Coastwise Trade in the Philippines: Rules on Domestic Shipping Under RA 9295

Coastwise trade — the carriage of passengers or cargo between Philippine ports — is reserved by law for Filipino-owned and Filipino-controlled ship operators. Under Republic Act No. 9295, the Domestic Shipping Development Act of 2004, no franchise, certificate, or other authorization for domestic carriage may be granted except to domestic ship owners or operators. Foreign vessels are barred from transporting passengers or cargo between Philippine ports unless MARINA grants a Special Permit, which is issued only when no domestic vessel is available or suitable and public interest requires it. This is the core of the Philippines' cargo reservation policy.

What "coastwise trade" means under Philippine law

The law uses the term domestic shipping, defined in Section 3 of RA 9295 as the transport of passengers or cargo, or both, by ships duly registered and licensed under Philippine law to engage in trade and commerce between Philippine ports and within Philippine territorial or internal waters, for hire or compensation, with general or limited clientele, whether permanent, occasional or incidental, with or without fixed routes, and done for contractual or commercial purposes.

A related definition is domestic trade, which means the sale, barter, or exchange of goods, materials, or products within the Philippines. In practice, coastwise trade covers the movement of cargo and passengers by sea from one Philippine port to another — the domestic leg of Philippine logistics.

Who may engage in coastwise trade

Under Section 3, a domestic ship operator or domestic ship owner is a citizen of the Philippines, a commercial partnership wholly owned by Filipinos, or a corporation at least sixty percent (60%) of the capital of which is owned by Filipinos, duly authorized by the Maritime Industry Authority (MARINA) to engage in the business of domestic shipping.

Section 2 of RA 9295 states the policy clearly: the Philippines needs a strong and competitive domestic merchant fleet owned and controlled by Filipinos or by corporations at least sixty percent (60%) of the capital of which is owned by Filipinos, and manned by qualified Filipino officers and crew.

Section 5 reinforces this: no franchise, certificate, or any other form of authorization for the carriage of cargo or passengers, or both, in the domestic trade shall be granted except to domestic ship owners or operators.

The general rule against foreign vessels

Section 6 of RA 9295 provides that no foreign vessel shall be allowed to transport passengers or cargo between ports or places within Philippine territorial waters, except upon the grant of a Special Permit by MARINA when no domestic vessel is available or suitable to provide the needed shipping service and public interest warrants the same.

This is the statutory basis of the Philippines' cabotage or cargo reservation regime. A foreign vessel may enter Philippine domestic trade only through a Special Permit, and only upon the two-fold test: unavailability or unsuitability of a domestic vessel, and public interest.

How to obtain authority to operate

Section 7 of RA 9295 vests in MARINA the power and authority to issue certificates of public convenience to qualified domestic ship operators. In evaluating an application, MARINA considers the economic and beneficial effect of the proposed service on the port, province, or region to be served, and the financial capacity of the operator to provide and sustain safe, reliable, adequate, efficient, and economic service.

Every applicant must state the route it proposes to serve and the service it proposes to offer. Operators who do not intend to operate on a fixed route must still state in the application the service they propose to offer.

Under Section 10, MARINA has the power to register vessels and to issue certificates of public convenience, provided that no such certificate shall be valid for a period of more than twenty-five (25) years. MARINA may also modify, suspend, or revoke any certificate, license, or accreditation upon notice and hearing.

Rates, government cargo, and monopolized routes

Section 8 of RA 9295 deregulated the industry: domestic ship operators are authorized to establish their own domestic shipping rates, provided that effective competition is fostered and public interest is served. MARINA monitors all shipping operations and may exercise regulatory intervention where, after due process, it is established that public interest needs to be protected.

Section 11 restates the operator's right to fix its own passenger or cargo rates, or both. Section 12 imposes an obligation to carry mail on mutually agreed terms and conditions, with preferential, negotiated conditions for the carriage of other government cargo.

Section 13 empowers MARINA to draw up rules for service in monopolized routes, taking into account the economic and beneficial effect on the port, province, island, or region served, the volume of passengers and cargo available, the level and quality of service offered, and available port facilities and terminal handling services.

Safety, insurance, and prohibited acts

Section 9 requires all vessels operated by domestic ship operators to be at all times in seaworthy condition, properly equipped with adequate life-saving, communication, safety, and other equipment, operated and maintained in accordance with MARINA standards, and manned by duly licensed and competent vessel crew.

Section 14 requires every domestic ship operator to submit annually adequate insurance coverage for each passenger and for cargo, computed in accordance with existing laws, rules, and regulations. Where an operator runs more than one vessel, the required coverage is based on the largest operating vessel, and shall not exceed the value of that vessel.

Section 16 lists prohibited acts, including operating without a valid certificate of public convenience, refusing to accept or carry any passenger or cargo without just cause, failing to maintain vessels in safe and serviceable condition, failing to obtain or maintain adequate insurance coverage, and failing to meet safe manning requirements. Section 18 authorizes MARINA to impose fines, suspend, or revoke certificates upon notice and hearing.

Frequently asked questions

Can a foreign-owned company operate a domestic shipping line in the Philippines? Only if it meets the ownership test: a corporation at least sixty percent (60%) of the capital of which is owned by Filipinos, as defined in Section 3 of RA 9295. Otherwise, it cannot be authorized as a domestic ship operator.

When can a foreign vessel carry cargo between Philippine ports? Only upon a Special Permit from MARINA, granted when no domestic vessel is available or suitable to provide the needed shipping service and public interest warrants it, under Section 6 of RA 9295.

How long is a certificate of public convenience valid? Under Section 10 of RA 9295, no certificate of public convenience shall be valid for a period of more than twenty-five (25) years.

Practical takeaways

• Coastwise trade is reserved for domestic ship operators — Filipino citizens, Filipino-owned partnerships, or corporations at least 60% Filipino-owned — under Section 3 of RA 9295.
• Foreign vessels cannot carry passengers or cargo between Philippine ports without a MARINA Special Permit, which requires proof that no domestic vessel is available or suitable and that public interest warrants it.
• A certificate of public convenience from MARINA is required to operate, and it cannot exceed twenty-five (25) years.
• Domestic ship operators may set their own rates, but MARINA monitors operations and may intervene to protect public interest.
• Compulsory insurance for passengers and cargo, seaworthiness, and safe manning are continuing obligations, and violations are grounds for fines, suspension, or revocation.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

Amendments to foreign exchange regulations covering foreign investmentsOpen in Law LibraryDownload PDF

• IRR of REPUBLIC ACT NO. 10635 - 2022 IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT 10635, "ACT ESTABLISHING THE MARINA AS THE SINGLE MARITIME ADMINISTRATION RESPONSIBLE FOR THE IMPLEMENTATION AND ENFORCEMENT OF THE INTERNATIONAL CONVENTION ON STANDARDS OF TRAINING, CERTIFICATION AND WATCHKEEPING FOR SEAFARERS, 1978, AS AMENDED, AND INTERNATIONAL AGREEMENTS OR COVENANTS RELATED THERETO:

• REPUBLIC ACT NO. 9295 - AN ACT PROMOTING THE DEVELOPMENT OF PHILIPPINE DOMESTIC SHIPPING, SHIPBUILDING, SHIP REPAIR AND SHIP BREAKING, ORDAINING REFORMS IN GOVERNMENT POLICIES TOWARDS SHIPPING IN THE PHILIPPINES, AND FOR OTHER PURPOSES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.