Can you think of an industry that takes in $150 billion in revenue with a million employees because of roughly 300 ships? Well, there’s only one, and it’s cruise ships.
Subject to some of the biggest regulations, cruise lines often have to pay massive fines for things you may have never heard about. Well, that doesn’t have to be the case anymore. Let’s talk about the Passenger Vessel Services Act (PVSA) and how it relates to your cruise vacations.
In This Article…
- What Is the Passenger Vessel Services Act?
- How The PVSA Affects Cruise Ships
- Jones Act vs Passenger Vessel Services Act
- PVSA News for Cruise Lines
- PVSA FAQ
- Keep On Cruising!
What Is the Passenger Vessel Services Act?
The PVSA is a law in the United States that came into play in 1886 relating to what was known as “cabotage,” which is the transportation of goods or passengers within one country while the transport owner or operator is from another country.
The idea behind this legislation was to rid the country of certain fees that were interfering with the operations of American vessels and to fix some of the broken laws from the time that interfered with US industrial transportation.
Whether you’re a first-time cruiser or a seasoned veteran, you’ve likely never heard of the PVSA, so let’s see what the law actually is before we discuss its relation to cruise ships.
To know what the law is about, it’s important to know the definition. The long title of the act is essentially a law to abolish certain fees for services to American vessels and to amend any laws related to shipping commissioners, operators, and owners of vessels, as well as for other purposes.
It also states that no foreign vessel larger than 5 tons, including ferries and other ships, shall transport passengers from one port within the US to another or face a penalty of $762 per passenger that was successfully transported and landed. The price at the time was $200 but has since been raised to $762 per passenger, where it currently stands.
These laws cover any navigable waters in or around the United States that offer transport to other countries, including oceans and The Great Lakes. States such as Hawaii and Alaska, as well as other US territories, are included in the same way as the mainland US. This law is still in place today and creates many logistical challenges for both cruise lines and passengers alike.
What Is Not Covered
There are important exceptions to this legislation that are worth noting. The law does not include vessels that depart from and land at the same US port, presuming they landed at another foreign port between.
The law does not prohibit foreign ships that are departing from a US port, who are then visiting a distant foreign port, and then continuing to a different US port. However, in order to travel in a US port and land in a second US port, the vessel must visit a distant foreign port outside North America or the Caribbean.
There were other specific exemptions. Canadian vessels were able to carry passengers from Rochester, NY to Alexandria, NY, as well as between certain ports in Alaska. This was only until the US was able to take over the market for this. Later on, ports between islands in Hawaii were also made into exceptions to this law.
Who Requests The Fines?
While the Passenger Vessel Association is responsible for overseeing the cruise industry in the United States, they are not responsible for charging or receiving these penalties.
The Customs and Border Protection (CBP) will deliver and accept fines from passenger vessels who violate the PVSA. There may be circumstances where CBP agents do not pursue a fine for a violation on the grounds that they see fit. However, this is a rare occurrence.
How The PVSA Affects Cruise Ships
Of course, when we think of passenger ships, cruise lines come to mind. However, this law didn’t come into play because of cruise ships, as cruises have only been around since the 1960s.
However, no exceptions were ever made to the PVSA in regard to cruise ships once they became popular, so how are they affected by the law?
The two biggest cruise lines in the US are Royal Caribbean and Carnival, and neither of them operates with US flags on their ships. Their ships always have foreign flags and registrations because of the advantageous laws and business opportunities in other countries, mostly within Latin America.
The next down the list is Norwegian Cruise Line (NCL) and Disney Cruise Line. NCL only has one single ship registered in the US, and Disney has all of theirs in the Bahamas. So, do they have to pay $762 per passenger when they arrive at another port in the US? Let’s start by talking about why they use different flags.
“Flag of Convenience”
Many cruise lines are accused of flying a “flag of convenience” as opposed to a flag of the company’s origin. This is simply because it’s true, and few companies would bother to deny it.
This is a long-standing practice that was started by passenger liners and ferries because of prohibition laws in the 1920s when American-flagged ships couldn’t serve alcohol. Using a different flag allowed them to serve alcohol in international waters.
However, the reason they do this today is to figure out which country will give them the most advantageous regulations for their routes. Since most cruise ships take fairly consistent routes, there may be a certain country that gives them the most convenient deal for that route.
Because of this, cruise lines work to determine which country will be the most convenient for their registration when it comes to worker compensation and rights, alcohol and gambling laws, tax advantages, and more.
Now, with some of the COVID restrictions, foreign-flagged ships were not allowed to continue service while American-flagged may be able to, which makes you wonder why they don’t just change their flags. That brings us to the reason they have “flags of convenience.” They can’t.
To become an American ship, the entire ship must be assembled in the US and hold primarily US crews. That’s a ship that sailed a long time ago, if you’ll pardon the pun.
This is important to know in order to understand why the PVSA affects the cruise industry. The majority of cruise ships fall under the umbrella of foreign-flagged ships, even if they have headquarters domestically.
What Happens If A Cruise Line Violates The PVSA?
Cruiselines will typically be diligent about planning their routes, but there’s no way to guarantee 100% effectiveness when avoiding fines. Even if they do plan it perfectly, there are still situations where this will happen.
For example, if somebody on board needs medical attention and needs to be dropped at the nearest port in Washington before arriving at their foreign destination in Vancouver. In this example, the cruise line will be fined $762 for that single passenger and nothing else.
If there is inclement weather that stopped someone in Florida from reaching their destination in the Dominican Republic and the cruise was canceled after leaving the port, they will be fined the $762 per passenger that is dropped off at the US port.
However, in a circumstance like this, the cruise line would try to negotiate the fee with the CBP for a lower rate, as this was not a planned landing. This is because if some of the largest passenger vessels have a serious emergency and need to get off, the fines could be steep, while the cruise lines will still have to refund their passengers.
If a cruise ship has 3,000 people on board and has to dock, it could be facing a fine of over $2.2 million. In these situations, fines will likely be reduced but not eliminated.
How Does It Apply To Back-To-Back Cruises?
If the cruise ship stops at a foreign port before their passengers land, there will be no fines regardless of the type of cruise route. However, if there are two or more trips combined into one and passengers land without stopping at a distant foreign port, then yes. This will trigger a violation on a per-passenger basis.
Let’s say somebody goes from Seattle to Vancouver on a cruise but then stops in Alaska afterward. They started in Seattle and will eventually need to return there. If they use the same ship and go straight there without stopping at a Canadian port, they will be subject to a fine.
Are Certain Cruise Ships Exempt?
Yes. We mentioned that at least one NCL ship is American, but there are plenty more. Many smaller cruise lines and other passenger vessels are American-made, flagged, and operated and are not subject to these penalties.
However, there is only one mainstream cruise ship, Norwegian Cruise Line’s Pride of America, that is registered and flagged in the US. The rest are small passenger vessels that may act as “cruise ships,” and they will not be subject to these fines.
Jones Act vs Passenger Vessel Services Act
When people bring up the PVSA, the Jones Act is often mentioned. The Jones Act was initiated in 1920 as part of the Merchant Marine Act, and it bars ships from transporting goods from US port to US port unless they are built, flagged, and operated domestically.
The intent of this law was to secure a merchant marine fleet, most likely for national defense. Not only does this affect cruise lines and other passenger vessels, but all vessels not built and flagged in the US. Because of this, passengers don’t necessarily need to get off the ship for cruise lines to incur fines for docking.
Fines for violating these laws are also under the discretion of CBP, and there is no specific dollar amount for violations. They are incurred on a case-by-case basis and are often steep.
There have been several occasions where the Jones Act has been amended or revised throughout its history. It’s also been waived on several occasions, usually due to natural disasters requiring ships within the US to provide assistance.
PVSA News for Cruise Lines
Because of the Covid restrictions, cruise lines were given a temporary pass when it came to Alaska. This allows them to skip the foreign port requirement without receiving a fine.
This was because of Canada’s laws about foreign cruise ships at the time, and Vancouver and other ports are common destinations for Alaskan cruises.
In June of 2021, a US Senator from Utah introduced three bills to allow cruise ships the freedom to operate this way permanently, arguing that the law only benefits Canada and Mexico with increased maritime revenue while disadvantaging the US.
The first bill introduced was called the “Open America’s Ports Act,” which would repeal the PVSA, allowing passenger vessels to freely transport from US port to US port.
The second was called the “Safeguarding American Tourism Act,” which was aimed at exempting large passenger vessels from PVSA requirements. The third was the “Protecting Jobs In American Ports Act”, aimed at repealing the requirement that ships be US-built to avoid these restrictions. Believe it or not, there hasn’t been a large cruise ship built in the US since 1958.
Since that bill was killed, Senator Lisa Murkowski announced a follow-up bill on September 15th called the Cruising For Alaska’s Workforce Act and is currently making its way through congress. The bill is primarily aimed to allow ships from the mainland US to reach Alaska without being subject to PVSA regulations.
No, the fines are targeted and designed for the owner/operator of the vessel. Cruise ships will not charge you.
Again, the cruise industry leaders majorly believe that the benefits of using foreign flags outweigh the risks. Norwegian seems to believe there is enough benefit to having one ship registered in the US, but no other major cruise line has followed suit.
That’s for you to decide. Lawmakers are currently trying to determine that as we speak. It clearly has not kept the largest companies within the industry to use American equipment and crew and would need some adjusting to accomplish that goal.
Some, yes. There are many instances where ships have to take detours or plan routes differently than they otherwise would have, and they do pass some of those expenses along to consumers.
Keep On Cruising!
Now that you know about the Passenger Vessel Services Act and how it affects the cruise industry, you should be able to make more sense of the routes and other practices within the cruise industry. We’ve got more helpful guides on cruising over on our Cruise Tips section.