[Federal Register Volume 76, Number 182 (Tuesday, September 20, 2011)]
[Proposed Rules]
[Pages 58227-58236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-23906]
[[Page 58227]]
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FEDERAL MARITIME COMMISSION
46 CFR Parts 501 and 540
[Docket No. 11-16]
RIN 3072-AC45
Passenger Vessel Operator Financial Responsibility Requirements
for Nonperformance of Transportation
September 13, 2011.
AGENCY: Federal Maritime Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Maritime Commission proposes to amend its rules
regarding the establishment of passenger vessel financial
responsibility for nonperformance of transportation. Currently the
amount of coverage required for performance shall not exceed $15
million. The amendments would modify the current cap on required
performance coverage from $15 million to $30 million over a two year
period; adjust the amount of coverage required for smaller passenger
vessel operators by providing for consideration of alternative forms of
protection; revise the application form; add an expiration date to the
Certificate (Performance); and make some technical adjustments to the
regulations. Comments and suggestions are particularly sought regarding
consideration of duplicative forms of protection without creating gaps
that could leave consumers vulnerable.
DATES: Submit comments on or before November 21, 2011.
ADDRESSES: Address all comments concerning this proposed rule to: Karen
V. Gregory, Secretary, Federal Maritime Commission, 800 North Capitol
Street, NW., Washington, DC 20573-0001.
Phone: (202) 523-5725.
E-mail: [email protected].
FOR FURTHER INFORMATION CONTACT: Sandra L. Kusumoto, Director, Bureau
of Certification and Licensing, 800 North Capitol Street, NW.,
Washington, DC 20573-0001.
Phone: (202) 523-5787.
E-mail: [email protected].
SUPPLEMENTARY INFORMATION:
Submit Comments: For non-confidential comments, submit an original
and five (5) copies, and if possible, send a PDF of the document by e-
mail to [email protected]. Include in the subject line: Docket No. 11-
16 Comments on PVO Financial Responsibility. Confidential filings must
be submitted in the traditional manner on paper, rather than by e-mail.
Comments submitted that seek confidential treatment must be submitted
in hard copy by U.S. mail or courier. Confidential filings must be
accompanied by a transmittal letter that identifies the filing as
``confidential'' and describe the nature and extent of the confidential
treatment requested. When submitting comments in response to the NPRM
that contain confidential information, the confidential copy of the
filing must consist of the complete filing and be marked by the filer
as ``Confidential-Restricted,'' with the confidential material clearly
marked on each page. When a confidential filing is submitted, an
original and one additional copy of the public version of the filing
must be submitted. The public version of the filing should exclude
confidential materials, and be clearly marked on each affected page,
``confidential materials excluded.'' The Commission will provide
confidential treatment to the extent allowed by law for those
submissions, or parts of submissions, for which the parties request
confidentiality. Questions regarding filing or treatment of
confidential responses to this NPRM should be directed to the
Commission's Secretary, Karen V. Gregory, at the telephone number or e-
mail provided above.
Section 3 of Public Law 89-777 (Section 3),\1\ 46 U.S.C. 44101-
44106, requires passenger vessel operators to establish financial
responsibility to indemnify passengers for nonperformance of
transportation.
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\1\ Section 3 provides, in pertinent part:
(a) No person in the United States shall arrange, offer,
advertise, or provide passage on a vessel having berth or stateroom
accommodations for fifty or more passengers and which is to embark
passengers at United States ports without their first having been
filed with the Federal Maritime Commission such information as the
Commission may deem necessary to establish the financial
responsibility of the person arranging, offering, advertising, or
providing such transportation, or, in lieu thereof, a copy of a bond
or other security, in such form as the Commission, by rule or
regulation, may require and accept, for indemnification of
passengers for nonperformance of the transportation.
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On December 3, 2009, the Commission issued a Notice of Inquiry
(NOI) \2\ to solicit information and comments on whether the passenger
vessel financial responsibility regulations in 46 CFR Part 540, Subpart
A, should be amended. The NOI focused on three subjects: (1) The Cost
of Complying with Nonperformance Regulations; (2) Adequacy of
Nonperformance Coverage; and (3) Practices of Sureties, Credit Card
Companies and Others. On March 3, 2010, the Commission held a public
hearing to receive further information regarding passenger vessel
operators' financial responsibility.\3\
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\2\ Federal Maritime Commission, Notice of Inquiry Regarding
Passenger Vessel Responsibility, 74 FR 65125 (December 9, 2009).
\3\ Federal Maritime Commission, Notice of Public Hearing,
Passenger Vessel Financial Responsibility, 75 FR 7599 (February 22,
2010).
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A number of comments received in response to the NOI contend that
the $15 million cap disproportionately affects small U.S.-flagged PVOs
and gives preferential treatment to larger PVOs who are only required
to cover a small percentage of unearned passenger revenue (UPR) versus
the 110% of coverage required for small PVOs with UPR below the $15
million cap. Several PVOs suggested that the Commission examine the
financial health of a PVO to assess its risk of nonperformance and
adjust the required coverage accordingly. Several respondents requested
that the Commission consider travel insurance and protection for credit
card payments to offset the required financial coverage for
nonperformance. The Commission now proposes to amend its current rules.
Background
The $15 million cap currently set forth at 46 CFR 540.9(j) has been
in place since 1991, when it was raised from $10 million.\4\ In 1994,
the Commission proposed to remove the $15 million cap. Following
receipt of comments opposing this proposal, the Commission revised its
proposal by proposing a sliding scale requirement that would increase
the amount of coverage required for those PVOs exceeding $15 million in
UPR, without requiring coverage of the total amount of UPR.\5\ The
Commission later discontinued Docket No. 94-06 without making any
revisions to its regulations.\6\
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\4\ See Docket No. 90-01, Security for the Protection of the
Public, Maximum Required Performance Amount, 55 FR 34563 (August 23,
1990).
\5\ See Docket No. 94-06, Financial Responsibility Requirements
for Nonperformance of Transportation, 59 FR 15149, March 31, 1994.
\6\ Docket No. 94-06, Financial Responsibility Requirements for
Nonperformance of Transportation, 67 FR 19535 (April 22, 2002).
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Since the cap was raised in 1991, UPR of many cruise lines has
increased substantially. Since September 2000, fifteen PVOs that had
been covered by the Commission's regulations have ceased operations:
Premier Cruise Operations Ltd. (Premier), New Commodore Cruise Lines
Limited (New Commodore), Cape Canaveral Cruise Lines, Inc., MP
Ferrymar, Inc., American Classic Voyages Company (American Classic),
Royal Olympic, Regal Cruises, Ocean Club Cruise Line, Society
Expeditions, Scotia Prince, Glacier Bay, Great American Rivers,
[[Page 58228]]
RiverBarge Excursion Lines, Inc., Majestic America Line, and West
Travel, Inc. d/b/a Cruise West.
Of those, three had UPR in excess of the present $15 million cap at
the time their operations ceased: Premier, New Commodore, and American
Classic. Premier and New Commodore passengers were reimbursed through a
combination of credit card refunds and surety bond payments. Without
credit card reimbursement, the surety bonds in place at the time would
have covered roughly two-thirds of outstanding UPR. The third line,
American Classic had the highest UPR at $51 million. It is estimated
that approximately 60% of its passengers were reimbursed through credit
card issuers and travel insurance. After ten years of bankruptcy
proceedings, the remaining 40% of passengers who had paid by cash or
check finally received some reimbursement, up to $2,100 each. American
Classic fares for their standard-length cruises were up to $3,435 per
person, and were required to be paid sixty days in advance.\7\
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\7\ See American Classic Voyage Co. Prospectus Statement at S-
31. S-33 (Feb. 16, 2000).
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Level of Unearned Passenger Revenue
There has been no increase in the coverage cap level since the
present cap was established in 1991. The amount of coverage required of
a PVO is 110% of its highest UPR earned within the most current two
year period, up to the cap. In 1990, total two year high UPR for all
PVOs regulated by the Commission exceeded $1 billion. Total financial
coverage provided at that time was slightly more than $250 million.
Thus, approximately 25% of outstanding UPR was protected by financial
instruments filed with the Commission in 1990. Since then, total two-
year high UPR for all PVOs in the Commission's program has more than
tripled to $3.7 billion, while total financial coverage for all such
PVOs under the Commission's program has increased to only $308 million,
providing coverage for approximately 8% of the total UPR now in the
hands of PVOs.
The Commission is required to ensure adequate financial
responsibility to reimburse passengers in the event of nonperformance.
The concern is the availability of funds to reimburse passengers for
nonperformance of cruises, as the amount of passenger funds collected
by PVOs well before scheduled voyages continues to increase. Moreover,
as the size of vessels deployed by these PVOs increases, failure to
perform a single voyage could have a significantly bigger impact.
While the risk of some cruise lines' failing may be low, the
potential losses could be high, the risk of which is determined by the
premiums charged to PVOs by their sureties. The more financially viable
a given PVO, the less an issuer of bonds or guaranties would presumably
charge for providing coverage. This concept is reflected in the
responses to the Commission's NOI last year, which indicated that the
largest PVO incurs premiums substantially less than other lines.
Moreover, as with insurance policies, coverage may be available only
when the client is of sound health. Premiums can increase exponentially
with increased risk, to the point where coverage is no longer available
for clients that are not financially or operationally sound. Once there
appears to be significant risk of failure, the ability to increase
coverage becomes problematic as increased coverage may not be
available, or may be so costly as to tip the PVO over the financial
brink and create the very nonperformance the Commission seeks to
prevent.
The $15 Million Cap
The Commission has examined its current $15 million cap in light of
the above circumstances. Since 1967, when the cap was set at $5
million, the Consumer Price Index has increased more than five-fold.
Simply keeping pace with that index would require a cap of over $25
million if adjusted from the last increase in 1990 or to approximately
$33 million if adjusted from 1967 (In 1967, 100% of all UPR was
covered). Yet the cruise industry itself and the amount of UPR
outstanding at any one time have increased to a much greater degree. A
coverage requirement capped at $25 million (much less $15 million)
would be far less than 100% coverage for cruise lines whose fleets
consistently have outstanding UPR in the hundreds of millions of
dollars.
Finally, recent experience has demonstrated that increased coverage
requirements should be put in place before a PVO begins to experience
financial difficulty. It appears that once a PVO becomes financially
unstable, any Commission action requiring a certificant to increase its
coverage may not be possible.
For these reasons, therefore, the Commission now proposes to
increase the cap on required evidence of financial responsibility in 46
CFR 540.9(j) from $15 million to $30 million. In order to allow the
industry time to adjust, the proposed rule includes a phase-in period
of two years for the adjustment. By the end of the first year, the
limit will adjust to $22 million, and by the end of the second year it
will adjust to $30 million. Every two years after the limit on required
financial responsibility reaches $30 million, the limit shall
automatically adjust to the nearest $1 million based on changes as
reflected in the Consumer Price Index.
Prior to any change in the amount of financial responsibility, the
proposed rule would require that notice be provided. This notice will
be published on the Commission's Web site and in the Federal Register,
affording PVOs time to post the correct amount of financial
responsibility.
In recognition of the disparity between small and large cruise
lines in the percentage of unearned passenger revenue for which
evidence of financial responsibility is required, the proposed rule
also includes a provision whereby the Commission may, on a case by case
basis, recognize additional protections submitted by an applicant in
consideration of a reduction in the amount required to be furnished.
This proposal would provide that PVOs with UPR not exceeding 150% of
the cap may request relief from coverage requirements otherwise
provided for in these rules by substituting alternative forms of
protection. The PVO would submit its request to BCL, which would
coordinate with the applicant, evaluate the request, and submit the
request with its analysis for Commission consideration. The Commission
invites comments on how this regulatory relief proposal could be
improved to most effectively avoid duplicative coverage without
creating gaps that leave cruise passengers vulnerable.
The Commission also invites comments on other proposals that will
ensure adequate financial responsibility of cruise vessels in the event
of nonperformance, such as modeling nonperformance financial
responsibility requirements on current financial requirements for
casualty administered by the Commission by: (1) Calculating the revenue
generated by the top two rate tiers of berths on a first-class or
premium voyage for an appropriate number (for example the five largest
vessels) of each PVO's fleets; and (2) applying appropriate discount
factors to prevent coverage that exceeds UPR.
The proposed rule also includes updates and improvements to the
Commission's existing financial responsibility rules and forms.
The $30 Million Cap
Each time the Section 3 cap has been increased by the Commission,
the pressure inflation places on passenger tickets was raised as a
primary
[[Page 58229]]
concern.\8\ In Docket No. 90-01, when the present Section 3 coverage
cap was set at $15 million, the Commission stated that the increase was
``predicated, for the most part, upon the increase in the consumer
price index.'' \9\ The Bureau of Labor Statistics' Consumer Price Index
for all Urban Consumers (CPI-U) is the most widely used measure to
track changes in prices by federal agencies and financial institutions.
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\8\ See Docket No. 79-93, Final Rule, 45 FR 23428 (April 7,
1980), and Docket No. 90-01, Final Rule, 55 FR 34564 (August 23,
1990).
\9\ Docket No. 90-01, Final Rule, 55 FR 34564, 34566 (August 23,
1990).
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It is common practice for federal agencies to adjust user fees,
fines and penalties using an inflation calculator on two or four year
cycles.\10\ The proposed automatic adjustment based on the widely
published and freely accessible CPI-U would provide PVOs with certainty
as to their ongoing responsibilities to comply with the regulations.
The proposed rule would thereafter automatically adjust the $30 million
cap every two years based on changes in prices as measured by the CPI-U
to the nearest $1 million.
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\10\ See 35 CFR 138.240 (procedure for calculating limit of
liability adjustments for inflation).
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Technical Changes
A number of other revisions are also proposed. These changes would
better refine the rules, based on the Commission's recent experience.
For example, Section 540.4(b) and Section 540.23(a) would be modified
to direct applicants to file application form FMC-131 with the Bureau
of Certification and Licensing instead of with the Office of the
Secretary. The current regulations in 46 CFR part 540 contain a sample
Form FMC-131 (Application for Passenger Vessel Certificate) as well as
a sample surety bond, guaranty, and escrow agreement. As proposed, Form
FMC-131 would no longer be included within the regulations, but would
be available from the Bureau of Certification and Licensing and the
Commission's Web site. The sample escrow agreement would also be
revised. The Commission also proposes to revise the application form to
more closely comport with the information needed in an application and
ultimately allow for the form to be completed electronically. Although
the current rules require the submission of an application form, the
current version for many years has not been useful to either the
applicants or staff reviewing the filing, and rarely is completed. The
new form will be streamlined and include a section that captures vessel
information. Additionally, the Commission proposes a 5-year expiration
period for each Certificate (Performance) issued. This proposed change
would harmonize the Commission's PVO certificates with international
certificates, such as those issued under The Safety of Life at Sea
Convention and the International Convention on Load Lines, as well as
with domestic certificates such as the U.S. Coast Guard's Certificate
of Inspection.\11\ An expiration date would also provide clarity to
U.S. Customs and Border Protection in determining the validity of a
certificate, and would ensure that the Commission periodically confirms
PVO information previously submitted to the Commission. Further, the
proposed rule would also provide that the Commission, for good cause,
could issue a certificate with an expiration date less than 5 years,
which would provide for issuance of short-term certificates to PVOs
that operate from U.S. ports for a short period.
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\11\ On October 31, 1988, the International Maritime
Organization (IMO) convened the International Conference on the
Harmonized Systems of Survey and Certification to adopt the Protocol
of 1988 relating to the International Convention for Safety of Life
at Sea (SOLAS), 1974, and the Protocol of 1988 relating to the
International Convention on Load Lines, 1966. By adopting these 1988
Protocols, IMO standardized the term of validity for certificates
and intervals for vessel inspections required by the Conventions.
These 1988 Protocols entered into force as international law on
February 3, 2000. See also 65 FR 6494 (February 9, 2000).
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Voluntary Resolution of Passenger Claims in the Event of Nonperformance
Though not part of this rulemaking, we desire to call the attention
of the public to the services provided by the Commission's Office of
Consumer Affairs and Dispute Resolution Services (CADRS), which
provides a number of services designed to assist passengers with
difficulties in dealing with cruise operators through its Ombudsman
Service. The CADRS staff is trained to serve as third-party neutrals in
a facilitative manner.
Regulatory Impact
In 2003, the Commission adopted a presumption that PVOs generally
are not small businesses under the Small Business Regulatory
Enforcement Fairness Act amendments to the Regulatory Flexibility Act
because they are generally large companies with more than 500
employees, the measure used by the North American Industrial
Classification System published by the Office of Management and
Budget.\12\
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\12\ See FMC Policy and Procedures Regarding Proper
Consideration of Small Entities in Rulemakings (February 7, 2003).
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Therefore, no small entities will be affected by the proposed rule.
Any potential impact from the proposed rule would be relatively
small. While the rule as proposed would require some PVOs to furnish an
increased amount of proof of financial responsibility, the estimated
cost of that increase is not significant. Additionally, Section
540.9(j)(ii) of the proposed rule would enable those PVOs with UPR not
exceeding 150% of the coverage cap to request that the Commission
consider alternative forms of financial protection.
The proposed rule would increase total net financial protections
for cruise passengers by approximately $144 million while likely
providing approximately $37 million in reduced bond requirements for
smaller PVOs. Surety companies have informed the Commission that bond
premiums typically range from 0.5% to 3% of a bond's face value,
depending on a company's financial health, which results in a total net
increase in premium costs of between $685,000 and $4.1 million. This
includes a likely reduction in premium costs of between $186,000 and
$1.1 million for small PVOs.
Accordingly, the Chairman of the Commission certifies, pursuant to
section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq.,
that the proposed rule will not, if promulgated, have a significant
economic impact on a substantial number of small entities. Members of
the public may comment on this certification.
This rule is not a ``major rule'' under 5 U.S.C. 804(2).
The collection of information requirements contained in this
proposed 46 CFR Part 540 have been submitted to the Office of
Management and Budget for review under section 3504(h) of the Paperwork
Reduction Act of 1980, as amended. Send comments regarding the burden
estimate or any other aspect of the collection of information,
including suggestions for reducing this burden, to Managing Director,
Federal Maritime Commission, 800 North Capitol Street, NW., Washington,
DC 20573, e-mail: [email protected], or fax: (202) 523-3646; and to the
Office of Information and Regulatory Affairs, Office of Management and
Budget, Attention: Desk Officer for Federal Maritime Commission, 17th
Street and Pennsylvania Avenue, NW., Washington, DC 20503, e-mail:
[email protected], or fax: (202) 395-5806.
[[Page 58230]]
List of Subjects
46 CFR Part 501
Administrative practice and procedure, Authority delegations,
Organization and functions, Seals and insignia.
46 CFR Part 540
Insurance, Maritime carriers, Reporting and recordkeeping
requirements, Surety bonds.
For the reasons stated in the supplementary information, the
Federal Maritime Commission proposes to amend 46 CFR parts 501 and 540
as follows.
PART 501--THE FEDERAL MARITIME COMMISSION--GENERAL
1. Revise the authority citation for Part 501 to read as follows:
Authority: 5 U.S.C. 551-557, 701-706, 2903 and 6304; 31 U.S.C.
3721; 41 U.S.C. 414 and 418; 44 U.S.C. 501-520 and 3501-3520; 46
U.S.C. 301-307, 40101-41309, 42101-42109, 44101-44106; Pub. L. 89-
56, 70 Stat. 195; 5 CFR Part 2638; Pub. L. 104-320, 110 Stat. 3870.
2. Revise Sec. 501.5(g)(2) to read as follows:
Sec. 501.5 Functions of the organizational components of the Federal
Maritime Commission.
* * * * *
(g) * * *
(2) Through the Office of Passenger Vessels and Information
Processing, has responsibility for reviewing applications for
certificates of financial responsibility with respect to passenger
vessels, reviewing requests for substitution of alternative forms of
financial protection, managing all activities with respect to evidence
of financial responsibility for OTIs and passenger vessel owner/
operators, and for developing and maintaining all Bureau database and
records of OTI applicants and licensees.
* * * * *
Sec. 501.26 [Amended]
3. In Sec. 501.26, amend the introductory text by removing the
word ``redelgated'' and adding the word ``redelegated'' in its place.
PART 540--PASSENGER VESSEL FINANCIAL RESPONSIBILITY
4. The authority citation for Part 540 continues to read as
follows:
Authority: 5 U.S.C. 552, 553; 31 U.S.C. 9701; 46 U.S.C. 305,
44101-44106.
Sec. 540.1 [Amended]
5. In Sec. 540.1(b), add the phrase ``by the Department of
Homeland Security'' after the phrase ``clearance''.
6. Amend Sec. 540.2 by revising paragraphs (a) and (i) to read as
follows:
Sec. 540.2 Definitions.
* * * * *
(a) Person includes individuals, limited liability companies,
corporations, partnerships, associations, and other legal entities
existing under or authorized by the laws of the United States or any
State thereof or the District of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands or any territory or possession of the United
States, or the laws of any foreign country.
* * * * *
(i) Unearned passenger revenue means that passenger revenue
received for water transportation and all other accommodations,
services, and facilities relating thereto not yet performed; this may
include port fees and taxes, but excludes such items as airfare, hotel
accommodations, and tour excursions.
* * * * *
7. Revise Sec. 540.4 to read as follows:
Sec. 540.4 Procedure for establishing financial responsibility.
(a) In order to comply with section 3 of Public Law 89-777 (46
U.S.C. 44101-44102, 44104-44106) enacted November 6, 1966, there must
be filed with the Federal Maritime Commission an application on Form
FMC-131 for a Certificate of Financial Responsibility for
Indemnification of Passengers for Nonperformance of Transportation.
Copies of Form FMC-131 may be obtained from the Commission's Web site
at http://www.fmc.gov, or from the Bureau of Certification and
Licensing, Federal Maritime Commission, Washington, DC 20573.
(b) An application for a Certificate (Performance) shall be filed
with the Bureau of Certification and Licensing, Federal Maritime
Commission, by the vessel owner or charterer at least 60 days in
advance of the arranging, offering, advertising, or providing of any
water transportation or tickets in connection therewith except that any
person other than the owner or charterer who arranges, offers,
advertises, or provides passage on a vessel may apply for a Certificate
(Performance). Late filing of the application will be permitted without
penalty only for good cause shown.
(c) All applications and evidence required to be filed with the
Commission shall be in English, and any monetary terms shall be
expressed in terms of U.S. currency.
(d) The Commission shall have the privilege of verifying any
statements made or any evidence submitted under the rules of this
subpart.
(e) An application for a Certificate (Performance), excluding an
application for the addition or substitution of a vessel to the
applicant's fleet, shall be accompanied by a filing fee remittance of
$2,767. An application for a Certificate (Performance) for the addition
or substitution of a vessel to the applicant's fleet shall be
accompanied by a filing fee remittance of $1,382. Administrative
changes, such as the renaming of a vessel will not incur any additional
fees.
(f) The application shall be signed by a duly authorized officer or
representative of the applicant with a copy of evidence of his or her
authority.
(g) In the event of any material change in the facts as reflected
in the application, an amendment to the application shall be filed no
later than fifteen (15) days following such change. For the purpose of
this subpart, a material change shall be one which: (1) results in a
decrease in the amount submitted to establish financial responsibility
to a level below that required to be maintained under the rules of this
subpart, or (2) requires that the amount to be maintained be increased
above the amount submitted to establish financial responsibility.
(h) Notice of the application for issuance, denial, revocation,
suspension, or modification of any such Certificate will be published
on the Commission's Web site at http://www.fmc.gov.
8. Amend Sec. 540.5 as follows:
a. Revise paragraph (a)(1)(i) to read as follows; and
b. Amend paragraph (c) by adding a sentence at the end of the
paragraph to read as follows.
Sec. 540.5 Insurance, guaranties, and escrow accounts.
* * * * *
(a) * * *
(1) * * * (i) Until notice in writing has been given to the assured
or to the insurer and to the Bureau of Certification and Licensing at
its office in Washington, DC 20573, by certified mail or courier
service, and
* * * * *
(c) * * * Copies of Form FMC-133A may be obtained from the
Commission's Web site at http://www.fmc.gov or from the Bureau of
Certification and Licensing.
* * * * *
9. Amend Sec. 540.6(a) by adding a sentence at the end of the
paragraph to read as follows:
[[Page 58231]]
Sec. 540.6 Surety bonds.
(a) * * * Copies of Form FMC-132A may be obtained from the
Commission's Web site at http://www.fmc.gov or from the Bureau of
Certification and Licensing.
* * * * *
10. Revise Sec. 540.7 to read as follows:
Sec. 540.7 Evidence of financial responsibility.
Where satisfactory proof of financial responsibility has been
established:
(a) A Certificate (Performance) covering specified vessels shall be
issued evidencing the Commission's finding of adequate financial
responsibility to indemnify passengers for nonperformance of water
transportation.
(b) The period covered by the Certificate (Performance) shall be
five (5) years, unless another termination date has been specified
thereon.
11. Amend Sec. 540.8 by revising paragraphs (a) and (b)(3) to read
as follows:
Sec. 540.8 Denial, revocation, suspension, or modification.
(a) Prior to the denial, revocation, suspension, or modification of
a Certificate (Performance), the Commission shall notify the applicant
of its intention to deny, revoke, suspend, or modify and shall include
with the notice the reason(s) for such action. If the applicant, within
20 days after the receipt of such notice, requests a hearing to show
that the evidence of financial responsibility filed with the Commission
does meet the rules of this subpart, such hearing shall be granted by
the Commission. Regardless of a hearing, a Certificate (Performance)
shall become null and void upon cancellation or termination of the
surety bond, evidence of insurance, guaranty, or escrow account.
(b) * * *
(3) Failure to comply with or respond to lawful inquiries, requests
for information, rules, regulations, or orders of the Commission
pursuant to the rules of this subpart.
* * * * *
12. Amend Sec. 540.9 by revising paragraphs (c), (e), (h), (j),
and (k) to read as follows:
Sec. 540.9 Miscellaneous.
* * * * *
(c) The Commission's bond (Form FMC-132A), guaranty (Form FMC-
133A), and application (Form FMC-131) forms may be obtained from the
Commission's Web site at http://www.fmc.gov or from the Bureau of
Certification and Licensing at its office in Washington, DC 20573.
* * * * *
(e) Each applicant, insurer, escrow agent and guarantor shall
furnish a written designation of a person in the United States as legal
agent for service of process for the purposes of the rules of this
subpart. Such designation must be acknowledged, in writing, by the
designee and filed with the Commission. In any instance in which the
designated agent cannot be served because of death, disability, or
unavailability, the Secretary, Federal Maritime Commission, will be
deemed to be the agent for service of process. A party serving the
Secretary in accordance with the above provision must also serve the
certificant, insurer, escrow agent, or guarantor, as the case may be,
by certified mail or courier service at the last known address of them
on file with the Commission.
* * * * *
(h) Every person who has been issued a Certificate (Performance)
must submit to the Commission a semi-annual statement of any changes
with respect to the information contained in the application or
documents submitted in support thereof or a statement that no changes
have occurred. Negative statements are required to indicate no change.
These statements must cover the 6-month period of January through June
and July through December, and include a statement of the highest
unearned passenger vessel revenue accrued for each month in the 6-month
reporting period. Such statements will be due within 30 days after the
close of every such 6-month period. The reports required by this
paragraph shall be submitted to the Bureau of Certification and
Licensing at its office in Washington, DC 20573 by certified mail,
courier service, or electronic submission.
* * * * *
(j) The amount of:
(1) The insurance as specified in Sec. 540.5(a),
(2) The escrow account as specified in Sec. 540.5(b),
(3) The guaranty as specified in Sec. 540.5(c), or
(4) The surety bond as specified in Sec. 540.6 shall not be
required to exceed $15 million for one year after the effective date of
this rule. Twelve (12) months after the effective date of this rule,
the amount shall not exceed $22 million, and twenty four (24) months
after the effective date of this rule, the amount shall not exceed $30
million.
(i) Every two years, on the anniversary after the cap on required
financial responsibility reaches $30 million, the cap shall
automatically adjust to the nearest $1 million based on changes as
reflected in the U.S. Bureau of Labor Statistics' Consumer Price Index.
(ii) A certificant whose unearned passenger revenue at no time for
the two immediately prior fiscal years has exceeded 150% of the
required cap may submit a request to the Commission to substitute
alternative forms of financial protection to evidence the financial
responsibility as otherwise provided in this part. The Commission will
consider such requests on a case by case basis. In determining whether
and to what level to reduce the required amount, the Commission may
consider the extent to which other statutory requirements provide
relevant protections, the certificant's financial data, and other
specific facts and circumstances.
(k) Every person in whose name a Certificate (Performance) has been
issued shall be deemed to be responsible for any unearned passage money
or deposits held by its agents or any other person authorized by the
certificant to sell the certificant's tickets. Certificants shall
promptly notify the Commission of any arrangements, including charters
and subcharters, made by it or its agent with any person pursuant to
which the certificant does not assume responsibility for all passenger
fares and deposits collected by such person or organization and held by
such person or organization as deposits or payment for services to be
performed by the certificant. If responsibility is not assumed by the
certificant, the certificant also must inform such person or
organization of the certification requirements of Public Law 89-777 and
not permit use of its vessel, name or tickets in any manner unless and
until such person or organization has obtained the requisite
Certificate (Performance) from the Commission. Failure to follow the
procedures in this paragraph means the certificant shall retain full
financial responsibility for indemnification of passengers for
nonperformance of the transportation.
13. Remove Form FMC-131 to Subpart A of part 540.
14. Revise Form FMC-132A to Subpart A of Part 540 to read follows:
FORM FMC-132A TO SUBPART A OF PART 540
FORM FMC-132A
FEDERAL MARITIME COMMISSION
Passenger Vessel Surety Bond (Performance)
Surety Co. Bond No. ----------
FMC Certificate No. ----------
[[Page 58232]]
Know all men by these presents, that we -------------- (Name of
applicant), of -------------- (City), -------------- (State and
country), as Principal (hereinafter called Principal), and ------------
-- (Name of surety), a company created and existing under the laws of
---------- (State and country) and authorized to do business in the
United States as Surety (hereinafter called Surety) are held and firmly
bound unto the United States of America in the penal sum of ----------
, for which payment, well and truly to be made, we bind ourselves and
our heirs, executors, administrators, successors, and assigns, jointly
and severally, firmly by these presents. Whereas the Principal intends
to become a holder of a Certificate (Performance) pursuant to the
provisions of subpart A of part 540 of title 46, Code of Federal
Regulations and has elected to file with the Federal Maritime
Commission such a bond to insure financial responsibility and the
supplying transportation and other services subject to subpart A of
part 540 of title 46, Code of Federal Regulations, in accordance with
the ticket contract between the Principal and the passenger, and
Whereas this bond is written to assure compliance by the Principal as
an authorized holder of a Certificate (Performance) pursuant to subpart
A of part 540 of title 46, Code of Federal Regulations, and shall inure
to the benefit of any and all passengers to whom the Principal may be
held legally liable for any of the damages herein described. Now,
therefore, the condition of this obligation is such that if the
Principal shall pay or cause to be paid to passengers any sum or sums
for which the Principal may be held legally liable by reason of the
Principal's failure faithfully to provide such transportation and other
accommodations and services in accordance with the ticket contract made
by the Principal and the passenger while this bond is in effect for the
supplying of transportation and other services pursuant to and in
accordance with the provisions of subpart A of part 540 of title 46,
Code of Federal Regulations, then this obligation shall be void,
otherwise, to remain in full force and effect.
The liability of the Surety with respect to any passenger shall not
exceed the passage price paid by or on behalf of such passenger. The
liability of the Surety shall not be discharged by any payment or
succession of payments hereunder, unless and until such payment or
payments shall amount in the aggregate to the penalty of the bond, but
in no event shall the Surety's obligation hereunder exceed the amount
of said penalty. The Surety agrees to furnish written notice to the
Federal Maritime Commission forthwith of all suits filed, judgments
rendered, and payments made by said Surety under this bond.
This bond is effective the ------ day of ---------- , 20---- , 12:01
a.m., standard time at the address of the Principal as stated herein
and shall continue in force until terminated as hereinafter provided.
The Principal or the Surety may at any time terminate this bond by
written notice sent by certified mail, courier service, or other
electronic means such as email and fax to the other and to the Federal
Maritime Commission at its office in Washington, D.C., such termination
to become effective thirty (30) days after actual receipt of said
notice by the Commission, except that no such termination shall become
effective while a voyage is in progress. The Surety shall not be liable
hereunder for any refunds due under ticket contracts made by the
Principal for the supplying of transportation and other services after
the termination of this bond as herein provided, but such termination
shall not affect the liability of the Surety hereunder for refunds
arising from ticket contracts made by the Principal for the supplying
of transportation and other services prior to the date such termination
becomes effective.
The underwriting Surety will promptly notify the Director, Bureau of
Certification and Licensing, Federal Maritime Commission, Washington,
DC 20573, of any claim(s) or disbursements against this bond.
In witness whereof, the said Principal and Surety have executed this
instrument on ------ day of ---------- , 20---- .
PRINCIPAL
Name-------------------------------------------------------------------
By---------------------------------------------------------------------
(Signature and title)
Witness----------------------------------------------------------------
SURETY
[SEAL]
Name-------------------------------------------------------------------
By---------------------------------------------------------------------
(Signature and title)
Witness----------------------------------------------------------------
Only corporations or associations of individual insurers may qualify to
act as surety, and they must establish to the satisfaction of the
Federal Maritime Commission legal authority to assume the obligations
of surety and financial ability to discharge them.
15. Revise Form FMC-133A to Subpart A of Part 540 to read follows:
FORM FMC-133A TO SUBPART A OF PART 540
FORM FMC-133A
FEDERAL MARITIME COMMISSION
Guaranty in Respect of Liability for Nonperformance, Section 3 of the
Act
Guaranty No ----------
FMC Certificate No. ----------
1. Whereas ---------- (Name of applicant) (Hereinafter referred to as
the ``Applicant'') is the Owner or Charterer of the passenger Vessel(s)
specified in the annexed Schedule (``the Vessels''), which are or may
become engaged in voyages to or from United States ports, and the
Applicant desires to establish its financial responsibility in
accordance with section 3 of Pub. L. 89-777, 89th Congress, approved
November 6, 1966 (``the Act'') then, provided that the Federal Maritime
Commission (``FMC'') shall have accepted, as sufficient for that
purpose, the Applicant's application, supported by this Guaranty, and
provided that FMC shall issue to the Applicant a Certificate
(Performance) (``Certificate''), the undersigned Guarantor hereby
guarantees to discharge the Applicant's legal liability to indemnify
the passengers of the Vessels for nonperformance of transportation
within the meaning of section 3 of the Act, in the event that such
legal liability has not been discharged by the Applicant within 21 days
after any such passenger has obtained a final judgment (after appeal,
if any) against the Applicant from a United States Federal or State
Court of competent jurisdiction, or has become entitled to payment of a
specified sum by virtue of a compromise settlement agreement made with
the Applicant, with the approval of the Guarantor, whereby, upon
payment of the agreed sum, the Applicant is to be fully, irrevocably
and unconditionally discharged from all further liability to such
passenger for such nonperformance.
2. The Guarantor's liability under this Guaranty in respect to any
passenger shall not exceed the amount paid by such passenger; and the
aggregate amount of the Guarantor's liability under this Guaranty shall
not exceed $--------.
3. The Guarantor's liability under this Guaranty shall attach only in
respect of events giving rise to a cause of action against the
Applicant, in respect of any of the Vessels, for nonperformance of
[[Page 58233]]
transportation within the meaning of Section 3 of the Act, occurring
after the Certificate has been granted to the Applicant, and before the
expiration date of this Guaranty, which shall be the earlier of the
following dates:
(a) The date whereon the Certificate is withdrawn, or for any reason
becomes invalid or ineffective; or
(b) The date 30 days after the date of receipt by FMC of notice in
writing delivered by certified mail, courier service or other
electronic means such as email and fax, that the Guarantor has elected
to terminate this Guaranty except that:
(i) If, on the date which would otherwise have been the expiration date
under the foregoing provisions (a) or (b) of this Clause 3, any of the
Vessels is on a voyage whereon passengers have been embarked at a
United States port, then the expiration date of this Guaranty shall, in
respect of such Vessel, be postponed to the date on which the last
passenger on such voyage shall have finally disembarked; and
(ii) Such termination shall not affect the liability of the Guarantor
for refunds arising from ticket contracts made by the Applicant for the
supplying of transportation and other services prior to the date such
termination becomes effective.
4. If, during the currency of this Guaranty, the Applicant requests
that a vessel owned or operated by the Applicant, and not specified in
the annexed Schedule, should become subject to this Guaranty, and if
the Guarantor accedes to such request and so notifies FMC in writing or
other electronic means such as email and fax, then, provided that
within 30 days of receipt of such notice, FMC shall have granted a
Certificate, such Vessel shall thereupon be deemed to be one of the
Vessels included in the said Schedule and subject to this Guaranty.
5. The Guarantor hereby designates ------ , with offices at ------ , as
the Guarantor's legal agent for service of process for the purposes of
the Rules of the Federal Maritime Commission, subpart A of part 540 of
title 46, Code of Federal Regulations, issued under Section 3 of Pub.
L. 89-777 (80 Stat. 1357, 1358), entitled ``Security for the Protection
of the Public.''
-----------------------------------------------------------------------
(Place and Date of Execution)
-----------------------------------------------------------------------
(Type Name of Guarantor)
-----------------------------------------------------------------------
(Type Address of Guarantor)
By---------------------------------------------------------------------
(Signature and Title)
Schedule of Vessels Referred to in Clause 1
Vessels Added to This Schedule in Accordance With Clause 4
16. Revise Appendix A to Subpart A of Part 540 to read as follows:
Appendix A to Subpart A of Part 540--Example of Escrow Agreement for
Use Under 46 CFR 540.5(b)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, made as of this ---- day of (month &
year), by and between (Customer), a corporation/company having a
place of business at (``Customer'') -------------- ---------- and
(Banking Institution name & address) a banking corporation, having a
place of business at (``Escrow Agent'').
Witnesseth:
WHEREAS, Customer wishes to establish an escrow account in order
to provide for the indemnification of passengers in the event of
non-performance of water transportation to which such passengers
would be entitled, and to establish Customer's financial
responsibility therefore; and
WHEREAS, Escrow Agent wishes to act as Escrow Agent of the
escrow account established hereunder;
NOW, THEREFORE, in consideration of the premises and covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Customer has established on (month & year) (the
``Commencement Date'') an escrow account with the Escrow Agent which
escrow account shall hereafter be governed by the terms of this
Agreement (the ``Escrow Account''). Escrow Agent shall maintain the
Escrow Account in its name, in its capacity as Escrow Agent.
2. Customer will determine, as of the date prior to the
Commencement Date, the amount of unearned passenger revenue,
including any funds to be transferred from any predecessor Escrow
Agent. Escrow Agent shall have no duty to calculate the amount of
unearned passenger revenue. Unearned Passenger Revenues are defined
as that passenger revenue received for water transportation and all
other accommodations, services and facilities relating thereto not
yet performed. 46 CFR 540.2(i).
3. Customer will deposit on the Commencement Date into the
Escrow Account cash in an amount equal to the amount of Unearned
Passenger Revenue determined under Paragraph 2 above plus a cash
amount (``the Fixed Amount'') equal to (10 percent of the Customer's
highest Unearned Passenger Revenue for the prior two fiscal years.
For periods on or after (year of agreement (2009)), the Fixed Amount
shall be determined by the Commission on an annual basis, in
accordance with 46 CFR Part 540.
4. Customer acknowledges and agrees that until such time as a
cruise has been completed and Customer has taken the actions
described herein, Customer shall not be entitled, nor shall it have
any interest in any funds deposited with Escrow Agent to the extent
such funds represent Unearned Passenger Revenue.
5. Customer may, at any time, deposit additional funds
consisting exclusively of Unearned Passenger Revenue and the Fixed
Amount, into the Escrow Account and Escrow Agent shall accept all
such funds for deposit and shall manage all such funds pursuant to
the terms of this Agreement.
6. After the establishment of the Escrow Account, as provided in
Paragraph 1, Customer shall on a weekly basis on each (identify day
of week), or if Customer or Escrow Agent is not open for business on
(identify day of week) then on the next business day that Customer
and Escrow Agent are open for business recompute the amount of
Unearned Passenger Revenue as of the close of business on the
preceding business day (hereinafter referred to as the
``Determination Date'') and deliver a Recomputation Certificate to
Escrow Agent on such date. In each such weekly recomputation
Customer shall calculate the amount by which Unearned Passenger
Revenue has decreased due to (i) the cancellation of reservations
and the corresponding refund of monies from Customer to the persons
or entities canceling such reservations; (ii) the amount which
Customer has earned as revenue as a result of any cancellation fee
charged upon the cancellation of any reservations; (iii) the amount
which Customer has earned due to the completion of cruises; and (iv)
the amount by which Unearned Passenger Revenue has increased due to
receipts from passengers for future water transportation and all
other accommodations, services and facilities relating thereto and
not yet performed.
The amount of Unearned Passenger Revenue as recomputed shall be
compared with the amount of Unearned Passenger Revenue for the
immediately preceding period to determine whether there has been a
net increase or decrease in Unearned Passenger Revenue. If the
balance of the Escrow Account as of the Determination Date exceeds
the sum of the amount of Unearned Passenger Revenue, as recomputed,
plus the Fixed Amount then applicable, then Escrow Agent shall make
any excess funds in the Escrow Account available to Customer. If the
balance in the Escrow Account as of the Determination Date is less
than the sum of the amount of Unearned Passenger Revenue, as
recomputed, plus an amount equal to the Fixed Amount, Customer shall
deposit an amount equal to such deficiency with the Escrow Agent.
Such deposit shall be made in immediately available funds via wire
transfer or by direct transfer from the Customer's U.S. Bank
checking account before the close of business on the next business
day following the day on which the Recomputation Certificate is
received by Escrow Agent. The Escrow Agent shall promptly notify the
Commission within two business days any time a deposit required by a
Recomputation Certificate delivered to the Escrow Agent is not
timely made.
7. Customer shall furnish a Recomputation Certificate, in
substantially the form attached
[[Page 58234]]
hereto as Annex 1, to the Federal Maritime Commission (the
``Commission'') and to the Escrow Agent setting forth the weekly
recomputation of Unearned Passenger Revenue required by the terms of
Paragraph 6 above. Customer shall mail or fax to the Commission and
deliver to the Escrow Agent the required Recomputation Certificate
before the close of business on the business day on which Customer
recomputes the amount of Unearned Passenger Revenue. Notwithstanding
any other provision herein to the contrary, Escrow Agent shall not
make any funds available to Customer out of the Escrow Account
because of a decrease in the amount of Unearned Passenger Revenue or
otherwise, until such time as Escrow Agent receives the above
described Recomputation Certificate from Customer, which
Recomputation Certificate shall include the Customer's verification
certification in the form attached hereto as Annex 1. The copies of
each Recomputation Certificate to be furnished to the Commission
shall be mailed to the Commission at the address provided in
Paragraph 25 herein. If copies are not mailed to the Commission,
faxed or e-mailed copies shall be treated with the same legal effect
as if an original signature was furnished. No repayment of the Fixed
Amount may be made except upon approval of the Commission.
Within fifteen (15) days after the end of each calendar month,
Escrow Agent shall provide to Customer and to the Commission at the
addresses provided in Paragraph 25 below, a comprehensive statement
of the Escrow Account. Such statement shall provide a list of assets
in the Escrow Account, the balance thereof as of the beginning and
end of the month together with the original cost and current market
value thereof, and shall detail all transactions that took place
with respect to the assets and investments in the Escrow Account
during the preceding month.
8. At the end of each quarter of Customer's fiscal year,
Customer shall cause the independent auditors then acting for it to
conduct an examination in accordance with generally accepted
auditing standards with respect to the weekly Recomputation
Certificates furnished by Customer of the Unearned Passenger
Revenues and the amounts to be deposited in the Escrow Account and
to express their opinion within forty-five (45) days after the end
of such quarter as to whether the calculations at the end of each
fiscal quarter are in accordance with the provisions of Paragraph 6
of this Agreement. The determination of Unearned Passenger Revenue
of such independent auditors shall have control over any computation
of Unearned Passenger Revenue by Customer in the event of any
difference between such determinations. To the extent that the
actual amount of the Escrow Account is less than the amount
determined by such independent auditors to be required to be on
deposit in the Escrow Account, Customer shall immediately deposit an
amount of cash into the Escrow Account sufficient to cause the
balance of the Escrow Account to equal the amount determined to be
so required. Such deposit shall be completed no later than the
business day after receipt by the Escrow Agent of the auditor's
opinion containing the amount of such deficiency.
The opinion of such independent auditors shall be furnished by
such auditors directly to Customer, to the Commission and to the
Escrow Agent at their addresses contained in this Agreement. In the
event that a required deposit to the Escrow Agent is not made within
one Business Day after receipt of an auditor's report or a
Recomputation Certificate, Escrow Agent shall send notification to
the Commission within the next two Business Days.
9. Escrow Agent shall invest the funds in the Escrow Account in
Qualified Investments as directed by Customer in its sole and
absolute discretion. ``Qualified Investments'' means, to the extent
permitted by applicable law:
(a) Government obligations or obligations of any agency or
instrumentality of the United States of America;
(b) Commercial paper issued by a United States company rated in
the two highest numerical ``A'' categories (without regard to
further gradation or refinement of such rating category) by Standard
& Poor's Corporation, or in the two highest numerical ``Prime''
categories (without regard to further gradation or refinement of
such rating) by Moody's Investor Services, Inc.;
(c) Certificates of deposit and money market accounts issued by
any United States bank, savings institution or trust company,
including the Escrow Agent, and time deposits of any bank, savings
institution or trust company, including the Escrow Agent, which are
fully insured by the Federal Deposit Insurance Corporation;
(d) Corporate bonds or obligations which are rated by Standard &
Poor's Corporation or Moody's Investors Service, Inc. in one of
their three highest rating categories (without regard to any
gradation or refinement of such rating category by a numerical or
other modifier); and
(e) Money market funds registered under the Federal Investment
Company Act of 1940, as amended, and whose shares are registered
under the Securities Act of 1933, as amended, and whose shares are
rated ``AAA'', ``AA+'' or ``AA'' by Standard & Poor's Corporation.
10. All interest and other profits earned on the amounts placed
in the Escrow Account shall be credited to Escrow Account.
11. This Agreement has been entered into by the parties hereto,
and the Escrow Account has been established hereunder by Customer,
to establish the financial responsibility of Customer as the owner,
operator or charterer of the passenger vessel(s) (see Exhibit A), in
accordance with Section 3 of Public Law 89-777, 89th Congress,
approved November 6, 1966 (the ``Act''). The Escrow Account shall be
held by Escrow Agent in accordance with the terms hereof, to be
utilized to discharge Customer's legal liability to indemnify the
passengers of the named vessel(s) for non-performance of
transportation within the meaning of Paragraph 3 of the Act. The
Escrow Agent shall make indemnification payments pursuant to written
instructions from Customer, on which the Escrow Agent may rely, or
in the event that such legal liability has not been discharged by
Customer within twenty-one (21) days after any such passenger has
obtained a final judgment (after appeal, if any) against Customer
from a United States Federal or State Court of competent
jurisdiction the Escrow Agent is authorized to pay funds out of the
Escrow Account, after such twenty-one day period, in accordance with
and pursuant to the terms of an appropriate order of a court of
competent jurisdiction on receipt of a certified copy of such order.
As further security for Customer's obligation to provide water
transportation to passengers holding tickets for transportation on
the passenger vessel(s) (see Exhibit A) Customer will pledge to each
passenger who has made full or partial payment for future passage on
the named vessel(s) an interest in the Escrow Account equal to such
payment. Escrow Agent is hereby notified of and acknowledges such
pledges. Customers' instructions to Escrow Agent to release funds
from the Escrow Account as described in this Agreement shall
constitute a certification by Customer of the release of pledge with
respect to such funds due to completed, canceled or terminated
cruises. Furthermore, Escrow Agent agrees to hold funds in the
Escrow Account until directed by Customer or a court order to
release such funds as described in this Agreement. Escrow Agent
shall accept instructions only from Customer, acting on its own
behalf or as agent for its passengers, and shall not have any
obligations at any time to act pursuant to instructions of
Customer's passengers or any other third parties except as expressly
described herein. Escrow Agent hereby waives any right of offset to
which it is or may become entitled with regard to the funds on
deposit in the Escrow Account which constitute Unearned Passenger
Revenue.
12. Customer agrees to provide to the Escrow Agent all
information necessary to facilitate the administration of this
Agreement and the Escrow Agent may rely upon any information so
provided.
13. Customer hereby warrants and represents that it is a
corporation in good standing in its State of organization and that
is qualified to do business in the State of. Customer further
warrants and represents that (i) it possesses full power and
authority to enter into this Agreement and fulfill its obligations
hereunder and (ii) that the execution, delivery and performance of
this Agreement have been authorized and approved by all required
corporate actions.
14. Escrow Agent hereby warrants and represents that it is a
national banking association in good standing. Escrow Agent further
warrants and represents that (i) it has full power and authority to
enter into this Agreement and fulfill its obligations hereunder and
(ii) that the execution, delivery and performance of this Agreement
have been authorized and approved by all required corporate actions.
15. This Agreement shall have a term of one (1) year and shall
be automatically renewed for successive one (1) year terms unless
notice of intent not to renew is delivered to the other party to
this Agreement and to the Commission at least 90 days prior to the
expiration of the current term of this
[[Page 58235]]
Agreement. Notice shall be given by certified mail to the parties at
the addresses provided in Paragraph 25 below. Notice shall be given
by certified mail to the Commission at the address specified in this
Agreement.
16. (a) Customer hereby agrees to indemnify and hold harmless
Escrow Agent against any and all claims, losses, damages,
liabilities, cost and expenses, including litigation, arising
hereunder, which might be imposed or incurred on Escrow Agent for
any acts or omissions of the Escrow Agent or Customer, not caused by
the negligence or willful misconduct of the Escrow Agent. The
indemnification set forth herein shall survive the resignation or
removal of the Escrow Agent and the termination of this agreement.
(b) In the event of any disagreement between parties which
result in adverse claims with respect to funds on deposit with
Escrow Agent or the threat thereof, Escrow Agent may refuse to
comply with any demands on it with respect thereto as long as such
disagreement shall continue and in so refusing, Escrow Agent need
not make any payment and Escrow Agent shall not be or become liable
in any way to Customer or any third party (whether for direct,
incidental, consequential damages or otherwise) for its failure or
refusal to comply with such demands and it shall be entitled to
continue so to refrain from acting and so refuse to act until such
conflicting or adverse demands shall finally terminate by mutual
written agreement acceptable to Escrow Agent or by a final, non-
appealable order of a court of competent jurisdiction.
17. Escrow Agent shall be entitled to such compensation for its
services hereunder as may be agreed upon from time to time by Escrow
Agent and Customer and which shall initially be set forth in a
separate letter agreement between Escrow Agent and Customer. This
Agreement shall not become effective until such letter agreement has
been executed by both parties hereto and confirmed in writing to the
Commission.
18. Customer may terminate this Agreement and engage a successor
escrow agent, after giving at least 90 days written termination
notice to Escrow Agent prior to terminating Escrow Agent if such
successor agent is a commercial bank whose passbook accounts are
insured by the Federal Deposit Insurance Corporation and such
successor agrees to the terms of this agreement, or if there is a
new agreement then such termination shall not be effective until the
new agreement is approved in writing by the Commission. Upon giving
the written notice to Customer and the Commission, Escrow Agent may
terminate any and all duties and obligations imposed on Escrow Agent
by this Agreement effective as of the date specified in such notice,
which date shall be at least 90 days after the date such notice is
given. All escrowed funds as of the termination date specified in
the notice shall be turned over to the successor escrow agent, or if
no successor escrow agent has been named within 90 days after the
giving of such notice, then all such escrowed funds for sailing
scheduled to commence after the specified termination date shall be
returned to the person who paid such passage fares upon written
approval of the Commission. In the event of any such termination
where the Escrow Agent shall be returning payments to the
passengers, then Escrow Agent shall request from Customer a list of
passenger names, addresses, deposit/fare amounts and other
information needed to make refunds. On receipt of such list, Escrow
Agent shall return all passage fares held in the Escrow Account as
of the date of termination specified in the notice to the
passengers, excepting only amounts Customer is entitled to receive
pursuant to the terms of this Agreement for cruises completed
through the termination date specified in the notice, and all
interest which shall be paid to Customer.
In the event of termination of this Agreement and if alternative
evidence of financial responsibility has been accepted by the
Commission and written evidence satisfactory to Escrow Agent of the
Commission's acceptance is presented to Escrow Agent, then Escrow
Agent shall release to Customer all passage fares held in the Escrow
Account as of the date of termination specified in the notice. In
the event of any such termination where written evidence
satisfactory to Escrow Agent of the Commission's acceptance has not
been presented to Escrow Agent, then Escrow Agent shall request from
Customer a list of passenger names, addresses, deposit/fare amounts
and other information needed to make refunds. On receipt of such
list, Escrow Agent shall return all passage fares held in the Escrow
Account as of the date of termination specified in the notice to the
passengers, excepting only amounts Customer is entitled to receive
pursuant to the terms of this Agreement for cruises completed
through the termination date specified in the notice, and all
interest which shall be paid to Customer. Upon termination, Customer
shall pay all costs and fees previously earned or incurred by Escrow
Agent through the termination date.
19. Neither Customer nor Escrow Agent shall have the right to
sell, pledge, hypothecate, assign, transfer or encumber funds or
assets in the Escrow Account except in accordance with the terms of
this Agreement.
20. This Agreement is for the benefit of the parties hereto and,
accordingly, each and every provision hereof shall be enforceable by
any or each or both of them. Additionally, this Agreement shall be
enforceable by the Commission. However, this Agreement shall not be
enforceable by any other party, person or entity whatsoever.
21. (a) No amendments, modifications or other change in the
terms of this Agreement shall be effective for any purpose
whatsoever unless agreed upon in writing by Escrow Agent and
Customer and approved in writing by the Commission.
(b) No party hereto may assign its rights or obligations
hereunder without the prior written consent of the other, and unless
approved in writing by the Commission. The merger of Customer with
another entity or the transfer of a controlling interest in the
stock of Customer shall constitute an assignment hereunder for which
prior written approval of the Commission is required, which approval
shall not be unreasonably withheld.
22. The foregoing provisions shall be binding upon undersigned,
their assigns, successors and personal representative.
23. The Commission shall have the right to inspect the books and
records of the Escrow Agent and those of Customer as related to the
Escrow Account. In addition, the Commission shall have the right to
seek copies of annual audited financial statements and other
financial related information.
24. All investments, securities and assets maintained under the
Escrow Agreement will be physically located in the United States.
25. Notices relating to this Agreement shall be sent to Customer
at (address) and to Escrow Agent at (address) or to such other
address as any party hereto may hereafter designate in writing. Any
communication sent to the Commission or its successor organization
shall be sent to the following address: Bureau of Certification and
Licensing, Federal Maritime Commission, 800 North Capitol, N.W.,
Washington, D.C. 20573-0001.
26. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and
all of which when taken together shall constitute one and the same
instrument.
27. This Agreement is made and delivered in, and shall be
construed in accordance with the laws of the State of ------ without
regard to the choice of law rules.
IN WITNESS WHEREOF, the undersigned have each caused this
Agreement to be executed on their behalf as of the date first above
written.
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
EXHIBIT A
ESCROW AGREEMENT, dated ------ by and between (Customer) and (Escrow
Agent).
Passenger Vessels Owned or Chartered
ANNEX 1
RECOMPUTATION CERTIFICATE
To: Federal Maritime Commission
And To: (``Bank'')
The undersigned, the Controller of ------------------------
hereby furnishes this Recomputation Certificate pursuant to the
terms of the Escrow Agreement dated ----------, between the Customer
and (``Bank''). Terms herein shall have the same definitions as
those in such Escrow Agreement and Federal Maritime Commission
regulations.
I. Unearned Passenger Revenue as of (``Date'') was:
$--------------
a. Additions to unearned Passenger Revenue since such date were:
1. Passenger Receipts: $----------
2. Other (Specify) $----------
3. Total Additions: $----------
b. Reductions in Unearned Passenger Revenue since such date
were:
1. Completed Cruises: $----------
2. Refunds and Cancellations: $----------
3. Other (Specify) $----------
4. Total Reductions: $----------
[[Page 58236]]
II. Unearned Passenger Revenue as of the date Of this Recomputation
Certificate is: $--------------
a. Excess Escrow Amount $--------------
III. Plus the Required Fixed Amount: $----------
IV. Total Required in Escrow: $----------
V. Current Balance in Escrow Account: $----------
VI. Amount to be Deposited in Escrow Account: $----------
VII. Amount of Escrow Account available to Operator: $----------
VIII. I declare under penalty of perjury that the above information
is true and correct.
Dated:-----------------------------------------------------------------
-----------------------------------------------------------------------
(Signature)
Name:
Title:
-----------------------------------------------------------------------
(Signature)
Name:
Title:
By the Commission.
Karen V. Gregory,
Secretary.
[FR Doc. 2011-23906 Filed 9-19-11; 8:45 am]
BILLING CODE 6730-01-P