Two pieces of legislation affecting the cruise industry are a step closer to becoming law.

Emerging with a House seal of approval last month was an amended maritime reform bill, HR 4003, which provides $1.3 billion over 10 years for the 52-vessel U.S. merchant marine fleet and U.S. shipyards by raising tonnage fees on cruise and cargo ships calling at U.S. ports. In passing the measure, the House killed a $1 billion House and Ways Means Committee version that would also have hiked cruise passenger departure taxes from $5 to $8 and increased ship fuel taxes.

Known as the Maritime Administration and Promotional Reform Act, the approved bill would raise net tonnage fees to 38 cents, regardless where the ship comes from. Current tonnage fees are: 9 cents per net ton from 1995-1998 and 2 cents from 1999-2004 for ships coming from the Western Hemisphere; and 27 cents from 1995-1998 and 6 cents from 1999-2004 for those coming from outside of the Western Hemisphere. The new bill also seeks to increase the number of times a ship has to pay these fees from the current first five arrivals per 12-month period to first 25 arrivals per 12-month time frame.

At press time, however, the Senate Commerce, Science, and Transportation Committee, is drafting new versions of the bill. An initial version raises cruise ship tonnage fees less – to 15 cents from 1995 and 13 cents from 1999 – than the House bill calls for, but eliminates any fee cap so vessels would pay every time they called at a U. S. port. However, one Senate committee source said the measure is going through various drafts, and it is unlikely any version will receive committee approval this year because of the committee’s divided membership.

Unsoeld Update

Foreign-flagged ship operators that want to sail U.S. routes may be forced to build in the U.S., the main provision of HR 3821, or the U.S. Passenger Vessel Development Act, which was approved by the House Merchant Marine and Fisheries Committee in August. Authored by Congresswoman Jolene Unsoeld, the measure allows foreign-flagged vessels to re-flag to U.S. registry, thus opening up U.S. routes to them, if cruise operators build ships at U.S. shipyards.

Briefly, foreign-flagged vessels would have to have a contract in hand with an American shipyard before they could re-flag, said an Unsoeld spokesperson, and lay the ship’s keel within 18 months. Any re-flagged ships must meet U.S. Coast Guard interpretations of SOLAS standards as well. The measure also recognizes the historic access of foreign­ flagged ships to Glacier Bay under the Alaska Interest Land Conservation Act, but grants U.S.-flagged ships preference for any remaining Glacier Bay permits.

The Unsoeld bill heads for the House Natural Resources Committee this month before final vote by the House.

Much of the Capitol Hill battle rests with the International Council of Cruise Lines (ICCL). As part of its grass-roots strategy, ICCL has been blanketing the travel agent community this summer with a 12-page summary report of a 1993 ICCL-commissioned study by Price Waterhouse titled, “The Cruise Industry: A Partner in America’s Economic Growth.”

The study emphasizes the real dollar impact of the cruise industry on the U.S. economy and reports that by 1996, the cruise industry will be paying $19 billion in wages to nearly 600,000 Americans, while coughing up over $8 billion in U.S. taxes.

However, the bills, which would impose higher taxes and stricter regulations on cruise ships sailing in the U.S., have been slowly moving forward fueled at times by appeals to American patriotism and special interests.

House debate and vote is imminent for HR 1517, commonly known as the Clay Bill after its architect Rep. William Clay, although a Clay staff member indicated chances are slim this session, with more pressing bills receiving priority. The Clay Bill was given the green light out of committee – after six tries – by the House Education and Labor Committee last April. The Clay Bill would extend some protective provisions of the U.S. National Labor Relations Act and Fair Labor Standards Act to employees on foreign­ flagged passenger and cargo ships calling at U.S. ports. Simply stated, this means minimum wages and the right to collective bargaining.

Opponents of the bill argue that HR 1517 interferes with countries’ sovereign rights to govern the internal affairs of ships that fly their flags. Advocates say that stories are widespread about poor living conditions, inedible food, and low pay for shipboard workers.

A similar bill was introduced to the Senate by Sen. Harris Wofford, but no move is expected until House action.

With the tide of newbuildings being announced, the Gibbons Bill should catch fire, but it’s not. Originally inked to prod the Organization for Economic Cooperation and Development (OECD) to urge members not to subsidize their yards, HR 1402 would impose economic and operations sanctions on ships flagged in countries that subsidize shipyards. The measure does, however, include a “grandfather” provision that would exempt all existing vessels, as well as those under contract when the bill becomes law, from these sanctions.

The OECD is moving toward its own solution: after years of negotiations, OECD members, with the exception of France, agreed last July to eliminate subsidies. According to ICCL President Jack Estes, Rep. Gibbons has stated that he will await the outcome of the OECD discussions before proceeding further.

Also in the picture is the Federal Maritime Commission (FMC), which is reviewing current cruise line “non-performance” bonds. These monies are based on a percentage of unearned passenger revenues (UPR), or passenger deposits, and are held in escrow to reimburse passengers in the event of non-performance or casualty.

According to Bryant Van Brakle, director of FMC’s Bureau of Tariffs, Certification and Licensing, currently, all cruise companies are required to post bonds equal to 110 percent of their highest UPR for the last two years, with a $15 million maximum. For new companies, the FMC sets the amount based on the line’s sailing schedule, advance payment policy, and cost of berths. The FMC receives update reports from lines every six months in case a bond adjustment is required.

FMC made two proposals earlier this year that would eliminate any cap. One proposed rule requires 110 percent of UPR between $0 to $25 million and 90 percent over $25 million. The altemative is 110 percent of UPR from $0 to $25 million, 75 percent from $25 to $50 million and 50 percent over $50 million.

“These proposals are designed to make certain that there is coverage for those cruise lines that have unearned passenger revenues which exceed our previous cap,” said Brakle.

(Carnival Corporation reported customer deposits (unearned passenger revenues) of $341 million for its second quarter ended May 31, 1994 and has two $15 million bonds posted for Carnival Cruise Lines and Holland America Line.

Royal Caribbean Cruises reported customer deposits of $190 million for the second quarter ended June 30, 1994 and has also a $15 million bond.

Bonds are often posted by insurance companies at estimated cost as low as 0.3 to 0.5 percent per year of the face value of the bond for the stronger companies. Thus the cost to a company such as Carnival could theoretically increase from an estimated $90,000 per year today to $1.0 million if the revisions are implemented.)

One cruise line executive, who asked not to be identified, said it would be a positive thing if unearned passenger revenues were 100 percent covered. If anybody should go bankrupt it would be good will for the industry if all the passengers received full refunds, he said.

The FMC is scheduled this month to review comments, including one from the ICCL, it received about the proposals. Whether either existing proposal will be implemented or new ones adopted, said Brakle, is up to the Commission review board, and the strength of arguments made by industry organizations.

Cuba

New legislation to repeal the United States’ Cuban Democracy Act of 1992, which prohibits any passenger or cargo ship of any country flag from embarking or disembarking passengers, or loading and unloading, at a U.S. port within 180 days of calling at a Cuban port, was introduced last month by Congressman Jose Serrano (D-NY).

The 1992 Act also prohibits any U.S. overseas subsidiary from trading with Cuba, regardless of whether the host country does business or not with Cuba.

Serrano introduced the bill in response to Cuban President Fidel Castro’s announcement last month to relax the country’s emigration policy, allowing refugees to head for the U.S.: at press time over 17,000 refuges have been picked up at sea and are being detained at the U.S. Naval Base at Guantanamo Bay. Since the mass exodus started, the Clinton administration has indicated it is willing to ease, but not eliminate, economic and travel restrictions if Castro allows free elections or more freedom of speech.

If the Act is repealed, cruise lines would most likely be the first to visit Cuba because their ships would provide the infrastructure for American standards that the country is lacking. In fact, cruise executives have expressed a fast response to sail there once the political situation changes.

“Cuba’s only viable trade at this point is tourism.” said Jay Lewis, President of Market Scope, a travel and tourism market research firm in Miami, adding that the cruise potential of the island nation is “enormous.”

According to Tampa Port Authority Port Manager Ron Ardis, “It would mean a lot to us from a port perspective,” if Cuba opened to U.S. tourism. Having two new terminals ready by the end of 1994, he added, leaves Tampa “better situated to serve any start-up of service to Cuba.”

Presently, the bill has 40-50 sponsors, according to a Serrano staff member: ironically, two sponsors Rep. William Clay and Rep. Jolene Unsoeld – have pending legislation seeking to further regulate the cruise industry.

However, it is unlikely that any action will come during this session, slated to end by early October, especially since Congress is still on hiatus. The bill is at the Foreign Affairs Subcommittee for the Western Hemisphere for review.