Law 14,301, of January 7, 2022 (Cabotage Law), passed with vetoes by the President of Brazil, establishes a new regulatory framework for cabotage in Brazil with different innovations and performance alternatives within the shipping  sector.

Since the first half of 2019, the Brazilian shipping industry has been following the development of the agenda around the BR do Mar project, prepared with the purpose of increasing the use of cabotage in Brazil. With an extensive coastline, Brazil has only 11% of cargo transported between Brazilian ports.[1]

Initially prepared jointly by the Investment Partnerships Program (PPI), the Ministry of Economy, and the Ministry of Infrastructure, the BR do Mar Project brought together technical studies, responses from the sector, and administrative decisions that pointed to the need to establish new guidelines for the cabotage sector. Regulatory inefficiencies, high operational costs, and low competitiveness were pointed out as factors that limited investments and restricted the diversification of the Brazilian logistics matrix, which is substantially based on road transport.

The measures contained in the Cabotage Law intend to expand the supply and improve the quality of cabotage transport in Brazil, encourage more competition in the sector, and stimulate the development of the cabotage naval industry. According to studies by the Logistics and Planning Company (EPL), linked to the Ministry of Infrastructure, it is expected that this set of changes will be able to provide reductions of more than 15% in the cost of cabotage freight in Brazil. We highlight some of the changes brought in by the law:


Chartering of foreign vessels. The Cabotage Law expanded the possibilities for chartering foreign vessels provided for in Law 9,432/97 (Waterway Transport Regulation Law).

With the Cabotage Law, foreign vessels were added to the list of possibilities for chartering, regardless of authorization by the National Waterway Transport Agency (Antaq):

  • chartering in the modalities by time or by voyage, to operate in cabotage shipping, in substitution for a vessel of similar type, own or chartered, that is under jumbling, conversion, modernization, docking, or repair, be it in Brazil or abroad, limited to up to 100% of the deadweight tonnage; and


  • the chartering of foreign vessels on bareboat, regardless of other requirements, up to the initial limit of one foreign vessel for cabotage shipping, which will progressively increase until, as of the 48th month of the Cabotage Law, there is no longer a limit for chartering foreign vessels on bareboat.

The main consequence of the changes in the charter rules is that Brazilian Shipping Companies (EBNs) will be able to operate without their own vessels, since it will no longer be necessary to link charters of foreign vessels to Brazilian vessels.

Subsidiaries abroad for fleet. According to the Cabotage Law, EBNs that qualify for the Cabotage Transportation Incentive Program (BR do Mar) will be able to charter vessels from wholly-owned subsidiaries abroad or wholly-owned subsidiaries of other EBNs abroad. A time charter of the foreign vessels of wholly-owned subsidiaries abroad can be carried out in five cases:

  • increase in the deadweight tonnage of its own vessels, in a proportion still to be defined by an act of the Federal Executive Power;
  • replacement of vessels of similar type under construction in Brazil in the proportion of up to 200% of the deadweight tonnage of the vessel under construction for a period of 6 months extendable to 36 months;
  • replacement of a vessel of similar type under construction abroad in the proportion of up to 100% of the deadweight tonnage of the vessel under construction for a period of 6 months, extendable to 36 months;
  • exclusive service for long-term transportation contracts, a case to be regulated by the Federal Executive Power; and
  • exclusive provision of regular operations for the transport of cargoes in type, route, or market that do not yet exist or are not consolidated in Brazilian cabotage, for a period of 36 months, extendable for up to 12 months, as regulated by the Federal Executive Power.

The qualification of the EBNs interested in the Incentive Program for Cabotage Transport (BR do Mar) will be carried out by an act of the Minister of Infrastructure and will depend on the regulations to be issued.

EBN-i. The Cabotage Law provides for the creation of the Empresa Brasileira de Investimentos em Navegação (Brazilian Shipping Investment Company - EBN-i), exclusively for chartering vessels to EBNs or foreign shipping companies.


Tax benefits

Tax incentives. Although the Tax Arrangement for the Incentive for Modernization and Expansion of the Port Structure (Reporto) has not been determined, the Cabotage Law created a tax benefit specifically for foreign chartered vessels authorized to operate in cabotage transport. These vessels will automatically be submitted to the temporary admission arrangement, without registration of the import declaration, with total suspension of different taxes: Import Tax (II), Tax on Industrialized Products (IPI-Import), PIS/Pasep-Import, Cofins-Import, Contribution for Intervention in the Economic Domain levied on the import and sale of oil and its derivatives, natural gas and its derivatives, and ethyl alcohol fuel (Cide-Fuels), and the Additional Freight for the Renovation of the Merchant Marine (AFRMM).


Use of the AFRMM. Some of the most relevant changes in the Cabotage Law are related to the procedures and rules for using the funds collected by AFRMM, which, according to a report prepared by the National Bank for Economic Development (BNDES) at the end of 2021, amount to about R$585 million deposited into escrow accounts in the name of EBNs and R$24.9 billion in the credit portfolio of the Merchant Marine Fund (FMM).[2]

The Cabotage Law made more restricted the possibilities of using AFRMM financial resources for vessel acquisitions or construction. The credits can be used for the purchase or construction of vessels of the same type that originated the AFRMM funds deposited in the EBN's escrow account. Thus, an EBN operating in cabotage shipping can no longer use the AFRMM funds collected in this activity to finance vessels that will operate in other modes of shipping (for example, port support and maritime support).

On the other hand, the Cabotage Law now allows the use of AFRMM funds to perform maintenance and overhaul services by specialized companies, a possibility that was previously restricted to shipyards. The AFRMM funds deposited into escrow accounts may be used to provide a guarantee for the construction of a vessel in a Brazilian shipyard and annual reimbursements of amounts related to insurance and reinsurance purchased to cover hulls and machinery of own or chartered vessels.

AFRMM and incentives for port infrastructure. The Cabotage Law now also allows the use of AFRMM funds by the FMM for financial support by granting loans in financing and contracting engineering works services by port authorities, lessees, and terminals for private use, up to 100% of the approved project.

Partial vetoes

Although the above changes were passed and approved by the President of Brazil, there was a partial veto to the bill that had been approved by the Brazilian Congress. With this, the part of Bill 4,199/21 passed and published in the Cabotage Law is already in effect, while the issues vetoed are still to be addressed by senators and representatives in a joint session and may return for presidential sanction, if the vetoes are rejected by an absolute majority of congressmen.

Among the vetoes of major importance are the following:

Reporto Veto. The Reporto, established by Executive Order 206/04 and with successive extensions, was in force until December 31, 2020. According to the wording of the bill of the Cabotage Law project was approved in Congress, the Reporto would be back in force for the period from January 1, 2022, to December 31, 2023, suspending federal taxes such as II, IPI-Import, PIS/Pasep-Import, and Cofins-Import for the import of machinery, equipment, and spare parts for the modernization and expansion of port structures. However, the President of Brazil vetoed the new Reporto's validity, and the benefit will no longer apply.

Changes in AFRMM rates. The bill approved by Congress provided for changes in the AFRMM rates applicable to long haul and cabotage shipping. On the remuneration for waterway transport, the rates of 40% would be applied in river and lake shipping, in the case of liquid bulk transport in the North and Northeast regions, and 8% in long haul, cabotage, and river and lake shipping, in the case of solid bulk transport and other cargoes in the North and Northeast regions.

Requirement of 2/3 of the crew as a minimum quantity of Brazilian seafarers on vessels. As a measure to preserve jobs for Brazilian crewmembers, the bill provided that foreign vessels of EBNs qualified under the BR do Mar program should be required to have:

  • crew composed of, at least, 2/3 Brazilians in each technical level of the officer corps, including senior or junior officers, and in each branch of activity, including deck and engine, on a continuous basis; and
  • Brazilian captain, coastmaster, chief engineer, and engine driver. In cases where there are not enough Brazilian seafarers to make up the minimum proportion required, the qualified company may apply to Antaq for authorization to operate the specific vessel with a foreign crew, on a temporary basis, for a fixed period, not exceeding 90 days, or in a single operation, in the event that the execution requires more time than the maximum period established. The discussions around the minimum quantity of Brazilian seafarers on foreign vessels enrolled in the BR do Mar program was one of the main points of controversy among government technicians, congressmen, union representatives, and businessmen from the sector.

The Cabotage Law went into effect on January 7, 2022, the same date it was passed and published. In addition to the new rules applicable, the EBNs should evaluate whether they consider it pertinent to qualify for and join the BR do Mar program, an optional part of the Cabotage Law that will offer greater flexibility in chartering foreign vessels from subsidiaries abroad. As for the presidential vetoes, they are expected to start being processed soon after the end of the parliamentary recess in February of 2022. Considering the public responses regarding these topics, it is possible that there will be various debates before a new definition is provided.


[1] Source: TKU of Inland, Cabotage and Long-haul Shipping on Inland Waterways - 2019. Brasília: Antaq, 2020. Available at: Accessed on: Jan. 3, 2022.

[2] Source: Accessed on January 11, 2022.