LEGISLATIVE
UPDATES
(Published March 2008)
Coast Guard Reauthorization Act of 2007-Wage Penalties and Incident Reporting in the Cruise Industry
Provisions have been included in both the House and Senate versions of this annual bill that would have direct application to cruise lines. One such provision seeks to amend the longstanding federal wage penalty statutes (46 U.S.C. sec. 10504, et seq., and 10313, et seq.) with regard to crew employed on both coastwise and international vessels capable of carrying over 500 passengers. Currently the statutes subject all maritime employers to a penalty of two days full wages for each day any amount remains unpaid “without sufficient cause”. In the cruise industry these statutes have been invoked in large fleet-wide class actions to justify claims for penalties in the hundreds of millions of dollars for alleged shortfalls in overtime and other wage disputes going back many years. Existing law does not impose any statute of limitations on wage claims, encouraging litigants to file their actions in jurisdictions like New York, which allows up to six years for the assertion of wage and hour disputes.
The new provisions would impose a three year statute of limitations on the filing of penalty wage lawsuits in the cruise industry. The House bill also establishes a cap on the penalty not to exceed 10 times the unpaid sum, if any, found to be owed in any class action. Also included in both bills is a provision that would allow foreign crewmembers to opt for direct deposit of their wages into foreign banks under prescribed conditions. Current law only permits direct deposit into FDIC insured savings institutions, resulting in many of the wages in the cruise industry being paid in cash.
Also included in the Coast Guard Reauthorization Act is an amendment to the Ports and Waterways Security Act (“PWSA”), 33 U.S.C. § 1221 et seq. The amendment does not call for new legislation, but simply new reporting regulations under the authority of the existing Act. The proposed amendment would direct the Secretary of Homeland Security to adopt regulations requiring cruise ships sailing to or from U.S. ports to report all deaths, missing persons, serious bodily injuries, sexual assaults and significant threats to the vessel, any passenger, or any person in or near a port. The Amendment has been sponsored by Congressman Shays and Congresswomen Matsui and Maloney.
In general the PWSA is designed to protect the ports and navigable waterways of the U.S., and directs and/or permits the Secretary (originally of the DOT; now DHS) to adopt regulations to implement the Act. The Act specifically allows the Secretary to require pre-arrival messages from foreign vessels operating outside U.S. waters regarding terrorism and other security or safety threats. The new reporting regulations would become part of the already existing regulations found in 33 CFR Part 160.
The crime reporting regulations already found in 33 CFR Part 120, adopted in 1996 and amended twice since, were also promulgated under the authority of the PWSA. The regulations found in Part 160 of Title 33 are along the same lines. Like the Part 120 regulations, the Part 160 regulations only apply to vessels destined to or from the U.S. However, instead of targeting "crime" they are aimed at vessel operations in general. They are designed to ensure that vessels operating in U.S. waters, or destined to or from U.S. ports, can be required to notify the Coast Guard of safety threats. The Part 160 regulations are the source of the existing requirement imposed on vessels coming to the U.S. to provide a Notice of Arrival (NOA). The same regulations also require, among other things, reports from vessels regarding pollution, hazardous cargo and other safety threats.
The Coast Guard Reauthorization Act has yet to be approved by the various House and Senate Committees before being voted on. Any differences between the two versions of the bill would then be reconciled during a conference process after the bills are voted upon.
Cabotage Changes Proposed by CBP Could Significantly Affect Operations of Foreign Flag Cruise Lines
In response to the U.S. Department of Transportation Maritime Administration’s request, the U.S. Bureau of Customs and Border Protection (“CBP”) has proposed a new criteria for foreign flag operators to comply with the Passenger Vessel Services Act of 1886 (“PVSA”). The new rule proposed on November 21, 2007 entitled “Hawaiian Coastwise Cruises Proposed Interpretive Rule,” was drafted in response to NCL America’s announcement that it will redeploy Pride of Hawaii to Europe and withdraw the ship from the U.S. registry due to economic hardship caused by competition from foreign lines. CBP’s proposal contains three requirements, including: 1) foreign flag ships must stay in a foreign port for a minimum of 48 hours; 2) at least 50% of the ship’s destination must be international to comply with U.S. cabotage laws, and 3) passengers must be permitted to go ashore at the foreign port.
Currently, foreign-flagged passenger vessels that visit more than one U.S. port per itinerary must stop at a port outside the U.S. to be in compliance with the PVSA. Flexible interpretations of the Act have allowed foreign ships to offer cruises with U.S. destinations as long as they stop in a foreign port. The amount of time such cruise ships must spend at the foreign port has not been clear, as such, most foreign port calls today are eight hours or less in duration. The CBP believes that foreign ships using brief foreign port stops, such as in Ensenada, Mexico to comply with the cabotage law, pose an imminent threat to the two remaining U.S. flag vessels, NCL’s Pride of Aloha and Pride of America. The three NCL America cruise ships were permitted U.S. registry to bolster the domestic cruise industry, particularly in Hawaii.
While intended to protect U.S. flag ships operating in Hawaii, as drafted, the interpretive rule could broadly apply to all cruise ships sailing in or out of U.S. ports and would represent a major change in the 122-year old U.S. policy. The rule has been widely criticized by many varying interests who believe the rule would cause significant economic harm to the nation’s cruise operators, port cities, and others involved in the travel industry such as tour operators and travel agents, as cruise lines reduce their U.S. cruise operations to comply with the new rule.
Opponents of the rule include foreign cruise operators, the Cruise Lines International Association, U.S. Chamber of Commerce, cruise and tour operators, U.S. ports, cities and government officials from across the nation and Hawaii, including Hawaii Tourism Authority, the Ship Repair Association of Hawaii, the Hawaii Pilots Association, Destination Hilo and the County of Kauai. Opponents argue the rule would adversely affect the time-limited cruise schedules, as few cruise operators spend more than one day in any port. The impact would be especially felt in Hawaii, where few if any itineraries could be offered while including two entire days in a foreign port on a time frame that passengers would accept. Hawaii’s Governor, Linda Lingle, estimates the loss of foreign ship visits to Hawaii would drain $200 million and over 1400 related jobs from Hawaii (including losses relating to local tour operations and businesses catering to interests of visiting passengers) and called for a more balanced interpretation of the law.
Critics of the proposed rule are concerned about its overbroad reach, affecting markets in all of the nation’s waters and beyond the intended Hawaii cruise target. Concerns have been raised as to the financial impact on other ports, such as Catalina Island where ships now stop, but which could be eliminated from itineraries to accommodate longer stays in foreign ports. Ports in Alaska and Connecticut could also be impacted due to anticipated 48 hour stays in Canada. As such, interests outside of Hawaii argue that if the rule was intended to protect the Hawaii market, it should be narrowly tailored to achieve its goals without disrupting the cruise and related travel industry nationwide.
The CBP interpretive rule proposal is supported, among others, by Norwegian Cruise Lines, the Marine Engineers’ Beneficial Association, and the Maritime Cabotage Task Force (a coalition of U.S. shipping interests and others in the maritime industry). Those supporting the rule argue it is needed to protect domestic cruise ships against foreign competitors, especially in light of the higher operational costs U.S. flag ships face due to U.S. tax, environmental and labor laws.
The deadline for submitting comments in response to CBP’s proposed new rule ended in December 2007. Currently, final rule making and the effective date for the new interpretation are unknown. CBP is analyzing the hundreds of comments filed with the Bureau, and thereafter, will refer the rule to CBP’s Commissioner and to the Department of Homeland Security (“DHS”). Once reviewed by the DHS, final rule-making will be published in the Federal Register and will likely take effect within 30 to 60 days.
New Legislation Offered In California Senate To Require Ocean Rangers
On February 22, 2008 California Democratic Senator Joe Simitian, a well known proponent of stricter environmental legislation in the cruise industry, introduced Senate Bill 1582. The bill targets environmental practices and criminal activity on board cruise ships. It requires all “large passenger vessels” operating “within the marine waters of the state” to carry on board one or more “ocean rangers”. The rangers would be U.S. Coast Guard licensed engineers who would observe environmental practices on board, could inspect records and exercise police power on board to enforce state and federal laws, and assist passengers and crew in the reporting and investigation of crimes on board. The state seeks to have the rangers on board for the entire voyage and will assess fees on a per passenger basis to pay all associated costs.
The proposed legislation, like similar legislation passed recently in Alaska, raises serious questions on the right of individual states to require local law enforcement personnel to be carried on board foreign-flag ships for all or even part of a voyage. International laws govern the right of nations to exercise national power on board foreign ships, because throughout international maritime history a vessel has been deemed a territorial extension of its flag nation. The U.S. is accorded certain limited powers, under specified circumstances, to board and exercise jurisdiction upon a foreign vessel. The U.S. can enforce international manning requirements, but even the U.S. is limited in its ability to otherwise direct the manning of foreign ships. The right of foreign nationals to board U.S. vessels is similarly circumspect.
The bill would require ocean rangers to enforce federal and state laws. However, the California Constitution only allows the attorney general of the state to enforce the state's laws, and not federal laws. Therefore the state legislature likely does not have power constitutionally to authorize the state’s Department of Justice to enforce federal laws.
Even when enforcing state laws, the state likely cannot require an on-board observer/enforcer. The manning of foreign ships is the sole purview of the flag state, as mandated by international law and treaties to which the U.S. is a signatory. This conclusion was actually adopted by the U.S. Supreme Court in the well known Intertanko case (U.S. v. Locke, 529 U.S. 89 (2000)). A unanimous Supreme Court ruled that the state of Washington’s rules for watchkeepers and casualty reporting on tankers were preempted by federal law.
In Intertanko the Supreme Court relied upon a federal statute that gave the U.S. Coast Guard authority to set manning and personnel qualifications on tankers as preempting any state law on the subject. With regard to incident reporting, the Court also relied upon the federal statutes governing the reporting and investigation of marine casualties as preempting any state reporting requirement.
