My Turn: U.S.-flagged cruise ships at a disadvantage

Posted: Friday, March 08, 2002

On behalf of the entire Cruise West staff, I am writing to express our concern about Sen. Ted Stevens' recent comments supporting changes to the Passenger Vessel Services Act.

How are U.S. companies supposed to compete against foreign companies allowed to set up shop in our own backyard without having to follow the same rules as the rest of us?

The only advantage that we have as a U.S. company is the ability to offer "all Alaska cruises." Reserving the domestic trade for domestic companies is a common practice followed by other industries. This should apply to the cruise industry as well. After all, we would not allow a foreign hotel operator to come into downtown Anchorage to build a hotel with foreign supplies and foreign workers completely exempt from building codes, wage and labor laws, OSHA rules, taxes and all other domestic regulations that protect our workers and promise them a safe working environment and fair wage. Further, we would not allow that hotel operator to operate that hotel in downtown Anchorage using foreign workers, and again, allowing them to operate exempt from wage and labor laws, safety rules and taxes. No hotel in Anchorage or any other American city could stay in business against a competitor with such an advantage! It would be similarly impossible for small U.S. cruise lines to succeed on such an unlevel playing field.

We do not understand why Sen. Stevens would support changes in the Passenger Vessel Services Act that only benefit these foreign operators and encourage more large-scale cruise activity. In fact, changing the Passenger Vessel Services Act will not provide additional benefits to Alaska, but only add to the profits of the foreign companies who take advantage of all that Alaska has to offer.

There are many other reasons not to change the law. However, if the law is to be changed, consider that the following would have to take effect in order to level the playing field:

• Foreign flag ships should only be allowed to operate between U.S. ports if they were owned and operated by U.S. corporations;

• U.S. corporations operating foreign flag ships should be subject to all federal and state corporate income taxes on their profits;

• U.S. corporations operating foreign flag ships should have to comply with all federal and state wage and hour laws where they operate;

• U.S. corporations operating foreign flag ships should be subject to a one-time tax equal to the federal and state taxes that would have been assessed to their ships had their ships been built in U.S. shipyards;

• U.S. corporations operating foreign flag ships would pay a tax that is equal to the amount of local and state taxes (including sales tax, use tax and inventory tax) paid by U.S. flag passenger vessels operating in the locale of their registry; and,

• U.S. corporations operating foreign flag ships would be prohibited from operating those foreign flag vessels on routes and itineraries already served by U.S. flag passenger vessels of any size.

If these minimum restrictions are not included in any amendment to the U.S. Passenger Vessel Services Act, the result would be disastrous for U.S. cruise lines. As an alternative, you could exempt current U.S. cruise operators from all wage and labor laws, health and safety rules, federal, state, and local taxes and create some sort of rebate for the added cost of building our vessels in U.S. shipyards and operating our vessels under more costly rules since we entered the trade. Of course, we realize that such an alternative is no more practical for the U.S. cruise industry than it would be for the U.S. hotel industry or any other U.S. industry, but that is what it would take to eliminate the advantages enjoyed by foreign cruise operators.

In addition to paying federal and state income taxes on profits, complying with all wage and labor laws, paying sales taxes on newly built or newly acquired vessels, U.S. flagged cruise ships also employ crews of U.S. residents who each contribute to U.S. federal income taxes with every paycheck.

I respectfully ask that legislators consider carefully how amendments to the U.S. Passenger Vessel Services Act would affect companies like Cruise West, a family owned, American company providing jobs to U.S. citizens, paying U.S., state and local taxes, and showing the best of America to visitors from around the world since 1973.

Jeffrey D. Krida is the president and chief operating officer for Cruise West.

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