Merchant Marine Fund (Fundo de Marinha Mercante FMM)

Transcription

1 Merchant Marine Fund (Fundo de Marinha Mercante FMM) 1. What is the Merchant Marine Fund FMM? The Merchant Marine Fund (FMM) was created to provide resources to the development of the Merchant Marine and of the Brazilian shipbuilding and ship repair industry (in accordance with Article 22 of Law /2004). The FMM is managed by the Ministry of Transportation (Ministério dos Transportes), via the Merchant Marine Fund Board of Directors (Conselho Diretor do Fundo da Marinha Mercante CDFMM), its financial agents are the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social BNDES) and all other government controlled federal banks - Banco do Nordeste, Banco da Amazônia, Banco do Brasil and Caixa (Caixa Econômica Federal). The FMM, whose main source of resources is The Additional Freight for the Renewing of the Merchant Marine (Adicional de Frete para a Renovação da Marinha Mercante - AFRMM), has been the foundation of the programme to encourage the development of the merchant marine and of the shipping industry. 2. What is the Merchant Marine Fund Board of Directors CDFMM? The Merchant Marine Fund Board of Directors - CDFMM, is a joint body, and an integral part of the Ministry of Transportation structure. In its composition are representatives of the Brazilian Navy, of Brazil s Special Ports Secretariat (Secretaria Especial de Portos da Presidência da República), of businessmen and employees of the merchant marine and of the shipbuilding and ship repair industry. The responsibilities of the CDFMM, in accordance with article 2 of Decree 5.269/2004, are: I - to provide input in the formulation and implementation of a national policy for the merchant marine and the Brazilian shipbuilding and ship repair industry; II to draw up and submit for approval of the Transport Minister the annual programming for the use of the FMM s resources; III to approve FMM s budget; IV to rule on FMM s use of resources; V to oversee the collection of The Additional Freight for the Renewing of the Merchant Marine, and its revenue sharing and destination; VI to comply and to make others comply with general rules related to the financing of projects and the grating of priorities of FMM s resources, as issued by the Transport Minister. VI to rule on the projects financed with resources of the FMM and to monitor their implementation;

2 VIII to rule on FMM s financial support priorities; IX to rule on priority requests cancelation, increment of resources after financing was contracted, project changes or project cost changes 10% higher than the approved amount, and change of contracted shipyard after the priority was granted; X to propose to the Transport Minister the signing of work agreements and contracts with the FMM s financial agents and other issues of interest to the development of waterway shipping and of the Brazilian shipbuilding and ship repair industry; XI to set criteria for the release of restricted accounts financial resources; XII to lay down the necessary conditions to accredit FMM s new financial agents, and track their activities; XIII to advise the Transport Minister on the group of activities related to FMM s responsibilities; XIV to demand accountability from the parties referred to in Paragraphs 1, 2 and 3 of Article 17 of Law /2004. XV to monitor and assess the economic and financial management of resources, as well as the performance of the approved programmes; XVI to monitor and control the financial agents financing operations with FMM s resources; XVII to issue a statement about the FMM s accounts, before they are forwarded, for the legal purposes, to the internal control governing bodies; XVIII to perform other activities assigned by the Transport Minister. 3. What is The Additional Freight for the Renewing of the Merchant Marine (Adicional de Frete para a Renovação da Marinha Mercante - AFRMM)? The Additional Freight for the Renewing of the Merchant Marine (Adicional de Frete para a Renovação da Marinha Mercante - AFRMM) is a taxation established by Decree-Law nº 2.404, date as of December 23, This taxation rules were set out by Law nº , date as of July 13, Its legal nature is of a contribution for intervention in the economic domain (Contribuição de intervenção no domínio econômico CIDE). This type of contribution is governed by the Constitution, which provides, in Article 149, the Union competence to institute the CIDE, as it is transcribed below: Article 149. It is the Union exclusive responsibility to establish social contributions, of intervention in the economic area and in the interest of professional or economic categories, as a tool of its work in the respective areas, pursuant to Article 146, III, and Article 150, I and III, without prejudice to the stipulations of Article 195, 6º, regarding contributions referred by the legal provision.

3 In the understanding of the Supremo Tribunal Federal (STF Brazilian Supreme Court) this taxation is a parafiscal or special contribution. So, it is a taxation that differs from a tax and a charge. According to STF: The Additional Freight for the Renewing of the Merchant Marine (Adicional de Frete para a Renovação da Marinha Mercante - AFRMM): Adicional ao Frete para Renovação da Marinha Mercante AFRMM: Parafiscal or special contribution, of intervention in the economic area. CF <art>. <149>, art. 155, 2º, IX. ADCT, Art. 36. The AFRMM is a parafiscal or especial contribution, contribution of intervention in the economic area, third tax system, distinct from a tax and a charge. (CF, <art>. <149>). (RE , Rel. Min. Carlos Velloso, trial date , Plenário, DJ de ) In accordance with the understanding of the STF, this type of taxation does not need to be regulated by supplementary law, as we can see: The STF rendered legal understanding that a complementary law is not necessary for the creation of contributions of intervention in the economic area and in the interest of professional categories. (AI AgR, Rel. Min. Eros Grau, trial date , Segunda Turma, DJE de ) The AFRMM tax event is the effective beginning of the vessel unloading operation in a Brazilian port (Article 4 of Law nº /2004) and occurs over the aquatic shipping costs of cargo unloaded at a Brazilian port. Shipping rate, for the purposes of Law nº /2004, is the aquatic transportation remuneration (cargo transportation remuneration, port to port, including all port costs due to cargo handling Article 5) The AFRMM is calculated based in the aquatic transportation remuneration (over shipping costs). The following rates apply: a) 25% for long haul shipping (carried out between Brazilian and International ports by sea, rivers or lakes) b) 10% for cabotage (carried out between Brazilian ports using only sea or sea and inland waterway); c) 40% for inland (river or lake) shipping (carried out between Brazilian ports using only internal waterways), when carrying liquid bulk in the North and Northeast regions.

4 4. How to submit projects to the Merchant Marine Fund Board of Directors, in order to be granted priority for financing? The requests to be granted priority for financing of projects with resources from the Merchant Marine Fund (FMM) shall be presented before the Department of Merchant Marine Fund (DEFMM) of the Secretariat for the Promotion of Transport (SFAT); - The request for financing shall be for projects of Brazilian companies, destined to (i) the construction of vessels in Brazilian shipyards, (ii) repair or alteration of vessels flying the Brazilian flag in Brazilian shipyards, or (iii) construction, modernization or alteration of industrial plants related to naval construction (shipyards); - The request to be granted priority for financing shall be sent both in printed and digital (this one in editable format) format of same content and form. It shall be accompanied by all necessary documentation requested by Decree GM nº 253/2009, dated as of December 12 th, 2009, including express consent to provide any needed information requested by the DEFMM, including reasons that might lead the financial agent to withdraw from financing the operation. The above-mentioned documents basically are: - The Debt Clearance Certificates by (i) Secretaria da Receita Federal (Federal Income Services), (ii) Procuradoria-Geral da Fazenda Nacional (The National Treasury Attorney s Office), (iii) Fundo de Garantia por Tempo de Serviço FGTS (The Guarantee Fund for Length of Service) and (iv) Instituto Nacional do Seguro Social INSS (National Institute of Social Security); - A filled out Annex I form (Prior Consultation - Consulta Prévia) - A filled out Annex II (for vessels) or Annex VI (for industrial installations) with a detailed budget worksheet and with a list of project uses and sources; - A summary of the technical specifications and the vessel s general repair plan; - Pre-contract signed by the company seeking financing and the shipyard, or, in the case shipyard is seeking financing, a pre-contract between the shipyard and the Company; - A filled out Annex V (a template to be written by the seeker of financing, giving the financial agent authorization to comply with any information requested by the DEFMM); - The construction timetable of the shipyard, including not only the construction to be financed by FMM, but also the timetable of all other shipyard s constructions; and - For industrial plants, a complete floor plan of the plant, technical specifications, and tables with detailed quantities and amounts of construction costs and equipments that shall be financed by FMM. The applicant must forward all the project s documentation to the chosen FMM s financial agent. This documentation shall be requested directly to the financial agent. Once the DEFMM technical team analyzed the request, it will be forwarded to the CDFMM.

5 In the case of project approval by the CDFMM, the CDFMM s President will publish the decision in the Official Gazette of the Union (Diário Oficial da União DOU). If the project is not approved it will be filed and should be communicated to the persons and parties concerned. 5. What is the validity period of the priority granted by the Merchant Marine Fund Board of Directors? According to Decree GM nº 82/2011, dated as of May 5 th, 2011, a priority granted by the Merchant Marine Fund Board of Directors will be valid for 360 (three hundred and sixty) consecutive days, counting from the date the CDFMM resolution is published in the Official Gazette of the Union, it comprises the operation framework and the contracting of financing. The beginning of the project may not exceed a year after the priority was granted, as determined by Decree GM nº 82/2011, dated as of May 5 th, Are there any tax benefits linked to The Additional Freight for the Renewing of the Merchant Marine tax collection? The Law provides three types of tax benefits: no occurrence, exemption and suspension of the AFRMM. No occurrence of the AFRMM: this taxation will not affect the unloading operations of river and lake navigation, except when carrying liquid bulk in the North and Northeast regions (Sole Paragraph of Article 4 of Law nº /2004). Exemption of the AFRMM: this tax benefit, contained in Article 14 of Law nº /2004, specifies a wide list of cargos, which are exempt from paying the AFRMM. Pursuant to the roll of Article 14, the most significant exemptions are: cargoes of books, newspapers and periodicals, as well as their printing paper; cargoes transported: by vessels, domestic or foreign, when not used for commercial purposes, exploitation activities (to take advantage of economic potential of specially of natural resources) Suspension of the AFRMM: pursuant to the Law, the payment of AFRMM over the freight of goods that are subject to special customs procedures remains suspended until that the date of the customs declaration registration (for admission of the goods in the customs procedure). 7. What is the role of the financial agent in the Merchant Marine Fund financing process? May the financial agent deny the request for financing even if the Merchant Marine Fund Board of Directors granted a priority?

6 The role of the Merchant Marine Fund s financial agent is to make the credit possible, after the evaluation of the viability study. It must be emphasized the financial agent is the party responsible to the project s financing. So, the grating of financing depends on the economic and financial feasibility of the project presented by the Brazilian shipping company or shipyard. That is the reason why the financial agent may refuse to grant the request for financing. In order to act as FMM s financial agent, the Merchant Marine Fund Board of Directors (CDFMM) must approve the agent. Once approved, the CDFMM proposes to the Transport Minister the signing of an agreement between the Ministry of Transport and the financial agent. The purpose of the agreement is to regulate the relationship between the parties, with a view to ensure the proper use of the FMM s resources, pursuant to article 29 of Law nº , dated as of July 3 rd, What are the financing limits for a project? There are no limits. 9. Does the financing terms may be renewed? No, there is no possibility of renewal. 10. Do the FMM resources come only from The Additional Freight for the Renewing of the Merchant Marine (AFRMM)? What are the other sources? No. Fonte 135 is the main revenue source of the FMM, the collection comes from The Additional Freight for the Renewing of the Merchant Marine (AFRMM). The AFRMM is an additional charge over the freight charged for the transport of any type of cargo shipped by Brazilian and international shipping companies operating in Brazil. The other sources of the FMM are: Fonte 100 Treasury obtained from Financial Surplus; and Fonte 180 directly collected from amortizations, loan interest and bank deposits remuneration (Conta Unica). The FMM resources are set forth in article 25 of Law nº / Do the Merchant Marine Fund credit lines offer better financing conditions? What are the payment terms? Yes, the financing conditions are better. The payment terms vary according to the asset that is being financed.

7 12. Where may I find information about the Brazilian shipping companies and shipyards that are using resources from the Merchant Marine Fund to finance their project? Such information is available on the Internet and may be accessed at the Ministry of Transport website. You should click the following links: Acesso à Informação (information); Institucional (institutional); Legislação (legislation); and Clique aqui (click here). After clicking, fill the available field with the acronym CDFMM (Conselho Diretor do Fundo da Marinha Mercante) and the click in Pesquisar (Research). As a result, all CDFMM Resolutions to date will show on the screen. 13. I am a businessman from the logistics industry and would like to open a shipping company. What should I do? To open a Brazilian shipping company you must first understand Law nº 9.432, dated as of January 8 th, 1997, governing about waterway transportation. It is possible to read the full Law at the following Internet address: It is necessary to get authorization in order to operate long-haul shipping, cabotage and port or maritime support. To obtain such authorization a request must be made to the National Waterway Transportation Agency (Agência Nacional de Transportes Aquaviários ANTAQ). We suggest you read Resolution ANTAQ n 843, dated as of August 14, It is possible to read the full Resolution at the following Internet address: I just started a shipping company. May this new company be a recipient of the Merchant Marine Fund s resources? The criteria for requesting prioritization of resources of the Merchant Marine Fund are described in article 26 of Law nº , dated as of July 13, It is possible to read the full Law at the following Internet address: How many shipyards were built or retrofitted with Merchant Marine Fund resources under Law nº /2004? How much was actually released to each shipyard? Ever since Law nº dated as of July 13, 2004, eight shipyards were either built or modernized with resources from the Merchant Marine Fund. Even though the Ministry of Transport has authority to supervise the work financed with resources from the Merchant Marine Fund, it must be observed that the financing agreements are signed without the Ministry s mediation. Thereby, information about the resources released to each shipyard should be requested to the financial agent responsible for the management of the construction or maintenance agreement.

8 The financial agents of the Merchant Marine Fund are the BNDES (Brazilian Development Bank), Banco do Brasil, Banco da Amazônia, Banco do Nordeste do Brasil and Caixa Econômica Federal. Shipyard State Type of Construction Work Atlântico Sul PE Construction Ebin/Aliança RJ Construction / Modernizing ERG2 RS Construction Navship SC Construction / Suplementation Promar Pernambuco PE Construction São Miguel RJ Construction STX Brazil RJ Modernizing Wilson Sons SP Construction / Modernizing