January 22, 2003

What McCain doesn't like about the NCL deal
Not everyone is wild about Senator Daniel Inouye's effort to bring NCL's former "Project America" ships under U.S. flag. Not too amazingly, Senator John Mccain is among the critics. Senator McCain tried to overturn the Inouye NCL initiative on January 17. His attempt failed, but it's informative to read what he had to say on the issue.

Senator McCain's failed amendment to H. J. Res. 2, the Omnibus Appropriations Bill, sought to strike Section 211 of Division B that would give Norwegian Cruise Lines the exclusive right to operate foreign-built cruise vessels in the domestic cruise trade:

"This amendment," said Senator McCain, "would strike Section 211 of Division B of the resolution, which would give the still-to-be-created subsidiary of the Malaysian-owned 'Norwegian Cruise Lines' (NCL) the exclusive right to operate foreign-built cruise vessels in the domestic cruise trade.

"Effectively, the provision would allow NCL, which bought the pieces and parts of two 'Project America' cruise vessels following the bankruptcy of a company called 'American Classic Voyages,' to incorporate these parts into large cruise vessels that would be constructed in foreign shipyards. Then, notwithstanding the Passenger Vessel Services Act, the provision would allow NCL to flag these vessels as if they were U.S.-built vessels and operate them in the domestic trade, requiring service in Hawaii. The provision also allows NCL to bring over a third foreign-built ship to operate in the United States.

"As many of my colleagues know, I am no fan of the protectionist laws that require domestic cruise ships to be U.S.-owned, U.S.-built, U.S.-flagged, and U.S.-crewed. However, I strongly object to waiving these laws for only one foreign-owned company.

"These proposed vessels have a long and sordid history. The pieces and parts that NCL will build into cruise ships have cost the American tax payers close to $200 million dollars. Again, these parts were bought following American Classic Voyages' bankruptcy, which had began construction of two vessels in Ingalls shipyard in Mississippi after securing loan guarantees from the federal government through an intensive lobbying effort.

"Let me provide some history of American Classic Voyages' 'Project America' for the record: The project, which was to consist of the construction of two large cruise ships in the United States, received considerable political support over the last several years. This political support translated into language being included in the Department of Defense Appropriation Bill for FY 1998 that granted a legal monopoly for its owner, American Classic Voyages, to operate as the only U.S. flagged operator among the Hawaiian islands. In March of 1999, the contract for Project America was signed with great fanfare in the rotunda of this very building.

"Intense lobbying also created the political pressure that helped secure a $1.1 billion loan guarantee from the U.S. Maritime Administration's (MARAD) Title XI loan guarantee program for the construction of these two vessels.

"Within the first year of construction on the first of these cruise ships, the project was a year to a year and a half behind schedule. Both American Classic Voyages and Northrop Grumman Corporation -- Ingalls Shipyard's parent company were crying foul over construction problems and months of non-binding mediation over contract disputes.

"On October 19, 2001, American Classic Voyages filed a bankruptcy petition under Chapter 11 of the U.S. Bankruptcy Code. The petition listed total assets of $37.4 million and total liabilities of $452.8 million. The cruise line said in its petition that it has more than 1,000 creditors, including the American taxpayers being represented by the Department of Transportation.

"Had the Project America vessels been completed, they would have been the largest cruise ships ever built in the United States and could have sparked a new phase of commercial shipbuilding in this country.

"None of that occurred. The failed project is one of the most costly loan guarantees ever granted under the Maritime Loan Guarantee Program. I questioned the merits of the 'Project America' at the time the special legislation was considered and went so far as to introduce an amendment to the FY 1998 Department of Defense Appropriation Bill to remove the monopoly language. Based on the information available at the time, I believed then that the project was more likely to fail than to succeed.

"The project did fail. Project America resulted in the U.S. Maritime Administration paying out over $187.3 million of the American taxpayers' money to cover the loan default for this project, and recovering only $2 million from the sale of some of the construction materials and parts. But now, the provision in the Omnibus is built around the scraps of that horribly failed pork project, which would now go into this new venture.

"Like 'Project America,' the provision in this omnibus bill singles out one company, this time it is Norwegian Cruise Lines, for preferential treatment, and gives that company privileges enjoyed by no other. There has been no analysis, no discussion, and more importantly, no debate on the value of granting this exclusive exemption from the Passenger Vessel Services Act.

"Over the last several years, I have worked with all sectors of the maritime industry to look for solutions that would provide for a healthy U.S.-flagged cruise ship industry calling on ports nationwide. While those efforts have not yet come to fruition, I am committed to continuing this work. But those efforts will be, and should be, taken in the Committee charged with this responsibility: the Committee on Commerce, Science, and Transportation. Any proposed legislation from the Commerce Committee will be crafted in an open and inclusive manner, not behind closed doors as appears to have occurred with Section 211.

"Aside from the procedural concerns I have, Section 211 is fundamentally unfair. I firmly believe that what is good for one corporation is good for all. Section 211, however, would create an uneven playing field for cruise operators and, depending on how the language is interpreted, also will create an uneven playing field for states by requiring these vessels to operate only in Hawaii, leaving most coastal states with no regular U.S.-flagged cruise ship service.

"Following on the heels of the failed attempt by American Classic Voyages to build a large cruise ship in a U.S. shipyard an effort driven by lobbyists and special interests I believe that further efforts to expand the U.S.-flagged cruise ship fleet should be accomplished through the normal legislative process, after debate and open examination. Any solution should benefit a broad section of the U.S. maritime industry and all of our nation's ports.

"In order to spur such a debate, I am now offering an amendment to simply strike the special interest provision in the Omnibus.

"We can do better than this provision. I ask my colleagues to support the amendment and give all parties concerned with the future of U.S. maritime trade a chance to find a solution that treats everyone fairly and builds a strong, diverse, and competitive domestic cruise fleet."

Senator McCain's amendment was voted down 62:33, with five senators not voting.

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