A covered carrier that is the merchant of record or, if a ticket agent is the merchant of record, the covered carrier that operated the flight or the last flight segment in a multiple-carrier itinerary, must provide a prompt refund to a consumer of any fee charged for transporting a lost bag or a significantly delayed checked bag, as defined in § 260.2 of this part and determined according to paragraph (a) of this section, subject to the conditions in paragraphs (b) and (c) of this section.

(a) Determining the length of delay for the bag. For the purpose of determining whether a checked bag is significantly delayed as defined in § 260.2, the length of delay is calculated from the time the passenger is given the opportunity to deplane from a flight at the passenger's final destination airport (the beginning of the delay) to the time that the carrier has delivered the bag to a location agreed upon by the passenger and carrier (e.g., passenger's home or hotel) or the time that the bag has been picked up by the passenger or another person acting on behalf of the passenger at the passenger's final destination airport (the end of the delay).

(b) Notification by passenger about lost or significantly delayed bag. A covered carrier does not have an obligation to provide a refund of the fee for a lost or significantly delayed checked bag unless a passenger files a Mishandled Baggage Report (MBR) for the lost or delayed bag with the carrier that operated the flight, or for multiple-carrier itineraries, the carrier that operated the last segment of the consumer's itinerary.

(c) Notification by carrier that received an MBR about lost or significantly delayed checked bag. Except when the carrier responsible for providing a prompt refund for a baggage fee as specified in this section is the same carrier that received the MBR, a covered carrier that received the MBR must timely notify the carrier responsible for providing a prompt refund that the bag has been lost or significantly delayed when this is the case. A covered carrier's obligation to provide a prompt refund of a baggage fee for a lost bag or a significantly delayed checked bag as defined in § 260.2 is conditioned upon the carrier that received the MBR notifying the carrier responsible for providing a prompt refund that the bag has been lost or significantly delayed.

(d) Automatic refunds. An automatic refund of a bag fee is due when a checked bag is significantly delayed as determined according to paragraph (a) of this section, the passenger has filed an MBR as provided in paragraph (b) of this section, and, if applicable, notification has been provided by the carrier that received the MBR as set forth in paragraph (c) of this section.

(e) Amount of the refund. The amount of the refund issued to a consumer must be a value equal to or greater than the fee that the consumer paid to transport his/her checked bag.

(1) For carriers that adopt an escalated baggage fee scale for multiple bags checked by one passenger, the amount of baggage fee refund issued to the passenger can be determined based on the unique identifier assigned to the significantly delayed or lost bag that correlates to the baggage fee charged for that bag at the time of checking. If there is no such unique identifier assigned, carriers must refund the highest per bag fee or fees charged for the multiple bags.

(2) For a carrier that offers a baggage fee subscription program where consumers can pay a subscription fee that covers fees for checked bags for a specified period, the carrier must refund the lowest amount of the baggage fee the carrier charges another passenger of similar frequent flyer status and in the same class of service without the subscription when a passenger subscribing to the program has a significantly delayed or lost bag.

(f) Exemptions from the refund obligation. A covered carrier is exempted from the obligation to refund the fee for a significantly delayed bag in situations where the delay resulted from:

(1) A passenger's failure to pick up and recheck a bag at the first international entry point into the United States as required by U.S. Customs and Border Protection;

(2) A passenger's failure to pick up a checked bag that arrived on time at the passenger's ticketed final destination due to the fault of the passenger if documented by the carrier (e.g., passenger ended the travel before reaching the final destination on the itinerary—“hidden city” itinerary, or the passenger failed to pick up the bag before taking a flight on a separate itinerary); and

(3) A passenger's voluntary agreement to travel without the checked bag on the same flight as described in paragraph (g) of this section.

(g) Voluntary separation from bag. A carrier may require a passenger who fails to meet the minimum check-in time requirement for a flight or is a standby passenger for a flight (i.e., a passenger who lacks a reservation on that flight and is waiting at the gate for a seat to be available on the flight) to agree to a new baggage delivery date and location in situations where the carrier is unable to place the passenger's checked bag on that flight because of the limited time available. The carrier must not require the passenger to waive the right to a refund of bag fees if the bag is lost, the right to compensation for damaged, lost, or pilfered bags, or the right to incidental expenses reimbursement arising from delayed bags beyond the agreed upon delivery date, consistent with the Department's regulation in 14 CFR part 254 and applicable international treaties.