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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 / Proposed Rules
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establish financial responsibility for indemnification of passengers for nonperformance of transportation. The proposed rule seeks 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. The proposed rule primarily does this by defining nonperformance.
The proposed rule would add a definition of nonperformance for which passengers would be entitled to a refund of their prepaid fares where voyages are canceled or delayed for three or more days and the passenger does not opt to accept an alternative voyage.
Additionally, the proposed rule changes the definition of UPR to remove the language excludes such items as airfare, hotel accommodations, and tour excursions, to include such items in the definition of UPR, if the PVO offers and collects money from the passenger for such items.
Determine and Estimate the Number of Small Entities to Which the New Rule Will Apply As part of this analysis, 5 U.S.C.
603b3 requires a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply. The SBA has established regulations to determine whether businesses qualify as small entities. 13 CFR part 121. The regulations use the North American Industry Classification System NAICS
with codes and descriptions to classify businesses and measure their size by either annual receipts gross annual revenue or number of employees.25 The calculation of total annual receipts or number of employees for the purpose of determining the size of a business includes those of the business itself plus those of its domestic and foreign affiliates.26
As discussed, the proposed rule would modify the regulations in 46 CFR
Subpart A of part 540 governing evidence of PVOs financial responsibility for nonperformance of transportation. The regulated businesses that the proposed rule applies to are PVOs. At present, there are a total of 43
PVOs with certificates of financial responsibility for nonperformance issued by the Commission. Pursuant to the SBA regulations in 13 CFR 121.201, PVOs fall under the classification of NAICS code 483112, Deep Sea Passenger Transportation, and under 25 See 13 CFR subpart ASize Eligibility Provisions and Standards January 1, 2020.
26 See 13 CFR 121.104 and 121.106.

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this classification, businesses with a total number of 1,500 employees or less qualify as small. Accordingly, the Commission estimates that 14 out of the 43 certified PVOs or 33 percent qualify as small businesses under the size standard of the SBA. While there may be PVOs that report employees of less than 1,500, lines that are subsidiaries of much larger companies would not qualify as small entities for the intent of receiving regulatory relief under the RFA. See 13 CFR 121.106b.
In terms of the economic impact on small PVOs, the proposed rule would add a definition of nonperformance for which passengers would be entitled to a refund of their prepaid fares where voyages are canceled or delayed for three or more days and the passenger does not opt to accept an alternative voyage. This new definition would potentially increase the number of claims for refunds, which in turn may affect the cost and method used by a PVO to cover the passengers prepaid fares. In effect, under the proposed definition, PVOs that perform well and on time as scheduled would be less impacted than PVOs that perform poorly. The Commission has no data or information on the performance of the 14 small PVOs per the specifics of the proposed definition by which to gauge which ones would be more significantly impacted by the proposed rule, and no such information is published. The proposed rule would require that all certified PVOs semi-annually report instances of non-performance by which the Commission could make this determination in the future. Therefore, the Commission assumes that all of the 14 small PVOs would be impacted by the proposed rule by varying degrees depending on their performance and other factors affecting their performance. The Commission seeks public comments on its assumption and the economic impact of the proposed rule on small PVOs supported by performance data on the cancelation or delay of voyages, as per the proposed definition of nonperformance.
Projected Reporting, Record Keeping, and Other Compliance Requirements of the New Rule Cost to Government The Commission estimates the total annual cost of this proposed rule to the Federal government to be $145,356, offset by the collection of $64,482 in filing fees, for a net annual cost of $80,874.

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Record Keeping and File Costs to PVOs The proposed rule would require that PVOs submit additional semi-annual reports on their instances of nonperformance. The estimated annual cost of the additional reports would be $41,670.
Other Costs to PVOs The definition of nonperformance under the proposed rule would likely increase instances of non-performance by PVOs and thus obligations on financial instruments filed with the Commission. The obligations on financial instruments may occur when a cruise has been delayed by more than three days or canceled and the passenger desires a refund instead of a credit on a future cruise. In turn, the change in the definition of UPR to include other items in addition to cruise fare plus fees and taxes offered and collected by the PVO could increase the amount of the refund and the cost to the PVO or discourage PVOs from offering such items to passengers. Prior to the proposed rule, the passenger vessel program focused on when PVOs ceased operations and canceled remaining cruises. Existing policies regarding cancelations and refunds vary by PVO.
In general, most PVOs provide refunds or credits for cancelled voyages or partial refunds for voyages that are forced to end early, but it is unclear whether PVOs may provide refunds for delayed voyages.
In response to the ANPRM, the Surety and Fidelity Association of America noted that because of the likely increase of instances of nonperformance sureties likely will require PVOs to have stronger balance sheets, specifically more cash on hand or larger lines of credit, thereby narrowing the universe of PVOs eligible to receive a surety bond guaranteeing this obligation. Also, they claimed that the required amount or value of collateral could be increased.
The increased costs to the PVOs would be from three factors. First, the increased cost of financial instruments to cover UPR because of possible increases in non-performance and issue more credits or refunds for certain delayed voyages now defined as nonperformance under this NPRM.
Second, PVOs would have to refund additional purchases by passengers such as airfare and third-party excursions that were previously excluded from the definition of UPR before the proposed rule. Third, for PVOs using escrow accounts, the opportunity cost of having to hold additional cash on hand that is
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