On September 16 2014 the Brazilian National Waterway Transportation Agency (ANTAQ) published Resolution 3.638 in the Official Gazette, which approves the draft of a new normative act to regulate the chartering of foreign vessels. The normative act is still under public consultation and all interested parties have until November 5 2015 to provide comments and proposed amendments.

The new act consolidates the procedures for chartering vessels, which are currently divided into four resolutions – one for each type of maritime navigation (ie, blue water, coastwise/cabotage, port support and offshore support).

Changes to regulation

Following Law 9.432/97 – which gives Brazilian flagged vessels priority over foreign flagged vessels – the existing act establishes the procedures for evidencing the availability or unavailability of Brazilian vessels (known as 'circularisation'). Whenever a Brazilian flagged vessel is available, the respective owner or disponent owner of the vessel may block the chartering of an equivalent foreign flagged vessel.

In addition to unifying the existing four resolutions, the new act introduces new and unexpected restrictions and requirements for chartering foreign vessels into Brazilian coastwise trade. One of the most controversial restrictions imposed by the draft is a limit on the number of foreign vessels that Brazilian shipping companies can charter to no more than double their Brazilian fleet.

The existing regulations follow Law 9.432/97, according to which any Brazilian shipping company that ANTAQ has duly authorised to operate may charter an unlimited number of vessels if Brazilian flagged vessels are unavailable. If passed, the new act may substantially affect the capacity of some companies to continue using foreign flagged vessels to trade in Brazilian waters, including state-owned oil company Petrobras, which owns an incipient Brazilian fleet of offshore supply vessels, compared to its approximately 250 chartered foreign offshore supply vessels.

Industry concern

At a public hearing held at ANTAQ headquarters in Brasilia in early October 2014, different shipowners' associations and representatives of major Brazilian oil companies expressed their concerns in relation to the proposed new cabotage restrictions because they do not appear to align with Law 9.432/97, which has been in force for more than 18 years.

The potential change to stable regulations – without proper and appropriate legislative procedures and debates before the National Congress – has also raised concern, mainly for foreign investors and owners that have based their business plans on Law 9.432/97.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.