Christine Duffy Defends the Cruise Industry

| 03.30.12

Amidst troubles, the president of CLIA, Cruise Lines International Association, upholds the integrity of the cruise industry.

Christine Duffy does not have an easy job, although I doubt she ever imagined it would be this difficult. She is the president of CLIA, the Cruise Lines International Association. When she took over in early 2011, the cruise industry was facing a few challenges, but nothing as drastic as what has happened since the Costa Concordia tragedy. That led to cruise safety hearings before a congressional committee - one headed up by Jay Rockefeller, head of the Senate's Commerce, Science and Transportation Committee.

Addressing the Concordia Tragedy

After the Concordia incident last January, CLIA acted very quickly to establish new safety guidelines that will, in the future, ameliorate some of the problems that occurred during the Concordia evacuation. One of the biggest problems that night was almost 700 newly boarded guests who had not yet received a boat drill.

At the time, that was within the guidelines of CLIA, which said passengers had to attend a lifeboat drill within 24-hours of boarding the ship. Those 700 had just boarded the ship in Civitavecchia (the port for Rome) that afternoon and were scheduled for a boat drill the next day after more passengers were to board in Genoa. To be clear, the ship was practicing "interporting," the process of bringing passengers onboard in several different ports of call during a seven-day itinerary. Each passenger still gets the same basic seven-day cruise, but they begin and end their cruises on different days in different ports.

CLIA's new guidelines require a boat drill for every passenger before they set sail, so no guest will ever be at sea without having been shown the proper way to put on a life jacket or where to report for a seat in a specific lifeboat.

The important thing to note is how the cruise industry is proactive ahead of government regulation. It shows a level of responsibility on the part of the cruise lines that many industries could learn from. But unfortunately, you just can't do enough to please some people.

Congressional Hearings by Jay Rockefeller

On February 29th, in an event that must have felt an awful lot like a never-ending Groundhog's Day, Christine faced U.S. Senator Jay Rockefeller, Democrat, West Virginia, chairman of the Senatorial Commerce, Science and Transportation Committee. During this hearing, the "good senator" made ample use of his high seat to plunder and pillage Ms. Duffy in a manner I consider demeaning and disrespectful – and I believe it was partly because she is a woman.

Had a Republican spoken to any professional woman that way we would be hearing about it for weeks. As the Senator took numerous opportunities to flap his gums about the "hard-working coal mining constituents" in the state he oddly represents considering his New York City roots, I couldn't help but think about the silver spoon he had in his mouth at birth. Jay Rockefeller is a true member of the "1% Club" in America disguising himself as someone who cares about the working man - yet there he was deriding a hard-working, self-made lady in an honest job-providing sector of the American economy that never needed a bailout.

There were two main talking points for the Senator; how much the cruise lines pay in corporate taxes, and how much sewage the cruise lines dump in the ocean. Asking Christine repeatedly about these two topics, when he wasn't satisfied with her candid and perfectly honest responses he chose to bully her like a high school principal talking to a teenager. As I watched the Senator I couldn't resist writing down some of the unbelievable abasing Ms. Duffy was hearing. These are fairly close reproductions – as accurate as I could make them by typing as I watched the hearing.

Rockefeller: "Ms Duffy, do you believe the cruise lines pay their fair share of taxes to the United States government?"

Duffy: "Sir, I am sure the cruise lines pay all of the taxes they are required to pay by law."

Rockefeller: "That is not what I asked, Ms Duffy, I asked if you think they pay their fair share."

Duffy: "Once again, sir, I am sure the Cruise Lines pay all of the taxes they are required to pay by law."

With the first reply this is a fully answered question, so why did the Senator persist? As a Senator he is the very person responsible for deciding what is the "fair share" for all of us who pay taxes. Christine had every right to say, "Sir, that's your job, not mine." Too bad she is too much of a lady.

All I could think about during this exchange was "Senator Rockefeller, do you think you pay your fair share in taxes since you come from one of the richest families America has ever created?"

But Senator Bully was just getting warmed up:

"Ms Duffy, let me give you some advice, when you come before a congressional committee. You had best be prepared to be honest. If you are not prepared to give me direct answers then we have a problem…"

"We have a problem?" That is a typically veiled threat made by an abusive personality, especially in response to an obviously ambiguous and provocative question solely meant to defame her job title. Christine Duffy answered the senator with an honest and accurate answer. The cruise lines are exactly a product of the laws created by the United States government regarding maritime businesses, and there is nothing illegal or immoral in how they operate.

Furthermore, it is not the responsibility of the cruise lines to decide what is their "fair share" of taxes – it is the job of Senator Rockefeller!

It never fails to amaze me how ill-informed the senators who hold hearings about the cruise industry can be. Rockefeller is the head of the Senatorial transportation committee, and cruise lines are a $35-billion industry he is in charge of regulating. Why doesn't he know exactly what laws are applicable to the cruise lines?

Another exchange –

Rockefeller: "Many Americans don't think corporations pay their fair share of taxes. I happen to be one of them. The New York Times just wrote Carnival only paid 1.1% of its revenue in taxes, is this true?"

Duffy: "I can't speak for the individual companies."

Rockefeller: "My staff has SEC filings that show Carnival Corp actually paid no corporate taxes at all in 2011, which I believe was last year, is that right? Do you have a comment on that?"

Duffy: "I think what is appropriate is that the cruise industry pays its taxes based on current laws."

Rockefeller: "So, if you paid no taxes, there must be laws that I am not aware of."

For the record, Mr. Rockefeller, it is called Section 883 of the Internal Revenue Code known as the Reciprocal Exemption:

Duffy: "Many of our companies are multi-national corporations."

Rockefeller: "I understand that Ms Duffy. Can you explain why a multi-million dollar company based in Miami should not be paying any US taxes?"

Duffy: "I do believe that our members do make various payments."

Ross Klein: "Carnival is registered in Panama and Royal Caribbean is based in Liberia, and so by using ships of foreign flags, they are exempt from US corporate taxes."

Rockefeller: "Well then maybe you should just move to one of those foreign countries and then you won't have the Coast Guard to help you when you get into trouble." This is not accurate at all, the Coast Guard assists anyone in our territorial waters. For that matter, we even aid illegal aliens coming over the border from Mexico if they get injured.

The senator then made several remarks about how much it costs to maintain the Coast Guard. The Senator first proclaimed his high esteem for the Coast Guard for assisting the cruise lines when they have an emergency – but later he expressed his confusion over the fact that the Coast Guard was not sharing his general indignation over the state of the cruise industry in America. In fact, the cruise industry works very closely with the Coast Guard and the FBI on a legal basis as well as a voluntary basis, and the cruise industry is generally held in very high regard by the Coast Guard and the FBI. I have never heard an FBI agent, Coast Guard official or CDC representative come to a congressional hearing to complain about the cruise industry, in fact, quite the opposite.

Rockefeller: "I am asking you, just as an American citizen, whether you think it is not enough to say 'oh, we are paying everything we are required to pay under the law?' The private sector is doing very well by you, but the Coast Guard doesn't get a dime."

Then the Senator moved on to talking about MRSA, the antibiotic-resistant virus that affects hospitals – as if that has anything at all to do with the cruise lines (it doesn't). His point was so remote I can't even remember it now.

Rockefeller: "There is a lot of discussion about this in the country right now that we won't hold together unless everybody does their fair share. Do you think you do your fair share in terms of taxes? So it's sometimes not just about doing what's expected of you, but it's about paying your fair share. I mean that is sort of what this country is all about. Do you think you are doing your fair share in terms of taxes that your industry pays?"

Duffy: "Again Mr. Chairman, we pay what is appropriate for the business we conduct."

Rockefeller: "What is appropriate or what is required? There is a big difference between what is appropriate and what is required, which do you mean?"

Duffy "We do what is required of us as an industry, we pay over 100 different types of taxes & fees, we provide jobs, other economic benefit, not just to ports & states…"

Rockefeller: "You can say the same thing about Goldman Sachs."

Duffy: "We [CLIA] also represent 16,000 travel agents who pay taxes…"

Rockefeller: "...and I'm thrilled about that. [pause] I'm going to be rude. If you are going to be effective up here, and you are new to this..."

Duffy: "uh-huh"

Rockefeller: " gotta speak more truth. I'm not accusing you of not speaking truth, I am saying you gotta speak more… credibly if you are going to have credibility with this… We take our work very seriously. Yes, we are consumer oriented. We assume that corporations are doing pretty well, but we also do a lot to help corporations. Your corporations are doing very, very well." Talk about beating a dead horse, and in this case I mean Christine Duffy. Asked and answered already, but the Senator still wasn't done.

Rockefeller: "So, I'm going to ask you, outside of three miles name about 4, 5 or 6 things you could be doing better, that you should be doing better."

Here the Senator is referring to supposed dumping of raw sewage by cruise ships – something that they are allowed to do by U.S. law. In the big picture, all ships dump sewage, but cruise ships actually use and dump far less sewage and waste water than the average city, about 30% less per person according to a recent Holland America report. Plus, keep in mind that the world's oceans comprise 3/5's of the earth's surface, so if one ship is letting loose any sewage at all – and in fact many ships first process sewage into sludge, incinerate all they can, and then bring the rest onshore to dispose of it in a landfill, the impact of the entire cruise industry to our planet in terms of sewage in an entire year is probably less than what New York City alone contributes in a week.

Duffy: "I think we are already beginning to explore areas where we can improve; safety issues, crew training, bridge team management, muster planning, technology for environmental impact, recycling, advanced waste technology, scrubbers that reduce emissions, shore power…"

Rockefeller: "I don't understand the term shore power."

Did you do your homework, Senator? One piece of advice, if you are going to come to these hearings you had best be prepared.

Duffy: "Shore power is where our ships can actually plug into the power onshore. These are things we are not required to do by regulations, but where the industry is continuing to invest. We are doing it voluntarily."

Rockefeller: "Did you notice what we did with automobiles; Toyota brakes, unintended acceleration. We passed laws mandating they do certain things. We fined them, we went after them, I say that to you because I have the feeling you are a law unto yourselves. I am a fair person, I have never been considered the most liberal or conservative part of my party; I am in the middle. But I am suspicious of what you do, and you are defending the heck out of what you do do."

What you doo-doo?

Jay Rockefeller is the ninth richest member of Congress, worth somewhere between $61 and $136-million dollars – we don't know because he does not disclose his personal financial wealth details. Yet he still takes a government paycheck of $174,000 year. Is he contributing his "fair share" to the U.S. Federal government?

Rockefeller: "I would like to start seeing on the tax thing, and you'll probably turn me down, and if you do we'll have to start talking about subpoenas, 'cause we can do that in this committee, on taxes the various lines have paid into the US treasury, not to the port, but to the government. Would you be willing to do that?"

Duffy: "We would be willing to work under any…"

Rockefeller: "There is no work I can do on that, the work will have to all be yours. You send in the information, and then we look at it."

Duffy: "We will work with you."

Rockefeller: "You should say yes, you really…"

Duffy: "Yes, I'm sorry, I don't mean to be"

Rockefeller: "I don't want to lead the witness, but you really should say yes."

Duffy: "Yes."

Exactly what is this nonsense? First Rockefeller says he has subpoena power, then he says it's all on her, then he badgers her repeatedly with the same question over & over, admittedly leads the witness, and she has no attorney present to say "hold on a minute, I have rights?"

Is This What We Want From Our Congress?

As these hearings went on, other senators and other government representatives such as the Coast Guard stood up for the cruise industry. Senator Bully was left alone in the cold. The director of the Port of Miami said his port makes about $100-million every year in port fees from the industry. The Senator from Alaska explained how much money his state makes from the cruise industry in state taxes and port fees, and said he is more than happy to have that money since cruise lines bring over 90% of tourists to the largest state in the Union. John Mica, the Senator from Florida was equally positive about the integrity of the cruise industry. To me, this display by Senator Rockefeller begs the question of whether this tactic of bullying the cruise industry with unsubstantiated allegations of rapes, crimes, tax evasion, etc., isn't really just a federal government ploy to get more taxes out of anyone it can find with money? And is anyone else as bothered as I am by this new tactic of using the IRS as a weapon to threaten American citizens?

Maybe Carnival the corporation only paid 1.1% in taxes one year, but how much tax revenue did the people who work for Carnival pay? How about all of the other good working American citizens at the ports, travel agencies, taxi drivers, bus drivers, food purveyors, makers of mechanical items that go into ships, shipyards where cruise lines do upgrades in Alabama, Massachusetts, Virginia and Florida… and so forth.

$35-billion in economic activity means hundreds of thousands of jobs for Americans, and Senator Bully is inviting the cruise lines to leave the U.S.? One cruise line did think about moving to London recently, which scared the Port of Miami substantially because they realized they were serious. Really, it would not change anything in terms of the cruise experience for us. But it would take away the ability of the U.S. government to bully the cruise lines completely – and don't think they do not already know this.

And does Jay Rockefeller feel better now that he pushed a woman around in his "court of public opinion" where he is allowed to debase anyone he wants because he can bring the wrath of the IRS down on any citizen whom he does not "find to be agreeable?"

Putting this in Perspective

America now has the highest corporate tax rate in the world at 39.2% as of Monday April 2nd (2012) since Japan just cut their rate. One reason the cruise industry is doing "very very well," is because it knows how to manage its money. The industry is not a tax cheat or otherwise more than any other corporation in America, there are many foreign companies operating fully within the letter of the U.S. law. British Air also operates in the U.S. - so does Mercedes.

This article is long already - but Rockefeller also went on and on about other issues that have nothing to do with the cruise industry. He mentioned the "vortex of plastic" known to exist in a remote area of the Pacific Ocean which were created by cargo ships dumping garbage over decades. If you have never heard of these, it's because in the big environmental picture they are not very significant - more like simple oddities. Moreover, there are actually barely visible for various reasons explained at the web site.

Good Luck, Christine

AmaWaterways has just selected Christine to be the godmother for its newest ship, the AmaCerto to be christened at a ceremony in Vilshofen, Germany on May 16, 2012. I see this as an affirmation of confidence in Christine's ability to guide the cruise industry through its recent tribulations.

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