SOURCE: American Association of Port Authorities

January 23, 2008 15:50 ET

AAPA Says Proposed Rule Change Would Hurt U.S. Cruise Vacationers, Ports & Cities

ALEXANDRIA, VA--(Marketwire - January 23, 2008) - United States Customs and Border Protection (CBP) has recommended redefining a rule in a 122-year-old maritime law that would put onerous new demands on cruise ships that stop at more than one U.S. port. This change would require ships to spend at least half of each cruise itinerary in ports outside the U.S., and at least 48 hours at each stop, completely disrupting the nation's cruise industry.

"This proposed rule 'interpretation' would represent a major change in U.S. policy and would cause immediate and significant economic harm to the nation's cruise cities, ports and passengers, and to the businesses and Americans who depend on the cruise industry for their livelihoods," said Kurt Nagle, American Association of Port Authorities (AAPA) president and CEO. "The CBP rule revision is completely out of line with industry practices."

Customs' proposed rule revision would also jeopardize future economic development plans for cruise facilities in Hawaii, Alaska, California and Washington State, and at ports all along the Eastern seaboard and into the Gulf.

Mr. Nagle noted that while it appears Customs' cruise rule was drafted to try and protect the jobs of a few hundred merchant mariners employed on U.S.-flagged cruise ships operating in Hawaii, the unintended consequences would be to threaten thousands of American jobs elsewhere in the country, from longshore, hotel, restaurant and retail store workers, to taxi, bus and tour operators, travel agents and insurance, banking and manufacturing employees.

"Customs is over-reacting, like using a sledgehammer to swat a fly," he said.

AAPA, which represents seaports throughout the Western Hemisphere, joined hundreds of others late last month -- including the American Society of Travel Agents, Cruise Lines International Association, U.S. Chamber of Commerce and International Longshore and Warehouse Union -- in filing comments critical of the rule change. CBP issued its proposed "interpretive rule" to more narrowly define the criteria applied to foreign-owned passenger ships that stop at two or more U.S. ports.

Currently, foreign-flagged passenger vessels that visit more than one U.S. port per itinerary must stop at a port outside the U.S. to be in compliance with the Passenger Vessel Services Act of 1886. The new criteria would require these vessels to stop for at least 48 hours at each foreign port, even though most port calls today are eight hours or less in duration. Furthermore, the time spent at foreign ports would have to comprise at least 50 percent of the total time spent at U.S. stops, putting in peril cruises between Southern California and Hawaii, Southern California and Catalina Island, the U.S. West Coast and Alaska and Mexico, the U.S. East Coast and Canada, and stops at the port of Key West, Fla., which last year served more than 830,000 cruise vacationers.

"This rule change could negatively affect the vacation plans of more than a million cruise travelers who embark or disembark at our port each year," said Port of Los Angeles Executive Director Geraldine Knatz, Ph.D. "Many of our cruises are three to five days in duration and, as such, too short to comply with a 48-hour vessel call. This rule change would effectively torpedo a cruise travel experience that millions of cruise travelers enjoy each year from ports nationwide. At roughly $1 million in direct wages and business revenues per ship call, it's also an economic hit for our regional economy."

Dr. Knatz noted that the cruise lines providing roundtrip voyages between Los Angeles, San Diego and Hawaii that would be adversely affected by Customs' proposed rule constitute a completely different market than the U.S.-flagged ships operating solely in Hawaii. "Cruises out of California ports appeal to Americans who prefer a longer at-sea cruise experience, as opposed to internal, multi-island cruise itineraries in the Hawaiian Islands," she remarked. "Each of these distinct markets has a place in the array of consumer choices presented to likely cruise travelers. The proposed interpretative rule would artificially deprive cruise travelers of a distinct cruise option that has proven immensely beneficial to them."

According to American Society of Travel Agents President and CEO Cheryl Hudak, CTC, were Customs' proposed measure to go through, it would have a devastating effect on the travel agency business. "Prospective cruise passengers would more than likely pass on Hawaii-bound cruises or cruises that stop at numerous U.S. ports-of-call because extended foreign port call requirements would force them to take extra time off from work, school or other commitments," she said. "This doesn't even account for the fact that more time spent at foreign docks would raise fuel, cabin lodging and other associated costs, which, in turn, would raise the price of travel agent inventory, making it a less attractive vacation for many American travelers. The end result of all this would be that travel agencies, especially those that are cruise-only, would suffer financially as their clients choose to book other vacations."

For additional information on this issue, see attached one-page "Key Points" or click to view the comments AAPA submitted to CBP on its proposed rule change.

The American Association of Port Authorities was founded in 1912 and today represents 160 of the leading public port authorities in the United States, Canada, Latin America and the Caribbean. In addition, the Association represents 335 sustaining and associate members, firms and individuals with an interest in the seaports of the Western Hemisphere. AAPA port members are public entities mandated by law to serve public purposes. These ports are gateways to world trade and are a critical component in these nations' economic health, national defense, and growing cruise industry. In the U.S. last year, commercial seaport activities provided jobs for 8.4 million Americans, whose earnings and consumption totaled $314.5 billion.

                             KEY POINTS
         CBP Interpretive Ruling of Passenger Vessel Services Act

--  This rule would cause immediate, significant economic harm to U.S.
    cruise passengers, ports and cities.
      -  The proposed interpretation represents a major change in existing
         U.S. policy regarding the permissible itineraries for cruise ships
         sailing in or out of U.S. ports.
      -  It would cause many cruise lines to either have to curtail service
         or significantly reduce their U.S. cruise operations, costing U.S.
         cruise port cities hundreds of millions of dollars a year in lost
         cruise passenger spending as well as the loss of thousands of
         local jobs (longshoremen, travel agents, tour bus operators,
      -  On the West Coast alone, according to estimates by Cruise the West
         (an association of West Coast ports and tourism organizations),
         the number of annual cruise calls impacted by the proposed Customs
         rule would be 567, including 206 four-day cruises between Southern
         California, Catalina Island and Mexico. All told, these ships
         carried more than 1.7 million passengers in 2007 and provided work
         for 16,060 longshoremen. Cruise the West estimated total annual
         spending by cruise customers and the cruise lines serving on West
         Coast itineraries at $453.7 million.  Elsewhere in the country,
         CruiseMaine estimates major losses to its cruise industry, which
         generated $24 million in 2006 and created 270 full- and part-time
         jobs in its two largest cruise ports alone.  The City of Key West,
         Fla., estimates losses upwards of $50 million a year in
         cruise-related spending, affecting 1,000 local jobs. The Florida
         Ports Council cited the implications to other Florida cruise ports
         (particularly Tampa, Jacksonville, Everglades and Canaveral)
         "could be devastating," noting the Florida cruise industry in
         2006 produced $5 billion in income and generated more than 125,000
      -  U.S. ports and private investors have invested in public cruise
         facilities to serve the growing cruise market relying on existing
         laws and regulations. The new proposal would totally change the
         rules and would cause millions of dollars in cruise facility
         investments to be wasted.
      -  Although reportedly being issued to address a specific concern in
         the Hawaiian trade, the new Customs rule on cruise ships will
         apply throughout the U.S. and disrupt hundreds of cruise
         itineraries that have nothing to do with the perceived problem
         with the California-Hawaii cruises.

--  The rule would drastically restrict vacation options available to
    cruise passengers.
      -  The effect of the rule as drafted would be to limit the cruise
         market to itineraries with a single U.S. port call, driving all
         Alaska business to Canada, Hawaiian business to Mexican ports
         and eliminating Key West, Fla., and numerous U.S. East Coast
         and Gulf ports as ports-of-call.
      -  Cruise lines have already established 2008 itineraries based on
         existing laws and numerous passengers have already booked their
         dream vacations -- many of these planned voyages would have to be
         withdrawn if the rule becomes effective.

--  The new rules are onerous and completely out of line with industry
      -  Few North American cruises could meet all three of these criteria;
         especially those related to the length of a foreign stop and the
         ratio of time at the foreign port.
      -  As many of the comments filed with CBP indicate, a 48-hour vessel
         call is extremely rare in any U.S. passenger cruise market. Many
         cruises (3-5 days) are too short to justify a 48-hour vessel call
         anywhere and most longer cruises (7 days or more) have 3 or 4
         port-of-call stops, also making a 48-hour call in any port
         difficult if not impossible.
      -  CBP has not offered any justification or analysis for the proposed
         criteria, and apparently no research was done to determine the
         current market conditions and practices.

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