged Hawaii ships. Alan Yamamoto, V. P. of Hawaii Operations for NCL America, stated in the Star Bulletin that, “NCL America’s U.S. flagged ships are at a competitive disadvantage because they are subject to U.S. taxes and labor laws.” Yamamoto went on the further state, “We have invested $1.3 billion in the fleet. Since 2004 the company has lost more than $250 million, principally due to lower cost foreign competition from the West Coast.”

While the final rule could be adopted anytime, it appears that customs officials are re-thinking their approach, “We do not want to turn the entire cruise industry upside down,” stated Glen Vereb, Customs Chief, in the Advertiser. With the largely negative reaction to the bill, it will be interesting to see how the Customs and Border Protection Agency navigates the bumpy waters ahead.

posted by Cara M. 2/11/08

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Entry Filed under: Big Island, Kauai, Maui, Oahu