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Focus on Panama

Panama approves cabotage law

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After years in the making, Panama’s first law on cabotage was signed in December by President Laurentino Cortizo and went into effect immediately.

Still pending are the regulations that accompany the law.

The ‘law offers major incentives for the purchase, sale, and repair of vessels. It also innovates on the research and development of green fuels,’ says Rodrigo Hernandez, president of Panama’s Ship Owners Association (ARPA by its Spanish acronym).

‘The law prioritises vessel ownership to Panamanian nationals, which is long overdue. Also considered are circumstances where changes are required to accommodate different services offered to ports and ships. These situations will be subject to regulations enforced by the Panama Maritime Authority (AMP) and its board of directors,’ adds Hernandez.

‘We have seen a boost of investments in fleet renewal by local shipowners, but we expect to see the major impact [of the law] by the end of this year.’ Companies undertaking cabotage must have an ownership structure where Panamanian nationals own at least 75% of the company capital and control.

Some cabotage activities were left out of the requirement of this shareholding: These are tugboats for port operations and dredging, which, due to its characteristics, requires regional companies. It also contemplates a window for cruise ships to carry out cabotage without being affected by this regulation, and yacht and mega yacht operations.

‘Future developments are also contemplated, such as breakthroughs in new energy sources related to LNG or other technologies which are the natural progression of bunker activities currently being carried out. This leaves the door open to new fuel operations of the future,’ explains Jose Digeronimo, executive director of ARPA.

One of the most significant improvements are the regulations to be implemented on abandoned ships. Throughout the years, the Canal anchorage areas have been the preferred location for shipowners to abandon their ships, sometimes with a skeleton crew. When the ships have a problem with their anchors, or when the hull structure fails, those ships sink or run aground near the coastline, becoming an obstacle to navigation or to shore development. They are a constant source of contamination of fuel, slops and other liquids that eventually are released into the environment. There are companies dedicated to wreck removal, offshore emergencies, and oil spills.

‘Yet Panama has not approved a national contingency plan for any of these situations. This is key if international help is required. That and force majeure’s exemptions, must be regulated. For the abandoned ships, the law offers some legal PANAMA SPECIAL REPORT 15 CABOTAGE LAW instruments. But it is not enough, this is a national problem involving various institutions. We are too ‘soft’ when punishing these things. Other countries have stronger enforcement because port state controls go hand in hand with militarised Coast Guards. We must also improve this as a nation,’ states Hernandez.

A special notification procedure for the licences’ cancellation of operation will help to better control the number of companies in operation and end the trade of unused licences.

The new law also gives the Panama Maritime Authority control of the income generated by inspections. This income will be set aside, in part, for improving the inspection system as well as other important activities related to ship and environmental safety; to create a special fund to finance research and development for maritime and logistics technologies; as well as giving access to loans for the development of local companies in the maritime sector.

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