On August 3, 2022, Brazil’s Ministry of Infrastructure published Ordinance No. 976/2022, which establishes specific procedures and guidelines for Brazilian Shipping Companies (EBNs) and Brazilian Shipping Companies with Conditional Authorization (EBN-CONs) to qualify for the BR do Mar Program (Law No. 14,307/2022).
EBN and EBN-CON seeking to qualify for BR do Mar must submit their applications to the National Secretariat of Ports and Waterway Transport (SNPTA). One of the main documents required for the qualification is a report on the company’s operations in Brazil, which is used to monitor public policies. The report must contain current information and projections demonstrating the company’s intention to expand, modernize and optimize its activities and its fleet for Brazilian cabotage operations, among other relevant information.
EBN and EBN-CON seekingto qualify for BR do Mar must submit their applications to the National Secretariat of Ports and Waterway Transport (SNPTA). One of the main documents required for the qualification is a report on the company’s operations in Brazil, which is used to monitor public policies. The report must contain detailed information on several issues, including but not limited to the following:
- 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 through the charter options permitted under BR do Mar;
- 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;
- 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.
Companies must also prove their good standing regarding federal taxes by presenting information on their operations during the qualification process. 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 of good standing.
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 whether the company meets the guidelines of the program. Therefore, after qualifying, companies must send SNPTA an updated version of the report used in the application process every six months, counting from the date of qualification.
Although these companies can now access the federal government's platform and apply for the program, there remain (unfortunately) still doubts regarding some requirements of the Ordinance, in particular regarding the report mentioned above (Annex C). There are also some uncertainties regarding the regulation to be issued by the Executive Branch with further details on requirements for the charter of foreign vessels.
The market's view is, therefore, that the Ordinance will not yet produce effects until these doubts are clarified and the decree regulating the charter rules is issued. The market's expectation is, however, that this decree should be issued in the near future given the demand and need to implement the BR do Mar Program.