Cabotage permits are temporary permits granted by the Ministry of Communications and Transportation, through the General Directorate for Ports and Merchant Marine, authorising foreign flagged vessels to engage in cabotage. Cabotage, or coastal trade, is defined as the navigation between two ports or spots within Mexican maritime zones.
Nearly 500 cabotage permits are granted and renewed in Mexico every year. The great majority of them are granted to vessels operating in the offshore oil fields in the Gulf of Mexico.
Cabotage is reserved to Mexican shipowners and Mexican vessels. Foreign vessels may engage in cabotage when there are no Mexican-flagged vessels available.
A special bidding procedure is conducted to award these permits and bidders must compete in equal technical conditions. The bidding procedure comprises two stages. In the first stage, only Mexican shipowners may participate and the priority ranking is as follows: |
(i) Mexican shipowners with foreign vessels under a bareboat charter (under this assumption the whole crew must be Mexican);
(ii) Mexican shipowners with foreign vessels under any other charter agreement (under this assumption priority is given to the vessel having a higher number of Mexican crewmembers).
In the event that no vessels are available under the above assumptions, the second stage of the special bidding procedure takes place and foreigners with foreign vessels may participate.
In their request for constitutional review, PEMEX put to the court that giving preference to Mexican shipowners with chartered foreign vessels may violate constitutional principles, such as equality, legal certainty, freedom of employment and commerce, and best value for money in public procurement procedures.
In reviewing the constitutionality of the bidding procedure, the Supreme Court found that the fact that Mexican shipping companies are preferred over foreign ones does not create a monopoly, favours certain companies in particular or have negative repercussions on the general public or a social class. |
The Supreme Court held that even though the bidding procedure intends to promote national maritime activities, protect the national shipbuilding industry and, consequently, benefit the Mexican economy, the procedure does not force PEMEX to hire Mexican vessels exclusively. Indeed, when the Mexican vessels available do not fulfil the technical specifications required by PEMEX, foreign vessels with cabotage permits may be hired.
New criteria to determine uniqueness
Cabotage permits are granted for three-month periods and can be renewed up to seven times only. Thus, the maximum period for foreign vessels to operate under these permits is two years, after which, vessels must be flagged Mexican in order to continue operating in Mexican waters. This rule does not apply to vessels deemed unique, as cabotage permits for the latter may be extended for longer periods. However, the question yet to be answered is which vessels are to be considered as unique.
According to the new draft bill of Regulations to the Navigation and Maritime Trade Law, a technical commission will be created to determine on a case by case basis if a vessel or naval artefact is unique due to its degree of specialisation.
If the draft bill is passed without amendments, the following criteria will be used to determine if a vessel is unique:
(i) The state of technology in the international market;
(ii) The availability of technology in the international market; and,
(iii) Construction and equipment reports in respect of vessels and naval artefacts that may be considered as extraordinary. |
Supply vessels, tugs, crew boats, tankers, cargo vessels and fixed oil rigs will not to be considered as unique in any case.
It is noteworthy upon the entry into force of the new Regulations mobile oil rigs will be permitted to operate up to 13 years under cabotage permits, and vessels and support units will be allowed to stay up to 7 years.
It must also be noted that under Mexican law vessels and naval artefacts –i.e. oil rigs whether fixed or not– are subject to the same regulatory framework –a few exceptions apply.
The above may not be relied upon as legal advice. For further information about the issues discussed in this newsletter, please contact:
David Enriquez
Email: denriquez@goodrichriquelme.com,
Tel: (+52) 55 5525 0369
Carlos Moran
Email: cmoran@goodrichriquelme.com,
Tel: (+52) 55 5514 8013
Goodrich Riquelme & Asociados
Paseo de la Reforma 265
Mexico City, D.F. 06500
Mexico
Tel: (+52) 55 5533 0040
Fax: (+52) 55 5525 1227
Email: mailcentral@goodrichriquelme.com
www.goodrichriquelme.com
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