Americans pay for cruise industry’s flags of convenience

Cruise ShipThere is some great news this summer for the American travel and leisure industry: cruise ships are back! Travelers who have endured a global pandemic and waited 18 months can now pack their bags and book that cruise, maybe even to Alaska.

The bad news? Cruising now comes at even higher cost for the U.S. Merchant Marine and the broader U.S. maritime industry.

Pre-pandemic, Americans accounted for nearly 50 percent of the almost 30 million worldwide cruise travelers. Yet of the 323 ocean passenger ships, only one, Pride of America, is registered in the United States. This results in a potential loss of roughly 162,000 good-paying American jobs. More egregious is that most large cruise lines are American-owned and/or based in the U.S. – serving mostly American passengers yet not employing American mariners. I often wonder how many of those 15 million Americans planning on cruising would be appalled to know these facts. 

The glaring question is — why? 

Instead of registering in the U.S., major cruise lines register their ships in another country, often in the developing world. This is called “flags of convenience (FOC),” which is a contentious maritime industry practice of allowing vessel owners to avoid regulations and taxes and reduce labor costs by hiring cheaper foreign mariners, often with questionable credentials.  

Cruise lines utilizing foreign-flagged ships may argue the question of mariner competency is moot with the advent of the International Maritime Organization’s International Convention of Standards of Training, Certification, and Watchkeeping (STCW). What these same FOC cruise lines will not tell you is that each flag state has the ultimate authority to administer, certify, and enforce STCW. As such, a flag state with limited resources may not have the training assets or personnel to ensure proper mariner certification. Complicating matters further, many of the same foreign flag states are ripe for corruption and graft. Together, these raise questions about the training and skills of mariners working on foreign-flagged cruise ships. 

Could passenger safety be impacted? 

Use of FOC ships allow American-owned cruise lines to side-step American labor laws. Mariners working on foreign-flagged cruise ships also lack the pay, benefits, and labor protections available to their American counterparts. A typical able seaman on an FOC ship will earn about $1,500 a month for 12 hours of work every day, with little to no overtime. The same able seaman typically must sign a contract for very long stretches of work, with pay contingent upon completing the tour. An able seaman aboard a U.S.-flagged ship earns a base monthly salary of about $3,750 for an eight-hour workday — not including overtime. 

Finally, these companies registering in other countries benefit by building ships overseas, rather than in the U.S. This arrangement deprives American shipyards of lucrative contracts and threatens the nation’s long-term security. With fewer big ships to build, the expertise needed to build large ships used in national defense will atrophy. Then what happens? I dread to think of having to depend on FOC ships to ferry U.S. military personnel and supplies in times of national emergency or war. Think it can’t happen? Think again. During Operation Desert Storm 30 years ago, the U.S. did not have sufficient sealift capability, and had to ask FOC ships to carry the fire to the fight. Many refused, and since they were registered elsewhere, they could not be ordered, commandeered, or compelled to sail into a war zone. 

Why is this year, of all years, going to be worse?  

The Passenger Vessel Service Act (PVSA) is the answer. Originally passed in 1886 to help protect our new and fledgling maritime industry — which ironically needs that protection now more than ever — it states, “No foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under penalty of $762 for each passenger so transported or landed.” Accordingly, this is the reason FOC cruise ships normally depart a U.S. port and then head directly to a foreign port before arriving at a subsequent U.S. port. FOC ships plying Alaskan waters would normally begin voyages in a Canadian port, typically Vancouver, British Columbia, and then continue to Alaska, thus complying with the PVSA. Canada’s decision in February to defer the resumption of large cruise travel until early 2022 effectively turned the Alaskan Cruise industry upside down. Now, the big American-owned and American-based cruise lines with FOC ships can no longer use a Canadian port “escape clause” to comply with the law. 

Not deterred, the large cruise lines lobbied U.S. politicians for a waiver from the PVSA for their FOC ships. And on May 25, 2021, President Joe Biden waived the PVSA by signing the gently named Alaskan Tourism Restoration Act. The law temporarily allows FOC cruise ship to sail directly from Washington state to Alaskan ports without the need for that pesky stop in Canada. But wait, what about the smaller U.S.-flagged Alaskan cruise ships? Those are the American cruise ships with several hundred passengers versus the jumbo FOC ships with thousands of passengers. Their feature draw, and thus a key to their business model, is the benefit to sail from one U.S. port directly to another with no need to sail foreign, because these tenderfoot cruise ships are actually American; built in America and operated by U.S. merchant mariners. With the stroke of a pen, the FOC ships continue to employ foreign non-union labor and avoid paying U.S. taxes while benefitting as if they were American ships.  

Unfortunately, there was one other option that apparently nobody raised. Instead of waiving the PVSA, the government could have required the colossal cruise lines to re-flag in the United States. Of course, in this scenario, cruise lines would then have to hire Americans to operate these “new” U.S.-flagged ships. Oh, and by all means, pay their mariners a living wage and permit unions like the rest of America demands. And I almost forgot to mention, yes, the cruise lines would have to pay their taxes; another annoying obligation that every American must satisfy.

This would not be precedent setting. In December 1986, after seeking American permission, Kuwait temporarily re-flagged its supertankers as U.S. vessels to be protected during the Iran-Iraq War. These ships employed unionized U.S. merchant mariners, abided by the U.S. labor laws, and paid their taxes. 

The same argument, in the way of both economic and national security, most certainly could have been made regarding the Alaskan cruise industry and the PVSA. Regrettably this did not occur. As of this writing, Canada has eased its pandemic response cruise ship ban from Feb. 28, 2022, to Nov. 1, 2021. But has the damage to the U.S. Maritime Industry already been done? That remains to be seen.

Capt. Sean P. Tortora is a Master Mariner with 25 years at sea having commanded many different vessels including tankers, general cargo, break bulk, ammunition, ocean towing and salvage, and special mission, with his specialty of underway replenishment vessels. He is an associate professor in the Department of Marine Transportation at the U.S. Merchant Marine Academy. He is the author of the novel, Steaming to Djibouti and textbooks, Study Guide for Marine Fire Prevention, Firefighting, and Fire Safety, as well as, Study Guide for Bridge Resource Management.The views expressed in this article are those of the author and not those of USMMA, MARAD, DOT, or the U.S. government.

Categories: Correspondence