Union Tribune

January 22, 2003 

Ports rally to Hawaii's effort to alter cruise ship law

By TOBY ECKERT 
COPLEY NEWS SERVICE 

WASHINGTON An effort to aid the cruise industry in Hawaii
has set off a flurry of lobbying by the port of San Diego and other
U.S. ports that want similar treatment from Congress.

At issue is an obscure, 117-year-old law that prohibits
foreign-built cruise ships, which dominate the cruise business, from
sailing directly from one U.S. port to another without a foreign
stop. Sen. Daniel Inouye, D-Hawaii, is maneuvering to get an
exemption that would allow up to three foreign-built vessels to
offer inter-island cruises in his state, with American crews.

San Diego and other ports that see an opportunity for developing
the domestic cruise business are seeking to extend the exemption
to other states.

"We just want the same thing," said Rita Vandergaw, a
spokeswoman for the San Diego Unified Port District. "What's fair
for Hawaii should be fair for all the states. We could create a
beautiful California coastal cruise."

A change also would facilitate cruises directly between California
and other states, including Hawaii.

The U.S. shipbuilding industry, maritime unions and small domestic
cruise lines long have opposed such broad changes to the
Passenger Vessel Services Act, and are likely to stand in the way.

"We are still very reluctant to have that law changed in any way,"
said Jim Scott, a spokesman for National Steel and Shipbuilding
Co. in San Diego.

Scott said shipbuilders fear that changing the passenger vessel law
would encourage similar efforts to modify the Jones Act, which
requires that cargo moved between U.S. ports be carried on
vessels that are domestically built and owned, and operated by
American crews.

The passenger vessel law has been on the books since 1886. It
arose from a dispute between U.S. and Canadian ferry operators.

The law bars foreign-built ships from carrying passengers between
U.S. ports unless they make a stop at a foreign port. The tourism
industry long has complained that the law has stifled development
of a large domestic cruise business since no major ocean-going
passenger vessels have been built in the United States since 1951.

Inouye slipped the exemption for Hawaii into a massive budget bill
the Senate is considering. He argued that it would salvage a 1998
deal known as "Project America" that provided federal loan
guarantees for the construction of two cruise ships in Mississippi
for use in Hawaii by the American Classic Voyages cruise line.

The project was halted when American Classic filed for
bankruptcy in November 2001. Norwegian Cruise Line bought
one of the partially completed ships and building material for the
other, planning to complete them in an overseas shipyard.

Inouye's provision would allow Norwegian to operate the two
ships and a third foreign-built vessel in Hawaii under the American
flag. They would be required to have U.S. crews and be subject
to U.S. tax, labor and environmental laws, according to a
statement from Inouye's office.

Norwegian "is the only cruise line willing to step up to the plate
today and commit to a U.S.-flag, U.S.-crewed operation," Inouye
said during debate on his provision last week.

"We can choose to write off the Project America investment by
not acting and watching as these completed hulls are introduced
. . . under a foreign flag, with foreign crews operated by foreign
corporations without direct benefit to the U.S. economy or
American workers."

Sen. John McCain, R-Ariz., tried unsuccessfully to strip Inouye's
provision from the budget bill, calling it "fundamentally unfair."

"Any solution should benefit a broad section of the U.S. maritime
industry and all of our nation's ports," McCain said.

McCain has tried several times in the past to create broader
exemptions.

Vandergaw said San Diego would be a natural hub for a West
Coast cruise industry, as it is for longer-haul cruises.

"The cruise business is still the fastest-growing segment in the
tourism industry today," she said.

In addition to U.S. shipbuilders and unions, opposition to creating
a broad exemption to the passenger vessel law is likely to come
from small companies that offer domestic cruises and fear being
swamped by the large cruise lines. Most of the domestic carriers
operate in Alaska during the summer and migrate south in the
winter.

"I don't want to say we're opposed to anything before I see it,"
said Edmund Welch, legislative director of the Passenger Vessel
Association, a trade group for the carriers. "We do have several
existing operators of smaller vessels who have been playing by the
rules. And we would ask the Senate and Congress that any kind
of legislation not put an unfair burden on them."