OMB criticizes CBP-sought cabotage rules

OMB criticizes CBP-sought cabotage rules The Office of Management and Budget said federal customs officials have failed to justify changes to certain Jones Act-related cabotage regulations that sought to require lengthy layovers in foreign ports for foreign-flagged cruise ships plying the California to Hawaii routes.
   The proposed rule 'presents no market failure or compelling public need, omits a statement of the costs and benefits of the rulemaking, and does not include a discussion and analysis of regulatory alternatives, significant distributive impacts or uncertainties. For these reasons, we are returning the draft proposed rule for your reconsideration,' the OMB said in a letter to the Department of Homeland Security last week.
   The U.S. Customs and Border Protection proposed the rules last year seeking to force foreign-flagged cruise vessels to stop at a foreign port for at least 48 hours and allow passengers to go ashore.
   Section 27 of the Merchant Marine Act of 1920, typically referred to as the Jones Act for its early 20th century congressional sponsor, set down protectionist policy concerning U.S. cabotage and defined the rights of U.S. merchant mariners. Cabotage is when goods are moved directly between two ports in one nation, with no stops in other countries. While the act does not specifically refer to the movement of passengers, it has been found to cover them in principle.
   The Jones Act cabotage provisions effectively restrict movement of cargo and passengers between U.S. ports to U.S.-built, U.S.-flagged, U.S.-crewed vessels. It also sets forth that the crew of any vessel operating in Jones Act trade must also be composed of 75 percent U.S. citizen mariners. In addition, Jones Act vessels are limited to 10 percent foreign-built steel weight, preventing repairs from being completed in foreign shipyards. These restrictions have resulted in higher operational costs for direct U.S. mainland to Hawaii Jones Act cruise vessels.
   Despite the protections of the Jones Act, federal interpretation has found that foreign-flagged cruise ships are not in violation of the Jones Act if they carry passengers from a U.S. port and return them to the same port with no other stops. This is referred to as a “cruise to nowhere.” In addition, foreign vessels are allowed to transport passengers between two U.S. ports as long as the vessel makes at least one call at a foreign port.
   Proponents of the new CBP rule claimed the change would level the playing field for U.S. Jones Act cruise lines to Hawaii and increase the U.S.-flagged vessel component of island tourism. Currently, Norwegian Cruise Lines is the only Jones Act line serving Hawaii and the line claims it had to move two of its three vessels in the service because it could not compete with foreign carriers.
   Opponents argued that the proposed CBP rules would lead to either a departure of Jones Act lines from the Hawaii routes or a shifting of cruise terminals from Southern California and San Diego to just south of the Mexican border.
   Norwegian Cruise Lines said it hopes CBP will submit a modified compromise version of the rules. ' Keith Higginbotham