FIFTEENTH CONGRESS: )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B, Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No,__2962

EXPLANATORY NOTE

This bill seeks to allow foreign vessels to engage in coastwise trade in the
country.

The coastwise trade is reserved only to national flag carriers. Foreign
vessels are only allowed to pick-up cargoes at one local point and then depart for
its international port of destination. Foreign vessels are prohibited from directly
transporting domestic cargo between two ports in the country. Hence, in the
absence of a treaty to the contrary, a State reserves for its own vessels
coastwise trade to the exclusion of foreign vessels. This is known as cabotage.

In the Philippines, the cabotage principle is embodied in Sections 902 and
1009 of Republic Act No. 1937, otherwise known as the “Tariff and Customs
Code of the Philippines’ which provide as follows:

“Sec. 902. Vessels Eligible For Coastwise Trade. — The right
to engage in the Philippines coastwise trade is limited to vessels
carrying a certificate of Philippine Registry.”

The cabotage policy limits competition and encourages inefficiency among
local vessel operators since foreign vessels are not allowed to pick-up local
cargo for delivery to another port within the Philippines. Local vessel operators
are not force to compete in terms of freight coast and service quality with
international vessel operators. This barrier in foreign trade must be eliminated.
Foreign vessels must be allowed to engage in transshipment of export and
import cargoes with the same rules and regulations that apply to domestic
shipping companies.

The passage of this bill will eliminate limitations on foreign cargo vessels.
They will be allowed to dock at any port all over the country. It will provide a
stronger and clearer basis for foreign vessels to provide the transshipment


services needed by our local exporters and importers. It will spur domestic
tourism, increase port revenues and promote cost-competitiveness among
shipping companies. Lastly, the bill seeks to ensure an adequate, efficient and
price-competitive shipping service that will help Filipino exporters and importers
compete effectively in the international market.

Hence, approval of this bill is highly recommended.

RUFUS B. ROBRIGUEZ

yh.

MAXIMO B. RODRIGUEZ, JR.


FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No. 2562

AN ACT
ALLOWING FOREIGN VESSELS TO ENGAGE IN COASTWISE TRADE IN
THE COUNTRY AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. — This Act shall be known as the “Coastwise
Trade Act of 2010.”

SEC. 2. Declaration of Policy. — It is the policy of the State to:

a) Liberalize the entry of foreign vessels to assist importers and exporters
in enhancing their competitiveness in the light of intensifying international trade;

b) Lower the cost of shipping export cargoes from Philippine ports to the
international ports and vice versa; and

c) Ensure the continued viability of domestic and foreign shipping
operations.

SEC. 3. Definition of Terms. - For purposes of this Act, the following
terms are hereby defined as follows:

a) “Clearance” refers to the compliance with the requirements of the
Bureau of Customs for the release of import cargoes which include but not

limited to the filing of import entry and payment of duties and taxes unless
otherwise exempt therefrom;

b) “Coastwise Trade” refers to the sale or exchange of goods, articles,
commodities or merchandise which are neither designated nor classified as
export cargo nor import cargo;


c) ‘Container’ refers to a ship's to cargo that is of Philippine origin
intended for local consumption, or those which have not been duly declared for
exportation to the Bureau of Customs at the port of origin, or those of foreign
origin but which have been entered and cleared by the Bureau of Customs;

e) “Export Cargo” refers to the goods, articles, commodities, or
merchandise duly declared to the Bureau of Customs at the poor of origin as
cargoes for foreign shipment to a foreign country;

f) “Foreign Cargo’ refers to export or import cargo;

g) “Foreign Port’ refers to a port or place outside the jurisdiction of the
Philippines’

h) “Foreign Trade’ refers to the sale or exchange of goods, articles,
commodities or merchandise which are either designated or classified as export
or import cargo;

i) "Foreign Vessels’ refers to vessels registered and documented in
registries other than that of the Philippines;

j) “Import Cargo” refers to the goods, articles, commodities or
merchandise of foreign origin which are intended to be cleared at the final port of
destination in the Philippines;

k) “Port of Entry’ refers to a place where foreign goods may be cleared
through a customhouse or a place where an alien may be permitted to enter a
country;

|) “Principal Port of Entry’ refers to the chief port of entry of the collection
district wherein it is situated and is the permanent station of the collector of such
port;

m) “Philippine Vessels’ refers to vessel duly registered and documented
in the Philippine registry; and

n) “Sub-ports of Entry’ refers to those ports granted by the Bureau of
Customs allowing a foreign vessel engaged in foreign trade to load and unload,
‘or accept and process export or import cargoes.

SEC. 4. Coastwise Trade. - The right to engage in the Philippine
coastwise trade shall not be limited to vessels carrying a certificate of Philippine
registry.


For this purpose, foreign vessels are hereby allowed to transport
passengers or cargoes between ports or places within the Philippine territorial
waters even when a domestic vessel is available or suitable to provide the
needed shipping service and public interest warrants.

Passengers or articles arriving from abroad on a foreign vessel may be
carried by the same vessel through any port of entry to the port of destination in
the Philippines. Passengers departing from the Philippines or articles intended
for export may likewise be carried in a foreign vessel through a Philippine port.

SEC. 5. Certificate of Public Convenience. — All domestic and foreign
ship owners or operators shall, upon approval of the application with the Maritime
Industry Authority and the compliance of all the requirements, be given the
certificate of public convenience or any form of authorization for the carriage of
cargoes or passengers, or both, in the domestic trade.

SEC. 6. Clearance. — Upon such reasonable conditions as he may
impose, the Commissioner of Customs may clear foreign vessels for any port
and authorize and conveyance therein of either articles or passengers brought
from abroad upon such vessels. He may likewise, upon such conditions as he
may impose, allow a foreign vessel to take cargo and passengers at any port and
convey the same upon such vessel to a foreign port.

The clearance permitting vessels to engage in foreign trade to load or
unload foreign cargoes to and from principal ports of entry or sub-ports in the
country shall include the following instances:

) Allowing an international cargo vessel to shift empty containers of any
foreign lines if said vessel regularly calls at Manila at proceeds to Philippine
outports; and

b) Allowing transshipment by an international vessel of cargo coming from
or headed for a foreign port to and from any Philippine outport.

SEC. 7. Regulatory Body. — The Maritime industry Authority (MARINA)
shall have the power and authority to issue certificates of public convenience to
qualified foreign and domestic ship operators, taking into consideration the
economic and beneficial effect which the proposed service shall have to the port,
province or region which it proposes to serve, and the financial capacity of the
domestic ship operator to provide and sustain safe, reliable, adequate, efficient
and economic service in accordance with the standards set by the government
regulation.

SEC. 8. Implementing Rules and Regulations. — Within sixty (60) days
from the approval of this Act, the Secretary of Finance shall, in coordination with
the Bureau of Customs (BOC), Maritime Industry Authority (MARINA), Philippine


Shipper’s Bureau and Philippine Coast Guard, promulgate such rules and
regulations necessary for effective implementation of this Act.

SEC. 9. Repealing Clause. — Sections 902 and 1009 of Republic Act No.
1937, otherwise known as the “Tariff and Customs Code of the Philippines,”
Sections 5, 6 and 7 of Republic Act No. 9295, otherwise known as the “Domestic
Shipping Development Act of 2004,” and all laws, decrees, executive orders,
rules and regulations or other issuances, or part thereof, inconsistent with this
Act are hereby repealed or modified accordingly.

SEC. 10. Effectivity Clause. - This Act shall take effect fifteen (15) days
after its publication in two (2) national newspapers of general circulation.

Approved