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PUBLISHED: 6:03 PM on Wednesday, April 9, 2008
Next Port Alaska?
Editor's note: "Next Port Alaska?" is the first of a two-part series looking at the Passenger Vessel Services Act that could alter how the Alaska cruise trade operates. Part two will run next week and will focus on Southeast cities

Officials with Customs and Border Protection are still discussing a 122-year-old maritime law that could dramatically harm the Alaska cruise industry. The process became more complex now that department is weighing more than 1,000 objections lodged, primarily from Alaskans, describing the substantial economic harm those changes will do to Alaska tourism.

Amendments to the Passenger Vessel Services Act (PVSA), created in 1886, would require foreign-flag vessels originating from Seattle and California ports to spend more than 50 percent of cruise time in foreign waters and to make foreign port calls for no less than 48-hours.

The act was originally created to provide a "legal structure that guarantees a coastwise monopoly to American shipping and thereby promotes development of the American merchant marine."

The PVSA would impact more than a third of the cruise industry and about 400,000 passengers, said Ron Peck, president of Alaska Travel Industry Association, during a March luncheon. State officials estimate Alaska businesses could lose hundreds of millions of dollars in the process.

"It quickly becomes a British Columbia and maybe Alaska cruise, not an Alaska cruise," Peck said. "It would devastate us. It would impact all ... small business owners immeasurably."


Cover photo by Mihael Blikshteyn and illustration by Anna Millard.
Peck said he is doubtful changes would take affect for the upcoming tourism season, which will begin in about two weeks, but an official with Customs and Border Protection (CBP) said anything is possible, including enforcing new regulations as soon as a decision is made - which could be any day.

"Right now, anything is possible," said Glen Vereb, chief of cargo security in the Office of International Trade with CBP. "It could stay as-is, be modified, or scrapped altogether."

Vereb said he could not offer a timeline for when a decision would be made.

"The whole issue is being reviewed as we speak," he said. "It's premature right now to say where we are. Homeland security is reviewing everything. We received over 1,000 total responses and many were from Alaskans. We understand their concerns with respect to the impact they believe it would have to the tourism industry. That message has been conveyed loud and clear."

Vereb said Homeland Security is reading through the responses. Originally, a decision was expected more than a month ago. Gov. Sarah Palin wrote a letter to Vereb requesting a regulatory impact review before making a ruling. It is currently unknown if the study will be conducted.


Cody Bennett photo
  If the Passenger Vessels Services Act is amended other Alaskan businesses, such as tourism services, airports, car rentals, hotels and restaurants, will feel the economic impact of fewer tourists making port calls in Southeast.
Wording in the federal register is written to address concerns with Hawaiian cruises with no mention of Alaska. The situation arose when foreign-flag vessels originating in California began circumventing the PVSA by making one-hour port calls in Ensenada, Mexico. The result was American cruise lines losing customers and going out of business, according to the Maritime Administration.

One such cruise line, Pride of Hawaii, redeployed to Europe resulting in the loss of more than 1,100 crewmember jobs.

The Maritime Administration, a maritime promotional agency within the U.S. government, requested CBP amend the act to enable American cruise lines to prosper in Hawaiian waters.

"The Maritime Administration takes seriously its responsibility to uphold federal law, protect American jobs, and maintain national security," said Administrator Sean T. Connaughton. "Consequently, after the Maritime Administration became aware earlier this year of possible violations of the Passenger Vessel Services Act ... in the Hawaiian cruise trade, it contacted Customs and Border Protection.

"The Maritime Administration will continue to work closely with Customs and

Border Protection to finalize its proposed response to this situation and ensure that federal law is adhered to."

State officials have asked Alaska cruises be exempted, arguing that applying the rule across the board may restore balance to Hawaiian cruises but would cripple Alaska's economy.


Cody Bennett photo
  About 100 percent of cruise traffic stopped in Juneau, totaling more than 500 port calls in 2007.
"At the end of the day it's going to have a negative impact on all aspects of the community," said State Chamber of Commerce President Wayne Stevens. "Basically, it boils down to an issue with Hawaii and foreign vessels doing cruise activity in Hawaii and small American-owned cruise vessels making a stink about it. I think the (Alaska) cruise ships have met the extent of the law. But at the federal level, it must be broadly applied to all states, and there lies the conundrum."

Stevens said the worst-case scenario is about 50 percent of the cruise industry being impacted, along with money lost spent at airports, on tourism services, car rental agencies and hotels.

"Anytime you talk about 50 percent of an industry being whacked, I can draw a conclusion that won't be a good thing," he said.

Donald Habeger, Royal Caribbean Cruises' regional vice president for government relations, said an immediate decision by Homeland Security to enforce the PVSA would make it near impossible to amend 2008 cruise itineraries. Many 2009 cruises are also booked.

"Passengers expect us to (follow the itinerary)," he said. "The Cruise Line International Association asked (Customs and Border Protection) to consider giving us time to react to the implementation process.

"Cruise lines will certainly comply to regulations, however, knowing the relationship we have with Alaska ... knowing that if this is implemented as proposed, it would have a dramatic impact in this market."

Alaskan cruises are a $1.2 billion industry and preliminary figures from the Alaska Cruise Association estimate that number could jump to $1.5 billion this year. Larger vessels carry up to 2,000 guests and 1,000 crewmembers, all of which spend money during day-long port calls in Southeast.

Habeger said nearly 100 percent of cruise traffic stopped in Juneau, about 500 port calls altogether, and forcing "coastwise" vessels on a seven-night cruise to make an extra stop in British Columbia would mean cutting out a port call in Southeast, which likely would be either Juneau, Ketchikan or Skagway. Sitka, Angoon and Haines also are port stops for major cruise lines.

"You can't squeeze in a fourth port in those seven days," he said. "By virtue of distance and time, we would have to add a Canadian port at the detriment to U.S. ports."

To learn more about the Passenger Vessel Services Act, or to send a comment to Customs and Border Protection, visit www.regulations.gov.

Passenger Vessel Services Act

•The PVSA was created on June 19, 1886, and was intended to "guarantee a coastwise monopoly to American shipping."

• Amendments to the act would require coastwise foreign-flag vessels to spend 50 percent of time in foreign waters and to make a foreign port call of 48-hours in between U.S. port calls.

• "Coastwise" vessels origination is in the U.S. and port stops include only U.S. ports.

•Foreign-flag vessels are any vessel built outside the U.S.

• Cruises originating in Seattle and California, about one-third of all cruises, would be impacted by the amendment, which could include up to 400,000 passengers. The cruise ships would be required to port in Canada before docking at a U.S. port in Southeast Alaska.

Charles Westmoreland is managing editor of the Capital City Weekly. Contact him at charles.westmoreland@capweek.com


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