Passenger Vessels - Federal Maritime Commission

Passenger Vessels

The Commission administers P.L. 89-777 (46 App. U.S.C. 817d and e) which requires operators of vessels having berth or stateroom accommodations for 50 or more passengers and embarking passengers at U.S. ports (“PVO’s”) to evidence proof of financial responsibility to reimburse passengers for the water portion of their fare in the event of nonperformance and provide coverage in the event death or injury to passengers or other persons on voyages to or from United States ports. Customs and Border Protection will generally not clear cruise vessels failing to hold these Certificates.

Certificates (Performance)

Certificates (Performance) are generally issued to the vessel operator and/or ticket issuer of the PVO. The Certificate (Performance) is required before advertising or booking for cruises aboard the vessel commences

PVOs must establish proof of financial responsibility (“coverage”) in the amount determined by the Commission. Commission regulations at 46 CFR 540.5 require that coverage be set at no less than 110 percent of the highest unearned passenger revenue of the applicant within two fiscal years prior to the filing of the application for Certificate(s) (Performance). Unearned passenger revenue is defined as “that passenger revenue received for water transportation and all other accommodations, services and facilities relating thereto not yet performed.” 46 CFR 540.5. Revenue is considered earned upon conclusion of the applicable cruise. If the applicant is a new PVO without experience in the U.S. trades, the Commission will estimate the coverage amount based upon the number of cabins, itinerary, the fare structure and the number of passengers expected to embark at U.S. ports. The PVO will be expected to adjust the coverage amount should actual experience indicate that an adjustment is needed. The amount of coverage required, however, is capped at $15 million dollars (see 46 CFR 540.9(j)). Each certificated PVO is required to provide the Commission with semiannual unearned passenger revenue reports.Each certificated PVO is required to provide the Commission with semiannual unearned passenger revenue reports.

Coverage may be provided by a surety bond underwritten by a surety acceptable to the Department of Treasury, acceptable insurance, a guaranty underwritten by an acceptable guarantor or an escrow account established in accordance with the terms of an escrow agreement approved by the Commission. PVOs choosing to establish evidence of financial responsibility by escrow account will have greater reporting requirements than for coverage established by surety bond or guaranty. In the event of significant nonperformance and the PVOs failure to refund the applicable fares to passengers, the financial responsibility provider is required to discharge the PVO’s legal liability to indemnify the passengers in the amount of the fares covered by Commission regulations.

Certificates (Casualty)

Certificates (Casualty) are generally issued to the owner or charterer of a PVO to evidence its financial responsibility to meet any liability incurred for death or injury to passengers or other persons. Certificates (Casualty) are required before embarking passengers at U.S. ports. The amount of the coverage is set by P.L. 89-777 and based upon the number of passenger accommodations aboard the vessel. Coverage is as follows:

$20,000 for each passenger accommodation up to and including 500; plus

$15,000 for each additional passenger accommodation between 501 and 1000; plus

$10,000 for each additional passenger accommodation between 1001 and 1500; plus

$ 5,000 for each passenger accommodation in escess of 1500

Coverage is generally provided by acceptable insurance or guaranty. Commission rules describe the requirements for acceptable insurance or guaranty at 46 CFR § 540.24.

Application

To obtain Certificates for a vessel, the PVO is required to complete and submit, in duplicate, Form FMC-131, Application for Certificate of Financial Responsibility. For a Certificate (Performance), Form FMC-131 should be submitted at least 60 days in advance of advertising or the commencement of a cruise embarking passengers from U.S. ports, whichever is earlier. A check in the amount of $2,767 made payable to the Federal Maritime Commission should accompany the application for a new application and $1,382 for the addition or substitution of a vessel. For a Certificate (Casualty), Form-131 should be submitted at least 60 days in advance of the commencement of a cruise embarking passengers from U.S. ports. A check in the amount of $1,206 should accompany the application for a new applicant and $605 for the addition or substitution of a vessel.

For further information you may wish to consult the areas listed below:

Bureau of Certification and Licensing

Office of Consumer Affairs and Dispute Resolution Services