SIXTEENTH 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. 1789

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 canying a certificate of Philippine
Registry.”

*Sec. 1009. Clearance of Foreign Vessels To and From
Coastwise Ports. Passengers or articles arriving from
abroad upon a foreign vessel may be carried by the
same vessel through any port of entry to the port of
destination in the Philippines: and passengers departing
from the Philippines or articles intended for export may
be carried in a foreign vessel through a Philippine port.

Upon such reasonable condition as he may
impose, the Commissioner may clear foreign vessels for
any port and authorize the conveyance therein of either
articles or passengers brought from abroad upon such
vessels; and 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.”

And in Sections 5, 6 and 7 of Republic Act 9295 or the Domestic Shipping
Development Act of 2004, which provide as follows:
SEC. 5. Authority to Operate. - No franchise,
certificate or any other form authorization for the carriage
of cargo or passenger, or both in the domestic trade,
shall be granted except of domestic ship owners or
operators.


‘SEC. 6. Foreign Vessels Engaged in Trade and
Commerce in the Philippines. Territorial Waters. - No
foreign vessel shall be allowed to transport passengers
or cargo between ports or place within the Philippine
territorial waters, except upon the grant Special Permit
by the MARINA when no domestic vessels is available
or suitable to provide the needed shipping service and
Public interest warrants the same,

‘SEC. 7. Issuance of Authority to operate. - the
MARINA shall have the power and authority to issue
certificates of public convenience to qualified domestic
ship operators, taking into consideration the economic
and beneficial effect which the proposed services 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.

Every domestic ship operator shall state in its
application the route it proposes to serve, and the
service it proposes to offer. Domestic ship operators who
do not intend to operate in a fixed route shall
nevertheless state in its application the service it
proposes to offer

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.

RUFYS B. RODRIGVEZ

sono Ma EZ, JR.


SIXTEENTH 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_1 789

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
2013".

SEC. 2. Declaration of Policy. — It is the policy of the State to:
1. Liberalize the entry of foreign vessels to assist importers and exporters in
enhancing their competitiveness in the light of intensifying international trade;
2. Lower the cost of shipping export cargoes from Philippine ports to the
international ports and vice versa; and
3. 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:

©) “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:

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


9) ‘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 itis 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

1n) “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
bee 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
toa 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

a) 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.