CBP considering Jones Act layover regs for Hawaii routes
U.S. Customs and Border Protection officials are seeking to change certain Jones Act-related regulations that will require lengthy layovers in foreign ports for foreign-flagged cruise ships plying California-to-Hawaii routes.
The CBP's proposed rule changes would force foreign-flagged cruise vessels to stop at a foreign port for at least 48 hours and allow passengers to go ashore. The CBP concluded public comment on the proposed rule changes in December and is expected to make a ruling before the end of 2008.
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 American 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 provisions effectively restricts 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, 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 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 say 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 only three Jones Act cruise ships, all owned by Miami-based NCL America, operate the Hawaii routes. The firm, which supports the rule change, claims the current ease with which foreign-flagged vessels can get around the restriction have cost the firm more than $250 million since 2004. NCL has also been forced to shift one of its Hawaii vessels to the European cruise market under a Bahamian flag.
Opponents believe the proposed CBP rules will 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.
If the CBP rules are approved, “the vast majority of U.S.-based cruises will have to be shut down or, alternatively, will have to move their base of operation to a foreign port,” wrote Bradley Stein, vice president and general counsel for Royal Caribbean Cruises, in a letter opposing the rule change.
While the Jones Act is uniquely U.S. in its creation, more than 50 nations worldwide have similar laws protecting their own merchant fleets.