Procedures for shipping companies established to qualify for BR do Mar program

On August 3, 2022, Brazil’s Ministry of Infrastructure published Ordinance No. 976/2022. The ordinance regulates the BR do Mar Law (Law No. 14,307/2022), establishing specific procedures and guidelines for Brazilian Shipping Companies (EBNs) and Brazilian Shipping Companies with Conditional Authorization (EBN-CONs) to qualify for the Program to Stimulate Transportation by Cabotage (BR do Mar, in Portuguese).

Published seven months after the BR do Mar Law was enacted, the ordinance addresses a number of aspects that are essential to the BR do Mar program.

The main features of the ordinance are described below.

EBNs and EBN-CONs

EBNs are defined as waterway transportation companies headquartered in Brazil and established in accordance with Brazilian law. EBNs are authorized to operate by the Brazilian Waterway Transport Agency (Antaq), using either their own or chartered vessels. The legal definition of an EBN remains in line with the new wording of item V, Article 2 of Law No. 9,432/1997, which was amended by the BR do Mar Law.

On the other hand, EBN-CONs are waterway transportation companies headquartered in Brazil and established in accordance with Brazilian law, authorized by Antaq to operate in cabotage transport based on the following chartering hypotheses:

• The exclusive fulfillment of long-term transport contracts, under the terms set forth in regulation from Brazil’s Executive Branch (still pending);
• The exclusive provision of special cabotage operations for a 36-month period (extendable by up to 12 months), pursuant to regulation from Brazil’s Executive Branch (still pending).

Qualification procedures

EBN and EBN-CON may submit their registration applications for the BR do Mar program to the National Secretariat of Ports and Waterway Transport (SNPTA). Annexes A and B of Ordinance No. 976/2022 contain forms necessary for submitting the application.

One of the main documents required to qualify is a report on the EBN or EBN-CON’s operations in Brazil, which is used to monitor public policies. The report must contain current data and detailed information in line with the following parameters:

• Current information and projections demonstrating the company’s intention to expand, modernize and optimize its activities and its fleet for Brazilian cabotage operations;
• Information regarding adopted or potential actions to improve the quality and efficiency of coastal shipping, taking into account the experiences, expectations, and feedback from cabotage transport users;
• A plan to increase supply to cabotage transport users via the options for chartered vessels permitted in the BR do Mar program;
• A plan to create and run regular cargo transportation operations, identifying the type of cargo that will be transported, transportation capacity, and routes (including their duration, point of origin, destination and any stops during the voyage);
• Information regarding adopted or potential actions to promote the employment and qualifications of Brazilian crew members, indicating the number of vacancies and total hours of onboard training available to them;
• Information indicating the promotion and development of activities that benefit the coastal shipping value chain in Brazil;
• Actions and projections concerning innovation, science and technology for boosting the economic development of coastal shipping;
• Information related to adopted or potential actions to ensure the security of transported goods, indicating the number of accidents in relation to the total cargo transported (among other data) and information that attests to the security and efficiency of the form of transport;
• A plan for sustainable development that describes adopted or potential actions focused on safe navigation and protecting the marine environment – for example, measures to reduce greenhouse gas emissions, the sulfur content in ship fuel, and marine litter, or to improve the efficiency of maritime transportation by exchanging digital information and calculating CO2/TKU emissions.
• Projections (in percentage terms) of the reduction in capital expenditure (Capex) and operational expenditure (Opex) by taking part in the BR do Mar program, as well as the results obtained over time;
• Adopted and potential measures for promoting transparency vis-à-vis the public in relation to freight values;
• Information on the adoption of actions that encourage healthy competition and guarantee competitiveness and ethical business practices;
• Data and information that demonstrates the company’s commitment to integrity through good governance practices, encouraging ethical conduct, transparency, compliance, social responsibility, and measures to prevent fraud and corruption.

Reduction of red tape

The documents required to qualify for the BR do Mar program may be submitted as uncertified copies, which are then digitally filed on the Ministry of Infrastructure’s website. Notarized or authenticated documents may only be required in the event of well-founded doubts as to a document’s authenticity or legality.

Application procedures

The Brazilian Navy’s Department of Navigation and Waterways (DNHI) has jurisdiction over the analysis of the application documents. It may request clarifications, information, and other necessary documents for its analysis.

In such a case, applicants will be given fifteen working days to submit additional documentation, though this period may be extended at the technical area’s discretion if the applicant makes a justified request.

If the applicant fails to submit the documents or information requested by the DNHI on time, the application to qualify for the BR do Mar program will be archived.

Transferring or assigningprohibited

Qualification for the BR do Mar program is specific to the approved applicants, and thus cannot be transferred or assigned to another company.

Fiscal good standing

Companies must prove their good standing regarding federal taxes by presenting information on their operations during the qualification application.

A jointly issued certificate from the Brazilian Federal Revenue Service (RFB) and the Attorney General of the National Treasury (PGFN) concerning all the company’s federal tax credits and the Federal Active Debt (DAU) will serve as sufficient proof.

Government monitoring

Once an EBN or EBN-CON has qualified for the BR do Mar program, the Ministry of Infrastructure will continue to follow up, monitor, and evaluate the company’s compliance with the BR do Mar Law’s guidelines.

Updated reports

After qualifying for the program, companies must send the SNPTA an updated version of the report from the application (mentioned above) every six months, beginning from the date of qualification.

DNHI analysis and monitoring

The SNPTA is responsible for forwarding the documentation to the DNHI, which may then decide to request clarifications, information, and other documents in the event any inaccuracies, omissions or doubts are found that could hinder the monitoring of the policy and the company’s compliance with the requirements of the BR do Mar program.

The DNHI must justify any such action, expressly indicating the subject it seeks clarification for.

Qualified companies will have fifteen working days to submit the additional documentation, though this period may be extended at the technical area’s discretion if the applicant makes a justified request.

The DNHI is also responsible for monitoring the implementation and development of the BR do Mar program, as well as preparing and publishing regular reports demonstrating how effectively the program is performing.

Disqualification

Ordinance No. 976/2022 provides for a company’s disqualification from the BR do Mar program in the following situations:

• The company’s failure to comply with any of the conditions for qualification;
• The company’s failure to submit the documentation and information requested every six months;
• If the company creates obstacles or hinders the SNPTA’s ability to monitor the policy.

Temporary blocking

Any EBN or EBN-CON disqualified from the BR do Mar program will be barred from qualifying again for two years, commencing from the publication date of the ordinance that determines its disqualification.

Communication with Antaq

Ordinances regarding a company’s qualification or disqualification will be forwarded to Antaq after publication, together with the qualified/disqualified company’s data and information. This will serve to assist Antaq with inspections, fleet and charter control, and regulation.

For further information, please contact Mattos Filho’s Infrastructure & Energy practice area.