Renewed focus on easing cruise-ship law

By Michele Kayal
Advertiser Staff Writer

With Hawai'i's only interisland cruise company out of business, debate has resurfaced over altering a controversial U.S. law that complicates operations for most foreign ships trying to sail to the Islands.

Under current U.S. law, only ships built in the United States and owned by American companies can sail passengers between U.S. ports. With the demise of American Classic Voyages (whose Independence, left, and Patriot are pictured here), some people are seeking an exemption to allow foreign ships to carry passengers between ports in Hawai'i. Advertiser ibrary photo

When American Classic Voyages was around, the cruise business in Hawai'i was forecast to add roughly $1.7 billion to the state's economy by 2020.

Since the company's shutdown, state Rep. Ed Case, D-23rd (Manoa), has asked Hawai'i's congressional delegation to consider legislation that, under certain conditions, would allow foreign cruise ships to sail Hawai'i's waters the way American Classic did — that is, to pick up or discharge passengers in Hawai'i.

That way, Case reasons, the state could regain some of the economic benefit lost when American Classic left the Islands.

"I think it will take a broader public education for people to understand the limitations that this federal law places on the full development of a passenger cruise industry in Hawai'i," Case said. "And the absence of American Classic Voyages creates a void that cannot be filled by any other U.S.-flag vessel at the same level. So without this kind of exemption, unless American Classic Voyages returns to service, our passenger cruise industry is not going to return."

Under current U.S. law, only ships built in the United States and owned by American companies can sail passengers between U.S. ports.

Miami-based American Classic fit that bill and was also legally guaranteed a virtual monopoly on the market for more than two decades. An exemption was made for its ship the Patriot, which was built abroad but was slated to be replaced by a U.S.-made vessel. The Patriot and its companion ship, the Independence, were both based in Hawai'i and visited five ports on four islands each week.

Foreign-owned ships, or even ships owned by a U.S. company but built abroad, must stop at a non-U.S. port in order to do business in American waters. Many of the foreign ships that sail to Hawai'i each year begin or end their cruises in Mexico or Canada.

Next month, Norwegian Cruise Line will become the first foreign company to base a ship in the Islands when its 2,200-passenger Star launches from Honolulu. But it will make a three-day trip to Fanning Island, 600 miles to the south, to get around the federal restrictions.

"That creates a huge problem in terms of the efficient operation of a bulk passenger cruise industry," Case said. "All the people that were employed both on those (American Classic) vessels and in those ports are all reliant on the cruise industry as conducted by American Classic Voyages. They're not going to get anywhere near the same level of economic activity from Norwegian Cruise Line being forced to roll in here from some foreign port and then sail days down to Fanning."

U.S. Rep. Neil Abercrombie's office notified Case's staff of related legislation introduced by the congressman earlier this year. A spokesman for Hawaii's senior senator, Daniel Inouye, said his office received Case's proposal but is not ready to respond. Case said the other lawmakers have not responded.

When American Classic Voyages declared bankruptcy last month, it took a large chunk of Hawai'i's cruise industry with it. The company, known as the largest operator of U.S.-flagged cruise ships, shut down its 1,212-passenger Patriot and its 867-passenger Independence, which accounted for half of all port calls in the state.

Other lines want berths

Other lines have begun to fill some of the void left by American Classic. Norwegian announced it will place a second ship in the Islands to provide cruises nine months of the year, though the company stressed that the decision was made before American Classic left the scene. And some cruise executives said they expect all the space left behind to be gone shortly.

"All the major cruise lines are now looking at how they can expand upon the availability of berth space in Hawai'i," said Troy Brown, assistant manager for the shipping agent Waldron Steamship Co. Ltd. "We can expect within a year to two years' time a very large part of the available berth space will be filled by international cruise lines."

In this atmosphere, and with Norwegian getting good response to its initial offerings on the Star, cruise executives apparently hold mixed views on whether an exemption to U.S. law would be necessary or useful to the lines.

"We're not lobbying one way or the other," said John Hansen, president of the North West CruiseShip Association, who noted that most of his members are already operating in the Hawai'i market. "I don't know what the implications would be if there were some changes."

Norwegian has said it has not considered applying for a waiver to sail Hawai'i exclusively, and that the company is not seeking any change.

But Hansen and others concede that an exemption would offer the lines more options. If they did not have to sail to Hawai'i from foreign ports, or visit a foreign port at some point on their Hawai'i itinerary, they could spend all their time in the Islands, which is better for the state's economy. They could also offer shorter cruises, which are more popular than long voyages. Some travel professionals say a change in the law would help lots of local businesses and the economy as a whole.

"We are the only one that cannot have these ships come in," said Valerie Davis, owner and president of Cruise Voyages in Honolulu. "They have to touch a foreign port, and we don't have one that's close.

"New York's got Bermuda and Canada. Seattle goes to Vancouver — big deal.

"We are hampered by this act. I cannot tell you how many people tell me they don't want to fly and they want to take a ship to the Mainland. ... It would open up a tremendous amount of business if we were allowed to have these ships here."

Touchy issue in Congress

Congress is prickly about the maritime laws that govern U.S. waters, however, and exemptions, repeal and other issues surrounding them have come up in the past.

Sen. John McCain, R-Ariz., who has been a vocal opponent of the original deal that created the exemption for American Classic Voyages and gave it a monopoly in Hawai'i, introduced a bill earlier this year that would allow U.S.-owned, foreign-built cruise vessels to offer service in all U.S. ports for a limited time if the operators agree to build replacement vessels in the United States.

Because of post-Sept. 11 legislative business in the Senate and other issues, McCain's bill is unlikely to come to the floor this year, said his press secretary Nancy Ives.

Sen. Inouye was instrumental in winning the measures that gave American Classic the exclusive operating rights in Hawai'i.

Inouye chief of staff Jennifer Goto Sabas recently said the senator might consider seeking an exemption to existing law under very specific conditions. However, she said, the senator is not considering any action right now.

Rep. Abercrombie introduced legislation Sept. 19 that would allow foreign-built ships to operate between U.S. ports under certain conditions. But his press secretary, Michael Slackman, said the bill specifically excludes allowing such operations in Hawai'i, a provision that was meant to protect the market for American Classic, which was still in business then. Slackman said the congressman wanted to open non-Hawai'i markets for other operators to create American jobs.

"It's national legislation," Slackman said.