New state law promotes ship recycling in Rio de Janeiro.

Published on May 29, 2023, Rio de Janeiro State Law No. 10,028/2023 regulates activities related to the dismantling of vessels and offshore maritime assets, including ships, platforms, maritime installations, and support equipment such as underwater systems.

The law applies to all individuals and legal entities directly or indirectly responsible for dismantling maritime structures, as well as to the integrated management and administration of such activities. It is also subject to regulation by the State of Rio de Janeiro‘s executive branch.

At the federal level, the House of Representatives is currently reviewing Bill No. 1,584/2021, which concerns ship recycling in Brazil and establishes guidelines for managing this activity.

However, there is a potential conflict between Bill No. 1,584/2021 and State Law No. 10,028/2023. In its current form, the bill would provide for establishing an exclusive list (via regulation) of the shipyards authorized to carry out ship recycling, which would be required to comply with International Maritime Organization (IMO) and International Labour Organization (ILO) guidelines, as well as international conventions on the subject. This provision does not exist in the Rio de Janeiro state law. Moreover, in contrast to the state law, the federal bill:

• Provides for new vessels being required to prepare an inventory of hazardous materials;
• Specifies obligations for preparing the vessel for recycling; and
• Requires maritime authorities to regulate the demand for specific risk insurance.

Ship recycling and recycling facilities

Recycling is defined as the total or partial dismantling of vessels and maritime assets with the aim of recovering their components for reprocessing and reuse. The concept also covers the storage and treatment of hazardous materials and other waste involved in dismantling, but not their final disposal.

Recycling is carried out in Ship Recycling Facilities (SRFs) duly licensed for this purpose. Among the guidelines established by the new state law is a preference to use facilities located in the Rio de Janeiro Continental Shelf and SRFs in the state of Rio de Janeiro over those in other Brazilian states or in other countries. However, this preference may be waived if the company proves that these SRFs do not offer comparable conditions to other recycling facilities.

Article 7 sets forth responsibilities for maritime asset owners when it comes to recycling. These obligations include creating a ‘Specific Ship Recycling Plan’ that covers different stages of recycling – such as management, planning, and the final destination of the materials. The plan should also address biofouling and hazardous waste management, provided such activities do not impede recycling. The regulation also prohibits intentional beaching for recycling, subjecting the responsible party to fines and civil, administrative, and criminal penalties.

Ship recycling industry in the Blue Economy

One of the objectives of Rio de Janeiro’s new legislation is to integrate the dismantling and recycling of maritime structures into the incentive regime for activities directly or indirectly related to the sea (Blue Economy), as established by State Law No. 9,466/2021.

According to the regulation, the state’s executive and legislative branches must develop a strategic plan to channel support from the maritime economy into Rio de Janeiro’s overall economic and social development. The sectoral stimulus instruments provided for in the aforementioned regulation include measures to strengthen scientific and technological arrangements in the state that support the Blue Economy, as well as tax incentives for agents within the sector – the latter dependent on signing an agreement with the Ministry of Finance’s National Fiscal Policy Council (Confaz).

However, to date, no economic agents have been granted tax incentives based on a strategic plan to promote the Blue Economy, and the new legislation is not clear regarding other specific or concrete economic incentives.

Streamlining shipyards’ environmental licensing

The new law also simplifies the environmental licensing of SRFs. Article 6, paragraph 1 provides that shipyards holding environmental licenses to construct, repair, and maintain vessels may request environmental agencies extend the scope of these licenses to include dismantling activities. However, in order to do so, shipyards must prepare an installation plan for ship recycling that establishes the physical and operational conditions of this activity. Companies must also adopt social and environmental responsibility policies and sustainability policies, and comply with the requirements of ISO 9002, ISO 14000, and NR 34.

According to Rio de Janeiro State Law No. 10,028/2023, ship recycling operations must be carried out under appropriate conditions. A vessel must be dismantled while moored at a pier and placed in a dry or floating dock. It must also be transported by barge, be towed, or moved using its own machinery.

In principle, the licensing of onshore ship recycling activities falls under the jurisdiction of the state environmental agency. The activity is not included among the types of projects and activities licensed by the federal government, according to Supplementary Law No. 140/2011 and Federal Decree No. 8,437/2015.

Onshore ship recycling licensing could be granted at the municipal level, in theory, if the local legislation classifies the activity as having local impacts. However, according to the legislation of the State of Rio de Janeiro (CONEMA Resolution No. 92/2021), ship recycling is not listed as a local impact activity, thus reinforcing state-level jurisdiction.

Licensed facilities for vessel repair and maintenance may have their licensing extended to include ship recycling, provided that the criteria and certifications required by the environmental agency are met.

Abandoned vessels in anchorage areas

Finally, the law stipulates that when vessels are identified as abandoned in anchorage areas – whether sunk, submerged, beached, or lost – and pose a danger, threat, or obstruction to navigation or the environment, the representative of the local maritime authority or port authority must take appropriate measures.

It should be noted that vessels in this situation will have their registration canceled (among other potential consequences), as provided for in Maritime Authority Regulations (NORMAM 1). Concerns about maritime safety in the state and the removal of abandoned vessels in Rio de Janeiro’s Guanabara Bay returned to the spotlight attention after an abandoned ship collided with the Rio-Niterói Bridge in November 2022.

Governor’s vetoes to other provisions

Bill No. 6,513/2022 (which State Law No. 10,028/2023 originated from) also intended to create an Emergency Fund for the Removal of Maritime Assets (Feramar), which would have received 30% of its funding from the Rio de Janeiro State Sovereign Wealth Fund, among other sources. The bill originally included special ICMS tax treatment for companies engaged in recycling maritime structures. However, the articles related to these topics were vetoed by Rio de Janeiro’s governor as they were incompatible with state and federal legal frameworks.

This latest piece of state legislation seeks to provide legal certainty and encourage this type of recycling in the state of Rio de Janeiro within the context of the Blue Economy. Nevertheless, it should be mentioned that the preference for shipyards in Rio de Janeiro operating under similar conditions as those in other states may be challenged from a constitutional perspective, particularly in light of the principle of free competition enshrined in Brazil’s Constitution.

For further information on this topic, please contact Mattos Filho’s Shipping & Ports and Environmental Law & Climate Change practice areas.

*With the collaboration of Bernardo Andreiuolo Tagliabue.