Republic of the Philippines
House of Representatives
Quezon City

EIGHTEENTH
CONGRESS
FIRST REGULAR SESSION

House Bill No,_ 4316

INTRODUCED BY REPRESENTATIVE BERNADETTE HERRERA-DY

EXPLANATORY NOTE

Excessive and unnecessary fees, charges and surcharges imposed as origin and destination
charges as well as unconscionable fees imposed on the management of empty containers by
international shipping lines which undermines the country’s competitiveness. These charges
being imposed and collected at will by international shipping lines have enormous impact on the
economy as it (a) increases the cost of importing raw materials and intermediate goods; (b)
escalates the prices paid by the domestic consumer; (c) impairs the government's collection of
correct taxes; and, (d) undermines the privity of obligations and contracts principle.

Through this Act, the Philippine Government asserts its inherent right to implement and enforce
compliance with existing local and international consumer trade laws; to protect the interests of
the consumer, promote general welfare and to establish standards of conduct for business and
industry as well as enforce the compliance with International Commercial Terms (INCOTERMS)
for the protection and fair treatment of Philippine domestic manufacturers, exporters and
importers.

In view of the foregoing, the passage of the bill is earnestly sought.

BERN: TE HE! NY


Republic of the Philippines
House of Representatives
Quezon City

EIGHTEENTH
CONGRESS
FIRST REGULAR SESSION

House Bill No. 4316

INTRODUCED BY REPRESENTATIVE BERNADETTE HERRERA-DY

AN ACT REGULATING THE APPLICATION OF LOCAL CHARGES (AT ORIGIN AND
DESTINATION) IMPOSED BY INTERNATIONAL SHIPPING LINES TO COMPLY WITH
EXISTING LAWS ON OBLIGATIONS AND CONTRACTS AND _ INTERNATIONAL
COMMERCIAL TERMINOLOGY (INCOTERMS) ESTABLISHING GUIDELINES THEREFOR.

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

SECTION 1. Title — This Act shall be known as the Standardization of International Shipping Local
Charges Act.

‘SECTION 2. Declaration of Policies and Objectives — It is hereby the policy of the State to promote
the competitiveness of the Philippine economy and protect the domestic and export-import
sectors from excessive and unnecessary fees, charges and surcharges imposed as origin and
destination charges as well as unconscionable fees imposed on the management of empty
containers by international shipping lines.

Currently, these charges being imposed and collected at will by international shipping lines have
enormous impact on the economy as it (a) increases the cost of importing raw materials and
intermediate goods; (b) escalates the prices paid by the domestic consumer; (c) impairs the
government's collection of correct taxes; and, (4) undermines the privity of obligations and
contracts principle.

The Philippine Government asserts its inherent right to implement and enforce compliance with
existing local and international consumer trade laws; to protect the interests of the consumer,
promote general welfare and to establish standards of conduct for business and industry as well
as enforce the compliance with Intemational Commercial Terms (INCOTERMS) for the protection
and fair treatment of Philippine Importers.


SECTION 3. Local charges (destination and origin) of international shipping lines doing
business in the Philippines — No origin and destination charges shall be billed and/or charged by
international shipping lines to Philippine consignees in the absence of a contractual relationship
with the carriers, and/or if they are not obligated to pay them under INCOTERMS. For this
purpose, all international shipping lines doing business in the Philippines shall ensure that:

(a) The quoted freight rates shall be inclusive of all charges, such as but not limited to terminal
handling cost(THC), container imbalance cost(CIC), Emergency Cost Recovery Charge
(ECRC), Bunker Price Adjustments (BPA), Bunker adjustment Factor (BAF), Bill of Lading
fee (BL), Import Release Fee(IRF), Container Cleaning (CC), Online Release Fee (ORF),
Emergency Bunker Surcharge (EBS), Seal Fee (SF), Operation Recovery Cost (OCR), Rate
Restoration (RR).

(b) Asa general rule, ifthe INCOTERMS used in the suppliers contractis in the nature of ‘Freight
Prepaid” then all charges due under INCOTERMS shall be collected and paid by the shipper
at origin. If the INCOTERM used in the suppliers contract is on basis “Freight Collect’ then
all charges due under INCOTERM shall be borne and paid by the consignee at destination;

(c) Other local charges of international shipping lines that do business in Philippine ports on
import and export cargoes must be transparently clarified and justified — explaining therefore
the nature of such charge/s and the corresponding local services rendered in exchange for
such charges;

(d) This will likewise serve the purpose of correctly calculating the correct duties and taxes
imposable on importations in accordance with Section 701 of Republic Act No. 10863
otherwise known as the Customs Modernization and Tariff Act (CMTA) clarifying that duties
and taxes are to be paid on the total cost of transport as part of the dutiable value.

SECTION 4. Taxation — All revenues generated by international shipping lines from approved
“local charges’ for local services within the Philippines shall be imposed with the appropriate taxes
(income tax and VAT) in accordance with the applicable provisions of the National Internal
Revenue Code of the Philippines. BIR shall issue the necessary guidelines for this purpose.

SECTION 5. Container deposits, demurrage and detention charges —

(a) Container Deposits’ — All intemational shipping lines including, shipping agents and general
agents shall implement an expeditious procedure in refunding container deposits upon the
return of empty containers by consignees. For this purpose all container deposits, posted
with the shipping lines including their shipping agents and general agents, shall be refunded
within a period of fifteen (15) days following the receipt of the empty containers in the yard or
container terminal of the shipping line.

(b) Demurrage and Detention Charges ~ The cost of recovery of all international shipping line
for detention and demurrage charges shall be limited to the actual lease cost rate per day
beyond the allowable free time granted by the shipping line to the consignee but under no
circumstances to exceed the depreciated market value of the container.

SECTION 6. Prohibited Acts — All international shipping lines are prohibited from doing directly or
indirectly any of the following acts that are contrary to laws governing obligations and contracts:

* Container deposits are not payments for services of shipping lines, they are funds posted and entrusted to shipping lines for
‘safekeeping to be refunded to the consignee upon the return of the empty container to their possession.


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(a) Impose an indirect lien and hold the release of the shipment of a consignee for the reason
that the consignee has an outstanding demurrage and detention collectibles from the
consignee corresponding to a previous and different transaction with the shipping line;

(b) Withhold and hold the refund of container deposits posted by the consignee for returned
empty containers for the reason that the consignee has outstanding demurrage and detention
collectibles from the consignee corresponding to a previous and different transaction with the
shipping line.

SECTION 7. Role of Agencies ~The following Agencies of the Executive Branch are directed to
carry out the following functions to best achieve the purposes of this law:

(a) Department of Trade and Industry — As lead agency to protect the interests of the consumer
and implement to the full extent existing consumer trade laws to curb unconscionable
business practices; excessive and unnecessary fees, charges and surcharges imposed as
origin and destination charges as well as unconscionable fees imposed on the management
of empty containers by international shipping lines.

(b) Bureau of Customs - Formulate and adopt policies and regulations regarding charges that
may be imposed by international shipping lines, regulate the imposition of destination charges
in the Philippines and require all shipping lines to include all charges in their freight and other
origin charges for the proper calculation and collection the correct duties and taxes imposable
on importations.

(c) Bureau of Internal Revenue — Investigate and identify the different destination charges or
local charges being collected international shipping lines that are considered local services
activities within the Philippines and impose the corresponding taxes on all revenues
generated for local services within the Philippines in accordance with the applicable
provisions of the National Internal Revenue Code of the Philippines and issue the necessary
guidelines for these transaction/s.

(d) Department of Justice - Philippine Competition Commission — Conduct investigation and
report on the purpose and activities of the intemational shipping lines primarily determining
whether the imposition of these excessive destination charges are manipulated, dictated and
controlled by the international shipping lines in concert with each other and thus, creating an
anti-competitive industry and recommend sanctions therefor.

SECTION 8. Oversight Committee — An oversight committee composed of representatives from
the following agencies is hereby created to ensure and monitor the implementation of this Act:

1. Department of Trade and Industry as Co-Chairperson;
2. Department of Transportation as Co-Chairperson;

3. Department of Finance as Member;

4. Bureau of Customs as Member;

5. Bureau of intemal Revenue as Member;

6. Philippine Ports Authority as Member;

7. Department of Justice as Member;

8. Philippine Competition Commission as Member;

9. House Committee on Trade and Industry as Member; and
10. House Committee on Transportation as Member


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SECTION 9. Separability Clause — If any provision of this Act is subsequently declared invalid or
unconstitutional, other provisions hereof which are not affected thereby shall remain in full force
and effect.

SECTION 10. Repealing Clause — All other laws, executive orders, issuances, rules and
regulations or parts thereof inconsistent with the foregoing rules and regulations are repealed,
amended, or modified accordingly.

SECTION 11. Effectivity — This Act shall take effect fiteen (15) days afer its publication in the
Official Gazette or in a newspaper of general circulation.

Approved,