Modification proposals
Other provisions

On 17 August 2021, by a presidential message to the Chamber of Deputies, a bill was submitted to amend the Merchant Navy Law and the Navigation Law in order to promote competition in the maritime cabotage market. The authors of this bill are:

  • the Ministry of National Defence;
  • the Ministry of Economy, Development and Tourism;
  • the Ministry of Finance; and
  • the Ministry of Transport and Telecommunications.

Modification proposals

If the bill is passed, the following amendments to national legislation will be introduced.

Merchant Navy Law (Decree-Law 3059/79)
The bill amends article 3 of Decree-Law 3059/79, stating that foreign merchant ships may freely offer cabotage services when moving cargo between two Chilean ports.

As regards the passenger cabotage market, the bill proposes that the 400-passenger threshold should be removed (for further details please "New law allows passenger cabotage on foreign cruise vessels"), thus allowing foreign cruise ships with a smaller capacity to compete in this market.

In addition, the release of the flag reserve implies that the bill is seeking to eliminate provisions that have become unnecessary as a result of the opening of cabotage. Other provisions that may be removed are:

  • the current exceptions contemplated by the law through waiver, together with their respective requirements; and
  • the existing regulation in the law that refers to the transport of empty containers in cabotage.

Navigation Law (Decree-Law 2.222/78)
Erasing barriers for companies that participate in a Chilean shipping company
In order to register a ship in Chile, the current law obliges the legal entity that owns the ship to comply with a series of requirements – namely that:

  • its address as well as real and effective headquarters in Chile;
  • its president, manager and the majority of directors or administrators, as the case may be, are Chilean; and
  • the majority of its share capital belongs to Chilean natural or legal persons.

The requirements for a Chilean shipping company to register ships in Chile and have Chilean managers or administrators and directors will be removed.

The percentage of officers and crew of a vessel that are Chilean nationals must meet the standards of the Labour Code
The bill proposes to reform this requirement, which was established in article 14 of the Navigation Law, and modify the maximum percentage of foreigners that any employer in an industry in Chile can have.(1)

Safeguard of naval reserve
With the aim of protecting national interests in the event of war, international conflicts that threaten Chile's security, internal commotion, public calamity or other emergencies, the bill establishes that ships or naval artefacts that have a national flag will be considered part of Chile's naval reserve, as referred to in article 98 of the Navigation Law.

Other provisions

The release of the Chilean flag reserve does not imply differential treatment for foreign vessels for labour or tax matters; foreign ships that carry out activities permanently in Chile must compete on equal terms with national shipping companies.

Chilean labour law governs employment contracts concluded and effected in Chile, regardless of the nationality of the workers or the employer. Therefore, the opening of cabotage will not allow foreign ships that operate permanently in Chile to be governed by international labour regulations, they must submit to the labour regulations of the Chilean Labour Code.

In tax matters, these vessels will continue to be taxed with the additional tax of articles 59 or 60 of the Law on Income Tax,(2) depending on whether the type of contract concluded is a charterparty or carriage of goods by sea, respectively. Additionally, if they operate permanently, and in the event that a permanent establishment is constituted, they will be taxed in the same way as Chilean companies.


According to the presidential message, the main objective of the bill is:

to optimise the logistics chain and multimodal transport, generating improvements in competitiveness in the industry and eradicating inefficient cargo movements that take place on Chile's coasts and in the ports. The opening of cabotage for foreign ships would optimise the use of the capacity of its ships, increasing the available supply at competitive prices and take advantage of the natural route – the extensive Chilean coast.

It is not known yet whether this bill will pass as other similar bills have been submitting to Congress, but without success (for further details please see "Potential regulatory changes in the cabotage trade").

For further information on this topic please contact Ricardo Rozas or Mayra Reyes at JJR Abogados by telephone (+56 2 2580 9300) or email ([email protected] or [email protected]). The JJR Abogados website can be accessed at


(1) This proposed release is not absolute, since the current percentage matches the 15% currently established in the Labour Code, equating the maritime industry with the general rule applicable in Chile, avoiding claims of preferential and/or protected treatment work. However, on a vessel, the master and first mate must be Chilean nationals.

(2) Decree-Law 824 of 1974.