Proposed Passenger Vessel Services Act Changes Rejected

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It’s taken an incredible amount of time to happen, but the prosed changes to the Passenger Vessel Services Act have been rejected by the Office of Management and Budget. The proposed changes, put forth by US Customs and Border Patrol had called for foreign flag ships sailing between US ports to spend at leat 50% of their voyages calling at foreign ports.

The controversial rule change was aimed squarely at the Hawai’i market, and was an attempt to protect the struggling NCL America which has faced significant competition in recent years. By requiring foreign flag lines to make longer foreign port calls instead of the token stop in Ensenada Mexico or a similar port, NCL America and their supporters were hoping to make it more difficult for lines to compete directly with NCLA.

As originally worded the proposal was extremely broad and state and city governments in Hawai’i, Alaska, California and Florida all expressed opposition to the proposal. Eventually a compromise was reached that limited to proposal to just Hawai’i.

OMB said Customs and Border Protection’s proposed rule for the Passenger Vessel Services Act ‘presents no market failure or compelling public need, omits a statement of the costs and benefits of the rule-making, and does not include a discussion and analysis of regulatory alternatives, significant distributive impacts or uncertainties.’ However, OMB’s ruling does not prevent the proposal from being re-worded and re-submitted.

NCL is encouraging a redraft that addresses OMB’s points. The company noted a compromise had been reached that limited the rule to Hawaii and imposed no minimum stay in a foreign port. NCL said that means foreign-flag ships could offer ‘bona fide international voyages built around Hawaii port calls from any port in the United States, while making clear that only U.S.-flag cruise ships are permitted to offer truly domestic Hawaii itineraries.’

The company also cited a study by the state of Hawaii that found Pride of America provides more than triple the economic benefit of the entire foreign-flag fleet calling on the state.

The American Association of Port Authorities however thinks that the OMB rejection should be the end of the line. They feel that the OMB gave ‘a pretty definitive answer’ that indicates Customs and Border Protection ‘haven’t made a good business case for why this rule-making is a necessity.’ AAPA opposed the proposals out of concern they could drive away the international cruise business, harming ports and costing jobs.

U.S. labor unions and Hawaii Sen. Daniel Inouye were among the supporters of the rule-making, but scores of other senators, mayors and ports warned that it could have a wide-ranging negative economic impact on the cruise business as a whole.