The Office of Passenger Vessels and Information Processing at The Federal Maritime Commission (“Commission”) issues Certificates (Performance) and Certificates (Casualty) to cruise lines which have provided proof of financial responsibility in an amount sufficient to reimburse passengers for claims against the cruise line for failure to perform cruises, and claims to cover death or injury to passengers and other persons.

What is meant by “proof of financial responsibility?”

Proof of financial responsibility is the coverage provided by the cruise line to demonstrate that it can reimburse passengers for the water portion of fares paid by passengers should the cruise line fail to perform, or provide coverage for death or injury of passengers or other persons in the amounts required by law. In most instances, coverage is shown through the filing of a surety bond, guaranty or similar financial instrument. Separate coverage is filed for non-performance and casualty.

What statute and rules govern this program?

Public Law 89-777, Financial Responsibility for Death and Injury to Passengers and Nonperformance of Voyages (46 App. USC 817d and e), and 46 CFR Part 540, Passenger Vessel Financial Responsibility

When is a vessel subject to the PVO program?

A vessel is subject to the PVO program when: 

(1)  the vessel has berth or stateroom accommodations for 50 or more passengers, and
(2) the vessel embarks passengers at U.S. ports.

To be considered a passenger, the individual must have embarked at a U.S. port and purchased a ticket entitling him to water transportation aboard that vessel.

Does the PVO program cover all vessels serving U.S. ports and cruises on those vessels?

No. The program only covers those vessels that are subject to the PVO program, i.e., those that have berth or stateroom accommodations for 50 or more passengers and embark passengers at U.S. ports.

Does the PVO program provide coverage for all the vessels in a cruise line’s fleet when some vessels have coverage and have been issued Certificates and others do not?

No. Coverage is available only for those vessels for which Certificates have been issued.

Does the vessel need to be a U.S. flagged vessel?

No. The regulations do not make a distinction as to flag of vessel.

Does the program cover non-U.S. citizens?

Yes. The regulations do not make a distinction as to citizenship of the passenger.

Does the program cover voyages originating from a foreign port and ending at a U.S. port?

No. The passenger must embark in the U.S.

Does the program cover passengers who first travel by air from the U.S. to a foreign destination to embark on a vessel?

No. The passenger must board the vessel at a U.S. port.

Does the program cover U.S. citizens who embark a foreign port?

No. The program covers only those passengers who embark at a U.S. port, regardless of citizenship.

What is a U.S. port?

A U.S. port is any port in the United States, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and any other territory or possession of the United States.

How may I contact the Commission should I have questions about this program?

You may contact the Office of Passenger Vessels and Information Processing with questions regarding the application process, coverage and how to make a claim:

Office of Passenger Vessels and Information Processing
Federal Maritime Commission
800 North Capitol Street, N.W.
Washington, D.C. 20573

Phone: (202) 523-5818
Fax: (202) 523-5830
E-mail: pvo@fmc.gov

Whom should I contact if I have a complaint or consumer concern about a cruise line?

You may contact the Office of Consumer Affairs and Dispute Resolution Services at:
 
Office of Consumer Affairs and Dispute Resolution Services
Federal Maritime Commission
800 North Capitol Street, N.W.
Washington, D.C. 20573

Phone: (202) 523-5807
Fax: (202) 275-0059
E-mail: complaints@fmc.gov

You may also wish to consult the Office of Consumer Affairs and Dispute Resolution Services web page. The office posts cruise line consumer information at that site.

What is a Certificate (Performance)?

A Certificate (Performance) is a certificate issued by the Commission to a vessel which indicates that the cruise line has filed acceptable proof of financial responsibility, i.e., coverage, which is available to pay passenger claims should the cruise line fail to perform contracted cruises.

When is a Certificate (Performance) required?

A Certificate (Performance) is required prior to any person in the United States arranging, offering, advertising or providing passage on a vessel subject to the PVO program.

To whom is a Certificate (Performance) issued?

The Certificate is generally issued in the name of the vessel operator and/or ticket issuer and specifies the name of the vessel covered. A separate Certificate is issued for each vessel in the cruise line fleet subject to the PVO program.

What constitutes “non-performance?”

In general, non-performance is the failure to commence or complete cruises upon which payment has been made. To date, the instances of non-performance which resulted in a payout from the coverage filed as proof of financial responsibility have been caused by the bankruptcy of a cruise line.

How is the amount of non-performance coverage calculated?

Cruise lines are required to provide coverage in the amount calculated by the Commission. The amount, in most cases, is 110% of the highest unearned passenger revenue collected by the cruise line in the prior two fiscal years. Non-performance coverage is capped at $15 million.

What is unearned passenger revenue?

Unearned passenger revenue consists of the deposits and/or advance payments for voyages that have not yet been performed. The unearned passenger revenue will fluctuate from week to week as the cruise line’s season proceeds and bookings are made and cruises are completed.

When does a cruise line earn monies paid by passengers for water transportation?

Revenue is earned upon completion of the water transportation for which the passenger paid.

What type of coverage is provided as proof of financial responsibility for non-performance?

In most instance, the coverage is provided by guaranty issued by an acceptable Protection and Indemnity Association or a surety bond issued by an acceptable surety, e.g., on the Department of Treasury list of acceptable sureties. In lieu of these financial instruments, the cruise line may establish an escrow account administered by a neutral financial institution in which these unearned passenger revenues are deposited, to be withdrawn by the cruise line as voyages are completed and the revenue earned.

Where may a passenger make a claim against a cruise line for failure to perform?

Claims may be filed against the coverage provider. The cruise line, coverage provider and/or the Commission generally provide guidance on how to make such claims. The coverage only covers the water portion of the fare. If the fare includes hotel or air fare charges, reimbursement from the coverage provider will not include those charges. If the passenger fares were paid by credit card, in most cases the credit card processor can credit the passenger’s account for the total amount of the charge. Therefore, charge backs may cover air fare, hotel and other non-water transportation not included under non-performance coverage. In these instances, the passenger may be able to obtain a full refund for all amounts charged to the credit card. Passengers who have purchased third party insurance should contact the underwriter to determine if their claim will be honored and what documentation will be required to file a claim.

For what sums can a passenger seek reimbursement?

Passengers may make a claim for any monies paid for water transportation and all other accommodations, services, and facilities not yet performed when those services cannot be separated from the water transportation costs. A Certificate (Performance) does not cover air transportation to the port even if arranged through the cruise line. It also does not cover any sums paid for hotels, shore excursions or tours unless they were required with the water passage.

In the event of the bankruptcy of the cruise line, will passenger coverage be reduced in order to satisfy claims other than for non-performance?

No. The coverage remains outside the reach of the bankruptcy court and is only available for the reimbursement of fares and deposits paid by passengers. Credit card companies and other such parties may not seek reimbursement from the coverage. Travel agents may not seek to obtain commissions from the coverage

What is a Certificate (Casualty)?

A Certificate (Casualty) is a certificate issued by the Commission to a vessel which indicates that the cruise line has filed acceptable proof of financial responsibility which is available to pay passenger claims for death or injury or such claims filed on behalf of other persons such as crew or staff aboard the vessel.

When is a Certificate (Casualty) required?

A Certificate (Casualty) is required prior to the embarkation of passengers aboard a vessel subject to the PVO program.

To whom is the Certificate (Casualty) issued?

The Certificate is generally issued in the name of the vessel owner and operator and specifies the name of the vessel covered. A separate Certificate is issued for each vessel in the cruise line fleet subject to the PVO program.

How is the amount of non-performance coverage calculated?

The amount of coverage is based on the number of berths on the cruise line’s largest vessel and the formula contained in the statute. The formula is as follows:

(a) $20,000 for each passenger accommodation up to and including 500, plus
(b) $15,000 for each passenger accommodation between 501 and 1,000, plus
(c) $10,000 for each passenger accommodation between 1,001 and 1,500, plus
(d) $5,000 for each passenger accommodation in excess of 1,500.

For example, if we apply the formula to a vessel of 1,200 berths, coverage is calculated as follows:

First 500 berths @ $20,000 = $10,000,000
Next 500 berths @ $15,000 = 7,500,000
Next 200 berths @ $10,000 = 2,000,000
Total required coverage = $19,500,000

Regulations regarding coverage for casualty liability refer to passengers and other persons. Who are “other persons.”

Other persons include, but are not limited to, visitors, crew, and temporary workers aboard ship.

What type of coverage is provided as proof of financial responsibility to meet liability for death or injury?

In most instances, the coverage is provided by guaranty issued by an acceptable Protection and Indemnity Association or insurance provided by an acceptable insurance company.

Where may passengers make a claim against the cruise line for death or injury?

The passenger or his representative may contact the coverage provider. The contact information may be obtained by contacting the Office of Passenger Vessels and Information Processing by phone at (202) 523-5818 or e-mail at pvo@fmc.gov.

Is there a separate application form to apply for Certificate (Performance) and a Certificate (Casualty)?

No. The same form (Form FMC-131) is used to apply for either Certificate. The applicant needs to indicate on the form which type of certificate is requested.

Where may I obtain a copy of the Form FMC-131 - Application for Certificate of Financial Responsibility?

Form FMC-131 may be printed from the Commission’s website at the Forms link at www.fmc.gov. You may also call the Office of Passenger Vessels and Information Processing at (202) 523-5818 and request a copy of the form be mailed or faxed to you.

How does a cruise line apply for a Certificate (Performance)?

The cruise line completes and submits Form FMC-131 and indicates the application is for a Certificate (Perfomance). It is advisable that the applicant contact the Office of Passenger Vessels and Information Processing prior to submitting Form FMC-131 to discuss what is needed to complete the application and determine the amount of coverage that will be required.

The application should be submitted to:
Office of Passenger Vessels and Information Processing
Federal Maritime Commission
800 North Capitol Street, N.W.
Washington, DC 20573

You may contact the Office of Passengers Vessels and Information Processing at the following:

Phone: (202) 523-5818
Fax: (202) 523-5830
E-mail: pvo@fmc.gov

What is the application fee for a Certificate (Performance)?

The fee for a Certificate (Performance) excluding one filed for the addition or substitution of a vessel, is $2,767.00. The fee for a Certificate (Performance) for a vessel addition or substitution to the cruise line’s fleet is $1,382.00. Payment is made by check and the check is to be made payable to the Federal Maritime Commission. The check must accompany the Form FMC-131 application form.

When should the Form FMC-131 application form be filed for a Certificate (Performance)?

The Form FMC-131 should be filed at least 60 days in advance of the arranging, offering, advertising, or providing of any water transportation or tickets. In addition, an amended application or written description is required to be filed within 5 days should a change in service result in a decrease or increase in the amount of coverage filed as proof of financial responsibility.

When should the non-performance coverage be filed with the Commission?

The coverage needs to be filed as soon as possible after the coverage amount is set. The original executed instrument is required.

What factors determine the amount of coverage for non-performance?

The coverage is typically set at 110% of the cruise line’s unearned passenger revenue experienced in the two fiscal years prior to application. If this information is not available, e.g., the cruise line is initiating a new service, then an estimate is made based upon the fare structure, itinerary, pre-payment policy and other factors to determine a coverage amount. Commission staff will monitor the unearned passenger revenue reports filed with the Commission to ensure that the coverage amount is appropriate and request adjustment as necessary. Commission rules cap the coverage amount for non-performance at $15 million.

What types of coverage may be filed to establish proof of responsibility for non-performance?

Cruise lines file a surety bond, guaranty or an escrow account as coverage. The surety must be on the Department of the Treasury's Listing of Approved Sureties (Department Circular 570) available at http://fms.treas.gov/c570. The guarantor must be acceptable to the Commission, i.e., a protection and indemnity association with sufficient assets in the U.S. Please contact the Office of Passenger Vessels and Information Processing to determine acceptability. The surety and guaranty forms are available by clicking on the Forms link at the Bureau of Certification and Licensing home page. The escrow agreement must be approved by the Commission. Please contact the Office of Passenger Vessels and Information Processing to discuss escrow agreement and escrow agent requirements.

How does a cruise line apply for a Certificate (Casualty)?

The cruise line completes and submits Form FMC-131 and indicates the application is for a Certificate (Casualty). It is advisable that the applicant contact the Office of Passenger Vessels and Information Processing prior to submitting the Form FMC-131 to be sure the coverage provider is acceptable. The application should be submitted to:

Office of Passenger Vessels and Information Processing
Federal Maritime Commission
800 North Capitol Street, N.W.
Washington, D.C. 20573

You may contact the Office of Passenger Vessels and Information Processing at the following: Phone: (202) 523-5818 Fax: (202) 523-5830 E-mail: pvo@fmc.gov. 

What is the application fee for a Certificate (Casualty)?

The fee for a Certificate (Casualty) excluding one filed for the addition or substitution of a vessel is $1,206.00. The fee for a Certificate (Casualty) for the addition or substitution of a vessel is $605.00 Payment is made by check and the check is to be made payable to the Federal Maritime Commission. The check must accompany the Form FMC-131 application form.

When should the Form FMC-131 application form be filed for a Certificate (Casualty)?

An application for Certificate (Casualty) should be filed with the Office of Passenger Vessels and Information Processing at least 60 days in advance of the first sailing. In addition, an amended application or written description is required to be filed within 5 days should a change in service occur which results in a decrease or increase in the amount of coverage required.

Must I apply for the Certificate (Casualty) at the same time as I apply for the Certificate (Performance)?

No. You may apply at different times. In most cases, the cruise line will apply for the Certificate (Performance) on a new vessel, much earlier than the Certificate (Casualty), since the Certificate (Performance) is required before advertising may begin but the Certificate (Casualty) is required before embarkation.

When should the casualty coverage be filed with the Commission?

Casualty coverage should be filed with the Form FMC-131 application for Certificate (Casualty) or shortly thereafter.

What types of coverage may be filed to establish proof of financial responsibility for casualty?

Cruise lines file acceptable guaranties or insurance. The guarantor must be acceptable to the Commission, i.e., a protection and indemnity association with sufficient assets in the U.S. The insurance company must have an acceptable financial rating. The guaranty form is available by clicking on the Forms link at the Bureau of Certification and Licensing home page. Please contact the Office of Passenger Vessels and Information Processing to ensure the coverage to be provided is acceptable.

What must I do with the Certificate(s) when I receive it?

The Certificate(s) will be needed when the vessel clears Customs from any U.S. port of embarkation. It should be physically available onboard the vessel for that purpose.

What reports are required after Certification?

For all cruise lines holding a Certificate (Performance):
a. A semiannual report which indicates the highest unearned passenger revenue for each month in the six month period and due 30 days after the close of every such six -month period.
b. A semiannual statement of any changes that have occurred during the six month period; a negative statement is necessary should there be no change. Reports are due 30 days after the close of every such six-month period.

For those cruise lines evidencing financial responsibility by means of escrow account:
a. Weekly recomputation schedule indicating the balance, receipts, refunds and withdrawal of earned funds from escrow. These are to be provided to the escrow agent and the Commision.
b. A monthly report prepared by the escrow agent which lists investment assets of the account. The reports are due 15 days after the end of the each month and must be provided to the cruise line and directly to the Commission
c. Quarterly reports prepared by the cruise line’s independent auditors and to be provided directly to the Commission and the escrow agent
d. Any other reports the Commission deems necessary to monitor the escrow account.

What can happen if the Certificates are required but not obtained?

U.S. Customs is required to refuse clearance to any vessel that is required to have a Certificate (Performance) and a Certificate (Casualty) but has failed to secure such certificates from the Commission. In addition, the Commission may impose civil penalties of $220 per passage sold against any cruise line it finds to be in violation of the PVO Certification Program.