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-Spencer L. Simons, former Director, O'Quinn Law Library and Associate Professor of Law

Friday, June 5, 2015

Cruising from Texas: How U.S., Maritime, Texas, and Panamanian Law May All Govern Your Vacation

While our law school community stays hard at work during the summer months, thoughts still occasionally turn toward vacation. Cruises are among the most popular vacation choices for Houston-area residents as the area boasts cruise ports both in Galveston and Pasadena, eliminating the need for costly air travel. Cruising is a big industry for Texas as well. Six percent of all cruise passengers leave from the Texas ports (605,000) and cruise industry expenditures in Texas exceeded $1.26 billion in 2013 (See, The Contribution of the North American Cruise Industry to the U.S. Economy in 2013, at 57). As travelers both depart and return from the United States it is easy for many to that these ships are generally not subject to U.S. laws. Here are some things to be aware of if you are planning on taking a cruise vacation. 

Open Registries: Despite the vast number of cruise ships sailing closed-loop itineraries from United States ports, these ships are nearly exclusively registered in other countries. Under international law, every merchant ship must be registered with a country, known as its flag state. The country of registry has jurisdiction over the vessel and is responsible for inspecting that it is safe to sail and to check on the crew's working conditions. Open registries are also known as “flags of convenience,” a term now generally understood to mean registration of a ship in a country with an open registry for primarily economic reasons. Only one major cruise ship is currently registered in the United States, Norwegian Cruise Line’s Pride of America, which sails exclusively in the Hawaiian Islands from Honolulu.

The practice of registering ships in Panama began in 1922 as a way for the passenger vessels to serve alcohol to its passengers during Prohibition. Registering ships in Panama grew in popularity even after the end of Prohibition as companies found it an effective way to avoid costly compliance with labor laws and avoid taxation Once a ship is outside of United States territorial waters the flag state exercises jurisdiction to adjudicate and enforce laws with respect to the ship or any conduct that occurs on the ship. In 2010, Congress passed the Cruise Vessel Security and Safety Act (Pub. L. No. 111-207) to provide increased security and at least some level of regulation to foreign flagged passenger vessels operated in U.S. territorial waters. The act establishes requirements to ensure the security and safety of passengers and crew on cruise vessels and implements reporting of crimes that affect U.S. passengers. For more about open registries and flags of convenience, see Brian Baker, Flags of Convenience and the Gulf Oil Spill: Problems and Proposed Solutions, 34 Houston Journal of International Law 687 (2012); and H. Edwin Anderson, III, The Nationality of Ships and Flags of Convenience: Economics, Politics, and Alternatives, 21 Tulane Maritime Law Journal 139 (1996).

Contracts: As is the case in many consumer transactions, the cruise passenger’s ticket contract will control the rights and remedies of the passenger. These contracts typically contain forum-selection clauses, choice-of-law provisions, and notice-requirement clauses that limits the time available for a passenger to make a claim against a cruise line.

Safety: Due to the myriad of laws and often lax reporting requirements, historically it has been difficult to find specific health and safety information about a given cruise ship. Recently ProPublica brought together data from a number of sources to provide the Cruise Control database  that allows users to search the known health and safety information and incidents for all cruise ships sailing out of the U.S.

Taxes: Texas law comes into play if your ship returns to the cruise ports in Galveston or Pasadena. In 2013, the Texas Alcoholic Beverage Commission announced  it would begin collecting personal importation taxes on alcohol and cigarettes from passengers returning from cruises under the authority of § 107.07 of the Texas Alcoholic Beverage Code. Enforcement of this law requires cruisers returning through Texas to pay a duty on alcohol and cigarettes that are considered exempt under U.S. Customs and Border Patrol regulations. That is, the “duty free” liter of spirits you purchased in port will not be taxed by U.S. Customs, but to enter the state of Texas with your bottle you’ll be charged $3.75

Happy cruising and safe travels to all this summer! Don't forget your sunscreen! 

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