Domestic shipping is expensive: Some solutions found – Philippine

Generally defined as coastal trade or transport, cabotage, in the legal sense, refers to the right of a country to engage exclusively in the transport of cargoes and passengers between and amongst points within its territorial waters.

The Philippine cabotage principle is enshrined in Republic Act 1937 or the Tariff and Customs Code and R.A. 9295 or the Domestic Shipping Development Act of 2004.

R.A. 1937 provides that only vessels with Philippine registry are accorded with the exclusive right to engage in coastwise trade (Section 902, R.A. 1937). The entry and clearance of foreign vessels carrying cargoes and passengers to and from a Philippine port of destination may only be allowed upon the approval of the Customs Commissioner (Section 1009, R.A. 1937).

R.A.9295 grants exclusive authority to domestic ship owners or operators to carry cargoes and/or passengers in domestic trade (Section 5, R.A. 9295). Foreign vessels may only be permitted to engage in trade and commerce in Philippine territorial waters upon the issuance of a special permit from the Maritime Industry Authority when no Philippine vessel can provide the required shipping service and if public interest so warrants (Section 6, R.A. 9295).

In his 2013 State of the Nation Address, President Benigno Aquino III called on the legislature to “amend the Cabotage Law in order to foster greater competition and to lower the cost of transportation for our agricultural sector and other industries”. Consequently Senate President Franklin Drilon and House Speaker Feliciano Belmonte, Jr. have both stated that amending the cabotage law would be one of the legislative priorities of the 16th Congress.

While exporters, foreign investors and business organizations are in favor of relaxing the country’s cabotage requirements to make the domestic shipping industry more competitive, present and past efforts to lift or amend cabotage restrictions have, however, stirred strong resistance from the local shipping industry arguing that allowing foreign vessels to operate locally will ultimately extinguish the Philippine shipping industry.

Intra-country shipping in the Philippines largely incurs more costs than inter-country shipping. For example, the domestic freight rate per nautical mile for transporting local containerized cargoes from Manila to Davao costs $0.72 while overseas freight rate for carrying cargoes from Manila to Singapore, despite longer distance, is much less inexpensive at $0.27 per nautical mile. Numerous factors contribute to high domestic shipping costs. These include the imposition of value-added tax (VAT) and income tax, high interest rates, expensive fuel costs, high-priced operating fees, port inefficiency and unproductivity, and the costincurring double-handled movement of exported and imported goods.

The reduction of local sea freight rates is envisaged to help improve the competitiveness of the country’s agri-business industry by facilitating inter-island transportation of agricultural produce and by-products. For instance, 70 percent of yellow corn in the country is processed as animal feeds for hogs, broilers and layers. Data from the Bureau of Agricultural Statistics show that Northern Mindanao, Soccsksargen and ARMM are among the leading regional corn producers with a combined annual output of about 2 million metric tons or 37.5 percent of the total national yellow corn production in 2012. Lower marine transportation costs will help Mindanao farmers trade their corn produce to Visayas regions where there is deficit in corn supply as well as to Central and Southern Luzon where a great number of livestock and poultry raisers and feed millers are located.


The joint venture of the A.P. Moller-Maersk Group and Aboitiz Transport System Corporation can be regarded as a viable low-cost freight business model.Due to stiff competition between budget airlines and passenger ships, the two firms formed MCC Transport Philippines, 2007 to rationalize their cost structures and expand freight capacity and ro-ro movement at the expense of passenger volume in their bid to achieve more competitiveness and cost-efficiency. Pending the abolishment of cabotage restrictions, foreign shipping lines can, at the present time, explore this type of joint venture alliance with domestic companies to comply with the cabotage law and the 40-percent cap on foreign ownership in public utilities.


The European Chamber of Commerce of the Philippines (ECCP) joined various House and Senate hearings on cabotage; the public sector, foreign business organizations and domestic shipping industry players have found common ground to reduce sea transport costs and increase the competitiveness of the Philippine maritimetransportation industry. The private sector welcomed the suggestion of the Export Development Council, the Philippine Port Authority, and MARINA to allow foreign vessels to engage in co-loading in order to address transshipment concerns. Both Houses of Congress have meanwhile approved corresponding legislation which is in Bicam now and will hopefully be signed into law by the President ASAP

Publicado el junio 8, 2015 en Technical y etiquetado en , , , , , , . Guarda el enlace permanente. Deja un comentario.


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