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SeaDog
09-17-2003, 11:05 AM
There's a bunch of pretty smart people who frequent this forum... was hoping one of you could chime in on a discussion we are having in my office... Why do cruise ships (and merchant ships for that matter) almost always sale under foreign flags...

You seldom, if ever, see a cruise or merchant ship flying the stars and stripes... I'm sure there's an economic reason behind it...

alexandrew
09-17-2003, 11:12 AM
tax advantages....

Lloyd Dobler
09-17-2003, 11:18 AM
I think the reason is almost purely economic. A ship registered under a foreign flag (the DCL ships are of Bahamian registry) do not have to comply with US labor laws. Since the ships do sail in and out of US ports, they must comply with USCG safety regulations, but the crew can be paid according to the labor laws of the country of registry, and taxes are paid to that country. US law requires that advertising list the ship's country of registry.

Here's an interesting link on this topic:

http://www.iccl.org/faq/imi.cfm

Incidentally, for a ship to be registered in the US, it must be built in a US yard, or receive special exemption, as the US Lines' ship Patriot did (it was formerly HAL's Nieuw Amsterdam). An obscure law called the Passenger Services Act requires that a passenger ship of foreign registry must make a port call outside the US during each voyage, which is why all cruises have a foreign port call. Some Hawaii to west coast cruises make a perfunctory call at Ensenada, Mexico, to comply.

ThreeCircles
09-17-2003, 02:19 PM
Originally posted by Lloyd Dobler
An obscure law called the Passenger Services Act requires that a passenger ship of foreign registry must make a port call outside the US during each voyage, which is why all cruises have a foreign port call.

It seems that this is not always the case. Several cruise lines offer "round-trip" cruises that make no call at any port. In other words, they leave from a US port, sail out to sea, and then return to that same port.

Lloyd Dobler
09-17-2003, 03:12 PM
Originally posted by ************
It seems that this is not always the case. Several cruise lines offer "round-trip" cruises that make no call at any port. In other words, they leave from a US port, sail out to sea, and then return to that same port.
I believe these cruises to "nowhere" are often preview cruises for the travel industry. I don't think they're regularly scheduled.

In any case, there seem to be other exceptions, for which I believe the lines must get permission. On one of our Magic cruises, we swapped St. Maarten for Key West due to a storm, so we ended up in all US ports (although, I guess Castaway Cay is technically the Bahamas). I've seen other reports where ships' scheduled itinerary is changed for some reason. The NCL ship which is based in Hawaii has to travel to Fanning Island in the Republic of Kiribati to fulfill it's PSA obligation. It's a day and a a half at sea each way. This ship occasionally has to skip this call due to different circumstances.

jgalecpa
09-17-2003, 03:30 PM
The reasonings are strictly economic, but rarely income tax based.

Foreign corp.'s pay tax on US source income just like US Corp.'s (See US Constitution, 16th Amendment and Sec 61(a) Title 26 USC).

The reasons are principally labor related, as mentioned above, i.e. overtime, employment taxes, etc.

jrabbit
09-17-2003, 04:18 PM
although, I guess Castaway Cay is technically the Bahamas

Nothing "technical" about it, it is in The Bahamas. Just because a US corporation buys land (or leases it in this case) in a foreign country, doesn't make it part of the USA.:)

Lloyd Dobler
09-17-2003, 04:30 PM
Originally posted by jrabbit
Nothing "technical" about it, it is in The Bahamas. Just because a US corporation buys land (or leases it in this case) in a foreign country, doesn't make it part of the USA.:)

That's a pretty "technical" explanation.....

I was under no illusion that Castaway Cay, properly named Gorda Cay, is part of the US. It just occurred to me after I typed the preceding sentence that my cruise did in fact call in a foreign port, albeit not a port in the traditional sense.

SeaDog
09-17-2003, 04:42 PM
Thanks for the replies and information!