Foreign Ships Co-Loading Act amends Cabotage Laws

Yashneira A. Lalia
President Benigno Aquino III signed into law Republic Act No. 10668
otherwise known as An Act Allowing Foreign Vessels to Transport and CoLoad Foreign Cargoes for Domestic Transshipment and for Other Purposes
on July 21, 2015, amending the cabotage laws enforced in the Philippines.
Cabotage is a nautical term from the Spanish denoting strictly navigation
from cape to cape along the coast without going out into the open sea. It
means navigating and trading along the coast between the ports thereof.1
In other words, cabotage involves the trading or transportation of goods
between ports or places within a countrys territorial waters.
Cabotage laws allow a country to reserve movement of cargoes to national
carriers to the exclusion of foreign vessels.
In the Philippines, cabotage laws are principally embodied in the provisions
of Republic Act No. 1937 otherwise known as the Tariff and Customs Code
and Republic Act No. 9295 or The Domestic Shipping Development Act of
2004, which impose restrictions and regulations on coastwise transportation
and transshipment of cargoes by foreign vessels.
Under the Tariff and Customs Code, the right to engage in the Philippine
coastwise trade is limited to vessels carrying a certificate of Philippine
registry.2 Articles which are boarded at a domestic port cannot be
transported to any other port in the Philippines in any other vessel than one
licensed for the coastwise trade.3
This means that the cabotage transportation of goods is limited to Philippineflag vessels to the exclusion of foreign vessels, although foreign nationals
may register ships in the Philippines and fly the Philippine flag.
Section 1009 of the Tariff and Customs Code also provides that foreign
cargoes aboard a foreign vessel can only be carried by the same foreign
vessel through any port of entry to the port of destination in the Philippines.
Meaning, foreign vessels are not allowed to transfer or transship their
cargoes to another foreign vessel for further transit within the Philippine
territorial waters.
The restrictions imposed on foreign vessels are further emphasized under
The Domestic Shipping Development Act of 2004 which provides that no
franchise, certificate or any other form authorization for the carriage of cargo
in the domestic trade shall be granted except of domestic ship owners or
operators.4
Said law also prohibits foreign vessel to transport cargo between ports or
place within the Philippine territorial waters, except upon the grant Special
1 Blacks Law Dictionary, 6th Edition, p. 202
2 Republic Act No. 1937 otherwise known as the Tariff and Customs Code, Section 902
3 Id., Section 905
4 Republic Act No. 9295 or The Domestic Shipping Development Act of 2004, Chapter III,
Section 5

Permit by the Maritime Industry Authority (MARINA) when no domestic

vessels is available or suitable to provide the needed shipping service and
public interest warrants the same.5
The circumstances when MARINA may grant Special Permit are enumerated
under its Memorandum Circular No. 105, which include the following: (i)
there is no existing vessel operating in the proposed route/area of operation;
(ii) there is no available local vessel to transport the cargo to meet the
shipping requirement; (iii) the proposed vessel is contracted by private/public
entities; and (iv) in the case of vessel carrying or bringing in foreign tourists,
operation calls at domestic ports is part of its itinerary.
With the passage of Republic Act No. 10668, Section 1009 of the Tariff and
Customs Code and all laws, decrees, orders, rules, regulations, issuances or
parts thereof which are inconsistent with its provisions are repealed and
modified.
The new law now allows foreign vessels carrying foreign cargoes, which are
for import or export, to dock in multiple ports in the Philippines and to
engage in co-loading or domestic transshipment of such foreign cargoes to
another foreign vessel.
Co-loading is defined under said law as the agreement between two or
more international or domestic sea carriers whereby a sea carrier bound for a
specified destination agrees to load, transport, and unload the container van
or cargo of another carrier bound for the same destination, 6 while
transshipment refers to the transfer of cargo from one vessel or
conveyance to another vessel for further transit to complete the voyage and
carry to its final destination.7
Specifically, the law provides that a foreign vessel: a) arriving from a foreign
port, shall be allowed to carry a foreign cargo to its Philippine port of final
destination, after being cleared at its port of entry; b) arriving from a foreign
port, shall be allowed to carry a foreign cargo by another vessel calling at the
same port of entry to the Philippine port of final destination of such foreign
cargo; c) departing from a Philippine port of origin through another Philippine
port to its foreign port of final destination, shall be allowed to carry foreign
cargo intended for export; and d) departing from a Philippine port of origin,
shall be allowed to carry a foreign cargo by another foreign vessel through a
domestic transshipment port to its foreign port of final destination.8
It must be noted however that the amendment of cabotage laws involves
only foreign cargo, which refers to import or export cargo carried by a
foreign vessel.9
5 Id., Section 6

6 Republic Act No. 10668, Section 2(a)

7 Id., Section 2(m)
8 Id., Section 4
9 Id., Section 2(e)
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The new law expressly prohibits foreign vessel to carry any domestic cargo
or domestic container van, whether loaded or empty, even if such domestic
container van may contain foreign cargo. 10 Domestic cargo refers to goods,
articles, commodities or merchandise which are intended to be shipped from
one Philippine port to another Philippine port, even if, in the carriage of such
cargo, there may be an intervening foreign port.11
The enactment of the new law aims to assist importers and exporters in
enhancing their competitiveness in light of intensifying international trade
and to lower the cost of shipping export cargoes from Philippine ports to
international ports and import cargoes from international ports for the
benefit of the consumers.12
Before the amendment of the cabotage laws, it was cheaper to send
products from other countries to the Philippines than to ship goods within the
country. Now, with the enactment of the new law, the cost for exporting or
importing goods is expected to be considerably reduced which will
consequently lower the prices of goods for consumers.

10 Id., Section 8
11 Id., Section 2(c)
12 Id., Section 1
3