Federal Maritime Commission

RESULTS OF COMMISSION MEETING HELD JANUARY 30, 2002

Washington, D.C. 20573 NR 02-01

CONTACT: BRYANT L. VANBRAKLE (202) 523-5725; e-mail: secretary@fmc.gov

FOR RELEASE JANUARY 31, 2002

At the Commission's January 30, 2002 meeting, Chairman Creel and Commissioners Brennan and Won were in attendance. Three items were considered.

1. The Commission considered recent developments impacting its passenger vessel operator financial responsibility program. The discussion included recent cruise line bankruptcies; the impact of the events of September 11, 2001; a trend of declining sales of cruises; and the impending deployment of a substantial increase in cruise ship capacity. The staff indicated that these factors were raising questions as to the appropriate levels of financial responsibility coverage for nonperformance; concerns about the continuing adequacy of self-insurance; and the appropriateness of the current sliding scale for coverage. In its discussions, the Commissioners also expressed concerns about delays encountered by passengers in obtaining refunds of deposits and prepayments from bankrupt cruise lines.

The Commissioners voiced their concern that the Commission's regulations do not provide for 100 percent coverage for passenger deposits and prepayments in the event of nonperformance. They directed the staff to:

-immediately notify the cruising public about the impact that ticket contract limitations can have on the indemnification of passengers for nonperformance, as well as circumstances where port calls are missed and other situations that cause complaints to reach Congress and the Commission;

-immediately open negotiations with self-insuring passenger vessel operators to obtain coverage through other forms of financial responsibility, such as surety bonds, guaranties or escrow accounts; and

-initiate efforts to prepare a draft a new rulemaking proposal, so as to:

• discontinue self-insurance as acceptable evidence of financial responsibility for nonperformance;

• increase coverage requirements to provide for 100% coverage of ticket deposits and prepayments, taking into consideration other coverage, such as that provided by third-party insurers; and

• discontinue the pending rulemaking proceeding under Docket No. 94-06, Financial Responsibility
Requirements for Nonperformance of Transportation.

As a separate matter, the Commission directed the staff to advise it of other areas where revisions to its rules could enhance the protection of cruise passengers in the event of cruise line nonperformance. The staff was also directed to draft an appropriate notification to Congress of the Commission's concerns about nonperformance coverage issues and the possible need for legislative changes in this area; the apparent need to increase current statutory limits on casualty coverage requirements; and related issues of concern in the cruise industry that have come to the Commission's attention.

2. The Commission conditionally approved a section 3, Public Law 89-777, escrow agreement proposal by the Delta Queen Steamboat Co. which should facilitate the resumption of operations by the DELTA QUEEN and MISSISSIPPI QUEEN. This agreement is like other, previously approved escrow agreements in that it requires dollar for dollar coverage of passenger deposits in the event of nonperformance by the line.

3. The Commission also considered the Report and Recommendations by former Commissioner Antony M. Merck, the Investigative Officer in Fact Finding Investigation No. 24, Exclusive Tug Arrangements in Florida Ports. The Commission determined to take no further action to challenge the practices of Port Everglades with respect to tug services because Port Everglades has discontinued its single, exclusive arrangement for tug services. With respect to the tug practices of the Canaveral Port Authority, the Commission directed the staff to draft, for simultaneous issuance, separate orders:

(1) instituting a formal adjudicatory proceeding before an Administrative Law Judge to determine whether the Canaveral Port Authority is in violation of Section 10(d)(1) and 10(d)(4) of the Shipping Act of 1984 and, if so, whether penalties should be assessed for such violations; and

(2) instituting a formal proceeding requiring the Canaveral Port Authority to show cause why its refusal to consider a pending application by a tug operator does not constitute a refusal to deal or negotiate within the meaning of section 10(b)(10) of the Shipping Act of 1984.

These actions will not be effectuated until appropriate documents implementing them are prepared and issued.