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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 / Proposed Rules
B. Process for Obtaining Refunds From PVO Financial Instruments After Nonperformance of Transportation 1. General 2. Deadline for Submitting Refund Requests Under the Financial Instrument 3. Deadline for Refund Payment Under the Financial Instrument 4. Form of Refund Payment Under the Financial Instrument 5. Defining Unearned Passenger Revenue UPR
6. Publishing Information on How To Obtain Refunds C. Passenger Cancellations IV. Discussion & NPRM Proposal A. Definition of Nonperformance of Transportation B. Process for Obtaining Refunds From PVO Financial Instruments for Nonperformance of Transportation C. Definition of Unearned Passenger Revenue UPR
D. Publishing Information on How To Obtain Refunds V. Public Participation VI. Rulemaking Analyses and Notices VII. Proposed Regulatory Language
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I. Introduction On October 29, 2020, the Federal Maritime Commission Commission issued an Advance Notice of Proposed Rulemaking 1 ANPRM to obtain comments on potential regulatory changes recommended in the Fact Finding 30 Interim Report on passenger vessel operator PVO refund policies.2
The proposed changes are intended to provide a clear and consistent policy toward vessel passenger ticket refunds, from the PVOs financial responsibility instruments filed with the Commission, in the case of nonperformance by the vessel operator. Specifically, the Commission recommended modifying regulations in 46 CFR part 540 to 1
adopt a definition of nonperformance of transportation, and 2 detail the process for obtaining refunds under the PVOs financial responsibility instruments filed with the Commission. In response to the ANPRM, the Commission received four sets of comments from interested parties. These parties are Cruise Lines International Association CLIA; Passenger Vessel Association PVA; The Surety & Fidelity Association of America SFAA; and Kacie Didier. Under this Notice of Proposed Rulemaking NPRM, the Commission addresses the comments to the ANPRM and seeks further public comments on the proposed 1 Docket No. 2015, Passenger Vessel Financial Responsibility, 85 FR 65020 October 29, 2020.
2 Fact Finding Investigation No. 30: COVID19
Impact on Cruise Industry, Interim Report: Refund Policy, at 1113 July 27, 2020 Fact Finding 30
Interim Report or Interim Report.

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modifications to its regulations in part 540.
II. Background On November 6, 1966, Congress enacted Public Law 89777. Section 2 of the statute codified at 46 U.S.C. 44103
requires owners and charterers of vessels having berth or stateroom accommodations for 50 or more passengers, and embarking passengers at United States ports, to establish financial responsibility to meet any liability incurred for death or injury to passengers or other persons on voyages to or from United States ports. Section 2 is commonly known as the Casualty section. Section 3 of the statute codified at 46 U.S.C. 44102 requires persons arranging, offering, advertising, or providing transportation on such vessels to establish evidence of financial responsibility to indemnify passengers for nonperformance of the transportation. Section 3 is commonly known as the Performance section.
The Commission published implementing regulations at 46 CFR part 540 in 1967.3
Under this program, the Commission issues two types of certificates to PVOs of vessels that: 1 Have berths for 50 or more passengers; and 2 embark passengers from U.S. ports. The first type of Certificate Performance is issued by the Commission when a PVO
provides the Commission with acceptable evidence of coverage to satisfy liability incurred for nonperformance of transportation up to the amount of unearned passenger revenue UPR held by the PVO or the monetary cap set in the Commissions regulation. Such coverage may be in the form of insurance, a guaranty, a surety bond, or escrow agreement collectively referred to as financial responsibility instruments.4 The coverage is used to reimburse passengers when the PVO
fails to perform cruises as contracted and has taken no further actions to refund passengers.5 The second type of Certificate Casualty is issued by the Commission when a PVO provides the Commission with acceptable evidence 3 32 FR 3986 Mar. 11, 1967 establishing regulations governing nonperformance coverage;
32 FR 7282 May 16, 1967 establishing regulations governing casualty coverage.
4 The Commissions regulations also permit smaller PVOs to request to substitute alternative forms of financial protection as evidence of financial responsibility. See 46 CFR 540.9l.
5 In practice, passengers generally receive refunds for canceled cruises from the PVOs directly or, if the passenger paid by credit card, from the credit card issuer. Refund payments under the PVO
financial responsibility instruments are rare and usually only occur if the PVO ceases operations or declares bankruptcy.

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of coverage to satisfy any liability incurred for death or injury during a voyage, as provided in the regulations and statute.
There have been few changes to the regulations in part 540 since its inception. Changes have included several increases to the monetary cap for required performance coverage under section 44102, the elimination of the self-insurance option for PVOs, some limitations on the types of entities acceptable as guarantors, and the elimination of certain sliding-scale provisions as to the amount of coverage required. Most recently, the Commission increased the cap on required performance coverage in two annual steps, from $15 million to $22
million in 2014, and then from $22
million to $30 million in 2015.6 Since 2015, the cap has been adjusted for inflation every two years based upon the U.S. Bureau of Labor Statistics Consumer Price Index. The current cap is $32 million.7
In March of 2020, following the arrival of COVID19 in the U.S., the Centers for Disease Control and Prevention CDC issued a No Sail Order and Suspension of Further Embarkation, CDC No Sail Order causing most PVOs to cease operations.
As a consequence, questions arose concerning future cruises and passengers ability to obtain refunds of monies paid for transportation disrupted by COVID19. Fact Finding 30 was initiated on April 30, 2020, to investigate the impact of COVID19 and identify commercial solutions to COVID19 related issues that interfered with the operation of the cruise industry. The Fact Finding Officer issued an Interim Report on PVO
Refund Policies on July 27, 2020, concluding that clearer guidance is needed in determining whether a passenger is entitled to obtain a refund if a PVO cancels a voyage, makes a significant schedule change, or significantly delays a voyage.8 The Fact Finding Officer proposed recommending certain regulatory changes in order to provide a clear interpretation of nonperformance of transportation, and to modify the 6 46 CFR 540.9j; Final Rule: Passenger Financial Responsibility Requirements for Nonperformance of Transportation, 78 FR 13268 Feb. 27, 2013.
7 Notice: Financial Responsibility for Indemnification of Passengers for Nonperformance of TransportationCap Adjustment, 84 FR 17410
June 24, 2019. An increase of $1 million from $32
million to $33 million, based on the 2020
Consumer Price Index, is pending as of April 1, 2021.
8 Fact Finding 30: Covid19 Impact on Cruise Industry, Interim Report: Refund Policy July 27, 2020.

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