Maritime Law. Foreign flag vessels in the Argentine economy. By Dra. Vanesa Balda

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1 Maritime Law Foreign flag vessels in the Argentine economy Over the last years, Argentina has been building up a shipping policy with the aim of entailing the incorporation of a growing number of vessels and, therefore, the enhancement of its current vessel supply, while taking its sea and inland waterway fleets to a state-of-the-art level. A clear example of this has been the incorporation of several vessels chartered for the performance of highly specialized activities within the Argentine sea. This favorable scenario has been largely boosted by the common activity of the relevant applicable authorities together with the Administración Nacional de Aduanas (the National Customs Authority), the Secretaría de Transporte (the Secretary of Transport) and the Prefectura Naval (the Argentine Coastguard Service). Also worthy of mention is the decisive contribution of the sector worker s unions to the above harmonious scenario. Now, the term of legal provisions regulating the above system in the past has expired and time has come for the passing of a definitive law on this matter. Item 3 of this report contains a review of the past legal framework which, undoubtedly, will provide an appropriate basis for the new body of laws, while item 4 describes the current situation of the sector. 1. Outline The activity of foreign flag vessels in Argentina has evolved in a such way as to permit and facilitate the work of all sectors involved. The Argentine legal system provided for the granting to foreign flag vessels of permits ranging from temporary licenses, renewable every three or four months, to more permanent permits for up to a maximum three-year term. Página 1 de 7

2 This led to a significant market opening which resulted in larger working opportunities for this South America country having a broad coastal area bathed by the Atlantic and South Pacific Oceans. 2. Legal Framework At the present time, the shipping policy of a country has become one of the fundamental issues to be inevitably addressed by any governmental plan. No longer can foreign trade traffic be left within the sphere of private sectors, specially, in countries traditionally having a heavy export and import traffic. The foregoing fully supports the prevailing special legal solutions, such as, for instance, the international bilateral agreements whereby the parties thereto acquire both an equal participation in and a clear primacy over the traffic that they are able to generate. Although the general principle in Argentina has always been that domestic navigation, communication and transport be performed by Argentine vessels alone, the Argentine law has set forth the following three exceptions to the principle, particularly applicable to foreign vessels willing to perform their business within the Argentinean territory: 1. Temporary import of the vessel, authorized by way of exception to the provisions contained in Decree No. 343/97, and subject to the requirements herein below. 2. Application for exemption under the Ley de Cabotaje (Law No on Domestic Transport). Página 2 de 7

3 3. Definitive import of the vessel, an event which involves the payment of the relevant custom duties. In view of their unusual features, cases in sections 1 and 2 above are analyzed in detail in the following paragraphs. 3. System under Decree No. 343/97. Decree No. 1493/92 and the supplementary provisions contained in Decree No. 343/97 regulated temporary imports by laying down a system of exceptions which entitled foreign flag vessels, or any other similar watercraft, to be considered, under certain circumstances, as Argentine flag vessels for the purpose of domestic and international navigation, communication and transport. Additionally, Decree No. 343/97 provided for the Subsecretaría de Transporte Aerocomercial, Fluvial y Marítimo (now, the Subsecretaría de Transporte por Agua y Puertos) (the Undersecretary of Air and Water Transport) (now, the Undersecretary of Sea and Waterway Transport and Ports) reporting to the Secretaría de Transporte (the Secretary of Transport) of the Ministerio de Economía y Obras y Servicios Públicos de la Nación, (the Ministry of Economy, Public Works and Utilities), to be in charge of receiving the temporary import applications and granting such benefit. Requirements To be entitled to the above benefit, the applicants had to prove: a) if individuals, their condition as Argentine citizens and, in the case of artificial persons, that they were duly incorporated under the laws in force in the Republic of Argentina; b) that they were registered as shipowners with the Registro Nacional de Armadores (the Argentine Registry of Shipowners) of the PREFECTURA NAVAL ARGENTINA Página 3 de 7

4 (the Argentine Coast Service) under the MINISTERIO DEL INTERIOR (the Ministry of the Interior); c) that they had executed a bareboat charter for the chartering of a vessel, or any other similar watercraft, the term of which charter could no be less than SIX (6) months from the date of approval; d) that, at the time of filing the application, the vessel or similar watercraft chartered under the bareboat charter was not older than FIFTEEN (15) years. The applicable authority was empowered to exempt the applicant from this requirement, provided the applicant s needs, the market conditions or any other circumstance so required. e) that the certificates of the vessel, or similar watercraft, so chartered, as requested by the PREFECTURA NAVAL ARGENTINA under the MINISTERIO DEL INTERIOR, were in full force and effect (Decree No.343/97, as partially amended by Decree No. 1091/97). Term of the benefit The benefit was granted for the term of the bareboat charter and it could not be extended for more than THREE (3) consecutive years as from the date of the authorization. Conformity to the temporary import system Vessels, or any similar watercraft, applying for the benefit envisaged by Decree No. 343/97 were subject to the temporary import system set out in Law No and its Regulatory Decree No of May 21, 1982, and to the supervision, within the scope of their respective jurisdictions, of the ADMINISTRACION NACIONAL DE ADUANAS under the SECRETARIA DE HACIENDA (the Secretary of Finance) under the MINISTERIO DE ECONOMIA Y OBRAS Y SERVICIOS PUBLICOS and of the PREFECTURA NAVAL ARGENTINA under the MINISTERIO DEL INTERIOR. Página 4 de 7

5 Business Operation of the Vessel The shipowners of the vessels profiting from the above mentioned Decree were responsible for the business operation of the units and the issuance of relevant bills of lading, or any other documents, on their own name, under penalty of revocation of the permit. Crew To the extent applicable, foreign vessels, or any similar watercraft, covered by the aforesaid Decree, were subject to the provisions of Decree No. 817/92 and, if on equal qualification basis, they had to be manned by Argentine crew. Where a contract of employment had been executed by the Argentine shipowner as a party thereto, the Argentine law controlled. Some degree of flexibilization was noticed as regards crew employment conditions. Shipowners were subject to the compliance with a basic social security system and, on equal qualification footing, Argentine crew had to be hired. Over the last years, pressure from the sector s unions comprising the Centro de Capitanes de Ultramar y Oficiales de la Marina Mercante (the Overseas Commanders and Merchant Navy Officers Centre), the Centro de Jefes y Oficiales Maquinistas Navales (the Navy Engineers Centre) and the Sindicato de Obreros Marítimos Unidos (the Marine Workers Union)- decreased as a result of the increase of unemployment rate in Argentina. System under Decree No. 1493/92 The shipowners of vessels, and/or any other similar watercraft, being (i) older than fifteen (15) years and, (ii) protected, at the time of issuance, by Decree No. 1493/92, could, at their sole request and upon expiration of the term of such benefit, seek for a one-time extension of such term for an equal period; such extension was subject to the previous compliance with all customs requisites and the filing of competence certificates in force issued by the PREFECTURA NAVAL ARGENTINA under the MINISTERIO DEL INTERIOR. Página 5 de 7

6 The above Decrees No. 343/97 and 1493/92 were repealed by Law No , passed on December 28, 1999; however a new body of laws is being discussed which would allow foreign vessels to restart operations in Argentina. 4. Current Situation of the Sector Law Nº on Domestic Transport. System regulating the System regulating the incorporation of foreign vessels Despite the repeal of the legal provisions considered in the previous sections, the system of exemptions provided for under the Ley de Cabotaje is still in force. At present, the application for the permit authorizing a foreign vessel to work in Argentina is filed by the Argentine party requesting its services; the permit is granted for renewable three- or fourmonth periods. It should be stressed, once again, that the general principle in Argentina lays down priority rights for national vessels to perform inland waterway transport. In this sense, section 1 of Law No provides that domestic navigation, communication and inland waterway transport shall be carried out solely by Argentine vessels. Foreign vessels are, thence, only entitled to perform international navigation and transport activities these being understood as navigation and transport between ports located in different countries. In summary, transport between Argentine ports must exclusively be served by domestic vessels, whereas transport between local and foreign ports international transportmay be served either by Argentine or foreign vessels. Nevertheless, section 6 of the aforesaid Ley de Cabotaje sets out an exception to the principle of priority rights of navigation and transport provided on behalf of the Argentine flag vessels. According to the said section, the National Executive is authorized to grant temporary permits to foreign flag vessels for the purpose of performing inland waterway transport where: due to exceptional circumstances...essential goods could not be supplied to a coastal area, and a) also due to unusual circumstances, any party to a contract could not comply with its obligation thereunder because... no Argentine vessels were available to render the service. Página 6 de 7

7 5. Conclusions The Argentine Republic has a wide coast and plenty of inland rivers, true waterways, particularly significant from the point of view of communication, transport and navigation, not only domestic but also international. In addition to the sea and inland waterway navigation and transport, the vessels that have worked in Argentina, or that are presently working here under any of the systems applicable to foreign vessels, have also performed, or are performing, offshore services, supplying oil platforms set up within the large offshore area surrounding the country territory. Argentina, with its remarkable economic resources, promotes and protects foreign investment by means of its legislation and the execution of international treaties. In this context, the incorporation of additional warehouse space and services becomes a most appropriate tool to fuel transport development either within or without the country borders. According to the experience of Vitale, Manoff & Feilbogen on this matter, permits have always been granted to foreign flag vessels when needed for special undertakings which existing domestic vessels were not able to serve. This has allowed premium international companies acting as charterers within the country to be supplied with foreign flag vessels. In this way, oil, gas and transport start -ups may be able to obtain vessels having state of the- art technology to be incorporated under the applicable law of Argentina. Dra. VITALE MANOFF & FEILBOGEN Página 7 de 7

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