Thursday, January 3, 2008

Rule Interpretation Could Hurt Alaskan Cruises

According to the Kodiak Daily Mirror, a 120 year old maritime law by the U.S. Bureau of Customs may be interpreted differently than it has for years. The new interpretation would have a major impact on tourism from cruise ships visiting Alaska. In short the way that they want to read the law would limit the time that a cruise ship can stay in Alaskan ports if foreign owned. Most cruise ships are registered in foreign countries. The ships would have to spend at least half as much time in a foreign port as in U.S. ports. If enforced, the law will affect cruises already booked for 2008 and 2009 and seriously affect revenues for the ports.

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(Note: All attributions were excerpted from comment letters sent to U.S. Customs’ Border Security Regulations Branch in December 2007, and available by going to and typing USCOB-2007-0098 in the Search field.)

• Robert McEllrath, President/CEO, International Longshore & Warehouse Union
o “The proposed rule would hurt many working families and communities that depend on good jobs generated by the cruise industry.”

• Angelo I. Amador, Immigration Policy Director, Chamber of Commerce of the United States
o “The proposed interpretation of the PVSA would cause severe economic harm to the U.S. tourism industry, as well as the U.S. port industry. Furthermore, CBP did not even conduct the initial regulatory flexibility analysis, which is in direct violation of the Regulatory Flexibility Act.”
o “The proposed Customs rule was constructed with no real input from the private sector and the industries it would so gravely affect. The median port call visit for any cruise ship is roughly eight hours in duration. Creating a 48-hour mandate on these stops greatly increases the cost of operating a cruise ship in the continental United States. In most cases, the 48-hour mandate would make it implausible to maintain the popular three to five day cruises. Strikingly, the proposed rule is written to protect a monopoly of foreign-built ships that are allowed to operate under U.S. flag through a suspension of the PVSA that took place in 2003.”

• Mary Brennan, Executive Director, National Association of Cruise-Oriented Agencies
o “All aspects of the Customs rule proposal will cause harm to the existing cruise industry, encompassing cruise selling travel agencies, cruise lines, workers, suppliers and the traveling public. Any part of the proposed changes will limit travel choice, cost travelers more and hurt American cities that will be dropped from cruise itineraries.”

• Cheryl Hudak, CTC, President and CEO, American Society of Travel Agents
o “Were this proposed measure to go through, it would have a devastating effect on the travel agency business. Prospective cruise passengers would more than likely pass on Hawaii-bound cruises or cruises that stop at numerous U.S. ports-of-call because extended foreign port call requirements would force them to take extra time off from work, school or other commitments. This doesn't even account for the fact that more time spent at foreign docks would raise fuel, cabin lodging and other associated costs which, in turn, would raise the price of travel agent inventory, making it a less attractive vacation for many American travelers. The end result of all this would be that travel agencies, especially those that are cruise-only, would suffer financially as their clients choose to book other vacations.”

• James P. Walsh, Davis Wright Tremaine LLP, on behalf of Holland America Line
o “Although the predicate facts on which the proposed interpretative rule is based relate to ‘Hawaiian Coastwise Cruises’ and the owner of the PRIDE OF HAWAII and the PRIDE OF AMERICA, the proposed interpretative rule has the clear potential for application to all other cruise itineraries that contemplate a foreign port call in conjunction with stops at U.S. coastwise ports. The type of cruise itinerary at issue is used widely in Alaska, as a prime example. In addition, other cruise itineraries that involve embarkation and disembarkation at two different U.S. ports, with stops at a ‘distant’ foreign port would logically be implicated as well. Consequently, while we do not believe Customs has the authority to adopt this proposed interpretative rule, should the agency do so then that rule arguably will apply to all foreign port call itineraries that might pertain to the PVSA. To avoid any penalty, non-coastwise-qualified cruise lines would have to change all such itineraries to meet the new criteria. For example, cruises that call temporarily at Alaska ports will have to move to Vancouver, British Columbia (and away from Seattle, Washington) to avoid possible penalty.”

• Amy Powers, Executive Director, CruiseMaine
o “The draft cruise ship rule, if implemented, would jeopardize every future foreign-flag cruise ship call to Maine ports. Last year, cruise-related tourism generated $24 million in revenue for the state, fostering tourism which has replaced commercial fishing and harvesting of forest products as our number one industry.”

• Michael L. Rubin, Vice President, Florida Ports Council
o “The implication to the five Florida cruise ports could be devastating; it could eliminate every future foreign flag cruise ship call to Key West, Florida, as well as impact a substantial number of cruise itineraries from the Ports of Tampa, Jacksonville, Everglades and Canaveral.”
o “Any requirement for extending foreign port calls would have the effect of making existing itineraries impossible to operate.”
• Marc Burgat, Vice President, Governmental Relations, California Chamber of Commerce
o “In any attempt to address suspect cruise itineraries the proposed new interpretation sets a standard for legitimate foreign port call that is unnecessarily stringent and will result in devastating consequences to the cruise industry of California.”

• Tim Schott, Executive Secretary, California Association of Port Authorities (CAPA)
o “California ports have invested millions of public dollars in the infrastructure and facilities necessary to attract and maintain a vital cruise ship industry. These ports have plans for significant new investment in the next few years. These important investments have been predicated in part on long-standing rules and practices based on the current interpretation of the PVSA. CAPA believes that the proposed Interpretative Rule is overly broad, and would result in a loss of jobs and economic benefits that would be difficult to absorb in an otherwise healthy industry.”

• Steve Falk, President/CEO, San Francisco Chamber of Commerce
o “In San Francisco, the cruise industry generates an estimated $60 million in economic impact to the City and the Region. The Port’s analysis shows that the proposed CBP rules as drafted would reduce our homeport cruise calls by 40% and our passengers by more than 50%. Furthermore, many of our repositioning calls would be in jeopardy resulting in the loss of over 150 waterfront jobs. And, as I am sure you know, there are no American-flat ship operators ready to fill this commercial void now or in the future.”

• Governor Arnold Schwarzenegger, State of California
o “These burdensome criteria are out of line with industry practice. A 48-hour vessel call is extremely rare in any U.S. passenger cruise market. Many cruises are three to five days in length – too short to justify a 48-hour vessel call anywhere. Most longer cruises have three or four port-of-call stops, also making a 48-hour call in any port difficult, if not impossible, to achieve.”
o “San Francisco, Los Angeles, Long Beach and San Diego have made significant capital improvements in cruise facilities and in supplying trained workforces. All of this is based on longstanding practices and itineraries of the cruise industry, which were established and permitted by previous CBP rulings. Now, one untimely interpretive rule could stand our entire cruise industry on its head.”

• Governor Charlie Crist, State of Florida
o “The interpretation being considered does not reflect the intent of the law. Florida would lose cruise port of calls at Ft. Lauderdale, Miami, and would eliminate all the calls in Key West. In addition, the requirements for extending foreign port calls to 48 hours would make other existing Florida cruise itineraries impossible to operate.”

• Governor Linda Lingle, State of Hawaii
o “It is our belief that any change made in the interpretation and application of the PVSA should be undertaken in a manner that balances the need to protect the U.S. flagged cruise ships operating in Hawai’i, while continuing to allow foreign cruise ships the opportunity to also service our islands. We believe there should be no minimum port-of-call time at an international destination as part of the cruise itinerary and no mandated percentage of stops that restrict or affect the manner in which shops are scheduling calls to Hawai’i.”

• Governor Sarah Palin, State of Alaska
o “Cruise lines have already booked not only 2008 summer cruises to Alaska, but also have started with 2009 scheduling. Such a severe and short notice change in itineraries as would be required under this proposal could create havoc for communities, travelers, and the industry.”
o “Taking something that is working well and changing it -- much less on 30-days notice -- is not reasonable public policy.”

• Mayor Antonio R. Villariagosa, City of Los Angeles
o “Implementation of this interpretative rule would have a severe and negative economic impact on several Los Angles communities, including the loss of hundreds of good jobs at the Port and in the allied industries that serve the cruise ships. These jobs, held by hard-working Americans, will not easily be replaced.”
o “The proposed requirements that non-coastwise qualified cruise operators stop in a foreign port for at least 48 hours and call at the foreign port be more than 50 percent of the total time at U.S. ports of call are arbitrary. Cruise lines operating throughout the world offering multiple ports of call rarely stop for as long as 48 hours at one port. The customary port call lasts approximately eight hours.”

• Mayor Gregory J. Nickels, City of Seattle
o “I strongly encourage Customs and Border Protection to reject an interpretation that any cruise itinerary that does not include a foreign port call would be in violation of the rule. To make such a broad interpretation would be a tremendous blow to the Seattle to Alaska cruise and tourism industry.”

• State of Washington Congressional Delegation (Senators Patty Murray and Maria Cantwell; Representatives Rick Larsen, Norm Dicks, Adam Smith, Jim McDermott, Dave Reichert, Jay Inslee, and Doc Hastings)
o “The CBP public notice strongly suggests that the proposed interpretive rule is intended to apply solely to Hawaiian Coastwise Cruises. Subsequently, however, CBP informed us that the interpretive rule could apply to all coastwise cruises, noting that the last paragraph in Section VI of the interpretive rule uses ‘any’ rather any ‘any Hawaiian,’ despite the fact the first paragraph of the Section VI clearly refers to Hawaiian Coastwise Cruises.”
o If the current proposal were broadly implemented, the most likely scenario would be the elimination of the Seattle-based Alaska service. A second scenario would be the movement of a portion of the Seattle service to Vancouver, B.C. with the remainder of the vessels moving elsewhere. The loss of jobs, business and tax revenue under either scenario would be devastating to both Washington and Alaska”

• U.S. Senators Susan M. Collins and Olympia Snowe, State of Maine
o “Application of this rule, as it is currently proposed in the Federal Register, would eliminate nearly every future foreign-flagged cruise port of call to Maine. This rule would have a devastating impact on Maine’s nascent cruise ship tourism business and on tourism around the nation.”

• Representative Tom Feeney, Member of Congress, 24th District, State of Florida
o “Last year, over 5 million people boarded cruises from one of Florida’s cruise ports and the industry contributed more than $5.8 billion in direct spending to the State’s economy. The cruise traffic at Port Canaveral, directly south of my district, generated over 9,000 jobs in Brevard County. These jobs are imperative to the economy of my district.”
o “Although the intention of the draft interpretation is to address an issue with the Hawaiian coastwise cruise trade, as drafted, the interpretation would apply to all itineraries subject to the Passenger Vessel Services Act. By implementing the rule as stated, ports around Florida will no longer serve as ports-of-call for cruises embarking from other U.S. ports. The current interpretation will prevent cruise lines from stopping at many of Florida’s ports, including Port Canaveral. As a result, a significant source of revenue for Florida, and many of my constituents, will be lost.”

• Jon Hemingway, President/CEO, Carrix (a Seattle-based affiliate of SSA Marine, which is entirely U.S.- owned, operated and controlled and is the nation’s largest privately-held marine terminal operator)
o “… ultimately it should be the objective of CBP to strike a balance maintaining its responsibility and obligation to uphold its statutory obligations and yet recognize the enormous economic contribution the cruise industry makes to our regional economy.”