Cruising in Hawaii How the federal government's 1886 Passenger Vessel Services Act has limited the Aloha State's tourism potential
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Grassroot Institute of Hawaii POLICY BRIEF, OCTOBER 2020 Cruising in Hawaii How the federal government’s 1886 Passenger Vessel Services Act has limited the Aloha State’s tourism potential By Jonathan Helton GRASSROOT
Grassroot Institute of Hawaii
POLICY BRIEF, OCTOBER 2020
Cruising in Hawaii
How the federal government’s
1886 Passenger Vessel Services Act
has limited the Aloha State’s tourism potential
By Jonathan Helton
GRASSROOT
grassrootinstitute.org Page 1October 2020 GRASSROOT ISBN: 9798696544885 Grassroot Institute of Hawaii Policy Brief, October 2020 Revised November 2020 Grassroot Institute of Hawaii 900 Fort Street Mall, Suite 950 Honolulu, Hawaii 96813 808-591-9193 info@grassrootinstitute.org Jonathan Helton is a research associate with the Grassroot Institute of Hawaii. Photos by Charley Myers and Adobe Stock Layout and design by klworks.net © 2020 Grassroot Institute of Hawaii. All rights reserved. Permission is granted to reproduce any portion of this document so long as credit is given to the Grassroot Institute of Hawaii. This study can be downloaded at www.grassrootinstitute.org. Nothing in this report is intended to aid or thwart the passage of any specific legislation. Page 2 Cruising in Hawaii
Grassroot Institute of Hawaii
Executive summary
E ven before the COVID-19 outbreak of early 2020, luxury cruise ships were
uncommon in Hawaii waters. Now, in the wake of the state’s coronavirus-
inspired lockdown, they aren’t being seen at all.
But what about those days before the coronavirus crisis? Under normal
circumstances, it would be reasonable to assume there would have been plenty
of U.S.-flagged cruise vessels capitalizing on the state’s exceptional natural
beauty. But there weren’t. The majority of cruise ships that visited Hawaii’s ports
were flying the flags of countries such as Bermuda or the Bahamas.1 Those, of
course, are all now missing in action, too, because of the fears of COVID-19 and
Hawaii’s lingering lockdown measures.
grassrootinstitute.org Page 3October 2020 And what about when this is all over? How can we encourage the ocean cruise industry to become a viable and thriving component of Hawaii’s tourism sector, generating thousands of jobs for isle residents and millions of dollars in revenues for businesses and government tax coffers? First we must realize what was holding back the industry to begin with. The reason was — and still is — a protectionist federal shipping law. No, it’s not the Jones Act, a similar law that was enacted in 1920 but applies to only merchandise.2 Instead, it’s the even older federal Passenger Vessel Services Act, adopted in 1886,3 which applies — as its title makes clear — to the transport of passengers. Like the Jones Act, the PVSA requires that ships being used in coastal trade be U.S. flagged and built, and at least 75% owned and crewed by Americans.4 Also like the Jones Act, its intent when enacted was “to protect the U.S. mari- time industry from foreign competition.”5 This allegedly was to support national security by ensuring the existence of U.S. shipyards and qualified mariners.6 But it hardly fulfills that intent now. No bluewater ocean-going cruise ships have been built in America for over 60 years.7 To fully revive cruising in Hawaii’s ocean waters, the PVSA needs to be either repealed or reformed. Page 4 Cruising in Hawaii
Grassroot Institute of Hawaii
Introduction
B
efore the COVID-19 lockdown restrictions These days the PVSA applies mostly to passenger
sidelined the ocean cruising business in ferries and river and ocean cruise liners. In Hawaii,
Hawaii virtually entirely, only one U.S. company the lack of ferry service between the islands can
in modern times, Pride of America Ship Holding LLC, be attributed, in part, to the cost of having to buy
had been offering cruises wholly in Hawaii’s island U.S.-made ferries, which are four to five times more
waters that allowed passengers to go ashore at each expensive than ferries manufactured abroad.9
Hawaii port.
In the case of so few cruise liners in Hawaii waters,
That was because of the federal Passenger Vessel the PVSA is almost wholly to blame. Partly it’s because
Services Act of 1886, which requires any ship car- of the U.S.-build requirement, but it’s also because
rying passengers in the American coastal trade be only U.S. ships may transport passengers from one
U.S. flagged and built, and at least 75% owned and Hawaii port to another without having to travel to at
crewed by Americans. It was enacted during the least one “distant” port.
days when all travel between Hawaii and anywhere
else took place on ships. Often those ships carried In other words, under this 134-year-old mercantilist
both passengers and cargo. As airplanes became legislation, foreign cruise liners are allowed to pick
common, the dynamics of travel changed.8 Fewer up passengers at a Hawaii port and cruise in Hawaii
people traveled by ship. Pretty soon it was mostly waters, but the passengers may not go ashore at any
just cargo on those ships, which by then were also of the other Hawaii ports unless the vessel also stops
shielded from foreign cargo competition by the at a foreign port. If a passenger wants to disembark,
Jones Act. or leave the cruise ship completely, before return-
ing to the original port, the ship must first go to a
grassrootinstitute.org Page 5October 2020
“distant” foreign port, such as Fanning Island, 1,000 At one time, foreign cruise liners could
miles south of Hawaii.10 A cruise liner attempting to also conduct “voyages to nowhere,” in
make such voyages in violation of the PVSA require- which the vessels leave and return to the
ments can be fined $798 per passenger.11 same port, stopping nowhere else. However,
these types of cruises were banned in 2016
This is similar to a “closed loop” cruise, whereby a by the U.S. Customs and Border Protection,16
foreign vessel can pick up passengers on the West based on an interpretation of U.S. immi-
Coast and visit Hawaii ports, but only if it stops at a gration law, leaving the Hawaii-based MS
“nearby” foreign port such as Ensenada, Mexico,12 Pride of America as the only ocean cruise
and returns to its point of embarkation.13 Closed-loop liner in the U.S. allowed to operate voy-
cruises can also be launched from Hawaii, but since ages to nowhere.
the nearest foreign port is Fanning Island, that would,
ironically, make them “distant port cruises” as well. For Hawaii to benefit more from the
ocean cruise industry, the PVSA would
Another type of “distant foreign port” cruise is need to be repealed or reformed. In the case
when foreign cruise liners take on passen- of the similar Jones Act, which applies to the trans-
gers in California, sail to Hawaii — where port of merchandise between U.S. ports, one reform
passengers can visit the various island that has been proposed is eliminating the U.S-build
ports — then continue to Oceania requirement. If U.S. companies did not have to buy
or Asia.14 This applies also to more expensive U.S.-built ships to carry merchandise
foreign vessels transiting between U.S. ports, that would lower upfront capital
from New Zealand to costs and conceivably encourage more companies
the West Coast.15 to enter the market. Such a reform could also work in
the cruise industry, though only full repeal — allowing
foreign-owned and foreign-flagged companies to
carry passengers between U.S. ports at will — would
more fully serve the goal of open competition and
greater prosperity for Hawaii’s economy.
—g—
For Hawaii to benefit more
from the ocean cruise
industry, the PVSA would
need to be repealed or
reformed.
Page 6 Cruising in HawaiiGrassroot Institute of Hawaii
Hawaii exemption
Cruise line companies for foreign-built
based in the U.S ocean cruise liners
B A
efore the coronavirus lockdowns, more than 20 s previously noted, the MS Pride of America is
cruise line companies qualified as American- the only large PVSA-qualified ship operating
owned. But besides Pride of America Ship in Hawaii waters. And that ship has a history
Holding LLC, which owns the 2,186-passenger MS that demonstrates the law’s failure as well.
Pride of America, none of them operated on domes-
tic ocean routes covered by the PVSA.17 Instead, Its construction began in 2001 at a U.S. shipyard.
they offered cruises in the Caribbean, Europe and But despite $185 million in federal subsidies,20
the Pacific using mostly less expensive foreign-built the shipyard was unable to finish the vessel. The
ships.18 half-completed Pride of America was “towed across
the Atlantic to be completed in Germany for [its then-
At least six of the smaller lines covered by the owner] Norwegian Cruise Lines.”21 Subsequently
PVSA plied America’s coastal or river routes, but considered foreign-built, the ironically named Pride
none operated ocean routes. These lines could be of America required an exemption to operate in U.S.
found sailing the Mississippi River, the Great Lakes, waters. So in 2003 its owner sought and obtained
the Columbia and Snake rivers in the U.S. Northwest, such an exemption, not only for the Pride of America
and touring the coast of Alaska.19 but two other foreign-built ships as well: the Pride of
Hawaii and the Pride of Aloha.22
In 2009, University of Hawaii economics professor
James Mak and two UH undergraduate students
documented that “ticket prices for NCL [Norwegian
Cruise Lines] spiked downward after the introduc-
tion of each new Pride vessel and remained lower
than before.”23 The cruise line also experienced an
increase of passengers on its Hawaii routes, from
134,000 in 2004 to 368,000 in 2007.24
grassrootinstitute.org Page 7October 2020
However, this passenger boom was not to last. In
—g— 2008, the cruise line redeployed two of the ships,
Today the Falls of to Europe and Florida, leaving the Pride of America
as the only U.S.-flagged ocean-going cruise ship in
Clyde sits deteriorating
Hawaii.25 Mak’s study noted that after the change,
in Honolulu Harbor. “ticket prices rose sharply.”26
Numerous efforts to
refurbish the vessel have The lesson here is that competition typically
results in lower prices. The competition in this case
failed and its future is
consisted of ships within the same company, and
uncertain. when the Pride of America was left as the only PVSA-
qualified ship in Hawaii, there was no incentive for
its owner to keep fares low. The company certainly
didn’t have to worry about meaningful competition
from foreign cruise lines.
Just prior to the coronavirus lockdowns, a seven-
night cruise on the Pride of America cost roughly the
same, or more, than a 15-night cruise on a Princess
Cruises-owned ship from California to Hawaii and
back (via Ensenada, of course).27 And this didn’t take
into account the airfares tourists
had to pay to fly to Hawaii to
board the cruise.
James Mak, economist and
professor emeritus at the University
of Hawaii, wrote more than
10 years ago about how the federal
Passenger Vessel Services Act is a
hindrance to Hawaii’s economy.
Page 8 Cruising in HawaiiGrassroot Institute of Hawaii
History of reform efforts
O
ne of the earliest proponents of PVSA reform The Hawaii Herald had noted in June 1917 that
was Matson Navigation Co., currently one of “to most people it would have been a good thing to
the two major ocean cargo carriers between have never instituted the coastwise shipping laws to
Hawaii and the U.S. mainland. these islands so far away from the mainland and are
touched at by so many passing foreign ships.”35
In 1898, Matson purchased the Falls of Clyde from
the Falls Line, in Scotland, where the ship had been The paper urged that any suspension should last
constructed. Matson planned to use the vessel in its the duration of the war, “at least,” and that, in fact, is
Hawaii-mainland trade, but the U.S. annexation of what happened. It wasn’t until Sept. 1, 1920, almost
Hawaii complicated the situation. However, in 1900, two years after the official end of World War I, that
the Hawaiian Organic Act, which governed the new America’s ocean transportation regulations were
territory, exempted certain vessels, including the reinstated. During the period the rules were sus-
Falls of Clyde, from PVSA requirements.28 pended, foreign-owned companies such as Toyo
Kisen Kaisha (T.K.K.) provided regular cargo and
Matson used the ship to carry goods and passen- passenger transport between Hawaii and the U.S.
gers between Hawaii and San Francisco.29 In 1907, mainland.36
it sold the vessel to Associated Oil Co., which used
it to transport oil and molasses between Hawaii and Jumping forward to the late 1990s, there were sev-
the mainland. Associated Oil Co. sold the Falls of eral bills that sought to reform the PVSA. One was
Clyde in 1920, and it changed hands several times the proposed United States Cruise Tourism Act of
after that. In 1963, it was returned to Hawaii, this 1997, which sought to allow foreign-flagged cruise
time as a historic landmark. In 1968 it was opened vessels to operate on routes not served by U.S.
as a museum, and in 1973 Congress declared it a ships. Their rights to operate on those routes would
National Historical Landmark.30 have been terminated three years after a U.S. vessel
started operating the same route,37 but the bill failed.
Today the Falls of Clyde sits deteriorating in Sponsor U.S. Rep. Mark Sanford (R-SC) proposed the
Honolulu Harbor. Numerous efforts to refurbish the bill again in 1999, to no avail.38
vessel have failed, and its future is uncertain.31
Another bill, the proposed Freedom to Ship Act of
Another reform occurred during the height of 1997, would have enacted more sweeping reforms.
World War 1. On Oct. 5, 1917, Congress unanimously It sought to repeal the domestic-build requirement
voted to suspend the nation’s “coastwise shipping and citizenship quota for passenger, cargo, dredg-
law,” as it applied to all U.S. coastal trade, except- ing and other coastal vessels. It still would have
ing Alaskan commerce.32 The impetus to “opening required that any ship operating in domestic trade
Hawaii to [the] service of Japanese and Dutch lin- be U.S. owned and flagged, but foreign companies
ers”33 was the lack of U.S.-flagged ships operating would have been allowed to establish U.S. subsid-
in U.S waters, as many had been requisitioned for iaries that could qualify as U.S. owned, so long as
the war effort. At least five of Matson’s ships, for they were two-thirds owned by U.S. citizens.39 Like
example, were enlisted for military transport, leaving Sanford’s bills, this bill also failed to gain traction.
Hawaii without sufficient carriage to and from the
mainland.34
grassrootinstitute.org Page 9October 2020
Where PVSA reform
stands now
I
In 1999 and again in 2001, U.S. Sen. John McCain n recent years, there has been little legislative
sponsored bills that would have allowed U.S. compa- activity related to the PVSA, but reform oppo-
nies to purchase one foreign-built cruise ship each, nents have remained vigilant.
if they also purchased at least two cruise ships each
from U.S. yards. The exemptions for the foreign-built The Transportation Institute, for example, claims
ships would be terminated “24 months after the on its website that the one U.S.-flagged blue-water
delivery date for the replacement vessel(s) for it.”40 cruise ship in the whole country “contributes to the
Those bills were terminated. critical pool of qualified U.S. seafarers and provides
vital repair and maintenance work for U.S. ship-
The final congressional salvo against the PVSA yards.”44
came from U.S. Rep. Henry Brown (R-SC), in 2002. He
introduced a bill similar to U.S. Rep. Sanford’s 1997 The Transportation Trades Department of the
and 1999 proposals.41 It never escaped committee. AFL-CIO stated in a 2017 Q&A mainly about the
Jones Act that, “Our members are also beneficia-
Throughout the debates over the years, it became ries of related maritime cabotage laws, including
clear that the PVSA was encouraging U.S. cruise line the Passenger Vessel Services Act of 1886 and the
companies to look abroad for new ships. At a 1998 Dredging Act of 1906, which support union jobs in
congressional hearing, U.S. Rep. Nick Smith (R-MI) the marine passenger transportation and dredging
cited Disney’s interest in building PVSA-compliant industries, respectively. Beyond employment, the
ships. However, “when they solicited over a billion Jones Act creates a framework for safe, good-paying
dollars in contracts, not a single U.S. shipyard would jobs set against an increasingly exploitative inter-
even bid on the projects.”42 The ships were subse- national shipping paradigm that routinely ignores
quently built in Italy. workers’ rights and profits on inhumane employ-
ment practices.”45
Additionally, a 2001 Senate report on McCain’s bill
noted the dearth of U.S. oceangoing cruise ships. Similarly, a one Capt. Kelly Sweeney from Washing–
ton state took to the pages of the Professional Mariner
“There are only two large coastwise trade- in July 2018 to defend the PVSA, claiming it “protects
qualified cruise ships engaged in that [coastwise] the livelihood of tens of thousands of American
trade,” it said. ferry workers.”46 Kelly was moved to pen his defense
two months after the U.S. Office of Information and
Both operated on routes in Hawaii. The report Regulatory Affairs released a request for information
blamed this on “the higher costs of building and regarding maritime regulatory reform. The office said
operating U.S.-flagged cruise ships and competition it was “particularly interested in learning more about
from modern, foreign-flagged cruise ships.”43 experiences with regulations involving cargo or pas-
senger vessels.”47
Page 10 Cruising in HawaiiGrassroot Institute of Hawaii
In Kelly’s view, this showed that the “enemies of Proponents of PVSA reform include executives
our domestic maritime industry work continually to from U.S. river cruise companies, with additional
undermine the laws that benefit and strengthen our support coming from various academic studies.
merchant marine, and would love nothing better
than to destroy the U.S.-flag fleet for the money that Bruce Nierenberg, former president of Delta
would line their pockets. Queen Steamboat Co., told Travel Weekly in 2014
that the PVSA’s domestic-build requirement is a
“Never in our nation’s history,” he said, “has there deterrent to anyone looking to enter the U.S. river
been such a concerted effort to question the stat- cruise market.50
utes that are the very foundation of our domestic
maritime industry. This unprecedented move could The U.S. crew requirement can prohibitively inflate
conceivably result in every U.S. maritime law being costs, he told Travel Weekly, but the real challenge is
scrapped.” building ships stateside. The crew, he said “is not the
limitation. It’s building the ships. It’s a big issue for a
Such claims about the supposed benefits of the couple reasons. There is really no American passen-
PVSA — and the occasional hysterics in defending ger shipbuilding left. … It’s an industry that we have
it — are clearly overblown. The U.S. blue-water cruise lost touch with here.”
industry is all but dead. In fact, there are only five
companies worldwide that have the capacity to build John Waggoner, chairman and CEO of the
cruise ships.48 Even if a U.S. company could afford to American Queen Steamboat Co. — one of the largest
build a cruise ship domestically, it is unlikely any U.S. river cruise lines in the United States — expressed
shipyard has the know-how to construct one, as the similar interest in modifying the domestic-build
case of Disney cited above shows. requirement.51
A 2017 report from National Defense University In 2018, Ted Sykes, then president and COO of
concurred: “The United States might also promote American Queen Steamboat, also cited the build
tourism by allowing foreign cruise ships to carry requirement as a barrier to the river cruise industry.52
passengers between U.S. ports; this
would not disrupt a U.S. industry
— —
because at present the Jones Act
g
[PVSA] has simply made this market Proponents of PVSA
uneconomical.” 49
reform include executives
from U.S. river cruise
companies, with
additional support coming
from various academic
studies.
grassrootinstitute.org Page 11October 2020
Cui bono?
A
—g— s for who benefits besides self-interested
The cruise docks of San labor unions and shipbuilders, there is the city
of Vancouver, in British Columbia, Canada,
Diego sit vacant 90% of
according to Seattle-based maritime attorney Terry
the year. Meanwhile, Leitzell.
80 miles south, Ensenada
receives more than three “Vancouver is a lovely city and an attractive destina-
tion for tourists,” Leitzell said in a 1996 commentary
times as many passengers
for the Seattle Journal of Daily Commerce, “but the
as San Diego, and many primary reason for its rapid growth as a cruise capital
more than New York, New is the U.S. Passenger Services Act, a restrictive stat-
Orleans and Boston. ute that discourages cruise ships from using Seattle,
Portland and other Northwest port cities.”53
A 2014 law review article by University of Michigan
law professor Keith E. Diggs made the same point:
“Today, our coastwise trade laws benefit Canada
by incentivizing cruise lines to bus passengers from
Seattle to Vancouver before embarking on cruises to
Alaska.”54
In 2005, sociologist and cruise industry expert
Ross Klein wrote for a Canadian research center:
“[British Columbia] ports, … are indispensable to
cruise lines due to U.S. cabotage laws that require
non-U.S. registered ships visiting multiple U.S. ports
to either include a foreign port in their itineraries
or to embark and/or disembark passengers at a
foreign port (cruise lines use foreign-flagged ships
as a means of dodging U.S. taxes and labour stan-
dards).”55
Page 12 Cruising in HawaiiGrassroot Institute of Hawaii
At the other end of the U.S. West Coast, the PVSA “Without the PVSA,” the pair noted, “dozens more
had been benefiting Mexico. As Victoria Buchholz, cruises would depart daily from U.S. cities such as
a corporate and intellectual property attorney, and New York and Seattle, and the hundreds of millions
Todd Buchholz, a former White House director of of dollars generated from those voyages would
economic policy, wrote in the Los Angeles Times in stay within the U.S. economy, providing thousands
August 2017: of portside jobs — for longshoremen loading cargo,
bellhops, tour guides, taxi drivers and local farmers
“The cruise docks of San Diego sit vacant 90% supplying fruits and vegetables for those all-you-
of the year. Meanwhile, 80 miles south, Ensenada can-eat buffets. And of course, each stop would
receives more than three times as many passengers generate revenue for U.S. cities in port fees as well
as San Diego, and many more than New York, New as local and state taxes.”
Orleans and Boston. Vancouver hosts three times as
many sailings as Seattle. Since cruising generates These examples are from the pre-coronavirus era,
an estimated $3.2 billion for Canada’s ports, it’s no but the U.S. law that they refer to is still in play, and
surprise that the Canadian government lobbies to would need to be repealed or reformed if America’s
preserve the PVSA.56 ocean cruise industry is not to revert to the same pat-
tern as it slowly revives.
grassrootinstitute.org Page 13October 2020
Reform options
F
or Hawaii, reform options could include U.S. Senator Mazie Hirono (D, HI), Rep. Tulsi
any of the bills proposed in Congress in the Gabbard (D, HI) and Hawaii Gov. David Ige (also a
late 90s and early 2000s, or outright repeal. Democrat), did not return requests for comment.
Alternatively, noncontiguous states and territories
could be exempted from the act. This would provide Only U.S. Rep. Ed Case (D-HI), who has submitted
benefits to Hawaii and Alaska especially, as well as several bills that would reform the Jones Act, stated
the West Coast ports that often embark passengers he would “consider this issue further,” though so far
to Hawaii and Alaska. he had “not especially focused on the impacts of the
Passenger Vessel Services Act.”58
For now, at least, proponents of change apparently
won’t be able to count on support from most of the
state’s congressional delegates or governor.
Asked recently for his position on the PVSA, U.S.
Sen. Brian Schatz (D-HI) wrote: “I support federal pol-
icies that protect and support our nation’s maritime —g—
industry. I will also continue to uphold policies that For now, at least,
support a strong U.S. domestic shipbuilding indus- proponents of change
trial base, which is critical to our national security and apparently won’t be able
helps sustain a fleet of vessels that can provide a reli-
able trade of perishable and nonperishable goods to count on support
to Hawaii.”57 from most of the state’s
congressional delegates
or governor.
Page 14 Cruising in HawaiiGrassroot Institute of Hawaii
Benefits of reform
H
awaii benefited, albeit temporarily, when The Government Accountability Office in 2004
Norwegian Cruise Lines was granted a PVSA noted that, “if additional exemptions to the U.S.-built
exemption in 2003 to use foreign ships in the requirement led to new entrants providing U.S.-flag
Hawaii trade. Puerto Rico experienced similar bene- cruise service,… ports and port cities, the merchant
fits, but even more spectacularly. marine, and consumers could benefit.”62
In 1984, almost 20 years before NCL was granted Additional domestic cruises, it said, “could create
a PVSA exemption, Congress granted Puerto Rico more activity for the ports and result in more jobs
an exemption from the law, allowing both U.S. and and increased spending in port cities. U.S.-flag ships
foreign cruise lines to carry passengers on non- also would employ U.S. seamen, adding to the base
PVSA ships between the U.S. mainland and Puerto of trained maritime employees who could serve the
Rico. Congress stipulated that this exemption would country in a time of emergency. Moreover, potential
remain so long as no PVSA-qualified line offered entrants could offer more cruise options and new
comparable service.59 To this day, none have, and itineraries to consumers.”
until the coronavirus crisis came along, the cruise
line business had been a significant generator of It is easy to imagine that Hawaii would experience
income for the territory’s economy. economic benefits, if not subjected to the require-
ments of the PVSA. Once the COVID-19 outbreak
A 2015 report conducted for the Senate of Puerto is contained, tourists will again want to cruise in
Rico found that from 1984 to 2014, the “arrival of Hawaii’s tropical climate and beautiful island waters,
cruise ships to our ports has tripled,” while between and the extent to which they are allowed to do so will
1990 and 2011 revenues from the cruise ship indus- depend very much on how regulated Hawaii is by
try also tripled, to $3 billion.60 While all of these gains the federal Passenger Vessel Services Act.63
may not be attributable to the exemption, the major-
ity of visitors to Puerto Rico have been from the U.S.
mainland.61
A 1997 study reached similar conclusions.
Commissioned by the California State Tourism
Board to examine potential reforms to the PVSA,
it found that absent the PVSA’s build requirement,
cruise lines might offer excursions up and down the
West Coast, benefiting California’s smaller ports and
traditional cruise hubs.
grassrootinstitute.org Page 15October 2020 Page 16 Cruising in Hawaii
Grassroot Institute of Hawaii
Conclusion
A s James Mak’s 2009 research into the Passenger Vessel Services Act
concluded, “The current, and antiquated law imposes costs on a lot of peo-
ple but confers few, if any, national benefits. It should be repealed.”64
Ten years later, Mak hadn’t changed his mind. Asked in September 2019 if he
had any updates to his research, Mak, emeritus professor of economics at the
University of Hawaii, said he hadn’t looked into the issue lately.
Nevertheless, he added, “The punchline is that we think the PVSA should be
abolished.”65
grassrootinstitute.org Page 17October 2020 Page 18 Cruising in Hawaii
Grassroot Institute of Hawaii
Endnotes
1 “Princess Cruises Fleet,” Princess Cruise Line, www.princess.com/news/backgrounders_and_fact_sheets/fact-
sheet/Princess-Cruises-Fleet-Overview.html; and Bill McGee, “Why are cruise ships registered in foreign countries?”
USA Today, Dec. 11, 2012, www.usatoday.com/story/travel/cruises/2012/12/11/why-are-cruise-ships-registered-in-
foreign-countries/1760759.
2 Thomas Grennes, “An Economic Analysis of the Jones Act,” Mercatus Center, George Mason University, 2017, p.
9, www.mercatus.org/system/files/mercatus-grennes-jones-act-v2.pdf; and “What is the Jones Act/Passenger
Services Act/Cabotage Law and how does it affect me?” Royal Caribbean International, 2019, www.royalcaribbean.
com/faq/questions/jones-act.
3 “What Every Member of the Trade Community Should Know About: The Passenger Vessel Services Act,” U.S. Cus-
toms and Border Protection, April 2010, pp. 8-9, www.cbp.gov/sites/default/files/documents/pvsa_icp_3.pdf; and
“The Passenger Vessels Service Act of 1886,” Wikipedia, en.wikipedia.org/wiki/Passenger_Vessel_Services_Act_
of_1886.
4 Carrie Ann, “Why Do Most US Cruises Have to Stop in a Foreign Port?” Should Be Cruising, July 1, 2020,
www.shouldbecruising.com/2020/07/01/passenger-vessel-services-act; see also “What Every Member of the Trade
Community Should Know About: The Passenger Vessel Services Act,” U.S. Customs and Border Protection; “The
Passenger Vessels Service Act of 1886,” Wikipedia; and “46 U.S. Code §12103. General eligibility requirements,”
Legal Information Institute, www.law.cornell.edu/uscode/text/46/12103.
5 “Maritime Law Exemption: Exemption Provides Limited Competitive Advantage, but Barriers to Further Entry under
U.S. Flag Remain,” Government Accountability Office, February 2004, www.gao.gov/products/gao-04-421.
6 “U.S.-Flagged Passenger Fleet Profile,” in ”Passenger Cruise Industry,” Transportation Institute, 2019, transportation-
institute.org/jones-act/passenger-cruise-industry; and “What Every Member of the Trade Community Should Know
About: The Passenger Vessel Services Act.”
7 “Effect of the Passenger Services Act on the Domestic Cruise Industry,” U.S. House of Representatives Subcommit-
tee on Coast Guard and Maritime Transportation and Committee on Transportation and Infrastructure, Washington,
D.C., April 29, 1998, http://commdocs.house.gov/committees/Trans/hpw105-65.000/hpw105-65_0.HTM.
8 Rebecca Maksel, “Hawaii by Air,” Air & Space Magazine, October 2014, www.airspacemag.com/history-of-flight/
hawaii-air-180952756/#:~:text=In%20December%201910%E2%80%94just%20seven,a%20polo%20field%20near%20
Honolulu. According to Maksel, “It wasn’t until 1936 that Pan Am began carrying passengers from San Francisco to
Hawaii on its luxurious Martin M-130 Clippers. Richard F. Bradley paid the equivalent of $51,000 to be among the
passengers on the first flight. … The Clippers flew just once a week, carrying only eight or nine passengers, since
cargo and mail took priority.”
9 “Trying to make the case in defense of Young Brothers (Community Matters),” ThinkTech Hawaii, interview with
Michael Hansen, July 10, 2020, see 18:20, www.youtube.com/watch?v=Pk-pygitYgY.
10 “The Passenger Vessel Services Act,” U.S. Customs and Border Protection, September 2019, p. 16,
https://www.cbp.gov/sites/default/files/assets/documents/2019-Sep/PVSA-ICP.pdf.
11 Erica Silverstein, “Hawaii Cruise Tips,” Cruise Critic, Aug. 11, 2019, www.cruisecritic.com/articles.cfm?ID=1362.
On the subject of fines, Jones Act violators risk having their merchandise seized, or having to pay fines equal to
the value of the merchandise carried or the “actual cost of the transportation, whichever is greater.” See “U.S.C.
46, §55102: Transportation of merchandise,” United States Code, 2011 Edition, U.S. Government Publishing Of-
fice, www.govinfo.gov/content/pkg/USCODE-2011-title46/html/USCODE-2011-title46-subtitleV-partD-chap551-
sec55102.htm. For PSVA violations, the fines are $798 per passenger, up from $200 in 1886; see “The Passenger
Vessel Services Act,” U.S. Customs and Border Protection, September 2019, p. 17, www.cbp.gov/sites/default/files/
assets/documents/2019-Sep/PVSA-ICP.pdf.
12 “The Passenger Vessel Services Act,” p. 16. Also, personal communication with Princess Cruises, Oct. 21, 2019; and
personal communication with U.S. Customs and Border Protection, Oct. 22, 2019.
13 Kimberly Wheeler, “What is a Closed Loop Cruise and do you need a passport?” CruiseExperts.com, Sept. 19, 2015,
https://www.cruiseexperts.com/news/2015/09/16/what-is-a-closed-loop-cruise-and-do-you-need-a-passport.
14 “Pacific Isles & Vietnam Odyssey,” Crystal Cruises, https://www.crystalcruises.com/voyage/san-diego-to-hong-
kong-ocs200113-32.
15 “MS Europa — from Auckland to San Francisco: South Sea dreams and Hawaiian wonders,” Hapag-Lloyd Cruises,
https://www.hl-cruises.com/cruisefinder/EUR2004#.
16 Bruce Parkinson, “Why Are Cruises To Nowhere Illegal in the USA?” CruiseRadio.net, Oct. 28, 2020,
https://cruiseradio.net/why-are-cruises-to-nowhere-illegal-in-the-usa.
17 “Pride of America Review and Specifications,” Cruise Mapper, www.cruisemapper.com/ships/Pride-of-America-594;
“List of cruise lines,” Wikipedia, en.wikipedia.org/wiki/List_of_cruise_lines#In_operation; and “Pride Of America,”
DNV GL, vesselregister.dnvgl.com/VesselRegister/vesseldetails.html?vesselid=24785
18 “Maritime Law Exemption,” U.S. Government Accountability Office, pp. 20-21, www.gao.gov/new.items/d04421.pdf.
19 These six lines are UnCruise USA, www.uncruise.com/about-us; American Cruise Lines, tinyurl.com/yfyspacz; Amer-
ican Queen Steamboat Company, www.americanqueensteamboatcompany.com/?aliaspath=%2fhome&lang=en-US;
Blount Small Ship Adventures, http://www.blountsmallshipadventures.com; Delta Queen Steamboat Company,
grassrootinstitute.org Page 19October 2020 deltaqueen.com; and Chicago Cruise Lines, www.chicagoline.com/about/#cruise-info. 20 Roger D. Blair and James Mak, “Saving the Last ‘American’ Cruise Ship,” The Milken Institute Review, p. 53, Fourth Quarter 2008, http://assets1c.milkeninstitute.org/assets/Publication/MIReview/PDF/50-57mr40.pdf; and James Mak, Christopher Sheehey and Shannon Toriki, “The Passenger Vessel Services Act and America’s Cruise Tourism Industry,” Working Paper No. 2009-1, University of Hawai‘i Economic Research Organization, Jan. 22, 2009, p. 5, uhero.hawaii.edu/wp-content/uploads/2019/08/UHERO_WP2009-01.pdf. 21 Victoria J. Buchholz and Todd G. Buchholz, “How Grover Cleveland ruined American cruises,” Los Angeles Times, Aug. 3, 2017, www.latimes.com/opinion/op-ed/la-oe-buchholz-pvsa-cruise-20170803-story.html. The Pride was originally owned by Norweigan Cruise Lines. NCL was the company that originally applied for the exemption to operate on routes in Hawaii. At that time, NCL was owned by Star Cruises, which was in turn owned by the Genting Group, a company based in Malaysia. To comply with the ownership requirements of the PVSA, NCL created a U.S. subsidiary, Norweigan Cruise Lines America. Today, the Pride of America is owned by Pride of America Ship Hold- ing LLC, which is also a subsidiary of NCL. See “Maritime Law Exemption,” U.S. Government Accountability Office, p. 2; PJ Morrissey, “Why Cruise Ships May Never Sail to American Ports,” Cruise Everyday, Aug. 8, 2017, www.cruiseveryday.com/cruise-everyday/cruise-ships-never-us; “Star Cruises,” Wikipedia, en.wikipedia.org/wiki/ Star_Cruises; “Norwegian Cruise Line,” Wikipedia, en.wikipedia.org/wiki/Norwegian_Cruise_Line; “Form 10-K Norwe- gian Cruise Line Holdings Ltd.,” SEC, Feb. 27, 2015, sec.report/Document/0001571049-15-001498/t1500098_ex21-1.htm; and “Pride Of America,” DNV GL, es.ndu.edu/Portals/75/Documents/industry-study/reports/2017/es-is-report-shipbuilding-2017.pdf. 22 “Maritime Law Exemption,” p. 13; and PJ Morrissey, “Why Cruise Ships May Never Sail to American Ports.” 23 James Mak, et al., “The Passenger Vessel Services Act and America’s Cruise Tourism Industry,” p. 21. 24 Ibid, pp. 16-17. 25 Ibid, p. 8. 26 Ibid, p. 21. 27 “Pride of America,” Priceline, prices for October 2020, cruises.priceline.com/shipdetail.do?c=34&v=431; and “Princess Cruises: 15 Night Hawaii Cruise,” The Cruise Web, prices for Oct. 22, 2020, cruiseweb.com/cruise-lines/ princess-cruises/ship-star-princess/15-night-hawaii-cruise-departs-los-angeles-california. 28 “Falls of Clyde (1878),” Maritime Quest, https://www.maritimequest.com/sailing_ships/02-pages/f/falls_of_ clyde_1878/falls_of_clyde_1878_data.htm; and “Chapter 339. – An Act To provide a government for the Territory of Hawaii,” Chapter 6, § 98., www.hawaiiankingdom.org/us-organic-act-1900.shtml. 29 ”Local items,” Hilo Daily Tribune, Feb. 8, 1901, p. 5. See also “L. Turner Co., Ltd,” Hilo Daily Tribune, Feb. 8, 1901, p. 6. www.newspapers.com/clip/60319382/hilo-daily-tribune. 30 “Falls of Clyde (1878),” Maritime Quest, www.maritimequest.com/sailing_ships/02-pages/f/falls_of_clyde_1878/ falls_of_clyde_1878_data.htm. 31 “Falls of Clyde (ship),” Wikipedia, en.wikipedia.org/wiki/Falls_of_Clyde_(ship). 32 “Senate Passes Measure,” Honolulu Star-Bulletin, Oct. 5, 1917, www.grassrootinstitute.org/wp-content/ uploads/2020/08/pre-Jones-Act-law-suspended-by-Senate-Oct-5-1917-part-1.pdf. 33 Ibid. 34 “Matson Liners Now Used as Freighters,” Hilo Daily Tribune, Jan. 18, 1919, www.grassrootinstitute.org/wp-content/ uploads/2020/08/pre-Jones-Act-Matson-ships-commandeered-for-the-war-Jan-18-1919.pdf. 35 “Coastwise Shipping Law,” The Hawaii Herald, June 22, 1917, www.grassrootinstitute.org/wp-content/uploads/2020/08/pre-Jones-Act-law-explaination-Jun-22-1917.pdf. 36 The Honolulu Advertiser, July 20, 1920, www.grassrootinstitute.org/wp-content/uploads/2020/08/PVSA- reinstated-July-20-1920.pdf. See also, “Asano Sōichirō,” Wikipedia, en.wikipedia.org/wiki/Asano_Soichiro, accessed Aug. 16, 2020, which notes that Asano Sōichirō, a Japanese businessman, founded Toyo Kisen. 37 “H.R.2420 — United States Cruise Tourism Act of 1997: Summary,” Congress.gov, www.congress.gov/ bill/105th-congress/house-bill/2420?q=%7B%22search%22%3A%5B%22H.R.+2420%22%5D%7D&s=1&r=1. 38 “H.R.248 — United States Cruise Tourism Act of 1999: Summary,” Congress.gov, www.congress.gov/bill/106th-congress/house-bill/248. 39 “S.1138 — Freedom to Ship Act of 1997: Summary,” Congress.gov, www.congress.gov/bill/105th-congress/ senate-bill/1138?q=%7B%22search%22%3A%5B%22Freedom+to+Ship+Act%22%5D%7D&s=5&r=1. 40 “S.127 — United States Cruise Vessel Act: Summary,” Congress.gov, www.congress.gov/bill/107th-congress/senate-bill/127. 41 “H.R.5509 — United States Cruise Tourism Act of 2002: Summary,” Congress.gov, www.congress.gov/ bill/107th-congress/house-bill/5509?q=%7B%22search%22%3A%5B%22United+States+Cruise+ Vessel+Act%22%5D%7D&r=3&s=10. 42 “Effect of the Passenger Services Act on the Domestic Cruise Industry,” April 29, 1998, p. 23. 43 “Senate Report 107-47: United States Cruise Vessel Act: Summary,” U.S. Government Publishing Office, July 27, 2001, www.govinfo.gov/content/pkg/CRPT-107srpt47/html/CRPT-107srpt47.htm. One of the two ships was a for- eign-built ship that operated for two years in Hawaii under a sort of waiver for the company that originally wanted to build the Pride of America. See “2000–2002: MS Patriot,” under “MS Marella Spirit,” Wikipedia, en.wikipedia.org/ wiki/MS_Marella_Spirit. 44 “U.S.-Flagged Passenger Fleet Profile,” in ”Passenger Cruise Industry,” Transportation Institute, Camp Springs, Md., Page 20 Cruising in Hawaii
Grassroot Institute of Hawaii
2019, transportationinstitute.org/jones-act/passenger-cruise-industry.
45 “Labor — Q & A on the Jones Act,.” Transportation Trades Department, AFL–CIO. Nov. 2, 2017, p. 1. https://www.
ajot.com/news/q-a-on-the-jones-actfrom-the-transportation-trades-department-ttd.
46 Kelly Sweeney, “‘Regulatory reform’ first shot in new attack on U.S. maritime industry.” Professional Mariner. July 31,
2018. www.professionalmariner.com/August-2018/Regulatory-reform-first-shot-in-new-attack-on-US-maritime-
industry.
47 “Maritime Regulatory Reform,” U.S. Office of Information and Regulatory Affairs, Office of Management and Budget,
Federal Register, May 17, 2018,
www.federalregister.gov/documents/2018/05/17/2018-10539/maritime-regulatory-reform.
48 “Shipbuilding Companies,” CruiseMapper, Nov. 26, 2015, www.cruisemapper.com/wiki/769-shipbuilding-companies.
49 “Shipbuilding: All hands on deck! Headwinds and Heavy Seas Ahead to Achieve the 355-Ship Navy,” The Dwight D.
Eisenhower School for National Security and Resource Strategy. National Defense University, Spring 2017 Industry
Report, p. 18, es.ndu.edu/Portals/75/Documents/industry-study/reports/2017/es-is-report-shipbuilding-2017.pdf.
50 Michelle Baran, “Longstanding statute tethers growth of U.S. river cruising,” Travel Weekly. April 21, 2014,
www.travelweekly.com/River-Cruising/Longstanding-statute-tethers-growth-of-US-river-cruising.
51 Ibid.
52 Jeri Clausing. “A boom time for U.S. river cruising.” Travel Weekly. October 28, 2018,
www.travelweekly.com/River-Cruising/US-river-cruise-lines-struggling-keep-up-with-demand.
53 Terry Leitzell. “US Laws Put Cruise Industry on Cruise Control,” Seattle Journal of Daily Commerce. 1996,
www.djc.com/special/maritime/c10009803.html.
54 Keith E. Diggs. “Tarrification of the Coastwise Trade Laws.” Michigan Law Review. 2014, p. 1510,
repository.law.umich.edu/cgi/viewcontent.cgi?article=1003&context=mlr.
55 Ross Klein, “Playing Off the Ports: BC and the Cruise Tourism Industry.” Canadian Center for Policy Alternatives. BC
Office, August 2005, p. 4,
www.policyalternatives.ca/sites/default/files/uploads/publications/BC_Office_Pubs/bc_2005/cruise_tourism.pdf.
56 Victoria J. Buchholz and Todd G. Buchholz, “How Grover Cleveland ruined American cruises,” Los Angeles Times,
Aug. 3, 2017.
57 U.S. Sen. Brian Schatz, via email correspondence, April 8, 2020.
58 U.S. Rep. Ed Case, via email correspondence, March 13, 2020.
59 John Frittelli, “Shipping Under the Jones Act: Legislative and Regulatory Background,” Congressional
Research Service, Nov. 19, 2019, pp. 10-11, fas.org/sgp/crs/misc/R45725.pdf. This exemption did not allow foreign
cruise lines to carry passengers between ports in Puerto Rico, however. See: “The Passenger Vessel Services Act,”
U.S. Customs and Border Protection, September 2019, p. 15,
www.cbp.gov/sites/default/files/assets/documents/2019-Sep/PVSA-ICP.pdf.
60 “Final Report: Senate Resolution No. 237,” Senate Of Puerto Rico Committee On Civil Rights, Citizen Participation
And Social Economy, April 9, 2015, pp. 130-131, tinyurl.com/vtrs82p; See also: Juan Gabriel Brida and Sandra Zapa-
ta Aguirre, “Cruise Tourism: Economic, Socio-Cultural and Environmental Impacts,” International Journal of Leisure
and Tourism Marketing, Vol. 1, No. 3, Jan. 25, 2009, pp. 205-226,
papers.ssrn.com/sol3/papers.cfm?abstract_id=1332619; “Cruise Industry Overview — 2017,” Florida-Caribbean
Cruise Association, p. 3, www.f-cca.com/downloads/2017-Cruise-Industry-Overview-Cruise-Line-Statistics.pdf;
“Economic Study of Puerto Rico: Report to the President, Volumes 1-2,” U.S. Department of Commerce, Interagency
Study Group, December 1979, p. 331, tinyurl.com/us8wzmc.
61 Inteligencia Económica, “Tourism: A Driver For Economic Growth,” October, 2016, pp. 7-8, www.finance.senate.gov/
imo/media/doc/Puerto%20Rico%20Hotel%20&%20Tourism%20Association%20(Submission%202).pdf.
62 “Maritime Law Exemption,” U.S. Government Accountability Office, February 2004, p. 28,
www.gao.gov/new.items/d04421.pdf.
63 Cruise lines already are making plans to resume service, keeping in mind safety precautions spurred by the corona-
virus pandemic. See “Rivals Royal Caribbean, Norwegian Cruise Line team up to plan restart” Reuters, via FoxBusi-
ness, July 6, 2020,
www.foxbusiness.com/economy/rivals-royal-caribbean-norwegian-cruise-line-team-up-to-plan-restart.
64 Mak, et al., “The Passenger Vessel Services Act and AMerica’s Cruise Tourism Industry,” p. 27.
65 James Mak, via email correspondence, Sept. 14, 2019.
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