Hawaii’s most influential legislator is supporting Norwegian
Cruise Line’s efforts to expand in the islands, putting his clout
behind controversial legislation that would allow foreign-flagged
ships to sail in U.S. waters without a required stop in a foreign
The provision was quietly tacked onto the Senate version of the
Omnibus Appropriations Bill and was announced by Sen. Daniel K.
Inouye, D-Hawaii, on Jan. 17.
His plan would resurrect key parts of the Project America
program that in late 2000 gave American Classic Voyages Co. a
virtual monopoly on interisland cruising. In exchange, the company
promised to build two cruise vessels in the United States, the
first in more than 40 years.
That plan disintegrated when American Classic filed for
bankruptcy and ceased operations in October 2001. The federal
government was stuck paying $185 million in loan guarantees, while
a partially built hull and the materials for a second one sat in
the Ingalls shipyard in Pascagoula, Miss.
“My provision gives America another opportunity to jump-start a
U.S.-flag cruise industry that will bring the government a return
on its investment,” Inouye said. “NCL is the only cruise line
willing to step up to the plate today and commit to a U.S.-flag,
In November NCL had Lloyd Werft tow the materials to its German
shipyard, but an NCL spokeswoman said no construction contract has
If NCL completes the two ships,, Inouye’s proposal would allow
them to operate in Hawaii with a U.S. flag, U.S. crew and in
compliance with all U.S. tax and labor laws - a costly undertaking
for cruise lines accustomed to hiring international crews that work
long shifts for lower salaries and tips.
In addition, NCL would be allowed to reflag a foreign-built ship
to American registry for the Hawaii market, but only after the
first Project America ship enters service in 2004.
NCL would benefit because only U.S.-built ships can fly the U.S.
flag and only U.S. flagged ships are exempt from the foreign-port
Currently NCL’s Norwegian Star, which has operated year-round
from Honolulu since December 2001, has to make a weekly 2,000-mile
roundtrip to Fanning Island in the Republic of Kiribati to comply
with the regulation.
During the Senate debate last week, Sen. John McCain criticized
Inouye’s provision but failed in his efforts to have it removed. At
press time, the Arizona Republican reportedly was pondering another
“As many of my colleagues know, I am no fan of the protectionist
laws that require domestic cruise ships to be U.S.-owned,
U.S.-built and U.S.-crewed,” McCain said. “However, I strongly
object to waiving these laws for only one foreign-owned
NCL, which is owned by Star Cruises of Malaysia, would be
required to form a U.S. corporation headed by U.S. citizens to
operate the American-flagged ships. McCain also reminded his
colleagues of the $185 million in losses sustained by U.S.
“Had the Project America vessels been completed, they would have
been the largest cruise ships ever built in the United States and
could have sparked a new phase of commercial shipbuilding in this
country,” he said. “None of that occurred. The failed project is
one of the most costly loan guarantees ever granted under the
Maritime Loan Guarantee Program.”
Inouye’s proposal prohibits the use of any federal funds or loan
guarantees and requires NCL to reimburse the U.S. Maritime
Administration for any administrative costs it incurs.
“NCL has worked with Sen. Inouye’s office to address his
concerns regarding U.S. crewing and adherence to U.S. labor,
environmental, public health and tax laws with the result that we
have confirmed our willingness to run these ships under a
full-fledged U.S. flag operation,” an NCL statement said.
The cruise line has declined to make any further statements.