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Is Pro-U.S. Shipbuilding Bill A Local Threat?
Proposed lifting of ceiling for conventions on
cruise ships is being studied by Puerto Rico hoteliers
by John Collins
February 3, 2000
Copyright © 2000 CARIBBEAN BUSINESS. All Rights Reserved.
A bill to encourage a greater role by U.S. shipbuilders in
the booming cruise industry is being studied carefully by the
Puerto Rico hotel industry. Of interest is the provision in it
which would lift a ceiling on the tax-deductibility of conventions
held on cruise ships, Rick Newman, president of the Puerto Rico
Hotel & Tourism Association (PRHTA) told
The All American Cruise Act, HR3392, was introduced into the
U.S. House of Representatives in November and is being reintroduced
in the new session which has just commenced. There is a similar
version in the U.S. Senate. Both have strong bipartisan support
from the Louisiana delegations because of the importance of shildbuilding
Most of the provisions in the bills are intended to encourage
more participation in the cruise trade by U.S. shipbuilders but
in the fine print is a proposed modification to repeal the $2,500
business tax-deduction limit for a convention on a cruise ship,
putting such gatherings on a par with the tax status of landside
"We are studying this bill and that specific provision
carefully," said Newman. "Conventions are a very important
and growing aspect of tourism in Puerto Rico. We have or are building
several big hotels with bigger meeting facilities. We're also
embarking on a new convention center which will open up our marketing
efforts. We're looking forward to a lot of new [convention] business."
While he is supportive of the bills' provisions to expand the
role of U.S. shipbuilders, Newman said "it can't be accomplished
at the expense of placing landbased tourism and hotels and resorts
at a disadvantage with the cruise industry. The cruise lines are
floating tax exemptions utilizing foreign ships, foreign flags
and foreign crews. They skirt many U.S. laws and regulations governing
labor and the environment. We comply with all of them and that
places us at a competitive disadvantage because the playing field
is not level."
The prime sponsor of the measure in the U.S. Senate is Sen.
John Breaux, D-LA, and in the House, Rep. Duncan Hunter, R-CA.
"The intent of this provision is to level the playing
field for the seven U.S. cruise ships it is hoped will develop
as the result of other incentives included in this bill,"
Michael Harrison, a spokesman for Hunter told
CARIBBEAN BUSINESS from Washington. "It would
not apply to foreign cruise lines." The bill presently has
four other House sponsors.
Special interest legislation?
"The problem with this type of legislation, to help one
sector by providing relief to one situation, sometimes creates
unintended negative results in another area," said a Washington
attorney who tracks maritime legislation. "The cruise industry
has tremendous clout and influence in Congress. It's hard to imagine
how long they and their friends would settle for this kind of
special interest legislation before challenging it. On the other
hand, the foreign cruise operators have come under much closer
scrutiny recently in both the Senate and House."
Another provision would allow U.S. shipyards to defer taxes
on construction or overhaul of a cruise ship until after delivery
provided the contract is at least 12 months in duration. Another
would provide parity for U.S. cruise ship operators with their
foreign competitors by eliminating corporate income taxes for
domestic firms operating cruise ships from U.S. ports.
Industry sources point out that the overwhelming majority of
cruise ships sailing out of U.S. ports are foreign operated but
they indicate that a few domestic companies operate in Florida
and the Hawaii trade.
Another provision would allow U.S. cruise operators to depreciate
their vessels over a five-year, rather than the existing 10-year,
depreciation period. Another would provide a 20% tax credit for
fuel operating costs associated with U.S.-manufactured, clean-burning
The bill would also allow a foreign-built ship to be brought
into the U.S. trades provided the owner or buyer had first entered
into a binding contract to build at least two cruise ships of
equal or greater size at a domestic shipyard, for delivery within
four and five years, respectively.
A number of Washington insiders who follow shipping legislation
indicate the measure will garner strong bipartisan support from
shipbuilding states like Louisiana, Mississippi and Virginia.
But they also point out that, while the foreign cruise operators
have powerful friends in Congress, they have opponents as well,
led by no less that Presidential candidate Sen. John McCain, R-AZ,
chair of the Science & Transportation Committee. He has been
outspoken in his criticism of abuses of environmental and labor
standards by cruise lines. Traditionally, shipping legislation
has tough going in Congress, particularly in a general election
This Caribbean Business article appears
courtesy of Casiano
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