Potential regulatory changes in the cabotage trade - International Law Office

Introduction
Modification proposal
Comment

Introduction

A cabotage reservation system is in force in Chile under the Merchant Navy Law (Decree Law 3059/79). The law implies that only Chilean vessels are permitted to provide maritime or fluvial transport services (of cargo or passengers) within the national territory or the exclusive economic zone. On exceptional occasions foreign vessels may participate in cabotage when:

• cargo volumes exceed 900 tons, and where a previous public bid has been carried out by the user in advance; or
• cargo volumes are equal to or less than 900 tons when Chilean flagged vessels are not available (provided that the Maritime Authority's authorisation is received).

Modification proposal

At the end of 2010 the transport minister and the Cooperation and Planning Ministry started to put in place the Decree Law 3059/79 modification proposal, in particular Article 3 on the regulation of cabotage. The government aims to broaden cabotage traffic to foreign vessels subject to the following restrictions:

• vessels must be foreign merchant shipping vessels under regular service;
• vessels must transport containerised cargo; and
• vessels must sail between two or more Chilean ports, with such ports registered as the vessels' regular calls.

Comment

In accordance with the government's principles, this project aims to reduce cabotage transport costs, leading to greater competence in the market and encouraging the transport of goods via maritime transport sources ahead of land transport. This is in harmony with the so-called 2010 Pro-competition Agenda Project, which focuses in part on transport and logistics problems and the optimisation of Chilean competition in relation to its neighbours.

While this proposal is under discussion, local shipping companies have questioned the project as, among other things, it may result in a potential loss of labour sources for Chilean crews and displays an absence of the reciprocity principle in relation to countries that keep their own reserves in cabotage matters. In addition, tax implications may also need to be solved so that a common treatment is granted for both local and foreign carriers.

For further information on this topic please contact Ricardo Rozas at Jorquiera & Rozas Abogados by telephone (+56 2 580 9300), fax (+56 2 580 9311) or email (rrozas@jjr.cl).