[Senate Report 107-47]
[From the U.S. Government Publishing Office]
Calendar No. 106
107th Congress Report
SENATE
1st Session 107-47
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UNITED STATES CRUISE VESSEL ACT
_______
July 27, 2001.--Ordered to be printed
_______
Mr. Hollings, from the Committee on Commerce, Science, and
Transportation, submitted the following
R E P O R T
[To accompany S. 127]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 127) ``A Bill to give American
workers and American ports the opportunity to compete in the
United States cruise market'', having considered the same,
reports favorably thereon without amendment and recommends that
the bill do pass.
PURPOSE OF THE BILL
The bill provides American companies, American workers, and
American ports with increased opportunity to compete in the
United States cruise market. By doing so, it would ultimately
give consumers greater choice in domestic cruise destinations
and allow more Americans to visit our nation's port cities on a
cruise vessel. The bill allows U.S.-owned foreign-built cruise
vessels to enter the domestic market for a limited time if the
operators agree to build replacement vessels in the United
States. This would allow new companies to enter the domestic
market with existing vessels and immediately increase the size
of the U.S. commercial fleet, thus providing new jobs for
merchant mariners.
Further, by requiring operators to build new vessels in the
United States, the bill would create much needed work for U.S.
shipyards while creating a fleet of modern and efficient U.S.-
flagged cruise vessels.
BACKGROUND AND NEEDS
Subject to certain limited exceptions, the provisions of the
law known as the Passenger Vessel Services Act (PVSA) (section
8 of the Act of June 19, 1886) and section 12106 of title 46,
United States Code, provide that only those vessels built in
the United States and continuously owned by U.S. citizens and
documented in the U.S. may transport passengers in the
coastwise trade of the United States i.e., between U.S. ports.
The law was enacted at a time when maritime transportation was
a significant mode of both domestic and international
transportation. The law was intended to prevent U.S.-based
companies from facing strong competition in the domestic market
from maritime nations such as Great Britain. The law did not
address ``vacation cruising'' as no market for this existed at
that time.
The Passenger Vessel Services Act has not been interpreted to
restrict domestic port calls as long as the domestic port call
is part of a trip that includes foreign destinations and the
U.S. port calls are intermediary stops. This means that
foreign-flagged vessels are currently entitled to make as many
U.S. port calls as they choose, provided that these calls are
part of an international route and that passengers who embark
at a U.S. port do not permanently disembark at a different U.S.
port. Additionally, the U.S. Customs Service has interpreted
the Passenger Vessel Services Act to allow a foreign vessel to
make as many intermediary U.S. port calls as it chooses, and
disembark passengers at a different U.S. port, as long as the
vessel makes a port call at a distant foreign port such as
Aruba.
One of the exceptions to the PVSA is the Puerto Rico
Passenger Ship Act (Public Law 98-563), which allows vessels
not qualified to engage in the coastwise trade to carry
passengers between U.S. ports and Puerto Rico, and between
Puerto Rico ports, if no similar coastwise trade-qualified
vessels are engaged in that trade. Under this exception, the
unqualified vessels must exit that trade 270 days after similar
coastwise trade-qualified vessels enter that trade. This
exception has not been widely used.
Following World War II, the nature of maritime travel changed
significantly as both domestic and transoceanic flights became
more common and affordable. Air travel provided new competition
for passenger vessels. With dwindling passengers, some vessel
operators started to package ``cruising'' more as a vacation at
sea than a mode of travel. By the mid-1970's the last regularly
scheduled transoceanic passenger service had ceased.
Companies sought to do something with now-empty ships.
Cruises to a few tropical ports slowly became popular. The
first passenger ship specifically built for warm-weather
cruising was introduced in 1970 by Carnival Cruise Lines. From
there, the industry grew rapidly and has boomed since the mid-
1980s when the first megaships were introduced.
The cruise ship industry is largely a North American
phenomenon, and more than 80 percent of the approximately seven
million passengers traveling are North Americans. The cruise
ship market has expanded slightly in the Mediterranean and very
slightly in the Far East. In Europe there are a large number of
smaller passenger vessel services operating in the domestic or
car ferry markets, but these vessels tend to provide
transportation rather than entertainment and tourism. In North
America, cruise vessel operations are particularly concentrated
in three cities: Miami departing for Caribbean, Mexican, and
Central and SouthAmerican destinations; Los Angeles for West
Coast Mexican and Central American destinations; and Vancouver, British
Columbia, for seasonal Alaskan tours. Recently, however, cruises have
increasingly departed from other U.S. ports.
While there are numerous small to medium-sized coastwise
trade-qualified vessels carrying passengers between U.S. ports,
there are only two large coastwise trade-qualified cruise ships
engaged in that trade. The S.S. INDEPENDENCE, a 46-year old
cruise ship, and the M.S. PATRIOT, a reflagged foreign-built
vessel, both of which operate in Hawaiian Islands. American
Classic Voyages (ACV), which owns and operates both vessels,
has a contract for two new large cruise vessels which will
enter the Hawaiian market in 2003 and 2004.
With the exception of ACV's project, growth in the domestic
cruise ship trade has been deterred due to the higher costs of
building and operating U.S.-flagged cruise ships and
competition from modern, foreign-flagged cruise ships engaged
in ``cruises to nowhere'' (departing from and returning to the
same U.S. port) and international cruises. While many cruise
ship operators are headquartered in the United States because
of the size of the market, almost all operators have registered
their ships under flag-of-convenience registries such as
Panama, Liberia, and the Bahamas. Operating under a flag-of-
convenience provides the cheapest maritime operating structure.
Ship operators are only required to pay registration fees, and
do not have to pay any U.S. or flag-state taxes on income
derived through operations.
Safety standards on flag-of-convenience vessels are dictated
by International Maritime Organization (IMO) safety standards
that are agreed to by the flag state. Implementation of those
standards is routinely delegated to private companies that
provide inspections (commonly referred to as ``classification
societies''). Labor relations are usually privatized, and labor
standards are dictated by International Labor Organization
(ILO) labor standards treaties that are agreed to on an
international basis.
For many years, numerous U.S. port, travel, tourism, and
business associations, and some vessel repair shipyards have
touted the economic benefits of U.S. port visits by modern
cruise ships. These groups have lobbied for changes in U.S. law
that would stimulate growth in the industry by allowing
foreign-flagged cruise ships to enter the domestic market,
provide incentives to build and operate U.S. flag cruise ships,
or both. The provisions of the bill reflect the Committee's
interest in structuring a compromise that would stimulate the
domestic cruise market, while at the same time ensure maximum
benefit for the U.S. maritime industry.
The Committee would expect the Secretary to act on submitted
applications for reflagging a vessel under the bill in a timely
manner. The bill clearly restricts the ability of an applicant
to transfer applications and does not confer a property right
through the filing of applications. The bill does not set a
time for completing the application process or receiving a
certificate of documentation. The Committee expects that
applicants should have a reasonable period of time to complete
an application, given the complexity of such a task. While the
Committee realizes that if applications are allowed to linger
without action the market would be subject to disrupting
uncertainties, the Committee wants to ensure that operators
applying to the Secretary for permission to reflag a vessel
into the domestic market are afforded ample time to complete
negotiations on a foreign-built vessel and new U.S.-built
vessels.
During consideration of S. 127, Senator Snowe expressed
concern that enactment of the bill could result in the market
being flooded with large numbers of foreign-built vessels from
unqualified operators who cannot meet the construction
requirements contained in the bill. The bill addresses this
concern with language requiring all operators to meet the same
requirements of an operator receiving a Title XI maritime loan
guarantee. The review of all applications required under
section 103(2)(a) of the bill would ensure that the market does
not become flooded to the point that operators of U.S.-built
vessels cannot compete, that shipyards are not hurt by the
entrance of foreign-built vessels, and that parties seeking to
enter the domestic market have the requisite expertise and
financial strength to operate a U.S.-flagged cruise line.
SUMMARY OF MAJOR PROVISIONS
The bill provides a two-year window of opportunity to
encourage the immediate reflagging of large cruise vessels
under the United States flag for operation in the domestic
cruise trades. The bill would allow the Secretary of
Transportation to issue permits for the limited operation of
foreign-built cruise vessels in the domestic trades if
applications are received within two years of the date of
enactment of this legislation.
To be eligible for reflagging and operation in the U.S.
domestic cruise trades, a cruise vessel must have been
delivered after January 1, 1980, displace at least 20,000 gross
registered tons, have no fewer than 800 passenger berths,
provide a full range of overnight accommodations, dining, and
entertainment services, comply with the Safety of Life at Sea
requirements for a fixed smoke detection and sprinkler system
in the accommodation areas, and be constructed according to
internationally accepted construction standards. This will help
ensure that any foreign-flagged vessels that are reflagged to
take advantage of the bill are modern and safe.
To be eligible to enter the domestic market, the vessel must
be owned by a person who is a citizen of the United States for
the purposes of operating a vessel in the coastwise trade
within the meaning of section 2 of the Shipping Act, 1916 (46
U.S.C. app. 802) or section 12106(e) of title 46, United States
Code.
The bill would assist the U.S. ship repair industry by
requiring foreign-built cruise vessels entering the domestic
market to have all repair, maintenance, alteration and other
work required for operation under the U.S. flag, as well as
regular repair and maintenance work, performed in a U.S.
shipyard.
Prior to allowing a foreign-built vessel to be reflagged and
used in the domestic market, the bill would require the
operator of a reflagged vessel to enter into a binding contract
with U.S. shipyards for the construction of at least one more
vessel than the total number of vessels they will operate in
the domestic cruise market. The contract must provide for a
total number of passenger berths equal to or greater than the
number operated in the domestic market by that operator.
Additionally, the replacement vessels must be atleast 20,000
gross registered tons and have no fewer than 800 passenger berths.
The bill would require the first replacement vessel be
delivered within five years of the date the foreign-built
vessel commences operation in the domestic trade, and that each
additional vessel be delivered within two years of the
proceeding vessel. Foreign-built vessels are required to leave
the domestic market two years after the replacement vessel or
vessels are delivered.
The bill would require the Secretary of Transportation to
ensure that the coastwise business of a U.S.-built vessel
operator is not harmed by the operation of a foreign-built
vessel in the domestic market. The Secretary, after reviewing
the proposed itineraries of foreign-built vessels in the
domestic market, as well as taking into consideration public
comments, is required to determine if there will be an adverse
impact on the operation of a U.S.-built vessel. The Secretary
is required to consider the scope of the vessel's itineraries,
the duration of the cruise, the size of the vessel and the
retail per diem of the vessel. If there is a conflict, the
operator of a foreign-built vessel must change the vessel's
itinerary in order to remove the conflict to the satisfaction
of the Secretary.
Legislative History
S. 127 was introduced on January 22, 2001, by Senator McCain.
The bill is cosponsored by Senators Hutchison, Cleland, Boxer,
Murkowski, Miller, Mikulski, Sarbanes, Thurmond, Feinstein,
Inouye, Breaux, Smith and Hollings. The bill is almost
identical to legislation passed unanimously by the Committee
during the 106th Congress.
During the 106th Congress, S. 1510 was introduced by Senators
McCain, Hutchison, Feinstein, and Murkowski on August 5, 1999,
to allow foreign-built vessels to be reflagged as U.S. vessels
and engage in domestic commerce, and to permit limited
employment of foreign-flagged cruise ships in domestic
commerce. The bill as originally drafted would authorize the
Secretary to issue permits to foreign-built passenger cruise
vessels to operate domestic itineraries in the transportation
of passengers in the coastwise trade under foreign or U.S.-
flags.
The Commerce Committee held a full committee hearing on S.
1510 on October 6, 1999. At the hearing, the committee heard
from a wide range of the maritime industry including
representatives of maritime labor, cruise operators, and ports.
Many raised concerns about allowing foreign vessels into the
domestic market under different standards than current U.S.
operators, and potentially different rules of operation. As a
result of these expressed concerns, but mindful of the need to
stimulate the domestic cruise market, the Committee adopted an
amendment in the nature of a substitute to help stimulate the
U.S. domestic cruise industry.
Two bills were introduced during the 105th Congress that
would have allowed foreign-flagged vessels access to the
domestic trade, and two bills were introduced allowing foreign-
built vessels to be reflagged for use in domestic trade under
certain conditions. The provisions of these bills were
patterned after the Puerto Rico exception. Senate bill 668, a
bill to increase economic benefits to the United States from
the activities of cruise ships visiting Alaska, introduced by
Senator Murkowski on April 30, 1997, would have allowed
foreign-flagged cruise ships of at least 5,000 gross tons
displacement to transport passengers between ports in Alaska
and between Alaska and other West Coast U.S. ports until the
Secretary of Transportation determined that U.S.-flagged cruise
ship service was available.
Senate bill 803, the United States Cruise Tourism Act of
1997, introduced by Senator Thurmond (cosponsored by Senators
Murkowski, Chafee, and McCain) on May 23, 1997, would have
allowed foreign-flagged cruise ships of at least 4,000 gross
tons displacement to transport passengers between ports in the
U.S. until the Secretary of Transportation determined that
U.S.-flagged cruise ships were available. It would have further
required such cruise ships to be repaired in the U.S. and would
have allowed foreign-flagged cruise ships' alien crew members
to extend their permits to land in the U.S.
Senator Hutchison chaired a Surface Transportation and
Merchant Marine Subcommittee hearing on S. 668, S. 803, and the
domestic cruise ship trade, on October 21, 1997.
Representatives of the Cruising America Coalition and the U.S.
maritime industry provided testimony.
Additionally, Senator Breaux introduced S. 2290 on July 10,
1998. Senate bill 2290 would have authorized the Secretary of
Transportation to allow foreign-built cruise ships into the
domestic trade if they are U.S.-flagged and ultimately replaced
with U.S.-built, U.S.-flagged cruise ships. Senate bill 2290
would have also prohibited competition between U.S.-built and
foreign-built U.S.-flagged cruise ships on the same trade
route; prohibited foreign-built, U.S.-flagged cruise ships from
operating between or among the Hawaiian islands; allowed
foreign-built U.S.-flagged cruise ships to meet international
construction standards (in lieu of U.S. standards); and allowed
foreign-built, U.S.-flagged cruise ships to be transferred to a
foreign registry without approval by the Secretary of
Transportation.
Senate bill 2507, the United States Cruise Ship Tourism Act
of 1998, was introduced by Senators McCain, Thurmond, Hutchison
and Burns on September 22, 1998. The bill would have allowed
foreign-built vessels to be reflagged as U.S. vessels and
engage in domestic commerce, and permitted limited employment
of foreign-flagged cruise ships in the domestic commerce.
Senate bill 2507 would have allowed foreign-built cruise ships,
fewer than ten years of age and at least 20,000 gross tons and
with accommodations for at least 800 passengers, to be
reflagged as U.S.-flagged vessels to engage in foreign
commerce. The bill would have limited each company that used
the provisions of the bill to no more than three vessels, and
would have waived certain design and safety standards provided
that a Coast Guard-recognized classification society had
approved the vessel. The bill also would have allowed the
Secretary to approve foreign-flagged vessels to operate
domestically, with certain limitations:
Repositioning voyages.--Foreign-flagged vessels could be
employed in the coastwise or domestic trades, two voyages a
year, as long as the voyage did not exceed two weeks and either
started on one coast of the United States and ended onthe
other, or started along one coast of the United States during a voyage
between two countries; and
Charter voyages.--The Secretary could approve not more than
thirty foreign-flagged vessels a year which could be chartered
for thirty days, to a non-cruise ship-owning company, to be
used in domestic commerce.
Estimated Costs
In accordance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 8, 2001.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 127, the United
States Cruise Vessel Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Deborah Reis.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
S. 127--United States Cruise Vessel Act
S. 127 would authorize the Secretary of Transportation to
issue certificates of documentation with temporary coastwise
endorsements for foreign-built cruise vessels under certain
conditions. (Under current law, such vessels are not eligible
to receive coastwise endorsements, which allow ships to serve
the domestic trade.) In order to receive the temporary
endorsements, cruise ship operators would have to enter into
contracts with U.S. shipyards to construct new cruise vessels.
The Secretary would oversee an operator's choice of cruise
routes to ensure that operators of vessels built in the United
States are not adversely affected by the entry of foreign-built
ships.
CBO estimates that implementing S. 127 would have no
significant impact on the federal budget because the costs of
issuing vessel documents and overseeing the cruise ship market
as required by the bill would be minimal. The bill would not
affect direct spending or receipts; therefore, pay-as-you-go
procedures would not apply.
The bill contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Deborah Reis.
This estimate was approved by Peter H. Fontaine, Deputy
Assistant Director for Budget Analysis.
Regulatory Impact Statement
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following evaluation of the regulatory impact of the
legislation, as reported:
S. 127 as reported makes no permanent change to existing
law. It would require businesses operating foreign built
vessels in the domestic trade to file proposed itineraries with
the Secretary of Transportation. This is an annual reporting
requirement limited to the time the foreign built vessel
operates in the domestic market and is necessary to ensure that
the foreign-built vessel does not have an adverse impact on the
coastwise business of a U.S.-built vessel operator.
Additionally, the bill would require the Secretary to
review and monitor operations of foreign-built vessels within
approved itineraries for the duration of their U.S. domestic
operations.
Because S. 127 does not create any permanent programs, the
legislation would have no additional regulatory impact, and
would result in no additional reporting requirements. The
legislation would have no further effect on the number of types
of individuals and businesses regulated, the economic impact of
such regulation, the personal privacy of affected individuals,
or the paperwork required from such individuals and businesses.
SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section designates the Act as the ``United States
Cruise Vessel Act''.
Sec. 2. Definitions
This section defines terms that may be unique to the bill
as well as terms defined elsewhere in law.
TITLE I--OPERATIONS UNDER A CERTIFICATE OF DOCUMENTATION
Sec. 101. Domestic cruise vessel
This section allows the Secretary of Transportation to accept
applications for the issuance of a certificate of documentation
with a temporary coastwise endorsement to foreign-built cruise
vessels that are at least 20,000 gross registered tons with a
minimum of 800 passenger berths; that are owned by a person
qualified to operate a passenger vessel in the coastwise trade;
and that provide a full range of overnight accommodations,
entertainment, dining, and other services for their passengers.
The vessel would also have to meet the standards for smoke
detection and sprinkler system installation required by the
1992 Amendments to the Safety of Life at Sea Conventions of
1974, and be classed by and designed in accordance with the
rules of the American Bureau of Shipping or another
classification society accepted by the Secretary as long as it
complies with applicable international agreements and
associated guidelines, as determined by the country in which
the vessel was documented immediately before becoming a U.S.-
documented vessel.
This section allows the Secretary to accept applications for
up to two years from the date of enactment and provides that
the right to reflag a foreign-built vessel under an application
may not be transferred by the applicant to any other person.
Sec. 102. Repairs requirement
This section requires that all vessels documented under the
bill have all repair, maintenance, and alteration performed in
a United States shipyard.
Sec. 103. Construction requirement
This section requires any operator who is issued a
certificate of documentation with a temporary coastwise
endorsement under the bill to enter into a binding contract
with a U.S. shipyard for one more vessel than the total number
of vessels brought into the coastwise trade by that operator
prior to commencing operations. In order to meet this
requirement, the operator and the yard must demonstrate to the
Secretary of Transportation that they have the ability to both
construct and operate the vessel prior to commencing
operations.
Further, it requires that the first vessel be delivered
within 5 years and each additional vessel within two years of
the proceeding vessel. It allows for an extension of this
provision due to impossibility of performance. It requires that
the foreign-built vessels leave the coastwise trade within two
years of the delivery of the replacement vessel or vessels and
allows the operator to reflag the vessels without the approval
of the Secretary of Transportation.
Finally, it requires that replacement vessels be at least
20,000 gross tons with a minimum of 800 passenger berths.
Sec. 104. Certain operations prohibited
This section prohibits any vessel entering the coastwise
trade under the bill from operating as a ferry, from regularly
carrying forhire both passengers and vehicles or other cargo,
and from operating between or among the islands of Hawaii.
Sec. 105. Priorities within domestic markets
This section provides priority to operate in the domestic
market to cruise vessels built in the United States. Under this
section the operator of a cruise vessel built in the United
States would notify the Secretary of Transportation at least
two full calender years before the vessel is scheduled to
commence domestic operations.
The Secretary is required to have the operators of all
foreign-built vessels operating under this bill submit for
review and public comment, in April of each year, proposed
itineraries for the calender year beginning 20-months after the
required submission.
After the review period, the Secretary is required to notify
the operator of a foreign-built cruise vessel of any
itineraries that are not available and attempt to work out any
disputes prior to publication of a final list of approved
itineraries.
For purposes of the review, the Secretary shall consider the
scope of the vessel's itinerary; the ports between which it
will operate; the duration of the cruise; the size of the
vessel; and the retail per diem of the vessel. In conducting
the review, if the Secretary determines that the submitted
itinerary of a foreign-built vessel will adversely affect the
coastwise business of a comparable U.S. cruise vessel in a
comparable market, the U.S.-built vessels shall be given
priority to operate.
Sec. 106. Report
This section requires the Secretary of Transportation to
issue an annual report on the number of vessels operating under
a certificate of documentation granted under the bill and on
the progress of construction of replacement vessels.
Sec. 107. Enforcement
This section requires the Secretary of Transportation to
revoke the temporary coastwise endorsement of a vessel if the
operator substantially breaches the construction contract
required by section 103(a). If such a breach is committed by
the shipyard, the operator is required immediately to notify
the Secretary, but may continue to operate the vessel for up to
24 months after such notification so long as the operator can
demonstrate to the Secretary of Transportation that it is
making a good faith effort to execute a construction contract
with another shipyard.
TITLE II--OTHER PROVISIONS
Sec. 201. Application with Jones Act and other Acts
This section states that nothing in the bill shall impact
current law relating to the transportation of cargo or
passengers in domestic commerce unless specified in the bill.
Specifically it states that nothing in the bill would affect
the Jones Act, P.L. 87-77, P.L. 98-563, section 27A of the
Merchant Marine Act, 1920, and section 8109 of the Department
of Defense Appropriations Act, 1998.
Sec. 202. Glacier Bay and other National Park Service area permits
This section requires that newly created or otherwise
available permits to enter Glacier Bay National Park or any
other area within the jurisdiction of the National Park Service
be issued to U.S.-flagged vessels carrying passengers for hire.
It does not require the creation of any new permits or impact
current permit holders.
CHANGES IN EXISTING LAW
In compliance with paragraph 12 of rule XXVI of the Standing
Rules of the Senate, the Committee states that the bill as
reported would make no change to existing law.