State aid: Commission adopts three decisions requiring taxation of ports in the Netherlands, Belgium and France

In Port News 27/01/2016

The Commission has required the Netherlands to abolish an exemption from corporate tax for its six seaports so as to align the regime with EU state aid rules. The Commission has also proposed in two separate decisions that Belgium and France align their taxation of ports with state aid rules.

Commissioner Margrethe Vestager, in charge of competition policy, stated: ‘Ports are key infrastructure for economic growth and regional development. I will soon present a proposal to facilitate unproblematic investments in ports that can create jobs, to exempt them from scrutiny under EU state aid rules. At the same time, the Commission’s decisions today regarding the Netherlands, Belgium and France make clear that if port operators generate profits from economic activities these should be taxed under the normal national tax laws to avoid distortions of competition.’

Cross-border competition plays an important role in the ports sector and the Commission is committed to ensuring a level playing field in this important economic sector.

Public companies, when carrying out economic activities, compete with private players, who are subject to paying corporate tax. The commercial operation of port infrastructure constitutes an economic activity. Public companies when carrying out economic activities should be subject to paying corporate tax, just like private companies are. These economic activities can be distinguished from other activities that linked to the operation of infrastructure for the exercise of the essential responsibilities of the State (e.g. safety, surveillance, traffic control), which fall outside the scope of EU state aid control.

The Netherlands

Following complaints, the Commission asked the Netherlands in May 2013 to abolish provisions exempting certain public companies, including port operators, from corporate tax, because it was concerned that they may give the companies concerned an undue advantage over their competitors. In July 2014, the Commission opened an in-depth investigation.

In the course of the Commission’s investigation, on 4 June 2015, the Netherlands adopted a law making public undertakings subject to corporate tax as of 1 January 2016. However, the law maintained a tax exemption for six publicly-owned Dutch seaports (namely Groningen Seaports N.V., Havenbedrijf Amsterdam N.V., Havenbedrijf Rotterdam N.V., Havenschap Moerdijk, N.V. Port of Den Helder and Zeeland Seaports).

The Commission considers that the Dutch legislation addresses its state aid concerns, except for the six Dutch seaports that remain exempted from corporate taxation. The Commission concluded that this exemption also has to be abolished in order to remove the resulting distortions of competition. The Netherlands now has two months to take the necessary steps to remove the exemption in order to ensure that from 1 January 2017 the six ports are subject to the same corporate taxation rules.

Belgium and France

In July 2014, the Commission informed Belgium and France about its concerns regarding their regimes for the taxation of ports.

In Belgium, a number of sea and inland waterway ports (notably the ports of Antwerp, Bruges, Brussels, Charleroi, Ghent, Liège, Namur and Ostende, as well as along the canals in Hainaut Province and Flanders) are exempt from the general corporate income tax regime. These ports are subject to a different tax regime, with a different base and tax rates, resulting in an overall lower level of taxation for Belgian ports as compared to other companies active in Belgium.

Most French ports, notably the 11 ‘grands ports maritimes’ (of Bordeaux, Dunkerque, La Rochelle, Le Havre, Marseille, Nantes – Saint-Nazaire and Rouen as well as Guadeloupe, Guyane, Martinique and Réunion), the Port autonome de Paris, and ports operated by chambers of industry and commerce, are fully exempt from corporate income tax.

The Commission takes the preliminary view that, in both Belgium and France, the existing regimes provide the ports with a selective advantage that may breach EU state aid rules.

Today, it has therefore proposed measures to Belgium and France to adapt their legislation, in order to ensure public or private ports pay corporate tax on their economic activities in the same way as other companies in Belgium and France, respectively. Each country now has two months to react.

Background

As announced in November 2015, the Commission is working on an extension of the General block exemption regulation (GBER) so as to cover non-problematic investments in ports and foster strategic investments in infrastructures that have the potential to create jobs in Europe.

Separately, the Commission is also continuing its investigation into the functioning and taxation of ports in other Member States and will take the necessary steps to ensure fair competition between all ports in the EU. The Commission has for example requested information on the financing of certain ports in Germany. This assessment is ongoing.

The exemption from corporate tax for Dutch public companies dates back to 1956. Similarly, the exemption from corporate tax for French ports dates back to 1942 and the Belgian favourable tax regime for ports also predates the entry into force of the Treaty of Rome, the founding Treaty of the EU, in 1958.

These measures are therefore considered as ‘existing aid’ and their assessment is subject to a specific cooperation procedure between the Member States and the Commission. When existing aid seems to be in breach of EU state aid rules, the Commission, as a first step, informs the Member State concerned about its concerns. In light of the reply, the Commission may then propose appropriate measures to the Member State to bring the measures in line with EU state aid rules.

Today’s proposals to Belgium and France are such second steps. If the two Member States do not accept the proposal, the Commission may, as a third step, open an in-depth investigation to verify the compatibility of the existing aid. If the Commission concludes that the regime is not compatible with EU state aid rules, it may require the Member State to put an end to existing aid that distorts competition in the Single Market. Today’s request to the Netherlands is this final stage in the existing aid procedure.

Source: European Commission Directorate General for Competition

Asia Fuel Oil-Front-month spreads widen as arbitrage volumes arrive

In International Shipping News 27/01/2016

Asian fuel oil markets showed signs of weakness on Tuesday as Western arbitrage volumes began to accumulate in Singapore, traders said. Front-month time spreads for 380cst and 180cst fuel oil fell $1 each, settling at a discount of $1.25 per tonne for 380cst and a discount of $1.75 per tonne for 180cst.

“The market is definitely weaker from yesterday,” a Singapore-based trader said.

“Bunker demand helped prop up the market for the past four weeks or so, but now that the arbitrage volumes are starting to come in we’re seeing differentials weaken quite a bit.” Spot differentials for 180cst fuel oil widened their discount by 50 cents from Monday, and settled at a discount of 70 cents per tonne to Singapore quotes.

Spot 380cst fuel oil narrowed its premium to 62 cents per tonne to Singapore quotes, down 47 cents from Monday. In another sign of a weakening market, ex-wharf premiums have been on the decline over the past week, traders said.

Spot premiums for ex-wharf 380cst fuel oil were assessed at $4.46 to spot 380cst Singapore quotes, down 78 cents from the previous day.

Signalling widening supplies, the number of offers for 180cst fuel oil has rebounded in the

Singapore pricing window after weeks of muted activity.

The number of offers for 380cst fuel oil, however, is still relatively low compared to previous

months. Mercuria was the only trader offering 380cst fuel oil cargos in the Singapore pricing window at a premium of $2 to Singapore quotes.

In China, the world’s largest consumer of fuel oil, December imports of the product declined 37 percent from a year earlier to just under 1.2 million tonnes at an average price of $232.37 per tonne, official customs figures showed.

Chinese imports of fuel oil fell 12.9 percent in 2015 from the previous year, while exports rose 11.2 percent. Chinese independent refiners have been switching from fuel oil to crude as a feedstock after the government opened crude imports to buyers outside the state-owned sector in early 2015.

SINGAPORE CASH DEALS – No deals reported.

 FUEL OIL                                                                                               
 CASH ($/T)                    ASIA CLOSE         Change     % Change     Prev Close   RIC
 Cargo - 180cst                           145.47     -12.64        -7.99       158.11  FO180-SIN
 Diff - 180cst                             -0.70      -0.50       250.00        -0.20  FO180-SIN-DIF
 Cargo - 380cst                           142.49     -12.62        -8.14       155.11  FO380-SIN
 Diff - 380cst                              0.62      -0.47       -43.12         1.09  FO380-SIN-DIF
 Bunker (Ex-wharf)- 380cst                146.95     -13.40        -8.36       160.35  BK380-B-SIN
 Bunker (Ex-wharf) Premium                  4.46      -0.78       -14.89         5.24

Source: Reuters (Reporting by Roslan Khasawneh; Editing by Dale Hudson)

Arctic Securities and John Fredriksen establish a shipbroking company

In International Shipping News 27/01/2016

Arctic Securities AS and the John Fredriksen family’s investment company, Geveran Trading Co, are together establishing a new shipbroking company, Arctic Shipping Norway AS, as a 50/50-owned Joint venture.

Arctic Shipping Norway is expected to start operations during the first half of 2016. Several key people have already been employed, and dialogues with additional experienced brokers are taking place to ensure rapid growth. As a consequence of the new establishment, Arctic Securities will terminate its cooperation with Affinity Shipping in London.

– The establishment of Arctic Shipping Norway will provide exciting synergies for our corporate finance operations. With this initiative, another piece of our strategy to cover all aspects of shipping and offshore in-house in Arctic is in place, says Mads H. Syversen, CEO at Arctic Securities.

– We are very satisfied with being able to pursue this shipping initiative with John Fredriksen, whom we have worked closely and well together with in other important areas for many years. Our ambition is to take a strong and leading position in the shipbroking market. I am truly convinced that both the shipping and the offshore markets will recover. Establishing a new business during tough times is not new to us. Arctic Securities was established in 2007, a short time before the financial crisis, maintains Syversen.

– We think it is very exciting to contribute to the creation of a new shipbroker. However, the new company will not receive any special treatment from our system when it comes to providing new business. Nothing comes for free in this market, and one has to work hard and stay competitive. With a team of young, hungry brokers and strong support from Arctic Securities, we have great confidence in the success of the new company, says Harald Thorstein in the Fredriksen group.

After Trond Mohn became a shareholder, Arctic Securities established an office in New York last summer. In addition, Arctic’s new company in Stockholm opened its doors right before Christmas, after the purchase of Nordic Fixed Income earlier in the year. Assertive action is being taken towards further development and growth of Nor-Ocean Offshore AS, which recently employed four new offshore brokers. Arctic is also following business opportunities in Asia, in addition to further develop its Norwegian operations.

Source: Arctic Securities

Baltic index resumes losses, ends below 350 points

In Dry Bulk Market 27/01/2016

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying industrial commodities, resumed its fall on Tuesday to touch a new all time low on concerns of slowing global demand and vessel oversupply.

The overall index, which gauges the cost of shipping dry bulk including iron ore, cement, grain, coal and fertiliser, fell 9 points or 2.54 percent to close at 345 points.

The index has tumbled 133 points, or 28 percent, in January and is yet to register a single session of gains in 2016. On Monday, the index ended flat to halt a run of 15 consecutive losing sessions.

The dry bulk sector has taken a beating from the slowdown in Chinese business and the sector is struggling with huge overcapacity.

The capesize index fell 12 points or 4.72 percent at 242 points.

Average daily earnings for capesize vessels, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased by $66 to $3,118.

The panamax index dropped 13 points or 4 percent to record a new all-time low of 312 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, fell $103 to $2,497.

Source: Reuters (Reporting by Vijaykumar Vedala in Bengaluru; Editing by Katharine Houreld)

LR tanker freight on Med-Japan route 1.5 month low: Sources

In International Shipping News 27/01/2016

Long Range tanker freight rates on the Mediterranean to Japan route, basis 55,000 mt, fell to a one-and-half-month low on a closed naphtha arbitrage and after a few LR tankers were heard available in the Northwest Europe region, shipping and trading source said Tuesday.

According to Platts data, freight on the trip fell $200,000 to a $2.1 million lump sum, equal to $38.18/mt — the lowest assessment since December 1 it was $36.36/mt.

LR tankers could ballast from the Persian Gulf and West Africa which could put pressure on freight rates, according to shipping sources. However, it was not clear at the time of writing how many ships were ballasting to Northwest Europe.

LR2 tanker freight rates on a Med-Japan trip, basis 80,000 mt — an active route for naphtha — were also heard to have fallen, down $300,000/mt to a $2.7 million lump sum, due to low demand. Platts does not yet assess freight on this route, basis 80,000 mt, but will from February 1 onwards.

Meanwhile, the front-month east/west spread — the premium of CFR Japan naphtha cargo swaps over the CIF NWE naphtha cargo swap — narrowed to a fresh three-month low of $26.25/mt Monday, down from $26.50/mt Friday, hitting sentiment as it worsened the economics of an already closed arbitrage from Europe to Asia.

In the meantime, the front-month CIF NWE naphtha crack swap slumped to a two-month low of $1.15/b Monday, from $2.20/b Friday, and the February/March CIF NWE naphtha spread flipped to a 75 cents/mt contango from a 75 cents/mt backwardation as concerns grew over the closed arbitrage to Asia and the increased likeliness of naphtha cargoes coming from the the Med to Northern Europe.

On Tuesday, cash differentials for naphtha fell further in Asia on news China’s CSPC shut its naphtha-fed cracker in Huizhou, Guangdong province, due to wintery weather conditions.

The Asian naphtha market has weakened recently due to an overhang of cargoes for February as well as news Friday that Japan’s Mitsubishi Chemical shut its No.2 naphtha-fed steam cracker at Kashima after experiencing an unspecified issue at the plant.

Source: Platts

Positive predictions for 2016: Efficient information management leads to massive savings in shipping companies

In International Shipping News 27/01/2016

Positive news for shipping companies in 2016: Latest study results from PricewaterhouseCoopers about future market prospects show that about 100 decision makers of German transport and shipping companies take a positive stock of 2015. 55 percent of the questioned people expect growing profit and two thirds are planning on investments – especially in new ships. 9 out of 10 shipping companies said their ships are running to capacity. Compared to 2014 this is clearly a higher result. For keeping up growth 86% expect more foreign investors. But the biggest obstacle for shipping companies is data quality, which frequently leaves international investors unsatisfied.

This is one of the problems the Hamburg based IT company Hanseaticsoft has set out to tackle: Paving the way to better data quality and speed of availability. CEO Alexander Buchmann explains illustrative how big the possibilities are for saving money through efficient information management: “Information management takes about 25 percent of the daily working hours of an employee at a shipping company. A company with 100 employees can calculate about 1,5 million Euros annually which can be saved through better data availability.” The specifically tailored solution Cloud Fleet Manager (CFM) is used by 650 users and has more than 20 applications. The accompanying Ship Client (Cloud Ship Manager) is installed on more than 1.200 on-board computers worldwide. One of the 20 applications is the Inspection Report which reduces the time needed for executing ship inspections from one week down to one day. The Cloud Fleet Manager´s included Partner Portal ensures reliable and quick data exchange with external partners like investors. Instead of e-mailing data the exchange takes place in your browser in real time.

Together with Hanseaticsoft’s partners navido and d.velop digital solutions the three of them represent the ideal solutions for more efficient working processes. Information management, digitalization of paperwork and integrated ERP solutions for capital, human and material resources have never been easier and more economic.

Hanseaticsoft was founded in 2009 by Alexander Buchmann who graduated in business informatics. Buchmann and his team gained many years of experience in the software department of a medium-sized shipping company in Hamburg, the second largest container harbor in Europe. With Hanseaticsoft the idea of a new software concept was finally realized: giving enterprises access to new and efficient technologies by means of intuitive software solutions. The Cloud Fleet Manager is the heart of Hanseaticsoft`s product range. Due to its intuitive design and user-friendly interface our software solutions simplify your daily business life and support your shipping operations. Various modules such as Crewing, Inspection Report, Disturbance Report and World Map seamlessly work together to enable a smooth operation at sea and ashore.

Source: Hanseaticsoft

Court of Appeals Holds U.S. Coast Guard May Detain Vessel Suspected of Polluting U.S., Foreign Waters

In Shipping Law News 25/01/2016

Any shipowner who has had the unfortunate experience of having one of its vessels detained for purportedly falsifying the oil record book, bypassing mandatory anti-pollution equipment or discharging oil waste directly overboard knows that the process of securing the vessel’s release can be quite onerous.

If the Coast Guard suspects that a vessel polluted in the United States or international waters it will initiate an investigation and detain the allegedly offending vessel until the owners and/or operators post a security bond and execute a “Security Agreement.”

In many cases, this “Security Agreement” calls for the vessel interests to pay wages, housing, and transportation costs to crew members who may be detained in the United States for months, as well as facilitate travel for those crewmembers to court appearances, to encourage crew members to cooperate with the government’s investigation, to help the government serve subpoenas on foreign crew members located outside of the United States, to waive objections to both in personam and in rem jurisdiction, and to enter an appearance in federal district court.

The vessel interests in Watervale Marine Co. Ltd., et al v. United States Department of Homeland Security, et al. challenged the Coast Guard’s authority to demand these nonfinancial conditions as a term of the vessel’s release. The vessel interests appealed to the U.S. Coast Guard, Office of the Commandant, and then to the U.S. District Court for the District of Columbia. Both held that the Coast Guard’s authority to detain a vessel was not limited to financial forms of security. The U.S. Court of Appeals for the District of Columbia Circuit agreed last month.

According to the court of appeal, the International Convention for the Prevention of Pollution from Ships, as modified by the Protocol of 1978 (“MARPOL”) and implemented in the United States by the Act to Prevent Pollution from Ships, 33 U.S.C. §1901, et seq. authorizes the Coast Guard to hold a vessel in port, not just through the pendency of the investigation, but “until legal proceedings are completed.” As a result, the court of appeal commented that “the nonfinancial conditions can, therefore, be thought of as simply quid pro quo for allowing ships to depart” during the investigation, and through any civil and/or criminal proceedings.

The vessel interests have not petitioned for a panel rehearing or for a rehearing by the court of appeal en banc, but may still petition for a writ of certiorari for review by the U.S. Supreme Court.

The current decision is not binding outside the District of Columbia, but will likely be seen as persuasive authority in other jurisdictions where the Coast Guard’s authority has not been challenged at the appellate level.

Source: Phelps Dunbar LLP