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The Real Reason Cruise Ships Aren't US Flagged

The Norwegian Encore, one of Norwegian Cruise Line’s newest additions to the fleet, is registered in the Bahamas and owned by a US-based company named after Norway. A little confusing, right? Things are further complicated when you consider that folks have recently taken issue with this in the aftermath of cruise-related Covid-19 issues.

An understanding of history and policies can help clarify things.

Though it no longer has ties to Norway, one of NCL’s cofounders, Knut Kloster, was Norwegian. The country is now merely a namesake.

That may clear up the name issue a bit. But it doesn’t explain why the majority of U.S.-based ships are registered in other countries?

Carnival Cruise Line and the Cruise Line International Association have some info that can shed a little light.

There are several reasons for cruise lines to flag their ships outside the US. One of the most crucial is that U.S. law requires that in order to be registered in the US, the ship must also be built here. There are US shipyards known for constructing military vessels, smaller passenger craft and historic ocean liners. However, they do not possess the expertise, capacity or supply chain necessary to construct the contemporary cruise ship behemoths. European shipyards have largely taken on this challenge and Germany in particular produces many of the ships we are so excited visit.

The exception to this rule in the mass market brands in Norwegian’s Pride of America. The vessel began construction in Mississippi as the failed Project America 1 before being acquired by Norwegian and completed in Germany. It took a special U.S. government exemption to permit the multinational ship to sail under a U.S. flag, which allows it to sail exclusively in the Hawaiian Islands. The Passenger Vessel Services Act of 1886 dictates that foreign-flagged passenger ships carrying guests between U.S. destinations must first stop at a foreign port, so Norwegian has exclusive access to this itinerary.

None of this is to say cruise lines do not pay domestic taxes. According to CLIA data, the 2019 total was $1.3 billion. $700 million of that was attributable to Carnival alone, and $600 million of that directly supported our port cities.

The truth is that all cruise lines boost the economy in every country they visit. Cruise ships operate globally and must pay taxes and port fees everywhere they go.

If the US laws were to change, more cruise ships could potentially be registered domestically and might sail itineraries closer to home without needing foreign ports of convenience. California coastal sailings, for example, could visit Western cities without the need to detour to Ensenada, Mexico in order to fulfill the requirement.

But until that happens, cruise ships will continue to be flagged in countries other than the US. At least now you know why.

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