If you’ve ever seen the back of a ship and wondered why it has a seemingly absurd city name, you’re not alone. That city represents the country where the ship is registered. But, since cruise passengers from the United States make up the largest number of passengers in the global cruise market, why are cruise ships not registered in the US?
Here, I will explain why you may not see the names of US cities emblazoned on cruise ships.
Where are cruise ships registered?
Names you’ll often see on ships are cities in the Bahamas, Bermuda, Panama, the Netherlands and the United Kingdom, among others. (For decades, Liberia also flew its flag on ships from many popular routes, but that has since changed.) Registering ships in foreign countries — charging cruise lines for the right to be registered there — is known as “flags of convenience.”
Why are cruise ships registered in the Bahamas, Panama and other countries?
Because the ships are not built in the US
United States law does not allow ships to be flagged in the US unless they were built there. Unfortunately, there were no US shipyards with the power or the intelligence to build ships as large as today’s behemoths, so they were built overseas – mostly in Europe.
Because cruise lines want to pay less tax
Cruise lines pay taxes to their home countries – the nations where their ships are registered. Lines often pay less tax when their ships are docked in countries like Panama and the Bahamas, saving them money.
That doesn’t mean cruise lines don’t pay taxes, though, including in the United States. Although the US has a reciprocal agreement with most of the countries where cruise ships are registered – meaning that if the US does not pay tax on the ships of those countries, neither will the American tax, either – cruise lines still pay tax to the United States every year but at a reduced government 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 with a loss of $62 million, according to its annual report. It also pays port entry fees and, in some ports, such as those in Alaska, a per-passenger head tax charged each time the ship visits.
Spending in the US tourism industry in 2019 – before the COVID-19 shutdown – supported nearly $2.6 billion in direct taxes and over $7.2 billion in taxes (including direct, indirect and indirect) to the US government , state and local, according to the Cruise Lines International Association. On average, every $1 million the tourism industry spends in the US supports approximately $102,000 in direct US, state and local tax revenue.
Because cruise lines want low labor costs
Wages for low-wage workers on cruise ships are low by American standards, but many crew members can earn more on the ships than they do working on land in their home countries. In addition to their salary, employees receive rewards from passengers and opportunities to advance to a higher paying position.
Ships registered in the US are required to hire American workers and pay them according to United States minimum wage laws. That, of course, increases the costs of lines – and, subsequently, passengers – so it is more economical for cruise lines to flag their ships abroad.
By registering their ships outside of the US, cruise lines can also require their employees to work more than 40 hours a week without overtime pay – something that is necessary due to the almost 24/7 nature of cruise ship operations and the limited number of crew accommodations.
Which cruise ship is registered in the US?
The only conventional megaship registered in the United States is Norwegian Cruise Line’s Pride of America, which required a special government exception to its registration. Because it is flagged in the US, it can only sail intra-island around Hawaii without calling at a foreign port – a requirement for foreign-flagged ships under the Passenger Services Act.
Additionally, other small cruise ships registered in the United States include those of UnCruise Adventures and American Cruise Lines. Those companies operate small cruise-style vessels, riverboats and US-flagged Great Lakes vessels. Because of their small size, they can be built and, therefore, registered in the US
Bottom line
Cruise lines almost always register their ships in countries outside the United States to receive benefits such as lower taxes and reduced labor regulations. With lower operating costs, cruise lines can pass that money on to passengers and keep cruise fares affordable.
Learn more about cruising with these TPG resources:
- Packing for a cruise? These items are not allowed on board
- Man overboard: Sailing overboard and how it happened
- What is Alaska baked, and why is it around cruise ships?
- What are the largest ships in the world?
- What is the Jones Act, and how does it affect cruise ships?
- What is the lido deck on a cruise ship?
- What is a vacation home warranty – and will it save you money?
- What is the difference between a cruise ship concierge and a butler?
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