Why are cruise ships registered in other countries?

If you’ve ever seen the back of a cruise ship and wondered why it bears the seemingly random name of a city, you’re not alone. That city represents the country where the vessel is registered. But, with cruise ships from the US accounting for the largest number of passengers in the global cruise market, why aren’t cruise ships registered in the US?

Here, I’ll explain why you’re unlikely to see US city names engraved on cruise ships.

Where are cruise ships registered?

The names you’ll most often see on ships are cities in the Bahamas, Bermuda, Panama, the Netherlands, and the United Kingdom, among many others. (For decades, Liberia also flew its flag on the ships of several prominent cruise lines, but that has changed.) Offshore ship registration – charging cruise lines for the privilege Register there – called “flags of convenience.”

Why are cruise ships registered in the Bahamas, Panama and other countries?

Because the ships are not built in America

US law does not allow ships to fly the US flag unless they are built there. Unfortunately, no US shipyard had the capacity or expertise to build ships as large as today’s giants, so they built abroad – mainly in Europe.

Because travel agencies want to pay less tax

Cruise lines pay taxes to their home country – the country where their ships are registered. Shipping lines often pay less tax when their ships are flagged in countries such as Panama and Bahamashelp them save money.

However, that doesn’t mean cruise lines don’t pay taxes, even in the United States. Although the United States has reciprocity agreements with most countries where cruise ships are registered – meaning that if the United States does not tax those countries’ ships federally, it also does not tax their own ships. US – cruise lines still pay taxes within the US every year but at a reduced federal rate.

For example, in 2023, Carnival Corporation & PLC – which operates Carnival Cruise Line, Princess Cruises, Holland America Line, Cunard, Seabourn and other brands – paid $13 million in taxes for a $62 million loss, according to company reports. annual report. It also pays docking fees and in some ports, such as in Alaska, a head tax is levied on each ship’s visit.

According to the report, cruise industry spending in the United States in 2019 — before the COVID-19 pandemic shutdown — supported about $2.6 billion in direct taxes and more than $7.2 billion in revenue. total taxes (including direct, indirect, and incidental) to U.S. federal, state, and local governments. Cruise Lines International Association. On average, every $1 million spent by the cruise industry in the United States supports approximately $102,000 in direct U.S. federal, state, and local tax revenue.

Because travel agencies want lower labor costs

The wages of the lowest-paid workers on cruise ships are low by American standards, but many seafarers can earn more on the ship than they would earn working on land in their home country. home. In addition to salary, seafarers also receive bonuses from passengers and the opportunity to advance to a position with a higher salary.

Vessels registered in the United States must employ American crew and pay them according to U.S. law requiring a minimum wage. Of course, that would increase costs for shipping lines – and subsequently passengers – so it’s more economical for shipping lines to flag their ships overseas.

By registering their ships outside the United States, cruise lines can also require their employees to work more than 40 hours per week without overtime pay – a necessity due to the close-quarter nature of operations. like the 24/7 of cruise ships and the limited number of crew berths.

Which cruise ships are registered in the US?

The only mainstream megaship registered in the United States is Norwegian Cruise Line‘s Pride of America, requires a special government exception to register. Because it is flagged in the United States, it can only travel within the island Travel around Hawaii without calling at foreign ports – a necessity for ships carrying foreign flags Passenger Vessel Services Act.

Additionally, a number of smaller cruise ships are registered in the United States including those in the UnCruise Adventures and American Cruise Lines fleets. These companies operate smaller expedition ships, river vessels, and US-flagged Great Lakes vessels. Because of their smaller size, they can be manufactured and therefore registered in the United States.

Bottom line

Cruise lines almost always register their ships in countries outside the United States to reap benefits such as tax breaks and reduced labor regulations. With lower operating costs, cruise lines can pass those savings on to passengers and keep cruise fares affordable.

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