Served June 25, 1997
FEDERAL MARITIME COMMISSION
Possible Discriminatory Treatment of U.S. and Third-Flag Carriers Serving the Brazil Trades
INFORMATION DEMAND ORDER
On July 8, 1996, the Federal Maritime Commission issued orders collecting information on certain policies or practices of the Government of Brazil which may create conditions unfavorable to shipping in the United States/Brazil trade, or constitute adverse conditions affecting U.S. carriers that do not exist for Brazilian carriers, or impair access of U.S.-flag vessels to ocean trade between Brazil and other foreign ports. Of specific interest to the Commission was the inability of a U.S. carrier in the Brazil trades to obtain permission to operate a bonded warehouse for import cargo, and the existence of restrictions on U.S. carriers' ability to carry cargoes in the cross-trades between Brazil and other South American countries.
The Commission continues to have serious concerns with regard to these practices. In addition, since the Commission's inquiry, the Government of Brazil has enacted significant new maritime legislation, which may further discriminate against or disadvantage U.S. carriers. Diplomatic efforts and consultations by the United States Government appear to have had little effect in resolving these issues. In light of these developments, the Commission is issuing this order to supplement its record and collect the most current information about potentially adverse conditions in the U.S.-Brazil trades.
In January of this year, the Government of Brazil enacted Law No. 9.432 which, among other things, established a new Brazilian second ships' register, the Registro Especial Brasileiro ("REB"). Article 11(7) of that law provides for the exclusion of freight charges from the calculation of Brazilian duties payable on imported and exported goods, when such goods are transported on a vessel registered under the REB. It appears that implementing regulations for the REB currently are being prepared. If the preferential tax treatment set forth in the law is implemented, it could provide REB vessels with significant competitive advantages, to the detriment of U.S.-flag and other non-REB vessels.
Preferential tax treatment for Brazil's new second registry may run contrary to the commitments set forth in the 1996 U.S.- Brazil maritime agreement. This agreement provides that the parties will "afford fair and nondiscriminatory opportunity to national-flag carriers of both parties and third-flag carriers to compete for the carriage of commercial cargo in the bilateral trade," and will "afford vessels of the other party the same treatment as its own vessels with respect to taxes assessed on tonnage or freight value and other taxes or levies." The establishment of a more favorable tax regime for cargo carried on REB vessels would appear on its face to contravene these provisions.
The Commission has concerns with other aspects of Law No. 9.432 as well. Article 5 of the law states that Decree-Law No. 666, a Brazilian statute which reserves a wide range of government- impelled cargoes to Brazilian-flag vessels, shall apply only to Brazilian import cargo from "countries which practice, either directly or by means of any benefit, subsidy, government favor, or export or import cargo prescription in favor of ships of their flag."/1/ While we understand that Decree-Law No. 666 will not be imposed in the U.S. trades out of regard for the existing U.S.- Brazil maritime agreement, we are concerned that the application of this section in Brazil's cross-trades may further frustrate U.S. carriers' abilities to access these markets.
To the extent that the provisions of Law No. 9.432 or other laws, rules and regulations disadvantage U.S.-flag carriers or otherwise create conditions unfavorable to U.S.-Brazil oceanborne trade, the Commission may take appropriate measures under section 19 of the Merchant Marine Act, 1920, 46 U.S.C. app. 876. That section authorizes the Commission "to make rules and regulations affecting shipping in the foreign trade not in conflict with law in order to adjust or meet general or special conditions unfavorable to shipping in the foreign trade . . . which arise out of or result from foreign laws, rules, or regulations . . . ." Also, the Foreign Shipping Practices Act of 1988, 46 U.S.C. app. 1710a, authorizes the Commission to investigate whether foreign laws or practices result in conditions that: "(1) adversely affect the operations of United States carriers in the United States oceanborne trade; and (2) do not exist for foreign carriers of that country in the United States. . . ." Sanctions under the two statutes are similar, and include suspension of tariffs, limitation of sailings, and assessment of per voyage fees.
To the extent that Brazilian measures impair U.S. carriers' ability to participate in the foreign-to-foreign trades, the Commission may take action pursuant to section 13(b)(5) of the Shipping Act of 1984, which states:
(5) If, after notice and hearing, the Commission finds that the action of a common carrier, acting alone or in concert with any person, or a foreign government has unduly impaired access of a vessel documented under the laws of the United States to ocean trade between foreign ports, the Commission shall take action that it finds appropriate. . . .
46 U.S.C. app. 1712(b)(5). The measures available under this section are similar to those available under the FSPA.
To ascertain the scope and commercial impact of Brazil's new maritime legislation, to collect the most current information on other matters of concern, and to evaluate whether further action is warranted, the Commission is requiring carriers operating in the Brazil-U.S. trade to respond to the questions set forth herein./2/
THEREFORE, IT IS ORDERED, that each of the persons listed in the attached Appendix shall submit to the Commission responses to the following requests for information and documents, on or before August 11, 1997:/3/
1. Identify all duties, taxes, fees or other levies to which Article 11(7) of Law No. 9.432 (which provides that freight charges for REB vessels shall not be included in the calculation of certain duties) applies.
2. For each duty, tax, fee or levy identified in response to Question 1:
a. state whether it applies to import cargo, export cargo, or both; b. describe in detail how the duty, tax, fee or levy is calculated; c. state the level of the duty, tax, fee or levy, expressed as a percentage of the total value of the cargo against which it is assessed. (If the answer varies by commodity, provide a minimum and maximum percentage, and indicate the commodities to which the minimum and maximum figures refer.) d. identify the party (e.g., importer, exporter, ocean carrier) responsible for payment of the duty, tax, fee or levy; e. identify what governmental body is responsible for the collection of the duty, tax, fee or levy; f. indicate by what percentage the duty, tax, fee or levy would be reduced, if ocean freight charges were excluded from its computation. (If the answer varies by commodity, provide a minimum and maximum percentage, and indicate the commodities to which the minimum and maximum figures refer.)
3. Identify the flag of the vessels operated by your company in the U.S.-Brazil trades. Does your company operate, or have any plans to begin operating, vessels under the REB registry?
4. What are PIS and COFINS? Is your company currently required to pay these taxes or assessments? If so, describe how they are assessed.
5. Has your company obtained any license or permission from the Government of Brazil to operate a bonded warehouse or other customs clearance or inspection facility since September 1, 1996? If so, describe the facility and indicate the type of permission obtained.
6. For response by Amazon Lines, Nacional Line, Di Gregorio Navegacao, Alianca SA, Frota Amazonica, Norsul Line, Transroll, only: List any bonded warehouses, other customs inspection facilities, and marine terminals owned or operated by your company (either directly or indirectly through subsidiaries, partnerships, or other affiliated companies) in the United States.
7. For response by Amazon Lines, Nacional Line, Di Gregorio Navegacao, Alianca SA, Frota Amazonica, Norsul Line, and Transroll, only: Describe the procedures used in administering the exemption from the Freight Additional for Merchant Marine Renewal (AFRMM) for cargo bound for northern Brazil, set forth in Article 17 of Law No. 9.432. Are there any differences in procedures or in amounts exempted, based on the nationality or flag of the carrier or vessel on which the cargo has been carried? If so, describe these differences.
8. For response by Amazon Lines, Nacional Line, Di Gregorio Navegacao, Alianca SA, Frota Amazonica, Norsul Line, Transroll, only: What are the "amounts foreseen in items II and III of article 8 of Decree-Law 2.414 of 23 December 1987," for which the Brazilian shipping companies will be reimbursed, pursuant to Article 17 of Law No. 9.432?
9. For response by Amazon Lines, Nacional Line, Di Gregorio Navegacao, Alianca SA, Frota Amazonica, Norsul Line, Transroll, only: For what purposes are payments, rebates, or disbursements made to carriers from the Merchant Marine Renewal Fund? Has your company received any such disbursements from the Merchant Marine Renewal Fund in the past three years? If so, indicate the amounts, and the purposes for which such disbursements were made.
IT IS FURTHER ORDERED, That except where otherwise noted each respondent must answer each of the questions listed above separately and fully;
IT IS FURTHER ORDERED, That responses to requests for information shall be set forth in writing and under oath, and signed by the corporate official providing the answer; and
IT IS FURTHER ORDERED, That every document provided pursuant to this Order must clearly identify the question in response to which it is supplied.
By the Commission.
Joseph C. Polking Secretary
ENDNOTES
/1/ Decree-Law 666, originally enacted in 1966, requires that the carriage of merchandise imported by any part of the Brazilian government, directly or indirectly, must be imported on Brazilian- flag vessels. Under this law, up to 50% of the cargo reserved for carriage by Brazilian-flag vessels can be released to vessels of the exporting or importing trading partner, if that country affords reciprocal treatment to Brazilian -flag vessels. The law has been applied broadly to include imports benefiting from any government sponsorship or financing, and is said to have included as much as a third of the cargo in some trades. Since 1970, the U.S. has been party to a series of agreements with Brazil that granted general waivers of reserved cargoes to U.S. vessels.
/2/ Section 19(6) of the Merchant Marine Act, 1920, 46 U.S.C. app. 876(6), states:
(a) the Commission may, by order, require any person . . . to file with the Commission a report, answers to questions, documentary material, or other information which the Commission considers necessary or appropriate; (b) the Commission may require a report or answers to questions to be made under oath; * * * (d) a person who fails to file . . . information required to be filed under this paragraph shall be liable to the United States Government for a civil penalty of not more than $5000 for each day that the information is not provided.
Section 10002(d) of the Foreign Shipping Practices Act, 46 U.S.C. app. 1710a(d), authorizes the Commission to require any person "to file with the Commission any periodic or special report, answers to questions, documentary material, or other information which the Commission considers necessary or appropriate" to further the purposes of that statute. Section 15 of the Shipping Act of 1984, 46 U.S.C. app. 1714, also authorizes the Commission to require sworn reports from carriers.
/3/ Any document in a language other than English shall be accompanied by an English translation. For the purposes of this Order, the term "document(s)" refers to written, printed, typed, or visually or aurally reproduced material of any kind, including (but not limited to) all copies of any and all letters, correspondence, recommendations, contracts, agreements, orders, records, minutes, reports, press releases, plans, manuals, lists, memos, instructions, notes, notices, confirmations, inter-office or electronic mail, faxes, cables, notations, summaries, opinions, studies, surveys, or memoranda of any conversations, telephone calls, meetings, or other communications.
APPENDIX
Amazon Lines The Kroger Center, Suite 214 8410 Northwest 53rd Terrace Miami, FL 33166
Chilean Lines (CSAV) 1 World Trade Center Suite 3815 New York, NY 10048
Columbus Line 300 Plaza Two The Harborside Financial Center Jersey City, NJ 07302
Nacional Line 99 Wood Avenue South, Suite 307 Iselin, NJ 08830
Crowley American Transport North Regency II 9487 Regency Square Jacksonville, FL 32225
Di Gregorio Navegacao Plume Central West, Suite 400 100 Plume Street Norfolk, VA 23510
Alianca SA 50 Cragwood Road, 3rd Floor South Plainfield, NJ 07080
Frota Amazonica c/o Omnium Agencies 55 Broadway Avenue 27th Floor New York, NY 10006
Ivaran Line Newport Financial Center 111 Pavonia Avenue, 5th fl. Jersey City, NJ 07310-1755
Maersk Line Giralda Farms Madison Ave, PO Box 880 Madison, NJ 07940-0880
Nedlloyd Line 2100 River Edge Parkway Suite 300 Atlanta, GA 30328-4656
Norsul (Internacional) Line, SA c/o Canada Maritime Agencies Ltd. 555 E. Ocean Blvd, Ste. 915 Long Beach, CA 90802
Pan American Independent Line c/o Norton Lilly International 200 Plaza Drive Secaucus, NJ 07096
Transroll Navegacao, SA c/o Transroll-Sea Land Joint Service 6000 Carnegie Blvd. Charlotte, NC 28217
Sea-Land Service 6000 Carnegie Blvd. Charlotte, NC 28217
Zim American Israeli Shipping Co. One World Trade Center, 16th fl. New York, NY 10048