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The US maritime law, passed just days before air travel, exports American tourism dollars to countries such as Canada, Mexico and Aruba.

The Passenger Ship Act of 1886 does this by prohibiting ships flying a foreign flag or built under a foreign flag from carrying passengers between U.S. ports unless they stop in another country.

For example, cruises on foreign ships can sail from San Diego to Hawaii, but only if they add Ensenada, Mexico to the itinerary. Cruises from Seattle to Alaska usually stop in Vancouver or elsewhere in Canada, and cruises from Florida to New York usually include a detour in Aruba.

Foreign cruise ships departing from Hawaii have been known to divert 1,000 miles south to Fanning Island, which is part of the Republic of Kiribati.

These legal exceptions enrich foreign destinations at the expense of U.S. tourism hotspots. The original intent of the law was to “protect” US passenger airliners from foreign competition. But those days are long gone, and PVSA is now like a duck to water. The US simply no longer has a large ocean liner industry to protect. As of the end of 2022, there is only one major U.S.-flagged cruise ship authorized to operate under the PVSA. Ironically named “The Pride of America”, it was built primarily in Germany and operates with an exception that limits its service to Hawaii.

In terms of shipbuilding, no major cruise ships have been built in the United States since 1958; most large cruise ships these days are built in Europe and Asia.

Even if US shipyards could build large cruise ships, they would simply cost too much. Container ships and tankers, for example, typically cost three to four times more in the United States than overseas.

As a result, there are no major American-built cruise ships serving the US cruise market other than Pride of America, and foreign ports, especially in Canada and Mexico, are the main beneficiaries.

Tourist dollars are going to other countries

British Columbia, Canada, home to Vancouver and Victoria, generates more than $2 billion in revenue annually from American-origin cruise ships, according to one estimate.

Now Panama wants in on the action. A few months ago, the country announced it would pay $100,000 to Washington lobbying firm Potomac Partners to help change Panama’s status under the PVSA from a “nearby foreign port” to a “distant foreign port.”

This seemingly minor change could be a game changer for Panama, as most ports in North and Central America, including Panama, are considered nearby foreign ports.

Under the PVSA, U.S. cruises visiting nearby foreign ports must begin and end at the same U.S. port. In other words, a cruise to Hawaii that starts in San Diego and stops in Ensenada must end in San Diego because Ensenada is considered a nearby foreign port.

Cruises starting in the United States and stopping at a distant foreign port such as Oranjestad, Aruba or Yokohama, Japan, or anywhere outside North and Central America, may disembark passengers at ports other than the one from which they departed.

If Panama were to gain “long-haul” foreign port status, it could attract more cruise tourism because cruises that originate in the U.S. would no longer have to return to ports of origin to disembark passengers. For example, passengers traveling from Los Angeles to Miami with a short visit to Panama will not have to return to Los Angeles aboard the same ship.

In its filing with the U.S. Department of Justice, Potomac Partners said the remote port designation would “assist the economic development of Panama.” Twenty years ago, when Panama asked U.S. Customs and Border Protection to administratively change its status, it predicted that “the number of American passengers visiting Panama would increase tenfold.”

Customs denied that earlier request. This time Panama is pushing for legislative changes. Potomac Partners hopes to be able to “take the necessary actions to ensure expeditious passage of this PVSA amendment in Congress,” the statement said.

But Panama’s attempt to gain long-distance foreign port status ignores a fundamental question: Why maintain PVSA in its current form at all?

There are a few US river cruise lines that are “protected” by the law, but why not waive the PVSA as it applies to large ocean ships?

A world without PVSA

Without PVSA, cruises from Florida to Maine would be possible without calling at Aruba. Instead, U.S. port cities such as Savannah, Georgia, and Atlantic City could reap those previously exported tourism dollars.

Cruises up and down the California coast could thrive without the required night in Ensenada. People could board a cruise ship from Oahu to Maui without the cruise line being fined $798 for violating the PVSA.

Many cruise lines may still want to include stops abroad in their itineraries, but those stops will be determined by market demand rather than an arbitrary, outdated law.

Recognizing the harm of the PVSA, Senators Mike Lee of Utah and Lisa Murkowski of Alaska amended the law. Lee proposes exempting large cruise ships from the law or repealing the law entirely; Murkowski’s legislation would only exempt large ocean liners heading to Alaska if there are no similar U.S.-built ships that can meet the demand.

Either way, US states and port communities will benefit as tourism dollars stop flowing overseas.