NCL May Grow in Hawaii

Islands' powerful senator backs a return to interisland cruising

By: Theresa Norton Masek

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 port.

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, U.S.-crewed operation.”

In November NCL had Lloyd Werft tow the materials to its German shipyard, but an NCL spokeswoman said no construction contract has been signed.

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 requirement.

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 tactic.

“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 company.”

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. taxpayers.

“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.