Merchant Navy and the Naval Industry

With the vote of 62 senators, on November 16, 2016 the Senate unanimously approved a bill on the “Development of the Argentine Merchant Navy and Regional Fluvial Integration” and a bill establishing a “Regime for the Promotion of the Argentine Naval Industry”. Both bills were jointly considered by the Senate and sent to the House of Representatives for  review.

Bill of law on the Development of the Argentine Merchant Navy and  Regional Fluvial Integration

The purpose of the law which has the Senate’s preliminary approval is  to promote regional integration in the Paraná-Paraguay Waterway, on the Uruguay River and the maritime spaces; to develop the merchant marine; to increase the participation of the Argentine fleet in the Waterway; and to generate sources of employment and to foster the registration of ships built in the Argentina.

The bill calls upon the Executive Branch to promote the implementation of article 7 of the Treaty on Fluvial Transport in the Waterway, which provides for state parties to harmonize their national legislation with the Waterway rules.

The bill would benefit Argentine shipowners operating merchant ships, except for certain types of vessels that are expressly excluded.

In order to be deemed an “Argentine shipowner” and, therefore, be a beneficiary of the proposed bill, in addition to the requirements of the Argentine Navigation Act and of the REGINAVE, it will be necessary to have permanent residence in the country, in the case of individuals, and be established in Argentina, in the case of legal entities. The bill provides that those who maintain any type of debt or issue with the Argentine Government or who carry out gambling activities may not be deemed national shipowners.

The bill establishes tax benefits and the elimination of customs taxes during seven years for the import of vessels, supplies and spare parts for ships.

The proposed bill seeks to expedite the process for the registration and deregistration of ships to the national flag.

Vessels imported under this regime would be required to be repaired, enlisted or modified by shipyards and naval workshops operating in Argentina, if they “undertake to carry out the works at reasonable prices and within timeframe” (this duty will need to be properly implemented by the regulations).

The bill allows national shipowners to lease foreign-flagged vessels of no more than 10 years old if they are maritime ships, or 15 years if they are river vessels. These vessels would be treated as Argentine-flagged vessels. Different types of ships will be admitted: vessels destined for the transport of passengers and/or vehicles, dredgers, towboats, pushboats, ships for cargo transport, support vessels for maritime and fluvial traffic, and pontoon cranes, indicating different tonnages, machine power, lengths and raising capacities. Periods for the lease are also indicated and relations or percentages between Argentine vessels in service of each national shipowner or placing of orders of construction in local shipyards, and leased foreign vessels, are established.

Crews must be Argentine and crew contracts must be governed by the Argentine law and union agreements.

Both captains and pilots would limit their liability to third parties to an amount equivalent to five monthly gross wages corresponding to the position of Captain of a tanker more than 25,000 GRT, except when “gross negligence or willful misconduct are proved”.

The prohibition to contract insurance outside of Argentina would not apply to vessels entered into the regime proposed by this bill.

Tax benefits are also to be applied in respect of the freight corresponding to the transported cargo.

If this bill is enacted, the merchant navy regime currently in force under the Decree No. 1010/2004 (in force by virtue of Decree No. 1022/2006) would be repealed.

Bill on the Regime for the Promotion of the Argentine Naval Industry

The purpose of the bill is to develop and grow the naval industry in a participative and competitive way, to create a source of labor, and to promote and foster the design, engineering, repair, transformation and the construction of ships.

The proposed bill creates a Registry of Argentine-based Shipyards, Naval Workshops and Naval Engineering Firms. Among other requirements, individuals who register must be domiciled in Argentina and legal entities must be established in Argentina.

The import of new unused supplies, parts and components, which are not produced in Argentina, would be exempted from import duties.

Works on Argentine ships and on foreign vessels with Argentine flag treatment should be performed by shipyards, naval workshops and engineering firms enrolled in the Registry. The implementing authority, which will be determined by the Argentine Executive Branch, may be exempt from this obligation if it can be proved that it is  impossible to carry out the works in Argentina.

A Fund for the Development of the Argentine Naval Industry (FODINN, for its acronym in Spanish) must be created for a period of 15 years to incorporate infrastructure, equipment and technology in shipyards and local navak workshops, and to grant pre-financing for the construction of vessels and naval artifacts.

Ship building mortgages will be accepted as security, among other things, for the purpose of pre-financing  ships.

National shipowners will have access to the system of leasing which must be implemented through the Banco Nación and managed by Nación Leasing.

A promotional tax regime will be established when the bill has been passed.

Both bills sanctioned by the Senate have been sent to the House of Representatives for review.