The DOJ Just Stepped Into Hawaii's Cruise Tax Battle—And Called It "Extortion"

Hawaii’s controversial “Green Fee” just got a whole lot more complicated. In an unprecedented move, the U.S. Department of Justice has intervened in the cruise industry’s lawsuit against the state, siding with cruise lines and calling Hawaii’s new climate tax scheme an illegal attempt to “extort American citizens and businesses.”

The federal government filed its motion on November 13 in U.S. District Court in Honolulu, arguing that Hawaii’s plan to impose an 11% tax on cruise passengers violates federal law and the Constitution. The Green Fee, officially known as Act 96, is scheduled to take effect January 1, 2026—and now faces a serious legal challenge from the highest levels of government.

What Exactly Is Hawaii’s Green Fee?

Enacted in May 2025, Hawaii’s Green Fee was hailed by Governor Joshua Green as “a groundbreaking move for climate action.” The law increases the Transient Accommodations Tax to 11% statewide and introduces an identical 11% tax on cruise ship passenger bills. The state projects the fee could generate up to $100 million annually for environmental stewardship projects.

But according to federal lawyers, the fee represents more than just climate policy—it’s unconstitutional overreach.

The DOJ’s Explosive Intervention

In its motion to intervene, Assistant Attorney General Stanley Woodward didn’t mince words, calling the Green Fee “a scheme to extort American citizens and businesses solely to benefit Hawaiʻi.”

The DOJ’s argument centers on two key constitutional and statutory violations:

The Tonnage Clause: The U.S. Constitution requires states to obtain Congressional approval before imposing charges on ships. Hawaii never sought that approval.

The Rivers and Harbors Appropriation Act of 1884: This federal law strictly limits the fees states can impose on vessels, and the DOJ argues Hawaii’s tax violates these protections.

By stepping into the lawsuit, the federal government is asserting that maintaining federal authority over vessel taxation is a matter of national interest—not just a dispute between Hawaii and the cruise industry.

The Original Lawsuit: Cruise Lines Fight Back

The legal battle began on August 27, when the Cruise Lines International Association (CLIA), along with cruise industry vendors and tour operators in Hawaii, filed suit seeking an injunction to stop the Green Fee.

CLIA’s argument? The cruise sector is being unfairly singled out compared to other tourism sectors. Hotels face only minimal cost increases under the new tax structure, and air travel isn’t included at all. According to the cruise industry, this makes the measure discriminatory and unconstitutional.

The stakes are real: during an October court session, Norwegian Cruise Line revealed that bookings on Pride of America for 2026 are down 30% compared to 2025—a drop the company directly links to concerns about the higher costs from the Green Fee.

A Potential Conflict of Interest?

The DOJ’s involvement comes with an eyebrow-raising detail: U.S. Attorney General Pam Bondi heads the Department of Justice, and under her leadership, the agency has pursued Trump administration efforts to roll back climate initiatives. Her brother, Bradley Bondi, serves as lead attorney representing Cruise Lines International in the lawsuit against Hawaii.

Critics are questioning whether this family connection influenced the DOJ’s unusual decision to intervene in what would normally be a state-versus-industry dispute.

Hawaii Stands Firm

Despite the federal pressure, Hawaii’s Attorney General is defending the law vigorously. In a statement following the DOJ’s motion, the state maintained its position that Act 96 is legal and constitutional, vowing to “continue to do so” in court.

Judge Otake hasn’t issued an immediate ruling on the pending motions but has promised to act “as quickly as possible.” However, Hawaii has requested additional time to assess and respond to the DOJ’s last-minute intervention—potentially delaying any resolution.

What This Means for Cruisers

For travelers planning Hawaii cruises in 2026, the legal uncertainty creates confusion. If the Green Fee goes into effect as scheduled on January 1, cruise passengers could see an 11% surcharge added to their bills. But if the courts grant an injunction, that fee could be blocked—at least temporarily.

The cruise industry brought approximately 300,000 visitors to Hawaii in 2023, compared to the state’s total of more than 9.6 million tourists that year. While cruise passengers represent a small fraction of Hawaii’s tourism, they’re now at the center of a high-stakes legal battle that could reshape how states tax maritime travel.

Why This Battle Matters Beyond Hawaii

This isn’t just about one state’s climate tax—it’s about whether states can unilaterally impose fees on cruise ships without federal approval. The outcome could set a precedent affecting cruise operations nationwide.

If Hawaii prevails, other coastal states might follow suit with their own fees and taxes on cruise passengers. If the DOJ and cruise industry win, it would reinforce federal supremacy over maritime commerce and limit states’ ability to single out cruise ships for taxation.

What Happens Next?

The court battle is moving forward with high stakes on both sides. The DOJ’s intervention adds significant weight to the cruise industry’s case, but Hawaii shows no signs of backing down.

As the January 1 implementation date approaches, we’re watching closely to see whether Judge Otake will grant the injunction or allow the Green Fee to take effect while the legal fight continues. Either way, this showdown between federal authority, state environmental policy, and the cruise industry is far from over.

For cruisers planning Hawaii itineraries in 2026, we recommend staying flexible and watching for updates. Prices could change depending on how this legal battle unfolds—and whether that 11% surcharge becomes reality or gets blocked by the courts.