Regulatory rules to Decree No 1010/2004 regarding the Argentine merchant navy

Decree No 1010/2004 has been briefly commented in Marval News # 31 of August 31, 2004 (please see “New regime for the Argentine merchant navy - Decree No 1010/2004”).

Such Decree abolished Decree No 1772/91 and the extending and modifying decrees thereof. Such abolished decrees allowed Argentine vessels to be provisionally removed from the Argentine registry and such vessels to take another flag but, for traffic purposes to be deemed as Argentine vessels.

Decree No 1010/2004, apart from abolishing Decree No 1772/91 and the extending and modifying decrees thereof, provided as follows:

a) that vessels that were subject to the derogated Decrees recover the Argentine flag within a two-year term;

b) that during such two-year term, the crew agreements be governed by Argentine legislation and be subject to Argentine jurisdiction;

c) that during such two-year term, vessels may continue operating within the National coastal navigation;

d) that bareboat chartered foreign vessels be treated as Argentine flag vessels by Argentine ship owners for all navigation, communication and trade purposes, either of national or international coastal navigation, under the conditions stipulated in said Decree, and

e) to establish the capacity to grant a leasehold in consideration of both the vessels that lessee may have under the Argentine ship registry and the constructions it ordered to Argentine shipyards.

Several rules of Decree No 1010/2004 needed that the authority put forward regulatory rules for purposes of construction or application. Some of these regulatory rules were dictated through Provision No 42/2005 issued on March 31, 2005 by the Undersecretariat of Ports and Waterways (Subsecretaría de Puertos y Vías Navegables) and published in the Official Gazette on April 5, 2005.

Below are some brief comments on the new regulation.

The new regulation only sees to sections 1, 5, 15 and 20 of Decree No 1010/2004, which means that the Undersecretariat of Ports and Waterways considered –at least for the moment - that it is unnecessary to rule sections 2, 3, 4, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 18, 19, 21 and following sections.

Regulation of section 1 of said Decree refers to the requirements that need to be observed so that the vessels that have provisionally cancelled their registration with the Argentine ship registry under the abolished Decree No 1772/91, may participate in Argentine coastal navigation.

So, to be treated as if with Argentine flag until full re-registration of the vessels with the Argentine ship registry, (a) owners shall need to maintain such condition and every six monthsevidence before the National Bureau of River and Maritime Transportation (Dirección Nacional de Transporte Fluvial y Marítimo) that the vessel is registered with the pertinent Registry under its ownership, (b) vessels shall have to be commercially operated by Argentine ship owners and the operator shall be identified in the pertinent certificate issued in order to be treated as under Argentine flag and (c) the crew list intervened by the Argentine National Coastguard (Prefectura Naval Argentina) shall have to be submitted.

Upon compliance thereof, the National Bureau of River and Maritime Transportation, depending on the Undersecretariat of Ports and Waterways, shall issue a certificate that will authorize those vessels that have provisionally discontinued being under the flag to be treated as if under the Argentine flag.

Furthermore, the ruling (also in section 1) sets forth that for such vessels to recover Argentine registration, the beneficiary indicated in the provisional discontinuation certificate shall need to obtain authorization for reincorporation purposes.

Finally, section 1 of the ruling stipulates that upon expiration of the two-year term fixed by Decree No 1010/2004, the Undersecretariat of Ports and Waterways shall communicate the list of vessels not reincorporated to several tax and administrative authorities and identify the owners thereof.

Regarding section 5, the ruling refers to two aspects, to wit:

Section 5.b) of the Decree requires that the vessel granting the leasehold capacity (that means, the capacity to lease foreign vessels to be treated as Argentine vessels) make a transportation or service operation at least once a month.

For evidence effects, said ruling requires a copy of the entrance and departure customs declarations of the last three months, intervened by the Argentine National Coastguard, and further, such information has to be updated monthly.

When dealing with vessels affected to international traffic, the documentation certifying the entrance and departure of foreign ports shall be submitted with a translation made by an Argentine sworn translator.

The crew list intervened by the Argentine National Coastguard should also be submitted, from where it arises that the vessel is fully manned by people of Argentine nationality.

Regarding section 5.c) of the Decree, relative to the granting of a leasehold capacity when a construction agreement in Argentine shipyards has been delivered, the ruling provides that the construction agreement shall be deemed to comply with all legal formalities “when the pertinent work has commenced”.

This issue gave place to reservations. The possibilities were either to consider the execution of the construction agreement sufficient or to require that the work had already commenced. The ruling adopted the last solution. We are aware that ship owners are concerned with this solution because the Argentine shipyards’ capacity is currently not very significant; this means that agreements may be entered into, but construction will not commence immediately;this implies that the person ordering the construction will not be able to obtain the leasing capacity during the term between the execution of the agreement and the effective commencement of works.

Section 15 fixes a twenty-four month limit counted as of the subscription of the construction order, to enjoy the leasehold capacity arising from the construction order. However, such term shall be lesser if the term of duration of the lease agreement is less.

Said ruling also provides for the intervention of the Naval Engineering Professional Board (Consejo Profesional de Ingeniería Naval) to verify the effective work in advance, pursuant to the works plans of the construction hired. Otherwise, the authorization will expire and the bareboat chartered vessel will no longer be treated as if under Argentine flag. Costs resulting from the inspections to be carried out by the Naval Engineering Professional Board shall be borne by the ship owner.Section 20 of Decree No 1010/04 refers to the authorization needed to navigate within national coastal navigation for more than thirty calendar days, when no Argentine flag vessels are available. The Decree sets forth that for authorization lasting more than thirty calendar days, vessels have to be manned by people of Argentine nationality (and all repairs and works on the vessel have to be carried out in Argentine shipyards and workshops). The ruling provides that the crew list stating that the vessel is fully manned by Argentine people has to be submitted. Moreover, personnel are subject to the Argentine labor system and that the crew list approved by the Prefecture must also be submitted.