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Concordia Hearing: U.S. Senate Grills Cruise Industry on Safety, TaxationMarch 2, 2012 By: Susan Young
|Senator John D. Rockefeller IV (D-WV) in a live webcast. // Photo by Susan J. Young|
It was rough going for the cruise industry at times in a U.S. Senate hearing room on Thursday. Depending on your perspective, Senator John D. Rockefeller IV (D-WV), chairman of the Committee on Science, Transportation and Commerce, was either a gallant crusader protecting the public from mayhem in the aftermath of Costa Concordia’s accident or a bit of a schoolyard bully.
The cruise safety topic at hand was “Are Current Regulations Enough to Protect Passengers and the Environment?” “The cruise ship industry is large, successful, and vastly profitable,” Sen. Rockefeller said in his written summary comments for the hearing. “The industry’s revenues top $25 billion a year. Nearly 13 million Americans took a cruise last year.
"The industry is growing with larger and larger ships entering service every year—some ships will carry over 5,000 passengers and crew," he said. "A modern cruise ship can carry the entire population of most West Virginia towns. They are floating private cities.”
Sen. Rockefeller said a unique and complex set of international rules governs the operations of the ship and the safety of passengers. “I believe that these rules work to protect the companies rather than their passengers,” he said. “We are here today to examine whether existing regulations are sufficient to protect the health and safety of passengers and the fragile ocean environment in which they operate.”
Agents may read the summary of Sen. Rockefeller’s written remarks here at: http://commerce.senate.gov/public/index.cfm?p=Hearings&ContentRecord_id=15f40d60-ec95-4afd-993c-7d03ca284efd&Statement_id=3c48123a-17be-4692-abb7-07204bd6ced8&ContentType_id=14f995b9-dfa5-407a-9d35-56cc7152a7ed&Group_id=b06c39af-e033-4cba-9221-de668ca1978a&MonthDisplay=3&YearDisplay=2012
Safety is Top Priority
Speaking on behalf of the cruise industry, Christine Duffy, president and CEO, Cruise Lines International Association (CLIA) passionately described the industry's safety record, its commitment, and the changes made since the Costa Concordia accident. Agents may read Duffy’s written testimony here at: http://commerce.senate.gov/public/?a=Files.Serve&File_id=78ebb7d8-f5b1-4219-ad39-ced384aa2e74
Stressing that “safety is our number one priority and there is nothing more important,” Duffy reiterated statistics given in her U.S. House hearing appearance yesterday. Of 153.4 million guests who have sailed, there were 28 passenger and crew deaths due to operational issues. That said, she stressed that “not a single fatality is acceptable” to the industry.
She talked about the industry’s proactive safety review undertaken since the Costa Concordia accident on Jan. 13 in Giglio, Italy. She outlined the change in the muster policy to assure all passengers receive an emergency drill prior to sailing. And she indicated CLIA’s desire to work with maritime regulatory bodies to assure best practices for safety are adopted.
In addition, Duffy stressed that the cruise industry worked with Congress in 2010 on the Cruise Vessel Security and Safety Act, which is now law and requires certain reporting procedures and training for onboard crimes.
Senator Frank Lautenberg (D-NJ), explained that he had constituents onboard Costa Concordia, and “when a passenger steps onto a cruise ship, they expect to relax and enjoy time off from the pressures of everyday life. No one expects to come onboard and [be part of] a nightmare.”
His concerns were that the passengers were abandoned after the crash, noting: “We owe it to the public to ask the tough questions,” so that cruise ships are the safest they can be, with only the best trained, best qualified officers and crew and that all passengers receive their own proper safety evacuation instruction.
The hearing, Sen. Lautenberg said, will give the committee a better understanding of whether international standards are adequate, were followed, and where improvement needs to be made.
Sen. Rockefeller told the hearing attendees of his personal commitment to the environment. “It’s an embarrassment that works on my soul,” he said, citing the three-mile limit in U.S. waters for U.S. Coast Guard control over environmental policies of cruise lines. Beyond that, foreign flagged cruise lines are in international waters.
His written summary said: “Just three miles from shore, a cruise ship can discharge thousands of gallons of raw sewage. In addition, they dump a significant amount of solid waste at sea. The environmental practices of the industry are unconscionable.”
Yet, the dumping of waste he spoke about seems far different than what cruise executives have told Travel Agent magazine in the past that their policies entail. While some incidents occurred 5, 10 or 15 years ago in close-in waters by accident, times have changed, executives say.
Cruise line processes are stringent, stressed Duffy, who gave several examples of new technological advancements on ships. In addition, CLIA member lines as a policy matter do not routinely dump raw sewage or trash in the ocean and treatment systems are so advanced that they can turn wastewater into drinking-water-quality liquid when discharged.
Here are two past stories on environmental stewardship: www.travelagentcentral.com/cruises/blue-waters-green-goals and www.travelagentcentral.com/trends-research-green-cruise-industry.
But Rockefeller continued, “Don’t expect to be wooed by it [the cruise industry’s defense]. Beyond the three mile limit, “you’re on your own and you do what you want” he told Duffy.
Alaskan Senator Mark Begich (D-AK) explained that his state had the strictest environmental regulations out there, and that while Alaska wanted cruising as a business, it also wanted to be sure to protect the environment.
The toughest questioning by Sen. Rockefeller came not on the topic one might have expected – the safety of the cruise industry post-Costa Concordia - but rather on a taxation issue Sen. Rockefeller raised.
Sen. Rockefeller asked: “Why [does] an industry that earns billions and uses a wide array of services pay almost no corporate income taxes at all?” He cited Carnival Corp., saying it made $ 11.3 billion in profits over the past five years, and quoted figures showing the cruise giant paid only 1.1 percent in local, state, federal and other taxes.
He then cited the U.S. Coast Guard’s readiness to help when cruise ships are in trouble, but the money issue became quite clear: “At a time when the Coast Guard and the entire federal government [are] struggling to maintain their critical missions, it is inconceivable that the industry does not pay its fair share.”
Sen. Rockefeller told Duffy he wanted to know whether she thought it “appropriate” for big cruise lines to pay little or no taxes. “Do you think you’re doing your fair share?” he asked.
Duffy responded that all CLIA member cruise lines pay “all taxes that are required based on current laws.” Speaking for the industry as a whole, Duffy is not party to any individual cruise lines’ tax return preparation or corporate strategy, nor is she an employee of any individual cruise line.
She stressed that cruise lines are often multi-national corporations that pay a slew of local, state, port and federal fees and charges, both for services and required taxes.
The industry's response clearly irritated Sen. Rockefeller, who suggested the possibility of Congressional subpoenas if the cruise industry wasn’t more willing to talk about the taxation issue.
But then he asked Duffy if the industry will work with his Committee to address his concerns and she said that it would.
Economic Impact and Safety at Sea
Throughout the hearing, the positive economic impact of the industry as well as its safety responsibilities remained top of mind. Sen. Rockefeller and other senators acknowledged their families have cruised and enjoyed their vacations at sea.
Senators Bill Nelson (D-FL) and Marco Rubio (R-FL) talked about the sizable economic benefits of what the industry brings to the U.S. economy. Cruising in Florida alone, which has 60 percent of U.S. cruise embarkations, is responsible for 123,000 jobs.
Sen. Rubio also commended the cruise industry for the voluntary steps it’s taken in the wake of Costa Concordia’s accident. He inferred that cruise lines clearly know the stakes: “Above all else, it is about customer service and people just won’t come back if they’ve had a bad experience.”
Sen. Nelson cited Florida's benefit from cruise guests flying into Florida to stay a night pre-cruise and then going on the cruise and, in particular, he cited passengers who combine a Disney theme park visit and a cruise vacation.
He noted that regulation of the industry has strengthened protections for consumers: “A couple of years ago, we passed the Cruise Vessel Security and Safety Act, which is going to continue to protect the traveling public.”
Bill Johnson, seaport director, PortMiami, the world’s largest cruise port, said he wanted the committee to understand not just how important cruising was to Miami or Florida, but how important it was economically for the United States.
Johnson said PortMiami generated $18 billion for the economy in South Florida last year, including 180,000 jobs of an average pay of $56,000 annually.
He said PortMiami just completed its fourth consecutive year exceeding 4 million passengers, that five major corporate headquarters of cruise companies are located in the area, and that 60 percent of those 4 million guests pass through Miami International Airport.
Those airport passengers spend millions on food, shopping, sales tax and so on. Supply-wise, Royal Caribbean Cruises Ltd. alone uses more than 2,000 suppliers at the port, he said.
He also provided the unique perspective – and perhaps a bit of a precautionary warning to the committee - that cruise companies, many headquartered in South Florida, have choices, both with where ships and land-based operations are located.
Johnson said that in Royal Caribbean Cruises Ltd.’s recent negotiation talks with the port about keeping the cruise company’s headquarters at PortMiami, the line said it was possibly considering London in the U.K. as an alternative, should the negotiations not be successfully completed. A deal was made to keep the line in South Florida.
Sen. Rockefeller said his prime goal with the hearing was to assure a safe environment for passengers. Some of his constituents who were on Costa Concordia felt they were let down by the crew and the system.
His written testimony said: “The rarity of major cruise ship accidents suggests that the industry has an excellent safety record. But, the recent sinking of the Costa Concordia off the Italian coast is a stark and tragic reminder that no mode of transportation is 100% safe.”
Sen. Rockefeller and other Congressional members also noted that when accidents occur, passengers have limited rights. Complicated ticket contracts limit passenger rights and antiquated laws prevent passengers from collecting fair compensation.
“Our laws have not kept up with the changes in the industry, and I believe we must revisit them,” Sen. Rockefeller said.
Coast Guard Perspective
Vice Admiral Brian M. Salerno, as he had at a U.S. House of Representatives committee hearing the previous day, discussed the U.S. Coast Guard’s oversight of the U.S. flagged cruise industry and its enforcement of U.S. regulations and laws for both foreign and domestic lines while calling at U.S. ports. He said 170 large passenger ships operating with 11.7 million passengers passed through U.S. ports last year.
Steady in his delivery and clearly highly respected by the committee members, Salerno said that the U.S. Coast Guard has rigorous inspection and enforcement activities, and that if a ship does not meet standards, it would not be allowed to leave port. “Safety has been a long standing focus of the U.S. Coast Guard,” he said.
Salerno said that despite a century of technology advancements since the loss of the Titanic, technological improvements are “only as good as the humans that operate them and the organizations that enforce [the regulations].” Certainly, there will be much to be learned from the Italian investigation of Costa Concordia, he said, and “we are open to the possibility that our regulations and international standards may need to be strengthened.”
One change since Costa Concordia? Following the industry’s voluntary step to undertake passenger muster drills prior to a ship leaving port, the U.S. Coast Guard has directed its inspectors to witness and evaluate those drills whenever they are on a ship for a periodic or annual inspection. That’s now built into the inspection process.
Captain William H. Doherty, director of maritime relations, NEXUS Consulting Corp., criticized the cruise industry, citing a number of issues where his group felt the industry has fallen short of its responsibility to maintain safety and security. Agents may read his written testimony here: http://commerce.senate.gov/public/?a=Files.Serve&File_id=46b676e1-48c3-4b3e-b44f-f0fc0830090a.
One interesting proposal he put forth was a shipboard passenger 911-type system. “We have to decentralize the manner in which emergencies…are reported,” Doherty said. He said on the Costa Concordia, rescuers arrived from efforts of passengers calling on cell phones and alerting people to the accident, rather than by actions of the ship’s own crew.
"If the survivors weren’t lucky enough to be within cell phone range, who know how much worse [the situation would have been],” Doherty said. If passengers feel their lives are in danger, they should be able to send out a passenger distress signal, he said, noting technology was already available to accomplish this.
Similarly, Dr. Ross Klein, professor, School of Social Work, St. Johns College, Memorial University, was critical of most everything the cruise lines do, including their handling of the environment, crime and onboard medical care and handling of norovirus outbreaks.
Agents may read Dr. Klein’s testimony is at: http://commerce.senate.gov/public/index.cfm?p=Hearings&ContentRecord_id=15f40d60-ec95-4afd-993c-7d03ca284efd&Statement_id=b96f3da1-a505-4453-9606-a0eb7b133f6a&ContentType_id=14f995b9-dfa5-407a-9d35-56cc7152a7ed&Group_id=b06c39af-e033-4cba-9221-de668ca1978a&MonthDisplay=3&YearDisplay=2012
Duffy countered that the U.S. Centers for Disease Control standard to which cruise ships are held for norovirus and other illnesses is among the highest in the world. For example, airlines, hotels and shopping malls are not held to the same reporting standards.
The cruise industry served 16.3 million passengers safely in 2011, Duffy said, noting that safety regulations start with the design and construction of ships and extend to navigation of the vessel, training of the crew and evacuation protocols. She noted that the International Maritime Organization mandates global standards, and most importantly, the lines adhere to SOLAS mandates for safety of life at sea.
Duffy also said her staff includes four retired U.S. Coast Guard officers, and that her staff work very closely with the U.S. Coast Guard.
CLIA, which represents not only 26 major cruise lines but 16,000 travel agents across the U.S., promotes the unique benefits of cruising, she said, as well as promotes policies and practices that promote a safe, healthy environment.
Of safety, “there is nothing more important to our business than that,” she said. “Every aspect is heavily regulated and monitored under U.S. and international law.”
Agents might view the full hearing proceedings via archived Web cast at: http://commerce.senate.gov/public/index.cfm?p=Hearings&ContentRecord_id=15f40d60-ec95-4afd-993c-7d03ca284efd&ContentType_id=14f995b9-dfa5-407a-9d35-56cc7152a7ed&Group_id=b06c39af-e033-4cba-9221-de668ca1978a