The Brazilian Admiralty Court has reviewed its initial position and validated the registration of a hull being built in Brazil under the ‘Pre-REB Regime’, despite limited parts of the construction having been imported into the country. The decision represents a major win for the Brazilian shipbuilding industry.

Context

The Pre-REB Regime, established by Federal Law 9,432/1997, incentivises local shipbuilding through tax benefits and special financing arrangements. A vessel’s hull, built by a Brazilian shipyard, was registered under this regime. However, the Admiralty Court cancelled the registration upon learning that certain components had been imported, arguing that the hull no longer met the requirements necessary to benefit from the regime.

CAR was instructed by the shipyard to review the case and challenge the Admiralty Court’s decision.

Issue in Dispute

The central issue was whether the importation of certain components invalidated the vessel’s Pre-REB registration, thereby affecting financing conditions and tax benefits.

The shipyard’s principal arguments were that:

• Building a vessel entirely with national resources is impractical due to the complexity and volume of components involved.
• The vessel was constructed in Brazil throughout the entire building process, and the shipyard presented clear evidence of having continuously employed thousands of workers on the project, thereby contributing significantly to the local economy.
• The imported components represented only a minimal portion of the vessel in terms of both complexity and cost.
• There was no evidence of non-compliance with the essential requirements established under Federal Law 9,432/97, nor did any regulation prohibit the importation of parts.

The Court’s position gradually evolved from cancelling the Pre-REB registration to ultimately issuing a final decision fully reinstating the regime. In the leading judgment, the prevailing judge stated:

“[…] perceived ‘normative gaps’ regarding the provisions regulating the granting of the Pre-REB cannot be interpreted in a way that harms the shipyard, especially concerning an act already consummated and a vessel already delivered, built on legal and legitimate legal and factual assumptions. Once the Pre-REB is granted and the existing formalities are completed, especially the construction in a national shipyard, as occurred, it materialises a perfect legal act that cannot be undone afterward.”

Comments

This decision is highly significant for the Brazilian shipbuilding industry. Through this ruling, the Admiralty Court established that:

• The importation of limited elements of a project will not invalidate registration under the Pre-REB Regime, provided that construction takes place in Brazil and the vessel is effectively built in the country.
• Registration under the Pre-REB Regime cannot be retrospectively suspended in relation to a period that has already elapsed.
• Registration cannot be suspended in relation to specific elements of a project while remaining valid for others.

This precedent provides welcome certainty regarding the Admiralty Court’s interpretation of the requirements for registration under the Pre-REB Regime. The Court’s long-awaited findings benefit both the Brazilian and international shipbuilding industries and, ultimately, support the continued development of the Brazilian economy.