Brazil: Memorandum - Infrastructure (18/04/2013)

Logistics and Industrial Customs Centers ("CLIA"): Reform of the legal regime governing dry ports (customs locations in secondary zones)

On April 4, 2013, Provisional Measure No. 612 ("PM 612") entered into effect, thus changing, among other provisions, the legal regime applicable to customs locations within Brazil's secondary zones, and in particular, the legal regime governing logistics and industrial customs centers ("CLIAs").

Customs or dutiable locations are sites under customs control where imported goods or goods dispatched for exportation (and associated services) transit or are stored for purposes of customs clearance.

For the purpose of customs control, the national territory is divided into a primary zone (consisting of ports, airports, and border customs points) and a secondary zone (the rest of the country). The terms ?CLIA? and ?dry port? thus refer to customs sites that are not located within ports, airports, or inland border transit points. 

PM 612 revokes the grant of concessions/permissions to operate dry ports in favor of a new model based upon licenses.

According to Art. 5 of PM 612, the right to operation a CLIA will be granted by license to entities incorporated in Brazil that are engaged in the service of general storage, by demonstrating their compliance with tax laws and economic, technical, and operational requirements for customs established by the Secretariat of Brazil?s Federal Revenue Service ("Federal Revenue"), as well as the requirements of the measure itself (e.g., being the owner, holder, or user of the land where the CLIA will operate; having net worth equal or superior to R$2 million; submitting an operational plan consistent with the preliminary project for the CLIA that was previously approved by the competent authorities; and the CLIA being located in a municipality or metropolitan region where a unit of the Federal Revenue is located).

Before the promulgation of PM 612, the operation of sites to movement and storage of goods in secondary zones for importation and exportation was authorized pursuant to concessions and permissions granted by the Federal Revenue pursuant to provision VI of Art 1, of Law No. 9.074 of July 7, 1995, which was revoked by the abovementioned PM 612. This means that parties who operated dry ports under the old regime were required to observe rules applicable to any party providing public services. In this regard, the operation of dry ports by private entities or individuals under the concession or permission regime had to, for example, be preceded by a public bid.

The old regime governing the operation of CLIAs was an obstacle to the wider movement and storage of goods and services, as it did not allow rapid modification of the operational capacity of locations placed in secondary zones, and prevented the relocation of CLIAs in order to meet changing demand. Additionally, because the services provided in dry ports are in the nature of public services, it was difficult to attract interested parties to bid, and there was legal uncertainty regarding extensions of the terms of contracts entered into with Federal Revenue.  

Pursuant to the new license regime, licensed operators have greater freedom to extend or exit contracts to operate CLIAs, allowing greater economic efficiency in the customs control system.

As noted, the old model was based upon revoked provision VI of Art. 1, of Law No. 9.074. Although the revoked provision deemed the operation of dry ports to be public services, the Constitution of the Federal Republic of Brazil does not expressly treat them as such. Indeed, before Law No. 9.074, the operation of customs stations and other customs terminals placed in secondary zones were deemed economic activities in the strict sense, although it was necessary to obtain an authorization granted by the Federal Revenue.

To avoid conflict between the old and new regimes for operating CLIAs, as well as to avoid harm to permitees operating dry ports upon the basis of the revoked provision, PM 612 provides that old-regime permitees may, upon request and where doing so will in no way prejudice the federal government, transfer their operations to the new regime governed by PM 612, with no interruption in activities and with no penalty for contractual termination. In the event such transfer occurs, the existing contract for operations will be terminated via the same act that grants the license for operation of the CLIA. We note, however, that the termination of such contracts does not dismiss the contracting party from outstanding contractual obligations or any penalties due for infractions occurring during the term of such contracts.

With the purpose of resolving disputes involving the term of existing concessions and permissions based on emergency contracts, injunctions, and on Provisional Measure No. 320 of August 24, 2006 (?PM 320?), the new regime will also apply to:

  • A customs venue that was previously operated pursuant to a permit or concession on the date that PM 612 entered into effect, due to judicial measure or supported by emergency contract; and
  • A customs venue that was operating, on the date PM 612 entered into effect (i.e., April 4, 2013), as a CLIA pursuant to PM 320 (transferal to the PM 612 regime will occur pursuant to Art. 16 of PM 612 or by court order).

We also note that Art. 16 of PM 612 provides that a concessionaire operating in a facility housed on federal government land may, upon 365 days prior notice, terminate its contract, such concessionaire retaining the right to operate the CLIA via a license issued by Federal Revenue until the end of the original term of the concession (in exchange, of course, for payment of rent to use federal government land). However, partial termination of such contracts is not permissible.

PM 612 prohibits the grant of licenses to operate CLIAs in municipalities covered in bid notices and concession contracts arising under revoked provision VI of Art. 1, of Law No. 9.074 during the term of the contract. However, as previously mentioned, such prohibition does not apply to prevent transfers from other locations that operate in geographic areas covered by bid notices arising under the former regime to the new regime.

It is important to mention that the limitation described above does not apply to geographic areas where the party seeking a license to operate a CLIA demonstrates, through a ?Technical and Economic Feasibility Study?, that: (i) there is demand for services that is not being met by existing resources under the old regime; (ii) the growing demand for services indicates that customs infrastructure must be strengthened quickly; or (iii) the economic growth of the region indicates a potential demand for services that cannot be met by current customs areas or infrastructure.

Finally, we must emphasize that Federal Revenue has jurisdiction over customs matters and thus establishes the procedures to be complied with by operators of customs areas (as provided by Federal Revenue Ordinance No. 3.518/2011). Although PM 612 provides that Federal Revenue may allow the operation of the CLIAs through licenses, we note that the Federal Revenue?s own ruling does not yet foresee the possibility of allowing operations pursuant to licenses. 

Thus, we recommend that potential concessionaires pay close attention to any Federal Revenue procedures that may be announced, it being possible that, in order to give effectiveness to the new provisional measure, Federal Revenue will issue implementing regulations in the future.

The promulgation of PM 612 demonstrates the government?s desire to encourage the development of infrastructure in Brazil and also to complement the reform of the ports legal regime recently witnessed by the issuance of Provisional Measure No. 595/2012. Together, these new measures will strengthen infrastructure for the movement and storage of goods within Brazil.

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.

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