Cruise exemption
passes Congress

Norwegian Cruise Line
will no longer have to
make a stop in
a foreign port

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By Janis L. Magin
Associated Press

A provision in the new federal spending bill allowing Norwegian Cruise Line to sail foreign-built ships under a U.S. flag in island waters was amended to apply exclusively to Hawaii.

The ships, the first of which may begin cruising the islands next year, could potentially create thousands of new jobs and inject millions of dollars into the state's tourism industry.

STAR-BULLETIN / SEPTEMBER 2002 The Norwegian Wind docks at Aloha Tower. Under a new federal exemption, Norwegian Cruise Line will be allowed to operate three foreign-flagged vessels in Hawaii waters without making a foreign port call.

"This will be a major economic boost to the Hawaii tourism industry and the economy in general, especially to the neighbor islands," said Rep. Ed Case, whose 2nd District encompasses rural Oahu and the outer islands. "The bottom line is hundreds if not thousands of jobs and a return to the tourist industry of Hawaii in the multimillions of dollars."

The U.S. House yesterday overwhelmingly approved the vast $397.4 billion fiscal 2003 appropriations bill, which finances every federal agency but the Pentagon for the rest of this federal budget year, which began Oct. 1. Hawaii Democrats Case and Neil Abercrombie both voted yes on the measure, which passed on a 228-83 vote.

The Senate passed the bill by a vote of 76-20 late last night. President Bush would sign the bill into law, said White House spokeswoman Claire Buchan.

"I hope that this initiative will help our economy and provide much needed jobs for our people," said Sen. Daniel Inouye, D-Hawaii, who inserted the language into the Senate version of the bill last month. Inouye and Sen. Daniel Akaka both voted to pass the bill.

The provision allows Norwegian to finish building overseas two partly built cruise ships destined for Hawaii under a failed American shipbuilding project, and then sail them exclusively in Hawaii. It also allows the cruise line to reflag an additional cruise ship already in operation.

The provision exempts Norwegian's ships from federal law that prohibits foreign-built ships from operating between U.S. ports. It also requires the Miami-based cruise line to employ American crews and abide by all U.S. laws.

The exemption will authorize Norwegian to be the only company to provide interisland cruise service exclusively in Hawaii.

A joint House-Senate conference this week amended the language to say "any ship documented under the authority of this section shall operate in regular service transporting passengers between or among the islands of Hawaii and shall not transport passengers in revenue service to ports in Alaska, the Gulf of Mexico or the Caribbean Sea."

Case said the language was amended to satisfy some opponents of the provision.

"Members of Congress from those locations representing shipping interests did not want these ships to come into competition in those areas," he said.

According to a report prepared by consulting firm Price Waterhouse Coopers that analyzes the proposal's economic impact, the first ship would begin cruising Hawaii in April 2004, followed by the second ship in May 2005 and the third in December 2005, Case said.

The report estimates that, once fully phased in, passenger spending alone would be $350 million annually, he said. The report projects 10,200 jobs for Hawaii residents, $126 million in annual federal tax revenue and $270 million in wages and salaries annually for Hawaii workers, he said.

The provision does not call for any federal funds to be used. The Maritime Administration was stuck with $185 million in guaranteed debt on the vessels when construction ended last year.

The two 1,900-passenger ships were being constructed in Mississippi as part of the failed Project America program to build cruise ships in the United States for the first time in more than 40 years.

The uncompleted ships and materials were bought by Norwegian last year and sent to Europe after Northrop Grumman Corp. canceled the project. The defense contractor had been building the two vessels for American Classic Voyages, which filed for bankruptcy protection Oct. 19, 2001, citing losses after the Sept. 11, 2001, attacks. The collapse of the Miami-based cruise company ended 2,150 jobs, including 1,100 in Hawaii.

Norwegian has sought the exemption from the federal ban on foreign-built ships operating between U.S. ports. To get around that law, the Norwegian Star now makes a trip to Fanning Island.