Tranportation & Logistics

TRANSPORTATION AND LOGISTICS

PUBLIC HEARING ON CABOTAGE LAW

Senate of the Philippines, Pasay City

September 17, 2014

Highlights:

  • The Public Hearing on the Cabbotage Bills in the Senate was called by Sen. Bam Aquino, Chairman of the Senate Committee on Trade, Commerce & Entrepreneurship to discuss the DOTC version of the bill that the committee has been waiting for since last year.
  • Cabotage is a principle which allows a country to reserve movement of domestic cargo to national carriers to the exclusion of foreign vessels and the Cabotage Law is expected to lower domestic shipping cost which is higher than the shipping fees for goods shipped from the Philippine to another country.
  • The Bill is entitled “AN ACT EXEMPTING THE CARRIAGE OF CONTAINER VANS FROM THE PROVISIONS OF SECTION 1009 OF PRESIDENTIAL DECREE NO. 1464 OTHERWISE KNOWN AS THE TARIFF AND CUSTOMS CODE OF 1978, AND FOR OTHER PURPOSES” (SENATE Bill No. 2364)
  • The exemption from Section 1009 of the Tariff and Customs Code which is provided in this law shall apply exclusively to a foreign container van and to import and export articles or cargo carried in such foreign container van by a foreign vessel.
  • Carriage of import cargo in a foreign container van by a foreign vessel to a PHL port of final destination:
    • A foreign container van carrying foreign cargo arriving from a foreign port on a foreign vessel, such foreign vessel, after being cleared at its port of entry, shall be allowed to carry the foreign container van to its domestic port of final destination.
    • A foreign container van carrying foreign cargo arriving from a foreign port on a foreign vessel may be carried by another foreign vessel calling at the same port of entry to the domestic port of final destination of such foreign cargo.
    • A foreign container van carrying cargo intended for export may be carried on a foreign vessel from its domestic port of origin through another Philippine port to its foreign port of final destination.
    • A foreign container van carrying foreign cargo intended for export may be transhipped in any foreign vessel from its domestic port of origin through a domestic transhipment port and transferred at such domestic transhipment port to another foreign vessel which will carry it to its foreign port of final destination.
    • An empty foreign container van going to or coming from any domestic port or going to or coming from a foreign port.
    • An empty foreign container van being transhipped between two Philippine domestic ports.
  • Authority of the Commissioner of Customs:
    • Clear any foreign vessel for any domestic port and authorize the conveyance therein of a foreign container van containing foreign cargo brought from abroad upon such foreign vessel.  
    • Allow a foreign vessel to take a foreign container van containing import or export articles or cargo at any Philippine port and convey the same upon such foreign vessel to a foreign port.  
    • Authorize the transhipment of such foreign cargo intended for export through another Philippine port for its conveyance by another foreign vessel to the cargo’s foreign port of final destination.
    • Take measures to ensure that no foreign vessel carries any domestic cargo.
    • Take measures to address illegal activities, including smuggling.
  • Carriage with respect to the liability of the carrier for the loss of, or damage to, goods carried should be conducted in accordance with the Carriage of Goods by Sea Act
    (Commonwealth Act No. 65).
  • Foreign vessels engaging in carriage conducted in accordance with this law shall not be considered common carriers as provided in the Civil Code (Republic Act No. 386); neither shall such foreign vessels be considered as offering a public service and thus shall fall outside the coverage of the Domestic Shipping Development Act (Republic Act No. 9295).
  • No foreign vessel shall be allowed to carry any domestic cargo or domestic container van, whether loaded or empty, even if such domestic container van may contain foreign cargo.
  • Addressing a question from Sen. Aquino on how will the domestic shipping be lowered, the DOTC representative pointed out that there are some local/domestic taxes that the bill will suggest to be removed in local shipping thus, lowering its cost.
    • We do not have the right infrastructure and sophisticated equipment for mother ships. We have ports with no cranes and craned ships are more expensive than those without. The cost of shipping is relative to the efficiency of the ports.
    • The trade volume of domestic ships are small.
  • How will the costs go down:
    • Domestic ships pay more taxes than foreign vessels so this should be addressed;
    • Create clusters of production and do economies of scale.
  • Representative from DoF added that there is an inclusion by the DoF that is aimed at reducing congestion at Manila ports. Letter G in Section 4 says that a foreign vessel should only be allowed to serve other domestic ports if they pass through Batangas and Subic ports.
  • Since the group is agreeable with the bill, the Committee TWG will consolidate the bills before the recess is over. Fees will be discussed in the next meeting (comparison of our tax regime will be made against other ASEAN countries).

Salient points of the DOTC Version of the Cabotage Bill

Other Points

Next Steps:

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