The Passenger Vessel Services Act (PVSA) of 1886 prevents foreign-flag cruise ships from transporting passengers directly between U.S. ports. The law was intended to reserve this business to U.S.-flagged passenger vessels, just as the Jones Act restricted domestic cargo service to U.S.-flag ships. The intent of both laws was to boost the U.S. shipbuilding industry, provide a market during peacetime to ensure ships were available for wartime use, and to maintain a ready reserve of mariners.
Times have changed and the fleet of U.S.-built, U.S.-flag large deep-draft vessels has shrunk dramatically. The only large U.S.-flag cruise ships that have been in service recently were NCL America ‘s three foreign-built and foreign-owned passenger vessels. The vessels were operated by a U.S. subsidiary after Congress permitted the re-flagging of the ships into U.S. registry. But business has not been good on NCL’s Pacific itineraries, and two of the ships are being reassigned to Europe.
For U.S.-flag ships, it’s tough to compete with foreign-flag vessels’ lower labor costs and also lower costs at yards that build and repair foreign cruise ships. Taxes are also lower for foreign cruise vessels.
Coastal and inland cities around the world have encouraged the development of cruise ship tourism to bolster their local economies, as destination ports or as home ports where cruise ships purchase many of their consumables and passengers spend time and money before and after cruises.
To get around Passenger Vessel Services Act and break into the U.S. cruise market, foreign designers and shipyards from the United Kingdom, New Zealand and Australia are licensing out their advanced passenger vessel designs to U.S. shipyards or setting up U.S. subsidiaries to partially capitalize on their technology, even if they can’t sell new ships built at their overseas yards for U.S. domestic operation.
In this case, the U.S. benefits from the introduction of new designs and innovative construction methods for new generations of low-wake, high-speed vessels for the U.S. small passenger vessel market and as prototypes for military transportation and combat vessels.
As a result, we have charted a new course in satisfying the original goals of PVSA by encouraging domestic shipbuilding and developing new vessels for military use.