AN ACT TO BE KNOWN AS ''THE PHILIPPINE OVERSEAS SHIPPING ACT OF NINETEEN HUNDRED AND FIFTY-FIVE.''

Case Overview and Summary

Summary of Republic Act No. 1407 (The Philippine Overseas Shipping Act of 1955)

Declaration of Policy (Section 1):
- Promote the development of a well-balanced Philippine merchant marine for international trade, national defense, and owned/operated by Filipino citizens or corporations.
- Encourage and assist Philippine-registered vessels engaged in international trade.
- Foster the development and maintenance of a Philippine merchant marine.
- Provide financial aid and assistance for a long-range ship-building program.
- Promote shipping to attract private capital and enterprise to the industry.
- Cooperate with other nations in maintaining international maritime practices.

Income Tax Exemption (Section 2):
- Filipino citizens, associations, or corporations engaged exclusively in overseas shipping and ship construction are exempt from income tax on shipping income for 10 years from the date of approval of this Act.
- Condition: All net profits during the exemption period must be invested in constructing, purchasing, or acquiring additional vessels and equipment, or improving existing vessels and equipment.

Loan Assistance (Section 3):
- An annual appropriation of 20 million pesos for 5 fiscal years starting from 1956 is allocated for the construction, purchase, or acquisition of ocean-going vessels.
- The funds can be used for resale, lease, or charter to eligible entities, or for loans to finance the construction, purchase, acquisition, and operation of ocean-going vessels.

Administration and Investment of Funds (Section 4):
- The National Development Company is authorized to acquire ocean-going vessels for resale, make loans, conduct studies and investigations, and determine the advisability of making loans.

Loan Terms and Conditions (Section 5):
- Loans are secured by a preferred mortgage on the vessel, its equipment, and operating authorization.
- Loans are self-liquidating within 20 years and bear interest of up to 4.5% per annum.
- Loans cannot exceed 75% of the vessel's cost.
- Vessels must be fully insured.
- Rights acquired under this Act cannot be transferred or encumbered without the consent of the National Development Company.

Loan Repayments (Section 6):
- Payments of principal and interest on loans are considered a special fund to be used exclusively for carrying out the provisions of this Act.

Foreclosure and Vessel Acquisition (Section 7):
- The National Development Company can bid for and purchase vessels, equipment, and operating authorizations at foreclosure or other sales.
- The purchase price and costs can be paid from the funds appropriated in Section 3.
- The acquired vessels can be leased or chartered on a bare-boat basis for an amount not exceeding 7% of the total cost annually.
- The acquired vessels can be sold to eligible Filipino citizens, associations, or corporations under reasonable terms and conditions.

Utilization of Government Services (Section 8):
- The National Development Company can request and utilize services of national officers and employees, and officers and employees of government-owned or controlled corporations, with the approval of the proper heads of departments, for making studies and investigations.

Rules and Regulations (Section 9):
- The National Development Company is empowered to issue necessary rules and regulations to carry out the provisions and purposes of this Act, subject to the limitations imposed.
- The National Development Company shall present a full report of its activities under this Act to Congress at the close of each fiscal year.

Government Possession in War and National Emergency (Section 10):
- The President of the Philippines may take possession, absolutely or temporarily, of any Philippine-registered vessels for naval or military purposes during war and other national emergencies.
- The Government shall pay the fair actual value or fair charter value, as determined by appraisers, to the vessel owner.

Definition of Ocean-Going Vessel in International Trade (Section 11):
- An ocean-going vessel of Philippine registry is deemed to be engaged in international trade when it carries goods and/or passengers from the Philippines to a foreign port, or from a foreign port to another port or a Philippine port.

Dollar Controls and Import Tax Exemption (Section 12):
- Dollars required by Philippine-registered ocean-going vessels or operators for vessel purchase, repair, improvement, engines, spare parts, accessories, supplies, and other operational expenses in foreign ports or high seas shall be made available by the Central Bank of the Philippines or any other agency in charge of dollar controls, free of exchange tax, when recommended by the National Economic Council.
- Engines, spare parts, accessories, supplies, and materials needed for vessel repair or construction are exempt from the special import tax, provided that the National Shipyards and Steel Corporation certifies that it cannot furnish such items.
- Owners of vessels shall properly account for all dollars acquired or spent to the Central Bank of the Philippines or any other agency in charge of dollar controls.

Repeal of Inconsistent Laws (Section 13):
- All laws, executive orders, and regulations, or parts thereof, which are inconsistent with this Act are hereby repealed.

Effectivity (Section 14):
- This Act shall take effect upon its approval.