January 18, 2003

Project America rides again
So, you thought the Project America plan to build two cruise ships for the Hawaiian market was over and done with when the deal was done to sell one half completed ship and the materials for the second to NCL at a bargain basement price? When last heard of, Northrop Grumman's Ingalls unit was getting the first ship completed to the point where it could be towed quietly away to Germany for completion.

As we may have said before, boy magician Harry Potter is not the only one with a magic wand. Every U.S. Senator seems to have one too. And Hawaii's Senator Inouye just waved his. Reproduced here is the text of a Senate amendment to the Omnibus Appropriations Act of 2003.

Theeffect of this amendment, should it clear all the remaining Congressional hurdles, was explained in this morning's Honolulu Advertiser.

"In a move that could revive interisland cruises in Hawai'i, Sen. Dan Inouye is close to obtaining a special exception in federal law so Norwegian Cruise Line can operate foreign-built ships in Hawai'i under U.S. flags," the newspaper reported. It says "the deal could restore an industry that collapsed when American Classic Voyages, which offered interisland tours for years and had plans for new ships, went bankrupt with the economic slump following the Sept. 11 terrorist attacks."

"Inouye, a Democrat," says the newspaper, "quietly slipped the provision into a spending bill that Congress is drafting to pay for government operations this fiscal year. An attempt by Sen. John McCain, R-Ariz., to strip the provision from the bill was rejected by the Senate."

The Honolulu Advertiser notes that the Passenger Vessel Services Act prohibits foreign-built ships from operating between U.S. ports without making a foreign stop in between or obtaining a federal exception. The law is intended to promote U.S. shipbuilding, but domestic shipbuilders have not built a cruise ship in more than 40 years.

The federal government promised more than $1 billion in loan guarantees for two new American Classic ships to be built by Northrup Grumman at Ingalls shipyard in Pascagoula, Miss. The project failed after American Classic filed for bankruptcy, and construction on the first ship was left unfinished, costing federal taxpayers more than $185 million, says the newspaper.

Last year, NCL, a subsidiary of Malaysia's Star Cruises, agreed to buy the partially completed ship and materials for a second ship. The newspaper says the first ship could be completed by spring or summer 2004.

Under Inouye's provision, says the Honolulu Advertiser story, NCL would be able to fly U.S. flags over the two "Project America" newbuilds but could reflag a third foreign-built ship with U.S. colors to secure its foothold in the market the same rights American Classic had before bankruptcy.

The newpaper reports that Inouye said the new ships would be required to have U.S. crews and would be subject to U.S. tax, labor and environmental laws. He estimated the three ships could bring the Islands as many as 3,000 jobs and millions of dollars in taxes and tourism revenue. The senator also said the ships could benefit national security by expanding the number of seafarers available in a national emergency, and argued the provision could help the government recover its investment in "Project America.''

SEC. 211. From funds made available from the "Operations and Training" account, not more than $50,000 shall be made available to the Maritime Administration for administrative expenses to oversee the implementation of this section for the purpose of recovering economic and national security benefits to the United States following the default under the construction contract described in section 8109 of the Department of Defense Appropriations Act for Fiscal Year 1998 (Public Law 105-56): Provided, That the owner of any ship documented under the authority of this section shall offset such appropriation through the payment of fees to the Maritime Administration not to exceed the appropriation and that such fees be deposited as an offsetting collection to this appropriation: Provided further, That notwithstanding any other provision of law, one or both ships originally contracted under section 8109 of Public Law 105-56 may be constructed to completion in a shipyard located outside of the United States and the owner thereof (or a related person with respect to that owner) may document one or both ships under U.S. flag with a coastwise endorsement, and notwithstanding any other provision of law, and not later than two years after entry into service of the first ship contracted for under section 8109 of Public Law 105-56, that owner (or a related person with respect to that owner) may re-document under U.S. flag with a coastwise endorsement one additional foreign-built cruise ship: Provided further, That: (1) the owner of any cruise ship documented under the authority of this section is a citizen of the United States within the meaning of 46 U.S.C. 12102(a), (2) the foreign-built cruise ship re-documented under the authority of this section meets the eligibility requirements for a certificate of inspection under section 1137(a) of Public Law 104-324 and applicable international agreements and guidelines referred to in section 1137(a)(2) thereof and the 1992 Amendments to the Safety of Life at Sea Convention of 1974, and that with respect to the re-documented foreign-built cruise ship, any repair, maintenance, alteration, or other preparation necessary to meet such requirements be performed in a United States shipyard, (3) any non-warranty repair, maintenance, or alteration work performed on any ship documented under the authority of this section shall be performed in a United States shipyard unless the Administrator of the Maritime Administration finds that such services are not available in the United States or if an emergency dictates that the ship proceed to a foreign port for such work, (4) any ship documented under the authority of this section shall operate in regular service between or among the islands of Hawaii, (5) no person, nor any ship operating between or among the islands of Hawaii, shall be entitled to the preference contained in the second proviso of section 8109 of Public Law 105-56, and (6) no cruise ship operating in coastwise trade under the authority of this section or constructed under the authority of this section shall be eligible for a guarantee of financing under title XI of the Merchant Marine Act 1936: Provided further, That any cruise ship to be documented under the authority of this section shall be immediately eligible before documentation of the vessel for the approval contained in section 1136(b) of Public Law 104-324: Provided further, That for purposes of this section the term "cruise ship" means a vessel that is at least 60,000 gross tons and not more than 120,000 gross tons (as measured under chapter 143 of title 46, United States Code) and has berth or stateroom accommodations for at least 1,600 passengers, the term "one or both ships" means collectively the partially completed hull and related components, equipment, and parts of whatever kind acquired pursuant to the construction contract described in section 8109 of Public Law 105-56 and intended to be incorporated into the ships constructed thereto, the term "related person" means with respect to a person: a holding company, subsidiary, or affiliate of such person meeting the citizenship requirements of section 12102(a) of title 46, United States Code, and the term "regular service" means the primary service in which the ship is engaged on an annual basis


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