WASHINGTON -- The Federal Maritime Commission (FMC) is requesting industry and public comments on a proposal to raise its bonding requirements for cruise lines.

Cruise lines sailing from U.S. ports are required to post a bond or other surety to protect passenger deposits in the event of nonperformance, with a $15 million ceiling.

In a rulemaking notice, the commission is proposing to eliminate the ceiling, effectively requiring larger cruise lines to post bigger bonds.

In the FMC's proposal, cruise lines would be responsible for coverage based on the total amount of passenger funds on hand for future cruises (the so-called "unearned passenger revenue"), except for revenue received from credit card charges made within 60 days of sailing.

The FMC said it recognized the elimination of the ceiling could impose "tremendous cost and difficulty" on some cruise lines, which is why it proposed excluding the credit card revenue.

Historically, the FMC has been hesitant to change the bond ceiling -- it was last raised in 1991 -- because the cruise industry has been stable; bankruptcies have been rare; and the risk of cruise line nonperformance was deemed to be minimal.

But the cruise climate has changed in the past two years, and five lines covered by the FMC bond program, plus two that were not covered, have stopped operating.

In several of those cases, passengers had difficulty collecting their deposits for voyages that never sailed. Premier Cruises' surety bond, for example, fell about $7 million short of its unearned passenger revenue.

And most of American Classic Voyages' passengers did not receive compensation because the line was self-insured.

In August, the FMC eliminated self-insurance as a coverage option.

Operators point out that the $15 million requirement covers only a fraction of large lines' deposits, even though smaller operators with less than $15 million in unearned revenue already are completely covered.

And, as fleets continue to grow, the percentage of unearned revenue covered by the bond continues to shrink.

In its request for comment, the FMC said even raising the ceiling by another $10 million "would be wholly inadequate for some cruise lines whose fleets consistently have outstanding [unearned revenue] in the hundreds of millions of dollars."

The FMC has asked for comments on this issue, Docket No. 02-15, be submitted before Jan. 8. For more information, visit www.fmc.gov.


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