Cruise ship lines propose broader foreign exemption
By Kelly Yamanouchi
Advertiser Staff Writer
The cruise industry is proposing an exemption to federal law that would allow any cruise line to operate foreign-built ships under U.S. flags.
The industry's idea is being offered as an alternative to a provision being pushed by U.S. Sen. Dan Inouye, D-Hawai'i.
His proposal is to grant an exemption only to Norwegian Cruise Line for ships that would operate in Ha-wai'i waters. The proposal is pending a review by House-Senate conferees.
Under the proposal by Inouye, Norwegian Cruise Line would gain the right to sail three foreign-built cruise ships in Hawai'i under U.S. flags. The ships would not have to make a trip to a foreign port as required by federal law.
An exemption to the law is expected to be a major boost to Hawai'i's cruise industry. Passengers from cruise ships make up only a fraction of the state's tourists but are sought after because of their potential to significantly increase visitor spending.
The Passenger Vessel Services Act requiring a foreign port stop by foreign-built ships was originally intended to promote U.S. shipbuilding. The act has made passenger lines reluctant to operate Hawai'i-based cruises.
Norwegian's cruises in Hawai'i make a round trip to the Republic of Kiribati's Fanning Island. Norwegian spokeswoman Susan Robison has said Inouye's legislation would allow the cruise line to expand its offerings in Hawai'i, "one of the less developed but potentially more attractive destinations." If the legislation is approved, Norwegian Cruise Line would hire primarily from Hawai'i, she said.
A federal spending bill that included Inouye's provision was passed by the Senate on Jan. 23 and may be reviewed next week by a conference committee, where the cruise industry legislation will be an item for discussion, said Jennifer Goto Sabas, Inouye's Hawai'i chief of staff.
Not all cruise lines are happy with Inouye's provision.
Earlier this month Holland America Line and Princess Cruises persuaded other members of Congress to draft legislation allowing six foreign cruise ships with U.S. flags in Hawai'i instead of three. Any cruise line, not just Norwegian, would be eligible, said Michael Crye, president of the International Council of Cruise Lines.
Inouye's legislation would allow one cruise line to put U.S. flags on three ships, including two vessels from Project America, an initiative backed by Inouye for two American Classic Voyages ships to be built in a Mississippi shipyard. Neither of the ships was completed before American Classic Voyages filed for bankruptcy protection in October 2001, which spelled an end to Hawai'i interisland cruises.
Norwegian — a subsidiary of NCL Holdings, owned by Hong Kong-based Star Cruises — bought materials and equipment for the two ships last August and is completing construction of the first ship in Germany.
Crye said his organization supports the changes for a broader exemption suggested by Holland America and Princess. Holland America representatives did not return calls, and a Princess representative refused to comment.
"This opportunity to waive the U.S.-build requirement should be provided to others," Crye said. "We suggest that that would not in any way harm Norwegian but that would provide for the opportunity for competition in that (Hawai'i) market ... and even more jobs."
"Senator Inouye's office seems to be reluctant to broaden it," Crye acknowledged.
Inouye's office and state officials are wary of the cruise industry's suggestions.
"We definitely have some questions as to their sincerity," said Sabas, who added that the cruise industry's provision hasn't been formally proposed. "None of the other lines up to this point have had any interest in setting up a U.S. crew, let alone setting up a U.S. subsidiary."
The strong suggestion from opponents of the cruise lines' provision is that the move is actually aimed at killing Inouye's amendment.
Broadening the exemption could draw greater opposition and put the senator's legislation at risk of gaining approval. Businesses and groups including National Steel and Shipbuilding Co. in San Diego, the merchant marine officers union American Maritime Officers and the Passenger Vessel Association, a cruise industry group in Arlington, Va., oppose an exemption.
Hawai'i Tourism Authority executive director Rex Johnson said he supports Inouye's legislation as a means of expanding the cruise industry in the state.
"The legislation is very complicated," said Johnson, who offered help to Inouye's office to get the legislation passed. "We kind of need to leave that to the senator's office because he's the one that understands it."
Inouye has discussed his legislation with Gov. Linda Lingle, who also supports the measure "because it's good for the people of Hawai'i," said spokesman Russell Pang.
Freshman Rep. Ed Case, D-Hawai'i, said he supports the direction Inouye's legislation is headed.
Case said labor organizations including the International Longshore and Warehouse Union oppose an exemption because it may lead to a repeal or exemption to the Jones Act. Under the Jones Act, the same requirement for a foreign port stop is applied to cargo ships as a protection for the U.S. cargo shipping industry.
"They view it as a toehold and they're reluctant (to allow an exemption)," Case said.
"But Senator Inouye's is a fairly narrow exemption he's carved out in the Passenger Services Act. I think it's in the right direction and I support it as an enhancement to the economy in Hawai'i.
"In an ideal world we would go much further than that to really open up interisland cruise traffic in Hawai'i so that foreign vessels under appropriate controls beyond Norwegian Cruise Line could do it as well. And that may well happen in the future, but I'm supportive of this step."
The exemption would allow Norwegian to gain a greater competitive advantage, said Joseph Hovorka, an analyst who covers the cruise industry for Raymond James & Associates in St. Petersburg, Fla.
Because the Caribbean is a crowded market for cruises, "if you can differentiate yourself and your brand by being in a place nobody else is in, that's beneficial," Hovorka said.
Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.
