FEDERAL MARITIME COMMISSION

FMC MEETS ON U.S. BRAZIL
MARITIME DEVELOPMENTS

Washington, D.C.

NR 99-06

For Release: March 11, 1999

As a result of recent favorable maritime Consultations between the United States and Brazil, the Federal Maritime Commission took no action at a March 9, 1999, meeting regarding discriminatory and unfair maritime policies of the Government of Brazil.

In recent months, the Commission has had serious concerns about a Brazilian law providing unfair tax and duty exemptions for vessels enrolled in its second ships register, the Registro Especial Brasileiro ("REB"). The Commission also has been troubled by Brazilian moves, late last year, to deny U.S. ocean carriers access to Brazilian government reserved cargoes, and to levy discriminatory duties on such cargoes when carried by U.S. shipping lines. The Commission has observed that such matters may warrant formal FMC action, including imposition of sanctions pursuant to section 19 of the Merchant Marine Act, 1920.

The Commission has received reports that, in U.S.-Brazil maritime consultations held February 24th and 25th in Brasilia, Brazilian authorities have made a number of commitments that, when implemented, would appear to address the Commission's concerns. The Brazilian delegation reportedly agreed to prepare a legislative proposal to eliminate the REB tax preference provisions. A Brazilian shipping line apparently committed to remove vessels currently operating in the U.S. trades from the REB registry, remedying its unfair advantage over U.S. carriers. After discussing a number of issues, the delegations reportedly agreed to enter into a new maritime agreement, which would resolve long-term concerns about access to government-impelled cargoes. Brazilian authorities also were said to have assured U.S. negotiators that until such an agreement goes into effect, Brazil will continue to provide waivers that allow U.S. carriers access to reserved cargoes without discriminatory tax treatment.

Chairman Harold J. Creel stated: "I am encouraged by the productive commitments made by Brazilian authorities, and I applaud the hard work of both delegations. The Commission welcomes the adoption of immediate interim solutions, that is, the re-registering of REB vessels and the continuation of waivers for reserved cargoes. However, we will continue to watch this matter closely, consulting with governmental and commercial sources, to ensure that permanent solutions to these matters are put into place promptly."