[Maritime Week / Bell Street Pier]


Passenger Services Act keeps Seattle out of global market

By Terry Leitzell
Bogle & Gates

Vancouver, British Columbia is the summer cruise capital of the Western Hemisphere with U. S. citizens providing 85% of its market. Those U. S. passengers use U. S. airlines, the SeaTac international airport, and a U. S. bus line to reach Vancouver so that they can cruise to Alaska. Vancouver is a lovely city and an attractive destination for tourists, but the primary reason for its rapid growth as a cruise capital is the U. S. Passenger Services Act, a restrictive statute that discourages cruise ships from using Seattle, Portland and other Northwest port cities.

The Passenger Services Act, enacted in 1886, requires that only U. S. flag and U. S.-built vessels be used to carry passengers between two U. S. ports, but allows foreign vessels to pick up or drop off passengers while touching at a single U. S. port. Since the large vessel cruise industry is overwhelmingly under foreign ownership and foreign flat, summer cruises to Alaska either begin or end in Vancouver, meeting the requirements of U. S. law, but leaving Northwest ports with only a handful of annual cruise calls.


The United States has been a maritime power for much of its history with a major shipbuilding industry, successful American vessel owners and operators and an experienced cadre of merchant mariners. Our maritime capability was an important factor in World War II, giving us the capability to supply Europe in the early years and to provision our troops in recapturing the islands in the Pacific.

In more recent years, our shipbuilding industry has concentrated on producing expensive, sophisticated combat and support ships for the military. Foreign shipyards in Europe, with the assistance of government subsidies, became predominant in building cruise ships and developed the technological advances and trained labor force to maintain their position.


The Passenger Services Act has protected the U. S. shipbuilding industry and American seamen for 110 years, but with the result that there is less and less to protect. Only two large American cruise vessels currently operate in U. S. waters, both working in Hawaii and both manned by U. S. maritime union crews. The parallel Jones Act, enacted earlier in this century, provides protection for the U. S. cargo fleet operating between U. S. domestic ports. This sector of the U. S. maritime industry continues to be substantial, providing extensive ocean service between almost all U. S. ports.

Combinations of interests including shipyards, maritime unions, ports, and the travel and tourist industries have worked since the late 1980s to amend the Passenger Services Act. Initially, the efforts were opposed by U. S. cargo ship owners and operators who feared parallel amendments to the Jones Act which provides protection to U. S. operators in U. S. domestic cargo trade. That opposition has waned, however, as Members of Congress have clearly distinguished between the two statutes, focusing on the Passenger Services Act for possible amendment.

The National Cruise Ship Alliance, headquartered in Seattle, has worked tirelessly in the last Congress and in the current Congress to forge compromises among the interests while ensuring that any legislation would in fact result in the production of new U. S. vessels that would operate between U. S. ports, particularly in the Northwest and Alaska. The balancing of interests is difficult since U. S. shipyards want the work and U. S. merchant seamen want to man the ships, while foreign cruise ship owners perceive higher costs from building in the United States and operating under U. S. flag. U. S. ports want cruise ship calls from foreign or domestic ships and the hotel and tourist industries want customers.

One approach considered was to allow foreign-flat vessels to operate on routes on which no U. S. cruise ship operates. This type of exemption was provided to Puerto Rico in 1984. The disadvantage to this concept is that it fails to promote the revitalization of the U. S. shipbuilding industry and the use of U. S. merchant seamen.

In the last Congress, legislation was seriously considered to provide several financial incentives to foreign cruise lines to build ships in the United States and to operate them under U. S. flag. They included an increase from 25% to 49% in allowed foreign ownership, capital loan guarantees and several tax breaks. In addition, the U. S. Coast Guard would inspect the new vessels based on the international Safety of Life At Sea Treaty standards rather than U. S. standards which are often different although not necessarily safer.

Each approach considered has included a requirement that new cruise ships be built in U. S. shipyards and be manned by U. S. merchant seamen. Some Members of Congress have considered allowing a foreign cruise line owner to operate one foreign-built vessel in U. S. domestic trades for each commitment to build a new vessel in a U. S. yard. Then, even if U. S. building costs were higher (which many dispute), the cruise line owner could average costs between the existing foreign-built vessel and the new U. S. vessel.

Until such amendments become law, passengers will continue to stream to Canada for their Alaska cruises. Although Congress has been unable to enact amendments to the Passenger Services Act, active consideration of legislation may be on the immediate horizon. Success would provide a dramatic boost to the maritime industry here, in California, in the Gulf states, and throughout the U. S. coast.

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