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Cade re-establishes provisional measure against Embraport and forbids the collection of port charges

Provisional Measure

The decision was rendered within the purview of proceedings that investigate allegations of abuse of dominant position by the operator of the Port of Santos
published: Jun 20, 2020 05:09 PM last modified: Jun 20, 2020 05:09 PM
by International Unit

Last Wednesday (17 June), the Tribunal of the Administrative Council for Economic Defense (Cade) decided to re-establish a provisional measure once provided by the General Superintendence against the port operator Embraport, in the context of a case that investigates possible abuse of dominant position in the market of bonded warehouses in the hinterland of the Port of Santos, state of São Paulo.

By majority opinion, the Council fully granted the appeal filed by Marimex, a company that offers bonded warehousing services in area of the Port of Santos. With the decision, Embraport is prohibited from collecting extra charges (called SSE, or THC2) to sort and deliver containers to independent bonded warehouses, including Marimex, until the administrative proceedings are concluded.

According to the rapporteur of the appeal, Commissioner Mauricio Oscar Bandeira Melo, Embraport's collection of the SEE charge (Service of Container Separation and Delivery, in a translation), also known as THC2, has significant potential to harm competition. Therefore, waiting the conduct to cease only after the conclusion of the case could lead to a decision with little or no effect.

"Embraport's collection of the SSE during several years would mean unjustified costs to downstream competitors, possibly causing their loss of market share or even exit from the market, as well as barriers to new entrants. None of these harms could be easily reverted by the final decision of the case," declared the commissioner.

Understand the THC2 collection

As far as imported goods are concerned, the THC (Terminal Handling Charge) is the basic fee shipowners — who are in charge of maritime transport and cargo delivery from an importer to the port of destination — pay to port operators — who are responsible for unloading the ships and delivering their cargo to the storage facilities. The THC includes the costs of the in-land horizontal transport of cargo, from its unloading to the arrival at a bonded warehouse — which is responsible for the storage and customs clearance of imported merchandise — hired by the importer.

Usually, port operators, such as Embraport, also provide storage services, competing with independent customs warehouses in this market. The THC2 is a second fee imposed by the port operator to "separate the containers" of independent customs warehouses.

The warehouses, however, claim the charge is undue, since the service of separating the containers is included in the basic fee paid by the shipowners — those who effectively hire services from port operators.

Moreover, they argue, since Embraport exercises market power in the Port of Santos and owns a storage area, an increase in the taxes paid by independent customs warehouses would end up diverting the demand to the operator, who does not incur the same cost. Thus, the THC2 would make such warehouses less competitive to importers as higher costs imply charging higher prices for the services.

Administrative Proceedings

Marimex's appeal against the General Superintendence's Order was heard last Wednesday. The appeal abrogated a provisional measure provided on 6 March 2019 against Embraport under the purview of proceedings to examine allegations of undue collection of the THC2 charge by the port operator.

In its complaint, Marimex claimed Embraport's THC2 collection was abusive, considering the dominant position the company has in the supply chain and its imposition of artificial, unjustified costs to competitors, intended to harm free competition in the market of bonded warehousing.

With Cade's decision, the provisional measure was re-established, and the proceedings are following their course, conducted by the General Superintendence. When the investigation is concluded, the Superintendence will decide for the conviction or the closure of the case. In the end, the case is submitted to Cade's Tribunal, which is responsible for the final decision.

Access the Administrative Proceedings 08700.000351/2019-53.

Access the Appeal 08700.001984/2020-12.