Rockefeller calls for DOT oversight tax on cruise lines

Key provisions of the Cruise Passenger Protection Act of 2013

• Applies to passenger vessels accommodating 250 passengers with “on board sleeping facilities for each passenger,” that “embarks or disembarks passengers in the U.S.” Vessels owned by the U.S. or any state government, or that are engaged in coastwise trade, are exempt.

• Directs the Transportation Department (DOT) to stipulate that the CLIA Bill of Rights is legally enforceable by passengers in court. The DOT is further directed to set standards for summarizing key terms of cruise lines’ contracts of carriage, including, style, formatting and terminology. Cruise lines would provide each passenger with a summary before booking and include a link on their Web booking site. Summaries would also be incorporated into advertising and promotional literature.

• Directs the DOT to maintain a toll-free hot line and Internet link for consumer complaints about cruise lines, and to compile statistical data for each category, at least quarterly, identifying passenger vessels by name. Cruise lines would be required to include the consumer complaint number on their websites, on electronic confirmation and on promotional literature and advertising “through any medium.”

• Authorizes the DOT and other federal agencies to investigate consumer complaints regarding cancellations, delays and port-skipping; lost, damaged and delayed baggage; onboard conditions; problems with fares, refunds or fare adjustments and deceptive advertising.

• Authorizes the DOT to impose civil penalties of up to $25,000 per violation or up to $50,000 for continuing violations, and to refer criminal matters to the Justice Department for prosecution, with penalties of up to $250,000 or one year in prison, or both.

• Creates a consumer advisory committee, to be appointed by the DOT, with representatives of cruise lines, cruise industry associations, state and local governments, nonprofits dedicated to consumer protection and victim assistance and an unspecified number of “relevant” federal agencies.

• Imposes additional requirements for crime reporting, crime scene preservation training, and video surveillance of public areas, and creates a federal director of victim support services to coordinate support services and to serve as the primary point of contact for passengers affected by onboard crime.

Continuing his campaign to reform the cruise industry, Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) delivered a one-two punch last week, introducing legislation that would impose new consumer protections rules on the industry and announcing his intent to “close the loophole” that exempts foreign-flag cruise lines from paying U.S. corporate income taxes.

Rockefeller disclosed his plan for a tax bill in his closing remarks following a two-hour oversight hearing that touched on a range of issues, including consumer protections, the recently adopted CLIA Passenger Bill of Rights, cruise ship safety and onboard crime.

He said he has been working with the Senate Finance and Budget committees on the tax issue and would have a bill ready in a few days.

Together, the proposed tax bill and the Cruise Passenger Protection Act of 2013, which Rockefeller introduced on July 23 (see box at left), would address nearly all of the Senator’s frequent criticisms of the cruise industry: that it operates with insufficient federal scrutiny of its consumer protection, safety and security practices, including the handling of onboard crime, and that it makes use of numerous U.S. government resources, while evading corporate income taxes because its ships fly under foreign flags.

Rockefeller called last week’s hearing in order to open debate on his bill and to air his concern that recent incidents, such as the highly publicized disabling of the Carnival Triumph in the Gulf of Mexico, suggested that the industry has been slow to reform itself.

It was at times a tense hearing.

Rockefeller began the session by acknowledging that cruises provide a “dream vacation” for millions of consumers, but he also criticized industry officials for making “empty promises” about pending improvements and later quoted a former safety official who once branded the cruise business as “an outlaw industry.”

At one point, he told Carnival Cruise Lines CEO Gerry Cahill that he was “stunned” by Cahill’s brief testimony, alleging that it had “no content.”

He put Cahill on the spot about the Triumph’s return to service last month, when he asked the Coast Guard witness, Rear Adm. Joseph Servidio, if the Triumph was “detained” during the Coast Guard inspection.

Servidio said it was, noting that several deficiencies were found, but Cahill was quick to point out that they had all been corrected by the following day. The timing of the ship’s return to service was not affected.

Also bearing the brunt of Rockefeller’s remarks was Adam Goldstein, CEO of Royal Caribbean International, who came bearing an industry olive branch.

Goldstein said the three top cruise companies — Carnival Corp., Royal Caribbean Cruises Ltd. (RCCL) and Norwegian Cruise Line — voluntarily agreed to exceed federal requirements for the reporting of onboard crime and would begin posting information about all incidents on their websites by Aug. 1.

Under the Cruise Vessel Security and Safety Act of 2010, cruise lines are required to report instances of crime for a database maintained by the Coast Guard (www.uscg.mil/hq/cg2/cgis/CruiseLine.asp), but some categories are excluded, and the lines are only required to report cases that the FBI considers closed.

Goldstein said the three companies, “in a spirit of transparency,” voluntarily agreed to file all their crime data, adding that in the case of RCCL, data would extend to the fourth quarter of 2010.

That initiative appeared designed, in part, to blunt the testimony of Ross Klein, a professor of social work at Canada’s Memorial University of Newfoundland and frequent critic of the industry, who stated in his prepared remarks that the crime data required by the 2010 law is inadequate.

Klein, along with some members of the committee, also zeroed in on the 10-point Cruise Industry Passenger Bill of Rights, which CLIA-member lines adopted two months ago.

Both Cahill and Goldstein were asked several times about the legal status of the Bill of Rights and whether the 10 points are considered part of the passenger’s contract of carriage or are enforceable in court.

Both CEOs said their companies regard them as enforceable and are in the process of revising their formal contracts of carriage to incorporate the 10 points. Goldstein added that he believed all the major lines were doing the same thing.

Even so, the issue came up again when Sen. Richard Blumenthal (D-Conn.) hammered away at item No. 3 on the list, the right to “full-time, professional emergency medical attention.”

Blumenthal pointedly noted that the cruise lines charge a fee for some infirmary visits and went on to note that the contract of carriage contains a lengthy disclaimer of liability for medical malpractice. He said the medical fees and liability limits are nowhere mentioned in the Bill of Rights.

Goldstein reassured him that cruise lines are working to harmonize their contracts of carriage and disclosure practices with the commitments in the Bill of Rights, but he noted that the CLIA program had been adopted only two months ago, and he said the committee should give the industry some time to fully implement it.

At least one member of the committee agreed with that approach. Sen. Mark Begich (D-Alaska) said he would prefer to give the cruise lines a little time to harmonize the Bill of Rights with their contracts of carriage before imposing the kind of regulatory regime contained in Rockefeller’s legislation.

Having dealt with the Transportation Department on other matters, Begich said, he would be “very nervous” about giving the DOT the lead role in cruise industry consumer protection, as Rockefeller’s bill would do.

It will take them two years” just to write regulations, he said of the DOT.

Begich also said that, having recently traveled on ferries on the East Coast, he is concerned that Rockefeller’s consumer protection bill does not include ferries operated by cash-strapped local governments. He said some vessels seemed to be “held together by duct tape. We love duct tape in Alaska, but I’m not sure I’d wrap a boat in it.”