Challenges Abound for the Cruise Industry
By Jeanne M. Grasso and Conor T. Warde
Many of 2007's major news stories about the maritime industry involved such unsavory topics as oil spills, intentional discharges, and criminal prosecutions resulting from actions or inactions of owners, operators, and managers of tankers and other cargo vessels. Even so, the cruise ship industry remains the most visible example of the maritime industry to the general public. While very few people will ever set foot on a tanker or a bulk carrier, thousands and even millions of people will board cruise ships at ports around the world to experience "life at sea" (or, at least, what "life at sea" aboard a cruise ship offers - exotic destinations, casinos, night clubs, and other entertainment). Of course, all of this foot traffic brings the general public up close to this segment of the shipping industry and, therefore, it tends to attract a great deal of attention from state and federal legislators and regulators. Furthermore, rarely is "good news" reported - the only news stories one usually hears or reads involve the occasional pollution incident, an outbreak of illnesses, or crimes at sea. As such, the result is a consistent flow of legislative and regulatory activity on the federal and state stages related to the cruise industry. An overview of some recent and upcoming challenges for the cruise industry follows.
of the foreign stop is evasion of the PVSA." This proposed interpretation arose in response to the former U.S.-flag Pride of Hawaii, owned by Norwegian Cruise Lines, being reflagged foreign and redeployed to Europe, allegedly due to increased competition from foreign-flag cruise ships operating in Hawaii. As a result of the reflagging, the Maritime Administration ("MarAd") requested that CBP take action to ensure enforcement of the PVSA and prevent foreign-flag cruise ships from competing directly with the U.S.-flag vessels operating in Hawaii. The objective, at the outset at least, seemed to be to ensure that the foreign-flag cruise ships make "legitimate" port calls in foreign countries so as not to end-run the PVSA. The proposed interpretation, however, goes far beyond approximating anything similar to a "normal" port call and would change how the cruise ship industry has been operating, legally, for decades. In essence, MarAd believes that the foreign-flag cruise operators are violating the PVSA, or at least the
spirit of the PVSA, by using a brief stopover in Ensenada, sometimes without allowing passengers to disembark, as a way to get around the PVSA's requirements. To address this concern, the proposed CBP interpretation will presume that a stop at a foreign port is not a "legitimate port call" unless: (1) the stop lasts at least 48 hours at the foreign port; (2) the amount of time at the foreign port is more than 50 percent of the total amount of time at the U.S. ports of call; and (3) the passengers are permitted to go ashore temporarily at the foreign port. Over 400 comments, both pro and con, from the affected industry were submitted in response to the CBP notice, as would be expected because cabotage issues always generate much attention. There is little question, though, that this proposed interpretation, should it be finalized as is, will be potentially devastating to U.S. ports, service providers, and tour operators, among others. While pegged as only intended to deal with the Hawaiian trade, as written, the proposed
Federal Challenges
While the focus of the industry is generally on major new legislation proposed or enacted by Congress, often in response to a casualty or some other real or perceived concern, some of the most impactful requirements arrive in the form of federal regulations or interpretations. This is true again in the recently proposed interpretation issued by U.S. Customs and Border Protection ("CBP") on November 21, 2007 (22 Fed. Reg. 65487) regarding the Passenger Vessel Services Act ("PVSA"). By way of background, the PVSA, originally enacted in 1886, generally provides that no foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port. CBP regulations, however, allow a round-trip voyage that begins and ends at the same port or place, with interim U.S. port stops along the way, so long as the voyage includes a foreign port stop. The proposed interpretation involves what it means to stop at a foreign port. More specifically, the proposed interpretation relates to whether foreign-flag cruise ships should be in violation of the PVSA when passengers board the ship at a U.S. port, the ship calls at several Hawaiian ports, and then proceeds to a foreign port, such as Ensenada, Mexico, before returning to the original port of embarkation where the passengers finally disembark. Such a voyage is consistent with the PVSA, implementing regulations, and a long history of CBP rulings as currently in effect. Regardless, and just of late as captured in the above-mentioned Federal Register notice, "CBP believes these itineraries are contrary to the PVSA because it appears that the primary objective
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