Obama's Title XI Policy Challenged by AFP

press release
Thursday, August 30, 2012

American Flagship Project challenges President Obama to explain why his Administration has blocked America’s entry into the $40 billion-a-year foreign-dominated cruise sector.


The Obama Administration has announced a policy prohibiting the use of its Title XI ship financing program for American flag cruise ships.

 

World City America Inc. has devoted more than fifteen years and invested $60 million in an effort to claim for the American economy and American jobs a share of the US-driven, but foreign-dominated, cruise industry. In May of 2012, the company was told by the US Maritime Administration (MARAD) that the agency had adopted a policy of prohibiting the financing of overnight passenger vessels (i.e., cruise ships).


In an Open Letter to President Obama, dated August 28, 2012, to coincide with the opening of the Republican National Convention, World City President, Stephanie Gallagher, challenged Obama to explain the Administration’s position that effectively excludes American shipowners from competing in a huge industry that is almost entirely supported by US passengers and US dollar revenues.

 

“The whole purpose of Title XI is to make it possible for American shipowners to obtain long-term financing on terms and conditions and at interest rates comparable to those available to large corporations,” Ms. Gallagher stated in her letter, citing 60 Fed. Reg. 20592. “And the whole purpose of that, of course, is to support job creation, not only in shipbuilding and supply, but in operating ships under the American Flag.”


“The only sector of the international shipping industry that is doing well and has consistently done well year after year after year, Mr. President, is the cruise sector,” Ms. Gallagher wrote. “Why would you want to exclude Americans from that activity?”

 

“Except for small coastwise vessels and riverboats,” World City’s letter continued, “none of the 200+ ocean-going cruise ships operating in the North American cruise market were built here, none hire American officers or crew, and none pay US income tax on their multi-billion dollar annual profits – unlike every other US hospitality organization.”


With its Open Letter to President Obama, World City forwarded a copy of Devils on the Deep Blue Sea by Kristoffer A. Garin, referring specifically to Chapter Eight, “Hiding in Plain Sight,” and quoted from it:

Carnival and Royal Caribbean, which together account for more than 85% of the North American cruise industry, have achieved something truly remarkable. As public companies headquartered in the United States, traded on the New York Stock Exchange, earning a vast majority of their revenue from U.S. citizens making round-trip voyages originating in U.S. ports, they have managed to maintain, for tax purposes, the status of foreign corporations engaged in the international transportation of people and goods…


In response to claims that they are effectively being subsidized by the U.S. government, industry spokespeople point to the economic contributions they make in their “homeports,” the cities where they embark and disembark passengers. Billions of dollars annually, they say… (p.204)

 

In 1999, it (the foreign-flag cruise industry) paid $66 million in port fees. But no federal taxes. Critics find this argument “absurd” … any other American corporation could make the same arguments they’re making, which is to say, ‘Well, gee, because we buy food from caterers, we buy advertising, we buy this, we buy that, we shouldn’t have to pay taxes… (p.205)

 

Garin’s book points out that “this profoundly American industry” is in fact not American at all; it also is not transportation.” In fact, according to Garin, “the story of the modern cruise industry has as much as anything been that of its steady and prosperous retreat from the transportation industry.” It competes directly with US hotels and resorts which are required to hire Americans and pay income taxes on their US operations.


World City doesn’t blame the Obama Administration for this predicament. “For decades, both sides of the aisle have been major recipients of the foreign-flag lobby largesse and, for the most part, have closed their eyes to this unfair situation,” Ms. Gallagher claims. “But we do blame the Obama Administration for throwing down the gauntlet…for precluding America’s long-delayed entry into this booming US-driven market; for shutting the door on what we have proven is possible and viable if the government applied the Title XI regulations as intended – not as a subsidy for special interests, but as a job-creating, economy-boosting and tax revenue-generating program and policy.”


“Why, Mr. Obama, would you choose this, of all times, to lock out American shipbuilders, hotel construction companies, hundreds of US suppliers in all fifty states, and thousands of long-term self-sustaining new jobs for our dwindling Merchant Marine and US hospitality workers?”

 

“Why,” the letter continues, “when there are twenty-three million Americans out of work, would you decide to announce a policy that America and Americans can’t participate in this booming
US-driven market that has grown steadily at 7% or more every year, recession or no recession, for decades?”
 

“I’ll tell you why,” World City asserts. “Politics and special interests. The rich non-taxpaying foreign-flag cruise industry does not want an American entrant into this market because it will focus the spotlight on the reality that these hospitality companies are operating unfairly in competition with American hotels, resorts and entertainment facilities. Period. And they especially don’t want the American Flagship Project to happen because it promises to build the
largest, safest and greenest passenger ship in the world; to fly the Stars & Stripes, to hire Americans and to pay taxes, like every other US hospitality organization. That’s why.”


World City’s Open Letter to President Obama ended with a request that the Administration “not only reverse this shocking anti-American policy, but instruct MARAD/DOT to reinstate World City’s fully-reviewed, economically sound Title XI application that was terminated without cause, and theoretically “without prejudice”, after the disgraceful American Classic Voyages Title XI fiasco – that was MARAD’s own doing – and which cost the American taxpayers over $500 million.”
 

“The current Administration,” World City asserts, “apparently wants to throw the baby out with the bathwater and would prefer to use limited Title XI resources to enable large corporations to refinance ships that are already built and which will not create any new jobs, either in shipbuilding or on their ships. This approach defies the statutorily mandated purpose of Title XI and would be a double whammy for entrepreneurial start-ups like World City America Inc.”
 

ABOUT THE AMERICAN FLAGSHIP PROJECT

World City America Inc. was formed to design, build and operate a new class of passenger vessel that could be constructed competitively in the United States and compete successfully in the foreign-dominated cruise sector under a US flag operation. More information about the American Flagship project can be found on its website: www.americanflagship.com

Maritime Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Lawyer: Korea Ferry Owners Accept Responsibilities

The family that has a major stake in companies that control the shipping operator whose ferry sank last week, likely to have killed hundreds, will take social and

Fredriksen Joins Rival for New Capesize Firm

Shipping tycoon John Fredriksen is joining one of its shipping firms with rival Knighsbridge Tankers Ltd to create the largest U.S. listed Capesize firm, which

Wärtsilä Reports Healthy Ship Power Sector in Q1 2014

In its interim financial report January to March 2014 Wärtsilä notes healthy development in ship power and services offsetting challenges in power generation markets.

Legal

Court: Japan's Mitsui Paid to Release Ship

China Supreme Court says Mitsui pays about $29 mln; Ship released about 0030 GMT Thursday. Ship was seized over dispute dating back to 1930s. Advisor to plaintiffs says will likely demand more money.

Lawyer: Korea Ferry Owners Accept Responsibilities

The family that has a major stake in companies that control the shipping operator whose ferry sank last week, likely to have killed hundreds, will take social and

Mitsui O.S.K. Ship Ready To Leave Chinese Port

Japanese shipping firm Mitsui O.S.K. Lines Ltd said on Thursday that its ship, the "Baosteel Emotion" 226,434 deadweight-tonne ore carrier, is ready to leave

Cruise Ship Trends

Holland American Line, with Seabourn Named 'World's Most Ethical' Companies

For the third consecutive year, Holland America Line, together with sister line Seabourn, was named among the World’s Most Ethical Companies by Ethisphere Institute,

Ship as Lifeboat Concept Disputed by ICV

A recent meeting at the National Transportation Safety Board in Washington, D.C. (attended by International Cruise Victims (ICV) Board representatives) discussed

NCL Spotlights Eco-Smart Cruising Program

On Earth Day, Norwegian Cruise Line NCL) celebrated key achievements from the past year that, as a part of its Eco-Smart Cruising program, help preserve the world's oceans.

Finance

Court: Japan's Mitsui Paid to Release Ship

China Supreme Court says Mitsui pays about $29 mln; Ship released about 0030 GMT Thursday. Ship was seized over dispute dating back to 1930s. Advisor to plaintiffs says will likely demand more money.

Fredriksen Joins Rival for New Capesize Firm

Shipping tycoon John Fredriksen is joining one of its shipping firms with rival Knighsbridge Tankers Ltd to create the largest U.S. listed Capesize firm, which

Diamond Offshore profit falls as rig demand softens

Diamond Offshore Drilling Inc, one of the world's top five offshore rig contractors, reported a 17 percent drop in quarterly profit as demand fell for rigs used in deep water drilling.

Government Update

Court: Japan's Mitsui Paid to Release Ship

China Supreme Court says Mitsui pays about $29 mln; Ship released about 0030 GMT Thursday. Ship was seized over dispute dating back to 1930s. Advisor to plaintiffs says will likely demand more money.

Korean Ferry: Pair Drowned with PFD's Tied Together

A boy and girl trapped in a sinking South Korean ferry with hundreds of other high school students tied their life jacket cords together, a diver who recovered their bodies said,

GAO: Limited Commercial Arctic Development Foreseen

Decreasing seasonal sea ice has opened up Arctic waters for longer periods with resulting potential economic opportunities in commercial shipping, cruises, commercial fishing, oil, and mining.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Navigation Offshore Oil Pipelines Port Authority Salvage Ship Repair Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2641 sec (4 req/sec)