Chilean government to introduce bill to open cabotage to foreign ships

The Chilean government has decided to introduce a bill to open shipping of cargo to foreign shipping companies. The initiative corresponds to one of 40 measures that the Ministry of Economy has included in the Economic Re-Impulse Agenda. The text’s content is being gradually defined.

According to government minutes, the necessary measures are being taken in order to not affect the development of small shipping companies operating mainly at the far end of the country.

“Cabotage will be open to foreign ships whose deadweight exceeds a certain ton limit to safeguard the competitive southernmost cabotage market and to promote competition in large cargo markets.”

In addition, the bill aims to revise “certain tax regulations applicable to foreign vessels provided by Chilean law to equalize tax charges to enable cabotage to be exercised in Chile under market conditions and to eliminate artificial barriers to entry.”

This is because currently, for example, if a foreign shipping company carries out cabotage under the exceptions of the law, it is taxed at 20% or 35% of gross amounts paid abroad, 20% for lease or freight contracts and 35% for maritime freight contracts.

Time and cost savings

Therefore, today cabotage is reserved for Chilean vessels, with three exceptions in which foreign vessels may operate: public bidding in the case of volumes exceeding 900 tons; special authorization or exemption for cargoes under 900 tons, provided that there is no availability of Chilean flags; and temporary registrations of foreign vessels as Chilean vessels.

According to a recent study called “Maritime cabotage reserve and free competition: the Chilean case”, conducted by Claudio Agostini and Ignacio Briones, of the Adolfo Ibáñez University, and by Benjamín Mordoj, of the University of Chile, such a measure would save consumers between US$300m and US$400m annually on this mode of transportation, while reducing the prices of this service by 40%.

As an example, it costs Codelco US$45 to transfer a ton of copper from Valparaiso to Angamos, while from Valparaiso to Shanghai it costs US$50.

Source: Mundo Marítimo

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