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The Honolulu Advertiser
Posted on: Saturday, January 18, 2003

Deal may resurrect cruise ship industry

By Derrick DePledge and Kelly Yamanouchi
Advertiser Staff Writers

WASHINGTON — In a move that could revive interisland cruises in Hawai'i, Sen. Dan Inouye is close to obtaining a special exception in federal law so Norwegian Cruise Line can operate foreign-built ships in Hawai'i under U.S. flags.

The deal could restore an industry that collapsed when American Classic Voyages, which offered interisland tours for years and had plans for new ships, went bankrupt with the economic slump following the Sept. 11 terrorist attacks.

Inouye, a Democrat, quietly slipped the provision into a spending bill that Congress is drafting to pay for government operations this fiscal year. An attempt by Sen. John McCain, R-Ariz., to strip the provision from the bill was rejected by the Senate yesterday.

If approved by the Senate, the bill will go before a House-Senate conference committee for review, then to the White House for President Bush's signature.

"We need something to be done," Inouye told his colleagues yesterday.

The Passenger Vessel Services Act prohibits foreign-built ships from operating between U.S. ports without making a foreign stop in between or obtaining a federal exception. The law is intended to promote U.S. shipbuilding, but domestic shipbuilders have not built a cruise ship in more than 40 years.

The federal government promised more than $1 billion in loan guarantees for two new American Classic ships to be built by Northrup Grumman at Ingalls shipyard in Pascagoula, Miss. The project failed after American Classic filed for bankruptcy, and construction on the first ship was left unfinished, costing federal taxpayers more than $185 million.

"Project America," as the shipbuilding initiative was called, was derided by McCain and others as an example of corporate welfare and wasteful spending that primarily benefited the home states of Inouye and Sen. Trent Lott, R-Miss.

Last year, Norwegian agreed to buy the partially completed ship and materials for a second ship. The hull and other materials have been transported to Germany, and Norwegian is working on a contract with a shipbuilder. The first ship could be completed by spring or summer 2004.

In Hawai'i, the cruise line operates the Norwegian Star, which offers seven-day cruises between Hawai'i and Fanning Island, and the Norwegian Wind, which offers 10- and 11-day cruises.

"The senator's legislation would enable us to considerably expand our existing range of offerings in Hawai'i, one of the less developed but potentially more attractive destinations in the rapidly growing cruise market,'' said Susan Robison, a Norwegian spokeswoman in Miami, in a statement.

Steve Hirano, a Norwegian spokesman in Hawai'i, said the federal exception would give the cruise line an opportunity to look at additional stops, especially Kona and Lahaina.

"We're hoping that the state of Hawai'i would welcome it,'' Hirano said. "I think that in most cases the Neighbor Islands especially have asked that we try to make longer stays at their ports.''

Under Inouye's provision, Norwegian would be able to fly U.S. flags over two foreign-built ships it acquired from "Project America" and could reflag a third foreign-built ship with U.S. colors to secure its foothold in the market — the same rights American Classic had before bankruptcy.

Inouye said the new ships would be required to have U.S. crews and would be subject to U.S. tax, labor and environmental laws. He estimated the three ships could bring the Islands as many as 3,000 jobs and millions of dollars in taxes and tourism revenue.

The senator also said the ships could benefit national security by expanding the number of seafarers available in a national emergency, and argued the provision could help the government recover its investment in "Project America.''

"NCL is the only cruise line that is willing to step up to the plate,'' he said.