236 million $ cruise to nowhere

I found this interesting article about Carnival’s response to the Hurricane disaster that hit New Orleans, in the October 2005 edition of the American Maritime Officer, the Union’s newsletter.

Foreign cruise interests seek waiver of Passenger Vessel, Services Act

A waiver of the Passenger Vessel Services Act has been requested on ,behalf of a foreign cruise line chartering foreign-flagged cruise ships to the U.S. government for use in the reconstruction efforts in Gulf Coast cities recently ravaged by hurricanes and flooding.

Also requested was an exemption from U.S. taxes for the three vessels during their charters.

The Passenger Vessel Services Act is the U.S. cabotage law that reserves domestic transportation of passengers for vessels manned by U.S. citizens, built in the U.S. and owned and operated by U.S. companies. At press time, no legislative waiver of the law had been applied.

Carnival has chartered three cruise ships to the U.S. government for a cost of $192 million, with up to $44 million in reimbursements for fuel and other costs. Initially, the ships were to have housed evacuees from the hurricane-stricken areas, who did not turn out in large numbers to move onto cruise ships. The ships are being used to house relief and law enforcement workers and their families for up to seven months.

In a letter to U.S. Treasury Secretary John Snow, legislators requested a waiver of the Passenger Vessel Services Act for three foreign cruise ships chartered by the government. The letter cites the temporary waiver of the Jones Act for petroleum and oil shipments.

Military Sealift Command’s solicitations for passenger vessels following Hurricane Katrina made no mention of coastwise qualified vessels and apparently did not anticipate a need for a legislative waiver of the cabotage law.

Because the ships are being used for temporary housing, rather than transporting paying passengers, and, due to the innate flexibility of the cabotage law under exigent circumstances, a legislative waiver is not necessary.

Carnival also asked Secretary Snow to work with the Internal Revenue Service have the income from operation of the ships exempted from U.S. corporate income, taxes.

“We simply do not want to jeopardize our tax classification, nor do we want to interrupt our relief efforts for failure to secure this assurance from the Treasury Department via the appropriate IRS guidelines,” said Carnival Chief Operating Officer Howard Frank in a letter to Secretary Snow.

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