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JONES: A Hard Act to Follow

by Alan Walker

It's A Long Way to Ensenada

First-time cruisers are unlikely to have heard of the "Jones Act," and even experienced cruisers may only be vaguely aware of some sort of "weird old law" that somehow controls whether cruise ships may (or may not) stop at US ports. But if you've ever had to take the five-hour bus ride from Los Angeles to Ensenada, or vice versa, at the start or end of a cruise, you will certainly have asked why you must suffer such an inconvenience - and the simple answer is, "it's the law."

Jones Misnomer

The US law that can make life difficult for a cruiser dates from 113 years ago, and is called the "Passenger Services Act," but Senator Wesley L. Jones, who sponsored a 1920 Merchant Marine Act amendment relating to the shipping of MERCHANDISE, not passengers, has unfairly been tagged as the author of the restrictions on what a foreign cruise ship may do or not do in US waters. The basic rule is that "foreign" ships may not carry passengers (whether Americans or others) between US ports, subject to certain exceptions.

Purpose

It's hard to disagree with the basic purpose of the Passenger Services Act (the "PSA") which the US Marine Administration Branch describes as "assuring reliable domestic shipping service that is completely subject to national control in times of war or national emergency." The Administration also states that "the money earned by these vessels remains in the national economy as opposed to being exported, while public revenues benefit from both corporate and personal tax receipts."

What's A Foreign Ship?

If you're cruising on a ship such as the Carnival Destiny, with 85% of the passengers being American, an American captain and officers, and an entertainment and cruise staff which is largely American, it's difficult to believe that this ship is "foreign." But check the ship's "registration" - on the stern of the ship and on the lifeboats, it will say "Panama" or "Monrovia" (capital of Liberia), or "Bahamas" or somewhere other than the USA - meaning that the ship is registered in that "convenient" country, and therefore not subject, among other things, to American employment standards or US income taxes, despite the fact that (in the case of the Carnival Destiny), its ultimate owner is Carnival Corporation, a publicly traded company on the US stock market.

All major cruise lines, including Royal Caribbean, Norwegian, Carnival, Princess, Holland America, Celebrity and Crystal, have "foreign-flagged" vessels. To be an "American-flagged" ship, the ship must be primarily fabricated in the US, totally assembled in the US, have an American crew and be registered in the US.

When Can Foreign Ships Cruise from US Ports?

You almost need to be an attorney to understand the precise regulations under the PSA. (Heck, I am an attorney and I still don't understand!) To make sense of the regulations, you need to know that non-US ports are classified as either "nearby foreign ports" or "distant foreign ports." Despite the name, a "nearby foreign port" means:

  • any port in Canada
  • any port in Mexico
  • Bermuda
  • any port in the Caribbean (except those in the Netherlands Antilles, such as Aruba and Curaçao)

A "distant foreign port" means any other port, except a U.S. port.

With those definitions in mind, here's what's allowed:

  • A cruise which starts and ends in the same US port, visits a nearby or distant foreign port, and where no permanent disembarkation is permitted during the cruise at any US port (because there has been no transportation BETWEEN US ports (Huh?)
  • A cruise between different US ports where no permanent disembarkation is permitted along the way, but at least one port is a nearby foreign port
  • A cruise between US ports where permanent disembarkation IS allowed at a US port along the way, but only if the ship visits a distant foreign port and any permanent disembarkation takes place at a subsequent US port
  • A "cruise to nowhere" from a US port where the ship travels beyond US territorial waters and keeps moving
  • Any cruise which visits US ports but where no permanent disembarkation is allowed along the way and the cruise begins or ends at a distant or nearby foreign port

A reader paying careful attention at this point might say, "Hey, I can think of some cruises that don't fit into those exemptions." Well, that's because we haven't got to two more rules:

  • The US Virgin Islands are presently exempt from the regulations, and may be treated as though its ports were "nearby foreign ports."
  • Travel between the US mainland and Puerto Rico is allowed, provided that no eligible US vessel offers such service

The penalty for breaching the rules is a fine of $200 per passenger, even if the ship breaks the rules because of some emergency.

So, What's the Big Deal?

Suppose you were one of the passengers on the Statendam this year, going on the one-way cruise to Hawaii from San Diego (as opposed to the 16-day roundtrip). The round-trip cruisers got on and got off in San Diego, but the one-way passengers waved goodbye to the Statendam in San Diego, then hopped on a bus at the crack of dawn the next morning, bussed to Ensenada, Mexico, and then boarded the Statendam - all because of the PSA. The Statendam didn't even stay long enough for other passengers to go ashore for the day. Can such a silly routine make any sense?

While the unnecessary Ensenada bus ride if often cited as one of the negative aspects of the PSA, the really significant adverse effects of the PSA only become apparent when you think about some of the cruise itineraries which COULD be taken if it weren't for the PSA:

  • San Diego to Seattle, and vice versa
  • Fort Lauderdale to Boston, or the reverse
  • Anchorage to Ketchikan, and vice versa
  • New York - Bermuda - Fort Lauderdale, or the reverse
  • Fort Lauderdale to Los Angeles (or the reverse), unless a "distant" foreign port (such as Aruba) is visited
  • A cruise around the Hawaiian Islands (unless a "distant" port, such as somewhere in Kiribati, is visited)
  • Boston to Miami
  • Fort Lauderdale to Houston
  • Seattle to Alaska ports (whether round trip or one way), unless a port in Canada is visited
  • Bakersfield to El Centro

And a zillion others.

Friends of the PSA

There's no doubt that cruisers and cruise lines would like the PSA abolished because of the hundreds of new itineraries which would be possible without these restrictions. But if you're an American, you may need to look at the "big picture" of the economic benefits - or economic disadvantages- that the abolition or retention of the PSA legislation would bring (or keep bringing).

The major opponents of any changes in the existing legislation are US shipbuilders and maritime unions. According to the Sailors Union of the Pacific, "why should our coast be open to foreigners who pay no taxes and don't comply with US labor laws?." Until recently, such a comment might be met with the response that the purpose of the PSA - to encourage the building and manning of US passenger ships - has been entirely unsuccessful, as no major US passenger ship has been built in the last 40 years. But now we have the announcement that American Classic Voyages is building two 72,000-ton ships in the US for around-Hawaii cruises. According to a Forbes magazine article, however, "these luxuries [the new US-built cruise ships] come courtesy of the US taxpayer whose Maritime Administration is guaranteeing up to $1.1 billion in loans on the two-ship project." Another Forbes article describes the shipbuilding project as a "floating pork barrel," and points out that most foreign shipyards are subsidized by their respective governments, and thus American cruisers should be thanking the taxpayers in Europe or Asia for subsidizing their cruises (grin).

Foes of the Passenger Services Act

Whether or not one believes in the creation of US employment with the help of a taxpayers' subsidy, there are other financial costs of maintaining the PSA, according to its opponents. Chief among the opposition is the "Cruise America Coalition," an organization of public port authorities and tourism groups, whose members include the cities of Charleston, San Francisco, San Diego and Seattle. Port officials point out the huge amounts of money which are poured into port economies by visiting cruise passengers, and even more money is added to local businesses when a ship's itinerary is such that a US city is the port of embarkation or disembarkation. One estimate, for example, is that San Francisco would have three times the current 50 annual visits of cruise ships if the law were changed. The importance to a port of having a cruise ship based there may be seen from the recent agreement of Norwegian Cruise Lines to base the Norwegian Sky in Seattle for Alaska sailings starting next year (despite the PSA). The three-year agreement is expected to create nearly 400 new jobs, funnel $56 million into the Seattle economy, and generate $4.2 million in state and local taxes. Surrounding areas will also benefit when cruise passengers make side trips before and after their Alaska cruise.

The Seattle "Shunt"

The shunting of passengers by bus from Seattle to Vancouver is often wrongly used as an example of the absurd results that can happen through the enforcement of the PSA. The Seattle/Vancouver bus run, unlike the San Diego/Ensenada one, was caused by the lack of capacity in flights for cruise passengers starting their Alaska cruise in Vancouver. Seattle, great city as it is, just doesn't conveniently fit into the 7-day Alaska cruise schedule. To make the new Norwegian Sky itinerary from Seattle work, the Sky must miss a port (Ketchikan), as well as travel northward through the open seas instead of through the protected waters of the Inside Passage. There is no doubt, however, that Seattle would get more cruise ship calls (using new itineraries), if the cruise lines didn't have to comply with the PSA and have to visit a Canadian port on their Alaska sailings.

Cruise Lines' Attitude towards PSA Repeal

The main protagonists on the PSA issue - shipbuilders and seamen's unions on the one side, port authorities and tourism groups on the other side - are at least reasonably candid in admitting that they are fighting for their own economic interests - selfish or otherwise. Less candid are the major cruise lines, as evidenced by the public statements of their industry association, the International Council of Cruise Lines (ICCL). Despite the abundantly-clear advantages to the cruise lines in not being fettered by the PSA restrictions, ICCL says it "does not support modifications to the Passenger Services Act," and dismisses the opponents of the PSA as "a grass roots coalition." ICCL also states that "we understand the efforts of the coalition, but their goal is to help American cities, not the cruise operators." The real truth, in my view, is that ICCL cannot afford to lobby in favor of ANY changes in the PSA because the proponents of the existing PSA will quickly point out the lack of contribution by the cruise lines to the American economy in the way of corporate taxes and employment income from having American crews. ICCL is quick to point out, however, that a February 1999 study showed that the economic impact of its members' operations in the US for the previous year was $11.6 billion, with the creation of 176,000 US shoreside jobs.

Changes In the Wind?

Recent efforts to change the PSA have been unsuccessful despite vigorous attempts by Senators Thurmond and Murkowski in 1997, and Senator McCain in 1998. A 1999 Passenger Service Act Cruise Ship Reform Bill is expected to be introduced in the US Senate by Senator McCain early next month (August, 1999). It is anticipated that the bill will specify that foreign-flagged ships would be allowed to operate 200 days in US domestic shipping over the next six years, in return for paying US Federal and state income taxes. Stay tuned!

The Last Word

As a cruiser, I'm totally in favor of the abolition of the PSA. If I were an American, and I took off my "cruiser" hat, I'd ask for an analysis of the economic benefits of more American ports visited versus the economic contributions of passenger cruise ships being built in the US and manned by US crews.

It's perhaps a good thing for Boeing that foreign countries don't insist that its residents fly on locally-built planes. And where would Bill Gates be if software had to be locally grown?

Having said all of the above, for the time being I think I'll keep my shares in the Ensenada Bus & Enchilada Company, Inc.

Line

Alan WalkerOriginally from Australia, Alan has for some time been permanently settled in Vancouver where he is a practicing Attorney. He has been a SeaLetter columnist, reviewer and our resident humorist for some time now.

To find all of Alan's SeaLetter columns, featured and humorous articles, and cruise and port reviews, use the SeaLetter Search Engine entering "Alan Walker" as your search phrase.

Alan loves email, and can be reached at: Alan@sealetter.com.


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