TOP OF MIND – The Filipino Star

November 2, 2015 | 9:00 a.m.

For so many decades, our country has adopted a protectionist policy in order to promote the development of our national maritime industry. But this approach changed when President Aquino enacted Republic Law No. 10668 or the “Co-loading of Foreign Vessels Law”, allowing foreign ships or vessels to freely transport cargo to their designated port of destination. . However, article 7 of RA 10668 clarified that these foreign vessels are not public carriers.

Article 1732 of the new Philippine Civil Code defines public carriers as “persons, companies, enterprises or associations engaged in the transport or transport of passengers or goods or both, by land, sea or air, for remuneration , offering their services to the public. “Since these foreign vessels / vessels are not considered public carriers, the services rendered by these foreign vessels are not considered public. Therefore, these foreign vessels are not required to ‘Obtain a certificate of public utility or certificate of public utility before being able to transport Philippine imported goods and exports within our country.

Cabotage is a principle of maritime law which refers to “the transit of a vessel along the coast of a nation for the purpose of trade from one port to another within the territorial limits of that nation”. Our old Coasting Trade Act is incorporated into the Tariff and Customs Code of the Philippines, in particular Articles 902 and 1009. As provided for in Article 902 of the Code, only vessels with a Philippine Certificate of Registry are permitted to ship. doing Filipino cabotage. On the other hand, Article 1009 provides that foreign ships can only be allowed to enter Philippine coastal ports if they have obtained customs clearance and authorization from the Commissioner of Customs. These limitations were taken up by article 6 of the law of the Republic n ° 9295 or the “Law of 2004 on the development of inland navigation” which stipulates that “no foreign vessel is authorized to carry passengers or goods between ports or a place in Philippine territorial waters, except on the granting of a special permit by MARINA when no domestic vessel is available or able to provide the necessary navigation service and the public interest justifies it. However, all these restrictions have already been modified by article 4 of RA 10668 which provides that a foreign vessel:

a. Coming from a foreign port, will be authorized to transport foreign goods to its Philippine port of final destination, after clearing customs at its port of entry.

b. Coming from a foreign port, will be permitted to transport foreign cargo by another foreign vessel calling at the same port of entry at the Philippine port of final destination of that foreign cargo.

vs. Departing from a Philippine port of origin via another Philippine port to its foreign final destination, will be permitted to transport foreign goods for export.

D. Departing from a port of Philippine origin, will be permitted to transport foreign goods by another foreign vessel through a domestic transshipment port and transferred from that domestic transshipment port to its foreign port of final destination; and

e. An empty foreign container van to or from any Philippine port, or to or from a foreign port, and transshipped between two Philippine ports is permitted.

With the amendment, foreign vessels are now allowed to carry cargo between ports in the country even without a MARINA license. However, even if foreign ships are already authorized to conduct coastal transport, Article 8 of RA 10668 expressly prohibits foreign ships from transporting domestic cargo or container vans, whether loaded or empty, although ‘they may contain foreign goods. This restriction can be considered as a protection for our local maritime operators as the transport of local or national cargoes is always exclusive to them.

Private and public stakeholders believe this new law will promote healthy competition in our national marine industry. With the additional activities expected from foreign vessels in our country, it will be deemed necessary for our local maritime operators to improve their equipment and operations in order to face their foreign counterparts and be more competitive. Prior to RA 10668, goods entering and leaving the country had to first be loaded or unloaded in Manila before they could be transported to their respective port of destination. But this configuration has been changed since importers and exporters can now ship their goods directly to their port of destination. In other words, the transport of these goods by a foreign vessel does not need the services of a shipowner or a local operator, so they will no longer incur additional costs for the transhipment. In this way, it will reduce the shipping costs and also help to relieve congestion in the port of Manila.

Thus, healthy competition would inevitably bring out the best players in our national maritime industry, whose development has stagnated in recent decades due to lack of competition. As former US President Herbert Hoover said, “Competition is not the only basis for customer protection, but the incentive to move forward.” Truly, RA 10668 is a welcome development as we are now ready to meet the current and future challenges of international trade, thus ensuring not only the continued progress of our economy, but also the development of our nation as a whole.

Carlo John Pascual is the Tax Group Supervisor of KPMG RG Manabat & Co. (KPMG RGM & Co.), The Philippine member firm of KPMG International. KPMG RGM & Co. has been recognized as a Level 1 Tax Practice, Level 1 Transfer Pricing Practice, and a Leading Transactional Tax Firm in the Philippines by the International Tax Review.

This article is for general information purposes only and should not be taken as professional advice for any specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM & Co. For comments or inquiries, please email [email protected] or [email protected]

For more information about KPMG in the Philippines, you can visit www.kpmg.com.ph.