Sep 20, 2018

Brazilian Agency to Enforce Payment of Higher Freight Rates

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The establishment of mandated freight rates in Brazil at the end of May has led to mass confusion in the Brazilian transportation sector. The mandated freight rates along with lower diesel prices and reduced toll charges were all part of the changes demanded by the independent truckers in exchange for ending the 11-day truck driver strike at the end of May that crippled the Brazilian economy.

Even though the higher freight rates have been the law of the land for several months, the mandated rates were widely ignored as companies continued to pay freight rates set by the supply and demand of the marketplace. Independent truck drivers in Brazil have been complaining that the National Land Transportation Agency (ANTT) had not established a mechanism to enforce the payment of the minimum freight rates in the country.

In response to that criticism, ANTT has proposed a new program to enforce the rates and the program will be open for public comments until October 10th. As part of the new program, ANTT has already started to monitor trucking operations at the Port of Santos in Sao Paulo, the Port of Paranagua in Parana, the Port of Rio Grande in Rio Grande do Sul, at Itajai in Santa Catarina, and Santana do Livramento in Rio Grande do Sul looking for violators

In the original law, the penalty for not paying the established rate was set at twice the difference between the established rate and the rate paid by the entity purchasing the freight. ANTT has now indicated that the fine could be as high as R$ 5,000 reals per incident ($1,200). The original freight rate was set on May 30th and it has since been increased by an average of 5% on September 5th due to higher diesel prices.

The mandated rates will increase freight costs by 20-40% and in some cases as much as 100% depending non cargo and distance traveled.

The constitutionally of the new rates has been challenged in the Brazilian Supreme Court, but a decision by the court is not expected until at least sometime in November.