Hawaii congressional delegates missing opportunity to help Hawaii tourism?

by Jonathan Helton, Grassroot Institute, October 27, 2021

Hawaii risks being left out in the cold unless its delegates to Congress act quickly to help reform the 1886 Passenger Vessel Services Act.

The federal maritime law has been a hindrance to transportation throughout the U.S. ever since it was enacted 135 years ago. That’s because it requires all passengers transported between U.S. ports to be on ships that are flagged and built in the U.S., unless they make a stop at a nearby foreign port as part of their itineraries.1

But while Alaska’s representatives in Washington, D.C., have been working to lessen the impact of the PVSA on cruise ships serving Alaska and help their state’s tourism industry, Hawaii’s delegation has expressed little interest in removing the obstacles that limit cruise ship service in Hawaii waters.

In the Hawaii market, the PVSA means foreign-flagged vessels must make a stop at Fanning Island, 1,000 miles to the south, or even Ensenada, Mexico, as part of their journeys between the U.S. West Coast and Hawaii or between ports within Hawaii. 

When sailing to Alaska from Washington state or anywhere else in the U.S., foreign-flagged liners typically make a stop in Canada. However, that option for large foreign-flagged vessels serving Alaska disappeared in early 2020, when, in an attempt to stop the spread of COVID-19, Canada banned cruise vessels carrying 500 or more passengers from calling at any of its ports.3 Because there are no large U.S.-built ships that serve the Alaska trade, this effectively destroyed most of Alaska’s cruise industry for 2020 and most of 2021.

Alaska’s lack of options following the Canadian ban sparked public outrage and resulted in fast action by Congress and the president to grant the state a temporary PVSA exemption that permitted foreign cruise ships to legally bypass Canadian ports and help salvage Alaska’s summer 2021 cruise season.4

As travel writer Aaron Saunders wrote in July, “Instead of calling on Victoria or Prince Rupert for a few hours, ships can now throw in a fourth Alaskan port call — and it’s creating some of the best Alaska-centric itineraries the region has seen in decades.”5

Since that happened, Canada decided to lift the cruise ban on Nov. 1, 2021, after which the large foreign cruise liners that serve Alaska will have to return to their pre-COVID-19 practice of stopping at Canadian ports.6

The date was moved up because Canada’s tourism industry and politicians feared that delaying reopening would prompt U.S. lawmakers to make Alaska’s PVSA exemption permanent, thus potentially costing Canada’s cruise tourism industry billions of dollars a year.7

And they were right! 

Wary of being under the thumb of Canada or any other foreign power, Alaska Sen. Lisa Murkowski and Rep. Don Young have each introduced bills that would more or less exempt the Last Frontier from the PVSA.

In a recent the Vancouver Sun commentary, Young wrote: “My proposal is simple yet powerful: Large foreign-flagged passenger vessels that call on ports or places in the United States owned by Tribes or Alaska Native Corporations would be compliant with the PVSA’s foreign-stop requirement.8

“My bill also benefits tribal communities in the lower 48 states by creating port development opportunities for tribes in Washington State, Oregon, the Great Lakes, and the Northeast,” Young said. 

Young’s Tribal Tourism Sovereignty Act obviously would not help Hawaii, since the Aloha State has no federally recognized tribes. But it would show the PVSA can be changed, giving hope to Hawaii’s tourism industry that perhaps the state could be granted a more broadly applied PVSA exemption — like what Murkowski is seeking for Alaska.

Murkowski’s Cruising for Alaska’s Workforce Act would allow cruise ships with more than 1,000 berths — regardless of where they are built or flagged — to serve Alaska without having to make inconvenient detours to foreign ports.9

Seeking to appease domestic maritime interests, she included language stating that the exemption would end if a large, U.S.-flagged, and mostly U.S.-crewed and owned, cruise ship ever entered the market.10

“We do not want to compete with U.S. shipbuilders — that’s why this legislation ends once there is an American market,” Murkowski said in a news release.

But realistically, the senator is paying lip service to the build requirement, since the ailing U.S. shipbuilding industry doesn’t build large cruise vessels anyway. In fact, no U.S. shipyard has built such a vessel since 1958, meaning the PVSA essentially is “protecting” an industry that doesn’t exist.11 Back in the 1990s when Disney tried to build a cruise ship domestically, no shipyard even bid on the project.12

Moreover, any vessel with less than 1,000 berths would still be fully subject to the PVSA, maintaining U.S. shipbuilders’ monopoly on the smaller vessels that serve Alaska from other U.S. ports.

In other words, Murkowski’s proposed PVSA exemption for large foreign-flagged cruise vessels serving Alaska would likely be permanent, considering the high cost of operating a cruise ship under the U.S. flag, with its attendant taxes and regulations.13

America’s last experience with granting a PVSA exemption to a large foreign-flagged cruise liner was back in the 2000s, when U.S. Sen. Daniel Inouye exerted his political capital to qualify the 1,250-passenger Pride of America.

Although construction of the vessel began in the United States, it was ultimately completed by a German shipyard, thus requiring an exemption from the PVSA’s U.S.-built requirement. Its operation has been restricted to Hawaii waters, and once its commercial life ends, in 15 years or so, there will be no PVSA-qualified ships to serve Hawaii either.14

If Hawaii’s congressional delegates think they can swing a PVSA exemption for another foreign-built vessel, they might be in for a rude surprise. Instead, they should support Murkowski’s bill and have it applied to Hawaii when no U.S.-flagged cruise liners are available — which will almost certainly be the case someday. 

There are actually several options for Hawaii congressional delegates to consider:

>> Extend the Alaska-style exemption to Hawaii after the Pride of America is retired, to allow foreign-flagged and -built vessels to serve the market without having to make detours to Ensenada or Kiribati’s Fanning Island.

>> Implement a broader PVSA exemption that allows large foreign-built cruise ships to serve Hawaii now without conditions, even before the Pride of America is retired.

>> Support repeal of the PVSA entirely, as proposed by Sen. Mike Lee, R-Utah, and Rep. Tom McClintock, R-Calif., in bills introduced into Congress earlier this year.15

>> Actively oppose all PVSA reform or repeal bills, to the detriment of Hawaii’s tourism industry.

>> Do nothing, also to the detriment of Hawaii’s tourism industry.

Full repeal would be optimal. In 2009, University of Hawaii professor emeritus James Mak wrote “The PVSA increases costs to producers and consumers of cruise tourism services in North America. … It should be repealed.”16

As for Alaska’s proposed PVSA legislation, Hawaii’s delegates to Congress would serve their constituents well by signing on as co-sponsors. The Alaska measures don’t include Hawaii, but with a little persuasion from the Hawaii delegation, perhaps that could be arranged. Even without being included, enactment of either of the Alaska bills could help Hawaii down the road, by showing that change in America’s ossified federal maritime laws is possible,

For Hawaii, ocean cruising fits well into the current zeitgeist of tourism that has minimal impact on the environment, traffic congestion, overcrowding and other factors that policymakers have been trying to mitigate. It is a relatively “clean” source of income that provides employment, generates taxes and boosts the economy — and could do so more, if only the PVSA were repealed or reformed.

Link: Footnotes